November 14, 2024 • 38 mins
Chuck Zodda and Mike Armstrong discuss the PPI data that showed little rise. Are rate cuts still on the table for December? Jobless claims dropped to lowest level since May. Powell to speak on interest rates and the economy. The $20,000 reason to buy a used car. Credit Card debt hits record $1.17T but there is a silver lining.
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Episode Transcript
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Speaker 1 (00:00):
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(01:05):
Veterans Development Corporation. This is the Financial Exchange with Chuck
Zada and Mike Armstrong.
Speaker 2 (01:13):
Chuck, Mike and Tucker with you, and we've got some
additional economic data out this morning to help give us
a little bit of clarity on what is going on
with the economy. We'll start right there, because at eight
thirty am this morning, two sets of data came out.
The first we got the Producer Price Index data for
the month of October that came in with a point
(01:35):
two percent headline and point three percent core number. Mike,
correct me if I'm wrong. That's the exact same as
what we saw from CPI yesterday.
Speaker 3 (01:42):
Is it not amazingly consistent and predictable right now? Which
I think is the best thing you can say about
these inflation numbers other than they've obviously come down a
fair bit compared to a year ago, but stubbornly high.
Is the downside to all this is? Yeah, we knew
where it was going to come in, but it's not.
(02:04):
It's getting to that final mile that is I think
proving difficult for the Federal Reserve and the economy right now.
But yeah, it's to your point two and point three
on those headline numbers month over month for producer prices,
which perfectly match what we saw out of consumer prices.
Speaker 2 (02:19):
So continuing to see no real upward movement on the
inflation side, and also, as you noted, there's no real
downward movement. We're not seeing anything that is, you know,
potentially pushing us into a situation where inflation is getting
much closer to that two percent number. But we're kind
of just floating around, you know, between two two and
(02:41):
two six on the headline number depending on the index
that you're looking at, and you're you're marginally higher on
the the core numbers, where you're somewhere between like two
six and three two, And I think in a perfect world, look,
we've we've talked at lent about how the FED is
never in the long run achieved the two percent inflation
(03:02):
target that they have today. They only adopted that target
in the twenty ten, so it's not like this has
been a permanent feature of the FED, but it's still
is something where hey, really you'd like to get that
core number down into the mid twos a little bit
more consistently than what we're seeing right now, where yeah,
sure you can make a case on PCeU at two
(03:24):
six ' five right now, but realistically you'd like to
get that number into kind of the low twos at least,
you know, two three, two four, And I think you're
fine there as far as you know the headline numbers,
they they are fine right now. But the higher core
number suggests this may be driven more by following energy
prices over the last year than the idea that we're
(03:47):
sustainably at you know, two and a half percent inflation
right now.
Speaker 3 (03:51):
Let me ask you just a again, nothing that we
can read into the data, and you know, definitively say
one way or another, but consumers care about inflation when
it's two and a half percent headline, three point three
percent core, right, They clearly care when they go when
prices go up by twenty plus percent.
Speaker 4 (04:10):
Over four years.
Speaker 3 (04:11):
Do do people care about prices when they continue up
in that let's call it three percent range on an
ongoing basis, Because that's that's kind of the question for
the Trump administration right now. Right if you're not getting
it down here and we're talking about tariffs and we're
talking about tax cuts, can you sustain inflation at this point?
(04:34):
And do consumers and American voters care when inflation's running
in that three percent range.
Speaker 4 (04:39):
No, No, they don't.
Speaker 5 (04:41):
No.
Speaker 2 (04:42):
And here's here's my here are my facts that I
will put into evidence. In the nineteen nineties, I just
ran the numbers just to make sure the COO.
Speaker 5 (04:50):
I'm sorry.
Speaker 2 (04:50):
The headline inflation number USCPI average three point h two percent.
The bulk of that was in the first you know,
eight nine years. By the time he got to March
of ninety seven, inflation dipped below at that point, largely
because of the Asian currency crisis that was unfolding after that,
you know, kind of took away any inflation that may
(05:11):
have been present for the remainder of the decade. But
when we look at the economy of the nineteen nineties,
do they want to look back at the nineteen nineties
aside from again the initial recession in like Gulf War
and you know, ninety and ninety one, does anyone look
at the nineteen nineties like, man, that was a bad
decade because inflation was at three percent.
Speaker 4 (05:28):
No, that's not the conversation.
Speaker 1 (05:31):
No.
Speaker 4 (05:31):
Plenty of people will say, well, you know.
Speaker 3 (05:33):
Back in my day, I could get a candy bar
for five cents and now it's but nobody looked at
the nineties in particular and said what a burdensome decade
on American households because of prices.
Speaker 2 (05:44):
No, it just wasn't the case where you saw that
as you know, a major problem. So I think that
you know, looking at it, And again, I use the
nineties just because anyone who's listening right now is alive
and remembers it. And I know that you know, a
lot of our you know listeners, you know, might have
been alive earlier during periods of you know, marginally higher
(06:06):
inflation than the two percent target. But ultimately, like our
actual memory of the economy of the nineteen fifties and
nineteen sixties is skewed by how far far away we
are from them, Like we just don't remember them as
well as things that are more recent. And that's why
I use the nineties is just because hey, it's it's
(06:26):
you know, only you gotta go back twenty five years,
not sixty five years to get there. So I think,
and we've been saying this all year, there's no golden
rule out there. There's no hard and fast, you know,
physics explanation that says you need to keep inflation at
two percent. That's the perfect level as determined by the universe.
Speaker 3 (06:48):
Sure, it's not the freezing temperature of water. No, it's
not a kit to that.
Speaker 2 (06:53):
It is something though, where the danger of having inflation
settle in around three percent is there's a much quicker
path up to the areas that can be damaging for
governments and societies. And that's something that I think we
need to pay attention to in the context of what
we just went through for the last five years, where
(07:14):
we did have an inflationary spike in the middle of it,
and you can make a case that that inflationary spike
has been the cause of basically every incumbent in developed
countries losing share of you know, votes compared to prior.
Speaker 5 (07:32):
Elections this year.
Speaker 2 (07:33):
And so I think that this is something that ultimately, yeah,
whether inflation is running a two, two and a half
or three, I think quite honestly, human being's ability to
discern the difference between those is minimal on an annual basis,
but it puts you into a danger zone where, yeah,
(07:55):
the path from going to three percent to five percent
inflation a little bit more dangerous than when you're starting
from a two percent baseline and you start getting numbers
up into that four to five percent range, people really
do start to feel it, and it puts pressures on governments,
and it's there's a reason why governments really try to
(08:15):
avoid high inflation.
Speaker 5 (08:17):
It's because people don't like it. That's it.
Speaker 4 (08:23):
That is it.
Speaker 3 (08:24):
Yeah, I mean it gets you voted out of office
quicker than anything else, and it gets you protests in
the street, especially when those items that are up in
price are gasoline and food, which by the way, are
also you know.
Speaker 4 (08:34):
Buy and large out of control.
Speaker 3 (08:36):
Well, I guess in decades past energy more than more
than anything else, but a lot of these things buy
and large out of control of the current day legislators.
Speaker 4 (08:45):
But that'll be the question here.
Speaker 3 (08:47):
It's tough for me to envision a path based on
where this economy is to day and then based on
the Trump priorities for twenty twenty five, where inflation comes
down substantially. That doesn't necessarily mean it goes up substantially,
because I think there's a lot of still open questions
about out there about food prices, about energy prices. But
(09:09):
if there's no significant path further downwards, what is the
risk to the upside and what could spark that and
then what would the reaction be on the part of
a new Trump administration.
