October 28, 2025 • 38 mins
Mike Armstrong and Paul Lane discuss the good vibes being back on Wall Street. $100B stock swings expose 'fragility' beneath Wall Street rally. Amazon lays off 14,000 corporate workers. The Fed's $6.6T test. Americans face a retirement confidence paradox. UPS jumps after sweeping job cuts push profit above estimates.
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Episode Transcript
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Speaker 1 (00:00):
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(00:42):
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(01:06):
and Paul.
Speaker 2 (01:07):
Lane Good more than happy Tuesday. Welcome to the Financial Exchange.
It's earnings week and FED week here on Wall Street.
We've got big earnings reports, especially coming tomorrow, but today
we do have Visa reporting after the bell, United Health Group, Novartis,
next Era all reported before the bell. Today we've got
(01:28):
layoff announcements from a couple of big companies actually, but
Amazon making the biggest splash. And then the FED has
entered their closed door meetings today. They will be doing
their press conference and what Chuck and I deemed to
be probably one of the most boring q and as
out there for the FED tomorrow, because they're going to
(01:49):
be asked questions like how do you know this without
government data, and they're going to respond, no, we don't
really know without government data, but here's what we think.
So they are very like the FED to cut rates
at the next coming meeting. We'll have a little bit
of Fed talk as well. But the starting piece from
the Wall Street Journal this morning, the good vibes back
(02:10):
on Wall Street. To be fair, the good vibes only
really took a halt for like a week and a
half here when it comes to Wall Street. But here's
what they are referring to. I think specifically was the
vibe change on October tenth. And on October tenth, that
was a Friday. That was the day the President Trump
(02:31):
hit truth social up with a post about China and
their rare earth material restrictions, said that he was going
to cancel the meeting with President she in. Where are
they meeting? I don't even remember career believe Okay, he's
canceling the meeting. He was going to impose one hundred
percent tariffs. Market sold off three percent that day. We
(02:53):
were also in the midst of digesting some really new
information when it came to the private credit industry and
Buddy talking about how the Tricolor failure followed by the
first brand's failure was going to send a reverberation into
markets and lo and behold. At the time, I want
to patter on back here for a home because on
at the time when it came to the tariff stuff,
(03:14):
at least we really looked at that and said, what
has changed here? Right? Nothing has changed here. These two
countries are posturing ahead of a meeting, and all they
are doing is announcing these things so that they can
then wipe them away at this big meeting that's coming up,
and so therefore there's nothing really happening here and you
shouldn't get overly concerned about it. It's not to say
(03:37):
that they can't boil over, but I'm very much on
the on the mindset now that until you actually see
China completely cut off rare earth materials into the US,
and until you see US retaliate with one hundred percent
actual tariffs being collected, we got to stop sweating it.
Speaker 3 (03:54):
We've built up some calls since April where it was
it was raw new, but now we're more seasons into
how this game goes.
Speaker 2 (04:01):
So you saw that sell off initially, things have rebounded.
I guess my point though, would be markets have clearly
turned more optimistic. The good vibes are back, if you will.
We're into earning season that has the ability to boost
the vibes even further potentially this week. But important to
consider here that neither of those things that set this
(04:23):
off have been resolved in any way. We don't suddenly
have a new realization about private credit that all is
fine and the you know, the bad weather has passed
on private credit. No, that is still a lingering issue
out there, and the relationship between the US and China
has not resolved and probably will not you know, during
the Trump administration. Would be my guess, My best guess
(04:45):
as to how things resolve with US and China is
this uncomfortable coexistence where we both realize that we can
dramatically harm each other's economies and just don't really move
the status quot on any of that. And that's fine,
I would agree.
Speaker 3 (05:02):
The tension is not going anywhere, but there is potentially
a catalyst from them making a deal, and the meeting's
coming up soon. I think it's in the next couple
of days here they if they're mad to make further
progress on a deal. I don't think that fixes everything,
but it certainly would add to the quote unquote good vibes.
Speaker 2 (05:19):
Best case scenario, you get a deal on TikTok and
a commitment to buy a bunch of soybeans that they
don't follow through on, probably right, like what are we
even talking about here? So yeah, I mean that is
the rare, rare deal like commitment Rea, you know, hey,
we're not going to do the worst case thing, which
also then completely throws into question the domestic industry for
(05:40):
rare earth, but we'll deal with that when we get there.
Other big news coming out this week, We have fifteen
trillion with a t dollars worth of market capitalization reporting
just across five companies, five of the biggest companies in
the world at this stage, Microsoft, Alphabet, and Meta all
reporting tomorrow after the bell. That's not to minimize the
(06:01):
impact of companies like Boeing and Caterpillar and Verizon who
are also reporting, but they're just not in the same
ballpark as those big three Thursday after the bell as well,
Apple and Amazon. Between those five that I mentioned, Apple, Amazon, Microsoft, Meta, Alphabet,
fifteen trillion dollars worth of market capitalization reporting probably.
Speaker 3 (06:21):
Class to twenty five percent of the S and P
five hundred from a waiting per second, maybe twenty.
Speaker 2 (06:27):
Probably more because the top ten represent forty seven percent
I believe it is now. And so you know, the
only other big, big, big one that you have probably yeah, yeah,
about a fifth. I think that's a good measurement. A
quarter to a fifth of the S and P five
hundred reporting earnings just over the next two days. So
(06:50):
clearly I think there's some optimism about that. Markets wouldn't
have floated up by one percent yesterday if they weren't
excited about big earnings coming out. What I guess, what
are you on the lookout for this week when it
comes to earnings?
Speaker 3 (07:02):
What we I'm gonna just pivot a little bit from
that question for just a moment, because I want to
mention something else that's been going on this week.
Speaker 2 (07:08):
That's just just your question with a question. No, no,
it's not a question.
Speaker 3 (07:11):
This is a statement a lot of mergers and acquisitions
activity over the course of the last week or so. Really,
that is part of this good vibes thesis on Wall
Street that you are seeing a tremendous amount of companies
agreeing to acquire one another or to merge together. And
that is also something that plays into just overall market
(07:31):
confidence that you have a regulatory environment that companies feel
pretty comfortable with merging here on the earning season. To
go back to your initial question here, in terms of
what we're looking for, it seems like there is going
to be a tremendous amount of scrutiny now on cap
ax capital expenditures. What are these big hyperscaler companies spending
on their data center build. I think that's something that's
(07:54):
going to be in focus, and what will probably segue
us to the next story too is the labor market
and sort of commentary there on where we're going to
sit any type of AI improvements is also something that
I think for the next six months to a year,
there's gonna be tremendous amount of scrutiny from Wall Street
and analysts to see if the products that are being
(08:15):
released or utilized by some of these big tech names
are making a significant impact from a productivity standpoint, And
the easiest way to probably see it is more on
like the cloud computing side. That's what they're going to
be looking at this week, is growth in those segments.
Speaker 2 (08:28):
Yeah, I'm very curious about it. Just how much scrutiny
investors aren't going to place on these companies.
Speaker 3 (08:33):
HM.
Speaker 2 (08:33):
So far, there's been very little, it's fair to say,
like just scrutinizing what is actually being There's just.
Speaker 3 (08:40):
Cheering left and right, really right, not a lot of.
Speaker 2 (08:43):
So that's what I'm interested in is, you know, assuming
these companies come out with another several billion dollars worth
of capex and announcements on this that or the other,
do analysts start to scrutinize, okay, and then what no,
not yet? Not yet?
Speaker 3 (08:57):
No, I don't think so. I think that as long
as to run.
Speaker 2 (08:59):
With that, let's take break. When we come back, I
want to talk a little bit more about these big
companies and the swings in their stock prices, and whether
or not what feels extraordinary to a lot of investors
is in fact extraordinary from these big companies. That and
Amazon job cuts coming up next.
