January 10, 2025 • 38 mins
Chuck Zodda and Mike Armstrong explain why markets are reacting poorly to the release of outstanding December jobs data. Are stocks truly afraid of rising treasury yields? Why are Fed officials saying rate cuts can wait awhile. What is the level of consumer confidence on hte eve of Trump 2.0? How many jobs on Wall Street could be replaced by AI?
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Episode Transcript
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Speaker 1 (00:01):
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(01:06):
Chuck Zada and Mike Armstrong.
Speaker 2 (01:10):
Jobs Friday here on the Financial Exchange, and you gotta
tell you we got a squatcher today. Not in terms
of the temperature outside our studio, which is better than
the last couple of days, but not great. But when
we look at the employment situation report published by the
(01:32):
Bureau of Labor Statistics, which is nested nicely within the
Department of Labor, it's just you know, the series of
US agency nesting dolls that you have there. Indeed, two
hundred and fifty six thousand jobs created in December, better
than the expectations of one hundred and sixty to two
hundred thousand. The October numbers revised up by seven thousand,
(01:52):
November revised down by fifteen thousand, so net net basically
the same. Like an eight thousand job difference over two
months is nothing. Uh And the unemployment rate also dropping
from four point two down to four point one percent.
But chuck, this all sounds like good news. Why are
markets selling off by two percent? Uh So, in terms
(02:13):
of what we are seeing in markets, couple things. First,
bond market says, oh, gee, fed, you're not gonna be
able to cut if we get more numbers like this,
and so yields moving on up ten year Treasury up
seven basis points to four point seventy five percent, Ladies
and gentlemen, on the eve of the start of the
spring housing season. I mean, we are less than a
(02:33):
month away from Super Bowl Sunday now, So buckle up
because right now, based on where these rates are, Mortgage
News Daily has the last national average for the thirty
year fixed rate at seven point one seven percent. You're
you're heading to seven and a quarter maybe seven to
three could bee, That's that's where you're going. So this
(02:54):
is the kind of thing where, ultimately, I think, if
you look at it, the very economic strength that has
led to yields moving up over the last couple of
months is also going to be tempered by higher rates,
simply because if you're going out and trying to buy
a home and you're like, hey, honey, look rates are
down around like six percent in you know, September. We'll
(03:17):
wait till the spring and maybe they'll be lower because
the Fed's cutting. Sorry, you're gonna be up about one
to quarter percent on the thirty year fixed rate mortgage.
From there.
Speaker 3 (03:24):
That's a painful pill to swall.
Speaker 2 (03:26):
It is and this is why Mike, you and I
were saying this back in September. If you're just you know, waiting, waiting, saying, Oh,
the Fed's gonna cut rates and then it'll be cheaper
to buy a home right now, that's not the case.
In fact, has moved in the exact opposite direction there,
it has. So let's dig into this job's report and
talk about the good, bad, and the ugly so good.
(03:48):
Unemployment down to four point one percent. Why, according to
the household survey, four hundred and seventy eight thousand jobs
out of there. Remember there's two different surveys. Yep. We
don't quote the household Job Survey number for you know,
jobs created because statistically it's been more unreliable in the past,
so normally we don't talk about it. But why does
the unemployment rate move? More jobs created there and two
(04:10):
hundred and thirty five thousand people off unemployment not being
reported as unemployed. So the combination of more jobs and
few are unemployed, that tends to do it.
Speaker 4 (04:18):
So sometimes you see the unemployment rate go down because
a whole bunch of people leave the jobs market, and
not exactly what we're seeing.
Speaker 2 (04:24):
According to the survey, labor force grew in this month
by two hundred and forty three thousand. So even with
that labor force growth, not seeing any negative effects there.
When we talk about the duration of unemployment, those longer
than twenty seven weeks, those unemployed longer than twenty seven
weeks drop from one point sixty five four million to
one point five to five to one, So long term
(04:45):
unemployment dropping here. That doesn't really match up with a
lot of the other data that we're getting from things
like the Jolts reporting things like that. So it's one
where I say, oh, like, that's nice, but it's a
trend of one, and overall that series is still up
about twenty five percent over the last year in terms
of the number of people that are unemployed for twenty
(05:05):
seven weeks or longer. So sure, it's great that you
saw that, but you see that big of a change
in a series where it's been moving up for the
last year. I kind of look at that and go,
it's gotta get proven out over the next little bit
for me to really buy that one. Other things, when
we talk about where the jobs are being created, what
(05:27):
industries are actually producing them, So mining and logging, which remember,
is not really a big industry in the United States.
How many loggers do you know, Mike, I don't know
any loggers personally. I know a couple. They sit right
next to the pilsners in my you know, refrigerator.
Speaker 3 (05:45):
You got the car wreck.
Speaker 2 (05:46):
I thought that was fantastic.
Speaker 3 (05:48):
I thought that was actually that was a great dad joke.
Speaker 2 (05:52):
I thought that was good. Constructions though, Mining and logging
down three thousand for the month, again, not not a
real problem. Construction eight thousand jobs added, same as November.
There's a slow down in construction job growth that is
going on right now. The last twelve months, you've been
seeing you know, kind of around two hundred thousand, you
do eight thousand a month, though you're talking about a
(06:13):
deceleration of about fifty percent. So there's something going on there,
and obviously higher interest rates could hurt construction further. Manufacturing
down thirteen thousand for the month. That obviously is not
great the last three months as a whole. When you
look at it again, any one month can show you,
you know, different things. The last three months down forty
(06:36):
thousand for manufacturing. So even though we have all this
manufacturing construction going on right now, actual manufacturing employment kind
of not great. Where were the jobs actually created. Big
jump in private education and health services up by eighty
thousand for the month, Leisure and hospitality up by forty
(06:57):
three thousand on the back of fifty two thousand added
in that sector in November, and then retail trade bouncing
back from November where you had down twenty nine thousand
to up forty three thousand here, so retail, leisure and
hospitality making up a decent sized chunk here.
Speaker 4 (07:16):
Overall, government jobs still continuing to do catch up work here.
In the year of twenty twenty four, in average of
thirty seven thousand government jobs were added per month. In
December we saw thirty three thousand, so slight deceleration, but
continuing there. And that's basically all at the state level.
Speaker 2 (07:35):
By the way, it's not the federal government where you're
seeing that expansion. It is very much state and local
governments where you're seeing that happening. Other data points that
we have average work week stayed the same at thirty
four point three hours. Wages up point three percent month
over months, so no change on that front. Aggregate payrolls,
(07:55):
which is how much are wages going up combined with
how much are is employment growing? Aggregate payrolls up four
point nine percent year over year, we've settled nicely into
that high four to low five range, which is just
where we were pre pandemic. And this is why, in
my opinion, my very humble opinion, sometimes not so humble,
(08:21):
the move that we're seeing in yields. Yes, it's moved up,
but there's a limit as to how far it can go,
simply because when we talk about inflation, there are two
components to it. The first is, hey, is there a
you know, shortage in supply of anything? But the other is, hey,
do you have you know, an excess demand? Excess aggregate
demand can only happen when you have you know, faster
(08:43):
growth of money coming in, not money coming into the system,
but basically more spending power overall for people or corporations.
And if wages and an employment growth are combining to
work out to around a five percent annualized growth rate,
you don't end up in situations where you can have
sustainable long term inflation. It's just not something that concerns
(09:07):
me on that front. Sure, I get nervous that maybe
inflation bottoms, you know, and since you know, two and
a half to three and a half, somewhere in that
range for a while. But that's different from hey, am
I nervous that inflation is going to be, you know,
perpetually stuck north of four things like that.
Speaker 3 (09:23):
Yeah, that's fair bit different.
Speaker 4 (09:24):
So what's very evident at this stage about equity markets
is we have re entered that bad news is good
news and good news is bad news. Market, at least temporarily.
Speaker 2 (09:34):
Start to this year is a lot like twenty twenty
two so far.
