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Is inflation making a comeback? · The Financial Exchange Show

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Speaker 1: a donation Today. Face is the Financial Exchange with Mike
1:06
Speaker 1: Armstrong and Mark Vandetti.
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Speaker 2: Good morning and welcome back to the Financial Exchange. It's
1:14
Speaker 2: a Tuesday here and markets are opening in positive territory
1:18
Speaker 2: after what's been quite a bit of volatility so far
1:21
Speaker 2: in twenty twenty five, not significantly to the downside, but
1:24
Speaker 2: about five percent to the downside really since the peaks
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Speaker 2: that were reached back in December on markets. And while
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Speaker 2: last week was jobs week here on the Financial Exchange,
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Speaker 2: this week's all about inflation. At eight thirty am this morning,
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Speaker 2: we received the Producer Price Index. Tomorrow we will see
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Speaker 2: the more heavily looked at Consumer Price Index, and after
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Speaker 2: a stronger than anticipated jobs report, I think markets and
1:48
Speaker 2: investors care quite a bit about these well, frankly a
1:52
Speaker 2: lot more about the CPI than the PPI, but nonetheless
1:55
Speaker 2: they care about both of them. As we head in,
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Speaker 2: we'll also be covering what I think is the most
2:00
Speaker 2: most a local story that we've ever covered on the
2:02
Speaker 2: Financial Exchange regarding a vote in the town of Needham
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Speaker 2: where we are broadcasting from regarding housing zoning. So that'll
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Speaker 2: be the most local coverage that I think we've ever done.
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Speaker 2: But let's start in on inflation for this week. And
2:16
Speaker 2: before we get to the PPI report, let's just talk
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Speaker 2: about the two reports in general, what they seem to indicate,
2:21
Speaker 2: and what investors seem to be caring about at this
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Speaker 2: stage of this market right now, Mark because it doesn't
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Speaker 2: seem to be recession concerns.
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Speaker 3: No, it doesn't, and we'll get to that, I think,
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Speaker 3: and why it might be a mistake to ever too
2:36
Speaker 3: heavily discount the possibility of an economic slow down. We
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Speaker 3: don't have to use the dramatic term recession. We could
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Speaker 3: just talk about the ebbing and flowing of the business cycle.
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Speaker 3: But back to CPI, back to inflation generally, and why
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Speaker 3: we care. It's come down a lot, as you and
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Speaker 3: Chucks out to talk about a lot on this show
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Speaker 3: over the past two years. We don't have to get
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Speaker 3: into why it went up so much special factors due
3:00
Speaker 3: to COVID monetary authorities waiting too long to stamp it out.
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Speaker 3: But it's come down a lot over the past year.
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Speaker 3: The Fed's target is what now about two and a
3:09
Speaker 3: half percent. I'm rounding I think down just a little bit.
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Speaker 3: I think most would consider that to be pretty low
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Speaker 3: and stable. We're not all freaking out about inflation no
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Speaker 3: day to day So in a sense, the Fed's done
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Speaker 3: its job, and in another sense, the Fed's gotten lucky.
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Speaker 3: There are divisions among economists.
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Speaker 2: Dueling arguments on which one is, but regardless tough target results.
3:29
Speaker 3: And this is almost always the case, we're still arguing
3:31
Speaker 3: about the causes of the Great Depression? What help resolve it?
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Speaker 3: So they'll never be a definitive answer. Let's just say
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Speaker 3: where we are today is basically where we want it
3:37
Speaker 3: to be, but it took a long time. So where
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Speaker 3: does the FED go from here? This is what the
3:43
Speaker 3: CPI reports that we pay so much attention to here
3:46
Speaker 3: on the financial Exchange, and everybody in finance is hanging
3:50
Speaker 3: on every word of what this is Why it's important
3:54
Speaker 3: the FED needs to strike the right balance between short
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Speaker 3: term growth and short term price pressure. Those things you
4:01
Speaker 3: can just think about them as inflation and unemployment. They're
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Speaker 3: in perfect tension in the short term. Nine out of
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Speaker 3: ten economist would agree with that state.
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Speaker 2: So I've described this market as bad news is good
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Speaker 2: news economy right now, and bad news is good news market.
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Speaker 2: That doesn't quite apply to inflation, because high inflation is
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Speaker 2: pretty much uniformly bad news and will be received as
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Speaker 2: bad news by the market. But what I meant by
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Speaker 2: that is when you saw indications that the economy is
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Speaker 2: doing well. Over the last few weeks here you've had
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Speaker 2: market sell off, and the jobs report was one of
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Speaker 2: those indications where we created one hundred thousand more jobs
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Speaker 2: than were anticipated and the unemployment rate dropped down. I
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Speaker 2: think most would look at that as hey, that's a
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Speaker 2: sign of a robust economy, and it is, but investors
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Speaker 2: took it poorly because it seems to insinuate the Fed
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Speaker 2: will have a tougher time bringing rates down in the
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Speaker 2: face of higher growth.
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Speaker 3: You don't want an economy that's running too hot. If
4:54
Speaker 3: you keep that general principle in mind, and keep that
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Speaker 3: tension between inflation and unemployment in mind, you won't get distracted.
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Speaker 2: So at eight thirty am this morning, the producer price
5:04
Speaker 2: Index was released. Again, this is not consumer facing prices.
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Speaker 2: There are many that would point to it and say, look,
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Speaker 2: it does feed into what we look at for the
5:12
Speaker 2: overall inflation. But like I said, it is not a
5:15
Speaker 2: heavily traded on or looked at report. But it does
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Speaker 2: factor into, for instance, a number of the different inflation
5:21
Speaker 2: pieces that go into the PCE index, which the FED
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Speaker 2: looks at closely. Expectations, according to market Watch, were for
5:29
Speaker 2: a zero point four percent monthly increase on the overall
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Speaker 2: PPI and a zero point three percent increase on the core.
