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Is the dollar in danger of losing its 'safe haven' status? · The Financial Exchange Show

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Speaker 1: Armstrong and Mark Vandetti.
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Speaker 2: Good morning, Welcome back to the financial exchange.
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Speaker 3: We've got equity markets moving in positive direction for the
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Speaker 3: second day in the row, which I think everyone will take.
1:21
Speaker 3: Dow currently up one hundred and forty eight points a
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Speaker 3: little bit more than a third of a percent, SMP
1:25
Speaker 3: up about a half a percent in the NASDAC up
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Speaker 3: about four tenths of one percent.
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Speaker 2: In early trading.
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Speaker 3: In the bond market on the ten year treasury yield,
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Speaker 3: we're seeing yields fall just a bit down to four
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Speaker 3: point three four percent. Oil markets price of oil is
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Speaker 3: basically flat for the day, but still sitting low at
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Speaker 3: sixty one dollars forty five cents per barrel on the
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Speaker 3: West Texas crewed. I do want to see triple A
1:48
Speaker 3: gas prices. Have we started to see any relief there?
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Speaker 3: I can't say I have noticed much. But the the
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Speaker 3: average for a gallon of gas across the country right
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Speaker 3: now is seeing at three dollars and seventeen cents compared
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Speaker 3: to a month ago, were about even compared to two
2:08
Speaker 3: weeks ago. You know, we're a little bit lower, but
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Speaker 3: you have not seen much of a drop down in
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Speaker 3: gas prices at the pump so far, Looking across New England,
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Speaker 3: New Hampshire is sitting at an average price of two
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Speaker 3: dollars eighty five cents, Maine at two ninety seven, Massachusetts
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Speaker 3: at two ninety five, Vermont at three oh nine. Let
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Speaker 3: me see if I can have a Rhode Island nine
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Speaker 3: dollars two dollars, sorry, two dollars at ninety four cents
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Speaker 3: nine dollars.
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Speaker 4: You get a pack of cigarettes?
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Speaker 3: Didn't run ou and Connecticut sitting at three dollars three
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Speaker 3: point zero four dollars per gallon? Mark anything else catching
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Speaker 3: your eyes in markets and early trading so far.
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Speaker 4: I'm surprised at the relative calm. I mean, there's more
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Speaker 4: tariff uncertainty today than there was after say, Liberation Day,
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Speaker 4: when we you think so, well, I think so in
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Speaker 4: the sense that he's doing carve outs. The administration is
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Speaker 4: doing carve outs like by the hour.
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Speaker 2: Agreed.
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Speaker 3: My takeaway is compared to Liberation Day and the worst
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Speaker 3: and the few days after there, the absolute worst case
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Speaker 3: scenario for businesses was, if not completely removed from the table,
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Speaker 3: likely heavily discounted.
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Speaker 2: Right.
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Speaker 3: If you are I don't know, we got it agreed
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Speaker 3: that we don't know but I have to say that
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Speaker 3: I think if I am an executive sitting at the
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Speaker 3: table today trying to figure out the path, I think
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Speaker 3: it's less likely that every country in the world is
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Speaker 3: going to face tariffs that average thirty.
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Speaker 4: Yes as of today. The long term objective is to
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Speaker 4: resure to use a horrible new term manufacturing, and the
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Speaker 4: current regime is most of the last regime. I just
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Speaker 4: mean group of people, not group of you know, thugs
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Speaker 4: or something. I know, regime's got a bad connotation. That's
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Speaker 4: not what I mean. Last regime used subsidies, chipsacks, stuff
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Speaker 4: like that. Yeah, this regime's using tariffs.
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Speaker 2: I sick versus carrot, don't.
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Speaker 4: I don't like either, obviously, but I'm a free market extremist.
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Speaker 4: But the subsidies appeared to work. We did add a
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Speaker 4: lot of manufacturing jobs. Investment did skyrocket. I would argue
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Speaker 4: that a lot of it was probably misdirected, but it
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Speaker 4: appeared to work. Will tariffs work? How long will it take?
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Speaker 4: We did a story in the last hour suggesting they
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Speaker 4: may not. They may not result in jobs, but rather automation.
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Speaker 4: If indeed it does, if indeed restoring even occurs, others
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Speaker 4: will simply move to lower cost venues overseas relatively more
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Speaker 4: favorably tariffed countries.
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Speaker 3: The other story that has been dominating has been the dollar,
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Speaker 3: and it is really a terribly hidden objective of the
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Speaker 3: Trump administration that he has mentioned it both in the
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Speaker 3: previous administration as well as on the campaign trip and
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Speaker 3: now looking for a cheaper dollar.
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Speaker 2: And there's some common threads there as to why that
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Speaker 2: might shatter.
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Speaker 3: But the other side of that coin is coin is
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Speaker 3: that it could eventually challenge the safe haven that was
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Speaker 3: talking about dollars in coin.
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Speaker 4: Sorry, sorry, sorry to make you explain it.
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Speaker 2: Stupid accidental joke.
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Speaker 3: The idea of the safe haven status of the dollar
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Speaker 3: before we even get to the idea of it being questioned,
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Speaker 3: which I'm unsure about. Can you describe the safe haven
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Speaker 3: status of the US dollar and what it what it represents,
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Speaker 3: and how it compares to other currencies.
