January 27, 2025 • 38 mins
Chuck Zodda and Mike Armstrong wonder if the release of DeepSeek will help bring efficiency back to the tech sector. Why is Apple avoiding the broad tech sell off? How will Jerome Powell handle questions about President Trump at this week's Fed meeting? Is the American Dream too expensive? The extra reward for owning stocks over bonds has disappeared. What are the changes coming to retirement in 2025? Financial advice on social media is growing. And risky.
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Transcript
Episode Transcript
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Speaker 1 (00:01):
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(00:21):
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(00:43):
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a donation today. This is the Financial Exchange with Chuck Zada,
(01:07):
and Mike Armstrong.
Speaker 2 (01:10):
Kicking off hour two of the Financial Exchange.
Speaker 3 (01:12):
It's Chuck, Mike and Tucker with you today and taking
ak a where equity market stam Right now, the dows
off fifty four points about I don't know an eighth
of a percent. SMP though is down one hundred and
five points about one point seventy five percent, and the
cute little Nasdak composite it's down five hundred and sixty
seven points two point eight three percent at the moment.
Speaker 4 (01:34):
In videos in the process right now of shedding about
eighty three. AT and T's of market capitalization down four
hundred and sixty five billion dollars in market cap this.
Speaker 2 (01:44):
Morning for AT and t's Is that right? Three?
Speaker 1 (01:46):
Yeah?
Speaker 4 (01:47):
Our market cap of AT and T is about one
sixty okay, so two home depots?
Speaker 2 (01:51):
Yeah yeah, let's see how else can we phrase this?
A Berkshire Hathaway? Yeah? Is it? Actually? No?
Speaker 3 (01:57):
Briksher is a little bigger anyways, Big reason in video
is down along with Microsoft, Broadcom and Google AMD also
getting hit hard. Oracle also down, so a lot of
big tech is Last week there was a new version
of deep Sea, who is a Chinese AI company unveiled
a new version of their AI platform called the R
(02:19):
one platform. It supposedly was built very cheaply in China
and costs very little relative to US alternatives, and as
a result, there's concern if this can be replicated by
other companies that hey, maybe you don't need to just
buy up as many in Nvidia chips as you can
in order to make the next latest and greatest. Maybe
(02:41):
you can figure out ways to program more efficiently for AI.
And that kind of up ends the entire AI CAPEX
structure that's been dominating US equity.
Speaker 4 (02:50):
Markets for you, and the entirety of everything that you
know open AI has done to this point, or that
the American system of Artificial Intelligence expansion and development has
has been doing things, so it would up end all
of that if this turns out to be true. My
question for you specifically this, it's not that they built
(03:10):
the platform. The platform is legit, and it's the text
stuff on it from people that know more about this
than I do. It's not a bunch of the platform
is legit. It's not a bunch of people behind computer screens.
Answering your question.
Speaker 3 (03:21):
No, the question is, hey, they say they built this
for one percent of the cost of what it cost
to bilities in the US, and the operating costs are
you know, one to three percent of US based models.
That is where hey, if no one else can do this,
and it becomes apparent that there actually was a whole
bunch of computing power that was just held like off
(03:43):
the books at some other Chinese entity that was responsible
for this, Okay, then it's not really the kind of
competition we think it is.
Speaker 4 (03:51):
Can we go down that path for a minute, So
let's assume the worst out of this, that it is
a bunch of hints.
Speaker 2 (03:55):
What's the worst?
Speaker 4 (03:55):
So sorry, the worst for this Chinese company, and then
it's all fabricated on some lies so that it actually
does still cost like a billion dollars to trade a
model that they in fact had to use the latest
and greatest in video chips that they got on the
black market through some company in Vietnam that they were
able to, you know, put a shell game there and
(04:16):
acquire a bunch of these chips somehow that they had
to use the latest and greatest How soon would we know?
Speaker 3 (04:24):
The company claims that they did the training on this
model in two months. As such, if someone starts right now,
and again there's we'll know by July fourth. Right, if
someone else can do this right, we'll know by July fourth.
Speaker 4 (04:38):
Because again they're not exactly keeping this close to their vest.
They made this an open source model. Everyone can see here.
Here's the thing. This still does kind of up end
the entire thing anyways. By making this open source with
this level of power held in this small of a
kind of in this small of a rapper in that look,
this thing is nimble enough that you can run this
(04:59):
on it a high end gaming computer.
Speaker 1 (05:02):
Right.
Speaker 3 (05:03):
You don't need to have some giant data center running this.
So even if you say, okay, maybe the training still
needs to be done on a high end data center
that is running the latest and greatest, there now is
proof of concept that you can actually run the model
built from the.
Speaker 2 (05:19):
Training on a PC sitting in your house.
Speaker 4 (05:22):
And I think that's a big takeaway for today is
even if you assume the worst out of this entity,
that they hit a bunch of costs, that they didn't
train it the way they say that did, the stuff
that we know already would still up end a large
portion of the industry because ultimately they were able to
generate a model that seems capable of massive computing power
(05:45):
sorry sorry, of massive response generation and intelligence without the
computing power that previous up until frankly today thought was necessary.
Speaker 3 (05:57):
On a tangent, you know how we always talk about
like people hold up their iPhones and granted, I'm one
of these idiots who does this, so I'm talking about
myself and I'll go, hey, isn't it amazing that this
computer has more power than the Space Shuttle did?
Speaker 2 (06:10):
Sure? And I use it to like send memes to
my friends. Ye.
Speaker 3 (06:15):
Wouldn't it be like fascinating if what this ends up
touching off is a real push towards efficiency where it's hey,
because it's become so cheap to build like memory chips
and stuff like that and data storage in the last
twenty years. If you talk to anyone who programs now,
it's totally different the constraints in the nineteen nineties, where Okay,
I've got limited bandwidth, i've got limited storage, i've got
(06:38):
limited memory.
Speaker 2 (06:39):
I've really got to.
Speaker 3 (06:39):
Be efficient with how I code this, and things have
gotten pretty bloated in recent years.
Speaker 2 (06:45):
Wouldn't it be fascinating if.
Speaker 3 (06:46):
One of the things that comes out of this is
everyone starts prioritizing efficiency in developing tech again, like not
just for AI, but for everything. And I'm not sure
it gets there because look, it still is really cheap
to build storage for iPhones. There's a reason why, like
the margins on them are forty percent and they still cost,
you know, a thousand bucks. But I think that this
(07:07):
has the potential just to be a seismic shift in
how computing is thought of, just because again I say
this over and over, scarcity forces innovation in anything. And
what China is claiming is, hey, we had a scarcity
of chips and computing power, and so that's how we
had to develop things this way. What if this becomes
(07:28):
something where hey, we might not have a scarcity in
the US, but we might need to force ourselves into
a scarcity mindset as far as resources because it helps
us develop more efficiently. And by the way, this is
exactly what happened with US energy companies back in the
mid twenty tens. Russia turned on the taps for their
oil and US fraker said, hey, we can't make money.
(07:51):
You know, it's seventy dollars a barrel. And when price
went down to twenty nine. They said, Okay, we got
to figure out how to make money at fifty a barrel.
And they did because they said, we can't use as
many inputs and they got more efficient.
Speaker 4 (08:04):
And so if you are the if I development company
right now, you're sold on the most high end in
vidio chip, and now you have to do it for
one one hundredth of the cost in order to compete
with this new Chinese startup or wherever it's going to
be next, then you're going to be forced innovate.
Speaker 3 (08:26):
If you are Sotny Innadella, you have your AI team
in your office today and you're saying, pull off twenty
percent of your team and try to replicate this over
the next three months. And if you can't replicate it,
I'm going to find someone who will, because it's that
kind of existential threat for them.
Speaker 2 (08:46):
Yeah. Why is Apple up two and a half percent today?
Speaker 3 (08:49):
So I was thinking about this actually because Apple's been
getting trashed for the last few weeks because of concerns
about declining phone sales in China and things like that.
Speaker 2 (08:57):
I have a theory too. You want to go first,
You want me to go first? Oh, you go first,
But don't take my idea.
Speaker 4 (09:01):
Apple's approach to AI has been the same as their
approach to many new emerging technologies. We're not going to
touch it. We're gonna see what comes to the top,
what floats to the top, and will adapt whatever that is.
They've started to make some inroads there when they thought
that open AI's chat GPT was going to be the
best in class, and they started announcing new phones that
we're going to be preloaded with it, but it was
(09:24):
still going to be problematic because they wanted everything to
run on that device.
Speaker 2 (09:27):
This would allow them to do it in some new meaningful.
Speaker 4 (09:30):
Way, and they haven't made giant investments like all of
their competitors the tech space have an AI.
Speaker 3 (09:34):
The AI reportedly is very bad, to the point where
like news agencies asked to like, can we find a
way to opt out of this because you're making our
headlines incorrect?
Speaker 2 (09:43):
That's Apple?
Speaker 3 (09:43):
You mean, yes, Yeah, So it's it's been a problem there.
My guess on this is it's probably a bunch of
institutional traders where hey, we have exposure to the tech
sector by virtual of you know, how our fund is
restricted from trading, and how we need to manage risk
across sectors. We need to maintain it somewhere. Okay, it's
(10:06):
gonna go to Apple because they're at least.