Speaker 2 (09:20):
Yeah, and I think, look, we all need to keep
kind of an open mind when it comes to inflation,
because if you can find me the person who got
the last five years exactly right in terms of how
it was going to play out, nobody, I'd love to
talk to them. Yeah, because I don't think anyone had
the exact path moving this way, like, hey, inflation's gonna
(09:41):
go up to nine percent and then come back down
into the two to three percent range without without triggering
a recession Like That's that's not something that many people
had on their Bengo card. There are a few who
I think were direc actionally, you know, close directionally right
(10:02):
on this and and had some good thoughts, but by
and large, the idea that hey, you can have inflation
come down seven percent and unemployment only has to move up.
You know, right now we're only point seven percent higher
than it was at its bottom. That's not something that
many people who study these things would say, is you know,
(10:25):
possible or likely? So I think that we do all
need to remain humble about this and as J. Powell
once said, I think we all now know how little
we know about inflation. Well put, so I just think
that some humilities warranted on this, and we'll see where
(10:46):
things go over, you know, the next six to twelve months.
Like sure, there are no major inflationary impulses out there
right now. It's tough to see, you know, further signs
of disinflation, given where the economy is at the moment.
But this thing is always evolving, it's always changing, and
you're never in the same place, or rarely at least
(11:07):
in the same place six months from now as you
are today. So we'll see how things evolve. Take a
quick break here. When we come back, I do want
to touch on the other piece of Economic Day that
we got, the initial jobbless claims, and then we'll talk
a little bit about the FED and their upcoming December
meeting after this.
Speaker 1 (11:27):
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Speaker 5 (12:25):
Mike.
Speaker 2 (12:26):
Let's touch on the jobless claims data quickly, just because
we did see this come out at eight thirty this morning.
Initial claims fell from two hundred and twenty one thousand
down to two hundred and seventeen thousand, Continuing claims from
one point eight eight four million down to one point
eight seven to three million, So still nothing showing up
on the jobles claim side indicating any continued weakness or
(12:50):
any type of concern in the labor market. There we
continue to see signs that the labor market is internally slowing,
things like the duration of unemployment going up, the number
of quits and hires going down, those kinds of things,
but it's not translating into greater job loss at this point.
(13:12):
Your thoughts, Yeah, I keep hearing from people, by the
way that they're just not happy about the state of
the labor market.
Speaker 4 (13:18):
And I can get that for new hires.
Speaker 3 (13:21):
I can get that for people looking for work right
now that are feeling that long delay of I can't
find a job in my field. I've been looking for
a while. It's just not happening. But I guess I
just keep being a broken record on this. If you're
unhappy with the labor market of today, then watch out
for the future, because this is in many ways close
(13:43):
to as good as the labor market gets. I mean,
we had some outsized, really really solid years in twenty
twenty one and things like that when there is just
a true shortage of labor. But those times don't come
very frequently, and nor does the market that we're dealing
with right now in terms of its strength.
Speaker 5 (14:01):
Yeah, I mean, I think if you.
Speaker 2 (14:04):
Look at what is well, here's the thing, Mike, so
I think in terms of like what we've seen historically
that we have data for, yeah, we're probably still close
to I think the hottest labor market that's sustainable, which
was probably like twenty seventeen, twenty eighteen. Yeah, it's it
(14:25):
still is something where the question that I think is
worth asking is is there something that is there anything
that we can do in order to improve it further?
Because I think that just just saying hey, it's gonna
be like it was in like twenty fourteen, twenty fifteen,
and that's what we have to deal with. I don't
(14:46):
think anyone really looks back at that and is like, yeah,
that was that was a great labor market, you know.
So I'm I'm less concerned with top line rates as
far as unemployment and things like that as the indicators
and more how do we get people turning over in
jobs more. I know that sounds like kind of counterintuitive
because everyone looks at the labor market now and is like,
(15:08):
the big problem with the labor markets is that nobody
works in one place anymore for forty years.
Speaker 5 (15:15):
How can we like That's That's not what I'm talking about.
Speaker 2 (15:18):
What I'm saying is high turnover is good in the
labor market, or higher than what we're seeing, is because
it allows people to get into the jobs they want
to be in for the long term. And when people
simply are locked into the jobs they're at out of
fear of losing a job as evidenced by the quits
rate declining, that's something that isn't good socially or economically
(15:41):
in the long run.
Speaker 5 (15:42):
Right.
Speaker 3 (15:42):
Yeah, And I think I think when you talk to
people realistically about their dissatisfaction with the jobs market, I
think part of that comes from more of a space
of not the number of jobs or the number of
people who are working, but the types of jobs that
are available today and the type of work that's done
today compared to decades in the past. And and that's
where certainly policy has been directed over the last few years,
(16:03):
and I'm sure will be continued to be during under
the Trump administration, of how do we bring more manufacturing
and you know, jobs here where people are doing things
and getting paid as more of a part of the
middle class, rather than the hollowing out that we've seen
over the last few decades.
Speaker 4 (16:19):
And that I get.
Speaker 3 (16:20):
I understand that I know that there are millions of
Americans who lost their manufacturing jobs throughout the seventies, eighties,
and nineties, and maybe that starts to come back a
little bit. But you know, you mentioned, you know, a
job market of the twenty fourteen to twenty fifteen type.
By most stats, we're not there, right, I mean by
(16:41):
most statistics that you look at, Chuck, whether it's the
employment to population ratio, the unemployment rate, you know, a
lot of those things are still churning along at late
twenty tens levels. And yeah, I think we can improve
things around the edges, But I go back to there
have been so many labor markets we've been through that
are so substantially worse than the one that we are
(17:03):
dealing with right now.
Speaker 2 (17:04):
Can we also, I want to touch on the manufacturing piece,
just because I think there's something interesting there.
Speaker 5 (17:10):
And I'm not the first person to have this idea.
Speaker 2 (17:12):
Rusty Gwynn, who was a hedge fund manager for a
number of years. He runs a firm out of Connecticut
now that basically studies studies how news tells people what
to think. I think is kind of the best way
that I can put it. He had a piece back
in twenty nineteen that is always top of mind for
(17:34):
me on this and what he talks about in it
when it comes to manufacturing is that the thing that
is the thing that's really redeeming about a manufacturing job
is when you finish the day and someone asks, hey,
what'd you do today, you can say, I built this.
The work is building something, and I pulled it up
(17:56):
right now just because I want to quote from it.
He compares, you know, it can instruction worker in a
banking analyst, and he says, look, the construction worker builds,
and then he comes home. His job and his worker
more or less the same. His job is to make,
and then he makes. He probably has some complaints about
the hard ass foreman and who you know, and about
his rotator cuff that keeps giving him issues, but hey,
he's got a job and he feels like.
Speaker 5 (18:17):
He's making something.
Speaker 2 (18:19):
The banking analyst, on the other hand, will have a
little more difficulty telling you what his work is what
he produces. If he's got more years of college telling
him how to answer this question than his experience actually
doing it, he'll give you something something matching.
Speaker 5 (18:30):
Capital with those who deploy it.
Speaker 2 (18:32):
Over time, he comes to understand that his job function
is one thing to permit his immediate boss to signal
competence to her immediate boss, a chain of signaling which
ultimately ends with a client who wants to do something
while offloading the risk to the bank. And this, I
think is a big thing. Like not that all of
us are banking analysts, but so much work today is
(18:55):
not actually making something, but basically doing something to say, hey,
this is okay for someone else to do something, And
so we get kind.
Speaker 5 (19:06):
Of lost there.
Speaker 2 (19:07):
And so I know that, you know, sometimes we can
be critical of, you know, romanticizing manufacturing, but the immediate
attraction of manufacturing is, hey, I went into work and
I made something today. When you're in a lot of
white collar jobs, we've all seen office space, like what
exactly is it that you do here? Quick Break Wall
(19:28):
Street watches next.
Speaker 1 (19:41):
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Watch a complete look and what's moving market so far today?
