November 5, 2024 • 38 mins
Mike Armstrong and Marc Fandetti discuss Boeing union members voting to end the strike. Did the union get everything it wanted? How will the next President manage a cooling labor sector? Housing construction around Boston has been sluggish. Here’s why that could change soon. Gen Z, millennials are using AI for personal finance advice, report finds.
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Episode Transcript
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Speaker 1 (00:00):
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(01:07):
Face is the Financial Exchange with Mike Armstrong and Mark Vandetti.
Speaker 2 (01:15):
Happy Tuesday, Good Morrian, Welcome back to the Financial Exchange.
On election Day, We've got equity markets broadly in positive territory.
Dow up two hundred ninety points seven tens of percent,
SMP up forty four, closing in on eight tenths of
a percent in the Nasdaq up almost a full percentage
point one hundred and seventy four points, the smaller size
(01:35):
Russell two thousand. By that I mean smaller cap companies
up about eight tenths of a percent as well. Yield
on the ten year Treasury up slightly to four point
three nearly four point three six percent in early trading here,
and price with barrel of oil up another nine ninety
cents one to a quarter percent, sitting at seventy two
(01:56):
dollars per barrel on that West Texas CRUED don't usually
quote crypto prices, but given the attention to the cryptocurrency
markets and bitcoin specifically has gotten from Canada Donald Trump,
i'll mention that Bitcoin also up three and a quarter
percent in early trading so far. Today. We'll come back
(02:16):
to polling data and just where things stand. Again. We
won't have fortunately any significant results coming out during the
broadcast of today's Financial Exchange, but obviously full coverage for
you tomorrow. One election that we did get data on
though last night, was out in Seattle, which was the
Boeing Union vote. Mark you wanted to say something, you go.
Speaker 3 (02:37):
Yeah, Trump, Trump just declared victory.
Speaker 2 (02:38):
Mike at eleven oh seven, mark the tape. Okay Boeing
union votes to end their strike. This is the third
consecutive vote on a labor deal from the Boeing Machinist Union.
Thirty three thousand workers have been on strike now for
I think what has been seven or eight nearly eight weeks,
(02:59):
and finally clearing the way for Boeing to restart their factories.
As you can imagine, with a manufacturing process as complex
as airplanes not going to happen overnight, it's assumed that
it's going to take a few weeks to restart things.
But finally getting this thing done by a margin of
I think fifty nine percent voting in favor of the
twenty some odd twenty six thousand members cast votes, fifty
(03:23):
nine percent voted in favor of that new deal.
Speaker 3 (03:27):
Mark, Yeah, this halted production of the seven thirty seven Max,
so gave the grim Reaper a little break there for
eight weeks. But he can get back to work as
soon as that suckers back up.
Speaker 2 (03:39):
In the air.
Speaker 3 (03:40):
I guess sorry, I had nothing substantive, Michael, No, it's
a good joe, little goofy.
Speaker 2 (03:46):
As part of this deal, workers will see a thirty
eight percent wage increase over the life of this four
year deal for those thirty three thousand machinists. Separately, Kelly Orberg,
the new CEO over there, is cutting seventeen one thousand jobs,
raising more than twenty four billion dollars in equity in
order to keep the company just afloat. They will also
(04:07):
be getting a twelve thousand dollars ratification bonus and a
pledge to build their next plane in the Pacific Northwest.
That promise, to me is completely irrelevant because this deal
is a four year deal and they are not going
to be building any new planes anywhere in the next
four years, but I guess is a indication of where
(04:27):
they intend to keep focusing their investment. The final piece
on this is this deal did not come with any
sort of commitment on reinstating pensions which were killed back
in twenty fourteen. If I am not mistaken, increase four
toh one K contributions as part of this, but not
going to be looking at any sort of pension contribution
or retake on that pension. And really, I think drove
(04:51):
this deal home was the leadership at the union finally
turning and saying this might be the best we're going
to get out of Boeing. So line up and come vote.
Speaker 3 (04:59):
Eight percent year before the increased four to one k.
I think it's a match. There may be some profit
sharing in there, which would actually be encouraging a wine
incentives increase your profit share. I wonder how telling it
is that they didn't budge on pension.
Speaker 2 (05:14):
It's also interesting because if you were going to have
to restart a pension plan and start funding it again,
not the worst time over the last couple decades to
go do so. You've got rates in a pretty solid place.
You can, you know, go out and buy a ten
year treasury at what did I just say? One was
going for four point three percent yield, you know, compared
to where you were in twenty fourteen when they canceled
(05:36):
this thing. You don't have to fund it quite as
much as you previously needed to.
Speaker 3 (05:39):
That can, of course change, of course, and their balance
sheet is in rickety enough shape as it is. Four
to one K doesn't go on it, pension liabilities do.
Speaker 2 (05:48):
It's understandable not that most workers get this choice mark,
but no, how do you evaluate, Like when you look
back at, you know, whether the Boeing workers would have
been better served their pension or their four to one K.
Let's look at this case specifically over the last ten years.
You know, you look at Boeing and we don't know
the specifics off the top of our head of four
(06:09):
oh one K contributions versus pension guarantees. But what's what's
you know, how do you evaluate what's actually better for
that person? Because being invested in a four to one
K over the last decade been pretty darn good for you. Yeah,
pretty darn good.
Speaker 3 (06:24):
Say, it depends on the individual and how risk averse
they are. Like you're taking the chance that at your
retirement date you will or won't have enough when you annuitize.
Most people don't actually buy an annuity, But the right
way to think about it is annuitization. What could I
government insurance company. If I gave them my five hundred
thousand dollars. Four to one k is a lump side.
What would they pay me a month for the rest
of my life? What would they pay my wife if
(06:45):
she survives me? And is there inflation? There are a
little levers you can pull there that affect the premium,
the cost up front of the annuity. So I think
it depends on how risk averse or risk accepting you are.
Thank you better way to put you are, because you're right,
it's been a spectacular there's been a spectacular advantage lately
(07:06):
for equities. There have been other periods though, when the
security of a pension looked really good.
Speaker 2 (07:11):
Yeah, the the pitfalls for the four to one k
are pretty obvious. You know, you screw up investing because
you don't know what you're doing, You don't funded enough,
because it's your choice, the markets don't perform the way
you want. The ones with pensions they're a bit less obvious.
But the risks exist, right, I mean generally with a
pension you're not getting a cost of living adjustment like
Social Security. Most pensions don't offer that. So hasn't really
(07:34):
been a problem for the last five decades. But imagine
that you retire with a pension and we see higher
than average inflation for your retirement. That could be you know,
that could put you in a bad situation. There's the
obvious risk of the company that offers the pension going
belly up. But even there you have the Pension Benefit
Guarantee Corporation, which steps into a point in short, to
(07:55):
a point that you're still paid something, albeit usually not
the full benefit of your pension, but it is I
think on the balance for most people, I would say
the pension is the better. You know, it is ultimately, as.
Speaker 3 (08:09):
You say, not that you have a choice, not that
you can't into one or the other.
Speaker 2 (08:12):
Unfortunately, Yeah, I mean very few people are looking at
jobs out there and saying, oh, well, this one offers
a pension and this one doesn't, And so that's how
I'm going to base my decision. No, most of us
are either in a career that offers a pension, which
is maybe twenty percent of us, and then even that high, no,
probably not five, five or ten.