Speaker 1 (09:16):
There's only one show that follows Well Street's continued volatility.
Keep it here all morning long on the Financial Exchange
Radio Network text US six one seven, three, six two
thirteen eighty five with your comments and questions about today's show,
and let us know what you think about the stories
we are covering. This is the Financial Exchange Radio Network, Paul.
Speaker 2 (09:48):
Our stocks more volatile than they used to be? That's
really what we're asking with some of these pieces these days, right?
Are stocks swinging more more than they used to? How
would you, I guess, first things first, how would you
go about even answering that question?
Speaker 3 (10:06):
Well, the way that the Financial Times poses it here
is they are using dollar values of market cap to
try and assess or gauge that volatility. So just for
listeners out there, market cap is just basically what Wall
Street deems a company to be worth, and how they
determine that is the number of shares out there that
people own times the price that it goes for on
(10:27):
the open market every single day. And so as a
result of that, on the highest end, you get in
Video worth four and a half trillion. And in terms
of what we've seen over the last five years, we've
had the S and P five hundred grow about a
one hundred percent, and as a result of that one
hundred billion dollars today compared to the volatility of five
(10:49):
years ago, it's easier to have moves one hundred billion
dollars in a day when that's what you know, two
percent of what in Vidia's market cap of four and
a half trillion.
Speaker 2 (10:58):
It's like when people tell me that the day move
three hundred points in there, freaked out. It's less than
one percent, exactly exactly, that's less than one percent.
Speaker 3 (11:06):
I hate dollar comparisons when you're talking about markets. I
think it's much better to do it in terms of percentages.
When you're trying to use these base of comparisons. Now
this piece does go in and try and make some
other points to why there could be more volatility, and
those I can kind of get behind a little bit.
There seems to be similar to twenty twenty one, a
(11:26):
lot more options activity. In fact, I believe we're seeing
the volume of single stock options reaching the highest level
since that period. There is some frothiness in the market
that could lead to more volatility, but it hasn't played
out on a broader scale.
Speaker 2 (11:41):
Yeah, I think beware of two big things, securitization and leverage,
and we are seeing growth in both of these things. Right,
we talked about how there's now more ETFs than there
are individual securities on the market. What does that mean.
It means that more companies are finding ways to make
money by securitizing things like single stock leverage, dtfs like well,
(12:04):
frankly all sorts of different things, crypto and other exchange
trade funds. And so I think be wary of securitization
of more and more products because that historically has led
to big problems. But without high degrees of leverage in there,
it's usually not been able to light a match that
burns the whole thing to the ground. And so that's
the biggest piece in my mind to watch out for,
(12:24):
is Hey, when there is a massive amount of leverage
in any area of the market, that's a bit of
a warning sign that if there's any bad news there,
then it can come crumbling down pretty quickly.
Speaker 3 (12:35):
Yeah, you take the stairs up with the market, but
oftentimes it's the elevator down when you have a lot
of leverage played in.
Speaker 2 (12:40):
So Amazon stock is not moving much on the news,
but ahead of their earnings call on Thursday, they've announced
a fourteen thousand corporate workforce layoff. There are apparently plans
to cut up to thirty thousand jobs that would be
roughly ten percent of Amazon's white collar. Reminder, this does
(13:01):
not include, uh, you know, any of their delivery drivers
or warehouse workers. Were specifically talking about the white college stuff.
What is your I was trying to think through, Is
there any way to read this in terms of the
timing of the announcement right ahead of earnings. My mind
immediately went there, and so I won't be shocked if,
(13:21):
for instance, they're trying to make this earnings call about
AI productivity, or maybe it's a bad earnings call and
they're trying to where to my thing.
Speaker 3 (13:30):
That's where my mind ran too. I said, oh, that
seems a little pessimistic sign that they're trying to kind
of throw this out before.
Speaker 2 (13:36):
Yeah. But again, reading too much into that can be
a bad move too, because sometimes what happens is a
local newspaper gets word of the the you know, announcement,
and they need to get out in front of it
before you know. The last thing you want as a
company is your employees reading about a coming layoff from
you know, the New York Times rather than from their
(13:57):
employer themselves. So there can be a number of different
reads to this, and I don't want to jump to
any conclusions on that. But what has been unique about
this market rally and this moment right here is the
discussion to me of expansion. Right there's been a huge
push for expansion. There's been massive expansion of R and
(14:19):
D dollars and clearly on AI. Usually historically when that's happened,
it's been paired with an expansion of employment. Yeah, like,
we're we're embarking on this new project. We're going to
need ten thousand new workers in order to do it,
and look at, you know, how profitable it's going to
be five years from now. This moment, because of the
(14:40):
nature of the technology that everyone's excited about, has all
been about how much can I cut staff, limit future
employment and still.
Speaker 3 (14:52):
Still make more revenue. That is, to me, the macroeconomic
point to make on this story about Amazon is that
there has been a tremendous shift call it over I
guess the last three or four years really since the
Chatchy pt moment and the further enthusiasm regarding AI has
just picked up momentum since then. That usually to strut
(15:16):
your stuff as to how strong you are as a company,
it was a tremendous flex to show that you're hiring
thousands of more workers, because what does that mean, growing sales,
growing optimism in your company? And now particularly in these
Silicon Valley companies, but also in retailers too. You know,
you hear this commentary from financial banks and others. It
(15:38):
is more sexy to sort of say, you know what,
we're going to keep our head count the way it is.
We may trim for efficiencies because we believe that this
technology is with AI is going to automate a lot
of work, and we're going to be able to make
more money with the same headcount, so you're almost kinnterintuitively,
sort of punished in a sense by Wall Street for
(15:59):
this idea, idea of this old methodology of hiring new workers,
which to me is fascinating that shift.
Speaker 2 (16:05):
The question to me is, you know, are our companies
actually cutting headcount because they are being more productive and
specifically they're being more productive because of artificial intelligence or
I think there's clearly a productivity shift going on right now.
We can measure that. We're also hearing rumors of have
(16:26):
you heard of the nine to nine six schedule? No,
nine to nine pm, nine am to nine pm, six
days a week. It's it's the work schedule of the
Chinese chin. Yeah, I've heard that, the nine nine to
six schedule. You know, there's big pressure among all companies,
but especially any of those in the US that are
tied to AI to push their workers to be more
(16:48):
productive and hopefully be able to credit artificial intelligence. My
question is, are we seeing a productivity boom across the
workforce right now because people are more nervous about their job,
They're putting in extra hours and just trying harder than
they were over the last few years, in which case
the productivity increase that we're seeing is not sustainable, right
(17:12):
you can't go from working eight hours to nine hours
to fifteen hours over the course the next five years.
There's a limitation to how much productivity you will actually
pick up in your job. You'll be capped at. Or
are we genuinely starting to see some increases in productivity
due to a new emerging technology that will drive a
(17:34):
decade of further productivity and allow us to deal with
the fact that we have a much slower growth in
our population and will allow countries like China to deal
with the fact that they are literally seeing more deaths
than they are births in their country right now. These
are again unanswerable questions, and I don't know, I don't
feel like many people are really asking them or holding
(17:56):
their feet to the fire on these questions. Either it's
just oh, yeah, we cut these heads and we were
able to still grow revenue. Okay, show show me the reality.
Speaker 3 (18:06):
I've been looking for a piece and maybe it is
out there and it just hasn't come across my desk
that provides concrete evidence, maybe just to an individual business
out there that is getting tremendous productivity enhancements from this
new technology.
Speaker 2 (18:20):
Amazon opposite exists. Amazon. MIT did a study where they
basically showed that ninety some odd percent of companies that
are implementing AI are seeing no increases in productory.