Right here on the Financial Exchange Radio Network.
Speaker 6 (20:01):
Markets are relatively quiet and dipping into negative territories. Investors
react to another measure of inflation this morning via the
Producer Price Index, where wholesale prices climb zero point two
percent last month, in line with expectations. Right now, the
Dow is off by only twenty points, s and P
five hundred down by five points, and the Nasdaq is
(20:24):
off by thirty three points. Russell two thousand is off
by a third of a percent. Ten year Treasure reeled
down by two basis points at four point four to
two percent, and crude oil is up nearly one percent higher,
trading just above sixty nine dollars a barrel. Disney shares
(20:44):
rallying by seven percent after the media and entertainment giant
posted a jump in quarterly net income and higher revenue.
Disney's streaming business and studio also gained momentum, while it's
cable and theme park units stumbled. Meanwhile, Cisco Systems beat
third quarter estimates and also lifted its full year guidance,
(21:05):
but posted its fourth straight quarter of declining revenue. Shares
in the networking equipment company are down by two percent. Elsewhere,
shares in super Microcomputer down another six percent today after
the AI server maker said it needs more time to
file its quarterly report. Chinese e commerce company JD posted
(21:27):
a higher quarterly profit, but revenue missed expectations, sending that
stock down by three percent. Piper Sandler upgraded Campbell Soup
to overweight from neutral, with a firm site of continued
strong growth expectations for the Rowse brand, sending Campbell shares
up by one percent, and Coach parent company Tapestry officially
(21:48):
drop plans to buy rival handbag maker Capri after a
judge last month block the deal from closing. Tapestry shares
up by eleven percent, while Capri stock is down by
one percent. I'm Tucker Silvan. That's Wall Street.
Speaker 2 (22:03):
Watch, and just a reminder every time we discussed that deal,
Tapestry does not actually make any Tapestries, and Caprice does
not actually make any Caprice or Caprice sons or Caprice sons.
Speaker 4 (22:16):
Yeah, yeah, certain distinction.
Speaker 5 (22:17):
There's that. Mike. Let's talk a little bit about the FED.
Speaker 2 (22:20):
So we spent the first couple segments today talking about
inflation and how hey, it's at a level that we've
seen it at even during extended you know, periods of
good economic uh tidings growth whatever, you know, even in
good economies, we've seen inflation in the two and a
half to three percent range annuals. Yes, the question I
(22:43):
think that is being asked now of the Fed, and
that's being asked over and over again. I'm seeing this
like as a constant refrain day in and day out.
Right now is Hey, you've previously said, you being the Fed,
that you think that the long run rate or the
Fed funds rate right now is like in the high
twos somewhere. What if you actually need to keep the
(23:07):
rate higher, the Fed funds rate higher, in order to
keep the economy from getting too hot again. This is
the question that I've seen come up time and time
again in the last four to six weeks with the
rebound and economic growth that we've seen.
Speaker 3 (23:21):
Yeah, and it's also going to be the piece that
is most objected to by President elect Donald Trump. If
it comes to be concluded that, yeah, rates need to
stay higher now and they cannot move down as quickly
as we were hoping. It is setting up for kind
of a megafight just based on the timing of all this, Right,
(23:43):
you look at it from this outside perspective, ignoring the
economic data for a moment, and the drome power fut
a reserve cut interest rates now three times leading up
to the election two times, but seventy five basis points
in total, and depending on where this data comes in,
you know, they could be taking a pause almost right
(24:05):
as Donald Trump takes office, and again, looking at from
the outside perspective, there's actually tremendous justification for doing it
exactly that way, and it has nothing to do with
the election. It has everything to do with the data.
But it's certainly setting up for what could be quite
a fight here. So there is a meeting coming up
(24:26):
now on December eighteenth. The odds of a great cut
have been moving around. A week ago, it was only
two thirds probability of a twenty five base point rate cut.
After the last two inflation reports, which again came in
line almost exactly with expectations. You now at about eighty
percent for a twenty five base point rate cut and
(24:47):
twenty percent that the rates stay right where they are.
But then the further out you get, and there's a
fair bit more uncertainty in terms of what all that
looks like.
Speaker 2 (24:56):
Mike, You know how a lot of times when we're
talking about the FED, and you know, we look through
the weekly calendar, like this week, just as an example, today,
Coogler from the Fed is speaking, Barkin is speaking, Powell
is speaking, Williams is speaking, the balance sheet is speaking.
Speaker 5 (25:14):
Now, the balance sheet's just.
Speaker 2 (25:15):
A release that they do, but that's four speeches in
a day, and a lot of times we're like, guys,
just go away and stop talking. I want to turn
this around a little bit as well, because it's also
bothersome to me that every little wiggle that we get
in economic data requires endless commentary from someone saying the
(25:44):
Fed is wrong.
Speaker 3 (25:47):
Everyone's got to make a living. Chuck listen, I get it,
I get it.
Speaker 2 (25:51):
But I'm gonna rip on Jeremy Siegel again, who's very
smart and likely has been very well compensated over the
course of his career, because in September, siegu was the
guy who went on all the morning shows and said
we need a seventy five basis point emergency cut now,
and then another seventy five basis point cut later in September,
(26:12):
And that was because of basically two maybe three months
of weakening economic data over the summer. Yes, and now
you've got everyone in their grandmother after two months of
better economic data saying, hey, the Fed's not going to
(26:32):
be able to cut it all like they might have
already gone too far, maybe they actually need to raise
the FED funds rate, And it's ultimately just revealing like
kind of who's biased where in terms of what they
think the FED should be doing. But maybe we all
need to just be quiet a little bit. I was
looking back at it in the nineteen nineties just because
(26:54):
we were we were talking about inflation, and I was like, Okay,
let me like see what what the FED was doing
even in the ninth nineties, Mike, do you know that
aside from you know, the Gulf War period, for the
entire rest of the nineteen nineties, the FED funds rate
basically sat between three percent and six percent. And I'd
like some little wobbles and jiggles where they decided to
(27:15):
move it this way and that way, but it was basically, hey,
the economy did what it did over eight years, and
in particular, like from from ninety four on you basically
had alan greenspan do very little. I mean, you were
basically between like four seven and sixty five, even through
(27:36):
the tech bubble. So it's like a very narrow range
that you had, and the idea that, hey, the FED
needs to be doing a ton man. In a healthy economy,
we don't obsess about the FED and what the cost
of money is on a daily basis.
Speaker 3 (27:51):
Maybe, But I also think that since the Great Recession,
there has been a giant abdication of I guess financial
responsibility on the part of Congress and just laying it
all at the feet of the FED.
Speaker 4 (28:02):
So I don't want to blame it all on media.
Speaker 3 (28:05):
I think that there has been a congressional members who
just throw their hands in the air and say, well,
it's the Fed's job to worry about all this stuff.
Speaker 4 (28:13):
You know, we're not going to deal with it.
Speaker 5 (28:16):
Let's to get on that.
Speaker 2 (28:17):
Though, Like, what do you mean, was was Congress that
responsive to economic conditions in the nineteen nineties that they
were constantly tinkering with economic policy?
Speaker 4 (28:27):
No, I guess.
Speaker 3 (28:29):
I guess it's not so much that they were passing
laws and actually taking action, but I think that there
was a lot more questions and answers.
Speaker 4 (28:41):
About what are you going to do about inflation?
Speaker 3 (28:43):
And these days, when asked about it, I think almost
universally the answer has been, well, that's really the Fed's job,
and you know, we don't we don't need to be
as involved in.
Speaker 5 (28:53):
This Yeah, I guess it's Look, don't get me wrong.