Speaker 2 (10:08):
At risk on this that's exciting than my example. It
is it is. Let's take a quick break here.
Speaker 3 (10:13):
When we come back, we do have a FED meeting
on Wednesday, the first one of twenty twenty five, the
first one of President Trump's second term. Gosh, I can't
wait for Wednesday. We'll talk FED right after this.
Speaker 1 (10:27):
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Speaker 5 (10:49):
Time for turitya here on the Financial Exchange. This week,
a major theme of the show will be the release
of earnings reports from the companies collectively known as the
Magnificent Seven. Today's Magnificent Seven look very different from the
original Magnificent Seven from the nineteen thirties, forties, and fifties.
(11:09):
So trivia question today, name one of the original Magnificent
seven Companies in the US. Once again, name one of
the original Magnificent seven companies in the US, and again
that's during the thirties, forties, and fifties.
Speaker 2 (11:24):
Be the seventh.
Speaker 5 (11:25):
Person today to text us at six one seven three
six two thirteen eighty five with the correct answer, and
you win a Financial Exchange Show T shirt.
Speaker 2 (11:32):
Once again, the.
Speaker 5 (11:32):
Seventh correct response to text us at six one seven
three six two thirteen eighty five, we'll get that T shirt.
See complete contest rules at Financial Exchange Show dot com.
Speaker 3 (11:43):
Mike, We've got a FED meeting on Wednesday, and the
expectations are not for much in the way of policy.
Right now, FED Fund's futures market is pricing in a
ninety nine point five percent chance that the FED does nothing,
So again that's pretty clear. We even a little bit
of room, but basically, no, they're not going to do anything.
Speaker 4 (12:05):
So given that they're not going to do anything, what
is of interest to you between the release as well
as the press conference?
Speaker 2 (12:10):
Because my over under, I.
Speaker 3 (12:12):
Guess we'll be honest, I have no interest in this.
This is going to be the most boring, annoying FED
meeting that we've ever had.
Speaker 2 (12:17):
To cover.
Speaker 4 (12:18):
It's going to be annoying because I bet that J.
Powell gets at least five questions related to Donald.
Speaker 3 (12:24):
Five, and like every question is going to be about
Donald Trump. Every question is going to be hey, with
the new administration, how is this affecting your approach? And
every answer is going to be we don't speculate on policy.
We leave that up to Congress ultimately, depending on what's
actually you know, past, we will just our approach as needed.
Speaker 4 (12:43):
Interestingly, though, higher thing interestingly though, at the last meeting,
they kind of sort of acknowledge that they are taking
into consideration potential policy changes. They effectively I don't remember
what it was, but it had to do with tax
rates and their prior models. I think had assumed tax
rates up in twenty twenty six, and I think they
begin to adjust those based on the again pure speculation
(13:06):
at this point that tax rates will be locked in
under a Donald Trump administration.
Speaker 2 (13:10):
So I think this is going to be again.
Speaker 3 (13:14):
I'm going to watch the press conference just because in
this profession you kind of have to, but it's going
to be a real hate watch because I.
Speaker 2 (13:24):
Just think I'm gonna get nothing useful out of it.
Speaker 4 (13:27):
I do think it's well put here that like, if
there's one goal of this for the Federal Reserve and J. Powell,
it's to not give Donald Trump any ammunition. Be eloquent,
be clear, don't go back and forth on things, because
you know you're already going to be getting hammered from
the White House. You don't need to give the guy
(13:47):
any ammunition to throw more stuff at you by being
I mean sure guilty of some of the things that
you've been guilty of over the last few years. Let's
be honest. He has not been the clearest about why
their policy is shifting in one direction or another when
it's come to the moments in time.
Speaker 2 (14:01):
Yeah, I don't know. I can't wait for this one
to be like there's nothing that's actually gonna happen. Now.
Speaker 3 (14:07):
If we get to like the March meeting and hey,
Congress has passed x Y or z or tariffs have
been placed on x Y or z, and okay, like
now we this is going to be just.
Speaker 2 (14:22):
Bah.
Speaker 3 (14:23):
Sure, it's not going to be exciting for any not
that I want the Fed meetings to be exciting, but
I don't think we're gonna get any useful nuggets because
all the focus of the questions is gonna be on
stuff that Powell's going to refuse to.
Speaker 4 (14:34):
Answer, and quite frankly, that's exactly what he needs to do,
because if you can tell me probably best for him,
Like if you can give me some sort of explanation
of which countries are going to face tariffs, what tax
rates are going to look like, and which regulations are.
Speaker 2 (14:49):
Going to go away over the next twelve months.
Speaker 4 (14:51):
Then you have a crystal ball that nobody else does
because nobody has any clue. Right, If so, acting at
the stage would be horribly irresponsible by Drome Powell.
Speaker 3 (14:59):
Yes, I I really think you know, Powell should answer
every question with a question. Okay, which policies would you
like me to address this?
Speaker 1 (15:07):
This?
Speaker 2 (15:07):
And this? Is that on the books? Yet?
Speaker 3 (15:08):
No, then I can't address it right. Well, that's how
I would handle it. But that's also why I'm not
fed chair. Well, no, it's there are a lot of
reasons why I'm not fed chair.
Speaker 4 (15:17):
Yeah, I think at the most interesting what you're likely
to get is some form of comment that the Board
generally believes taxes would be lower than otherwise thought and
tariffs will be higher than otherwise thought. That that's the
most that you're going to get. Like I guess, best
case scenario in terms of something predictive in nature.
Speaker 3 (15:40):
Let's talk about this piece in the Wall Street Journal.
Really good piece, I think. Actually it's titled one House,
three Owners, The Balloon and Costs of the American Dream,
and it talks about a home in Chapel Hill, North Carolina,
and basically says, look, right now, it's listed for five
hundred and twenty thousand dollars back in twenty eleven.
Speaker 2 (15:58):
It's sold for less than half.
Speaker 4 (15:59):
Of that as a new bill quarter million dollars back
in twenty eleven as brand new construction, so a new home.
Speaker 3 (16:04):
And especially with the change in interest rates, the mortgage
payment would be nearly twenty eight hundred dollars, which would
be triple or almost triple the monthly cost in twenty eleven.
And that's not even factoring in property taxes and insurance,
both of which have gone up quite a bit.
Speaker 2 (16:21):
By the way.
Speaker 4 (16:21):
That's assuming you can get a mortgage rate under seven,
which is no guarantee right now.
Speaker 2 (16:25):
Correct.
Speaker 3 (16:26):
So ultimately, what you end up with is a situation where, hey,
if you are seeing home prices moving in this fashion
where incomes have not. Have incomes tripled since twenty eleven
in the Chapel Hill area, not to my knowledge they
have not. Not a huge Chapel Hill, North Carolina expert,
but I would guess now I'm relatively plugged in.
Speaker 2 (16:43):
Yeah, you know, and the answers.
Speaker 3 (16:45):
My parents spent quite a bit of time living down
in Durham, so I know Chapel Hill well.
Speaker 4 (16:48):
The previous owner of this home bought in twenty twenty,
so it was built in twenty eleven, sold in twenty twenty.
Previous owners bought it in twenty twenty for three hundred
and fifteen thousand dollars, so they made a cool two
hundred grand in five years, as I think many people
have across the country on their homes. They bought it
with a three point seventy five percent mortgage rate now
for sale five twenty, who knows if they actually get
(17:09):
five to twenty, but for sale for five to twenty
at seven percent mortgage rates, property taxes higher, insurance costs
substantially higher. And I think everybody listening who owns a
home has probably experienced this pretty recently, because maybe you
didn't buy a home in twenty twenty. But what portion
of homes were refinanced within the last ten years.
Speaker 2 (17:31):
It's gotta be the vast majority of them, hey, Like, it's.
Speaker 4 (17:34):
Got to be a huge portion of homes that were
refinanced sometimes sometime in the last decade. And so we're
all intimately familiar with this math.
Speaker 3 (17:42):
And so it gets to a point where, hey, for
someone to go and buy that home just a couple
it becomes more impractical. And this is why you start
seeing these, you know, different things that pop up with
you know, different people who end up, you know, trying
to buy homes in different setups and stuff like that.
Speaker 2 (17:56):
But ultimately the math is not going to work.
Speaker 4 (18:00):
To Redfinn back in January of twenty twelve, which I
think now in hindsight, we can all describe January of
twenty twelve as one of the best times to buy
a home in American history. But January of twenty twelve,
the income required to buy the typical home in the
United States was thirty nine thousand dollars two hundred and
twenty three thirty two hundred twenty three dollars. As of
November twenty twenty four, home buyers needed to earn one
(18:23):
hundred twenty six thousand, seven hundred and sixty four dollars
to afford the typical home in the United States, which
is a two hundred twenty three percent increase in income,
which has not been the lived experience.
Speaker 3 (18:34):
Now, the counter to this, it's kind of a counter,
is we're comparing one of again arguably the best times
to purchase a home in American history.
Speaker 2 (18:43):
Like we knew that after the fact at the time.
