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Stop trying to predict the unpredictable · The Financial Exchange Show

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Speaker 2: Good morning and welcome back to the Financial Exchange. We've
1:14
Speaker 2: got markets in early trading and negative territory across the board,
1:18
Speaker 2: with the NASDAC leading the way down off three quarters
1:21
Speaker 2: of one percent, but Dow Jones Industrial Average SMP five
1:25
Speaker 2: hundred also off by a little bit more than half
1:27
Speaker 2: a percent. As over the weekend, the narrative and conversation
1:31
Speaker 2: all shifted from tax cuts and jobs, sorry not the
1:35
Speaker 2: tax cuts and jobs at the Big Beautiful Bill Act,
1:37
Speaker 2: resulting in income tax cuts to tax increases in the
1:41
Speaker 2: form of tariffs coming our way. Deadlines self imposed deadlines
1:46
Speaker 2: initially looking like Wednesday of this week, given tweets over
1:50
Speaker 2: the weekend, we're now kind of working under an August
1:54
Speaker 2: first deadline. But as Mark pointed out in the previous
1:58
Speaker 2: hour of the show, God knows, that's to change nine
2:00
Speaker 2: ways from Sunday. In terms of the Big Beautiful Bill
2:04
Speaker 2: Act that has now been signed into law, the biggest
2:07
Speaker 2: changes here are simply the tax rates are not going
2:09
Speaker 2: to increase for most Americans come twenty twenty six. But
2:12
Speaker 2: I looked at six specific areas that I think applied
2:15
Speaker 2: to a lot of Americans in particular, One would be
2:18
Speaker 2: an expansion of the salt cap from ten to forty
2:20
Speaker 2: thousand dollars. Two would be a new special deduction for
2:24
Speaker 2: charitable contributions. Three would be a new change to deductions
2:28
Speaker 2: for folks over the age of sixty five, four changes
2:32
Speaker 2: to deductions on tips, five overtime changes and deductions there
2:36
Speaker 2: and then six would be the ten K car car
2:41
Speaker 2: Loan interest deduction that's going into place now, which we'll
2:43
Speaker 2: need some more details on, but that bill is now
2:46
Speaker 2: signed into law. We have permanence. Changes now to those
2:51
Speaker 2: actual tax rates will permanence insofar as until somebody else
2:54
Speaker 2: changes the rules down the road, as well as things
2:58
Speaker 2: like a state tax that had all been changed under
3:00
Speaker 2: the previous bills now getting locked in for an extended
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Speaker 2: period of time would be my guess. Mark. Anything to
3:06
Speaker 2: discuss in addition to that on the tax bill.
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Speaker 3: No, No, pretty comprehensive, thanks Mike.
3:13
Speaker 2: When it comes to trade deals, we have this new
3:16
Speaker 2: self imposed deadline of August first, when it all comes
3:20
Speaker 2: into play. I assume that we will have more announcements
3:23
Speaker 2: when it comes to trade, like we did with Vietnam,
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Speaker 2: But quite honestly, it seems to me that many countries
3:29
Speaker 2: are slow walking. All this delay, delay, delay seems to
3:33
Speaker 2: be the tactic because the President has been willing to
3:36
Speaker 2: push those deadlines further out. Some experts that I've read
3:40
Speaker 2: seem to think that we will have something announced with
3:42
Speaker 2: the EU. But the way it is described to me
3:44
Speaker 2: was described as the general public with this person was
3:48
Speaker 2: you know, think of any sort of trade deal with
3:50
Speaker 2: the EU as an engagement while you spend the next
3:52
Speaker 2: year or two figuring out the details of the marriage.
3:55
Speaker 2: And so we are likely to get some announcements, but
3:58
Speaker 2: I doubt we're going to get real clarity when it
4:00
Speaker 2: comes to the state of trade between US and large
4:02
Speaker 2: trading partners. Some other smaller partners may just have a
4:06
Speaker 2: letter written where they say this is the new tariff rate.
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Speaker 2: But frankly, I'm not sure how that affects everyday Americans
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Speaker 2: too much. Mark, we were talking in the first hour
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Speaker 2: about deficits and just what it does, you know, mechanically,
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Speaker 2: how they work, how we fund them, how it can
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Speaker 2: come crashing down in other countries when they get too large.
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Speaker 2: I want to shift our thinking a little bit and
4:27
Speaker 2: our talking a little bit to how behavior changes when
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Speaker 2: you are worried about deficits. And I guess I'll give
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Speaker 2: you an example. I have spoken to many, many people
4:38
Speaker 2: over the course of the last decade who all seem
4:42
Speaker 2: to assume that tax rates are going to eventually go
4:44
Speaker 2: up meaningfully. I've talked to several people in addition who
4:49
Speaker 2: think that so Security is going to going to go away.
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Speaker 2: And if you genuinely believe those things, you do change
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Speaker 2: your behavior a little bit. For example, I've seen people
4:58
Speaker 2: pull money out of their traditional IRA earlier than they
5:01
Speaker 2: need to because they're concerned about tax rates going up
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Speaker 2: in the future, or for their children. I've seen people
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Speaker 2: claim their Social Security early because they're worried about the
5:10
Speaker 2: funding of the program and where the benefits actually go.
5:15
Speaker 2: What sort of things can make their way into the
5:18
Speaker 2: American psyche, and do you think they are actually starting
5:21
Speaker 2: to when we talk about deficits that are as large
5:23
Speaker 2: as they are now and increasing at a fairly rapid pace.
