October 21, 2025 • 38 mins
Mike Armstrong and Marc Fandetti explain why you shouldn't trust a publication that has the answers to protecting your portfolio. Apple stock hits new record on report of strong iPhone sales. Understand required minimum distributions. Andrew Ross Sorkin (CNBC, NYTimes, and author of 1929) joins the show to chat about today's economic conditions vs those in the 1920s.
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Episode Transcript
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Speaker 1 (00:00):
The Financial Exchange is produced by Money Matters Radio and
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(00:20):
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Armstrong and Money Matters Radio do not compensate each other
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Exchange with Mike Armstrong and Mark Vandetti. Your exclusive look
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(00:43):
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(01:06):
and Mark Vandetti.
Speaker 2 (01:10):
Good morning, Welcome back to the Financial Exchange. It's Mike,
Mark and Tucker with you on a Tuesday where we've
got markets in mixed territory. The Dow strongly positive for
the day, up nine tenths of a percent, the SMP
up about a fifth of a percent, and the Nasdaq
currently down thirty five points are a little bit more than
one tenth of a percent. We're in the midst of
earning season. Eighty nine S and P five hundred companies
(01:32):
reporting this week alone, Netflix, the biggest of today will
be going after the bell, but Ge Aerospace before Coca Cola,
Philip Morris, Raytheon, to name a few, all reported this morning. Tomorrow,
we'll be hearing from the likes of Tesla after the bell,
the one point four trillion dollar company and top still
(01:53):
in the top ten I believe, of yeah, obviously of
the S and P five hundred, SAP, IBM, Thermo Fisher
reporting tomorrow as well. Thursday, we'll hear from T Mobile, Intel, Union, Pacific, Honeywell,
and then Friday, is there anything big? Proctor Gamble, Actually,
Proctor Gamble will be reporting before the bell on Friday.
(02:14):
If also Friday, will get a report on the consumer
price index. All that ahead of next week's Federal Reserve
meeting as they tackle interest rates without government data. And
then finally later in the program, today we're gonna be
joined by Andrew Ross Sorkin, co host of Squakbox on
CNBC and New York Times best selling author, this time
(02:36):
for his book nineteen twenty nine, and talking about the
Great Depression and some of the comparison points between today
and the Roaring twenties. If you will, let's go over
to this Wall Street Journal piece mark anything else in
terms of markets or data catching.
Speaker 3 (02:53):
I was just thinking, it's been nice not having government data.
Nice to take a little break. And I don't mean
that sarcastic.
Speaker 4 (02:59):
As the guy who doesn't host a financial data show.
Speaker 3 (03:03):
Oh true, Well, you guys can change format.
Speaker 2 (03:06):
I mean we're actually thinking about doing recipes and ukuleles.
Speaker 3 (03:10):
Yeah, yeah, no, But honestly, it's so easy. We talked
in the last hour about.
Speaker 2 (03:15):
Tucker cantonies because he's got a mouthful apple right now,
but other screaming.
Speaker 3 (03:19):
About how government data, how the big economic reports are
often just not up to the task that we expect
of them. People think about GDP, or at least maybe
I used to is some kind of measure of economic welfare.
It is and it isn't. It doesn't capture the average
Americans experience the value of the stock market. It's a
(03:40):
different type of of of of of data. It's a price,
but it's It can be equally misinterpreted. The gap between
high earners and low earners. The extent to which high
earners account for spending further cloud's relationships between or a
mon ung variables that make it really hard to draw
(04:03):
conclusions to whether or not the economy is is good
in some sense for the average American just looking at GDP,
stock prices or unemployment. That's what I mean when I
say it's nice to take a step back from government data.
Hope we don't get we don't get poor quality government
data as a result of the shutdown. This is not
the type of break from government data that I suppose
is ideal, But in some ways it's just nice to
(04:24):
not have to cope with all the noise that's attended
with data.
Speaker 4 (04:27):
That's fair. Uh, and markets have not seemed to mind
one bit, as they have just continued to crazy roads.
Speaker 2 (04:34):
Yes and no, I mean Morgan Stanley did a report that,
on average, over every government shutdown that they looked at,
the stock market was up.
Speaker 4 (04:42):
I think an average we did.
Speaker 3 (04:43):
Yeah, you could say that analysis. We've done it internally too.
The problem is the sample is very, very, very small, small.
You only have one I think that's of the duration
that this one's now projected to be and it happened
in the middle of a booming market and economy. I
imagine if this shut if shutdowns had happened under a
less favorable economic circumstances. I don't imagine it's definitely the case,
(05:04):
you'd come to a very different conclusion.
Speaker 4 (05:06):
I guess there's probably some selection bias there.
Speaker 2 (05:08):
Right, If the economy is in a tail spin, you're
not gonna be willing to shut down the government when
you are well.
Speaker 4 (05:14):
You have to.
Speaker 3 (05:14):
Control there's bias in that way when since we have
time to talk about it, since we have no data.
But bias means, as you said, you don't have a
truly random sample. Bias can come from measurement problems, it
can come from omitting a critical variable. I'm not sure
how you'd adjust for the state of the there's way
too many potential factors influencing the stock market that you
(05:36):
cannot control for in your low model, which is what
we researchers do. Give me enough data and I can
give you a definitive answer. The uncertainty grows though, with
either measurement problems or things that you might have left
out of your little model that you should have put
in there. So stock market's picking up on a lot
of things. It is a little surprising that stocks would
continue to plow ahead with very little economic.
Speaker 2 (06:00):
Yeah, I guess my point would be, I would theorize
that lawmakers would be a lot less willing to shut
down the government in the event that the market was
dropping if we were in the middle of percentage point
of day or we were in the middle No, you're right,
everybody feels really het.
Speaker 4 (06:13):
We're gonna get paid. You're right, we're gonna ask a
bunch of work and they're not gonna do that.
Speaker 5 (06:18):
Right.
Speaker 2 (06:18):
You know, when when stock markets hitting all time highs
and uh and things are looking pretty good, sure shut
it down and.
Speaker 4 (06:24):
We'll we'll go to battle over this. Absolutely, that wouldn't
happen to nine now.
Speaker 3 (06:27):
There's a very diverse little feedback from markets to policy.
Right now, interest rates are falling, right, long term interest
rates anyway are stable to falling. Markets are up.
Speaker 2 (06:36):
So great news Mark the Wall Street Journal has the
solution to everyone's angst about whether or not we are
in an AI bubble with their guide to Cushioning your
Portfolio against an AI Bust. Should we do anything with
this other than throwing in the toilet? I I get
really worried when I see any news publication to tell
(07:00):
me that they've got a guide to cushioning your portfolio
from an AI bus. So I guess first things first,
I don't know if we are in an AI bubble.
I would venture to say that it is entirely possible
that it ends in a bust. And I'll also say
that every market cycle throughout our history has led to
(07:21):
a bust at some point, and so we will probably
see one at some point. Sure, But first thing, first
to acknowledge you know I'm talking right now, you're listening
to the program. I don't know anything about you. I
don't know how your portfolio is allocated today. I don't
know how old you are, I don't know what your
goals are, and so I would personally never give you
investment advice about how to guard your portfolio against an
(07:44):
ai bus. But Wail Street Journal thought that they could
maybe do so, and so they have several categories in
this piece here one would be equal weighted funds, another
healthcare stocks, international shares, software stocks, and gold.
Speaker 3 (08:00):
I think people tell you how that we did similar analysis,
So that's sort of top of mind for me, and
if you look at mine was in the context of
what happens. I think when regional banks pull back by
a lot, what sectors and alternative asset classes do best,
and it is dependably healthcare, staples, gold.
Speaker 4 (08:21):
Historically when regional banks.
Speaker 3 (08:23):
Yes, but yeah, there is. It's very easy to do
this analysis. You just filter by a big draw down
in the variable the dis of interest and in this case,
in my case it was regional banks. In your case
it's tech and tech held up okay too. And interestingly,
in the early stages of what could be a bigger
draw down in regional banks, there was only anyway for
(08:44):
what that's worth.
Speaker 2 (08:44):
One of these that I figured some people might not
know about. What are equal weighted funds? Can you can
you describe them to people? And I guess just just
compared to the s and P five.
Speaker 3 (08:52):
When, Yeah, that's the reference, natural reference point. When you
buy a stock index font typically it's market capitalization weighted.