Speaker 3 (18:46):
I remember even in twenty thirteen a it was terrifying,
but as you got to like thirteen and fourteen, people
were like, oh, these prices have run up so much,
and in HEINTSD You're like, that's not really.
Speaker 2 (18:54):
Let me show you twenty twenty one.
Speaker 3 (18:55):
But I think that in looking at this part to
me would like a comparison in terms of the average
income needed to buy a place in like two thousand
and six right to now, just because remember, home prices
fell like thirty percent nationally peaked to trough and again
maybe that's part of the reason why we should be
a little bit more nervous about home prices today. Not
(19:16):
so much you know, defaults, because they're they're kind of
non existent, but hey, how much do prices have to
come down in order to get the volume moving again.
Speaker 2 (19:25):
I think that's a fair question. Quick break here.
Speaker 3 (19:27):
When we come back, we've got the trivia answer, and
then we're talking stocks and bonds.
Speaker 1 (19:42):
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(20:03):
Exchange Radio Network.
Speaker 5 (20:08):
The tribute question today was to name one of the
original Magnificent Seven companies in the US from the nineteen thirties, forties,
and fifties. It will be AT and T, General Electric, IBM,
General Motors, Standard Oil, DuPont and US Steel. Winner today
of the Financial Exchange Show t shirt? Where's Roger from
assen at Mass Congrats to Roger. We played trivia every
(20:30):
day here on the Financial Exchamee. See complete contest rules
at Financial Exchange Show dot com.
Speaker 3 (20:36):
Mike, there's a piece in the Wall Street Journal. It's
titled the extra Reward for owning stocks over bonds have
has disappeared. What are they talking about and how do
they know?
Speaker 2 (20:46):
So we talk.
Speaker 4 (20:48):
A lot about the priciness of this market, and as
we point out, it's useless to just say, oh, well,
the Dow is at forty four thousand, so it's expensive.
That's not a useful piece of information because you're not comparing.
Speaker 2 (20:59):
It to any thing.
Speaker 4 (21:00):
So we've talked about price to earnings ratios, for example,
and you know, levels that we haven't seen since the
dot com bubble, and this talks about another version of
those same measurements, which is, hey, let's take a look
at the expected earnings of the S and P five
hundred companies, turn that into a yield, and then compare
(21:20):
that to what's generally considered to be the risk free asset.
What's the risk free asset? Chuck, treasuries?
Speaker 2 (21:25):
Yep.
Speaker 4 (21:26):
And for most of history, not terribly surprisingly, you've been
paid more for the risk you undertake in something that's
not the risk free asset right when comparing you would
expect it. Hey, there's some of these companies that aren't
going to exist in a few decades. You know, take
a look at S and P five hundred companies and
(21:47):
how many of them have gone bankrupt on a year
to year basis, And so you get rewarded for that
extra risk that you take. Today that difference has turned
to negative. The yield that you can expect on a
ten year treasury compared to the earnings of the S
and P five hundred is now higher than the S
and P five hundred, and therefore as an indication that, hey,
(22:08):
one more indication at least that in comparison to a
whole bunch of different benchmarks, this stock market is quite expensive.
Speaker 2 (22:15):
It is now.
Speaker 3 (22:16):
None of this is to say that it's going to
definitively perform this way that way over the next one, three,
five or ten year period, but much more that, Hey,
the risk reward, which again you could make a case
like ten years ago in particular, that the risk reward
was kind of asymmetrically skewed towards equities. Bonds were yielding,
(22:37):
you know, even long term bonds were like two percent.
Short term you were getting quite literally almost zero.
Speaker 2 (22:44):
Inflation was nothing.
Speaker 3 (22:46):
And so that there's a case to be made then yeah,
this is exactly when you would want to be backing
up the truck on stocks. Obviously, hindsight's twenty twenty, like
how many people actually bought the bottom in March of nine,
like not many.
Speaker 2 (22:58):
But today where you sit here and you say, Okay, I've.
Speaker 3 (23:01):
Got long term bonds that are yielding in the mid furs,
I've got short term bonds in the high threes to
low furs, and equities are priced, you know, twenty two
to twenty three times earnings over the next year. Yeah,
the risk reward is one where there's not a clear
sign that this can continue to move in this fashion.
(23:22):
But hey, we are aware that over short time periods
and short time periods in the stock mark, you can
still be a year or two. Yeah, there's a case
to be made that things could still get more exuberant
before you run into trouble. It's just the numbers don't
indicate the same risk reward that you had over the
last decade.
Speaker 4 (23:42):
The timing of this piece is just kind of fantastic too,
given the massive selloff we're seeing if you haven't been
tuning in.
Speaker 2 (23:49):
Led by Tech specifically.
Speaker 4 (23:50):
Tech specifically is selling off, the Nasdaq off over three percent,
the SMP down close to two, and the article goes
on to interview a Mike Yo. He's a seventy three
year old retired surgeon from Columbia, South Carolina, who puts
together an argument which is I think no worse than
many others that I've seen before, that look, the old
sixty forty rule is dead, and I keep This individual
(24:13):
keeps more than eighty percent of his portfolio and equities
believes that tech companies like Tesla and Meta can keep
powering double digit percentage gains, basically just doing away with
the idea of the sixty forty and quote, you want
to make sure you're invested with these companies that are
proven winners. You don't want to bet against these guys.
(24:33):
You don't want to bet against Elon Musk. Can we
stop right there please? That's really it's got wrench to me.
It's troubling to me, and well.
Speaker 2 (24:46):
Because it all falls into the category of it's different
this time. Well, here's the thing.
Speaker 3 (24:50):
A year and a half ago, this is in twenty
twenty three, right, It's like AI was like really taken off.
If you look at the top ten companies from a
year and a half ago, Apple, Microsoft, this is globally,
by the way, Saudi, Ramco, Alphabet, Amazon and Vidia, Tesla, Berkshire, Hathaway, Meta,
and Taiwan Semiconductor. This is probably pretty similar today. Here
are the top ten in two thousand, twenty five years ago. Microsoft, okay,
(25:14):
we got one that's still on the list. Ge is
that on the list? No, Cisco is that on the list?
Walmart no, Exons, no Intel, no NTT, DoCoMo no, I
don't know, Royal, Dutch, Shell, Pfizer, no, Nokia.
Speaker 2 (25:33):
No. Let's go back to nineteen eighty. Maybe this was
just like a one time thing. Nineteen eighty.
Speaker 3 (25:38):
Here are the big ten top ten companies. IBM okay,
that was oh no, it was not any of them.
At and T oh no, that was not any of them.
Exon great, that was on in two thousand.
Speaker 2 (25:48):
Yep.
Speaker 3 (25:49):
Standard Oil, well, it ended up being bought by Xon
Shell okay, we got two Mobile Okay, like that, General
Motors with nope, Texico nope, DuPont nope, Golf Oil nope.
Speaker 2 (26:01):
So the idea shifting, the idea.
Speaker 3 (26:04):
Of proven winners in the stock market not a real thing.
It's not to say that companies can't do well over five, ten, fifteen, twenty,
even thirty years or longer like occasionally they do, but
more often than not, what worked for the last decade
or two has not been what worked for the next
decade or two.
Speaker 4 (26:25):
I think there's a lot of folks out there who
have been tempted by well, the likes of the stock
market that we've seen for the last five hard not
to be really, really difficult to not be tempted by it.
And I'm not here sitting here saying that the sixty
to forty portfolio is the holy grail that everybody needs
to adhere to. But I think today is a pretty
(26:45):
good wake up call for folks out there of just
how quickly and dramatically the ongoing narrative of what's going
to drive markets forward can be entirely flipped on its head.
That is what happened today. I have no idea if
it's going to flip back in the other direction.
Speaker 2 (26:59):
It might.
Speaker 4 (27:00):
I don't really trust any of the information that's coming
out of China about this new AI company. However, it
is a really good fresh reminder that telling me that
it's different this time almost always gets proven incorrectly. And
I think that's the message that I take away from this. Yes,
(27:20):
stocks are expensive right now. We've been talking about this
all the time. What scared the living Craik's out of
me was this interview with this individual who said, no,
I'm doing away with the old way of managing my portfolio,
and you know, today was probably a pretty rough wake
up call. If you are waking up today and finding
yourself in some form of similar boat, bought into some
(27:42):
of these ideas of hype and what's going to drive
markets forward from here, and getting a refresher on just
how quickly that narrative can change, I would encourage you to,
at the very least take a second look. Make sure
you understand what you own and how that's changed over
the last few years. Maybe you've been really intentional about it,
maybe it's been an accident. But getting a good understanding
(28:05):
of where you sit now, where your risks are in
your portfolio in case that what we learned today ends
up being a true game changer for the markets, would
be a good first step. Give the folks at Armstrong
Advisory Group a call. You can reach us at eight
hundred three nine three four zero zero one. We'll sit
down with you to analyze your investment holdings see how
(28:26):
they line up with your own personal financial situation. Nobody
is the same. Give us a call eight hundred three
nine three four zero zero one.
