November 22, 2024 • 38 mins
Chuck Zodda and Marc Fandetti discuss investors still trying to figure out the Trump market. Is Buffett's $325B cash pile a warning sign? Why is nobody listening? Trump has a plan for Treasury Secretary and Fed Chair. Automakes are hoping Trump continues existing policies on EVs. 73% of workers worry Social Security won’t be able to pay retirement benefits.
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:02):
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(01:09):
is the Financial Exchange with Chuck Zada and Mark Vandetti.
Speaker 2 (01:14):
Chuck, Mark and Tucker with you finishing up the last
full week of trading before the Thanksgiving holiday. Normally Thanksgiving
would be yesterday, but given how the UH month falls,
we have the latest Thanksgiving possible with it falling on
the twenty eighth this month, and so it's all kinds
of confusing. I mean, I'm seeing like pictures from a
(01:36):
year ago and it's like, oh, like it was thanks
Wait a minute, What's what's going on here? In any case,
I will, by the way, say I do think that
Thanksgiving is a better holiday setup than many of our
other holidays in that you know it's always going to
be the fourth Thursday of the month. Why do we
(01:56):
not do this with other holidays as well?
Speaker 1 (01:59):
You did?
Speaker 2 (02:00):
They kind of float around the calendar Halloween? Why not
just make it the fourth Friday in October so everyone
has the ability to go out and do what they
want without it being a school night or a weekday
or whatever it is.
Speaker 3 (02:13):
No, I like a particular day because I know what
day it is. Now I have to go searching for
it on the calendar. Okay, seven seconds.
Speaker 2 (02:20):
Have fun with you know, Tuesday, fourth of July. Yep,
be fair, you know, like, yeah, that's that's great. You know,
think of it this way. We have President's Day, which
celebrates the birthdays of you know, all the president. We
don't do it on their actual birthday. We have President's Day.
Speaker 4 (02:39):
It wasn't that originally Washington's birthday, though I believe.
Speaker 2 (02:43):
Washington was not born on the second Tuesday in February.
When it's observed, is it like the holiday itself is
a Monday, always, same with Martin Luther King Day. Like
we do these things on fixed days because it makes
it easier for us. Series all right, now again the
fourth July, I kind of understand because it's the fourth
(03:06):
of July, fourth of July and the eighth.
Speaker 4 (03:10):
But but but freaking Halloween, like what we could just
call Independence Day.
Speaker 2 (03:17):
Jimmy Halloween was not born on October thirty first, you know,
Veterans Day we observe on it's always the first Monday
after the eleventh. We like, that's when we observe it,
even if it happens before banks are closed that Monday.
So like we do this stuff and so I'm I
(03:39):
just think that we could get more into consistency. Consistent
inconsistency is what I'm looking for. That's what I want
is just to have it be on the same weekday
every year, so that we're not trying to scramble around
and be like, well, new Year's falls on it. No,
(04:00):
I guess New Year's is another one of those you
can't really change.
Speaker 3 (04:03):
No, you can't chuck No.
Speaker 4 (04:04):
Honestly, I've never heard anybody complain about this before. It's
I'm not saying it's not a legitimate grievance. Clearly, you've
got to be in your your bonnet.
Speaker 2 (04:13):
But here's the thing, it's in my life I've often
searched for true originality, and it appears that I finally
found it in wanting more holidays to be like Thanksgiving.
As far as.
Speaker 4 (04:24):
Where would you even go? Who would you petition to
get that done?
Speaker 2 (04:28):
I mean it's a federal thing, right, Where should we
write to agency handles holidays?
Speaker 4 (04:35):
It's probably just tweeted Elon Musk, He'll probably agree to
do it.
Speaker 2 (04:40):
What agency do you think actually schedules federal holidays? Agency?
It's probably Congress? Yes, So we got to start writing
Congress on this. Actually, I'm sure they'll be able to
get it done. They're pretty quick on things. You know,
there will be no problem. Let's talk a little bit
about the market with expectations of the inc I Trump administration.
(05:01):
Piece of New York Times the high Risk, high reward
Trump Market, and look, I'll read right from here because
I think there's some really good things in here. Aspects
of the Trump platform are bomb for the markets. He
promises lower corporate taxes and less regulation. Those assurances are
widely being interpreted as a recipe for fat company profits
(05:21):
and a prosperous stock market. The President elect is also
expected to try to extend tax cuts that he signed
into along twenty seventeen and expire at the end of
twenty twenty five. So that's, you know, kind of Hey,
these are things that you know historically have helped markets,
but not all of his program is a positive for growth.
Mister Trump is a self described tariff mancung for sharply
increasing tariffs on China and lesser but substantial levies on
(05:42):
other trading nations. Furthermore, he has promised a drastic reduction
immigration and a tsunami of deportations, so I think that
when we look at this the proposed policies, some of
them would potentially, in certain situations, be either very good
or very bad for the economy. And so trying to
make sense out of what the Trump two point zero
(06:06):
economy looks like is kind of challenging because it's going
to depend on the timing, size, magnitude, and actual implementation
of all these things and what actually comes to fruition
and what is simply a campaign promise that doesn't get fulfilled,
because every politician has those.
Speaker 4 (06:22):
The number one, of course, threat to economic stability is
his strong feeling, a parent strong feeling, and it's been
reinforced by various I don't know, spokespeople, Toty's whatever you
want to call Musk and others that the president should
have a role in setting interest rates. It doesn't seem
like the market is appreciating how destabilizing that could be.
(06:46):
The second a politician gets his or her hands on
interest rates, inflation expectations probably go up because you don't
see President Trump or anybody else as likely to say, no, no,
we got to raise rates next month. Inflation's a little
bit too hot. I want to slow the economy down
and possibly push it into recession, which was the whole
rationale for central bank independence, which is this sort of
technical name for a FED. Think of it like the
(07:09):
Supreme Court. It would be weird, although constitutionally they're obviously
very different. If the FED is a creature of Congress,
and the executive branch couldn't theory control the FED if
Congress gave it the power to, unlike with the Supreme Court.
So this analogy doesn't work, doesn't go that far, but
it would be weird for the President to have a
say in Supreme Court decisions, at least under our current structure.
(07:30):
It'd be equally weird after several decades of hard won
FED independence and a lot of evidence. Every monetary economist,
and this is a specialty that is populated by people
who look at nothing but what constitutes good rules and
practices for conducting monetary policy. What the FED does. It
(07:51):
controls the money supply and indirectly interest rates. Everybody agrees
almost to a person, that FED independence, at central bank independence,
not just our FED, is a good thing and associated
with better outcomes. Lower inflation or stable inflation. Those two
things are related and in the long run, higher economic
growth so that would be to call it disruptive if
(08:12):
we change that relationship is a huge understatement that to
me is the number one risk. Tariffs can be reversed,
tax rates can be changed, regulations come and go. If
we lose fed independence, Chuck, what president is likely to
give that? Back to the ved.
Speaker 2 (08:27):
Question, just because a lot of times you'll hear, whether
it's politicians or individuals, say, look, it's not fair that
you know an unelected group is making this policy. This
should be something that you know people are having a
say in when it comes to elections. Your thoughts and
or critiques of that view.
Speaker 4 (08:47):
I would say elected officials and we indirectly, as a consequence,
do have a say. Appointments are made by the President
and approved to the Federal Reserve Board anyway in Congress,
and approved by the Senate, right the Senate by Congress
our represent Now, if the Senate was still appointed by governors,
that changed over one hundred years ago, as you know
very well, that would be a different story. But they
(09:09):
are indirectly accountable. They serve terms, those terms are limited,
they're reappointed. We do have a say, and this is
true of the head of the FBI. Lots of federal agencies. Sure,
you could argue that many of these federal agencies agencies,
excuse me, should be eliminated or curtailed. Different argument, So that,
to me is the big threat to the to the
stock market, which is not pricing this thread in, it seems,
(09:31):
and the economy too. Those other policies could have profound
and deep and widespread implications, but they can always be
reversed fed independence, Chuck. Once it's lost, I'm afraid it
could take a generation or more to be re established
because it took decades to get to this point.
Speaker 2 (09:48):
Let's take a quick break here. When we come back,
talk a little bit about Berkshire Hathaway sitting on three
hundred and twenty five billion dollars and what good old
Warren has planning on doing with it.