Speaker 3 (08:30):
Well, unions are less than ten of the private sector
workforce ten percent. Then not everybody in a union has
a traditional defined benefit which is a fancy way of
referring to a pension.
Speaker 2 (08:40):
Play public sector workforce. Almost everybody has them, but yeah, yeah,
it's tough to say exactly what portion are covered by
a pension these days, but yeah, it's just an interesting
thought exercise. If you were given the option to choose
one versus the other, how you would do So it's
it's in one area we actually might see that choice
coming into play. Is insurance companies starting to play a
(09:03):
bigger role in four one K plans, right, you've seen it.
Speaker 3 (09:06):
Yeah, they've They've tried over the last ten to twenty
years to give participants is what this is what we're
called in one K world participants instead of account owners,
but you can use them synonymously to give them the
opportunity to pensionize your distribution by buying an annuity within
the plan. Yeah, it was an iffy area for so
called plant sponsors for a while. It's more accepted now.
Speaker 2 (09:29):
I e. Les so don't see a lot of it,
but it is one of those areas where you actually
might be able to choose. Ye, are people are choosing.
Speaker 3 (09:37):
It that The innovation has been slow because it's not
a popular option and you could do it yourself. You
can roll over to an ir right and annuitize.
Speaker 2 (09:47):
You hypothetically could do So, let's take a quick break
when we come back, going to have a bit of
trivia for you coming up, and then we'll talk a
little bit more about the upcoming election today or the
ongoing election today and what the most recent pulling data
seems to be. Saying quick break, that's next on the
Financial Exchange.
Speaker 1 (10:03):
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(11:45):
Trivia question today, who was the first president to win
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Speaker 1 (11:50):
Once again?
Speaker 4 (11:51):
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Speaker 2 (12:24):
Well, it is a election day in America, and as such,
we kind of want to talk about statistics. And it's
particularly interesting with polling because unlike the statistics that we
review here on the Financial Exchange, you ultimately get an
answer on how close your measurements were, and you get
an answer pretty darn quickly. Like you know, we eventually
do two you know, eventually they do a census and
(12:46):
we get some answers to certain questions about the state
of the labor market toward this, that or the other,
but it often takes years before that data actually comes in. Here,
we've had polling going on for the last I don't
know two years on presidential politics, and we should know
late tonight tomorrow, Thursday at the latest. According to the
(13:07):
most polls, which is just kind of crazy, they seem
incredibly close. According to one source five thirty eight, which
has a model where they take averages of different polls
wait them differently depending on historical accuracy, they have run
simulations that show basically a coin toss. They ran a
thousand different simulations for the electoral college. Five hundred and
(13:30):
three of those thousand came out in favor of Harris,
four hundred and ninety five of them came out in
favor of Trump. Two of them came out with no
electoral college winner, in which case would be tossed I
believe to the house, in which case Trump would likely
win in that scenario, but incredibly close.
Speaker 1 (13:46):
Now.
Speaker 2 (13:47):
There has been some criticism of that closeness, some claiming that, hey,
maybe statistically it's somewhat improbable for the race to be
as close it is as it is right now, and
they're could be a number of different reasons behind that.
But can we talk about that statistical improbability and why
some people are suspect of this data market?
Speaker 3 (14:08):
The problem at its core is that of getting a
random sample. We talk about the unemployment rate every month,
the number of new jobs created. For example, last month
it was a disappointing probably whether related, but a disappointing Nevertheless,
twelve thousand that comes from a sample of employers, and
that sample has an error because we don't know the
(14:29):
real number. We don't go out and ask sure everybody,
much like in these poles. So all samples, all estimates
that come from a sample, have an error. That's why
they say plus or minus two or three percentage points,
and that's why they say. That's why they use the
phrase statistically tied, because the difference is bigger as big
(14:49):
or bigger than the gap between the two. So when
you say a poll has a margin of error plus
or minus three, if it's candidate X at forty seven,
candidate why at forty nine, the margin of error is
bigger than the difference between the two. So statistically they
are the same. The issue is getting the right size sample.
That's addressed in the margin of error that we always
(15:11):
hear a lot about. That's easy enough to do if
you have the resources. Tougher thing to do is getting
a random sample. We don't think about this a lot.
But if you went, for example, into a church. I
used this in the last hour, I'll use it again
and ask people your pro life, your pro choice, everybody's
going to pretty much everybody's going to raise their hand.
I wouldn't just to be a jerk, but pretty much
everybod's gonna raise their hand and say I on pro life.
(15:31):
You can't do an abortion poll in a church. That
sample's biased. You can't pull just people on say cell
phones or on social media about who they like for president.
That sample would be biased towards say, younger people or
wealthier people who can afford the mechanism you're using to
gather the data. So in addition to the size of
(15:52):
the sample, there's randomness issues. And this is what Silver
I think is getting in part at some polsters are
looking at their sample and saying, oh, it wasn't really random.
In the last two election cycles, we missed a bunch of.
Speaker 2 (16:06):
Yeah, in twenty sixteen, that was the big one. They
missed a whole bunch of Trump supporters because they missed
I think the general conclusion there is that they missed
defined the pool of likely voters. They did not capture
those people. That typically weren't voting in elections in presidential politics,
they didn't usually register. They didn't even if they were registered,
(16:27):
they didn't usually show up. They didn't show up at
the last mid term, and so they said that person
favors Trump that, but they might not show up. And
this time around the accusation seemed to go on the
other way, which is polsters, again, according to some of
the accusations, seem so concerned about being wrong that they're
(16:48):
just calling it a coin toss.
Speaker 3 (16:49):
You might wonder, how can he come to that conclusion.
He didn't ask every polster how they conducted their poll,
He didn't dig into every polster's methodology.
Speaker 2 (16:57):
I did not.
Speaker 3 (16:57):
And the answer no, not you silver in this exams,
Yeah no, And we most certainly didn't want to waste
the time. It most certainly did not. The answer is
they don't vary as much as random chance would suggest.
If I flipped a coin, I said this in the
last hour. I'll use the analogy again. I'm just trying
to generalize here and take something away from this. If
I flipped a coin ten times and it came up
heads ten times, you wouldn't have to have seen me
(17:19):
do it. You wouldn't need to inspect the coin. You
wouldn't need to know any of the other variables. You
would say on its face that suspicious chance. The mathematics
of a coin flip tell me it's going to be
fifty to fifty and in a big enough sample ten
times isn't a good example. If I did it a
thousand times and it came up ninety percent heads, you'd
say that coin's loaded. I don't have to inspect the coin.
(17:41):
I don't have to look at you. I don't have
to know anything about the process. That's what Silver's doing here.
He's saying these pulls are suspiciously well aligned. Yep, they
should be. There should be more diverg.
Speaker 2 (17:51):
Is shit, and there isn't. So again, conclude what you
will about that this does indicate, even with some sampling
and hurting, that this seems to be a pretty close race.
That does not mean that the results will be close.
By the way, you know, you could have a blowout
in the popular vote. You could have a blowout in
the electoral college. You could have Trump win all seven
swing states. You could have all sorts of things happen
(18:13):
that don't get really properly defined in polling data like this.
Just because polling data indicates a close race, I will
repeat this again, does not mean that you will get
a close result. It just means that they're having a
tough time predicting what the outcome will be. Yeah, well put,
So I think that's where I would leave it in
(18:33):
terms of, you know, good and bad uses of reading
up on polls. Obviously, betting market's quite different. We talked
about that at the beginning of the show as well.