Speaker 1 (28:35):
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 3 (28:51):
CNBC's got a piece talking about twenty twenty five changes
that could impact your finances. First, we now have the
super Ketchup for your four oh one K, So if
you're between ages sixty to sixty three, you get an
extra special Ketchup contribution that is eleven two hundred and
(29:12):
fifty dollars for this year, as opposed to the seventy
five hundred dollars normal Ketchup contribution. Remember that's just for
ages sixty two sixty three. Mike, do you do you
have to be those ages at any I have year.
Speaker 4 (29:26):
I have not figured out if you have to end
the year at that age, be at that age at
any point in the year.
Speaker 2 (29:31):
I'll have to get back to you.
Speaker 4 (29:33):
I also have no oh yeah, I also have no
evidence that the four oh one K companies are prepared
to deal with these extra catchup contributions.
Speaker 2 (29:39):
I just genuinely don't know yet.
Speaker 3 (29:41):
So you've got that that is supposed to be happening
this year, also in twenty twenty five. If you are
a if you're someone who has inherited a non spousal ira,
so from a brother's, sister, aunt, uncle, friend, anyone other
than a husband and wife, if you've inherited one of
those since twenty twenty, you now, in addition to having
(30:02):
to exhaust that account in ten years, you've got to
take an R and D out this year.
Speaker 4 (30:06):
In almost all case, there's a feusitive. In small chances
where that's not the case. And I bring this up
because my mother in law is one of them, but
generally speaking, you're going to be faced by this and
there's a whole new set of rules and then you know,
final one here, especially for folks listening in uh Massachusetts
who work for the state at any point in time,
there's a whole new set of rules when it comes
(30:26):
to Social Security and the web and the GPO. So yeah,
in addition to an interesting market to start January, you've
got some pretty significant tax rule changes going into place
in twenty twenty five as well.
Speaker 2 (30:40):
Just take a quick break here when we come back,
we'll do some stack roulette.
Speaker 1 (30:44):
Find daily interviews and full shows of the Financial Exchange
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(31:06):
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Speaker 5 (31:09):
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Speaker 2 (31:55):
Mike, what do you got for me? For stack roulette?
Speaker 4 (31:57):
The growing industry of financial advice on social media? If
you're not familiar, there's all sorts of TikTokers YouTubers out
there who provide financial advice via social media, which by
its very nature obviously can't be customized. And I'm not
gonna sit here and say that I'm surprised, as somebody
in the financial services industry that this exists. People search
online for all sorts of medical advice and other sorts
(32:20):
of things, but I think most people agree that it's
not a terribly Is there any medical professional you know
that says it's a great idea to get medical advice
over the internet.
Speaker 2 (32:28):
No, every time I put something into WebMD, I think
I'm gonna die. So why would you expect different results
with financial services?
Speaker 3 (32:34):
You wouldn't every time you put something in there, you
think you're gonna go broke or make a trillion dollars.
Speaker 4 (32:38):
Yeah, so I'm sure. Look, I know for certainty that
There is plenty of good financial advice out there on
the Internet and via social media, but trying to comb
through what is actually good advice and what is actually
somebody pushing a pump and dump scheme and getting paid
(32:59):
on the other side that you don't know about because
there's no adequate disclosure, it's really really difficult to figure out.
Speaker 2 (33:05):
And so I.
Speaker 4 (33:06):
Would treat it the same way that I would medical
advice or anything else that's serious over the internet, is
with a high degree of skepticism.
Speaker 2 (33:13):
I want to talk about meat sticks.
Speaker 3 (33:15):
I was pretty certain you would. I. There's a piece
from the Wall Street Journal. It's titled Americans three billion
dollars habit meat sticks. And apparently I didn't realize that
this category saw sales expand ten point four percent last
year to three point twenty nine billion dollars. And so
(33:38):
apparently beef jerky is just becoming.
Speaker 2 (33:43):
Jerkier.
Speaker 4 (33:45):
Yeah, this one caught me by surprise. So here's the
thing that this was a big trend.
Speaker 2 (33:50):
What's being rolled out is a whole new line.
Speaker 3 (33:54):
Of meat sticks that basically claim to be like healthier
than the originals.
Speaker 2 (34:00):
And look, here's the thing.
Speaker 3 (34:02):
Here's some things that they can definitively say about probably.
Speaker 2 (34:07):
I don't know. Here. Here's the thing about these.
Speaker 3 (34:08):
Number one, they are really high in protein and pretty
low in just about everything else.
Speaker 2 (34:14):
How about salt, They're very high in that generally.
Speaker 3 (34:16):
Yeah, so they have like lower sodium versions and less
processed versions in this and that. But ultimately, I think
my advice on meat sticks, and again as someone who's
not a doctor, my advice on meat sticks boils down
to something pretty simple, which is, if you're relying on
them to be a health food.
Speaker 2 (34:36):
You're probably doing it wrong.
Speaker 1 (34:39):
Boy.
Speaker 2 (34:39):
It's not to poop poo them like.
Speaker 3 (34:41):
I like a good slim gym just as much as anyone,
but I understand where that fits.
Speaker 2 (34:45):
In my general life pyramid, you know.
Speaker 3 (34:49):
And so as such, again it's not to say like
don't eat these or any like.
Speaker 2 (34:55):
I eat them like it. I think they're great.
Speaker 4 (34:57):
But am I likely to find a meat stick on
the menu at a high restaurant anytime soon?
Speaker 2 (35:01):
I bet you will.
Speaker 3 (35:02):
I bet there has to be some Michelin starred chef
out there who's.
Speaker 2 (35:06):
Like, all right, we're gonna repurpose this, Jim, I have
to do.
Speaker 3 (35:09):
The slim gym's that's how we talk se I don't know,
but I don't know why the Missilan starred chefs are French.
There's plenty in like New York that are not French.
So anyways, this is one of the fastest growing snack segments.
And I had no idea until I read this piece
that meat sticks were on the up and up.
Speaker 2 (35:28):
Yeah, didn't know.
Speaker 4 (35:30):
I have an irrelevant story of the day published on
January twenty fourth, which was Friday. If I'm not mistaken, Yes,
from Bloomberg, AI driven power boom will drive demand thirty
eight percent higher on top US grid. The electricity demand
and the largest US grid is poised to rise so
fast thanks to a boat I boom that'll be the
equivalent of installing two new England networks in the coming decade. Well,
(35:53):
according to today's news, maybe maybe not.
Speaker 2 (35:57):
Can we can we stop calling AI AI and just
pronounce you know how like VRBO wants to be Verbo,
Like I, Can we just.
Speaker 4 (36:05):
Go I No, No, that's just much more confusing.
Speaker 2 (36:10):
Okay, Yeah, In any case, Yeah, that this entire story.
Speaker 4 (36:14):
And potent to this whole industry completely flipped on its
head this morning. Not to say it won't be powerful
and still usable, and many companies will still make huge
amounts of money on artificial intelligence, but it could completely
upend which companies those are.
Speaker 3 (36:29):
I'd like to talk about parlays in sports betting.
Speaker 2 (36:34):
Tucker knows way more about this than I do.
Speaker 3 (36:36):
But Tucker, the general rule of thumb on parlays, as
I understand them, is don't yes that.
Speaker 5 (36:43):
The old school gamblers are like, no, if you're if
you're doing parlays, you're a chump if you're going to lose.
Speaker 2 (36:48):
Here's why.
Speaker 3 (36:49):
Just as an example, there's this this piece is perfect
for this. So this sports fan made a fourteen leg parlay,
which means if all of these happens, she gets to
turn her ten dollars into twenty two thousand. Thirteen of
them hit and the last one didn't, and so she
lost everything. Now here's the thing. If she had bet
one dollar on all of the ones that and every
(37:11):
single one of these, on each of these fourteen legs,
she would have made a boatload of money. It wouldn't
have been twenty two thousand, because it's not compounding or anything,
but she.
Speaker 2 (37:18):
Would have made a boatload of money.
Speaker 3 (37:19):
So here's the problem with parlays is Hey, they actually
end up giving you worse odds than doing all of
the bets separately from what I understand, and b you
could be ninety percent correct and get nothing.
Speaker 2 (37:33):
I ward you no points and may God have mercy
on yourself. Now. I do not bet on sports. It's
something that I'm very bad at.
Speaker 3 (37:41):
The furthest I go is a March madness bracket that
I participated, and so I'm not someone who can tell
you like all the ins and outs, but these long
shot parlays and things like that Reek of financial nihilism, nihilism.
Speaker 5 (37:54):
And whatever heavily heavily promoted there everywhere books, well.
Speaker 4 (37:58):
Yeah, it looks no dumber to me than playing powerball,
but it seems perceived differently than yes, powerball.
Speaker 3 (38:04):
Yes, And I can tell you from talking to people
in their early twenties the number of young males who
are in debt to sportsbooks right now is through the
roof and it.
Speaker 2 (38:15):
Is very sad. So this is a huge problem that
we have here. Quick break for the rest of the day.
Speaker 3 (38:22):
We'll see you 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
registered investment advisor. All opinions expressed are solely those of
the hosts. Do not reflect the opinions of Armstrong Advisory
or anyone else. Investments can lose money. This program does
not offer any specific financial or investment advice. Please consult
your own financial, tax, and estate planning advisors before making
(00:21):
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this program do not endorse each other or their services.