Speaker 1 (10:04):
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Speaker 3 (10:32):
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Speaker 2 (11:06):
So Warren Buffett is a person and widely acknowledged, as
you know, one of the greatest investors in history and
in particular of you know, the twentieth century and early
twenty first and Buffett's company, Berkshire Hathaway, typically holds an
awful lot of cash if you look from you know,
basically twenty fifteen through twenty twenty two, they were holding
(11:30):
between one hundred and one hundred and fifty billion dollars
in cash at any particular point in time. Something interesting
has happened in the last couple of quarters, though at
the end of twenty twenty three nothing was too out
of line. Berkshire Hathaway was still holding about one hundred
and sixty seven billion in cash, so up a little bit,
but nothing, you know, dramatic. But in the last three
(11:51):
quarters that cash pile has more than doubled to three
hundred and twenty five billion dollars now, so there's been
a very rapid build up in cash for Buffet. And
this raises, not begs, the question, Hey, does Warren Buffett
know something about where the economy's gonna go? And the
answer is, well, he knows something about the economy. Whether
(12:14):
it's where it's gonna go is unclear. But you get
this piece titled you Know Buffet's three hundred and twenty
five billion dollar cash hoard is an early warning signal,
and it's pretty much saying that Buffet, you know, knows
when markets are expensive and he stays clear of him then,
and I'm gonna make the case that the size of
the cash pile has absolutely nothing to do with what
(12:36):
Buffet is thinking. And here's why. In two thousand and one,
after the dot com bubble burst, Berkshire Hathaway's cash pile
was about forty billion dollars. It stayed around forty billion
dollars until oh, g let's see, got up to around
forty seven billion in September of seven, right before the
(12:57):
financial crisis hit, So it didn't budge at all. It
expanded by like seventeen percent over a seven year period,
you know, compound annual growth rate of two and a
half percent. It then went down all through eight from
and part of that is just because look, when you
have you know, global financial crisis and everything, even insurers
(13:20):
are affected by that and so you know they have
some losses and things like that. But there wasn't any
great build up then, and likewise, even before the dot
com bubble, it wasn't something where Buffett saw this, you know,
giant build up there as well. In December of ninety eight,
Buffett's Berkshire Hathaway was holding about fifteen billion in cash.
(13:41):
By March of two thousand, they were only holding four billions.
So there really aren't facts and evidence that the size
of Buffett's cash pile is indicative of what he thinks
about how the market's going to do or how expensive
it is at any point in time, because we haven't
seen this kind of build up from them prely in
advance of any problems.
Speaker 4 (14:02):
Buffett's an active manager, and any active manager has to
make a decision. Do I invest in something like the
S and P five hundred, which would make them an
index fund and you wouldn't pay high active management fees
for that. Do I depart from the S and P
five hundred overweighting some sectors and stocks underweighting others? And
if so, how much? To your point when you started
(14:23):
this segment, Buffett has on average been a pretty successful
active manager. We all have exposure to active managers. If
you have before one day and you look at the
roster of funds available to you, some of them are
probably active.
Speaker 2 (14:33):
I mean, look, ultimately, if you own the S and
P five hundred. We talk about it as a passive index,
but there still are criteria that they have active. It's
a more active instrument than people think.
Speaker 4 (14:44):
Yeah, it's not strictly market capitalization i e. Total share value.
Speaker 2 (14:50):
Of their profit requirements.
Speaker 4 (14:52):
Yeah, they have a few, and there's evidence that that's
actually added a little bit of value. At least the
last time I read about that subject, which was now
a long time ago. So the point I want to
make about Buffett is his job as an active manager,
and this is tree of any active manager that follows
a fundamental bottom up strategy. That's an important qualifier. I
don't worry too much about it. But not every active
manager approaches markets the same way. They want to buy
(15:13):
something that's worth a dollar for fifty cents on the
dollar or seventy five cents on the dollar, and they
use various measures forgetting it, how discounted something might be.
He's not finding as many attractive opportunities today, many discounted
businesses as he was a year or two years, or
is a percentage of assets, say five years ago. He'd
(15:33):
probably tell you I have no opinion on the near
term direction of the economy. All I know is that
good companies are expensive right now. Their prospects are fully
priced in, so to speak, He's not finding the bargains
that he likes that's at face value. How you interpret this,
Does that bode well for future stock market growth? I'd
argue that it probably doesn't if his forecasting ability is strong,
(15:57):
and I'm not saying that it is. But if you
got him in a if you got him in a
moment of unvarnished truth, he'd probably tell you that he
thinks stocks are way too expensive and that's why he's
not touching some But you know, if you're an investor,
at the same time, you got ask, do I want
my active manager holding ten percent? I don't know what
percentage of his assets that is? Ten percent sounds a
(16:19):
little high. Is probably higher that it's it's probably higher
than that, a little low, probably higher than that.
Speaker 2 (16:26):
If I'm reading this right, it's actually closer to twenty
five percent. A little low.
Speaker 1 (16:31):
This is what I meant saying.
Speaker 4 (16:32):
Yeah, So you can't read that as saying anything other
than he's pessimistic about near term return prospects. Sure, because
he's not finding bargains, and that's what any act all
active managers have who take a bottom up fundamental value
oriented approach, are overweight cash right now for the very
(16:53):
same reason, though not to that degree. Why would you
pay him active manager to hold twenty five cents out
of every dollar you invest with them in cash?
Speaker 2 (17:00):
How much of this also just has to do with
and not so much of this, but just you think
about the evolution of Berkshire and how it's gotten to
the size that it's at today. You get to a
certain size and it becomes harder to deploy that cash
as well. When when you've got you know, a trillion
dollars in assets that you are managing, Hey, you can't
(17:23):
the stuff that worked for you when you were managing
twenty billion dollars, it doesn't work the same way when
you're managing this much, simply because you're not gonna look
at this and say, hey, I found this great business
that's gonna be you know, it's gonna cost us, you know,
one hundred million dollars and this is a great business. Well, okay,
(17:43):
it's not gonna have any impact on your actual bottom
line because it's such a small fraction of your you know,
your your your book. On the other hand, you start saying, well, gee,
you know, do I need to take just you know,
these stakes in companies that we don't operate the apples
and banks of Americas of the world, And okay, what
edge do I have that I'm any any better than
(18:04):
people at picking publicly traded companies and how they'll do
as opposed operating them. And you kind of look at
and you say, I don't know that I do, and
maybe that's part of the reason why they're trimming some
of their publicly traded stakes and things like that. So
it's hard to untangle what's going on. But there are
a few different possibilities there.
Speaker 4 (18:22):
Yeah, I think the one clear conclusion is that there
are fewer bargains. I know, I'm repeating myself a little bit.
There are fewer bargains today. If you look at cash
is a percentage of his total assets under management. He's
finding fewer bargains yet, and he found five years ago.
That's really all you can say given the data that
we have at our fingertips.
Speaker 2 (18:42):
And it doesn't mean that he's going to find them
next week or next year. It says nothing about how
long it may take for the market to present him
with attractive options.
Speaker 4 (18:53):
Oh yeah, he'll keep his power.
Speaker 2 (18:54):
We were you and I were talking about this this morning.
The irrational, exuberant speech from Alan Greenspan was I'm pretty
sure we settled on nineteen ninety six for it, maybe
early ninety seven at the latest.
Speaker 1 (19:05):
No, it was late.
Speaker 4 (19:06):
It was December ninety six. You're right, early December nineteen
ninety six.
Speaker 2 (19:09):
The party didn't stop until four years later. And even
then it still didn't fully stop for another two years.
You know, the people have to like, oh, the tech
bubble popped, and it was just this one time thing.
It was three years before you finally got that thing
to bottom. Let's take a quick break here. When we
come back, we got Wall Street Watch and we're talking
(19:29):
Treasury secretary contenders after this.
Speaker 1 (19:42):
Like us on Facebook and follow us on Twitter. Act
TFE show Breaking business news is all ways first right
here on the Financial Exchange Radio Network. Time now for
Wall Street Watch. A complete look at what's moving market
so far today right here on the final Inchel Exchange
Radio Network.
Speaker 3 (20:03):
Markets are on pace for a winning week and are
currently in mixed territory. Right now, the Dow is up
by one hundred and ninety four points, just under a
half a percent, SMP five hundred is edging three points higher,
and the Nasdaq is off by about a third of
a percent or fifty six points. Rusted two thousand up
by over one percent this morning. Ten year treasureealed is
(20:26):
flat at four point four to two percent, and crude
oil is up nearly three quarters of a percent, trading
just above seventy.