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Speaker 4: Sure, it is the world's reserve currency, and that that
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Speaker 4: means simply that when we have a trade deficit with
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Speaker 4: the country, they have to do something with the dollars
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Speaker 4: we send them. We buy trinkets from China, we send
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Speaker 4: we pay for those trinkets with dollars they recycle those
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Speaker 4: dollars into treasuries or into US factories, or into US stocks,
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Speaker 4: but mostly treasuries. That makes the dollar because of our
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Speaker 4: role in the post war or financial order where we were,
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Speaker 4: we became the world's reference currency. You didn't have to
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Speaker 4: hold gold in your central bank reserves after nineteen seventy one, anyway,
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Speaker 4: you could hold dollars, so where the world's reserve. And
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Speaker 4: before that you could hold dollars which were backed by gold.
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Speaker 4: Dollars were as good as gold. The because of the
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Speaker 4: goal plated to continue with the to use a metaphor
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Speaker 4: relevant metaphor hopefully reputation of the US government. So as
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Speaker 4: a result of the post war trade and capital restriction
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Speaker 4: at first anyway regime, the dollar became the world's reserve currency.
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Speaker 4: It remains the world's reserve currency. It's what central banks hold,
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Speaker 4: and that some would argue is kept its value high.
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Speaker 4: If countries have to hold them, that pushes up the
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Speaker 4: relative value. This gets a little arcane, and it's not
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Speaker 4: my areas. You can tell them fumbling a little bit.
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Speaker 4: But some would argue that keeps the value of the
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Speaker 4: dollar artificially if you like high expensive, Yeah, and that
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Speaker 4: makes it hard for our exporters to compete, and also
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Speaker 4: makes us a relatively attractive investment venue. So it exacerbates
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Speaker 4: trade deficit problems. Though, as I tried to point out
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Speaker 4: in the last hour, the trade deficit is mainly a
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Speaker 4: result of and this is not intuitive. So I don't
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Speaker 4: be frustrated if you don't get it at first. God
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Speaker 4: knows I didn't. The trade deficit as a result of
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Speaker 4: is not saving enough. Not just you and me, Mike
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Speaker 4: and everybody who's joined us today, but the government too.
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Speaker 4: All these things are interconnected. All these things result in
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Speaker 4: the dollar being relatively strong. And we mean strong. We
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Speaker 4: mean it takes a large number of a foreign currency
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Speaker 4: to buy one unit of at one dollar.
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Speaker 3: So there are some things that we can debate. There's
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Speaker 3: others that we can't. The dollar has weakened recently against basket,
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Speaker 3: so it.
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Speaker 4: Takes fewer UK pounds or euros to buy a dollar.
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Speaker 2: That's what that means. But simply I'm just trying to
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Speaker 2: explain it.
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Speaker 3: Also, I'm put simply, back in January, a dollar would
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Speaker 3: buy you ninety eight cents in euros basically at par
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Speaker 3: Today it's eighty eight cents, right, So dollars to buy
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Speaker 3: one euro?
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Speaker 2: Is the answer the.
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Speaker 3: Question that I have, And you know the New York
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Speaker 3: Times has this piece here today. Is this depreciation that
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Speaker 3: we are seeing, a questioning of the safe haven status,
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Speaker 3: a questioning of the norm of Hey, the dollar is
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Speaker 3: the place that we flee to when times are tough.
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Speaker 3: We buy treasuries when things are in turmoil, We need
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Speaker 3: dollars to conduct trade. Is it a questioning of that
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Speaker 3: safe haven status? Or is it just anti American backlash
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Speaker 3: on the result of trades? And does that or am
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Speaker 3: I asking the wrong question? Does it even matter which
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Speaker 3: one it is?
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Speaker 4: I think it's the right question. I don't know that
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Speaker 4: we have or need to come up with a single answer.
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Speaker 4: It's probably a little from column A, B and a
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Speaker 4: couple of other columns we didn't think of. If people
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Speaker 4: are buying fewer US assets, stocks, factories, treasuries, bank accounts,
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Speaker 4: I mean, these are all their financial assets, but it's
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Speaker 4: a little bit broader than that. I'll just call it
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Speaker 4: assets generally. If the demand for those goes down, so
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Speaker 4: does the demand for dollars. So, in a sense, if
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Speaker 4: we keep sullying our international reputation with trade wars and
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Speaker 4: I know there's a political case for it. I'm not
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Speaker 4: qualified to comment on that, but we have without question,
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Speaker 4: we're more We're smaller today on the international trade stage
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Speaker 4: than we were two months ago. We are riskier in
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Speaker 4: a sense, so if foreign central banks and foreign investors
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Speaker 4: generally want to hedge against that risk, they would be
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Speaker 4: diversifying out of dollars now. That makes US assets relatively
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Speaker 4: less attractive and pushes up all these things interact. As
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Speaker 4: you've probably sensed, it sounds it sounds all fragmented and
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Speaker 4: probably not coherent the first time you hear, but all
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Speaker 4: these things are interconnected. Bottom line is this will push
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Speaker 4: up US interest rates, as it has over the past
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Speaker 4: few weeks.
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Speaker 3: And that's what I wanted to focus on and conclude
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Speaker 3: with that, which is, yeah, there can be some benefits
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Speaker 3: to a cheaper dollar are manufactured goods.
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Speaker 2: If you're a manufacturer doing business.
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Speaker 3: Family member mine has a manufacturing business in Massachusetts that
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Speaker 3: sells really complex products like bottle manufacturers, great good for
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Speaker 3: him because dollar is cheaper. The downside to that, if
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Speaker 3: there are fewer buyers of American debt, what you see
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Speaker 3: happen is precisely what everyone saw happen on Wednesday of
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Speaker 3: last week, and what is precisely what caused the Trump
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Speaker 3: administration to pivot, which is interest rates going through the roof.