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Speaker 2: What we got instead was a fair bit lower. We
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Speaker 2: saw zero point two percent bump on the PPI and
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Speaker 2: zero point one percent on core. And so again you
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Speaker 2: may be able to read that markets are slightly positive
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Speaker 2: on this better than expected inflation news. But this is
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Speaker 2: a I think less like I said, less looked at
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Speaker 2: and less forecasted series compared to the Consumer Price Index.
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Speaker 2: So I wouldn't read too much in terms of reaction here.
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Speaker 3: It doesn't help you predict A researcher would say, PPI
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Speaker 3: doesn't help you predict CPI better than past values of
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Speaker 3: CPI alone. It just doesn't add much richness to your forecasting, right,
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Speaker 3: so it gets downplayed.
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Speaker 2: So tomorrow, however, we will receive the CPI and the
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Speaker 2: Consumer Price Index expectations right now zero point three percent
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Speaker 2: for both core and regular CPI two point nine percent
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Speaker 2: year over year, three point three percent if you're stripping
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Speaker 2: out food and energy, and as a few pieces point
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Speaker 2: out here, you can take a look at what we
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Speaker 2: refer to as implied volatility, how much volatility people are
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Speaker 2: expecting upon that release of that CPI report tomorrow and
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Speaker 2: piece here I believe from Bloomberg, Yeah, that traders are
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Speaker 2: bracing for the SMP's busiest CPI day since March of
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Speaker 2: twenty twenty three. What exactly are they saying with that?
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Speaker 2: What do they mean busiest day for CPI since twenty
6:57
Speaker 2: twenty three? It seems to be an insinuation about how
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Speaker 2: much they expect markets to move one way or another.
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Speaker 3: Yeah, they use the VIX as the proxy for implied
7:06
Speaker 3: because you can't really see it risk. The so called
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Speaker 3: VIX is just an estimate of how much the S
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Speaker 3: and P will fluctuate day to day thirty days out.
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Speaker 3: It's an estimate of how much bumpier the ride might
7:18
Speaker 3: be said differently in a month. That's all it is.
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Speaker 3: So I guess as I read it, and I'll admit
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Speaker 3: I only kind of scan this one because I thought, Man,
7:28
Speaker 3: this isn't that interesting to tell you this. It's notice.
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Speaker 2: Intriguing.
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Speaker 3: No, it is, and that can be influenced by a
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Speaker 3: lot of different things. Mike, I don't think any one
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Speaker 3: inflation report is going unless it comes on the day
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Speaker 3: before a FED meeting, and it might change the outcome
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Speaker 3: or their view, which it never will because it's already
7:51
Speaker 3: the dye has already gassed. I don't think any one
7:54
Speaker 3: is or should be meaningful. You need to take I
7:58
Speaker 3: jokingly call you Mike average, a moving average armstrong.
8:01
Speaker 2: You know what you do.
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Speaker 3: He's not really a moving average, but it sounds better.
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Speaker 2: And you like to take a very average.
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Speaker 3: I wouldn't say that, but you like to take the
8:11
Speaker 3: last few months. You do this all the time. I
8:13
Speaker 3: don't find it annoying, but a lot of people probably do.
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Speaker 3: I'm just telling you what I've heard. You take the
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Speaker 3: past few months of data, you smooth it, and then
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Speaker 3: you sort of and that's what taking a few months
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Speaker 3: as it smooths it. Like when you weigh yourself. You
8:25
Speaker 3: don't take one day's wait and say I met my goal.
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Speaker 3: You take it over the average. You smooth it by
8:30
Speaker 3: taking a week and then taking an average. Taking a
8:32
Speaker 3: wisworth and taking an average. That's what we like to
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Speaker 3: do here with data. Don't look at just one data point,
8:37
Speaker 3: look at the last few months, then annualize that. If
8:39
Speaker 3: you like to make it more relatable, but you can't
8:41
Speaker 3: infer a trend from just one that said a big
8:45
Speaker 3: jump would freak everybody out.
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Speaker 2: Yeah, in any case, the reason that Bloomberg wrote this
8:49
Speaker 2: piece is because the options moves on the CPI report
8:54
Speaker 2: on Wednesday are indicating that investors, for one reason or another,
8:58
Speaker 2: are paying a lot of attention to this one. It's
8:59
Speaker 2: probably because of the hot and expected jobs report and
9:02
Speaker 2: curiosity as to how that's going to play out. It's
9:04
Speaker 2: got an incoming Trump administration weeks after. Whatever the reason is,
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Speaker 2: investors are clearly paying a lot of attention to this
9:12
Speaker 2: CPI report. And so, according to this reporting, the S
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Speaker 2: and P five hundred is expected to move one percent
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Speaker 2: in either direction on January fifteen, according to implied volatility.
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Speaker 2: And so I think the message that I take away
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Speaker 2: here is I don't know what the CPI report is
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Speaker 2: going to indicate, but if you get a beat or
9:31
Speaker 2: a miss, you could have markets moving more than one
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Speaker 2: percent in either direction and reaction to that report that
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Speaker 2: comes out tomorrow.
9:37
Speaker 3: And that's rational. I don't want to minimize that. It's
9:40
Speaker 3: new information, the stocks should react to it. That's a
9:43
Speaker 3: bedrock principle of asset pricing. Of basic finance theory. So
9:48
Speaker 3: I don't want to diminish that. But as practice, everybody
9:51
Speaker 3: who does what we do knows very well. It doesn't
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Speaker 3: as you and Chuck like to point out, doesn't make
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Speaker 3: a trend but a big surprise. It could be measurement error,
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Speaker 3: but CPI is pretty precise, or it could be hinting
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Speaker 3: at something problematic.
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Speaker 2: Let's take a quick break. When we come back, I
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Speaker 2: want to talk about the incoming Trump administration. Piece today
10:14
Speaker 2: from market Watch, is Donald Trump inheriting the best economy
10:20
Speaker 2: in history? Sure would be surprising to many, given that
10:22
Speaker 2: he was elected on the premise that it was one
10:24
Speaker 2: of the worst economies in history. But we'll talk about
10:26
Speaker 2: that next. Here on the Financial Exchange text.
