January 6, 2025 • 38 mins
Chuck Zodda and Mike Armstrong discuss the stock market losing its juggernaut status as 2025 begins, but that doesn't mean the bull run is over. Generative AI still has a long way to go before it is truly useful. The Fed's messaging continues to fall short. Private equity to lobby Trump for access to saver's retirement funds. Gen Z has a different take on stocks.
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Episode Transcript
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Speaker 1 (00:01):
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(00:43):
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(01:07):
and Mike Armstrong.
Speaker 2 (01:11):
Chuck Mike Tucker with the kicking off hour two of
the financial exchange, stocks mostly moving up. The Dow is
up two hundred and eleven points today, SMP five hundred
is up seventy nasdac's up three seventy one, three seventy
two now three seventy three. Not bad for a couple seconds,
(01:32):
right there.
Speaker 3 (01:32):
Huh.
Speaker 2 (01:32):
We got the ten year US Treasury that is selling
off just a touch down three point seven basis points
to four point six three two percent. Oil West Texas
Intermedia continuing its recent run up, but not by too
much today, only up seventeen cents a barrel to seventy
four to thirteen. We got gold down nine eighty and
ounced to twenty six forty four and ninety cents, and
(01:56):
the TRIPAA national AVERAGUR gas prices moving back up as well.
We never got below three dollars nationally, which is one
it's my great regret for twenty twenty four is that
we didn't get to say, like two ninety nine, everyone
has regrets about years.
Speaker 3 (02:09):
Sorry, can you can you extract late expand on that?
What was your regret about gas prices in twenty twenty fifth.
Speaker 2 (02:14):
The national average didn't get below three dollars a gallon.
Oh okay, yeah, what'd you think it was? I just
I missed that for a minute there, Yeah, okay, got it. Yeah,
we were just floating around like three o two, three
oh three. We could never punch through, at least nationally.
So today back up to three oh six and four
tenths another three tenths of a cent up, and that's
what we've got going on in markets here. Speaking of markets,
(02:38):
piece from Michael Santoli on CMBC dot com stock market
is losing juggernaut status as twenty twenty five begins, but
it doesn't mean the bowl is over and uh. Santoli
and connorson, by the way, had this on social media first,
so there's a little bit of a uh, a little
bit of a competition to see who's getting credit for
this metaphor actually, but basically people were saying, hey, the
(03:02):
stock market right now is like the Kansas City Chiefs.
It's won the last two Super Bowls because you know,
the market's been over twenty percent gains in the S
and P five hundred the last two years, so it's
done well. It's still undefeated to start this year, but
it doesn't quite feel the same, is the point Santole
makes kind of like the Chiefs, like, yeah, there's sixteen
(03:23):
and one heading in the playoffs too, fifteen to two
that they was yesterday.
Speaker 4 (03:27):
Yeah, I get smoked yesterday.
Speaker 2 (03:28):
Who cares what happened yesterday?
Speaker 1 (03:31):
Oh?
Speaker 3 (03:32):
In either case, who'd you have?
Speaker 1 (03:34):
The Chiefs?
Speaker 3 (03:37):
While I'm marry well, I might not have a lot
of contexts to add on the Chiefs comparison. I can't
assure you that I've been to Kansas City and nobody
sounds like that there.
Speaker 2 (03:47):
Well, no, it's it's not a Kansas Citian.
Speaker 3 (03:50):
Okay.
Speaker 4 (03:51):
That was like a football Oh okay, thing.
Speaker 2 (03:54):
That was yeah, like that was the book maker that
Tucker got it in any case, So you've got market,
a market that has rallied the last two years strongly.
And look, people are looking at the foundation now saying, hey,
it's it's expensive. Everything's priced in like it's it's gonna
go you know great. You know things have you know,
(04:16):
maybe gone a little bit too far. And it's kind
of where people are with the Chiefs, like I'm just
gonna finish the metaphor. Travis Kelcey not what he used
to be Patrick Mahomes not putting up the numbers he
used to speaking of, you know, wasting money and you
know sports horrible fantasy pick for me this year. You
don't pick Patrick Mahomes this year because the Chiefs aren't
what they used to be. But how do you bet
(04:37):
against them? Is the other question that that you look at.
And it's kind of the same thing that people are
saying with stocks now, which is, yeah, it might not
look great, but how do you bet against it? And I'm
not saying that that's the meat the outlook you should have,
but more that's where are right now to.
Speaker 3 (04:53):
Continue that, Like, hey, five years from now, I'm not
sure what it's going to look like, but twenty twenty five, huhm.
To bet against that you will.
Speaker 2 (05:01):
Get the consensus estimates for the S and P five
hundred for this year. And if you will get I
think the average investment banking growth, like the S and
P five hundred projection is for like twelve and a
half percent growth.
Speaker 3 (05:14):
Yeah, I say somewhere the ten percent.
Speaker 1 (05:16):
Right.
Speaker 2 (05:16):
There's no one saying that the market's going to struggle
this year, and so this is kind of where you
find yourself, which is, Hey, what what do I do
here at this point? Because everything is just pulled this
market up for the last two years. And sure, you've
got a new incoming administration that's, you know, promising to
(05:37):
be friendly to business and so on, which again kind
of tough to bet against, you know, an administration that
that's saying those things. But also if the slightest thing
goes wrong, you've got a market that is not priced
with a lot of caution in it.
Speaker 3 (05:51):
Yeah, so let's talk about indicators that are useful and
not useful. They point out, or Michael points out in
this piece that January performance has ten to be poor
after a twenty percent annual gain in the S and
P five hundred useful or not useful statistic not useful.
Years after an abundance of record highs, twenty twenty four
had fifty seven separate record highs have likewise been tougher,
(06:14):
and the first year of a new president's term tends
to not be the most rewarding. Again, maybe the presidential
stuff you can pull some decent statistics out of, but
I'm not sure that there's anything to a high number
of record highs contributing anything to the next year's performance.
Speaker 2 (06:31):
Here's the big thing about twenty twenty four, and here's
where the rubber actually meets the road on this stuff.
Twenty twenty four was not just a year of great performance.
It was a year of great risk adjusted performance. And
by that I mean there was almost no volatility. You
had a ten percent eight lineup where you had a
ten percent dip in August where everyone became yen carry
(06:53):
trade experts overnight. Other than that, you did not have
a ten percent dip in markets. You remember that.
Speaker 3 (06:59):
Whole episode, I do, and I'm just like, yen carry
just sounds like someone's name, So I was just kind
of confused for like half a millisecond there. And yeah,
but everyone.
Speaker 2 (07:09):
Became experts in the Japanese yen carry trade for you know,
a period of a week. Other than that, we had
a few like five to seven percent pullbacks, but there
was very low volatility. And the number one driving force
behind that low volatility was there was very low equity
correlation throughout the year. It was, Hey, the first half,
(07:29):
tech stocks are leading, everything else is just kind of meth.
The next five months five and a half, even tech
stocks are struggling. The other stuff is you know, moving
around utilities there, you know, the leader in the clubhouse
for like four months the last month and a half
of the year rotate back into tech. But small caps
had like it was just it was a market that
(07:51):
did not have any consistency amongst who was pulling it forward,
and so it was a very low volatility year. The
data that's out there when it comes to volatility is
that low volatility is not the norm, and specifically, low
correlation is not the norm in equity markets. They tend
to become more correlated over time, and they tend to
(08:14):
see higher volve when they become more correlated. So I'm
not saying this from the perspective of, hey, this is
inherently bad. Remember, volatility cuts both ways. People think of
it as just being a downy prove. Volatility is just hey,
how much are you moving? Not what direction is it in?
