March 10, 2025 • 38 mins
Chuck Zodda and Mike Armstrong discuss President Trump's comments about not ruling out a recession. Why are the guys not ready to proclaim a recession? Why is everyone spooked about recession? What are markets really scared about? Rocket Companies to buy real estate firm Redfin in $1.75B deal. Is the bull market in detox or melting down? Stock investors go on defense with dividends.
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Speaker 1 (00:00):
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(01:06):
and Mike Armstrong.
Speaker 2 (01:09):
Kicking off another week here on the Financial Exchange is Chuck, Mike,
and Tucker with you, and we've got a busy, busy, busy, busy, busy, busy,
busy week full of economic data. We're all the way
through earning season, is a handful of companies left to report,
so not much on that front, but from an economic
data standpoint, on Tuesday, we're gonna get the job Opening
(01:32):
and Labor Turnover Survey report, the Jolts Report that comes
at nine am tomorrow, actually ten am. Sorry, my calendar
did not adjust for daylight savings time yet. So I
hope all of you that are working on you know,
springing forward, that you got a little pep in your
step today, because we'll be talking about that too. Yeah,
let me tell you my step is peppin. I gotta
(01:52):
say that. Wednesday we're gonna be getting inflation data. The
CPI is out at eight thirty am. We're also on
Thursday in begetting the Producer Price Index, the PPI data,
and weekly jobless claims. And then on Friday we get
consumer sentiment out of the University of Michigan. So pretty
much every day, but today we've got some major economic data,
and today what we have so far is just a continued, nice, steady,
(02:19):
orderly puke of markets at this point, with what I
will say is at least to the downside here kind
of the first potential break to the downside that we've
seen out of the range that we've been in since
early November. So we'll see where this market ends up going.
But ultimately, the question that I've heard in the last
(02:40):
twenty four hours now, there was an interview with President
Trump on Fox News yesterday morning and he was asked, Hey,
are you expecting a recession this year? And he basically
did not say no. Is the short of it. His
quote is, I hate to predict things like that. There's
a period of transition because what we're doing is very big,
(03:00):
and so I think that, look, I think it's actually
a pretty fair statement by him, and that, Hey, the
Trump administration is trying to effectively overhaul the US economy
in a really substantial way. And what's going to determine
whether or not they're successful, in my opinion, is not
(03:22):
whether or not the economy slows down in the short term.
I think it's probably going to And I'll get into
my reasons why for that in a bit, but rather
the two questions that you need to ask, how deep
does that slow down get and then how quick is
the economic growth on the back end of it, And
those are going to be the things that ultimately determine
whether or not they are successful at this.
Speaker 3 (03:45):
So Jack, I mean, I found it incredibly telling because
it is, to your point, I think, both an accurate
and honest assessment of the economy, and to some degree
you wish politicians would be this honest more frequently, Right,
Like I think about the last few years messaging from
the Biden White House on the state of the economy
and basically getting out there and in disregarding I think
(04:08):
a lot of the polling that Americans were stating about
their feelings on the economy and inflation and pricing, and
that did not go terribly well.
Speaker 4 (04:16):
That having been said, I don't know a lot.
Speaker 3 (04:20):
I can't think of, for instance, in my adult memory,
a president coming out there being asked about weakness in
the economy and not trying to spin the question right,
not trying to say, hey, yeah, we might be facing
some form of downturn, but I have confidence that tax
cuts or if it gets that way, the Federal Reserve
will lower interest rates, or I will put pressure on
(04:41):
Congress to pass a stimulus bill or lower taxes or
do any of those things that you would expect an
administration to respond to an economic downturn with instead saying yeah,
I'm not really sure, and we kind of anticipated this
sort of turmoil to get where we're going. It is
very honest, but very surprising to hear from a sitting president.
Speaker 2 (05:05):
And so let's enter some facts into evidence. I'll put
on my lawyer hat, which I generally try not to
wear because well, I'm not a lawyer, but I like
the way they build arguments, and so that's what I'm
going to do here. Let's enter a couple things into evidence. First,
the reason that companies and large portions of the United
(05:30):
States have enjoyed and benefited from globalization is because of
lower costs.
Speaker 3 (05:38):
Yes, go look at the price of a TV thirty
years from now compared to it today, and we don't
need to explain a lot more. But that has played
out everywhere across food supply chains and every other area
out there.
Speaker 2 (05:50):
The reason that companies send their production elsewhere is because
it's cheaper for them to do so, and that allows
them to do two things. Number one, expand their margins.
Number two, sell those goods more cheaply. Then, So that
is first and foremost what you see. So number one,
if you're talking about bringing production back into the United States,
(06:10):
ultimately it is an absolute certainty, an absolute certainty, And Mike,
I'm not certain of too much in life. Maybe a
few things on a daily basis, that's about it. It
is an absolute certainty that if you are bringing production
back to the United States that you had previously Offshort,
it's going to be more expensive because otherwise you wouldn't
have Offshort. Agreed, it's easier to make stuff here and
(06:33):
not have to deal with logistics and you know, potential
currencies and this it's the reason that you do it
is because it's cheaper.
Speaker 3 (06:40):
So and by the way, no one in this administration
is denying that. Scott Beston just last week, and you
can't deny because it would be fundamentally unserious. Scott Besen't
last week acknowledged that, hey, you know, the American dream
is not built on the idea of being able to
buy cheap goods.
Speaker 4 (06:55):
That was specifically speaking to.
Speaker 3 (06:57):
The fact that, yeah, if you try and manufacture much
stuff in the United Dates, no matter where you were
doing it previously, it'll be more expensive to do it.
Speaker 2 (07:03):
Just here part number two. When you're talking about imposing tariffs,
whether it is on China, Canada, Mexico, the EU, European Union,
whoever it might be, that is raising costs as well.
Speaker 4 (07:16):
Sure hard stop yep.
Speaker 3 (07:18):
Whether born by entirely by the consumer, in part by
the consumer and part by the manufacturer or importer up
for debate, but higher prices yes.
Speaker 2 (07:29):
Number three. If you are talking about wide spread deportations
of people that are not legal immigrants in the United States,
you are reducing the labor force in the United States
because the vast majority of those people are working. They
are often working under the table and jobs where they
(07:50):
can be paid, you know, in cash and things like that,
and oftentimes in jobs that a lot of Americans probably
wouldn't do for the wages that are available. And that
is something where you're talking about again. If you look
at where GDP growth comes from, it's a function of
two things. How many hours does the population work and
how productive are they during those hours. If you're reducing
(08:13):
the labor force, you are reducing the number of hours worked.
As such, it's going to be a drag on growth. Now, Ultimately,
what you are trying to get to if you are
President Trump and his team is something where you say, look,
I want to resolve these imbalances so that the average
American can have a better platform for growth for the
(08:35):
long run. So the fourth piece that I'll enter into
evidence is kind of one of these long run things
that's out there, which is the United States is running
seven percent annual deficits at a time when unemployment is
four percent. That is not sustainable. That can be more
up for debate because there's really no clear there's no
(08:58):
hard and fast rule when it comes to exactly what
level of debt or deficit you know, annually or in
totality is sustainable or not.
Speaker 3 (09:05):
And to be fair, like every previous understanding of what
was sustainable.
Speaker 4 (09:09):
Has been stretched and it just expanded.
Speaker 3 (09:13):
Right, if you had told somebody where deficits would have
gotten to back in the nineteen seventies by the nineteen nineties,
they would have told you that it's completely unsustainable. And likewise,
if you told somebody from the nineties where we'd be
by twenty twenty, they would say that's crazy, but we're.
Speaker 2 (09:25):
In unprecedented territory right now. Like agree, it's it's like
completely agreed, you know, like everything sustainable until it's not.
And you know, one of the one of the lessons
that and this comes from from NASA when the Challenger
space shuttle exploded. The reason why, yes, it was you know,
a failure in and overring, but the reason why was
(09:46):
that they launched the thing with temperatures way too cold.