Armstrong and Money Matters Radio do not compensate each other
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Exchange with Chuck Zada and Mike Armstrong, Your exclusive look
at business and financial news affecting your day, your city,
(00:43):
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heroes by visiting Dad five K dot Boston and making
a donation today. This is the Financial Exchange with Chuck Zada,
(01:07):
and Mike Armstrong.
Speaker 2 (01:10):
Kicking off hour two of the Financial Exchange.
Speaker 3 (01:12):
It's Chuck, Mike and Tucker with you today and taking
ak a where equity market stam Right now, the dows
off fifty four points about I don't know an eighth
of a percent. SMP though is down one hundred and
five points about one point seventy five percent, and the
cute little Nasdak composite it's down five hundred and sixty
seven points two point eight three percent at the moment.
Speaker 4 (01:34):
In videos in the process right now of shedding about
eighty three. AT and T's of market capitalization down four
hundred and sixty five billion dollars in market cap this.
Speaker 2 (01:44):
Morning for AT and t's Is that right? Three?
Speaker 1 (01:46):
Yeah?
Speaker 4 (01:47):
Our market cap of AT and T is about one
sixty okay, so two home depots?
Speaker 2 (01:51):
Yeah yeah, let's see how else can we phrase this?
A Berkshire Hathaway? Yeah? Is it? Actually? No?
Speaker 3 (01:57):
Briksher is a little bigger anyways, Big reason in video
is down along with Microsoft, Broadcom and Google AMD also
getting hit hard. Oracle also down, so a lot of
big tech is Last week there was a new version
of deep Sea, who is a Chinese AI company unveiled
a new version of their AI platform called the R
(02:19):
one platform. It supposedly was built very cheaply in China
and costs very little relative to US alternatives, and as
a result, there's concern if this can be replicated by
other companies that hey, maybe you don't need to just
buy up as many in Nvidia chips as you can
in order to make the next latest and greatest. Maybe
(02:41):
you can figure out ways to program more efficiently for AI.
And that kind of up ends the entire AI CAPEX
structure that's been dominating US equity.
Speaker 4 (02:50):
Markets for you, and the entirety of everything that you
know open AI has done to this point, or that
the American system of Artificial Intelligence expansion and development has
has been doing things, so it would up end all
of that if this turns out to be true. My
question for you specifically this, it's not that they built
(03:10):
the platform. The platform is legit, and it's the text
stuff on it from people that know more about this
than I do. It's not a bunch of the platform
is legit. It's not a bunch of people behind computer screens.
Answering your question.
Speaker 3 (03:21):
No, the question is, hey, they say they built this
for one percent of the cost of what it cost
to bilities in the US, and the operating costs are
you know, one to three percent of US based models.
That is where hey, if no one else can do this,
and it becomes apparent that there actually was a whole
bunch of computing power that was just held like off
(03:43):
the books at some other Chinese entity that was responsible
for this, Okay, then it's not really the kind of
competition we think it is.
Speaker 4 (03:51):
Can we go down that path for a minute, So
let's assume the worst out of this, that it is
a bunch of hints.
Speaker 2 (03:55):
What's the worst?
Speaker 4 (03:55):
So sorry, the worst for this Chinese company, and then
it's all fabricated on some lies so that it actually
does still cost like a billion dollars to trade a
model that they in fact had to use the latest
and greatest in video chips that they got on the
black market through some company in Vietnam that they were
able to, you know, put a shell game there and
(04:16):
acquire a bunch of these chips somehow that they had
to use the latest and greatest How soon would we know?
Speaker 3 (04:24):
The company claims that they did the training on this
model in two months. As such, if someone starts right now,
and again there's we'll know by July fourth. Right, if
someone else can do this right, we'll know by July fourth.
Speaker 4 (04:38):
Because again they're not exactly keeping this close to their vest.
They made this an open source model. Everyone can see here.
Here's the thing. This still does kind of up end
the entire thing anyways. By making this open source with
this level of power held in this small of a
kind of in this small of a rapper in that look,
this thing is nimble enough that you can run this
(04:59):
on it a high end gaming computer.
Speaker 1 (05:02):
Right.
Speaker 3 (05:03):
You don't need to have some giant data center running this.
So even if you say, okay, maybe the training still
needs to be done on a high end data center
that is running the latest and greatest, there now is
proof of concept that you can actually run the model
built from the.
Speaker 2 (05:19):
Training on a PC sitting in your house.
Speaker 4 (05:22):
And I think that's a big takeaway for today is
even if you assume the worst out of this entity,
that they hit a bunch of costs, that they didn't
train it the way they say that did, the stuff
that we know already would still up end a large
portion of the industry because ultimately they were able to
generate a model that seems capable of massive computing power
(05:45):
sorry sorry, of massive response generation and intelligence without the
computing power that previous up until frankly today thought was necessary.
Speaker 3 (05:57):
On a tangent, you know how we always talk about
like people hold up their iPhones and granted, I'm one
of these idiots who does this, so I'm talking about
myself and I'll go, hey, isn't it amazing that this
computer has more power than the Space Shuttle did?
Speaker 2 (06:10):
Sure? And I use it to like send memes to
my friends. Ye.
Speaker 3 (06:15):
Wouldn't it be like fascinating if what this ends up
touching off is a real push towards efficiency where it's hey,
because it's become so cheap to build like memory chips
and stuff like that and data storage in the last
twenty years. If you talk to anyone who programs now,
it's totally different the constraints in the nineteen nineties, where Okay,
I've got limited bandwidth, i've got limited storage, i've got
(06:38):
limited memory.
Speaker 2 (06:39):
I've really got to.
Speaker 3 (06:39):
Be efficient with how I code this, and things have
gotten pretty bloated in recent years.
Speaker 2 (06:45):
Wouldn't it be fascinating if.
Speaker 3 (06:46):
One of the things that comes out of this is
everyone starts prioritizing efficiency in developing tech again, like not
just for AI, but for everything. And I'm not sure
it gets there because look, it still is really cheap
to build storage for iPhones. There's a reason why, like
the margins on them are forty percent and they still cost,
you know, a thousand bucks. But I think that this
(07:07):
has the potential just to be a seismic shift in
how computing is thought of, just because again I say
this over and over, scarcity forces innovation in anything. And
what China is claiming is, hey, we had a scarcity
of chips and computing power, and so that's how we
had to develop things this way. What if this becomes
(07:28):
something where hey, we might not have a scarcity in
the US, but we might need to force ourselves into
a scarcity mindset as far as resources because it helps
us develop more efficiently. And by the way, this is
exactly what happened with US energy companies back in the
mid twenty tens. Russia turned on the taps for their
oil and US fraker said, hey, we can't make money.
(07:51):
You know, it's seventy dollars a barrel. And when price
went down to twenty nine. They said, Okay, we got
to figure out how to make money at fifty a barrel.
And they did because they said, we can't use as
many inputs and they got more efficient.
Speaker 4 (08:04):
And so if you are the if I development company
right now, you're sold on the most high end in
vidio chip, and now you have to do it for
one one hundredth of the cost in order to compete
with this new Chinese startup or wherever it's going to
be next, then you're going to be forced innovate.
Speaker 3 (08:26):
If you are Sotny Innadella, you have your AI team
in your office today and you're saying, pull off twenty
percent of your team and try to replicate this over
the next three months. And if you can't replicate it,
I'm going to find someone who will, because it's that
kind of existential threat for them.
Speaker 2 (08:46):
Yeah. Why is Apple up two and a half percent today?
Speaker 3 (08:49):
So I was thinking about this actually because Apple's been
getting trashed for the last few weeks because of concerns
about declining phone sales in China and things like that.
Speaker 2 (08:57):
I have a theory too. You want to go first,
You want me to go first? Oh, you go first,
But don't take my idea.
Speaker 4 (09:01):
Apple's approach to AI has been the same as their
approach to many new emerging technologies. We're not going to
touch it. We're gonna see what comes to the top,
what floats to the top, and will adapt whatever that is.
They've started to make some inroads there when they thought
that open AI's chat GPT was going to be the
best in class, and they started announcing new phones that
we're going to be preloaded with it, but it was
(09:24):
still going to be problematic because they wanted everything to
run on that device.
Speaker 2 (09:27):
This would allow them to do it in some new meaningful.
Speaker 4 (09:30):
Way, and they haven't made giant investments like all of
their competitors the tech space have an AI.
Speaker 3 (09:34):
The AI reportedly is very bad, to the point where
like news agencies asked to like, can we find a
way to opt out of this because you're making our
headlines incorrect?
Speaker 2 (09:43):
That's Apple?
Speaker 3 (09:43):
You mean, yes, Yeah, So it's it's been a problem there.
My guess on this is it's probably a bunch of
institutional traders where hey, we have exposure to the tech
sector by virtual of you know, how our fund is
restricted from trading, and how we need to manage risk
across sectors. We need to maintain it somewhere. Okay, it's
(10:06):
gonna go to Apple because they're at least.
Speaker 2 (10:08):
At risk on this that's exciting than my example. It
is it is. Let's take a quick break here.