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Speaker 3: It might be a gradual process. I don't think we're
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Speaker 3: going to see what we did on Wednesday of last
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Speaker 3: week on multiple days with basis points in the twenty
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Speaker 3: to thirty basis points move upwards. But that long steady slog.
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Speaker 3: If foreign buyers of US debt start to disappear means
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Speaker 3: that the US cannot finance at six percent deficits at
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Speaker 3: a cheap interest rate. It means that it would be
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Speaker 3: tougher for that to happen, meaning government spending might need
11:03
Speaker 3: to come in, taxes might need to go up, a
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Speaker 3: number of things could need to change out of necessity
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Speaker 3: to make that whole situation work. You're not in your
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Speaker 3: head that you agree with me, but I feel like you.
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Speaker 3: It's because you sense time. We're not out of time.
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Speaker 4: I wanted to take a joint about the engineer the
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Speaker 4: coordinated devaluation of the dollar in the mid nineteen eighties.
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Speaker 4: Dollar got really expensive. In the early nineteen eighties, we
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Speaker 4: were running big budget deficits, we were growing strongly. That
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Speaker 4: made US a relatively attractive investment venue. Dollar got very expensive.
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Speaker 4: Some people will remember the Plaza Accord, which Donald Trump
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Speaker 4: now owns that hotel. I think he still owns it.
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Speaker 4: So there's history. History makes these kind of quirky connections.
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Speaker 4: It was agreed among our major trading partners that a
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Speaker 4: lower value dollar relative to their currencies would be a
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Speaker 4: good thing, and so I wanted to draw a connection
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Speaker 4: between that and the rise and real interest rates, which
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Speaker 4: happened in the late nineteen eighties. The timing doesn't quite work,
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Speaker 4: it's off by about a year, but it may nevertheless
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Speaker 4: be an example of In that case, it was widely
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Speaker 4: we want. Every president says they want a strong Every
12:12
Speaker 4: Treasury secretary president say we want a strong dollar. That's
12:15
Speaker 4: bs they don't. They want a weaker dollar. They want
12:18
Speaker 4: deep down that benefits our exporters, and that would to
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Speaker 4: an extent mitigate the trade deficit. But inevitably that will
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Speaker 4: push up I say, inevitably, oh lseql, unless we become
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Speaker 4: raging savers, which we will not in this country anytime soon,
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Speaker 4: that will push up the cost of capital. You've got
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Speaker 4: fewer foreign dollars seeking to invest in US assets, Treasuries
12:44
Speaker 4: quick break.
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Speaker 5: All right, time for trivia here on the Financial Exchange
13:17
Speaker 5: and on this day back in nineteen ninety In Living
13:20
Speaker 5: Color premiered on Fox. In Living Color was created by
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Speaker 5: keenan Ivory Rain Waynes and featured a number of his
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Speaker 5: siblings in the cast. Trivia question today, how many Wayne's
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Speaker 5: family members appeared on the show in Living Color?
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Speaker 1: Once again?
13:35
Speaker 5: How many Waynes family members appeared on the show in
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Speaker 5: Living Color. Be the fourth person today that texts us
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14:00
Speaker 3: Dot com for some context around this text message that
14:03
Speaker 3: we received on April fourth, which was Friday of last week.
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Speaker 3: China's Ministry of Commerce impose export restrictions on seven rare
14:10
Speaker 3: earth elements and magnets used in defense, energy and automotive
14:14
Speaker 3: sectors in response to President Donald Trump's tariff increase on
14:18
Speaker 3: Chinese products. I'll get into what all that meant, but
14:21
Speaker 3: the question from one of our listeners if I can
14:24
Speaker 3: find it here. I was listening the last segment about
14:27
Speaker 3: tarrifs and discussion turned to manufacturing and touched on rare
14:30
Speaker 3: earth materials and one country in particular having them. Earlier
14:33
Speaker 3: this morning I heard on the Craig Peterson podcast that
14:36
Speaker 3: other countries such as Australia and Canada pose pose them,
14:40
Speaker 3: especially a good deal in Canada, as well as countries
14:43
Speaker 3: in Southeast Asia and perhaps Greenland too, making the point
14:45
Speaker 3: that these rare earth materials do exist all across the globe.
14:49
Speaker 3: This gives us an opportunity to resource them and strengthen
14:51
Speaker 3: our economy, and doing so, I certainly hope we don't
14:55
Speaker 3: have to rely on a single country, single source if
14:57
Speaker 3: we need them. So there's a piece here from the
15:01
Speaker 3: Centers for Strategic and International Studies explaining just where these
15:06
Speaker 3: materials go into.
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Speaker 2: But a few points.
15:08
Speaker 3: That they make on this subject. First, until twenty twenty three,
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Speaker 3: China accounted for ninety nine percent of global heavy rare
15:16
Speaker 3: earth processing ninety nine percent. The only minimal output came
15:23
Speaker 3: from a refinery in Vietnam. That was the portion coming
15:25
Speaker 3: outside of of China. However, that facility has been shut
15:28
Speaker 3: down for the past year, so pretty much all rare
15:31
Speaker 3: earth materials currently come from China.
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Speaker 2: Why does it matter?
15:35
Speaker 3: Forget about car batteries for a moment here, like, yes,
15:38
Speaker 3: it's important to make electric cars, but I know that's
15:40
Speaker 3: not the most important thing to people listening. Rare earth
15:43
Speaker 3: materials are crucial according to this, to this R I
15:46
Speaker 3: don't I'm not an engineer. I don't know this stuff.