Speaker 3 (18:28):
Really, Amazon is a good example of a company that
has benefited. I mean, if you look at some of
these statistics in terms of the number of packages that
they ship per employee, it's was one hundred and seventy
five back about ten years ago. Now per employee that
they have within their warehouses it's three eight hundred and
seventy just over a ten year span. You know, the
(18:50):
amount of robots that they have, like, they are probably
the epin me of the use of robotics and technology
to their benefit on the retail side of things, just
to how efficient that they've become. But that doesn't speak
to the broader economy in terms of it.
Speaker 2 (19:05):
Doesn't speak to what people care about right now, which
is not how robotics are fixing things, but how artificial
intelligence is making you more productive. Right That MIT study,
by the way, found that ninety five percent of enterprise
level genera AI products failed to deliver measurable revenue acceleration.
Still early days, but that's where MIT found us. Quick
(19:25):
Break Full market recap is next with Wall Street Watch.
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 at what's moving markets so
far today right here on the Financial Exchange Radio Network.
Speaker 4 (19:59):
Markets modestly extending gains from yesterday's rally is the FED
kicks off its two day meeting today, followed by rate
decision on Wednesday. Traders are also writing for a batch
of big tech earnings and a potential China trade deal
later this week. Right now, the Dow is up by
just over half a percenter two hundred and fifty six points.
(20:19):
Hired SMP five hundred is up a tenth of a
percenter six points, NASDAC UPUB up about a quarter percent
or fifty five points, Russell two thousand down by four
tenths of one percent, Tenure Treasureel flat at the moment
now at three point nine to nine to one percent,
and crude oil is down one in a quarter percent.
Trading it's sixty dollars and fifty four cents at barrel.
(20:42):
Amazon announced that it will lay off about fourteen thousand
corporate jobs, marking the largest round of corporate job cuts
in the company's history. Reports indicated Amazon's layoffs are expected
to affect as many as thirty thousand corporate jobs. Amazon
shares are down slightly. Meanwhile, UPS shares a jumping seven
percent after the delivery giant posted better than expected third
(21:04):
quarter revenue and raised its fourth quarter guidance. The company
also said it has reduced its management workforce by about
fourteen thousand positions so far this year, and its operational
workforce by thirty four thousand positions elsewhere. Microsoft and open
Ai finalized a new agreement where Microsoft will get a
twenty seven percent ownership stake in open Ai, worth about
(21:27):
one hundred and thirty five billion dollars. Microsoft shares are
up over two percent and has surpassed four trillion dollars
in market cap today. Apple also crossed that mark today.
PayPal is up by twelve percent after the digital payments
company beat third quarter earnings and announced a new e
commerce partnership with open Ai. Wayfair surging about twenty percent
(21:50):
after the online furniture retailer posted stronger than expected third
quarter earnings, and after today's closing bell, we'll see third
quarter results from Visa. I'm Tucker Silvan. That is Wall
Street Watch.
Speaker 2 (22:03):
Hey, those guys have just what you need? Shut up?
Speaker 1 (22:07):
Did I say that aloud?
Speaker 2 (22:10):
I find it to be a catch? What is the
actual slogan? Just what I need? Okay? Yeah, pretty solid,
just what I needed. No, no different song that. Yeah,
they should maybe do that matter. I'm ware it is.
I'm just singing that song. Yeah, got it wayfair and uh,
I just wanted to sing that.
Speaker 3 (22:31):
I mean, if you can tell if you can tell
a joke during break and then retrail it on you
that I can do that fair enough.
Speaker 2 (22:38):
The Fed's six point six trillion dollar test. Here's my thesis.
Nobody has anything to write about regarding the FED because
they're going to cut by a quarter percent tomorrow and
there's no government data for them to digest. So instead
they're talking about their balance sheet. Because you got to
(23:01):
write something about the FED. It's the day before a meeting,
So what do we talk about their six point six
trillion dollar balance sheet and the fact that it's about
to be paused in terms of the runoff. So in
order to explain this, so you have to kind of explain,
I guess how they came upon six point six trillion
dollars worth of securities over the course of the last
few decades. So typically when we talk about the FED,
(23:23):
we're talking about the FED fund's target interest rate, which
they set and they don't set they through open market actions.
They attempt to put it within a range of interest rates,
and that drives everything from your auto loan to your
credit card interest rate, to your heelock and really drives
those interest rates on the short end of the curve.
(23:46):
In times of crisis or frankly, even in times that
I wouldn't really considered crisis, they have implemented different market actions,
such as during eight during that crisis and during twenty twenty,
and I was I was talking to Mark Fandatty today
to make sure I'm describing this properly, but failure. Yes,
(24:08):
here is kind of how I would describe these market actions.
Is it is the Fed's attempt to supply liquidity into
the market and specifically to do something about longer term
interest rates. It's not direct yield curve controlled. They're not
targeting to say, hey, we want the thirty year treasury
to be trading at four percent or two percent, But
they are by going out there during COVID and buying
(24:32):
what was it like forty five billion dollars a month
in treasuries and mortgage backed securities. There's only one reason
you do that, which is to supply the market with
liquidity dollars and to make sure that rates on that
stuff that you know could otherwise go crazy are staying
within some sort of range that you are targeting.
Speaker 3 (24:50):
And that you could credit for your third three percent
mortgages that you picked up right back in what not
have been the reprise. Like that is kind of a
direct almost direct core and.
Speaker 2 (25:00):
So I feel like that confuses myself included people because
we do talk about the FED as, oh, they don't
really control long term rates. Well, they can, they just
usually don't do it unless it's a crisis.
Speaker 3 (25:12):
They try, they can try to influence them, you know,
as best they can with monetary policy. Sometimes that could
fall flat, but they've been successful in being stimulative by
these approaches.
Speaker 2 (25:25):
And this was really kind of revolutionized by Bernanki, who
kind of wrote about it a lot in the nineties
and got the chance to implement it during the Great
Financial Crisis and really put this to the test and
then was just kind of accelerated to a previously unforeseen
level during the COVID crisis. But here we stand now
with a federal reserve, a central bank with six plus
(25:46):
trillion dollars sitting there in terms of security. Is what
they had been doing since twenty twenty two has been
not exactly selling them into the open market. But again,
they're bonds, so at some point those bonds mature, the
Fed gets there dollars, and they've just not been going
back out and buying new ones. That's what they mean
by balance sheet runoff is just saying, Yep, the bond
(26:07):
at matured, We're going to allow it to mature. We're
not going to go take that cash and buy another one.
We are therefore, you know, sapping the market of liquidity
a little bit.
Speaker 3 (26:16):
Uh.
Speaker 2 (26:16):
It looks like they are going to end that portfolio
runoff very soon, is where people are conjecturing, and in
the context of where we are right now in markets,
very slow job growth, concerns about private credit, concerns about
some of the owners that private credit. I think that
is a reasonable policy choice, but it is just kind
(26:38):
of wild to be sitting here and saying Yeah, with
low unemployment, low inflation, a stock market that's hitting all
time highs, the Fed's probably going to be saying sometimes
soon that not only are we lowering interest rates, but
we are going to continue to supply the market with
liquidity by not allowing these balance these bonds to just
run off our balance sheet.
Speaker 3 (26:55):
It seems really counterintuitive that we'd be wrapping up this
cycle so quickly. To be fair, you know, inflation has
come down to a more reasonable target of three percent
or so, and then on the liquidity front, like you mentioned,
it's been in a little bit better place. But it's
always a very difficult balancing act. And I don't pretend
(27:16):
to know the intricacies of it. That FED fight FED
Fund overnight rate is heavily influenced by the amount of
reserves that the FED has on its balance sheet separate
from the securities portfolio. So it's a really careful balancing
act that they have to strike here in terms of
when they end this runoff. But you intro the segment
(27:36):
the best where this is deep cut sort of like
that indie band or like that movie at like a Cambridge,
you know, small theater sort of chatter here when you
talk about the FED balance sheet. It's not the big
boys stuff, which the interest rate movements.
