October 23, 2025 • 38 mins
Mike Armstrong and Marc Fandetti discuss hotter CPI unlikely to deter rate cuts and the S&P 500 rally. Mark Hamrick (Bankrate) joins the show to chat about Social Security concerns. Fed lost access to private jobs data ahead of government shutdown. The maximun you can borrow from your 401(k) hasn't changed in 40 years. Should that change now?
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Episode Transcript
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Speaker 1 (00:00):
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(00:43):
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(01:06):
Armstrong and Mark Vandebdi.
Speaker 2 (01:12):
Good morning, Welcome back to the Financial Exchange. Is Mike,
Mark and Tucker with you on a Thursday morning where
we've got stocks moving in the right direction. Dow up
thirty five points, a little bit less than a tenth
of a percent, SMP up twenty two or a third
of a percent of the NASDAK up one hundred and
thirty eight points, six tenths of a percent after a
modest sell off yesterday of what about half a percent
(01:33):
on the S and P five hundred, If I'm not mistaken,
was it more?
Speaker 3 (01:36):
We'll find out.
Speaker 4 (01:37):
Uh Ah, I did a big write up on it too.
It may as well have been five years ago. He's
a moving fast, Michael.
Speaker 2 (01:45):
Oil prices jumping five percent after the Trump administration announces
sanctions on big Russian oil companies.
Speaker 3 (01:53):
Uh.
Speaker 2 (01:53):
Still more to be seen in terms of the actual
effect of these, but what we do know is that
the owner and operator of the world it's largest oil
refinery in India, Reliance Industries, has come out and said
that with this announcement it may cause them to well,
they came up with a very political statement about, you know,
(02:14):
not violating Indian law when it comes to what products
that they purchase or don't purchase from Russia. But they
have been one of the large beneficiaries over the last
several years of buying heavily discounted Russian oil in the
open market in spite of sanctions on those companies. So
we will see if these sanctions are enough to deter
at least the Indian buyers. The most that I've seen
(02:36):
written has not really questioned whether or not China is
going to be willing to buy this oil still, and
the answer seems to be yes, because they're not as
reliant on the United States financial system. But we shall see.
Speaker 4 (02:46):
Can we talk as we did in the last hour
about winners and losers here and yeah, because that was
you know, naturally people might ask, well, what does that
mean for me? And if you're in the East Coast,
you're a loser when oil prices go up. But if
you're in the car e from Thedo is down to
Texas oil country, I'm just being obviously very general here,
you're a winner. The picture is a lot more complicated
(03:06):
in terms of sizing up, yeah, a winners and losers
relative to say twenty or thirty years ago. Thanks to
fracking techniques that allow us to get too hard to
access oil.
Speaker 2 (03:15):
The other big question that we would pose here, and look,
I am personally not in the business of trying to
guess where oil prices go on a month to month
or year to year basis. I don't know anybody that's
made a successful career on that path, although I'm sure
many have tried. The benefit that we have seen to
inflation over the course of the last year from at
(03:37):
least moderating, if not dropping oil prices and gas prices
has been pretty significant. It has helped inflation stay relatively modest,
and I think very clearly, if that happens to go
in the wrong direction, then this three percent inflation scenario
that the FED has been more than willing to accept
and live with could quickly become a four percent inflation number.
Speaker 3 (04:01):
Or that's everything beyond.
Speaker 4 (04:02):
That's another important implication of all this.
Speaker 2 (04:04):
That is an important implication because it affects everything from well,
most importantly, the Fed's willingness to succumb to further rate
cuts and the presence ability to drive them towards that,
and everything else alongside that, whether it's credit card rates,
mortgage rates, car loan rates, all of those other items
that are tag along with this overall strategy.
Speaker 4 (04:24):
And that point can sometimes be confusing because we often
say the FED, through its control of the supply of
money heavily influences effectively controls long term inflation. In the
short term, there are things that push average prices as
measured by for example, CPI or whatever your preferred measure is.
In the short term, there are things that cause the
average to go up because, for example, the price of oil,
which is very flexible, It changes every day throughout the day.
(04:46):
So if the price of oil goes up, everything you
buy may not go up. Other producers don't change their prices.
As frequently said differently in kind of economic jargon, some
prices are rigid or sticky if you prefer, while others
are very flexible. So price spike a shock in again
economic jargon, can cause inflation.
Speaker 3 (05:04):
To go up.
Speaker 4 (05:05):
The Fed's policy is generally well, oil prices are as
likely to go up as go down. We're going to
look through that, but they can't ignore it completely.
Speaker 2 (05:11):
Yeah, I was gonna say, like, they're willing to look
through it, but if it's bringing overall inflation to five percent,
then they're.
Speaker 4 (05:17):
Going to feel the heat, and it could also push
out expectations, which you're an important component. We learned this
lesson in the seventies. Before the nineteen seventies, inflation expectations
weren't part of anybody's inflation modeling process. Now it's widely
accepted that they must be, and that's why oil price
movements are concerned.
Speaker 3 (05:32):
It has been a busy earnings week as well.
Speaker 2 (05:34):
Tesla reported yesterday after the bell stock is down about
two percent in early trading. They beat on revenue, missed
on earnings. The big push for Tesla sales was ahead
of the September thirtieth deadline on the expiration of the
EV tax credits, so that has now passed, and really
the entire earnings call had little to do about their
(05:55):
traditional EV sales business model and much to do about
their future as a robotics and self driving car company,
an autonomous taxi company, which there is a lot to
be proven on that front, but that is kind of
always been the mantra of Elon Musk and his car company,
which is massive promises for the future and investors' willingness
(06:17):
to give him extra rope on that.
Speaker 4 (06:20):
It's so hard to attach evaluation to a stock when
so much depends on a highly uncertain perspective, that is future.
I'm being redundant here, but outcomes. We've got Cybercab intended
to roll out in many cities. The intention is to
roll out in many cities next year. We've got Optimists,
the Humanoid, the human like robot, which is supposed to
(06:43):
go into mass production next year. And we've got the
Megapack or whatever he's calling his new residential slash commercially yeah,
scheduled to be rolled out next year. We have no
idea whether they'll roll out on time, et cetera. How
do you use traditional valuation methods to to slap evaluate,
to slap a fair price on this company? I just
(07:05):
don't know.
Speaker 2 (07:06):
Well, it's been a busy earnings week this week, with
eighty nine S and P five hundred companies reporting. It'll
be an even bigger one next week in terms of
market cap. We'll have Visa kicking things off on Tuesday
after the bell, United Healthcare Tuesday before the bell, Nevartas
as well before the bell Wednesday, Microsoft, Google Meta all
reporting earnings. In addition to Caterpillar and others, and then Thursday, Apple, Amazon, Lily, MasterCard,
(07:32):
merk All reporting earnings, so big heavy hitters. Just between
five companies there, I count well over ten trillion dollars
worth of market cap reporting, so big potential market moving
week next week when it comes to earnings as well,
let's focus in a little bit more on that inflation scenario.
We are going to get a report tomorrow on inflation.
(07:52):
The context here important because we have a FED meeting
in addition to all the earnings next week. They're going
to be operating blindly. They have no jobs data. This
is the first inflation report that we've gotten since the
government shut down. What do you suppose I mean, I
don't need you to predict inflation. My guess is somewhere
(08:13):
around three percent is where we're going to see in
this inflation report. We'll see if there's anything that shocks us.
But how is the FED going to I guess, voice
their opinion on the economy at this upcoming meeting because
they are flying fairly blind.
Speaker 4 (08:27):
They are, but they can use and any researcher would
do the same thing. We do it internally, but we
don't use it necessarily to make major decisions. It's more
as a check of our intuition, you can estimate based
on past values likely future values, assuming the process that
generates those values is the same. That sounds more complicated
than it is, but so that My point is, there
(08:50):
are ways for researchers, including those obviously starting with those
arguably at the FED, to fill in the gaps using
statistical techniques. It's the methods we're doing so are pretty
tried and true, but they're subject to a lot of uncertainty.