The most valuable companies in terms of the total value
of their stock get the biggest weight. So Nvidia is
the biggest holding in the S and P five hundred
index of Leading US Companies, which is technically not market
cap weighted. So it might be better to use the
(09:13):
Russell one thousand in this example. But we're worry too
far down this road. Sure, so it's determined by market
cap weight. Yes, there are there are good theoretical reasons
for starting with a market cap weighted portfolio when you're
building your portfolio of stocks. It's a little harder to
do with bonds for reasons, we don't have to get
into and equal weighted portfolio. Says, I don't care what
(09:34):
the biggest companies are. If there are ten companies, if
they are five hundred companies in the index, one five
hundredth of every dollar I invest will go into so
you know, a fifth of a cent if you want
to think about it that way, fifth of one hundredth
we'll go into. Uh, We'll go into each company without
regard to what the overall value of the company is
why would they favor that? Well, if you think the
(09:56):
biggest companies are likely to teeter because they've and.
Speaker 4 (10:00):
If you're worried about concentration risks.
Speaker 3 (10:02):
Yeah, let's just wait it instead of putting, instead of
attaching market cap weights to each But that that gives
you biases too that you may not be away. You
got too much small and mid in that case.
Speaker 4 (10:11):
Right.
Speaker 2 (10:12):
I was going to bring up, like you, any decision
you make here, don't let yourself off as you're not
making it decision.
Speaker 3 (10:18):
No, you're making an active management decision. You're betting you
know better than the average investor, than the wisdom if
you like of the crowds that is represented by the
market price of an asset. You might end up being right,
But be advised you're introducing new biases. And I don't
mean biases in a bad way. I just mean you've
got tilts now exposures in your portfolio you didn't have
before if you do it that way.
Speaker 4 (10:39):
Let's take a quick break.
Speaker 2 (10:40):
When we come back, we're playing a little bit of
trivia here next on the Financial Exchange.
Speaker 1 (10:46):
Here the Financial Exchange every day from eleven to noon,
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Speaker 6 (11:23):
The Financial Exchange is a proud partner of the Disabled
American Veterans Department of Massachusetts and this year's DAV five
K is Saturday, November eighth at Castle Island. The race
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Please visit DAV fivek dot Boston to make your gift today.
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Your participation helps provide vital services like free transportation to
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Donate today at DAV fivek dot Boston. That's DAV five
k dot Boston. Time for trivia here in the Financial Exchange.
In On September third, nineteen twenty nine, the Dow Jones
(12:07):
Industrial average hit a high of three hundred and eighty one.
A month and a half later, the market crashed, taking
the Dow down with it. It took many years for
the Dow to climb back up and beat its previous
high of three hundred and eighty one. So our trivia
question today, how many years did it take for the
Dow Jones to pass its record high in nineteen twenty nine?
(12:31):
Once again, how many years did it take for the
Dow Jones to pass its record high in nineteen twenty nine?
Be the fourth person today to text us at six
one seven thirty six two thirteen eighty five with the
correct answer and win a Financial Exchange Show T shirt.
Once again. The fourth correct response to Texas to the
number six one seven three six two thirteen eighty five
(12:54):
will win that T shirt. See complete contest rules at
Financial Looks, Change Show dot com mark.
Speaker 2 (13:00):
If there's been one reliable trend in markets so far
this year, especially since the spring, it has been artificial intelligence. Obviously,
beginning of this year was much more about trade and
tariffs and the new Trade Order, but since then it's
all been about artificial intelligence, and to that end, Apple
has been sort of left behind in the discussion it's
not as though their stock price has taken a giant head.
Speaker 3 (13:21):
They're not making the massive investments.
Speaker 2 (13:23):
They're not making these huge investments, and they're not seeing
the benefit from the lack of investment.
Speaker 3 (13:31):
Trust me, I know you know this.
Speaker 2 (13:35):
The the stock for Apple was down until about September
of this year, when it's just slightly turned positive now,
but you know, far away from what you've seen from
the giant AI stocks today up about a quarter of
a percent. Was it yesterday that it was that big?
I think four percent or so on on some news,
And so in spite of their lack of artificial intelligence investment,
(13:58):
which people can bringing up as though it's some weird thing,
my counterpoint would be this is always what Apple does.
Apple is an expert at being the last to a
new technology and then making it great for its users.
But nonetheless, they've been criticized a fair bit this year
on their lack of investment in aiither lack of progress
on any sort of built in artificial intelligence on their phones.
(14:21):
And yet they had a pretty big day yesterday on
apparent early sales of the new iPhone seventeen, looking pretty
good and outpacing last year's pace. Of sales in both
in the US and China, according to one research firm, at.
Speaker 3 (14:35):
Least well, look, from the point of view of a consumer,
is it obvious that Microsoft's big investments have paid off?
Are you using copilot on outlook or any No, it's
it doesn't do what you wanted to do half the
time and the other time the other half of the time,
it doesn't do it. Well, look, I don't. That's more
critical than I meant for it to sound.
Speaker 4 (14:57):
I guess my point is ask saying Microsoft sucks is
what you're trying.
Speaker 3 (15:00):
I'm saying I'm not. I've not unlike in the early
stages of the Internet boom, which had had a tangible impact.
I'm being a little bit sloppier, but I'm gonna say
it had a tangible impact on not just on economic
growth and productivity at the time, though there were many
years of investments in it leading up to it. I've
(15:22):
not seen anything as a consumer, and some of AI
is operating behind the scenes making processes easier, but I've
not seen anything life changing the way I felt it
can experience the Internet as a as a life changing
series of the culmination of a life series, a life
changing series of innovations.
Speaker 4 (15:41):
Yeah, so that's all.
Speaker 2 (15:42):
Nonetheless, Apple has taken a very slow approach to all this.
And again why I bring up that that seems normal
to me. Apple was not the creator of the first
MP three player. They weren't the creator of the first
you know that was who created the first MP three player?
I don't even know, but we don't talk about them anymore,
maybe or something I think it was. They were not
(16:02):
the first creator of a smartphone that was BlackBerry. They
were not the first creator of wireless headphones. They just
made them really easy to use, work within their network
of existing customers, and therefore made a ton of money
on those innovations. Years later, now they've gotten in trouble
(16:24):
for some of that stuff, and on their Apple Watch
they tried to rip off some technology when it came
to oxygen sensors, and so, you know, this is not
a universal strategy, and maybe it doesn't work at some
point in the future. But all the criticisms that I've
heard about Apple not jumping in with both feet when
it comes to artificial intelligence, I've just I don't know,
I've kind of quietly pumped the.
Speaker 4 (16:42):
Brakes on to say that's never been their strategy.
Speaker 3 (16:45):
What specifically is people's concern, what.
Speaker 2 (16:48):
Their concern would be that the progress that Google is
making with their AI Virtual assistant on my phone, which
is a Google.
Speaker 3 (16:56):
Fan, Okay, so it's phone based, it's phone software. This
criticism is phone software based. They feel like Apple's lagging
and if they had more horsepower they could run. Is
there something that is there something on the pre Is
there something that they're trying to engineer in Siri that
could be done if they just had more processors. I'm
more simplifying what a data center is, but I don't
(17:17):
have any I'd love for that to be Okay, Well,
neither one of us is a stock analyst. Maybe a
stock analyst has more specific insight just where they are.
They falling behind because they're on the precipice of something
and they're not able to execute because they don't have
the horsepower to do it.
Speaker 4 (17:33):
Here's what I am willing to say.
Speaker 2 (17:35):
Uh, I have a Android phone, a Google Pixel phone specifically,
which has Gemini and and you know, an AI Virtual
assistant built into it. My wife has an iPhone that
has Siri, and when it comes to very basic things,
the Google phone is significantly better at like a voice
(17:56):
activated virtual assistant function than the Apple phone. I'm very
confident saying that in my experience using the two of them,
whether I'm driving and using it or whether I'm just
asking it basic questions, giving it basic tasks, it is
better at that. I will also say that it's always
been better and that you know, it's increased a little
bit since we've been talking about an artificial intelligence, but
(18:17):
not significantly, and so that I think is the investor concern.
But again I would shoot back at that and say
that's all well and good. My wife ain't changing systems.
She's not going from an iPhone to a Google phone
because of her perceived, uh you know, difference in the
usability of the virtual assistant on the two phones.
Speaker 4 (18:38):
So I'm not sure that that matters.
Speaker 2 (18:40):
But I can confidently say that the progress that Google
is making on my ability to assign an AI tool
tasks and you know, have it be slightly convenient in
my life is far and way better than what Apple
has put out there on their devices so far. But again,
if I'm Apple, I'm probably just going to wait until
one of those companies will sell me their tool and
(19:01):
then just put it onto my device anyway, and if
history is a guide, it'll be easy to use, well integrated,
and heck, the company might even pay me to do it.
Speaker 4 (19:12):
So that's where I land with it. Let's take a
quick break.
Speaker 2 (19:16):
When we come back, we're gonna have a full market
update next with Wall Street Watch.
Speaker 1 (19:38):
Bringing the latest financial news straight to your radio. Every day.
It's the Financial Exchange on the Financial Exchange Radio Network.