And so I think that for twenty twenty five, if
(08:37):
if you want my honest opinion, you gotta be more
prepared for tail outcomes on either side. There's a possibility
that the S and P five hundred rips another twenty
five thirty percent here, it's a legit possibility. Sure, hey,
you get you know, tax cuts, deregulation, inflation doesn't spike
as a result of this, that the tariff implementation goes
(08:59):
well great s and P. Five hundred at you know,
seventy eight hundred not out of the question. Counterpoint though, Hey,
if some of this stuff goes badly s and P
at forty two hundred thirty percent, pullback also very much
a possibility.
Speaker 3 (09:19):
And by the way, we tend to think about these
outsize years that we had for the last two or
the really devastating years that we all experienced in say
two thousand and nine, as the as the irregular ones.
Taking a look at one hundred years worth of data,
markets have gone either up by twenty percent in a
calendar year or fallen by more than twenty percent in
(09:41):
a calendar year, a little bit more than a third
of the time.
Speaker 2 (09:44):
It's not irregular, no, And we talked about how look,
even if you expect your long term equity returns to
be you know, between eight and ten percent, equities almost
never return eight to ten percent. It's usually fifteen percent
plus or fifteen percent. Mind, there's a handful of years
you know, ten to twenty percent of the time, but
it's It's not a distribution that is, you know, concentrated
(10:08):
around like eight to ten percent. It's much more. Hey,
you tend to either make a lot of money or
lose a lot in stocks in a given year, and
this year, to me, I think it's that, but extended
even further in my opinion as the possibility. I think
there is a really wide range of outcomes this year
and investors need to be prepared for that. Let's take
(10:31):
a quick break. When we come back, we've got trivia
and then we'll talk about how the FED is approaching
the new year as well.
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(11:03):
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Speaker 4 (11:12):
Time for trivia here on the Financial Exchange. And on
this day in history, one of the country's greatest presidents
passed away. The President in question, is the only US
president to have won the Medal of Honor? Trivia question today?
Which US president is the only to have won the
Medal of Honor?
Speaker 3 (11:33):
Once again?
Speaker 4 (11:33):
Which US president is the only to have won the
Medal of Honor? Be the seventh person today to text
us at six one seven three six two thirteen eighty
five with the correct answer, and you want a Financial
Exchange Show T shirt? Once again? The seventh correct response
to text us at six one seven three six to
two thirteen eighty five. We'll get that Financial Exchange Show
T shirt. See complete contest rules at Financial Exchange Show
(11:56):
dot com.
Speaker 2 (11:57):
Mike, I came across thing during the break and I
showed it to you, and we've we've got to take
a little bit of a detour on this.
Speaker 3 (12:06):
So it's job market Week, so this is in theme
it is.
Speaker 2 (12:10):
So zip recruiter has ah the a page on it
where you can find salaries for any job, uh and
you can put in you know, basically whatever you want,
uh and like see what happens. So if you go
to ZipRecruiter dot com and then at the top there's
a button that says salaries that you can put in,
(12:33):
and once you click on that button and get taken
to the page. You can type in anything, So Tucker,
give me a completely made up job that has no
basis in reality.
Speaker 4 (12:47):
AI brisket slicer.
Speaker 2 (12:50):
Okay, So if you if you put that in it
hit enter. It gives you the distribution of AI brisket
slicers nation will and in your market. And according to
ZipRecruiter dot com, the average salary nationwide for an AI
brisket slicer is thirty thirty eight dollars. So you don't
(13:13):
get paid well in that role. But on the other hand,
if you go and say, hey, I want to be
a potato mining engineer, moon mining manager with shrimp, oh,
the nationwide average is sixty and fifty one dollars to
do that. If you want to be a cheese petter,
(13:34):
so you want to get paid to pet cheese, ZipRecruiter says, hey,
you can get paid thirty eight four hundred nine dollars
a year on average, including there's some people three percent
of jobs pay over sixty seven grand.
Speaker 3 (13:48):
Do they have geographic Can I Can I put in
a New York City giraffe walker?
Speaker 1 (13:53):
Uh?
Speaker 2 (13:54):
Yes, So if I do, let me do New York city,
So Manhattan or just New York Manhattan. Okay, and you
want to be a raft walker. Yeah, okay, hold on,
hold on, let me go back, because you actually have
to do it from the salaries page if you type
it into the search somewhere else. So giraffe walker, Yeah,
it's the big leash in Manhattan. Oh, they might have
(14:18):
just fixed it. Hang on, they just fixed it. They
they literally might have just fixed it.
Speaker 3 (14:25):
I doubt it.
Speaker 2 (14:28):
I'm gonna try. I'm gonna try one more thing.
Speaker 4 (14:30):
I typed in whale washer, not watch her, and it
came in as forty two thousand dollars a year washed.
Speaker 2 (14:36):
Honestly, I think it's something with giraffe. Giraffe is the
one that doesn't work for some. So maybe maybe there's
a limit in that you can't walk a giraffe.
Speaker 1 (14:44):
Mic.
Speaker 2 (14:45):
Obviously you are silly goose.
Speaker 3 (14:46):
I didn't think mine on the Moon in the shrimp,
but apparently you can. So I think the conclusion here
is a good reminder that don't trust what you read
on the internet.
Speaker 4 (14:57):
I just typed in goose walker to an sixty three
thousand dollars a year goosewalker walk on that silly goose
is that.
Speaker 2 (15:05):
For like goose the animal, goose, the.
Speaker 4 (15:09):
Fighter pilot, goose the band or goose.
Speaker 2 (15:13):
These are questions that you wonder about, right, Wow, but uh,
something's off.
Speaker 3 (15:17):
So Zip Recruiter, I'm gonna guess, by the way, I'm
gonna guess poor use of generative AI would be my
guess on the back end of Ziprecruiter's website.
Speaker 2 (15:27):
Almost certainly, because here here's the interesting thing is it's
not the interesting thing because I don't know that there's
anything that interesting about this other than hey, you really
wouldn't expect a website like zip recruiter to have this
kind of issue. The jobs that then get listed, like
under the category so if you again goosewalker, which again
(15:52):
sounds like a great job nationwide, the average is a
little bit lower. Okay, there's nothing that comes up as
even a comparable. But for other things like I would
again the moon mining manager, moon mining manager with shrimp,
which sounds like something you would order, not a job.
These are the things that come up. It's like nearby
(16:14):
moon mining manager with shrimp jobs, a New England outside
sales territory manager for Aggs Co Manufacturing. Okay, I kind
of get how they might get there. Maybe maybe a
civil engineer at jobot okay, like kind of this one
(16:35):
bar manager at Kitchen and Cocktails by Kevin Kelly. Probably
not you know, the in that category. But again shrimp
probably throws it off. But it's clearly a generative AI
thing where it's like, here are the words that are
similar to this, and dealed.
Speaker 3 (16:50):
Us a chart with some salary information and that is uh.
Speaker 2 (16:54):
Again, this is why I think generative AI is not
ready for prime time, Like it's this is a public
facing website, Mike. We're talking about this in front of
thousands of people right now. Right.
Speaker 3 (17:05):
The uses where generative AI is completely falling down are
in areas like search. The areas where it is really
becoming useful and helpful is in areas where a worker
is using it on the back end to come up
with conclusions and come up with work that they are
then cross checking and presenting to somebody. But the idea
(17:27):
that generative AI is going to do away with Google
in some way, shape or form is I won't say.
I won't say years ahead, because the pace at which
this technology is developing is quite impressive and I have
to acknowledge that. But it does not seem like the
thing that we should be concerned about. We should instead
be concerned about those workers who are not going to
get their jobs anymore because coders can be thirty percent
(17:51):
more efficient with generative AI.
Speaker 2 (17:54):
How do we Where do I apply for one of
those goose jobs? I don't know that you're gonna be
able to support of the street? Wait wait, oh no,
that was the one that was like two hundred and
sixty grand.
Speaker 3 (18:04):
Yeah, okay, that does sound like a relatively stress free environment.
Speaker 2 (18:08):
To be fair, you ever been around geese?