Speaker 2 (28:59):
I've said time time again, the FED has more gravity
towards what happens in the economy than any other institution
or person on the planet because they can literally push
a button and change things, and basically either route, they
could ruin the economy in any number of ways through
the wrong button push. And I think it's you know,
(29:23):
worthy to respect that power. But I think it also
means that, hey, just because you get a set of
data for a month or a quarter, it doesn't mean
that we need to pretend that the economy is gonna
be permanently doing what it did for that quarter. You know,
like we can just say, hey, let's let's wait and
(29:46):
see before we do anything. Now, there are times to
not wait and see again Q one to twenty twenty two.
I was the dude who's like, yeah, just raise rates
five percent and get it over with. I still take
credit for that because it would have been a great move,
a great move, But there's other times where it's just
kind of, hey, maybe we don't need to do anything
right now, and getting swayed by a quarter of economic
(30:10):
data might be the wrong thing, And hey, maybe that
fifty basis point rate cut in September. You're hearing an
awful lot of potential regret expressed about that right now,
And so maybe even for the FED, Yeah, maybe you
don't need to be, you know, quite as in tune
with what the data is doing right now unless you
(30:33):
know that right now is also going to be exactly
what you get in the future. And Mike, do any
of us know exactly what we're gonna get in the future? Yes,
which people me, Oh, only me. I'm so happy that,
I'm so happy we do this together. Then it's uh,
it's great.
Speaker 4 (30:47):
Yep, that crystal ball that I keep my back pocket.
Perfect score.
Speaker 5 (30:51):
So that's kind of where I'm at on this. Let's
take a quick break here.
Speaker 2 (30:54):
When we come back, let's talk about why the Wall
Street Journal has a piece today title the twenty five
thousand dollars Reason to Buy a used Car.
Speaker 1 (31:03):
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(31:27):
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Speaker 2 (31:33):
Mike, there's a piece in the Wall Street Journalists title
the twenty thousand dollars reason to buy a used car,
and the big reason is, Hey, right now, on average,
there's a twenty thousand dollars difference between the price of
new vehicles purchased and the price of used vehicles purchased.
But isn't that kind of not in apples to apples comparison?
Speaker 4 (32:00):
Plane, I'm not following you. Why it's not Apple staples?
Speaker 2 (32:02):
Okay, so you look at the average price of two things, right, Sure,
but we know there's a wide range of car prices,
including a number of new cars that you can get
for under twenty seven thousand dollars. Sure, So simply saying, hey,
you should buy a used car because you'll save twenty
thousand dollars, I don't think is actually giving people the
(32:26):
info that they want, especially because when you look at
new vehicles, they often have features, drive trains, or whatever
they may be that might not exist in older used vehicles.
Speaker 3 (32:39):
Yeah, I guess it's not perfectly Apples staples, but I
would suspect, right. I mean we talk about how what's
the average new transaction price on a vehicle forty five
forty seventy thousand. Yeah, and it's you know, largely being
driven upwards by SUVs and trucks. But that's not a
new phenomenon, right, you know, I would imagine that the
class of used vehicle when purchased is probably pretty similar
(33:00):
to the class of new vehicle. Certainly if you're gonna
do a more thorough analysis than what you need to
do is compare the new Tesla Model three to the
twenty twenty one Tesla Model three and see what the
discount is, and then do the same.
Speaker 4 (33:10):
For every other vehicle out there.
Speaker 3 (33:12):
But the point that they make that I think contextualizing
is helpful here is that that gap between used and
new has never been larger.
Speaker 2 (33:21):
True, But I I'd be curious, and look, I haven't
done the legwork on this. I'd be curious how large
the gap is if you adjust for inflation. Sure, again,
twenty thousand dollars today is not what twenty thousand dollars
was ten years ago.
Speaker 5 (33:34):
Agreed. There are some.
Speaker 2 (33:36):
Vehicles they point out, like the Tesla Model three, where
the new price, and again you talk about what you get,
you know, in the same model. The new price right
now is you know, forty two thousand change. You could
buy a three year old one that is in the
twenty fives. But it's something where hey, there's you know,
(33:56):
reasons for that, and it's it's basically been that. Because
Tesla has a history now of trying to cut prices,
your resale value down the road may also be lower,
and so it's something that you have to pay attention to.
Speaker 3 (34:09):
Yeah, so look, I mean this is a big reversal
from just a couple of years ago when I myself
had never bought a new car before, and I went
and bought a new car because the used car prices
were so outrageous that if you could actually get your
hands on a new one, it was a comparatively again
still in hindsight, a crap deal, but a comparatively a
good deal. The other piece of this, though, in general,
(34:31):
is just the high cost of cars and car ownership
in general, and one of the things that I keep
running into more and more now because of rates where
they are are high interest car loans, and specifically on
the used car side of things. Chuck I mean, we've
talked about the wide range there, but you're seeing car
loans on the use side of in excess of ten percent.
And a common thing that I continue to get questions
(34:54):
on is, you know, I've got this loan, but it's
fixed and I can afford or did why should I
try and pay it off faster?
Speaker 5 (35:03):
Right?
Speaker 3 (35:03):
Like, I've got this money in my portfolio that in
many cases grew twenty percent over the last nine months.
Why would I take anything out of that in order
to pay off alone? Even if it is at five
six seven percent interest? I'm doing so well with my investments.
Do you encounter that a lot?
Speaker 2 (35:18):
Yeah, it's it certainly is something where there are a
number of things that you have to sort through there
in terms of, hey, the rates that you're potentially earning
on savings or investments versus what you're paying. But I
do think look to it's something where that stuff matters.
But also how you think about it in the stress
(35:39):
that a loan might cause you is something worth having
in the conversation as well, because look, people often make
decisions that might not be in their financial best interest,
you know, taking out you know, credit card debt or whatever.
But sure, Hey, you have to do it because you
know the alternative otherwise is whatever. If you know you're
(35:59):
dealing with the situation where you're like, hey, my investments,
maybe I've got you know, CDs that are earning four percent,
and I got a car loan you know that's only
at six Like what do I do with the car loans?
Speaker 5 (36:09):
Causing me stress?
Speaker 2 (36:11):
Hey, maybe you might actually end up just being in
a happier place even though it's not financially best for
you to pay that car loan off.
Speaker 3 (36:18):
Yeah, I think I think there's a lot of psychological
barriers when it comes to this type of planning, and
I get questions about it all the time. But that's
what a financial planner is there to help you guide through,
is Hey, this is mathematically where it's going to be
in your best interest to do something, and then psychologically,
how do how do we get you there so that
you're not damaging your own financial future. If you have
(36:38):
questions along those lines, maybe it's a mortgage, maybe it's
student loans, maybe it's a car loan, and you're trying
to figure out how do I get myself in the
better financial position from my future? Please give the folks
at Armstrong Advisory Group, a ring we work with our
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Speaker 2 (37:23):
Mike, speaking of a credit card debt which I just
mentioned briefly, the FED has a new quarterly report that
they just published on the dead outstanding from Americans, and
Americans now a one point one to seven trillion dollars
on their credit cards, rising by twenty four billion dollars
during the third quarter. That's eight point one percent higher
than a year ago. But despite that increase, delinquency rates
(37:47):
actually improved from nine point one percent down to eight
point eight percent. So even as credit card balances are
growing again, not showing signs of continued deterioration as far
as the delinquency rates and things like that.
Speaker 3 (38:02):
Yeah, that is the ultimately important piece. But even inflation
adjusted terms, I believe that's a brand new record for
credit card debt. So that's frightening. Let's take a quick
break here.
Speaker 2 (38:11):
We got our two coming up in just a little
bit on the Financial Exchange,
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(01:05):
Veterans Development Corporation. This is the Financial Exchange with Chuck
Zada and Mike Armstrong.
Speaker 2 (01:13):
Chuck, Mike and Tucker with you, and we've got some
additional economic data out this morning to help give us
a little bit of clarity on what is going on
with the economy. We'll start right there, because at eight
thirty am this morning, two sets of data came out.