Speaker 4 (09:36):
Yeah, this summer, this most recent summer, bad news was
bad news. People were worried about recession. When you got
a bad jobs report, markets were selling off because we
were worried about the solemn rule. We were worried about
an economic slowdown. That is clearly not on investors' minds
today is a big economic slowdown with maybe some of
(09:56):
the growth concerns there from GDP now and things like that,
but buying law. What investors are worried about right now
is rates going higher and staying there for longer. And
this job's report indicates that that's what should happen.
Speaker 2 (10:08):
And the other thing when we talked about equity markets,
we've been saying for you know, the last few months. Now, Hey, Like,
it's great that there's all this optimism and equity markets,
but it also means the second something very small goes wrong,
it can have an outsize impact. This kind of jobs report,
if it were in a more cheaply priced market, wouldn't
(10:30):
be moving equity markets this way.
Speaker 3 (10:32):
The perfection, and so you get this type of reaction.
Speaker 2 (10:35):
And so I think investors need to be prepared for. Hey,
depending on how this year goes, there's probably going to
be more volatility than last year, because last year historically
was one of the calmest years in history for the
S and P five hundred in terms of overall volatility. Yes,
it was moving up, but there was very little chop.
Aside from that August freak out about you know, the
(10:59):
Yen Carrie rade and stuff like that. We we didn't
really have much volatility all year. Let's take a quick
break here when we come back, anything else that we
want to talk about from a jobs report perspective.
Speaker 3 (11:13):
No, I think we can move.
Speaker 2 (11:15):
To pretty straightforward quite honestly.
Speaker 4 (11:17):
Yeah, I mean, like we said, this market has very
much turned to a bad news is good news, good
news is bad news market, and that's exactly what we're
getting today. It's reflected by the way in every piece
that we had from Tucker thank you, that was printed
prior to the jobs report coming out, it was all
these reports of, oh, well, we sure hope we get
a bad jobs report because then you will see markets
do fine. And that is the opposite of what we
(11:39):
got this morning.
Speaker 3 (11:39):
So let's move along quick break. We'll be right back
after this.
Speaker 1 (11:45):
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Speaker 2 (12:56):
Mike, I get a piece in Bloomberg Opinion Today's title,
who's a's rate of rising treasury yields not stocks now today?
Kind of threw that into question.
Speaker 4 (13:04):
But he, Mike, here's what's the point he's making here,
because he then goes on to argue that stock investors
have been watching the run up in US treasury yields
with considerable alarm of late.
Speaker 2 (13:13):
Well, here's the other thing. So look, I know that
when we first got this job, support treasury sold off
pretty significantly. The tenure was down I think eleven basis points.
As we're sitting here talking right now, the ten years
I'm sorry, it was up eleven basis points. As we
see yield on the tenure, the yield was up eleven
as we sit here right now, it's only up four,
so reversing pretty strongly over the course of the morning.
(13:37):
But despite that, stocks remain pretty heavily negative. So I
think ultimately, you know, in looking at this and trying
to figure out where equities go and what's important to them. Sure,
rising yields, we've seen this in twenty twenty two. They
can't impact equities, sure, pretty significantly. And in twenty twenty
(13:57):
two they did. We had a bear market in the
S and P five hundred and basically every the major
US index. But ultimately, what is going to continue to
be the major driver of equity performance is going to be, Hey,
can the great earnings growth that you've seen from the
last twelve months or so, can that continue? Because that's
(14:18):
what's priced in here, and the risk that higher yields
put you know, puts on equities is Hey, that could
be something that slows that earnings growth. But it's not
the only thing that's out there. It's one thing in
the matrix that you have to consider, but it's it's
not the only thing. That's that's important there.
Speaker 4 (14:35):
So his is his conclusion then that in the intermediate
term stocks don't really care about yields, because in the
short term they very obviously can and they are right now.
But I would generally conclude with him that, yeah, over
the longer term, what matter is more for the long
term and media intermediate term direction of stocks is earnings.
Speaker 2 (14:56):
Yeah, it's It's totally true, and what's going and part
of the reason if you look at you know why
this happens in the short term and twenty twenty two,
just as an example, when when yields kept moving up
and up and up and stocks kept moving down and
down and down. Yes, there was some weakness in the
companies and in what they were seeing that year. We
talked about that at length. But ultimately a big part
(15:20):
of the concern is, hey, Fed keeps raising rates, they're
going to break something and send us into recession, and
that means that earnings are going to go down over
the next couple of years. That was the big concern
that's out there for really all of the last three years. Yes,
So the interesting thing to me right now about today's
market is it's kind of thrown that to the side.
(15:41):
The projections for earnings growth in twenty twenty five is
like fifteen percent according to factset.
Speaker 4 (15:45):
Right, So the threat to markets right now does not
appear to be investors worried about FED throwing us into recession,
but rather needing to play catch up again on inflation
and hold yields where they are.
Speaker 2 (15:58):
So I think it's just kind of an interesting way
to look at Hey, why why do yields matter? And
when do they not matter to markets? Uh More? FED
officials talking here in this next story. So Alberto Musalam,
who's the president of the Federal Reserve Bank of Saint Louis,
(16:19):
did an interview yesterday.
Speaker 3 (16:21):
Is he even a voting member.
Speaker 2 (16:23):
Don't know, not sure. The day before, Christopher Waller, who
is from what what? What branches? The governor of I forget,
but we we covered the story about how he was
looking at this alternative measure of inflation, the market inflation.
He's just on the board of governors? What what? What board?
(16:45):
Is he part of the governors? In any case? Yesterday
we covered how Waller was basically saying, hey, we can
afford to cut because some of this stuff looks fine today.
Psalm's like no, we probably don't need to be cutting
because the data has been stronger recently.
Speaker 3 (17:05):
Now I have a lot.
Speaker 4 (17:06):
Less to fight about this guy with than I do
with Waller's obscure inflation targets that he pointed out as
looking good right now.
Speaker 2 (17:14):
My point is we don't need so much FED talk.
And look, if you're really really into it, if you
wake up each morning you're like, man, I can't wait
to hear what you know. Waller says, find more power
to you. But otherwise you kind of sit in here
and go, well, why is one member telling me this
and the other that the real answers. They're kind of
giving you the triangulation of hey, here's where everyone is,
(17:37):
so that you can, you know, kind of scout out,
you know, the the most extreme positions on the hawkish
or dubbish side. Who is the guy who for years
he's not on the the voting committee anymore, he's not
even with the FED anymore. It was the guy from
Saint Louis board board for the longest time, he had
a great role on the FED. To be fair, what
(18:00):
ever Bullard said, you knew that was the most hawkish
thing that anyone on the FED was saying at any
particular point in time, but we don't need all of
these FED people speaking as frequently as they do. I mean,
yesterday Mike Markets were closed, the New York Stock Exchange
and NASDAK decided to close because they said, hey, there's
(18:23):
a funeral of a former president going on and we
don't need to be open.
Speaker 4 (18:28):
And as that happened, you had one, two, three, five speeches,
five speeches from FED fish.
Speaker 2 (18:35):
Five speeches have a little respect, five of them, Like, what.
Speaker 3 (18:41):
Are we doing here?
Speaker 2 (18:42):
Why do we need five a day? Unless you think
that that's just well, maybe that's just when they were all,
you know, stacked up in this and that. Here's the
schedule for FED speakers next week Tuesday, Schmid and Williams. Wednesday, Barkin, Kashgari, Williams, Goolsby.
Let's see, I'm just going down the list. Oh, Thursday,
(19:03):
we get a day off. No FED speakers on Thursday Friday. Wow,
two days. Oh it's blackout period because the meeting's coming
up in two weeks after that. So that's why you
have no FED speakers. So in any case, it's not
just a one day thing. It's we're consistently getting eight
to fifteen FED speeches a week, and it's too many.
(19:26):
Let's take a quick break here. When we come back,
it's Wall Street Watch.