Time now for Wall Street Watch. A complete look at
what's moving markets so far today right here on the
Financial Exchange Radio Network.
Speaker 6 (19:57):
Markets and mixed territory as investors we sift through a
new batch of third quarter earnings from major names including
General Motors, GE Aerospace, Coca Cola, and many more. Right now,
the Dow is up by seven tenths of one percent,
or three hundred and thirty seven points higher. SMP five
hundred is up eight points, are about a tenth of
a percent, NASDAC down nearly a tenth of a percent
(20:20):
or twenty points lower, Russell two thousand dipping into negative
territory mostly flat at the moment. Tenure treasureel is down
three basis points at three point nine to five five percent,
and crude oil up about half a percent higher training
a fifty seven dollars and eighty cents a barrel before
we get into earnings. Some breaking news in the media
(20:41):
space this morning. After several outlets of reporting that Warner
Brothers Discovery initiated a review of strategic alternatives in response
to acquisition interest it has received from multiple parties, CNBC
is reporting that Netflix and Comcasts are among the interested parties.
Warner Brothers stock is jumping eleven percent on that news. Meanwhile,
(21:04):
shares in GM are surging fifteen percent now after the
automaker posted a third quarter earnings and revenue beat and
raised its full year guidance. The company's three point four
billion dollars in operating income adjusted for certain items, exceeded
analyst expectations of two point seven billion. Meanwhile, jet engine
(21:24):
company GE Aerospace handily beat third quarter earnings and revenue
forecasts and also hiked its full your outlook. Shares are
about up or excuse me, or up about two percent elsewhere.
Coca Cola now up three percent after the beverage and
snack giant reported better than expected quarterly results as higher
prices helped lift sales. Regional bank Zion's Ban Corp. Reported
(21:47):
higher quarterly earnings despite the fifty million dollar charge off
it disclosed last week. Shares are up about two percent.
Philip Morris lifted its annual guidance as smokeless tobacco products
continued to drive growth. However, shares are down about eight percent.
And after today's closing bill, we'll see earnings from Netflix,
Capital One, Mattel and Texas Instruments. I'm Tucker Silva and
(22:11):
that is Wall Street Watch. And in the previous segment,
we asked you the trivia question how many years did
it take for the Dow Jones to pass its record
high in nineteen twenty nine. That'll be twenty five years
after the crash out of nineteen twenty nine. It wasn't
until nineteen fifty four that the dowd Jones beat its
previous record. Brian from woober Mass is our winner today
(22:32):
taking on a Financial Eks Shange Show t shirt. Congrats
to Brian. We play trivia every day here in the
Financial Looks Change. See complete contest rules at Financial Looks
Shane Show dot com.
Speaker 2 (22:42):
A brand new guide out from the Armstrong Advisory Group
this month on understanding required minimum distributions to talk about
this guy, And I've got to talk about a a story.
A client I was meeting with a couple of weeks ago,
and it was a ninety year old and her daughter,
and we were talking through required minimum distributions. The nine
year old client obviously quite familiar with them at that stage,
(23:04):
and we were just mentioning through all these different rules
that apply, and we walked through it and it was okay,
we've got mom and her set of rules. And then
we talked about what happens when mom passes away and
if that ira gets left to daughter, and we talked
about that set of rules separately. The daughter mentions, you know,
my husband passed away a couple of years ago and
(23:25):
I don't remember these rules applying to his retirement accounts.
And I said, oh, yeah, there is a different set
of required minimum distribution rules that apply when it's a spouse.
And then, just for the fun of it, I brought
up my mother in law who was not married to
a man, but was partners with a man for over
a decade and he passed away, and there was a
(23:47):
different set of rules for that individual who passed away
when it comes to required minimum distributions. If I have
left you with your head spinning. It's because these are
really complicated rules that have different sets of reals depending
on who you are, how old you are in, what
stage of life you are in, and what type of
account you have. If you would like our brand new,
(24:07):
comprehensive guide on Understanding Required minimum Distributions, it is free
and you request it by calling eight hundred three nine
three for zero zero one. Again, it's our new Guide
on Understanding Required minimum Distributions. You can request it at
Armstrong Advisory dot com or eight hundred three nine three
for zero zero one.
Speaker 1 (24:26):
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 make contact you to offer investment
advisory services.
Speaker 2 (24:42):
We have got to take a quick break. When we
come back. Andrew Ross Sorkin, author of nineteen twenty nine
co host of CNBC Squak Box, is joining us next
for what I consider to be the interview of the year.
Stay tuned right here, folks.
Speaker 1 (24:55):
The Financial Exchange Show podcast drops every day on Apple, Spotify,
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(25:18):
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Radio Network.
Speaker 4 (25:38):
We are joined now by Andrew Ross Sorkin.
Speaker 2 (25:40):
He's a New York Times bestselling author, the co host
of CNBC squawk Box, and joins us to discuss this
brand new book, nineteen twenty nine, The Inside Story of
the Greatest Crash in Wall Street History.
Speaker 4 (25:52):
Andrew, thanks so much for joining us. Appreciate it.
Speaker 7 (25:54):
Thanks for having me. Great to see it.
Speaker 1 (25:56):
So.
Speaker 2 (25:57):
You know, you wrote Too Big to Fail in two
thousand and nine, and he only had like a year
to prep that one. What took so long on this book, Andrew?
Speaker 5 (26:05):
Honestly, it was just a much longer process than I
ever expected or imagined. This was a book really about
going into the archives and finding transcripts and memos and
diaries and letters and all sorts of material that I
had to chase down frankly, all over the country.
Speaker 7 (26:22):
When I got involved in this.
Speaker 5 (26:23):
Project, probably close to a decade ago, I thought I
could do it.
Speaker 7 (26:27):
In two or three years, max.
Speaker 5 (26:29):
And it just sort of took over every part of
my life in the best way in some senses, because
it just, you know, these characters were so fascinating, and
I think getting underneath it being inside the room, which
is what I was trying to do with this story,
sort of like I did in Too Big to Fail,
you know, just was all encompassing.
Speaker 4 (26:49):
Well, so anyways that part comes across.
Speaker 2 (26:52):
I mean, the details of those people's lives at the
time was truly fascinating to me as somebody who's read
the textbooks on the Great Depression.
Speaker 4 (27:00):
Obviously, this is a very different piece.
Speaker 2 (27:01):
You're right in the forward that you know the drama
of nineteen twenty nine is misunderstood or unknown by the
public today. But now that you've written this, and I'm
sure you've done book tours and talked to all sorts
of folks, what are the most common details or themes
that you found the public just doesn't realize about the
Great Depression.
Speaker 5 (27:21):
Oh goodness. I mean, I think there's so many aspects
to it. I think, you know, when I went into
this project, most people that I know would say, Hey,
you know, I know that I know that there was
a crash in nineteen twenty nine. I think people think
it happened on one day. They think it was a
direct line to the Great Depression, and.
Speaker 7 (27:37):
That therefore that the Great Depression just happened.
Speaker 5 (27:39):
Yeah, I think none of that's true, right, you know,
the crash was actually a whole sequence of crash. Is
oddly the market ot be came back afterwards in ways
that you I think are just shocking, and.
Speaker 7 (27:54):
It really was yeah, and unrealized.
Speaker 5 (27:57):
And then I think it was the crash itself was
really more of a domino. And the story is not
just about ninet twenty nine. The book that I wrote
really goes through nineteen thirty three. It was really a
series of dominoes of then very bad policy choices that
really led to the Great Depression. So when you think
about unemployment reriching twenty five percent in nineteen thirty two
(28:19):
or nine thousand, banks failing in nineteen thirty three, or
tented camps like Hooverville's. All of that was a function
of mistakes that President Hoover was making. He was trying
to raise taxes at the time he was implementing tariffs,
which obviously has a parallel to today in part by
the way, because he was trying to make good on
a pledge to farmers who had tried he tried to
(28:42):
get to vote for him in nineteen twenty eight originally.
So there were lots of just periods, moments in this
that I think shifted the balance. The role of the
Federal Reserve, which effectively sat on its hands during most
of this period, did not flood the system with liquidity
the way they should have, in part because of the
political pressure.
Speaker 7 (29:00):
Again strange parallel.
Speaker 5 (29:02):
As we have conversations today about, you know, the independence
of the Fed and what political pressure looks like, Well
we saw what political pressure actually looks like in nineteen
twenty nine. So I think those are so money of
the sort of systematic pieces of it, but it really
is about the people.
Speaker 7 (29:16):
And their own motivations and incentives. And I think when
you see.
Speaker 5 (29:19):
What the decision makers were actually thinking and what they
were saying and the conversations they're having with their wives.
