Fed needs to cut interest rates sooner rather than later

Mike Armstrong and Marc Fandetti react to the May retail sales report that came in weaker than expected. Does the Fed need to cut rates sooner rather than later? Boeing CEO calls culture 'far from perfect' as a new whistleblower surfaces. '529' plans are getting a lot more flexible and useful this year. McDonald's to end AI drive-thru test with IBM.

Episode Transcript

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DAV five K Boston is presented byVeterans Development corporation. Face is the Financial
Exchange with Mike Armstrong and Mark Fandetti. Good morning and welcome back to the
Financial Exchange. We continue a weekof financial data out there. At eight
thirty this morning, we receive dataon retail sales. We've got a number

(01:26):
of Federal Reserve presidents speaking today,which I'm sure surprises nobody. Ten am,
eleven, forty am, one pm. Sorry too. At one pm,
one twenty pm, and two pm. We've got Austin Goules be kicking
off little speech. Markster closed tomorrowfor the Juneteenth holiday. We will get
home builder confidence data. Thursday we'llget some jobless claims data as well as

(01:49):
a bunch of housing data, sohousing starts and building permits. And then
finally Friday, we'll get some FlashServices PMI data as well as existing home
sales data coming out on Friday.So a lot more to come. If
it weren't so sad, it wouldbe funny. But we'll be talking about
Boeing's hunt for a new CEO.But let's start off with the eight thirty

(02:09):
am data today that we got onretail sales and mark so far markets reacting
positively, which would seem to indicatethat still bad news is good news,
I suppose, because it's driving downyields. But don't read too much into
what's going on in markets at thisstage because they're just barely positive for the

(02:30):
day. But what did we hearin terms of retail sales data this morning
at eight thirty mark, Well,the gust of it is that they were
up a tenth of a percent monthover month after falling two tenths of a
percent the prior month. So basically, the last two months people have bought
the same amount of stuff that theybought two months ago. Yeah, that's
when you let it out. That'sa decent summary. If you look at

(02:52):
longer term trends in the reel orinflation adjusted change year over year, there's
been a big slowdown from the breakneckperiod of twenty twenty one twenty twenty two
when everything was running hot. Sowhat we've seen over the past couple months,
I think from this survey is consistentwith what we've seen from others,

(03:13):
which is a possible slow down ineconomic activity. Whether or not that snowballs
into something more serious like recession,is what the Fed is struggling with right
now. It ties into the questionof do they ease preemptively or do they
wait until we could see the whitesof a slow down our recession's eyes To
the point, retail sales data isrelatively volatile. So you know, while

(03:36):
street Journal's got a pretty good charthere on previous month's retail sales, and
you take a look going back totwenty twenty two, you had monthly changes
in the one percent range. Forsome reason, in January twenty twenty three,
there was a four percent month ofa month increase in retail sales.
I don't really know what that was, but generally see, generally speaking,
you've seen this hop around between minusone to positive one over the last twenty

(04:00):
four months, but it's been muchmore to the upside throughout twenty twenty three,
in parts of twenty twenty four,and we're finally starting to see a
cool down. I don't think there'smuch you can take away from this one
report to say, oh, arewe heading for lower inflation? Are we
heading for a recession? But whenyou take this with the combination of the
last three months of data on retailsales plus what we saw on CPI last

(04:24):
week, I think it generally pointstowards what the Federal Reserve has been looking
for, which is more trends inthe data to point towards a slowing economy
and inflation continuing to dissipate. Wouldyou take it any other way based on
this data point? In the lasta few months, we learned that economic
output as we measure it, socalled GDP gross domestic product, that was

(04:46):
slower in the first quarter than itwas in the quarter before that, and
in the four quarter average the fourquarter average period prior to that. So
some evidence for economic slow down there, though to your point, one observation
isn't enough sure to make conclusions abouta trend from unemployment has gone up on
inflation and at the same time inflationhas come down. I know it was

(05:10):
only one month's reading, sure,but broader measures of the trend in inflation
confirm that what we saw in thefirst few months of the year may have
been a blip. Yeah, Sothe conversation has shifted. It shifted pretty
noticeably in the past couple of weekstoward how do we manage growth slow down
and prevent it from becoming a recession. It may be premature to conclude that

(05:30):
the economy is slowing enough to warrantFED action, But it's a reasonable question
ask yeah, I think I agree, And the Federal Reserve seems to agree
to. They didn't cut rates lastweek in light of the CPI data.
We'll see what they do July thirtyfirst, but they seem to be saying,
hey, there's some evidence of aslow down, but we're not ready
to move on any of this stuff. And I guess the overall question is

(05:55):
but two questions that I have.One, I don't think I can point
to much in the way of pureeconomic data that contradicts that narrative right now.
Again, we could get some ofthose data points over the next few
months, but I hesitate to thinkof much other than again, continued conflicting
data in the labor market, datathat we get that would point me towards
the direction of saying, oh,we're about to see a resurgence in inflation.

