September 2, 2025 • 38 mins
Mike Armstrong and Paul Lane discuss why a good economy can feel so bad. US stocks are now pricier than they were in the lead-up to the Dot-Com bubble pop. How bad could the fallout be from an AI bubble pop? What is the ultimate goal of the tariffs? A band of retail investors are beginning to flex their muscle. Musk now claims Tesla's profits will largely come from robots.
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
The Financial Exchange is produced by Money Matters Radio and
is hosted by employees of the Armstrong Advisory Group, a
registered investment advisor. All opinions expressed are solely those of
the hosts. Do not reflect the opinions of Armstrong Advisory
or anyone else. Investments can lose money. This program does
not offer any specific financial or investment advice. Please consult
your own financial, tax, and estate planning advisors before making
(00:20):
any investment decisions. Armstrong Advisory and the advertisers heard on
this program do not endorse each other or their services.
Armstrong and Money Matters Radio do not compensate each other
for referrals and are not affiliated. This is the Financial
Exchange with Mike Armstrong and Paul Lane, your exclusive look
at business and financial news affecting your day, your city,
(00:43):
your world. Stay informed and up to date about economic
and market trends plus breaking business news every day. The
Financial Exchange is a proud partner of the Disabled American
Veterans Department of Massachusetts. Help us support our great American
heroes by visiting DAV five DOC Boston and making a
donation today. This is the Financial Exchange with Mike Armstrong
(01:06):
and Paul Lane.
Speaker 2 (01:11):
Good morning, Welcome back to the Financial Exchange. It is
the uh first day of trading for the month of September,
the historically worst month for stocks out there, living up
to its name this morning, as we've got a broad
based risk off sell off today, with the NASDAC off
one point four percent, the S and P off one
point two in the Dow Jones Industrial average off nine
(01:34):
tenths of one percent in early trading here.
Speaker 3 (01:38):
Bond yields moving up as well.
Speaker 2 (01:41):
You've got the thirty year topping four point nine to
seven percent, of the ten year treasury yield up by
almost point zero five percent, so sitting now at four
point two seven to three percent. Oil prices are jumping
as well on something about Russia, probably one point eight
(02:01):
percent to the upside there, and gold moving up some
one point seven percent on probably some uncertainty news. The
big story of the day was Friday's federal court ruling
against the Trump administration's use of tariffs under AEPA. This
seven to four ruling sets things up for a likely
(02:23):
appeal to the United States Supreme Court. Perhaps the administration
already has appealed, I'm not certain, but seven justices ruling
against the White House and their use of emergency powers,
effectively calling into question the Trump administration's ability to implement
and maintain the majority of tariffs that they have put
(02:44):
out there. Does not call into question tariffs on things
like steel and aluminum or autos, but very much calls
into question country specific tariffs under the emergency powers of
fentanyl and trade imbalance. So, like we said, likely headed
for the Supreme Court. The federal appeals court that did
rule on this put a stay in here until October
(03:06):
fourteenth to allow time for that appeal. But we will
see what lands next. In the meantime, just a whole
bunch of uncertainty about what you do and really does
call into question a whole bunch of other things that
we will be facing down for this month of September.
You know, obviously we've got the jobs report coming Friday,
which is already baked, the inflation report coming the week after,
(03:27):
which is also already measured and taken care of. But
you think about the Federal Reserve meeting that you have
coming up. Okay, if I'm Jay Powell and trying to
orchestrate the next move, I probably don't move on my
stance that interest rates should be lower here, but you
do have to suddenly acknowledge that, Yeah, if the White House,
if the Treasury needs to reimburse how much has been
(03:48):
collected in tariff so far, it's.
Speaker 4 (03:50):
Over hundreds of billions of dollars.
Speaker 2 (03:52):
Yeah, if they have to suddenly reimburse two US companies
hundreds of billions of dollars, very much calls into question
what that inflation environment could look like. Well, you know
what the hiring environment would look like on the heels
of that. What do I do as a company if
I'm suddenly given billions of dollars that I thought was
previously tax out the door? Big big questions about how
(04:17):
all of this plays out. And I'm sure we'll be
discussed at that next FED meeting, but we will see
a lot of uncertainty now, both in terms of the
current tariffs that are being collected and will continue to
be collected for the time being, as well as future
negotiations that foreign countries will engage in with the trade
(04:38):
officials in the White House. You know, it's pretty tough.
It's pretty tough to drive a hard bargain with these
countries when you feel like you've got your hands tied
behind your back, and I'm sure that's how some of
the negotiators feels right feel right now is hey, Yeah,
let's put all these plans in place and just hope
the Supreme Court goes along with us on this, because
I don't know why you would. I don't know why
(04:59):
you would go siating good faith. If you're India right now,
I wouldn't.
Speaker 4 (05:03):
I wouldn't.
Speaker 2 (05:06):
Alixon Schrager for Bloomberg writes, how can an economy this
good feel this bad? So Paul layout for me, why
is the economy good according to the numbers right now?
I would agree, like the numbers are proving pretty solid
for this economy right now.
Speaker 3 (05:20):
But what arguments does she lay out?
Speaker 4 (05:22):
This has been really the issue for the last five years.
And Mike think we've talked about where the S and
P five hundred is up more than one hundred and
forty percent from the end of the recession that we
saw during that COVID range. We've got unemployment that has
remained about four and a half percent since twenty twenty one.
You've had GDP growth for the Q one of this
(05:44):
year that just came in. Sorry, Q two of this
year that just came in at three point three percent.
You've had strong economic growth, you've stock market at stock
market at all time really really well, and you've had
a labor market that, particularly in twenty one twenty two
was the hottest it's ever been in terms of people
job hopping. The argument could be made that some of
(06:05):
wages were enoup by inflation. We'll get to that in
just a moment. But great labor market, great stock market,
and GDP growth that has been quite strong as well.
Those are all the positive economic indicators that you can
point to in what's been a pretty good period, though
it hasn't felt good the whole time.
Speaker 2 (06:24):
Nonetheless, when you ask people via surveys how they feel
about the economy, the answers are pretty overwhelmingly negative. And
yes it's partisan, yes, but it's pretty negative regardless of
political affiliation. Also, you had one survey recently that was
(06:46):
ninety percent of Democrats responding negatively, fifty five percent of
Republicans responding negatively. And so to some degree, we've largely
taken a look at these surveys of the course the
last few years and just had to put our you know,
put our hands down, say I don't know if this
matters anymore. I don't know that these surveys really give
us a representation of It might give us a representation
(07:09):
of how people feel, but clearly over the last few
years has not given us any indication whatsoever of what
people do right.
Speaker 3 (07:17):
And that's you know, if you're an investor, that's what
you care about.
Speaker 4 (07:19):
Money talks.
Speaker 2 (07:20):
Am I so dour and negative on the economy that
I'm gonna stop going to restaurants? Am I so negative
that I am going to save a much larger percentage
of my paycheck so that I don't get laid off?
Those would be really indicat, you know, indicative things about
where the economy is going to go. And in spite
of the way that everybody's responded to these things, it
has meant nothing. Whether it's the Michigan Sentiment Survey that's
(07:43):
been around since the sixties or a number of the
ones that are mentioned here on where was this one done?
The Conference Board was another one. The Wall Street Journal
just did another survey and again all of this finding Yeah,
just not a lot of hiring, not a lot of
outlook for the economy, and a real souring on the
(08:04):
idea that the American dream still exists, right, And that's
that's pretty that's pretty earth shattering to me, you know,
one way, in one specific way, I keep asking myself
with this question, and Chuck's brought it up before too,
if you could be born in any country in the
(08:26):
world right now, for solely the prospects of economic mobility,
right Like, you know, if I'm going to be born
into the lowest class of any country, where would I
be born? And I really do hesitate to come up
with a single country other than the United States.
Speaker 3 (08:42):
That I would prefer too.
Speaker 2 (08:44):
I would too, but clearly with things like the cost
of housing, clearly with job prospects for younger Americans, and
all sorts of other inflation. Over the last several years,
people are very very negative on this economy. My problem
is still is I don't know what to do with
that information.
Speaker 4 (09:03):
No, ultimately, there has to be some proof that sentiment
matches behavior to your point earlier, and it hasn't. The
US consumer has continued to get out there and spend.
Maybe you can make the argument that it's really reflecting
the bifurcation and the economy that we've talked about the
stat before, more higher income Americans are more responsible for
(09:23):
the consumer spending across this country.
Speaker 2 (09:26):
The specific statistic that we've referred to more than once,
and I should pull the source on it, but top
ten percent of income earners in the US right now
are counting for fifty percent of total spending right.
