July 7, 2025 • 38 mins
Mike Armstrong and Marc Fandetti discuss Trump sets August 1st as the tariff start date. Want to know where the economy is heading? Don't trust those who have the answers. Why some see the dollar's drop as a sign America is losing its financial might. Late-career job losses are blurring what retirement looks like. Homeowners who gambled on lower rates are paying the price. Elon Musk is running out of road in China.
Mark as Played
Transcript
Episode Transcript
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Speaker 1 (00:00):
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(00:43):
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(01:06):
Armstrong and Mark Vandebdi.
Speaker 2 (01:10):
Good morning and welcome back to the Financial Exchange. We've
got markets in early trading and negative territory across the board,
with the NASDAC leading the way down off three quarters
of one percent, but Dow Jones Industrial Average SMP five
hundred also off by a little bit more than half
a percent. As over the weekend, the narrative and conversation
(01:31):
all shifted from tax cuts and jobs, sorry not the
tax cuts and jobs at the Big Beautiful Bill Act,
resulting in income tax cuts to tax increases in the
form of tariffs coming our way. Deadlines self imposed deadlines
initially looking like Wednesday of this week, given tweets over
the weekend, we're now kind of working under an August
(01:54):
first deadline. But as Mark pointed out in the previous
hour of the show, God knows, that's to change nine
ways from Sunday. In terms of the Big Beautiful Bill
Act that has now been signed into law, the biggest
changes here are simply the tax rates are not going
to increase for most Americans come twenty twenty six. But
I looked at six specific areas that I think applied
(02:15):
to a lot of Americans in particular, One would be
an expansion of the salt cap from ten to forty
thousand dollars. Two would be a new special deduction for
charitable contributions. Three would be a new change to deductions
for folks over the age of sixty five, four changes
to deductions on tips, five overtime changes and deductions there
(02:36):
and then six would be the ten K car car
Loan interest deduction that's going into place now, which we'll
need some more details on, but that bill is now
signed into law. We have permanence. Changes now to those
actual tax rates will permanence insofar as until somebody else
changes the rules down the road, as well as things
(02:58):
like a state tax that had all been changed under
the previous bills now getting locked in for an extended
period of time would be my guess. Mark. Anything to
discuss in addition to that on the tax bill.
Speaker 3 (03:10):
No, No, pretty comprehensive, thanks Mike.
Speaker 2 (03:13):
When it comes to trade deals, we have this new
self imposed deadline of August first, when it all comes
into play. I assume that we will have more announcements
when it comes to trade, like we did with Vietnam,
But quite honestly, it seems to me that many countries
are slow walking. All this delay, delay, delay seems to
be the tactic because the President has been willing to
(03:36):
push those deadlines further out. Some experts that I've read
seem to think that we will have something announced with
the EU. But the way it is described to me
was described as the general public with this person was
you know, think of any sort of trade deal with
the EU as an engagement while you spend the next
year or two figuring out the details of the marriage.
And so we are likely to get some announcements, but
(03:58):
I doubt we're going to get real clarity when it
comes to the state of trade between US and large
trading partners. Some other smaller partners may just have a
letter written where they say this is the new tariff rate.
But frankly, I'm not sure how that affects everyday Americans
too much. Mark, we were talking in the first hour
about deficits and just what it does, you know, mechanically,
(04:20):
how they work, how we fund them, how it can
come crashing down in other countries when they get too large.
I want to shift our thinking a little bit and
our talking a little bit to how behavior changes when
you are worried about deficits. And I guess I'll give
you an example. I have spoken to many, many people
over the course of the last decade who all seem
(04:42):
to assume that tax rates are going to eventually go
up meaningfully. I've talked to several people in addition who
think that so Security is going to going to go away.
And if you genuinely believe those things, you do change
your behavior a little bit. For example, I've seen people
pull money out of their traditional IRA earlier than they
need to because they're concerned about tax rates going up
(05:04):
in the future, or for their children. I've seen people
claim their Social Security early because they're worried about the
funding of the program and where the benefits actually go.
What sort of things can make their way into the
American psyche, and do you think they are actually starting
to when we talk about deficits that are as large
as they are now and increasing at a fairly rapid pace.
Speaker 3 (05:26):
Possibly it's not a new idea. An economist by the
name of David Ricardo, who was English despite what the
last name sounds like, I think his family was from
Spain or something, came up with this idea of the
early eighteen hundreds. It's actually called Recardian equivalents. And to
put it really simply, debt is just future taxes or
future inflation. So what do people do when they get
(05:47):
a tax cut? Now, this is not always the case,
by the way, there's some evidence that debt finance tax
cuts do increase spending today. But it could very well
be the case that with respect to this tax cut,
like the one in one, it does not increase spending consumption.
More technically, people anticipate that it's going to need to
be paid back one way or the other, so they
(06:07):
don't change their average spending. Again, if you just keep
in mind that debt is future taxes. A dollar given
to you today by the government is going to have
to be paid back with interest one way or the
other whenever the say bond used to finance that tax cut.
I'm giving you a very simple example here, but it
makes the point. Whenever that bond matures comes due, you're
(06:30):
going to be taxed to pay the holder of that bond,
which is it turns out as you because you are
a you're on both sides of this transaction, so to speak.
So there is a theory and some evidence though it's
not airtight that tax cut, tax debt finance. Tax cuts
might don't change consumption behavior. The phrase contractionary fiscal expansion,
(06:55):
which if you break it down, contractionary shrink, fiscal tax
and spending policy expansion means increasing spending or decreasing taxes,
same thing. That phrase contractionary fiscal expansion describes what happens
when the government tries to stimulate the economy but fails
because people anticipate that the piper's got to be paid
(07:16):
at some point. That's what happened in OH one, for example.
Most researchers agree nineteen nineties opposite happened. Clinton raised taxes
that allowed the Fed to keep rates low. Long term
interest rates came down. The economy not just because of that.
There were other forces that work, but the economy boomed.
That was arguably an expansionary fiscal contraction, which is different
(07:37):
than the phrase I used earlier. It's all very interesting.
Unfortunately we have to live through it to find out
what the results going to be. We can't tell you
in advance.
Speaker 2 (07:46):
So to put it, I'm going to try and put
all these words plainly. To put it plainly, I think
the effect that you would be playing out here is
if Americans think that their country is in a fiscal
disaster zone, then they're going to save more than they spend.
Speaker 3 (08:02):
That's why.
Speaker 2 (08:03):
Yeah, And if they think that they're overall financial houses
in order, then they are going to think that, hey,
maybe taxes don't need to go up, and maybe I
can't afford to spend a little bit more and save
a little bit less because I'm not terrified about the
state of the overall.
Speaker 1 (08:20):
Maybe.
Speaker 3 (08:21):
God, I don't know if I buy all this. By
the way, I maybe sound convincing. I'm not sure I
buy it. I don't get the mechanism. First of all, Like,
what are you telling me? Somebody reads the Wall Street
Journal does a little projection of future deficits and debt
and what they're going to owe or their kids are
going to own twenty five years, and then modify their
spending today accordingly. I don't think I buy that. In
basket case economies, people are far more Let me give
(08:44):
you an example. We're far more attuned we all are
to inflation right now than we were five years ago.
And that's why inflation expectations are on a hair trigger.
They go up very fast as we've learned over the
past few months. If indeed the fiscal our fiscal situation.
By that, I just mean tax spending, debt and the
effect it can have on interest rates. If that does
indeed start to spin out of control quickly, at some
(09:06):
point we will be on a hair trigger with respect
to future government spending. The Argentinians are a good example
of this, although Milla may have somewhat righted the ship,
so this example is a little bit outdated. But people
in basket case countries, and I'm not saying we are
one because I don't believe that, but we could become one.
They're much more attuned to the impact of changes in
(09:27):
fiscal policy on things like future taxes and inflation than
we are because we've been blessed historically, though we might
be squandering our inheritance there.
Speaker 2 (09:41):
Oh sorry, you dozed off.