Speaker 2 (27:51):
Yeah, I mean, frankly, I just feel like the FED
is stuck in this position now where they have a
giant balance sheet and nobody fully understands, even at the
Federal Reserve, what would happen if they continue to try
and run it off. And so the safe thing to
do is just to say, yeah, we're pausing, We're going
to keep doing what we're doing. And yes, we own
this gargantuan amount of securities and a huge balance sheet
(28:13):
that we've never seen before. But as such, running it
off when we have some concerns about the state of
markets is too dangerous, So we'll let the next person
worry about it. That's I kind of think where the
FED sits right now. Let's take a quick break. When
we come back, Americans facing a retirement confidence paradox, we
(28:35):
will talk about what's the plur of paradox paradoxes? Yeah,
we'll talk about paradoxes next on The Financial Exchange.
Speaker 1 (28:43):
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(29:06):
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Speaker 4 (29:11):
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Speaker 2 (29:43):
So Paul Prudential did a survey about Americans, and actually
not just Americans. They surveyed folks from Brazil, Mexico, Japan,
and the United States, specifically looking at forty two hundred
adults and their feelings about retirement. One I guess surprising
piece to me, which I take as good news, is
(30:05):
that eighty nine percent of wealthy US adults said that
they are confident they'd be able to cover essential cost
in retirement, but only about half of them have actually
factored in inflation to their retirement planning. So that's the
paradox that they're calling is they're basically saying that Americans
are overly confident about their ability to retire and fund
(30:27):
their retirements, which I would I guess by I think
such a bull market like the one that we have
seen frankly over the last seventeen ish years now, right
since since twenty ten or so or two thousand and
nine or so, we have seen just a straight line
bull market that I think has lent a lot of
confidence to folks. But it's a fair point that, yeah,
(30:52):
when you dig underneath the hood, you start to raise
some questions about where people are actually prepared or unprepared
for their retirement.
Speaker 3 (31:00):
The inflation pieces is probably the hardest moving target because
it is impossible to project in our financial planning work
that we do. It usually is the most sensitive one
that can impact a client's plan. Is any changes in inflation,
particularly if it's higher than projected, can really put a
(31:20):
damper and a huge den into someone's potential financial success.
Speaker 2 (31:24):
I've said this before here, but I'll actually say that
most people that I have met and had these types
of conversations with are much more worried about a market crash,
but much more exposed to higher inflation. Sure sure, like
the way that they're managing their own money. They're terrified
of the market falling apart and completely underprepared for the
idea that inflation could run three percent instead of two
(31:46):
and a half, exactly right, Like such a small little
tweak there, I think the I think one of the
problems though with our industry. We both work as financial advisors,
we work in wealth management. I feel as though we
have this kind of stodgy reputation for, oh, they're just
going to take my money and do whatever they want
(32:07):
with it. And some people have a positive outlook with that, like, oh, look,
how great they have done it managing money over the
course of a decade. Others might have a negative outlook
of it. But I think that's kind of the opinion
of what financial advisors do is they're here to take
my money and you allocate it properly, and frankly, if
I'm looking at my own portfolio over the last fifteen
(32:29):
years and even did something very simple like put it
all in some sort of balanced type of fun I've
probably done pretty darn well, and I think that's that's
where some of the nuance comes in. And what we
do a bad job of in our industry is actually
explaining that. Oh yeah, we have plenty of clients who
have you know, some of the best wealth managers out there.
(32:51):
They can pick stocks, they can run a portfolio on
their own, they don't really know our help, but they
have no idea how to build a financial plan right.
I've met engineers who are excellent at building spreadsheets and
can model out their entire rest of their financial lives
with a high degree of accuracy, accounting for things like
inflation and market drops, but are some of the worst
(33:13):
when it comes to assessing how taxes are going to
play out with their plan. I've met tax attorneys who
know the tax code in and out and can find
every loophole for you, and suck at investing. And so
my point with all this would merely be there's a
lot of you know, places that try and do a
(33:33):
one size fits all approach, and that can be right
for some people, but it's absolutely wrong for others, and
I think especially you know, I'm seeing differences between generations too.
I've found older generations that really just want to outsource
it all and just say I'm not interested in this.
I found a lot of younger generations who say, no,
I am passionate about investing. I just need help here.
(33:54):
And that's where again, I think our industry could do
a better job of explaining, like, oh, yeah, there are
financial advisors out there where if I just need somebody
to take a look at what I've already done and
give me a grade and tell me how, you know,
how am I coming along When it comes to preparing
for all this. There are people that will do that.
There are people that you can have on retainer and
just pay an hourly fee. There are folks that will
(34:17):
just manage your money and do nothing else at all.
But we have this again reputation of oh, they want
to do everything and take over everything. If you have
questions about your own financial future and you fall into
one of those categories of oh, I feel like I'm
actually fine at these other things and could use a
(34:38):
little bit of help hereer guidance on this guidance on
that specific issue, I can't promise that Armstrong Advisor Group
can answer all of them right. Like you know, we
are not experts on everything. Nobody is experts on everything.
But if you have questions like that and you want
to kick the tires a little bit and understand how
we work with our clients, give us a call at
eight hundred three nine three four zero zero one. It's
(35:00):
a number for the Armstrong Advisory Group. We have employees
and offices scattered throughout the New England area, but we
meet with people nationwide and be happy to chat with
you too. The number again is eight hundred three nine
three four zero zero one.
Speaker 1 (35:13):
The proceeding was paid for by Armstrong Advisory Group, a
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Speaker 2 (35:29):
At the open this morning, United Parcel Service UPS was
up about ten percent in early trading. It's calmed down
a little bit. It's up about seven percent so far
in trading. What did we hear from the logistics and
delivery Giant Pole.
Speaker 3 (35:43):
Similar to what Amazon had talked about earlier that we
covered in the show. UPS is also cutting thirty four
thousand jobs in its operational workforce, and that's a seventy
percent increase from its previous target. But also in terms
of the reason why it's so high today, is it
just crush profit expectations and there's more confidence in the
(36:06):
courier's comeback plans. UPS has struggled tremendously post pandemic. They
had a lot of momentum, but have struggled since then
quite a bit. It's interesting this mirrors sort of a
conversation I had recently with a client who is a
longtime employee of UPS who recently retired, who mentioned that
the cost cutting endeavors that they are embarking aren't are
serious and significant. He was mentioning to me that they
(36:28):
are really looking to cut headken down and this backs
that up.
Speaker 2 (36:33):
Yeah, you've seen it with the storefronts too. They are
closing more of those. Frankly, the only time I ever
enter them. Actually, there's two occasions. One is when I
need to ship something to my family in the Midwest
for usually Christmas, and usually it's my wife doing that,
not me. Two. It's when I'm returning for something for Amazon,
right right, and that's convenient, but I don't know how
(36:55):
much business that really generates for ups, And so they're
cutting these stores and finally seeing a bit of a
break in what has been, frankly a three year direct
trend downwards for this company. It's trading at ninety five
dollars and fifty cents a share this morning. It hit
a peek back in twenty twenty two of nearly two
hundred and twenty five dollars a share. Yeah, I mean,
(37:17):
it has been a big, big fall for what has
been Yea again a huge logistics company. But they've been
I think struggling to find their position ever since Amazon
started to compete with them, No.
Speaker 3 (37:32):
Question about it. That business is very challenging. The low
value e commerce stuff that they were doing for Amazon,
it's just been tough, and Amazon has taken a lot
of it on its own, and ye been a fierce
competitor for them. It's it's incredible. The cost savings that
they've achieved this year is about two point two billion
for the first nine months of the year. Three and
a half billion will be the total year over year
(37:52):
savings that they have. Stock was down, as you mentioned,
twenty nine percent this year through Monday.