Speaker 1 (19:42):
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 at what's moving markets so
far today right here on the Financial Exchange Radio Network.
Speaker 5 (20:02):
Markets are selling off as Wallstree reacts to the December
jobs report posted this morning, where two hundred and fifty
six thousand jobs were added last month, much stronger than
expectations of one hundred and sixty five thousand. The unemployment
rate ticks lower to four point one percent from four
point two percent, Treasure yields jumping higher on the news
(20:23):
so far. At the moment, the Dow is down over
one percent to four hundred and ninety one points, SMP
five hundred is down one and a quarter percent or
seventy four points, and the Nasdaq down just over one
and a half percent lower or three hundred and one points.
Russell two thousand selling off by over two percent. Ten
year treasure Field up five basis points now at four
(20:43):
point seven to three percent, and crude oil up nearly
four percent higher on the day, trading at seventy six
dollars and seventy cents a barrel ahead of the open.
This morning, Delta Airlines posted a record quarterly revenue in
the fourth quarter and also offered strong guidance, sending that
stock up by a eleven percent. Meanwhile, Walgreens also posted
quarterly results, beating earnings and revenue expectations. Where a drug
(21:07):
store chain had cost cutting initiatives, including shuttering stores, Walgreens
also maintained its fiscal twenty twenty five adjusted earnings guidance.
Walgreen shares jumping by twenty five percent so far today.
Elsewhere shares and Constellation Energy up by twenty one percent
after the company struck a twenty six point six billion
(21:27):
dollar cash and stock deal to buy Calpine, combining two
of the US industry's players. Amid surging demand for electricity
and breaking news in the media space this morning, where
Disney Fox and Warner Brothers Discovery called off plans to
launch their venue sports streaming service. In a joint statement,
the companies said quote they determined that it was best
(21:50):
to meet the evolving demands of sports fans by focusing
on existing products and distribution channels. Disney shares down by
over one and a half percent, sent Warner Brothers down
by five percent, and Fox shares are down by about
two percent. Today, I'm Tucker Silva and that's Wall Street.
Speaker 2 (22:07):
Watch, Mike. Another data set that we got this morning.
University of Michigan comes out once a month with consumer
confidence data, and as as part of that, they also
survey people and they ask them, hey, what do you
think inflation is going to be over the next one,
(22:28):
three and five years? And the one year estimate ticked
up from two point eight percent to three point three percent.
That's not really the interesting part of it. The interesting
part of it is, again, this is for December that
we got this data, so it's the first reading in
a full month after the election. Democrats their inflation expectations
(22:52):
move from around two percent to four point two percent
in this report. Now, nothing has actually changed it. The
new administration hasn't even come in, but Democrats saying, yes,
inflation is gonna be so much worse.
Speaker 4 (23:03):
Double, it's gonna be double their prior expectations. Yes, independence
not much movement.
Speaker 2 (23:09):
They went from like three to three point two Okay, fine, reasonable,
Like you know, it's been fluctuating. Whatever Republicans went from
expecting four percent inflation two point one percent inflation if now,
this is something that happens every time I see a
president change office. But I do want to just put
(23:29):
some context into that last number. If you look at
the historical data set for CPI and look for the
last three times that we have had inflation annually zero
point one percent or lower, here are the numbers twenty fifteen.
(23:50):
And this was caused basically by Russia flooding the world
with a bunch of cheap crude oil, and so oil
prices plunged, and US equity markets in twenty fifteen had
a nice little hiccup during that year as well. So
you came in below zero actually in twenty fifteen or
parts of it. Two thousand and nine, not really a
(24:11):
great economy. And the third time that that's happened recently
is nineteen fifty five.
Speaker 4 (24:19):
Got it so unlikely for inflation to come in at
zero point one percent?
Speaker 3 (24:23):
Be your conclusion.
Speaker 2 (24:24):
There's a reasonable there's a case to be made. And
again I'm not saying it's right or wrong. Hey, I
think the new incoming administration may have a different approach
on inflation that improves it reasonable to have a prediction of, Hey,
inflation is going to be zero for the next year,
unreasonable outside of recession.
Speaker 4 (24:43):
We talk about this folks all the time, and I
guess my main conclusion here is you really need to
check your emotional baggage at the door when investing. Yes,
I don't know that the way that people respond to
you Michigan sentiment surveys translate to how somebody invests. I
don't know that with certainty. But if you're listening right
(25:05):
now and you've said something along the lines of I
trust this new administration, I'm getting heavier into stocks, or
I'm terrified of this incoming administration, I think inflation is
going to take off. I'm buying tips. Neither of those
are neither way to do rational considerations to what's going
on right now, and you need to check that stuff
(25:26):
out the door because historically it has been a terrible
way to invest. There is no guarantee that an incoming
Trump administration is going to reduce inflation or produce heavy
equity market returns.
Speaker 2 (25:39):
Yeah, it's it's something where there's a lot more happening
in the world than just what goes on at sixteen
hundred Pennsylvania Avenue, which is the address of the White House.
Speaker 3 (25:50):
That might be the worst investment strategy that.
Speaker 4 (25:52):
I can think of, actually, And by the way, we
bring it up only because we hear so many people
that employ it. How many people have you heard of
the last several years have said I'm not investing in
the stock market so long as Biden is our president
or Obama is our president.
Speaker 2 (26:07):
And now you get people from the other side saying
I want to buy stocks and I can't do this
as Trump's president. Well, how'd that work out for you
during his first term?
Speaker 3 (26:14):
And how did it work out for you during Biden's term?
Speaker 2 (26:17):
Right, Like, let's let's be.
Speaker 3 (26:20):
It's okay to have political viewpoints.
Speaker 4 (26:21):
That's not what I'm saying, obviously, Like we all have
differing views on which direction this country should go from
a political perspective. Just be really, really careful when you
take all of that and say, and therefore the stock
market will do X.
Speaker 2 (26:35):
Yeah, because there's right. You could you could be completely
right about your political viewpoints and still have the exact
wrong intuition about how that will end up impacting markets.
That's the point that we're trying to make.
Speaker 3 (26:46):
Yeah, so I think we've driven that home. Well, let's
move on.
Speaker 2 (26:49):
Let's talk about artificial intelligence AI replaced your job.
Speaker 4 (26:53):
Well, watch out, because Microsoft is cutting thousands of jobs,
maybe less than one percent of their workforce, so probably
not related to a massive AI increase in productivity.
Speaker 2 (27:06):
No, but I do think there's something interesting and also
very dystopian about the fact that workers at Microsoft could
be building their replacement.
Speaker 3 (27:14):
Yeah, I do too. It's kind of.
Speaker 4 (27:17):
Funny on the surface and sadder underneath a little bit.
Speaker 3 (27:21):
But the answer to me is could be.
Speaker 4 (27:24):
And in my opinion, we have no evidence yet that
AI is legitimately replacing or slowing down the hiring of
any real employees today.
Speaker 3 (27:34):
Yeah, I just I don't.
Speaker 4 (27:36):
I don't see the evidence yet other than on a
firm by firm level like we're talking about here. You
can't find any data in the big picture numbers when
we talk about the state of the labor market. Maybe
we will in the future, but today it's all just conjecture.
Speaker 3 (27:53):
And by the.
Speaker 4 (27:54):
Way, you know Microsoft's headcount over the course of the
last couple of years here we went from two hundred
twenty one thousand employees the previous year up to two
hundred twenty eight thousand today. Now, part of that's because
they acquired Blizzard Activision actually Blizzard. Yeah, so that was
some of the additions. But you know, they've been talking
about job cuts throughout the last couple of years, and
(28:15):
they have seven thousand more employees than they did a
couple years ago.
Speaker 2 (28:18):
And part of this, though, is as part of that acquisition,
they're talking about cutting some of the employees that are
duplicative in terms of roles that used to be at
Activision Blizzard that are now under Microsoft umbrella.
Speaker 3 (28:30):
So again probably not AI related.