Speaker 3 (09:45):
I have that effect.
Speaker 2 (09:47):
Barons tells us that if we want to know where
the economy is heading, we need to study earnings mark
and this has been something that bothers me over and
over again, because as you have reminded me, there is
economist builds a model based on earnings to forecast where
the economy is he's about wrong that.
Speaker 3 (10:06):
Well he's talking about average hourly earnings, right, not company earnings. Yeah, okay,
so I did do a little during the break. I
did do a little quick modeling. I was skeptical. I
was like, this guy's full he hasn't tested this, he
doesn't know what he's talking about. Well, lo, and behold,
it does help if you do a naive forecast. So
what is a researcher interested in? Can I predict GDP
growth next quarter based on what I know today? What
(10:28):
do I know today? I know a lot of things
today in theory, but which of them are useful? So
you have to sort of test combinations and then be
wary of various statistical pitfalls and so forth. But I
can tell you that earnings, if you add them to
a simple model of what the economy was doing last quarter,
they do improve your forecast a little bit. I can
tell you that. I can also tell you that I
also threw unemployment in there in vacancies because I had
(10:50):
a little bit of spare time, because Tucker's not talking
to me. Because I do this in my spare time,
is why he's not talking to me. And they all
come and yeah, this is like a big intervention.
Speaker 1 (11:05):
A lot of things not even broadcasting right now, a
lot of.
Speaker 3 (11:11):
Mom why are you here? A lot of things help
improve my forecast of next quarter's GDP based on what
I know today, I'm not convinced Earnings is the Holy Grail.
Maybe over the past five years, Earnings has done a
really good job relative to the other stuff I didn't
look at various time periods. I wasn't very sophisticated. But
my point is, be wary of people touting sort of
(11:31):
a miracle, miracle predictor the relationships off and breakdown.
Speaker 2 (11:38):
Be especially concerned about anyone telling you they know exactly
where the economy is going over the course of the
next few months or years ago.
Speaker 3 (11:46):
Yeah, any full of crap.
Speaker 2 (11:48):
This is not physics or chemistry. Let's take a quick break.
When we come back. We're playing a little bit of
trivia here. Next on the Financial Exchange.
Speaker 1 (11:56):
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Speaker 4 (12:35):
Right time for Surevia here on the Financial Exchange and
on this day. In twenty seventeen, Tesla produced its first
mass market car, the Model three. The Model three has
been a top seller for Tesla since its debut, but
it isn't the top selling Tesla model. Trivia question today,
(12:57):
What is the top selling Tesla Model? Once again? Trivia
questions today, what is the top selling Tesla Model? Be
the third person today to text us at six one
seven three six two thirteen eighty five with the correct answer,
and you win a Financial Exchange Show T shirt once again.
The third correct response to text us to the number
(13:20):
six one seven three six to two thirteen eighty five
will win that T shirt. See complete contest rules at
Financial Exchange Show dot com.
Speaker 2 (13:29):
Mark, I want to talk about the US dollar, but
before we move on, there were just two statistics that
were highlighted in that piece from Barons that I thought
were they're obvious because the overall story is, hey, you know,
we're getting older as a society and that's going to
be a problem. But these stats really back that up.
(13:49):
The prime age labor force participation rate, so just looking
at people from twenty five to fifty four is pretty
close to its late nineteen nineties peak, hias it ever got,
where as the over fifty five labor force participation rate
is now sitting at a nineteen year low of thirty
eight percent. Obviously, why there's more people that are on
(14:13):
the much older than fifty five spectrum than there were
just a few years ago, and so all of this
is somewhat obvious, but I think backs up that overall narrative,
which is, yeah, the job market is pretty darn good.
There's a lot of people interested in working who are
in their prime working years, but there are now so
many people that are outside of that demographic that it's
(14:34):
going to potentially inject some stress on the labor market
in ways that we aren't maybe used to, I guess
would be my conclusion. I don't know if there's any
other way to read all that, but that's certainly what
it seems to me.
Speaker 3 (14:48):
I don't think there's look softening as possible. We just
won't know, I'm sure, for repeating myself, we just won't know.
Without the benefit of hindsight, you never do. And we're expecting,
repeating myself again, the FED to act more preciently than
it has historically, because we've become accustomed to the FED
(15:08):
responding to obvious economic emergencies like the market crash and
nine to eleven, which exacerbated economic conditions in the early
in two thousand and one and two, like the global
financial crisis, the Great Recession, which you did see the
tsunami before it actually showed up in the data, so
(15:29):
we knew it was coming, and similarly the COVID recession. Normally,
the FED is in the position that it's in today,
acting in the midst of sort of the fog of
economic data, trying to determine whether it struck the right
balance between the forces of inflation and the forces of
economics luggishness that push up unemployment.
Speaker 2 (15:53):
Moving on to that conversation on the dollar here Mark,
So the dollar has slid about ten percent this year
copared to a basket of other currencies. If you go
take a look at the dollar versus the euro, for example,
you can chart it out and see a pretty significant
slide there. We're back to twenty twenty one twenty twenty
two levels against the dollar. Some people are finding this
(16:13):
a bit confound and giving where interest rates are in
the US. Right, when you have higher interest rates than
the rest of the globe, generally speaking, you attract investors
into your currency who want to borrow at those higher
interest rates. Growth in the US economy has remained pretty
solid as well, and yet you have the currency falling.
Is this a real story here to be concerned about
(16:35):
and get concerned about or are we really just seeing
some degree of normalization compared to just the absolute exceptionalism
that's been in the United States over the last few years.
I guess I could buy out a story.
Speaker 3 (16:47):
Is the recent decline in the dollar something to be
concerned about? Yeah, that's the tone of the article. Okay, sorry,
I just you threw an interest rates there too, and
they're related. I think the decline in the dollar was
probably due to and this is not my insight, but
it's something that makes sense, an observation that others have
made that makes sense to me, probably due to expectations
(17:08):
that the Fed. And these expectations are different now than
they were when we got the unemployment report last Thursday.
Expectations that the Fed will have to ease in an
attempt to forestall economic slow down that caused the difference
between US interest rates and foreign interest rates to narrow.
US interest rates are higher, so the expectation is the
(17:30):
Fed will have to lower that will and I'm using
interest rates here to describe the entire yield curve. That's
a little bit sloppy, but I'm just going to continue
down this path. So I think the dollar was falling
because people expected Fed to cut interest rates. That would
make us safe assets a little bit less attractive. You
would expect a dollar to fall. I don't know what
(17:52):
it's doing today, God forbid, I tap my mouse and
look at it. But I'm gonna say the dollar is
firmed over the last days since we got the employment numbers.
Speaker 1 (18:02):
Yeah.
Speaker 2 (18:02):
Yeah. And what's certainly firmed over the last few days
since we got the employment numbers are the expectations for
what the Fed ends up doing. A week ago today,
the expectations of a rate cut at this next July
meeting were still possible. It's like a one in five chance,
according to Chicago Mercantelic Exchange CMDA group, that we would
(18:23):
have a rate cut in this July meeting. That's been
all but taken off the table at this point, with
only a five percent likelihood of the rate cut. Now
at that July meeting, you get out now to September,
and yeah, there's a pretty good chance of a rate
cut by September, but there's still a one in three
chance that in fact, no, they don't end up cutting
rates at all between now and that meeting, which doesn't
(18:44):
even occur until September seventeenth.
Speaker 3 (18:47):
Right, we just we don't know. They don't know, so
criticizing them unless you have very strong conviction in the
short term direction of the economy, criticizing them is irresponsible.
If you're a public fit, you're in futile anyway. We know,
monetary policy operates with long so called legs. It takes
a while for the effects of interest rate changes to
work their way through the economy.
Speaker 2 (19:10):
Yeah, I couldn't agree more. Criticizing the FED is, if anything,
going to have the opposite effect on what you want
them to do. But nonetheless that's going to be the
strategy here and mounting pressure to cut. We got to
take a quick break. When we come back. Wall Street
Watch coming up, followed by late career job Losses, a
piece by the Wall Street Journal. That's next here on
(19:31):
the Financial Exchange.