But betty markets strongly favoring a Donald Trump outcome in
the high fifty percent range. Again, don't I don't really
know what to do about that. And by the way,
betty markets haven't been reliably correct. Betty markets were heavily
(18:55):
favoring Clinton in twenty sixteen because that seemed like the
obvious outcomere all wrong. So I wouldn't say they're any
better than polls at predicting outcomes, Mike.
Speaker 3 (19:04):
They're not. That's not a biased, unbiased excuse me sample.
These are people who are inclined to go online, they're
inclined to gamble, they've got some bucks. They're more likely
to be men said differently than women. So on its face,
you can almost reject that approach in a statistical sense.
It's not a random sample.
Speaker 2 (19:20):
Let's take a quick break. But when we come back,
we are going to have the trivia winner for you,
and then we'll talk a little bit about just the
overall state of labor market. We've got our Boeing workers
back to work, but what does the rest of the
market look like as we head into the next presidential cycle.
Speaker 1 (19:40):
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Speaker 4 (20:30):
Trivia question today was who was the first president to
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Speaker 2 (21:09):
Whoever is next president, is going to be inheriting a
labor market that, whatever you want to say about it,
is distinctly weaker than it was eighteen months ago. I
think we can all agree that.
Speaker 3 (21:20):
They're more normal.
Speaker 2 (21:20):
I don't know, yeah, I mean, however you want to
describe it, it's not as tight as it was eighteen
months ago. If that's normalization, if that's weakness, fair, whatever
you want to call it. But you know, it's always
easier to compare something to something else than describe it.
If you were to look at only and I know
you hate doing this, but if I were to look
at one data point that you think best sums up
(21:43):
the state of labor market and like evaluated of the
last eighteen months, what do you think is easiest to
look at it in unemployment?
Speaker 1 (21:50):
Right?
Speaker 2 (21:50):
I was going to go there too, right, the old
standby I think as actually doing a pretty good job
of summarizing what's been happening with the labor market over
the last eighteen months. And let's go ahead, And I
didn't have this pulled up, but I will pull up
the unemployment rate over the last couple of years to
just help people understand where we are right now and
(22:11):
what it might indicate about where we're going. So obviously,
March of April of twenty twenty, when we read the
unemployment rate, it wasn't looking so good. Came in at
fourteen point eight percent. I don't know the last time
we got that high.
Speaker 3 (22:23):
We might not have ever gotten nineteen mid nineteen thirties probably.
Speaker 2 (22:26):
Yeah. By you know, late twenty twenty two and early
twenty twenty three, we were getting to crazy low rates
of unemployment. So when I take a look at this,
I think the low that I saw in twenty twenty three. Yeah,
April of twenty twenty three we hit a three point
four percent unemployment rate. That is also pretty unheard of.
(22:47):
We have very few instances where things have gotten that low.
Speaker 3 (22:50):
The lowest since the nineteen sixties, only incidents prior to that.
The State of said only goes back in nineteen forty seven.
You're looking at it was the nineteen forties.
Speaker 2 (22:58):
Slowly, over the of about a year, you saw that
start ticking up, and by July of this year we
got to four point three percent. It's now ticked back down.
We're sitting at four point one percent. But I think
that does a pretty good job if I'm just looking
at like a five year trend of explaining where we've
come and gone. We were in late twenty nineteen at
a really low rate of unemployment rate again back in
(23:20):
the mid threes, we shot up to fifteen, we got
back down to the mid threes, and now we're back
in this kind of normalization period, and it just begs
a question that I don't have an answer to, is
does that trend continue And I'm talking about the longer
one year trend of rising unemployment slowing job gains or
(23:42):
have we met some temporary equilibrium here, because again, like
we talked about, in spite of the slowing job gains,
last couple of months has been defined by lower unemployment.
Speaker 3 (23:53):
Yeah, and just take it at face value. It's low
relative to its historical average. The average by decade kind
of goes I'll go through this very quickly, Mike. You
gave a lot of data. I think this is the
only way to interpret the number. The average in the
nineteen fifties, which was quite go go economically speaking, it
was a it was a frenetic growth decade. Four point
(24:15):
five percent was the average, Then four point eight percent
was the average in the nineteen sixties. It then went
up slowly, as we all know, in the seventies until
the late eighties when it started to come down. In
the nineties, which we all remember quite fondly, the average
unemployment rate was five point eight percent, so much higher
than it is today. In the twenty tens, six point
two percent because of the aftermath of the Great Recession
and so forth. So no matter how you slice it
(24:36):
in historical terms, for what it is worth, the unemployment
rate is very low. I'll tell you a second statistical
if you like fact about unemployment. It's changes unemployment or persistent.
Speaker 2 (24:46):
I didn't say whether or not i'd like.
Speaker 3 (24:48):
I'm not giving you the choice I would like, So
go okay, changes unemployment of persistent. It's got a momentum
if you like. When it starts to go up, it
continues to go up. This is why the FED cut
by a half a percentage point when it last met
six weeks ago, and it's likely to cut again in
a couple of days. They know that unemployment changes are persistent.
They're worried about more labor market slackening and what that
(25:09):
might bode for the economy. Not something good if our
historical experience is any guide.
Speaker 2 (25:16):
Bringing it back to presidential politics, is this a tough
economy to inherit or is it theirs to screw up?
Speaker 3 (25:24):
It's I don't know, Mike, we won't know until after
the facts. You could make the case that things are
and you did kind of make this case. Things might
be deteriorating not the word you used.
Speaker 2 (25:33):
My choice is good interpretation.
Speaker 3 (25:35):
Yeah, so things might be deteriorating, deteriorating, we don't know,
or they may have just normalized in plateaued. I don't
really buy the plateau explanation because the change in unemployment
never really sits still, but economic growth is healthy.
Speaker 4 (25:51):
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to the asset if the child has credit or issues,
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Speaker 1 (26:55):
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Speaker 2 (27:06):
Piece from the Boston Globe Today, housing construction around Boston
has been sluggish. Here's why that could change soon. They
then go on for three four pages here to describe
a bunch of things. But the only real argument that
I could find in this entire piece as to why
Boston home construction would pick up again would be lower
(27:28):
interest rates. And I'm not saying that that won't be
a factor. But if the only thing that you can
look at to say that housing construction is going to
pick up is lower interest rates, then don't hold your breath.
We had this same type of article published six months
ago when the FED was about to cut rates, or
(27:51):
not six months ago, six weeks ago, when they were
about to cut rates feels like what's happened with mortgage
rates since the FED did so? I know what you got.
Speaker 3 (27:58):
They've gone off micro thank you.
Speaker 2 (28:00):
Substantially, they've gone up, and so look, I hope that
rates come down. I think it'll lead to more housing activity.
It would be nice. I feel for the first time
home buyers out there who can't buy a home. But
if all we're going to say about housing is, hey,
hopefully home rates interest rates come down so builders can
start building again, I don't know that we're going to
get the outcome we're looking for.
Speaker 3 (28:20):
Can we expand on that point about rates going up?
Because we talked about this internally this morning at a
storming advisor group, or at least I did. People politely
listened and probably played with their smartphones.
Speaker 2 (28:29):
So far as you know, Yeah, that's what it is said.