Speaker 2 (37:58):
S and P five hundred barely hanging on to some
gains here. We've got it up about a tenth of
a percent. We're gonna take a quick break when we
come back. We're talking private credit among other things, so
stay tuned, folks will be right back
The Financial Exchange is produced by Money Matters Radio and
is hosted by employees of the Armstrong Advisory Group, a
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(00:20):
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(01:06):
and Paul.
Speaker 2 (01:07):
Lane Good more than happy Tuesday. Welcome to the Financial Exchange.
It's earnings week and FED week here on Wall Street.
We've got big earnings reports, especially coming tomorrow, but today
we do have Visa reporting after the bell, United Health Group, Novartis,
next Era all reported before the bell. Today we've got
(01:28):
layoff announcements from a couple of big companies actually, but
Amazon making the biggest splash. And then the FED has
entered their closed door meetings today. They will be doing
their press conference and what Chuck and I deemed to
be probably one of the most boring q and as
out there for the FED tomorrow, because they're going to
(01:49):
be asked questions like how do you know this without
government data, and they're going to respond, no, we don't
really know without government data, but here's what we think.
So they are very like the FED to cut rates
at the next coming meeting. We'll have a little bit
of Fed talk as well. But the starting piece from
the Wall Street Journal this morning, the good vibes back
(02:10):
on Wall Street. To be fair, the good vibes only
really took a halt for like a week and a
half here when it comes to Wall Street. But here's
what they are referring to. I think specifically was the
vibe change on October tenth. And on October tenth, that
was a Friday. That was the day the President Trump
(02:31):
hit truth social up with a post about China and
their rare earth material restrictions, said that he was going
to cancel the meeting with President she in. Where are
they meeting? I don't even remember career believe Okay, he's
canceling the meeting. He was going to impose one hundred
percent tariffs. Market sold off three percent that day. We
(02:53):
were also in the midst of digesting some really new
information when it came to the private credit industry and
Buddy talking about how the Tricolor failure followed by the
first brand's failure was going to send a reverberation into
markets and lo and behold. At the time, I want
to patter on back here for a home because on
at the time when it came to the tariff stuff,
(03:14):
at least we really looked at that and said, what
has changed here? Right? Nothing has changed here. These two
countries are posturing ahead of a meeting, and all they
are doing is announcing these things so that they can
then wipe them away at this big meeting that's coming up,
and so therefore there's nothing really happening here and you
shouldn't get overly concerned about it. It's not to say
(03:37):
that they can't boil over, but I'm very much on
the on the mindset now that until you actually see
China completely cut off rare earth materials into the US,
and until you see US retaliate with one hundred percent
actual tariffs being collected, we got to stop sweating it.
Speaker 3 (03:54):
We've built up some calls since April where it was
it was raw new, but now we're more seasons into
how this game goes.
Speaker 2 (04:01):
So you saw that sell off initially, things have rebounded.
I guess my point though, would be markets have clearly
turned more optimistic. The good vibes are back, if you will.
We're into earning season that has the ability to boost
the vibes even further potentially this week. But important to
consider here that neither of those things that set this
(04:23):
off have been resolved in any way. We don't suddenly
have a new realization about private credit that all is
fine and the you know, the bad weather has passed
on private credit. No, that is still a lingering issue
out there, and the relationship between the US and China
has not resolved and probably will not you know, during
the Trump administration. Would be my guess, My best guess
(04:45):
as to how things resolve with US and China is
this uncomfortable coexistence where we both realize that we can
dramatically harm each other's economies and just don't really move
the status quot on any of that. And that's fine,
I would agree.
Speaker 3 (05:02):
The tension is not going anywhere, but there is potentially
a catalyst from them making a deal, and the meeting's
coming up soon. I think it's in the next couple
of days here they if they're mad to make further
progress on a deal. I don't think that fixes everything,
but it certainly would add to the quote unquote good vibes.
Speaker 2 (05:19):
Best case scenario, you get a deal on TikTok and
a commitment to buy a bunch of soybeans that they
don't follow through on, probably right, like what are we
even talking about here? So yeah, I mean that is
the rare, rare deal like commitment Rea, you know, hey,
we're not going to do the worst case thing, which
also then completely throws into question the domestic industry for
(05:40):
rare earth, but we'll deal with that when we get there.
Other big news coming out this week, We have fifteen
trillion with a t dollars worth of market capitalization reporting
just across five companies, five of the biggest companies in
the world at this stage, Microsoft, Alphabet, and Meta all
reporting tomorrow after the bell. That's not to minimize the
(06:01):
impact of companies like Boeing and Caterpillar and Verizon who
are also reporting, but they're just not in the same
ballpark as those big three Thursday after the bell as well,
Apple and Amazon. Between those five that I mentioned, Apple, Amazon, Microsoft, Meta, Alphabet,
fifteen trillion dollars worth of market capitalization reporting probably.
Speaker 3 (06:21):
Class to twenty five percent of the S and P
five hundred from a waiting per second, maybe twenty.
Speaker 2 (06:27):
Probably more because the top ten represent forty seven percent
I believe it is now. And so you know, the
only other big, big, big one that you have probably yeah, yeah,
about a fifth. I think that's a good measurement. A
quarter to a fifth of the S and P five
hundred reporting earnings just over the next two days. So
(06:50):
clearly I think there's some optimism about that. Markets wouldn't
have floated up by one percent yesterday if they weren't
excited about big earnings coming out. What I guess, what
are you on the lookout for this week when it
comes to earnings?
Speaker 3 (07:02):
What we I'm gonna just pivot a little bit from
that question for just a moment, because I want to
mention something else that's been going on this week.
Speaker 2 (07:08):
That's just just your question with a question. No, no,
it's not a question.
Speaker 3 (07:11):
This is a statement a lot of mergers and acquisitions
activity over the course of the last week or so. Really,
that is part of this good vibes thesis on Wall
Street that you are seeing a tremendous amount of companies
agreeing to acquire one another or to merge together. And
that is also something that plays into just overall market
(07:31):
confidence that you have a regulatory environment that companies feel
pretty comfortable with merging here on the earning season. To
go back to your initial question here, in terms of
what we're looking for, it seems like there is going
to be a tremendous amount of scrutiny now on cap
ax capital expenditures. What are these big hyperscaler companies spending
on their data center build. I think that's something that's
(07:54):
going to be in focus, and what will probably segue
us to the next story too is the labor market
and sort of commentary there on where we're going to
sit any type of AI improvements is also something that
I think for the next six months to a year,
there's gonna be tremendous amount of scrutiny from Wall Street
and analysts to see if the products that are being
(08:15):
released or utilized by some of these big tech names
are making a significant impact from a productivity standpoint, And
the easiest way to probably see it is more on
like the cloud computing side. That's what they're going to
be looking at this week, is growth in those segments.
Speaker 2 (08:28):
Yeah, I'm very curious about it. Just how much scrutiny
investors aren't going to place on these companies.
Speaker 3 (08:33):
HM.
Speaker 2 (08:33):
So far, there's been very little, it's fair to say,
like just scrutinizing what is actually being There's just.
Speaker 3 (08:40):
Cheering left and right, really right, not a lot of.
Speaker 2 (08:43):
So that's what I'm interested in is, you know, assuming
these companies come out with another several billion dollars worth
of capex and announcements on this that or the other,
do analysts start to scrutinize, okay, and then what no,
not yet? Not yet?
Speaker 3 (08:57):
No, I don't think so. I think that as long
as to run.
Speaker 2 (08:59):
With that, let's take break. When we come back, I
want to talk a little bit more about these big
companies and the swings in their stock prices, and whether
or not what feels extraordinary to a lot of investors
is in fact extraordinary from these big companies. That and
Amazon job cuts coming up next.
Speaker 1 (09:16):
There's only one show that follows Well Street's continued volatility.