Speaker 2 (28:33):
Related story, though Wall Street job losses may top two
hundred thousand as AI replaces roles. This according to a
Bloomberg Intelligence study that says, look, we think that well,
it was a survey also basically saying, hey, chief technology
officers surveyed said they expect a net three percent of
(28:55):
their workforce to be cut and replaced with AI over
the next three to five years. Now, this is something
where again that two hundred thousand number gets like a
lot of eyeballs, But then you look at this and
you say, okay, net three percent that doesn't sound like
AI is making some huge push where it's going to
be replacing large numbers of those workers over any short
(29:16):
to intermediate term timeframe.
Speaker 3 (29:18):
Right.
Speaker 4 (29:19):
I suppose if you had the perspective that the global
banks were going to be able to cost, you know,
cut two hundred thousand jobs on their investment banking and
research teams, then you could get to some serious savings here.
But at this stage, I think what people are referring
to when they talk about AI cutting jobs out would
be an entry level investment banker putting together a slide
(29:42):
deck and a customer service representative answering questions on behalf
of a customer. So those are not big cost savings
for you.
Speaker 2 (29:48):
No. The other one here that I find to be
laughable given what we know about AI. So it says,
you know customer services could see changes as bots managed
client functions. Okay, see how that ingratiates you to your clients.
Good luck with that, while know your customer duties would
also be vulnerable. So when we talk about know your
customer KYC is how it's referred to in the biz.
(30:09):
Know your customer is basically, hey, make sure that the
people you are taking money from are real people and
not on some kind of terrorist watch list. Is the
short version of it. If there's one thing I know
about generative AI, if you give it something fake, it
(30:29):
doesn't know it's fake.
Speaker 3 (30:31):
Well.
Speaker 4 (30:32):
Furthermore, the name of the rule is know your customer,
So you outsourcing that to a robot does not fulfill
the obligation.
Speaker 2 (30:40):
This is if you were asking me, as if I
were someone running a compliance division at an investment bank, Hey,
can I use AI to replace my know your customer people?
Speaker 3 (30:51):
That'd be like the last on the list.
Speaker 2 (30:53):
I'd be like, no, Like, don't even consider that once
you know, well, my goodness, what are we talking about here?
You're literally talking about not knowing your customer? Oh boy,
So I found out to be kind of humorous as
we As I read through that, I was like, Oh,
wouldn't do that if I were you. Let's take a
quick break here. When we come back, we'll talk about
(31:13):
economists starving in the wilderness, not literally but metaphorically speaking.
What's going on with economists and why have they lost
their way? We'll discuss after this.
Speaker 1 (31:26):
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Speaker 2 (31:54):
Mike. Starting this year, the Secure Act two point zero
allows for employees age sixty to sixty three to do
what's called a super ketchup contribution. Regular ketchup contribution is
seventy five hundred dollars for workers fifty or over, but
if you're in that sixty to sixty three band, you
can do an extra eleven thousand, two fifty into your
four oh one K plan in theory, taking total employee
(32:16):
contributions from twenty three to five up to thirty four
seven fifty for people in that group.
Speaker 4 (32:22):
Chuck, We oftentimes leave these things kind of open ended
in terms of what people do. I'm going to try
and make this brief and concise. If you are working
for a company that has a four oh one K
and you are between the ages of sixty to sixty three,
you need to pay attention to this and you can
call us to learn more. The second one would be
if you maxed out your four oh one K contribution
(32:43):
prior to December thirty first of last year. Then you
also again have some homework to do. You need to
learn about whether or not your four oh one K
offers a true up.
Speaker 3 (32:52):
Not all of them do.
Speaker 4 (32:54):
Maybe you might be a missing out on some of
your employer match.
Speaker 3 (32:58):
Two only two there is here right one.
Speaker 4 (33:01):
If you're sixty to sixty three, you have some additional
opportunity if you're maxing out your four oh one K
and doing so prior to year end, you need to
learn more about how your four oh one K functions.
Issues that Armstrong Advisor Group helps our clients with all
the time. If you have questions, if you fall into
one of those two categories, give us a ring so
we can help guide you through next steps to take
(33:21):
on your own end and ultimately save more for your
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zero zero one. Again that's the Armstrong Advisory Group. The
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Speaker 1 (33:37):
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Speaker 2 (33:53):
Economists are in the wilderness. How can they find a
way back to influence? That's the headline in the New
York Times? Is this New York Times? Yes, Yeah, Castleman's
New York Times. And basically what it's talking about is that, Hey,
over the last decade or so, economists have kind of
(34:16):
been looked at as not people to rely on when
you are trying to actually do anything related to the.
Speaker 4 (34:25):
Economy or at least public policy when it comes to
the economy from a policy perspective, They're just kind of
shunned at the moment a little bit. And I think
there's a few specifics that you can point to here
and show it with the political results that we're seeing. One,
it is pretty close to universally agreed upon by trained
economists that free trade is the way to go, and
(34:47):
both Democrats and Republicans at this point are pushing back
hard on free trade.
Speaker 2 (34:51):
Yeah.
Speaker 4 (34:52):
In other words, more minor one economists generally speaking, and
this is more just on the Democrats side, that if
you want want to address climate change through policy in
one way, shape or form, then one of the best
ways to do it is through a carbon tax. It's
been a pretty well established economic viewpoint among trade economists
that hey, you want to get companies and individuals to
(35:16):
send less crappy stuff into the atmosphere, use a carbon tax.
It'll cause them to do less. The Biden administration wholeheartedly
rejected that and went with a whole bunch of subsidies
for certain industries instead. Those are two pretty big losses
of influence in my view on again, pretty universally agreed
(35:38):
upon perspectives about the economy from PhD economists.
Speaker 2 (35:43):
And there's some stuff in this piece about like what
the issue is, And there's really one thing that I
think is at the crux of the issue, which is
that economists have struggled to communicate their ideas in simple,
concise ways that normal people who aren't trained on all
(36:04):
of the lingo and everything can understand.
Speaker 3 (36:07):
Yeah.
Speaker 2 (36:08):
Now there's also the idea that you know, folks around
about like, hey, economists, you're like they're wrong all the time.
They're just like whether people well, look, yeah, economists aren't
going to be right all the time.
Speaker 4 (36:17):
Well, I think there's also perhaps we've talked about this
on the show. Economics is described as a science, and
it's just not. It's it's much not exhaustible science. No,
in the way the chemistry or physics are.
Speaker 2 (36:31):
No.
Speaker 4 (36:31):
And I think far too often we assume that it
will be, and so you get economists saying you should
cut taxes and this will be the result, and you
get completely different results because it's not physics and it's
not chemistry.
Speaker 2 (36:43):
Like most things in life, there's probably a healthy balance
where you say, Okay, i'm gonna take what people who
have studied this, you know, their entire lives with, and
i'm gonna, you know, look at that, and i'm gonna
balance it with my own experience and go from there.
At some points we probably skewed a little bit too
far towards Hey, these people study this all the time
and they The free trade example is one of them,
(37:05):
just as an example where yeah, like if you look
at it from a pure economic standpoint, there is basically
no argument against free trade in that situation, but in
terms of how it actually works on a societal level
and with actual you know, actors in place around the
world that don't necessarily share the same idealistic view. It
(37:27):
starts to break down. So there's there's something where we can,
you know, look at a balance and say, yes, I
understand what you are saying. Here are some of the
concerns I have. How do we meet in the middle
in order to address this, because it's very rare that
the answer is to go either all in one direction
or another.
Speaker 4 (37:43):
I'm also not convinced this is relegated to just economists.
There's a general distrust of trust of experts that we
have seen across multiple places, whether it's doctors, scientists, across
the board, there's been a shift away from trusting experts
in their field. And it may be a little bit
more pronounced in economists, but I think it's pretty universal.
Speaker 2 (38:06):
I would agree. Let's take a quick break. We still
got another hour to come here on the financial exchange
stick around. More coming up.
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(01:06):
Chuck Zada and Mike Armstrong.