Speaker 3 (28:31):
But it's really unusual for longer term rates to go
up after the FED cuts rates. The average response, and
by longer term rates, i'll dis arbitrari really say anything
longer than say, five years, using the US Treasury bill
or bond if you want to go out even further
as a reference point. Normally, when the FED cuts short
(28:52):
term interest rates, long term interest rates kind of follow suit,
at least in the very short term. The immediate reaction
is consist across the so called yield curve. But over
the past several weeks, the FED, as we all know,
lowered its short term interest rate target, the only tool
that it really controls in an almost direct sense. In
(29:12):
point of fact, it targets rates. It doesn't control them.
But let's just pretend it controls. Normally, longer term bond
rates follow suit. They haven't this time. We all know this.
Interest rates on the ten year and up in terms
of the treasury bond long end of the curve have
gone up by over a half a percent. Mortgage rates,
which are tied to longer term treasury rates, have followed suit.
(29:35):
This has never happened before to the extent that it's
happened this time around. Normally, longer term rates and thus
mortgage rates fall after the FED cuts. Sometimes they've gone
up by a little bit, but the incidents are very
few and far between. You can count them on fewer
than fewer than five fingers. But in this case, they've
gone up by a lot this cycle, if you like.
(29:57):
So far, the behavior of long term interest rates during
the cycle has been unusual.
Speaker 2 (30:01):
Weird, yeah, weird. Hopefully it'll maybe it'll flip back. Maybe
it won't. Maybe we're in a different cycle. Maybe it
means something else. Maybe the Fed is going to need
to reverse course because of what bond markets are reading
in terms of uh the rates going up. See, like
we talked.
Speaker 3 (30:15):
About earlier, this is why the election will have consequences
if the outcome is decisive and say uniform across the
branches of government.
Speaker 2 (30:24):
Let's take a quick break here on the Financial Exchange
when we come back, a little bit of stack roulette.
Speaker 1 (30:30):
Thanks to US six one seven, three six two thirteen
eighty five with your comments and questions about today's show,
and let us know what you think about the stories
we are covering. This is the Financial Exchange Radio Network.
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Speaker 2 (32:53):
Well, markets, finally happened. Artificial intelligence has come from my
job too, and uh, I guess just hang up the
skates and retire at this stage. But according to a
recent poll by Experience, sixty seven percent of Gen z
ers and sixty two percent of surveyed millennials are using
(33:13):
artificial intelligence to help with personal finance tasks. This changes
obviously by generation, but quite frankly, people of a certain
age are using artificial intelligence for darn near everything. And
I'm not there myself, but I do frequently use it
for especially general search tasks in terms of returning information
(33:37):
to me. I would say that financial advice and investment
advice fall into this same category of There have been
several threats of change to that entire area for decades,
and I think some of those threats have been positive
on the industry, such as more transparency and lower fees.
Others haven't really made much of a dent. Remember a
(33:58):
decade and a half ago when robo advice was going
to change the universe of the investing world. Can you
point to anything that's significantly changed on that front.
Speaker 3 (34:08):
I think people who make that claim don't know what
a financial advisor does, which is, if I had to
sum it up, Mike, it's provide peace of mind. Sometimes
you're a psychologist, sometimes you're a numbers guy. Sometimes you're
a family counselor. And in my experience and from watching
you and others here at Armstrong Advisory Group, anybody can
(34:29):
allocate their assets among so called asset classes. Major investment
ingredients have target date funds and for Wing Kate Blands
do that for you, and you can put it on autopilot.
You don't have to look at it in theory until
you retire. That's one approach anyway.
Speaker 2 (34:42):
So I did test it this morning, just like kind
of curious, like, and I do think, you know, chat,
GPT or any other artificial intelligence tool can probably help
you solve some basic questions, like, Hey, give me five
steps to help improve my improve my credit score based
on based on what I have going on.
Speaker 3 (34:58):
Number one, get off your computer and get the work.
Speaker 2 (35:00):
You know, give me give me some tips about how
to budget properly, and maybe there'll be some useful stuff
in there. When I asked it more complex questions like hey,
I've got this company stock within my retirement plan. What
am I going to do about it? It lacked some
of that nuance that you might need in order to
take action. And so fortunately for those in you know,
(35:23):
professionals like financial advice and investment management, I don't think
this is on the cusp of replacing you yet, what.
Speaker 1 (35:31):
Do you have?
Speaker 3 (35:32):
Isn't there always a judgment called there? Well, okay, we
can talk about that anytime. So a reminder over the
last four years that what irks people more. We know this,
but what irks people more than anything, Mike, is inflation,
Because if you take that out of the picture, the
incumbent parties economic record looks really strong compared to the
previous party's economic record. So if you look at Trump
(35:53):
versus Biden, unemployment went up under Trump, it's come down
under Biden. I am not, by the way, make it
a value judgment here. I'm just giving the numbers. Is
reported by the Federal Reserve, which takes it from various
statistical agencies. Is reported by the federal government. GDP per
capita under Trump up about six point six percent under Biden.
This is after inflation under Biden up nine point three percent.
Manufacturing jobs under Trump negative one hundred and eighty k
(36:16):
under Biden plus six hundred eighty k. So huge differences
in what an economist might think at first, plush are
the most meaningful series. Then you look at inflation. Inflation
up twenty percent cumulatively under Biden versus seven percent under Trump.
And that's why we are where we are today. People
hate it more than they like economic growth and other
(36:39):
on the surface anyway, measures of economic activity and labor
market health. This should be a lesson to the Fed
and topolicy makers. Inflation above all, get it under control,
Keep it under control.
Speaker 2 (36:51):
I have a personal story related to one of the
pieces that we're covering for stack Roulette. Hear about retailers
offering returnless refunds. All that means is the cost for
them to accept the return is more than just giving
you a refund on it. I ordered some my wife
really ordered them from Wayfair, some pretty heavy coffee tables
(37:12):
for our living room when we were decorating a few
years ago. And two of these things came chipped, called them.
One of them wasn't so bad, and it was not
really the centerpiece for the room, so we said, and
they told us, hey, would you like us to return
it and send you a new one, or do you
just want a discount on it. We'll send you thirty percent.
And we said, you know, on that one, we'll take
(37:34):
the thirty percent, but on the other one, it's pretty bad.
I'd like you to send us a new one. He said, okay,
sounds good. Dispose of it yourself where you'll have a
new one at your door in a few days. That
was an interesting way of doing it to me. I mean,
again speaks to the fact that it's expensive to return
these things, but specifically the order in which he offered
(37:54):
those things was particularly interesting because hey, I'm not going
to tell you that I'll take this thing back and
offer you a full refund. But first I'm gonna go
with the thirty percent discount and see what happens. So
buyer beware. Out there, you can work the system a
little bit. Markets remain open and strongly in positive territory
now with the S and P up over a one percent,
we'll have a full election and market recap for you tomorrow. Tomorrow, folks,
(38:17):
have a great rest of your afternoon.
The Financial Exchange is produced by Money Matters Radio and
is hosted by employees of the Armstrong Advisory Group, a
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the hosts. Do not reflect the opinions of Armstrong Advisory
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(00:20):
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(01:07):
Face is the Financial Exchange with Mike Armstrong and Mark Vandetti.
Speaker 2 (01:15):
Happy Tuesday, Good Morrian, Welcome back to the Financial Exchange.
On election Day, We've got equity markets broadly in positive territory.