Speaker 4 (09:37):
So perhaps it is more reflection that that the bigger
numbers point to the consumer still spending, but perhaps that
other ninety percent of income earners maybe they aren't feeling
as well or spending as well. But overall, the way
that companies have performed, it's hard to make that claim entirely.
And what we learned over the last five years is
(09:57):
with inflation rearing its head, it is true the one
thing that upsets sentiment the most. I feel like, yeah,
outside of job loss.
Speaker 2 (10:09):
Probably we've talked about this before, but I'll make this
point that inflation affects these numbers really poorly, because everyone
responds to inflation in those worst unemployment scenarios that we
get like, yeah, certainly, if I lose my job, I'm
going to be way more negative on one of these
surveys than I would be with twenty twenty two inflation
(10:30):
if I were still working like you put yourself in
that position like, Okay, it really sucks that all my
prices have gone way up, but I do still have
a job and I'm able to put food on the
put food on the table from my family. The problem
with how that all works out is in the worst
recessions that we've been through, maybe one in ten people
has lost their job. So yeah, that is the way
(10:53):
that these surveys go. And frankly, it's just been a
very long time since we've experienced a time period like
this with price uncertainty like we've been delivered of the
last five years. Let's take quick break when we come back,
playing a little bit of trivia for you here next
on the Financial Exchange.
Speaker 1 (11:11):
The Financial Exchange is now available every day from eleven
to noon on Serious XM's business radio channel one thirty two.
Stay informed about the latest from Wall Street, fiscal policy,
and breaking business news every day. The Financial Exchange is
life on Serious XM's Business radio channel one thirty two.
This is the Financial Exchange Radio Network. If you missed
(11:32):
any of today's show, catch up whenever you want on
our YouTube page. Find daily show segments and full shows.
Just go to YouTube dot com and search for the
Financial Exchange. This is your home for breaking business and
financial news. This is the Financial Exchange Radio Network.
Speaker 5 (11:51):
It's sad for trivia here on the Financial Exchange and
we have a new trivia theme this week. We're gonna
go with Famous Bends Street here in our week long
look at Famous Ben's begins with Massachusetts native Ben Affleck.
Speaker 4 (12:08):
Trivia question today.
Speaker 5 (12:10):
What was the name of the twenty thirteen Best Picture
winner that Ben Affleck directed and starred in? Once again,
what was the name of the twenty thirteen Best Picture
winner that Ben Affleck directed and starred in? Be the
sixth person today to text us at six one seven
three six two thirteen eighty five with the correct answer.
Speaker 3 (12:31):
You know when a.
Speaker 5 (12:31):
Financial Exchange Show T shirt. Once again, The six correct
response to text us to the number six one seven
three six to two thirteen eighty five will win that
T shirt. See complete contest rules at Financial Exchange Show
dot com.
Speaker 2 (12:45):
Paul, We've got a piece in the Wall Street Journal
today about stocks being the priceiest at least by one
measure that they have ever been fitting for a day
when the stocks are selling off by more than a
percentage point across the board, but we have made on
this show. We have made comparisons to this moment in
time and the dot com bubble, and the valuation piece
(13:06):
of it is just another part of that comparison to
the AI driven rally of today versus the dot com
driven rally of the past. And I just wonder at
how to read into this so specifically, the metric that
they're looking at here is not the price to earnings
(13:27):
ratio that is still not quite as high as it
was during the dot com era, but the price to
sales ratio today on the S and P five hundred
is higher than it has ever been. So what you're
talking about here is take a look at the price
of every stock compared to the total value of all
of their gross sales, and you are pricier right now
than you were during that dot com era. What is
(13:49):
one to make of all of this? Do you think
it goes.
Speaker 4 (13:52):
Back to the usual conversation that we have with valuations
that over the longer term they are a better predictor
of not a bit, they can be a better predictor
of future returns, but over the shorter term you can't
really draw much from the fact that the S and
P five hundreds trading at a pricer level at this point.
(14:12):
In terms of the numbers here, there's no question if
you look at many different valuation metrics, the market's more expensive.
As a counter argument, you could perhaps say that maybe
the earnings growth in productivity that's going to be driven
by these technological advancements will bring those valuations down. That
would be the argument to be made. Or you could
(14:34):
make the argument that things have gotten over extended and
perhaps investors should brace for a decade where they'd owner
as strongly as they have over the past ten years.
Speaker 2 (14:43):
One of the big differences that has been pointed out
during this rally is precisely what this reflects, which is
in the dot com era, you had a bunch of
really unprofitable companies getting their stock prices bid up, and
maybe they were profitable, maybe they were unprofitable pets. Dot
Com gets referred to all the time, these companies that
barely were in existence and put dot com in their
(15:04):
name and got a big price boost. That's not what's
really happened in this rally. Instead, you've had some of
the most profitable and literally one of the most profitable
companies in the history of the world I believe that
being Google getting their stocks bid up, and so that
price to earnings ratio has not been back to where
(15:26):
it was during the dot com bubble, but the price
that you're paying for every dollar of revenue that these
companies generate is higher than it has ever been for
the S and P five hundred. We did get a
text a week ago that I never got to. I
don't know if you guys did, but somebody texted the
show said, have you guys discussed ever the impact of
an AI bubble burst on the economy? Just curious if
(15:46):
it holds enough weight to have a significant impact. My
answer would be if it resembled anything like the dot
com bubble burst, then yes, it would be enough to
have a significant impact on the economy. You have so
many people that are so leveraged right now when it
comes to their portfolios. You have so many people that
I think are continuing to spend and continuing to feel
(16:10):
wealthy because of the values of their stock portfolio. That yeah,
if you had an AI bubble burst and suddenly the
valuations of companies like Nvidia and Microsoft and others came
crashing down, would that be enough to result in a
genuine effect on the economy. Yes, And there's genuine economic
activity right now that's taking place because of the bets
(16:31):
on AI, right all the data center construction, all this
stuff that is second order to the stock prices, I
think could be affected by something.
Speaker 4 (16:39):
It's fantastic question opposed, and it's right on the mark.
I undoubtedly agree with this proposition out there, because if
you look at the capital expenditures of some of these
big hyper skills, which are the names the Googles, the Microsofts,
these others, they're spending each upwards of one hundred billion
dollars eighty five to one hundred billion year on building
(17:02):
out data centers and developing their capabilities on AI. If
that gets pulled, you've got hundreds of billions of dollars
of CAPAX that's being trickled out through the economy that's
building pulled out. And then, oh, by the way, those
companies in terms of their waiting in the S and P.
Five hundred, not all of them are pure AI plays,
to be clear, but a lot of the enthusiasm around
(17:22):
the Magnificent seven, which makes up a waiting close to
a third of the S and P five hundred. If
that is taken away because there is some skepticism on
AI's future profitability. If there's some big hit that is
taken to AI between the lesser capax going forward and
just the valuation hit that these companies would take, yeah,
(17:43):
definitely it could result in a pullback. Not to mention,
a lot of smaller names that have been writing the
cotails of this momentum would probably go down with it.
But it would have to be a seismic shift in
the future optimism around AI that would cause that. But
a great question.
Speaker 2 (17:59):
So this story on price to sales, as with many
others that we've covered, I think my conclusion is it
does not spell a great deal of optimism that I
would have for the next decade in the stock market.
It also tells me nothing about anything timing related. It
does not tell me whether or not we're in a
bubble right now. It does not tell I think anybody
(18:20):
anything discernible about what to do with their portfolio today.
I think it's just a story of, Hey, things have
to go really really well for companies to fit into
these very pricey valuations that they are being bid up
to right now, and so will we see will we
see that revolution? From AI that is being promised. Will
(18:44):
we see these companies able to genuinely save a lot
of costs and innovate new inventive products that nobody has
been able to dream of before on the heels of
AI like.
Speaker 3 (18:55):
Was done with the Internet.
Speaker 2 (18:57):
And even if it does happen, will we have a
bubble burst in between then and now?
Speaker 4 (19:01):
Yeah, there's a great quote in one of these pieces.
I'm forgetting which one it was, but the economic relly
it doesn't die of old age, it dies by homicide.
I thought that was a good way of putting. It's
something that you don't anticipate that comes in and really
slashes valuations that we can't even foresee.
Speaker 2 (19:16):
Today, we've got to take a quick break. When we
come back, we've got your trivia winner and a full
look at Wall Street today with the sell off that's
next on the Financial Exchange.
Speaker 1 (19:40):
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 market so far today right here on the
Financial Exchange Radio Network.
