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Garbage stocks are on fire again · The Financial Exchange Show

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Speaker 1: donation today. This is the Financial Exchange with Chuck Zada
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Speaker 1: and Mike Armstrong.
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Speaker 2: Chuck, Mike, and talk with you here on the financial
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Speaker 2: exchange and the rebound that kicked off yesterday when I
1:20
Speaker 2: made again like I hate to break it to you,
1:22
Speaker 2: but if you thought the US was actually going to
1:24
Speaker 2: like attack Europe over Greenland, maybe sit this one out
1:28
Speaker 2: a little bit, because you know, it was pretty obvious
1:31
Speaker 2: that wasn't going to happen. So the relief rally that
1:34
Speaker 2: started when President Trump you know, said as much, is
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Speaker 2: continuing today. And so you've got the S and P
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Speaker 2: five hundred up another forty two points, the Dow Jones
1:44
Speaker 2: Industrial Average up three hundred and ninety four points, and
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Speaker 2: the Nasdaq Composite up two hundred and six points, so
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Speaker 2: all three major up into major US indices up anywhere
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Speaker 2: from two thirds of a percent to nine tenths of
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Speaker 2: a percent. Russell two thousand, which by the way, it
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Speaker 2: has been, you know, kind of crushing it this year
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Speaker 2: so far, up one and a quarter percent as well.
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Speaker 2: So those cute little small caps are having their day
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Speaker 2: for the first three weeks of the year at least
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Speaker 2: tenure US Treasury selling off just a touchdown one point
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Speaker 2: eight I'm sorry, up one point eight basis points to
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Speaker 2: four point two seven to one percent. Dollar index is
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Speaker 2: selling off as well, down point three one percent to
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Speaker 2: ninety eight twenty six, and we've got gold up another
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Speaker 2: thirty five seventy announced to forty eight seventy three and
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Speaker 2: twenty cents. Crude oil West Textas Intermediate down eighty eight
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Speaker 2: cents of barrel to fifty nine seventy two. The TRIPAA
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Speaker 2: National averagur gas prices though, up one point seven cents
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Speaker 2: to two dollars and eighty five cents basically where it
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Speaker 2: was a month ago. We've kind of been holding anywhere
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Speaker 2: in the two eighties over that time period. So those
2:55
Speaker 2: are the major market happenings today, and we can things
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Speaker 2: off of their top story this hour piece from the
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Speaker 2: Wall Street Journal, the uproar over affordability is coming for
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Speaker 2: insurers now. Few things. Number one, Mike in the aggregate,
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Speaker 2: is there any class of companies more disliked by Americans
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Speaker 2: than insurers?
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Speaker 3: No, I would specifically say, you know, we're talking about
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Speaker 3: home and auto insurers. I think health insurers probably are
3:30
Speaker 3: the but just like it's just hated demo, But yeah.
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Speaker 4: Insurance companies generally not well liked.
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Speaker 3: No, No, I hesitate to think of any industry less
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Speaker 3: less liked by the America's.
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Speaker 5: On the phone with them over an hour yesterday. It
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Speaker 5: was fantastic, how tod go, I bet it was, dude,
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Speaker 5: I don't have enough time to go through it.
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Speaker 4: Maybe cable companies.
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Speaker 5: Let's just say things escalated quickly. Oh and I had
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Speaker 5: to remind them I was a customer of theirs.
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Speaker 2: Oh oh yeah. Well in any case, so fun. So
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Speaker 2: most people generally don't like insurers. I'm not here to
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Speaker 2: say whether that's fair or not. I'm just stating the facts.
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Speaker 2: And so given what we've seen from insurance rate increased
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Speaker 2: in the last few years, that feeling has grown. Whether
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Speaker 2: you're talking about auto insurance increases, homeowners health like, it's
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Speaker 2: been basically across the board, large increases for the vast
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Speaker 2: majority of Americans for the last three to five years,
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Speaker 2: and so. Earlier this month, New York Governor Kathy Hockel
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Speaker 2: decided to advocate for profit caps on insurers. In order
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Speaker 2: to basically say, I'll quote you from the Wall Street Journal.
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Speaker 2: Her plan would require home insurans with outsized profit margins
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Speaker 2: to lower or justify their rates and review the profits
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Speaker 2: threshold in which auto insurers are required required to refund customers.
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Speaker 2: So here's the thing. Two things are through true at
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Speaker 2: the same time. Number One, no one likes seeing their
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Speaker 2: insurance rates go up as much as they have. Number Two,
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Speaker 2: deciding that there's a right price for insurance is how
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Speaker 2: we got into this position in the first place, and
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Speaker 2: trying to stretch that even further is gonna make it worse.
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Speaker 4: Yeah, most certainly.
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Speaker 6: Well.
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Speaker 4: By the way, New York State is.
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Speaker 3: Not one of those like Florida where it's a non
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Speaker 3: competitive market. I was taking a look at you can
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Speaker 3: actually download the list of insurers who are writing policies
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Speaker 3: in the state of New York. It's between fifty and
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Speaker 3: one hundred different insurance.
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Speaker 6: Companies, not three like Florida.