Speaker 2 (01:10):
Jobs Friday here on the Financial Exchange, and you gotta
tell you we got a squatcher today. Not in terms
of the temperature outside our studio, which is better than
the last couple of days, but not great. But when
we look at the employment situation report published by the
(01:32):
Bureau of Labor Statistics, which is nested nicely within the
Department of Labor, it's just you know, the series of
US agency nesting dolls that you have there. Indeed, two
hundred and fifty six thousand jobs created in December, better
than the expectations of one hundred and sixty to two
hundred thousand. The October numbers revised up by seven thousand,
(01:52):
November revised down by fifteen thousand, so net net basically
the same. Like an eight thousand job difference over two
months is nothing. Uh And the unemployment rate also dropping
from four point two down to four point one percent.
But chuck, this all sounds like good news. Why are
markets selling off by two percent? Uh So, in terms
(02:13):
of what we are seeing in markets, couple things. First,
bond market says, oh, gee, fed, you're not gonna be
able to cut if we get more numbers like this,
and so yields moving on up ten year Treasury up
seven basis points to four point seventy five percent, Ladies
and gentlemen, on the eve of the start of the
spring housing season. I mean, we are less than a
(02:33):
month away from Super Bowl Sunday now, So buckle up
because right now, based on where these rates are, Mortgage
News Daily has the last national average for the thirty
year fixed rate at seven point one seven percent. You're
you're heading to seven and a quarter maybe seven to
three could bee, That's that's where you're going. So this
(02:54):
is the kind of thing where, ultimately, I think, if
you look at it, the very economic strength that has
led to yields moving up over the last couple of
months is also going to be tempered by higher rates,
simply because if you're going out and trying to buy
a home and you're like, hey, honey, look rates are
down around like six percent in you know, September. We'll
(03:17):
wait till the spring and maybe they'll be lower because
the Fed's cutting. Sorry, you're gonna be up about one
to quarter percent on the thirty year fixed rate mortgage.
From there.
Speaker 3 (03:24):
That's a painful pill to swall.
Speaker 2 (03:26):
It is and this is why Mike, you and I
were saying this back in September. If you're just you know, waiting, waiting, saying, Oh,
the Fed's gonna cut rates and then it'll be cheaper
to buy a home right now, that's not the case.
In fact, has moved in the exact opposite direction there,
it has. So let's dig into this job's report and
talk about the good, bad, and the ugly so good.
(03:48):
Unemployment down to four point one percent. Why, according to
the household survey, four hundred and seventy eight thousand jobs
out of there. Remember there's two different surveys. Yep. We
don't quote the household Job Survey number for you know,
jobs created because statistically it's been more unreliable in the past,
so normally we don't talk about it. But why does
the unemployment rate move? More jobs created there and two
(04:10):
hundred and thirty five thousand people off unemployment not being
reported as unemployed. So the combination of more jobs and
few are unemployed, that tends to do it.
Speaker 4 (04:18):
So sometimes you see the unemployment rate go down because
a whole bunch of people leave the jobs market, and
not exactly what we're seeing.
Speaker 2 (04:24):
According to the survey, labor force grew in this month
by two hundred and forty three thousand. So even with
that labor force growth, not seeing any negative effects there.
When we talk about the duration of unemployment, those longer
than twenty seven weeks, those unemployed longer than twenty seven
weeks drop from one point sixty five four million to
one point five to five to one, So long term
(04:45):
unemployment dropping here. That doesn't really match up with a
lot of the other data that we're getting from things
like the Jolts reporting things like that. So it's one
where I say, oh, like, that's nice, but it's a
trend of one, and overall that series is still up
about twenty five percent over the last year in terms
of the number of people that are unemployed for twenty
(05:05):
seven weeks or longer. So sure, it's great that you
saw that, but you see that big of a change
in a series where it's been moving up for the
last year. I kind of look at that and go,
it's gotta get proven out over the next little bit
for me to really buy that one. Other things, when
we talk about where the jobs are being created, what
(05:27):
industries are actually producing them, So mining and logging, which remember,
is not really a big industry in the United States.
How many loggers do you know, Mike, I don't know
any loggers personally. I know a couple. They sit right
next to the pilsners in my you know, refrigerator.
Speaker 3 (05:45):
You got the car wreck.
Speaker 2 (05:46):
I thought that was fantastic.
Speaker 3 (05:48):
I thought that was actually that was a great dad joke.
Speaker 2 (05:52):
I thought that was good. Constructions though, Mining and logging
down three thousand for the month, again, not not a
real problem. Construction eight thousand jobs added, same as November.
There's a slow down in construction job growth that is
going on right now. The last twelve months, you've been
seeing you know, kind of around two hundred thousand, you
do eight thousand a month, though you're talking about a
(06:13):
deceleration of about fifty percent. So there's something going on there,
and obviously higher interest rates could hurt construction further. Manufacturing
down thirteen thousand for the month. That obviously is not
great the last three months as a whole. When you
look at it again, any one month can show you,
you know, different things. The last three months down forty
(06:36):
thousand for manufacturing. So even though we have all this
manufacturing construction going on right now, actual manufacturing employment kind
of not great. Where were the jobs actually created. Big
jump in private education and health services up by eighty
thousand for the month, Leisure and hospitality up by forty
(06:57):
three thousand on the back of fifty two thousand added
in that sector in November, and then retail trade bouncing
back from November where you had down twenty nine thousand
to up forty three thousand here, so retail, leisure and
hospitality making up a decent sized chunk here.
Speaker 4 (07:16):
Overall, government jobs still continuing to do catch up work here.
In the year of twenty twenty four, in average of
thirty seven thousand government jobs were added per month. In
December we saw thirty three thousand, so slight deceleration, but
continuing there. And that's basically all at the state level.
Speaker 2 (07:35):
By the way, it's not the federal government where you're
seeing that expansion. It is very much state and local
governments where you're seeing that happening. Other data points that
we have average work week stayed the same at thirty
four point three hours. Wages up point three percent month
over months, so no change on that front. Aggregate payrolls,
(07:55):
which is how much are wages going up combined with
how much are is employment growing? Aggregate payrolls up four
point nine percent year over year, we've settled nicely into
that high four to low five range, which is just
where we were pre pandemic. And this is why, in
my opinion, my very humble opinion, sometimes not so humble,
(08:21):
the move that we're seeing in yields. Yes, it's moved up,
but there's a limit as to how far it can go,
simply because when we talk about inflation, there are two
components to it. The first is, hey, is there a
you know, shortage in supply of anything? But the other is, hey,
do you have you know, an excess demand? Excess aggregate
demand can only happen when you have you know, faster
(08:43):
growth of money coming in, not money coming into the system,
but basically more spending power overall for people or corporations.
And if wages and an employment growth are combining to
work out to around a five percent annualized growth rate,
you don't end up in situations where you can have
sustainable long term inflation. It's just not something that concerns
(09:07):
me on that front. Sure, I get nervous that maybe
inflation bottoms, you know, and since you know, two and
a half to three and a half, somewhere in that
range for a while. But that's different from hey, am
I nervous that inflation is going to be, you know,
perpetually stuck north of four things like that.
Speaker 3 (09:23):
Yeah, that's fair bit different.
Speaker 4 (09:24):
So what's very evident at this stage about equity markets
is we have re entered that bad news is good
news and good news is bad news. Market, at least temporarily.
Speaker 2 (09:34):
Start to this year is a lot like twenty twenty
two so far.
Speaker 4 (09:36):
Yeah, this summer, this most recent summer, bad news was
bad news. People were worried about recession. When you got
a bad jobs report, markets were selling off because we
were worried about the solemn rule. We were worried about
an economic slowdown. That is clearly not on investors' minds
today is a big economic slowdown with maybe some of
(09:56):
the growth concerns there from GDP now and things like that,
but buying law. What investors are worried about right now
is rates going higher and staying there for longer. And
this job's report indicates that that's what should happen.