Speaker 1 (20:35):
Dollars a barrel.
Speaker 3 (20:36):
We have more retailer earnings for you this morning, as
GAP raised its sales outlook for the year for the
third time in twenty twenty four. The apparel retailer said
it now expects full year sales to grow between one
and a half and two percent. Gap stock is up
by six percent on that news. Meanwhile, shares in TurboTax
(20:57):
pairent company into it down by four percent after its
earnings guidance for the current quarter missed analysts expectations. Elsewhere
read it down by seven percent after China's ten Cent
reported it had cut its stake in the social media
company by about twenty eight percent. Data analytics company Elastic
(21:17):
posted better than expected earnings and a revenue for its
quarterly results, sending that stock up by sixteen percent. Goldman
Sachs initiated coverage of Flutter Entertainment stock with a buy
rating and a price target that reflects almost twenty percent
upside from Thursday's close, where a bank cited stronger US
margins and share buybacks as catalysts for growth ahead. That
(21:40):
stock Flutter up by one percent and after its sixteen
percent plummet. Yesterday's shares in bitcoin buying software company Micro
strategy are narrowly rebounding by four percent so far today.
I'm Tucker Silvan.
Speaker 2 (21:55):
That's Wall Street Watch Markets. Talk a little bit about
the still in position of Treasury Secretary for the incoming
Trump administration. Been a number of different rumors over the
last couple of weeks. The latest is that Kevin Warsh
is now one of the leaders in the clubhouse for
that role. What can you tell us about Kevin.
Speaker 1 (22:19):
Well?
Speaker 4 (22:20):
You know, academically his background is impressive Stanford undergrad JD
from Harvard. What I can't find out? And I'm scrammed,
ner Yeah, loser right under retiever.
Speaker 2 (22:31):
No, I didn't say loser, I said nerd.
Speaker 4 (22:32):
Well, that's my insecurity.
Speaker 2 (22:35):
It's you, it's me.
Speaker 4 (22:36):
I don't know that he's got an economics degree, which
you don't need. Definitely no need for Treasury's probably better
suited for Treasury than he is for FED share. Look,
I think the bottom line is, and I'll just repeat
what we can all read in the newspaper. I have
no inside track on this guy. He's viewed as a
sensible kind of establishment right of center, which I can
relate to and respect and admire and agree with for
(22:58):
what it is worth, So I'm a little bit biased.
He'd be a good, steady hand at Treasury who's not
likely to do anything stupid, like say, I think the
dollar is too expensive. We've had Treasury secretary stumble into
ill advised statements about the value of the dollar. Best statement,
as Bob Rubin taught us decades ago, Clinton's Treasury secretary
(23:19):
is just to say a strong dollars in the United
States interest, full stop. He never elaborated, so he'll avoid
big mistakes like that. Markets seemed to like him, Chuck Right.
Speaker 2 (23:26):
The Wall Street Journal exclusive is that in a meeting
with President elect Trump, he floated the idea that, hey,
why don't you go run Treasury four year and a
half and then I'll nominate you as the FED chair
when Powell's term is up in May of twenty twenty six.
What would be the logic behind that, I guess because
it's not like you need experience at Treasury in order
(23:49):
to run the FED. That's typically not something that's not
something that we've seen, you know, from previous FED chairs.
Speaker 4 (23:56):
No, they're too entirely different, somewhat different skill set.
Speaker 2 (24:00):
Figuring out, hey, how do you finance operations of the
United States and how do you pay the bills. The
other is, let's make sure that the financial system plumbing
doesn't break, and let's try to manage the speed of
the economy.
Speaker 4 (24:14):
I mean, I shouldn't say entirely different. They both have
financial market oversight responsibility, and as we learned during the
financial crisis, Treasury and the FED working hand in glove
as they did then is very helpful. Sure, it's kind
of it would be weird for them to have that
kind of arrangement. It's not public. The Wall Street Journal
got some tip. It wouldn't be the first time somebody
(24:34):
has been somebody's been promised a high level position and
then later became FED chairman. Ben Bernanke was head of
the CEA under Bush, then became FED chairman. Larry Summers
would have become FED chairman probably had the two thousand
election gone differently. And there are probably other examples that
just aren't on the tip of my tongue, I think. Again,
the key point about him is that he's viewed as
(24:56):
a good, safe pair of hands. You can dis agree
with his politics. I probably wouldn't. Other people would. Those
are honest disagreements, but nobody views him as a wild
eyed radical who's likely to say dumb things that upset markets.
Speaker 2 (25:11):
And he spent what was it in two thousand and six,
he was a Fed governor. So again he's got experience operating,
you know, at or near this level to begin with.
So again, we'll see where this goes. I would expect
we're going to have a a name for Treasury Secretary
within the next couple weeks. It's if we don't buy
(25:31):
the first week in December, I would be surprised.
Speaker 4 (25:33):
No rush though, I don't, but yes, you're right, I
would too. I would too. He's going at a break
neck pace with his appointments.
Speaker 2 (25:39):
Well, here's the thing, Like, normally you see most appointments
and someone asked me about this the other the other day.
They're like, does it seem like these appointments are coming quickly?
And I'm like, maybe by a week or two. But generally,
in most cases, you look at when the names for
cabinet positions are, you know, when the nominations are made,
and it's typically by that first week in December. So like, yeah,
(26:01):
they're moving maybe a little quickly, but it's not anything significant.
You typically see most nominations made in the first month
after the election.
Speaker 4 (26:11):
I mean, the bigger question we talked about this, or
I did, I ranted about it in the last segment,
is will this appointee, whoever it ends up being, to
the Treasury, assuming it's a stepping stone to FED, and
whether or not it's Worsh it may go that way.
That may be the progression. Will they push back when
he attempts to impose his will on the FED, as
he's attempting to do with other branches of government and
(26:33):
institutions right now? Will his FED chairman stand up to him,
because the time will come when he will want lower
interest rates or steady interest rates, and the right thing
to do for the economy is something different. What kind
of backbone will this person, whether it's Worsh or somebody
else show.
Speaker 2 (26:49):
Let's talk a little bit about this piece from the
New York Times. It's automakers to Trump, please require us
to sell electric vehicles. What's going on here?
Speaker 4 (26:59):
Well, they've been gearing up for nothing else for the
past ten The government's been telling them for roughly ten years.
Or I'll go back even further and say since two
thousand and nine that they've got to raise they've got
to increase fuel efficiency and what is roughly the same thing,
decrease emissions.
Speaker 2 (27:16):
They've been spending billions of dollars to do so.
Speaker 4 (27:18):
They've retooled their entire I'll just say their entire operation
for lack of a more precise way to put it,
because I'm largely ignorant about this area. So they've invested
so much in this that to do a U turn
would require a big I guess revamping on once again,
which would dang profits.
Speaker 2 (27:35):
And I don't think the take from here is not
that car companies want to be forced to produce only evs,
but rather, hey, we've spent a bunch of money retooling
these plants in order to produce more evs and more
efficient vehicles. And if all you do is take away
what's there now, you're leaving us with a bunch of
(27:57):
spending that's not necessarily going to pay off. It's kind
of like, why do we spend all.
Speaker 4 (28:01):
These big investments in battery production and research and that
all goes down the drain. You could say, look, that's fair.
That's called regulatory risk.
Speaker 2 (28:10):
The company that I continue to think really just kind
of nailed this despite everyone criticizing them for a couple
of years in the early twenty twenties. Is Toyota who
did not get sucked in by the idea of, Hey,
we just need to make EV's like every other company
in twenty twenty one and twenty two was like, Wow,
we're gonna have twenty different EV models by you know,
(28:31):
twenty thirty. We're gonna have thirty different EV models by
twenty thirty five. And Toyota looked at it and was like, Yeah,
we're gonna keep doing hybrids. And what you are seeing
is an expansion of their hybrid lineup. Just as an example,
the Toyota Camry. Now it's only available in a hybrid.
They don't offer a a gas only version, and it
still is the best selling sedan in the country because
(28:53):
people are like, Wow, I can get fifty miles a
gallon in a Toyota Cameray. Sure, I'm gonna like that.
