September 23, 2025 • 38 mins
Mike Armstrong and Marc Fandetti discuss how Argentina's Javier Milei lost the markets and is turning to the US. Are H1B visas crucial to American productivity? Stocks are expensive. Does earnings growth mean that doesn't matter? Is the age of value investing over? Regional US casinos cash in as gamblers shun prices Vegas trips.
Mark as Played
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Episode Transcript
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Speaker 1 (00:00):
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(00:43):
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a donation today. Face is the Financial Exchange with Mike
(01:06):
Armstrong and Mark Vandetti.
Speaker 2 (01:09):
Good morning, Welcome back to the Financial Exchange.
Speaker 3 (01:12):
We have markets in mixed.
Speaker 2 (01:13):
Territory here with the Dow up about half percent and
as back down a.
Speaker 3 (01:17):
Third and the S ANDP somewhere in between. There.
Speaker 2 (01:21):
Breaking news over the course of the last twenty four
hours was in Vidia's announced investment in chat GPT owner
open Ai. They're making one hundred billion dollar up to
one hundred billion dollar investment in that company, and in
Vidia shareholders not taking it extraordinarily well this morning, with
(01:41):
the stock down about two percent today in early trading.
The insinuation that concerned Mark and I when we were
talking about it during the last segment, being that, hey,
if you're the largest supplier of semiconductors in the world,
then you have to go and inject one of your
biggest buyer with cash. It might not be a great
(02:02):
sign for the state of the demand for these semiconductors,
but in their own customer, yeah, they're becoming their own customer.
It becomes a bit of circular reference warning there if
you're taking a look at it all. But nonetheless, that's
where we stand in the semiconductor space. At the same time,
obviously China continuing to reject the Nvidia made chips by
(02:24):
and large and working to develop their own homegrown industry
when it comes to semiconductor design and development. I did
want to turn over now though, to Mark the story
of Argentina. Argentina is well. Investors in Argentina are concerned
about default once again, this would not be anything new
(02:44):
for Argentina. In fact, they haven't defaulted in five years,
and some might argue that that means they're overdue.
Speaker 3 (02:50):
But a lot has.
Speaker 2 (02:53):
Changed in Argentina over the course the last few years,
election wise, just economic thinking wise. So I guess bring
us in Mark on the state of things with Argentinian
public finances if you would. I know you were doing
more reading about this than I was, So give us
a state of play right now.
Speaker 3 (03:11):
When it comes to Argentina, Well, like you.
Speaker 4 (03:13):
Said, they're kind of a perennial basket case, and the
reasons for that are not really well, the proximate reasons
are very easy to see. They have a shortage of
foreign currency reserves dollars with which to repay debt. They're
short of money.
Speaker 3 (03:31):
So have been perennially for thirty some odd years.
Speaker 4 (03:34):
They were a very rich country one hundred years ago,
top ten in terms of per capita GDP in the world,
richer than France on a per capita basis, Italy, Germany.
This is an astonishing fact. If you would ask somebody
in nineteen ten which country will dominate the twentieth century,
Argentina or the United States, the answer wouldn't have been straightforward,
believe it or not. So what's happened to them? The
(03:56):
long term answer is probably institutions, better institutions, rule of law,
welcoming foreign talent, free trade, free markets, generally independent monetary policy,
at least since the nineteen fifties. For the most part,
Argentina has a few of those, but has not had
(04:18):
them consistently. They broke from Spain and like the early
part of the nineteenth century eighteenth, fifteen, eighteen twenty, something
like that, and they never quite got their institutional act together.
That's put them at a disadvantage relative to the United States,
is probably the easiest way to put it. That doesn't
really help explain the buying bind they're in right now
(04:38):
in terms of the immediate cause, which is a shortage
of foreign currency reserves, which is in part due to
recent bad harvests. That's agriculture is a big export for them,
but also due to their need to defend the paso.
Their currency is linked to the dollar. It trades within
a band, and when it goes below, when it takes
too many pesos to buy a dollar cent, bank steps
(05:01):
in using foreign currency reserves, which they're increasingly short of,
to shore up the paeso. This is crucial to keeping
inflation down. So your currency goes down, the prices of
things that you buy from abroad goes up. That pushes
up your inflation, which feeds the vicious cycles. So the
US has stepped in, as China has stepped in, by
the way, we're competing with the Chinese on this, as
we talked about in the last hour, US has stepped
(05:23):
in to promise to do sort of whatever it takes,
as Bissent said yesterday or whenever it was the day before,
to help Argentina meet its obligations. The idea that it's
a systemic risk is preposterous. By the way, Argentina, as
you said, defaults like every several years on average this
century and ten times in the past century.
Speaker 2 (05:42):
Systemic risk would imply that there are a bunch of
institutions globally who are relying on the Argentinian debt to
continue to operate.
Speaker 3 (05:50):
And that's probably not the key.
Speaker 4 (05:52):
Absolutely not. No, No expert mic or anyone who's remotely
familiar with this that I could find and is respected
as said anything of the kind that's preposterous.
Speaker 2 (05:59):
So instead taking from so Jai, Miley took office at
the end of twenty twenty three and Chang came in
with the idea the chainsaw guy crazy had a hair
chainsaw came in with the idea of significant reform, and
he did. I mean, he dramatically cut social programs in
the country, really implemented austerity, which I think many mainstream
(06:20):
economists believe was necessary.
Speaker 3 (06:22):
Cut government.
Speaker 4 (06:23):
No, they warned about his cuts. He's libertarian, so I
love him, but they warned about austerity and so forth.
But it did get inflation down from one hundred and
forty to about forty percent annual.
Speaker 2 (06:34):
And I guess that is that in part stemming the
problem is, Hey, you got inflation down, but you had
to use dollar.
Speaker 4 (06:41):
Problems is to pay so link to the dollar. He's
gotta let it float if they stop defend. Now that's
going to import some inflation, but you can fight that
with higher interest rate, which causes more economic pain, which
will cause more elections. They lost a big one in
a very important Buenos Aires apparently, which is a bell
weather of I don't know anything about Argentine politics, but
(07:03):
or Argentinian whatever it's called. I don't even know what
it's called, somewhat of a bell weather that freaked out markets, like,
oh boy, we're going back to left wing populism known
as paranism there because the guy perone a vita parans
I guess husband, if you're like, if you want the
pop culture angle on this, her husband was the military
dictator who took over the government I guess in the
(07:25):
nineteen forties or something like that. So his political descendants
are called Paranis. They get back in power, it's going
to be big spending again, and we're back to the
old cycle.
Speaker 2 (07:34):
So what can the United States actually practically do here
to counter Argentina's failure and how much of it is
genuinely we just discussed that. We don't really think that
it has much to do with systemic risk. But is
there an argument China?
Speaker 4 (07:49):
Yeah, there's a geopolitical argument, and I'm not qualified to
make it to counter China's influence in the hemisphere. Yeah,
if they're going to extend. When they say swap lines,
they mean you can borrow cheap to shore up your currency.
Is the simplest way to think about orbarro to get
more of their currency cheaply, which you can use in
turn to prop up your currency. The problem is that
the peso, the experts I have seen are unanimous and
(08:14):
that the peso has to be allowed to depreciate further.
That's going to mean importing some inflation. You can check that,
but it causes economic pain. But it absolutely has to
happen if we get mired in this mic. We don't
have unlimited exchange stabilization funds with which to help the Argentinians,
like we're going to start to the irony is Bascent
was the guy who in nineteen ninety two ran the
(08:35):
desk of George Soros that shorted the UK pound and
got them kicked out of the what was known at
that time as the erm the European Exchange Rate Mechanism,
and Biscent is now on the other side of this,
so he knows darn well that he's fighting world capital
tides here that it's probably feudle to push against.
Speaker 2 (08:55):
The financial situation in Argentina is just so stunningly bad.
It's almost difficult for Americans to comprehend it, right, I mean,
when we're talking about inflation in Argentina, their recent peak
inflation rate was two hundred and eighty nine percent annual
back in April of twenty twenty four. How do you even, like,
just thinking about anything that you buy a lot of,
(09:16):
it's difficult to comprehend what two hundred eighty nine percent inflation?