Speaker 2 (29:25):
It changes everything, you know, Andrew, one piece that really
stood out to me was, you know, all the discussion
about the FED and Congress at the time, in the
nineteen twenties through the early thirties, how do you view
I mean, you conduct interviews with all of these people
and business leaders and others.
Speaker 4 (29:41):
How do you view changes in those.
Speaker 2 (29:44):
Institutions over the course of the last century, like the
FED and their attitude towards markets and downturns, and Congress too.
I mean, in my mind when reading your book, it
seemed vastly different, at least the attitudes towards these types
of events in those institutions.
Speaker 5 (30:00):
Well, I think it's you know, there's so many similarities
in so many differences. One of the similarities is actually
that you know, famously, there was a senator named Carter
Glass who ultimately puts his name on a bill called
the Glass Tingle Bill, which breaks up the banks in
nineteen thirty three, quite famously, but you know, he was
the Elizabeth Warren of his time, and he was railing
about Wall Street and actually guy Naed Charles Mitchell, who's
(30:21):
another main character in the book who he believed was
going to, you know, up end America because of all
the leverage in the system. So there were these people
who do have these sort of parallels to today. At
the same time, I think politically there was a view
you don't flood.
Speaker 7 (30:36):
The system, for example, with money.
Speaker 5 (30:39):
After a crash, you hold back, you know, you raise taxes,
you do all sorts of thing. You know, you get
into an austerity period. But the lesson, and by the way,
we saw that lesson actually get learned in two thousand
and eight by Ben Bernanke who had written his thesis
is phg Thesis at Princeton on the Great Depression. So
he saw this firsthand in terms of just you know,
(31:01):
the mistakes are unfortunately oftentimes when there is a crisis,
you have to reward the arsonists. I mean, it's a
it's a it's a very it's sort of a hard
pill to swallow.
Speaker 2 (31:11):
Andrew leverage was of course a huge piece of your
story margin Low and all the speculation that accompanied it,
and seemingly part of every stock market crisis that we see. Yes,
I wonder, you know, from your standpoint, where is the
leverage in today's market. Where are there worrying degrees and
leverage in today's market? If you if you do see that,
(31:33):
I'm sure there are areas where we can go find that.
And what are the differences between then and now?
Speaker 7 (31:40):
So a couple of things.
Speaker 5 (31:41):
First of all, I do believe that leverage really is
the match that lights the fire of every financial crisis.
It really is that you can have a lot of
you can make a lot of mistakes without enough leverage,
doesn't it doesn't boil over to a demonstrable crisis. You know,
back then, there were no there was no sec there
was no insider trading laws. There was nothing to you know,
stop you from hump and dump schemes. There were no
(32:04):
capital requirements that the banks had. The good news is
a lot of that has been solved or at least
resolved to some degree. Having said that, there's still a
lot of leverage in the system. You go look at
margin loans today, they exist. You look at what's happening
in the AI boom, maybe bubble. You know, there's a
lot of leverage not you know, people look and say, oh,
(32:24):
there's cash coming out of you know, Meta and Google
are paying for all of these data centers.
Speaker 7 (32:29):
Yes, but you go look at how.
Speaker 5 (32:31):
Some of the data centers are being created in terms of,
you know, who's funding the real estate piece of it,
who's funding all the energy and.
Speaker 7 (32:38):
Electricity that's required. There is serious leverage there.
Speaker 5 (32:41):
And the other piece of it is it's in the
private credit space, which you know, people talk about as
the shadow banking system.
Speaker 7 (32:47):
So I don't think we have a full sense of
what it is.
Speaker 5 (32:49):
There's part of it should be better off in some
ways because it's not on the balance sheets of the banks.
It's in these private credit funds. But those private credit
funds are sometimes leveraged and extended to the banks.
Speaker 7 (32:59):
So I think we have to do a little bit
more work to really.
Speaker 5 (33:02):
Understand all of that, and I would actually urge people
to focus on that.
Speaker 2 (33:06):
Yeah, I know a lot of our focus frankly, over
the course the last few years has been the expansion
of private credit and just I think just over the
course the last few weeks with some bankruptcies, we're starting
to see under the covers there of where that can
seek its It's.
Speaker 5 (33:19):
Jamie Dimond, a cockroach in the cockroaches exactly, the cockroaches.
Speaker 2 (33:24):
Andrew, what would you know you've spent the last few
years living in these people's diaries and personal writings about
the Great Depression. What would the Wall Street and political
leaders of the nineteen twenties and thirties think of some
of the gambling like products of today, Like I think
of zero day expiration options, prediction markets, even sports gambling
today is more prevalent. Where How do you think people
(33:48):
of that age would reflect on where we've come today.
Speaker 5 (33:51):
Well, I think those who went through the crash would
think it's slightly insane that some of this is happening.
I think they would argue, you know, you want look,
you want some kind of speculation of the system.
Speaker 7 (34:01):
You do.
Speaker 5 (34:02):
Actually, it's it's the twin of innovation. So you want
new products, but you need to do it responsibly. And
I think there's question mark about what that looks like.
You know, you haven't mentioned where I think actually the
biggest amount of leverage exists, which is in crypto right now.
I mean there are some of these products that have
you know, twenty times fifty times leverage.
Speaker 7 (34:19):
I don't think it's a huge part of the cryptos space.
Speaker 5 (34:21):
I think it's maybe five or ten percent of the
crypto space, but it's still meaningful. And I think that's
you know, meme stocks, that's where we you know, places
where there are where there isn't regulation is where I
would I would argue we should probably be more focused
than some of the other places in the markets today.
Speaker 4 (34:40):
Yeah, I tend to agree.
Speaker 2 (34:40):
I mean, I live and breathe in the stock market
every day, and I don't see that same relentless optimism
about you know, the lack of possibility ever for a crash,
as you wrote about leading up to the nineteen twenty
nine crash. But I will say I can see that
echoed in some parts of other markets. And so you
mentioned crypto. Is there is there anywhere else that you
you just see this relentless push towards optimism in markets
(35:04):
in twenty twenty five or over the course of the
last few years.
Speaker 5 (35:07):
Look, Ai, I mean I just think in video is
the You know, there was a stock called RCA.
Speaker 7 (35:13):
It was a ticker symbole radio in nineteen twenty nine.
It was the future.
Speaker 5 (35:16):
It was radio and Babe had patents for television and
people said this is going to change the world, and
it was going to change the right world. It was
the video of its time. It was the meme stock
of its time, and that stock, you know, I think
it was got up as highs I think something like
three hundred or five hundred dollars split adjusted, and then
fell down a couple years later to two or three dollars.
So things can happen, and we just need to be
(35:38):
aware that those things can happen. I think some of
these round trip deals that in VideA and others are making,
you know, by by default, should be red flags.
Speaker 7 (35:47):
That doesn't mean that it's going to fall or that
it's you know, going to be a crash or anything else.
Speaker 5 (35:51):
This could all work out and be great. It just
requires more vigilance.
Speaker 2 (35:56):
Andrew, excellent book. Really appreciated it. I appreciate you joining
us today. Andrew will also be at the back Bay
Events Center this Friday, October twenty fourth for a discussion
sponsored by the Boston Book Festival. You can check it
out online and again. The book is nineteen twenty nine
by Andrew Ross, Ork and Andrew, thanks so much for
joining us.
Speaker 4 (36:15):
Appreciate it, Tanke you coverage.
Speaker 7 (36:17):
Appreciate it. See in Boston.
Speaker 4 (36:18):
Yeah, thank you, Ben.
Speaker 2 (36:21):
Yeah, it is one piece stuck with me throughout the
entire book, which is we do not have a full
appreciation for how those things played out. And frankly, the
generation that had a real knowledge of the Great Depression
and what led up to it and the feelings behind it, frankly,
they're not with us anymore, and so we're now in
(36:43):
a generation that does not remember the Great Depression.
Speaker 3 (36:46):
Yeah, it's one of the parallels. Is the financial kindling
and the FED is response. Of course, my usual rant,
The FED is responsible for, broadly speaking, financial conditions. The
kindling mike is certainly there, and when the kindling is excited,
if any spark could result in a big conflagration, the
feding courage is too much risk taking, which I feel
(37:07):
other analysts feel like it's doing right now. The stage
is set. The question is what, if anything, will provide
the spark to ignite the gainlink. Maybe nothing.
Speaker 2 (37:16):
Markets again, you said, markets have turned slightly positive for
the day. The Dow currently up three hundred and twenty
one points, seven tenths of a percent, the S and
P five hundred up about ten points, a little bit
more than a tenth of a percent. The Nasdak is
almost exactly flat for the day. Taking a look around
gold and silver were both taking a hit earlier. They've
(37:38):
recovered some of their losses, but gold still down two
hundred dollars an ounce four point seven percent on the day,
Silver off three dollars announce off over six percent for
the day. That's all the time that we have for
today's Financial Exchange, but the earnings are going to continue.