The first we got the Producer Price Index data for
the month of October that came in with a point
(01:35):
two percent headline and point three percent core number. Mike,
correct me if I'm wrong. That's the exact same as
what we saw from CPI yesterday.
Speaker 3 (01:42):
Is it not amazingly consistent and predictable right now? Which
I think is the best thing you can say about
these inflation numbers other than they've obviously come down a
fair bit compared to a year ago, but stubbornly high.
Is the downside to all this is? Yeah, we knew
where it was going to come in, but it's not.
(02:04):
It's getting to that final mile that is I think
proving difficult for the Federal Reserve and the economy right now.
But yeah, it's to your point two and point three
on those headline numbers month over month for producer prices,
which perfectly match what we saw out of consumer prices.
Speaker 2 (02:19):
So continuing to see no real upward movement on the
inflation side, and also, as you noted, there's no real
downward movement. We're not seeing anything that is, you know,
potentially pushing us into a situation where inflation is getting
much closer to that two percent number. But we're kind
of just floating around, you know, between two two and
(02:41):
two six on the headline number depending on the index
that you're looking at, and you're you're marginally higher on
the the core numbers, where you're somewhere between like two
six and three two, And I think in a perfect world, look,
we've we've talked at lent about how the FED is
never in the long run achieved the two percent inflation
(03:02):
target that they have today. They only adopted that target
in the twenty ten, so it's not like this has
been a permanent feature of the FED, but it's still
is something where hey, really you'd like to get that
core number down into the mid twos a little bit
more consistently than what we're seeing right now, where yeah,
sure you can make a case on PCeU at two
(03:24):
six ' five right now, but realistically you'd like to
get that number into kind of the low twos at least,
you know, two three, two four, And I think you're
fine there as far as you know the headline numbers,
they they are fine right now. But the higher core
number suggests this may be driven more by following energy
prices over the last year than the idea that we're
(03:47):
sustainably at you know, two and a half percent inflation
right now.
Speaker 3 (03:51):
Let me ask you just a again, nothing that we
can read into the data, and you know, definitively say
one way or another, but consumers care about inflation when
it's two and a half percent headline, three point three
percent core, right, They clearly care when they go when
prices go up by twenty plus percent.
Speaker 4 (04:10):
Over four years.
Speaker 3 (04:11):
Do do people care about prices when they continue up
in that let's call it three percent range on an
ongoing basis, Because that's that's kind of the question for
the Trump administration right now. Right if you're not getting
it down here and we're talking about tariffs and we're
talking about tax cuts, can you sustain inflation at this point?
(04:34):
And do consumers and American voters care when inflation's running
in that three percent range.
Speaker 4 (04:39):
No, No, they don't.
Speaker 5 (04:41):
No.
Speaker 2 (04:42):
And here's here's my here are my facts that I
will put into evidence. In the nineteen nineties, I just
ran the numbers just to make sure the COO.
Speaker 5 (04:50):
I'm sorry.
Speaker 2 (04:50):
The headline inflation number USCPI average three point h two percent.
The bulk of that was in the first you know,
eight nine years. By the time he got to March
of ninety seven, inflation dipped below at that point, largely
because of the Asian currency crisis that was unfolding after that,
you know, kind of took away any inflation that may
(05:11):
have been present for the remainder of the decade. But
when we look at the economy of the nineteen nineties,
do they want to look back at the nineteen nineties
aside from again the initial recession in like Gulf War
and you know, ninety and ninety one, does anyone look
at the nineteen nineties like, man, that was a bad
decade because inflation was at three percent.
Speaker 4 (05:28):
No, that's not the conversation.
Speaker 1 (05:31):
No.
Speaker 4 (05:31):
Plenty of people will say, well, you know.
Speaker 3 (05:33):
Back in my day, I could get a candy bar
for five cents and now it's but nobody looked at
the nineties in particular and said what a burdensome decade
on American households because of prices.
Speaker 2 (05:44):
No, it just wasn't the case where you saw that
as you know, a major problem. So I think that
you know, looking at it, And again, I use the
nineties just because anyone who's listening right now is alive
and remembers it. And I know that you know, a
lot of our you know listeners, you know, might have
been alive earlier during periods of you know, marginally higher
(06:06):
inflation than the two percent target. But ultimately, like our
actual memory of the economy of the nineteen fifties and
nineteen sixties is skewed by how far far away we
are from them, Like we just don't remember them as
well as things that are more recent. And that's why
I use the nineties is just because hey, it's it's
(06:26):
you know, only you gotta go back twenty five years,
not sixty five years to get there. So I think,
and we've been saying this all year, there's no golden
rule out there. There's no hard and fast, you know,
physics explanation that says you need to keep inflation at
two percent. That's the perfect level as determined by the universe.
Speaker 3 (06:48):
Sure, it's not the freezing temperature of water. No, it's
not a kit to that.
Speaker 2 (06:53):
It is something though, where the danger of having inflation
settle in around three percent is there's a much quicker
path up to the areas that can be damaging for
governments and societies. And that's something that I think we
need to pay attention to in the context of what
we just went through for the last five years, where
(07:14):
we did have an inflationary spike in the middle of it,
and you can make a case that that inflationary spike
has been the cause of basically every incumbent in developed
countries losing share of you know, votes compared to prior.
Speaker 5 (07:32):
Elections this year.
Speaker 2 (07:33):
And so I think that this is something that ultimately, yeah,
whether inflation is running a two, two and a half
or three, I think quite honestly, human being's ability to
discern the difference between those is minimal on an annual basis,
but it puts you into a danger zone where, yeah,
(07:55):
the path from going to three percent to five percent
inflation a little bit more dangerous than when you're starting
from a two percent baseline and you start getting numbers
up into that four to five percent range, people really
do start to feel it, and it puts pressures on governments,
and it's there's a reason why governments really try to
(08:15):
avoid high inflation.
Speaker 5 (08:17):
It's because people don't like it. That's it.
Speaker 4 (08:23):
That is it.
Speaker 3 (08:24):
Yeah, I mean it gets you voted out of office
quicker than anything else, and it gets you protests in
the street, especially when those items that are up in
price are gasoline and food, which by the way, are
also you know.
Speaker 4 (08:34):
Buy and large out of control.
Speaker 3 (08:36):
Well, I guess in decades past energy more than more
than anything else, but a lot of these things buy
and large out of control of the current day legislators.
Speaker 4 (08:45):
But that'll be the question here.
Speaker 3 (08:47):
It's tough for me to envision a path based on
where this economy is to day and then based on
the Trump priorities for twenty twenty five, where inflation comes
down substantially. That doesn't necessarily mean it goes up substantially,
because I think there's a lot of still open questions
about out there about food prices, about energy prices. But
(09:09):
if there's no significant path further downwards, what is the
risk to the upside and what could spark that and
then what would the reaction be on the part of
a new Trump administration.
Speaker 2 (09:20):
Yeah, and I think, look, we all need to keep
kind of an open mind when it comes to inflation,
because if you can find me the person who got
the last five years exactly right in terms of how
it was going to play out, nobody, I'd love to
talk to them. Yeah, because I don't think anyone had
the exact path moving this way, like, hey, inflation's gonna
(09:41):
go up to nine percent and then come back down
into the two to three percent range without without triggering
a recession Like That's that's not something that many people
had on their Bengo card. There are a few who
I think were direc actionally, you know, close directionally right
(10:02):
on this and and had some good thoughts, but by
and large, the idea that hey, you can have inflation
come down seven percent and unemployment only has to move up.
You know, right now we're only point seven percent higher
than it was at its bottom. That's not something that
many people who study these things would say, is you know,
(10:25):
possible or likely? So I think that we do all
need to remain humble about this and as J. Powell
once said, I think we all now know how little
we know about inflation. Well put, so I just think
that some humilities warranted on this, and we'll see where
(10:46):
things go over, you know, the next six to twelve months.