Speaker 3 (09:20):
Heck, it's even.
Speaker 2 (09:21):
Difficult, like the The win for Argentina recently has been
that they got annual inflation rates down to thirty four
percent in August of this year. Right, even that, I
don't I don't think American can really accurately comprehend. I
guess that's a little bit easier than two hundred eighty
nine percent. Like, okay, my two hundred dollars worth of
groceries is going to to seventy I guess in thirty
(09:42):
four percent annual inflation, that's even tough to comprehend.
Speaker 4 (09:48):
But it has happened here to the Confederate States of
America between eighteen sixty one and sixty five they had
like four or five thousand percent inflation. Price is doubled
in the North. Yeah, right, so there have been some
power and during the during the Revolutionary War, there were
similar and there was similar inflation. We printed money to
finance the spending. So it has happened here before, but
(10:08):
it wasn't It wasn't the USA, it was the CSA,
and it was brief.
Speaker 2 (10:12):
So thank god, we will see what the involvement of
the United States looks like. You know, it seems to
run pretty contradictory to other goals of the administration, which
is pulling back from you know, internationals.
Speaker 4 (10:23):
Okay, what's our interest exactly here? Other than that we
like Milley. Look, the only China excuse.
Speaker 2 (10:29):
Me, I think the only one that I can come
up with would be the counter The only legitimate one
that I could come up with would be. Yeah, the
threat of more Chinese interest in Argentina, their ability to
conduct trade on a much more global scale with Latin
American countries could be perceived and I think would be
perceived as a threat.
Speaker 4 (10:47):
Well, yeah, if you exchange them, if you afford them
favorable borrowing terms, you can get the Chinese currency cheaper
than you can get the dollar, use the Chinese currency
to shore up your currency. That for others, I suppose
their goal, and I think it is the goal of
the Chinese Communist Party to have the yuan or whatever
it's called replace the US dollar, so it would advance
(11:08):
that objective. So I guess there is a geopolitical or
national security angle here. But again, are we don't have
a reservoir, an unlimited reservoir of stabilization funds with which
to prop up the PAESO.
Speaker 2 (11:20):
Agreed, Let's take a quick break when we come back.
We talked a little bit about of it yesterday, but
you know a few more days to digest the story
and the looming story on H one B visas and
where those may be going. A couple pieces covered their
next In addition to trivia on the Financial Exchange.
Speaker 1 (11:37):
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Speaker 5 (12:19):
SAM trivia here in the Financial Exchange And On August
twenty third, nineteen ninety eight, the Seventies Show debuted on Fox.
The series focused on the lives of a group of
teen eight Is this supposed to be September twenty third, Benjamin, September?
Speaker 1 (12:36):
Isn't it? Well?
Speaker 5 (12:37):
Anyways, it's It's a series that focuses on the lives
of a group of sixteenage friends living in the fictional
town of Point Place. So our trivia question today is simply,
what state was that seventies show based in? Once again,
what state was that seventies show based in?
Speaker 3 (12:58):
Never watched?
Speaker 5 (12:59):
It couldn't tell?
Speaker 3 (12:59):
You be the.
Speaker 5 (13:00):
Seventh person today to text us at six one seven
three six two thirteen eighty five with the correct answer,
you know, win a Financial Exchange Show T shirt. Once again,
the seventh correct response to text us to the number
six one seven three six two thirteen eighty five will
win that T shirt. See complete contest rules at Financial
Exchange Show dot com.
Speaker 2 (13:21):
Was that the show with Fez I don't know yah,
which was just an acronym for foreign exchange student.
Speaker 1 (13:26):
I don't know.
Speaker 5 (13:28):
I told you I didn't see it.
Speaker 3 (13:29):
Yeah, that's why the no ideah.
Speaker 4 (13:31):
I watched that show for years.
Speaker 3 (13:32):
Yeah. H one B visus.
Speaker 2 (13:34):
So Friday and over the weekend we had a number
of announcements from the White House on H one B visas.
If you're unfamiliar, about sixty five thousand of these are
issued every year for foreign workers that companies in the
United States want to hire. The rules around it have
changed several times. The last change occurred during the first
(13:56):
Trump administration, but we didn't really see the effects of
it until the Biden administration. But effectively, what it did
during the Trump administration was removed the need to do
a full application for an H one B visa in
order to enter the lottery. And it was a and
still is a lottery system that determines who gets these.
Since that point in time, you saw the applications for
(14:18):
H one B visas increase something like three or four fold.
I think in the most recent data I saw there
were seven hundred and fifty thousand applications for sixty five
thousand visas to be issued, because all you'd need to
do is basically pay a ten dollars registration fee to
get into one of these visa applications. As we covered,
I think three quarters of these are issued to Indian citizens.
(14:42):
And we actually today got to look at which companies
are using the most H one B visa beneficiaries. So
in twenty twenty five, Amazon took the top spot, followed
by Tata Consultancy, Microsoft, Meta, Apple, Google. Unsurprising answers here, right,
the biggest companies out there who can most easily navigate
these complex rules are the ones that got issued the visas.
(15:06):
Alison Schraeger from Bloomberg This Morning wrote a piece H
one B visas are Crucial to American productivity and lays
out her argument night I'll be honest, I thought I
was going to disagree with the conclusions that she draws here,
because you know, quite honestly, I think there probably is
a fair bit of abuse in this program. I think
(15:27):
there's from everything I've seen, a lot of H one
B visa use that is specifically designed to cut overall headcount,
cost and bring in talented resources that you wouldn't be
able to do in the United States without H one
B visa and undercutting American workers and their salaries because
of that. And so that's been my take on this
(15:49):
program is it's so cheap to apply for that it's
basically a lottery ticket for your company, and if you
can put in thousands of applications, you're likely to get
a few hits on them and be able to.
Speaker 3 (16:00):
Hire somebody at much below market rate.
Speaker 2 (16:01):
And I think there's plenty of evidence for that, But
I think that does ignore the fact that we still
aren't great at training stem in the United States, and
this type of program where we bring foreign workers into
the United States based on their merit is still important.
And that's really the case that she's making. It's not
(16:24):
so much that she's saying, hey, one hundred thousand dollars
fee or a ten dollars fee is the right or
wrong answer. But her argument is, look, we should focus
on an overall reform of the US immigration system.
Speaker 3 (16:36):
Which good luck.
Speaker 2 (16:37):
But where I agree with her is, look, start prioritizing
skilled labor migrants and bring them in here and give
them a path the citizenship as opposed to the current process,
which is mostly family reunification and means that a lot
of the people coming in don't have skills that our
economy needs, or might not even have an intention to
(16:58):
work in the United States. And so again I came
into this thinking, Yeah, Allison's kind of missing the boat
on this, and I don't think she's going to come
up with a good.
Speaker 3 (17:08):
Argument for it.
Speaker 2 (17:09):
She actually does, and her argument is, look, we still
need to be able to find these workers, and whether
the fee is ten dollars, twenty thousand dollars or one
hundred thousand dollars, that still might happen, but we probably
need a better process for it.
Speaker 4 (17:23):
Yeah, that's the textbook economist argument. If somebody with skills,
whether they be high or low, if they meet a
need and they don't require any training, they come to
us fully equippedor nearly so, with a lot of so
called human capital, make it as easy as possible for
them to come here.
Speaker 2 (17:42):
For those of you, by the way, that think that
I'm full of crap and that this is a you
know that we shouldn't have any h one B visas
at all, right, because I've heard that argument like this
is a useless program. We shouldn't allow this to happen. Generally,
except for very specific situations like if we need doctors
in rural Tennessee, then go for it.
Speaker 3 (18:00):
But other than that, no, I don't want to see it.