We've got Netflix reporting after the bell today and Tesla
coming later this week, so tune in all folks, have
(38:00):
a great rest of your day, and we'll be back
on the Financial Exchange tomorrow.
The Financial Exchange is produced by Money Matters Radio and
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(00:20):
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(00:43):
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(01:06):
and Mark Vandetti.
Speaker 2 (01:10):
Good morning, Welcome back to the Financial Exchange. It's Mike,
Mark and Tucker with you on a Tuesday where we've
got markets in mixed territory. The Dow strongly positive for
the day, up nine tenths of a percent, the SMP
up about a fifth of a percent, and the Nasdaq
currently down thirty five points are a little bit more than
one tenth of a percent. We're in the midst of
earning season. Eighty nine S and P five hundred companies
(01:32):
reporting this week alone, Netflix, the biggest of today will
be going after the bell, but Ge Aerospace before Coca Cola,
Philip Morris, Raytheon, to name a few, all reported this morning. Tomorrow,
we'll be hearing from the likes of Tesla after the bell,
the one point four trillion dollar company and top still
(01:53):
in the top ten I believe, of yeah, obviously of
the S and P five hundred, SAP, IBM, Thermo Fisher
reporting tomorrow as well. Thursday, we'll hear from T Mobile, Intel, Union, Pacific, Honeywell,
and then Friday, is there anything big? Proctor Gamble, Actually,
Proctor Gamble will be reporting before the bell on Friday.
(02:14):
If also Friday, will get a report on the consumer
price index. All that ahead of next week's Federal Reserve
meeting as they tackle interest rates without government data. And
then finally later in the program, today we're gonna be
joined by Andrew Ross Sorkin, co host of Squakbox on
CNBC and New York Times best selling author, this time
(02:36):
for his book nineteen twenty nine, and talking about the
Great Depression and some of the comparison points between today
and the Roaring twenties. If you will, let's go over
to this Wall Street Journal piece mark anything else in
terms of markets or data catching.
Speaker 3 (02:53):
I was just thinking, it's been nice not having government data.
Nice to take a little break. And I don't mean
that sarcastic.
Speaker 4 (02:59):
As the guy who doesn't host a financial data show.
Speaker 3 (03:03):
Oh true, Well, you guys can change format.
Speaker 2 (03:06):
I mean we're actually thinking about doing recipes and ukuleles.
Speaker 3 (03:10):
Yeah, yeah, no, But honestly, it's so easy. We talked
in the last hour about.
Speaker 2 (03:15):
Tucker cantonies because he's got a mouthful apple right now,
but other screaming.
Speaker 3 (03:19):
About how government data, how the big economic reports are
often just not up to the task that we expect
of them. People think about GDP, or at least maybe
I used to is some kind of measure of economic welfare.
It is and it isn't. It doesn't capture the average
Americans experience the value of the stock market. It's a
(03:40):
different type of of of of of data. It's a price,
but it's It can be equally misinterpreted. The gap between
high earners and low earners. The extent to which high
earners account for spending further cloud's relationships between or a
mon ung variables that make it really hard to draw
(04:03):
conclusions to whether or not the economy is is good
in some sense for the average American just looking at GDP,
stock prices or unemployment. That's what I mean when I
say it's nice to take a step back from government data.
Hope we don't get we don't get poor quality government
data as a result of the shutdown. This is not
the type of break from government data that I suppose
is ideal, But in some ways it's just nice to
(04:24):
not have to cope with all the noise that's attended
with data.
Speaker 4 (04:27):
That's fair. Uh, and markets have not seemed to mind
one bit, as they have just continued to crazy roads.
Speaker 2 (04:34):
Yes and no, I mean Morgan Stanley did a report that,
on average, over every government shutdown that they looked at,
the stock market was up.
Speaker 4 (04:42):
I think an average we did.
Speaker 3 (04:43):
Yeah, you could say that analysis. We've done it internally too.
The problem is the sample is very, very, very small, small.
You only have one I think that's of the duration
that this one's now projected to be and it happened
in the middle of a booming market and economy. I
imagine if this shut if shutdowns had happened under a
less favorable economic circumstances. I don't imagine it's definitely the case,
(05:04):
you'd come to a very different conclusion.
Speaker 4 (05:06):
I guess there's probably some selection bias there.
Speaker 2 (05:08):
Right, If the economy is in a tail spin, you're
not gonna be willing to shut down the government when
you are well.
Speaker 4 (05:14):
You have to.
Speaker 3 (05:14):
Control there's bias in that way when since we have
time to talk about it, since we have no data.
But bias means, as you said, you don't have a
truly random sample. Bias can come from measurement problems, it
can come from omitting a critical variable. I'm not sure
how you'd adjust for the state of the there's way
too many potential factors influencing the stock market that you
(05:36):
cannot control for in your low model, which is what
we researchers do. Give me enough data and I can
give you a definitive answer. The uncertainty grows though, with
either measurement problems or things that you might have left
out of your little model that you should have put
in there. So stock market's picking up on a lot
of things. It is a little surprising that stocks would
continue to plow ahead with very little economic.
Speaker 2 (06:00):
Yeah, I guess my point would be, I would theorize
that lawmakers would be a lot less willing to shut
down the government in the event that the market was
dropping if we were in the middle of percentage point
of day or we were in the middle No, you're right,
everybody feels really het.
Speaker 4 (06:13):
We're gonna get paid. You're right, we're gonna ask a
bunch of work and they're not gonna do that.
Speaker 5 (06:18):
Right.
Speaker 2 (06:18):
You know, when when stock markets hitting all time highs
and uh and things are looking pretty good, sure shut
it down and.
Speaker 4 (06:24):
We'll we'll go to battle over this. Absolutely, that wouldn't
happen to nine now.
Speaker 3 (06:27):
There's a very diverse little feedback from markets to policy.
Right now, interest rates are falling, right, long term interest
rates anyway are stable to falling. Markets are up.
Speaker 2 (06:36):
So great news Mark the Wall Street Journal has the
solution to everyone's angst about whether or not we are
in an AI bubble with their guide to Cushioning your
Portfolio against an AI Bust. Should we do anything with
this other than throwing in the toilet? I I get
really worried when I see any news publication to tell
(07:00):
me that they've got a guide to cushioning your portfolio
from an AI bus. So I guess first things first,
I don't know if we are in an AI bubble.
I would venture to say that it is entirely possible
that it ends in a bust. And I'll also say
that every market cycle throughout our history has led to
(07:21):
a bust at some point, and so we will probably
see one at some point. Sure, But first thing, first
to acknowledge you know I'm talking right now, you're listening
to the program. I don't know anything about you. I
don't know how your portfolio is allocated today. I don't
know how old you are, I don't know what your
goals are, and so I would personally never give you
investment advice about how to guard your portfolio against an
(07:44):
ai bus. But Wail Street Journal thought that they could
maybe do so, and so they have several categories in
this piece here one would be equal weighted funds, another
healthcare stocks, international shares, software stocks, and gold.
Speaker 3 (08:00):
I think people tell you how that we did similar analysis,
So that's sort of top of mind for me, and
if you look at mine was in the context of
what happens. I think when regional banks pull back by
a lot, what sectors and alternative asset classes do best,
and it is dependably healthcare, staples, gold.
Speaker 4 (08:21):
Historically when regional banks.
Speaker 3 (08:23):
Yes, but yeah, there is. It's very easy to do
this analysis. You just filter by a big draw down
in the variable the dis of interest and in this case,
in my case it was regional banks. In your case
it's tech and tech held up okay too. And interestingly,
in the early stages of what could be a bigger
draw down in regional banks, there was only anyway for
(08:44):
what that's worth.
Speaker 2 (08:44):
One of these that I figured some people might not
know about. What are equal weighted funds? Can you can
you describe them to people? And I guess just just
compared to the s and P five.
Speaker 3 (08:52):
When, Yeah, that's the reference, natural reference point. When you
buy a stock index font typically it's market capitalization weighted.
The most valuable companies in terms of the total value
of their stock get the biggest weight. So Nvidia is
the biggest holding in the S and P five hundred
index of Leading US Companies, which is technically not market
cap weighted. So it might be better to use the
(09:13):
Russell one thousand in this example. But we're worry too
far down this road. Sure, so it's determined by market
cap weight. Yes, there are there are good theoretical reasons
for starting with a market cap weighted portfolio when you're
building your portfolio of stocks. It's a little harder to
do with bonds for reasons, we don't have to get
into and equal weighted portfolio. Says, I don't care what
(09:34):
the biggest companies are. If there are ten companies, if
they are five hundred companies in the index, one five
hundredth of every dollar I invest will go into so
you know, a fifth of a cent if you want
to think about it that way, fifth of one hundredth
we'll go into. Uh, We'll go into each company without
regard to what the overall value of the company is
why would they favor that? Well, if you think the
(09:56):
biggest companies are likely to teeter because they've and.