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Speaker 2: As Donald Trump takes office, there's a piece from market
11:41
Speaker 2: Watch here on the economy that he's inheriting, and I'm
11:45
Speaker 2: going to quote here. With low unemployment, rising incomes, and
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Speaker 2: inflation down to a third of its peak in twenty
11:50
Speaker 2: twenty two, raises the question of just how good an
11:53
Speaker 2: economy President elect Donald Trump stands to inherit when he
11:56
Speaker 2: enters office in less than two weeks. Obviously, if you
12:00
Speaker 2: sense to anybody across the campaign trail, it was an
12:02
Speaker 2: argument of quite the opposite. It's a terrible economy that
12:05
Speaker 2: needs to be fixed in some way, shape or form,
12:08
Speaker 2: and I'm the man to do it, which is, let's
12:11
Speaker 2: be honest, a pretty successful argument. If you're running for president,
12:13
Speaker 2: it's always about the economy. But you know, you do
12:16
Speaker 2: take a look at president's taking office over the last
12:20
Speaker 2: several decades, and there's few and far between that if
12:23
Speaker 2: you're willing to look at just the unemployment rate, for example,
12:26
Speaker 2: inherited a better one. So Nixon did in sixty nine
12:29
Speaker 2: unemployment rate of three point four percent, George W. Bush
12:33
Speaker 2: did in two thousand and one inherit one pretty similar
12:36
Speaker 2: at four point two percent. But other than that, not
12:38
Speaker 2: a whole lot of experience. The last time Donald Trump
12:41
Speaker 2: took off, as January seventeen, unemployment was sitting around four
12:44
Speaker 2: point seven percent. Likewise, you know, CPI, there are several
12:48
Speaker 2: where it was in the same general area. But I
12:53
Speaker 2: don't think trying to argue who inherited the single best
12:56
Speaker 2: economy at that moment in time is going to be
12:59
Speaker 2: an easy argument to make because structurally, economies are just
13:02
Speaker 2: significantly different when you're comparing one from the nineteen sixties
13:04
Speaker 2: to today.
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Speaker 3: Yeah, that's why you wouldn't use the unemployment rate, because
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Speaker 3: the natural rate, the rate that the economy is capable
13:11
Speaker 3: of providing jobs, that does change over time. So I
13:14
Speaker 3: think that's a great point as I think about some
13:17
Speaker 3: of the examples you mentioned. The economy was slipping into
13:20
Speaker 3: recession in nineteen sixty nine and in two thousand and
13:23
Speaker 3: we know that now the unemployment rate that was a
13:25
Speaker 3: lagging indicator, didn't pick up on that.
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Speaker 2: So could we be slipping into recession? No idea right now.
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Speaker 3: Yeah, there are industrial production capacity utilization, Atlanta FED GDP.
13:38
Speaker 3: Now those are all ebbing or sliding, So there's if
13:42
Speaker 3: we're in recession in six months, you would point in
13:44
Speaker 3: retrospect to those and say there were warning signs. So
13:47
Speaker 3: you never really know. I think the best you can
13:50
Speaker 3: do is try to agree on a set of criteria
13:54
Speaker 3: that you use to judge the economy to given point
13:56
Speaker 3: in time. And I think it's okay to use a
13:57
Speaker 3: combination of inflation, on employment and the so called holy
14:01
Speaker 3: trinity that everybody learns about in first year macro economics
14:04
Speaker 3: the study of the whole economy, but don't put too
14:07
Speaker 3: much stock in the persistence of those things. Don't assume
14:10
Speaker 3: because GDP growth has been strong, which it has over
14:12
Speaker 3: the past year, up way more than trend or potential,
14:16
Speaker 3: depending on your preferred measure, that it's going to continue
14:19
Speaker 3: to be. Don't assume that if we go in a
14:21
Speaker 3: recession in six months, that it's necessarily Donald Trump's fault,
14:24
Speaker 3: just like the one recession was definitely not George W's fault,
14:27
Speaker 3: and the recession arguably in seventy was not Richard Nixon's fault.
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Speaker 2: I would also argue, I mean, look, you always want
14:35
Speaker 2: an American economy that is strong, if you know, just
14:38
Speaker 2: generally speaking, I think most Americans want a strong US economy.
14:41
Speaker 2: If you are a president who's trying to leave a
14:43
Speaker 2: legacy on the overall system, you don't really want to
14:49
Speaker 2: inherit a really strong economy. You don't leave a whole
14:53
Speaker 2: lot of room for improvements when unemployments are already in
14:55
Speaker 2: the low tours, inflation's already in the low No, you're right,
14:58
Speaker 2: mid twos. You want one where deployments sitting at six
15:01
Speaker 2: and say, look at everything that I was able to
15:02
Speaker 2: do in order to bring it all down. And so, look,
15:07
Speaker 2: we've talked a lot about the challenge that Donald Trump
15:09
Speaker 2: faces here. He ran for present on a platform of
15:14
Speaker 2: being the change, and you know, making America greater. You
15:19
Speaker 2: can say great again, you can say whatever you want.
15:22
Speaker 2: When you're inheriting an economy that is already I'm not
15:26
Speaker 2: going to say so good. I'm going to say already
15:30
Speaker 2: at you know what most would describe some of its
15:33
Speaker 2: capacity limitations. When you look at the unemployment rate, when
15:37
Speaker 2: you look at how much lower inflation can get. It's
15:40
Speaker 2: going to be a unique challenging, a unique challenge that
15:43
Speaker 2: Donald Trump did not face the first time in office.
15:45
Speaker 2: He had an economy in twenty seventeen where unemployment was higher,
15:51
Speaker 2: inflation it was.