Speaker 4 (18:11):
A lot of poop?
Speaker 2 (18:11):
Yeah, not the nicest either, very nice and very not nice.
Not the nicest animals, A lot of poop and not nice. Yep,
you know, generally something you try to avoid. Taking a
look at markets as we head towards the bottom of
the hour, that was now up three hundred and twenty
four points, continuing to rally. Smp IS up seventy four,
Nasdaq up three fifty nine, So a broad based rally
(18:34):
taking place here, but led largely by tech companies. If
you actually look, you do still have a little bit
of weakness under the hood here. Utilities getting whacked today.
The utility sector down as a whole Telecoms getting whacked.
Beverage and tobacco companies are falling. I don't know why,
but they are banks struggling a little bit, and uh,
(18:55):
drug makers struggling a little bit today as well. But
overall decent amount of green on the board, led by Nvidia, Google, Meta, Microsoft, Amazon,
and Apple. Let me know if you've heard any of
those names before. We are going to take a quick
break here when we come back again. We had to
detour into that zip recruiter piece just because it's worth
(19:18):
detouring and it might fix it at some point. Maybe
they'll fix it now. We will get to a little
bit of talk about the FED after this. We've also
got the trivia answer coming up next.
Speaker 1 (19:43):
Bringing the latest financial news straight to your radio every day.
It's the Financial Exchange on the Financial Exchange Radio Network.
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Speaker 4 (20:07):
Trivia question today was which US president is the only
one who had been awarded the Medal of Honor be
Teddy Roosevelt, who won the Medal of Honor for whose
courageous charge up San Juan heights during the Spanish American War.
Roosevelt is the only person in history to win their
nation's highest military honor and the Nobel Peace Prize. Winner
(20:28):
today of the Financial Exchange Show T shirt was Susan
from Methuen, Mass. Congrats to Susan taking home that Financial
Exchange Show T shirt and we play trivia every day
here on the Financial Exchange See complete contest rules at
Financial Exchange Show dot com.
Speaker 2 (20:43):
Mike, what do we got from the Fed? In terms
of Bill Dudley who used to be at the FED,
he ran the Federal Reserve Bank of New York for
about ten years. He was talking about how the FACT
can improve their communication heading into this year.
Speaker 3 (20:57):
He does, and he talks a lot about out how
they have this flexible inflation target, these individual growth projections,
and so there leaves I guess a lot of room
for misinterpretation in terms of how the FED plans to
react to things, and I think it feeds in. The
perfect example that I can think of of all of
this is going into twenty twenty four, when the Federal
(21:19):
Reserve had very specific expectations about inflation, growth and unemployment.
The economy proved to have higher inflation, lower unemployment, and
yet the FED cut interest rates more than they were
anticipating doing. And so you think about all that logically
and it doesn't make sense from where they were on
January first, and under the surface, it probably speaks to
(21:42):
a lot of what Bill Dudley's talking about here as well.
They have these other economic models that speak to what
they think is going to happen, but don't do a
great job of setting those expectations with the public and
explaining them very well. And I don't know. I don't
know what you change about the framework to make that better,
because I think a lot of it has been about
(22:03):
inconsistencies in the chair's Jern Powell's speaking engagements when it
comes to addressing the nation on their policies. Yeah, I.
Speaker 2 (22:14):
Just think I think there's too much focus on communication now.
And I know that that's how they want to try
to push policy at this point is say more and
do less, like have the market do its work for them.
But ultimately, I just don't know. I don't know that
(22:37):
there's the marginal benefit that you get from more. Differently,
I just don't know that it's there at this point,
and it makes us too focus then on, you know,
trying to interpret every little word instead of just we
did this and you got to deal with it. You know,
(22:59):
we don't all need to feel like we're on the
Federal Open Market Committee. We're not. We're not. Just tell
us what you're doing and do it. And if you
do a bad job, then you'll be remembered to someone
who did a bad job. If you did a good job,
you'll be remembered to someone who did a good job.
Speaker 3 (23:17):
But yeah, it's been strange over the course of the
last few years because generally speaking, since the early mistakes
of the FED in twenty twenty two and twenty twenty one,
the results have been fantastic, but I think the messaging
has been not helpful. And so I'm judging on these
dual sides. We're like, hey, it's tough to argue with
(23:38):
the results. The results have been unemployment that stayed around
low fours and inflation that's come in around three. That's
a pretty darn good result compared to where we were
in twenty twenty two. But the messaging around it and
the guidance and the explanations as to how we're getting
here and how we're going to remain here I think
have been confusing.
Speaker 2 (23:58):
But I'll give you an example. We get this piece
from Bloomberg, another one FEDS Daily, and Coogler stressed that
inflation fight has not yet been won. Well, how about
instead of telling us this, just raise rates.
Speaker 3 (24:10):
Of quarter percent?
Speaker 2 (24:12):
Why do you have to tell us this? It's because
they don't want to actually undertake those actions and they
want the market to make the move for them.
Speaker 1 (24:20):
Right.
Speaker 3 (24:20):
And furthermore, if you believe that the inflation fight has
not yet been won, then I need a little bit
more context as to why you voted for another rate
cut on December What was that thirteen, sixteenth, sixteenth, somewhere
like seventeenth. Yet those two things don't really play well
with me. So what's the story? Why did you do so?
(24:42):
And it comes back to you know, our star, the
neutral raid, all these all these kind of complex topics
that I don't think they do a great job of messaging.
Speaker 2 (24:51):
But it's also trying to manage a central bank this
way is very much an elite problem. And what I
mean by that is, if you're the central bank in Brazil,
or you're the central bank in South Korea, if the
(25:12):
bond market moves against you. You're basically like, Okay, I
gotta do what I gotta do, otherwise I lose credibility.
You can't talk your way out of it, right, it's
only by virtue of the United States being the United
States that you can even consider this. The only other
place on the planet, there's two The only other two
places on the planet that can consider this are Europe
(25:34):
and Japan. There's no one else, and even Europe getting
kind of dodgy in terms of, you know how the
euro's being used internationally these days. So I look at
this and sure you can, you can try to talk
your way out of it, but eventually the market's gonna
force you in ways that you don't anticipate, and you're
(25:57):
gonna have to just do what you're gonna have to do,
and no amount of talking is going to get you
out of it. So it's kind of where I am.
Speaker 3 (26:05):
I think.
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Speaker 1 (26:58):
The proceeding was paid for. The views expressed are solely
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Speaker 2 (27:10):
I'm really happy we get to discuss this next piece, actually,
because I think it's a really interesting one, in some
ways horrifying, in some ways exciting. It's from the Financial Times.
It's titled Private Equity to lobby Trump for access to
savers retirement funds, And basically what it's talking about is
that the private equity industry wants to find a way
to get its investment options into four to one K plans.
Speaker 3 (27:34):
Or just retirement accounts and investors that are at least,
according to most regulators, considered less sophisticated than the current
typical private equity fund investor. To invest in a lot
of these places, you need to be deemed in a
credited investor by I believe those are SEC standards, meaning
you have to have a million dollars in investable assets
(27:56):
and or two hundred thousand dollars of income. And there's
a whole swath of people that don't meet those standards,
and it appears nowhere in four one K is regardless
of your accreditation status.
Speaker 2 (28:07):
So a couple things here. First, When we talk about
like accredited investors and this and that, there's a case
to be.
Speaker 4 (28:15):
Made that.
Speaker 2 (28:18):
Why aren't you allowing a broader swath of people to
access you know, these types of things.
Speaker 3 (28:24):
I would completely agree. We've talked about this, but it's
been a while. I mean, if you want to pave
a path where someone doesn't meet those standards and instead
goes and educates themselves on how private equity investments works
and earns their accreditation status. You got to taste, you know,
a six hour course or something like, and arguably, given
the incentives there for people to sell these types of
things to accredited investors who don't know what the hell
(28:47):
they're buying, there might be a case for doing that. Anyway,
Does anyone think that.