And the reason why they did that is because they
had kind of kept moving the goal posts and they
saw no problems and so they said, Okay, maybe we
can go a little bit further, and eventually they couldn't.
And so so it was one of those situations where
everything was fine until it very much was not. When
you look at deficits again, there's been this Okay, we
(10:09):
can stretch it a little further. We can stretch it further,
but eventually you get to a point where you're like, no,
you really can't. So where that point is, we don't
know until we get there. And so ultimately, if the
federal government is saying, hey, we want to reduce government spending,
that is going to be government spending. Whether you think
it's efficient or inefficient. It is going into the economy
(10:31):
and producing demand. If you reduce that demand and suck
it out of the economy, it's tough to say that
that is going to help growth. So you got four
key areas where you're sitting there and you're saying, these
are things that potentially raise prices and slow demand in
the short term, which brings us to again, there's two
(10:53):
trillion dollar questions, which are, hey, can you slow demand
in a way where it doesn't get so bad that
you have, you know, a recession because quite honestly, I
think a lot of us have forgotten how bad recessions are.
We haven't had a real one in you know, seventeen
years now. Yep. The twenty twenty one was induced by
our behavior from you know, kind of the top down
(11:15):
and ultimately was you know, resolved pretty quickly. The last
real recession we had was sixteen seventeen years ago, so
we haven't gone through one in very long I'm sorry,
in a long time actually, And it's something where hey,
can you avoid it, or at least if you do
experience one, can it be you know, relatively short and shallow.
(11:37):
And the second piece there is then okay, how do
you grow on the back end of that recession or
slow down? What do you do on that front? So
I think this is the bet that the Trump administration
is making. I have no idea if they're going to
be successful or not. They may they may not. I'm
(11:57):
not going to preemptively punish them for something that hasn't
happened yet. I'm not going to be the boy who
cried recession. If it does happen, Okay, like, how are
you going to actually deal with it? And how do
you get out of it? And how do you manage
your way through and what do you look like on
the back end of that is going to be the question.
But we're not there yet. And that's something that I
keep coming back to because I am a follower of
(12:20):
the data. There's things out there that's concerning, but you
have to see how it develops because you just don't know.
And we've seen plenty of these instances in the last
few years where everyone wanted to cry recession and it
never happened. And I'm not going to cry recession if
we don't see the data suggesting it.
Speaker 3 (12:41):
What else we got, Mike, Uh, We've got a Monday
Morning acquisition to talk about. Oh that's fun across, So
we'll be covering that and a whole lot more, but
really much more on this recession concern, how the Fed's
likely to respond, and economy talk as markets are once
again selling off as we head into it new week
week quick break, we'll be right back with that next text.
Speaker 1 (13:04):
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Speaker 5 (13:26):
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Speaker 2 (14:10):
Hit Chuck.
Speaker 3 (14:11):
Yeah, we just spent the last time we're talking about how,
you know, policies that we've been looking.
Speaker 4 (14:16):
At could drive up prices.
Speaker 3 (14:19):
We didn't spend a lot of time talking about why
markets are responding to what seems to be a recession
scare here, and that's I think that's very clearly what
we're getting. We had the Nasdaq just a second ago
down more than three percent, the S and P right
now off one in three quarters. You've had ten year
treasury yield drop, you know, no real talk of a
rate hike with response to higher prices. So where does
(14:41):
this all come back to? Why is everyone spooked about
recession in particular, because, like you just said, I think
we're talking about potential deportations, tariffs, deglobalization, all of those
I can see very clearly how they how they correlate
to potentially higher prices in the future. But as far
as I can tell, that's not seemingly what markets are
(15:03):
scared about right now.
Speaker 2 (15:04):
No. I mean, look, I'll be I'll be completely honest.
If I look at what's moving in this market today,
the biggest players that are moving down, it's it's big
Teket's mag seven. Yeah, and after that. The only thing
in the market that is pointing to recession right now
is that financials for the last week and a half
have gotten absolutely whacked. It's it's basically like Jamie Diamond's
(15:28):
woken up every morning looked at JP morganstock and just
been like pull the covers back over my head and
get back to bed. Like it's it's so, if you
do want a sign that this market is starting to
price in something recessionary, financials are getting absolutely bodied every day.
It's just like, over and over, you're seeing it right now.
But aside from that, like you take a look at it,
(15:51):
and some of the stuff, a lot of this is
that you're seeing in markets is not necessarily hey, recession
is coming, but much more these valuations got absolutely out
of line, and now we just need to adjust them.
We've talked about Max seven, but I want to spend
some time on boring old consumer staples. Boring old consumer staples,
(16:13):
and I want to talk to you a little bit.
We touched on this last week, but Walmart and Costco,
their valuations now on a forward earnings basis are higher
than NVIDIAs now looks. As I said on Friday, I love,
you know, big slabs of meat as much as anyone else,
but there's no reason why Costco should be trading like
at a valuation premium to an AI stock.
Speaker 4 (16:36):
I don't know, man, you have ever been there at
like eleven am on a Saturday.
Speaker 2 (16:39):
I have. Well, actually I haven't been to a Costco
just because i'm a BJ's member, but I drive by
the lot and I'm like, yep, it's like there's a
line out the door. So here's what's happened in the
last one week is Walmart's down nine point six percent,
Costco's down ten point eight five. So generally you look
at it and you're like, okay, big consumer staple stocks,
they don't usually get whacked heading into recession. Usually they
(17:00):
pick up some some gains. Actually, like, that's that's where
people go in their.
Speaker 4 (17:04):
Nervous at least relative gains to the market.
Speaker 2 (17:06):
Or actual gains. Because here's here's where I'm going with this.
Procter and Gamble is up one point three three percent
during that time, Clorox up six point seven percent, Kimberly
Clark up three point two, can View up point eight percent.
I don't know what el is ste lot Air. Okay, fine,
they're up five point four to two. Let's see again.
(17:28):
Sticking with you know, consumer staples, General Mills up six
point one one percent, uh Craft Hinds up five point
four point seven three percent, Cannagra Foods up seven point
nine five percent. Some of what you are seeing in
this market right now is either just rotations out of
overvalued stuff or even within a sector, rotations from the
(17:53):
overvalued to undervalued parts of it. It's not like consumer
defensive has just gotten whacked as a whole because everyone's like, no,
tell the sector. It's no. Like there's there's a reason
why Walmart doesn't usually traded thirty five times forward earnings
is because that's insane. And I think part of this
is just you're going through a correction on this front.
The other piece when it relates to so we got
(18:14):
a few things. Banks are absolutely screaming recession right now,
no doubt about it. Some of the other stuff that's
getting hit, like Walmart and Costco is just like Vali,
you got overvalued, and like when when the levy breaks,
like you move on. The mag seven stuff is concerning
to me, not because of recession, but it's been dominated
by a bunch of foreign capital flows coming into the US,
(18:38):
where hey, there's been all these dollars that went overseas
because of you know, imports from overseas, and instead of
going out and buying you know, real estate in Manhattan,
the money's been coming back in and buying mag seven stocks.
And when those flows stop, there's a real problem for
those companies because a lot of them trade it, you know,
pretty crazy valuations too. The growth is there in a
lot of cases, but not all of them. You know,
(18:59):
Apple growing revenue three percent year over year. Tesla might
not have any growth this year, that's what their CFO said.
And Video sure, like you're growing a ton Meta, You're
growing a ton of Microsoft. Okay, you're growing like low
double digits. So there's some stuff there that's dodgy, and
so I think part of it is, you know, you
get these big narratives that pop up in markets, but
(19:20):
if you actually look at what's going on, I think
there are three or four different stories that this market
is telling you right now, and only one of them is, Hey,
this could because of you know, recession. Let's take a
quick break. When we come back, we got Wall Street
Watch after this.