That sounds wonderful. And there's rumors now that the next
RAV four, which is going to be the twenty six
model version, is going to be hybrid only as well,
and it's getting at the idea that, look, people want
better gas mileage. They're not necessarily ready to go to
EV's and mass And I think Toyota completely saw through
(29:18):
the short term infatuation with hey, we need to only
make evs that so many other automakers kind of move
towards when when Tesla was rallying back in twenty twenty,
they were like, oh, we got to do this. No,
Toyota saw through that and said, hey, this is a
temporary thing. This is not real and permanent. And man,
they look like geniuses because that when everyone was criticizing
(29:39):
him back in twenty twenty one and twenty two for
not having larger EV plans.
Speaker 4 (29:44):
I do pity us automakers. I mean, they were counting
on a regulatory regime remaining in place and they're getting whipsaw.
They'll get whipsawed again. And my guess is we'll have
a lot of electoral turnover over the next a lot
of turnover the executive level anyway, over the next ten
or twenty years, as we've had over the past ten
(30:05):
because these problems are not amenable to being solved in
four years. Are deeper structural problems economically are They're gonna
have to do another one eighty in four years. If
a Democrat wins the White House or if they take
back Congress and try to reinstitute some of these.
Speaker 2 (30:19):
I'm not screen I have that much pity for the
automakers because a lot of this was of their own chooses.
A lot of the decisions they made were before the
Inflation Reduction Act was even passed. But in response to
a lot of this was before like it was twenty
twenty one and all these companies were like, yep, we're
gonna be rolling out all evs in the next ten
years because they saw what EV's were doing to, you know,
(30:42):
the stocks of EV companies, and it turned out that
that was just a short term. But like, they made
these decisions before the federal tax credits were in place,
and that to me is more, Hey, we got greedy
because we thought we could be a trillion dollar company.
Speaker 4 (30:58):
I thought it was average fuel economy motivated too. We're
going to sell a lot of big trucks that are
terrible on gas and balance that with smaller vehicle They.
Speaker 2 (31:07):
Still made the wrong decision. Then, Yeah, I always go
back to this quote, Mark, You'll appreciate this one. This
is the business we have chosen, and ultimately, when you're
an automaker. Hey, that's the business you chose, like you
have to figure out how to navigate it correctly. They didn't,
(31:27):
and they're dealing with it now. Say what do you say?
Speaker 4 (31:29):
I'll appreciate that because I look like an extra at
Connie's wedding from Godfather one. I just know that if
you squint, I'm in that shot. What if I don't squint,
I'm still in that Still in that shot, I still
look like fifteen people in that Yeah, there you go,
pick a random person in that scene.
Speaker 2 (31:44):
Let's take a quick break here. When we come back,
let's see let's talk a little bit about energy prices
and also want to touch a little bit on social
security benefits.
Speaker 1 (31:53):
Right after this, The Financial Exchange Show podcast drops every
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then leave us a five star review. You're listening to
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(32:13):
Radio Network.
Speaker 2 (32:25):
Mark we got a piece in CMBC here seventy three
percent of workers worry social security won't be able to
pay retirement benefits. Here's what financial advisors say. I always
I would love to hear what financial advisors say on
this topic, and basically it says lots of advisors, you know,
get questions about this, and the thing that you're hearing
(32:47):
from advisors two different things. The first is, hey, you
want to bet on longevity, saying, hey, wait as long
as possible, because with advances in medicine, people are most
likely going to live longer. And that's what you hear
from basically all of the advisors in this piece. I
do think it's important to note that, look, not everyone
has the same kind of family health history that you
(33:09):
know would encourage people to think of it in terms
of longevity. There are a whole bunch of us out
there who, hey, the family health history doesn't look great,
and you know, oftentimes that can be a real predictor
of your longevity, and in particular, if you already have
things that might be developing. Hey, even though it might
not be best for a long retirement, in some situations,
(33:33):
it can make more sense to, you know, claim solid
security earlier because the health piece is a big one
that matters.
Speaker 4 (33:39):
Yeah, I guess you have to get tested for something specific.
I have personal experience with this. The result wasn't great
and it will probably affect my decision at sixty two
because my break heathen is shorter, probability speaking, probabilistically speaking,
whatever the right adverbis. Then say some without the predisposition,
(34:01):
the genetic predisposition predisposition that I have and that many
of you have. This is not uncommon. So I've never
really thought about the larger impact to tell you the
truth of say, better testing through one of these services
or through your doctor, if they find out that your
father passed away from something that we're getting better at
(34:22):
identifying genetically, and how that might play into your financial
planning decisions. I've never thought about how that might impact
the Social security Social Security's longevity, which ain't looking good.
Trust fund depletes you, guys. You and Mike Armstrong talk
about this a lot. What ten years, the trust fund?
Eight years?
Speaker 2 (34:39):
Okay, yeah, twenty thirty three, and we're through twenty four now, so.
Speaker 4 (34:42):
Exactly when almost exactly when I'm eligible. So what they've
said about the midpoint of gen X is actually true,
which means what they either cut benefits or they have
to get money from elsewhere to make good on promised
benefits at that point. Is that accurate?
Speaker 2 (34:57):
Mike and I have our theory as to what they're
actually going to do.
Speaker 4 (35:00):
What's your are are likely?
Speaker 2 (35:02):
Our going theory is that they are simply going to
change the rules so that Social Security can just pay
out however much it needs to deficit be damned. Yeah,
so that's that's our thought.
Speaker 4 (35:14):
Do nothing, barmore borrow can't I mean, we're talking about
enormous new additions to borrow.
Speaker 2 (35:21):
There's no one alive right now who's ever had to
deal with that as a US citizen.
Speaker 4 (35:28):
Yeah, well, we've never had a debt is big outside
of wartime, but.
Speaker 2 (35:33):
But basically, like, there's no one alive right now that
has had to deal with the situation where the US
couldn't borrow more money. Yeah, you know, it's You talk
to any argentineator, any Greek, and they'll tell you, Yeah,
this is real stuff that we have to deal with. Like,
our government cannot just borrow in perpetuity. It causes problems.
(35:55):
When it does, the interest rates go up, inflation goes up,
and it causes problems. There's no one a lot in
the United States that's had that experience.
Speaker 4 (36:02):
That's true. Yeah, we have to face that constraint.
Speaker 2 (36:04):
And so my point is like, Congress isn't going to
think that's possible, that that's a problem.
Speaker 4 (36:09):
But what if the average interest rate on US debt,
which is today about three percent, is five or seven
and instead of thirteen percent of the federal budget, interest
payments are thirty That reality will be playing.
Speaker 2 (36:21):
Will be for everybody mostly understood, though by Congress It's
not going to be absorbed quickly, is the point I'm making.
Speaker 4 (36:28):
Yeah, No, I don't disagree. They'll kick the can. I
guess as much as it is feasible.
Speaker 2 (36:31):
Yeah, it's so.
Speaker 4 (36:32):
What does that mean for quik? Back to the point
of the article. What would you tell a client if
they were fretting, handwringing about availability of social Security? Do
you say, just go with what the current law says
or plan for the worst?
Speaker 2 (36:42):
Well, I think that you have to be able to
kind of hedge different ways and say, look, you have
to stress test to your financial plan against what happens
if there are changes, if you're trying to figure this
out for yourself. This is what the Armstrong Advisory Group
helps clients out with. Every single day. Call eight hundred three,
nine three or zero zero one to schedule time to
speak with an advisor again eight hundred three nine three
(37:05):
four zero zero one.
Speaker 1 (37:07):
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, and estate planning advisors before making
any investment decisions. Armstrong make contact you to offer investment
advisory services.
Speaker 2 (37:23):
Mark, We don't have a ton of time here, so
I just want to let's actually cover this story just
because I think it's kind of interesting. Actually, DirecTV there's
scrapping their merger with Dish Network, and I think the
big thing is that it's unclear what the path is
for either of these companies to surviving. It's unclear either
(37:45):
of these companies really survive in the future. In my opinion,
I'm not sure what is there for them.
Speaker 1 (37:51):
Would that leave?
Speaker 4 (37:51):
If these companies don't, who would that leave in the
satellite cable space.
Speaker 2 (37:55):
Basically no One part of me wonders if Elon Musk's
Starlink might step in and find some way to build
out a platform on that side of the things.
Speaker 4 (38:06):
That's gonna be great for people.
Speaker 2 (38:08):
You know, in the wilderness. Hey, look, i'll tell you,
having used the service a couple of times present. Yeah,
I've got a couple friends that have it at their
places and might oh yeah, it's cool. Let's take a
quick break here. When we come back, more financial exchange
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
(00:22):
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Armstrong and Money Matters Radio do not compensate each other
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with Chuck Zada and Mark Vandetti, your exclusive look at
business and financial news affecting your day, your city, your world.