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Speaker 3: Possibly it's not a new idea. An economist by the
5:29
Speaker 3: name of David Ricardo, who was English despite what the
5:32
Speaker 3: last name sounds like, I think his family was from
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Speaker 3: Spain or something, came up with this idea of the
5:36
Speaker 3: early eighteen hundreds. It's actually called Recardian equivalents. And to
5:40
Speaker 3: put it really simply, debt is just future taxes or
5:44
Speaker 3: future inflation. So what do people do when they get
5:47
Speaker 3: a tax cut? Now, this is not always the case,
5:49
Speaker 3: by the way, there's some evidence that debt finance tax
5:52
Speaker 3: cuts do increase spending today. But it could very well
5:56
Speaker 3: be the case that with respect to this tax cut,
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Speaker 3: like the one in one, it does not increase spending consumption.
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Speaker 3: More technically, people anticipate that it's going to need to
6:05
Speaker 3: be paid back one way or the other, so they
6:07
Speaker 3: don't change their average spending. Again, if you just keep
6:11
Speaker 3: in mind that debt is future taxes. A dollar given
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Speaker 3: to you today by the government is going to have
6:16
Speaker 3: to be paid back with interest one way or the
6:18
Speaker 3: other whenever the say bond used to finance that tax cut.
6:24
Speaker 3: I'm giving you a very simple example here, but it
6:26
Speaker 3: makes the point. Whenever that bond matures comes due, you're
6:30
Speaker 3: going to be taxed to pay the holder of that bond,
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Speaker 3: which is it turns out as you because you are
6:35
Speaker 3: a you're on both sides of this transaction, so to speak.
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Speaker 3: So there is a theory and some evidence though it's
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Speaker 3: not airtight that tax cut, tax debt finance. Tax cuts
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Speaker 3: might don't change consumption behavior. The phrase contractionary fiscal expansion,
6:55
Speaker 3: which if you break it down, contractionary shrink, fiscal tax
6:59
Speaker 3: and spending policy expansion means increasing spending or decreasing taxes,
7:05
Speaker 3: same thing. That phrase contractionary fiscal expansion describes what happens
7:09
Speaker 3: when the government tries to stimulate the economy but fails
7:13
Speaker 3: because people anticipate that the piper's got to be paid
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Speaker 3: at some point. That's what happened in OH one, for example.
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Speaker 3: Most researchers agree nineteen nineties opposite happened. Clinton raised taxes
7:24
Speaker 3: that allowed the Fed to keep rates low. Long term
7:26
Speaker 3: interest rates came down. The economy not just because of that.
7:30
Speaker 3: There were other forces that work, but the economy boomed.
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Speaker 3: That was arguably an expansionary fiscal contraction, which is different
7:37
Speaker 3: than the phrase I used earlier. It's all very interesting.
7:41
Speaker 3: Unfortunately we have to live through it to find out
7:43
Speaker 3: what the results going to be. We can't tell you
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Speaker 3: in advance.
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Speaker 2: So to put it, I'm going to try and put
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Speaker 2: all these words plainly. To put it plainly, I think
7:53
Speaker 2: the effect that you would be playing out here is
7:55
Speaker 2: if Americans think that their country is in a fiscal
7:58
Speaker 2: disaster zone, then they're going to save more than they spend.
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Speaker 3: That's why.
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Speaker 2: Yeah, And if they think that they're overall financial houses
8:08
Speaker 2: in order, then they are going to think that, hey,
8:11
Speaker 2: maybe taxes don't need to go up, and maybe I
8:13
Speaker 2: can't afford to spend a little bit more and save
8:15
Speaker 2: a little bit less because I'm not terrified about the
8:19
Speaker 2: state of the overall.
8:20
Speaker 1: Maybe.
8:21
Speaker 3: God, I don't know if I buy all this. By
8:23
Speaker 3: the way, I maybe sound convincing. I'm not sure I
8:27
Speaker 3: buy it. I don't get the mechanism. First of all, Like,
8:29
Speaker 3: what are you telling me? Somebody reads the Wall Street
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Speaker 3: Journal does a little projection of future deficits and debt
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Speaker 3: and what they're going to owe or their kids are
8:35
Speaker 3: going to own twenty five years, and then modify their
8:37
Speaker 3: spending today accordingly. I don't think I buy that. In
8:41
Speaker 3: basket case economies, people are far more Let me give
8:44
Speaker 3: you an example. We're far more attuned we all are
8:46
Speaker 3: to inflation right now than we were five years ago.
8:49
Speaker 3: And that's why inflation expectations are on a hair trigger.
8:51
Speaker 3: They go up very fast as we've learned over the
8:54
Speaker 3: past few months. If indeed the fiscal our fiscal situation.
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Speaker 3: By that, I just mean tax spending, debt and the
9:00
Speaker 3: effect it can have on interest rates. If that does
9:02
Speaker 3: indeed start to spin out of control quickly, at some
9:06
Speaker 3: point we will be on a hair trigger with respect
9:08
Speaker 3: to future government spending. The Argentinians are a good example
9:11
Speaker 3: of this, although Milla may have somewhat righted the ship,
9:14
Speaker 3: so this example is a little bit outdated. But people
9:17
Speaker 3: in basket case countries, and I'm not saying we are
9:21
Speaker 3: one because I don't believe that, but we could become one.
9:23
Speaker 3: They're much more attuned to the impact of changes in
9:27
Speaker 3: fiscal policy on things like future taxes and inflation than
9:31
Speaker 3: we are because we've been blessed historically, though we might
9:34
Speaker 3: be squandering our inheritance there.
9:41
Speaker 2: Oh sorry, you dozed off.
9:45
Speaker 3: I have that effect.
9:47
Speaker 2: Barons tells us that if we want to know where
9:50
Speaker 2: the economy is heading, we need to study earnings mark
9:54
Speaker 2: and this has been something that bothers me over and
9:56
Speaker 2: over again, because as you have reminded me, there is
10:00
Speaker 2: economist builds a model based on earnings to forecast where
10:03
Speaker 2: the economy is he's about wrong that.