Speaker 1 (19:40):
Like us on Facebook and follow us on Twitter at
TFE show. Breaking business news is always first right here
on the Financial Exchange Radio Network. Time now for Wall
Street Watch, a complete look and what's moving market so
far today right here on the Financial Exchange Radio Network.
Speaker 5 (20:00):
Coming off a losing week where the SMP five hundred
sung three point one percent. Overall markets today are extending
their losses as investors' way of recession fears and ready
for a new batch of economic data points this week,
including a CPI inflation reading on Wednesday. Right now, the
Dow down by one percent or four hundred and twenty
(20:21):
four points, SMP five hundred selling off by two percent
or one hundred and sixteen points, and the tech heavy
NASDAC plunging over three percent now or five hundred and
eighty four points, Russe of two thousand is down one
in seven tenths of a percent, ten year treasure yield,
ten year treasure yield excuse me down by ten basis
points at four point two to one percent, and crude
(20:44):
oiled down by three quarters of a percent trading and
sixty six dollars in fifty four cents a barrel. Several
bank stocks, including JP, Morgan Chase, Bake of America, and
City Group are seeing losses on the day as worries
over a possible economic slowdown weigh on them. While Tesla
shares down another eight percent today are now down over
thirty five percent so far this year, and Video shares
(21:07):
down nearly four percent, bringing its total pullback this year
to over sixteen percent, and Pallunteer shares down to another
seven percent, bringing its total losses this year to more
than twenty seven percent. Elsewhere, Robinhood agreed to pay nearly
thirty million dollars to settle an investigation by the Financial
Industry Regulatory Authority into a range of violations. Robinhood down
(21:30):
by fourteen percent on the day. Nova Nordisk shares down
by eight percent after trial results for its weight loss
drug cagri Sema, I think showed the treatment yielded a
smaller impact for patients than previous tests. Door Dash will
officially join the S and P five hundred on March
(21:50):
twenty fourth, sending shares in the food delivery company actually
down now by three percent, Redfin surging by seventy two
percent after the Realists, a brokerage firm, announced plans to
be acquired by Rocket Companies in a one point seventy
five billion dollar all stock deal expected to close in
the second or third quarter of this year. In cloud
(22:13):
software company Oracle will report their earnings after today's closing bell.
I'm Tucker Silvan, that's Wall Street Watch.
Speaker 2 (22:21):
Mike. You mentioned earlier you had a mergery that or
a deal that you wanted to talk about.
Speaker 4 (22:27):
That was it the Rocket Redfin deal?
Speaker 2 (22:29):
Interesting something else? Now, talk to me a little bit
about that one. Well.
Speaker 4 (22:33):
Redfin major platform.
Speaker 3 (22:34):
I remember that they're not just a tech platform like
Zillo for instance.
Speaker 4 (22:39):
You tech platform.
Speaker 3 (22:41):
Then they sell different leads in advertising, two different agents
across the fross across the nation. Redfinn has their own
employee agents. From what I understand, and I don't know
how big that business is. It looks like about twenty
two hundred agents across the country, so clearly not a
massive brokerage, but very much one of the dominant I
think too, like online real estate venues to go take
(23:06):
a look at, and so you know, I think an
acquisition by a big mortgage. I don't think Rocket actually
originates mortgages. Maybe they do, but do they do originate
as well? I don't know that they carry any I
don't know they like I believe they might just be
an originator. I don't know if they hold any inventory.
In any case, you know, teaming those two ups so
(23:26):
that you know you have this default and very easy
to use, because I think that's Rocket's main appeal is
like you know, sign on will get you a pre
approval letter in like fifteen minutes. And if you have
that integration right alongside redfin, I can see how that
might be valuable, especially if you are of the opinion
that rates might be dropping in the near future. But
(23:46):
Redfin itself has never really been able to I think,
fully execute on some of their vision. You know, they
came out there, made a big splash by discounting commissions,
and you know Frankly, it's not like I see Redfin
for sale signs all across the country on a frequent basis.
You see them here and there, but it's not like
they've made a huge dent in the industry or brought
(24:08):
down prices.
Speaker 4 (24:09):
I think in the way they were hoping to.
Speaker 2 (24:11):
Yeah, I think that's a fair statement. Anything else that
you want to talk about, we got. We got a
piece where you know, Treasury Secretary Scott Bessen talking about, hey,
there could be some economic pain coming as well. I
think we kind of covered most of that.
Speaker 4 (24:25):
Yeah, I don't want to beat this to death.
Speaker 3 (24:27):
Many people within the Trump administration are going in eyes
wide open that when you attempt to reign in government
spending and you know, take in these frankly outlandish deficits
that we've been seeing over the course of the last
few years, that it can lead to unforeseen consequences, one
(24:47):
of which could be recession. And they're not really denying
any of that because it would be tough to do so.
The promise on the other side is that hey, this
public spending might get replaced by private spending, because we
are going to attract investment by making the United States
the most compelling place to invest in in the world.
Speaker 4 (25:05):
Jury is out on that one.
Speaker 2 (25:08):
One other thing that I do want to talk about,
just when it comes to the market and trying to
get a read on again more the market than the economy,
and whether the market is saying anything about recession. I
mentioned financials, and generally when we talk about financials and
think about them, what most people are thinking about is
JP Morgan, Chase, JP Morgan, Bank of America, Goldman, Sachs,
(25:31):
Wells Fargar, Like, what are those companies telling us? There's
another part of the market though, that is quite honestly
completely melting down right now. And like I, anyone who
listens to the show knows that I generally am not
someone who you know, gets all excited about things and
(25:52):
uses terms like that frequently. But you do have one
that is happening right now. And specifically look at some
of these alternative asset managers and for those of you
are not familiar with them, an alternative asset manager is
basically someone who manages something other than traditional publicly traded
equities or publicly traded bonds.
Speaker 3 (26:15):
Massive growth area over the last fifteen years, as banks
have largely been forced to exit the area of smaller
size financing and things along those lines, or if not exit,
then you know, hands tied in terms of what they
are able to do. Their private credit has come to
dominate and makes up massive portions of insurance companies, businesses
(26:35):
in terms of their assets. Private equity funds, pensions, all endowments,
all sorts of things like that have a lot of
exposure to this to this area.
Speaker 2 (26:46):
So you get a bunch of these that end up
being big enough that they're publicly traded and they're in
the S and P five hundred. Some of them, their
names might be familiar to you, Apollo Global Management, Blackstone KKR,
Colbert Cravertz, Cravis and Roberts. Others you might not be
as familiar with. You might not have ever heard of
Blue Owl Capital, you might not have ever heard of
(27:06):
Ari's Management Corporation. But these are the big names in
this space. And what has happened now basically in the
last four five weeks, this is since the end of January,
is the five companies that I just mentioned, which are
really the biggest ones playing in this space. They run.
The huge growth in their business in the last couple
(27:28):
of years has been through something called private credit, and
private credit is a really wide like it's a big
term for something. It's kind of like if you tell
someone that you have mammals at your house, Like that
could mean a lot of things. Private credit is kind
of like that in that it's not one specific thing.
It could be direct lending where Blackstone takes in two
(27:50):
hundred million dollars and lends it all to one company.
It could be something where there's a bunch of death
that's out there and Blackstone buys it all and consolidates
it and and it's no longer, you know, being traded publicly.
There's all kinds of different flavors that you can have.
It can be for companies, it can be for real estate,
all kinds of different things. I've seen like private credit
(28:10):
businesses that lend for jewelry inventory. Okay, like again, you
can anything you can think of. It's in there. But
regardless of it, all of these companies are big in
that space. Here's how far all of these companies are
off their fifty two week highs right now, and this
has pretty much all happened in the last four weeks.
Blue Owl is down thirty point eight percent from its highs.
(28:33):
Apollo is down thirty point four to one, Aries down
twenty seven, Blackstone down twenty nine, KKR down thirty six.
So all these, all these companies that focus on that
space are down about a third. And the interesting piece
to me isn't just that they're down a third. But
one of the places that investors look to see how
risk is being handled by the financial system is in
(28:55):
the credit markets to see, hey, is it becoming more
expensive for copanies in general, but in particular for bad
companies with bad debt situations to manage their way through.