Speaker 5 (20:00):
Markets are starting off the month of September by selling
off amid more tariff confusion after an appeals court struck
down the administration's reciprocal tariffs late last week. Investors are
also waiting a court ruling on whether Trump's bid to
fire FED Governor Lisa Cook is legitimate. And on top
of all of that, we'll have a jobs report on
(20:22):
Friday this week. Right now, the Dow is down by
over one percent, or four hundred and eighty five points,
SMP five hundreds down one point three percent or eighty
five points in the NASDAC down one point six percenter,
three hundred and fifty four points, RUSS two thousand is
down just over one percent. Tenure Treasure wheeled up five
(20:42):
basis points now at four point two seven nine percent,
and crude oil is jumping two percent higher excuse me,
trading at sixty five dollars and thirty two cents a barrel.
According to The Wall Street Journal, Activist investor Elliott Management
has built a roughly four billion dollar steak in Pepsi
and plans to push the beverage and snack's company to
(21:04):
make changes to boost its sagging share price. Meanwhile, craft
Hins confirmed earlier reports that it would split into two
publicly traded companies through tax free spinoff Berkshire. Hathaway's born
Buffett told CNBC this morning that he is disappointed in
the Craft hind split, as Berkshire was behind the merger
back in twenty fifteen. Kraft Hinds shares are down now
(21:27):
by over six percent. Elsewhere, shares in Signet Jewelers up
nearly one percent after it reported better than expected second
quarter results and also up to its full year earnings guidance.
Constellation Brands down now over seven percent after the maker
of Modella and Modello in Corona cut its full year guidance,
(21:50):
and Goldmeyer New Neumont is up by about two percent
after the precious metal hit a fresh record high. Out
Tucker Silva and that is Wall Street. And in the
previous segment, we asked you the trivia question, what was
the name of the twenty thirteen Best Picture winner that
Ben Affleck directed and starred in. That would be our
(22:12):
go Brian from Addleborough, Mass or Brian from Addleborough Mass. Yes,
there's our winner today taking home a Financial Exchange showed
t shirt. Congrats to Brian and we play trivia every
day here in the Financial Exchange. See complete contest rules
at Financial Exchange show dot com.
Speaker 2 (22:28):
We had an other text earlier during the show about
tariffs that I think it is worth rady. If you
want to text the show, you can do that too
by texting six one seven three six two thirteen eighty five,
or you can have Tucker's personal cell phone out Tiger.
Speaker 3 (22:40):
What's that number again? Oh? Sure? Yeah, I almost got him.
I felt like I almost had him.
Speaker 4 (22:44):
There.
Speaker 3 (22:45):
Get my social social too, please.
Speaker 2 (22:47):
Problem from the earlier text to the point behind the
tariffs is that ultimately it's better for the American people. Yes,
people will be unhappy in the short term. However, businesses
and business people are constantly changing their models to adapt
to the economy and new opportunities and changes. They will
do that in this case. First they will make their
suppliers eat the cost then they will eat some of
(23:09):
the costs. Then they will change the business model and
find suppliers in different countries. In the meantime, they will
complain about it. I think some of those things are accurate,
and what it comes back down to for me is
the ultimate goal of these tariffs. And that's where I'm
a little bit confused from this text message too, because
I've heard a few things about the ultimate goal of
(23:31):
the tariffs. One of them has been to bring a
majority of the manufacturing that we do of goods back
into the United States. And no, India is not good
enough in that case, Canada, Mexico is not good enough
in that case.
Speaker 3 (23:42):
We want it done here.
Speaker 2 (23:46):
The text or acknowledges in this case that yeah, they're
going to go to different countries, not necessarily the United
States in this case, and that does that ultimately end
up being better for Americans if it moves from China
to Vietnam, for example, or Malaysia to India. I don't
have a good answer to those questions. Is it instead
(24:08):
the real end goal to raise revenues that we can
cut income taxes. We're seeing some of that year this year.
The tariffs have raised a lot of revenue, they haven't
really brought a ton of jobs back, And I don't
think most companies are ready to do that in this case,
both because of uncertainty and just because of the level
of the tariffs rates themselves. Right, you can probably pay
a thirty percent tariff on Chinese made products and still
(24:31):
produce it cheaper in China than you can in the
United States.
Speaker 3 (24:34):
So to me. I guess my personal opinion doesn't matter.
Speaker 2 (24:38):
My personal opinion, though, is that it's just unclear to
me how much tariffs do or don't benefit the United
States in the long term. I think others are much
more convinced of that, and I'm open to that argument.
What I think the texture and I can't agree on
is the president's powers. Of these tariffs now being largely
in question as to whether or not they will still
be out there leads to a whole ton of uncertainty.
Speaker 4 (25:01):
Sure, I agree with the sentiment about businesses changing and adapting.
Of course they always that's it's always, that's always the case,
and I would never disagree with that notion at all.
Speaker 2 (25:11):
You have to It's the same argument I would use
for you know, when people tell me, oh, you know,
Trump got elected, I can't be in the stock market,
or Biden got elected or Obama got elected.
Speaker 3 (25:20):
You got to get me out of My.
Speaker 2 (25:21):
Argument is always, Look, companies are very good at navigating
all sorts of changes to administrations and businesses and policy.
Don't worry about who the prison president is, right, that's
not relevant. And that's the same argument I make with tariffs.
Companies find ways to succeed.
Speaker 4 (25:36):
What we can all agree on is that we need
certainty going forward as to what the economic playing field
is going to look like. And we sit here today
five months in and I know less about where tarraffs
are going to be than I did on April second.
You know, it's just so hard.
Speaker 3 (25:51):
That's I'm being maybe an exaggeration, but you know what
I mean.
Speaker 4 (25:54):
Like, if this gets reversed, then I really will have
no clue at all. But the point being that, ultimately
there's two reasons that have been mentioned as to why
these tariffs will be unofficial for the economy, bring back
manufacturing to the United States and raising revenue. And to me,
on the raising revenue side, I'm all for that. If
(26:15):
it's going to be utilized to offset the spending pattern
that we're on as a country, I'm there. I'm with it,
But you have to look at the numbers in terms
of the recent tax bill being passed. It it's not
going to be a dollar for dollar offset on the
increase spending on the tax side of things. There that
the tariffs will cover all of the potential debt that's
going to be added from these lower tax rates going forward,
(26:37):
I would have rather seen we move in the same direction. Okay,
raise revenue from tariffs, but then cut expenses at the
same time. Then to me, you have a compelling argument
from a budgetary standpoint that hey, you're dropping down the
cost of things. On the manufacturing side. We're not going
to know the answers to that for years as to
whether or not this is going to bring more manufacturers
to the United States, and people just have to be
(27:00):
aware that with bringing things to the United States, the
manufacturing the cost of goods will go up, and there's
a lot of specialization that goes into manufacturing that I
don't think everyone is aware of on a sector sector basis.
Speaker 2 (27:14):
All said and done, we can all have an intelligent
debate about whether or not tariffs will or won't be good.
What I think is probably not good is the uncertainty
around where they're going to land. And we just got
a big dose of that on Friday afternoon when this
court ruled against the White House. So we will see
where things go in the second half of the last
four months of this year and when it comes to
(27:36):
these tariffs. But I think what we're seeing in markets
today is an admission of more uncertainty. If you are
staring down this market right now and we're heading into
September with a sellof and you're trying to formulate what
your investment strategy looks like for the rest of this year.
Maybe you are at a big turning point in life.
(27:57):
Maybe you've started a new job, job, a career, heading
down to that retirement path, and you have questions about
your investment and financial strategy for the future. Give the
folks at Armstrong Advisory Group a call so we can
lend you some degree of certainty when it comes to
your strategy. The numbers eight hundred three nine three for
zero zero one. Again, that's the number for the Armstrong
(28:19):
Advisory Group. You can reach us at eight hundred three
nine three four zero zero one.
Speaker 1 (28:24):
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 (28:40):
Band of retail investors powered the Memestock rally and now
they're taking different steps here and I just have to
say this is reason one thousand why small companies and
any companies prefer to stay private rather than going public
these days, and why there are so few publicly traded
companies out there, which is a phenomenalon we talked about before.
(29:01):
But a company called open Door Technologies got looped into
the Memestock rally earlier this year. Stock went up ten x.