Speaker 2 (10:08):
And the other thing when we talked about equity markets,
we've been saying for you know, the last few months. Now, Hey, Like,
it's great that there's all this optimism and equity markets,
but it also means the second something very small goes wrong,
it can have an outsize impact. This kind of jobs report,
if it were in a more cheaply priced market, wouldn't
(10:30):
be moving equity markets this way.
Speaker 3 (10:32):
The perfection, and so you get this type of reaction.
Speaker 2 (10:35):
And so I think investors need to be prepared for. Hey,
depending on how this year goes, there's probably going to
be more volatility than last year, because last year historically
was one of the calmest years in history for the
S and P five hundred in terms of overall volatility. Yes,
it was moving up, but there was very little chop.
Aside from that August freak out about you know, the
(10:59):
Yen Carrie rade and stuff like that. We we didn't
really have much volatility all year. Let's take a quick
break here when we come back, anything else that we
want to talk about from a jobs report perspective.
Speaker 3 (11:13):
No, I think we can move.
Speaker 2 (11:15):
To pretty straightforward quite honestly.
Speaker 4 (11:17):
Yeah, I mean, like we said, this market has very
much turned to a bad news is good news, good
news is bad news market, and that's exactly what we're
getting today. It's reflected by the way in every piece
that we had from Tucker thank you, that was printed
prior to the jobs report coming out, it was all
these reports of, oh, well, we sure hope we get
a bad jobs report because then you will see markets
do fine. And that is the opposite of what we
(11:39):
got this morning.
Speaker 3 (11:39):
So let's move along quick break. We'll be right back
after this.
Speaker 1 (11:45):
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and let us know what you think about the stories
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Speaker 5 (12:10):
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Speaker 2 (12:56):
Mike, I get a piece in Bloomberg Opinion Today's title,
who's a's rate of rising treasury yields not stocks now today?
Kind of threw that into question.
Speaker 4 (13:04):
But he, Mike, here's what's the point he's making here,
because he then goes on to argue that stock investors
have been watching the run up in US treasury yields
with considerable alarm of late.
Speaker 2 (13:13):
Well, here's the other thing. So look, I know that
when we first got this job, support treasury sold off
pretty significantly. The tenure was down I think eleven basis points.
As we're sitting here talking right now, the ten years
I'm sorry, it was up eleven basis points. As we
see yield on the tenure, the yield was up eleven
as we sit here right now, it's only up four,
so reversing pretty strongly over the course of the morning.
(13:37):
But despite that, stocks remain pretty heavily negative. So I
think ultimately, you know, in looking at this and trying
to figure out where equities go and what's important to them. Sure,
rising yields, we've seen this in twenty twenty two. They
can't impact equities, sure, pretty significantly. And in twenty twenty
(13:57):
two they did. We had a bear market in the
S and P five hundred and basically every the major
US index. But ultimately, what is going to continue to
be the major driver of equity performance is going to be, Hey,
can the great earnings growth that you've seen from the
last twelve months or so, can that continue? Because that's
(14:18):
what's priced in here, and the risk that higher yields
put you know, puts on equities is Hey, that could
be something that slows that earnings growth. But it's not
the only thing that's out there. It's one thing in
the matrix that you have to consider, but it's it's
not the only thing. That's that's important there.
Speaker 4 (14:35):
So his is his conclusion then that in the intermediate
term stocks don't really care about yields, because in the
short term they very obviously can and they are right now.
But I would generally conclude with him that, yeah, over
the longer term, what matter is more for the long
term and media intermediate term direction of stocks is earnings.
Speaker 2 (14:56):
Yeah, it's It's totally true, and what's going and part
of the reason if you look at you know why
this happens in the short term and twenty twenty two,
just as an example, when when yields kept moving up
and up and up and stocks kept moving down and
down and down. Yes, there was some weakness in the
companies and in what they were seeing that year. We
talked about that at length. But ultimately a big part
(15:20):
of the concern is, hey, Fed keeps raising rates, they're
going to break something and send us into recession, and
that means that earnings are going to go down over
the next couple of years. That was the big concern
that's out there for really all of the last three years. Yes,
So the interesting thing to me right now about today's
market is it's kind of thrown that to the side.
(15:41):
The projections for earnings growth in twenty twenty five is
like fifteen percent according to factset.
Speaker 4 (15:45):
Right, So the threat to markets right now does not
appear to be investors worried about FED throwing us into recession,
but rather needing to play catch up again on inflation
and hold yields where they are.
Speaker 2 (15:58):
So I think it's just kind of an interesting way
to look at Hey, why why do yields matter? And
when do they not matter to markets? Uh More? FED
officials talking here in this next story. So Alberto Musalam,
who's the president of the Federal Reserve Bank of Saint Louis,
(16:19):
did an interview yesterday.
Speaker 3 (16:21):
Is he even a voting member.
Speaker 2 (16:23):
Don't know, not sure. The day before, Christopher Waller, who
is from what what? What branches? The governor of I forget,
but we we covered the story about how he was
looking at this alternative measure of inflation, the market inflation.
He's just on the board of governors? What what? What board?
(16:45):
Is he part of the governors? In any case? Yesterday
we covered how Waller was basically saying, hey, we can
afford to cut because some of this stuff looks fine today.
Psalm's like no, we probably don't need to be cutting
because the data has been stronger recently.
Speaker 3 (17:05):
Now I have a lot.
Speaker 4 (17:06):
Less to fight about this guy with than I do
with Waller's obscure inflation targets that he pointed out as
looking good right now.
Speaker 2 (17:14):
My point is we don't need so much FED talk.
And look, if you're really really into it, if you
wake up each morning you're like, man, I can't wait
to hear what you know. Waller says, find more power
to you. But otherwise you kind of sit in here
and go, well, why is one member telling me this
and the other that the real answers. They're kind of
giving you the triangulation of hey, here's where everyone is,
(17:37):
so that you can, you know, kind of scout out,
you know, the the most extreme positions on the hawkish
or dubbish side. Who is the guy who for years
he's not on the the voting committee anymore, he's not
even with the FED anymore. It was the guy from
Saint Louis board board for the longest time, he had
a great role on the FED. To be fair, what
(18:00):
ever Bullard said, you knew that was the most hawkish
thing that anyone on the FED was saying at any
particular point in time, but we don't need all of
these FED people speaking as frequently as they do. I mean,
yesterday Mike Markets were closed, the New York Stock Exchange
and NASDAK decided to close because they said, hey, there's
(18:23):
a funeral of a former president going on and we
don't need to be open.
Speaker 4 (18:28):
And as that happened, you had one, two, three, five speeches,
five speeches from FED fish.
Speaker 2 (18:35):
Five speeches have a little respect, five of them, Like, what.
Speaker 3 (18:41):
Are we doing here?
Speaker 2 (18:42):
Why do we need five a day? Unless you think
that that's just well, maybe that's just when they were all,
you know, stacked up in this and that. Here's the
schedule for FED speakers next week Tuesday, Schmid and Williams. Wednesday, Barkin, Kashgari, Williams, Goolsby.
Let's see, I'm just going down the list. Oh, Thursday,
(19:03):
we get a day off. No FED speakers on Thursday Friday. Wow,
two days. Oh it's blackout period because the meeting's coming
up in two weeks after that. So that's why you
have no FED speakers. So in any case, it's not
just a one day thing. It's we're consistently getting eight
to fifteen FED speeches a week, and it's too many.
(19:26):
Let's take a quick break here. When we come back,
it's Wall Street Watch.
Speaker 1 (19:42):
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 at what's moving markets so
far today right here on the Financial Exchange Radio Network.
Speaker 5 (20:02):
Markets are selling off as Wallstree reacts to the December
jobs report posted this morning, where two hundred and fifty
six thousand jobs were added last month, much stronger than
expectations of one hundred and sixty five thousand. The unemployment
rate ticks lower to four point one percent from four
point two percent, Treasure yields jumping higher on the news
(20:23):
so far. At the moment, the Dow is down over
one percent to four hundred and ninety one points, SMP
five hundred is down one and a quarter percent or
seventy four points, and the Nasdaq down just over one
and a half percent lower or three hundred and one points.