And we've seen a little bit of a widening of
credit spreads in publicly traded markets, but nothing huge, nothing notable.
But these companies that operate in the private credit space
(29:16):
have been Again, a thirty percent drawdown in five weeks
qualifies as a meltdown in my book, Michael, It's hard
to call it anything other than that. And so part
of the problem here is there's a theory out there
that a lot of the companies that are really bad
credit risks have been going to the private credit markets
(29:38):
rather than publicly issuing bonds. And so you might not
have a great signal anymore from public credit markets as
to how bad things are, because all the really bad
stuff might not be publicly traded anymore. It might be
privately held.
Speaker 3 (29:52):
Yeah, we used to look at like the spread between
junk and treasury. And that's what you're talking about, hey,
is there's a whole bunch of debt out there that
we don't even qualify as junk because there's nobody rating
it because it's.
Speaker 4 (30:02):
Held by private credit.
Speaker 2 (30:03):
You don't need to rate a private credit like if
I make a loan to you, Mike directly, I don't
need to go out and have you know, Moody's or
Fits or Standard and Poors rate it.
Speaker 4 (30:11):
No, I just because I'm not selling it on public market, I.
Speaker 2 (30:13):
Just go and do it like I'm not trying to
sell it to anyone, or at least on public markets.
I And this is here's the other part of this.
So and again, my intent have been up about this
for the last year or so because I see so
many emails and pitches about private credit this and private
credit that, And in particular in the last year or so,
(30:35):
it's been starting to push more towards the average retail
investor under the guise of, Hey, we want to democratize
access to these products and listen, it's all well and
good if you want to democratize access to products, but
generally there's a reason why big companies don't like to
sell expensive investment products to retail investors. There's actually a
(30:57):
few different reasons. The first is it's really in a fit.
They'd rather, you know, get one hundred million dollar client
than a thousand, you know, a thousand you know, one
hundred thousand dollar clients. It's just like they don't want
to be dealing with all that administrative stuff. The second
piece is, hey, like, if their job is, you know,
managing money and there's some kind of end, there's kind
(31:20):
of an elitist thing to it, and that hey like,
come to us because this is how you get access, Like,
you don't want to offer it to everyone otherwise, you know,
why would anyone want it. The fact that it's being
offered to so many more people now is kind of like, Okay,
you're just trying to dump this on retail. As you know,
the musical chairs are ending. It kind of has that
(31:41):
feel to it to a certain extent. So there's a
lot out there that you wonder about. And the fact
that these companies that specialize in this alternative asset management
are at the front lines for what's getting beaten up
in the last you know, four weeks or so. Might
be a signal here, like there's something going on there
that that you just kind of perk up ears at
and you go, oh, like I need to pay attention there.
(32:05):
I don't even know how we got on this topic neither,
but we gotta take a break. We do, so, let's
take a break when we come back. Let's do a
little bit of FED talk when we return.
Speaker 1 (32:14):
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Speaker 2 (32:45):
All right, let's do a quick market update here. We've
got the Dow off four hundred and seven points about
one percent right now, the S and P down one
hundred and seventeen points about two percent, the NASDAC taking
it the hardest, down about six hundred and twenty one
points three point four percent right now on the Nasdaq
tenure US Treasury moving eleven basis points down to four
point two oh seven percent. So you got bonds getting
(33:07):
bit up, Oil down thirty four cents a barrel on
West Texas Intermediate to sixty six sixty nine, and we've
got gold down two dollars and nine cents per ounce
to twenty nine twelve. Even so overall you've got a
pretty steep cell off inequity markets, energy and gold not
really moving anywhere, and he got bond seeing some inflows there.
(33:28):
So certainly some nervousness and skiddishness in markets. And big
thing is, hey, when you look at where this market
actually stands right now, a lot of times we kind
of poopoom. We're like, well, this market hasn't really moved,
you know, too much or anything. And to be fair,
this is still regular, you know, normal market action. You
typically see a ten percent correction in the S and
(33:49):
P five hundred anywhere from every like twelve to twenty
four months, depending on you know, exactly how the market moves.
Where we stand right now with where you know the
S and P five hundred currently is is it is
now down about eight point six percent from it's high.
So we have kind of broken out to the low
end from the trading range that we had been in
(34:10):
since election day. The day before the election, the SMP
closed at fifty seven eighty two and it really had
not spent any time below that until the last couple
of days. We're now sitting, you know, almost two percent below,
So today's action really pushing us there. So if we
close below and then stay down there for a little bit,
this is kind of the first real extension to the
(34:31):
downside that we've seen. It still is something where hey,
the S and P five hundred is where it was
back in last July. So yeah, it's given up you know,
eight nine months of gains at this point. But obviously
market's a little nervous and certainly something where individuals, you know,
I can understand some nervousness out there if you're wondering,
(34:51):
ge like, how does this end up moving from here?
Speaker 3 (34:54):
Yeah, because look, nobody has any guarantee that this is
going to go one direction or another from here. Could
continue down very frequently historically has, but nobody actually knows
and certainly nobody knows what the next policy outcome from
the White House is going to be. But I can
certainly understand how investors would be starting to get nervous
now you've wiped out a few months of gains pretty quickly,
especially in some of those high flying companies that have
(35:16):
really made people money over the last few years. Here's
the one question that I would be asking myself as
an investor, and it's really a question you should be
asking yourself at any point in time, But how was
I prepared for a potential market downturn in recession going
into twenty twenty five? Like what specific parts of my
portfolio had me prepared for that potential outcome? And what
was my game plan going into this year in the
(35:38):
eventive one? And if you can answer that question in
like three sentences or less, then I'm not sure there's
really much that you need to be doing. But if
you can't, just honestly, if you can't answer that question
when looking at your investment portfolio and your retirement future
and trying to sort those things out, if you can't
honestly assess that and say here is where I am
(35:58):
prepared for that potential outcome, Here are the steps that
I took ahead of time, then I think you'd need
a second opinion, and if you would like one of those,
no commitment, just second opinions on what it is that
you are doing today, the potential upsides and downsides and
risks that you have when you approach your own portfolio.
Please give the folks at Armstrong Advisory Group a call.
(36:19):
We'd be happy to offer one of those. The phone
numbers eight hundred three nine three for zero zero one.
I know that markets like this can be nerve racking.
If you have questions about how you are prepared for it,
call us at eight hundred three nine three for zero
zero one.
Speaker 1 (36:35):
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Speaker 2 (36:52):
Mike, let's talk a little bit. Actually, I just want
to briefly hop forward to one story here in terms
of Mike, when's the last time we even saw a
piece published in any publication talking about dividends.
Speaker 4 (37:09):
Mid twenty tens.
Speaker 2 (37:10):
It's been a while, right, like a yields are higher,
and b stock performance has been good the last few years.
Twenty twenty two obviously was was a hiccup, but I
don't think anyone was like sitting there like, hey, dividends
in twenty twenty two, Why amsing?
Speaker 3 (37:23):
Why am I obsessed with dividends when I can get
four percent on a bond and tech stocks are going
up by thirty percent a year.
Speaker 2 (37:30):
But interesting point here where this piece from the Wall
Street Journal that hey, dividend stocks are dramatically or at
least the dividend indices are dramatically outperforming their non dividend counterparts.
Standard and Poors for the S and P five hundred
has a sub like index called the Dividend Aristocrats. It's
(37:52):
companies that have raised their dividends in each of the
past twenty five years. That index up about three and
a half percent, while the S and P five hundred,
again this is when it was published, you know, down
a couple percentage points on the course of the year.
So I don't know if this is you know, investors
specifically seeking out dividends or more just hey, those are
the companies that aren't as overvalued, and that's where they're
(38:13):
flocking to right now, but a little bit of noise
that we haven't heard on that front in recent years.