15:52
Speaker 3: Much all those things we're trending in the right direction
15:54
Speaker 3: Obama left him. And I'm not crediting Obama. I think
15:56
Speaker 3: these things are far more attributable to long run force
15:59
Speaker 3: called cycle. But he inherited a good economy in twenty seventeen,
16:03
Speaker 3: and it did get better because he goosed it with text,
16:06
Speaker 3: with Paul Ryan's tax cuts, and with deregulation, which I
16:09
Speaker 3: think probably helped. A lot of studies show that it did.
16:11
Speaker 2: And there's a lot of the question that I don't
16:14
Speaker 2: have the answer to and nobody does. Is there still
16:17
Speaker 2: additional capacity to absorb things like that? Okay twenty five?
16:21
Speaker 3: Yeah, So given the inflation is already uncomfortably a little
16:23
Speaker 3: bit high, how do you increase the productive capacity? The
16:26
Speaker 3: economy said, differently, echoing the nineteen eighties, how do we
16:30
Speaker 3: grow the supply side? How do you bring more laborers
16:33
Speaker 3: into the labor force? How do you increase productivity? These
16:36
Speaker 3: are supply How do you make energy prices cheaper? These
16:39
Speaker 3: would be supply side effects that you want to bring about.
16:44
Speaker 2: So we've talked about it at length. I think there's
16:46
Speaker 2: any number of different ways to judge this administration on
16:49
Speaker 2: how they do. We've talked about, you know, Mark said
16:51
Speaker 2: the holy trinity, right, unemployment, inflation, What was the third one? GDPP?
16:55
Speaker 2: So yeah, I think I.
16:56
Speaker 3: Would say the trinity so as to not offend my
16:58
Speaker 3: fellow Catholic.
17:00
Speaker 2: Yeah, those are I think as reasonable and as any
17:03
Speaker 2: other other people have texted us. You know, regulation, it's
17:06
Speaker 2: tougher to measure regulation. We talked about there is an
17:10
Speaker 2: actual general registration that you can actually.
17:14
Speaker 3: You know REGs fell under Carter, or many did anyway,
17:18
Speaker 3: I don't think so the average.
17:20
Speaker 2: That's a tough one to measure you. I suppose could
17:22
Speaker 2: look at an interest rates if you are particularly moved
17:26
Speaker 2: by how a president controls interest rates, which they don't,
17:30
Speaker 2: so I don't know how you would attribute that to
17:31
Speaker 2: one person. You could talk about homes for sale, businesses started.
17:35
Speaker 2: There are a few of these that are actually measurable.
17:39
Speaker 2: But I think that's important when we judge any administration
17:42
Speaker 2: on their performance, is okay? How do we set those standards?
17:46
Speaker 2: And doing so ahead of time, I think is also important.
17:49
Speaker 3: I think it's Mike. I think it's futile. I think
17:52
Speaker 3: people will ultimately decide whether or not. They just feel better.
17:56
Speaker 2: In some agree and that's how people will not.
17:58
Speaker 3: Arguing with you. I'm just staying they're going but I
18:00
Speaker 3: don't care about it. But we need well, sure, but
18:03
Speaker 3: you're always gonna upset somebody by telling, and when you
18:06
Speaker 3: tell them the Biden economy has been reasonably strong, with
18:10
Speaker 3: the exception and it's a big one of out of
18:12
Speaker 3: control inflation early on, some people get really upset they
18:15
Speaker 3: tell you're not living in the real world. You're looking
18:17
Speaker 3: at statistics that nobody else pays attention to. And I
18:20
Speaker 3: don't disagree with any of that. The statistics we cite
18:22
Speaker 3: were not made to serve as a thermometer for the
18:26
Speaker 3: health of the average American family or even the economy.
18:29
Speaker 3: They were just meant to get a handle on why
18:31
Speaker 3: there was such a shortfall in production during the nineteen thirties.
18:35
Speaker 3: We had all these unused resources and all this unemployment
18:38
Speaker 3: at the same time. It made no sense to economy.
18:40
Speaker 2: If you have other ideas about how you are going
18:42
Speaker 2: to judge the state of the economy over the next
18:43
Speaker 2: four years, you're welcome to text the show at six one, seven, three, six,
18:46
Speaker 2: two thirteen eighty five. We're happy to bring up your
18:49
Speaker 2: ideas on air.
18:50
Speaker 3: And then we should like track it, keep a scorecard,
18:53
Speaker 3: get a consensus of measures, and then by the measures
18:55
Speaker 3: that you picked. Here's how he's doing.
18:58
Speaker 2: The other piece that is completely ignored by this piece
19:00
Speaker 2: here is he's also Donald Trump inheriting an economy with
19:05
Speaker 2: a deficit the likes of which we have never seen,
19:08
Speaker 2: and I think most comments would expect we would never
19:10
Speaker 2: have gotten to at this stage, and I have no
19:14
Speaker 2: idea what to do with that information, but I think
19:16
Speaker 2: it does speak to the health or lack of health
19:19
Speaker 2: of the economy when you talk about deficits that are
19:21
Speaker 2: ballooning at a pace of six to seven percent a year. Yeah,
19:24
Speaker 2: quick break, We have got Wall Street Watch next with
19:27
Speaker 2: a full market update. We'll be right back on the
19:29
Speaker 2: Financial Exchange.
19:41
Speaker 1: Like us on Facebook and follow us on Twitter at
19:44
Speaker 1: TFE show. Breaking business news is always first right here
19:48
Speaker 1: on the Financial Exchange Radio Network. Time now for Wall
19:53
Speaker 1: Street Watch. A complete look at what's moving market so
19:56
Speaker 1: far today right here on the Financial Exchange right field Network.
20:00
Speaker 4: Well, markets are trading modestly hire as investors ready for
20:04
Speaker 4: a key inflation reading tomorrow morning when the consumer Price
20:07
Speaker 4: Index is posted. This morning, we saw the producer Price
20:10
Speaker 4: Index climb zero point two percent last month, lighter than
20:14
Speaker 4: forecasts of zero point four percent. At the moment, the
20:17
Speaker 4: Dow is up by about a third of a percent,
20:19
Speaker 4: or one hundred and fifty two points, SMP is up
20:23
Speaker 4: by a quarter percent or fifteen points, and the Nasdaq
20:26
Speaker 4: is up by a third of a percent or sixty
20:28
Speaker 4: three points. Russell two thousand up over one percent trading
20:32
Speaker 4: twenty six points higher. Tenure treasure yield is down by
20:36
Speaker 4: one basis point at four point seventy nine percent, and
20:39
Speaker 4: crude oil is down one to two thirds of a percent,
20:42
Speaker 4: trading at seventy seven dollars in fifty four cents a barrel.