15:48
Speaker 3: They are crucial for a range of defense technologies, including
15:51
Speaker 3: F thirty five jets, Virginia and Columbia based class submarines,
15:55
Speaker 3: Tomahawk missiles, radar systems, Predator unmanned aerial vehicles, and the
15:59
Speaker 3: Joint Direct Attack Munition series of smart bombs. For an example,
16:05
Speaker 3: the F thirty five fighter jet contains over nine hundred
16:07
Speaker 3: pounds of rare earth extracts. These things do exist elsewhere
16:16
Speaker 3: across the globe. The point that's being made here is
16:19
Speaker 3: that nobody has set up the facilities.
16:22
Speaker 2: And the requirements to do this extraction. Help.
16:25
Speaker 3: We have a massive deposit all across the United States.
16:29
Speaker 3: It's merely a question of whether or not we are
16:32
Speaker 3: willing to undergo the vast environmental damage that would be
16:37
Speaker 3: associated with this. From what I understand, there's an area
16:39
Speaker 3: in Wyoming that might have the largest rare earth deposits
16:42
Speaker 3: in the world.
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Speaker 2: But are we willing to completely change.
16:47
Speaker 3: The society in Wyoming in order to extract this stuff?
16:51
Speaker 3: And what are the problems with doing so? As an
16:54
Speaker 3: example here, Harvard took a look back in twenty twenty
16:58
Speaker 3: one at some of the externalities from this type of
17:03
Speaker 3: environmental damage. When they look at every ton of rare
17:08
Speaker 3: earth material that's produced, the mining process yields thirteen kilograms
17:11
Speaker 3: of dust, ninety six hundred and twelve thousand cubic meters
17:15
Speaker 3: of waste gas, seventy five cubic meters of waste water,
17:18
Speaker 3: and one ton of radioactive residue. China obviously currently dominating,
17:23
Speaker 3: they took a look at one area here where they
17:26
Speaker 3: do this, and I'm trying to find this section here,
17:29
Speaker 3: but effectively spoke to this one region in which they
17:33
Speaker 3: are doing this, and there's this massive lake of radioactive
17:37
Speaker 3: water that is very dangerously close to seeping into the
17:42
Speaker 3: drinking water source for several major cities across that country.
17:45
Speaker 2: And so.
17:47
Speaker 3: Whoever texts the show, you're absolutely right. These things exist everywhere.
17:53
Speaker 3: They exist in Greenland, they exist in Canada, Australia. Many
17:56
Speaker 3: of our close allies have the deposits needed to do so.
18:00
Speaker 3: What they do not have is both the infrastructure and
18:03
Speaker 3: seemingly maybe the willing I don't know if there's a
18:05
Speaker 3: willingness or lack of willingness to do this type of extraction,
18:08
Speaker 3: but undoubtedly it's been easier and cheaper to do it
18:12
Speaker 3: in China than it has been to do it anywhere else.
18:15
Speaker 3: So my point here would just be that this is
18:19
Speaker 3: not a question of supply and demand. It's a question
18:22
Speaker 3: of where can you do it cheapest and which countries
18:26
Speaker 3: are actually willing to do it, which very clearly, no
18:29
Speaker 3: matter how safely you attempt, has some big externalities for
18:33
Speaker 3: the populations in the areas.
18:34
Speaker 4: Mm hmm, Yeah, that's probably true. That producer seeking out
18:40
Speaker 4: the lowest cost source is probably true just about anything. Sure,
18:45
Speaker 4: I guess I don't know what to say about any
18:48
Speaker 4: of that other than that, well, the g you don't
18:50
Speaker 4: start a trade war with China if they supply ninety
18:52
Speaker 4: percent of your rare earth minerals. And for them it's
18:56
Speaker 4: only a very small percentage of their exports, right I
18:59
Speaker 4: said Differently, very little pain from for China from turning
19:03
Speaker 4: off the supply.
19:05
Speaker 3: They will lastly sell this to France, Australia just not
19:08
Speaker 3: sell it at all.
19:09
Speaker 2: And yeah, and they've used it before.
19:11
Speaker 3: They used it to punish Japan in twenty ten over
19:13
Speaker 3: some you know, over some stuff there. And it can
19:15
Speaker 3: literally bring your high tech economy two way screeching halt
19:20
Speaker 3: if you do not have a supply of this and
19:22
Speaker 3: again could change the future. But for now it all
19:25
Speaker 3: comes from China. Quick Break, were gonna have the trivia
19:27
Speaker 3: winner next here on the Financial Exchange.
19:34
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20:33
Speaker 5: book your trip today. That's visit USVII dot com. Trivia
20:39
Speaker 5: question today was how many Waynes family members appeared in
20:42
Speaker 5: the show excuse me on the show in living color,
20:45
Speaker 5: There'll be five members and that would be Keenan Damon,
20:49
Speaker 5: Marlon Kim and Sean Waynes. Winner today of the Financial
20:54
Speaker 5: Exchange Show T shirt was Tom from East Longmeadow, mass
20:58
Speaker 5: Congrats to Tom, and we played trivia every day here
21:01
Speaker 5: on the Financial Exchange. See complete contest rules at Financial
21:06
Speaker 5: Exchange Show dot com.
21:07
Speaker 3: By the way, we're talking about rare earth materials and
21:09
Speaker 3: that text we got to the show. You can text
21:11
Speaker 3: the show too at six one, seven, three, six, two,
21:15
Speaker 3: thirteen eighty five if you have questions or items you
21:18
Speaker 3: wants to discuss on air. But thank you to Eileen
21:20
Speaker 3: who texted regarding the rare earth materials and our extraction
21:24
Speaker 3: from China and our trade with China. More than sixty
21:28
Speaker 3: percent of CEOs now expect a recession within the next
21:32
Speaker 3: six months, according to a new survey released by CNBC.