10:06
Speaker 3: Well he's talking about average hourly earnings, right, not company earnings. Yeah, okay,
10:12
Speaker 3: so I did do a little during the break. I
10:14
Speaker 3: did do a little quick modeling. I was skeptical. I
10:16
Speaker 3: was like, this guy's full he hasn't tested this, he
10:18
Speaker 3: doesn't know what he's talking about. Well, lo, and behold,
10:21
Speaker 3: it does help if you do a naive forecast. So
10:24
Speaker 3: what is a researcher interested in? Can I predict GDP
10:26
Speaker 3: growth next quarter based on what I know today? What
10:28
Speaker 3: do I know today? I know a lot of things
10:30
Speaker 3: today in theory, but which of them are useful? So
10:32
Speaker 3: you have to sort of test combinations and then be
10:35
Speaker 3: wary of various statistical pitfalls and so forth. But I
10:38
Speaker 3: can tell you that earnings, if you add them to
10:40
Speaker 3: a simple model of what the economy was doing last quarter,
10:44
Speaker 3: they do improve your forecast a little bit. I can
10:46
Speaker 3: tell you that. I can also tell you that I
10:48
Speaker 3: also threw unemployment in there in vacancies because I had
10:50
Speaker 3: a little bit of spare time, because Tucker's not talking
10:52
Speaker 3: to me. Because I do this in my spare time,
10:56
Speaker 3: is why he's not talking to me. And they all
10:59
Speaker 3: come and yeah, this is like a big intervention.
11:05
Speaker 1: A lot of things not even broadcasting right now, a
11:07
Speaker 1: lot of.
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Speaker 3: Mom why are you here? A lot of things help
11:14
Speaker 3: improve my forecast of next quarter's GDP based on what
11:17
Speaker 3: I know today, I'm not convinced Earnings is the Holy Grail.
11:20
Speaker 3: Maybe over the past five years, Earnings has done a
11:22
Speaker 3: really good job relative to the other stuff I didn't
11:24
Speaker 3: look at various time periods. I wasn't very sophisticated. But
11:27
Speaker 3: my point is, be wary of people touting sort of
11:31
Speaker 3: a miracle, miracle predictor the relationships off and breakdown.
11:38
Speaker 2: Be especially concerned about anyone telling you they know exactly
11:43
Speaker 2: where the economy is going over the course of the
11:45
Speaker 2: next few months or years ago.
11:46
Speaker 3: Yeah, any full of crap.
11:48
Speaker 2: This is not physics or chemistry. Let's take a quick break.
11:51
Speaker 2: When we come back. We're playing a little bit of
11:53
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Speaker 4: Right time for Surevia here on the Financial Exchange and
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13:29
Speaker 2: Mark, I want to talk about the US dollar, but
13:31
Speaker 2: before we move on, there were just two statistics that
13:35
Speaker 2: were highlighted in that piece from Barons that I thought
13:38
Speaker 2: were they're obvious because the overall story is, hey, you know,
13:43
Speaker 2: we're getting older as a society and that's going to
13:45
Speaker 2: be a problem. But these stats really back that up.
13:49
Speaker 2: The prime age labor force participation rate, so just looking
13:53
Speaker 2: at people from twenty five to fifty four is pretty
13:57
Speaker 2: close to its late nineteen nineties peak, hias it ever got,
14:01
Speaker 2: where as the over fifty five labor force participation rate
14:05
Speaker 2: is now sitting at a nineteen year low of thirty
14:08
Speaker 2: eight percent. Obviously, why there's more people that are on
14:13
Speaker 2: the much older than fifty five spectrum than there were
14:16
Speaker 2: just a few years ago, and so all of this
14:18
Speaker 2: is somewhat obvious, but I think backs up that overall narrative,
14:22
Speaker 2: which is, yeah, the job market is pretty darn good.
14:26
Speaker 2: There's a lot of people interested in working who are
14:29
Speaker 2: in their prime working years, but there are now so
14:32
Speaker 2: many people that are outside of that demographic that it's
14:34
Speaker 2: going to potentially inject some stress on the labor market
14:38
Speaker 2: in ways that we aren't maybe used to, I guess
14:40
Speaker 2: would be my conclusion. I don't know if there's any
14:42
Speaker 2: other way to read all that, but that's certainly what
14:45
Speaker 2: it seems to me.
14:48
Speaker 3: I don't think there's look softening as possible. We just
14:51
Speaker 3: won't know, I'm sure, for repeating myself, we just won't know.
14:54
Speaker 3: Without the benefit of hindsight, you never do. And we're expecting,
15:00
Speaker 3: repeating myself again, the FED to act more preciently than
15:03
Speaker 3: it has historically, because we've become accustomed to the FED
15:08
Speaker 3: responding to obvious economic emergencies like the market crash and
15:14
Speaker 3: nine to eleven, which exacerbated economic conditions in the early
15:18
Speaker 3: in two thousand and one and two, like the global
15:22
Speaker 3: financial crisis, the Great Recession, which you did see the
15:27
Speaker 3: tsunami before it actually showed up in the data, so
15:29
Speaker 3: we knew it was coming, and similarly the COVID recession. Normally,
15:33
Speaker 3: the FED is in the position that it's in today,
15:36
Speaker 3: acting in the midst of sort of the fog of
15:40
Speaker 3: economic data, trying to determine whether it struck the right
15:43
Speaker 3: balance between the forces of inflation and the forces of
15:48
Speaker 3: economics luggishness that push up unemployment.