Speaker 1 (19:40):
Bringing the latest financial news straight to your radio every day.
It's the Financial Exchange on the Financial Exchange Radio Network.
Time now for Wall Street Watch. A complete look at
what's moving markets so far today right here on the
Financial Exchange Radio Network.
Speaker 4 (19:58):
Markets a negative territory as traders return from the July
fourth holiday and turn their attention to tariffs with President
Trump's July ninth deadline, although administration officials have signaled the
new August first deadline is possible. At the moment, the
Dow is off by seven tenths of one percent or
(20:19):
three hundred and fourteen points. SMP five hundred is down
six tenths of one percent or thirty seven points, NASDAC
down nearly seven tenths of one percent or one hundred
and forty points. Rusted two thousand now off over one
percent or twenty three points, Tenured Treasure reeled is up
by four basis points now at four point three eight percent,
(20:40):
and crude oil is up just over seven tenths of
one percent, trading at sixty seven dollars and fifty one
cents a barrel. More tensions between Elon Musk and President
Trump after Musk said he would form a new political
party called the America Party, with Trump calling it ridiculous.
Tesla Scher sinking nearly seven percent. Meanwhile, Core We've said
(21:03):
this morning it will acquire Core Scientific, a leading data
center infrastructure provider, and an all stock deal valued at
about nine billion dollars. Corewave stock is down by two percent,
while Core Scientific stock is down by twelve percent. Elsewhere,
Oracle down by one percent after the company said it
is slicing the cost of its database software and cloud
(21:25):
computing service for the government, making it the largest tech
giant to offer the Trump administration a significant discount on services.
New data from research firm Counterpoint found that iPhone sales
in China grew for the first time in two years
last quarter, but not enough to overtake local rival Huawei.
Apple shares down over half a percent. Shell said it
(21:47):
expected weaker gas trading would hurt quarterly earning, sending shares
down by two percent today and later this week. On Thursday,
Delta Airlines will kick off second quarter earning season. I'm
Tucker Silva in that is Wall Street Watch and the
trivia question we asked in the prior segment was what
is the top selling Tesla model that would be the
(22:08):
model why? Chris from Bristol, Rhode Island is our winner today,
taking home a Financial Exchange Show t shirt. Congrats to Chris,
and we play trivia every day here in the Financial
Exchange See complete contest rules at Financial Exchange Show dot com.
Speaker 2 (22:24):
Mark I've got some stunning news for all of our
listeners here who just aren't going to believe it. Agism
in the workforce seems to exist, and if you lose
your job in your fifties and sixties, it ends up
being quite a bit more difficult to find a new one.
According to data from the Bureau Labor Statistics, for those
who are over the age of fifty five spacically fifty
(22:46):
five to sixty four, it takes them about twenty six
weeks on average to find a new job, whereas it's
just nineteen weeks for those who are filing for unemployment
to find a new job. Between the age of twenty
five and thirty four, The Walls Journal has a piece
that goes through the lives of a few people whose
careers were ended earlier than they intended. And I find
(23:08):
it to be an interesting piece, also an entertaining piece,
because they interview somebody from Gloucester, Massachusetts, and the rest
of the country is probably trying to figure out how
to pronounce Gloucester. But they go through a few different
people and the experiences that they had. And I'll tell
you I've personally been working with a couple of people
in a similar category, one of whom had to leave
(23:30):
the workforce due to a medical condition way earlier than
they were anticipating, and it doesn't look like they're going
to be able to return. Another was laid off in
their early sixties and is now kind of trying to
navigate that whole world of Okay, I was planning on
waiting on things like Social Security and I've still got
kids on health insurance. What am I going to do here?
And frankly, one of them, it's probably the best thing
(23:53):
that could have happened to them. The other it's going
to be a real big challenge. And while the Wall
Street Journal piece I find interesting, it's kind of a
lifestyle piece and you get to you get a glimpse
of these people's lives. I think there's some other stuff
that really matters when it comes to when it comes
to all of this mark I mean number one thing
(24:13):
that I think about when I consider somebody at that
stage of life getting laid off or losing their work unexpectedly,
it immediately goes to their health and specifically where you're
going to find your health insurance. In many cases it
can be from Cobra. When you get laid off, you
get access to purchase your own health insurance for a
(24:35):
period of time, but especially when it's pre sixty five,
this becomes an immediate stress stressor on the system of Okay,
I need to find health insurance right now. Do I
have a spouse that's working that's eligible for health insurance?
Can I get it somewhere else? How much is it
going to cost me? There are massive questions that come
up there. The other big one, though, is that nobody
(24:58):
actually thinks I'm going to ask them about when I'm
when I'm dealing with this sort of thing, is how
well how well are they mentally prepared for retirement? Like
whenever I'm doing this, everybody assumes that I'm going to
ask about the financial pieces. How much is your social security?
How much is it? But I'll tell you when I
think about people dramatically failing at retirement, which I've seen
(25:19):
several times, and sometimes I culminate some people going back
to work. Sometimes it's other formats. But think about people
you know, Mark and Tucker. Do you know somebody who
has gone through a quick change from working to not
working and just seems completely lost. Have either of you
experienced that? Sure, it's I see it frequently. I see
(25:42):
it all the time. And to me, that's one of
the biggest things that comes up is, Hey, am I
prepared for what this new stage of life is going
to do? Do I have something to fill my day?
Do I have some sort of activity that I'm waiting
to take part in, Because otherwise, in my experience, you're
going to have a miserable retirement if you are sitting
around not sure what to do, or just being sour
(26:04):
about the fact that you lost your job and not
prepared to take advantage of it. In many cases, like
the early loss of a job pre retirement, you know,
what sort of lifestyle changes does this actually necessitate. If
I'm going to have to be forking over to three
grand a month for health insurance, what do I need
to cut out of the budget in order to make
that work? So the Wall Street Jurnal piece, like I said,
(26:27):
it's interesting, it's compelling, but there are some really important
questions that I think everyone really over the age of
fifty five or sixty needs to consider when they are
in the workforce. It's okay if I choose to retire
early or if unfortunately I'm forced to, And that can
come in a lot of different fashions. It can come
(26:49):
from general economic stressors, it can come from a company
going out of business, and come due to your health care.
How prepared am I for that unforeseen circumstance answer. It's
one thing to have a plan, to be prepared for
how I'm going to make this all work. Assuming I
do keep my job until sixty five or sixty seven,
whenever your plan retire. But that unexpected change, if it
(27:12):
happens when I'm in my late fifties and I'm unable
to find that new job for an extended period of time,
how prepared am I for all of this? Both from
a mental standpoint and a financial standpoint. If you have
questions along those lines, if you have not answered that
question for yourself, please call the folks at Armstrong Advisory Group.
I have seen first hand the effect that this can
(27:33):
have on people, even if it is just checking the
boxes to make sure that if it happens in that
off chance, you feel good about it. It can have
a dramatic impact on obviously not only your financial future,
but just your attitude towards going to work every day.
I've seen it firsthand, and if you're stressing about this
(27:53):
sort of thing, please please give us a ring. The
number is eight hundred three nine three four zero zero one.
That's the number four the Armstrong Advisory Group. We work
with our clients on issues like this every single day.
We have offices throughout the New England area. We're happy
to meet with you over the phone via zoom whatever
works best for you and your schedule, but that number.
Take that first step and give us a call. It's
(28:15):
eight hundred three nine three four zero zero one.
Speaker 1 (28:19):
The proceeding was paid for by Armstrong Advisory Group, a
registered investment advisor. Nothing in the ad or in any
Armstrong guide a specific financial, legal or tax advice consult
your own financial tax into state planning advisors before making
any investment decisions. Armstrong may contact you to offer investment
advisory services.