(06:18):
I'm at least comfortable concluding that overthe last month is that most of
the data has pointed in one direction, which has been slow down in growth
and slow down in inflation. Wouldthat be your general takeaway if we're just
looking at the last month of dataor so Yeah, tentatively it is.
I don't see how you could drawany other conclusion. Again, the only
thing that I can think of isthe data on the labor market that we

(06:39):
got from Let's see what it wasthat last week that we got the monthly
jobs report last Friday, I thinkit might have been or the friday before.
The only point in there, Imean you pointed out we saw an
uptick on an unemployment the number ofjobs created according to the Establishment Survey,
plus the average hourly earnings numbers,both of which pointed towards a lot of

(07:03):
hiring and decent wage gains. Sothat's the one data point that I can
look at to say, Okay,according to this one survey for this one
month, you're continuing to see heatin the labor market, if you will.
But there's a fair bit to contradictthat as well. What really encouraged
me came last week. It's nota widely followed statistic, but there's a

(07:26):
Federal Reserve Bank in Cleveland that reportsmedian inflation and a few other measures of
inflation that trim out the extreme movementsno matter what sector those movements come from.
We talk about core, which excludesfood and energy. Categorically, there
are measures that exclude things that jumparound a lot, no matter what sector

(07:46):
they they camp from. The medianis one of those, and median and
other measures that take out outliers havealso come in a bit. That's really
encouraging to me because inflation researchers usethose outlier exclusion if you like statistics,
to get at the trend in inflation. So then when do I'm not talking

(08:07):
about the general public, but whendo we collectively start thinking less and worrying
less about inflation and more about recession. When does bad news right now it
seems, hey, some bad newsof the last month has meant good news
for outlooks on the economy and themarkets. When does bad news become bad
news? Again? Nobody knows?That is been from time immemorial. The

(08:31):
big question for the Fed are theydo they have a good enough grasp on
the current state of the economy andon the short term future state of the
economy to ease preemptively or titan preemptively. That's always the question before the Fed,
and the question, and it's gettinglouder it's being asked by more people,

(08:52):
is should they ease preemptively to staveoff a slowdown or worse. Yeah,
that is the line question. Andyeah, again, there's a lot
of different ways to read this information. But if you took it on its
own without the context of hey,we're in a high inflation environment right now,
or at least we have been forthe last few years. The data
points we just talked about, right, GDP grew slower than we thought,

(09:16):
Retail sales barely budged over the lasttwo months, inflation dramatically, not dramatically,
but cooling over the last month comparedto the previous three data. When
you survey households, when it comesto unemployment, unemployment ticking up, we're
now a full half a percentage pointhigh than the twelvemonth low on unemployment.

(09:37):
That's not quite triggering as rule,based on how they calculate that, but
we're now a half percent higher onunemployment. So that to me is a
big underlying question is when does thisbad news get away from Oh, we're
hitting the perfect Goldilock slow point whereinflation is going to go away towards oh,
this stuff slowing down. It mightbe heading towards job loss in a
recession. Let's take a quick breakwhen we come back. Hammadel Aarian has

(10:00):
been fairly i would say categorically fairlycritical of the Federal Reserve over the last
two to three years on a numberof different points, and he's got a
piece in the Financial Times today onjust that. So we'll talk muhammadel Aarian
and the Fed next on the FinancialExchange. The Financial Exchange is now available
on your alexis smart speaker has toplay the Financial Exchange and catch up on

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visit USBI dot com. Mark.As I mentioned, there's a piece in

(11:09):
the Financial Times by Mohammad al Arianfor those unfamiliar, one of the biggest
bond investors. Ever, I don'tthink did he ever run a portfolio.
I'm not sure he's held management positionsand among other companies, Pimco. He
is kind of a public intellectual.He weighs in on economic debates. I