Speaker 3 (10:13):
When we come back, we do have a FED meeting
on Wednesday, the first one of twenty twenty five, the
first one of President Trump's second term. Gosh, I can't
wait for Wednesday. We'll talk FED right after this.
Speaker 1 (10:27):
Mixed one of our shows. Catch up anytime by asking
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Speaker 5 (10:49):
Time for turitya here on the Financial Exchange. This week,
a major theme of the show will be the release
of earnings reports from the companies collectively known as the
Magnificent Seven. Today's Magnificent Seven look very different from the
original Magnificent Seven from the nineteen thirties, forties, and fifties.
(11:09):
So trivia question today, name one of the original Magnificent
seven Companies in the US. Once again, name one of
the original Magnificent seven companies in the US, and again
that's during the thirties, forties, and fifties.
Speaker 2 (11:24):
Be the seventh.
Speaker 5 (11:25):
Person today to text us at six one seven three
six two thirteen eighty five with the correct answer, and
you win a Financial Exchange Show T shirt.
Speaker 2 (11:32):
Once again, the.
Speaker 5 (11:32):
Seventh correct response to text us at six one seven
three six two thirteen eighty five, we'll get that T shirt.
See complete contest rules at Financial Exchange Show dot com.
Speaker 3 (11:43):
Mike, We've got a FED meeting on Wednesday, and the
expectations are not for much in the way of policy.
Right now, FED Fund's futures market is pricing in a
ninety nine point five percent chance that the FED does nothing,
So again that's pretty clear. We even a little bit
of room, but basically, no, they're not going to do anything.
Speaker 4 (12:05):
So given that they're not going to do anything, what
is of interest to you between the release as well
as the press conference?
Speaker 2 (12:10):
Because my over under, I.
Speaker 3 (12:12):
Guess we'll be honest, I have no interest in this.
This is going to be the most boring, annoying FED
meeting that we've ever had.
Speaker 2 (12:17):
To cover.
Speaker 4 (12:18):
It's going to be annoying because I bet that J.
Powell gets at least five questions related to Donald.
Speaker 3 (12:24):
Five, and like every question is going to be about
Donald Trump. Every question is going to be hey, with
the new administration, how is this affecting your approach? And
every answer is going to be we don't speculate on policy.
We leave that up to Congress ultimately, depending on what's
actually you know, past, we will just our approach as needed.
Speaker 4 (12:43):
Interestingly, though, higher thing interestingly though, at the last meeting,
they kind of sort of acknowledge that they are taking
into consideration potential policy changes. They effectively I don't remember
what it was, but it had to do with tax
rates and their prior models. I think had assumed tax
rates up in twenty twenty six, and I think they
begin to adjust those based on the again pure speculation
(13:06):
at this point that tax rates will be locked in
under a Donald Trump administration.
Speaker 2 (13:10):
So I think this is going to be again.
Speaker 3 (13:14):
I'm going to watch the press conference just because in
this profession you kind of have to, but it's going
to be a real hate watch because I.
Speaker 2 (13:24):
Just think I'm gonna get nothing useful out of it.
Speaker 4 (13:27):
I do think it's well put here that like, if
there's one goal of this for the Federal Reserve and J. Powell,
it's to not give Donald Trump any ammunition. Be eloquent,
be clear, don't go back and forth on things, because
you know you're already going to be getting hammered from
the White House. You don't need to give the guy
(13:47):
any ammunition to throw more stuff at you by being
I mean sure guilty of some of the things that
you've been guilty of over the last few years. Let's
be honest. He has not been the clearest about why
their policy is shifting in one direction or another when
it's come to the moments in time.
Speaker 2 (14:01):
Yeah, I don't know. I can't wait for this one
to be like there's nothing that's actually gonna happen. Now.
Speaker 3 (14:07):
If we get to like the March meeting and hey,
Congress has passed x Y or z or tariffs have
been placed on x Y or z, and okay, like
now we this is going to be just.
Speaker 2 (14:22):
Bah.
Speaker 3 (14:23):
Sure, it's not going to be exciting for any not
that I want the Fed meetings to be exciting, but
I don't think we're gonna get any useful nuggets because
all the focus of the questions is gonna be on
stuff that Powell's going to refuse to.
Speaker 4 (14:34):
Answer, and quite frankly, that's exactly what he needs to do,
because if you can tell me probably best for him,
Like if you can give me some sort of explanation
of which countries are going to face tariffs, what tax
rates are going to look like, and which regulations are.
Speaker 2 (14:49):
Going to go away over the next twelve months.
Speaker 4 (14:51):
Then you have a crystal ball that nobody else does
because nobody has any clue. Right, If so, acting at
the stage would be horribly irresponsible by Drome Powell.
Speaker 3 (14:59):
Yes, I I really think you know, Powell should answer
every question with a question. Okay, which policies would you
like me to address this?
Speaker 1 (15:07):
This?
Speaker 2 (15:07):
And this? Is that on the books? Yet?
Speaker 3 (15:08):
No, then I can't address it right. Well, that's how
I would handle it. But that's also why I'm not
fed chair. Well, no, it's there are a lot of
reasons why I'm not fed chair.
Speaker 4 (15:17):
Yeah, I think at the most interesting what you're likely
to get is some form of comment that the Board
generally believes taxes would be lower than otherwise thought and
tariffs will be higher than otherwise thought. That that's the
most that you're going to get. Like I guess, best
case scenario in terms of something predictive in nature.
Speaker 3 (15:40):
Let's talk about this piece in the Wall Street Journal.
Really good piece, I think. Actually it's titled one House,
three Owners, The Balloon and Costs of the American Dream,
and it talks about a home in Chapel Hill, North Carolina,
and basically says, look, right now, it's listed for five
hundred and twenty thousand dollars back in twenty eleven.
Speaker 2 (15:58):
It's sold for less than half.
Speaker 4 (15:59):
Of that as a new bill quarter million dollars back
in twenty eleven as brand new construction, so a new home.
Speaker 3 (16:04):
And especially with the change in interest rates, the mortgage
payment would be nearly twenty eight hundred dollars, which would
be triple or almost triple the monthly cost in twenty eleven.
And that's not even factoring in property taxes and insurance,
both of which have gone up quite a bit.
Speaker 2 (16:21):
By the way.
Speaker 4 (16:21):
That's assuming you can get a mortgage rate under seven,
which is no guarantee right now.
Speaker 2 (16:25):
Correct.
Speaker 3 (16:26):
So ultimately, what you end up with is a situation where, hey,
if you are seeing home prices moving in this fashion
where incomes have not. Have incomes tripled since twenty eleven
in the Chapel Hill area, not to my knowledge they
have not. Not a huge Chapel Hill, North Carolina expert,
but I would guess now I'm relatively plugged in.
Speaker 2 (16:43):
Yeah, you know, and the answers.
Speaker 3 (16:45):
My parents spent quite a bit of time living down
in Durham, so I know Chapel Hill well.
Speaker 4 (16:48):
The previous owner of this home bought in twenty twenty,
so it was built in twenty eleven, sold in twenty twenty.
Previous owners bought it in twenty twenty for three hundred
and fifteen thousand dollars, so they made a cool two
hundred grand in five years, as I think many people
have across the country on their homes. They bought it
with a three point seventy five percent mortgage rate now
for sale five twenty, who knows if they actually get
(17:09):
five to twenty, but for sale for five to twenty
at seven percent mortgage rates, property taxes higher, insurance costs
substantially higher. And I think everybody listening who owns a
home has probably experienced this pretty recently, because maybe you
didn't buy a home in twenty twenty. But what portion
of homes were refinanced within the last ten years.
Speaker 2 (17:31):
It's gotta be the vast majority of them, hey, Like, it's.
Speaker 4 (17:34):
Got to be a huge portion of homes that were
refinanced sometimes sometime in the last decade. And so we're
all intimately familiar with this math.
Speaker 3 (17:42):
And so it gets to a point where, hey, for
someone to go and buy that home just a couple
it becomes more impractical. And this is why you start
seeing these, you know, different things that pop up with
you know, different people who end up, you know, trying
to buy homes in different setups and stuff like that.
Speaker 2 (17:56):
But ultimately the math is not going to work.
Speaker 4 (18:00):
To Redfinn back in January of twenty twelve, which I
think now in hindsight, we can all describe January of
twenty twelve as one of the best times to buy
a home in American history. But January of twenty twelve,
the income required to buy the typical home in the
United States was thirty nine thousand dollars two hundred and
twenty three thirty two hundred twenty three dollars. As of
November twenty twenty four, home buyers needed to earn one
(18:23):
hundred twenty six thousand, seven hundred and sixty four dollars
to afford the typical home in the United States, which
is a two hundred twenty three percent increase in income,
which has not been the lived experience.
Speaker 3 (18:34):
Now, the counter to this, it's kind of a counter,
is we're comparing one of again arguably the best times
to purchase a home in American history.
Speaker 2 (18:43):
Like we knew that after the fact at the time.
Speaker 3 (18:46):
I remember even in twenty thirteen a it was terrifying,
but as you got to like thirteen and fourteen, people
were like, oh, these prices have run up so much,
and in HEINTSD You're like, that's not really.