Speaker 2 (28:51):
Like, wealthier people are just smarter? I mean, like not
a lot of evidence. I'm not saying they're dumber. I'm
just saying, hey, like smarts and financial wealth are not
tied together necessarily, Like it's not one and the same. Like, sure,
you can be correlated in some ways, but like, quite honestly,
(29:13):
I know some people that are not like the smartest
as far as like if you ask them very basic
math questions and stuff, they'd struggle with them. Yes, but
they've made large amounts of money because of acumen in
other areas and whatever it might be. I guess that's
what I'm getting at. So on one hand, you look
at this and you're like, sure, why should investments with
(29:34):
you know that the types of return that private equity
can generate sometimes, why should it only be limited to
those who were very wealthy. The reasoning that's justified it
to this point is that historically these have also been
some of the riskiest investments for a couple of reasons. A.
They may hold, you know, investments that are illiquid, so
you don't have access to your principle. They may employ
(29:56):
large amounts of leverage, so you have the greater risk
of wipeout. There's all kinds of potential downsides.
Speaker 3 (30:02):
They are riskier, and by and large, they don't have
the same requirements about disclosures, so you won't see the
same things that you get out of a mutual fund
perspectus when you talk about a private equity investment. Correct.
Speaker 2 (30:12):
So this tends to lead you to okay, if you're
talking about people's retirement, sure they have this potential upside,
but if the downside risk materializes, that risk doesn't leave
the system. Now you've got a whole bunch of people
where their retirement if things go badly, is compromised. And
what do you do then if you have a bunch
(30:33):
of people that committed their retirement into these things and
now are out of luck because they're four to one,
k is.
Speaker 3 (30:39):
Worthless, or even if it's doesn't all fall apart. Even
in somewhat stressful times, there are severe liquidity issues and
things that aren't a great fit for retirement accounts. If
you think about correct eighty year olds have whoever required
a minimum distribution requirements and at the same time have
a bunch of their money in private equity, that could
be a real problem. So I think where both of
(31:01):
us are landing here is that I think it's perfectly
reasonable to have a conversation and debate about who should
be eligible to place money into these things. But purely
deregulating it and saying yeah, any financial advisor out there
can go and sell private equity investments to the general
public in their retirement plans is a really dangerous path
that I don't think you want to go down.
Speaker 2 (31:22):
Here's the other place that I'm gonna go with this
number one. If you're talking like four to one k's,
how many four to one K fiduciaries are just gonna
be like, yeah, sign me up for like this kind
of risk. Right, It's a little like is if you're
a fiduciary managing that four to one K plan, Okay,
you're held to a really high standard. Yes, you're gonna
(31:45):
just take on that kind of risk. How are you
gonna manage it? If again you talk about you know,
these funds tend to be liquid. Hey, if someone wants
to start withdrawing funds, they can't just do it pro rata, right,
you know, how do you manage those types of things.
The other piece on this, and this is where I
always go is look private equity and private credit and
(32:06):
you know, hedge funds and this and that. They don't
want to have a lot of thousand dollars clients.
Speaker 3 (32:15):
Right, That's why the four ohne casepase makes sense.
Speaker 2 (32:17):
That's not their business. It's not that they like don't
like you, It's just they don't want you. It's not
what their businesses are set up for. They're not set
up for like large scale record keeping in this and
that they want not Robin Hood. No. So the question
that I always ask is when they start talking about
doing this, why are they doing it now?
Speaker 3 (32:39):
Have they?
Speaker 2 (32:40):
Again?
Speaker 3 (32:41):
Well?
Speaker 2 (32:41):
I mean very clearly because Trump administration is coming into
office and is in favor of deregulation and like maybe,
but even for this entire year, you've been seeing like
Apollo and other managers trying to start up like private
credit ETFs and interval funds and things along these lines,
and you're kind of like, why are they pushing it
(33:02):
on the retail person, because the retail person gets burned
on these a lot of times after everyone else has
made their money.
Speaker 3 (33:08):
Last one of the punch bowl is the argument.
Speaker 2 (33:10):
That's kind of how I feel sometimes, and so it's
another thing that just gets my intent uping make me go.
We'll have to see if this is actually a good
idea or not. Take a quick break when we come back.
Stack Roulette.
Speaker 1 (33:23):
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Speaker 4 (33:51):
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Speaker 2 (34:35):
Mike, what do you got for stack Roulette?
Speaker 3 (34:37):
Interesting generational stuff, and it comes to investing right now.
I remember in one of my first jobs at a
financial services company, I was taking a look at trends
when it came to millennials in their investing habits. And
millennials came of age or entered the labor force around
the Great Recession, and their investing habits tended to fall.
(35:00):
Of that they were more interested in large blue chip
dividend paying stocks. And at the time, I distinctly remember
speaking to somebody who you know, I was, I think
I was still a college student at the time, who
was pointing out They're like, that's not the usual and
you know, recommended path for somebody that's eighteen to twenty
five years old. You would want to be a more
(35:20):
aggressive investor at that stage, and yet they are are
you know, quite conservative. Gen Z also appears to be
a product of their time and have gotten started investing
earlier and more aggressively. On average, gen Z those born
between ninety seven and twenty twelve started investing at age eighteen,
Millennials started at twenty five, gen X started at thirty two,
(35:43):
and boomers started at thirty five. So I can take
some good news from all of this. The bad news
would be that anyone that's invested long enough knows that
these things also go down. We have always had a
period of time where stocks boom and then bust, and
gen Zers are getting started earlier, hopefully with money that
they have that they're able to actually save, but will
(36:04):
likely be subject to one of these bust cycles at
some point, and are likely invested more aggressively than their
previous generations at their age.
Speaker 2 (36:12):
Yeah, it's uh again. Volatility in these these markets. It's
a feature, not a bug. Ye, And thus far most
of that volatility has been in the upward direction. But look,
twenty twenty two was a brutal year for gen Z
investors who might have been starting out. Hopefully they didn't
get too discouraged and didn't lose all their capital and
you know, are able to learn some lessons and continue on.
(36:34):
But it can be tough navigating those waters. You know,
early on, DraftKings is putting out a subscription service. It's
going to be called Draft.
Speaker 3 (36:45):
Kings Ambler's Anonymous.
Speaker 2 (36:47):
No, that's that's actually a thing. It's called Draft Kings
Sportsbook Plus. Because we just need another plus here, and
I'll quote from market Watch. Members would have access to
stepped up boosts for all part parlays where the individual
legs are minus five hundred or shorter two leg parlays.
We'll see profits increase by ten percent as part of
the membership, and the boost will grow as the parlays
(37:09):
get bigger. Parlay with more than ten legs will have
the profits for the better doubled. I knew like three
to five of those words, like I know very little
about betting, and Tucker's probably going to be like, you're
all wrong, Tucker, Am I correct that if you're betting
ten leg parlays, it's basically as good as giving your
money away.
Speaker 4 (37:28):
Correct, Like, first of all, it's extremely rare for a
ten leg parlay to hit.
Speaker 2 (37:35):
Beyond that, here's the thing. You could hit on nine
of these, meaning that you were like right most of
the time, and if you lose that last one you
get nothing. So it doesn't even reward someone with good skill,
it rewards someone with luck. It is like it's gambling
on gambling, is the way that I would put it.
Speaker 3 (37:53):
And you pay a subscription fee for access to this.
Speaker 2 (37:56):
They're not doing this out of the goodness of their hearts.
They're not doing this to make you money. They're doing
this to make them money. They've run the numbers and
you better believe, Hey, if you're good at this, they're
gonna throttle how much you can win because that's what
they do.
Speaker 4 (38:14):
I'll just limit you. Yeah, So.
Speaker 2 (38:19):
There's that quick break for the rest of the day.