Speaker 2 (18:02):
I ask you this, Okay, if you are Amazon now
and you don't get your visa or you don't want
to pay one hundred thousand dollars for that visa, how
difficult is it for me to set up a base
in Bangalore, India and just hire as many Indian engineers
as I want to design my internet, to design my product,
(18:22):
to do the work that they were otherwise hired to
do in the United States, and pay payroll taxes on
If I don't have an H ONEB visa, why wouldn't
I go do that? I can't come up with a
compelling reason. Yeah, if you need to manufacture a car, yeah,
there's tariff reasons. There's a whole bunch of reasons that
you need that person. But that's not who's getting these
H ONEB visas. It's Amazon, it's Google, it's Meta, it's
(18:44):
these high tech companies that need to design internet infrastructure
and all sorts of website design, and they are finding
that in a lot of cases it makes sense to
hire foreign workers to do so, and my concern would be, Okay,
if I have to pay one hundred thousand dollars to
do that, forget about it. I won't bring that person
to the United States. I will just go hire that
person in India in the first place. So it's a
(19:08):
complex issue, Like genuinely, it's a really complicated situation, and
I have no idea what the overall effect is going
to be on one hundred thousand dollars new application price.
I think I like the idea, but there could be
some serious problems with it for employment in the United States.
Speaker 3 (19:24):
Quick Break. Wall Street Watch coming up.
Speaker 1 (19:25):
Next, bringing the latest financial news straight to your radio
every day. It's the Financial Exchange on the Financial Exchange
(19:46):
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):
It's our mixed territory and a little changed after all
three major averages recorded at all time highs yesterday. Coming
up this afternoon, Wall Street will monitor Jerome Powell's speaking
engagement in Rhode Island. I think that's around twelve thirty
Eastern time.
Speaker 3 (20:16):
Right now, the.
Speaker 5 (20:17):
Dow is up by three tenths of one percent, or
one hundred and twenty nine points. SMP five hundred is
down a tenth of a percent or seven points lower.
NASDAK down nearly three tenths of one percent, or sixty
four points lower. Russell two thousand is up nine tenths
of one percent. Ten year Treasure reeled flat at four
point one four to seven percent, and crude oil up
(20:39):
two and a half percent higher, trading at sixty three
dollars in eighty three cents a barrel. Following the big
news from Nvidia yesterday, with the announcement that the AI
and chip giant said it would invest up to one
hundred billion dollars into open AI or open AI will
build in deploy systems using in Vidia's graphics process units
(21:01):
and video. Stock jump nearly four percent yesterday on that news,
but is giving back nearly two percent today. Meanwhile, Firefly
Aerospace shares are sinking twelve percent after the space and
defense technology company posted a wider quarterly loss in lower
than expected revenue in its first earnings report since its
stock market debut. Elsewhere, after its seven percent decline yesterday,
(21:25):
ken View shares a rebounding over three percent today. The
Tailenol parent company's bracing four lawsuits after the Trump administration
said prenatal exposure to Tailanol's active ingredient might cause autism.
AutoZone falling over two percent after the auto parts retailers
saw its gross profits and earnings per share fall below
street expectations for its most recent quarter despite an increase
(21:49):
in same store sales, and after today's closing bell, we'll
see earnings from Micron Technology. That stock is up by
two percent at the moment. I'm Tucker Silvan that does
Wall Street Watch. In the previous segment, we asked you
the trivia question, what state was that seventy shows based in?
That would be Wisconsin. Peter from our Charge, Yeah, you
(22:11):
got it. My congrats. Peter from Charlton, Mass is our
winner today taking home a Financial Exchange Show teacher. Congrats
to Peter. We play trivia every day here in the
Financial Exchange See complete contest rules at Financial Exchange Show
dot com.
Speaker 3 (22:25):
Listen, Tucker, I don't know.
Speaker 2 (22:26):
Yeah, I get the answer correct to maybe one in
thirty of our trivia questions. And so when I do,
I have a little excitement for myself. I get excited
about prodia so yeah, thank you. Our first stock Our
first story of the show today was a piece from
Barons by Martin I'm gonna go BACKERDS. Is the stock
(22:51):
market over valued? We're about to find out. Our next
story of the show is also from Barons, from Teresa Rivas,
saying stocks are expensive.
Speaker 3 (23:00):
Growth means that may not matter.
Speaker 2 (23:02):
So let's argue the opposite side of this piece here, Mark,
which is we just got done talking about it.
Speaker 4 (23:09):
That's like saying I'm fat, but I might have a
growth spirit. Well, yeah, sure, earnings. Growth might Earnings is
the denominator in the so called PDE that we talked
about in the last hour. We talked about how to
answer the question or stock's expensive? What objective quantifiable measure?
That's a little redundant, but anyway would you use and
we said we'll use P to E. The trick is
(23:30):
what you put in the E of that ratio? You
use the last twelve months? Do you use a longer
term series?
Speaker 3 (23:36):
Go ahead? Nope, keep going.
Speaker 4 (23:38):
Okay, So we concluded in this you can confirm it's
readily available that by any measure, stocks are really expensive,
epically expensive, historically expensive. Is that a disaster that foretold
bad things. In ninety eight ninety nine, a lot of
people rang the one not for a few years, right,
(23:58):
It took time. Yeah, so there needed to be some catalyst.
What will that be? Hard to say. Will the economy
turn people become less willing to take risk and that
causes these multiple p relative to E. Whatever you decide
to put an E, Will that cause that multiple to compress?
Probably that's the way it's going to get resolved. It
could also resolve in a more orderly and happy way
(24:19):
if the E just grows when you have a fraction,
If the thing on the bottom of your fraction grows,
the fraction, the ratio excuse me, goes down. That is
one way that this could get resolved. It is worth
noting that has never happened, so that's a bit optimistic. Again,
that's like your doctor's saying one hundred pounds overweight, but
(24:39):
you might hit a growth spurt. Not likely to happen
to an adult person anyway.
Speaker 2 (24:44):
Give me the I want to talk through the last
argument that I oftentimes hear people bring up, which is
when we're talking about price to earnings ratios. Yeah, you
can compare company to company or market to market, but
most of the time. What I hear it talked about
is is it normal.
Speaker 3 (24:59):
Compared to it self?
Speaker 4 (25:01):
And so that's probably the only right way to think
about it.
Speaker 2 (25:03):
And so let's make let's let's cover that argument that Mark,
you're making a comparison of this market to nineteen ninety
seven and the two have nothing in common with each other,
and maybe we should just now I know that you're not,
but yeah, for the sake of and I am, and
I am for the sake of argument here, let's let's
run through the piece of well, these things aren't comparable,
(25:26):
and the fundamentals of our economy and how people invest
in four oh one k's and everything else are so
different now that any of the history around totallys are irrelevant.
Speaker 4 (25:35):
Pees I'm going to use the Shiller so called Chiller
pe named after a guy called Robert Schiller, one that
about prize and economics come came up with many interesting
things over the course of his career, still teaches. One
of them was to in the ratio of PDE, don't
just use the last twelve months of the used the
last ten years, adjusted for inflation, and take an average
that smooths out business cycle effects. Always a good practice.
(25:58):
So by the that Schiller PE also called cyclically adjusted PE,
which just describes what Schiller did adjusted for the business cycle,
that is also at all time near all time record highs.
It has been trending up more or less since the
early nineteen nineties. It's been the mean. The average of
(26:19):
that series has doubled since that period. So something did change.
People became more willing to take on risk for lots
of different reasons. Internet trading, pervasiveness of the four oh
one K where all stock investors now right, lots of
other potential suspects in why people are willing to pay
(26:39):
more for a dollar's worth of earnings today than they
were fifty years ago. So yes, schill it PE or
whatever your favorite measure has trended up. Will it continue
to trend up? Will there be another big leg up
by possibly? I can't say it won't. I can't say
there won't be. There aren't the obvious catalysts though that
there were in the mid nineteen nineties, when in trading,
(27:00):
for example, was new, when the four to oh one
K was only fifteen or so years old. All of
those tailwinds, those tailwinds have abated so that seems again optimistic, Mike,
though obviously we can't roll it out.
Speaker 2 (27:14):
If you're listening to this program right now, I assume
you're generally interested in these types of topics about the
market and the economy and the seeming turning point that
we are reaching. If you would like to learn a
bit more, I would love for you to come join
us at one of our two events next month. I've
talked a little bit about these before, but just as
a reminder, we're going to be doing lunch followed by
(27:34):
meet and Greed and meeting with the folks at Armstrong
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(27:56):
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(28:16):
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(28:37):
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Speaker 1 (28:44):
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Speaker 2 (29:00):
Mark forget about the Golden age of value investing? Is
value investing generally dead?