Keep it here all morning long on the Financial Exchange
Radio Network text US six one seven, three, six two
thirteen eighty five with your comments and questions about today's show,
and let us know what you think about the stories
we are covering. This is the Financial Exchange Radio Network, Paul.
Speaker 2 (09:48):
Our stocks more volatile than they used to be? That's
really what we're asking with some of these pieces these days, right?
Are stocks swinging more more than they used to? How
would you, I guess, first things first, how would you
go about even answering that question?
Speaker 3 (10:06):
Well, the way that the Financial Times poses it here
is they are using dollar values of market cap to
try and assess or gauge that volatility. So just for
listeners out there, market cap is just basically what Wall
Street deems a company to be worth, and how they
determine that is the number of shares out there that
people own times the price that it goes for on
(10:27):
the open market every single day. And so as a
result of that, on the highest end, you get in
Video worth four and a half trillion. And in terms
of what we've seen over the last five years, we've
had the S and P five hundred grow about a
one hundred percent, and as a result of that one
hundred billion dollars today compared to the volatility of five
(10:49):
years ago, it's easier to have moves one hundred billion
dollars in a day when that's what you know, two
percent of what in Vidia's market cap of four and
a half trillion.
Speaker 2 (10:58):
It's like when people tell me that the day move
three hundred points in there, freaked out. It's less than
one percent, exactly exactly, that's less than one percent.
Speaker 3 (11:06):
I hate dollar comparisons when you're talking about markets. I
think it's much better to do it in terms of percentages.
When you're trying to use these base of comparisons. Now
this piece does go in and try and make some
other points to why there could be more volatility, and
those I can kind of get behind a little bit.
There seems to be similar to twenty twenty one, a
(11:26):
lot more options activity. In fact, I believe we're seeing
the volume of single stock options reaching the highest level
since that period. There is some frothiness in the market
that could lead to more volatility, but it hasn't played
out on a broader scale.
Speaker 2 (11:41):
Yeah, I think beware of two big things, securitization and leverage,
and we are seeing growth in both of these things. Right,
we talked about how there's now more ETFs than there
are individual securities on the market. What does that mean.
It means that more companies are finding ways to make
money by securitizing things like single stock leverage, dtfs like well,
(12:04):
frankly all sorts of different things, crypto and other exchange
trade funds. And so I think be wary of securitization
of more and more products because that historically has led
to big problems. But without high degrees of leverage in there,
it's usually not been able to light a match that
burns the whole thing to the ground. And so that's
the biggest piece in my mind to watch out for,
(12:24):
is Hey, when there is a massive amount of leverage
in any area of the market, that's a bit of
a warning sign that if there's any bad news there,
then it can come crumbling down pretty quickly.
Speaker 3 (12:35):
Yeah, you take the stairs up with the market, but
oftentimes it's the elevator down when you have a lot
of leverage played in.
Speaker 2 (12:40):
So Amazon stock is not moving much on the news,
but ahead of their earnings call on Thursday, they've announced
a fourteen thousand corporate workforce layoff. There are apparently plans
to cut up to thirty thousand jobs that would be
roughly ten percent of Amazon's white collar. Reminder, this does
(13:01):
not include, uh, you know, any of their delivery drivers
or warehouse workers. Were specifically talking about the white college stuff.
What is your I was trying to think through, Is
there any way to read this in terms of the
timing of the announcement right ahead of earnings. My mind
immediately went there, and so I won't be shocked if,
(13:21):
for instance, they're trying to make this earnings call about
AI productivity, or maybe it's a bad earnings call and
they're trying to where to my thing.
Speaker 3 (13:30):
That's where my mind ran too. I said, oh, that
seems a little pessimistic sign that they're trying to kind
of throw this out before.
Speaker 2 (13:36):
Yeah. But again, reading too much into that can be
a bad move too, because sometimes what happens is a
local newspaper gets word of the the you know, announcement,
and they need to get out in front of it
before you know. The last thing you want as a
company is your employees reading about a coming layoff from
you know, the New York Times rather than from their
(13:57):
employer themselves. So there can be a number of different
reads to this, and I don't want to jump to
any conclusions on that. But what has been unique about
this market rally and this moment right here is the
discussion to me of expansion. Right there's been a huge
push for expansion. There's been massive expansion of R and
(14:19):
D dollars and clearly on AI. Usually historically when that's happened,
it's been paired with an expansion of employment. Yeah, like,
we're we're embarking on this new project. We're going to
need ten thousand new workers in order to do it,
and look at, you know, how profitable it's going to
be five years from now. This moment, because of the
(14:40):
nature of the technology that everyone's excited about, has all
been about how much can I cut staff, limit future
employment and still.
Speaker 3 (14:52):
Still make more revenue. That is, to me, the macroeconomic
point to make on this story about Amazon is that
there has been a tremendous shift call it over I
guess the last three or four years really since the
Chatchy pt moment and the further enthusiasm regarding AI has
just picked up momentum since then. That usually to strut
(15:16):
your stuff as to how strong you are as a company,
it was a tremendous flex to show that you're hiring
thousands of more workers, because what does that mean, growing sales,
growing optimism in your company? And now particularly in these
Silicon Valley companies, but also in retailers too. You know,
you hear this commentary from financial banks and others. It
(15:38):
is more sexy to sort of say, you know what,
we're going to keep our head count the way it is.
We may trim for efficiencies because we believe that this
technology is with AI is going to automate a lot
of work, and we're going to be able to make
more money with the same headcount, so you're almost kinnterintuitively,
sort of punished in a sense by Wall Street for
(15:59):
this idea, idea of this old methodology of hiring new workers,
which to me is fascinating that shift.
Speaker 2 (16:05):
The question to me is, you know, are our companies
actually cutting headcount because they are being more productive and
specifically they're being more productive because of artificial intelligence or
I think there's clearly a productivity shift going on right now.
We can measure that. We're also hearing rumors of have
(16:26):
you heard of the nine to nine six schedule? No,
nine to nine pm, nine am to nine pm, six
days a week. It's it's the work schedule of the
Chinese chin. Yeah, I've heard that, the nine nine to
six schedule. You know, there's big pressure among all companies,
but especially any of those in the US that are
tied to AI to push their workers to be more
(16:48):
productive and hopefully be able to credit artificial intelligence. My
question is, are we seeing a productivity boom across the
workforce right now because people are more nervous about their job,
They're putting in extra hours and just trying harder than
they were over the last few years, in which case
the productivity increase that we're seeing is not sustainable, right
(17:12):
you can't go from working eight hours to nine hours
to fifteen hours over the course the next five years.
There's a limitation to how much productivity you will actually
pick up in your job. You'll be capped at. Or
are we genuinely starting to see some increases in productivity
due to a new emerging technology that will drive a
(17:34):
decade of further productivity and allow us to deal with
the fact that we have a much slower growth in
our population and will allow countries like China to deal
with the fact that they are literally seeing more deaths
than they are births in their country right now. These
are again unanswerable questions, and I don't know, I don't
feel like many people are really asking them or holding
(17:56):
their feet to the fire on these questions. Either it's
just oh, yeah, we cut these heads and we were
able to still grow revenue. Okay, show show me the reality.
Speaker 3 (18:06):
I've been looking for a piece and maybe it is
out there and it just hasn't come across my desk
that provides concrete evidence, maybe just to an individual business
out there that is getting tremendous productivity enhancements from this
new technology.
Speaker 2 (18:20):
Amazon opposite exists. Amazon. MIT did a study where they
basically showed that ninety some odd percent of companies that
are implementing AI are seeing no increases in productory.
Speaker 3 (18:28):
Really, Amazon is a good example of a company that
has benefited. I mean, if you look at some of
these statistics in terms of the number of packages that
they ship per employee, it's was one hundred and seventy
five back about ten years ago. Now per employee that
they have within their warehouses it's three eight hundred and
seventy just over a ten year span. You know, the
(18:50):
amount of robots that they have, like, they are probably
the epin me of the use of robotics and technology
to their benefit on the retail side of things, just
to how efficient that they've become. But that doesn't speak
to the broader economy in terms of it.