Is you point out, the FED is faced with elevated
ongoing elevated inflation is measured by things that do a
good job capturing the trend in inflation, that do a
(09:11):
good job of filtering out some of those one time
influences we were talking about a moment ago, such as
an oil price shock. Those measures like median inflation and
other outlier trimming methods point to elevated underlying inflation somewhere
in the threes high two s threes, which is way
above the FEDS two percent goal. We know this with certainty.
Speaker 3 (09:29):
Let's take a quick break.
Speaker 2 (09:30):
The entire reason we're getting an inflation report tomorrow has
everything to do with social security and cost of living, adjustments.
We're going to be joined next by Mark Hamrick from
bank Rate on their survey on Americans expectations for social security.
That's next with Mark Hamrick on the Financial Exchange.
Speaker 1 (09:46):
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Speaker 2 (10:57):
Mark Hamrick is the Washington Bureau chief and senior economic
analysts with bank Rate and joins us now to talk
about Americans attitudes towards soarch security and retirement generally. Mark,
thanks so much for joining us. Appreciate it. Talk to
us about who you surveyed in the main findings here
on Americans attitudes towards social security right now.
Speaker 6 (11:16):
Good to be with you, Mike. Well, this is like
most of our surveys at bank Rate of everyday Americans.
We work with survey firms to get across section of
the American public, and so this is meant to represent
essentially the way that Americans feel on this particular issue.
The key finding really is that a majority of Americans,
(11:37):
and in this case we're going to boil it down
to what I'm going to talk about right now, and
those who are not yet retired or so called non
retired adults say that they do expect to be reliant
on Social Security to pay necessary expenses once they do retire.
At the same time, a little more than three quarters
(11:58):
of Americans are concerned that they won't get their promised
benefits when that time comes.
Speaker 2 (12:04):
I've found that most Americans that I talked to are
particularly salient on the issue and aware of the issue
that this is something that is going to run into
funding issues well within their lifetimes. My biggest concern here
would be that with that knowledge, Americans make decisions around
Social Security that aren't all that logical. Do we know
(12:24):
if this fear is resulting in specific decision making on
behalf of Social Security beneficials I'm thinking about working longer
or taking benefits earlier, that you could potentially compound problems
for their own financial situations.
Speaker 6 (12:40):
It could be blatantly honest. That's not what we were
surveying on. But I think we can surmise anecdotally that
obviously there are a range of potential outcomes or behaviors
that are related to the skepticism that the full benefits
will be available. And it's really problematic because you know,
we have, as measured for example by Gallop, very low
(13:04):
trust and institutions in this country. It's been going down
for a long time. Congress is not at the top
of the list of trust by the way, typically it's
the military and small business. It does reign supreme in
the Gallop data. But so if you're skeptical that Congress
(13:24):
is going to do the right thing, and you do have, frankly, unfortunately,
in a historical basis upon which to judge, you know,
you can imagine there's a range of potential ways to.
Speaker 1 (13:36):
Deal with that.
Speaker 6 (13:37):
One would be what I would recommend, and that would
be prioritize what you can control, and that is, make
sure you're saving what you can save if indeed there
is a potential benefit cut of twenty to twenty five
percent around twenty thirty three, if indeed elected officials do nothing.
(13:57):
The other part would be sure work longer. The other
part would be, maybe you think I want to get
my money while I can and get the benefit earlier
rather than waiting till full retirement eight age. And I
can understand the logic to that, but of course the
calendar of that is the longer you wait before that
time twenty thirty three, the more you get in a payout.
(14:20):
So you know, it's a rather complicated situation, to say
the least.
Speaker 2 (14:26):
I tend to hear from younger Americans in particular, who
are far more skeptical about social security solvency and it
being there for them when they get to retirement. Does
that bear out in your survey in terms of generational shifts?
Speaker 3 (14:40):
Sure?
Speaker 6 (14:40):
And so, for example, when we go across the range
of adult cohorts or age groups, you've got thirty seven
percent of members of Generation Z that's those who are
aged eighteen to twenty eight say they expect to be
reliant on Social Security to pay necessary expenses. So you
would comp that to you know, that overall number of
(15:02):
fifty two percent or seventy two percent among Baby boomers
that's those age sixty one to seventy nine. And again,
you can come up with a number of reasons why
they may give that answer. One is they have less
confidence the money will be there. I would also hope
that they are hoped that they are planning to take
(15:26):
more control of their retirement savings. Given that we are
where we are with.
Speaker 2 (15:32):
This right now shifting gears a little bit just to
general retirement. How confident are the people you surveyed that
they are I guess, catching up to where they should
be when it comes to you know, retirement being on track.
And again I'm sure I know you guys broke this
out by generation as well.
Speaker 6 (15:50):
This is a survey that we released a month ago
as a sort of precursor to the Social Security survey
that we've just released, and this is pretty constant over
time as well, that about three and five Americans say
they don't believe they're on track with where they need
or want to be with their retirement savings. And I
(16:11):
do think that there is kind of a coming to
terms with reality aspect of this as people become more
senior and can you know, literally imagine the end of
their work as opposed to being in their twenties or
thirties or even forties and thinking, oh, that's so far
away from right now. You know, either it's incomprehensible or
(16:37):
I don't want to think about it. And you know,
when you're seeing that over the dashboard, so to speak,
over the hood of your car, that's when it starts
to get real. And that is a call to action,
right In other words, those who are youngest, earliest in
their careers, they are in the greatest position to benefit
(16:58):
from the power of compounding, taking advantage of the employeer
matchment four oh one K doing what they can to
live beneath their means, not on the cutting edge of
the envelope, to live their best instagrammable life. That isn't
necessary unless you've become an influencer. Isn't going to help you.
And then those who are more senior, you know you
(17:18):
can still you can still make changes that make a difference.
And that could mean waiting to tap Social Security to
get the higher payout. That could mean working longer, maybe
not full time, but even just working part time because
some income is better than no income arising from employment.
Speaker 2 (17:37):
Yeah, in spite of my best efforts, Mark, my forty
second TikTok dance videos are just not getting the following
I'm looking for. But really appreciate you being here, Mark
excellent research is always and really interested in the survey
and looking forward to having you on again soon.
Speaker 1 (17:51):
Always a pleasure.
Speaker 6 (17:51):
Thanks for having me, Thanks all right.
Speaker 5 (17:53):
Time for trivia here in the Financial Exchange. In today's
Weird Al Yankovic's sixty six birthday weird Else first top
forty hit song came back in nineteen eighty four when
he parodied his first Michael Jackson song. So our trivia
question today, what was the name of weird Awl's first
Michael Jackson parody song? Once again? What was the name
(18:14):
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three six two thirteen eighty five with the correct answer,
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The fifth correct response to textus to the number six
one seven three six two thirteen eighty five will win
(18:34):
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Speaker 2 (18:39):
As we sorry, as we head towards the bottom of
the hour here, we've got all marked all three major
indices in positive territory here. Price of oil continuing floating upwards,
but not quite as bad as it was earlier. We're
up now about four point nine to four percent on
West Texas crude, and old prices which have been bouncing
(19:01):
around all of the last week, continuing to do so today,
Gold up ninety eight dollars announced two point four percent,
and silver also up in trading this morning, up two
point seven three percent in early trading. We're gonna take
a quick break when we come back. Tucker's gonna give
us a full market recap and then We're talking fed
(19:23):
when we return.
Speaker 1 (19:38):
Bringing the latest financial news straight to your radio. Every day,
It's the Financial Exchange on the Financial Exchange Radio Network.
Time now for Wall Street. Watch a complete look at
what's moving markets so far today right here on the
Financial Exchange Radio Network.
Speaker 5 (19:57):
Market's in positive territory, a mid and another batch of
third quarter earnings from the likes of IBM and Tesla.
Wall Street's also seeing a jump into oil prices after
President Trump announced new sanctions on Russia's two biggest oil companies.