Speaker 3 (29:05):
Is it over?
Speaker 4 (29:07):
I hope not, because that's what most active managers profess
that they are. They So let's be let's talk.
Speaker 3 (29:13):
Let me let me define find value investing for.
Speaker 4 (29:15):
You buy stocks more cheaply than the prevailing rate for
say the index of which they're apart.
Speaker 2 (29:19):
So a stock that based on the discount to what
you think it is value.
Speaker 4 (29:24):
Yeah, but if you own like a value index fundation
four oh one K, it's usually put together using rules,
and the rule is pretty straightforward. In the case of
say the S and P or the Russell family of indices,
they just include stocks that traded a lower We talked
about the price to earnings in the last segment they trade.
I'll just use that as an example, though you could
also use price to book value of a company, price
(29:45):
to sales. They traded a lower price to I think
it's sales. Is the way that S and P. Well, anyway,
they traded lower valuations. That makes them cheaper. I know
that sounds circular, but that's how we fine whether or
not something is expensive. We look at his relative valuation.
So might know that's most investors want to buy a
(30:06):
dollar's worth of earnings for fifty cents. That's what you
buy when you buy into a value oriented strategy. You
want to buy something that's likely to that other investors
or the market, I should say, investors on average that is,
aren't appreciating, aren't seeing. Yeah, I'm oversimplifying a bit, but
that's that's the nut shock.
Speaker 2 (30:25):
The author's making the argument here that the dissemination of
information is now so easy and perfect right between artificial intelligence,
the internet, and everything else. He makes the case that look,
forty years ago, my job was flying around the world
and trying to get that competitive edge to find where
that value is and determine it and find it, and
(30:47):
data and information is so perfectly disseminated now that he
doesn't feel that he has the same competitive advantage.
Speaker 3 (30:53):
I'm not sure I would. I'm not just sure that
I agree with that perspective.
Speaker 2 (30:58):
Yes, information is much quicker to get out there, but
I think it has also led a whole bunch of
people to say, I have no idea what to do
with this information overload. I can't build a model based
on it, and so I'm throwing my hands in the
air and giving me away.
Speaker 4 (31:14):
He's right in a sense, if you think about what
most people, this isn't what most people do. So this
I'll try to say it in a way that is
accessible even if you haven't studied asset managers, which we
do in our day job at Armstrong Advisory Group, we
cover that's my job anyway, covering managers, finding those that
(31:35):
might have an edge that will allow clients for whom
these funds are suitable. That's a big caveat sure to
outperform the market, because that's the name of the game.
If I wanted to just keep pace with the S
and B five hundred, I'd buy an index fund and
call it a day. You want to try most investors,
not all want to try to outperform the index. You'll
need to hire a manager. What type of manager should
(31:56):
I hire? I want to hire one that scours the
universe of companies and find that somebody else is missing
the big story. With respect to in the old days,
you had to go through financial statements. Computers helped, but
you still had to go through them looking for things
that in the past have helped you identify underappreciated potential gainers,
(32:18):
so to speak. AI to a degree you could program that.
Now you could put your secret sauce into a formula
and it can at least eliminate the need for a
lot of analysts doing the legwork for you. We do
that a little bit internally too. We're just starting to
explore that, not using it, but starting to appreciate how
it might be used. What this manager means is if
(32:39):
my secret sauce can be reduced to a formula, somebody's
going to figure it out and I have no edge.
Speaker 2 (32:44):
Yeah, it's an interesting argument for where AI is going.
Quick break when we come back, but a stack Roulette
is next.
Speaker 1 (32:52):
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Speaker 2 (34:05):
Financial Times is that with a piece on the casino
industry and making the case that as Americans kind of
run through their rest of their savings, as prices continue
up in other areas, and as Americans have more and
more access to legal sports, gambling and local casinos, that
(34:25):
they are skipping the Vegas trip, which that could be possible.
I just want to point out one thing though, which
seems seemingly contradicts that argument. As I mentioned last week,
we got the state by state level unemployment data for
the month of August, and the Nevada overall unemployment rate
for the last twelve months has come way down. We
(34:47):
were sitting at five point seven percent a year ago
and we're now sitting at five point three. It came
down from five point four the previous month and has
just been slowly heading downwards since February or March of
this year to rates that you know, five point three
percent isn't ultra low, but for Nevada, it actually kind
of is. You haven't gotten below five point one percent
(35:10):
anytime since post COVID, and the last time you were
below five percent was in the late twenty tens. And
so look, Nevada's an entire employment industry is not defined
by the casinos.
Speaker 3 (35:21):
Especially these days. They've they've continued to diversify it fair bit.
Speaker 2 (35:25):
But I just find it strange that if we're truly
seeing a real pushback against visits to Vegas, I would
expect the unemployment rate in the state to be going
the other direction, and it's it's simply not. But every
other piece I find compelling. Right, Like we've covered at length,
how you easily you can sports gamble compared to ten
(35:45):
years ago, I can get to a casino here in
Massachusetts within half an hour, I don't I guess.
Speaker 3 (35:51):
Previously through a quarter.
Speaker 4 (35:52):
Now it lands in a slot.
Speaker 3 (35:53):
Yeah, I mean you gotta.
Speaker 2 (35:55):
I used to have to drive down to Mohegan if
I wanted to be a place at bed Now now
I can go do it wherever I want.
Speaker 1 (36:01):
Why is that funny.
Speaker 4 (36:02):
It's for a lot of people, it's a problem.
Speaker 2 (36:08):
Well it's especially funny for me specifically, because so last year, Tucker,
you remember, we did the live broadcast from MGMGM out
out in Springfield, and so I went there the night
before because I didn't want to make the drive during
the commuter time and in the morning, and and like
Mark mentioned on.
Speaker 3 (36:24):
Like gambling, you don't explain myself.
Speaker 2 (36:26):
I'm not your wife despise gambling, honey. I walked around
with three hundred dollars in my pocket, and I walked
around that casino floor like three times, and out of
just angst, also a lack of knowledge of how to gamble.
I genuinely don't even know how you change the dollars
(36:48):
for poker chips for chips at this stage, I just
walked around dollars in my pocket and then went.
Speaker 3 (36:54):
Back up to my wife's listening.
Speaker 2 (36:55):
So genuinely that that's that's my gambling experiences. I walk
around the floor and don't know how to gamble. What
do you have for us for stack roulette?
Speaker 4 (37:03):
Mark, crypto hoarders turned to share buy You're gonna like this,
Mike turn to share buybacks and push to boost falling
stock prices. The Financial Times, I think correctly calls this
the death the death knell for some crypto business model.
So it's all companies that used to do something else.
They make golf carts, they make catheters, they do something,
they make something concrete. They decided that their share price
(37:26):
would be higher if they if they re if they
transform themselves into a crypto reserve. Effectively, we buy bitcoin
you by us. I don't get that. Why wouldn't people
just buy a bitcoin etf or good question? Right, it's
a business model, or has been for the past several years. Well,
that has petered out. The momentum from that sort of
repositioning has petered out, so they've now resorted to selling
(37:48):
bitcoin to buy their stock prices to boost that. This
has to be a sign of the end of the
craziest phase in crypto, right, Mike.
Speaker 3 (37:58):
I've never what you're willing to call a peek mark,
but that does seem that's what we like about you, Mike.
Speaker 2 (38:05):
Concerning quick break for the next twenty two hours, we
will be back at it tomorrow here on the Financial Exchange.
Have a great rest of your day, folks,
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):
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(01:06):
Armstrong and Mark Vandetti.
Speaker 2 (01:09):
Good morning, Welcome back to the Financial Exchange.
Speaker 3 (01:12):
We have markets in mixed.
Speaker 2 (01:13):
Territory here with the Dow up about half percent and
as back down a.
Speaker 3 (01:17):
Third and the S ANDP somewhere in between. There.