Speaker 2 (19:05):
Doesn't speak to what people care about right now, which
is not how robotics are fixing things, but how artificial
intelligence is making you more productive. Right That MIT study,
by the way, found that ninety five percent of enterprise
level genera AI products failed to deliver measurable revenue acceleration.
Still early days, but that's where MIT found us. Quick
(19:25):
Break Full market recap is next with Wall Street Watch.
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 at what's moving markets so
far today right here on the Financial Exchange Radio Network.
Speaker 4 (19:59):
Markets modestly extending gains from yesterday's rally is the FED
kicks off its two day meeting today, followed by rate
decision on Wednesday. Traders are also writing for a batch
of big tech earnings and a potential China trade deal
later this week. Right now, the Dow is up by
just over half a percenter two hundred and fifty six points.
(20:19):
Hired SMP five hundred is up a tenth of a
percenter six points, NASDAC UPUB up about a quarter percent
or fifty five points, Russell two thousand down by four
tenths of one percent, Tenure Treasureel flat at the moment
now at three point nine to nine to one percent,
and crude oil is down one in a quarter percent.
Trading it's sixty dollars and fifty four cents at barrel.
(20:42):
Amazon announced that it will lay off about fourteen thousand
corporate jobs, marking the largest round of corporate job cuts
in the company's history. Reports indicated Amazon's layoffs are expected
to affect as many as thirty thousand corporate jobs. Amazon
shares are down slightly. Meanwhile, UPS shares a jumping seven
percent after the delivery giant posted better than expected third
(21:04):
quarter revenue and raised its fourth quarter guidance. The company
also said it has reduced its management workforce by about
fourteen thousand positions so far this year, and its operational
workforce by thirty four thousand positions elsewhere. Microsoft and open
Ai finalized a new agreement where Microsoft will get a
twenty seven percent ownership stake in open Ai, worth about
(21:27):
one hundred and thirty five billion dollars. Microsoft shares are
up over two percent and has surpassed four trillion dollars
in market cap today. Apple also crossed that mark today.
PayPal is up by twelve percent after the digital payments
company beat third quarter earnings and announced a new e
commerce partnership with open Ai. Wayfair surging about twenty percent
(21:50):
after the online furniture retailer posted stronger than expected third
quarter earnings, and after today's closing bell, we'll see third
quarter results from Visa. I'm Tucker Silvan. That is Wall
Street Watch.
Speaker 2 (22:03):
Hey, those guys have just what you need? Shut up?
Speaker 1 (22:07):
Did I say that aloud?
Speaker 2 (22:10):
I find it to be a catch? What is the
actual slogan? Just what I need? Okay? Yeah, pretty solid,
just what I needed. No, no different song that. Yeah,
they should maybe do that matter. I'm ware it is.
I'm just singing that song. Yeah, got it wayfair and uh,
I just wanted to sing that.
Speaker 3 (22:31):
I mean, if you can tell if you can tell
a joke during break and then retrail it on you
that I can do that fair enough.
Speaker 2 (22:38):
The Fed's six point six trillion dollar test. Here's my thesis.
Nobody has anything to write about regarding the FED because
they're going to cut by a quarter percent tomorrow and
there's no government data for them to digest. So instead
they're talking about their balance sheet. Because you got to
(23:01):
write something about the FED. It's the day before a meeting,
So what do we talk about their six point six
trillion dollar balance sheet and the fact that it's about
to be paused in terms of the runoff. So in
order to explain this, so you have to kind of explain,
I guess how they came upon six point six trillion
dollars worth of securities over the course of the last
few decades. So typically when we talk about the FED,
(23:23):
we're talking about the FED fund's target interest rate, which
they set and they don't set they through open market actions.
They attempt to put it within a range of interest rates,
and that drives everything from your auto loan to your
credit card interest rate, to your heelock and really drives
those interest rates on the short end of the curve.
(23:46):
In times of crisis or frankly, even in times that
I wouldn't really considered crisis, they have implemented different market actions,
such as during eight during that crisis and during twenty twenty,
and I was I was talking to Mark Fandatty today
to make sure I'm describing this properly, but failure. Yes,
(24:08):
here is kind of how I would describe these market actions.
Is it is the Fed's attempt to supply liquidity into
the market and specifically to do something about longer term
interest rates. It's not direct yield curve controlled. They're not
targeting to say, hey, we want the thirty year treasury
to be trading at four percent or two percent, But
they are by going out there during COVID and buying
(24:32):
what was it like forty five billion dollars a month
in treasuries and mortgage backed securities. There's only one reason
you do that, which is to supply the market with
liquidity dollars and to make sure that rates on that
stuff that you know could otherwise go crazy are staying
within some sort of range that you are targeting.
Speaker 3 (24:50):
And that you could credit for your third three percent
mortgages that you picked up right back in what not
have been the reprise. Like that is kind of a
direct almost direct core and.
Speaker 2 (25:00):
So I feel like that confuses myself included people because
we do talk about the FED as, oh, they don't
really control long term rates. Well, they can, they just
usually don't do it unless it's a crisis.
Speaker 3 (25:12):
They try, they can try to influence them, you know,
as best they can with monetary policy. Sometimes that could
fall flat, but they've been successful in being stimulative by
these approaches.
Speaker 2 (25:25):
And this was really kind of revolutionized by Bernanki, who
kind of wrote about it a lot in the nineties
and got the chance to implement it during the Great
Financial Crisis and really put this to the test and
then was just kind of accelerated to a previously unforeseen
level during the COVID crisis. But here we stand now
with a federal reserve, a central bank with six plus
(25:46):
trillion dollars sitting there in terms of security. Is what
they had been doing since twenty twenty two has been
not exactly selling them into the open market. But again,
they're bonds, so at some point those bonds mature, the
Fed gets there dollars, and they've just not been going
back out and buying new ones. That's what they mean
by balance sheet runoff is just saying, Yep, the bond
(26:07):
at matured, We're going to allow it to mature. We're
not going to go take that cash and buy another one.
We are therefore, you know, sapping the market of liquidity
a little bit.
Speaker 3 (26:16):
Uh.
Speaker 2 (26:16):
It looks like they are going to end that portfolio
runoff very soon, is where people are conjecturing, and in
the context of where we are right now in markets,
very slow job growth, concerns about private credit, concerns about
some of the owners that private credit. I think that
is a reasonable policy choice, but it is just kind
(26:38):
of wild to be sitting here and saying Yeah, with
low unemployment, low inflation, a stock market that's hitting all
time highs, the Fed's probably going to be saying sometimes
soon that not only are we lowering interest rates, but
we are going to continue to supply the market with
liquidity by not allowing these balance these bonds to just
run off our balance sheet.
Speaker 3 (26:55):
It seems really counterintuitive that we'd be wrapping up this
cycle so quickly. To be fair, you know, inflation has
come down to a more reasonable target of three percent
or so, and then on the liquidity front, like you mentioned,
it's been in a little bit better place. But it's
always a very difficult balancing act. And I don't pretend
(27:16):
to know the intricacies of it. That FED fight FED
Fund overnight rate is heavily influenced by the amount of
reserves that the FED has on its balance sheet separate
from the securities portfolio. So it's a really careful balancing
act that they have to strike here in terms of
when they end this runoff. But you intro the segment
(27:36):
the best where this is deep cut sort of like
that indie band or like that movie at like a Cambridge,
you know, small theater sort of chatter here when you
talk about the FED balance sheet. It's not the big
boys stuff, which the interest rate movements.