Right now, the Dow is up over a tenth of a percent,
or seventy six points higher, SMP five hundreds up four
(20:19):
tenths of one percent, or twenty seven points. Nasdaq is
up nearly three quarters of a percent, or one hundred
and sixty two points higher. Russell two thousand is up
about seven tenths of one percent. Tenure Treasure reeled up
four basis points now at three point nine to nine
to three percent in creude oil up five point three
percent today, trading at sixty one dollars and sixty two
(20:40):
cents a barrel. Tesla shares falling nearly two percent after
the ev maker posted a thirty seven percent drop in
quarterly profit, siting R and D spending in lower tax
credit revenue. Meanwhile, IBM stock is dropping almost three percent
now despite the computing company swinging to a quarterly profit
and reporting higher earnings, noting that customers have shifted from
(21:02):
experimenting with AI to using it at scale, sticking with
tech where several quantum computing stocks are seeing gains after
the Wall Street Journal reported that the Trump administration is
in talks to acquire equity stakes in several quantum computing firms.
Ion Q, Reghetti Computing, and Quantum Computing are all up
anywhere between nine and twelve percent. Elsewhere, American Airlines narrowed
(21:27):
it's quarterly lost, saying it expects to end the year
more profitable than analysts had been anticipating. That stock is
up five percent, Las Vegas Sands jumping twelve percent after
it posted solid third quarter results, and Intel will report
earnings after today's closing bell. I'm Tucker Silva and that
is Wall Street Watch. And in the previous segment, we
(21:49):
asked you the trivia question, what was the name of
weird Owl's first Michael Jackson parody song? That would be
Eat It Lower? From Plainfield, New Hampshire is our winner
today taking on a Financial Exchange Show t shirt. Congrats
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Speaker 2 (22:09):
We will have a FED meeting and press conference on
Wednesday of next week. Amidst the heavy earnings that we
were talking about earlier, very widely anticipated, they will be
cutting rates by another quarter of one percent. The current
FED funds target is sitting at four to four and
a quarter according to the Chicago Mercantiles Change at ninety
nine percent. Probably that the rates will come down to
(22:31):
that three and a quarter to four percent range. Again,
we alluded to this a bit earlier, but they are
operating somewhat blindly. They certainly have their existing models, but
they do not have government data. They also kind of
surprisingly lost access to some private data. So ADP is
a private payroll provider, and we have quoted the data
(22:54):
they put out on jobs on a regular basis, and
for whatever reason, for the last several months, they have
cut off access to the FED for that data.
Speaker 3 (23:01):
And I don't I don't know.
Speaker 2 (23:03):
Based on reporting, I don't really have a real semblance
of the reason why maybe ADP wants to get paid,
But there's been no real reporting on why ADP terminated
the access to all that.
Speaker 3 (23:14):
I don't know if you have any.
Speaker 4 (23:16):
No special insight, no special insight, sorry, but not helpful though,
I mean ideally go ahead.
Speaker 2 (23:23):
Yeah, I mean ideally you would have whatever you can
put together.
Speaker 4 (23:26):
So ADP payrolls are taken obviously from a different sample
than the federal government uses. Federal governments measure is far
more comprehensive, and it's a random sample. ADP sample is
not random. They just survey their clients.
Speaker 2 (23:39):
But the changes are I guess it's probably not even
a survey, right, it's probably just a sense.
Speaker 4 (23:44):
It's just exactly, yeah, exactly. But the changes are pretty
highly correlated. And the work we did on this internally
suggests that if you're a forecaster and you want to
forecast next month's payrolls change, it helps in your little
model to include what ADP did, which you learn a
couple weeks or whatever earlier. So it does help you
(24:05):
if you're a forecaster, and if you're a FED forecaster
using similar methods, because all researchers do, you're worse off
for not having that data what that is worth.
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Speaker 2 (25:17):
There's a piece and market Watch today that I think
brought up some fair points. But I've never seen someone
please so passionately about such an obscure financial demand. So
this piece is about borrowing from a four oh one K,
which you are generally allowed to do the plan documents prevail.
(25:39):
But there's a law there that you can't borrow more
than fifty thousand dollars and it's been set there for
forty years, and this author considers it an outrage that
it hasn't been indexed for inflation. And to some degree,
you know, I tend to agree here that a lot
of these things should be indexed to inflation. And certainly
(26:01):
it's I can't think a completely separate issue. But you know,
he brings up that you can now inherit thirty million
dollars tax free from mom and dad without having to
pay any taxes on that inheritance, and that number is
going to be indexed to inflation. So why wouldn't you
index this? And I think it's a worthy cause, but
(26:21):
I just I don't know how elevent it is.
Speaker 4 (26:23):
Quick camp plant it. This will be a nightmare if
you're a record keeper to update your systems every year. Yeah,
that's when four one K laws changed. They don't often
at the pace is pretty glacial, but when they do change,
it's a huge undertaking for your big record keepers like Fidelity.
Speaker 3 (26:37):
Yeah.
Speaker 2 (26:37):
Or in fact, they forced Congress to kind of delay
some of these things with the most recent changes on
ROTH four oh one K contributions.
Speaker 4 (26:44):
That said, we do update contribution limits every year. Yeah,
and record keeping software has to accommodate that. Yeah, but
it would place the burden on record keepers. That's one drawback.
The other much bigger drawback, and this is why Congress
isn't updating those limits. It is obscene that a residential
mortgage loan, which has a longer repayment period on a
(27:05):
four to one K loans and thus a lower payment
hasn't moved in forty years when the median home price
has troubled in. For that is a little bit obnoxious.
But of course there's a policy motivation here, which is
they don't want people tapping, and it's a good policy motivation.
They don't want people tapping.
Speaker 2 (27:21):
Therefore away and by the way, I think currently like
thirteen percent of four to one K holders have an
outstanding loan.
Speaker 4 (27:28):
Is it really that low.
Speaker 3 (27:29):
It's not a.
Speaker 2 (27:30):
Huge portion of people based on data that I found,
So I just don't see this as such a big issue.
I think there are plenty of you know, outrages out
there when it comes to this sort of thing. One
of the biggest ones to me that has just always
bothered me. So if you work for a company that
offers a four to oh one K, you're allowed to
put away Now I don't even know what's the four
(27:52):
to one K contribution limit for twenty twenty five is
now twenty three five hundred dollars. If you do not
work for an employer that offers a four oh one K,
then your only option is to contribute to an IRA,
and your limit there is far lower. And I've always
(28:15):
just asked, like, what's why, Why would that difference exist?
Just because my employer is too lazy or too cheap
to set up a four oh one K, it means
that I'm not allowed to save for retirement in the
same way that.
Speaker 3 (28:26):
Other people are.
Speaker 2 (28:27):
It seemed just obscene to me and just an easy
thing to correct. I'm guessing it's because big influential financial
companies like having that four oh one K business built in.
But yeah, there's a lot of these idiosyncrasies into idiosyncrasies
across the financial system, and I don't know this one,
just this one didn't really get my blood pumping, if
(28:48):
I'm being quite honest.
Speaker 4 (28:50):
No, it's minor in the scheme of things. Plus it's
it's not a bad thing that policy discourages people from
borrowing their four one K.
Speaker 3 (28:58):
Yeah, I'm not sure it's something we should encourage. Not
sure something we should that's against future.
Speaker 2 (29:05):
Let's take quick break when we come back. Stack Roulette
on the Financial Exchange.
Speaker 1 (29:10):
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Speaker 2 (29:55):
There have apparently been some disappointed investors year with kind
of obscure new investment product that's out there. It's not
new an idea, the idea is using leverage in investing decisions,
which has been around forever.
Speaker 4 (30:11):
It is borrowing money to buy your and we all
use leverage to buy a house for example.
Speaker 3 (30:15):
Yep.
Speaker 4 (30:15):
And it's prevalence, which is why when you're underwater, it's
it's worrisome. So on, the underwater concept applies here, sorry,
Mike Right.