(00:46):
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(01:09):
is the Financial Exchange with Chuck Zada and Mark Vandetti.
Speaker 2 (01:14):
Chuck, Mark and Tucker with you finishing up the last
full week of trading before the Thanksgiving holiday. Normally Thanksgiving
would be yesterday, but given how the UH month falls,
we have the latest Thanksgiving possible with it falling on
the twenty eighth this month, and so it's all kinds
of confusing. I mean, I'm seeing like pictures from a
(01:36):
year ago and it's like, oh, like it was thanks
Wait a minute, What's what's going on here? In any case,
I will, by the way, say I do think that
Thanksgiving is a better holiday setup than many of our
other holidays in that you know it's always going to
be the fourth Thursday of the month. Why do we
(01:56):
not do this with other holidays as well?
Speaker 1 (01:59):
You did?
Speaker 2 (02:00):
They kind of float around the calendar Halloween? Why not
just make it the fourth Friday in October so everyone
has the ability to go out and do what they
want without it being a school night or a weekday
or whatever it is.
Speaker 3 (02:13):
No, I like a particular day because I know what
day it is. Now I have to go searching for
it on the calendar. Okay, seven seconds.
Speaker 2 (02:20):
Have fun with you know, Tuesday, fourth of July. Yep,
be fair, you know, like, yeah, that's that's great. You know,
think of it this way. We have President's Day, which
celebrates the birthdays of you know, all the president. We
don't do it on their actual birthday. We have President's Day.
Speaker 4 (02:39):
It wasn't that originally Washington's birthday, though I believe.
Speaker 2 (02:43):
Washington was not born on the second Tuesday in February.
When it's observed, is it like the holiday itself is
a Monday, always, same with Martin Luther King Day. Like
we do these things on fixed days because it makes
it easier for us. Series all right, now again the
fourth July, I kind of understand because it's the fourth
(03:06):
of July, fourth of July and the eighth.
Speaker 4 (03:10):
But but but freaking Halloween, like what we could just
call Independence Day.
Speaker 2 (03:17):
Jimmy Halloween was not born on October thirty first, you know,
Veterans Day we observe on it's always the first Monday
after the eleventh. We like, that's when we observe it,
even if it happens before banks are closed that Monday.
So like we do this stuff and so I'm I
(03:39):
just think that we could get more into consistency. Consistent
inconsistency is what I'm looking for. That's what I want
is just to have it be on the same weekday
every year, so that we're not trying to scramble around
and be like, well, new Year's falls on it. No,
(04:00):
I guess New Year's is another one of those you
can't really change.
Speaker 3 (04:03):
No, you can't chuck No.
Speaker 4 (04:04):
Honestly, I've never heard anybody complain about this before. It's
I'm not saying it's not a legitimate grievance. Clearly, you've
got to be in your your bonnet.
Speaker 2 (04:13):
But here's the thing, it's in my life I've often
searched for true originality, and it appears that I finally
found it in wanting more holidays to be like Thanksgiving.
As far as.
Speaker 4 (04:24):
Where would you even go? Who would you petition to
get that done?
Speaker 2 (04:28):
I mean it's a federal thing, right, Where should we
write to agency handles holidays?
Speaker 4 (04:35):
It's probably just tweeted Elon Musk, He'll probably agree to
do it.
Speaker 2 (04:40):
What agency do you think actually schedules federal holidays? Agency?
It's probably Congress? Yes, So we got to start writing
Congress on this. Actually, I'm sure they'll be able to
get it done. They're pretty quick on things. You know,
there will be no problem. Let's talk a little bit
about the market with expectations of the inc I Trump administration.
(05:01):
Piece of New York Times the high Risk, high reward
Trump Market, and look, I'll read right from here because
I think there's some really good things in here. Aspects
of the Trump platform are bomb for the markets. He
promises lower corporate taxes and less regulation. Those assurances are
widely being interpreted as a recipe for fat company profits
(05:21):
and a prosperous stock market. The President elect is also
expected to try to extend tax cuts that he signed
into along twenty seventeen and expire at the end of
twenty twenty five. So that's, you know, kind of Hey,
these are things that you know historically have helped markets,
but not all of his program is a positive for growth.
Mister Trump is a self described tariff mancung for sharply
increasing tariffs on China and lesser but substantial levies on
(05:42):
other trading nations. Furthermore, he has promised a drastic reduction
immigration and a tsunami of deportations, so I think that
when we look at this the proposed policies, some of
them would potentially, in certain situations, be either very good
or very bad for the economy. And so trying to
make sense out of what the Trump two point zero
(06:06):
economy looks like is kind of challenging because it's going
to depend on the timing, size, magnitude, and actual implementation
of all these things and what actually comes to fruition
and what is simply a campaign promise that doesn't get fulfilled,
because every politician has those.
Speaker 4 (06:22):
The number one, of course, threat to economic stability is
his strong feeling, a parent strong feeling, and it's been
reinforced by various I don't know, spokespeople, Toty's whatever you
want to call Musk and others that the president should
have a role in setting interest rates. It doesn't seem
like the market is appreciating how destabilizing that could be.
(06:46):
The second a politician gets his or her hands on
interest rates, inflation expectations probably go up because you don't
see President Trump or anybody else as likely to say, no, no,
we got to raise rates next month. Inflation's a little
bit too hot. I want to slow the economy down
and possibly push it into recession, which was the whole
rationale for central bank independence, which is this sort of
technical name for a FED. Think of it like the
(07:09):
Supreme Court. It would be weird, although constitutionally they're obviously
very different. If the FED is a creature of Congress,
and the executive branch couldn't theory control the FED if
Congress gave it the power to, unlike with the Supreme Court.
So this analogy doesn't work, doesn't go that far, but
it would be weird for the President to have a
say in Supreme Court decisions, at least under our current structure.
(07:30):
It'd be equally weird after several decades of hard won
FED independence and a lot of evidence. Every monetary economist,
and this is a specialty that is populated by people
who look at nothing but what constitutes good rules and
practices for conducting monetary policy. What the FED does. It
(07:51):
controls the money supply and indirectly interest rates. Everybody agrees
almost to a person, that FED independence, at central bank independence,
not just our FED, is a good thing and associated
with better outcomes. Lower inflation or stable inflation. Those two
things are related and in the long run, higher economic
growth so that would be to call it disruptive if
(08:12):
we change that relationship is a huge understatement that to
me is the number one risk. Tariffs can be reversed,
tax rates can be changed, regulations come and go. If
we lose fed independence, Chuck, what president is likely to
give that? Back to the ved.
Speaker 2 (08:27):
Question, just because a lot of times you'll hear, whether
it's politicians or individuals, say, look, it's not fair that
you know an unelected group is making this policy. This
should be something that you know people are having a
say in when it comes to elections. Your thoughts and
or critiques of that view.
Speaker 4 (08:47):
I would say elected officials and we indirectly, as a consequence,
do have a say. Appointments are made by the President
and approved to the Federal Reserve Board anyway in Congress,
and approved by the Senate, right the Senate by Congress
our represent Now, if the Senate was still appointed by governors,
that changed over one hundred years ago, as you know
very well, that would be a different story. But they
(09:09):
are indirectly accountable. They serve terms, those terms are limited,
they're reappointed. We do have a say, and this is
true of the head of the FBI. Lots of federal agencies. Sure,
you could argue that many of these federal agencies agencies,
excuse me, should be eliminated or curtailed. Different argument, So that,
to me is the big threat to the to the
stock market, which is not pricing this thread in, it seems,
(09:31):
and the economy too. Those other policies could have profound
and deep and widespread implications, but they can always be
reversed fed independence, Chuck. Once it's lost, I'm afraid it
could take a generation or more to be re established
because it took decades to get to this point.
Speaker 2 (09:48):
Let's take a quick break here. When we come back,
talk a little bit about Berkshire Hathaway sitting on three
hundred and twenty five billion dollars and what good old
Warren has planning on doing with it.