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Speaker 3: So you do not have a competition problem. Nope, you
5:44
Speaker 3: can go ahead and try and cap profits. I'm sure
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Speaker 3: you can probably legally do so in the state of
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Speaker 3: New York, and there will only be one result. We
5:54
Speaker 3: keep going back to the same solution to our problems,
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Speaker 3: whether it is with rent or credit cards or anything else,
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Speaker 3: is we try and cap the prices. You're doing the
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Speaker 3: same thing by capping profits, and you will see one
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Speaker 3: result only which is a shortage, and in this case,
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Speaker 3: it will be insurance companies saying, great, don't need to
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Speaker 3: issue insurance policies in the state of New York.
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Speaker 6: We will go issue them elsewhere.
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Speaker 3: Instead, just like you have seen in states like California
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Speaker 3: and Florida whose insurance markets basically collapsed over the last decade.
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Speaker 4: Yes, yeah, I guess, have at it.
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Speaker 3: You know, we're only going to see one thing likely
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Speaker 3: occur here. By the way, I do recognize that people
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Speaker 3: are uncomfortable with insurance rates at the national level, according
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Speaker 3: to CPI. Just so we're all on the same page here,
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Speaker 3: I'm looking at the index from CPI for tenants and
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Speaker 3: household insurance in US cities, which I believe would include
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Speaker 3: both renters and homeowners. Insurance and prices are up, but
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Speaker 3: they're up thirteen percent from pre COVID levels.
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Speaker 4: I know it's a big bill.
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Speaker 3: I know that's a lot, but I mean, you know,
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Speaker 3: we're seeing overall price increases since that time period at
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Speaker 3: like twenty eight percent. Food prices are up thirty five percent.
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Speaker 3: This is not really the biggest focus, or at least
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Speaker 3: I don't think it should be the biggest focus of
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Speaker 3: lawmakers at the moment.
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Speaker 2: And this comes from the fact, by the way, that
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Speaker 2: from twenty twenty one through twenty three, property and casualty
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Speaker 2: insurers lost a combined forty three billion dollars during those
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Speaker 2: three years. They then had you know, profits of about
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Speaker 2: twenty six billion and twenty twenty four and about sixty
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Speaker 2: billion dollars last year, so like they're back in the green.
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Speaker 2: But I think that the question on this is like,
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Speaker 2: what is the right level of profit? And the answer
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Speaker 2: is there is none. Because if you want to go through, hey,
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Speaker 2: what's the right level of profit? Then I want to
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Speaker 2: ask you are you willing to ask the other side
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Speaker 2: of that question, Hey, what's the right level of loss?
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Speaker 2: Like when do we start giving money back to insurance
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Speaker 2: companies right now?
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Speaker 3: In the case of banks and some insurance companies, the
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Speaker 3: US government literally did say, well, we can't let them
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Speaker 3: lose that much because we will let them, which is
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Speaker 3: twice do you want to regulate a company is too
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Speaker 3: big to fail? Okay, I get that there's a compelling
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Speaker 3: argument there, We're just not there.
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Speaker 2: It's actually not a compelling argument. Can we like be
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Speaker 2: honest about this for a little bit. The compelling argument
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Speaker 2: is if you're too big to fail. You should be
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Speaker 2: too big to exist and should be broken up. Yeah, yeah,
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Speaker 2: because like that's the compelling argument. Not well, it's gonna
8:43
Speaker 2: be hard to do this and we don't want to
8:47
Speaker 2: be mean to y'all. So Bank of America, Jamie Diamond
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Speaker 2: over there, it's at Chase City Group, Wells Fargo. Yeah,
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Speaker 2: you guys can continue to like just do what you do,
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Speaker 2: and we know you're too big, but please don't fail again,
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Speaker 2: because then we'll have to bail you out. Like the
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Speaker 2: compelling argument is, guys, we bailed you out once, not
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Speaker 2: gonna do that again. You gotta get shrunk, honey. I
9:12
Speaker 2: shrunk the banks, you know, like we we need that
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Speaker 2: because otherwise, now, like quite honestly, you are in a
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Speaker 2: position where it's like, okay, the government is saying, here's
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Speaker 2: the right amount of profit, here's the right amount of loss,
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Speaker 2: and that doesn't serve anyone.
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Speaker 3: Back to insurance companies for a moment here. I, you know, Chuck,
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Speaker 3: you and I talk to clients specifically about their finances
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Speaker 3: all the time, and insurance costs keep coming up with
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Speaker 3: people that I speak to, and I keep mentioning something
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Speaker 3: to people that for some reason. I think there's just
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Speaker 3: a lack of awareness about this and how insurance companies
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Speaker 3: operate and get reinsurance. So I'm just gonna go on
9:49
Speaker 3: a minute tangent here. So if you are XYZ insurance company,
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Speaker 3: you insure a bunch of homes and then you purchase reinsurance,
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Speaker 3: and if you get you know absolutely claw with an event,
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Speaker 3: the reinsurance company steps in and covers some portion of
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Speaker 3: your losses. What they look at, among other things, you know,
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Speaker 3: the risk that you have is concentration risk. And so
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Speaker 3: let's imagine for a moment that XYZ insurance company ensures
10:17
Speaker 3: a ton of homes in coastal New Hampshire. Therein reinsurance
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Speaker 3: rates are going to go up because they have that
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Speaker 3: concentration risk. And uh, you know, if a storm rolls
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Speaker 3: through that area and floods the whole place, then the
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Speaker 3: company itself is going to have a massive problem. So
10:32
Speaker 3: what these insurance companies do in some cases they try
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Speaker 3: and cancel policies for you know, what they think are
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Speaker 3: particularly high risks.