We'll see tomorrow on the Financial Exchange,
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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(00:21):
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(01:07):
and Mike Armstrong.
Speaker 2 (01:11):
Chuck Mike Tucker with the kicking off hour two of
the financial exchange, stocks mostly moving up. The Dow is
up two hundred and eleven points today, SMP five hundred
is up seventy nasdac's up three seventy one, three seventy
two now three seventy three. Not bad for a couple seconds,
(01:32):
right there.
Speaker 3 (01:32):
Huh.
Speaker 2 (01:32):
We got the ten year US Treasury that is selling
off just a touch down three point seven basis points
to four point six three two percent. Oil West Texas
Intermedia continuing its recent run up, but not by too
much today, only up seventeen cents a barrel to seventy
four to thirteen. We got gold down nine eighty and
ounced to twenty six forty four and ninety cents, and
(01:56):
the TRIPAA national AVERAGUR gas prices moving back up as well.
We never got below three dollars nationally, which is one
it's my great regret for twenty twenty four is that
we didn't get to say, like two ninety nine, everyone
has regrets about years.
Speaker 3 (02:09):
Sorry, can you can you extract late expand on that?
What was your regret about gas prices in twenty twenty fifth.
Speaker 2 (02:14):
The national average didn't get below three dollars a gallon.
Oh okay, yeah, what'd you think it was? I just
I missed that for a minute there, Yeah, okay, got it. Yeah,
we were just floating around like three o two, three
oh three. We could never punch through, at least nationally.
So today back up to three oh six and four
tenths another three tenths of a cent up, and that's
what we've got going on in markets here. Speaking of markets,
(02:38):
piece from Michael Santoli on CMBC dot com stock market
is losing juggernaut status as twenty twenty five begins, but
it doesn't mean the bowl is over and uh. Santoli
and connorson, by the way, had this on social media first,
so there's a little bit of a uh, a little
bit of a competition to see who's getting credit for
this metaphor actually, but basically people were saying, hey, the
(03:02):
stock market right now is like the Kansas City Chiefs.
It's won the last two Super Bowls because you know,
the market's been over twenty percent gains in the S
and P five hundred the last two years, so it's
done well. It's still undefeated to start this year, but
it doesn't quite feel the same, is the point Santole
makes kind of like the Chiefs, like, yeah, there's sixteen
(03:23):
and one heading in the playoffs too, fifteen to two
that they was yesterday.
Speaker 4 (03:27):
Yeah, I get smoked yesterday.
Speaker 2 (03:28):
Who cares what happened yesterday?
Speaker 1 (03:31):
Oh?
Speaker 3 (03:32):
In either case, who'd you have?
Speaker 1 (03:34):
The Chiefs?
Speaker 3 (03:37):
While I'm marry well, I might not have a lot
of contexts to add on the Chiefs comparison. I can't
assure you that I've been to Kansas City and nobody
sounds like that there.
Speaker 2 (03:47):
Well, no, it's it's not a Kansas Citian.
Speaker 3 (03:50):
Okay.
Speaker 4 (03:51):
That was like a football Oh okay, thing.
Speaker 2 (03:54):
That was yeah, like that was the book maker that
Tucker got it in any case, So you've got market,
a market that has rallied the last two years strongly.
And look, people are looking at the foundation now saying, hey,
it's it's expensive. Everything's priced in like it's it's gonna
go you know great. You know things have you know,
(04:16):
maybe gone a little bit too far. And it's kind
of where people are with the Chiefs, like I'm just
gonna finish the metaphor. Travis Kelcey not what he used
to be Patrick Mahomes not putting up the numbers he
used to speaking of, you know, wasting money and you
know sports horrible fantasy pick for me this year. You
don't pick Patrick Mahomes this year because the Chiefs aren't
what they used to be. But how do you bet
(04:37):
against them? Is the other question that that you look at.
And it's kind of the same thing that people are
saying with stocks now, which is, yeah, it might not
look great, but how do you bet against it? And I'm
not saying that that's the meat the outlook you should have,
but more that's where are right now to.
Speaker 3 (04:53):
Continue that, Like, hey, five years from now, I'm not
sure what it's going to look like, but twenty twenty five, huhm.
To bet against that you will.
Speaker 2 (05:01):
Get the consensus estimates for the S and P five
hundred for this year. And if you will get I
think the average investment banking growth, like the S and
P five hundred projection is for like twelve and a
half percent growth.
Speaker 3 (05:14):
Yeah, I say somewhere the ten percent.
Speaker 1 (05:16):
Right.
Speaker 2 (05:16):
There's no one saying that the market's going to struggle
this year, and so this is kind of where you
find yourself, which is, Hey, what what do I do
here at this point? Because everything is just pulled this
market up for the last two years. And sure, you've
got a new incoming administration that's, you know, promising to
(05:37):
be friendly to business and so on, which again kind
of tough to bet against, you know, an administration that
that's saying those things. But also if the slightest thing
goes wrong, you've got a market that is not priced
with a lot of caution in it.
Speaker 3 (05:51):
Yeah, so let's talk about indicators that are useful and
not useful. They point out, or Michael points out in
this piece that January performance has ten to be poor
after a twenty percent annual gain in the S and
P five hundred useful or not useful statistic not useful.
Years after an abundance of record highs, twenty twenty four
had fifty seven separate record highs have likewise been tougher,
(06:14):
and the first year of a new president's term tends
to not be the most rewarding. Again, maybe the presidential
stuff you can pull some decent statistics out of, but
I'm not sure that there's anything to a high number
of record highs contributing anything to the next year's performance.
Speaker 2 (06:31):
Here's the big thing about twenty twenty four, and here's
where the rubber actually meets the road on this stuff.
Twenty twenty four was not just a year of great performance.
It was a year of great risk adjusted performance. And
by that I mean there was almost no volatility. You
had a ten percent eight lineup where you had a
ten percent dip in August where everyone became yen carry
(06:53):
trade experts overnight. Other than that, you did not have
a ten percent dip in markets. You remember that.
Speaker 3 (06:59):
Whole episode, I do, and I'm just like, yen carry
just sounds like someone's name, So I was just kind
of confused for like half a millisecond there. And yeah,
but everyone.
Speaker 2 (07:09):
Became experts in the Japanese yen carry trade for you know,
a period of a week. Other than that, we had
a few like five to seven percent pullbacks, but there
was very low volatility. And the number one driving force
behind that low volatility was there was very low equity
correlation throughout the year. It was, Hey, the first half,
(07:29):
tech stocks are leading, everything else is just kind of meth.
The next five months five and a half, even tech
stocks are struggling. The other stuff is you know, moving
around utilities there, you know, the leader in the clubhouse
for like four months the last month and a half
of the year rotate back into tech. But small caps
had like it was just it was a market that
(07:51):
did not have any consistency amongst who was pulling it forward,
and so it was a very low volatility year. The
data that's out there when it comes to volatility is
that low volatility is not the norm, and specifically, low
correlation is not the norm in equity markets. They tend
to become more correlated over time, and they tend to
(08:14):
see higher volve when they become more correlated. So I'm
not saying this from the perspective of, hey, this is
inherently bad. Remember, volatility cuts both ways. People think of
it as just being a downy prove. Volatility is just hey,
how much are you moving? Not what direction is it in?
And so I think that for twenty twenty five, if
(08:37):
if you want my honest opinion, you gotta be more
prepared for tail outcomes on either side. There's a possibility
that the S and P five hundred rips another twenty
five thirty percent here, it's a legit possibility. Sure, hey,
you get you know, tax cuts, deregulation, inflation doesn't spike
as a result of this, that the tariff implementation goes
(08:59):
well great s and P. Five hundred at you know,
seventy eight hundred not out of the question. Counterpoint though, Hey,
if some of this stuff goes badly s and P
at forty two hundred thirty percent, pullback also very much
a possibility.
