April 22, 2025 • 38 mins
Paul Lane and Marc Fandetti discuss Tesla's earnings possibly offering some hope for the stock market. As the dollar falters, the world's central banks tread a tightrope. Vance calls for new era of US-India ties as trade talks advance. Gold hits $3,500, setting another record. Warren Buffett timed his Apple stock sale to perfection. Wide federal workforce may shrink by 1.2 million. Trumps millionaire tax would generate $400B in revenue.
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Episode Transcript
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Speaker 1 (00:00):
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(00:43):
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(01:06):
and Mark Vandetti.
Speaker 2 (01:11):
Kicking off the second hour of the Financial Exchange, Paul Lane,
Mark Vendetti, and Ben Kitchen here with you. All US
markets up over two percent, making back some of the
losses from yesterday's sell off. We start the second hour
of our program by previewing some earnings that we have
coming after the bell today. Tesla is going to be
(01:32):
reporting its earnings. They had earlier in this month reported
that they saw a thirteen percent decline in deliveries. Obviously,
they've been in the headlines quite a bit because of
Elon Musk's involvement in the Trunk administration. The stock is
off about fifty percent from where it was before Trump
(01:52):
took office. It had had a significant run up from
November to January, but since then has has really created
quite a bit, and sales are slowing across many different markets,
whether you look at the European market. There's also tremendous
challenges that they face in China to gain market share,
or rather to maintain market share. They're really losing there,
(02:14):
So it'll be interesting to see what we get out
of Tesla at the close of market today. It's anticipated
that their revenue grew less than one percent for this
most recent quarter here.
Speaker 3 (02:25):
So yeah, strange reversal of well, not strange. We know
exactly what it's attributable to. Some of it may be fair,
some of it may be unfair. But if you look
at analysts who follow the company, their comments have turned
from the fine tuning things he needs to do to
how to save it. And you would not have thought
that fortunes could have turned that quickly. But those are
(02:45):
the risks you take when you become vocal.
Speaker 2 (02:48):
Yes, and he being involved in the headlines. Yeah, like
I you know it just it seems as if a
lot of the buyers have been alienated just because of
some of the local views. And it goes back to
that Michael Jordan line that we always reference to the
show that you know both sides by by shoes er
in this case, by electric vehicles. So be interesting. Like
(03:10):
I said, actually, but I think the.
Speaker 4 (03:14):
Yeah, that's true, talk about this.
Speaker 3 (03:17):
Eli is a very smart guy, I think, right, Oh, definitely, Okay,
so he knows this, so uh, I guess he thought
it was worth it.
Speaker 2 (03:24):
The full year results, like I mentioned, uh, probably won't
be that tremendous. As I mentioned, the thirteen percent year
over year dropping vehicles in Q one has been concerning,
and this is coming off a year previously where they
had seen slowing sales growth. So that had really been
the story with Tesla that as much as you'd want
to beat them up from a valuation perspective, which I
(03:46):
think all of us traditional valuation people out there had
in terms of what it was trading at, from a
prist earnings perspective, at least they could previously promise that
there's sort of this hockey hockey shape hockey stick shape
revenue growth, but that has really plateaued a bit here.
And then the other reason that you'd be a Tesla
buyers just the optimism around Elon Musk and the company's
(04:10):
propensity for innovation, and none of those bets have really
proven just yeah, you know, in terms of the cyber tax,
the robotaxity, Yeah, that's probably the insue story.
Speaker 3 (04:21):
Certainly, the uncertainty around electric vehicle, I was electrical ownership
is not quite the way a way I want to
put it, but I'll go with that. You know, four
years ago, they were shoving these things aggressively down everybody's
start out almost felt like I'd have to buy one
at some point now, I feel like if I had
bought one, I might not be able to charge it
(04:42):
because the FEDS have backed off the larger theme. They're
backing off supporting charging infrastructure. This type of whip sawing
policy is not helpful.
Speaker 4 (04:55):
And if I'm.
Speaker 3 (04:56):
Feeling it a little idio bit as a consumer, I
can only imagine what businesses who have to make investment
and in the short term inventory decisions based on say,
tariff policy might be.
Speaker 4 (05:05):
It's really the.
Speaker 3 (05:08):
Uncertainty with respect to prospects for electric vehicles and the
degree to which the government will support them has got
to be really anxiety provoking for some people to climate
has changed so radically in such a short period and
it could flip back in three years or eight years
or one.