Speaker 2 (30:22):
And some of the new ETFs that have been coming
out this year have been focused on not only it's
an ETF that allows you to own a single stock
or try and mirror the price return of a single stock,
but with leverage, and unfortunately for some investors, they are
learning kind of a hard lesson about the difference between
(30:43):
owning a security with leverage and owning a fund that
attempts to do something, because some of those shares are
not doing a terribly good job of tracking their underlying security.
And in one case, the actual shares of the company
rose twenty eight percent in the twelve months that ended Wednesday,
whereas the fund that tried to track it with a
(31:03):
leveraged exposure went down by sixty five percent. So not
that you are an expert mark in leveraged funds that
track single.
Speaker 4 (31:13):
No idea how that could happen, I would need to
talk to the manager.
Speaker 2 (31:16):
But I think the important thing here is that you
actually have to read those really annoying packets that come
out to you that the SEC mandates that disclose how
these things actually work when you're investing in a brand new.
Speaker 3 (31:31):
I don't know house before.
Speaker 4 (31:32):
I mean again, using leverage means I put up a
dollar to buy two dollars worth of something. Sure, so
if that doubles, my two goes to four. But I
only put in one hundred, so my return would be
not one hundred percent but two or three hundred. I'm
I'm having trouble doing that. Yeah, minus the interest, Yeah,
minus whatever the fee is. Yeah, sorry, that's embarrassing. So
(31:55):
I'm not sure how if the underlying asset goes up,
given the fact that you didn't, you didn't commit the
full amount of the investment, how you could, ever, how
it's conceivable even remotely that you could lose money when
the underlying moves in your favor.
Speaker 2 (32:09):
However, that's precisely what happened in this case, and I
don't again, depends on how they are conducting that leverage
and on what time frame I suppose, but in any case.
Speaker 3 (32:20):
There are a ton.
Speaker 2 (32:22):
Of new financial products that are being put out there
every day. We talked about earlier this year had the
number of outstanding ETFs surpassed mutual funds for the first time,
or maybe it surpassed individual securities this year, I don't recall.
Speaker 3 (32:35):
It was one of the.
Speaker 4 (32:35):
Yeah, more ETFs than stocks and probably traded companies.
Speaker 2 (32:39):
The point that we made at the time was just
be careful because a lot of these do not have
a track record. A lot of these are, you know,
putting out there an objective that may or may not
be accomplishable, and they're you know, they're required to disclose
it all. I think of a lot of these head
strategies where there's no downside potential or capped downside or
limited downside potential, and it screams it at You're right
(33:02):
in the disclosure document that these results can't be guaranteed,
and this is an objective, not a not a financial guarantee.
It's still a security. It can go up and down.
And yet I think a lot of those warnings go
largely ignored.
Speaker 4 (33:14):
I just don't understand. And the example I gave, the
return was three hundred percent instead of one hundred percent,
and that's that's how you Yeah, I don't understand how
the how this is what you describe is even possible
absent malpractice and possibly well, I don't want to use
the F word being fraud, but you have to suspect
(33:35):
that if something goes that badly, something wasn't happening under
the hood, that uh, something happened under the hood that
was very different than what was being represented. But I
don't know the particulars. I probably shouldn't say that.
Speaker 3 (33:45):
What do you have for a stackerlete market?
Speaker 4 (33:47):
This story that Tucker keeps talking about about the federal
government taking more equity stakes is really grating. We criticized
it when the buy or at least I did. I
think you did too.
Speaker 3 (33:56):
Yeah, when the.
Speaker 4 (33:57):
Biden administration larded chips companies that were having no problem
tapping public markets with public funds. Trump administration is taking
this to a new level. It's taken shares in Intel
a goal a so called golden share, and nip on
Steel whatever the hell that means him putting board members
in as he pleases and vetoing major decisions multiple rare
earths companies. The federal government now is an equity stake,
(34:19):
and it's going to be a dozen or will be
after these equity stakes are consummated, like ten a dozen companies.
Like a lot of people who would normally vote Republican
to cry socialism. This is the definition of it. They're
gonna meddle in how these companies are managed. There is
no capital shortage. Stocks are at record highs. These companies
are all in interesting industries. Venture capitalists are overflowing with
(34:43):
dry powder. There's no evidence that this industry is having
trouble getting capital, and it's not clear that it's nationally vital.
This administration just likes owning shares and companies. Those companies
are going to be favored. It's going to cause other
companies to rather than innovate this angle for getting in
the good races of the Trump administration. Who do we
contribute to his ballroom? Maybe they'll give us some capital.
(35:04):
This just sets such a bad precedent. A lot of
people are worried about the next mayor of New York
City owning a few grocery stores. The scale of this
and the implications for the economy as a whole are
for far greater, far more dire.
Speaker 2 (35:16):
I just Whenever stuff like this comes up, I always
just like to put it in perspective of, you know,
does the average American think this is a good or
bad idea?
Speaker 4 (35:26):
They don't know about it, Mike.
Speaker 3 (35:27):
I don't think the average American knows we're trying to.
Speaker 4 (35:30):
But you know, they are major news channels. They aren't
talking about this at all.
Speaker 2 (35:32):
But I think a lot of them would say that's okay.
I trust the president. I elected him because he's a
good businessman, and this is precisely what I want him
to do. And I'm going to take your perspective on
that and say, okay, you buy that. The problem is
the president, because when the president leaves office, the United
States Government is still likely to own shares in these companies,
(35:55):
and it is going to be holding upon the following
president to be these stewards, and then, you know, presumably
continue to expect.
Speaker 4 (36:04):
How do we get out of these if the US
government at some point if President aoc God forbid, but
if it happened in five years, forgive me, but God forbid,
then again, would she buy fewer companies than this guy's doing.
How do we get out of these positions if the
next president announcers, they're going to unwind them. It would
tank these companies. And I'll say again, where is the
evidence that they're having trouble raising capital? And why would
(36:24):
you want to pick these companies? Is the winners in
the quantum and in this example it's quantum computing, but
there are lots of other examples with this crowd.
Speaker 2 (36:32):
I think we should just always be highly suspect of
the idea that any government US abroad is going to
be good at picking winners and losers. I think there's
very little compelling evidence to support that the Soviet Union
attempted it, China has attempted it, the United States is
now attempting it. I think that the lesson here is
(36:55):
that the government, when it comes to markets in the economy,
the job that they should play is to set conditions
for good investment and let the markets figure it out.
There are exceptions, right like, yeah, when the Great Depression happens,
sitting back and raising taxes is probably not a good idea.
But in normal market environments, where the system is working,
(37:17):
cash flow is moving, and there is liquidity, the government's job,
in my view at least, should not be to step
in and say we're taking stakes in companies. You can
set the conditions for that to happen, but it doesn't
need to be done by the United States Treasury.
Speaker 4 (37:32):
It's really annoying that we're still having these discovery Look,
there are arguments over what's vital. Should the federal government
help industries or but there.
Speaker 3 (37:40):
Are ways to do it without taking equities.
Speaker 4 (37:42):
You don't take funding away from colleges that create Forgive me,
but this is another thing they're doing that's totally backwards
and counterproductive. Good research happens in colleges. That research is
then disseminated out into the world. It becomes a public good.
We can all use it. They're defunding college research and
at the same time effectively show bring private sector companies
with favors.
Speaker 2 (38:02):
Markets are in positive territory, Nasdaq leading the way, up
three quarters of a percent, SMP up four tenths of percent,
the Dow up one tenth of a percent.
Speaker 3 (38:10):
That is all the time we have for.
Speaker 2 (38:11):
Today, but we will be right back at it tomorrow
with a CPI Friday.
Speaker 3 (38:15):
Have a great day, everybody,
The Financial Exchange is produced by Money Matters Radio and
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(01:06):
Armstrong and Mark Vandebdi.