Dow up two hundred ninety points seven tens of percent,
SMP up forty four, closing in on eight tenths of
a percent in the Nasdaq up almost a full percentage
point one hundred and seventy four points, the smaller size
(01:35):
Russell two thousand. By that I mean smaller cap companies
up about eight tenths of a percent as well. Yield
on the ten year Treasury up slightly to four point
three nearly four point three six percent in early trading here,
and price with barrel of oil up another nine ninety
cents one to a quarter percent, sitting at seventy two
(01:56):
dollars per barrel on that West Texas CRUED don't usually
quote crypto prices, but given the attention to the cryptocurrency
markets and bitcoin specifically has gotten from Canada Donald Trump,
i'll mention that Bitcoin also up three and a quarter
percent in early trading so far. Today. We'll come back
(02:16):
to polling data and just where things stand. Again. We
won't have fortunately any significant results coming out during the
broadcast of today's Financial Exchange, but obviously full coverage for
you tomorrow. One election that we did get data on
though last night, was out in Seattle, which was the
Boeing Union vote. Mark you wanted to say something, you go.
Speaker 3 (02:37):
Yeah, Trump, Trump just declared victory.
Speaker 2 (02:38):
Mike at eleven oh seven, mark the tape. Okay Boeing
union votes to end their strike. This is the third
consecutive vote on a labor deal from the Boeing Machinist Union.
Thirty three thousand workers have been on strike now for
I think what has been seven or eight nearly eight weeks,
(02:59):
and finally clearing the way for Boeing to restart their factories.
As you can imagine, with a manufacturing process as complex
as airplanes not going to happen overnight, it's assumed that
it's going to take a few weeks to restart things.
But finally getting this thing done by a margin of
I think fifty nine percent voting in favor of the
twenty some odd twenty six thousand members cast votes, fifty
(03:23):
nine percent voted in favor of that new deal.
Speaker 3 (03:27):
Mark, Yeah, this halted production of the seven thirty seven Max,
so gave the grim Reaper a little break there for
eight weeks. But he can get back to work as
soon as that suckers back up.
Speaker 2 (03:39):
In the air.
Speaker 3 (03:40):
I guess sorry, I had nothing substantive, Michael, No, it's
a good joe, little goofy.
Speaker 2 (03:46):
As part of this deal, workers will see a thirty
eight percent wage increase over the life of this four
year deal for those thirty three thousand machinists. Separately, Kelly Orberg,
the new CEO over there, is cutting seventeen one thousand jobs,
raising more than twenty four billion dollars in equity in
order to keep the company just afloat. They will also
(04:07):
be getting a twelve thousand dollars ratification bonus and a
pledge to build their next plane in the Pacific Northwest.
That promise, to me is completely irrelevant because this deal
is a four year deal and they are not going
to be building any new planes anywhere in the next
four years, but I guess is a indication of where
(04:27):
they intend to keep focusing their investment. The final piece
on this is this deal did not come with any
sort of commitment on reinstating pensions which were killed back
in twenty fourteen. If I am not mistaken, increase four
toh one K contributions as part of this, but not
going to be looking at any sort of pension contribution
or retake on that pension. And really, I think drove
(04:51):
this deal home was the leadership at the union finally
turning and saying this might be the best we're going
to get out of Boeing. So line up and come vote.
Speaker 3 (04:59):
Eight percent year before the increased four to one k.
I think it's a match. There may be some profit
sharing in there, which would actually be encouraging a wine
incentives increase your profit share. I wonder how telling it
is that they didn't budge on pension.
Speaker 2 (05:14):
It's also interesting because if you were going to have
to restart a pension plan and start funding it again,
not the worst time over the last couple decades to
go do so. You've got rates in a pretty solid place.
You can, you know, go out and buy a ten
year treasury at what did I just say? One was
going for four point three percent yield, you know, compared
to where you were in twenty fourteen when they canceled
(05:36):
this thing. You don't have to fund it quite as
much as you previously needed to.
Speaker 3 (05:39):
That can, of course change, of course, and their balance
sheet is in rickety enough shape as it is. Four
to one K doesn't go on it, pension liabilities do.
Speaker 2 (05:48):
It's understandable not that most workers get this choice mark,
but no, how do you evaluate, Like when you look
back at, you know, whether the Boeing workers would have
been better served their pension or their four to one K.
Let's look at this case specifically over the last ten years.
You know, you look at Boeing and we don't know
the specifics off the top of our head of four
(06:09):
oh one K contributions versus pension guarantees. But what's what's
you know, how do you evaluate what's actually better for
that person? Because being invested in a four to one
K over the last decade been pretty darn good for you. Yeah,
pretty darn good.
Speaker 3 (06:24):
Say, it depends on the individual and how risk averse
they are. Like you're taking the chance that at your
retirement date you will or won't have enough when you annuitize.
Most people don't actually buy an annuity, But the right
way to think about it is annuitization. What could I
government insurance company. If I gave them my five hundred
thousand dollars. Four to one k is a lump side.
What would they pay me a month for the rest
of my life? What would they pay my wife if
(06:45):
she survives me? And is there inflation? There are a
little levers you can pull there that affect the premium,
the cost up front of the annuity. So I think
it depends on how risk averse or risk accepting you are.
Thank you better way to put you are, because you're right,
it's been a spectacular there's been a spectacular advantage lately
(07:06):
for equities. There have been other periods though, when the
security of a pension looked really good.
Speaker 2 (07:11):
Yeah, the the pitfalls for the four to one k
are pretty obvious. You know, you screw up investing because
you don't know what you're doing, You don't funded enough,
because it's your choice, the markets don't perform the way
you want. The ones with pensions they're a bit less obvious.
But the risks exist, right, I mean generally with a
pension you're not getting a cost of living adjustment like
Social Security. Most pensions don't offer that. So hasn't really
(07:34):
been a problem for the last five decades. But imagine
that you retire with a pension and we see higher
than average inflation for your retirement. That could be you know,
that could put you in a bad situation. There's the
obvious risk of the company that offers the pension going
belly up. But even there you have the Pension Benefit
Guarantee Corporation, which steps into a point in short, to
(07:55):
a point that you're still paid something, albeit usually not
the full benefit of your pension, but it is I
think on the balance for most people, I would say
the pension is the better. You know, it is ultimately, as.
Speaker 3 (08:09):
You say, not that you have a choice, not that
you can't into one or the other.
Speaker 2 (08:12):
Unfortunately, Yeah, I mean very few people are looking at
jobs out there and saying, oh, well, this one offers
a pension and this one doesn't, And so that's how
I'm going to base my decision. No, most of us
are either in a career that offers a pension, which
is maybe twenty percent of us, and then even that high, no,
probably not five, five or ten.
Speaker 3 (08:30):
Well, unions are less than ten of the private sector
workforce ten percent. Then not everybody in a union has
a traditional defined benefit which is a fancy way of
referring to a pension.
Speaker 2 (08:40):
Play public sector workforce. Almost everybody has them, but yeah, yeah,
it's tough to say exactly what portion are covered by
a pension these days, but yeah, it's just an interesting
thought exercise. If you were given the option to choose
one versus the other, how you would do So it's
it's in one area we actually might see that choice
coming into play. Is insurance companies starting to play a
(09:03):
bigger role in four one K plans, right, you've seen it.
Speaker 3 (09:06):
Yeah, they've They've tried over the last ten to twenty
years to give participants is what this is what we're
called in one K world participants instead of account owners,
but you can use them synonymously to give them the
opportunity to pensionize your distribution by buying an annuity within
the plan. Yeah, it was an iffy area for so
called plant sponsors for a while. It's more accepted now.