Quick Break, our two of the Financial Exchange is coming
right up.
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(01:06):
and Mike Armstrong.
Speaker 2 (01:09):
Kicking off another week here on the Financial Exchange is Chuck, Mike,
and Tucker with you, and we've got a busy, busy, busy, busy, busy, busy,
busy week full of economic data. We're all the way
through earning season, is a handful of companies left to report,
so not much on that front, but from an economic
data standpoint, on Tuesday, we're gonna get the job Opening
(01:32):
and Labor Turnover Survey report, the Jolts Report that comes
at nine am tomorrow, actually ten am. Sorry, my calendar
did not adjust for daylight savings time yet. So I
hope all of you that are working on you know,
springing forward, that you got a little pep in your
step today, because we'll be talking about that too. Yeah,
let me tell you my step is peppin. I gotta
(01:52):
say that. Wednesday we're gonna be getting inflation data. The
CPI is out at eight thirty am. We're also on
Thursday in begetting the Producer Price Index, the PPI data,
and weekly jobless claims. And then on Friday we get
consumer sentiment out of the University of Michigan. So pretty
much every day, but today we've got some major economic data,
and today what we have so far is just a continued, nice, steady,
(02:19):
orderly puke of markets at this point, with what I
will say is at least to the downside here kind
of the first potential break to the downside that we've
seen out of the range that we've been in since
early November. So we'll see where this market ends up going.
But ultimately, the question that I've heard in the last
(02:40):
twenty four hours now, there was an interview with President
Trump on Fox News yesterday morning and he was asked, Hey,
are you expecting a recession this year? And he basically
did not say no. Is the short of it. His
quote is, I hate to predict things like that. There's
a period of transition because what we're doing is very big,
(03:00):
and so I think that, look, I think it's actually
a pretty fair statement by him, and that, Hey, the
Trump administration is trying to effectively overhaul the US economy
in a really substantial way. And what's going to determine
whether or not they're successful, in my opinion, is not
(03:22):
whether or not the economy slows down in the short term.
I think it's probably going to And I'll get into
my reasons why for that in a bit, but rather
the two questions that you need to ask, how deep
does that slow down get and then how quick is
the economic growth on the back end of it, And
those are going to be the things that ultimately determine
whether or not they are successful at this.
Speaker 3 (03:45):
So Jack, I mean, I found it incredibly telling because
it is, to your point, I think, both an accurate
and honest assessment of the economy, and to some degree
you wish politicians would be this honest more frequently, Right,
Like I think about the last few years messaging from
the Biden White House on the state of the economy
and basically getting out there and in disregarding I think
(04:08):
a lot of the polling that Americans were stating about
their feelings on the economy and inflation and pricing, and
that did not go terribly well.
Speaker 4 (04:16):
That having been said, I don't know a lot.
Speaker 3 (04:20):
I can't think of, for instance, in my adult memory,
a president coming out there being asked about weakness in
the economy and not trying to spin the question right,
not trying to say, hey, yeah, we might be facing
some form of downturn, but I have confidence that tax
cuts or if it gets that way, the Federal Reserve
will lower interest rates, or I will put pressure on
(04:41):
Congress to pass a stimulus bill or lower taxes or
do any of those things that you would expect an
administration to respond to an economic downturn with instead saying yeah,
I'm not really sure, and we kind of anticipated this
sort of turmoil to get where we're going. It is
very honest, but very surprising to hear from a sitting president.
Speaker 2 (05:05):
And so let's enter some facts into evidence. I'll put
on my lawyer hat, which I generally try not to
wear because well, I'm not a lawyer, but I like
the way they build arguments, and so that's what I'm
going to do here. Let's enter a couple things into evidence. First,
the reason that companies and large portions of the United
(05:30):
States have enjoyed and benefited from globalization is because of
lower costs.
Speaker 3 (05:38):
Yes, go look at the price of a TV thirty
years from now compared to it today, and we don't
need to explain a lot more. But that has played
out everywhere across food supply chains and every other area
out there.
Speaker 2 (05:50):
The reason that companies send their production elsewhere is because
it's cheaper for them to do so, and that allows
them to do two things. Number one, expand their margins.
Number two, sell those goods more cheaply. Then, So that
is first and foremost what you see. So number one,
if you're talking about bringing production back into the United States,
(06:10):
ultimately it is an absolute certainty, an absolute certainty, And Mike,
I'm not certain of too much in life. Maybe a
few things on a daily basis, that's about it. It
is an absolute certainty that if you are bringing production
back to the United States that you had previously Offshort,
it's going to be more expensive because otherwise you wouldn't
have Offshort. Agreed, it's easier to make stuff here and
(06:33):
not have to deal with logistics and you know, potential
currencies and this it's the reason that you do it
is because it's cheaper.
Speaker 3 (06:40):
So and by the way, no one in this administration
is denying that. Scott Beston just last week, and you
can't deny because it would be fundamentally unserious. Scott Besen't
last week acknowledged that, hey, you know, the American dream
is not built on the idea of being able to
buy cheap goods.
Speaker 4 (06:55):
That was specifically speaking to.
Speaker 3 (06:57):
The fact that, yeah, if you try and manufacture much
stuff in the United Dates, no matter where you were
doing it previously, it'll be more expensive to do it.
Speaker 2 (07:03):
Just here part number two. When you're talking about imposing tariffs,
whether it is on China, Canada, Mexico, the EU, European Union,
whoever it might be, that is raising costs as well.
Speaker 4 (07:16):
Sure hard stop yep.
Speaker 3 (07:18):
Whether born by entirely by the consumer, in part by
the consumer and part by the manufacturer or importer up
for debate, but higher prices yes.
Speaker 2 (07:29):
Number three. If you are talking about wide spread deportations
of people that are not legal immigrants in the United States,
you are reducing the labor force in the United States
because the vast majority of those people are working. They
are often working under the table and jobs where they
(07:50):
can be paid, you know, in cash and things like that,
and oftentimes in jobs that a lot of Americans probably
wouldn't do for the wages that are available. And that
is something where you're talking about again. If you look
at where GDP growth comes from, it's a function of
two things. How many hours does the population work and
how productive are they during those hours. If you're reducing
(08:13):
the labor force, you are reducing the number of hours worked.
As such, it's going to be a drag on growth. Now, Ultimately,
what you are trying to get to if you are
President Trump and his team is something where you say, look,
I want to resolve these imbalances so that the average
American can have a better platform for growth for the
(08:35):
long run. So the fourth piece that I'll enter into
evidence is kind of one of these long run things
that's out there, which is the United States is running
seven percent annual deficits at a time when unemployment is
four percent. That is not sustainable. That can be more
up for debate because there's really no clear there's no
(08:58):
hard and fast rule when it comes to exactly what
level of debt or deficit you know, annually or in
totality is sustainable or not.
Speaker 3 (09:05):
And to be fair, like every previous understanding of what
was sustainable.
Speaker 4 (09:09):
Has been stretched and it just expanded.
Speaker 3 (09:13):
Right, if you had told somebody where deficits would have
gotten to back in the nineteen seventies by the nineteen nineties,
they would have told you that it's completely unsustainable. And likewise,
if you told somebody from the nineties where we'd be
by twenty twenty, they would say that's crazy, but we're.
Speaker 2 (09:25):
In unprecedented territory right now. Like agree, it's it's like
completely agreed, you know, like everything sustainable until it's not.
And you know, one of the one of the lessons
that and this comes from from NASA when the Challenger
space shuttle exploded. The reason why, yes, it was you know,
a failure in and overring, but the reason why was
(09:46):
that they launched the thing with temperatures way too cold.
And the reason why they did that is because they
had kind of kept moving the goal posts and they
saw no problems and so they said, Okay, maybe we
can go a little bit further, and eventually they couldn't.