20:47
Speaker 4: Southwest there, Southwest Airlines confirmed to CNBC that the airline
20:51
Speaker 4: is pausing corporate hiring and promotion, suspending most of its
20:55
Speaker 4: summer internships and going without some employee team building events
21:00
Speaker 4: date back to the eighties in order to cut costs
21:03
Speaker 4: and improve margins. Southwest shares are up by three quarters
21:07
Speaker 4: of a percent. Meanwhile, shares and KB Home jumping by
21:10
Speaker 4: three percent after the home builder beat fourth quarter earnings
21:13
Speaker 4: and revenue expectations. The company also said home deliveries jump
21:17
Speaker 4: seventeen percent year over year. Elsewhere, a signat Jeweler stock
21:22
Speaker 4: is sinking twenty two percent after the parent company two
21:26
Speaker 4: K Jewelers and Zales cut its quarterly outlook, prompted by
21:29
Speaker 4: a disappointing holiday shopping season as consumers gravitated to lower
21:34
Speaker 4: price points. Teledoc Health announced a partnership with Amazon, where
21:38
Speaker 4: its diabetes, hypertension and weight management programs will be available
21:42
Speaker 4: on the e commerce platform that stock up by one percent,
21:46
Speaker 4: and Tomorrow morning will mark the official kickoff to fourth
21:49
Speaker 4: quarter earning season, where banks including JP Morgan, Chase, Wells Fargo, Blackrock,
21:53
Speaker 4: and City Group will all report ahead of the opening bell.
21:58
Speaker 4: I'm Tucker Silvan, that's Wall Street Walk.
22:00
Speaker 2: I've got the scam of the week here for you.
22:02
Speaker 2: That Tucker just sent us MARKA. This one is particularly
22:08
Speaker 2: easy to spot. I think it is a little bit shocking,
22:12
Speaker 2: but I think we need to continue to bring these up.
22:15
Speaker 2: According to reporting from TMZ, a woman in France has
22:18
Speaker 2: lost eight hundred and fifty thousand dollars in a romance
22:22
Speaker 2: scam tricked by fake pictures of Brad Pitt. The fifty
22:27
Speaker 2: three year old woman was married to a millionaire at
22:29
Speaker 2: the time, fell for a romance scam in twenty twenty three.
22:35
Speaker 2: Pictures of Brad Pitt from a hospital bed because he
22:38
Speaker 2: was apparently undergoing cancer treatment is what she fell for. Here,
22:42
Speaker 2: along with a series of text messages from the scammer,
22:46
Speaker 2: she divorced her husband of the time was sitting on
22:49
Speaker 2: millions of dollars in cash, and sent Brad Pitt eight
22:54
Speaker 2: hundred and thirty thousand euro believing that she was in
22:57
Speaker 2: a relationship with him in order to pay for his
23:00
Speaker 2: cancer treatment, because obviously Brad Pitt not only fallen on cancer,
23:03
Speaker 2: but hard times in this scam, financial hard times. She well, Look,
23:11
Speaker 2: I don't want to jump to any conclusions, but I
23:13
Speaker 2: think clearly, if you're a fifty three year old person
23:15
Speaker 2: who falls for this type of thing, then you have
23:17
Speaker 2: some stuff going on in your mind that isn't working
23:20
Speaker 2: terribly well.
23:20
Speaker 3: To cancel a check really fast? Excuse me?
23:22
Speaker 2: Hold on, Okay, So what are the lessons to be
23:26
Speaker 2: learned from this? I think everyone listening here is like,
23:30
Speaker 2: I would never fall for any of this, and you
23:32
Speaker 2: are probably right. I think the lesson to be learned
23:35
Speaker 2: here is we all probably know somebody who is going
23:39
Speaker 2: through some form of crisis or has gone through some
23:41
Speaker 2: form of crisis over the years, and they are more
23:46
Speaker 2: susceptible to fall to this when they are going through
23:48
Speaker 2: some sort of mental health crisiss. The times where I
23:51
Speaker 2: have seen people fall victim to scams that are albeit
23:55
Speaker 2: a lot less obvious than this one, have been moments
23:59
Speaker 2: like I'd just lost my husband and I'm going through
24:02
Speaker 2: a ton of grief, and I fell for something that
24:04
Speaker 2: I wouldn't have otherwise. I just lost a family member,
24:07
Speaker 2: I'm going through a divorce. So if you know those
24:10
Speaker 2: people and you're responsible for their well being and you
24:13
Speaker 2: know that they are going through those moments, those are
24:16
Speaker 2: the times when you have to be especially alert because
24:18
Speaker 2: I've seen it with people firsthand where they are intelligent,
24:25
Speaker 2: you know, smart, well educated people who still fall for
24:30
Speaker 2: this type of things and it can literally wipe them
24:32
Speaker 2: out as that I'm sure it just did here. And
24:35
Speaker 2: so I don't know that I have any of the
24:36
Speaker 2: tips for this, Like this is a very obvious one
24:39
Speaker 2: that you take a look at the pictures and it's like, Okay,
24:41
Speaker 2: well that's pretty obviously AI and not Brad Pitt sitting
24:46
Speaker 2: in a hospital room, So how would you fall for that?
24:48
Speaker 2: And I don't I can't answer that question, but I
24:50
Speaker 2: will tell you that there are a lot of less
24:51
Speaker 2: obvious ones that people fall for every single day.