Speaker 2 (09:29):
I e. Les so don't see a lot of it,
but it is one of those areas where you actually
might be able to choose. Ye, are people are choosing.
Speaker 3 (09:37):
It that The innovation has been slow because it's not
a popular option and you could do it yourself. You
can roll over to an ir right and annuitize.
Speaker 2 (09:47):
You hypothetically could do So, let's take a quick break
when we come back, going to have a bit of
trivia for you coming up, and then we'll talk a
little bit more about the upcoming election today or the
ongoing election today and what the most recent pulling data
seems to be. Saying quick break, that's next on the
Financial Exchange.
Speaker 1 (10:03):
Tune in for trivia brought to you by Applebee's every
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Speaker 4 (11:01):
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Now that's even good. In the neighborhood void, we're prohibited
dine in only last day of Presidential trivia here on
the Financial Exchange. Four US presidents have been awarded the
Nobel Peace Prize. Three of those presidents were in office
when they won the award, Jimmy Carter being the exception,
as he won it twenty years after he left office.
(11:45):
Trivia question today, who was the first president to win
the Nobel Peace Prize?
Speaker 1 (11:50):
Once again?
Speaker 4 (11:51):
Who was the first president to win the Nobel Peace Prize.
Be the fifth person today to text us at six
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(12:13):
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Show dot com.
Speaker 2 (12:24):
Well, it is a election day in America, and as such,
we kind of want to talk about statistics. And it's
particularly interesting with polling because unlike the statistics that we
review here on the Financial Exchange, you ultimately get an
answer on how close your measurements were, and you get
an answer pretty darn quickly. Like you know, we eventually
do two you know, eventually they do a census and
(12:46):
we get some answers to certain questions about the state
of the labor market toward this, that or the other,
but it often takes years before that data actually comes in. Here,
we've had polling going on for the last I don't
know two years on presidential politics, and we should know
late tonight tomorrow, Thursday at the latest. According to the
(13:07):
most polls, which is just kind of crazy, they seem
incredibly close. According to one source five thirty eight, which
has a model where they take averages of different polls
wait them differently depending on historical accuracy, they have run
simulations that show basically a coin toss. They ran a
thousand different simulations for the electoral college. Five hundred and
(13:30):
three of those thousand came out in favor of Harris,
four hundred and ninety five of them came out in
favor of Trump. Two of them came out with no
electoral college winner, in which case would be tossed I
believe to the house, in which case Trump would likely
win in that scenario, but incredibly close.
Speaker 1 (13:46):
Now.
Speaker 2 (13:47):
There has been some criticism of that closeness, some claiming that, hey,
maybe statistically it's somewhat improbable for the race to be
as close it is as it is right now, and
they're could be a number of different reasons behind that.
But can we talk about that statistical improbability and why
some people are suspect of this data market?
Speaker 3 (14:08):
The problem at its core is that of getting a
random sample. We talk about the unemployment rate every month,
the number of new jobs created. For example, last month
it was a disappointing probably whether related, but a disappointing Nevertheless,
twelve thousand that comes from a sample of employers, and
that sample has an error because we don't know the
(14:29):
real number. We don't go out and ask sure everybody,
much like in these poles. So all samples, all estimates
that come from a sample, have an error. That's why
they say plus or minus two or three percentage points,
and that's why they say. That's why they use the
phrase statistically tied, because the difference is bigger as big
(14:49):
or bigger than the gap between the two. So when
you say a poll has a margin of error plus
or minus three, if it's candidate X at forty seven,
candidate why at forty nine, the margin of error is
bigger than the difference between the two. So statistically they
are the same. The issue is getting the right size sample.
That's addressed in the margin of error that we always
(15:11):
hear a lot about. That's easy enough to do if
you have the resources. Tougher thing to do is getting
a random sample. We don't think about this a lot.
But if you went, for example, into a church. I
used this in the last hour, I'll use it again
and ask people your pro life, your pro choice, everybody's
going to pretty much everybody's going to raise their hand.
I wouldn't just to be a jerk, but pretty much
everybod's gonna raise their hand and say I on pro life.
(15:31):
You can't do an abortion poll in a church. That
sample's biased. You can't pull just people on say cell
phones or on social media about who they like for president.
That sample would be biased towards say, younger people or
wealthier people who can afford the mechanism you're using to
gather the data. So in addition to the size of
(15:52):
the sample, there's randomness issues. And this is what Silver
I think is getting in part at some polsters are
looking at their sample and saying, oh, it wasn't really random.
In the last two election cycles, we missed a bunch of.
Speaker 2 (16:06):
Yeah, in twenty sixteen, that was the big one. They
missed a whole bunch of Trump supporters because they missed
I think the general conclusion there is that they missed
defined the pool of likely voters. They did not capture
those people. That typically weren't voting in elections in presidential politics,
they didn't usually register. They didn't even if they were registered,
(16:27):
they didn't usually show up. They didn't show up at
the last mid term, and so they said that person
favors Trump that, but they might not show up. And
this time around the accusation seemed to go on the
other way, which is polsters, again, according to some of
the accusations, seem so concerned about being wrong that they're
(16:48):
just calling it a coin toss.
Speaker 3 (16:49):
You might wonder, how can he come to that conclusion.
He didn't ask every polster how they conducted their poll,
He didn't dig into every polster's methodology.
Speaker 2 (16:57):
I did not.
Speaker 3 (16:57):
And the answer no, not you silver in this exams,
Yeah no, And we most certainly didn't want to waste
the time. It most certainly did not. The answer is
they don't vary as much as random chance would suggest.
If I flipped a coin, I said this in the
last hour. I'll use the analogy again. I'm just trying
to generalize here and take something away from this. If
I flipped a coin ten times and it came up
heads ten times, you wouldn't have to have seen me
(17:19):
do it. You wouldn't need to inspect the coin. You
wouldn't need to know any of the other variables. You
would say on its face that suspicious chance. The mathematics
of a coin flip tell me it's going to be
fifty to fifty and in a big enough sample ten
times isn't a good example. If I did it a
thousand times and it came up ninety percent heads, you'd
say that coin's loaded. I don't have to inspect the coin.
(17:41):
I don't have to look at you. I don't have
to know anything about the process. That's what Silver's doing here.
He's saying these pulls are suspiciously well aligned. Yep, they
should be. There should be more diverg.
Speaker 2 (17:51):
Is shit, and there isn't. So again, conclude what you
will about that this does indicate, even with some sampling
and hurting, that this seems to be a pretty close race.
That does not mean that the results will be close.
By the way, you know, you could have a blowout
in the popular vote. You could have a blowout in
the electoral college. You could have Trump win all seven
swing states. You could have all sorts of things happen
(18:13):
that don't get really properly defined in polling data like this.
Just because polling data indicates a close race, I will
repeat this again, does not mean that you will get
a close result. It just means that they're having a
tough time predicting what the outcome will be. Yeah, well put,
So I think that's where I would leave it in
(18:33):
terms of, you know, good and bad uses of reading
up on polls. Obviously, betting market's quite different. We talked
about that at the beginning of the show as well.
But betty markets strongly favoring a Donald Trump outcome in
the high fifty percent range. Again, don't I don't really
know what to do about that. And by the way,
betty markets haven't been reliably correct. Betty markets were heavily
(18:55):
favoring Clinton in twenty sixteen because that seemed like the
obvious outcomere all wrong. So I wouldn't say they're any
better than polls at predicting outcomes, Mike.