Russell two thousand selling off by over two percent. Ten
year treasure Field up five basis points now at four
(20:43):
point seven to three percent, and crude oil up nearly
four percent higher on the day, trading at seventy six
dollars and seventy cents a barrel ahead of the open.
This morning, Delta Airlines posted a record quarterly revenue in
the fourth quarter and also offered strong guidance, sending that
stock up by a eleven percent. Meanwhile, Walgreens also posted
quarterly results, beating earnings and revenue expectations. Where a drug
(21:07):
store chain had cost cutting initiatives, including shuttering stores, Walgreens
also maintained its fiscal twenty twenty five adjusted earnings guidance.
Walgreen shares jumping by twenty five percent so far today.
Elsewhere shares and Constellation Energy up by twenty one percent
after the company struck a twenty six point six billion
(21:27):
dollar cash and stock deal to buy Calpine, combining two
of the US industry's players. Amid surging demand for electricity
and breaking news in the media space this morning, where
Disney Fox and Warner Brothers Discovery called off plans to
launch their venue sports streaming service. In a joint statement,
the companies said quote they determined that it was best
(21:50):
to meet the evolving demands of sports fans by focusing
on existing products and distribution channels. Disney shares down by
over one and a half percent, sent Warner Brothers down
by five percent, and Fox shares are down by about
two percent. Today, I'm Tucker Silva and that's Wall Street.
Speaker 2 (22:07):
Watch, Mike. Another data set that we got this morning.
University of Michigan comes out once a month with consumer
confidence data, and as as part of that, they also
survey people and they ask them, hey, what do you
think inflation is going to be over the next one,
(22:28):
three and five years? And the one year estimate ticked
up from two point eight percent to three point three percent.
That's not really the interesting part of it. The interesting
part of it is, again, this is for December that
we got this data, so it's the first reading in
a full month after the election. Democrats their inflation expectations
(22:52):
move from around two percent to four point two percent
in this report. Now, nothing has actually changed it. The
new administration hasn't even come in, but Democrats saying, yes,
inflation is gonna be so much worse.
Speaker 4 (23:03):
Double, it's gonna be double their prior expectations. Yes, independence
not much movement.
Speaker 2 (23:09):
They went from like three to three point two Okay, fine, reasonable,
Like you know, it's been fluctuating. Whatever Republicans went from
expecting four percent inflation two point one percent inflation if now,
this is something that happens every time I see a
president change office. But I do want to just put
(23:29):
some context into that last number. If you look at
the historical data set for CPI and look for the
last three times that we have had inflation annually zero
point one percent or lower, here are the numbers twenty fifteen.
(23:50):
And this was caused basically by Russia flooding the world
with a bunch of cheap crude oil, and so oil
prices plunged, and US equity markets in twenty fifteen had
a nice little hiccup during that year as well. So
you came in below zero actually in twenty fifteen or
parts of it. Two thousand and nine, not really a
(24:11):
great economy. And the third time that that's happened recently
is nineteen fifty five.
Speaker 4 (24:19):
Got it so unlikely for inflation to come in at
zero point one percent?
Speaker 3 (24:23):
Be your conclusion.
Speaker 2 (24:24):
There's a reasonable there's a case to be made. And
again I'm not saying it's right or wrong. Hey, I
think the new incoming administration may have a different approach
on inflation that improves it reasonable to have a prediction of, Hey,
inflation is going to be zero for the next year,
unreasonable outside of recession.
Speaker 4 (24:43):
We talk about this folks all the time, and I
guess my main conclusion here is you really need to
check your emotional baggage at the door when investing. Yes,
I don't know that the way that people respond to
you Michigan sentiment surveys translate to how somebody invests. I
don't know that with certainty. But if you're listening right
(25:05):
now and you've said something along the lines of I
trust this new administration, I'm getting heavier into stocks, or
I'm terrified of this incoming administration, I think inflation is
going to take off. I'm buying tips. Neither of those
are neither way to do rational considerations to what's going
on right now, and you need to check that stuff
(25:26):
out the door because historically it has been a terrible
way to invest. There is no guarantee that an incoming
Trump administration is going to reduce inflation or produce heavy
equity market returns.
Speaker 2 (25:39):
Yeah, it's it's something where there's a lot more happening
in the world than just what goes on at sixteen
hundred Pennsylvania Avenue, which is the address of the White House.
Speaker 3 (25:50):
That might be the worst investment strategy that.
Speaker 4 (25:52):
I can think of, actually, And by the way, we
bring it up only because we hear so many people
that employ it. How many people have you heard of
the last several years have said I'm not investing in
the stock market so long as Biden is our president
or Obama is our president.
Speaker 2 (26:07):
And now you get people from the other side saying
I want to buy stocks and I can't do this
as Trump's president. Well, how'd that work out for you
during his first term?
Speaker 3 (26:14):
And how did it work out for you during Biden's term?
Speaker 2 (26:17):
Right, Like, let's let's be.
Speaker 3 (26:20):
It's okay to have political viewpoints.
Speaker 4 (26:21):
That's not what I'm saying, obviously, Like we all have
differing views on which direction this country should go from
a political perspective. Just be really, really careful when you
take all of that and say, and therefore the stock
market will do X.
Speaker 2 (26:35):
Yeah, because there's right. You could you could be completely
right about your political viewpoints and still have the exact
wrong intuition about how that will end up impacting markets.
That's the point that we're trying to make.
Speaker 3 (26:46):
Yeah, so I think we've driven that home. Well, let's
move on.
Speaker 2 (26:49):
Let's talk about artificial intelligence AI replaced your job.
Speaker 4 (26:53):
Well, watch out, because Microsoft is cutting thousands of jobs,
maybe less than one percent of their workforce, so probably
not related to a massive AI increase in productivity.
Speaker 2 (27:06):
No, but I do think there's something interesting and also
very dystopian about the fact that workers at Microsoft could
be building their replacement.
Speaker 3 (27:14):
Yeah, I do too. It's kind of.
Speaker 4 (27:17):
Funny on the surface and sadder underneath a little bit.
Speaker 3 (27:21):
But the answer to me is could be.
Speaker 4 (27:24):
And in my opinion, we have no evidence yet that
AI is legitimately replacing or slowing down the hiring of
any real employees today.
Speaker 3 (27:34):
Yeah, I just I don't.
Speaker 4 (27:36):
I don't see the evidence yet other than on a
firm by firm level like we're talking about here. You
can't find any data in the big picture numbers when
we talk about the state of the labor market. Maybe
we will in the future, but today it's all just conjecture.
Speaker 3 (27:53):
And by the.
Speaker 4 (27:54):
Way, you know Microsoft's headcount over the course of the
last couple of years here we went from two hundred
twenty one thousand employees the previous year up to two
hundred twenty eight thousand today. Now, part of that's because
they acquired Blizzard Activision actually Blizzard. Yeah, so that was
some of the additions. But you know, they've been talking
about job cuts throughout the last couple of years, and
(28:15):
they have seven thousand more employees than they did a
couple years ago.
Speaker 2 (28:18):
And part of this, though, is as part of that acquisition,
they're talking about cutting some of the employees that are
duplicative in terms of roles that used to be at
Activision Blizzard that are now under Microsoft umbrella.
Speaker 3 (28:30):
So again probably not AI related.
Speaker 2 (28:33):
Related story, though Wall Street job losses may top two
hundred thousand as AI replaces roles. This according to a
Bloomberg Intelligence study that says, look, we think that well,
it was a survey also basically saying, hey, chief technology
officers surveyed said they expect a net three percent of
(28:55):
their workforce to be cut and replaced with AI over
the next three to five years. Now, this is something
where again that two hundred thousand number gets like a
lot of eyeballs, But then you look at this and
you say, okay, net three percent that doesn't sound like
AI is making some huge push where it's going to
be replacing large numbers of those workers over any short
(29:16):
to intermediate term timeframe.