Speaker 2 (01:21):
Breaking news over the course of the last twenty four
hours was in Vidia's announced investment in chat GPT owner
open Ai. They're making one hundred billion dollar up to
one hundred billion dollar investment in that company, and in
Vidia shareholders not taking it extraordinarily well this morning, with
(01:41):
the stock down about two percent today in early trading.
The insinuation that concerned Mark and I when we were
talking about it during the last segment, being that, hey,
if you're the largest supplier of semiconductors in the world,
then you have to go and inject one of your
biggest buyer with cash. It might not be a great
(02:02):
sign for the state of the demand for these semiconductors,
but in their own customer, yeah, they're becoming their own customer.
It becomes a bit of circular reference warning there if
you're taking a look at it all. But nonetheless, that's
where we stand in the semiconductor space. At the same time,
obviously China continuing to reject the Nvidia made chips by
(02:24):
and large and working to develop their own homegrown industry
when it comes to semiconductor design and development. I did
want to turn over now though, to Mark the story
of Argentina. Argentina is well. Investors in Argentina are concerned
about default once again, this would not be anything new
(02:44):
for Argentina. In fact, they haven't defaulted in five years,
and some might argue that that means they're overdue.
Speaker 3 (02:50):
But a lot has.
Speaker 2 (02:53):
Changed in Argentina over the course the last few years,
election wise, just economic thinking wise. So I guess bring
us in Mark on the state of things with Argentinian
public finances if you would. I know you were doing
more reading about this than I was, So give us
a state of play right now.
Speaker 3 (03:11):
When it comes to Argentina, Well, like you.
Speaker 4 (03:13):
Said, they're kind of a perennial basket case, and the
reasons for that are not really well, the proximate reasons
are very easy to see. They have a shortage of
foreign currency reserves dollars with which to repay debt. They're
short of money.
Speaker 3 (03:31):
So have been perennially for thirty some odd years.
Speaker 4 (03:34):
They were a very rich country one hundred years ago,
top ten in terms of per capita GDP in the world,
richer than France on a per capita basis, Italy, Germany.
This is an astonishing fact. If you would ask somebody
in nineteen ten which country will dominate the twentieth century,
Argentina or the United States, the answer wouldn't have been straightforward,
believe it or not. So what's happened to them? The
(03:56):
long term answer is probably institutions, better institutions, rule of law,
welcoming foreign talent, free trade, free markets, generally independent monetary policy,
at least since the nineteen fifties. For the most part,
Argentina has a few of those, but has not had
(04:18):
them consistently. They broke from Spain and like the early
part of the nineteenth century eighteenth, fifteen, eighteen twenty, something
like that, and they never quite got their institutional act together.
That's put them at a disadvantage relative to the United States,
is probably the easiest way to put it. That doesn't
really help explain the buying bind they're in right now
(04:38):
in terms of the immediate cause, which is a shortage
of foreign currency reserves, which is in part due to
recent bad harvests. That's agriculture is a big export for them,
but also due to their need to defend the paso.
Their currency is linked to the dollar. It trades within
a band, and when it goes below, when it takes
too many pesos to buy a dollar cent, bank steps
(05:01):
in using foreign currency reserves, which they're increasingly short of,
to shore up the paeso. This is crucial to keeping
inflation down. So your currency goes down, the prices of
things that you buy from abroad goes up. That pushes
up your inflation, which feeds the vicious cycles. So the
US has stepped in, as China has stepped in, by
the way, we're competing with the Chinese on this, as
we talked about in the last hour, US has stepped
(05:23):
in to promise to do sort of whatever it takes,
as Bissent said yesterday or whenever it was the day before,
to help Argentina meet its obligations. The idea that it's
a systemic risk is preposterous. By the way, Argentina, as
you said, defaults like every several years on average this
century and ten times in the past century.
Speaker 2 (05:42):
Systemic risk would imply that there are a bunch of
institutions globally who are relying on the Argentinian debt to
continue to operate.
Speaker 3 (05:50):
And that's probably not the key.
Speaker 4 (05:52):
Absolutely not. No, No expert mic or anyone who's remotely
familiar with this that I could find and is respected
as said anything of the kind that's preposterous.
Speaker 2 (05:59):
So instead taking from so Jai, Miley took office at
the end of twenty twenty three and Chang came in
with the idea the chainsaw guy crazy had a hair
chainsaw came in with the idea of significant reform, and
he did. I mean, he dramatically cut social programs in
the country, really implemented austerity, which I think many mainstream
(06:20):
economists believe was necessary.
Speaker 3 (06:22):
Cut government.
Speaker 4 (06:23):
No, they warned about his cuts. He's libertarian, so I
love him, but they warned about austerity and so forth.
But it did get inflation down from one hundred and
forty to about forty percent annual.
Speaker 2 (06:34):
And I guess that is that in part stemming the
problem is, Hey, you got inflation down, but you had
to use dollar.
Speaker 4 (06:41):
Problems is to pay so link to the dollar. He's
gotta let it float if they stop defend. Now that's
going to import some inflation, but you can fight that
with higher interest rate, which causes more economic pain, which
will cause more elections. They lost a big one in
a very important Buenos Aires apparently, which is a bell
weather of I don't know anything about Argentine politics, but
(07:03):
or Argentinian whatever it's called. I don't even know what
it's called, somewhat of a bell weather that freaked out markets, like,
oh boy, we're going back to left wing populism known
as paranism there because the guy perone a vita parans
I guess husband, if you're like, if you want the
pop culture angle on this, her husband was the military
dictator who took over the government I guess in the
(07:25):
nineteen forties or something like that. So his political descendants
are called Paranis. They get back in power, it's going
to be big spending again, and we're back to the
old cycle.
Speaker 2 (07:34):
So what can the United States actually practically do here
to counter Argentina's failure and how much of it is
genuinely we just discussed that. We don't really think that
it has much to do with systemic risk. But is
there an argument China?
Speaker 4 (07:49):
Yeah, there's a geopolitical argument, and I'm not qualified to
make it to counter China's influence in the hemisphere. Yeah,
if they're going to extend. When they say swap lines,
they mean you can borrow cheap to shore up your currency.
Is the simplest way to think about orbarro to get
more of their currency cheaply, which you can use in
turn to prop up your currency. The problem is that
the peso, the experts I have seen are unanimous and
(08:14):
that the peso has to be allowed to depreciate further.
That's going to mean importing some inflation. You can check that,
but it causes economic pain. But it absolutely has to
happen if we get mired in this mic. We don't
have unlimited exchange stabilization funds with which to help the Argentinians,
like we're going to start to the irony is Bascent
was the guy who in nineteen ninety two ran the
(08:35):
desk of George Soros that shorted the UK pound and
got them kicked out of the what was known at
that time as the erm the European Exchange Rate Mechanism,
and Biscent is now on the other side of this,
so he knows darn well that he's fighting world capital
tides here that it's probably feudle to push against.
Speaker 2 (08:55):
The financial situation in Argentina is just so stunningly bad.
It's almost difficult for Americans to comprehend it, right, I mean,
when we're talking about inflation in Argentina, their recent peak
inflation rate was two hundred and eighty nine percent annual
back in April of twenty twenty four. How do you even, like,
just thinking about anything that you buy a lot of,
(09:16):
it's difficult to comprehend what two hundred eighty nine percent inflation?
Speaker 3 (09:20):
Heck, it's even.
Speaker 2 (09:21):
Difficult, like the The win for Argentina recently has been
that they got annual inflation rates down to thirty four
percent in August of this year. Right, even that, I
don't I don't think American can really accurately comprehend. I
guess that's a little bit easier than two hundred eighty
nine percent. Like, okay, my two hundred dollars worth of
groceries is going to to seventy I guess in thirty
(09:42):
four percent annual inflation, that's even tough to comprehend.
Speaker 4 (09:48):
But it has happened here to the Confederate States of
America between eighteen sixty one and sixty five they had
like four or five thousand percent inflation. Price is doubled
in the North. Yeah, right, so there have been some
power and during the during the Revolutionary War, there were
similar and there was similar inflation. We printed money to
finance the spending. So it has happened here before, but
(10:08):
it wasn't It wasn't the USA, it was the CSA,
and it was brief.