Speaker 1 (10:04):
This is your home for the most comprehensive coverage of
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Speaker 3 (10:32):
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Speaker 2 (11:06):
So Warren Buffett is a person and widely acknowledged, as
you know, one of the greatest investors in history and
in particular of you know, the twentieth century and early
twenty first and Buffett's company, Berkshire Hathaway, typically holds an
awful lot of cash if you look from you know,
basically twenty fifteen through twenty twenty two, they were holding
(11:30):
between one hundred and one hundred and fifty billion dollars
in cash at any particular point in time. Something interesting
has happened in the last couple of quarters, though at
the end of twenty twenty three nothing was too out
of line. Berkshire Hathaway was still holding about one hundred
and sixty seven billion in cash, so up a little bit,
but nothing, you know, dramatic. But in the last three
(11:51):
quarters that cash pile has more than doubled to three
hundred and twenty five billion dollars now, so there's been
a very rapid build up in cash for Buffet. And
this raises, not begs, the question, Hey, does Warren Buffett
know something about where the economy's gonna go? And the
answer is, well, he knows something about the economy. Whether
(12:14):
it's where it's gonna go is unclear. But you get
this piece titled you Know Buffet's three hundred and twenty
five billion dollar cash hoard is an early warning signal,
and it's pretty much saying that Buffet, you know, knows
when markets are expensive and he stays clear of him then,
and I'm gonna make the case that the size of
the cash pile has absolutely nothing to do with what
(12:36):
Buffet is thinking. And here's why. In two thousand and one,
after the dot com bubble burst, Berkshire Hathaway's cash pile
was about forty billion dollars. It stayed around forty billion
dollars until oh, g let's see, got up to around
forty seven billion in September of seven, right before the
(12:57):
financial crisis hit, So it didn't budge at all. It
expanded by like seventeen percent over a seven year period,
you know, compound annual growth rate of two and a
half percent. It then went down all through eight from
and part of that is just because look, when you
have you know, global financial crisis and everything, even insurers
(13:20):
are affected by that and so you know they have
some losses and things like that. But there wasn't any
great build up then, and likewise, even before the dot
com bubble, it wasn't something where Buffett saw this, you know,
giant build up there as well. In December of ninety eight,
Buffett's Berkshire Hathaway was holding about fifteen billion in cash.
(13:41):
By March of two thousand, they were only holding four billions.
So there really aren't facts and evidence that the size
of Buffett's cash pile is indicative of what he thinks
about how the market's going to do or how expensive
it is at any point in time, because we haven't
seen this kind of build up from them prely in
advance of any problems.
Speaker 4 (14:02):
Buffett's an active manager, and any active manager has to
make a decision. Do I invest in something like the
S and P five hundred, which would make them an
index fund and you wouldn't pay high active management fees
for that. Do I depart from the S and P
five hundred overweighting some sectors and stocks underweighting others? And
if so, how much? To your point when you started
(14:23):
this segment, Buffett has on average been a pretty successful
active manager. We all have exposure to active managers. If
you have before one day and you look at the
roster of funds available to you, some of them are
probably active.
Speaker 2 (14:33):
I mean, look, ultimately, if you own the S and
P five hundred. We talk about it as a passive index,
but there still are criteria that they have active. It's
a more active instrument than people think.
Speaker 4 (14:44):
Yeah, it's not strictly market capitalization i e. Total share value.
Speaker 2 (14:50):
Of their profit requirements.
Speaker 4 (14:52):
Yeah, they have a few, and there's evidence that that's
actually added a little bit of value. At least the
last time I read about that subject, which was now
a long time ago. So the point I want to
make about Buffett is his job as an active manager,
and this is tree of any active manager that follows
a fundamental bottom up strategy. That's an important qualifier. I
don't worry too much about it. But not every active
manager approaches markets the same way. They want to buy
(15:13):
something that's worth a dollar for fifty cents on the
dollar or seventy five cents on the dollar, and they
use various measures forgetting it, how discounted something might be.
He's not finding as many attractive opportunities today, many discounted
businesses as he was a year or two years, or
is a percentage of assets, say five years ago. He'd
(15:33):
probably tell you I have no opinion on the near
term direction of the economy. All I know is that
good companies are expensive right now. Their prospects are fully
priced in, so to speak, He's not finding the bargains
that he likes that's at face value. How you interpret this,
Does that bode well for future stock market growth? I'd
argue that it probably doesn't if his forecasting ability is strong,
(15:57):
and I'm not saying that it is. But if you
got him in a if you got him in a
moment of unvarnished truth, he'd probably tell you that he
thinks stocks are way too expensive and that's why he's
not touching some But you know, if you're an investor,
at the same time, you got ask, do I want
my active manager holding ten percent? I don't know what
percentage of his assets that is? Ten percent sounds a
(16:19):
little high. Is probably higher that it's it's probably higher
than that, a little low, probably higher than that.
Speaker 2 (16:26):
If I'm reading this right, it's actually closer to twenty
five percent. A little low.
Speaker 1 (16:31):
This is what I meant saying.
Speaker 4 (16:32):
Yeah, So you can't read that as saying anything other
than he's pessimistic about near term return prospects. Sure, because
he's not finding bargains, and that's what any act all
active managers have who take a bottom up fundamental value
oriented approach, are overweight cash right now for the very
(16:53):
same reason, though not to that degree. Why would you
pay him active manager to hold twenty five cents out
of every dollar you invest with them in cash?
Speaker 2 (17:00):
How much of this also just has to do with
and not so much of this, but just you think
about the evolution of Berkshire and how it's gotten to
the size that it's at today. You get to a
certain size and it becomes harder to deploy that cash
as well. When when you've got you know, a trillion
dollars in assets that you are managing, Hey, you can't
(17:23):
the stuff that worked for you when you were managing
twenty billion dollars, it doesn't work the same way when
you're managing this much, simply because you're not gonna look
at this and say, hey, I found this great business
that's gonna be you know, it's gonna cost us, you know,
one hundred million dollars and this is a great business. Well, okay,
(17:43):
it's not gonna have any impact on your actual bottom
line because it's such a small fraction of your you know,
your your your book. On the other hand, you start saying, well, gee,
you know, do I need to take just you know,
these stakes in companies that we don't operate the apples
and banks of Americas of the world, And okay, what
edge do I have that I'm any any better than
(18:04):
people at picking publicly traded companies and how they'll do
as opposed operating them. And you kind of look at
and you say, I don't know that I do, and
maybe that's part of the reason why they're trimming some
of their publicly traded stakes and things like that. So
it's hard to untangle what's going on. But there are
a few different possibilities there.
Speaker 4 (18:22):
Yeah, I think the one clear conclusion is that there
are fewer bargains. I know, I'm repeating myself a little bit.
There are fewer bargains today. If you look at cash
is a percentage of his total assets under management. He's
finding fewer bargains yet, and he found five years ago.
That's really all you can say given the data that
we have at our fingertips.
Speaker 2 (18:42):
And it doesn't mean that he's going to find them
next week or next year. It says nothing about how
long it may take for the market to present him
with attractive options.
Speaker 4 (18:53):
Oh yeah, he'll keep his power.
Speaker 2 (18:54):
We were you and I were talking about this this morning.
The irrational, exuberant speech from Alan Greenspan was I'm pretty
sure we settled on nineteen ninety six for it, maybe
early ninety seven at the latest.
Speaker 1 (19:05):
No, it was late.
Speaker 4 (19:06):
It was December ninety six. You're right, early December nineteen
ninety six.
Speaker 2 (19:09):
The party didn't stop until four years later. And even
then it still didn't fully stop for another two years.
You know, the people have to like, oh, the tech
bubble popped, and it was just this one time thing.
It was three years before you finally got that thing
to bottom. Let's take a quick break here. When we
come back, we got Wall Street Watch and we're talking
(19:29):
Treasury secretary contenders after this.
Speaker 1 (19:42):
Like us on Facebook and follow us on Twitter. Act
TFE show Breaking business news is all ways first right
here on the Financial Exchange Radio Network. Time now for
Wall Street Watch. A complete look at what's moving market
so far today right here on the final Inchel Exchange
Radio Network.
Speaker 3 (20:03):
Markets are on pace for a winning week and are
currently in mixed territory. Right now, the Dow is up
by one hundred and ninety four points, just under a
half a percent, SMP five hundred is edging three points higher,
and the Nasdaq is off by about a third of
a percent or fifty six points. Rusted two thousand up
by over one percent this morning. Ten year treasureealed is
(20:26):
flat at four point four to two percent, and crude
oil is up nearly three quarters of a percent, trading
just above seventy.
Speaker 1 (20:35):
Dollars a barrel.