Speaker 2 (28:35):
Well, Tucker, and Mark, I remember having this conversation over
the course of the last couple of years when it
came to mortgage rates and home prices, and I remember
speaking with Chuck about it specifically. It's people going out
there into the homeowner's market right now banking on rates
going lower. Buyer beware, because that might not necessarily happen
(28:57):
the way that you are waiting for it to play.
Wall Street Journal does a piece today on this exact
subject of, you know, those homeowners who gambled on those
lower rates getting absolutely creamed right now in some cases.
And I'll tell you, Mark, it's always tough to predict
where long term rates go, but it sure is just
(29:18):
difficult at this stage of the game to say, oh, yeah,
I think that the thirty year rate is going to
dramatically come down over the next year and a half.
What would be the compelling reason for it to happen, right.
Speaker 1 (29:30):
I don't know.
Speaker 3 (29:31):
I don't know if that's something realtors tell people or
it's just everyone I know who's ever bought a home
has made that statement, I'm going to refinance when rates
go down. Oh really, you're an interest rate forecaster. Yeah,
it's any financial variable, interest rates, stock prices, you name
it is. I'm going to say, impossible to forecast. The
attempt to do so should be abandoned, and you should
(29:53):
spend your time gardening or with your kids or something.
Don't bother. Many Nobel Prize winners have come to this conclusion.
It's not that I've tested it and am frustrated. No
serious person thinks you can. Now. There is no trend
in long term interest rates. That is true, although there
have been long periods when rates tended to go up,
like the seventies and eighties, and then gradually come down
(30:16):
like the decades since, more or less when they plateaued.
Are we participating in an upward trend again, where they
go from four point three on the ten year to
five to seven if inflation picks up. I don't really know,
nor does anybody else, So that should not I think, Mike,
you would agree, as a financial planner extraordinary that that
(30:37):
is not something that somebody should bake into their financial plan.
Lower interest payments at some.
Speaker 2 (30:42):
Point not absolutely not. I mean, look, the thirty year mortgage,
in my mind is one of the greatest investments that
Americans can make if they can afford to buy a home,
because you have a locked set interest rate that can
only go down if you choose to refinance. Right, I mean,
you are you know where your payments are going to be,
and if you happen to get lucky with lower interest rates,
(31:02):
then you get to refinance into a lower payment And
what a deal.
Speaker 3 (31:07):
You know what Mike can suggest? Oh? Sorry, sorry, good?
Can I suggest something? If you don't believe me, I
want you to go to Google or whatever your favorite
search engine is. Type in ten year Treasury yield. The
second or third result should be to the Saint Louis
Federal Reserves database, where they have a wonderful chart on
the ten year going all the way back to January
nineteen sixty two. You tell me at what point in
(31:28):
that put yourself in every interval there and ask what
you thought was going at Now we know, so it's
easy to say, but you will see how hard it
is to time rates. There's a broad upward trend, as
I mentioned, until the early nineteen eighties, then a broad
downward trend, but it's not uninterrupted. My point is, if
you need convincing that interest rates are not forecastable, look
(31:50):
at this chart, or type in S and P five
hundred in this same tool and look at the daily
price change. You will see absolutely no patterns. It's a
very humbling exercise. I just thought i'd suggest that for
anybody who was on vacation this week and maybe was
thinking about charting financial market variables.
Speaker 2 (32:08):
That's not what everybody else does on vacation.
Speaker 1 (32:10):
No fish shuit yourself.
Speaker 2 (32:16):
In either case. Thirty year mortgage rates got up over
six percent back in twenty twenty two and have not
gotten below that level since then. And who anyone's guess
where they go next? I think would be my overall take.
Let's take a quick break now when we come back
at a stack roulette coming up on the Financial Exchange.
Speaker 1 (32:35):
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Speaker 4 (33:09):
That was a great time to register for the DAV
five k, taking place Saturday November eighth at Fort Independence
on Castle Island. The race has sold out each of
the past four years and slots are continuing to fill
up quickly, so don't delay. Visit DAV five k dot
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(33:35):
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Speaker 2 (33:44):
I'm gonna kick things off here with stack Roulette Mark
with a piece from the Journal on Elon Musk and
Tesla's business in China and god it, it's just shocking
how this plays out. So Tesla, over the course of
the last decade met and expanded their presence in China,
(34:04):
and specifically, in twenty nineteen they completed the Big Gigafactory
and shockingly, the Chinese government had some stipulations for them
when it came to doing business in China, largely that
there would be some form of technology sharing when it
came to Tesla's battery tech and manufacturing processes. Wouldn't you
know it? Six seven years later, Tesla doesn't seem to
(34:27):
have much of a business model in China anymore, and
all the local Chinese automakers are becoming more popular and
out selling it in just about every segment that's out there,
and producing some darn good looking cars at much lower
price points than what Tesla can offer, completely upending how
many times are American businesses going to use this exact
(34:48):
same playbook, the temptation of the Chinese market to go there,
make their stuff, get all of their intellectual property completely
ripped off, and then face competition from those same China
These companies that went and ripped off their technology. We've
seen it with I mean everything, We've seen it with
(35:09):
almost every big tech company that I can think of.
Apple's done it now. Granted, you know, you can't sell
Chinese made iPhones into the US market, but you can
into many others. They've undercut them every step of the
way and learned how to manufacture.
Speaker 3 (35:21):
Not just China. There's oh, I forget the branch of
economists who study this. But one example was like a
T shirt factory in some African country where Western businessman
went in, set it up, taught them how to do it,
and then as soon as they could raise the capital,
naturally they did it themselves. So this is a well
(35:43):
known I think risk when you're making direct investments as
a company or whatever elsewhere, I guess you just figure
there's going to be a period of very high profits
before the inevitable competition. If I guess trade agreements allow sports,
that's another consideration and another reason why protectionist environment like
(36:05):
the one we're in and probably will be in for
a long time, encourages businesses to jockey for favorable treatment.
But it's a well known i'll call it problem, Mike,
and I guess businesses just figure, well, they got to
make hay while the sun is shining. Competition is inevitable anyway.
Speaker 2 (36:19):
Yeah, I guess that if you're going to take the
very open eyed approach to it, it's very simply. I'm
a CEO who has a very short tenure here. My
job is to goose the stock price over the next severals.
I can do that as I go into China, Yes,
exactly right, completely misaligned with the long term incentives as
we're seeing with you know, with Tesla and many other
(36:39):
companies as well who have done this strategy. But you're
right for you know, the several years China arguably bailed
Tesla out of completely failing because they needed somewhere cheap
to build these cars, and China definitely served that. They're
just now eating Tesla's lunch. What do you have for us, Mark,
You've got like a minute?
Speaker 3 (36:58):
Uh, you know, I don't think I'm gonna It's about
Boston's biotech sector reeling due to Trump's health policy uncertainty.
It's in the Financial Times. I picked it because I
thought it was interesting that an international newspaper picked up
a story. But now, we're a little Massachusetts center here.
It's where we broadcast from, it's where we live, is
where we're over taxed, so it caught my eye. There's
(37:20):
nothing here that we don't know. But the international investor
community is catching on to the fact that, well not
catching on in the fact, because it's pretty obvious biotech
is in trouble. They're out of favor with the current
regime and the universities that feed the research pipeline that
ultimately translates into the downstream, so to speak, stuff that
biotech does. Their fundings being threatened. So not a great
(37:44):
not a great outlook, Mike for the economic model, if
you like. That is propelled Massachusetts to the prosperity that
we enjoy.
Speaker 2 (37:51):
Massachusetts, by the way, currently tied for the tenth worst
unemployment rate in the country along with Illinois, Colorado, New Jersey,
org and Ohio, sitting here at four point eight percent unemployment,
whereas this is as of May, whereas the rest of
the country is four point two. That's all the time
we have for today. Markets remain in negative territory. We'll
(38:13):
have a full recap and more for you tomorrow. Have
a great rest of your day, folks,
The Financial Exchange is produced by Money Matters Radio and
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heroes by visiting dav five K dot Boston and making
a donation today. Face is the Financial Exchange with Mike
(01:06):
Armstrong and Mark Vandebdi.