And so so it was one of those situations where
everything was fine until it very much was not. When
you look at deficits again, there's been this Okay, we
(10:09):
can stretch it a little further. We can stretch it further,
but eventually you get to a point where you're like, no,
you really can't. So where that point is, we don't
know until we get there. And so ultimately, if the
federal government is saying, hey, we want to reduce government spending,
that is going to be government spending. Whether you think
it's efficient or inefficient. It is going into the economy
(10:31):
and producing demand. If you reduce that demand and suck
it out of the economy, it's tough to say that
that is going to help growth. So you got four
key areas where you're sitting there and you're saying, these
are things that potentially raise prices and slow demand in
the short term, which brings us to again, there's two
(10:53):
trillion dollar questions, which are, hey, can you slow demand
in a way where it doesn't get so bad that
you have, you know, a recession because quite honestly, I
think a lot of us have forgotten how bad recessions are.
We haven't had a real one in you know, seventeen
years now. Yep. The twenty twenty one was induced by
our behavior from you know, kind of the top down
(11:15):
and ultimately was you know, resolved pretty quickly. The last
real recession we had was sixteen seventeen years ago, so
we haven't gone through one in very long I'm sorry,
in a long time actually, And it's something where hey,
can you avoid it, or at least if you do
experience one, can it be you know, relatively short and shallow.
(11:37):
And the second piece there is then okay, how do
you grow on the back end of that recession or
slow down? What do you do on that front? So
I think this is the bet that the Trump administration
is making. I have no idea if they're going to
be successful or not. They may they may not. I'm
(11:57):
not going to preemptively punish them for something that hasn't
happened yet. I'm not going to be the boy who
cried recession. If it does happen, Okay, like, how are
you going to actually deal with it? And how do
you get out of it? And how do you manage
your way through and what do you look like on
the back end of that is going to be the question.
But we're not there yet. And that's something that I
keep coming back to because I am a follower of
(12:20):
the data. There's things out there that's concerning, but you
have to see how it develops because you just don't know.
And we've seen plenty of these instances in the last
few years where everyone wanted to cry recession and it
never happened. And I'm not going to cry recession if
we don't see the data suggesting it.
Speaker 3 (12:41):
What else we got, Mike, Uh, We've got a Monday
Morning acquisition to talk about. Oh that's fun across, So
we'll be covering that and a whole lot more, but
really much more on this recession concern, how the Fed's
likely to respond, and economy talk as markets are once
again selling off as we head into it new week
week quick break, we'll be right back with that next text.
Speaker 1 (13:04):
Us at six one seven three, six two one three
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and let us know what you think about the stories
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Speaker 2 (14:10):
Hit Chuck.
Speaker 3 (14:11):
Yeah, we just spent the last time we're talking about how,
you know, policies that we've been looking.
Speaker 4 (14:16):
At could drive up prices.
Speaker 3 (14:19):
We didn't spend a lot of time talking about why
markets are responding to what seems to be a recession
scare here, and that's I think that's very clearly what
we're getting. We had the Nasdaq just a second ago
down more than three percent, the S and P right
now off one in three quarters. You've had ten year
treasury yield drop, you know, no real talk of a
rate hike with response to higher prices. So where does
(14:41):
this all come back to? Why is everyone spooked about
recession in particular, because, like you just said, I think
we're talking about potential deportations, tariffs, deglobalization, all of those
I can see very clearly how they how they correlate
to potentially higher prices in the future. But as far
as I can tell, that's not seemingly what markets are
(15:03):
scared about right now.
Speaker 2 (15:04):
No. I mean, look, I'll be I'll be completely honest.
If I look at what's moving in this market today,
the biggest players that are moving down, it's it's big
Teket's mag seven. Yeah, and after that. The only thing
in the market that is pointing to recession right now
is that financials for the last week and a half
have gotten absolutely whacked. It's it's basically like Jamie Diamond's
(15:28):
woken up every morning looked at JP morganstock and just
been like pull the covers back over my head and
get back to bed. Like it's it's so, if you
do want a sign that this market is starting to
price in something recessionary, financials are getting absolutely bodied every day.
It's just like, over and over, you're seeing it right now.
But aside from that, like you take a look at it,
(15:51):
and some of the stuff, a lot of this is
that you're seeing in markets is not necessarily hey, recession
is coming, but much more these valuations got absolutely out
of line, and now we just need to adjust them.
We've talked about Max seven, but I want to spend
some time on boring old consumer staples. Boring old consumer staples,
(16:13):
and I want to talk to you a little bit.
We touched on this last week, but Walmart and Costco,
their valuations now on a forward earnings basis are higher
than NVIDIAs now looks. As I said on Friday, I love,
you know, big slabs of meat as much as anyone else,
but there's no reason why Costco should be trading like
at a valuation premium to an AI stock.
Speaker 4 (16:36):
I don't know, man, you have ever been there at
like eleven am on a Saturday.
Speaker 2 (16:39):
I have. Well, actually I haven't been to a Costco
just because i'm a BJ's member, but I drive by
the lot and I'm like, yep, it's like there's a
line out the door. So here's what's happened in the
last one week is Walmart's down nine point six percent,
Costco's down ten point eight five. So generally you look
at it and you're like, okay, big consumer staple stocks,
they don't usually get whacked heading into recession. Usually they
(17:00):
pick up some some gains. Actually, like, that's that's where
people go in their.
Speaker 4 (17:04):
Nervous at least relative gains to the market.
Speaker 2 (17:06):
Or actual gains. Because here's here's where I'm going with this.
Procter and Gamble is up one point three three percent
during that time, Clorox up six point seven percent, Kimberly
Clark up three point two, can View up point eight percent.
I don't know what el is ste lot Air. Okay, fine,
they're up five point four to two. Let's see again.
(17:28):
Sticking with you know, consumer staples, General Mills up six
point one one percent, uh Craft Hinds up five point
four point seven three percent, Cannagra Foods up seven point
nine five percent. Some of what you are seeing in
this market right now is either just rotations out of
overvalued stuff or even within a sector, rotations from the
(17:53):
overvalued to undervalued parts of it. It's not like consumer
defensive has just gotten whacked as a whole because everyone's like, no,
tell the sector. It's no. Like there's there's a reason
why Walmart doesn't usually traded thirty five times forward earnings
is because that's insane. And I think part of this
is just you're going through a correction on this front.
The other piece when it relates to so we got
(18:14):
a few things. Banks are absolutely screaming recession right now,
no doubt about it. Some of the other stuff that's
getting hit, like Walmart and Costco is just like Vali,
you got overvalued, and like when when the levy breaks,
like you move on. The mag seven stuff is concerning
to me, not because of recession, but it's been dominated
by a bunch of foreign capital flows coming into the US,
(18:38):
where hey, there's been all these dollars that went overseas
because of you know, imports from overseas, and instead of
going out and buying you know, real estate in Manhattan,
the money's been coming back in and buying mag seven stocks.
And when those flows stop, there's a real problem for
those companies because a lot of them trade it, you know,
pretty crazy valuations too. The growth is there in a
lot of cases, but not all of them. You know,
(18:59):
Apple growing revenue three percent year over year. Tesla might
not have any growth this year, that's what their CFO said.
And Video sure, like you're growing a ton Meta, You're
growing a ton of Microsoft. Okay, you're growing like low
double digits. So there's some stuff there that's dodgy, and
so I think part of it is, you know, you
get these big narratives that pop up in markets, but
(19:20):
if you actually look at what's going on, I think
there are three or four different stories that this market
is telling you right now, and only one of them is, Hey,
this could because of you know, recession. Let's take a
quick break. When we come back, we got Wall Street
Watch after this.
Speaker 1 (19:40):
Like us on Facebook and follow us on Twitter at
TFE show. Breaking business news is always first right here
on the Financial Exchange Radio Network. Time now for Wall
Street Watch, a complete look and what's moving market so
far today right here on the Financial Exchange Radio Network.