Speaker 3 (09:19):
And by the way, we tend to think about these
outsize years that we had for the last two or
the really devastating years that we all experienced in say
two thousand and nine, as the as the irregular ones.
Taking a look at one hundred years worth of data,
markets have gone either up by twenty percent in a
calendar year or fallen by more than twenty percent in
(09:41):
a calendar year, a little bit more than a third
of the time.
Speaker 2 (09:44):
It's not irregular, no, And we talked about how look,
even if you expect your long term equity returns to
be you know, between eight and ten percent, equities almost
never return eight to ten percent. It's usually fifteen percent
plus or fifteen percent. Mind, there's a handful of years
you know, ten to twenty percent of the time, but
it's It's not a distribution that is, you know, concentrated
(10:08):
around like eight to ten percent. It's much more. Hey,
you tend to either make a lot of money or
lose a lot in stocks in a given year, and
this year, to me, I think it's that, but extended
even further in my opinion as the possibility. I think
there is a really wide range of outcomes this year
and investors need to be prepared for that. Let's take
(10:31):
a quick break. When we come back, we've got trivia
and then we'll talk about how the FED is approaching
the new year as well.
Speaker 1 (10:43):
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(11:03):
home for the latest business and financial news in New
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Radio Network.
Speaker 4 (11:12):
Time for trivia here on the Financial Exchange. And on
this day in history, one of the country's greatest presidents
passed away. The President in question, is the only US
president to have won the Medal of Honor? Trivia question today?
Which US president is the only to have won the
Medal of Honor?
Speaker 3 (11:33):
Once again?
Speaker 4 (11:33):
Which US president is the only to have won the
Medal of Honor? Be the seventh person today to text
us at six one seven three six two thirteen eighty
five with the correct answer, and you want a Financial
Exchange Show T shirt? Once again? The seventh correct response
to text us at six one seven three six to
two thirteen eighty five. We'll get that Financial Exchange Show
T shirt. See complete contest rules at Financial Exchange Show
(11:56):
dot com.
Speaker 2 (11:57):
Mike, I came across thing during the break and I
showed it to you, and we've we've got to take
a little bit of a detour on this.
Speaker 3 (12:06):
So it's job market Week, so this is in theme
it is.
Speaker 2 (12:10):
So zip recruiter has ah the a page on it
where you can find salaries for any job, uh and
you can put in you know, basically whatever you want,
uh and like see what happens. So if you go
to ZipRecruiter dot com and then at the top there's
a button that says salaries that you can put in,
(12:33):
and once you click on that button and get taken
to the page. You can type in anything, So Tucker,
give me a completely made up job that has no
basis in reality.
Speaker 4 (12:47):
AI brisket slicer.
Speaker 2 (12:50):
Okay, So if you if you put that in it
hit enter. It gives you the distribution of AI brisket
slicers nation will and in your market. And according to
ZipRecruiter dot com, the average salary nationwide for an AI
brisket slicer is thirty thirty eight dollars. So you don't
(13:13):
get paid well in that role. But on the other hand,
if you go and say, hey, I want to be
a potato mining engineer, moon mining manager with shrimp, oh,
the nationwide average is sixty and fifty one dollars to
do that. If you want to be a cheese petter,
(13:34):
so you want to get paid to pet cheese, ZipRecruiter says, hey,
you can get paid thirty eight four hundred nine dollars
a year on average, including there's some people three percent
of jobs pay over sixty seven grand.
Speaker 3 (13:48):
Do they have geographic Can I Can I put in
a New York City giraffe walker?
Speaker 1 (13:53):
Uh?
Speaker 2 (13:54):
Yes, So if I do, let me do New York city,
So Manhattan or just New York Manhattan. Okay, and you
want to be a raft walker. Yeah, okay, hold on,
hold on, let me go back, because you actually have
to do it from the salaries page if you type
it into the search somewhere else. So giraffe walker, Yeah,
it's the big leash in Manhattan. Oh, they might have
(14:18):
just fixed it. Hang on, they just fixed it. They
they literally might have just fixed it.
Speaker 3 (14:25):
I doubt it.
Speaker 2 (14:28):
I'm gonna try. I'm gonna try one more thing.
Speaker 4 (14:30):
I typed in whale washer, not watch her, and it
came in as forty two thousand dollars a year washed.
Speaker 2 (14:36):
Honestly, I think it's something with giraffe. Giraffe is the
one that doesn't work for some. So maybe maybe there's
a limit in that you can't walk a giraffe.
Speaker 1 (14:44):
Mic.
Speaker 2 (14:45):
Obviously you are silly goose.
Speaker 3 (14:46):
I didn't think mine on the Moon in the shrimp,
but apparently you can. So I think the conclusion here
is a good reminder that don't trust what you read
on the internet.
Speaker 4 (14:57):
I just typed in goose walker to an sixty three
thousand dollars a year goosewalker walk on that silly goose
is that.
Speaker 2 (15:05):
For like goose the animal, goose, the.
Speaker 4 (15:09):
Fighter pilot, goose the band or goose.
Speaker 2 (15:13):
These are questions that you wonder about, right, Wow, but uh,
something's off.
Speaker 3 (15:17):
So Zip Recruiter, I'm gonna guess, by the way, I'm
gonna guess poor use of generative AI would be my
guess on the back end of Ziprecruiter's website.
Speaker 2 (15:27):
Almost certainly, because here here's the interesting thing is it's
not the interesting thing because I don't know that there's
anything that interesting about this other than hey, you really
wouldn't expect a website like zip recruiter to have this
kind of issue. The jobs that then get listed, like
under the category so if you again goosewalker, which again
(15:52):
sounds like a great job nationwide, the average is a
little bit lower. Okay, there's nothing that comes up as
even a comparable. But for other things like I would
again the moon mining manager, moon mining manager with shrimp,
which sounds like something you would order, not a job.
These are the things that come up. It's like nearby
(16:14):
moon mining manager with shrimp jobs, a New England outside
sales territory manager for Aggs Co Manufacturing. Okay, I kind
of get how they might get there. Maybe maybe a
civil engineer at jobot okay, like kind of this one
(16:35):
bar manager at Kitchen and Cocktails by Kevin Kelly. Probably
not you know, the in that category. But again shrimp
probably throws it off. But it's clearly a generative AI
thing where it's like, here are the words that are
similar to this, and dealed.
Speaker 3 (16:50):
Us a chart with some salary information and that is uh.
Speaker 2 (16:54):
Again, this is why I think generative AI is not
ready for prime time, Like it's this is a public
facing website, Mike. We're talking about this in front of
thousands of people right now. Right.
Speaker 3 (17:05):
The uses where generative AI is completely falling down are
in areas like search. The areas where it is really
becoming useful and helpful is in areas where a worker
is using it on the back end to come up
with conclusions and come up with work that they are
then cross checking and presenting to somebody. But the idea
(17:27):
that generative AI is going to do away with Google
in some way, shape or form is I won't say.
I won't say years ahead, because the pace at which
this technology is developing is quite impressive and I have
to acknowledge that. But it does not seem like the
thing that we should be concerned about. We should instead
be concerned about those workers who are not going to
get their jobs anymore because coders can be thirty percent
(17:51):
more efficient with generative AI.
Speaker 2 (17:54):
How do we Where do I apply for one of
those goose jobs? I don't know that you're gonna be
able to support of the street? Wait wait, oh no,
that was the one that was like two hundred and
sixty grand.
Speaker 3 (18:04):
Yeah, okay, that does sound like a relatively stress free environment.
Speaker 2 (18:08):
To be fair, you ever been around geese?
Speaker 4 (18:11):
A lot of poop?
Speaker 2 (18:11):
Yeah, not the nicest either, very nice and very not nice.