15:53
Speaker 2: Moving on to that conversation on the dollar here Mark,
15:55
Speaker 2: So the dollar has slid about ten percent this year
16:00
Speaker 2: copared to a basket of other currencies. If you go
16:02
Speaker 2: take a look at the dollar versus the euro, for example,
16:04
Speaker 2: you can chart it out and see a pretty significant
16:07
Speaker 2: slide there. We're back to twenty twenty one twenty twenty
16:10
Speaker 2: two levels against the dollar. Some people are finding this
16:13
Speaker 2: a bit confound and giving where interest rates are in
16:16
Speaker 2: the US. Right, when you have higher interest rates than
16:18
Speaker 2: the rest of the globe, generally speaking, you attract investors
16:22
Speaker 2: into your currency who want to borrow at those higher
16:24
Speaker 2: interest rates. Growth in the US economy has remained pretty
16:28
Speaker 2: solid as well, and yet you have the currency falling.
16:32
Speaker 2: Is this a real story here to be concerned about
16:35
Speaker 2: and get concerned about or are we really just seeing
16:38
Speaker 2: some degree of normalization compared to just the absolute exceptionalism
16:43
Speaker 2: that's been in the United States over the last few years.
16:45
Speaker 2: I guess I could buy out a story.
16:47
Speaker 3: Is the recent decline in the dollar something to be
16:49
Speaker 3: concerned about? Yeah, that's the tone of the article. Okay, sorry,
16:53
Speaker 3: I just you threw an interest rates there too, and
16:55
Speaker 3: they're related. I think the decline in the dollar was
16:59
Speaker 3: probably due to and this is not my insight, but
17:02
Speaker 3: it's something that makes sense, an observation that others have
17:05
Speaker 3: made that makes sense to me, probably due to expectations
17:08
Speaker 3: that the Fed. And these expectations are different now than
17:12
Speaker 3: they were when we got the unemployment report last Thursday.
17:15
Speaker 3: Expectations that the Fed will have to ease in an
17:17
Speaker 3: attempt to forestall economic slow down that caused the difference
17:22
Speaker 3: between US interest rates and foreign interest rates to narrow.
17:27
Speaker 3: US interest rates are higher, so the expectation is the
17:30
Speaker 3: Fed will have to lower that will and I'm using
17:32
Speaker 3: interest rates here to describe the entire yield curve. That's
17:37
Speaker 3: a little bit sloppy, but I'm just going to continue
17:41
Speaker 3: down this path. So I think the dollar was falling
17:44
Speaker 3: because people expected Fed to cut interest rates. That would
17:46
Speaker 3: make us safe assets a little bit less attractive. You
17:50
Speaker 3: would expect a dollar to fall. I don't know what
17:52
Speaker 3: it's doing today, God forbid, I tap my mouse and
17:55
Speaker 3: look at it. But I'm gonna say the dollar is
17:58
Speaker 3: firmed over the last days since we got the employment numbers.
18:02
Speaker 1: Yeah.
18:02
Speaker 2: Yeah. And what's certainly firmed over the last few days
18:06
Speaker 2: since we got the employment numbers are the expectations for
18:09
Speaker 2: what the Fed ends up doing. A week ago today,
18:13
Speaker 2: the expectations of a rate cut at this next July
18:16
Speaker 2: meeting were still possible. It's like a one in five chance,
18:20
Speaker 2: according to Chicago Mercantelic Exchange CMDA group, that we would
18:23
Speaker 2: have a rate cut in this July meeting. That's been
18:26
Speaker 2: all but taken off the table at this point, with
18:28
Speaker 2: only a five percent likelihood of the rate cut. Now
18:31
Speaker 2: at that July meeting, you get out now to September,
18:34
Speaker 2: and yeah, there's a pretty good chance of a rate
18:37
Speaker 2: cut by September, but there's still a one in three
18:39
Speaker 2: chance that in fact, no, they don't end up cutting
18:41
Speaker 2: rates at all between now and that meeting, which doesn't
18:44
Speaker 2: even occur until September seventeenth.
18:47
Speaker 3: Right, we just we don't know. They don't know, so
18:50
Speaker 3: criticizing them unless you have very strong conviction in the
18:54
Speaker 3: short term direction of the economy, criticizing them is irresponsible.
18:59
Speaker 3: If you're a public fit, you're in futile anyway. We know,
19:01
Speaker 3: monetary policy operates with long so called legs. It takes
19:05
Speaker 3: a while for the effects of interest rate changes to
19:07
Speaker 3: work their way through the economy.
19:10
Speaker 2: Yeah, I couldn't agree more. Criticizing the FED is, if anything,
19:15
Speaker 2: going to have the opposite effect on what you want
19:17
Speaker 2: them to do. But nonetheless that's going to be the
19:19
Speaker 2: strategy here and mounting pressure to cut. We got to
19:22
Speaker 2: take a quick break. When we come back. Wall Street
19:26
Speaker 2: Watch coming up, followed by late career job Losses, a
19:29
Speaker 2: piece by the Wall Street Journal. That's next here on
19:31
Speaker 2: the Financial Exchange.
19:40
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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. A complete look at
19:53
Speaker 1: what's moving markets so far today right here on the
19:56
Speaker 1: Financial Exchange Radio Network.