Speaker 4 (10:00):
If you're worried about concentration risks.
Speaker 3 (10:02):
Yeah, let's just wait it instead of putting, instead of
attaching market cap weights to each But that that gives
you biases too that you may not be away. You
got too much small and mid in that case.
Speaker 4 (10:11):
Right.
Speaker 2 (10:12):
I was going to bring up, like you, any decision
you make here, don't let yourself off as you're not
making it decision.
Speaker 3 (10:18):
No, you're making an active management decision. You're betting you
know better than the average investor, than the wisdom if
you like of the crowds that is represented by the
market price of an asset. You might end up being right,
But be advised you're introducing new biases. And I don't
mean biases in a bad way. I just mean you've
got tilts now exposures in your portfolio you didn't have
before if you do it that way.
Speaker 4 (10:39):
Let's take a quick break.
Speaker 2 (10:40):
When we come back, we're playing a little bit of
trivia here next on the Financial Exchange.
Speaker 1 (10:46):
Here the Financial Exchange every day from eleven to noon,
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Speaker 6 (11:23):
The Financial Exchange is a proud partner of the Disabled
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Donate today at DAV fivek dot Boston. That's DAV five
k dot Boston. Time for trivia here in the Financial Exchange.
In On September third, nineteen twenty nine, the Dow Jones
(12:07):
Industrial average hit a high of three hundred and eighty one.
A month and a half later, the market crashed, taking
the Dow down with it. It took many years for
the Dow to climb back up and beat its previous
high of three hundred and eighty one. So our trivia
question today, how many years did it take for the
Dow Jones to pass its record high in nineteen twenty nine?
(12:31):
Once again, how many years did it take for the
Dow Jones to pass its record high in nineteen twenty nine?
Be the fourth person today to text us at six
one seven thirty six two thirteen eighty five with the
correct answer and win a Financial Exchange Show T shirt.
Once again. The fourth correct response to Texas to the
number six one seven three six two thirteen eighty five
(12:54):
will win that T shirt. See complete contest rules at
Financial Looks, Change Show dot com mark.
Speaker 2 (13:00):
If there's been one reliable trend in markets so far
this year, especially since the spring, it has been artificial intelligence. Obviously,
beginning of this year was much more about trade and
tariffs and the new Trade Order, but since then it's
all been about artificial intelligence, and to that end, Apple
has been sort of left behind in the discussion it's
not as though their stock price has taken a giant head.
Speaker 3 (13:21):
They're not making the massive investments.
Speaker 2 (13:23):
They're not making these huge investments, and they're not seeing
the benefit from the lack of investment.
Speaker 3 (13:31):
Trust me, I know you know this.
Speaker 2 (13:35):
The the stock for Apple was down until about September
of this year, when it's just slightly turned positive now,
but you know, far away from what you've seen from
the giant AI stocks today up about a quarter of
a percent. Was it yesterday that it was that big?
I think four percent or so on on some news,
And so in spite of their lack of artificial intelligence investment,
(13:58):
which people can bringing up as though it's some weird thing,
my counterpoint would be this is always what Apple does.
Apple is an expert at being the last to a
new technology and then making it great for its users.
But nonetheless, they've been criticized a fair bit this year
on their lack of investment in aiither lack of progress
on any sort of built in artificial intelligence on their phones.
(14:21):
And yet they had a pretty big day yesterday on
apparent early sales of the new iPhone seventeen, looking pretty
good and outpacing last year's pace. Of sales in both
in the US and China, according to one research firm, at.
Speaker 3 (14:35):
Least well, look, from the point of view of a consumer,
is it obvious that Microsoft's big investments have paid off?
Are you using copilot on outlook or any No, it's
it doesn't do what you wanted to do half the
time and the other time the other half of the time,
it doesn't do it. Well, look, I don't. That's more
critical than I meant for it to sound.
Speaker 4 (14:57):
I guess my point is ask saying Microsoft sucks is
what you're trying.
Speaker 3 (15:00):
I'm saying I'm not. I've not unlike in the early
stages of the Internet boom, which had had a tangible impact.
I'm being a little bit sloppier, but I'm gonna say
it had a tangible impact on not just on economic
growth and productivity at the time, though there were many
years of investments in it leading up to it. I've
(15:22):
not seen anything as a consumer, and some of AI
is operating behind the scenes making processes easier, but I've
not seen anything life changing the way I felt it
can experience the Internet as a as a life changing
series of the culmination of a life series, a life
changing series of innovations.
Speaker 4 (15:41):
Yeah, so that's all.
Speaker 2 (15:42):
Nonetheless, Apple has taken a very slow approach to all this.
And again why I bring up that that seems normal
to me. Apple was not the creator of the first
MP three player. They weren't the creator of the first
you know that was who created the first MP three player?
I don't even know, but we don't talk about them anymore,
maybe or something I think it was. They were not
(16:02):
the first creator of a smartphone that was BlackBerry. They
were not the first creator of wireless headphones. They just
made them really easy to use, work within their network
of existing customers, and therefore made a ton of money
on those innovations. Years later, now they've gotten in trouble
(16:24):
for some of that stuff, and on their Apple Watch
they tried to rip off some technology when it came
to oxygen sensors, and so, you know, this is not
a universal strategy, and maybe it doesn't work at some
point in the future. But all the criticisms that I've
heard about Apple not jumping in with both feet when
it comes to artificial intelligence, I've just I don't know,
I've kind of quietly pumped the.
Speaker 4 (16:42):
Brakes on to say that's never been their strategy.
Speaker 3 (16:45):
What specifically is people's concern, what.
Speaker 2 (16:48):
Their concern would be that the progress that Google is
making with their AI Virtual assistant on my phone, which
is a Google.
Speaker 3 (16:56):
Fan, Okay, so it's phone based, it's phone software. This
criticism is phone software based. They feel like Apple's lagging
and if they had more horsepower they could run. Is
there something that is there something on the pre Is
there something that they're trying to engineer in Siri that
could be done if they just had more processors. I'm
more simplifying what a data center is, but I don't
(17:17):
have any I'd love for that to be Okay, Well,
neither one of us is a stock analyst. Maybe a
stock analyst has more specific insight just where they are.
They falling behind because they're on the precipice of something
and they're not able to execute because they don't have
the horsepower to do it.
Speaker 4 (17:33):
Here's what I am willing to say.
Speaker 2 (17:35):
Uh, I have a Android phone, a Google Pixel phone specifically,
which has Gemini and and you know, an AI Virtual
assistant built into it. My wife has an iPhone that
has Siri, and when it comes to very basic things,
the Google phone is significantly better at like a voice
(17:56):
activated virtual assistant function than the Apple phone. I'm very
confident saying that in my experience using the two of them,
whether I'm driving and using it or whether I'm just
asking it basic questions, giving it basic tasks, it is
better at that. I will also say that it's always
been better and that you know, it's increased a little
bit since we've been talking about an artificial intelligence, but
(18:17):
not significantly, and so that I think is the investor concern.
But again I would shoot back at that and say
that's all well and good. My wife ain't changing systems.
She's not going from an iPhone to a Google phone
because of her perceived, uh you know, difference in the
usability of the virtual assistant on the two phones.
Speaker 4 (18:38):
So I'm not sure that that matters.
Speaker 2 (18:40):
But I can confidently say that the progress that Google
is making on my ability to assign an AI tool
tasks and you know, have it be slightly convenient in
my life is far and way better than what Apple
has put out there on their devices so far. But again,
if I'm Apple, I'm probably just going to wait until
one of those companies will sell me their tool and
(19:01):
then just put it onto my device anyway, and if
history is a guide, it'll be easy to use, well integrated,
and heck, the company might even pay me to do it.
Speaker 4 (19:12):
So that's where I land with it. Let's take a
quick break.
Speaker 2 (19:16):
When we come back, we're gonna have a full market
update next with Wall Street Watch.
Speaker 1 (19:38):
Bringing the latest financial news straight to your radio. Every day.
It's the Financial Exchange on the Financial Exchange Radio Network.
Time now for Wall Street Watch. A complete look at
what's moving markets so far today right here on the
Financial Exchange Radio Network.