21:38
Speaker 3: Here these reported on by CNBC, and we talked about
21:41
Speaker 3: signs that we're seeing of it in other areas, whether
21:46
Speaker 3: it's shopping malls or beauty salons. I've heard staking a
21:50
Speaker 3: drop back, but in either case. A piece from Bloomberg
21:53
Speaker 3: today about social security being protection from volatility, and I
21:57
Speaker 3: want to get into this subject a little bit because
22:01
Speaker 3: when I talk about this to clients, I don't use
22:03
Speaker 3: these exact words, but you know, when we discuss social security,
22:07
Speaker 3: I do think of it as this protection from volatility,
22:11
Speaker 3: especially for those who have yet to file for their
22:13
Speaker 3: Social Security benefit. I kind of look at it as
22:16
Speaker 3: this other lever that you can pull, and so I
22:19
Speaker 3: think everyone generally knows that, hey, the longer you delay
22:22
Speaker 3: your social Security, the larger the payment ultimately gets. And
22:27
Speaker 3: so most of the people are thinking about social security
22:29
Speaker 3: in terms of, hey, how do I maximize my benefit
22:32
Speaker 3: over my lifetime? Those are the questions I get most
22:35
Speaker 3: commonly about social security.
22:37
Speaker 2: Is hey, if I live.
22:37
Speaker 3: Until eighty five, my mother lift to lady too, my
22:40
Speaker 3: father lived till ninety, you know, with all that, with
22:42
Speaker 3: you know, medicine, I think, possibly I live this long,
22:45
Speaker 3: what's my best option for social security? But I think
22:49
Speaker 3: it's also good to rephrase the question, which is, hey,
22:52
Speaker 3: how can social security best serve me when I need
22:56
Speaker 3: access to funds? And so for some people right now
23:00
Speaker 3: now it may in fact be a good time to
23:02
Speaker 3: be looking at soci security, not because hey, if I
23:05
Speaker 3: pull it right now, I can maximize the benefit over
23:07
Speaker 3: my lifetime. But maybe I went into this moment, or
23:10
Speaker 3: maybe I'm going to be faced with recession soon and
23:13
Speaker 3: my portfolio is not performing the way it wants to,
23:16
Speaker 3: and I'm stuck with, hey, do I have to sell
23:19
Speaker 3: a bunch of things at a lower price in order
23:22
Speaker 3: to satisfy my bills? Or do I take in that
23:26
Speaker 3: locked in lower social Security benefit in order to avoid
23:29
Speaker 3: doing so? And so I guess my point with social
23:33
Speaker 3: security is there's a lot of different ways to evaluate
23:37
Speaker 3: it and think about it. I know there are those
23:39
Speaker 3: out there who say, hey, no matter what, you should
23:42
Speaker 3: almost always take the benefit at sixty two. There are
23:45
Speaker 3: others who say you should always wait until age seventy.
23:48
Speaker 3: The answer is not so clear cut, and I do
23:51
Speaker 3: like to use it in planning as a technique for Hey,
23:54
Speaker 3: here's how we hedge against market volatility and downside. You're
23:57
Speaker 3: worried about tapping your portfolio too early retirement because of
24:01
Speaker 3: this economy, Well, great, we've got a backup plan. There's
24:03
Speaker 3: an option here for you to start this other income
24:05
Speaker 3: stream that's fully guaranteed by the United States government at
24:09
Speaker 3: least until about twenty thirty five, when it runs out
24:12
Speaker 3: of money for the rest of your life.
24:15
Speaker 2: And so.
24:17
Speaker 3: Sorry, I just had to throw that in there, because
24:19
Speaker 3: we never talk about the fact that's our security is
24:21
Speaker 3: just gonna run out of money years. In any case,
24:27
Speaker 3: if you are evaluating social security, it's important that you
24:32
Speaker 3: do so in the context of the market and the
24:35
Speaker 3: economy that you're being delivered. Nobody knows what's going to
24:38
Speaker 3: happen with markets and the economy next clearly a lot
24:43
Speaker 3: of big leaders of big companies are more worried about
24:46
Speaker 3: a recession and an economic downturn than they usually are.
24:49
Speaker 2: I can tell you that.
24:50
Speaker 3: Sixty percent of CEOs reporting that they expect a recession
24:53
Speaker 3: in the next six months is not normal. But if
24:56
Speaker 3: you are trying to figure all this out on your own,
24:58
Speaker 3: if you're trying to navigate this planning process of hey,
25:01
Speaker 3: when I retire, where is the next dollar going to
25:04
Speaker 3: come from? And when does it make the most sense
25:06
Speaker 3: to think about my four oh one K versus my
25:09
Speaker 3: social security versus the savings I have in the bank.
25:12
Speaker 3: Maybe I've got a pension too. How are they all
25:15
Speaker 3: going to work together to give me the safest version.
25:19
Speaker 2: Of my retirement plan?
25:21
Speaker 3: If that's your goal, to talk to a real life
25:23
Speaker 3: human being over here at the Armstrong Advisory Group about that. Specifically,
25:27
Speaker 3: give us a ring eight hundred three nine three four
25:29
Speaker 3: zero zero one. If you're driving right now and you'd
25:32
Speaker 3: like to schedule time to have us call you back,
25:36
Speaker 3: you can go to our website at Armstrong Advisory dot
25:38
Speaker 3: com get started button there where you can schedule a callback.
25:41
Speaker 3: But the phone number once again for the Armstrong Advisory
25:44
Speaker 3: group is eight hundred three nine three for zero zero one.