Speaker 2 (01:10):
Good morning and welcome back to the Financial Exchange. We've
got markets in early trading and negative territory across the board,
with the NASDAC leading the way down off three quarters
of one percent, but Dow Jones Industrial Average SMP five
hundred also off by a little bit more than half
a percent. As over the weekend, the narrative and conversation
(01:31):
all shifted from tax cuts and jobs, sorry not the
tax cuts and jobs at the Big Beautiful Bill Act,
resulting in income tax cuts to tax increases in the
form of tariffs coming our way. Deadlines self imposed deadlines
initially looking like Wednesday of this week, given tweets over
the weekend, we're now kind of working under an August
(01:54):
first deadline. But as Mark pointed out in the previous
hour of the show, God knows, that's to change nine
ways from Sunday. In terms of the Big Beautiful Bill
Act that has now been signed into law, the biggest
changes here are simply the tax rates are not going
to increase for most Americans come twenty twenty six. But
I looked at six specific areas that I think applied
(02:15):
to a lot of Americans in particular, One would be
an expansion of the salt cap from ten to forty
thousand dollars. Two would be a new special deduction for
charitable contributions. Three would be a new change to deductions
for folks over the age of sixty five, four changes
to deductions on tips, five overtime changes and deductions there
(02:36):
and then six would be the ten K car car
Loan interest deduction that's going into place now, which we'll
need some more details on, but that bill is now
signed into law. We have permanence. Changes now to those
actual tax rates will permanence insofar as until somebody else
changes the rules down the road, as well as things
(02:58):
like a state tax that had all been changed under
the previous bills now getting locked in for an extended
period of time would be my guess. Mark. Anything to
discuss in addition to that on the tax bill.
Speaker 3 (03:10):
No, No, pretty comprehensive, thanks Mike.
Speaker 2 (03:13):
When it comes to trade deals, we have this new
self imposed deadline of August first, when it all comes
into play. I assume that we will have more announcements
when it comes to trade, like we did with Vietnam,
But quite honestly, it seems to me that many countries
are slow walking. All this delay, delay, delay seems to
be the tactic because the President has been willing to
(03:36):
push those deadlines further out. Some experts that I've read
seem to think that we will have something announced with
the EU. But the way it is described to me
was described as the general public with this person was
you know, think of any sort of trade deal with
the EU as an engagement while you spend the next
year or two figuring out the details of the marriage.
And so we are likely to get some announcements, but
(03:58):
I doubt we're going to get real clarity when it
comes to the state of trade between US and large
trading partners. Some other smaller partners may just have a
letter written where they say this is the new tariff rate.
But frankly, I'm not sure how that affects everyday Americans
too much. Mark, we were talking in the first hour
about deficits and just what it does, you know, mechanically,
(04:20):
how they work, how we fund them, how it can
come crashing down in other countries when they get too large.
I want to shift our thinking a little bit and
our talking a little bit to how behavior changes when
you are worried about deficits. And I guess I'll give
you an example. I have spoken to many, many people
over the course of the last decade who all seem
(04:42):
to assume that tax rates are going to eventually go
up meaningfully. I've talked to several people in addition who
think that so Security is going to going to go away.
And if you genuinely believe those things, you do change
your behavior a little bit. For example, I've seen people
pull money out of their traditional IRA earlier than they
need to because they're concerned about tax rates going up
(05:04):
in the future, or for their children. I've seen people
claim their Social Security early because they're worried about the
funding of the program and where the benefits actually go.
What sort of things can make their way into the
American psyche, and do you think they are actually starting
to when we talk about deficits that are as large
as they are now and increasing at a fairly rapid pace.
Speaker 3 (05:26):
Possibly it's not a new idea. An economist by the
name of David Ricardo, who was English despite what the
last name sounds like, I think his family was from
Spain or something, came up with this idea of the
early eighteen hundreds. It's actually called Recardian equivalents. And to
put it really simply, debt is just future taxes or
future inflation. So what do people do when they get
(05:47):
a tax cut? Now, this is not always the case,
by the way, there's some evidence that debt finance tax
cuts do increase spending today. But it could very well
be the case that with respect to this tax cut,
like the one in one, it does not increase spending consumption.
More technically, people anticipate that it's going to need to
be paid back one way or the other, so they
(06:07):
don't change their average spending. Again, if you just keep
in mind that debt is future taxes. A dollar given
to you today by the government is going to have
to be paid back with interest one way or the
other whenever the say bond used to finance that tax cut.
I'm giving you a very simple example here, but it
makes the point. Whenever that bond matures comes due, you're
(06:30):
going to be taxed to pay the holder of that bond,
which is it turns out as you because you are
a you're on both sides of this transaction, so to speak.
So there is a theory and some evidence though it's
not airtight that tax cut, tax debt finance. Tax cuts
might don't change consumption behavior. The phrase contractionary fiscal expansion,
(06:55):
which if you break it down, contractionary shrink, fiscal tax
and spending policy expansion means increasing spending or decreasing taxes,
same thing. That phrase contractionary fiscal expansion describes what happens
when the government tries to stimulate the economy but fails
because people anticipate that the piper's got to be paid
(07:16):
at some point. That's what happened in OH one, for example.
Most researchers agree nineteen nineties opposite happened. Clinton raised taxes
that allowed the Fed to keep rates low. Long term
interest rates came down. The economy not just because of that.
There were other forces that work, but the economy boomed.
That was arguably an expansionary fiscal contraction, which is different
(07:37):
than the phrase I used earlier. It's all very interesting.
Unfortunately we have to live through it to find out
what the results going to be. We can't tell you
in advance.
Speaker 2 (07:46):
So to put it, I'm going to try and put
all these words plainly. To put it plainly, I think
the effect that you would be playing out here is
if Americans think that their country is in a fiscal
disaster zone, then they're going to save more than they spend.
Speaker 3 (08:02):
That's why.
Speaker 2 (08:03):
Yeah, And if they think that they're overall financial houses
in order, then they are going to think that, hey,
maybe taxes don't need to go up, and maybe I
can't afford to spend a little bit more and save
a little bit less because I'm not terrified about the
state of the overall.
Speaker 1 (08:20):
Maybe.
Speaker 3 (08:21):
God, I don't know if I buy all this. By
the way, I maybe sound convincing. I'm not sure I
buy it. I don't get the mechanism. First of all, Like,
what are you telling me? Somebody reads the Wall Street
Journal does a little projection of future deficits and debt
and what they're going to owe or their kids are
going to own twenty five years, and then modify their
spending today accordingly. I don't think I buy that. In
basket case economies, people are far more Let me give
(08:44):
you an example. We're far more attuned we all are
to inflation right now than we were five years ago.
And that's why inflation expectations are on a hair trigger.
They go up very fast as we've learned over the
past few months. If indeed the fiscal our fiscal situation.
By that, I just mean tax spending, debt and the
effect it can have on interest rates. If that does
indeed start to spin out of control quickly, at some
(09:06):
point we will be on a hair trigger with respect
to future government spending. The Argentinians are a good example
of this, although Milla may have somewhat righted the ship,
so this example is a little bit outdated. But people
in basket case countries, and I'm not saying we are
one because I don't believe that, but we could become one.
They're much more attuned to the impact of changes in
(09:27):
fiscal policy on things like future taxes and inflation than
we are because we've been blessed historically, though we might
be squandering our inheritance there.
Speaker 2 (09:41):
Oh sorry, you dozed off.
Speaker 3 (09:45):
I have that effect.
Speaker 2 (09:47):
Barons tells us that if we want to know where
the economy is heading, we need to study earnings mark
and this has been something that bothers me over and
over again, because as you have reminded me, there is
economist builds a model based on earnings to forecast where
the economy is he's about wrong that.