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Speaker 6: You've seen these stories of them flying drones over homes.
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Speaker 3: Or you know, spotting trampolines and just sending cancelation notices.
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Speaker 3: But much more common is if an insurance company has
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Speaker 3: a bunch of concentration risk, they'll just jack up the
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Speaker 3: premiums and they will assume that either hey, okay, now
10:55
Speaker 3: I can cover these increased risks that I have, or
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Speaker 3: a bunch of people will cancel their policy and I
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Speaker 3: won't have to cancel it on them. And so when
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Speaker 3: people talk about, oh, yeah, I shopped for a new
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Speaker 3: insurance policy and I was able to find a much
11:07
Speaker 3: lower rate, that's usually the reason why is your insurance
11:10
Speaker 3: company may be too exposed to your area, and they're
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Speaker 3: not raising premiums because they view you in particular as
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Speaker 3: a big risk, but rather that they, as an insurance company,
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Speaker 3: have too big a risk. And that's why everybody always
11:22
Speaker 3: talks about, yeah, when you go shop every few years,
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Speaker 3: you do have the potential to save a whole boatload
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Speaker 3: of money.
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Speaker 2: Yeah, you should be at a minimum every two years
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Speaker 2: going and looking and seeing if you can get a
11:34
Speaker 2: better deal somewhere else. And it's not to say that
11:37
Speaker 2: you will like there's plenty of times in my own
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Speaker 2: experience where it's been like, Okay, good exercise and not
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Speaker 2: worth it. There's other times where it's like, oh, gee,
11:44
Speaker 2: I can cut my insurance costs by one thousand dollars
11:48
Speaker 2: by doing you know, a couple hours of work to
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Speaker 2: do this. Yeah, I'll take five hundred dollars an hour,
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Speaker 2: you know, equivalent of you know, in the savings basically
11:55
Speaker 2: in order to do this. And it's a worthwhile exercise
12:00
Speaker 2: and so you should be doing it every couple years
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Speaker 2: at a minimum and worst case, okay, there's nothing better.
12:07
Speaker 2: And you know you cost yourself a couple hours of time.
12:10
Speaker 2: That's great. You can always go and watch you know,
12:13
Speaker 2: you know, Law and Order s for you you know
12:15
Speaker 2: that episode you've seen, you know later you can you
12:17
Speaker 2: can put that on hold for a little bit and
12:20
Speaker 2: shop around for some insurance. So there's that. Let's take
12:24
Speaker 2: a quick break here. When we return, we've got trivia
12:29
Speaker 2: and then jobs are bonds, Mike, I just don't.
12:37
Speaker 6: Know, I want to talk bonds. Let's go to bond.
12:39
Speaker 2: Yeah, we've been talking the job market a lot. Let's
12:41
Speaker 2: talk to bond market. Right after this.
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14:19
Speaker 2: Mike, we got a piece in Bloomberg. It's titled why
14:22
Speaker 2: global bond markets are more prone to flash crashes? Why
14:28
Speaker 2: are they?
14:30
Speaker 3: I want to guess debate the premise a little bit
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Speaker 3: here that they actually are. But you did see Japan's
14:37
Speaker 3: bonds jumping more than twenty five BIPs on Tuesday, and
14:40
Speaker 3: a little bit more volatility here and there. I think,
14:43
Speaker 3: by and large, you have some problems with a inflation
14:49
Speaker 3: over the last few years, but frankly with massive deficits
14:53
Speaker 3: across the globe, and I think investors are still getting
14:58
Speaker 3: used to those and be uncomfortable with just how large
15:01
Speaker 3: they have grown at this stage.
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Speaker 6: Do you blame it on anything else?
15:07
Speaker 2: No, I mean I think that I think if you're
15:12
Speaker 2: trying to look at this, So the first thing is,
15:15
Speaker 2: how does one define a flash crash in bonds?
15:19
Speaker 6: Right?
15:20
Speaker 2: What?
15:20
Speaker 3: I don't I wanted to start because I'm not sure
15:22
Speaker 3: that we consider we saw this week in Japan qualifies.
15:25
Speaker 2: No. If you see the Japanese ten year you know
15:28
Speaker 2: treasury selling off by a quarter percent in a day
15:30
Speaker 2: that's not a flash crash. Like a flash crash was
15:34
Speaker 2: back in when was that? Was that twenty eleven or
15:39
Speaker 2: was it twenty ten? It was twenty ten, the flash
15:42
Speaker 2: crash in the United States. So the S and P.
15:45
Speaker 2: Let's use the Dow. Actually, the Dow midway through the
15:49
Speaker 2: day was trading at about ten thousand, eight hundred. Isn't
15:51
Speaker 2: that quaint right now? Mike ten eight hundred on the Dow,
15:54
Speaker 2: which is currently sitting at almost fifty thousand. So the
15:57
Speaker 2: Dow is at ten thy eight hundred, round two forty five.