Speaker 2 (10:12):
So thank god, we will see what the involvement of
the United States looks like. You know, it seems to
run pretty contradictory to other goals of the administration, which
is pulling back from you know, internationals.
Speaker 4 (10:23):
Okay, what's our interest exactly here? Other than that we
like Milley. Look, the only China excuse.
Speaker 2 (10:29):
Me, I think the only one that I can come
up with would be the counter The only legitimate one
that I could come up with would be. Yeah, the
threat of more Chinese interest in Argentina, their ability to
conduct trade on a much more global scale with Latin
American countries could be perceived and I think would be
perceived as a threat.
Speaker 4 (10:47):
Well, yeah, if you exchange them, if you afford them
favorable borrowing terms, you can get the Chinese currency cheaper
than you can get the dollar, use the Chinese currency
to shore up your currency. That for others, I suppose
their goal, and I think it is the goal of
the Chinese Communist Party to have the yuan or whatever
it's called replace the US dollar, so it would advance
(11:08):
that objective. So I guess there is a geopolitical or
national security angle here. But again, are we don't have
a reservoir, an unlimited reservoir of stabilization funds with which
to prop up the PAESO.
Speaker 2 (11:20):
Agreed, Let's take a quick break when we come back.
We talked a little bit about of it yesterday, but
you know a few more days to digest the story
and the looming story on H one B visas and
where those may be going. A couple pieces covered their
next In addition to trivia on the Financial Exchange.
Speaker 1 (11:37):
Find daily interviews in full shows of the Financial Exchange
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This is the Financial Exchange Radio Network. The Financial Exchange
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(11:58):
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Speaker 5 (12:19):
SAM trivia here in the Financial Exchange And On August
twenty third, nineteen ninety eight, the Seventies Show debuted on Fox.
The series focused on the lives of a group of
teen eight Is this supposed to be September twenty third, Benjamin, September?
Speaker 1 (12:36):
Isn't it? Well?
Speaker 5 (12:37):
Anyways, it's It's a series that focuses on the lives
of a group of sixteenage friends living in the fictional
town of Point Place. So our trivia question today is simply,
what state was that seventies show based in? Once again,
what state was that seventies show based in?
Speaker 3 (12:58):
Never watched?
Speaker 5 (12:59):
It couldn't tell?
Speaker 3 (12:59):
You be the.
Speaker 5 (13:00):
Seventh person today to text us at six one seven
three six two thirteen eighty five with the correct answer,
you know, win a Financial Exchange Show T shirt. Once again,
the seventh correct response to text us to the number
six one seven three six two thirteen eighty five will
win that T shirt. See complete contest rules at Financial
Exchange Show dot com.
Speaker 2 (13:21):
Was that the show with Fez I don't know yah,
which was just an acronym for foreign exchange student.
Speaker 1 (13:26):
I don't know.
Speaker 5 (13:28):
I told you I didn't see it.
Speaker 3 (13:29):
Yeah, that's why the no ideah.
Speaker 4 (13:31):
I watched that show for years.
Speaker 3 (13:32):
Yeah. H one B visus.
Speaker 2 (13:34):
So Friday and over the weekend we had a number
of announcements from the White House on H one B visas.
If you're unfamiliar, about sixty five thousand of these are
issued every year for foreign workers that companies in the
United States want to hire. The rules around it have
changed several times. The last change occurred during the first
(13:56):
Trump administration, but we didn't really see the effects of
it until the Biden administration. But effectively, what it did
during the Trump administration was removed the need to do
a full application for an H one B visa in
order to enter the lottery. And it was a and
still is a lottery system that determines who gets these.
Since that point in time, you saw the applications for
(14:18):
H one B visas increase something like three or four fold.
I think in the most recent data I saw there
were seven hundred and fifty thousand applications for sixty five
thousand visas to be issued, because all you'd need to
do is basically pay a ten dollars registration fee to
get into one of these visa applications. As we covered,
I think three quarters of these are issued to Indian citizens.
(14:42):
And we actually today got to look at which companies
are using the most H one B visa beneficiaries. So
in twenty twenty five, Amazon took the top spot, followed
by Tata Consultancy, Microsoft, Meta, Apple, Google. Unsurprising answers here, right,
the biggest companies out there who can most easily navigate
these complex rules are the ones that got issued the visas.
(15:06):
Alison Schraeger from Bloomberg This Morning wrote a piece H
one B visas are Crucial to American productivity and lays
out her argument night I'll be honest, I thought I
was going to disagree with the conclusions that she draws here,
because you know, quite honestly, I think there probably is
a fair bit of abuse in this program. I think
(15:27):
there's from everything I've seen, a lot of H one
B visa use that is specifically designed to cut overall headcount,
cost and bring in talented resources that you wouldn't be
able to do in the United States without H one
B visa and undercutting American workers and their salaries because
of that. And so that's been my take on this
(15:49):
program is it's so cheap to apply for that it's
basically a lottery ticket for your company, and if you
can put in thousands of applications, you're likely to get
a few hits on them and be able to.
Speaker 3 (16:00):
Hire somebody at much below market rate.
Speaker 2 (16:01):
And I think there's plenty of evidence for that, But
I think that does ignore the fact that we still
aren't great at training stem in the United States, and
this type of program where we bring foreign workers into
the United States based on their merit is still important.
And that's really the case that she's making. It's not
(16:24):
so much that she's saying, hey, one hundred thousand dollars
fee or a ten dollars fee is the right or
wrong answer. But her argument is, look, we should focus
on an overall reform of the US immigration system.
Speaker 3 (16:36):
Which good luck.
Speaker 2 (16:37):
But where I agree with her is, look, start prioritizing
skilled labor migrants and bring them in here and give
them a path the citizenship as opposed to the current process,
which is mostly family reunification and means that a lot
of the people coming in don't have skills that our
economy needs, or might not even have an intention to
(16:58):
work in the United States. And so again I came
into this thinking, Yeah, Allison's kind of missing the boat
on this, and I don't think she's going to come
up with a good.
Speaker 3 (17:08):
Argument for it.
Speaker 2 (17:09):
She actually does, and her argument is, look, we still
need to be able to find these workers, and whether
the fee is ten dollars, twenty thousand dollars or one
hundred thousand dollars, that still might happen, but we probably
need a better process for it.
Speaker 4 (17:23):
Yeah, that's the textbook economist argument. If somebody with skills,
whether they be high or low, if they meet a
need and they don't require any training, they come to
us fully equippedor nearly so, with a lot of so
called human capital, make it as easy as possible for
them to come here.
Speaker 2 (17:42):
For those of you, by the way, that think that
I'm full of crap and that this is a you
know that we shouldn't have any h one B visas
at all, right, because I've heard that argument like this
is a useless program. We shouldn't allow this to happen. Generally,
except for very specific situations like if we need doctors
in rural Tennessee, then go for it.
Speaker 3 (18:00):
But other than that, no, I don't want to see it.
Speaker 2 (18:02):
I ask you this, Okay, if you are Amazon now
and you don't get your visa or you don't want
to pay one hundred thousand dollars for that visa, how
difficult is it for me to set up a base
in Bangalore, India and just hire as many Indian engineers
as I want to design my internet, to design my product,
(18:22):
to do the work that they were otherwise hired to
do in the United States, and pay payroll taxes on
If I don't have an H ONEB visa, why wouldn't
I go do that? I can't come up with a
compelling reason. Yeah, if you need to manufacture a car, yeah,
there's tariff reasons. There's a whole bunch of reasons that
you need that person. But that's not who's getting these
H ONEB visas. It's Amazon, it's Google, it's Meta, it's
(18:44):
these high tech companies that need to design internet infrastructure
and all sorts of website design, and they are finding
that in a lot of cases it makes sense to
hire foreign workers to do so, and my concern would be, Okay,
if I have to pay one hundred thousand dollars to
do that, forget about it. I won't bring that person
to the United States. I will just go hire that
person in India in the first place. So it's a
(19:08):
complex issue, Like genuinely, it's a really complicated situation, and
I have no idea what the overall effect is going
to be on one hundred thousand dollars new application price.