19:58
Speaker 4: Markets a negative territory as traders return from the July
20:02
Speaker 4: fourth holiday and turn their attention to tariffs with President
20:07
Speaker 4: Trump's July ninth deadline, although administration officials have signaled the
20:12
Speaker 4: new August first deadline is possible. At the moment, the
20:16
Speaker 4: Dow is off by seven tenths of one percent or
20:19
Speaker 4: three hundred and fourteen points. SMP five hundred is down
20:22
Speaker 4: six tenths of one percent or thirty seven points, NASDAC
20:26
Speaker 4: down nearly seven tenths of one percent or one hundred
20:29
Speaker 4: and forty points. Rusted two thousand now off over one
20:32
Speaker 4: percent or twenty three points, Tenured Treasure reeled is up
20:36
Speaker 4: by four basis points now at four point three eight percent,
20:40
Speaker 4: and crude oil is up just over seven tenths of
20:43
Speaker 4: one percent, trading at sixty seven dollars and fifty one
20:46
Speaker 4: cents a barrel. More tensions between Elon Musk and President
20:51
Speaker 4: Trump after Musk said he would form a new political
20:54
Speaker 4: party called the America Party, with Trump calling it ridiculous.
20:58
Speaker 4: Tesla Scher sinking nearly seven percent. Meanwhile, Core We've said
21:03
Speaker 4: this morning it will acquire Core Scientific, a leading data
21:06
Speaker 4: center infrastructure provider, and an all stock deal valued at
21:10
Speaker 4: about nine billion dollars. Corewave stock is down by two percent,
21:14
Speaker 4: while Core Scientific stock is down by twelve percent. Elsewhere,
21:19
Speaker 4: Oracle down by one percent after the company said it
21:22
Speaker 4: is slicing the cost of its database software and cloud
21:25
Speaker 4: computing service for the government, making it the largest tech
21:28
Speaker 4: giant to offer the Trump administration a significant discount on services.
21:33
Speaker 4: New data from research firm Counterpoint found that iPhone sales
21:37
Speaker 4: in China grew for the first time in two years
21:40
Speaker 4: last quarter, but not enough to overtake local rival Huawei.
21:43
Speaker 4: Apple shares down over half a percent. Shell said it
21:47
Speaker 4: expected weaker gas trading would hurt quarterly earning, sending shares
21:51
Speaker 4: down by two percent today and later this week. On Thursday,
21:54
Speaker 4: Delta Airlines will kick off second quarter earning season. I'm
21:58
Speaker 4: Tucker Silva in that is Wall Street Watch and the
22:01
Speaker 4: trivia question we asked in the prior segment was what
22:04
Speaker 4: is the top selling Tesla model that would be the
22:08
Speaker 4: model why? Chris from Bristol, Rhode Island is our winner today,
22:12
Speaker 4: taking home a Financial Exchange Show t shirt. Congrats to Chris,
22:16
Speaker 4: and we play trivia every day here in the Financial
22:18
Speaker 4: Exchange See complete contest rules at Financial Exchange Show dot com.
22:24
Speaker 2: Mark I've got some stunning news for all of our
22:26
Speaker 2: listeners here who just aren't going to believe it. Agism
22:30
Speaker 2: in the workforce seems to exist, and if you lose
22:34
Speaker 2: your job in your fifties and sixties, it ends up
22:37
Speaker 2: being quite a bit more difficult to find a new one.
22:39
Speaker 2: According to data from the Bureau Labor Statistics, for those
22:43
Speaker 2: who are over the age of fifty five spacically fifty
22:46
Speaker 2: five to sixty four, it takes them about twenty six
22:48
Speaker 2: weeks on average to find a new job, whereas it's
22:50
Speaker 2: just nineteen weeks for those who are filing for unemployment
22:55
Speaker 2: to find a new job. Between the age of twenty
22:57
Speaker 2: five and thirty four, The Walls Journal has a piece
23:00
Speaker 2: that goes through the lives of a few people whose
23:03
Speaker 2: careers were ended earlier than they intended. And I find
23:08
Speaker 2: it to be an interesting piece, also an entertaining piece,
23:10
Speaker 2: because they interview somebody from Gloucester, Massachusetts, and the rest
23:14
Speaker 2: of the country is probably trying to figure out how
23:16
Speaker 2: to pronounce Gloucester. But they go through a few different
23:20
Speaker 2: people and the experiences that they had. And I'll tell
23:23
Speaker 2: you I've personally been working with a couple of people
23:26
Speaker 2: in a similar category, one of whom had to leave
23:30
Speaker 2: the workforce due to a medical condition way earlier than
23:33
Speaker 2: they were anticipating, and it doesn't look like they're going
23:35
Speaker 2: to be able to return. Another was laid off in
23:38
Speaker 2: their early sixties and is now kind of trying to
23:41
Speaker 2: navigate that whole world of Okay, I was planning on
23:44
Speaker 2: waiting on things like Social Security and I've still got
23:47
Speaker 2: kids on health insurance. What am I going to do here?
23:50
Speaker 2: And frankly, one of them, it's probably the best thing
23:53
Speaker 2: that could have happened to them. The other it's going
23:55
Speaker 2: to be a real big challenge. And while the Wall
23:59
Speaker 2: Street Journal piece I find interesting, it's kind of a
24:02
Speaker 2: lifestyle piece and you get to you get a glimpse
24:04
Speaker 2: of these people's lives. I think there's some other stuff
24:07
Speaker 2: that really matters when it comes to when it comes
24:10
Speaker 2: to all of this mark I mean number one thing
24:13
Speaker 2: that I think about when I consider somebody at that
24:17
Speaker 2: stage of life getting laid off or losing their work unexpectedly,
24:22
Speaker 2: it immediately goes to their health and specifically where you're
24:25
Speaker 2: going to find your health insurance. In many cases it
24:28
Speaker 2: can be from Cobra. When you get laid off, you
24:32
Speaker 2: get access to purchase your own health insurance for a
24:35
Speaker 2: period of time, but especially when it's pre sixty five,
24:38
Speaker 2: this becomes an immediate stress stressor on the system of Okay,
24:43
Speaker 2: I need to find health insurance right now. Do I
24:45
Speaker 2: have a spouse that's working that's eligible for health insurance?