Speaker 2 (01:12):
Good morning, Welcome back to the Financial Exchange. Is Mike,
Mark and Tucker with you on a Thursday morning where
we've got stocks moving in the right direction. Dow up
thirty five points, a little bit less than a tenth
of a percent, SMP up twenty two or a third
of a percent of the NASDAK up one hundred and
thirty eight points, six tenths of a percent after a
modest sell off yesterday of what about half a percent
(01:33):
on the S and P five hundred, If I'm not mistaken,
was it more?
Speaker 3 (01:36):
We'll find out.
Speaker 4 (01:37):
Uh Ah, I did a big write up on it too.
It may as well have been five years ago. He's
a moving fast, Michael.
Speaker 2 (01:45):
Oil prices jumping five percent after the Trump administration announces
sanctions on big Russian oil companies.
Speaker 3 (01:53):
Uh.
Speaker 2 (01:53):
Still more to be seen in terms of the actual
effect of these, but what we do know is that
the owner and operator of the world it's largest oil
refinery in India, Reliance Industries, has come out and said
that with this announcement it may cause them to well,
they came up with a very political statement about, you know,
(02:14):
not violating Indian law when it comes to what products
that they purchase or don't purchase from Russia. But they
have been one of the large beneficiaries over the last
several years of buying heavily discounted Russian oil in the
open market in spite of sanctions on those companies. So
we will see if these sanctions are enough to deter
at least the Indian buyers. The most that I've seen
(02:36):
written has not really questioned whether or not China is
going to be willing to buy this oil still, and
the answer seems to be yes, because they're not as
reliant on the United States financial system. But we shall see.
Speaker 4 (02:46):
Can we talk as we did in the last hour
about winners and losers here and yeah, because that was
you know, naturally people might ask, well, what does that
mean for me? And if you're in the East Coast,
you're a loser when oil prices go up. But if
you're in the car e from Thedo is down to
Texas oil country, I'm just being obviously very general here,
you're a winner. The picture is a lot more complicated
(03:06):
in terms of sizing up, yeah, a winners and losers
relative to say twenty or thirty years ago. Thanks to
fracking techniques that allow us to get too hard to
access oil.
Speaker 2 (03:15):
The other big question that we would pose here, and look,
I am personally not in the business of trying to
guess where oil prices go on a month to month
or year to year basis. I don't know anybody that's
made a successful career on that path, although I'm sure
many have tried. The benefit that we have seen to
inflation over the course of the last year from at
(03:37):
least moderating, if not dropping oil prices and gas prices
has been pretty significant. It has helped inflation stay relatively modest,
and I think very clearly, if that happens to go
in the wrong direction, then this three percent inflation scenario
that the FED has been more than willing to accept
and live with could quickly become a four percent inflation number.
Speaker 3 (04:01):
Or that's everything beyond.
Speaker 4 (04:02):
That's another important implication of all this.
Speaker 2 (04:04):
That is an important implication because it affects everything from well,
most importantly, the Fed's willingness to succumb to further rate
cuts and the presence ability to drive them towards that,
and everything else alongside that, whether it's credit card rates,
mortgage rates, car loan rates, all of those other items
that are tag along with this overall strategy.
Speaker 4 (04:24):
And that point can sometimes be confusing because we often
say the FED, through its control of the supply of
money heavily influences effectively controls long term inflation. In the
short term, there are things that push average prices as
measured by for example, CPI or whatever your preferred measure is.
In the short term, there are things that cause the
average to go up because, for example, the price of oil,
which is very flexible, It changes every day throughout the day.
(04:46):
So if the price of oil goes up, everything you
buy may not go up. Other producers don't change their prices.
As frequently said differently in kind of economic jargon, some
prices are rigid or sticky if you prefer, while others
are very flexible. So price spike a shock in again
economic jargon, can cause inflation.
Speaker 3 (05:04):
To go up.
Speaker 4 (05:05):
The Fed's policy is generally well, oil prices are as
likely to go up as go down. We're going to
look through that, but they can't ignore it completely.
Speaker 2 (05:11):
Yeah, I was gonna say, like, they're willing to look
through it, but if it's bringing overall inflation to five percent,
then they're.
Speaker 4 (05:17):
Going to feel the heat, and it could also push
out expectations, which you're an important component. We learned this
lesson in the seventies. Before the nineteen seventies, inflation expectations
weren't part of anybody's inflation modeling process. Now it's widely
accepted that they must be, and that's why oil price
movements are concerned.
Speaker 3 (05:32):
It has been a busy earnings week as well.
Speaker 2 (05:34):
Tesla reported yesterday after the bell stock is down about
two percent in early trading. They beat on revenue, missed
on earnings. The big push for Tesla sales was ahead
of the September thirtieth deadline on the expiration of the
EV tax credits, so that has now passed, and really
the entire earnings call had little to do about their
(05:55):
traditional EV sales business model and much to do about
their future as a robotics and self driving car company,
an autonomous taxi company, which there is a lot to
be proven on that front, but that is kind of
always been the mantra of Elon Musk and his car company,
which is massive promises for the future and investors' willingness
(06:17):
to give him extra rope on that.
Speaker 4 (06:20):
It's so hard to attach evaluation to a stock when
so much depends on a highly uncertain perspective, that is future.
I'm being redundant here, but outcomes. We've got Cybercab intended
to roll out in many cities. The intention is to
roll out in many cities next year. We've got Optimists,
the Humanoid, the human like robot, which is supposed to
(06:43):
go into mass production next year. And we've got the
Megapack or whatever he's calling his new residential slash commercially yeah,
scheduled to be rolled out next year. We have no
idea whether they'll roll out on time, et cetera. How
do you use traditional valuation methods to to slap evaluate,
to slap a fair price on this company? I just
(07:05):
don't know.
Speaker 2 (07:06):
Well, it's been a busy earnings week this week, with
eighty nine S and P five hundred companies reporting. It'll
be an even bigger one next week in terms of
market cap. We'll have Visa kicking things off on Tuesday
after the bell, United Healthcare Tuesday before the bell, Nevartas
as well before the bell Wednesday, Microsoft, Google Meta all
reporting earnings. In addition to Caterpillar and others, and then Thursday, Apple, Amazon, Lily, MasterCard,
(07:32):
merk All reporting earnings, so big heavy hitters. Just between
five companies there, I count well over ten trillion dollars
worth of market cap reporting, so big potential market moving
week next week when it comes to earnings as well,
let's focus in a little bit more on that inflation scenario.
We are going to get a report tomorrow on inflation.
(07:52):
The context here important because we have a FED meeting
in addition to all the earnings next week. They're going
to be operating blindly. They have no jobs data. This
is the first inflation report that we've gotten since the
government shut down. What do you suppose I mean, I
don't need you to predict inflation. My guess is somewhere
(08:13):
around three percent is where we're going to see in
this inflation report. We'll see if there's anything that shocks us.
But how is the FED going to I guess, voice
their opinion on the economy at this upcoming meeting because
they are flying fairly blind.
Speaker 4 (08:27):
They are, but they can use and any researcher would
do the same thing. We do it internally, but we
don't use it necessarily to make major decisions. It's more
as a check of our intuition, you can estimate based
on past values likely future values, assuming the process that
generates those values is the same. That sounds more complicated
than it is, but so that My point is, there
(08:50):
are ways for researchers, including those obviously starting with those
arguably at the FED, to fill in the gaps using
statistical techniques. It's the methods we're doing so are pretty
tried and true, but they're subject to a lot of uncertainty.
Is you point out, the FED is faced with elevated
ongoing elevated inflation is measured by things that do a
good job capturing the trend in inflation, that do a
(09:11):
good job of filtering out some of those one time
influences we were talking about a moment ago, such as
an oil price shock. Those measures like median inflation and
other outlier trimming methods point to elevated underlying inflation somewhere
in the threes high two s threes, which is way
above the FEDS two percent goal. We know this with certainty.
Speaker 3 (09:29):
Let's take a quick break.