Speaker 2 (18:54):
Let me show you twenty twenty one.
Speaker 3 (18:55):
But I think that in looking at this part to
me would like a comparison in terms of the average
income needed to buy a place in like two thousand
and six right to now, just because remember, home prices
fell like thirty percent nationally peaked to trough and again
maybe that's part of the reason why we should be
a little bit more nervous about home prices today. Not
(19:16):
so much you know, defaults, because they're they're kind of
non existent, but hey, how much do prices have to
come down in order to get the volume moving again.
Speaker 2 (19:25):
I think that's a fair question. Quick break here.
Speaker 3 (19:27):
When we come back, we've got the trivia answer, and
then we're talking stocks and bonds.
Speaker 1 (19:42):
Bringing the latest financial news straight to your radio every day.
It's the Financial Exchange on the Financial Exchange Radio Network.
Miss any of the show. The Financial Exchange Show podcast
is available on Apple, Spotify, and iHeartRadio. Hit the subscribe button,
leave us a five star review. This is the Financial
(20:03):
Exchange Radio Network.
Speaker 5 (20:08):
The tribute question today was to name one of the
original Magnificent Seven companies in the US from the nineteen thirties, forties,
and fifties. It will be AT and T, General Electric, IBM,
General Motors, Standard Oil, DuPont and US Steel. Winner today
of the Financial Exchange Show t shirt? Where's Roger from
assen at Mass Congrats to Roger. We played trivia every
(20:30):
day here on the Financial Exchamee. See complete contest rules
at Financial Exchange Show dot com.
Speaker 3 (20:36):
Mike, there's a piece in the Wall Street Journal. It's
titled the extra Reward for owning stocks over bonds have
has disappeared. What are they talking about and how do
they know?
Speaker 2 (20:46):
So we talk.
Speaker 4 (20:48):
A lot about the priciness of this market, and as
we point out, it's useless to just say, oh, well,
the Dow is at forty four thousand, so it's expensive.
That's not a useful piece of information because you're not comparing.
Speaker 2 (20:59):
It to any thing.
Speaker 4 (21:00):
So we've talked about price to earnings ratios, for example,
and you know, levels that we haven't seen since the
dot com bubble, and this talks about another version of
those same measurements, which is, hey, let's take a look
at the expected earnings of the S and P five
hundred companies, turn that into a yield, and then compare
(21:20):
that to what's generally considered to be the risk free asset.
What's the risk free asset? Chuck, treasuries?
Speaker 2 (21:25):
Yep.
Speaker 4 (21:26):
And for most of history, not terribly surprisingly, you've been
paid more for the risk you undertake in something that's
not the risk free asset right when comparing you would
expect it. Hey, there's some of these companies that aren't
going to exist in a few decades. You know, take
a look at S and P five hundred companies and
(21:47):
how many of them have gone bankrupt on a year
to year basis, And so you get rewarded for that
extra risk that you take. Today that difference has turned
to negative. The yield that you can expect on a
ten year treasury compared to the earnings of the S
and P five hundred is now higher than the S
and P five hundred, and therefore as an indication that, hey,
(22:08):
one more indication at least that in comparison to a
whole bunch of different benchmarks, this stock market is quite expensive.
Speaker 2 (22:15):
It is now.
Speaker 3 (22:16):
None of this is to say that it's going to
definitively perform this way that way over the next one, three,
five or ten year period, but much more that, Hey,
the risk reward, which again you could make a case
like ten years ago in particular, that the risk reward
was kind of asymmetrically skewed towards equities. Bonds were yielding,
(22:37):
you know, even long term bonds were like two percent.
Short term you were getting quite literally almost zero.
Speaker 2 (22:44):
Inflation was nothing.
Speaker 3 (22:46):
And so that there's a case to be made then yeah,
this is exactly when you would want to be backing
up the truck on stocks. Obviously, hindsight's twenty twenty, like
how many people actually bought the bottom in March of nine,
like not many.
Speaker 2 (22:58):
But today where you sit here and you say, Okay, I've.
Speaker 3 (23:01):
Got long term bonds that are yielding in the mid furs,
I've got short term bonds in the high threes to
low furs, and equities are priced, you know, twenty two
to twenty three times earnings over the next year. Yeah,
the risk reward is one where there's not a clear
sign that this can continue to move in this fashion.
(23:22):
But hey, we are aware that over short time periods
and short time periods in the stock mark, you can
still be a year or two. Yeah, there's a case
to be made that things could still get more exuberant
before you run into trouble. It's just the numbers don't
indicate the same risk reward that you had over the
last decade.
Speaker 4 (23:42):
The timing of this piece is just kind of fantastic too,
given the massive selloff we're seeing if you haven't been
tuning in.
Speaker 2 (23:49):
Led by Tech specifically.
Speaker 4 (23:50):
Tech specifically is selling off, the Nasdaq off over three percent,
the SMP down close to two, and the article goes
on to interview a Mike Yo. He's a seventy three
year old retired surgeon from Columbia, South Carolina, who puts
together an argument which is I think no worse than
many others that I've seen before, that look, the old
sixty forty rule is dead, and I keep This individual
(24:13):
keeps more than eighty percent of his portfolio and equities
believes that tech companies like Tesla and Meta can keep
powering double digit percentage gains, basically just doing away with
the idea of the sixty forty and quote, you want
to make sure you're invested with these companies that are
proven winners. You don't want to bet against these guys.
(24:33):
You don't want to bet against Elon Musk. Can we
stop right there please? That's really it's got wrench to me.
It's troubling to me, and well.
Speaker 2 (24:46):
Because it all falls into the category of it's different
this time. Well, here's the thing.
Speaker 3 (24:50):
A year and a half ago, this is in twenty
twenty three, right, It's like AI was like really taken off.
If you look at the top ten companies from a
year and a half ago, Apple, Microsoft, this is globally,
by the way, Saudi, Ramco, Alphabet, Amazon and Vidia, Tesla, Berkshire, Hathaway, Meta,
and Taiwan Semiconductor. This is probably pretty similar today. Here
are the top ten in two thousand, twenty five years ago. Microsoft, okay,
(25:14):
we got one that's still on the list. Ge is
that on the list? No, Cisco is that on the list?
Walmart no, Exons, no Intel, no NTT, DoCoMo no, I
don't know, Royal, Dutch, Shell, Pfizer, no, Nokia.
Speaker 2 (25:33):
No. Let's go back to nineteen eighty. Maybe this was
just like a one time thing. Nineteen eighty.
Speaker 3 (25:38):
Here are the big ten top ten companies. IBM okay,
that was oh no, it was not any of them.
At and T oh no, that was not any of them.
Exon great, that was on in two thousand.
Speaker 2 (25:48):
Yep.
Speaker 3 (25:49):
Standard Oil, well, it ended up being bought by Xon
Shell okay, we got two Mobile Okay, like that, General
Motors with nope, Texico nope, DuPont nope, Golf Oil nope.
Speaker 2 (26:01):
So the idea shifting, the idea.
Speaker 3 (26:04):
Of proven winners in the stock market not a real thing.
It's not to say that companies can't do well over five, ten, fifteen, twenty,
even thirty years or longer like occasionally they do, but
more often than not, what worked for the last decade
or two has not been what worked for the next
decade or two.
Speaker 4 (26:25):
I think there's a lot of folks out there who
have been tempted by well, the likes of the stock
market that we've seen for the last five hard not
to be really, really difficult to not be tempted by it.
And I'm not here sitting here saying that the sixty
to forty portfolio is the holy grail that everybody needs
to adhere to. But I think today is a pretty
(26:45):
good wake up call for folks out there of just
how quickly and dramatically the ongoing narrative of what's going
to drive markets forward can be entirely flipped on its head.
That is what happened today. I have no idea if
it's going to flip back in the other direction.
Speaker 2 (26:59):
It might.
Speaker 4 (27:00):
I don't really trust any of the information that's coming
out of China about this new AI company. However, it
is a really good fresh reminder that telling me that
it's different this time almost always gets proven incorrectly. And
I think that's the message that I take away from this. Yes,
(27:20):
stocks are expensive right now. We've been talking about this
all the time. What scared the living Craik's out of
me was this interview with this individual who said, no,
I'm doing away with the old way of managing my portfolio,
and you know, today was probably a pretty rough wake
up call. If you are waking up today and finding
yourself in some form of similar boat, bought into some
(27:42):
of these ideas of hype and what's going to drive
markets forward from here, and getting a refresher on just
how quickly that narrative can change, I would encourage you to,
at the very least take a second look. Make sure
you understand what you own and how that's changed over
the last few years. Maybe you've been really intentional about it,
maybe it's been an accident. But getting a good understanding
(28:05):
of where you sit now, where your risks are in
your portfolio in case that what we learned today ends
up being a true game changer for the markets, would
be a good first step. Give the folks at Armstrong
Advisory Group a call. You can reach us at eight
hundred three nine three four zero zero one. We'll sit
down with you to analyze your investment holdings see how
(28:26):
they line up with your own personal financial situation. Nobody
is the same. Give us a call eight hundred three
nine three four zero zero one.