24:49
Speaker 2: Can I get it somewhere else? How much is it
24:51
Speaker 2: going to cost me? There are massive questions that come
24:54
Speaker 2: up there. The other big one, though, is that nobody
24:58
Speaker 2: actually thinks I'm going to ask them about when I'm
25:00
Speaker 2: when I'm dealing with this sort of thing, is how
25:03
Speaker 2: well how well are they mentally prepared for retirement? Like
25:08
Speaker 2: whenever I'm doing this, everybody assumes that I'm going to
25:10
Speaker 2: ask about the financial pieces. How much is your social security?
25:12
Speaker 2: How much is it? But I'll tell you when I
25:15
Speaker 2: think about people dramatically failing at retirement, which I've seen
25:19
Speaker 2: several times, and sometimes I culminate some people going back
25:22
Speaker 2: to work. Sometimes it's other formats. But think about people
25:25
Speaker 2: you know, Mark and Tucker. Do you know somebody who
25:29
Speaker 2: has gone through a quick change from working to not
25:34
Speaker 2: working and just seems completely lost. Have either of you
25:37
Speaker 2: experienced that? Sure, it's I see it frequently. I see
25:42
Speaker 2: it all the time. And to me, that's one of
25:45
Speaker 2: the biggest things that comes up is, Hey, am I
25:47
Speaker 2: prepared for what this new stage of life is going
25:51
Speaker 2: to do? Do I have something to fill my day?
25:53
Speaker 2: Do I have some sort of activity that I'm waiting
25:55
Speaker 2: to take part in, Because otherwise, in my experience, you're
25:58
Speaker 2: going to have a miserable retirement if you are sitting
26:02
Speaker 2: around not sure what to do, or just being sour
26:04
Speaker 2: about the fact that you lost your job and not
26:07
Speaker 2: prepared to take advantage of it. In many cases, like
26:10
Speaker 2: the early loss of a job pre retirement, you know,
26:13
Speaker 2: what sort of lifestyle changes does this actually necessitate. If
26:16
Speaker 2: I'm going to have to be forking over to three
26:19
Speaker 2: grand a month for health insurance, what do I need
26:21
Speaker 2: to cut out of the budget in order to make
26:23
Speaker 2: that work? So the Wall Street Jurnal piece, like I said,
26:27
Speaker 2: it's interesting, it's compelling, but there are some really important
26:32
Speaker 2: questions that I think everyone really over the age of
26:35
Speaker 2: fifty five or sixty needs to consider when they are
26:39
Speaker 2: in the workforce. It's okay if I choose to retire
26:42
Speaker 2: early or if unfortunately I'm forced to, And that can
26:47
Speaker 2: come in a lot of different fashions. It can come
26:49
Speaker 2: from general economic stressors, it can come from a company
26:52
Speaker 2: going out of business, and come due to your health care.
26:55
Speaker 2: How prepared am I for that unforeseen circumstance answer. It's
27:00
Speaker 2: one thing to have a plan, to be prepared for
27:02
Speaker 2: how I'm going to make this all work. Assuming I
27:04
Speaker 2: do keep my job until sixty five or sixty seven,
27:07
Speaker 2: whenever your plan retire. But that unexpected change, if it
27:12
Speaker 2: happens when I'm in my late fifties and I'm unable
27:14
Speaker 2: to find that new job for an extended period of time,
27:16
Speaker 2: how prepared am I for all of this? Both from
27:19
Speaker 2: a mental standpoint and a financial standpoint. If you have
27:22
Speaker 2: questions along those lines, if you have not answered that
27:25
Speaker 2: question for yourself, please call the folks at Armstrong Advisory Group.
27:29
Speaker 2: I have seen first hand the effect that this can
27:33
Speaker 2: have on people, even if it is just checking the
27:36
Speaker 2: boxes to make sure that if it happens in that
27:39
Speaker 2: off chance, you feel good about it. It can have
27:42
Speaker 2: a dramatic impact on obviously not only your financial future,
27:47
Speaker 2: but just your attitude towards going to work every day.
27:50
Speaker 2: I've seen it firsthand, and if you're stressing about this
27:53
Speaker 2: sort of thing, please please give us a ring. The
27:56
Speaker 2: number is eight hundred three nine three four zero zero one.
28:00
Speaker 2: That's the number four the Armstrong Advisory Group. We work
28:02
Speaker 2: with our clients on issues like this every single day.
28:06
Speaker 2: We have offices throughout the New England area. We're happy
28:09
Speaker 2: to meet with you over the phone via zoom whatever
28:11
Speaker 2: works best for you and your schedule, but that number.
28:13
Speaker 2: Take that first step and give us a call. It's
28:15
Speaker 2: eight hundred three nine three four zero zero one.
28:19
Speaker 1: The proceeding was paid for by Armstrong Advisory Group, a
28:22
Speaker 1: registered investment advisor. Nothing in the ad or in any
28:24
Speaker 1: Armstrong guide a specific financial, legal or tax advice consult
28:27
Speaker 1: your own financial tax into state planning advisors before making
28:30
Speaker 1: any investment decisions. Armstrong may contact you to offer investment
28:33
Speaker 1: advisory services.
28:35
Speaker 2: Well, Tucker, and Mark, I remember having this conversation over
28:39
Speaker 2: the course of the last couple of years when it
28:41
Speaker 2: came to mortgage rates and home prices, and I remember
28:45
Speaker 2: speaking with Chuck about it specifically. It's people going out
28:49
Speaker 2: there into the homeowner's market right now banking on rates
28:52
Speaker 2: going lower. Buyer beware, because that might not necessarily happen
28:57
Speaker 2: the way that you are waiting for it to play.