(11:30):
don't know if he's a trained economist. Yeah, fair enough, but he's
a holds influence and you know,people talk about it when he talks.
He likes to write, so beenfairly critical of the Federal Reserve, and
I don't think there's been a consistentcriticism there in terms of, hey,
rates should be higher or lower throughoutit. I think the criticism that he

(11:50):
has leveled at the Federal Reserve hasbeen you don't seem to have a coherent
policy on where things are going.You keep saying you're gonna be a dependent
and it's important to listen to thedata, but you don't seem to have
an overall narrative of how you wouldreact to the data if it went a
certain way. That's been my readof his criticisms of the Fed over the
last really three years. As Ihave read them, you know here and

(12:13):
there. I don't know if youhave a different conclusion. But his conclusion
right now, at least the titleof his piece here is that the Fed
needs to cut interest rates sooner ratherthan later. What does he lay out
as his criticism of what the Fed'sdoing. He thinks the risks are tipping
toward a growth serious growth slow down, which can always become recession if an
outside shock hits, or just dueto random forces. The FED could,

(12:35):
in theory, if they had goodforesight, preempt a growth slow down and
ward off potential recession. The questionis, is the account that we talked
about this in the last segment.Some of the data over the past few
months have pointed, including this morning'sretail sales report, to a slow down
in the pace of economic growth fromsolid to even frenetic at times over the

(13:01):
past few years, which has helpedpush up inflation, which has of course
come back down. If that's shifting, should the Fed be in response easing
policy? Is inflation under control numberone? Yep? And if so,
if that box can be checked,is growth slowing and as a consequence,

(13:26):
should the Fed be more commodative?Right? Those are very difficult questions to
answer now, obviously see I buypart of his criticism. I do think
that the Federal Reserve has had adone a pretty bad job of messaging exactly
what their outlook is, right.I don't think it's been coherent. I
think it's just been we're going tolook at the data, and then they

(13:46):
get the data, and then theydon't act in the way that you would
expect them to because they haven't reallylaid out what their view on things is.
And I think my point would beeither just don't give us any of
this stuff or put together a coherentview. And that seems to be Elaryan's
criticism. Now, whether or notyou know his point that the Federal Reserve

(14:07):
needs to act sooner than later,I would disagree there. That would be
one conclusion that I don't know thatthe facts are in evidence yet, and
I was trying to find a pieceon this before, but I would be
willing to bet that el Aarian hasforecasted downturns in economic economic activity a few

(14:28):
times over the last few years andhas said that the Fed needs to be
preemptively cutting before just now, sohe hasn't gotten it right. One hundred
percent of the time. Either.My criticism is very simply that, hey,
Federal Reserve, if you're going todo all these speeches and give all
these views, then at least painta picture for what the conditions would be
under certain circumstances. And I thinkthat's where I would level the same criticism

(14:54):
as larian is is. You know, in twenty twenty one, I had
a pretty clear narrative of the inflationstory heating up, and pretty much everyone
would have anticipated the Fed, heyraising rates, and they didn't do so.
And I think that surprised a lotof people. And likewise, I'm
sure there are folks right now thatare surprised. Hey, you know,
FED funds rate is sitting at fiveand a quarter CPI, PCE, no

(15:18):
matter which way you measure, itis sitting around three. Why haven't you
cut rate? Haven't you cut ratesyet? And when is it going to
happen? So I'm critical of theprocess. I'm not really convinced that the
feder Reserve needs to be laying outthe path towards rate cuts quite yet.
I don't know. Look again,this is something that the FED has always

(15:39):
struggled with. They struggle with iton both ends. When things appear to
be heating up, there's pressure onthem to tighten policy. But because you
don't know if the economy is overheating, is growing unsustainably fast, versus experiencing
some sort of fleeting shock that's pushedup pushed up inflation temporarily, it's uncle

(16:00):
what the best course of action is. The problem is we have too many
people like there are several policymakers speakingtoday. It is impossible, even with
the help of all media outlets coveringthose speeches, that we could glean some
sort of compon we as people,consumers, you, me, Tucker,
everybody listening. That's who the FEDis talking to. They're trying to keep