Speaker 1 (28:35):
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 3 (28:51):
CNBC's got a piece talking about twenty twenty five changes
that could impact your finances. First, we now have the
super Ketchup for your four oh one K, So if
you're between ages sixty to sixty three, you get an
extra special Ketchup contribution that is eleven two hundred and
(29:12):
fifty dollars for this year, as opposed to the seventy
five hundred dollars normal Ketchup contribution. Remember that's just for
ages sixty two sixty three. Mike, do you do you
have to be those ages at any I have year.
Speaker 4 (29:26):
I have not figured out if you have to end
the year at that age, be at that age at
any point in the year.
Speaker 2 (29:31):
I'll have to get back to you.
Speaker 4 (29:33):
I also have no oh yeah, I also have no
evidence that the four oh one K companies are prepared
to deal with these extra catchup contributions.
Speaker 2 (29:39):
I just genuinely don't know yet.
Speaker 3 (29:41):
So you've got that that is supposed to be happening
this year, also in twenty twenty five. If you are
a if you're someone who has inherited a non spousal ira,
so from a brother's, sister, aunt, uncle, friend, anyone other
than a husband and wife, if you've inherited one of
those since twenty twenty, you now, in addition to having
(30:02):
to exhaust that account in ten years, you've got to
take an R and D out this year.
Speaker 4 (30:06):
In almost all case, there's a feusitive. In small chances
where that's not the case. And I bring this up
because my mother in law is one of them, but
generally speaking, you're going to be faced by this and
there's a whole new set of rules and then you know,
final one here, especially for folks listening in uh Massachusetts
who work for the state at any point in time,
there's a whole new set of rules when it comes
(30:26):
to Social Security and the web and the GPO. So yeah,
in addition to an interesting market to start January, you've
got some pretty significant tax rule changes going into place
in twenty twenty five as well.
Speaker 2 (30:40):
Just take a quick break here when we come back,
we'll do some stack roulette.
Speaker 1 (30:44):
Find daily interviews and full shows of the Financial Exchange
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and everything you might have missed. This is the Financial
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(31:06):
Exchange Radio Network.
Speaker 5 (31:09):
This segment of the Financial Exchange is brought to you
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Speaker 2 (31:55):
Mike, what do you got for me? For stack roulette?
Speaker 4 (31:57):
The growing industry of financial advice on social media? If
you're not familiar, there's all sorts of TikTokers YouTubers out
there who provide financial advice via social media, which by
its very nature obviously can't be customized. And I'm not
gonna sit here and say that I'm surprised, as somebody
in the financial services industry that this exists. People search
online for all sorts of medical advice and other sorts
(32:20):
of things, but I think most people agree that it's
not a terribly Is there any medical professional you know
that says it's a great idea to get medical advice
over the internet.
Speaker 2 (32:28):
No, every time I put something into WebMD, I think
I'm gonna die. So why would you expect different results
with financial services?
Speaker 3 (32:34):
You wouldn't every time you put something in there, you
think you're gonna go broke or make a trillion dollars.
Speaker 4 (32:38):
Yeah, so I'm sure. Look, I know for certainty that
There is plenty of good financial advice out there on
the Internet and via social media, but trying to comb
through what is actually good advice and what is actually
somebody pushing a pump and dump scheme and getting paid
(32:59):
on the other side that you don't know about because
there's no adequate disclosure, it's really really difficult to figure out.
Speaker 2 (33:05):
And so I.
Speaker 4 (33:06):
Would treat it the same way that I would medical
advice or anything else that's serious over the internet, is
with a high degree of skepticism.
Speaker 2 (33:13):
I want to talk about meat sticks.
Speaker 3 (33:15):
I was pretty certain you would. I. There's a piece
from the Wall Street Journal. It's titled Americans three billion
dollars habit meat sticks. And apparently I didn't realize that
this category saw sales expand ten point four percent last
year to three point twenty nine billion dollars. And so
(33:38):
apparently beef jerky is just becoming.
Speaker 2 (33:43):
Jerkier.
Speaker 4 (33:45):
Yeah, this one caught me by surprise. So here's the
thing that this was a big trend.
Speaker 2 (33:50):
What's being rolled out is a whole new line.
Speaker 3 (33:54):
Of meat sticks that basically claim to be like healthier
than the originals.
Speaker 2 (34:00):
And look, here's the thing.
Speaker 3 (34:02):
Here's some things that they can definitively say about probably.
Speaker 2 (34:07):
I don't know. Here. Here's the thing about these.
Speaker 3 (34:08):
Number one, they are really high in protein and pretty
low in just about everything else.
Speaker 2 (34:14):
How about salt, They're very high in that generally.
Speaker 3 (34:16):
Yeah, so they have like lower sodium versions and less
processed versions in this and that. But ultimately, I think
my advice on meat sticks, and again as someone who's
not a doctor, my advice on meat sticks boils down
to something pretty simple, which is, if you're relying on
them to be a health food.
Speaker 2 (34:36):
You're probably doing it wrong.
Speaker 1 (34:39):
Boy.
Speaker 2 (34:39):
It's not to poop poo them like.
Speaker 3 (34:41):
I like a good slim gym just as much as anyone,
but I understand where that fits.
Speaker 2 (34:45):
In my general life pyramid, you know.
Speaker 3 (34:49):
And so as such, again it's not to say like
don't eat these or any like.
Speaker 2 (34:55):
I eat them like it. I think they're great.
Speaker 4 (34:57):
But am I likely to find a meat stick on
the menu at a high restaurant anytime soon?
Speaker 2 (35:01):
I bet you will.
Speaker 3 (35:02):
I bet there has to be some Michelin starred chef
out there who's.
Speaker 2 (35:06):
Like, all right, we're gonna repurpose this, Jim, I have
to do.
Speaker 3 (35:09):
The slim gym's that's how we talk se I don't know,
but I don't know why the Missilan starred chefs are French.
There's plenty in like New York that are not French.
So anyways, this is one of the fastest growing snack segments.
And I had no idea until I read this piece
that meat sticks were on the up and up.
Speaker 2 (35:28):
Yeah, didn't know.
Speaker 4 (35:30):
I have an irrelevant story of the day published on
January twenty fourth, which was Friday. If I'm not mistaken, Yes,
from Bloomberg, AI driven power boom will drive demand thirty
eight percent higher on top US grid. The electricity demand
and the largest US grid is poised to rise so
fast thanks to a boat I boom that'll be the
equivalent of installing two new England networks in the coming decade. Well,
(35:53):
according to today's news, maybe maybe not.
Speaker 2 (35:57):
Can we can we stop calling AI AI and just
pronounce you know how like VRBO wants to be Verbo,
Like I, Can we just.
Speaker 4 (36:05):
Go I No, No, that's just much more confusing.
Speaker 2 (36:10):
Okay, Yeah, In any case, Yeah, that this entire story.
Speaker 4 (36:14):
And potent to this whole industry completely flipped on its
head this morning. Not to say it won't be powerful
and still usable, and many companies will still make huge
amounts of money on artificial intelligence, but it could completely
upend which companies those are.
Speaker 3 (36:29):
I'd like to talk about parlays in sports betting.
Speaker 2 (36:34):
Tucker knows way more about this than I do.
Speaker 3 (36:36):
But Tucker, the general rule of thumb on parlays, as
I understand them, is don't yes that.
Speaker 5 (36:43):
The old school gamblers are like, no, if you're if
you're doing parlays, you're a chump if you're going to lose.
Speaker 2 (36:48):
Here's why.
Speaker 3 (36:49):
Just as an example, there's this this piece is perfect
for this. So this sports fan made a fourteen leg parlay,
which means if all of these happens, she gets to
turn her ten dollars into twenty two thousand. Thirteen of
them hit and the last one didn't, and so she
lost everything. Now here's the thing. If she had bet
one dollar on all of the ones that and every
(37:11):
single one of these, on each of these fourteen legs,
she would have made a boatload of money. It wouldn't
have been twenty two thousand, because it's not compounding or anything,
but she.
Speaker 2 (37:18):
Would have made a boatload of money.
Speaker 3 (37:19):
So here's the problem with parlays is Hey, they actually
end up giving you worse odds than doing all of
the bets separately from what I understand, and b you
could be ninety percent correct and get nothing.
Speaker 2 (37:33):
I ward you no points and may God have mercy
on yourself. Now. I do not bet on sports. It's
something that I'm very bad at.
Speaker 3 (37:41):
The furthest I go is a March madness bracket that
I participated, and so I'm not someone who can tell
you like all the ins and outs, but these long
shot parlays and things like that Reek of financial nihilism, nihilism.
Speaker 5 (37:54):
And whatever heavily heavily promoted there everywhere books, well.
Speaker 4 (37:58):
Yeah, it looks no dumber to me than playing powerball,
but it seems perceived differently than yes, powerball.
Speaker 3 (38:04):
Yes, And I can tell you from talking to people
in their early twenties the number of young males who
are in debt to sportsbooks right now is through the
roof and it.
Speaker 2 (38:15):
Is very sad. So this is a huge problem that
we have here. Quick break for the rest of the day.
Speaker 3 (38:22):
We'll see you tomorrow on the Financial Exchange
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