29:00
Speaker 2: Wall Street Journal does a piece today on this exact
29:03
Speaker 2: subject of, you know, those homeowners who gambled on those
29:06
Speaker 2: lower rates getting absolutely creamed right now in some cases.
29:10
Speaker 2: And I'll tell you, Mark, it's always tough to predict
29:14
Speaker 2: where long term rates go, but it sure is just
29:18
Speaker 2: difficult at this stage of the game to say, oh, yeah,
29:21
Speaker 2: I think that the thirty year rate is going to
29:23
Speaker 2: dramatically come down over the next year and a half.
29:27
Speaker 2: What would be the compelling reason for it to happen, right.
29:30
Speaker 1: I don't know.
29:31
Speaker 3: I don't know if that's something realtors tell people or
29:33
Speaker 3: it's just everyone I know who's ever bought a home
29:36
Speaker 3: has made that statement, I'm going to refinance when rates
29:38
Speaker 3: go down. Oh really, you're an interest rate forecaster. Yeah,
29:43
Speaker 3: it's any financial variable, interest rates, stock prices, you name
29:47
Speaker 3: it is. I'm going to say, impossible to forecast. The
29:50
Speaker 3: attempt to do so should be abandoned, and you should
29:53
Speaker 3: spend your time gardening or with your kids or something.
29:56
Speaker 3: Don't bother. Many Nobel Prize winners have come to this conclusion.
30:00
Speaker 3: It's not that I've tested it and am frustrated. No
30:03
Speaker 3: serious person thinks you can. Now. There is no trend
30:06
Speaker 3: in long term interest rates. That is true, although there
30:09
Speaker 3: have been long periods when rates tended to go up,
30:12
Speaker 3: like the seventies and eighties, and then gradually come down
30:16
Speaker 3: like the decades since, more or less when they plateaued.
30:19
Speaker 3: Are we participating in an upward trend again, where they
30:22
Speaker 3: go from four point three on the ten year to
30:26
Speaker 3: five to seven if inflation picks up. I don't really know,
30:30
Speaker 3: nor does anybody else, So that should not I think, Mike,
30:33
Speaker 3: you would agree, as a financial planner extraordinary that that
30:37
Speaker 3: is not something that somebody should bake into their financial plan.
30:41
Speaker 3: Lower interest payments at some.
30:42
Speaker 2: Point not absolutely not. I mean, look, the thirty year mortgage,
30:46
Speaker 2: in my mind is one of the greatest investments that
30:48
Speaker 2: Americans can make if they can afford to buy a home,
30:51
Speaker 2: because you have a locked set interest rate that can
30:55
Speaker 2: only go down if you choose to refinance. Right, I mean,
30:58
Speaker 2: you are you know where your payments are going to be,
31:00
Speaker 2: and if you happen to get lucky with lower interest rates,
31:02
Speaker 2: then you get to refinance into a lower payment And
31:05
Speaker 2: what a deal.
31:07
Speaker 3: You know what Mike can suggest? Oh? Sorry, sorry, good?
31:09
Speaker 3: Can I suggest something? If you don't believe me, I
31:12
Speaker 3: want you to go to Google or whatever your favorite
31:14
Speaker 3: search engine is. Type in ten year Treasury yield. The
31:17
Speaker 3: second or third result should be to the Saint Louis
31:20
Speaker 3: Federal Reserves database, where they have a wonderful chart on
31:23
Speaker 3: the ten year going all the way back to January
31:25
Speaker 3: nineteen sixty two. You tell me at what point in
31:28
Speaker 3: that put yourself in every interval there and ask what
31:32
Speaker 3: you thought was going at Now we know, so it's
31:34
Speaker 3: easy to say, but you will see how hard it
31:37
Speaker 3: is to time rates. There's a broad upward trend, as
31:40
Speaker 3: I mentioned, until the early nineteen eighties, then a broad
31:43
Speaker 3: downward trend, but it's not uninterrupted. My point is, if
31:47
Speaker 3: you need convincing that interest rates are not forecastable, look
31:50
Speaker 3: at this chart, or type in S and P five
31:52
Speaker 3: hundred in this same tool and look at the daily
31:55
Speaker 3: price change. You will see absolutely no patterns. It's a
31:59
Speaker 3: very humbling exercise. I just thought i'd suggest that for
32:02
Speaker 3: anybody who was on vacation this week and maybe was
32:05
Speaker 3: thinking about charting financial market variables.
32:08
Speaker 2: That's not what everybody else does on vacation.
32:10
Speaker 1: No fish shuit yourself.
32:16
Speaker 2: In either case. Thirty year mortgage rates got up over
32:19
Speaker 2: six percent back in twenty twenty two and have not
32:21
Speaker 2: gotten below that level since then. And who anyone's guess
32:26
Speaker 2: where they go next? I think would be my overall take.
32:29
Speaker 2: Let's take a quick break now when we come back
32:31
Speaker 2: at a stack roulette coming up on the Financial Exchange.
32:35
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33:09
Speaker 4: That was a great time to register for the DAV
33:12
Speaker 4: five k, taking place Saturday November eighth at Fort Independence
33:17
Speaker 4: on Castle Island. The race has sold out each of
33:19
Speaker 4: the past four years and slots are continuing to fill
33:22
Speaker 4: up quickly, so don't delay. Visit DAV five k dot
33:26
Speaker 4: Boston and reserve your spot, or join our team here
33:29
Speaker 4: at the Financial Exchange by registering under Team TFE. That's
33:35
Speaker 4: Saturday November eighth for this year's DAV five K. Sign
33:39
Speaker 4: up now at DAV five k dot Boston.