(16:22):
our inflation expectations tempered moderate, somewherearound two percent. That's the whole point
of them addressing the public. Ifwe don't come away with a reasonably strong,
feeling, reasonably strong level of confidencethat they're going to do that,
then there's no point to this is. One commentator called it cacaphony. I've
seen a lot written. I thinkthere are even a few Fener Reserve presidents

(16:44):
who wrote recently about the general public'sabsolute hatred of inflation and how they seem
to hate that a lot more thanthey do recession. And we've talked about
that, and I think they're sridiculouslogical reasons why I agree it is silly.
Would you rather let me ask you, guys, would you rather be
paying five percent more for everything ayear from now or would there be a

(17:06):
fifty percent chance you lose your job? Which would you pick? A rational
person would pick y, Everyone wouldpick A. But the fact of the
matter is inflation impacts every single person, and nobody ever thinks they're going to
lose their job. That's I thinkthe logical piece to it is, you
know, nobody thinks that the recessionis gonna make me lose my job.

(17:26):
I'm too good at it. It'snever going to impact me, whereas inflation
impacts everybody. And there was apiece written again and I forget who wrote
it last week, but you know, when going out and interviewing people,
they asked people about that exact dichonomy, and they said, well, you
know, I did lose my joba few years ago during another recession,
and the fact of the matter was, you know, I had cousins and
friends who still had a job.They were able to help help me out

(17:48):
financially, whereas right now all thosesame people are impacted by inflation. None
of us are able to make endsmeet, and so it's been a more
difficult time for my network overall.And that's why I hate more inflation.
I generally agree with you that look, recession generationally is way worth. Some
things are not comparable, Mike.It's like, would you rather have a
heart attack or cancer? Which doyou hate more? They're both god awful,

(18:11):
and if I've only had one orthe other, I can't really relate.
Here's my question. Do you thinkthe Federal Reserve is taking this public
frustration with inflation into account when developingtheir policy? Because that would be me
because their job is to achieve stableinflation and maximum unemployment. Another way of

(18:34):
summarizing all that, but should theybe taking Americans feelings about inflation into account
because that would be concerned to meis Hey, if your folks is way
more on inflation now because of allthat you've learned about the public's dislike of
inflation, then you may overshoot andcauses to have a recession which you don't
views as bad as inflation. Theyshould. The problem is getting a proxy

(18:56):
for that, something that quantifies itthat you can plug into your model as
an economist and come up with theright, say, balance the interest rate
that strikes the right balance between thosetwo factors, between the risk of economic
slowdown and inflation. Markets remain open. Biggest moves happening today in bond markets,
which are continuing lower. You've gotthe ten continuing higher, the ten

(19:21):
year treasury yield now around four anda quarter percent. We'll have a full
market recap coming up next with WallStreet Watch. Stay tuned, Like us

(19:44):
on Facebook and follow us on Twitterat TFE show. Breaking business news is
always first right here on the FinancialExchange Radio Network. Time now for Wall
Street Watch. A complete look atwhat's moving markets today right here on the
Financial Exchange Radio Network. Well,markets are mostly flat, edging higher as

(20:06):
investors digest this morning's retail sales report, which climbs zero point one percent in
May, just below expectations of azero point two percent increase. Investors are
also monitoring bond yields ongoing right now. The Dow is up by seven points,
s and P five hundred is upby ten points, and the Nasdaq

(20:27):
also up by ten points. Russelltwo thousand is flat. Ten year treasure
yield is down by two basis points, now at four point twenty five percent,
and crude oil up by one percent, trading at eighty one dollars and
eighteen cents a barrel. Struggling electricvehicle maker Fisker filed for bankruptcy merely a

(20:48):
year after releasing its first electric carmodel, the Ocean SUV. Fisker joins
the latest group of ev startups thathave ran out of money, including Lordstown
Motors and bus manufacturer Arrival. Meanwhile, Broadcom pulling back slightly today after its
recent rally, down by one percent, as investors had been celebrating its quarterly

(21:11):
earnings beat last week and the announcementof a stock split. Other chip makers
today, including Qualcom, Micron Technology, and Taiwan Semiconductor, are seeing gains
of over three percent. Elsewhere,Boston Scientific announcement will acquire medical device maker
Silk Road Medical for about one pointtwo six billion dollars. Silk stock is

(21:33):
surging by twenty four percent, whileshares in Boston Scientific are flat. Leonardo
down by two and a half percentafter posting stronger than expected quarterly profit and
revenue however. Revenue, however,the home builder posted a disappointing outlook Philip
Morris down by three quarters of apercent after the company's sales of its zen
nicotine pouches were suspended on its websiteas Washington officials are investigating its compliance with

(22:00):
the district's ban on selling flavored products. And as a reminder, US markets
will be closed tomorrow in observance ofthe Juneteenth holiday. On Tucker Silva and
that's Wall Street watch. Boeing CEODavid Calhoun is set to testify today as
new whistleblower comments have now surfaced,so he'll be testifying in front of Congress.