Speaker 3 (29:18):
Right.
Speaker 4 (29:19):
I suppose if you had the perspective that the global
banks were going to be able to cost, you know,
cut two hundred thousand jobs on their investment banking and
research teams, then you could get to some serious savings here.
But at this stage, I think what people are referring
to when they talk about AI cutting jobs out would
be an entry level investment banker putting together a slide
(29:42):
deck and a customer service representative answering questions on behalf
of a customer. So those are not big cost savings
for you.
Speaker 2 (29:48):
No. The other one here that I find to be
laughable given what we know about AI. So it says,
you know customer services could see changes as bots managed
client functions. Okay, see how that ingratiates you to your clients.
Good luck with that, while know your customer duties would
also be vulnerable. So when we talk about know your
customer KYC is how it's referred to in the biz.
(30:09):
Know your customer is basically, hey, make sure that the
people you are taking money from are real people and
not on some kind of terrorist watch list. Is the
short version of it. If there's one thing I know
about generative AI, if you give it something fake, it
(30:29):
doesn't know it's fake.
Speaker 3 (30:31):
Well.
Speaker 4 (30:32):
Furthermore, the name of the rule is know your customer,
So you outsourcing that to a robot does not fulfill
the obligation.
Speaker 2 (30:40):
This is if you were asking me, as if I
were someone running a compliance division at an investment bank, Hey,
can I use AI to replace my know your customer people?
Speaker 3 (30:51):
That'd be like the last on the list.
Speaker 2 (30:53):
I'd be like, no, Like, don't even consider that once
you know, well, my goodness, what are we talking about here?
You're literally talking about not knowing your customer? Oh boy,
So I found out to be kind of humorous as
we As I read through that, I was like, Oh,
wouldn't do that if I were you. Let's take a
quick break here. When we come back, we'll talk about
(31:13):
economists starving in the wilderness, not literally but metaphorically speaking.
What's going on with economists and why have they lost
their way? We'll discuss after this.
Speaker 1 (31:26):
This is your home for the most comprehensive coverage of
the economy and the trends on Wall Street. This is
the Financial Exchange Radio Network. Find daily interviews and full
shows of the Financial Exchange on our YouTube page. Like
us on YouTube and get caught up on anything and
everything you might have missed. This is the Financial Exchange
(31:46):
Radio Network.
Speaker 2 (31:54):
Mike. Starting this year, the Secure Act two point zero
allows for employees age sixty to sixty three to do
what's called a super ketchup contribution. Regular ketchup contribution is
seventy five hundred dollars for workers fifty or over, but
if you're in that sixty to sixty three band, you
can do an extra eleven thousand, two fifty into your
four oh one K plan in theory, taking total employee
(32:16):
contributions from twenty three to five up to thirty four
seven fifty for people in that group.
Speaker 4 (32:22):
Chuck, We oftentimes leave these things kind of open ended
in terms of what people do. I'm going to try
and make this brief and concise. If you are working
for a company that has a four oh one K
and you are between the ages of sixty to sixty three,
you need to pay attention to this and you can
call us to learn more. The second one would be
if you maxed out your four oh one K contribution
(32:43):
prior to December thirty first of last year. Then you
also again have some homework to do. You need to
learn about whether or not your four oh one K
offers a true up.
Speaker 3 (32:52):
Not all of them do.
Speaker 4 (32:54):
Maybe you might be a missing out on some of
your employer match.
Speaker 3 (32:58):
Two only two there is here right one.
Speaker 4 (33:01):
If you're sixty to sixty three, you have some additional
opportunity if you're maxing out your four oh one K
and doing so prior to year end, you need to
learn more about how your four oh one K functions.
Issues that Armstrong Advisor Group helps our clients with all
the time. If you have questions, if you fall into
one of those two categories, give us a ring so
we can help guide you through next steps to take
(33:21):
on your own end and ultimately save more for your
financial future. The numbers eight hundred three nine three four
zero zero one. Again that's the Armstrong Advisory Group. The
number to give us a ring and answer questions about
this subject eight hundred three nine three four zero zero one.
Speaker 1 (33:37):
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 (33:53):
Economists are in the wilderness. How can they find a
way back to influence? That's the headline in the New
York Times? Is this New York Times? Yes, Yeah, Castleman's
New York Times. And basically what it's talking about is that, Hey,
over the last decade or so, economists have kind of
(34:16):
been looked at as not people to rely on when
you are trying to actually do anything related to the.
Speaker 4 (34:25):
Economy or at least public policy when it comes to
the economy from a policy perspective, They're just kind of
shunned at the moment a little bit. And I think
there's a few specifics that you can point to here
and show it with the political results that we're seeing. One,
it is pretty close to universally agreed upon by trained
economists that free trade is the way to go, and
(34:47):
both Democrats and Republicans at this point are pushing back
hard on free trade.
Speaker 2 (34:51):
Yeah.
Speaker 4 (34:52):
In other words, more minor one economists generally speaking, and
this is more just on the Democrats side, that if
you want want to address climate change through policy in
one way, shape or form, then one of the best
ways to do it is through a carbon tax. It's
been a pretty well established economic viewpoint among trade economists
that hey, you want to get companies and individuals to
(35:16):
send less crappy stuff into the atmosphere, use a carbon tax.
It'll cause them to do less. The Biden administration wholeheartedly
rejected that and went with a whole bunch of subsidies
for certain industries instead. Those are two pretty big losses
of influence in my view on again, pretty universally agreed
(35:38):
upon perspectives about the economy from PhD economists.
Speaker 2 (35:43):
And there's some stuff in this piece about like what
the issue is, And there's really one thing that I
think is at the crux of the issue, which is
that economists have struggled to communicate their ideas in simple,
concise ways that normal people who aren't trained on all
(36:04):
of the lingo and everything can understand.
Speaker 3 (36:07):
Yeah.
Speaker 2 (36:08):
Now there's also the idea that you know, folks around
about like, hey, economists, you're like they're wrong all the time.
They're just like whether people well, look, yeah, economists aren't
going to be right all the time.
Speaker 4 (36:17):
Well, I think there's also perhaps we've talked about this
on the show. Economics is described as a science, and
it's just not. It's it's much not exhaustible science. No,
in the way the chemistry or physics are.
Speaker 2 (36:31):
No.
Speaker 4 (36:31):
And I think far too often we assume that it
will be, and so you get economists saying you should
cut taxes and this will be the result, and you
get completely different results because it's not physics and it's
not chemistry.
Speaker 2 (36:43):
Like most things in life, there's probably a healthy balance
where you say, Okay, i'm gonna take what people who
have studied this, you know, their entire lives with, and
i'm gonna, you know, look at that, and i'm gonna
balance it with my own experience and go from there.
At some points we probably skewed a little bit too
far towards Hey, these people study this all the time
and they The free trade example is one of them,
(37:05):
just as an example where yeah, like if you look
at it from a pure economic standpoint, there is basically
no argument against free trade in that situation, but in
terms of how it actually works on a societal level
and with actual you know, actors in place around the
world that don't necessarily share the same idealistic view. It
(37:27):
starts to break down. So there's there's something where we can,
you know, look at a balance and say, yes, I
understand what you are saying. Here are some of the
concerns I have. How do we meet in the middle
in order to address this, because it's very rare that
the answer is to go either all in one direction
or another.
Speaker 4 (37:43):
I'm also not convinced this is relegated to just economists.
There's a general distrust of trust of experts that we
have seen across multiple places, whether it's doctors, scientists, across
the board, there's been a shift away from trusting experts
in their field. And it may be a little bit
more pronounced in economists, but I think it's pretty universal.
Speaker 2 (38:06):
I would agree. Let's take a quick break. We still
got another hour to come here on the financial exchange
stick around. More coming up.
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