25:49
Speaker 1: The proceeding was paid for by Armstrong Advisory Group, a
25:51
Speaker 1: registered investment advisor. Nothing in the ad or in any
25:54
Speaker 1: Armstrong guide a specific financial, legal, or tax advice. Consult
25:57
Speaker 1: your own financial tax into state planning advisors before making
26:00
Speaker 1: any investment decisions. Armstrong may contact you to offer investment
26:03
Speaker 1: advisory services.
26:05
Speaker 2: Mark.
26:05
Speaker 3: The thing that surprises me most right now looking at
26:08
Speaker 3: everything is how little we've had time to spend time
26:12
Speaker 3: thinking and talking about taxes here on the program, Because
26:15
Speaker 3: if you're not following along, the Trump era tax cuts
26:18
Speaker 3: are due to expire next year, and Congress has been
26:21
Speaker 3: working through a bill to try and get those extended.
26:25
Speaker 3: I just compare that too, for instance, when Joe Biden
26:28
Speaker 3: was elected and we dedicated I think an entire program
26:31
Speaker 3: as well as a off program like webinar type thing too,
26:36
Speaker 3: the idea of hey, where are tax rates going to
26:38
Speaker 3: go in the future, and we barely had time to
26:40
Speaker 3: think about it so far. Scott Beston sat down for
26:43
Speaker 3: an interview saying that everything is on the table for
26:46
Speaker 3: taxes on the wealthiest, which is just a fascinating turn
26:50
Speaker 3: for the Republican administration to be talking about raising taxes
26:54
Speaker 3: on the wealthy here, but clearly there are some priorities
26:57
Speaker 3: from the Trump campaign when they were campaigning and now
27:00
Speaker 3: the administration to lock in some lower taxes for working Americans,
27:04
Speaker 3: and I think they are having a reality moment here
27:08
Speaker 3: where they realize, hey, we might not be able to
27:10
Speaker 3: do that, as well as cut taxes for businesses and
27:13
Speaker 3: for people earning three million dollars a year.
27:16
Speaker 4: Yes, everybody knows we're in big trouble. Fiscally. Deficits have
27:20
Speaker 4: been huge over the past few years, despite a relatively
27:23
Speaker 4: robust economy. Economy with sluggish in twenty twenty two, or
27:27
Speaker 4: at least the first couple of quarters, but since then
27:29
Speaker 4: it's been growing at above trend. When that happens, you
27:31
Speaker 4: should be running surpluses are close to them. Instead, we
27:34
Speaker 4: ran six percent seven We ran like wartime level. Not
27:38
Speaker 4: quite I'm exaggerating, but we ran extreme deficits as a
27:41
Speaker 4: percentage of GDP and absolute dollar terms, however you want
27:43
Speaker 4: to look at it. Those deficits are only going to
27:46
Speaker 4: get bigger if something isn't done. We're on track this
27:49
Speaker 4: year so far through yesterday to spend more money at
27:52
Speaker 4: the federal level. Then we spent last year, so spending
27:55
Speaker 4: is up, notwithstanding all the doge theater and all the proclamations,
28:00
Speaker 4: all the great things they're going to cut. So we've
28:02
Speaker 4: got to raise revenue somehow. It's got to come from taxes,
28:05
Speaker 4: so you know idea sers excuse me, but those tariffs
28:08
Speaker 4: have been on and off, right.
28:11
Speaker 2: In either case.
28:12
Speaker 3: The discussions that are being had, you know, there's proposals
28:15
Speaker 3: to cut taxes on tipped wages, overtime pay, certain benefits
28:21
Speaker 3: for Social Security recipients. There's discussion of making interest payments
28:26
Speaker 3: on auto loans or certain auto loans tax deductible. But
28:30
Speaker 3: all of this is in the backdrop of also hearing
28:32
Speaker 3: some things about a new income tax bracket for those
28:35
Speaker 3: earning amollion dollars or more.
28:36
Speaker 4: We're talking about bumping it back up to where it
28:38
Speaker 4: was under Obama.
28:39
Speaker 3: Right, which was what thirty nine points sounds I believe.
28:42
Speaker 4: I mean, in the old days we were under we
28:45
Speaker 4: were at fifty for the first couple years of Reagan's term.
28:50
Speaker 4: Then eighty six brought it down to I think twenty eight,
28:52
Speaker 4: but closed a bunch of loopholes, so the effective rate
28:54
Speaker 4: may have been just as high, so it's not unheard
28:57
Speaker 4: of to get into the forties. In terms of ten
29:00
Speaker 4: marginal bracket. It's probably inevitable given the size of the deficit,
29:05
Speaker 4: or it'll be inevitable once interest rates start to rise inexorably,
29:10
Speaker 4: which is tied into the issue of demand for treasuries
29:13
Speaker 4: and the dollar is a safe ab and that we
29:15
Speaker 4: talked about in the last segment.
29:17
Speaker 2: Let's take a quick break here on the Financial Exchange
29:19
Speaker 2: when we return stack Roulette.
29:23
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29:26
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29:29
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30:05
Speaker 3: I have a pair of stories about the idea of recession. Generally,
30:09
Speaker 3: we talked about one of them the sixty percent of
30:11
Speaker 3: CEOs now expecting a recession in the next six months,
30:13
Speaker 3: and then billions being lost from foreign tourists almost said terrorists.
30:20
Speaker 3: There my apologies staying away from the US and this
30:24
Speaker 3: is being mentioned here with a number arrivals of non
30:28
Speaker 3: citizens to the US by plane dropped about ten percent.
30:32
Speaker 2: In March from a year earlier.