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Speaker 2: It suddenly started going down and went down about a
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Speaker 2: thousand points in a ten minute span and then bounced
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Speaker 2: right back. That is a flash crash. Something happens quickly
16:11
Speaker 2: without explanation, and you don't know what's driving it. What's
16:14
Speaker 2: happening in bonds, quite honestly, is entirely rational and more
16:21
Speaker 2: slow moving, even if you do have, you know, big
16:23
Speaker 2: moves in a single day. In that investors are looking
16:27
Speaker 2: at the playbook, that that countries and central banks are
16:33
Speaker 2: running throughout the world, and they're saying, now, we're not
16:38
Speaker 2: sure that's really it for us, because let's look at this,
16:43
Speaker 2: let's look at the example of an insurance company, since
16:46
Speaker 2: we were talking about them earlier. Yeah, if you are, actually,
16:50
Speaker 2: let's let's use a pension fund. This will be a
16:52
Speaker 2: better example. If you're a pension fund, well, no insurance
16:56
Speaker 2: company is a good one. So let's say you're an
16:58
Speaker 2: insurance company and you say, okay, I am taking in
17:02
Speaker 2: all of these premiums and I need to pay out
17:06
Speaker 2: claims X, Y and Z down the road if short
17:11
Speaker 2: term bonds. Because again, if if you're you know, an
17:14
Speaker 2: auto insurer, you're you're not buying you know, ten year
17:16
Speaker 2: bonds to deal with that. But if you're an auto
17:17
Speaker 2: insurre and you're looking at even one year bonds, you're
17:19
Speaker 2: looking and you're saying, okay, i'm getting you know, three
17:23
Speaker 2: and a half percent on one year bonds right now,
17:25
Speaker 2: three point seventy five percent on one year bonds. And
17:29
Speaker 2: if there's any inflation, then that's not gonna be enough
17:32
Speaker 2: to cover my claims. And so what you do as
17:35
Speaker 2: part of your book is you say, hey, I need
17:38
Speaker 2: to peel off, you know, five or ten percent of
17:40
Speaker 2: my premiums and not allocate it towards government debt. Instead,
17:45
Speaker 2: I need to put it towards private credit that might
17:47
Speaker 2: mature in that period that yields six or seven percent
17:50
Speaker 2: instead of three and a half, and so what it
17:53
Speaker 2: does on the margin then is okay, the end seller
17:58
Speaker 2: of that bond, the person who's borrowing the money, sees
18:01
Speaker 2: a drop in demand because some of the insurance company
18:05
Speaker 2: money's not flowing there anymore, and in turn the yield
18:08
Speaker 2: has to rise in order to make supply and demand match. Again,
18:12
Speaker 2: this is generally what we're seeing now. It can be
18:15
Speaker 2: exacerbated in short periods of time based on projected changed
18:18
Speaker 2: in monetary policy as it relates to new economic data
18:22
Speaker 2: and stuff like that. That's why when you see a
18:25
Speaker 2: CPI release, bonds might move around a lot, is because
18:28
Speaker 2: it can affect policy projections and in turn supply and demand. Then.
18:32
Speaker 2: So I think all of this is, in my opinion,
18:37
Speaker 2: a rational response to governments printing money left and right,
18:42
Speaker 2: and also noting this is not a US only phenomenon.
18:50
Speaker 2: The reason that we know this is if you look
18:51
Speaker 2: at what's going on with the price of gold denominated
18:54
Speaker 2: in other major currencies, it's going up in those two.
18:59
Speaker 2: It's not just we're not sitting here like, oh gee,
19:01
Speaker 2: gold's gone from like three thousand to forty eight hundred
19:04
Speaker 2: in the US, but it hasn't moved anywhere else. Now,
19:07
Speaker 2: if you will get gold and yen terms and Yuwan
19:09
Speaker 2: terms and euro terms and Australian dollar terms and Canadian
19:13
Speaker 2: dollar terms, like you go down the list. Gold is
19:17
Speaker 2: moving up. And it's because across the board, governments are
19:21
Speaker 2: engaging in UH in actions and policy that represents a
19:27
Speaker 2: threat of higher inflation and or higher nominal growth, and
19:30
Speaker 2: so buyers of bonds are adjusting. Quick break here. When
19:34
Speaker 2: we come back, we get the trivia answer in Wall
19:35
Speaker 2: Street Watch.