And then these investors, as they've done on a number
of different occasions, when that CEO did something that did
not sit well with them, pretty successfully forced out that
CEO effectively. In one of the earnings calls. They were
(29:22):
looking for the CEO to announce some big hope for
a strategy turnaround, perhaps a pivot to artificial intelligence. For
those that aren't familiar, open Door is a company that
buys houses, so I'm not sure how the turn to
AI was going to be successful for them. She did
not commit to any big turn there, and so there's
a big movement to fire the CEO carry Wheeler. The
(29:43):
board ended up doing so, and I guess I don't
know where I really land on this. To one degree,
this is one of the points of markets is to
have investors buy and sell companies with an intent of
making change. That's activist investor one oh one. On the
other hand, it does seem like investors are digging in,
(30:06):
some investors anyway, really digging in on issues that don't
really seem core to a lot of these businesses. And
they're walking a delicate game now of you know, hurting
investors' feelings about decisions that CEOs are making. That the
cracker barrel example is another way. And look, I don't
think it was a good idea to change the cracker
barrel logo, but I also didn't expect investors to get
(30:29):
as upset about it as they did and move that
stock price around. And maybe this is just the lesson
of twenty twenty is you know, you suddenly now have
a whole bunch of investors who have opinions and previously
didn't have investor experience, and they got a whole lot
of it back in twenty twenty and twenty twenty one
when there wasn't any gambling to be done or other
forms of entertainment.
Speaker 4 (30:50):
The last five years the retail Trader Frenzy has been
has produced wonderful content for the show, first of all,
and sorry, thank you. In terms of all the means off.
I'll never forget the GameStop days and nothing like it
today obviously, but still there's pockets of the market that
have this out there, the amount of retail trading and
just how accessible it is for everyone to be participants
(31:13):
in the markets. This is some of the buy products
of that, and there's going to be success stories and
there's probably gonna be a lot of failures come from
this too. But ultimately, for what we talk about on
a daily basis, which is largely the S and P
five hundred companies, you have such large sizes that if
(31:34):
they want to do this hypothetically with Apple, these retail
investors know you can't move the needle there. So it
remains a fascinating subplot of the market.
Speaker 2 (31:43):
Let buyer beware with this as an investment strategy, because
it does seem to me like a lot of these
people are not oftentimes not doing it to make any
sort of long term money. Yes, it might be to
make short term money, it might be to make short
term bets, but oftentimes it seems the strategy is much
more about short term and that's very different from a
lot of investors' overall strategy. Let's take a quick break
(32:04):
when we come back. Stack Roulette.
Speaker 3 (32:06):
Here on the Financial Exchange.
Speaker 1 (32:08):
The Financial Exchange is life on Series XM's Business Radio
Channel one thirty two weekdays from eleven to noon. Get
the latest business and financial news from across the country
and around the world, and keep up to date 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. This is the Financial Exchange Radio Network.
(32:33):
Find daily interviews and full shows of the Financial Exchange
on our YouTube page. Subscribe to our page and get
caught up on anything and everything you might have missed.
This is the Financial Exchange Radio Network.
Speaker 5 (32:47):
This segment of The Financial Exchange is brought to you
by the US Virgin Islands Department of Tourism. Looking for
a getaway that's easy, warm, and unforgettable, Discover the magic
of the US Virgin Islands. Saint Croix, Saint Thomas and
Saint John just a short flight from New England, with
no passport needed and no money to exchange. Soak up
(33:09):
the sun, stroll along white sand beaches and feel the
rhythm of the heartbeat of the islands. The USBI is
America's Caribbean paradise. Plan your fallscape now at visit USVII
dot com. That's visit USVII dot com.
Speaker 2 (33:25):
I would kick things off for our stack roulette here, Paul,
We've got a columnist based in Bloomberg. Stable coins are
coming from for your rewards points. And I would really
genuinely like if anybody's listening right now and feels like
they have a really good grasp on stable coins, to
tell me where I'm wrong here. But here's my brief
(33:46):
understanding of the direction that stable coins seem to be going.
Speaker 3 (33:50):
A number of different.
Speaker 2 (33:52):
Retailers are considering rolling out stable coins. Credit card companies
are doing the same as well. And here is the promise.
You will have a let's use Amazon as an example
because it's the easiest. You will have a Amazon issued
stable coin that is pegged to the US dollar, that
(34:13):
is easy transfer easily transferable between your Amazon stable coin
and dollars, is backed by something at Amazon, and you
will be able to use those stable coins to make purchases,
receive purchases if you're a vendor on there, and do
so without Amazon needing to pay exorbitant credit card fees
(34:34):
and processing times with money movement and all sorts of
stuff like that, to which I say great and yeah,
that could be really disruptive to a bunch of banks
and visa and payment networks and hopefully bring down cost
of transactions for people. But isn't it just a slightly
more technologically advanced gift card in that case?
Speaker 3 (34:56):
Yes? I mean, like what is different here?
Speaker 4 (34:59):
Yeah, I'll go further with that. Yes, that's part of it,
And it's important for listeners to understand every time that
you're swiping a card at these vendors out there, Visa
and MasterCard are making money from what's called interchange fees.
That basically the merchant if I pay one hundred dollars
at a store for some item, they're not getting all
one hundred dollars of that. Visa and MasterCard for the
(35:20):
network they provide, are taking a cut in between. Now
that can be anywhere from one and a half to
three percent, depending on how it's negotiated. They don't get
all that money, A lot of it gets offered back
to me and for rewards points. So if you have
a credit card out there, a Chase, Sapphire, or whatever
the case may be and you get two percent cash
back or whatever the offer is. They're giving some of
it back to you there, and usually they're taking maybe
(35:42):
a quarter of a percent on all transaction volume, the
big on anything that you spend using these cards. Obviously,
Amazon and Walmart and all these other would love a
boost of two or three percent on their margins to
not have to pay that.
Speaker 3 (35:55):
You can be sure that Amazon's not paying two to
three percent, you know what I mean? Again?
Speaker 4 (35:58):
Yeah, yeah, they're way too big. But how do you
convince me, Paul Lane, who is a big his family
is a big Amazon shopper. The five percent cash back
that I get on our Amazon card, where does that
fit into the stable coins here? Because right now you
have to you have to convince me that it's better
to go with stable coins than the current way of
getting my three to five percent cash back in different
(36:21):
varying offs.
Speaker 3 (36:21):
I just I feel like I'm missing some piece of this.
Speaker 2 (36:24):
But the more it gets explained to me, they're like, yeah,
that's it.
Speaker 4 (36:28):
Someone make the argument. And the only way that they're
going to be able to get people to do this
is you're gonna have to. As the retailers really offer
some incentives to get me on the platform to.
Speaker 2 (36:38):
Do it, and you have to be big enough that
I trust you, right, right, right, Like I have to
trust that my Amazon stable coin is still going to
be worth a dollar three years from now.
Speaker 4 (36:46):
Yeah, and they're going to have to give the three
to that percentage back is going to have to be
a real lucrative, a war to the end consumer.
Speaker 2 (36:53):
So I guess if you're Amazon, you can invest the
funds like a treasury and make money like a bank does. Right,
And then all of a sudden, all of this I
see is basically Amazon realizing that, Okay, now I have
to get regulated like a bank, and I'm not sure
I want to do that.
Speaker 4 (37:09):
The other great point that's made in this Bloomberg piece
is that, yeah, that sounds great when interest rates on
money markets are four percent, but if they come back
down to zero, then you have an either more of
an uphill battle. Tesla will derive eighty percent of its
value from optimists, according to Elon Musk, very strategically de
emphasizing his Tesla car business and saying that in the future,
(37:32):
the company will derive eighty percent of its value from optimists.
The robot initiative must predicted that I'm going.
Speaker 3 (37:38):
To be six three by next year.
Speaker 4 (37:39):
Paul, did you know that that's tremendous. Yeah, that's tremendous.
Speaker 3 (37:44):
It's gonna be really impressive.
Speaker 4 (37:45):
It's gonna help your hockey game. Yeah, it's It's a
classic strategic move by Musk of emphasizing things that are
on longer timelines. And I don't want to just garage
it because he's made some tremendous inrods and some businesses
out there.
Speaker 3 (38:02):
But stock is down one point eight percent today, so.
Speaker 4 (38:05):
Selling cars has been their business.
Speaker 2 (38:07):
My question is can Elon still move his company stock
given everyone he's pissed off in the same way that
he used to be able to. That's all the time
we have for today, folks, but we will be right
back at it tomorrow here on the Financial Exchange.
Speaker 3 (38:19):
I have a great afternoon. We'll see you then.
The Financial Exchange is produced by Money Matters Radio and
is hosted by employees of the Armstrong Advisory Group, a
registered investment advisor. All opinions expressed are solely those of
the hosts. Do not reflect the opinions of Armstrong Advisory
or anyone else. Investments can lose money. This program does
not offer any specific financial or investment advice. Please consult
your own financial, tax, and estate planning advisors before making
(00:20):
any investment decisions. Armstrong Advisory and the advertisers heard on
this program do not endorse each other or their services.