Like sure, there are no major inflationary impulses out there
right now. It's tough to see, you know, further signs
of disinflation, given where the economy is at the moment.
But this thing is always evolving, it's always changing, and
you're never in the same place, or rarely at least
(11:07):
in the same place six months from now as you
are today. So we'll see how things evolve. Take a
quick break here. When we come back, I do want
to touch on the other piece of Economic Day that
we got, the initial jobbless claims, and then we'll talk
a little bit about the FED and their upcoming December
meeting after this.
Speaker 1 (11:27):
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Speaker 5 (12:25):
Mike.
Speaker 2 (12:26):
Let's touch on the jobless claims data quickly, just because
we did see this come out at eight thirty this morning.
Initial claims fell from two hundred and twenty one thousand
down to two hundred and seventeen thousand, Continuing claims from
one point eight eight four million down to one point
eight seven to three million, So still nothing showing up
on the jobles claim side indicating any continued weakness or
(12:50):
any type of concern in the labor market. There we
continue to see signs that the labor market is internally slowing,
things like the duration of unemployment going up, the number
of quits and hires going down, those kinds of things,
but it's not translating into greater job loss at this point.
(13:12):
Your thoughts, Yeah, I keep hearing from people, by the
way that they're just not happy about the state of
the labor market.
Speaker 4 (13:18):
And I can get that for new hires.
Speaker 3 (13:21):
I can get that for people looking for work right
now that are feeling that long delay of I can't
find a job in my field. I've been looking for
a while. It's just not happening. But I guess I
just keep being a broken record on this. If you're
unhappy with the labor market of today, then watch out
for the future, because this is in many ways close
(13:43):
to as good as the labor market gets. I mean,
we had some outsized, really really solid years in twenty
twenty one and things like that when there is just
a true shortage of labor. But those times don't come
very frequently, and nor does the market that we're dealing
with right now in terms of its strength.
Speaker 5 (14:01):
Yeah, I mean, I think if you.
Speaker 2 (14:04):
Look at what is well, here's the thing, Mike, so
I think in terms of like what we've seen historically
that we have data for, yeah, we're probably still close
to I think the hottest labor market that's sustainable, which
was probably like twenty seventeen, twenty eighteen. Yeah, it's it
(14:25):
still is something where the question that I think is
worth asking is is there something that is there anything
that we can do in order to improve it further?
Because I think that just just saying hey, it's gonna
be like it was in like twenty fourteen, twenty fifteen,
and that's what we have to deal with. I don't
(14:46):
think anyone really looks back at that and is like, yeah,
that was that was a great labor market, you know.
So I'm I'm less concerned with top line rates as
far as unemployment and things like that as the indicators
and more how do we get people turning over in
jobs more. I know that sounds like kind of counterintuitive
because everyone looks at the labor market now and is like,
(15:08):
the big problem with the labor markets is that nobody
works in one place anymore for forty years.
Speaker 5 (15:15):
How can we like That's That's not what I'm talking about.
Speaker 2 (15:18):
What I'm saying is high turnover is good in the
labor market, or higher than what we're seeing, is because
it allows people to get into the jobs they want
to be in for the long term. And when people
simply are locked into the jobs they're at out of
fear of losing a job as evidenced by the quits
rate declining, that's something that isn't good socially or economically
(15:41):
in the long run.
Speaker 5 (15:42):
Right.
Speaker 3 (15:42):
Yeah, And I think I think when you talk to
people realistically about their dissatisfaction with the jobs market, I
think part of that comes from more of a space
of not the number of jobs or the number of
people who are working, but the types of jobs that
are available today and the type of work that's done
today compared to decades in the past. And and that's
where certainly policy has been directed over the last few years,
(16:03):
and I'm sure will be continued to be during under
the Trump administration, of how do we bring more manufacturing
and you know, jobs here where people are doing things
and getting paid as more of a part of the
middle class, rather than the hollowing out that we've seen
over the last few decades.
Speaker 4 (16:19):
And that I get.
Speaker 3 (16:20):
I understand that I know that there are millions of
Americans who lost their manufacturing jobs throughout the seventies, eighties,
and nineties, and maybe that starts to come back a
little bit. But you know, you mentioned, you know, a
job market of the twenty fourteen to twenty fifteen type.
By most stats, we're not there, right, I mean by
(16:41):
most statistics that you look at, Chuck, whether it's the
employment to population ratio, the unemployment rate, you know, a
lot of those things are still churning along at late
twenty tens levels. And yeah, I think we can improve
things around the edges, But I go back to there
have been so many labor markets we've been through that
are so substantially worse than the one that we are
(17:03):
dealing with right now.
Speaker 2 (17:04):
Can we also, I want to touch on the manufacturing piece,
just because I think there's something interesting there.
Speaker 5 (17:10):
And I'm not the first person to have this idea.
Speaker 2 (17:12):
Rusty Gwynn, who was a hedge fund manager for a
number of years. He runs a firm out of Connecticut
now that basically studies studies how news tells people what
to think. I think is kind of the best way
that I can put it. He had a piece back
in twenty nineteen that is always top of mind for
(17:34):
me on this and what he talks about in it
when it comes to manufacturing is that the thing that
is the thing that's really redeeming about a manufacturing job
is when you finish the day and someone asks, hey,
what'd you do today, you can say, I built this.
The work is building something, and I pulled it up
(17:56):
right now just because I want to quote from it.
He compares, you know, it can instruction worker in a
banking analyst, and he says, look, the construction worker builds,
and then he comes home. His job and his worker
more or less the same. His job is to make,
and then he makes. He probably has some complaints about
the hard ass foreman and who you know, and about
his rotator cuff that keeps giving him issues, but hey,
he's got a job and he feels like.
Speaker 5 (18:17):
He's making something.
Speaker 2 (18:19):
The banking analyst, on the other hand, will have a
little more difficulty telling you what his work is what
he produces. If he's got more years of college telling
him how to answer this question than his experience actually
doing it, he'll give you something something matching.
Speaker 5 (18:30):
Capital with those who deploy it.
Speaker 2 (18:32):
Over time, he comes to understand that his job function
is one thing to permit his immediate boss to signal
competence to her immediate boss, a chain of signaling which
ultimately ends with a client who wants to do something
while offloading the risk to the bank. And this, I
think is a big thing. Like not that all of
us are banking analysts, but so much work today is
(18:55):
not actually making something, but basically doing something to say, hey,
this is okay for someone else to do something, And
so we get kind.
Speaker 5 (19:06):
Of lost there.
Speaker 2 (19:07):
And so I know that, you know, sometimes we can
be critical of, you know, romanticizing manufacturing, but the immediate
attraction of manufacturing is, hey, I went into work and
I made something today. When you're in a lot of
white collar jobs, we've all seen office space, like what
exactly is it that you do here? Quick Break Wall
(19:28):
Street watches next.
Speaker 1 (19:41):
Like us on Facebook and follow us on Twitter at
TFE show. Breaking business news is always first right here
on the Financial Exchange Radio Network. Time now for Wall Street.
Watch a complete look and what's moving market so far today?
Right here on the Financial Exchange Radio Network.
Speaker 6 (20:01):
Markets are relatively quiet and dipping into negative territories. Investors
react to another measure of inflation this morning via the
Producer Price Index, where wholesale prices climb zero point two
percent last month, in line with expectations. Right now, the
Dow is off by only twenty points, s and P
five hundred down by five points, and the Nasdaq is
(20:24):
off by thirty three points. Russell two thousand is off
by a third of a percent. Ten year Treasure reeled
down by two basis points at four point four to
two percent, and crude oil is up nearly one percent higher,
trading just above sixty nine dollars a barrel. Disney shares
(20:44):
rallying by seven percent after the media and entertainment giant
posted a jump in quarterly net income and higher revenue.