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Speaker 1: Time now for Wall Street Watch. A complete look at
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Speaker 1: what's moving market so far today right here on the
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20:00
Speaker 5: Markets adding to yesterday's rally, which was driven by President
20:04
Speaker 5: Trump's terror threat pivot on European countries over Greenland, this morning,
20:07
Speaker 5: investors are digesting delayed November core PCEE data for the
20:13
Speaker 5: latest gauge on inflation, in addition to jobless claims and
20:17
Speaker 5: revise GDP with no surprises. Right now, the Dow is
20:22
Speaker 5: up nearly nine cents of a percent or four hundred
20:24
Speaker 5: and twenty six points highr SMP five hundred up over
20:27
Speaker 5: two thirds of a percent, Nasdaq up one percent or
20:30
Speaker 5: two hundred and twenty nine points. Russell two thousand is
20:33
Speaker 5: up one and a quarter percent, Tenure Treasure reeled up
20:36
Speaker 5: one basis point at four point two six seven percent,
20:39
Speaker 5: and crude oil is down one and two thirds of
20:43
Speaker 5: a percent, rating at fifty nine dollars and sixty two
20:45
Speaker 5: cents a barrel. Procter and Gamble reported mixed quarterly results
20:49
Speaker 5: this morning, where the consumer goods company cut its annual
20:52
Speaker 5: earnings outlook, citing higher restructuring charges. The company also noted
20:56
Speaker 5: it expects commodity costs to ease a bit and act
21:00
Speaker 5: it's prior forecast for adjusted earnings. That stock is up
21:04
Speaker 5: over two and a half percent. Meanwhile, Abbott Labs reported
21:08
Speaker 5: quarterly sales fell short of expectations, though earnings per share
21:11
Speaker 5: slightly beat forecasts. Shares in the maker of medical devices
21:15
Speaker 5: thinking about seven percent. Ge Aerospace shares are off six percent,
21:20
Speaker 5: despite the aviation technology company reporting stronger than expected adjusted earnings,
21:25
Speaker 5: boosted by rebounding air travel demand as well as increased
21:29
Speaker 5: military spending and after today's closing bell, we'll see earnings
21:33
Speaker 5: from Intel, Intuitive Surgical, Capital One and CSX. I'm Tucker
21:39
Speaker 5: Silva and that is Wall Street Watch. And in the
21:41
Speaker 5: previous segment we asked you the trivia question which network
21:45
Speaker 5: to Conan O'Brien moved to after he left NBC. That'll
21:49
Speaker 5: be TBS. Jerome from Beverly, mass is our winner today
21:52
Speaker 5: taking on my Financial Exchange Show t shirt. And we
21:55
Speaker 5: play trivia every day here on the Financial Exchange See
21:59
Speaker 5: complete contest rules at Financial Exchange Show dot com.
22:03
Speaker 2: Mike, we get a piece in Bloomberg Opinion. It's titled
22:07
Speaker 2: rating your four oh one K to buy a house
22:10
Speaker 2: should be an option, And what it talks about is
22:12
Speaker 2: that the Trump administration is proposing, that we don't have
22:16
Speaker 2: any details yet, an expanded plan to allow for owners
22:22
Speaker 2: of four to one K assets to use that those
22:25
Speaker 2: proceeds to buy a property, one would assume without certain
22:31
Speaker 2: penalties and things like that. Now currently in place is
22:35
Speaker 2: a rule that allows for an investor to take up
22:39
Speaker 2: to ten thousand dollars out of any retirement account without
22:44
Speaker 2: any type of penalty if you are a first time
22:47
Speaker 2: home buyer. So there is already kind of a narrow
22:50
Speaker 2: niche that's in place here, but the proposal that's being
22:53
Speaker 2: talked about would expand it to a level that we
22:55
Speaker 2: just don't know because we don't have any specifics the
22:58
Speaker 2: question good idea, bad idea, or maybe idea.
23:04
Speaker 4: I'm torn on this one, Chuck. So I personally am in.
23:08
Speaker 3: Favor of fewer of these rules around what you can
23:12
Speaker 3: take penalties out for ahead of time and allowing more.
23:16
Speaker 4: Flexibility, while also acknowledging.
23:19
Speaker 3: That we prove over and over that we just can't
23:21
Speaker 3: have nice things in this country. We are so bad
23:24
Speaker 3: at handling our finances. And even with the penalties, the
23:30
Speaker 3: rate at which people take withdrawals out of their four
23:33
Speaker 3: oh one K prior to the penalty date is pretty stunning,
23:39
Speaker 3: And so look, I tend to think that I would
23:43
Speaker 3: like to see the ability to take these withdrawals and
23:46
Speaker 3: more flexibility when it comes to all of this.
23:49
Speaker 6: It is your money, after all.
23:51
Speaker 3: But over and over again I'm proven wrong when I
23:56
Speaker 3: look at things like how people use credit cards and
23:58
Speaker 3: the rate at which people withdraw from their four oh
24:01
Speaker 3: one K. I think, honestly, expanding this is reasonable. I
24:06
Speaker 3: think there's a lot of value in home ownership. I
24:10
Speaker 3: don't want to see it expanded to, for instance, the
24:13
Speaker 3: use of funds to buy a rental property or other
24:16
Speaker 3: pieces of property. But I tend to think that, hey,
24:18
Speaker 3: if it's going to be your primary residence, allow some
24:21
Speaker 3: flexibility here.
24:22
Speaker 4: But the question then is where does that stop?
24:25
Speaker 2: Right?
24:25
Speaker 6: So, Okay, what if some.
24:27
Speaker 3: Other situation, my car breaks down and I can't get
24:30
Speaker 3: to work without my car? Should I be able to
24:34
Speaker 3: take a withdrawal of my four oh one K for
24:36
Speaker 3: emergency car repairs? What about if I have medical bills
24:40
Speaker 3: that I need to pay and some of these are
24:41
Speaker 3: already exempt. But it is a long list that you
24:44
Speaker 3: have to think through, and I'm not sure why. You know,
24:48
Speaker 3: home ownership gets a very special exception to all of
24:51
Speaker 3: this ownership.