Speaker 3 (20:36):
We have more retailer earnings for you this morning, as
GAP raised its sales outlook for the year for the
third time in twenty twenty four. The apparel retailer said
it now expects full year sales to grow between one
and a half and two percent. Gap stock is up
by six percent on that news. Meanwhile, shares in TurboTax
(20:57):
pairent company into it down by four percent after its
earnings guidance for the current quarter missed analysts expectations. Elsewhere
read it down by seven percent after China's ten Cent
reported it had cut its stake in the social media
company by about twenty eight percent. Data analytics company Elastic
(21:17):
posted better than expected earnings and a revenue for its
quarterly results, sending that stock up by sixteen percent. Goldman
Sachs initiated coverage of Flutter Entertainment stock with a buy
rating and a price target that reflects almost twenty percent
upside from Thursday's close, where a bank cited stronger US
margins and share buybacks as catalysts for growth ahead. That
(21:40):
stock Flutter up by one percent and after its sixteen
percent plummet. Yesterday's shares in bitcoin buying software company Micro
strategy are narrowly rebounding by four percent so far today.
I'm Tucker Silvan.
Speaker 2 (21:55):
That's Wall Street Watch Markets. Talk a little bit about
the still in position of Treasury Secretary for the incoming
Trump administration. Been a number of different rumors over the
last couple of weeks. The latest is that Kevin Warsh
is now one of the leaders in the clubhouse for
that role. What can you tell us about Kevin.
Speaker 1 (22:19):
Well?
Speaker 4 (22:20):
You know, academically his background is impressive Stanford undergrad JD
from Harvard. What I can't find out? And I'm scrammed,
ner Yeah, loser right under retiever.
Speaker 2 (22:31):
No, I didn't say loser, I said nerd.
Speaker 4 (22:32):
Well, that's my insecurity.
Speaker 2 (22:35):
It's you, it's me.
Speaker 4 (22:36):
I don't know that he's got an economics degree, which
you don't need. Definitely no need for Treasury's probably better
suited for Treasury than he is for FED share. Look,
I think the bottom line is, and I'll just repeat
what we can all read in the newspaper. I have
no inside track on this guy. He's viewed as a
sensible kind of establishment right of center, which I can
relate to and respect and admire and agree with for
(22:58):
what it is worth, So I'm a little bit biased.
He'd be a good, steady hand at Treasury who's not
likely to do anything stupid, like say, I think the
dollar is too expensive. We've had Treasury secretary stumble into
ill advised statements about the value of the dollar. Best statement,
as Bob Rubin taught us decades ago, Clinton's Treasury secretary
(23:19):
is just to say a strong dollars in the United
States interest, full stop. He never elaborated, so he'll avoid
big mistakes like that. Markets seemed to like him, Chuck Right.
Speaker 2 (23:26):
The Wall Street Journal exclusive is that in a meeting
with President elect Trump, he floated the idea that, hey,
why don't you go run Treasury four year and a
half and then I'll nominate you as the FED chair
when Powell's term is up in May of twenty twenty six.
What would be the logic behind that, I guess because
it's not like you need experience at Treasury in order
(23:49):
to run the FED. That's typically not something that's not
something that we've seen, you know, from previous FED chairs.
Speaker 4 (23:56):
No, they're too entirely different, somewhat different skill set.
Speaker 2 (24:00):
Figuring out, hey, how do you finance operations of the
United States and how do you pay the bills. The
other is, let's make sure that the financial system plumbing
doesn't break, and let's try to manage the speed of
the economy.
Speaker 4 (24:14):
I mean, I shouldn't say entirely different. They both have
financial market oversight responsibility, and as we learned during the
financial crisis, Treasury and the FED working hand in glove
as they did then is very helpful. Sure, it's kind
of it would be weird for them to have that
kind of arrangement. It's not public. The Wall Street Journal
got some tip. It wouldn't be the first time somebody
(24:34):
has been somebody's been promised a high level position and
then later became FED chairman. Ben Bernanke was head of
the CEA under Bush, then became FED chairman. Larry Summers
would have become FED chairman probably had the two thousand
election gone differently. And there are probably other examples that
just aren't on the tip of my tongue, I think. Again,
the key point about him is that he's viewed as
(24:56):
a good, safe pair of hands. You can dis agree
with his politics. I probably wouldn't. Other people would. Those
are honest disagreements, but nobody views him as a wild
eyed radical who's likely to say dumb things that upset markets.
Speaker 2 (25:11):
And he spent what was it in two thousand and six,
he was a Fed governor. So again he's got experience operating,
you know, at or near this level to begin with.
So again, we'll see where this goes. I would expect
we're going to have a a name for Treasury Secretary
within the next couple weeks. It's if we don't buy
(25:31):
the first week in December, I would be surprised.
Speaker 4 (25:33):
No rush though, I don't, but yes, you're right, I
would too. I would too. He's going at a break
neck pace with his appointments.
Speaker 2 (25:39):
Well, here's the thing, Like, normally you see most appointments
and someone asked me about this the other the other day.
They're like, does it seem like these appointments are coming quickly?
And I'm like, maybe by a week or two. But generally,
in most cases, you look at when the names for
cabinet positions are, you know, when the nominations are made,
and it's typically by that first week in December. So like, yeah,
(26:01):
they're moving maybe a little quickly, but it's not anything significant.
You typically see most nominations made in the first month
after the election.
Speaker 4 (26:11):
I mean, the bigger question we talked about this, or
I did, I ranted about it in the last segment,
is will this appointee, whoever it ends up being, to
the Treasury, assuming it's a stepping stone to FED, and
whether or not it's Worsh it may go that way.
That may be the progression. Will they push back when
he attempts to impose his will on the FED, as
he's attempting to do with other branches of government and
(26:33):
institutions right now? Will his FED chairman stand up to him,
because the time will come when he will want lower
interest rates or steady interest rates, and the right thing
to do for the economy is something different. What kind
of backbone will this person, whether it's Worsh or somebody
else show.
Speaker 2 (26:49):
Let's talk a little bit about this piece from the
New York Times. It's automakers to Trump, please require us
to sell electric vehicles. What's going on here?
Speaker 4 (26:59):
Well, they've been gearing up for nothing else for the
past ten The government's been telling them for roughly ten years.
Or I'll go back even further and say since two
thousand and nine that they've got to raise they've got
to increase fuel efficiency and what is roughly the same thing,
decrease emissions.
Speaker 2 (27:16):
They've been spending billions of dollars to do so.
Speaker 4 (27:18):
They've retooled their entire I'll just say their entire operation
for lack of a more precise way to put it,
because I'm largely ignorant about this area. So they've invested
so much in this that to do a U turn
would require a big I guess revamping on once again,
which would dang profits.
Speaker 2 (27:35):
And I don't think the take from here is not
that car companies want to be forced to produce only evs,
but rather, hey, we've spent a bunch of money retooling
these plants in order to produce more evs and more
efficient vehicles. And if all you do is take away
what's there now, you're leaving us with a bunch of
(27:57):
spending that's not necessarily going to pay off. It's kind
of like, why do we spend all.
Speaker 4 (28:01):
These big investments in battery production and research and that
all goes down the drain. You could say, look, that's fair.
That's called regulatory risk.
Speaker 2 (28:10):
The company that I continue to think really just kind
of nailed this despite everyone criticizing them for a couple
of years in the early twenty twenties. Is Toyota who
did not get sucked in by the idea of, Hey,
we just need to make EV's like every other company
in twenty twenty one and twenty two was like, Wow,
we're gonna have twenty different EV models by you know,
(28:31):
twenty thirty. We're gonna have thirty different EV models by
twenty thirty five. And Toyota looked at it and was like, Yeah,
we're gonna keep doing hybrids. And what you are seeing
is an expansion of their hybrid lineup. Just as an example,
the Toyota Camry. Now it's only available in a hybrid.
They don't offer a a gas only version, and it
still is the best selling sedan in the country because
(28:53):
people are like, Wow, I can get fifty miles a
gallon in a Toyota Cameray. Sure, I'm gonna like that.
That sounds wonderful. And there's rumors now that the next
RAV four, which is going to be the twenty six
model version, is going to be hybrid only as well,
and it's getting at the idea that, look, people want
better gas mileage. They're not necessarily ready to go to
EV's and mass And I think Toyota completely saw through
(29:18):
the short term infatuation with hey, we need to only
make evs that so many other automakers kind of move
towards when when Tesla was rallying back in twenty twenty,
they were like, oh, we got to do this. No,
Toyota saw through that and said, hey, this is a
temporary thing. This is not real and permanent. And man,
they look like geniuses because that when everyone was criticizing
(29:39):
him back in twenty twenty one and twenty two for
not having larger EV plans.