33:44
Speaker 2: I'm gonna kick things off here with stack Roulette Mark
33:47
Speaker 2: with a piece from the Journal on Elon Musk and
33:50
Speaker 2: Tesla's business in China and god it, it's just shocking
33:54
Speaker 2: how this plays out. So Tesla, over the course of
33:58
Speaker 2: the last decade met and expanded their presence in China,
34:04
Speaker 2: and specifically, in twenty nineteen they completed the Big Gigafactory
34:09
Speaker 2: and shockingly, the Chinese government had some stipulations for them
34:13
Speaker 2: when it came to doing business in China, largely that
34:16
Speaker 2: there would be some form of technology sharing when it
34:19
Speaker 2: came to Tesla's battery tech and manufacturing processes. Wouldn't you
34:23
Speaker 2: know it? Six seven years later, Tesla doesn't seem to
34:27
Speaker 2: have much of a business model in China anymore, and
34:31
Speaker 2: all the local Chinese automakers are becoming more popular and
34:34
Speaker 2: out selling it in just about every segment that's out there,
34:37
Speaker 2: and producing some darn good looking cars at much lower
34:40
Speaker 2: price points than what Tesla can offer, completely upending how
34:44
Speaker 2: many times are American businesses going to use this exact
34:48
Speaker 2: same playbook, the temptation of the Chinese market to go there,
34:53
Speaker 2: make their stuff, get all of their intellectual property completely
34:56
Speaker 2: ripped off, and then face competition from those same China
35:00
Speaker 2: These companies that went and ripped off their technology. We've
35:03
Speaker 2: seen it with I mean everything, We've seen it with
35:09
Speaker 2: almost every big tech company that I can think of.
35:11
Speaker 2: Apple's done it now. Granted, you know, you can't sell
35:14
Speaker 2: Chinese made iPhones into the US market, but you can
35:16
Speaker 2: into many others. They've undercut them every step of the
35:20
Speaker 2: way and learned how to manufacture.
35:21
Speaker 3: Not just China. There's oh, I forget the branch of
35:25
Speaker 3: economists who study this. But one example was like a
35:29
Speaker 3: T shirt factory in some African country where Western businessman
35:34
Speaker 3: went in, set it up, taught them how to do it,
35:38
Speaker 3: and then as soon as they could raise the capital,
35:40
Speaker 3: naturally they did it themselves. So this is a well
35:43
Speaker 3: known I think risk when you're making direct investments as
35:47
Speaker 3: a company or whatever elsewhere, I guess you just figure
35:51
Speaker 3: there's going to be a period of very high profits
35:54
Speaker 3: before the inevitable competition. If I guess trade agreements allow sports,
36:00
Speaker 3: that's another consideration and another reason why protectionist environment like
36:05
Speaker 3: the one we're in and probably will be in for
36:07
Speaker 3: a long time, encourages businesses to jockey for favorable treatment.
36:11
Speaker 3: But it's a well known i'll call it problem, Mike,
36:13
Speaker 3: and I guess businesses just figure, well, they got to
36:15
Speaker 3: make hay while the sun is shining. Competition is inevitable anyway.
36:19
Speaker 2: Yeah, I guess that if you're going to take the
36:21
Speaker 2: very open eyed approach to it, it's very simply. I'm
36:25
Speaker 2: a CEO who has a very short tenure here. My
36:27
Speaker 2: job is to goose the stock price over the next severals.
36:30
Speaker 2: I can do that as I go into China, Yes,
36:32
Speaker 2: exactly right, completely misaligned with the long term incentives as
36:36
Speaker 2: we're seeing with you know, with Tesla and many other
36:39
Speaker 2: companies as well who have done this strategy. But you're
36:42
Speaker 2: right for you know, the several years China arguably bailed
36:47
Speaker 2: Tesla out of completely failing because they needed somewhere cheap
36:50
Speaker 2: to build these cars, and China definitely served that. They're
36:54
Speaker 2: just now eating Tesla's lunch. What do you have for us, Mark,
36:57
Speaker 2: You've got like a minute?
36:58
Speaker 3: Uh, you know, I don't think I'm gonna It's about
37:01
Speaker 3: Boston's biotech sector reeling due to Trump's health policy uncertainty.
37:05
Speaker 3: It's in the Financial Times. I picked it because I
37:07
Speaker 3: thought it was interesting that an international newspaper picked up
37:10
Speaker 3: a story. But now, we're a little Massachusetts center here.
37:13
Speaker 3: It's where we broadcast from, it's where we live, is
37:16
Speaker 3: where we're over taxed, so it caught my eye. There's
37:20
Speaker 3: nothing here that we don't know. But the international investor
37:22
Speaker 3: community is catching on to the fact that, well not
37:26
Speaker 3: catching on in the fact, because it's pretty obvious biotech
37:28
Speaker 3: is in trouble. They're out of favor with the current
37:31
Speaker 3: regime and the universities that feed the research pipeline that
37:35
Speaker 3: ultimately translates into the downstream, so to speak, stuff that
37:38
Speaker 3: biotech does. Their fundings being threatened. So not a great
37:44
Speaker 3: not a great outlook, Mike for the economic model, if
37:47
Speaker 3: you like. That is propelled Massachusetts to the prosperity that
37:50
Speaker 3: we enjoy.
37:51
Speaker 2: Massachusetts, by the way, currently tied for the tenth worst
37:54
Speaker 2: unemployment rate in the country along with Illinois, Colorado, New Jersey,
38:00
Speaker 2: org and Ohio, sitting here at four point eight percent unemployment,
38:05
Speaker 2: whereas this is as of May, whereas the rest of
38:08
Speaker 2: the country is four point two. That's all the time
38:10
Speaker 2: we have for today. Markets remain in negative territory. We'll
38:13
Speaker 2: have a full recap and more for you tomorrow. Have
38:15
Speaker 2: a great rest of your day, folks,