(22:21):
And I think it might be helpfulto go back and look at the
last six years of history when itcomes to Boeing for a moment here and
kind of take a look at thetimeline. So October of twenty eighteen was
when a Lion Air Max plane crashedin Indonesia, killed one hundred and eighty
nine people on board. The FAAand Boeings that they were evaluating after that
some potential software designs. In Marchof twenty nineteen, less than six months

(22:47):
later, in Ethiopian Airlines, Maxcrash killed one hundred and fifty seven passengers
on board. Sort of embarrassingly,China was the first aviation regular to actually
ground the Max. Following that,the FAA formed an international team to review
the seven thirty seven Max in Aprilof twenty nineteen, Let's take a look

(23:07):
here. In September of nineteen,Boeing's Board of directors created a permanent safety
committee. In October of nineteen,they fired Kevin McAllister, the top executive
of the Commercial Airplane Division, afull year and a half. Almost a
year and a half after the firstcrash, they finally ousted CEO Dennis Muhlenberg.

(23:29):
In the wake of the two crashes. In January of twenty twenty,
Boeing suspended seven thirty seven production.Let's see. In September of twenty twenty,
and eighteen month investigation by the Houseof Representatives found that Boeing failed in
its design and development of the Max. Let's keep going here. In April

(23:52):
of twenty twenty one, Boeing haltedthe seven thirty seven Max deliveries after electrical
problems regrounded part of the fleet.In November of twenty twenty one, Boeing
and the directors reached a two hundredand thirty seven and a half million dollars
settlement with shareholders to settle lawsuits oversafety. But in October of twenty twenty

(24:14):
two, FAA tells Boeing that somekey documentations submitted as part of their review
of the Max are incomplete and theyneed a reassessment. Boeing then paused in
April twenty twenty three the delivery ofseven thirty seven Max with a new supplier
quality problem involving non compliant fittings.The first delivery of the Max seven is

(24:34):
delayed until twenty twenty four. Thatwas back in July of twenty twenty three.
When did the door blow out?There we go January of twenty twenty
four, a mid air cabin blowout, that was January. It was compels
Alaska Air to perform an emergency landingand it's recently acquired seven thirty seven Max

(24:55):
nine aircraft, prompting the FA toground one hundred and seventy one of these
jets. In February, NITSA sorry. The National Transportation Safety Board NTSB published
its preliminary report on the Alaska Airlinesproblem. And then we've continued to have
a litany of different issues spirit Aerosystemsdisclosing some problems. There was the issue

(25:22):
last week, I think it wasof the seven eighty seven Dreamliner. No
titanium, counterfeit titanium was put inthere. And now you have a new
whistleblower who is alleging that faulty partswere handled at the seven thirty seven factory.

(25:44):
So Calhoun is facing questions as hehas for the last several years about
the airline and there seemingly massive cultureproblems, acknowledging here that the culture is
far from perfect and facing a numberof different questions. I love one of
them from Senator Richard Blumenthal who notreally a question but quote, Instead of

(26:06):
asking what caused Boeing safety culture toerode, you and your colleagues in the
C suite have deflected blame. Iagree, looked the other way quite possibly,
and catered to your shareholders instead.Well, let's talk about that shareholder
piece for a minute, because Ithink that's important to highlight. Over the
last five years, Boeing shares havelost fifty three percent of their total value.