24:53
Speaker 2: Home ownership gets a special exception to basically everything in
24:55
Speaker 2: our tax code. It does like it's one of the
24:58
Speaker 2: most highly reception I it's one of the most highly
25:01
Speaker 2: subsidized industries in the country. And then we wonder why
25:07
Speaker 2: the cost of home ownership is so prohibitively expensive for people.
25:12
Speaker 2: So here's the thing. I'm of two minds on this. First, Like,
25:16
Speaker 2: I am someone who when I bought my first property.
25:19
Speaker 2: I did use that ten thousand dollars first time home
25:22
Speaker 2: buyer exception in order to buy it because I had
25:26
Speaker 2: no other savings. That was basically all that I had,
25:31
Speaker 2: and I pretty much exhausted my retirement account in order
25:35
Speaker 2: to make a tiny, little three and a half percent
25:37
Speaker 2: down payment using an FHA mortgage to go and buy
25:40
Speaker 2: a property, and combination of factors like timing and location whatever,
25:45
Speaker 2: it ended up working out like really nicely. So Like
25:50
Speaker 2: I'm not going to say that by and large we
25:54
Speaker 2: just shouldn't allow for this to happen, but I do
26:00
Speaker 2: think it raises the question of, okay, ten thousand dollars
26:03
Speaker 2: for a first time home buyer. Ultimately, if we're talking
26:07
Speaker 2: about someone saving for retirement, is it fair to say
26:11
Speaker 2: that that ten thousand dollars is not going to end
26:14
Speaker 2: up making or breaking what their retirement picture looks like
26:17
Speaker 2: at age sixty five or seventy.
26:19
Speaker 3: Probably not, But we can also safely say that ten
26:22
Speaker 3: thousand dollars in today's housing market isn't going to get
26:24
Speaker 3: you a home.
26:25
Speaker 2: It's not. And first of all, do you know where
26:27
Speaker 2: that ten thousand dollars provision comes from? No, it was
26:31
Speaker 2: first made available I believe in nineteen ninety seven. So
26:35
Speaker 2: clearly like thirty years have gone by and it hasn't
26:37
Speaker 2: been index for inflation, so maybe it should be close
26:39
Speaker 2: to like twenty five or thirty thousand, now if you
26:42
Speaker 2: just wanted to do like a simple inflation adjustment to
26:45
Speaker 2: get you there. So you know, that's something where I
26:48
Speaker 2: could look at and say, okay, just expand the first
26:50
Speaker 2: time home buyer, you know, ability to do this. But ultimately,
26:57
Speaker 2: what we're coming back to on this over and over
27:00
Speaker 2: and over, and it's the same thing as the insurance argument.
27:03
Speaker 2: We're not solving the root problem, which is housing is
27:06
Speaker 2: too expensive. We're just giving people access to more funds
27:10
Speaker 2: in order to buy it. Which if you allow people
27:12
Speaker 2: to use more funds to buy the same number of homes,
27:16
Speaker 2: probably just gonna push the cost up even.
27:18
Speaker 6: More, almost no doubt.
27:20
Speaker 3: And you know every other housing proposal that I've seen
27:24
Speaker 3: on this subject is likely to do the same thing.
27:26
Speaker 3: But when it comes to four oh one case, there
27:30
Speaker 3: are huge benefits that are afforded to you while working
27:34
Speaker 3: for an employer that you just can't get from any
27:39
Speaker 3: other type of investment account out there. You can't the
27:43
Speaker 3: contribution limits are higher. They're special rules for folks that
27:46
Speaker 3: are over the age of sixty. There are special rules
27:48
Speaker 3: for those that are over age fifty. They are special.
27:50
Speaker 4: Withdrawal rules, loan rules.
27:53
Speaker 3: There's now the increasing confusion of choice between your traditional
27:57
Speaker 3: versus your WROTH for a one K that have options
28:01
Speaker 3: out there, and there's even special rules if you get
28:03
Speaker 3: laid off in terms of how you can access those
28:06
Speaker 3: funds ahead of your ahead of your retirement. If you
28:12
Speaker 3: are saving in your four oh one K and not
28:15
Speaker 3: sure about whether or not you're doing it right, if
28:18
Speaker 3: you're thinking about stopping saving in your four oh one K,
28:21
Speaker 3: if you're not sure you're saving to the right type
28:23
Speaker 3: of four oh one K, or have too many of
28:25
Speaker 3: them scattered all out there, all around there and trying
28:28
Speaker 3: to assess what to do with them, you are in
28:30
Speaker 3: good company. This is one of the most confusing subjects
28:33
Speaker 3: that is out there, and people constantly ask questions about it.
28:36
Speaker 3: Armstrong would like to help you. You can give us
28:39
Speaker 3: a call at eight hundred three nine three for zero
28:41
Speaker 3: zero one to discuss the complexities of retirement saving, specifically
28:46
Speaker 3: with your employer plan. The number again is eight hundred
28:49
Speaker 3: three nine three for zero zero one, or if you're
28:52
Speaker 3: driving around right now and don't have time to call,
28:54
Speaker 3: you can book a time for us to call you
28:56
Speaker 3: back by visiting Armstrong Advisory dot com.
28:59
Speaker 1: The proceeding paid for by Armstrong Advisory Group, a registered
29:02
Speaker 1: investment advisor. Nothing in the ad or in any Armstrong
29:04
Speaker 1: guide a specific financial, legal or tax advice. Consult your
29:07
Speaker 1: own financial tax into state planning advisors before making any
29:10
Speaker 1: investment decisions. Armstrong make contact you to offer investment advisory services.