Speaker 3 (10:06):
Well he's talking about average hourly earnings, right, not company earnings. Yeah, okay,
so I did do a little during the break. I
did do a little quick modeling. I was skeptical. I
was like, this guy's full he hasn't tested this, he
doesn't know what he's talking about. Well, lo, and behold,
it does help if you do a naive forecast. So
what is a researcher interested in? Can I predict GDP
growth next quarter based on what I know today? What
(10:28):
do I know today? I know a lot of things
today in theory, but which of them are useful? So
you have to sort of test combinations and then be
wary of various statistical pitfalls and so forth. But I
can tell you that earnings, if you add them to
a simple model of what the economy was doing last quarter,
they do improve your forecast a little bit. I can
tell you that. I can also tell you that I
also threw unemployment in there in vacancies because I had
(10:50):
a little bit of spare time, because Tucker's not talking
to me. Because I do this in my spare time,
is why he's not talking to me. And they all
come and yeah, this is like a big intervention.
Speaker 1 (11:05):
A lot of things not even broadcasting right now, a
lot of.
Speaker 3 (11:11):
Mom why are you here? A lot of things help
improve my forecast of next quarter's GDP based on what
I know today, I'm not convinced Earnings is the Holy Grail.
Maybe over the past five years, Earnings has done a
really good job relative to the other stuff I didn't
look at various time periods. I wasn't very sophisticated. But
my point is, be wary of people touting sort of
(11:31):
a miracle, miracle predictor the relationships off and breakdown.
Speaker 2 (11:38):
Be especially concerned about anyone telling you they know exactly
where the economy is going over the course of the
next few months or years ago.
Speaker 3 (11:46):
Yeah, any full of crap.
Speaker 2 (11:48):
This is not physics or chemistry. Let's take a quick break.
When we come back. We're playing a little bit of
trivia here. Next on the Financial Exchange.
Speaker 1 (11:56):
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(12:16):
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Speaker 4 (12:35):
Right time for Surevia here on the Financial Exchange and
on this day. In twenty seventeen, Tesla produced its first
mass market car, the Model three. The Model three has
been a top seller for Tesla since its debut, but
it isn't the top selling Tesla model. Trivia question today,
(12:57):
What is the top selling Tesla Model? Once again? Trivia
questions today, what is the top selling Tesla Model? Be
the third person today to text us at six one
seven three six two thirteen eighty five with the correct answer,
and you win a Financial Exchange Show T shirt once again.
The third correct response to text us to the number
(13:20):
six one seven three six to two thirteen eighty five
will win that T shirt. See complete contest rules at
Financial Exchange Show dot com.
Speaker 2 (13:29):
Mark, I want to talk about the US dollar, but
before we move on, there were just two statistics that
were highlighted in that piece from Barons that I thought
were they're obvious because the overall story is, hey, you know,
we're getting older as a society and that's going to
be a problem. But these stats really back that up.
(13:49):
The prime age labor force participation rate, so just looking
at people from twenty five to fifty four is pretty
close to its late nineteen nineties peak, hias it ever got,
where as the over fifty five labor force participation rate
is now sitting at a nineteen year low of thirty
eight percent. Obviously, why there's more people that are on
(14:13):
the much older than fifty five spectrum than there were
just a few years ago, and so all of this
is somewhat obvious, but I think backs up that overall narrative,
which is, yeah, the job market is pretty darn good.
There's a lot of people interested in working who are
in their prime working years, but there are now so
many people that are outside of that demographic that it's
(14:34):
going to potentially inject some stress on the labor market
in ways that we aren't maybe used to, I guess
would be my conclusion. I don't know if there's any
other way to read all that, but that's certainly what
it seems to me.
Speaker 3 (14:48):
I don't think there's look softening as possible. We just
won't know, I'm sure, for repeating myself, we just won't know.
Without the benefit of hindsight, you never do. And we're expecting,
repeating myself again, the FED to act more preciently than
it has historically, because we've become accustomed to the FED
(15:08):
responding to obvious economic emergencies like the market crash and
nine to eleven, which exacerbated economic conditions in the early
in two thousand and one and two, like the global
financial crisis, the Great Recession, which you did see the
tsunami before it actually showed up in the data, so
(15:29):
we knew it was coming, and similarly the COVID recession. Normally,
the FED is in the position that it's in today,
acting in the midst of sort of the fog of
economic data, trying to determine whether it struck the right
balance between the forces of inflation and the forces of
economics luggishness that push up unemployment.
Speaker 2 (15:53):
Moving on to that conversation on the dollar here Mark,
So the dollar has slid about ten percent this year
copared to a basket of other currencies. If you go
take a look at the dollar versus the euro, for example,
you can chart it out and see a pretty significant
slide there. We're back to twenty twenty one twenty twenty
two levels against the dollar. Some people are finding this
(16:13):
a bit confound and giving where interest rates are in
the US. Right, when you have higher interest rates than
the rest of the globe, generally speaking, you attract investors
into your currency who want to borrow at those higher
interest rates. Growth in the US economy has remained pretty
solid as well, and yet you have the currency falling.
Is this a real story here to be concerned about
(16:35):
and get concerned about or are we really just seeing
some degree of normalization compared to just the absolute exceptionalism
that's been in the United States over the last few years.
I guess I could buy out a story.
Speaker 3 (16:47):
Is the recent decline in the dollar something to be
concerned about? Yeah, that's the tone of the article. Okay, sorry,
I just you threw an interest rates there too, and
they're related. I think the decline in the dollar was
probably due to and this is not my insight, but
it's something that makes sense, an observation that others have
made that makes sense to me, probably due to expectations
(17:08):
that the Fed. And these expectations are different now than
they were when we got the unemployment report last Thursday.
Expectations that the Fed will have to ease in an
attempt to forestall economic slow down that caused the difference
between US interest rates and foreign interest rates to narrow.
US interest rates are higher, so the expectation is the
(17:30):
Fed will have to lower that will and I'm using
interest rates here to describe the entire yield curve. That's
a little bit sloppy, but I'm just going to continue
down this path. So I think the dollar was falling
because people expected Fed to cut interest rates. That would
make us safe assets a little bit less attractive. You
would expect a dollar to fall. I don't know what
(17:52):
it's doing today, God forbid, I tap my mouse and
look at it. But I'm gonna say the dollar is
firmed over the last days since we got the employment numbers.
Speaker 1 (18:02):
Yeah.
Speaker 2 (18:02):
Yeah. And what's certainly firmed over the last few days
since we got the employment numbers are the expectations for
what the Fed ends up doing. A week ago today,
the expectations of a rate cut at this next July
meeting were still possible. It's like a one in five chance,
according to Chicago Mercantelic Exchange CMDA group, that we would
(18:23):
have a rate cut in this July meeting. That's been
all but taken off the table at this point, with
only a five percent likelihood of the rate cut. Now
at that July meeting, you get out now to September,
and yeah, there's a pretty good chance of a rate
cut by September, but there's still a one in three
chance that in fact, no, they don't end up cutting
rates at all between now and that meeting, which doesn't
(18:44):
even occur until September seventeenth.
Speaker 3 (18:47):
Right, we just we don't know. They don't know, so
criticizing them unless you have very strong conviction in the
short term direction of the economy, criticizing them is irresponsible.
If you're a public fit, you're in futile anyway. We know,
monetary policy operates with long so called legs. It takes
a while for the effects of interest rate changes to
work their way through the economy.
Speaker 2 (19:10):
Yeah, I couldn't agree more. Criticizing the FED is, if anything,
going to have the opposite effect on what you want
them to do. But nonetheless that's going to be the
strategy here and mounting pressure to cut. We got to
take a quick break. When we come back. Wall Street
Watch coming up, followed by late career job Losses, a
piece by the Wall Street Journal. That's next here on
(19:31):
the Financial Exchange.
Speaker 1 (19:40):
Bringing the latest financial news straight to your radio every day.
It's the Financial Exchange on the Financial Exchange Radio Network.
Time now for Wall Street Watch. A complete look at
what's moving markets so far today right here on the
Financial Exchange Radio Network.