Speaker 2 (27:51):
Yeah, I mean, frankly, I just feel like the FED
is stuck in this position now where they have a
giant balance sheet and nobody fully understands, even at the
Federal Reserve, what would happen if they continue to try
and run it off. And so the safe thing to
do is just to say, yeah, we're pausing, We're going
to keep doing what we're doing. And yes, we own
this gargantuan amount of securities and a huge balance sheet
(28:13):
that we've never seen before. But as such, running it
off when we have some concerns about the state of
markets is too dangerous, So we'll let the next person
worry about it. That's I kind of think where the
FED sits right now. Let's take a quick break. When
we come back, Americans facing a retirement confidence paradox, we
(28:35):
will talk about what's the plur of paradox paradoxes? Yeah,
we'll talk about paradoxes next on The Financial Exchange.
Speaker 1 (28:43):
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(29:06):
Radio Network.
Speaker 4 (29:11):
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Speaker 2 (29:43):
So Paul Prudential did a survey about Americans, and actually
not just Americans. They surveyed folks from Brazil, Mexico, Japan,
and the United States, specifically looking at forty two hundred
adults and their feelings about retirement. One I guess surprising
piece to me, which I take as good news, is
(30:05):
that eighty nine percent of wealthy US adults said that
they are confident they'd be able to cover essential cost
in retirement, but only about half of them have actually
factored in inflation to their retirement planning. So that's the
paradox that they're calling is they're basically saying that Americans
are overly confident about their ability to retire and fund
(30:27):
their retirements, which I would I guess by I think
such a bull market like the one that we have
seen frankly over the last seventeen ish years now, right
since since twenty ten or so or two thousand and
nine or so, we have seen just a straight line
bull market that I think has lent a lot of
confidence to folks. But it's a fair point that, yeah,
(30:52):
when you dig underneath the hood, you start to raise
some questions about where people are actually prepared or unprepared
for their retirement.
Speaker 3 (31:00):
The inflation pieces is probably the hardest moving target because
it is impossible to project in our financial planning work
that we do. It usually is the most sensitive one
that can impact a client's plan. Is any changes in inflation,
particularly if it's higher than projected, can really put a
(31:20):
damper and a huge den into someone's potential financial success.
Speaker 2 (31:24):
I've said this before here, but I'll actually say that
most people that I have met and had these types
of conversations with are much more worried about a market crash,
but much more exposed to higher inflation. Sure sure, like
the way that they're managing their own money. They're terrified
of the market falling apart and completely underprepared for the
idea that inflation could run three percent instead of two
(31:46):
and a half, exactly right, Like such a small little
tweak there, I think the I think one of the
problems though with our industry. We both work as financial advisors,
we work in wealth management. I feel as though we
have this kind of stodgy reputation for, oh, they're just
going to take my money and do whatever they want
(32:07):
with it. And some people have a positive outlook with that, like, oh, look,
how great they have done it managing money over the
course of a decade. Others might have a negative outlook
of it. But I think that's kind of the opinion
of what financial advisors do is they're here to take
my money and you allocate it properly, and frankly, if
I'm looking at my own portfolio over the last fifteen
(32:29):
years and even did something very simple like put it
all in some sort of balanced type of fun I've
probably done pretty darn well, and I think that's that's
where some of the nuance comes in. And what we
do a bad job of in our industry is actually
explaining that. Oh yeah, we have plenty of clients who
have you know, some of the best wealth managers out there.
(32:51):
They can pick stocks, they can run a portfolio on
their own, they don't really know our help, but they
have no idea how to build a financial plan right.
I've met engineers who are excellent at building spreadsheets and
can model out their entire rest of their financial lives
with a high degree of accuracy, accounting for things like
inflation and market drops, but are some of the worst
(33:13):
when it comes to assessing how taxes are going to
play out with their plan. I've met tax attorneys who
know the tax code in and out and can find
every loophole for you, and suck at investing. And so
my point with all this would merely be there's a
lot of you know, places that try and do a
(33:33):
one size fits all approach, and that can be right
for some people, but it's absolutely wrong for others, and
I think especially you know, I'm seeing differences between generations too.
I've found older generations that really just want to outsource
it all and just say I'm not interested in this.
I found a lot of younger generations who say, no,
I am passionate about investing. I just need help here.
(33:54):
And that's where again, I think our industry could do
a better job of explaining, like, oh, yeah, there are
financial advisors out there where if I just need somebody
to take a look at what I've already done and
give me a grade and tell me how, you know,
how am I coming along When it comes to preparing
for all this. There are people that will do that.
There are people that you can have on retainer and
just pay an hourly fee. There are folks that will
(34:17):
just manage your money and do nothing else at all.
But we have this again reputation of oh, they want
to do everything and take over everything. If you have
questions about your own financial future and you fall into
one of those categories of oh, I feel like I'm
actually fine at these other things and could use a
(34:38):
little bit of help hereer guidance on this guidance on
that specific issue, I can't promise that Armstrong Advisor Group
can answer all of them right. Like you know, we
are not experts on everything. Nobody is experts on everything.
But if you have questions like that and you want
to kick the tires a little bit and understand how
we work with our clients, give us a call at
eight hundred three nine three four zero zero one. It's
(35:00):
a number for the Armstrong Advisory Group. We have employees
and offices scattered throughout the New England area, but we
meet with people nationwide and be happy to chat with
you too. The number again is eight hundred three nine
three four zero zero one.
Speaker 1 (35:13):
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 (35:29):
At the open this morning, United Parcel Service UPS was
up about ten percent in early trading. It's calmed down
a little bit. It's up about seven percent so far
in trading. What did we hear from the logistics and
delivery Giant Pole.
Speaker 3 (35:43):
Similar to what Amazon had talked about earlier that we
covered in the show. UPS is also cutting thirty four
thousand jobs in its operational workforce, and that's a seventy
percent increase from its previous target. But also in terms
of the reason why it's so high today, is it
just crush profit expectations and there's more confidence in the
(36:06):
courier's comeback plans. UPS has struggled tremendously post pandemic. They
had a lot of momentum, but have struggled since then
quite a bit. It's interesting this mirrors sort of a
conversation I had recently with a client who is a
longtime employee of UPS who recently retired, who mentioned that
the cost cutting endeavors that they are embarking aren't are
serious and significant. He was mentioning to me that they
(36:28):
are really looking to cut headken down and this backs
that up.
Speaker 2 (36:33):
Yeah, you've seen it with the storefronts too. They are
closing more of those. Frankly, the only time I ever
enter them. Actually, there's two occasions. One is when I
need to ship something to my family in the Midwest
for usually Christmas, and usually it's my wife doing that,
not me. Two. It's when I'm returning for something for Amazon,
right right, and that's convenient, but I don't know how
(36:55):
much business that really generates for ups, And so they're
cutting these stores and finally seeing a bit of a
break in what has been, frankly a three year direct
trend downwards for this company. It's trading at ninety five
dollars and fifty cents a share this morning. It hit
a peek back in twenty twenty two of nearly two
hundred and twenty five dollars a share. Yeah, I mean,
(37:17):
it has been a big, big fall for what has
been Yea again a huge logistics company. But they've been
I think struggling to find their position ever since Amazon
started to compete with them, No.
Speaker 3 (37:32):
Question about it. That business is very challenging. The low
value e commerce stuff that they were doing for Amazon,
it's just been tough, and Amazon has taken a lot
of it on its own, and ye been a fierce
competitor for them. It's it's incredible. The cost savings that
they've achieved this year is about two point two billion
for the first nine months of the year. Three and
a half billion will be the total year over year
(37:52):
savings that they have. Stock was down, as you mentioned,
twenty nine percent this year through Monday.
Speaker 2 (37:58):
S and P five hundred barely hanging on to some
gains here. We've got it up about a tenth of
a percent. We're gonna take a quick break when we
come back. We're talking private credit among other things, so
stay tuned, folks will be right back
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