24:54
Speaker 3: Yeah, one thing that comes to mind, and this is
24:56
Speaker 3: a little self interested, because we are in the business
24:59
Speaker 3: of helping people manage their money. But if you know
25:02
Speaker 3: someone is financially vulnerable, or psychologically vulnerable, or prone to
25:07
Speaker 3: being more gullible than maybe they should be make sure
25:09
Speaker 3: they have a good relationship with their bank or with
25:11
Speaker 3: a financial advisor. Yeah, someone who can do, say a
25:14
Speaker 3: callback to a trusted relative or friend in the event
25:16
Speaker 3: that they want to release a big amount of money.
25:19
Speaker 3: I mean, we're all going to have to make a
25:20
Speaker 3: decision for a parent or a loved one at some point.
25:23
Speaker 2: The ones that I see that are immensely frustrating, too,
25:26
Speaker 2: is when somebody's clearly dealing with I know a few
25:32
Speaker 2: people actually who have had to deal with relatives who
25:34
Speaker 2: are later in life and very obviously to them dealing
25:37
Speaker 2: with dementia and it's changing their personality in some way,
25:41
Speaker 2: shape or form. I've seen gambling because of this. I've
25:43
Speaker 2: seen online subscriptions or donations to really bogus charities and
25:49
Speaker 2: ruining themselves financially and fighting over control of their financial
25:54
Speaker 2: situation because that is I think a very normal thing
25:57
Speaker 2: that people deal with is they want to have that autonomy,
26:01
Speaker 2: and that autonomy makes them throw money away, vast sums
26:04
Speaker 2: of monch away at you know, things that are very
26:07
Speaker 2: obviously useless resources that they wouldn't be doing if they
26:09
Speaker 2: weren't suffering from that form of dementia. But the act
26:13
Speaker 2: of trying to take control away from that person is ugh,
26:18
Speaker 2: it's just it's heartbreaking anyway, Sorry, I have to move on,
26:22
Speaker 2: but we see the stuff too often. I couldn't help it,
26:24
Speaker 2: but bring it up. The Trump team is apparently studying
26:28
Speaker 2: gradual tariff hikes under emergency powers. The plan would be
26:31
Speaker 2: to boost import duties by two to five percent a
26:34
Speaker 2: month on trade partners. Supporters include a number of Trump
26:38
Speaker 2: advisors on the subject of tariffs. I have no idea
26:42
Speaker 2: what to make of this study the story because the
26:43
Speaker 2: proposal has not even been presented to Trump apparently, so
26:46
Speaker 2: I won't be shocked if Trump tweets or posts on
26:50
Speaker 2: truth Social that this is a bunch of lies made
26:52
Speaker 2: up by Bloomberg and the fake media. But here is
26:55
Speaker 2: the point that I will take it from. It is
26:57
Speaker 2: I hear far too many people saying things like, you know,
27:00
Speaker 2: I hear what you're saying, But I just don't think
27:03
Speaker 2: he's serious about all these tariffs, and I don't think
27:05
Speaker 2: it'll actually come to pass, or you know, I think
27:08
Speaker 2: he's serious about the tax cuts and the changes to
27:10
Speaker 2: social Security, but there's no way he's going to put
27:12
Speaker 2: tariffs on all these countries, and maybe you're right. I
27:16
Speaker 2: don't know. But when we see story after story of this,
27:19
Speaker 2: I become more and more convinced that he and his
27:23
Speaker 2: incoming administration are fundamentally serious about the power of tariffs
27:28
Speaker 2: that they want to utilize in their administration. And I
27:31
Speaker 2: don't know how it's all going to work out. Generally speaking,
27:34
Speaker 2: almost every economist thinks it's a bad idea. But he
27:37
Speaker 2: does have smart, well educated pH d economists who are
27:41
Speaker 2: advising him that it may like.
27:42
Speaker 3: They're smarter than me. He's got to but they're fringy.
27:45
Speaker 3: They're not They don't do a lot of published research,
27:49
Speaker 3: which is the standard by which economists judge one another
27:52
Speaker 3: fairly or unfairly. So my first reaction to Steve Moran
27:56
Speaker 3: and people Navarro and these are Harvard PhDs, So my
27:59
Speaker 3: little master's degree is say that you know they're wrong,
28:02
Speaker 3: and but it's not me being right. It's the whole
28:04
Speaker 3: profession versus it's like people who sort of deny. I
28:07
Speaker 3: hate to bring up a sensitive issue, but there are
28:09
Speaker 3: climate change deniers, some of the metaphysics PhDs. But they're
28:12
Speaker 3: like a fraction of a percent of researchers in the area.
28:16
Speaker 3: So I go with the ninety nine point nine. I
28:17
Speaker 3: don't go with the point one. The point one could
28:19
Speaker 3: be right, but that's probably motivated. That's probably wishful thinking.
28:24
Speaker 3: So I think your statement Mike about most the vast,
28:27
Speaker 3: vast majority of economists hating tariffs, thinking there are better
28:30
Speaker 3: ways to achieve whatever goal it is you want to achieve,
28:33
Speaker 3: I tend to think they're probably right.
28:34
Speaker 2: My main point with all of this is, like you said,
28:38
Speaker 2: we will see what actually gets implemented. We will see
28:40
Speaker 2: what the effect is. Most economists agree that tariffs are
28:43
Speaker 2: a poor way to affect policy, and even the education policy.
28:46
Speaker 3: By the way, what's he trying to achieve here? Is
28:47
Speaker 3: it revenue? Is it making things here? Is it both?
28:50
Speaker 3: Because you can't have both. If tariffs are good at
28:53
Speaker 3: make getting things made here, you're not going to get revenue,
28:56
Speaker 3: So I don't have it. I'm confused about that too.
28:58
Speaker 2: There's a lot of lack of consistency to what the
29:02
Speaker 2: argument is. Sometimes it's we support this country too much,
29:06
Speaker 2: so we want you to spend more on your military.