Speaker 4 (19:58):
Markets a negative territory as traders return from the July
fourth holiday and turn their attention to tariffs with President
Trump's July ninth deadline, although administration officials have signaled the
new August first deadline is possible. At the moment, the
Dow is off by seven tenths of one percent or
(20:19):
three hundred and fourteen points. SMP five hundred is down
six tenths of one percent or thirty seven points, NASDAC
down nearly seven tenths of one percent or one hundred
and forty points. Rusted two thousand now off over one
percent or twenty three points, Tenured Treasure reeled is up
by four basis points now at four point three eight percent,
(20:40):
and crude oil is up just over seven tenths of
one percent, trading at sixty seven dollars and fifty one
cents a barrel. More tensions between Elon Musk and President
Trump after Musk said he would form a new political
party called the America Party, with Trump calling it ridiculous.
Tesla Scher sinking nearly seven percent. Meanwhile, Core We've said
(21:03):
this morning it will acquire Core Scientific, a leading data
center infrastructure provider, and an all stock deal valued at
about nine billion dollars. Corewave stock is down by two percent,
while Core Scientific stock is down by twelve percent. Elsewhere,
Oracle down by one percent after the company said it
is slicing the cost of its database software and cloud
(21:25):
computing service for the government, making it the largest tech
giant to offer the Trump administration a significant discount on services.
New data from research firm Counterpoint found that iPhone sales
in China grew for the first time in two years
last quarter, but not enough to overtake local rival Huawei.
Apple shares down over half a percent. Shell said it
(21:47):
expected weaker gas trading would hurt quarterly earning, sending shares
down by two percent today and later this week. On Thursday,
Delta Airlines will kick off second quarter earning season. I'm
Tucker Silva in that is Wall Street Watch and the
trivia question we asked in the prior segment was what
is the top selling Tesla model that would be the
(22:08):
model why? Chris from Bristol, Rhode Island is our winner today,
taking home a Financial Exchange Show t shirt. Congrats to Chris,
and we play trivia every day here in the Financial
Exchange See complete contest rules at Financial Exchange Show dot com.
Speaker 2 (22:24):
Mark I've got some stunning news for all of our
listeners here who just aren't going to believe it. Agism
in the workforce seems to exist, and if you lose
your job in your fifties and sixties, it ends up
being quite a bit more difficult to find a new one.
According to data from the Bureau Labor Statistics, for those
who are over the age of fifty five spacically fifty
(22:46):
five to sixty four, it takes them about twenty six
weeks on average to find a new job, whereas it's
just nineteen weeks for those who are filing for unemployment
to find a new job. Between the age of twenty
five and thirty four, The Walls Journal has a piece
that goes through the lives of a few people whose
careers were ended earlier than they intended. And I find
(23:08):
it to be an interesting piece, also an entertaining piece,
because they interview somebody from Gloucester, Massachusetts, and the rest
of the country is probably trying to figure out how
to pronounce Gloucester. But they go through a few different
people and the experiences that they had. And I'll tell
you I've personally been working with a couple of people
in a similar category, one of whom had to leave
(23:30):
the workforce due to a medical condition way earlier than
they were anticipating, and it doesn't look like they're going
to be able to return. Another was laid off in
their early sixties and is now kind of trying to
navigate that whole world of Okay, I was planning on
waiting on things like Social Security and I've still got
kids on health insurance. What am I going to do here?
And frankly, one of them, it's probably the best thing
(23:53):
that could have happened to them. The other it's going
to be a real big challenge. And while the Wall
Street Journal piece I find interesting, it's kind of a
lifestyle piece and you get to you get a glimpse
of these people's lives. I think there's some other stuff
that really matters when it comes to when it comes
to all of this mark I mean number one thing
(24:13):
that I think about when I consider somebody at that
stage of life getting laid off or losing their work unexpectedly,
it immediately goes to their health and specifically where you're
going to find your health insurance. In many cases it
can be from Cobra. When you get laid off, you
get access to purchase your own health insurance for a
(24:35):
period of time, but especially when it's pre sixty five,
this becomes an immediate stress stressor on the system of Okay,
I need to find health insurance right now. Do I
have a spouse that's working that's eligible for health insurance?
Can I get it somewhere else? How much is it
going to cost me? There are massive questions that come
up there. The other big one, though, is that nobody
(24:58):
actually thinks I'm going to ask them about when I'm
when I'm dealing with this sort of thing, is how
well how well are they mentally prepared for retirement? Like
whenever I'm doing this, everybody assumes that I'm going to
ask about the financial pieces. How much is your social security?
How much is it? But I'll tell you when I
think about people dramatically failing at retirement, which I've seen
(25:19):
several times, and sometimes I culminate some people going back
to work. Sometimes it's other formats. But think about people
you know, Mark and Tucker. Do you know somebody who
has gone through a quick change from working to not
working and just seems completely lost. Have either of you
experienced that? Sure, it's I see it frequently. I see
(25:42):
it all the time. And to me, that's one of
the biggest things that comes up is, Hey, am I
prepared for what this new stage of life is going
to do? Do I have something to fill my day?
Do I have some sort of activity that I'm waiting
to take part in, Because otherwise, in my experience, you're
going to have a miserable retirement if you are sitting
around not sure what to do, or just being sour
(26:04):
about the fact that you lost your job and not
prepared to take advantage of it. In many cases, like
the early loss of a job pre retirement, you know,
what sort of lifestyle changes does this actually necessitate. If
I'm going to have to be forking over to three
grand a month for health insurance, what do I need
to cut out of the budget in order to make
that work? So the Wall Street Jurnal piece, like I said,
(26:27):
it's interesting, it's compelling, but there are some really important
questions that I think everyone really over the age of
fifty five or sixty needs to consider when they are
in the workforce. It's okay if I choose to retire
early or if unfortunately I'm forced to, And that can
come in a lot of different fashions. It can come
(26:49):
from general economic stressors, it can come from a company
going out of business, and come due to your health care.
How prepared am I for that unforeseen circumstance answer. It's
one thing to have a plan, to be prepared for
how I'm going to make this all work. Assuming I
do keep my job until sixty five or sixty seven,
whenever your plan retire. But that unexpected change, if it
(27:12):
happens when I'm in my late fifties and I'm unable
to find that new job for an extended period of time,
how prepared am I for all of this? Both from
a mental standpoint and a financial standpoint. If you have
questions along those lines, if you have not answered that
question for yourself, please call the folks at Armstrong Advisory Group.
I have seen first hand the effect that this can
(27:33):
have on people, even if it is just checking the
boxes to make sure that if it happens in that
off chance, you feel good about it. It can have
a dramatic impact on obviously not only your financial future,
but just your attitude towards going to work every day.
I've seen it firsthand, and if you're stressing about this
(27:53):
sort of thing, please please give us a ring. The
number is eight hundred three nine three four zero zero one.
That's the number four the Armstrong Advisory Group. We work
with our clients on issues like this every single day.
We have offices throughout the New England area. We're happy
to meet with you over the phone via zoom whatever
works best for you and your schedule, but that number.
Take that first step and give us a call. It's
(28:15):
eight hundred three nine three four zero zero one.
Speaker 1 (28:19):
The proceeding was paid for by Armstrong Advisory Group, a
registered investment advisor. Nothing in the ad or in any
Armstrong guide a specific financial, legal or tax advice consult
your own financial tax into state planning advisors before making
any investment decisions. Armstrong may contact you to offer investment
advisory services.
Speaker 2 (28:35):
Well, Tucker, and Mark, I remember having this conversation over
the course of the last couple of years when it
came to mortgage rates and home prices, and I remember
speaking with Chuck about it specifically. It's people going out
there into the homeowner's market right now banking on rates
going lower. Buyer beware, because that might not necessarily happen
(28:57):
the way that you are waiting for it to play.
Wall Street Journal does a piece today on this exact
subject of, you know, those homeowners who gambled on those
lower rates getting absolutely creamed right now in some cases.