Speaker 2 (09:30):
The entire reason we're getting an inflation report tomorrow has
everything to do with social security and cost of living, adjustments.
We're going to be joined next by Mark Hamrick from
bank Rate on their survey on Americans expectations for social security.
That's next with Mark Hamrick on the Financial Exchange.
Speaker 1 (09:46):
Find daily interviews and full shows of the Financial Exchange
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Speaker 5 (10:21):
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Speaker 2 (10:57):
Mark Hamrick is the Washington Bureau chief and senior economic
analysts with bank Rate and joins us now to talk
about Americans attitudes towards soarch security and retirement generally. Mark,
thanks so much for joining us. Appreciate it. Talk to
us about who you surveyed in the main findings here
on Americans attitudes towards social security right now.
Speaker 6 (11:16):
Good to be with you, Mike. Well, this is like
most of our surveys at bank Rate of everyday Americans.
We work with survey firms to get across section of
the American public, and so this is meant to represent
essentially the way that Americans feel on this particular issue.
The key finding really is that a majority of Americans,
(11:37):
and in this case we're going to boil it down
to what I'm going to talk about right now, and
those who are not yet retired or so called non
retired adults say that they do expect to be reliant
on Social Security to pay necessary expenses once they do retire.
At the same time, a little more than three quarters
(11:58):
of Americans are concerned that they won't get their promised
benefits when that time comes.
Speaker 2 (12:04):
I've found that most Americans that I talked to are
particularly salient on the issue and aware of the issue
that this is something that is going to run into
funding issues well within their lifetimes. My biggest concern here
would be that with that knowledge, Americans make decisions around
Social Security that aren't all that logical. Do we know
(12:24):
if this fear is resulting in specific decision making on
behalf of Social Security beneficials I'm thinking about working longer
or taking benefits earlier, that you could potentially compound problems
for their own financial situations.
Speaker 6 (12:40):
It could be blatantly honest. That's not what we were
surveying on. But I think we can surmise anecdotally that
obviously there are a range of potential outcomes or behaviors
that are related to the skepticism that the full benefits
will be available. And it's really problematic because you know,
we have, as measured for example by Gallop, very low
(13:04):
trust and institutions in this country. It's been going down
for a long time. Congress is not at the top
of the list of trust by the way, typically it's
the military and small business. It does reign supreme in
the Gallop data. But so if you're skeptical that Congress
(13:24):
is going to do the right thing, and you do have, frankly, unfortunately,
in a historical basis upon which to judge, you know,
you can imagine there's a range of potential ways to.
Speaker 1 (13:36):
Deal with that.
Speaker 6 (13:37):
One would be what I would recommend, and that would
be prioritize what you can control, and that is, make
sure you're saving what you can save if indeed there
is a potential benefit cut of twenty to twenty five
percent around twenty thirty three, if indeed elected officials do nothing.
(13:57):
The other part would be sure work longer. The other
part would be, maybe you think I want to get
my money while I can and get the benefit earlier
rather than waiting till full retirement eight age. And I
can understand the logic to that, but of course the
calendar of that is the longer you wait before that
time twenty thirty three, the more you get in a payout.
(14:20):
So you know, it's a rather complicated situation, to say
the least.
Speaker 2 (14:26):
I tend to hear from younger Americans in particular, who
are far more skeptical about social security solvency and it
being there for them when they get to retirement. Does
that bear out in your survey in terms of generational shifts?
Speaker 3 (14:40):
Sure?
Speaker 6 (14:40):
And so, for example, when we go across the range
of adult cohorts or age groups, you've got thirty seven
percent of members of Generation Z that's those who are
aged eighteen to twenty eight say they expect to be
reliant on Social Security to pay necessary expenses. So you
would comp that to you know, that overall number of
(15:02):
fifty two percent or seventy two percent among Baby boomers
that's those age sixty one to seventy nine. And again,
you can come up with a number of reasons why
they may give that answer. One is they have less
confidence the money will be there. I would also hope
that they are hoped that they are planning to take
(15:26):
more control of their retirement savings. Given that we are
where we are with.
Speaker 2 (15:32):
This right now shifting gears a little bit just to
general retirement. How confident are the people you surveyed that
they are I guess, catching up to where they should
be when it comes to you know, retirement being on track.
And again I'm sure I know you guys broke this
out by generation as well.
Speaker 6 (15:50):
This is a survey that we released a month ago
as a sort of precursor to the Social Security survey
that we've just released, and this is pretty constant over
time as well, that about three and five Americans say
they don't believe they're on track with where they need
or want to be with their retirement savings. And I
(16:11):
do think that there is kind of a coming to
terms with reality aspect of this as people become more
senior and can you know, literally imagine the end of
their work as opposed to being in their twenties or
thirties or even forties and thinking, oh, that's so far
away from right now. You know, either it's incomprehensible or
(16:37):
I don't want to think about it. And you know,
when you're seeing that over the dashboard, so to speak,
over the hood of your car, that's when it starts
to get real. And that is a call to action,
right In other words, those who are youngest, earliest in
their careers, they are in the greatest position to benefit
(16:58):
from the power of compounding, taking advantage of the employeer
matchment four oh one K doing what they can to
live beneath their means, not on the cutting edge of
the envelope, to live their best instagrammable life. That isn't
necessary unless you've become an influencer. Isn't going to help you.
And then those who are more senior, you know you
(17:18):
can still you can still make changes that make a difference.
And that could mean waiting to tap Social Security to
get the higher payout. That could mean working longer, maybe
not full time, but even just working part time because
some income is better than no income arising from employment.
Speaker 2 (17:37):
Yeah, in spite of my best efforts, Mark, my forty
second TikTok dance videos are just not getting the following
I'm looking for. But really appreciate you being here, Mark
excellent research is always and really interested in the survey
and looking forward to having you on again soon.
Speaker 1 (17:51):
Always a pleasure.
Speaker 6 (17:51):
Thanks for having me, Thanks all right.
Speaker 5 (17:53):
Time for trivia here in the Financial Exchange. In today's
Weird Al Yankovic's sixty six birthday weird Else first top
forty hit song came back in nineteen eighty four when
he parodied his first Michael Jackson song. So our trivia
question today, what was the name of weird Awl's first
Michael Jackson parody song? Once again? What was the name
(18:14):
of weird Awl's first Michael Jackson parody song? Be the
fifth person today to text us at six one seven
three six two thirteen eighty five with the correct answer,
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The fifth correct response to textus to the number six
one seven three six two thirteen eighty five will win
(18:34):
that T shirt. See complete contest rules at Financial Exchange
Show dot com.
Speaker 2 (18:39):
As we sorry, as we head towards the bottom of
the hour here, we've got all marked all three major
indices in positive territory here. Price of oil continuing floating upwards,
but not quite as bad as it was earlier. We're
up now about four point nine to four percent on
West Texas crude, and old prices which have been bouncing
(19:01):
around all of the last week, continuing to do so today,
Gold up ninety eight dollars announced two point four percent,
and silver also up in trading this morning, up two
point seven three percent in early trading. We're gonna take
a quick break when we come back. Tucker's gonna give
us a full market recap and then We're talking fed
(19:23):
when we return.
Speaker 1 (19:38):
Bringing the latest financial news straight to your radio. Every day,
It's the Financial Exchange on the Financial Exchange Radio Network.
Time now for Wall Street. Watch a complete look at
what's moving markets so far today right here on the
Financial Exchange Radio Network.
Speaker 5 (19:57):
Market's in positive territory, a mid and another batch of
third quarter earnings from the likes of IBM and Tesla.
Wall Street's also seeing a jump into oil prices after
President Trump announced new sanctions on Russia's two biggest oil companies.