29:15
Speaker 2: Piece of Financial Times garbage stocks are on fire again, Mike,
29:18
Speaker 2: Does that make it a dumpster fire?
29:21
Speaker 3: Yeah, it looks like it could be. You mentioned earlier
29:24
Speaker 3: the rally that we've been seeing in the Russell. What
29:27
Speaker 3: you didn't mention is that what percentage of the Russell
29:29
Speaker 3: two thousand is comprised of companies that do not make
29:32
Speaker 3: a profit?
29:34
Speaker 2: About forty percent.
29:35
Speaker 3: Okay, So we are seeing something here, and you know
29:40
Speaker 3: it could be the I don't know, start of something
29:44
Speaker 3: like we saw back in twenty twenty one with memestock
29:47
Speaker 3: mania and other things. The article makes another point that
29:52
Speaker 3: hedge funds are probably hating it.
29:54
Speaker 4: I'm not so sure about that.
29:57
Speaker 3: There are now entire indices dedicated to tracking unprofitable tech
30:02
Speaker 3: companies and the most short, heavily shorted stocks that are
30:06
Speaker 3: out there.
30:07
Speaker 4: Hedgephones are pretty aware of the.
30:09
Speaker 3: Risk of the you know, the short squeeze trade that
30:12
Speaker 3: was orchestrated back in twenty twenty one. And I'm just
30:16
Speaker 3: unsure that they're going to find themselves caught on this one,
30:20
Speaker 3: caught off sides on this one again.
30:22
Speaker 2: Yeah, I tend to agree. And again if they are
30:28
Speaker 2: caught off sides, okay, that's the business like.
30:31
Speaker 3: Yeah, I mean, shame on you forgetting if you are
30:34
Speaker 3: caught off sides on this one this time, and then
30:36
Speaker 3: shame on you on that one.
30:37
Speaker 2: Don't make the same mistake twice. You know, you want
30:40
Speaker 2: to make entirely new mistakes because that's how you learn.
30:43
Speaker 2: But once you've made the mistake, you don't want to
30:46
Speaker 2: make the same mistake twice. I think it's a good
30:48
Speaker 2: principle for just about anything. Let's take a quick break.
30:52
Speaker 2: When we return, we've got stack roue left.
30:56
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32:16
Speaker 2: Mike, I'd like to kick off stack Roulette if that's okay.
32:21
Speaker 6: I'm fine with that.
32:23
Speaker 2: There's a pause.
32:24
Speaker 6: Didn't seem like you're myself mute. And it's not because
32:27
Speaker 6: I didn't like it.
32:28
Speaker 2: It seemed like you wanted to go first.
32:31
Speaker 6: It was rather pregnant.
32:32
Speaker 2: Pause.
32:32
Speaker 6: I agree.
32:33
Speaker 2: In any case, I wanted to talk about this piece
32:36
Speaker 2: from Bloomberg. This is not in the stack. Colleges are
32:41
Speaker 2: letting AI bots help who makes decisions. Let AI bots
32:45
Speaker 2: help make decisions on who to admit. So basically i'll
32:49
Speaker 2: quote here. Uh, consider the application project process at Virginia Tech.
32:54
Speaker 2: In a typical year, students would answer four short essay
32:57
Speaker 2: questions which would be reviewed and then scored by two
32:59
Speaker 2: human readers. Oh, think about that, humans reading essays on
33:03
Speaker 2: you know, should we admit this person to college? A
33:06
Speaker 2: third would be called on if the first two scores
33:08
Speaker 2: very greatly, Oh even another human Look at that three
33:10
Speaker 2: of them. For last year's record fifty eight thousand applications,
33:14
Speaker 2: they were about five hundred thousand essays to read. Okay,
33:18
Speaker 2: this year, both the single reader and AI will give scores,
33:21
Speaker 2: and if there's a discrepancy and additional human reader, we'll
33:23
Speaker 2: then give a score and that's saved and estimated eight
33:25
Speaker 2: thousand hours so far. So here is the suck. Okay,
33:31
Speaker 2: it's literally like, okay, we don't even care enough about
33:36
Speaker 2: you to have a human look at your your application anymore.
33:40
Speaker 2: We're gonna have half the work done by a computer.
33:44
Speaker 2: And then if that computer like disagrees with our person only,
33:49
Speaker 2: then will you get another person who actually reads it.
33:52
Speaker 2: And I gotta tell you, like, the whole problem here
33:55
Speaker 2: is that colleges continue to be evaluated based on how
34:00
Speaker 2: many people they reject. That makes them get rated higher,
34:03
Speaker 2: and so the entire incentive is to get more and
34:05
Speaker 2: more applications because then you can reject more and more
34:07
Speaker 2: kids and then you get rated more highly. Which now
34:09
Speaker 2: you gotta have AI come in and be like, ooh,
34:11
Speaker 2: your say sucks, No, yours is good. I like that
34:14
Speaker 2: you wrote about shrimp, and I like shrimp because I'm
34:16
Speaker 2: an AI. Fine, Okay, this is stupid. At this point,
34:22
Speaker 2: colleges need to get away from the common application. They
34:25
Speaker 2: need to stop taking fifty eight thousand applications at Virginia
34:30
Speaker 2: Tech and actually get back to hey, how many of
34:34
Speaker 2: these people actually are willing to write an application for
34:37
Speaker 2: this specific university instead of just shipping it off at
34:40
Speaker 2: the click of a button because it's on the common
34:42
Speaker 2: app and saying oh yeah, I'll apply there too. This
34:45
Speaker 2: is a problem that they won't address, and so instead,
34:49
Speaker 2: now you're gonna have computers deciding whether or not you
34:52
Speaker 2: get into college.