Speaker 3 (19:04):
They're not. That's not a biased, unbiased excuse me sample.
These are people who are inclined to go online, they're
inclined to gamble, they've got some bucks. They're more likely
to be men said differently than women. So on its face,
you can almost reject that approach in a statistical sense.
It's not a random sample.
Speaker 2 (19:20):
Let's take a quick break. But when we come back,
we are going to have the trivia winner for you,
and then we'll talk a little bit about just the
overall state of labor market. We've got our Boeing workers
back to work, but what does the rest of the
market look like as we head into the next presidential cycle.
Speaker 1 (19:40):
Bringing the latest financial news straight to your radio every day,
it's the Financial Exchange on the Financial Exchange Radio Network.
Now it's your chance to support the Disabled American Veterans
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Speaker 4 (20:30):
Trivia question today was who was the first president to
win the Nobel Peace Prize. It'll be Teddy Roosevelt. He
won the Nobel Peace Prize in nineteen oh six for
his role in mediating the Russo Japanese War. Winner today
of the Financial show t shirts Chad from havel Mass
and Chad's also registered to win a one hundred dollars
gift guard to Applebee's, which will give away on Friday.
(20:52):
Show and Trivia is brought to you by Applebe's. Enjoy
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Speaker 2 (21:09):
Whoever is next president, is going to be inheriting a
labor market that, whatever you want to say about it,
is distinctly weaker than it was eighteen months ago. I
think we can all agree that.
Speaker 3 (21:20):
They're more normal.
Speaker 2 (21:20):
I don't know, yeah, I mean, however you want to
describe it, it's not as tight as it was eighteen
months ago. If that's normalization, if that's weakness, fair, whatever
you want to call it. But you know, it's always
easier to compare something to something else than describe it.
If you were to look at only and I know
you hate doing this, but if I were to look
at one data point that you think best sums up
(21:43):
the state of labor market and like evaluated of the
last eighteen months, what do you think is easiest to
look at it in unemployment?
Speaker 1 (21:50):
Right?
Speaker 2 (21:50):
I was going to go there too, right, the old
standby I think as actually doing a pretty good job
of summarizing what's been happening with the labor market over
the last eighteen months. And let's go ahead, And I
didn't have this pulled up, but I will pull up
the unemployment rate over the last couple of years to
just help people understand where we are right now and
(22:11):
what it might indicate about where we're going. So obviously,
March of April of twenty twenty, when we read the
unemployment rate, it wasn't looking so good. Came in at
fourteen point eight percent. I don't know the last time
we got that high.
Speaker 3 (22:23):
We might not have ever gotten nineteen mid nineteen thirties probably.
Speaker 2 (22:26):
Yeah. By you know, late twenty twenty two and early
twenty twenty three, we were getting to crazy low rates
of unemployment. So when I take a look at this,
I think the low that I saw in twenty twenty three. Yeah,
April of twenty twenty three we hit a three point
four percent unemployment rate. That is also pretty unheard of.
(22:47):
We have very few instances where things have gotten that low.
Speaker 3 (22:50):
The lowest since the nineteen sixties, only incidents prior to that.
The State of said only goes back in nineteen forty seven.
You're looking at it was the nineteen forties.
Speaker 2 (22:58):
Slowly, over the of about a year, you saw that
start ticking up, and by July of this year we
got to four point three percent. It's now ticked back down.
We're sitting at four point one percent. But I think
that does a pretty good job if I'm just looking
at like a five year trend of explaining where we've
come and gone. We were in late twenty nineteen at
a really low rate of unemployment rate again back in
(23:20):
the mid threes, we shot up to fifteen, we got
back down to the mid threes, and now we're back
in this kind of normalization period, and it just begs
a question that I don't have an answer to, is
does that trend continue And I'm talking about the longer
one year trend of rising unemployment slowing job gains or
(23:42):
have we met some temporary equilibrium here, because again, like
we talked about, in spite of the slowing job gains,
last couple of months has been defined by lower unemployment.
Speaker 3 (23:53):
Yeah, and just take it at face value. It's low
relative to its historical average. The average by decade kind
of goes I'll go through this very quickly, Mike. You
gave a lot of data. I think this is the
only way to interpret the number. The average in the
nineteen fifties, which was quite go go economically speaking, it
was a it was a frenetic growth decade. Four point
(24:15):
five percent was the average, Then four point eight percent
was the average in the nineteen sixties. It then went
up slowly, as we all know, in the seventies until
the late eighties when it started to come down. In
the nineties, which we all remember quite fondly, the average
unemployment rate was five point eight percent, so much higher
than it is today. In the twenty tens, six point
two percent because of the aftermath of the Great Recession
and so forth. So no matter how you slice it
(24:36):
in historical terms, for what it is worth, the unemployment
rate is very low. I'll tell you a second statistical
if you like fact about unemployment. It's changes unemployment or persistent.
Speaker 2 (24:46):
I didn't say whether or not i'd like.
Speaker 3 (24:48):
I'm not giving you the choice I would like, So
go okay, changes unemployment of persistent. It's got a momentum
if you like. When it starts to go up, it
continues to go up. This is why the FED cut
by a half a percentage point when it last met
six weeks ago, and it's likely to cut again in
a couple of days. They know that unemployment changes are persistent.
They're worried about more labor market slackening and what that
(25:09):
might bode for the economy. Not something good if our
historical experience is any guide.
Speaker 2 (25:16):
Bringing it back to presidential politics, is this a tough
economy to inherit or is it theirs to screw up?
Speaker 3 (25:24):
It's I don't know, Mike, we won't know until after
the facts. You could make the case that things are
and you did kind of make this case. Things might
be deteriorating not the word you used.
Speaker 2 (25:33):
My choice is good interpretation.
Speaker 3 (25:35):
Yeah, so things might be deteriorating, deteriorating, we don't know,
or they may have just normalized in plateaued. I don't
really buy the plateau explanation because the change in unemployment
never really sits still, but economic growth is healthy.
Speaker 4 (25:51):
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Speaker 1 (26:55):
The proceeding was paid for and the views expressed are
solely those of Cushing and Dolan. Cushing and Dolan and
or Armstrong Advisory may contact you offering legal or investment services.
Cushing and Armstrong did not endorse each other and are
not affiliated.
Speaker 2 (27:06):
Piece from the Boston Globe Today, housing construction around Boston
has been sluggish. Here's why that could change soon. They
then go on for three four pages here to describe
a bunch of things. But the only real argument that
I could find in this entire piece as to why
Boston home construction would pick up again would be lower
(27:28):
interest rates. And I'm not saying that that won't be
a factor. But if the only thing that you can
look at to say that housing construction is going to
pick up is lower interest rates, then don't hold your breath.
We had this same type of article published six months
ago when the FED was about to cut rates, or
(27:51):
not six months ago, six weeks ago, when they were
about to cut rates feels like what's happened with mortgage
rates since the FED did so? I know what you got.
Speaker 3 (27:58):
They've gone off micro thank you.
Speaker 2 (28:00):
Substantially, they've gone up, and so look, I hope that
rates come down. I think it'll lead to more housing activity.
It would be nice. I feel for the first time
home buyers out there who can't buy a home. But
if all we're going to say about housing is, hey,
hopefully home rates interest rates come down so builders can
start building again, I don't know that we're going to
get the outcome we're looking for.