30:33
Speaker 3: And I have a tough time understanding if what I
30:38
Speaker 3: am seeing and hearing from people is because I'm in
30:41
Speaker 3: the New England bubble or the coastal bubble, which you know,
30:45
Speaker 3: I would imagine, for example, patterns that are in Texas
30:50
Speaker 3: might not be playing out in the same way as
30:52
Speaker 3: they are in New England. And so I try and
30:53
Speaker 3: keep that idea in mind, because most of the patterns
30:55
Speaker 3: that I'm seeing are restaurant volumes down. Attendance at discretionary
31:02
Speaker 3: things like ballgames.
31:05
Speaker 2: Or ballgames is a bad example because it's only just started.
31:08
Speaker 3: But you know, concerts are these types of things you're
31:11
Speaker 3: seeing demand down. I'm curious, you know, if you live
31:14
Speaker 3: down on the cape, what are you hearing about the
31:16
Speaker 3: summer travel season?
31:17
Speaker 2: Right?
31:17
Speaker 3: Are all the homes booked up like they usually are
31:20
Speaker 3: this time of year? Are the hotels busier than they
31:22
Speaker 3: ever have been? Or are they seeing some decline in
31:26
Speaker 3: bookings this time of year?
31:27
Speaker 2: Right? I mean, these are the things that I continue.
31:30
Speaker 3: To hear about when I go and ask other people
31:32
Speaker 3: what they're seeing out there. And the other one that
31:36
Speaker 3: I gave earlier in the show. As I was speaking
31:37
Speaker 3: with the client yesterday who was back in town for
31:40
Speaker 3: the Passover holiday, was walking around a mall and it
31:43
Speaker 3: was like places empty. I don't see anybody around. And
31:47
Speaker 3: granted it was a week day towards the middle of
31:49
Speaker 3: the day, but it usually is not is not empty
31:51
Speaker 3: like that.
31:52
Speaker 4: Yeah, double whammy effects. Stock values have gone down, they've
31:54
Speaker 4: come back somewhat, but when they go down and when
31:57
Speaker 4: stocks get choppier, something called the wealth effect, which works
32:02
Speaker 4: in both directions, can depress spending or at least hurt it.
32:06
Speaker 4: People feel wealthier. This is common sense. It's also validated
32:10
Speaker 4: by people who've looked at it and continue to look
32:14
Speaker 4: at it, and we've done some work on this internally.
32:16
Speaker 4: The confirm it. People will spend a certain portion of
32:18
Speaker 4: their equity market gains. People who are depending on their
32:21
Speaker 4: portfolio may even have a higher propensity to spend. They
32:25
Speaker 4: may spend a larger proportion of their gain. So some
32:27
Speaker 4: retrenchment there, some retrenchment in consumption. We haven't we saw
32:31
Speaker 4: a little bit of it in last month's spending month
32:34
Speaker 4: over month we'll see how it unfolds over the next
32:37
Speaker 4: several months. That wouldn't be surprising. And then you've got manufacturing.
32:39
Speaker 4: We are in a bubble in the sense that we
32:41
Speaker 4: don't work with stuff. We don't know what it's like
32:43
Speaker 4: to have to order six months worth of material. The
32:46
Speaker 4: price of your inputs is fluctuating. You're getting emails from
32:49
Speaker 4: your suppliers saying, hey, I got to put a twenty
32:51
Speaker 4: percent surcharge on your cable. And I don't I mean
32:55
Speaker 4: a cable. I'm just using an example out of thin air.
32:58
Speaker 4: But so we don't see that finance. Some people in
33:01
Speaker 4: finance actually benefit from these volatile environments, and we listen
33:05
Speaker 4: to and work with and maybe pay the most attention
33:07
Speaker 4: to people in finance who tend to be on CNBC
33:10
Speaker 4: the most. They don't have a purchasing manager with for
33:13
Speaker 4: a manufacturing firm on CNBC to talk, you know, with
33:16
Speaker 4: their sort of dirty hands and their their sweat under
33:20
Speaker 4: their arms because they actually do like real physical work
33:22
Speaker 4: for a living, you know what I mean. People don't
33:24
Speaker 4: get on CNBC.
33:26
Speaker 2: They have callouses on their hands.
33:27
Speaker 4: Yeah, people who can't take the time to talk to you.
33:30
Speaker 5: No, just to follow up on the old Cape Cod
33:32
Speaker 5: point you brought up their mic. This is from about
33:35
Speaker 5: a month ago, on March fourth, Cape Cod Times headline
33:39
Speaker 5: short short term rentals tourism may feel hit on Cape
33:43
Speaker 5: Cod saying people are fed up and then CBS News
33:46
Speaker 5: has something along the line.
33:48
Speaker 2: Up with what what were they fed up with on
33:50
Speaker 2: in March?
33:51
Speaker 5: The the Canadian tariff or the tariffs on Canada and
33:56
Speaker 5: Canadians canceling their vacation.
33:58
Speaker 4: There's that too. Yeah, even we weren't even getting at
34:01
Speaker 4: that angle, but that's.
34:03
Speaker 2: It was a month ago.
34:04
Speaker 5: It was a month ago.
34:05
Speaker 3: Yeah, yeah, So yeah, if you are if you live
34:08
Speaker 3: in a area that is typically visited by a lot
34:11
Speaker 3: of summer travelers. I know we have people that listen
34:13
Speaker 3: up in Maine, maybe up in the Lakes region of
34:16
Speaker 3: New Hampshire down on Cape Cod. I'm I'm just curious,
34:18
Speaker 3: what are you hearing from local businesses there in terms
34:21
Speaker 3: of their anticipation for the summer season right now. I'm
34:25
Speaker 3: sure there's always concerns about, hey, do I get all
34:27
Speaker 3: the visas that I applied for?