I think I like the idea, but there could be
some serious problems with it for employment in the United States.
Speaker 3 (19:24):
Quick Break. Wall Street Watch coming up.
Speaker 1 (19:25):
Next, bringing the latest financial news straight to your radio
every day. It's the Financial Exchange on the Financial Exchange
(19:46):
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):
It's our mixed territory and a little changed after all
three major averages recorded at all time highs yesterday. Coming
up this afternoon, Wall Street will monitor Jerome Powell's speaking
engagement in Rhode Island. I think that's around twelve thirty
Eastern time.
Speaker 3 (20:16):
Right now, the.
Speaker 5 (20:17):
Dow is up by three tenths of one percent, or
one hundred and twenty nine points. SMP five hundred is
down a tenth of a percent or seven points lower.
NASDAK down nearly three tenths of one percent, or sixty
four points lower. Russell two thousand is up nine tenths
of one percent. Ten year Treasure reeled flat at four
point one four to seven percent, and crude oil up
(20:39):
two and a half percent higher, trading at sixty three
dollars in eighty three cents a barrel. Following the big
news from Nvidia yesterday, with the announcement that the AI
and chip giant said it would invest up to one
hundred billion dollars into open AI or open AI will
build in deploy systems using in Vidia's graphics process units
(21:01):
and video. Stock jump nearly four percent yesterday on that news,
but is giving back nearly two percent today. Meanwhile, Firefly
Aerospace shares are sinking twelve percent after the space and
defense technology company posted a wider quarterly loss in lower
than expected revenue in its first earnings report since its
stock market debut. Elsewhere, after its seven percent decline yesterday,
(21:25):
ken View shares a rebounding over three percent today. The
Tailenol parent company's bracing four lawsuits after the Trump administration
said prenatal exposure to Tailanol's active ingredient might cause autism.
AutoZone falling over two percent after the auto parts retailers
saw its gross profits and earnings per share fall below
street expectations for its most recent quarter despite an increase
(21:49):
in same store sales, and after today's closing bell, we'll
see earnings from Micron Technology. That stock is up by
two percent at the moment. I'm Tucker Silvan that does
Wall Street Watch. In the previous segment, we asked you
the trivia question, what state was that seventy shows based in?
That would be Wisconsin. Peter from our Charge, Yeah, you
(22:11):
got it. My congrats. Peter from Charlton, Mass is our
winner today taking home a Financial Exchange Show teacher. Congrats
to Peter. We play trivia every day here in the
Financial Exchange See complete contest rules at Financial Exchange Show
dot com.
Speaker 3 (22:25):
Listen, Tucker, I don't know.
Speaker 2 (22:26):
Yeah, I get the answer correct to maybe one in
thirty of our trivia questions. And so when I do,
I have a little excitement for myself. I get excited
about prodia so yeah, thank you. Our first stock Our
first story of the show today was a piece from
Barons by Martin I'm gonna go BACKERDS. Is the stock
(22:51):
market over valued? We're about to find out. Our next
story of the show is also from Barons, from Teresa Rivas,
saying stocks are expensive.
Speaker 3 (23:00):
Growth means that may not matter.
Speaker 2 (23:02):
So let's argue the opposite side of this piece here, Mark,
which is we just got done talking about it.
Speaker 4 (23:09):
That's like saying I'm fat, but I might have a
growth spirit. Well, yeah, sure, earnings. Growth might Earnings is
the denominator in the so called PDE that we talked
about in the last hour. We talked about how to
answer the question or stock's expensive? What objective quantifiable measure?
That's a little redundant, but anyway would you use and
we said we'll use P to E. The trick is
(23:30):
what you put in the E of that ratio? You
use the last twelve months? Do you use a longer
term series?
Speaker 3 (23:36):
Go ahead? Nope, keep going.
Speaker 4 (23:38):
Okay, So we concluded in this you can confirm it's
readily available that by any measure, stocks are really expensive,
epically expensive, historically expensive. Is that a disaster that foretold
bad things. In ninety eight ninety nine, a lot of
people rang the one not for a few years, right,
(23:58):
It took time. Yeah, so there needed to be some catalyst.
What will that be? Hard to say. Will the economy
turn people become less willing to take risk and that
causes these multiple p relative to E. Whatever you decide
to put an E, Will that cause that multiple to compress?
Probably that's the way it's going to get resolved. It
could also resolve in a more orderly and happy way
(24:19):
if the E just grows when you have a fraction,
If the thing on the bottom of your fraction grows,
the fraction, the ratio excuse me, goes down. That is
one way that this could get resolved. It is worth
noting that has never happened, so that's a bit optimistic. Again,
that's like your doctor's saying one hundred pounds overweight, but
(24:39):
you might hit a growth spurt. Not likely to happen
to an adult person anyway.
Speaker 2 (24:44):
Give me the I want to talk through the last
argument that I oftentimes hear people bring up, which is
when we're talking about price to earnings ratios. Yeah, you
can compare company to company or market to market, but
most of the time. What I hear it talked about
is is it normal.
Speaker 3 (24:59):
Compared to it self?
Speaker 4 (25:01):
And so that's probably the only right way to think
about it.
Speaker 2 (25:03):
And so let's make let's let's cover that argument that Mark,
you're making a comparison of this market to nineteen ninety
seven and the two have nothing in common with each other,
and maybe we should just now I know that you're not,
but yeah, for the sake of and I am, and
I am for the sake of argument here, let's let's
run through the piece of well, these things aren't comparable,
(25:26):
and the fundamentals of our economy and how people invest
in four oh one k's and everything else are so
different now that any of the history around totallys are irrelevant.
Speaker 4 (25:35):
Pees I'm going to use the Shiller so called Chiller
pe named after a guy called Robert Schiller, one that
about prize and economics come came up with many interesting
things over the course of his career, still teaches. One
of them was to in the ratio of PDE, don't
just use the last twelve months of the used the
last ten years, adjusted for inflation, and take an average
that smooths out business cycle effects. Always a good practice.
(25:58):
So by the that Schiller PE also called cyclically adjusted PE,
which just describes what Schiller did adjusted for the business cycle,
that is also at all time near all time record highs.
It has been trending up more or less since the
early nineteen nineties. It's been the mean. The average of
(26:19):
that series has doubled since that period. So something did change.
People became more willing to take on risk for lots
of different reasons. Internet trading, pervasiveness of the four oh
one K where all stock investors now right, lots of
other potential suspects in why people are willing to pay
(26:39):
more for a dollar's worth of earnings today than they
were fifty years ago. So yes, schill it PE or
whatever your favorite measure has trended up. Will it continue
to trend up? Will there be another big leg up
by possibly? I can't say it won't. I can't say
there won't be. There aren't the obvious catalysts though that
there were in the mid nineteen nineties, when in trading,
(27:00):
for example, was new, when the four to oh one
K was only fifteen or so years old. All of
those tailwinds, those tailwinds have abated so that seems again optimistic, Mike,
though obviously we can't roll it out.
Speaker 2 (27:14):
If you're listening to this program right now, I assume
you're generally interested in these types of topics about the
market and the economy and the seeming turning point that
we are reaching. If you would like to learn a
bit more, I would love for you to come join
us at one of our two events next month. I've
talked a little bit about these before, but just as
a reminder, we're going to be doing lunch followed by
(27:34):
meet and Greed and meeting with the folks at Armstrong
Advisory Group, and you can hear us talk about our
perspectives on where this market is and is going. Whether
you're do it yourself or whether you have an investment
advisor today, or you're just trying to learn a little
bit more about where the economy might be going nationally, internationally,
and even locally. Please join us for one of these
(27:56):
two events, the two dates October ninth and October sixth, sixteenth.
The first one on the ninth is going to be
at the Margariteville Resort on Cape Cod October ninth, we're
doing a live broadcast of this show at both of
these events, followed by that lunch and meet and greet.