Disney's streaming business and studio also gained momentum, while it's
cable and theme park units stumbled. Meanwhile, Cisco Systems beat
third quarter estimates and also lifted its full year guidance,
(21:05):
but posted its fourth straight quarter of declining revenue. Shares
in the networking equipment company are down by two percent. Elsewhere,
shares in super Microcomputer down another six percent today after
the AI server maker said it needs more time to
file its quarterly report. Chinese e commerce company JD posted
(21:27):
a higher quarterly profit, but revenue missed expectations, sending that
stock down by three percent. Piper Sandler upgraded Campbell Soup
to overweight from neutral, with a firm site of continued
strong growth expectations for the Rowse brand, sending Campbell shares
up by one percent, and Coach parent company Tapestry officially
(21:48):
drop plans to buy rival handbag maker Capri after a
judge last month block the deal from closing. Tapestry shares
up by eleven percent, while Capri stock is down by
one percent. I'm Tucker Silvan. That's Wall Street.
Speaker 2 (22:03):
Watch, and just a reminder every time we discussed that deal,
Tapestry does not actually make any Tapestries, and Caprice does
not actually make any Caprice or Caprice sons or Caprice sons.
Speaker 4 (22:16):
Yeah, yeah, certain distinction.
Speaker 5 (22:17):
There's that. Mike. Let's talk a little bit about the FED.
Speaker 2 (22:20):
So we spent the first couple segments today talking about
inflation and how hey, it's at a level that we've
seen it at even during extended you know, periods of
good economic uh tidings growth whatever, you know, even in
good economies, we've seen inflation in the two and a
half to three percent range annuals. Yes, the question I
(22:43):
think that is being asked now of the Fed, and
that's being asked over and over again. I'm seeing this
like as a constant refrain day in and day out.
Right now is Hey, you've previously said, you being the Fed,
that you think that the long run rate or the
Fed funds rate right now is like in the high
twos somewhere. What if you actually need to keep the
(23:07):
rate higher, the Fed funds rate higher, in order to
keep the economy from getting too hot again. This is
the question that I've seen come up time and time
again in the last four to six weeks with the
rebound and economic growth that we've seen.
Speaker 3 (23:21):
Yeah, and it's also going to be the piece that
is most objected to by President elect Donald Trump. If
it comes to be concluded that, yeah, rates need to
stay higher now and they cannot move down as quickly
as we were hoping. It is setting up for kind
of a megafight just based on the timing of all this, Right,
(23:43):
you look at it from this outside perspective, ignoring the
economic data for a moment, and the drome power fut
a reserve cut interest rates now three times leading up
to the election two times, but seventy five basis points
in total, and depending on where this data comes in,
you know, they could be taking a pause almost right
(24:05):
as Donald Trump takes office, and again, looking at from
the outside perspective, there's actually tremendous justification for doing it
exactly that way, and it has nothing to do with
the election. It has everything to do with the data.
But it's certainly setting up for what could be quite
a fight here. So there is a meeting coming up
(24:26):
now on December eighteenth. The odds of a great cut
have been moving around. A week ago, it was only
two thirds probability of a twenty five base point rate cut.
After the last two inflation reports, which again came in
line almost exactly with expectations. You now at about eighty
percent for a twenty five base point rate cut and
(24:47):
twenty percent that the rates stay right where they are.
But then the further out you get, and there's a
fair bit more uncertainty in terms of what all that
looks like.
Speaker 2 (24:56):
Mike, You know how a lot of times when we're
talking about the FED, and you know, we look through
the weekly calendar, like this week, just as an example, today,
Coogler from the Fed is speaking, Barkin is speaking, Powell
is speaking, Williams is speaking, the balance sheet is speaking.
Speaker 5 (25:14):
Now, the balance sheet's just.
Speaker 2 (25:15):
A release that they do, but that's four speeches in
a day, and a lot of times we're like, guys,
just go away and stop talking. I want to turn
this around a little bit as well, because it's also
bothersome to me that every little wiggle that we get
in economic data requires endless commentary from someone saying the
(25:44):
Fed is wrong.
Speaker 3 (25:47):
Everyone's got to make a living. Chuck listen, I get it,
I get it.
Speaker 2 (25:51):
But I'm gonna rip on Jeremy Siegel again, who's very
smart and likely has been very well compensated over the
course of his career, because in September, siegu was the
guy who went on all the morning shows and said
we need a seventy five basis point emergency cut now,
and then another seventy five basis point cut later in September,
(26:12):
And that was because of basically two maybe three months
of weakening economic data over the summer. Yes, and now
you've got everyone in their grandmother after two months of
better economic data saying, hey, the Fed's not going to
(26:32):
be able to cut it all like they might have
already gone too far, maybe they actually need to raise
the FED funds rate, And it's ultimately just revealing like
kind of who's biased where in terms of what they
think the FED should be doing. But maybe we all
need to just be quiet a little bit. I was
looking back at it in the nineteen nineties just because
(26:54):
we were we were talking about inflation, and I was like, Okay,
let me like see what what the FED was doing
even in the ninth nineties, Mike, do you know that
aside from you know, the Gulf War period, for the
entire rest of the nineteen nineties, the FED funds rate
basically sat between three percent and six percent. And I'd
like some little wobbles and jiggles where they decided to
(27:15):
move it this way and that way, but it was basically, hey,
the economy did what it did over eight years, and
in particular, like from from ninety four on you basically
had alan greenspan do very little. I mean, you were
basically between like four seven and sixty five, even through
(27:36):
the tech bubble. So it's like a very narrow range
that you had, and the idea that, hey, the FED
needs to be doing a ton man. In a healthy economy,
we don't obsess about the FED and what the cost
of money is on a daily basis.
Speaker 3 (27:51):
Maybe, But I also think that since the Great Recession,
there has been a giant abdication of I guess financial
responsibility on the part of Congress and just laying it
all at the feet of the FED.
Speaker 4 (28:02):
So I don't want to blame it all on media.
Speaker 3 (28:05):
I think that there has been a congressional members who
just throw their hands in the air and say, well,
it's the Fed's job to worry about all this stuff.
Speaker 4 (28:13):
You know, we're not going to deal with it.
Speaker 5 (28:16):
Let's to get on that.
Speaker 2 (28:17):
Though, Like, what do you mean, was was Congress that
responsive to economic conditions in the nineteen nineties that they
were constantly tinkering with economic policy?
Speaker 4 (28:27):
No, I guess.
Speaker 3 (28:29):
I guess it's not so much that they were passing
laws and actually taking action, but I think that there
was a lot more questions and answers.
Speaker 4 (28:41):
About what are you going to do about inflation?
Speaker 3 (28:43):
And these days, when asked about it, I think almost
universally the answer has been, well, that's really the Fed's job,
and you know, we don't we don't need to be
as involved in.
Speaker 5 (28:53):
This Yeah, I guess it's Look, don't get me wrong.
Speaker 2 (28:59):
I've said time time again, the FED has more gravity
towards what happens in the economy than any other institution
or person on the planet because they can literally push
a button and change things, and basically either route, they
could ruin the economy in any number of ways through
the wrong button push. And I think it's you know,
(29:23):
worthy to respect that power. But I think it also
means that, hey, just because you get a set of
data for a month or a quarter, it doesn't mean
that we need to pretend that the economy is gonna
be permanently doing what it did for that quarter. You know,
like we can just say, hey, let's let's wait and
(29:46):
see before we do anything. Now, there are times to
not wait and see again Q one to twenty twenty two.