Speaker 6 (19:57):
Markets and mixed territory as investors we sift through a
new batch of third quarter earnings from major names including
General Motors, GE Aerospace, Coca Cola, and many more. Right now,
the Dow is up by seven tenths of one percent,
or three hundred and thirty seven points higher. SMP five
hundred is up eight points, are about a tenth of
a percent, NASDAC down nearly a tenth of a percent
(20:20):
or twenty points lower, Russell two thousand dipping into negative
territory mostly flat at the moment. Tenure treasureel is down
three basis points at three point nine to five five percent,
and crude oil up about half a percent higher training
a fifty seven dollars and eighty cents a barrel before
we get into earnings. Some breaking news in the media
(20:41):
space this morning. After several outlets of reporting that Warner
Brothers Discovery initiated a review of strategic alternatives in response
to acquisition interest it has received from multiple parties, CNBC
is reporting that Netflix and Comcasts are among the interested parties.
Warner Brothers stock is jumping eleven percent on that news. Meanwhile,
(21:04):
shares in GM are surging fifteen percent now after the
automaker posted a third quarter earnings and revenue beat and
raised its full year guidance. The company's three point four
billion dollars in operating income adjusted for certain items, exceeded
analyst expectations of two point seven billion. Meanwhile, jet engine
(21:24):
company GE Aerospace handily beat third quarter earnings and revenue
forecasts and also hiked its full your outlook. Shares are
about up or excuse me, or up about two percent elsewhere.
Coca Cola now up three percent after the beverage and
snack giant reported better than expected quarterly results as higher
prices helped lift sales. Regional bank Zion's Ban Corp. Reported
(21:47):
higher quarterly earnings despite the fifty million dollar charge off
it disclosed last week. Shares are up about two percent.
Philip Morris lifted its annual guidance as smokeless tobacco products
continued to drive growth. However, shares are down about eight percent.
And after today's closing bill, we'll see earnings from Netflix,
Capital One, Mattel and Texas Instruments. I'm Tucker Silva and
(22:11):
that is Wall Street Watch. And in the previous segment,
we asked you the trivia question how many years did
it take for the Dow Jones to pass its record
high in nineteen twenty nine. That'll be twenty five years
after the crash out of nineteen twenty nine. It wasn't
until nineteen fifty four that the dowd Jones beat its
previous record. Brian from woober Mass is our winner today
(22:32):
taking on a Financial Eks Shange Show t shirt. Congrats
to Brian. We play trivia every day here in the
Financial Looks Change. See complete contest rules at Financial Looks
Shane Show dot com.
Speaker 2 (22:42):
A brand new guide out from the Armstrong Advisory Group
this month on understanding required minimum distributions to talk about
this guy, And I've got to talk about a a story.
A client I was meeting with a couple of weeks ago,
and it was a ninety year old and her daughter,
and we were talking through required minimum distributions. The nine
year old client obviously quite familiar with them at that stage,
(23:04):
and we were just mentioning through all these different rules
that apply, and we walked through it and it was okay,
we've got mom and her set of rules. And then
we talked about what happens when mom passes away and
if that ira gets left to daughter, and we talked
about that set of rules separately. The daughter mentions, you know,
my husband passed away a couple of years ago and
(23:25):
I don't remember these rules applying to his retirement accounts.
And I said, oh, yeah, there is a different set
of required minimum distribution rules that apply when it's a spouse.
And then, just for the fun of it, I brought
up my mother in law who was not married to
a man, but was partners with a man for over
a decade and he passed away, and there was a
(23:47):
different set of rules for that individual who passed away
when it comes to required minimum distributions. If I have
left you with your head spinning. It's because these are
really complicated rules that have different sets of reals depending
on who you are, how old you are in, what
stage of life you are in, and what type of
account you have. If you would like our brand new,
(24:07):
comprehensive guide on Understanding Required minimum Distributions, it is free
and you request it by calling eight hundred three nine
three for zero zero one. Again, it's our new Guide
on Understanding Required minimum Distributions. You can request it at
Armstrong Advisory dot com or eight hundred three nine three
for zero zero one.
Speaker 1 (24:26):
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 make contact you to offer investment
advisory services.
Speaker 2 (24:42):
We have got to take a quick break. When we
come back. Andrew Ross Sorkin, author of nineteen twenty nine
co host of CNBC Squak Box, is joining us next
for what I consider to be the interview of the year.
Stay tuned right here, folks.
Speaker 1 (24:55):
The Financial Exchange Show podcast drops every day on Apple, Spotify,
and iHeart Radio. Hit that subscribe button and leave us
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Radio Network. The Financial Exchange is Life on Series XM's
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Get the latest business and financial news from across the
(25:18):
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on how it might affect your wallet. That's the Financial
Exchange weekdays from eleven to noon on Series XM's Business
Radio Channel one thirty two. Face He's the Financial Exchange
Radio Network.
Speaker 4 (25:38):
We are joined now by Andrew Ross Sorkin.
Speaker 2 (25:40):
He's a New York Times bestselling author, the co host
of CNBC squawk Box, and joins us to discuss this
brand new book, nineteen twenty nine, The Inside Story of
the Greatest Crash in Wall Street History.
Speaker 4 (25:52):
Andrew, thanks so much for joining us. Appreciate it.
Speaker 7 (25:54):
Thanks for having me. Great to see it.
Speaker 1 (25:56):
So.
Speaker 2 (25:57):
You know, you wrote Too Big to Fail in two
thousand and nine, and he only had like a year
to prep that one. What took so long on this book, Andrew?
Speaker 5 (26:05):
Honestly, it was just a much longer process than I
ever expected or imagined. This was a book really about
going into the archives and finding transcripts and memos and
diaries and letters and all sorts of material that I
had to chase down frankly, all over the country.
Speaker 7 (26:22):
When I got involved in this.
Speaker 5 (26:23):
Project, probably close to a decade ago, I thought I
could do it.
Speaker 7 (26:27):
In two or three years, max.
Speaker 5 (26:29):
And it just sort of took over every part of
my life in the best way in some senses, because
it just, you know, these characters were so fascinating, and
I think getting underneath it being inside the room, which
is what I was trying to do with this story,
sort of like I did in Too Big to Fail,
you know, just was all encompassing.
Speaker 4 (26:49):
Well, so anyways that part comes across.
Speaker 2 (26:52):
I mean, the details of those people's lives at the
time was truly fascinating to me as somebody who's read
the textbooks on the Great Depression.
Speaker 4 (27:00):
Obviously, this is a very different piece.
Speaker 2 (27:01):
You're right in the forward that you know the drama
of nineteen twenty nine is misunderstood or unknown by the
public today. But now that you've written this, and I'm
sure you've done book tours and talked to all sorts
of folks, what are the most common details or themes
that you found the public just doesn't realize about the
Great Depression.
Speaker 5 (27:21):
Oh goodness. I mean, I think there's so many aspects
to it. I think, you know, when I went into
this project, most people that I know would say, Hey,
you know, I know that I know that there was
a crash in nineteen twenty nine. I think people think
it happened on one day. They think it was a
direct line to the Great Depression, and.
Speaker 7 (27:37):
That therefore that the Great Depression just happened.
Speaker 5 (27:39):
Yeah, I think none of that's true, right, you know,
the crash was actually a whole sequence of crash. Is
oddly the market ot be came back afterwards in ways
that you I think are just shocking, and.
Speaker 7 (27:54):
It really was yeah, and unrealized.
Speaker 5 (27:57):
And then I think it was the crash itself was
really more of a domino. And the story is not
just about ninet twenty nine. The book that I wrote
really goes through nineteen thirty three. It was really a
series of dominoes of then very bad policy choices that
really led to the Great Depression. So when you think
about unemployment reriching twenty five percent in nineteen thirty two
(28:19):
or nine thousand, banks failing in nineteen thirty three, or
tented camps like Hooverville's. All of that was a function
of mistakes that President Hoover was making. He was trying
to raise taxes at the time he was implementing tariffs,
which obviously has a parallel to today in part by
the way, because he was trying to make good on
a pledge to farmers who had tried he tried to
(28:42):
get to vote for him in nineteen twenty eight originally.
So there were lots of just periods, moments in this
that I think shifted the balance. The role of the
Federal Reserve, which effectively sat on its hands during most
of this period, did not flood the system with liquidity
the way they should have, in part because of the
political pressure.
Speaker 7 (29:00):
Again strange parallel.
Speaker 5 (29:02):
As we have conversations today about, you know, the independence
of the Fed and what political pressure looks like, Well
we saw what political pressure actually looks like in nineteen
twenty nine. So I think those are so money of
the sort of systematic pieces of it, but it really
is about the people.
Speaker 7 (29:16):
And their own motivations and incentives. And I think when
you see.
Speaker 5 (29:19):
What the decision makers were actually thinking and what they
were saying and the conversations they're having with their wives.
Speaker 2 (29:25):
It changes everything, you know, Andrew, one piece that really
stood out to me was, you know, all the discussion
about the FED and Congress at the time, in the
nineteen twenties through the early thirties, how do you view
I mean, you conduct interviews with all of these people
and business leaders and others.
Speaker 4 (29:41):
How do you view changes in those.