34:28
Speaker 2: Am I going to get.
34:29
Speaker 3: The the you know, the worker visas that I need?
34:31
Speaker 3: But if you're in one of those areas I'm very interested.
34:34
Speaker 3: Or if you have some other indicator of either the
34:36
Speaker 3: economy doing well or doing poorly, I'd be really interested
34:40
Speaker 3: to hear it. I've named a few of them, the
34:42
Speaker 3: shopping mall story. Last week there was the big convention
34:46
Speaker 3: of beauty workers down in New York City that were
34:48
Speaker 3: pretty negative about the overall economy. But if you have
34:51
Speaker 3: something else that is kind of an indication of the
34:53
Speaker 3: state of the economy that I'm not thinking of, I'd.
34:56
Speaker 2: Love to hear from you.
34:56
Speaker 3: You can text the show against six one, seven, three, six,
34:58
Speaker 3: two thirteen eighty five.
35:00
Speaker 5: You bring up the shopping mall thing, and it was
35:01
Speaker 5: a different mall you went to, and it was a
35:03
Speaker 5: different experience you had. You said you won.
35:05
Speaker 2: Yesterday, right, This wasn't me.
35:06
Speaker 5: This is a client, Oh client he went yesterday or whatever.
35:09
Speaker 3: Yep.
35:10
Speaker 5: Our producer Ben said he went to his local mall
35:14
Speaker 5: over the weekend. I believe it was Burlington, not one
35:17
Speaker 5: hundred percent on that, but he said it was the
35:18
Speaker 5: busiest he's seen the mall in his recent memory. So
35:23
Speaker 5: given the weather though, forty eight degrees and crap rain
35:26
Speaker 5: and yeah, but he said was the busiest he's seen.
35:28
Speaker 2: It was a lot of high schoolers were.
35:29
Speaker 3: There and yesterday was gorgeous, so maybe maybe, Again, there's
35:33
Speaker 3: a lot of ways to misinterpret this stuff. Yesterday was
35:35
Speaker 3: a sixty five degree day in New England with the
35:37
Speaker 3: sun out.
35:38
Speaker 2: Why would you go to a shopping mall. It's it's
35:39
Speaker 2: a fair point.
35:40
Speaker 4: Why he's been hanging out with high schoolers.
35:42
Speaker 2: At the No, he was at the mall just lobbing accusations.
35:48
Speaker 2: What do you have for us? Mark?
35:50
Speaker 4: Some interesting stats in a Financial Times article headline diamond
35:53
Speaker 4: industry in crisis as Tariff's rock market. A couple things
35:57
Speaker 4: I didn't know and found interesting. Two billion dollar industry,
36:01
Speaker 4: first of all worldwide. So to put that in perspective, Well,
36:04
Speaker 4: the US economy is thirty trillion, so that's not huge.
36:08
Speaker 4: The video game industry something else. A lot of people
36:11
Speaker 4: are familiar with this, five hundred billion, so again not huge,
36:14
Speaker 4: but bigger maybe than I would have thought, given that
36:17
Speaker 4: these things are of finite supply, I e. I imagine
36:22
Speaker 4: most diamonds that are sold are new, and people hold
36:26
Speaker 4: on to the ones that they've got or passed them
36:28
Speaker 4: along or whatever. But the the the essence of this
36:33
Speaker 4: article is that the industry is basically frozen up because
36:36
Speaker 4: the US is half the market for diamonds.
36:39
Speaker 3: The US put half half of the market, half the.
36:43
Speaker 4: World market demand is US. The ten percent tariffs. I
36:48
Speaker 4: don't want to get into the rates because they're changing
36:50
Speaker 4: every day, but this ten percent baseline teriff right seems
36:54
Speaker 4: to be. We've had it for a few days now,
36:56
Speaker 4: so maybe it'll a couple of weeks now, maybe it'll
36:57
Speaker 4: stick around. That applies as do reciprocal tariffs, and the
37:03
Speaker 4: hub for these is in Belgium. Interestingly, didn't know that,
37:07
Speaker 4: so if there are any reciprocal tariffs, the article doesn't
37:09
Speaker 4: mention that on Belgium specifically. Don't know why they would be, but.
37:14
Speaker 2: There were on everybody else, so yeah, probably are.
37:16
Speaker 4: Right right, right, So the the industry has basically come
37:21
Speaker 4: to a stand still. According to the Financial.
37:24
Speaker 3: Times, Fascinating markets remain in positive territory as we close
37:29
Speaker 3: in on the noon hour here, European stocks ended higher
37:33
Speaker 3: for the day by one point six percent. In the US,
37:36
Speaker 3: we've got the Dow Jones Industrial average closing in on
37:39
Speaker 3: one hundred points to the upside, up about one fifth
37:42
Speaker 3: of one percent. The S and P five hundred up
37:44
Speaker 3: one third of one percent, the NASDAC mirroring that, up
37:47
Speaker 3: one third of one percent, and the Rustle two thousand,
37:49
Speaker 3: those smaller size names, up also one third of one percent.
37:54
Speaker 3: Oil prices continuing down off now eight tenths of a percent,
37:57
Speaker 3: down to sixty one dollars per barrel, not a whole
38:00
Speaker 3: lot of new drilling and exploration happening at those prices,
38:03
Speaker 3: and the year yield on the ten year Treasury now
38:07
Speaker 3: sitting at four point three four percent. That's all the
38:10
Speaker 3: time we have for today. Big show tomorrow will have
38:12
Speaker 3: some retail sales data to go through, as well as
38:15
Speaker 3: continued earnings here on the Financial Exchange