Armstrong and Money Matters Radio do not compensate each other
for referrals and are not affiliated. This is the Financial
Exchange with Mike Armstrong and Paul Lane, your exclusive look
at business and financial news affecting your day, your city,
(00:43):
your world. Stay informed and up to date about economic
and market trends plus breaking business news every day. The
Financial Exchange is a proud partner of the Disabled American
Veterans Department of Massachusetts. Help us support our great American
heroes by visiting DAV five DOC Boston and making a
donation today. This is the Financial Exchange with Mike Armstrong
(01:06):
and Paul Lane.
Speaker 2 (01:11):
Good morning, Welcome back to the Financial Exchange. It is
the uh first day of trading for the month of September,
the historically worst month for stocks out there, living up
to its name this morning, as we've got a broad
based risk off sell off today, with the NASDAC off
one point four percent, the S and P off one
point two in the Dow Jones Industrial average off nine
(01:34):
tenths of one percent in early trading here.
Speaker 3 (01:38):
Bond yields moving up as well.
Speaker 2 (01:41):
You've got the thirty year topping four point nine to
seven percent, of the ten year treasury yield up by
almost point zero five percent, so sitting now at four
point two seven to three percent. Oil prices are jumping
as well on something about Russia, probably one point eight
(02:01):
percent to the upside there, and gold moving up some
one point seven percent on probably some uncertainty news. The
big story of the day was Friday's federal court ruling
against the Trump administration's use of tariffs under AEPA. This
seven to four ruling sets things up for a likely
(02:23):
appeal to the United States Supreme Court. Perhaps the administration
already has appealed, I'm not certain, but seven justices ruling
against the White House and their use of emergency powers,
effectively calling into question the Trump administration's ability to implement
and maintain the majority of tariffs that they have put
(02:44):
out there. Does not call into question tariffs on things
like steel and aluminum or autos, but very much calls
into question country specific tariffs under the emergency powers of
fentanyl and trade imbalance. So, like we said, likely headed
for the Supreme Court. The federal appeals court that did
rule on this put a stay in here until October
(03:06):
fourteenth to allow time for that appeal. But we will
see what lands next. In the meantime, just a whole
bunch of uncertainty about what you do and really does
call into question a whole bunch of other things that
we will be facing down for this month of September.
You know, obviously we've got the jobs report coming Friday,
which is already baked, the inflation report coming the week after,
(03:27):
which is also already measured and taken care of. But
you think about the Federal Reserve meeting that you have
coming up. Okay, if I'm Jay Powell and trying to
orchestrate the next move, I probably don't move on my
stance that interest rates should be lower here, but you
do have to suddenly acknowledge that, Yeah, if the White House,
if the Treasury needs to reimburse how much has been
(03:48):
collected in tariff so far, it's.
Speaker 4 (03:50):
Over hundreds of billions of dollars.
Speaker 2 (03:52):
Yeah, if they have to suddenly reimburse two US companies
hundreds of billions of dollars, very much calls into question
what that inflation environment could look like. Well, you know
what the hiring environment would look like on the heels
of that. What do I do as a company if
I'm suddenly given billions of dollars that I thought was
previously tax out the door? Big big questions about how
(04:17):
all of this plays out. And I'm sure we'll be
discussed at that next FED meeting, but we will see
a lot of uncertainty now, both in terms of the
current tariffs that are being collected and will continue to
be collected for the time being, as well as future
negotiations that foreign countries will engage in with the trade
(04:38):
officials in the White House. You know, it's pretty tough.
It's pretty tough to drive a hard bargain with these
countries when you feel like you've got your hands tied
behind your back, and I'm sure that's how some of
the negotiators feels right feel right now is hey, Yeah,
let's put all these plans in place and just hope
the Supreme Court goes along with us on this, because
I don't know why you would. I don't know why
(04:59):
you would go siating good faith. If you're India right now,
I wouldn't.
Speaker 4 (05:03):
I wouldn't.
Speaker 2 (05:06):
Alixon Schrager for Bloomberg writes, how can an economy this
good feel this bad? So Paul layout for me, why
is the economy good according to the numbers right now?
I would agree, like the numbers are proving pretty solid
for this economy right now.
Speaker 3 (05:20):
But what arguments does she lay out?
Speaker 4 (05:22):
This has been really the issue for the last five years.
And Mike think we've talked about where the S and
P five hundred is up more than one hundred and
forty percent from the end of the recession that we
saw during that COVID range. We've got unemployment that has
remained about four and a half percent since twenty twenty one.
You've had GDP growth for the Q one of this
(05:44):
year that just came in. Sorry, Q two of this
year that just came in at three point three percent.
You've had strong economic growth, you've stock market at stock
market at all time really really well, and you've had
a labor market that, particularly in twenty one twenty two
was the hottest it's ever been in terms of people
job hopping. The argument could be made that some of
(06:05):
wages were enoup by inflation. We'll get to that in
just a moment. But great labor market, great stock market,
and GDP growth that has been quite strong as well.
Those are all the positive economic indicators that you can
point to in what's been a pretty good period, though
it hasn't felt good the whole time.
Speaker 2 (06:24):
Nonetheless, when you ask people via surveys how they feel
about the economy, the answers are pretty overwhelmingly negative. And
yes it's partisan, yes, but it's pretty negative regardless of
political affiliation. Also, you had one survey recently that was
(06:46):
ninety percent of Democrats responding negatively, fifty five percent of
Republicans responding negatively. And so to some degree, we've largely
taken a look at these surveys of the course the
last few years and just had to put our you know,
put our hands down, say I don't know if this
matters anymore. I don't know that these surveys really give
us a representation of It might give us a representation
(07:09):
of how people feel, but clearly over the last few
years has not given us any indication whatsoever of what
people do right.
Speaker 3 (07:17):
And that's you know, if you're an investor, that's what
you care about.
Speaker 4 (07:19):
Money talks.
Speaker 2 (07:20):
Am I so dour and negative on the economy that
I'm gonna stop going to restaurants? Am I so negative
that I am going to save a much larger percentage
of my paycheck so that I don't get laid off?
Those would be really indicat, you know, indicative things about
where the economy is going to go. And in spite
of the way that everybody's responded to these things, it
has meant nothing. Whether it's the Michigan Sentiment Survey that's
(07:43):
been around since the sixties or a number of the
ones that are mentioned here on where was this one done?
The Conference Board was another one. The Wall Street Journal
just did another survey and again all of this finding Yeah,
just not a lot of hiring, not a lot of
outlook for the economy, and a real souring on the
(08:04):
idea that the American dream still exists, right, And that's
that's pretty that's pretty earth shattering to me, you know,
one way, in one specific way, I keep asking myself
with this question, and Chuck's brought it up before too,
if you could be born in any country in the
(08:26):
world right now, for solely the prospects of economic mobility,
right Like, you know, if I'm going to be born
into the lowest class of any country, where would I
be born? And I really do hesitate to come up
with a single country other than the United States.
Speaker 3 (08:42):
That I would prefer too.
Speaker 2 (08:44):
I would too, but clearly with things like the cost
of housing, clearly with job prospects for younger Americans, and
all sorts of other inflation. Over the last several years,
people are very very negative on this economy. My problem
is still is I don't know what to do with
that information.
Speaker 4 (09:03):
No, ultimately, there has to be some proof that sentiment
matches behavior to your point earlier, and it hasn't. The
US consumer has continued to get out there and spend.
Maybe you can make the argument that it's really reflecting
the bifurcation and the economy that we've talked about the
stat before, more higher income Americans are more responsible for
(09:23):
the consumer spending across this country.
Speaker 2 (09:26):
The specific statistic that we've referred to more than once,
and I should pull the source on it, but top
ten percent of income earners in the US right now
are counting for fifty percent of total spending right.
Speaker 4 (09:37):
So perhaps it is more reflection that that the bigger
numbers point to the consumer still spending, but perhaps that
other ninety percent of income earners maybe they aren't feeling
as well or spending as well. But overall, the way
that companies have performed, it's hard to make that claim entirely.
And what we learned over the last five years is
(09:57):
with inflation rearing its head, it is true the one
thing that upsets sentiment the most. I feel like, yeah,
outside of job loss.
Speaker 2 (10:09):
Probably we've talked about this before, but I'll make this
point that inflation affects these numbers really poorly, because everyone
responds to inflation in those worst unemployment scenarios that we
get like, yeah, certainly, if I lose my job, I'm
going to be way more negative on one of these
surveys than I would be with twenty twenty two inflation
(10:30):
if I were still working like you put yourself in
that position like, Okay, it really sucks that all my
prices have gone way up, but I do still have
a job and I'm able to put food on the
put food on the table from my family. The problem
with how that all works out is in the worst
recessions that we've been through, maybe one in ten people
has lost their job. So yeah, that is the way
(10:53):
that these surveys go. And frankly, it's just been a
very long time since we've experienced a time period like
this with price uncertainty like we've been delivered of the
last five years. Let's take quick break when we come back,
playing a little bit of trivia for you here next
on the Financial Exchange.