Not the nicest animals, A lot of poop and not nice. Yep,
you know, generally something you try to avoid. Taking a
look at markets as we head towards the bottom of
the hour, that was now up three hundred and twenty
four points, continuing to rally. Smp IS up seventy four,
Nasdaq up three fifty nine, So a broad based rally
(18:34):
taking place here, but led largely by tech companies. If
you actually look, you do still have a little bit
of weakness under the hood here. Utilities getting whacked today.
The utility sector down as a whole Telecoms getting whacked.
Beverage and tobacco companies are falling. I don't know why,
but they are banks struggling a little bit, and uh,
(18:55):
drug makers struggling a little bit today as well. But
overall decent amount of green on the board, led by Nvidia, Google, Meta, Microsoft, Amazon,
and Apple. Let me know if you've heard any of
those names before. We are going to take a quick
break here when we come back again. We had to
detour into that zip recruiter piece just because it's worth
(19:18):
detouring and it might fix it at some point. Maybe
they'll fix it now. We will get to a little
bit of talk about the FED after this. We've also
got the trivia answer coming up next.
Speaker 1 (19:43):
Bringing the latest financial news straight to your radio every day.
It's the Financial Exchange on the Financial Exchange Radio Network.
Text uys six one seven, three six two one eight
five with your comments and questions about today's show. This
is the Financial Exchange Radio Network.
Speaker 4 (20:07):
Trivia question today was which US president is the only
one who had been awarded the Medal of Honor be
Teddy Roosevelt, who won the Medal of Honor for whose
courageous charge up San Juan heights during the Spanish American War.
Roosevelt is the only person in history to win their
nation's highest military honor and the Nobel Peace Prize. Winner
(20:28):
today of the Financial Exchange Show T shirt was Susan
from Methuen, Mass. Congrats to Susan taking home that Financial
Exchange Show T shirt and we play trivia every day
here on the Financial Exchange See complete contest rules at
Financial Exchange Show dot com.
Speaker 2 (20:43):
Mike, what do we got from the Fed? In terms
of Bill Dudley who used to be at the FED,
he ran the Federal Reserve Bank of New York for
about ten years. He was talking about how the FACT
can improve their communication heading into this year.
Speaker 3 (20:57):
He does, and he talks a lot about out how
they have this flexible inflation target, these individual growth projections,
and so there leaves I guess a lot of room
for misinterpretation in terms of how the FED plans to
react to things, and I think it feeds in. The
perfect example that I can think of of all of
this is going into twenty twenty four, when the Federal
(21:19):
Reserve had very specific expectations about inflation, growth and unemployment.
The economy proved to have higher inflation, lower unemployment, and
yet the FED cut interest rates more than they were
anticipating doing. And so you think about all that logically
and it doesn't make sense from where they were on
January first, and under the surface, it probably speaks to
(21:42):
a lot of what Bill Dudley's talking about here as well.
They have these other economic models that speak to what
they think is going to happen, but don't do a
great job of setting those expectations with the public and
explaining them very well. And I don't know. I don't
know what you change about the framework to make that better,
because I think a lot of it has been about
(22:03):
inconsistencies in the chair's Jern Powell's speaking engagements when it
comes to addressing the nation on their policies. Yeah, I.
Speaker 2 (22:14):
Just think I think there's too much focus on communication now.
And I know that that's how they want to try
to push policy at this point is say more and
do less, like have the market do its work for them.
But ultimately, I just don't know. I don't know that
(22:37):
there's the marginal benefit that you get from more. Differently,
I just don't know that it's there at this point,
and it makes us too focus then on, you know,
trying to interpret every little word instead of just we
did this and you got to deal with it. You know,
(22:59):
we don't all need to feel like we're on the
Federal Open Market Committee. We're not. We're not. Just tell
us what you're doing and do it. And if you
do a bad job, then you'll be remembered to someone
who did a bad job. If you did a good job,
you'll be remembered to someone who did a good job.
Speaker 3 (23:17):
But yeah, it's been strange over the course of the
last few years because generally speaking, since the early mistakes
of the FED in twenty twenty two and twenty twenty one,
the results have been fantastic, but I think the messaging
has been not helpful. And so I'm judging on these
dual sides. We're like, hey, it's tough to argue with
(23:38):
the results. The results have been unemployment that stayed around
low fours and inflation that's come in around three. That's
a pretty darn good result compared to where we were
in twenty twenty two. But the messaging around it and
the guidance and the explanations as to how we're getting
here and how we're going to remain here I think
have been confusing.
Speaker 2 (23:58):
But I'll give you an example. We get this piece
from Bloomberg, another one FEDS Daily, and Coogler stressed that
inflation fight has not yet been won. Well, how about
instead of telling us this, just raise rates.
Speaker 3 (24:10):
Of quarter percent?
Speaker 2 (24:12):
Why do you have to tell us this? It's because
they don't want to actually undertake those actions and they
want the market to make the move for them.
Speaker 1 (24:20):
Right.
Speaker 3 (24:20):
And furthermore, if you believe that the inflation fight has
not yet been won, then I need a little bit
more context as to why you voted for another rate
cut on December What was that thirteen, sixteenth, sixteenth, somewhere
like seventeenth. Yet those two things don't really play well
with me. So what's the story? Why did you do so?
(24:42):
And it comes back to you know, our star, the
neutral raid, all these all these kind of complex topics
that I don't think they do a great job of messaging.
Speaker 2 (24:51):
But it's also trying to manage a central bank this
way is very much an elite problem. And what I
mean by that is, if you're the central bank in Brazil,
or you're the central bank in South Korea, if the
(25:12):
bond market moves against you. You're basically like, Okay, I
gotta do what I gotta do, otherwise I lose credibility.
You can't talk your way out of it, right, it's
only by virtue of the United States being the United
States that you can even consider this. The only other
place on the planet, there's two The only other two
places on the planet that can consider this are Europe
(25:34):
and Japan. There's no one else, and even Europe getting
kind of dodgy in terms of, you know how the
euro's being used internationally these days. So I look at
this and sure you can, you can try to talk
your way out of it, but eventually the market's gonna
force you in ways that you don't anticipate, and you're
(25:57):
gonna have to just do what you're gonna have to do,
and no amount of talking is going to get you
out of it. So it's kind of where I am.
Speaker 3 (26:05):
I think.
Speaker 4 (26:05):
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Speaker 1 (26:58):
The proceeding was paid for. The views expressed are solely
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Speaker 2 (27:10):
I'm really happy we get to discuss this next piece, actually,
because I think it's a really interesting one, in some
ways horrifying, in some ways exciting. It's from the Financial Times.
It's titled Private Equity to lobby Trump for access to
savers retirement funds, And basically what it's talking about is
that the private equity industry wants to find a way
to get its investment options into four to one K plans.
Speaker 3 (27:34):
Or just retirement accounts and investors that are at least,
according to most regulators, considered less sophisticated than the current
typical private equity fund investor. To invest in a lot
of these places, you need to be deemed in a
credited investor by I believe those are SEC standards, meaning
you have to have a million dollars in investable assets
(27:56):
and or two hundred thousand dollars of income. And there's
a whole swath of people that don't meet those standards,
and it appears nowhere in four one K is regardless
of your accreditation status.
Speaker 2 (28:07):
So a couple things here. First, When we talk about
like accredited investors and this and that, there's a case
to be.
Speaker 4 (28:15):
Made that.
Speaker 2 (28:18):
Why aren't you allowing a broader swath of people to
access you know, these types of things.
Speaker 3 (28:24):
I would completely agree. We've talked about this, but it's
been a while. I mean, if you want to pave
a path where someone doesn't meet those standards and instead
goes and educates themselves on how private equity investments works
and earns their accreditation status. You got to taste, you know,
a six hour course or something like, and arguably, given
the incentives there for people to sell these types of
things to accredited investors who don't know what the hell
(28:47):
they're buying, there might be a case for doing that. Anyway,
Does anyone think that.