Following that Chestnut Hill the Showcase super Lucks on October sixteenth,
(28:16):
so once again October nine, October sixteen. You can get
a whole bunch more information by going to Armstrong Advisory
dot com. But you can call us to at eight
hundred three nine three four zero zero one. I've mentioned
this a few times. Space is limited. We are doing
these at a few different locations. We would love for
you to join, but you do need to register ahead
(28:37):
of time. Armstrong Advisory dot com or eight hundred three
nine three four zero zero one.
Speaker 1 (28:44):
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, intestate planning advisors before making any
investment decisions. Armstrong may contact you to offer investment advisory services.
Speaker 2 (29:00):
Mark forget about the Golden age of value investing? Is
value investing generally dead?
Speaker 3 (29:05):
Is it over?
Speaker 4 (29:07):
I hope not, because that's what most active managers profess
that they are. They So let's be let's talk.
Speaker 3 (29:13):
Let me let me define find value investing for.
Speaker 4 (29:15):
You buy stocks more cheaply than the prevailing rate for
say the index of which they're apart.
Speaker 2 (29:19):
So a stock that based on the discount to what
you think it is value.
Speaker 4 (29:24):
Yeah, but if you own like a value index fundation
four oh one K, it's usually put together using rules,
and the rule is pretty straightforward. In the case of
say the S and P or the Russell family of indices,
they just include stocks that traded a lower We talked
about the price to earnings in the last segment they trade.
I'll just use that as an example, though you could
also use price to book value of a company, price
(29:45):
to sales. They traded a lower price to I think
it's sales. Is the way that S and P. Well, anyway,
they traded lower valuations. That makes them cheaper. I know
that sounds circular, but that's how we fine whether or
not something is expensive. We look at his relative valuation.
So might know that's most investors want to buy a
(30:06):
dollar's worth of earnings for fifty cents. That's what you
buy when you buy into a value oriented strategy. You
want to buy something that's likely to that other investors
or the market, I should say, investors on average that is,
aren't appreciating, aren't seeing. Yeah, I'm oversimplifying a bit, but
that's that's the nut shock.
Speaker 2 (30:25):
The author's making the argument here that the dissemination of
information is now so easy and perfect right between artificial intelligence,
the internet, and everything else. He makes the case that look,
forty years ago, my job was flying around the world
and trying to get that competitive edge to find where
that value is and determine it and find it, and
(30:47):
data and information is so perfectly disseminated now that he
doesn't feel that he has the same competitive advantage.
Speaker 3 (30:53):
I'm not sure I would. I'm not just sure that
I agree with that perspective.
Speaker 2 (30:58):
Yes, information is much quicker to get out there, but
I think it has also led a whole bunch of
people to say, I have no idea what to do
with this information overload. I can't build a model based
on it, and so I'm throwing my hands in the
air and giving me away.
Speaker 4 (31:14):
He's right in a sense, if you think about what
most people, this isn't what most people do. So this
I'll try to say it in a way that is
accessible even if you haven't studied asset managers, which we
do in our day job at Armstrong Advisory Group, we
cover that's my job anyway, covering managers, finding those that
(31:35):
might have an edge that will allow clients for whom
these funds are suitable. That's a big caveat sure to
outperform the market, because that's the name of the game.
If I wanted to just keep pace with the S
and B five hundred, I'd buy an index fund and
call it a day. You want to try most investors,
not all want to try to outperform the index. You'll
need to hire a manager. What type of manager should
(31:56):
I hire? I want to hire one that scours the
universe of companies and find that somebody else is missing
the big story. With respect to in the old days,
you had to go through financial statements. Computers helped, but
you still had to go through them looking for things
that in the past have helped you identify underappreciated potential gainers,
(32:18):
so to speak. AI to a degree you could program that.
Now you could put your secret sauce into a formula
and it can at least eliminate the need for a
lot of analysts doing the legwork for you. We do
that a little bit internally too. We're just starting to
explore that, not using it, but starting to appreciate how
it might be used. What this manager means is if
(32:39):
my secret sauce can be reduced to a formula, somebody's
going to figure it out and I have no edge.
Speaker 2 (32:44):
Yeah, it's an interesting argument for where AI is going.
Quick break when we come back, but a stack Roulette
is next.
Speaker 1 (32:52):
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(33:13):
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Speaker 5 (33:27):
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Speaker 2 (34:05):
Financial Times is that with a piece on the casino
industry and making the case that as Americans kind of
run through their rest of their savings, as prices continue
up in other areas, and as Americans have more and
more access to legal sports, gambling and local casinos, that
(34:25):
they are skipping the Vegas trip, which that could be possible.
I just want to point out one thing though, which
seems seemingly contradicts that argument. As I mentioned last week,
we got the state by state level unemployment data for
the month of August, and the Nevada overall unemployment rate
for the last twelve months has come way down. We
(34:47):
were sitting at five point seven percent a year ago
and we're now sitting at five point three. It came
down from five point four the previous month and has
just been slowly heading downwards since February or March of
this year to rates that you know, five point three
percent isn't ultra low, but for Nevada, it actually kind
of is. You haven't gotten below five point one percent
(35:10):
anytime since post COVID, and the last time you were
below five percent was in the late twenty tens. And
so look, Nevada's an entire employment industry is not defined
by the casinos.
Speaker 3 (35:21):
Especially these days. They've they've continued to diversify it fair bit.
Speaker 2 (35:25):
But I just find it strange that if we're truly
seeing a real pushback against visits to Vegas, I would
expect the unemployment rate in the state to be going
the other direction, and it's it's simply not. But every
other piece I find compelling. Right, Like we've covered at length,
how you easily you can sports gamble compared to ten
(35:45):
years ago, I can get to a casino here in
Massachusetts within half an hour, I don't I guess.
Speaker 3 (35:51):
Previously through a quarter.
Speaker 4 (35:52):
Now it lands in a slot.
Speaker 3 (35:53):
Yeah, I mean you gotta.
Speaker 2 (35:55):
I used to have to drive down to Mohegan if
I wanted to be a place at bed Now now
I can go do it wherever I want.
Speaker 1 (36:01):
Why is that funny.
Speaker 4 (36:02):
It's for a lot of people, it's a problem.
Speaker 2 (36:08):
Well it's especially funny for me specifically, because so last year, Tucker,
you remember, we did the live broadcast from MGMGM out
out in Springfield, and so I went there the night
before because I didn't want to make the drive during
the commuter time and in the morning, and and like
Mark mentioned on.
Speaker 3 (36:24):
Like gambling, you don't explain myself.
Speaker 2 (36:26):
I'm not your wife despise gambling, honey. I walked around
with three hundred dollars in my pocket, and I walked
around that casino floor like three times, and out of
just angst, also a lack of knowledge of how to gamble.
I genuinely don't even know how you change the dollars
(36:48):
for poker chips for chips at this stage, I just
walked around dollars in my pocket and then went.
Speaker 3 (36:54):
Back up to my wife's listening.
Speaker 2 (36:55):
So genuinely that that's that's my gambling experiences. I walk
around the floor and don't know how to gamble. What
do you have for us for stack roulette?
Speaker 4 (37:03):
Mark, crypto hoarders turned to share buy You're gonna like this,
Mike turn to share buybacks and push to boost falling
stock prices. The Financial Times, I think correctly calls this
the death the death knell for some crypto business model.
So it's all companies that used to do something else.
They make golf carts, they make catheters, they do something,
they make something concrete. They decided that their share price
(37:26):
would be higher if they if they re if they
transform themselves into a crypto reserve. Effectively, we buy bitcoin
you by us. I don't get that. Why wouldn't people
just buy a bitcoin etf or good question? Right, it's
a business model, or has been for the past several years. Well,
that has petered out. The momentum from that sort of
repositioning has petered out, so they've now resorted to selling
(37:48):
bitcoin to buy their stock prices to boost that. This
has to be a sign of the end of the
craziest phase in crypto, right, Mike.
Speaker 3 (37:58):
I've never what you're willing to call a peek mark,
but that does seem that's what we like about you, Mike.
Speaker 2 (38:05):
Concerning quick break for the next twenty two hours, we
will be back at it tomorrow here on the Financial Exchange.
Have a great rest of your day, folks,
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