Speaker 1 (11:11):
The Financial Exchange is now available every day from eleven
to noon on Serious XM's business radio channel one thirty two.
Stay informed about the latest from Wall Street, fiscal policy,
and breaking business news every day. The Financial Exchange is
life on Serious XM's Business radio channel one thirty two.
This is the Financial Exchange Radio Network. If you missed
(11:32):
any of today's show, catch up whenever you want on
our YouTube page. Find daily show segments and full shows.
Just go to YouTube dot com and search for the
Financial Exchange. This is your home for breaking business and
financial news. This is the Financial Exchange Radio Network.
Speaker 5 (11:51):
It's sad for trivia here on the Financial Exchange and
we have a new trivia theme this week. We're gonna
go with Famous Bends Street here in our week long
look at Famous Ben's begins with Massachusetts native Ben Affleck.
Speaker 4 (12:08):
Trivia question today.
Speaker 5 (12:10):
What was the name of the twenty thirteen Best Picture
winner that Ben Affleck directed and starred in? Once again,
what was the name of the twenty thirteen Best Picture
winner that Ben Affleck directed and starred in? Be the
sixth person today to text us at six one seven
three six two thirteen eighty five with the correct answer.
Speaker 3 (12:31):
You know when a.
Speaker 5 (12:31):
Financial Exchange Show T shirt. Once again, The six correct
response to text us to the number six one seven
three six to two thirteen eighty five will win that
T shirt. See complete contest rules at Financial Exchange Show
dot com.
Speaker 2 (12:45):
Paul, We've got a piece in the Wall Street Journal
today about stocks being the priceiest at least by one
measure that they have ever been fitting for a day
when the stocks are selling off by more than a
percentage point across the board, but we have made on
this show. We have made comparisons to this moment in
time and the dot com bubble, and the valuation piece
(13:06):
of it is just another part of that comparison to
the AI driven rally of today versus the dot com
driven rally of the past. And I just wonder at
how to read into this so specifically, the metric that
they're looking at here is not the price to earnings
(13:27):
ratio that is still not quite as high as it
was during the dot com era, but the price to
sales ratio today on the S and P five hundred
is higher than it has ever been. So what you're
talking about here is take a look at the price
of every stock compared to the total value of all
of their gross sales, and you are pricier right now
than you were during that dot com era. What is
(13:49):
one to make of all of this? Do you think
it goes.
Speaker 4 (13:52):
Back to the usual conversation that we have with valuations
that over the longer term they are a better predictor
of not a bit, they can be a better predictor
of future returns, but over the shorter term you can't
really draw much from the fact that the S and
P five hundreds trading at a pricer level at this point.
(14:12):
In terms of the numbers here, there's no question if
you look at many different valuation metrics, the market's more expensive.
As a counter argument, you could perhaps say that maybe
the earnings growth in productivity that's going to be driven
by these technological advancements will bring those valuations down. That
would be the argument to be made. Or you could
(14:34):
make the argument that things have gotten over extended and
perhaps investors should brace for a decade where they'd owner
as strongly as they have over the past ten years.
Speaker 2 (14:43):
One of the big differences that has been pointed out
during this rally is precisely what this reflects, which is
in the dot com era, you had a bunch of
really unprofitable companies getting their stock prices bid up, and
maybe they were profitable, maybe they were unprofitable pets. Dot
Com gets referred to all the time, these companies that
barely were in existence and put dot com in their
(15:04):
name and got a big price boost. That's not what's
really happened in this rally. Instead, you've had some of
the most profitable and literally one of the most profitable
companies in the history of the world I believe that
being Google getting their stocks bid up, and so that
price to earnings ratio has not been back to where
(15:26):
it was during the dot com bubble, but the price
that you're paying for every dollar of revenue that these
companies generate is higher than it has ever been for
the S and P five hundred. We did get a
text a week ago that I never got to. I
don't know if you guys did, but somebody texted the
show said, have you guys discussed ever the impact of
an AI bubble burst on the economy? Just curious if
(15:46):
it holds enough weight to have a significant impact. My
answer would be if it resembled anything like the dot
com bubble burst, then yes, it would be enough to
have a significant impact on the economy. You have so
many people that are so leveraged right now when it
comes to their portfolios. You have so many people that
I think are continuing to spend and continuing to feel
(16:10):
wealthy because of the values of their stock portfolio. That yeah,
if you had an AI bubble burst and suddenly the
valuations of companies like Nvidia and Microsoft and others came
crashing down, would that be enough to result in a
genuine effect on the economy. Yes, And there's genuine economic
activity right now that's taking place because of the bets
(16:31):
on AI, right all the data center construction, all this
stuff that is second order to the stock prices, I
think could be affected by something.
Speaker 4 (16:39):
It's fantastic question opposed, and it's right on the mark.
I undoubtedly agree with this proposition out there, because if
you look at the capital expenditures of some of these
big hyper skills, which are the names the Googles, the Microsofts,
these others, they're spending each upwards of one hundred billion
dollars eighty five to one hundred billion year on building
(17:02):
out data centers and developing their capabilities on AI. If
that gets pulled, you've got hundreds of billions of dollars
of CAPAX that's being trickled out through the economy that's
building pulled out. And then, oh, by the way, those
companies in terms of their waiting in the S and P.
Five hundred, not all of them are pure AI plays,
to be clear, but a lot of the enthusiasm around
(17:22):
the Magnificent seven, which makes up a waiting close to
a third of the S and P five hundred. If
that is taken away because there is some skepticism on
AI's future profitability. If there's some big hit that is
taken to AI between the lesser capax going forward and
just the valuation hit that these companies would take, yeah,
(17:43):
definitely it could result in a pullback. Not to mention,
a lot of smaller names that have been writing the
cotails of this momentum would probably go down with it.
But it would have to be a seismic shift in
the future optimism around AI that would cause that. But
a great question.
Speaker 2 (17:59):
So this story on price to sales, as with many
others that we've covered, I think my conclusion is it
does not spell a great deal of optimism that I
would have for the next decade in the stock market.
It also tells me nothing about anything timing related. It
does not tell me whether or not we're in a
bubble right now. It does not tell I think anybody
(18:20):
anything discernible about what to do with their portfolio today.
I think it's just a story of, Hey, things have
to go really really well for companies to fit into
these very pricey valuations that they are being bid up
to right now, and so will we see will we
see that revolution? From AI that is being promised. Will
(18:44):
we see these companies able to genuinely save a lot
of costs and innovate new inventive products that nobody has
been able to dream of before on the heels of
AI like.
Speaker 3 (18:55):
Was done with the Internet.
Speaker 2 (18:57):
And even if it does happen, will we have a
bubble burst in between then and now?
Speaker 4 (19:01):
Yeah, there's a great quote in one of these pieces.
I'm forgetting which one it was, but the economic relly
it doesn't die of old age, it dies by homicide.
I thought that was a good way of putting. It's
something that you don't anticipate that comes in and really
slashes valuations that we can't even foresee.
Speaker 2 (19:16):
Today, we've got to take a quick break. When we
come back, we've got your trivia winner and a full
look at Wall Street today with the sell off that's
next on the Financial Exchange.
Speaker 1 (19:40):
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 market so far today right here on the
Financial Exchange Radio Network.
Speaker 5 (20:00):
Markets are starting off the month of September by selling
off amid more tariff confusion after an appeals court struck
down the administration's reciprocal tariffs late last week. Investors are
also waiting a court ruling on whether Trump's bid to
fire FED Governor Lisa Cook is legitimate. And on top
of all of that, we'll have a jobs report on
(20:22):
Friday this week. Right now, the Dow is down by
over one percent, or four hundred and eighty five points,
SMP five hundreds down one point three percent or eighty
five points in the NASDAC down one point six percenter,
three hundred and fifty four points, RUSS two thousand is
down just over one percent. Tenure Treasure wheeled up five
(20:42):
basis points now at four point two seven nine percent,
and crude oil is jumping two percent higher excuse me,
trading at sixty five dollars and thirty two cents a barrel.