Speaker 5 (20:00):
Coming off a losing week where the SMP five hundred
sung three point one percent. Overall markets today are extending
their losses as investors' way of recession fears and ready
for a new batch of economic data points this week,
including a CPI inflation reading on Wednesday. Right now, the
Dow down by one percent or four hundred and twenty
(20:21):
four points, SMP five hundred selling off by two percent
or one hundred and sixteen points, and the tech heavy
NASDAC plunging over three percent now or five hundred and
eighty four points, Russe of two thousand is down one
in seven tenths of a percent, ten year treasure yield,
ten year treasure yield excuse me down by ten basis
points at four point two to one percent, and crude
(20:44):
oiled down by three quarters of a percent trading and
sixty six dollars in fifty four cents a barrel. Several
bank stocks, including JP, Morgan Chase, Bake of America, and
City Group are seeing losses on the day as worries
over a possible economic slowdown weigh on them. While Tesla
shares down another eight percent today are now down over
thirty five percent so far this year, and Video shares
(21:07):
down nearly four percent, bringing its total pullback this year
to over sixteen percent, and Pallunteer shares down to another
seven percent, bringing its total losses this year to more
than twenty seven percent. Elsewhere, Robinhood agreed to pay nearly
thirty million dollars to settle an investigation by the Financial
Industry Regulatory Authority into a range of violations. Robinhood down
(21:30):
by fourteen percent on the day. Nova Nordisk shares down
by eight percent after trial results for its weight loss
drug cagri Sema, I think showed the treatment yielded a
smaller impact for patients than previous tests. Door Dash will
officially join the S and P five hundred on March
(21:50):
twenty fourth, sending shares in the food delivery company actually
down now by three percent, Redfin surging by seventy two
percent after the Realists, a brokerage firm, announced plans to
be acquired by Rocket Companies in a one point seventy
five billion dollar all stock deal expected to close in
the second or third quarter of this year. In cloud
(22:13):
software company Oracle will report their earnings after today's closing bell.
I'm Tucker Silvan, that's Wall Street Watch.
Speaker 2 (22:21):
Mike. You mentioned earlier you had a mergery that or
a deal that you wanted to talk about.
Speaker 4 (22:27):
That was it the Rocket Redfin deal?
Speaker 2 (22:29):
Interesting something else? Now, talk to me a little bit
about that one. Well.
Speaker 4 (22:33):
Redfin major platform.
Speaker 3 (22:34):
I remember that they're not just a tech platform like
Zillo for instance.
Speaker 4 (22:39):
You tech platform.
Speaker 3 (22:41):
Then they sell different leads in advertising, two different agents
across the fross across the nation. Redfinn has their own
employee agents. From what I understand, and I don't know
how big that business is. It looks like about twenty
two hundred agents across the country, so clearly not a
massive brokerage, but very much one of the dominant I
think too, like online real estate venues to go take
(23:06):
a look at, and so you know, I think an
acquisition by a big mortgage. I don't think Rocket actually
originates mortgages. Maybe they do, but do they do originate
as well? I don't know that they carry any I
don't know they like I believe they might just be
an originator. I don't know if they hold any inventory.
In any case, you know, teaming those two ups so
(23:26):
that you know you have this default and very easy
to use, because I think that's Rocket's main appeal is
like you know, sign on will get you a pre
approval letter in like fifteen minutes. And if you have
that integration right alongside redfin, I can see how that
might be valuable, especially if you are of the opinion
that rates might be dropping in the near future. But
(23:46):
Redfin itself has never really been able to I think,
fully execute on some of their vision. You know, they
came out there, made a big splash by discounting commissions,
and you know Frankly, it's not like I see Redfin
for sale signs all across the country on a frequent basis.
You see them here and there, but it's not like
they've made a huge dent in the industry or brought
(24:08):
down prices.
Speaker 4 (24:09):
I think in the way they were hoping to.
Speaker 2 (24:11):
Yeah, I think that's a fair statement. Anything else that
you want to talk about, we got. We got a
piece where you know, Treasury Secretary Scott Bessen talking about, hey,
there could be some economic pain coming as well. I
think we kind of covered most of that.
Speaker 4 (24:25):
Yeah, I don't want to beat this to death.
Speaker 3 (24:27):
Many people within the Trump administration are going in eyes
wide open that when you attempt to reign in government
spending and you know, take in these frankly outlandish deficits
that we've been seeing over the course of the last
few years, that it can lead to unforeseen consequences, one
(24:47):
of which could be recession. And they're not really denying
any of that because it would be tough to do so.
The promise on the other side is that hey, this
public spending might get replaced by private spending, because we
are going to attract investment by making the United States
the most compelling place to invest in in the world.
Speaker 4 (25:05):
Jury is out on that one.
Speaker 2 (25:08):
One other thing that I do want to talk about,
just when it comes to the market and trying to
get a read on again more the market than the economy,
and whether the market is saying anything about recession. I
mentioned financials, and generally when we talk about financials and
think about them, what most people are thinking about is
JP Morgan, Chase, JP Morgan, Bank of America, Goldman, Sachs,
(25:31):
Wells Fargar, Like, what are those companies telling us? There's
another part of the market though, that is quite honestly
completely melting down right now. And like I, anyone who
listens to the show knows that I generally am not
someone who you know, gets all excited about things and
(25:52):
uses terms like that frequently. But you do have one
that is happening right now. And specifically look at some
of these alternative asset managers and for those of you
are not familiar with them, an alternative asset manager is
basically someone who manages something other than traditional publicly traded
equities or publicly traded bonds.
Speaker 3 (26:15):
Massive growth area over the last fifteen years, as banks
have largely been forced to exit the area of smaller
size financing and things along those lines, or if not exit,
then you know, hands tied in terms of what they
are able to do. Their private credit has come to
dominate and makes up massive portions of insurance companies, businesses
(26:35):
in terms of their assets. Private equity funds, pensions, all endowments,
all sorts of things like that have a lot of
exposure to this to this area.
Speaker 2 (26:46):
So you get a bunch of these that end up
being big enough that they're publicly traded and they're in
the S and P five hundred. Some of them, their
names might be familiar to you, Apollo Global Management, Blackstone KKR,
Colbert Cravertz, Cravis and Roberts. Others you might not be
as familiar with. You might not have ever heard of
Blue Owl Capital, you might not have ever heard of
(27:06):
Ari's Management Corporation. But these are the big names in
this space. And what has happened now basically in the
last four five weeks, this is since the end of January,
is the five companies that I just mentioned, which are
really the biggest ones playing in this space. They run.
The huge growth in their business in the last couple
(27:28):
of years has been through something called private credit, and
private credit is a really wide like it's a big
term for something. It's kind of like if you tell
someone that you have mammals at your house, Like that
could mean a lot of things. Private credit is kind
of like that in that it's not one specific thing.
It could be direct lending where Blackstone takes in two
(27:50):
hundred million dollars and lends it all to one company.
It could be something where there's a bunch of death
that's out there and Blackstone buys it all and consolidates
it and and it's no longer, you know, being traded publicly.
There's all kinds of different flavors that you can have.
It can be for companies, it can be for real estate,
all kinds of different things. I've seen like private credit
(28:10):
businesses that lend for jewelry inventory. Okay, like again, you
can anything you can think of. It's in there. But
regardless of it, all of these companies are big in
that space. Here's how far all of these companies are
off their fifty two week highs right now, and this
has pretty much all happened in the last four weeks.
Blue Owl is down thirty point eight percent from its highs.
(28:33):
Apollo is down thirty point four to one, Aries down
twenty seven, Blackstone down twenty nine, KKR down thirty six.
So all these, all these companies that focus on that
space are down about a third. And the interesting piece
to me isn't just that they're down a third. But
one of the places that investors look to see how
risk is being handled by the financial system is in
(28:55):
the credit markets to see, hey, is it becoming more
expensive for copanies in general, but in particular for bad
companies with bad debt situations to manage their way through.
And we've seen a little bit of a widening of
credit spreads in publicly traded markets, but nothing huge, nothing notable.