And I'll tell you, Mark, it's always tough to predict
where long term rates go, but it sure is just
(29:18):
difficult at this stage of the game to say, oh, yeah,
I think that the thirty year rate is going to
dramatically come down over the next year and a half.
What would be the compelling reason for it to happen, right.
Speaker 1 (29:30):
I don't know.
Speaker 3 (29:31):
I don't know if that's something realtors tell people or
it's just everyone I know who's ever bought a home
has made that statement, I'm going to refinance when rates
go down. Oh really, you're an interest rate forecaster. Yeah,
it's any financial variable, interest rates, stock prices, you name
it is. I'm going to say, impossible to forecast. The
attempt to do so should be abandoned, and you should
(29:53):
spend your time gardening or with your kids or something.
Don't bother. Many Nobel Prize winners have come to this conclusion.
It's not that I've tested it and am frustrated. No
serious person thinks you can. Now. There is no trend
in long term interest rates. That is true, although there
have been long periods when rates tended to go up,
like the seventies and eighties, and then gradually come down
(30:16):
like the decades since, more or less when they plateaued.
Are we participating in an upward trend again, where they
go from four point three on the ten year to
five to seven if inflation picks up. I don't really know,
nor does anybody else, So that should not I think, Mike,
you would agree, as a financial planner extraordinary that that
(30:37):
is not something that somebody should bake into their financial plan.
Lower interest payments at some.
Speaker 2 (30:42):
Point not absolutely not. I mean, look, the thirty year mortgage,
in my mind is one of the greatest investments that
Americans can make if they can afford to buy a home,
because you have a locked set interest rate that can
only go down if you choose to refinance. Right, I mean,
you are you know where your payments are going to be,
and if you happen to get lucky with lower interest rates,
(31:02):
then you get to refinance into a lower payment And
what a deal.
Speaker 3 (31:07):
You know what Mike can suggest? Oh? Sorry, sorry, good?
Can I suggest something? If you don't believe me, I
want you to go to Google or whatever your favorite
search engine is. Type in ten year Treasury yield. The
second or third result should be to the Saint Louis
Federal Reserves database, where they have a wonderful chart on
the ten year going all the way back to January
nineteen sixty two. You tell me at what point in
(31:28):
that put yourself in every interval there and ask what
you thought was going at Now we know, so it's
easy to say, but you will see how hard it
is to time rates. There's a broad upward trend, as
I mentioned, until the early nineteen eighties, then a broad
downward trend, but it's not uninterrupted. My point is, if
you need convincing that interest rates are not forecastable, look
(31:50):
at this chart, or type in S and P five
hundred in this same tool and look at the daily
price change. You will see absolutely no patterns. It's a
very humbling exercise. I just thought i'd suggest that for
anybody who was on vacation this week and maybe was
thinking about charting financial market variables.
Speaker 2 (32:08):
That's not what everybody else does on vacation.
Speaker 1 (32:10):
No fish shuit yourself.
Speaker 2 (32:16):
In either case. Thirty year mortgage rates got up over
six percent back in twenty twenty two and have not
gotten below that level since then. And who anyone's guess
where they go next? I think would be my overall take.
Let's take a quick break now when we come back
at a stack roulette coming up on the Financial Exchange.
Speaker 1 (32:35):
Find daily interviews in full shows of the Financial Exchange
on our YouTube page. Subscribe to our page and get
caught up on anything and everything you might have missed.
This is the Financial Exchange Radio Network. Here the Financial
Exchange every day from eleven to noon, non serious XM's
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(32:55):
the latest business and financial news and the trends on
Wall Street. The Financial links Change is now life on
Series XM's business radio channel one thirty two. Thanks He's
the Financial Exchange Radio Network.
Speaker 4 (33:09):
That was a great time to register for the DAV
five k, taking place Saturday November eighth at Fort Independence
on Castle Island. The race has sold out each of
the past four years and slots are continuing to fill
up quickly, so don't delay. Visit DAV five k dot
Boston and reserve your spot, or join our team here
at the Financial Exchange by registering under Team TFE. That's
(33:35):
Saturday November eighth for this year's DAV five K. Sign
up now at DAV five k dot Boston.
Speaker 2 (33:44):
I'm gonna kick things off here with stack Roulette Mark
with a piece from the Journal on Elon Musk and
Tesla's business in China and god it, it's just shocking
how this plays out. So Tesla, over the course of
the last decade met and expanded their presence in China,
(34:04):
and specifically, in twenty nineteen they completed the Big Gigafactory
and shockingly, the Chinese government had some stipulations for them
when it came to doing business in China, largely that
there would be some form of technology sharing when it
came to Tesla's battery tech and manufacturing processes. Wouldn't you
know it? Six seven years later, Tesla doesn't seem to
(34:27):
have much of a business model in China anymore, and
all the local Chinese automakers are becoming more popular and
out selling it in just about every segment that's out there,
and producing some darn good looking cars at much lower
price points than what Tesla can offer, completely upending how
many times are American businesses going to use this exact
(34:48):
same playbook, the temptation of the Chinese market to go there,
make their stuff, get all of their intellectual property completely
ripped off, and then face competition from those same China
These companies that went and ripped off their technology. We've
seen it with I mean everything, We've seen it with
(35:09):
almost every big tech company that I can think of.
Apple's done it now. Granted, you know, you can't sell
Chinese made iPhones into the US market, but you can
into many others. They've undercut them every step of the
way and learned how to manufacture.
Speaker 3 (35:21):
Not just China. There's oh, I forget the branch of
economists who study this. But one example was like a
T shirt factory in some African country where Western businessman
went in, set it up, taught them how to do it,
and then as soon as they could raise the capital,
naturally they did it themselves. So this is a well
(35:43):
known I think risk when you're making direct investments as
a company or whatever elsewhere, I guess you just figure
there's going to be a period of very high profits
before the inevitable competition. If I guess trade agreements allow sports,
that's another consideration and another reason why protectionist environment like
(36:05):
the one we're in and probably will be in for
a long time, encourages businesses to jockey for favorable treatment.
But it's a well known i'll call it problem, Mike,
and I guess businesses just figure, well, they got to
make hay while the sun is shining. Competition is inevitable anyway.
Speaker 2 (36:19):
Yeah, I guess that if you're going to take the
very open eyed approach to it, it's very simply. I'm
a CEO who has a very short tenure here. My
job is to goose the stock price over the next severals.
I can do that as I go into China, Yes,
exactly right, completely misaligned with the long term incentives as
we're seeing with you know, with Tesla and many other
(36:39):
companies as well who have done this strategy. But you're
right for you know, the several years China arguably bailed
Tesla out of completely failing because they needed somewhere cheap
to build these cars, and China definitely served that. They're
just now eating Tesla's lunch. What do you have for us, Mark,
You've got like a minute?
Speaker 3 (36:58):
Uh, you know, I don't think I'm gonna It's about
Boston's biotech sector reeling due to Trump's health policy uncertainty.
It's in the Financial Times. I picked it because I
thought it was interesting that an international newspaper picked up
a story. But now, we're a little Massachusetts center here.
It's where we broadcast from, it's where we live, is
where we're over taxed, so it caught my eye. There's
(37:20):
nothing here that we don't know. But the international investor
community is catching on to the fact that, well not
catching on in the fact, because it's pretty obvious biotech
is in trouble. They're out of favor with the current
regime and the universities that feed the research pipeline that
ultimately translates into the downstream, so to speak, stuff that
biotech does. Their fundings being threatened. So not a great
(37:44):
not a great outlook, Mike for the economic model, if
you like. That is propelled Massachusetts to the prosperity that
we enjoy.
Speaker 2 (37:51):
Massachusetts, by the way, currently tied for the tenth worst
unemployment rate in the country along with Illinois, Colorado, New Jersey,
org and Ohio, sitting here at four point eight percent unemployment,
whereas this is as of May, whereas the rest of
the country is four point two. That's all the time
we have for today. Markets remain in negative territory. We'll
(38:13):
have a full recap and more for you tomorrow. Have
a great rest of your day, folks,
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