According to The Wall Street Journal, Activist investor Elliott Management
has built a roughly four billion dollar steak in Pepsi
and plans to push the beverage and snack's company to
(21:04):
make changes to boost its sagging share price. Meanwhile, craft
Hins confirmed earlier reports that it would split into two
publicly traded companies through tax free spinoff Berkshire. Hathaway's born
Buffett told CNBC this morning that he is disappointed in
the Craft hind split, as Berkshire was behind the merger
back in twenty fifteen. Kraft Hinds shares are down now
(21:27):
by over six percent. Elsewhere, shares in Signet Jewelers up
nearly one percent after it reported better than expected second
quarter results and also up to its full year earnings guidance.
Constellation Brands down now over seven percent after the maker
of Modella and Modello in Corona cut its full year guidance,
(21:50):
and Goldmeyer New Neumont is up by about two percent
after the precious metal hit a fresh record high. Out
Tucker Silva and that is Wall Street. And in the
previous segment, we asked you the trivia question, what was
the name of the twenty thirteen Best Picture winner that
Ben Affleck directed and starred in. That would be our
(22:12):
go Brian from Addleborough, Mass or Brian from Addleborough Mass. Yes,
there's our winner today taking home a Financial Exchange showed
t shirt. Congrats to Brian and we play trivia every
day here in the Financial Exchange. See complete contest rules
at Financial Exchange show dot com.
Speaker 2 (22:28):
We had an other text earlier during the show about
tariffs that I think it is worth rady. If you
want to text the show, you can do that too
by texting six one seven three six two thirteen eighty five,
or you can have Tucker's personal cell phone out Tiger.
Speaker 3 (22:40):
What's that number again? Oh? Sure? Yeah, I almost got him.
I felt like I almost had him.
Speaker 4 (22:44):
There.
Speaker 3 (22:45):
Get my social social too, please.
Speaker 2 (22:47):
Problem from the earlier text to the point behind the
tariffs is that ultimately it's better for the American people. Yes,
people will be unhappy in the short term. However, businesses
and business people are constantly changing their models to adapt
to the economy and new opportunities and changes. They will
do that in this case. First they will make their
suppliers eat the cost then they will eat some of
(23:09):
the costs. Then they will change the business model and
find suppliers in different countries. In the meantime, they will
complain about it. I think some of those things are accurate,
and what it comes back down to for me is
the ultimate goal of these tariffs. And that's where I'm
a little bit confused from this text message too, because
I've heard a few things about the ultimate goal of
(23:31):
the tariffs. One of them has been to bring a
majority of the manufacturing that we do of goods back
into the United States. And no, India is not good
enough in that case, Canada, Mexico is not good enough
in that case.
Speaker 3 (23:42):
We want it done here.
Speaker 2 (23:46):
The text or acknowledges in this case that yeah, they're
going to go to different countries, not necessarily the United
States in this case, and that does that ultimately end
up being better for Americans if it moves from China
to Vietnam, for example, or Malaysia to India. I don't
have a good answer to those questions. Is it instead
(24:08):
the real end goal to raise revenues that we can
cut income taxes. We're seeing some of that year this year.
The tariffs have raised a lot of revenue, they haven't
really brought a ton of jobs back, And I don't
think most companies are ready to do that in this case,
both because of uncertainty and just because of the level
of the tariffs rates themselves. Right, you can probably pay
a thirty percent tariff on Chinese made products and still
(24:31):
produce it cheaper in China than you can in the
United States.
Speaker 3 (24:34):
So to me. I guess my personal opinion doesn't matter.
Speaker 2 (24:38):
My personal opinion, though, is that it's just unclear to
me how much tariffs do or don't benefit the United
States in the long term. I think others are much
more convinced of that, and I'm open to that argument.
What I think the texture and I can't agree on
is the president's powers. Of these tariffs now being largely
in question as to whether or not they will still
be out there leads to a whole ton of uncertainty.
Speaker 4 (25:01):
Sure, I agree with the sentiment about businesses changing and adapting.
Of course they always that's it's always, that's always the case,
and I would never disagree with that notion at all.
Speaker 2 (25:11):
You have to It's the same argument I would use
for you know, when people tell me, oh, you know,
Trump got elected, I can't be in the stock market,
or Biden got elected or Obama got elected.
Speaker 3 (25:20):
You got to get me out of My.
Speaker 2 (25:21):
Argument is always, Look, companies are very good at navigating
all sorts of changes to administrations and businesses and policy.
Don't worry about who the prison president is, right, that's
not relevant. And that's the same argument I make with tariffs.
Companies find ways to succeed.
Speaker 4 (25:36):
What we can all agree on is that we need
certainty going forward as to what the economic playing field
is going to look like. And we sit here today
five months in and I know less about where tarraffs
are going to be than I did on April second.
You know, it's just so hard.
Speaker 3 (25:51):
That's I'm being maybe an exaggeration, but you know what
I mean.
Speaker 4 (25:54):
Like, if this gets reversed, then I really will have
no clue at all. But the point being that, ultimately
there's two reasons that have been mentioned as to why
these tariffs will be unofficial for the economy, bring back
manufacturing to the United States and raising revenue. And to me,
on the raising revenue side, I'm all for that. If
(26:15):
it's going to be utilized to offset the spending pattern
that we're on as a country, I'm there. I'm with it,
But you have to look at the numbers in terms
of the recent tax bill being passed. It it's not
going to be a dollar for dollar offset on the
increase spending on the tax side of things. There that
the tariffs will cover all of the potential debt that's
going to be added from these lower tax rates going forward,
(26:37):
I would have rather seen we move in the same direction. Okay,
raise revenue from tariffs, but then cut expenses at the
same time. Then to me, you have a compelling argument
from a budgetary standpoint that hey, you're dropping down the
cost of things. On the manufacturing side. We're not going
to know the answers to that for years as to
whether or not this is going to bring more manufacturers
to the United States, and people just have to be
(27:00):
aware that with bringing things to the United States, the
manufacturing the cost of goods will go up, and there's
a lot of specialization that goes into manufacturing that I
don't think everyone is aware of on a sector sector basis.
Speaker 2 (27:14):
All said and done, we can all have an intelligent
debate about whether or not tariffs will or won't be good.
What I think is probably not good is the uncertainty
around where they're going to land. And we just got
a big dose of that on Friday afternoon when this
court ruled against the White House. So we will see
where things go in the second half of the last
four months of this year and when it comes to
(27:36):
these tariffs. But I think what we're seeing in markets
today is an admission of more uncertainty. If you are
staring down this market right now and we're heading into
September with a sellof and you're trying to formulate what
your investment strategy looks like for the rest of this year.
Maybe you are at a big turning point in life.
(27:57):
Maybe you've started a new job, job, a career, heading
down to that retirement path, and you have questions about
your investment and financial strategy for the future. Give the
folks at Armstrong Advisory Group a call so we can
lend you some degree of certainty when it comes to
your strategy. The numbers eight hundred three nine three for
zero zero one. Again, that's the number for the Armstrong
(28:19):
Advisory Group. You can reach us at eight hundred three
nine three four zero zero one.
Speaker 1 (28:24):
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 (28:40):
Band of retail investors powered the Memestock rally and now
they're taking different steps here and I just have to
say this is reason one thousand why small companies and
any companies prefer to stay private rather than going public
these days, and why there are so few publicly traded
companies out there, which is a phenomenalon we talked about before.
(29:01):
But a company called open Door Technologies got looped into
the Memestock rally earlier this year. Stock went up ten x.
And then these investors, as they've done on a number
of different occasions, when that CEO did something that did
not sit well with them, pretty successfully forced out that
CEO effectively. In one of the earnings calls. They were
(29:22):
looking for the CEO to announce some big hope for
a strategy turnaround, perhaps a pivot to artificial intelligence. For
those that aren't familiar, open Door is a company that
buys houses, so I'm not sure how the turn to
AI was going to be successful for them. She did
not commit to any big turn there, and so there's
a big movement to fire the CEO carry Wheeler. The
(29:43):
board ended up doing so, and I guess I don't
know where I really land on this. To one degree,
this is one of the points of markets is to
have investors buy and sell companies with an intent of
making change. That's activist investor one oh one. On the
other hand, it does seem like investors are digging in,
(30:06):
some investors anyway, really digging in on issues that don't
really seem core to a lot of these businesses. And
they're walking a delicate game now of you know, hurting
investors' feelings about decisions that CEOs are making. That the
cracker barrel example is another way. And look, I don't
think it was a good idea to change the cracker
barrel logo, but I also didn't expect investors to get
(30:29):
as upset about it as they did and move that
stock price around. And maybe this is just the lesson
of twenty twenty is you know, you suddenly now have
a whole bunch of investors who have opinions and previously
didn't have investor experience, and they got a whole lot
of it back in twenty twenty and twenty twenty one
when there wasn't any gambling to be done or other
forms of entertainment.