But these companies that operate in the private credit space
(29:16):
have been Again, a thirty percent drawdown in five weeks
qualifies as a meltdown in my book, Michael, It's hard
to call it anything other than that. And so part
of the problem here is there's a theory out there
that a lot of the companies that are really bad
credit risks have been going to the private credit markets
(29:38):
rather than publicly issuing bonds. And so you might not
have a great signal anymore from public credit markets as
to how bad things are, because all the really bad
stuff might not be publicly traded anymore. It might be
privately held.
Speaker 3 (29:52):
Yeah, we used to look at like the spread between
junk and treasury. And that's what you're talking about, hey,
is there's a whole bunch of debt out there that
we don't even qualify as junk because there's nobody rating
it because it's.
Speaker 4 (30:02):
Held by private credit.
Speaker 2 (30:03):
You don't need to rate a private credit like if
I make a loan to you, Mike directly, I don't
need to go out and have you know, Moody's or
Fits or Standard and Poors rate it.
Speaker 4 (30:11):
No, I just because I'm not selling it on public market, I.
Speaker 2 (30:13):
Just go and do it like I'm not trying to
sell it to anyone, or at least on public markets.
I And this is here's the other part of this.
So and again, my intent have been up about this
for the last year or so because I see so
many emails and pitches about private credit this and private
credit that, And in particular in the last year or so,
(30:35):
it's been starting to push more towards the average retail
investor under the guise of, Hey, we want to democratize
access to these products and listen, it's all well and
good if you want to democratize access to products, but
generally there's a reason why big companies don't like to
sell expensive investment products to retail investors. There's actually a
(30:57):
few different reasons. The first is it's really in a fit.
They'd rather, you know, get one hundred million dollar client
than a thousand, you know, a thousand you know, one
hundred thousand dollar clients. It's just like they don't want
to be dealing with all that administrative stuff. The second
piece is, hey, like, if their job is, you know,
managing money and there's some kind of end, there's kind
(31:20):
of an elitist thing to it, and that hey like,
come to us because this is how you get access, Like,
you don't want to offer it to everyone otherwise, you know,
why would anyone want it. The fact that it's being
offered to so many more people now is kind of like, Okay,
you're just trying to dump this on retail. As you know,
the musical chairs are ending. It kind of has that
(31:41):
feel to it to a certain extent. So there's a
lot out there that you wonder about. And the fact
that these companies that specialize in this alternative asset management
are at the front lines for what's getting beaten up
in the last you know, four weeks or so. Might
be a signal here, like there's something going on there
that that you just kind of perk up ears at
and you go, oh, like I need to pay attention there.
(32:05):
I don't even know how we got on this topic neither,
but we gotta take a break. We do, so, let's
take a break when we come back. Let's do a
little bit of FED talk when we return.
Speaker 1 (32:14):
Miss any of the show. The Financial Exchange Show podcast
is available on Apple, Spotify, and iHeartRadio. Hit the subscribe
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the Financial Exchange Radio Network. Find daily interviews and full
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Get cut up on anything and everything you might have missed.
(32:35):
This is the Financial Exchange Radio Network.
Speaker 2 (32:45):
All right, let's do a quick market update here. We've
got the Dow off four hundred and seven points about
one percent right now, the S and P down one
hundred and seventeen points about two percent, the NASDAC taking
it the hardest, down about six hundred and twenty one
points three point four percent right now on the Nasdaq
tenure US Treasury moving eleven basis points down to four
point two oh seven percent. So you got bonds getting
(33:07):
bit up, Oil down thirty four cents a barrel on
West Texas Intermediate to sixty six sixty nine, and we've
got gold down two dollars and nine cents per ounce
to twenty nine twelve. Even so overall you've got a
pretty steep cell off inequity markets, energy and gold not
really moving anywhere, and he got bond seeing some inflows there.
(33:28):
So certainly some nervousness and skiddishness in markets. And big
thing is, hey, when you look at where this market
actually stands right now, a lot of times we kind
of poopoom. We're like, well, this market hasn't really moved,
you know, too much or anything. And to be fair,
this is still regular, you know, normal market action. You
typically see a ten percent correction in the S and
(33:49):
P five hundred anywhere from every like twelve to twenty
four months, depending on you know, exactly how the market moves.
Where we stand right now with where you know the
S and P five hundred currently is is it is
now down about eight point six percent from it's high.
So we have kind of broken out to the low
end from the trading range that we had been in
(34:10):
since election day. The day before the election, the SMP
closed at fifty seven eighty two and it really had
not spent any time below that until the last couple
of days. We're now sitting, you know, almost two percent below,
So today's action really pushing us there. So if we
close below and then stay down there for a little bit,
this is kind of the first real extension to the
(34:31):
downside that we've seen. It still is something where hey,
the S and P five hundred is where it was
back in last July. So yeah, it's given up you know,
eight nine months of gains at this point. But obviously
market's a little nervous and certainly something where individuals, you know,
I can understand some nervousness out there if you're wondering,
(34:51):
ge like, how does this end up moving from here?
Speaker 3 (34:54):
Yeah, because look, nobody has any guarantee that this is
going to go one direction or another from here. Could
continue down very frequently historically has, but nobody actually knows
and certainly nobody knows what the next policy outcome from
the White House is going to be. But I can
certainly understand how investors would be starting to get nervous
now you've wiped out a few months of gains pretty quickly,
especially in some of those high flying companies that have
(35:16):
really made people money over the last few years. Here's
the one question that I would be asking myself as
an investor, and it's really a question you should be
asking yourself at any point in time, But how was
I prepared for a potential market downturn in recession going
into twenty twenty five? Like what specific parts of my
portfolio had me prepared for that potential outcome? And what
was my game plan going into this year in the
(35:38):
eventive one? And if you can answer that question in
like three sentences or less, then I'm not sure there's
really much that you need to be doing. But if
you can't, just honestly, if you can't answer that question
when looking at your investment portfolio and your retirement future
and trying to sort those things out, if you can't
honestly assess that and say here is where I am
(35:58):
prepared for that potential outcome, Here are the steps that
I took ahead of time, then I think you'd need
a second opinion, and if you would like one of those,
no commitment, just second opinions on what it is that
you are doing today, the potential upsides and downsides and
risks that you have when you approach your own portfolio.
Please give the folks at Armstrong Advisory Group a call.
(36:19):
We'd be happy to offer one of those. The phone
numbers eight hundred three nine three for zero zero one.
I know that markets like this can be nerve racking.
If you have questions about how you are prepared for it,
call us at eight hundred three nine three for zero
zero one.
Speaker 1 (36:35):
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 2 (36:52):
Mike, let's talk a little bit. Actually, I just want
to briefly hop forward to one story here in terms
of Mike, when's the last time we even saw a
piece published in any publication talking about dividends.
Speaker 4 (37:09):
Mid twenty tens.
Speaker 2 (37:10):
It's been a while, right, like a yields are higher,
and b stock performance has been good the last few years.
Twenty twenty two obviously was was a hiccup, but I
don't think anyone was like sitting there like, hey, dividends
in twenty twenty two, Why amsing?
Speaker 3 (37:23):
Why am I obsessed with dividends when I can get
four percent on a bond and tech stocks are going
up by thirty percent a year.
Speaker 2 (37:30):
But interesting point here where this piece from the Wall
Street Journal that hey, dividend stocks are dramatically or at
least the dividend indices are dramatically outperforming their non dividend counterparts.
Standard and Poors for the S and P five hundred
has a sub like index called the Dividend Aristocrats. It's
(37:52):
companies that have raised their dividends in each of the
past twenty five years. That index up about three and
a half percent, while the S and P five hundred,
again this is when it was published, you know, down
a couple percentage points on the course of the year.
So I don't know if this is you know, investors
specifically seeking out dividends or more just hey, those are
the companies that aren't as overvalued, and that's where they're
(38:13):
flocking to right now, but a little bit of noise
that we haven't heard on that front in recent years.
Quick Break, our two of the Financial Exchange is coming
right up.
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