Speaker 3 (28:20):
Can we expand on that point about rates going up?
Because we talked about this internally this morning at a
storming advisor group, or at least I did. People politely
listened and probably played with their smartphones.
Speaker 2 (28:29):
So far as you know, Yeah, that's what it is said.
Speaker 3 (28:31):
But it's really unusual for longer term rates to go
up after the FED cuts rates. The average response, and
by longer term rates, i'll dis arbitrari really say anything
longer than say, five years, using the US Treasury bill
or bond if you want to go out even further
as a reference point. Normally, when the FED cuts short
(28:52):
term interest rates, long term interest rates kind of follow suit,
at least in the very short term. The immediate reaction
is consist across the so called yield curve. But over
the past several weeks, the FED, as we all know,
lowered its short term interest rate target, the only tool
that it really controls in an almost direct sense. In
(29:12):
point of fact, it targets rates. It doesn't control them.
But let's just pretend it controls. Normally, longer term bond
rates follow suit. They haven't this time. We all know this.
Interest rates on the ten year and up in terms
of the treasury bond long end of the curve have
gone up by over a half a percent. Mortgage rates,
which are tied to longer term treasury rates, have followed suit.
(29:35):
This has never happened before to the extent that it's
happened this time around. Normally, longer term rates and thus
mortgage rates fall after the FED cuts. Sometimes they've gone
up by a little bit, but the incidents are very
few and far between. You can count them on fewer
than fewer than five fingers. But in this case, they've
gone up by a lot this cycle, if you like.
(29:57):
So far, the behavior of long term interest rates during
the cycle has been unusual.
Speaker 2 (30:01):
Weird, yeah, weird. Hopefully it'll maybe it'll flip back. Maybe
it won't. Maybe we're in a different cycle. Maybe it
means something else. Maybe the Fed is going to need
to reverse course because of what bond markets are reading
in terms of uh the rates going up. See, like
we talked.
Speaker 3 (30:15):
About earlier, this is why the election will have consequences
if the outcome is decisive and say uniform across the
branches of government.
Speaker 2 (30:24):
Let's take a quick break here on the Financial Exchange
when we come back, a little bit of stack roulette.
Speaker 1 (30:30):
Thanks to US six one seven, three six two thirteen
eighty five with your comments and questions about today's show,
and let us know what you think about the stories
we are covering. This is the Financial Exchange Radio Network.
The Ultimate Boston Sports Option to benefit the disabled American
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Speaker 2 (31:24):
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Speaker 2 (32:53):
Well, markets, finally happened. Artificial intelligence has come from my
job too, and uh, I guess just hang up the
skates and retire at this stage. But according to a
recent poll by Experience, sixty seven percent of Gen z
ers and sixty two percent of surveyed millennials are using
(33:13):
artificial intelligence to help with personal finance tasks. This changes
obviously by generation, but quite frankly, people of a certain
age are using artificial intelligence for darn near everything. And
I'm not there myself, but I do frequently use it
for especially general search tasks in terms of returning information
(33:37):
to me. I would say that financial advice and investment
advice fall into this same category of There have been
several threats of change to that entire area for decades,
and I think some of those threats have been positive
on the industry, such as more transparency and lower fees.
Others haven't really made much of a dent. Remember a
(33:58):
decade and a half ago when robo advice was going
to change the universe of the investing world. Can you
point to anything that's significantly changed on that front.
Speaker 3 (34:08):
I think people who make that claim don't know what
a financial advisor does, which is, if I had to
sum it up, Mike, it's provide peace of mind. Sometimes
you're a psychologist, sometimes you're a numbers guy. Sometimes you're
a family counselor. And in my experience and from watching
you and others here at Armstrong Advisory Group, anybody can
(34:29):
allocate their assets among so called asset classes. Major investment
ingredients have target date funds and for Wing Kate Blands
do that for you, and you can put it on autopilot.
You don't have to look at it in theory until
you retire. That's one approach anyway.
Speaker 2 (34:42):
So I did test it this morning, just like kind
of curious, like, and I do think, you know, chat,
GPT or any other artificial intelligence tool can probably help
you solve some basic questions, like, Hey, give me five
steps to help improve my improve my credit score based
on based on what I have going on.
Speaker 3 (34:58):
Number one, get off your computer and get the work.
Speaker 2 (35:00):
You know, give me give me some tips about how
to budget properly, and maybe there'll be some useful stuff
in there. When I asked it more complex questions like hey,
I've got this company stock within my retirement plan. What
am I going to do about it? It lacked some
of that nuance that you might need in order to
take action. And so fortunately for those in you know,
(35:23):
professionals like financial advice and investment management, I don't think
this is on the cusp of replacing you yet, what.
Speaker 1 (35:31):
Do you have?
Speaker 3 (35:32):
Isn't there always a judgment called there? Well, okay, we
can talk about that anytime. So a reminder over the
last four years that what irks people more. We know this,
but what irks people more than anything, Mike, is inflation,
Because if you take that out of the picture, the
incumbent parties economic record looks really strong compared to the
previous party's economic record. So if you look at Trump
(35:53):
versus Biden, unemployment went up under Trump, it's come down
under Biden. I am not, by the way, make it
a value judgment here. I'm just giving the numbers. Is
reported by the Federal Reserve, which takes it from various
statistical agencies. Is reported by the federal government. GDP per
capita under Trump up about six point six percent under Biden.
This is after inflation under Biden up nine point three percent.
Manufacturing jobs under Trump negative one hundred and eighty k
(36:16):
under Biden plus six hundred eighty k. So huge differences
in what an economist might think at first, plush are
the most meaningful series. Then you look at inflation. Inflation
up twenty percent cumulatively under Biden versus seven percent under Trump.
And that's why we are where we are today. People
hate it more than they like economic growth and other
(36:39):
on the surface anyway, measures of economic activity and labor
market health. This should be a lesson to the Fed
and topolicy makers. Inflation above all, get it under control,
Keep it under control.
Speaker 2 (36:51):
I have a personal story related to one of the
pieces that we're covering for stack Roulette. Hear about retailers
offering returnless refunds. All that means is the cost for
them to accept the return is more than just giving
you a refund on it. I ordered some my wife
really ordered them from Wayfair, some pretty heavy coffee tables
(37:12):
for our living room when we were decorating a few
years ago. And two of these things came chipped, called them.
One of them wasn't so bad, and it was not
really the centerpiece for the room, so we said, and
they told us, hey, would you like us to return
it and send you a new one, or do you
just want a discount on it. We'll send you thirty percent.
And we said, you know, on that one, we'll take
(37:34):
the thirty percent, but on the other one, it's pretty bad.
I'd like you to send us a new one. He said, okay,
sounds good. Dispose of it yourself where you'll have a
new one at your door in a few days. That
was an interesting way of doing it to me. I mean,
again speaks to the fact that it's expensive to return
these things, but specifically the order in which he offered
(37:54):
those things was particularly interesting because hey, I'm not going
to tell you that I'll take this thing back and
offer you a full refund. But first I'm gonna go
with the thirty percent discount and see what happens. So
buyer beware. Out there, you can work the system a
little bit. Markets remain open and strongly in positive territory
now with the S and P up over a one percent,
we'll have a full election and market recap for you tomorrow. Tomorrow, folks,
(38:17):
have a great rest of your afternoon.
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