Speaker 4 (30:50):
The last five years the retail Trader Frenzy has been
has produced wonderful content for the show, first of all,
and sorry, thank you. In terms of all the means off.
I'll never forget the GameStop days and nothing like it
today obviously, but still there's pockets of the market that
have this out there, the amount of retail trading and
just how accessible it is for everyone to be participants
(31:13):
in the markets. This is some of the buy products
of that, and there's going to be success stories and
there's probably gonna be a lot of failures come from
this too. But ultimately, for what we talk about on
a daily basis, which is largely the S and P
five hundred companies, you have such large sizes that if
(31:34):
they want to do this hypothetically with Apple, these retail
investors know you can't move the needle there. So it
remains a fascinating subplot of the market.
Speaker 2 (31:43):
Let buyer beware with this as an investment strategy, because
it does seem to me like a lot of these
people are not oftentimes not doing it to make any
sort of long term money. Yes, it might be to
make short term money, it might be to make short
term bets, but oftentimes it seems the strategy is much
more about short term and that's very different from a
lot of investors' overall strategy. Let's take a quick break
(32:04):
when we come back. Stack Roulette.
Speaker 3 (32:06):
Here on the Financial Exchange.
Speaker 1 (32:08):
The Financial Exchange is life on Series XM's Business Radio
Channel one thirty two weekdays from eleven to noon. Get
the latest business and financial news from across the country
and around the world, and keep up to date 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. This is the Financial Exchange Radio Network.
(32:33):
Find daily interviews and full shows of the Financial Exchange
on our YouTube page. Subscribe to our page and get
caught up on anything and everything you might have missed.
This is the Financial Exchange Radio Network.
Speaker 5 (32:47):
This segment of The Financial Exchange is brought to you
by the US Virgin Islands Department of Tourism. Looking for
a getaway that's easy, warm, and unforgettable, Discover the magic
of the US Virgin Islands. Saint Croix, Saint Thomas and
Saint John just a short flight from New England, with
no passport needed and no money to exchange. Soak up
(33:09):
the sun, stroll along white sand beaches and feel the
rhythm of the heartbeat of the islands. The USBI is
America's Caribbean paradise. Plan your fallscape now at visit USVII
dot com. That's visit USVII dot com.
Speaker 2 (33:25):
I would kick things off for our stack roulette here, Paul,
We've got a columnist based in Bloomberg. Stable coins are
coming from for your rewards points. And I would really
genuinely like if anybody's listening right now and feels like
they have a really good grasp on stable coins, to
tell me where I'm wrong here. But here's my brief
(33:46):
understanding of the direction that stable coins seem to be going.
Speaker 3 (33:50):
A number of different.
Speaker 2 (33:52):
Retailers are considering rolling out stable coins. Credit card companies
are doing the same as well. And here is the promise.
You will have a let's use Amazon as an example
because it's the easiest. You will have a Amazon issued
stable coin that is pegged to the US dollar, that
(34:13):
is easy transfer easily transferable between your Amazon stable coin
and dollars, is backed by something at Amazon, and you
will be able to use those stable coins to make purchases,
receive purchases if you're a vendor on there, and do
so without Amazon needing to pay exorbitant credit card fees
(34:34):
and processing times with money movement and all sorts of
stuff like that, to which I say great and yeah,
that could be really disruptive to a bunch of banks
and visa and payment networks and hopefully bring down cost
of transactions for people. But isn't it just a slightly
more technologically advanced gift card in that case?
Speaker 3 (34:56):
Yes? I mean, like what is different here?
Speaker 4 (34:59):
Yeah, I'll go further with that. Yes, that's part of it,
And it's important for listeners to understand every time that
you're swiping a card at these vendors out there, Visa
and MasterCard are making money from what's called interchange fees.
That basically the merchant if I pay one hundred dollars
at a store for some item, they're not getting all
one hundred dollars of that. Visa and MasterCard for the
(35:20):
network they provide, are taking a cut in between. Now
that can be anywhere from one and a half to
three percent, depending on how it's negotiated. They don't get
all that money, A lot of it gets offered back
to me and for rewards points. So if you have
a credit card out there, a Chase, Sapphire, or whatever
the case may be and you get two percent cash
back or whatever the offer is. They're giving some of
it back to you there, and usually they're taking maybe
(35:42):
a quarter of a percent on all transaction volume, the
big on anything that you spend using these cards. Obviously,
Amazon and Walmart and all these other would love a
boost of two or three percent on their margins to
not have to pay that.
Speaker 3 (35:55):
You can be sure that Amazon's not paying two to
three percent, you know what I mean? Again?
Speaker 4 (35:58):
Yeah, yeah, they're way too big. But how do you
convince me, Paul Lane, who is a big his family
is a big Amazon shopper. The five percent cash back
that I get on our Amazon card, where does that
fit into the stable coins here? Because right now you
have to you have to convince me that it's better
to go with stable coins than the current way of
getting my three to five percent cash back in different
(36:21):
varying offs.
Speaker 3 (36:21):
I just I feel like I'm missing some piece of this.
Speaker 2 (36:24):
But the more it gets explained to me, they're like, yeah,
that's it.
Speaker 4 (36:28):
Someone make the argument. And the only way that they're
going to be able to get people to do this
is you're gonna have to. As the retailers really offer
some incentives to get me on the platform to.
Speaker 2 (36:38):
Do it, and you have to be big enough that
I trust you, right, right, right, Like I have to
trust that my Amazon stable coin is still going to
be worth a dollar three years from now.
Speaker 4 (36:46):
Yeah, and they're going to have to give the three
to that percentage back is going to have to be
a real lucrative, a war to the end consumer.
Speaker 2 (36:53):
So I guess if you're Amazon, you can invest the
funds like a treasury and make money like a bank does. Right,
And then all of a sudden, all of this I
see is basically Amazon realizing that, Okay, now I have
to get regulated like a bank, and I'm not sure
I want to do that.
Speaker 4 (37:09):
The other great point that's made in this Bloomberg piece
is that, yeah, that sounds great when interest rates on
money markets are four percent, but if they come back
down to zero, then you have an either more of
an uphill battle. Tesla will derive eighty percent of its
value from optimists, according to Elon Musk, very strategically de
emphasizing his Tesla car business and saying that in the future,
(37:32):
the company will derive eighty percent of its value from optimists.
The robot initiative must predicted that I'm going.
Speaker 3 (37:38):
To be six three by next year.
Speaker 4 (37:39):
Paul, did you know that that's tremendous. Yeah, that's tremendous.
Speaker 3 (37:44):
It's gonna be really impressive.
Speaker 4 (37:45):
It's gonna help your hockey game. Yeah, it's It's a
classic strategic move by Musk of emphasizing things that are
on longer timelines. And I don't want to just garage
it because he's made some tremendous inrods and some businesses
out there.
Speaker 3 (38:02):
But stock is down one point eight percent today, so.
Speaker 4 (38:05):
Selling cars has been their business.
Speaker 2 (38:07):
My question is can Elon still move his company stock
given everyone he's pissed off in the same way that
he used to be able to. That's all the time
we have for today, folks, but we will be right
back at it tomorrow here on the Financial Exchange.
Speaker 3 (38:19):
I have a great afternoon. We'll see you then.
Popular Podcasts
NFL Daily with Gregg Rosenthal
Gregg Rosenthal and a rotating crew of elite NFL Media co-hosts, including Patrick Claybon, Colleen Wolfe, Steve Wyche, Nick Shook and Jourdan Rodrigue of The Athletic get you caught up daily on all the NFL news and analysis you need to be smarter and funnier than your friends.
On Purpose with Jay Shetty
I’m Jay Shetty host of On Purpose the worlds #1 Mental Health podcast and I’m so grateful you found us. I started this podcast 5 years ago to invite you into conversations and workshops that are designed to help make you happier, healthier and more healed. I believe that when you (yes you) feel seen, heard and understood you’re able to deal with relationship struggles, work challenges and life’s ups and downs with more ease and grace. I interview experts, celebrities, thought leaders and athletes so that we can grow our mindset, build better habits and uncover a side of them we’ve never seen before. New episodes every Monday and Friday. Your support means the world to me and I don’t take it for granted — click the follow button and leave a review to help us spread the love with On Purpose. I can’t wait for you to listen to your first or 500th episode!
Dateline NBC
Current and classic episodes, featuring compelling true-crime mysteries, powerful documentaries and in-depth investigations. Follow now to get the latest episodes of Dateline NBC completely free, or subscribe to Dateline Premium for ad-free listening and exclusive bonus content: DatelinePremium.com