(26:26):
So if they are catering to shareholders, then they're doing an expletive job
of it. They're doing a badjob of catering to those shareholders, if
that's what they are focusing on rightnow. During that same time period,
by the way, the S andP five hundred is appreciated by eighty five
percent, so you're looking at aboutone hundred and thirty one hundred and forty
percent differential in terms of how Boeingis compared to the overall S and P

(26:51):
five hundred in terms of price performance. I don't know what else to say
about this company other than they havehad now six years of almost constant issues
and errors in what was admittedly acomplex process, but a company that seems
to have completely lost the confidence ofeverybody around it. Yeah, this illustrates

(27:11):
for me the risks of owning individualcompanies. There are some excellent investment managers
who visit Boeing regularly, and noC suite people, no management people who
didn't pick up on the extent ofthe Rot'd be careful, I guess before
buying any individual company, no matterhow essential. Yeah, I mean,
this was the I think I canthink of no other company that better represents

(27:37):
exceptional American manufacturing. Prior to twentyeighteen. Yeah, and because of that
performance difference, As you said,Mike, if you had invested a dollar
in a broad market index five yearsago, you'd have about two dollars today
on a total return basis dividends plusappreciation. If you put that same dollar
just in Boeing, which a lotof Boeing employees did, probably none listening

(27:57):
to this because they to be inthe Northwest, Yeah, you'd have fifty
cents. So to your point,there's a fiduciary potential fiduciary liability too.
I'm sure. Therefore, when Kparticipants have sued probably management for mishandling the

(28:18):
series of issues. I think italso shows up here in their search for
their CEO, which again is justkind of embarrassing here, but you're taking
a look here. They're hitting somesnags on the CEO search because seemingly nobody
wants the job. Apparently they hadapproached ge Aerospace CEO Larry Culp, who
had declined Boeing's request to consider takingover. There's a few candidates, Stephanie

(28:44):
Pope who's internal to Boeing, andPat Shanahan who are considered. But Stephanie's
kind of part of that rot froma lot of outside perspectives that people are
trying to avoid. Spirit Aerosystems hasfaced a whole bunch of issues with Boeing
in terms of quality control of theirown And then I love this one.
David Gitlin, one of the company'sowned directors, in an aerospace veteran,

(29:07):
also declined an approach to the topjob at Boeing. So not only do
they have all these culture problems,and the CEO has told the general public
that he's planning on stepping down,but they don't seem to be able to
find a candidate that wants the job. And likewise, I've brought this up
before, but looking at those candidates, there's only one of them who has

(29:29):
any actual engineering education and experience.It's the CEO of Spirit aero Systems,
Pat Shanahan, who, for reasonsthat I mentioned with Spirit Aerosystems own quality
control problems. I'm not sure isthe perfect fit for the job right now,
but he at least has an engineeringdegree and an MBA. Every other
candidate that I've looked at here rightCEO Larry Culp, NBA candidate or NBA

(29:52):
holder Stephanie Pope held the CFO positionof a few of the business units,
no engineering background. The Dave Gitlinthat I mentioned one of the company's director's
NBA plus a law degree. Andagain I'm not criticizing the NBA. Chuck's
been critical of that before. I'mnot. I think it generally requires a
lot of effort and know how anda lot of things. But if you

(30:15):
are trying to send a message tothe general public and shareholders that you're working
on a turnaround of this company,I think the worst thing you can do
is put somebody in charge of itthat has zero engineering back. That'd be
like putting a non economist in chargeof the FED. What idiot would do
that? Oh wait, the lasttwo presidents did. Sorry, yeah,
we did do that. Let's takea quick break when we come back.
Bunch of changes to five twenty ninegoing into place this year and over the

(30:38):
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plan or a college savings plan,they get sponsored generally by each individual state.
Some states offer some state tax deductionsfor putting money into them, but
the easiest way to think of themis that they kind of serve as a
similar tool to a roth IRA,but specifically for higher education expenses or education

(32:20):
expenses of one sort or another.And one of the biggest complaints and concerns
that I heard about in the pastwas that if you overfund one of these
things, you're going to end uppaying a bunch of taxes and penalties to
get the money back out. Andthat's one of the key things that they
actually did away with in these newchanges. So one of the things that

(32:42):
you're now allowed to do with thesecollege savings plans is you can take tax
and penalty free rollovers from any unusedfunds. So let's say your kid ends
up being I don't know what dothey give scholarships out the next video gaming
expert and gets a full ride tousc to be on their Fortnite team,

(33:05):
And you've funded one of these collegesavings plans. In the past, it
was like, all right, howdo I Maybe I can switch it to
another beneficiary, maybe my other kidwon't get that same Fortnite scholarship. But
today what you can now do istake money out of that plan every year
and contribute to a roth IRA againfor that child. It's not going to
be for you, but again findinga way to get that money out.