Speaker 2 (28:51):
Like, wealthier people are just smarter? I mean, like not
a lot of evidence. I'm not saying they're dumber. I'm
just saying, hey, like smarts and financial wealth are not
tied together necessarily, Like it's not one and the same. Like, sure,
you can be correlated in some ways, but like, quite honestly,
(29:13):
I know some people that are not like the smartest
as far as like if you ask them very basic
math questions and stuff, they'd struggle with them. Yes, but
they've made large amounts of money because of acumen in
other areas and whatever it might be. I guess that's
what I'm getting at. So on one hand, you look
at this and you're like, sure, why should investments with
(29:34):
you know that the types of return that private equity
can generate sometimes, why should it only be limited to
those who were very wealthy. The reasoning that's justified it
to this point is that historically these have also been
some of the riskiest investments for a couple of reasons. A.
They may hold, you know, investments that are illiquid, so
you don't have access to your principle. They may employ
(29:56):
large amounts of leverage, so you have the greater risk
of wipeout. There's all kinds of potential downsides.
Speaker 3 (30:02):
They are riskier, and by and large, they don't have
the same requirements about disclosures, so you won't see the
same things that you get out of a mutual fund
perspectus when you talk about a private equity investment. Correct.
Speaker 2 (30:12):
So this tends to lead you to okay, if you're
talking about people's retirement, sure they have this potential upside,
but if the downside risk materializes, that risk doesn't leave
the system. Now you've got a whole bunch of people
where their retirement if things go badly, is compromised. And
what do you do then if you have a bunch
(30:33):
of people that committed their retirement into these things and
now are out of luck because they're four to one,
k is.
Speaker 3 (30:39):
Worthless, or even if it's doesn't all fall apart. Even
in somewhat stressful times, there are severe liquidity issues and
things that aren't a great fit for retirement accounts. If
you think about correct eighty year olds have whoever required
a minimum distribution requirements and at the same time have
a bunch of their money in private equity, that could
be a real problem. So I think where both of
(31:01):
us are landing here is that I think it's perfectly
reasonable to have a conversation and debate about who should
be eligible to place money into these things. But purely
deregulating it and saying yeah, any financial advisor out there
can go and sell private equity investments to the general
public in their retirement plans is a really dangerous path
that I don't think you want to go down.
Speaker 2 (31:22):
Here's the other place that I'm gonna go with this
number one. If you're talking like four to one k's,
how many four to one K fiduciaries are just gonna
be like, yeah, sign me up for like this kind
of risk. Right, It's a little like is if you're
a fiduciary managing that four to one K plan, Okay,
you're held to a really high standard. Yes, you're gonna
(31:45):
just take on that kind of risk. How are you
gonna manage it? If again you talk about you know,
these funds tend to be liquid. Hey, if someone wants
to start withdrawing funds, they can't just do it pro rata, right,
you know, how do you manage those types of things.
The other piece on this, and this is where I
always go is look private equity and private credit and
(32:06):
you know, hedge funds and this and that. They don't
want to have a lot of thousand dollars clients.
Speaker 3 (32:15):
Right, That's why the four ohne casepase makes sense.
Speaker 2 (32:17):
That's not their business. It's not that they like don't
like you, It's just they don't want you. It's not
what their businesses are set up for. They're not set
up for like large scale record keeping in this and
that they want not Robin Hood. No. So the question
that I always ask is when they start talking about
doing this, why are they doing it now?
Speaker 3 (32:39):
Have they?
Speaker 2 (32:40):
Again?
Speaker 3 (32:41):
Well?
Speaker 2 (32:41):
I mean very clearly because Trump administration is coming into
office and is in favor of deregulation and like maybe,
but even for this entire year, you've been seeing like
Apollo and other managers trying to start up like private
credit ETFs and interval funds and things along these lines,
and you're kind of like, why are they pushing it
(33:02):
on the retail person, because the retail person gets burned
on these a lot of times after everyone else has
made their money.
Speaker 3 (33:08):
Last one of the punch bowl is the argument.
Speaker 2 (33:10):
That's kind of how I feel sometimes, and so it's
another thing that just gets my intent uping make me go.
We'll have to see if this is actually a good
idea or not. Take a quick break when we come back.
Stack Roulette.
Speaker 1 (33:23):
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(33:44):
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Speaker 4 (33:51):
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Speaker 2 (34:35):
Mike, what do you got for stack Roulette?
Speaker 3 (34:37):
Interesting generational stuff, and it comes to investing right now.
I remember in one of my first jobs at a
financial services company, I was taking a look at trends
when it came to millennials in their investing habits. And
millennials came of age or entered the labor force around
the Great Recession, and their investing habits tended to fall.
(35:00):
Of that they were more interested in large blue chip
dividend paying stocks. And at the time, I distinctly remember
speaking to somebody who you know, I was, I think
I was still a college student at the time, who
was pointing out They're like, that's not the usual and
you know, recommended path for somebody that's eighteen to twenty
five years old. You would want to be a more
(35:20):
aggressive investor at that stage, and yet they are are
you know, quite conservative. Gen Z also appears to be
a product of their time and have gotten started investing
earlier and more aggressively. On average, gen Z those born
between ninety seven and twenty twelve started investing at age eighteen,
Millennials started at twenty five, gen X started at thirty two,
(35:43):
and boomers started at thirty five. So I can take
some good news from all of this. The bad news
would be that anyone that's invested long enough knows that
these things also go down. We have always had a
period of time where stocks boom and then bust, and
gen Zers are getting started earlier, hopefully with money that
they have that they're able to actually save, but will
(36:04):
likely be subject to one of these bust cycles at
some point, and are likely invested more aggressively than their
previous generations at their age.
Speaker 2 (36:12):
Yeah, it's uh again. Volatility in these these markets. It's
a feature, not a bug. Ye, And thus far most
of that volatility has been in the upward direction. But look,
twenty twenty two was a brutal year for gen Z
investors who might have been starting out. Hopefully they didn't
get too discouraged and didn't lose all their capital and
you know, are able to learn some lessons and continue on.
(36:34):
But it can be tough navigating those waters. You know,
early on, DraftKings is putting out a subscription service. It's
going to be called Draft.
Speaker 3 (36:45):
Kings Ambler's Anonymous.
Speaker 2 (36:47):
No, that's that's actually a thing. It's called Draft Kings
Sportsbook Plus. Because we just need another plus here, and
I'll quote from market Watch. Members would have access to
stepped up boosts for all part parlays where the individual
legs are minus five hundred or shorter two leg parlays.
We'll see profits increase by ten percent as part of
the membership, and the boost will grow as the parlays
(37:09):
get bigger. Parlay with more than ten legs will have
the profits for the better doubled. I knew like three
to five of those words, like I know very little
about betting, and Tucker's probably going to be like, you're
all wrong, Tucker, Am I correct that if you're betting
ten leg parlays, it's basically as good as giving your
money away.
Speaker 4 (37:28):
Correct, Like, first of all, it's extremely rare for a
ten leg parlay to hit.
Speaker 2 (37:35):
Beyond that, here's the thing. You could hit on nine
of these, meaning that you were like right most of
the time, and if you lose that last one you
get nothing. So it doesn't even reward someone with good skill,
it rewards someone with luck. It is like it's gambling
on gambling, is the way that I would put it.
Speaker 3 (37:53):
And you pay a subscription fee for access to this.
Speaker 2 (37:56):
They're not doing this out of the goodness of their hearts.
They're not doing this to make you money. They're doing
this to make them money. They've run the numbers and
you better believe, Hey, if you're good at this, they're
gonna throttle how much you can win because that's what
they do.
Speaker 4 (38:14):
I'll just limit you. Yeah, So.
Speaker 2 (38:19):
There's that quick break for the rest of the day.
We'll see tomorrow on the Financial Exchange,
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