Speaker 4 (29:44):
I do pity us automakers. I mean, they were counting
on a regulatory regime remaining in place and they're getting whipsaw.
They'll get whipsawed again. And my guess is we'll have
a lot of electoral turnover over the next a lot
of turnover the executive level anyway, over the next ten
or twenty years, as we've had over the past ten
(30:05):
because these problems are not amenable to being solved in
four years. Are deeper structural problems economically are They're gonna
have to do another one eighty in four years. If
a Democrat wins the White House or if they take
back Congress and try to reinstitute some of these.
Speaker 2 (30:19):
I'm not screen I have that much pity for the
automakers because a lot of this was of their own chooses.
A lot of the decisions they made were before the
Inflation Reduction Act was even passed. But in response to
a lot of this was before like it was twenty
twenty one and all these companies were like, yep, we're
gonna be rolling out all evs in the next ten
years because they saw what EV's were doing to, you know,
(30:42):
the stocks of EV companies, and it turned out that
that was just a short term. But like, they made
these decisions before the federal tax credits were in place,
and that to me is more, Hey, we got greedy
because we thought we could be a trillion dollar company.
Speaker 4 (30:58):
I thought it was average fuel economy motivated too. We're
going to sell a lot of big trucks that are
terrible on gas and balance that with smaller vehicle They.
Speaker 2 (31:07):
Still made the wrong decision. Then, Yeah, I always go
back to this quote, Mark, You'll appreciate this one. This
is the business we have chosen, and ultimately, when you're
an automaker. Hey, that's the business you chose, like you
have to figure out how to navigate it correctly. They didn't,
(31:27):
and they're dealing with it now. Say what do you say?
Speaker 4 (31:29):
I'll appreciate that because I look like an extra at
Connie's wedding from Godfather one. I just know that if
you squint, I'm in that shot. What if I don't squint,
I'm still in that Still in that shot, I still
look like fifteen people in that Yeah, there you go,
pick a random person in that scene.
Speaker 2 (31:44):
Let's take a quick break here. When we come back,
let's see let's talk a little bit about energy prices
and also want to touch a little bit on social
security benefits.
Speaker 1 (31:53):
Right after this, The Financial Exchange Show podcast drops every
day on Apple, Spotify, and iHeartRadio. Hit that subscribe button
then leave us a five star review. You're listening to
the Financial Exchange Radio Network, breaking business and financial news
first throughout the day only here on the Financial Exchange
(32:13):
Radio Network.
Speaker 2 (32:25):
Mark we got a piece in CMBC here seventy three
percent of workers worry social security won't be able to
pay retirement benefits. Here's what financial advisors say. I always
I would love to hear what financial advisors say on
this topic, and basically it says lots of advisors, you know,
get questions about this, and the thing that you're hearing
(32:47):
from advisors two different things. The first is, hey, you
want to bet on longevity, saying, hey, wait as long
as possible, because with advances in medicine, people are most
likely going to live longer. And that's what you hear
from basically all of the advisors in this piece. I
do think it's important to note that, look, not everyone
has the same kind of family health history that you
(33:09):
know would encourage people to think of it in terms
of longevity. There are a whole bunch of us out
there who, hey, the family health history doesn't look great,
and you know, oftentimes that can be a real predictor
of your longevity, and in particular, if you already have
things that might be developing. Hey, even though it might
not be best for a long retirement, in some situations,
(33:33):
it can make more sense to, you know, claim solid
security earlier because the health piece is a big one
that matters.
Speaker 4 (33:39):
Yeah, I guess you have to get tested for something specific.
I have personal experience with this. The result wasn't great
and it will probably affect my decision at sixty two
because my break heathen is shorter, probability speaking, probabilistically speaking,
whatever the right adverbis. Then say some without the predisposition,
(34:01):
the genetic predisposition predisposition that I have and that many
of you have. This is not uncommon. So I've never
really thought about the larger impact to tell you the
truth of say, better testing through one of these services
or through your doctor, if they find out that your
father passed away from something that we're getting better at
(34:22):
identifying genetically, and how that might play into your financial
planning decisions. I've never thought about how that might impact
the Social security Social Security's longevity, which ain't looking good.
Trust fund depletes you, guys. You and Mike Armstrong talk
about this a lot. What ten years, the trust fund?
Eight years?
Speaker 2 (34:39):
Okay, yeah, twenty thirty three, and we're through twenty four now, so.
Speaker 4 (34:42):
Exactly when almost exactly when I'm eligible. So what they've
said about the midpoint of gen X is actually true,
which means what they either cut benefits or they have
to get money from elsewhere to make good on promised
benefits at that point. Is that accurate?
Speaker 2 (34:57):
Mike and I have our theory as to what they're
actually going to do.
Speaker 4 (35:00):
What's your are are likely?
Speaker 2 (35:02):
Our going theory is that they are simply going to
change the rules so that Social Security can just pay
out however much it needs to deficit be damned. Yeah,
so that's that's our thought.
Speaker 4 (35:14):
Do nothing, barmore borrow can't I mean, we're talking about
enormous new additions to borrow.
Speaker 2 (35:21):
There's no one alive right now who's ever had to
deal with that as a US citizen.
Speaker 4 (35:28):
Yeah, well, we've never had a debt is big outside
of wartime, but.
Speaker 2 (35:33):
But basically, like, there's no one alive right now that
has had to deal with the situation where the US
couldn't borrow more money. Yeah, you know, it's You talk
to any argentineator, any Greek, and they'll tell you, Yeah,
this is real stuff that we have to deal with. Like,
our government cannot just borrow in perpetuity. It causes problems.
(35:55):
When it does, the interest rates go up, inflation goes up,
and it causes problems. There's no one a lot in
the United States that's had that experience.
Speaker 4 (36:02):
That's true. Yeah, we have to face that constraint.
Speaker 2 (36:04):
And so my point is like, Congress isn't going to
think that's possible, that that's a problem.
Speaker 4 (36:09):
But what if the average interest rate on US debt,
which is today about three percent, is five or seven
and instead of thirteen percent of the federal budget, interest
payments are thirty That reality will be playing.
Speaker 2 (36:21):
Will be for everybody mostly understood, though by Congress It's
not going to be absorbed quickly, is the point I'm making.
Speaker 4 (36:28):
Yeah, No, I don't disagree. They'll kick the can. I
guess as much as it is feasible.
Speaker 2 (36:31):
Yeah, it's so.
Speaker 4 (36:32):
What does that mean for quik? Back to the point
of the article. What would you tell a client if
they were fretting, handwringing about availability of social Security? Do
you say, just go with what the current law says
or plan for the worst?
Speaker 2 (36:42):
Well, I think that you have to be able to
kind of hedge different ways and say, look, you have
to stress test to your financial plan against what happens
if there are changes, if you're trying to figure this
out for yourself. This is what the Armstrong Advisory Group
helps clients out with. Every single day. Call eight hundred three,
nine three or zero zero one to schedule time to
speak with an advisor again eight hundred three nine three
(37:05):
four zero zero one.
Speaker 1 (37:07):
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, and estate planning advisors before making
any investment decisions. Armstrong make contact you to offer investment
advisory services.
Speaker 2 (37:23):
Mark, We don't have a ton of time here, so
I just want to let's actually cover this story just
because I think it's kind of interesting. Actually, DirecTV there's
scrapping their merger with Dish Network, and I think the
big thing is that it's unclear what the path is
for either of these companies to surviving. It's unclear either
(37:45):
of these companies really survive in the future. In my opinion,
I'm not sure what is there for them.
Speaker 1 (37:51):
Would that leave?
Speaker 4 (37:51):
If these companies don't, who would that leave in the
satellite cable space.
Speaker 2 (37:55):
Basically no One part of me wonders if Elon Musk's
Starlink might step in and find some way to build
out a platform on that side of the things.
Speaker 4 (38:06):
That's gonna be great for people.
Speaker 2 (38:08):
You know, in the wilderness. Hey, look, i'll tell you,
having used the service a couple of times present. Yeah,
I've got a couple friends that have it at their
places and might oh yeah, it's cool. Let's take a
quick break here. When we come back, more financial exchange
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