Right now, the Dow is up over a tenth of a percent,
or seventy six points higher, SMP five hundreds up four
(20:19):
tenths of one percent, or twenty seven points. Nasdaq is
up nearly three quarters of a percent, or one hundred
and sixty two points higher. Russell two thousand is up
about seven tenths of one percent. Tenure Treasure reeled up
four basis points now at three point nine to nine
to three percent in creude oil up five point three
percent today, trading at sixty one dollars and sixty two
(20:40):
cents a barrel. Tesla shares falling nearly two percent after
the ev maker posted a thirty seven percent drop in
quarterly profit, siting R and D spending in lower tax
credit revenue. Meanwhile, IBM stock is dropping almost three percent
now despite the computing company swinging to a quarterly profit
and reporting higher earnings, noting that customers have shifted from
(21:02):
experimenting with AI to using it at scale, sticking with
tech where several quantum computing stocks are seeing gains after
the Wall Street Journal reported that the Trump administration is
in talks to acquire equity stakes in several quantum computing firms.
Ion Q, Reghetti Computing, and Quantum Computing are all up
anywhere between nine and twelve percent. Elsewhere, American Airlines narrowed
(21:27):
it's quarterly lost, saying it expects to end the year
more profitable than analysts had been anticipating. That stock is
up five percent, Las Vegas Sands jumping twelve percent after
it posted solid third quarter results, and Intel will report
earnings after today's closing bell. I'm Tucker Silva and that
is Wall Street Watch. And in the previous segment, we
(21:49):
asked you the trivia question, what was the name of
weird Owl's first Michael Jackson parody song? That would be
Eat It Lower? From Plainfield, New Hampshire is our winner
today taking on a Financial Exchange Show t shirt. Congrats
to Laura and we play trivia every day here in
the Financial Exchange See complete contest rules at Financial Exchange
Show dot com.
Speaker 2 (22:09):
We will have a FED meeting and press conference on
Wednesday of next week. Amidst the heavy earnings that we
were talking about earlier, very widely anticipated, they will be
cutting rates by another quarter of one percent. The current
FED funds target is sitting at four to four and
a quarter according to the Chicago Mercantiles Change at ninety
nine percent. Probably that the rates will come down to
(22:31):
that three and a quarter to four percent range. Again,
we alluded to this a bit earlier, but they are
operating somewhat blindly. They certainly have their existing models, but
they do not have government data. They also kind of
surprisingly lost access to some private data. So ADP is
a private payroll provider, and we have quoted the data
(22:54):
they put out on jobs on a regular basis, and
for whatever reason, for the last several months, they have
cut off access to the FED for that data.
Speaker 3 (23:01):
And I don't I don't know.
Speaker 2 (23:03):
Based on reporting, I don't really have a real semblance
of the reason why maybe ADP wants to get paid,
But there's been no real reporting on why ADP terminated
the access to all that.
Speaker 3 (23:14):
I don't know if you have any.
Speaker 4 (23:16):
No special insight, no special insight, sorry, but not helpful though,
I mean ideally go ahead.
Speaker 2 (23:23):
Yeah, I mean ideally you would have whatever you can
put together.
Speaker 4 (23:26):
So ADP payrolls are taken obviously from a different sample
than the federal government uses. Federal governments measure is far
more comprehensive, and it's a random sample. ADP sample is
not random. They just survey their clients.
Speaker 2 (23:39):
But the changes are I guess it's probably not even
a survey, right, it's probably just a sense.
Speaker 4 (23:44):
It's just exactly, yeah, exactly. But the changes are pretty
highly correlated. And the work we did on this internally
suggests that if you're a forecaster and you want to
forecast next month's payrolls change, it helps in your little
model to include what ADP did, which you learn a
couple weeks or whatever earlier. So it does help you
(24:05):
if you're a forecaster, and if you're a FED forecaster
using similar methods, because all researchers do, you're worse off
for not having that data what that is worth.
Speaker 5 (24:17):
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Speaker 2 (25:17):
There's a piece and market Watch today that I think
brought up some fair points. But I've never seen someone
please so passionately about such an obscure financial demand. So
this piece is about borrowing from a four oh one K,
which you are generally allowed to do the plan documents prevail.
(25:39):
But there's a law there that you can't borrow more
than fifty thousand dollars and it's been set there for
forty years, and this author considers it an outrage that
it hasn't been indexed for inflation. And to some degree,
you know, I tend to agree here that a lot
of these things should be indexed to inflation. And certainly
(26:01):
it's I can't think a completely separate issue. But you know,
he brings up that you can now inherit thirty million
dollars tax free from mom and dad without having to
pay any taxes on that inheritance, and that number is
going to be indexed to inflation. So why wouldn't you
index this? And I think it's a worthy cause, but
(26:21):
I just I don't know how elevent it is.
Speaker 4 (26:23):
Quick camp plant it. This will be a nightmare if
you're a record keeper to update your systems every year. Yeah,
that's when four one K laws changed. They don't often
at the pace is pretty glacial, but when they do change,
it's a huge undertaking for your big record keepers like Fidelity.
Speaker 3 (26:37):
Yeah.
Speaker 2 (26:37):
Or in fact, they forced Congress to kind of delay
some of these things with the most recent changes on
ROTH four oh one K contributions.
Speaker 4 (26:44):
That said, we do update contribution limits every year. Yeah,
and record keeping software has to accommodate that. Yeah, but
it would place the burden on record keepers. That's one drawback.
The other much bigger drawback, and this is why Congress
isn't updating those limits. It is obscene that a residential
mortgage loan, which has a longer repayment period on a
(27:05):
four to one K loans and thus a lower payment
hasn't moved in forty years when the median home price
has troubled in. For that is a little bit obnoxious.
But of course there's a policy motivation here, which is
they don't want people tapping, and it's a good policy motivation.
They don't want people tapping.
Speaker 2 (27:21):
Therefore away and by the way, I think currently like
thirteen percent of four to one K holders have an
outstanding loan.
Speaker 4 (27:28):
Is it really that low.
Speaker 3 (27:29):
It's not a.
Speaker 2 (27:30):
Huge portion of people based on data that I found,
So I just don't see this as such a big issue.
I think there are plenty of you know, outrages out
there when it comes to this sort of thing. One
of the biggest ones to me that has just always
bothered me. So if you work for a company that
offers a four to oh one K, you're allowed to
put away Now I don't even know what's the four
(27:52):
to one K contribution limit for twenty twenty five is
now twenty three five hundred dollars. If you do not
work for an employer that offers a four oh one K,
then your only option is to contribute to an IRA,
and your limit there is far lower. And I've always
(28:15):
just asked, like, what's why, Why would that difference exist?
Just because my employer is too lazy or too cheap
to set up a four oh one K, it means
that I'm not allowed to save for retirement in the
same way that.
Speaker 3 (28:26):
Other people are.
Speaker 2 (28:27):
It seemed just obscene to me and just an easy
thing to correct. I'm guessing it's because big influential financial
companies like having that four oh one K business built in.
But yeah, there's a lot of these idiosyncrasies into idiosyncrasies
across the financial system, and I don't know this one,
just this one didn't really get my blood pumping, if
(28:48):
I'm being quite honest.
Speaker 4 (28:50):
No, it's minor in the scheme of things. Plus it's
it's not a bad thing that policy discourages people from
borrowing their four one K.
Speaker 3 (28:58):
Yeah, I'm not sure it's something we should encourage. Not
sure something we should that's against future.
Speaker 2 (29:05):
Let's take quick break when we come back. Stack Roulette
on the Financial Exchange.
Speaker 1 (29:10):
Here the Financial Exchange every day from eleven to noon
non Serious XM's Business radio channel one thirty two. Keep
it here for the latest business and financial news and
the trends on Wall Street. The Financial Exchange is now
live on Serious XM's Business radio channel one thirty two.
Faces the Financial Exchange Radio Network. The Financial Exchange streams
(29:32):
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to date on breaking business news all morning. Long. Face
is the Financial Exchange Radio Network.
Speaker 2 (29:55):
There have apparently been some disappointed investors year with kind
of obscure new investment product that's out there. It's not
new an idea, the idea is using leverage in investing decisions,
which has been around forever.
Speaker 4 (30:11):
It is borrowing money to buy your and we all
use leverage to buy a house for example.