I was the dude who's like, yeah, just raise rates
five percent and get it over with. I still take
credit for that because it would have been a great move,
a great move, But there's other times where it's just
kind of, hey, maybe we don't need to do anything
right now, and getting swayed by a quarter of economic
(30:10):
data might be the wrong thing, And hey, maybe that
fifty basis point rate cut in September. You're hearing an
awful lot of potential regret expressed about that right now,
And so maybe even for the FED, Yeah, maybe you
don't need to be, you know, quite as in tune
with what the data is doing right now unless you
(30:33):
know that right now is also going to be exactly
what you get in the future. And Mike, do any
of us know exactly what we're gonna get in the future? Yes,
which people me, Oh, only me. I'm so happy that,
I'm so happy we do this together. Then it's uh,
it's great.
Speaker 4 (30:47):
Yep, that crystal ball that I keep my back pocket.
Perfect score.
Speaker 5 (30:51):
So that's kind of where I'm at on this. Let's
take a quick break here.
Speaker 2 (30:54):
When we come back, let's talk about why the Wall
Street Journal has a piece today title the twenty five
thousand dollars Reason to Buy a used Car.
Speaker 1 (31:03):
Miss any of the show. Catch up at your convenience
by visiting Financial Exchange Show dot com and clicking the
on demand icon, where you'll find all of our interviews
in full shows. This is your home for the latest
business and financial news in New England and around the country.
This is the Financial Exchange Radio Network, breaking business and
financial news first throughout the day, only here on the
(31:27):
Financial Exchange Radio Network.
Speaker 2 (31:33):
Mike, there's a piece in the Wall Street Journalists title
the twenty thousand dollars reason to buy a used car,
and the big reason is, Hey, right now, on average,
there's a twenty thousand dollars difference between the price of
new vehicles purchased and the price of used vehicles purchased.
But isn't that kind of not in apples to apples comparison?
Speaker 4 (32:00):
Plane, I'm not following you. Why it's not Apple staples?
Speaker 2 (32:02):
Okay, so you look at the average price of two things, right, Sure,
but we know there's a wide range of car prices,
including a number of new cars that you can get
for under twenty seven thousand dollars. Sure, So simply saying, hey,
you should buy a used car because you'll save twenty
thousand dollars, I don't think is actually giving people the
(32:26):
info that they want, especially because when you look at
new vehicles, they often have features, drive trains, or whatever
they may be that might not exist in older used vehicles.
Speaker 3 (32:39):
Yeah, I guess it's not perfectly Apples staples, but I
would suspect, right. I mean we talk about how what's
the average new transaction price on a vehicle forty five
forty seventy thousand. Yeah, and it's you know, largely being
driven upwards by SUVs and trucks. But that's not a
new phenomenon, right, you know, I would imagine that the
class of used vehicle when purchased is probably pretty similar
(33:00):
to the class of new vehicle. Certainly if you're gonna
do a more thorough analysis than what you need to
do is compare the new Tesla Model three to the
twenty twenty one Tesla Model three and see what the
discount is, and then do the same.
Speaker 4 (33:10):
For every other vehicle out there.
Speaker 3 (33:12):
But the point that they make that I think contextualizing
is helpful here is that that gap between used and
new has never been larger.
Speaker 2 (33:21):
True, But I I'd be curious, and look, I haven't
done the legwork on this. I'd be curious how large
the gap is if you adjust for inflation. Sure, again,
twenty thousand dollars today is not what twenty thousand dollars
was ten years ago.
Speaker 5 (33:34):
Agreed. There are some.
Speaker 2 (33:36):
Vehicles they point out, like the Tesla Model three, where
the new price, and again you talk about what you get,
you know, in the same model. The new price right
now is you know, forty two thousand change. You could
buy a three year old one that is in the
twenty fives. But it's something where hey, there's you know,
(33:56):
reasons for that, and it's it's basically been that. Because
Tesla has a history now of trying to cut prices,
your resale value down the road may also be lower,
and so it's something that you have to pay attention to.
Speaker 3 (34:09):
Yeah, so look, I mean this is a big reversal
from just a couple of years ago when I myself
had never bought a new car before, and I went
and bought a new car because the used car prices
were so outrageous that if you could actually get your
hands on a new one, it was a comparatively again
still in hindsight, a crap deal, but a comparatively a
good deal. The other piece of this, though, in general,
(34:31):
is just the high cost of cars and car ownership
in general, and one of the things that I keep
running into more and more now because of rates where
they are are high interest car loans, and specifically on
the used car side of things. Chuck I mean, we've
talked about the wide range there, but you're seeing car
loans on the use side of in excess of ten percent.
And a common thing that I continue to get questions
(34:54):
on is, you know, I've got this loan, but it's
fixed and I can afford or did why should I
try and pay it off faster?
Speaker 5 (35:03):
Right?
Speaker 3 (35:03):
Like, I've got this money in my portfolio that in
many cases grew twenty percent over the last nine months.
Why would I take anything out of that in order
to pay off alone? Even if it is at five
six seven percent interest? I'm doing so well with my investments.
Do you encounter that a lot?
Speaker 2 (35:18):
Yeah, it's it certainly is something where there are a
number of things that you have to sort through there
in terms of, hey, the rates that you're potentially earning
on savings or investments versus what you're paying. But I
do think look to it's something where that stuff matters.
But also how you think about it in the stress
(35:39):
that a loan might cause you is something worth having
in the conversation as well, because look, people often make
decisions that might not be in their financial best interest,
you know, taking out you know, credit card debt or whatever.
But sure, Hey, you have to do it because you
know the alternative otherwise is whatever. If you know you're
(35:59):
dealing with the situation where you're like, hey, my investments,
maybe I've got you know, CDs that are earning four percent,
and I got a car loan you know that's only
at six Like what do I do with the car loans?
Speaker 5 (36:09):
Causing me stress?
Speaker 2 (36:11):
Hey, maybe you might actually end up just being in
a happier place even though it's not financially best for
you to pay that car loan off.
Speaker 3 (36:18):
Yeah, I think I think there's a lot of psychological
barriers when it comes to this type of planning, and
I get questions about it all the time. But that's
what a financial planner is there to help you guide through,
is Hey, this is mathematically where it's going to be
in your best interest to do something, and then psychologically,
how do how do we get you there so that
you're not damaging your own financial future. If you have
(36:38):
questions along those lines, maybe it's a mortgage, maybe it's
student loans, maybe it's a car loan, and you're trying
to figure out how do I get myself in the
better financial position from my future? Please give the folks
at Armstrong Advisory Group, a ring we work with our
clients one on one to budget to work towards their
retirement future, and we can help you too. That phone
number is eight hundred three nine three four four zero
(37:00):
zero one. Again free consultations in person throughout in New
England at eight hundred three nine three four zero zero one.
Speaker 1 (37:07):
The proceeding was paid for by Armstrong Advisory Group, a
registered investment advisor. Nothing in the ad or in any
Armstrong guide a specific financial, legal or tax advice. Consult
your own financial tax into state planning advisors before making
any investment decisions. Armstrong may contact you to offer investment
advisory services.
Speaker 2 (37:23):
Mike, speaking of a credit card debt which I just
mentioned briefly, the FED has a new quarterly report that
they just published on the dead outstanding from Americans, and
Americans now a one point one to seven trillion dollars
on their credit cards, rising by twenty four billion dollars
during the third quarter. That's eight point one percent higher
than a year ago. But despite that increase, delinquency rates
(37:47):
actually improved from nine point one percent down to eight
point eight percent. So even as credit card balances are
growing again, not showing signs of continued deterioration as far
as the delinquency rates and things like that.
Speaker 3 (38:02):
Yeah, that is the ultimately important piece. But even inflation
adjusted terms, I believe that's a brand new record for
credit card debt. So that's frightening. Let's take a quick
break here.
Speaker 2 (38:11):
We got our two coming up in just a little
bit on the Financial Exchange,
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