29:07
Speaker 2: Other Times it's yeah, we want to have a competitive
29:10
Speaker 2: edge when it comes to manufacturing in the US or
29:13
Speaker 2: just other reasons. So I think it does run the gambit,
29:16
Speaker 2: but clearly he sees them as a tool to get
29:19
Speaker 2: partners or adversaries in line. And the more and more
29:23
Speaker 2: we read, the more and more fundamentally serious I think
29:25
Speaker 2: they are about those tools regardless of the potential downsides
29:29
Speaker 2: to the US economy. And that's an important consideration too,
29:32
Speaker 2: is I acknowledge that Donald Trump himself hasn't talked about
29:37
Speaker 2: the downsides, but when you read pieces about his closest advisors,
29:41
Speaker 2: they acknowledge that there are downsides and potential real problems
29:44
Speaker 2: with this strategy that will need to be navigated. Which
29:47
Speaker 2: is why I fundamentally take it pretty seriously that I
29:50
Speaker 2: think it's I think it's likely to happen. Let's take
29:53
Speaker 2: we got to take a quick break. When we come back,
29:55
Speaker 2: I want to talk a little bit about emerging markets.
29:58
Speaker 2: There's a well written piece here today from the Financial
30:01
Speaker 2: Times about emerging markets specifically in twenty twenty five, and
30:06
Speaker 2: beyond quick break, we'll cover that next year on the
30:08
Speaker 2: Financial Exchange.
30:10
Speaker 1: This is your home for the most comprehensive coverage of
30:13
Speaker 1: the economy and the trends on Wall Street. This is
30:16
Speaker 1: the Financial Exchange Radio Network. Find daily interviews and full
30:20
Speaker 1: shows of the Financial Exchange on our YouTube page. Like
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30:38
Speaker 2: He's in the Financial Times pain coming for emerging markets
30:42
Speaker 2: from a Trump trade war. I think they make a
30:45
Speaker 2: pretty compelling case on this argument here. And that's in
30:48
Speaker 2: spite of the fact that when you take a look
30:50
Speaker 2: at valuations. We talk a lot about valuations right now,
30:52
Speaker 2: because the S and P five hundred in the United
30:55
Speaker 2: States is among the most expensive it has ever been.
30:58
Speaker 2: Depending on how you're measuring measuring it on a historical basis,
31:02
Speaker 2: most people would say that the only times it's been
31:04
Speaker 2: in these areas are twenty twenty one and late to
31:09
Speaker 2: early two thousands leading up to the dot com bubble.
31:11
Speaker 2: And so when you take a look at many other
31:13
Speaker 2: parts of the world, you can make a pretty compelling
31:15
Speaker 2: argument that, hey, you know, stocks and emerging markets, for example,
31:19
Speaker 2: are relatively more affordable, and why not. Financial Times I
31:25
Speaker 2: think Lay's out a pretty good case of why not.
31:27
Speaker 2: What do you think are the most compelling arguments for
31:30
Speaker 2: or against this investor? Bet if you will on em.
31:34
Speaker 3: Well, this piece is written by an asset manager. Sure
31:37
Speaker 3: runs a lot of emerging market strategies, including fixed incomes.
31:41
Speaker 3: So the first thing.
31:42
Speaker 2: Though, the writer is the head of emerging markets across
31:44
Speaker 2: asset strategy at UB.
31:46
Speaker 3: So I don't know if he actually runs money or
31:48
Speaker 3: if he's just the public face of the merging market teams.
31:51
Speaker 3: You always got to ask, so who am I listening to?
31:53
Speaker 3: We're reading and do they have but what's their background?
31:56
Speaker 3: Do they have an ax to grind? This person may
31:59
Speaker 3: have a little of an ax to grind because they
32:01
Speaker 3: run strategies that would benefit from a move towards they advocate.
32:05
Speaker 3: If you're investing in emerging So emerging markets, who are they?
32:08
Speaker 3: It's South Korea, It's Southeast Asia?
32:11
Speaker 2: Ex Japan, you've heard of the bricks?
32:13
Speaker 1: Yes?
32:15
Speaker 3: Are they still all emerging?
32:16
Speaker 2: Or Russia?
32:18
Speaker 3: They're still emerging. They're all still emerging, but they are
32:21
Speaker 3: countries that it's a rather condescending term. It's also a
32:24
Speaker 3: rather optimistic term. It implies that they will get somewhere.
32:28
Speaker 3: They're on the way up there, emerge. Somebody made this
32:30
Speaker 3: point a long time ago. It's not mine. I wish
32:32
Speaker 3: I could take credit. So rather than call them the
32:34
Speaker 3: third world, which we used to in the nineteen eighties,
32:37
Speaker 3: rather than call them the developing world, which makes them
32:40
Speaker 3: sound somehow regressed, we call them emerging because it's more
32:44
Speaker 3: politic if you like, Maybe it's but anyway, so they
32:48
Speaker 3: think about that. It is, in and of itself a
32:49
Speaker 3: marketing term. You probably have some exposure to emerging markets
32:53
Speaker 3: in your FOURAL one K. If you own an asset
32:55
Speaker 3: allocation fund like a target date fund, they tend to
32:57
Speaker 3: own a smidge of emerging markets. If you have a
32:59
Speaker 3: PEN fund, the people that run it, the investment consultants
33:03
Speaker 3: and the pensin board, they probably allocate to emerging market strategies.
33:06
Speaker 3: So you may not think this is relevant for you,
33:08
Speaker 3: but it is. You don't always have control over these decisions,
33:11
Speaker 3: but they We all have exposure to emerging markets, directly
33:14
Speaker 3: or indirectly. The point of this piece is tariffs are
33:16
Speaker 3: going to hurt emerging markets because they're big exporters. I'm
33:19
Speaker 3: summing it up at a very high level, but that's
33:20
Speaker 3: how I read it, and of course that's true. But
33:23
Speaker 3: our job as fiduciaries people in a position of trust,
33:28
Speaker 3: stewards of other people's money is to diversify the money
33:31
Speaker 3: that investors in trust to us, and part of that
33:34
Speaker 3: is looking at the global opportunity set of which em
33:38
Speaker 3: emerging markets is. What that stands for is a subset.