Speaker 3 (30:15):
Yep.
Speaker 4 (30:15):
And it's prevalence, which is why when you're underwater, it's
it's worrisome. So on, the underwater concept applies here, sorry,
Mike Right.
Speaker 2 (30:22):
And some of the new ETFs that have been coming
out this year have been focused on not only it's
an ETF that allows you to own a single stock
or try and mirror the price return of a single stock,
but with leverage, and unfortunately for some investors, they are
learning kind of a hard lesson about the difference between
(30:43):
owning a security with leverage and owning a fund that
attempts to do something, because some of those shares are
not doing a terribly good job of tracking their underlying security.
And in one case, the actual shares of the company
rose twenty eight percent in the twelve months that ended Wednesday,
whereas the fund that tried to track it with a
(31:03):
leveraged exposure went down by sixty five percent. So not
that you are an expert mark in leveraged funds that
track single.
Speaker 4 (31:13):
No idea how that could happen, I would need to
talk to the manager.
Speaker 2 (31:16):
But I think the important thing here is that you
actually have to read those really annoying packets that come
out to you that the SEC mandates that disclose how
these things actually work when you're investing in a brand new.
Speaker 3 (31:31):
I don't know house before.
Speaker 4 (31:32):
I mean again, using leverage means I put up a
dollar to buy two dollars worth of something. Sure, so
if that doubles, my two goes to four. But I
only put in one hundred, so my return would be
not one hundred percent but two or three hundred. I'm
I'm having trouble doing that. Yeah, minus the interest, Yeah,
minus whatever the fee is. Yeah, sorry, that's embarrassing. So
(31:55):
I'm not sure how if the underlying asset goes up,
given the fact that you didn't, you didn't commit the
full amount of the investment, how you could, ever, how
it's conceivable even remotely that you could lose money when
the underlying moves in your favor.
Speaker 2 (32:09):
However, that's precisely what happened in this case, and I
don't again, depends on how they are conducting that leverage
and on what time frame I suppose, but in any case.
Speaker 3 (32:20):
There are a ton.
Speaker 2 (32:22):
Of new financial products that are being put out there
every day. We talked about earlier this year had the
number of outstanding ETFs surpassed mutual funds for the first time,
or maybe it surpassed individual securities this year, I don't recall.
Speaker 3 (32:35):
It was one of the.
Speaker 4 (32:35):
Yeah, more ETFs than stocks and probably traded companies.
Speaker 2 (32:39):
The point that we made at the time was just
be careful because a lot of these do not have
a track record. A lot of these are, you know,
putting out there an objective that may or may not
be accomplishable, and they're you know, they're required to disclose
it all. I think of a lot of these head
strategies where there's no downside potential or capped downside or
limited downside potential, and it screams it at You're right
(33:02):
in the disclosure document that these results can't be guaranteed,
and this is an objective, not a not a financial guarantee.
It's still a security. It can go up and down.
And yet I think a lot of those warnings go
largely ignored.
Speaker 4 (33:14):
I just don't understand. And the example I gave, the
return was three hundred percent instead of one hundred percent,
and that's that's how you Yeah, I don't understand how
the how this is what you describe is even possible
absent malpractice and possibly well, I don't want to use
the F word being fraud, but you have to suspect
(33:35):
that if something goes that badly, something wasn't happening under
the hood, that uh, something happened under the hood that
was very different than what was being represented. But I
don't know the particulars. I probably shouldn't say that.
Speaker 3 (33:45):
What do you have for a stackerlete market?
Speaker 4 (33:47):
This story that Tucker keeps talking about about the federal
government taking more equity stakes is really grating. We criticized
it when the buy or at least I did. I
think you did too.
Speaker 3 (33:56):
Yeah, when the.
Speaker 4 (33:57):
Biden administration larded chips companies that were having no problem
tapping public markets with public funds. Trump administration is taking
this to a new level. It's taken shares in Intel
a goal a so called golden share, and nip on
Steel whatever the hell that means him putting board members
in as he pleases and vetoing major decisions multiple rare
earths companies. The federal government now is an equity stake,
(34:19):
and it's going to be a dozen or will be
after these equity stakes are consummated, like ten a dozen companies.
Like a lot of people who would normally vote Republican
to cry socialism. This is the definition of it. They're
gonna meddle in how these companies are managed. There is
no capital shortage. Stocks are at record highs. These companies
are all in interesting industries. Venture capitalists are overflowing with
(34:43):
dry powder. There's no evidence that this industry is having
trouble getting capital, and it's not clear that it's nationally vital.
This administration just likes owning shares and companies. Those companies
are going to be favored. It's going to cause other
companies to rather than innovate this angle for getting in
the good races of the Trump administration. Who do we
contribute to his ballroom? Maybe they'll give us some capital.
(35:04):
This just sets such a bad precedent. A lot of
people are worried about the next mayor of New York
City owning a few grocery stores. The scale of this
and the implications for the economy as a whole are
for far greater, far more dire.
Speaker 2 (35:16):
I just Whenever stuff like this comes up, I always
just like to put it in perspective of, you know,
does the average American think this is a good or
bad idea?
Speaker 4 (35:26):
They don't know about it, Mike.
Speaker 3 (35:27):
I don't think the average American knows we're trying to.
Speaker 4 (35:30):
But you know, they are major news channels. They aren't
talking about this at all.
Speaker 2 (35:32):
But I think a lot of them would say that's okay.
I trust the president. I elected him because he's a
good businessman, and this is precisely what I want him
to do. And I'm going to take your perspective on
that and say, okay, you buy that. The problem is
the president, because when the president leaves office, the United
States Government is still likely to own shares in these companies,
(35:55):
and it is going to be holding upon the following
president to be these stewards, and then, you know, presumably
continue to expect.
Speaker 4 (36:04):
How do we get out of these if the US
government at some point if President aoc God forbid, but
if it happened in five years, forgive me, but God forbid,
then again, would she buy fewer companies than this guy's doing.
How do we get out of these positions if the
next president announcers, they're going to unwind them. It would
tank these companies. And I'll say again, where is the
evidence that they're having trouble raising capital? And why would
(36:24):
you want to pick these companies? Is the winners in
the quantum and in this example it's quantum computing, but
there are lots of other examples with this crowd.
Speaker 2 (36:32):
I think we should just always be highly suspect of
the idea that any government US abroad is going to
be good at picking winners and losers. I think there's
very little compelling evidence to support that the Soviet Union
attempted it, China has attempted it, the United States is
now attempting it. I think that the lesson here is
(36:55):
that the government, when it comes to markets in the economy,
the job that they should play is to set conditions
for good investment and let the markets figure it out.
There are exceptions, right like, yeah, when the Great Depression happens,
sitting back and raising taxes is probably not a good idea.
But in normal market environments, where the system is working,
(37:17):
cash flow is moving, and there is liquidity, the government's job,
in my view at least, should not be to step
in and say we're taking stakes in companies. You can
set the conditions for that to happen, but it doesn't
need to be done by the United States Treasury.
Speaker 4 (37:32):
It's really annoying that we're still having these discovery Look,
there are arguments over what's vital. Should the federal government
help industries or but there.
Speaker 3 (37:40):
Are ways to do it without taking equities.
Speaker 4 (37:42):
You don't take funding away from colleges that create Forgive me,
but this is another thing they're doing that's totally backwards
and counterproductive. Good research happens in colleges. That research is
then disseminated out into the world. It becomes a public good.
We can all use it. They're defunding college research and
at the same time effectively show bring private sector companies
with favors.
Speaker 2 (38:02):
Markets are in positive territory, Nasdaq leading the way, up
three quarters of a percent, SMP up four tenths of percent,
the Dow up one tenth of a percent.
Speaker 3 (38:10):
That is all the time we have for.
Speaker 2 (38:11):
Today, but we will be right back at it tomorrow
with a CPI Friday.
Speaker 3 (38:15):
Have a great day, everybody,
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