(33:25):
The other piece of this, they'renow allowed to use these college savings plans
for private high school or any numberof different other causes. It can be
used for books for room and board, but that's always been the case.
And there's also some new favorable treatmentfor accounts that are owned by grandparents.
So these used to be included inbalances when applying to things for like financial

(33:50):
aid, and those rules have changednow to call it go ahead. So
this is like insurance. This makesit By that, I mean give you
an option maybe a better way tothink about it as an option to convert.
So whether or not you think thesefunds will be used, and we're
all hoping for the scholarship opportunity obviously, but whatever your situation, if you

(34:14):
qualify for a five to twenty nine, you should contribute. This extends the
tax free compounding power of a wrothover another generation. Right, you get
decades more tax free Even if youknow in the back of your mind,
look, this is probably going toget rolled to a wroth eventually, assuming
they don't change the law yep,which they probably can't. They'll grant father's
previous contributions. This gives you decadesmore of tax free compounding. It becomes

(34:37):
a far more compelling reason to doall of this. Now, you know,
we can not beger contribution limits thana roth, right, Yeah,
significantly higher. It basically puts youin the gifting limits. There is actually
I should take that back. Whenyou convert this money over to a WRATH,
you do have to meet the annualcontribution limits. So let's say your
kid gets a hot shot job rightout of college and earn too much to

(35:00):
be able to contribute to a ROTH. This money can't go into that ROTH
anymore. Let's say that they're puttingtoo much money into their own retirement plan
and they go over the contribution limits. Again, you can't put this money
into it, Okay, So whati'll call the rollover is subject to ROTH
contribution limits. Correct. So thereare, like anything, that Congress creates
a whole lot of complicating factors toall of this, But in my view,

(35:22):
it makes the offering of the collegesavings plan all the more compelling,
especially if you believe the tax ratescould go up in the future. If
you have not educated yourself about collegesavings as an overall goal, if that's
on your list of items to do, maybe it's for your own kids,
maybe for it's for your grandkids,and you're looking to find a way to

(35:43):
build out that financial legacy, callthe Armstrong Advisor group and learn a little
bit more. We'd be happy tosit down with you and build out your
overall college planning and succession planning strategy. The phone number is eight hundred three
nine three four zero zero one.We've got locations throughout New England. Happiness
that down with you and build outyour strategy. Numbers eight hundred three nine

(36:04):
three four zero zero one. Theproceeding was paid for by Armstrong Advisory Group,
a registered investment advisor. Nothing inthe ad or in any Armstrong guide
a specific financial, legal or taxadvice. Consult your own financial tax into
state planning advisors before making any investmentdecisions. Armstrong may contact you to offer
investment advisory services. McDonald's ending apartnership that they had with IBM, who

(36:27):
apparently either the product or the entireidea is not quite up to snuff.
McDonald's have been testing out an AIdrive through test with IBM. I don't
think it requires a whole lot moreexplanation other than to say a artificial intelligence
computer was in charge of taking thoseorders, and according to data from CNBC,
it's going to be killed no laterthan July twenty six, so must

(36:52):
not have worked terribly well I thinkI no, no, you got no.
I was just going to say,like, I don't understand the purpose
of this. Is this supposed topredict what the customers want to eat?
No? No, no, no, no no, what's the purpose of
this just to have Basically it's Ithink basically just a like a Alexa or

(37:16):
a hey Google orders as opposed tohey, porky, maybe you don't need
a ten piece McNugget, maybe youshould go with it. Well that was
probably the problem is that these aisare not quite up to snuff, and
apparently we're screwing up the orders allover the places. Yeah, hopefully they
weren't criticized one salad coming out,But I mean, look if we we

(37:40):
didn't get any data from this,because who knows exactly what these things were
saying. But I mean from thereports of the Google AI, like it
was telling people to eat rocks andput glue on their No, it's just
couldn't get a clear read on theirorder. Right. It says it was
attributable to accents and die whatever thatdialects are. I don't think of Americans
as having dial X. And thisis in Spain. No, we don't

(38:01):
speak you ever spoken to somebody fromthe swamps Louisiana. No, would you
call that a dialect. That's adifferent I am not a linguist. Does
that consider a dialect. Let's takea quick break when we come back.
A lot more to come in thesecond hour of the Financial Exchange, and
including hikes in one of the largestpieces of inflation that's coming up next on

(38:22):
the Financial Exchange