33:42
Speaker 3: So as an asset allocator so to speak, Mike, I
33:45
Speaker 3: have to consider emerging markets. But over the short term, sure,
33:48
Speaker 3: if we impose big tariffs on if we impose them indiscriminately,
33:53
Speaker 3: it's going to hurt emerging markets, maybe disproportionately.
33:58
Speaker 2: I think the compelling pace that case that I will make,
34:01
Speaker 2: like the author makes a compelling case against emerging markets,
34:04
Speaker 2: basically that look, you're talking about a trade war and tariffs,
34:07
Speaker 2: it could accelerate decelerate China in particular, China has been
34:12
Speaker 2: kind of exporting disinflation across a lot of the world.
34:14
Speaker 2: What does that mean for inflation globally? What does it
34:16
Speaker 2: mean for growth in a number of developing economies? If
34:19
Speaker 2: interest rates are higher in the US? Like, these are
34:21
Speaker 2: real problems that many will face. I think I always
34:24
Speaker 2: try and bring it back to the average person and
34:27
Speaker 2: what should anyone be doing? And for many people the
34:30
Speaker 2: answer is quite possibly nothing. But I always ask people,
34:35
Speaker 2: can you pretty easily summarize how your retirement investments are
34:40
Speaker 2: allocated today. Like if I asked you that question of, hey,
34:46
Speaker 2: you know, how is your investment investment portfolio aligned? Would
34:50
Speaker 2: you be able to describe it in three to five sentences?
34:55
Speaker 2: Do you know, for example, like Mark mentioned, in your
34:58
Speaker 2: overall portfolio, how much of it is invested overseas? How
35:03
Speaker 2: much of it is invested in emerging markets in China
35:06
Speaker 2: in particular, those are getting pretty granular with the data points.
35:09
Speaker 2: And I'm not sure that I'm not saying that every
35:10
Speaker 2: single person should understand that. But if you, in particular
35:13
Speaker 2: have a big grievance with the idea of investing overseas
35:18
Speaker 2: and you haven't looked at your own investments to see
35:20
Speaker 2: if they align with your own personal goals, then that's concerning. Likewise,
35:26
Speaker 2: if you can't really describe what the purpose of your
35:31
Speaker 2: investments are and how they align with your personal plans.
35:36
Speaker 2: I want to retire at sixty two, I'm going to
35:39
Speaker 2: have to pay for health insurance for a few years.
35:41
Speaker 2: Does my investment portfolio account for all of that? That's another,
35:45
Speaker 2: I guess red flag that I would point out there.
35:48
Speaker 2: If you have questions along these lines, then you're trying
35:50
Speaker 2: to just educate yourself on the subject of how to
35:54
Speaker 2: look at and answer these questions. Please give the folks
35:57
Speaker 2: at Armstrong Advisory Group a call. Sit down with our
36:01
Speaker 2: clients we build out a financial strategy for their future
36:04
Speaker 2: that is plain and easy to understand because it's about
36:08
Speaker 2: your personal goals, not some high in the sky piece
36:12
Speaker 2: that's written about how emerging markets are going to perform.
36:15
Speaker 2: We'll sit down with you, will develop a strategy that
36:18
Speaker 2: meets your goals and then develop the investments alongside it
36:21
Speaker 2: to fit those goals. Give us a ring at eight
36:23
Speaker 2: hundred three nine three four zero zero one. Again, that's
36:27
Speaker 2: the Armstrong Advisory Group. You can reach us by calling
36:29
Speaker 2: eight hundred three nine three four zero zero one.
36:33
Speaker 1: The proceeding was paid for by Armstrong Advisory Group, a
36:36
Speaker 1: registered investment advisor. Nothing in the ad or in any
36:38
Speaker 1: Armstrong guide a specific financial, legal or tax advice. Consult
36:41
Speaker 1: your own financial, tax into state planning advisors before making
36:44
Speaker 1: any investment decisions. Armstrong may contact you to offer investment
36:47
Speaker 1: advisory services.
36:49
Speaker 2: In our hyper local story of the day, the town
36:51
Speaker 2: of Needham, where we are broadcasting our program from, is
36:54
Speaker 2: going to be the latest town to vote over the
36:57
Speaker 2: Massachusetts MBTA zoning rules. It's a little bit different in
37:01
Speaker 2: the town of need Them in particular, there were a
37:05
Speaker 2: couple plans that were proposed and need Them specifically, the
37:09
Speaker 2: town initially decided to go above and beyond what the
37:13
Speaker 2: NBTA community's law requires by allowing zoning for up to
37:17
Speaker 2: thirty three hundred units. I think they were only required
37:20
Speaker 2: to do seventeen hundred. But it passed via the elected
37:25
Speaker 2: select board in the town, and then the residents brought
37:28
Speaker 2: it up for a basically a ballot to be discussed
37:32
Speaker 2: and to have a vote over it, which is occurring
37:34
Speaker 2: to day. Milton voted down their proposal. Just being a
37:40
Speaker 2: resident as well of Needham, I can tell you that
37:42
Speaker 2: it has been highly contentious, especially if.
37:45
Speaker 3: Yeah, I heard somebody sneered at somebody in need Him
37:48
Speaker 3: this morning.
37:48
Speaker 2: Oh it was Yeah, I heard that. Pretty funny.
37:51
Speaker 3: Somebody didn't say God bless you when somebody sneezed.
37:53
Speaker 2: We talked so much about housing affordability, and I'll just
37:57
Speaker 2: be fascinated to hear and see what happened. Is in
38:00
Speaker 2: a small town like Needum, where this issue of housing
38:03
Speaker 2: affordability and zoning is being brought up and whether or
38:06
Speaker 2: not it'll be happening everywhere, hypocritical quick break. Markets remain
38:10
Speaker 2: open and slightly in positive territory. We will have a
38:13
Speaker 2: full recap next on the Financial Exchange