34:53
Speaker 4: This is stupid, Chuck, Get used to it.
34:57
Speaker 6: What do you think employers are doing.
35:00
Speaker 2: Here's the problem. We're gonna get to the point where
35:02
Speaker 2: we don't actually know any humans, and it's just it's
35:05
Speaker 2: our AI bots dating for each other, being like, oh
35:08
Speaker 2: do you like the OC No, I'm more of a
35:11
Speaker 2: Star Trek fan, Get away from me. Okay, thanks. We
35:14
Speaker 2: won't actually meet instead of like, hey, maybe you guys
35:16
Speaker 2: actually would get together and realize that you have things
35:19
Speaker 2: in common between those two shows and that could be
35:22
Speaker 2: something fun to talk about as you learn about another person,
35:25
Speaker 2: instead of just having your AI talk to their AI.
35:28
Speaker 4: Undoubtedly already there, Chuck, I know it. We are undoubtedly
35:32
Speaker 4: already there.
35:33
Speaker 2: I am when there's a rocket to the planet without AI,
35:36
Speaker 2: I want to get.
35:37
Speaker 6: On, not use dating apps.
35:39
Speaker 3: But is there any doubt in your mind that dating
35:42
Speaker 3: apps are.
35:45
Speaker 4: Not even doing this?
35:46
Speaker 3: Shyly, I am certain that they are boasting about this
35:49
Speaker 3: to their investors, that they are utilizing AI to better
35:53
Speaker 3: match people up.
35:55
Speaker 2: If we're just going to get to know people, like what,
35:57
Speaker 2: what's the point why we would lead?
35:59
Speaker 3: That is what is happening. And I'm sorry, but get
36:03
Speaker 3: used to it. This is not changing.
36:05
Speaker 2: Are used to it. I am not going to get
36:07
Speaker 2: used to it.
36:08
Speaker 3: This is going to permeate more and more areas on
36:12
Speaker 3: the subject, though, Chuck, because this was in my potential stack.
36:17
Speaker 3: The job applicants have been trying to sue companies to
36:24
Speaker 3: require them to tell them why AI rejected them. Effectively,
36:28
Speaker 3: what they are seeing here is that you know, AI
36:31
Speaker 3: is scoring applications for jobs, and you know, getting some
36:36
Speaker 3: candidates to the to the interview round, and others are
36:39
Speaker 3: being flat out rejected. And so they're making the point
36:42
Speaker 3: that hey, like a FICO credit score, I should be
36:44
Speaker 3: able to know on what basis you rejected me, because
36:47
Speaker 3: it's basically just an algorithm that is doing this, and
36:50
Speaker 3: I should be able to fix those things. I don't
36:52
Speaker 3: know that they have any leg to stand on.
36:54
Speaker 2: I disagree with that.
36:56
Speaker 3: Yeah, I don't think that they're going to have any
36:58
Speaker 3: leg to stand on here to be able to sort
37:00
Speaker 3: that out. Also, there's millions of you know, at least
37:06
Speaker 3: tens of thousands of companies that are hiring at any
37:08
Speaker 3: point in time, there are what three credit rating agencies,
37:11
Speaker 3: So it does make a little bit of sense that
37:12
Speaker 3: you would be able to go and look into this
37:14
Speaker 3: sort of things. But yeah, for anyone that's not familiar
37:19
Speaker 3: with this, AI is making all sorts of very big
37:23
Speaker 3: decisions for all sorts of institutions, from non for profit
37:27
Speaker 3: universities to very much for profit companies, and it is
37:34
Speaker 3: to your point becoming, you know, the game on the
37:36
Speaker 3: applicant of how do I submit more resumes and submit
37:39
Speaker 3: more applications and tailor them to the AI that's going
37:42
Speaker 3: to read them, and the company constantly tailoring the AI
37:44
Speaker 3: to try and sort through all those applications and find
37:47
Speaker 3: the right one for their job.
37:49
Speaker 2: The other study on AI just that I thought that
37:51
Speaker 2: was interesting. I forget who put it out in the
37:53
Speaker 2: last day or two is either open AI or anthropic,
37:56
Speaker 2: But basically what they found was that there was a
37:59
Speaker 2: very high correlation between the education level of the person
38:04
Speaker 2: entering the questions and the output level with regards to
38:08
Speaker 2: education coming out. So basically saying like, hey, all AI
38:11
Speaker 2: is really doing is mirroring what you're asking back to you,
38:15
Speaker 2: And so that was kind of interesting that they actually
38:18
Speaker 2: published that, let's take a quick break for the entire
38:21
Speaker 2: rest of the day, and we'll be back at it
38:23
Speaker 2: tomorrow to finish up the week.