Speaker 2 (29:44):
Institutions over the course of the last century, like the
FED and their attitude towards markets and downturns, and Congress too.
I mean, in my mind when reading your book, it
seemed vastly different, at least the attitudes towards these types
of events in those institutions.
Speaker 5 (30:00):
Well, I think it's you know, there's so many similarities
in so many differences. One of the similarities is actually
that you know, famously, there was a senator named Carter
Glass who ultimately puts his name on a bill called
the Glass Tingle Bill, which breaks up the banks in
nineteen thirty three, quite famously, but you know, he was
the Elizabeth Warren of his time, and he was railing
about Wall Street and actually guy Naed Charles Mitchell, who's
(30:21):
another main character in the book who he believed was
going to, you know, up end America because of all
the leverage in the system. So there were these people
who do have these sort of parallels to today. At
the same time, I think politically there was a view
you don't flood.
Speaker 7 (30:36):
The system, for example, with money.
Speaker 5 (30:39):
After a crash, you hold back, you know, you raise taxes,
you do all sorts of thing. You know, you get
into an austerity period. But the lesson, and by the way,
we saw that lesson actually get learned in two thousand
and eight by Ben Bernanke who had written his thesis
is phg Thesis at Princeton on the Great Depression. So
he saw this firsthand in terms of just you know,
(31:01):
the mistakes are unfortunately oftentimes when there is a crisis,
you have to reward the arsonists. I mean, it's a
it's a it's a very it's sort of a hard
pill to swallow.
Speaker 2 (31:11):
Andrew leverage was of course a huge piece of your
story margin Low and all the speculation that accompanied it,
and seemingly part of every stock market crisis that we see. Yes,
I wonder, you know, from your standpoint, where is the
leverage in today's market. Where are there worrying degrees and
leverage in today's market? If you if you do see that,
(31:33):
I'm sure there are areas where we can go find that.
And what are the differences between then and now?
Speaker 7 (31:40):
So a couple of things.
Speaker 5 (31:41):
First of all, I do believe that leverage really is
the match that lights the fire of every financial crisis.
It really is that you can have a lot of
you can make a lot of mistakes without enough leverage,
doesn't it doesn't boil over to a demonstrable crisis. You know,
back then, there were no there was no sec there
was no insider trading laws. There was nothing to you know,
stop you from hump and dump schemes. There were no
(32:04):
capital requirements that the banks had. The good news is
a lot of that has been solved or at least
resolved to some degree. Having said that, there's still a
lot of leverage in the system. You go look at
margin loans today, they exist. You look at what's happening
in the AI boom, maybe bubble. You know, there's a
lot of leverage not you know, people look and say, oh,
(32:24):
there's cash coming out of you know, Meta and Google
are paying for all of these data centers.
Speaker 7 (32:29):
Yes, but you go look at how.
Speaker 5 (32:31):
Some of the data centers are being created in terms of,
you know, who's funding the real estate piece of it,
who's funding all the energy and.
Speaker 7 (32:38):
Electricity that's required. There is serious leverage there.
Speaker 5 (32:41):
And the other piece of it is it's in the
private credit space, which you know, people talk about as
the shadow banking system.
Speaker 7 (32:47):
So I don't think we have a full sense of
what it is.
Speaker 5 (32:49):
There's part of it should be better off in some
ways because it's not on the balance sheets of the banks.
It's in these private credit funds. But those private credit
funds are sometimes leveraged and extended to the banks.
Speaker 7 (32:59):
So I think we have to do a little bit
more work to really.
Speaker 5 (33:02):
Understand all of that, and I would actually urge people
to focus on that.
Speaker 2 (33:06):
Yeah, I know a lot of our focus frankly, over
the course the last few years has been the expansion
of private credit and just I think just over the
course the last few weeks with some bankruptcies, we're starting
to see under the covers there of where that can
seek its It's.
Speaker 5 (33:19):
Jamie Dimond, a cockroach in the cockroaches exactly, the cockroaches.
Speaker 2 (33:24):
Andrew, what would you know you've spent the last few
years living in these people's diaries and personal writings about
the Great Depression. What would the Wall Street and political
leaders of the nineteen twenties and thirties think of some
of the gambling like products of today, Like I think
of zero day expiration options, prediction markets, even sports gambling
today is more prevalent. Where How do you think people
(33:48):
of that age would reflect on where we've come today.
Speaker 5 (33:51):
Well, I think those who went through the crash would
think it's slightly insane that some of this is happening.
I think they would argue, you know, you want look,
you want some kind of speculation of the system.
Speaker 7 (34:01):
You do.
Speaker 5 (34:02):
Actually, it's it's the twin of innovation. So you want
new products, but you need to do it responsibly. And
I think there's question mark about what that looks like.
You know, you haven't mentioned where I think actually the
biggest amount of leverage exists, which is in crypto right now.
I mean there are some of these products that have
you know, twenty times fifty times leverage.
Speaker 7 (34:19):
I don't think it's a huge part of the cryptos space.
Speaker 5 (34:21):
I think it's maybe five or ten percent of the
crypto space, but it's still meaningful. And I think that's
you know, meme stocks, that's where we you know, places
where there are where there isn't regulation is where I
would I would argue we should probably be more focused
than some of the other places in the markets today.
Speaker 4 (34:40):
Yeah, I tend to agree.
Speaker 2 (34:40):
I mean, I live and breathe in the stock market
every day, and I don't see that same relentless optimism
about you know, the lack of possibility ever for a crash,
as you wrote about leading up to the nineteen twenty
nine crash. But I will say I can see that
echoed in some parts of other markets. And so you
mentioned crypto. Is there is there anywhere else that you
you just see this relentless push towards optimism in markets
(35:04):
in twenty twenty five or over the course of the
last few years.
Speaker 5 (35:07):
Look, Ai, I mean I just think in video is
the You know, there was a stock called RCA.
Speaker 7 (35:13):
It was a ticker symbole radio in nineteen twenty nine.
It was the future.
Speaker 5 (35:16):
It was radio and Babe had patents for television and
people said this is going to change the world, and
it was going to change the right world. It was
the video of its time. It was the meme stock
of its time, and that stock, you know, I think
it was got up as highs I think something like
three hundred or five hundred dollars split adjusted, and then
fell down a couple years later to two or three dollars.
So things can happen, and we just need to be
(35:38):
aware that those things can happen. I think some of
these round trip deals that in VideA and others are making,
you know, by by default, should be red flags.
Speaker 7 (35:47):
That doesn't mean that it's going to fall or that
it's you know, going to be a crash or anything else.
Speaker 5 (35:51):
This could all work out and be great. It just
requires more vigilance.
Speaker 2 (35:56):
Andrew, excellent book. Really appreciated it. I appreciate you joining
us today. Andrew will also be at the back Bay
Events Center this Friday, October twenty fourth for a discussion
sponsored by the Boston Book Festival. You can check it
out online and again. The book is nineteen twenty nine
by Andrew Ross, Ork and Andrew, thanks so much for
joining us.
Speaker 4 (36:15):
Appreciate it, Tanke you coverage.
Speaker 7 (36:17):
Appreciate it. See in Boston.
Speaker 4 (36:18):
Yeah, thank you, Ben.
Speaker 2 (36:21):
Yeah, it is one piece stuck with me throughout the
entire book, which is we do not have a full
appreciation for how those things played out. And frankly, the
generation that had a real knowledge of the Great Depression
and what led up to it and the feelings behind it, frankly,
they're not with us anymore, and so we're now in
(36:43):
a generation that does not remember the Great Depression.
Speaker 3 (36:46):
Yeah, it's one of the parallels. Is the financial kindling
and the FED is response. Of course, my usual rant,
The FED is responsible for, broadly speaking, financial conditions. The
kindling mike is certainly there, and when the kindling is excited,
if any spark could result in a big conflagration, the
feding courage is too much risk taking, which I feel
(37:07):
other analysts feel like it's doing right now. The stage
is set. The question is what, if anything, will provide
the spark to ignite the gainlink. Maybe nothing.
Speaker 2 (37:16):
Markets again, you said, markets have turned slightly positive for
the day. The Dow currently up three hundred and twenty
one points, seven tenths of a percent, the S and
P five hundred up about ten points, a little bit
more than a tenth of a percent. The Nasdak is
almost exactly flat for the day. Taking a look around
gold and silver were both taking a hit earlier. They've
(37:38):
recovered some of their losses, but gold still down two
hundred dollars an ounce four point seven percent on the day,
Silver off three dollars announce off over six percent for
the day. That's all the time that we have for
today's Financial Exchange, but the earnings are going to continue.
We've got Netflix reporting after the bell today and Tesla
coming later this week, so tune in all folks, have
(38:00):
a great rest of your day, and we'll be back
on the Financial Exchange tomorrow.
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