Speaker 2 (05:24):
Yeah, you've seen the major auto manufacturers that first of all,
they're dealing with enough as it is with everything that's
going on from a tear front now. But also they
had pulled back on a lot of their ev initiatives
to begin with to begin with, and so there's just
really not a lot of momentum there. Not to mention,
if you're battling on the global market field like Tesla is,
(05:45):
you've got a lot of Chinese vehicles that are taking
a lot of market share away at some of these
subsidized prices. So it's a challenging business environment out there,
that is for sure. Piece here from CNBC is the
dollar falters the World Center Bank trends a tightrope to
devalue their currency or not. As I mentioned earlier in
(06:07):
the program, we've seen the dollar index down more than
nine percent so far this year. Other currencies out there
have appreciated against it, such as the Japanese gen and
the Swiss franc. So now there's this piece here as
to know what we do about that drop in the
dollar index and is that an area of concern.
Speaker 3 (06:29):
So the dollar is falling, presumably, and there may be
other reasons, but the main story is that people are
fleeing US assets. They're fleeing treasuries, they're fleeing stocks to
I'm talking about international investors now, and there's hard evidence
for this. They have maybe less confidence that, say, the
Fed won't inflate our debts away if it comes under
(06:50):
political control, or they just don't like the policy uncertainty
here generally, or they're doing it out of spite, they're
being a little bit vindictive. Oh you're going to teriff us.
Speaker 4 (06:58):
We're not going to buy your assets. And it's worth reminding.
Speaker 3 (07:02):
Ourselves that all those dollars we send abroad when we
buy Chinese goods, lows or Japanese electronics, those dollars get
recycled back into US investments. The recycling part into investments
is called the capital account. You hear about the current
account or the trade deficit a lot you don't hear
about the flip side of that, which is what foreigners
do with those dollars.
Speaker 4 (07:22):
They invest them.
Speaker 3 (07:23):
The reason is we don't save enough here to support
our own investment needs. We're a very attractive investment location
the US is, but we don't save enough. So the
point I guess I want to make getting a little
bit sidetracked, but I think it's worthwhile reminding ourselves myself included,
is that the trade deficit as a result of us
not saving enough. It's not a result of anybody playing
(07:45):
of stacking the deck against us.
Speaker 4 (07:48):
Necessarily.
Speaker 3 (07:49):
There might be a little bit of that China might
you know, some currency manipulation might be going on, but
that's not the primary reason behind the trade deficit. This
article points out that as the dollar is weakened lately
because people are fleeing US assets right, other countries are
now finding themselves in less favorable in a less favorable
competitive position. If you're a Japanese exporter, your export's just
(08:12):
got more expensive because the yen is appreciating. So now
the Japanese Central Bank has to think about Bank of
Japan has to think about the yen, its value, and
how it makes monetary how its monetary policy affects the
value of the yen. It gets quite involved, is my
wandering commentary here suggests.
Speaker 2 (08:35):
Similarly, a similar story that ties into this discussion is JD.
Vance is on a tour where he was speaking recently
in India calling for US India ties to sort of
tighten and create a win win partnership where they would
leverage one another more than they have previously. Certainly from
(08:56):
a business perspective, Apple has been in the headlines that's
trying to divert of its manufacturing of the Apple iPhone
to India, and there's been a lot of pieces that
have been written about this idea that India can be
the next manufacturing frontier. They still have a tremendous amount
of ground to make up when it comes to competing
with China on the manufacturing front. But JD Vance was
(09:18):
out there encouraging them not only to work with the
US and create closer ties, but also encouraging them to
purchase more American goods, in particular energy and military equipment,
as well as the potential of purchasing American F thirty
five warplanes to strengthen the Indian Air Force.
Speaker 3 (09:39):
Fine, great, you want to be the it's a good
role for the vice president. You're sort of the unofficial
head of the US Chamber of Commerce or something that's
always been an appropriate role for politicians. Don't fool yourself though,
into thinking this will and I don't think we need
to fix the trade deficit. By the way, it's not
a bad thing that we ship fewer goods abroad than
we buy from abroad. That makes us all better off.
(10:01):
And again the flip side to that is that we
export investments and services. That aside, we had about a
fifty billion dollar so called trade deficit. We bought fifty
billion dollars more in Indian goods last year than we exported.
If you brought that to zero, because again, the trade
deficit is it root a savings deficit you have to
(10:23):
keep it's it's non intuitive. First time I learned it,
I didn't believe it. Second time I learned it, I
was a little more open to it, and it took
me like, probably years for it to sink in. So
I understand this is it's a weird concept. But the
trade deficit is just going to go someplace else because
we're not fixing the root of the problem, which is
low savings. And that savings problem includes federal government disssavings
(10:46):
or the federal budget deficit. All these things are tied together.
Speaker 2 (10:49):
Should we be fixing the savings.
Speaker 3 (10:52):
I wouldn't mind seeing incentives for I think our savings
rate is probably too low as evit look, given the
level of services. There are a couple I'm sorry, I'm
answering your question now three different ways, and I've stopped
each time and started to answer it differently. We got
a big we got a big federal budget debt and deficit.
Federal debt, federal budget deficit problem. So I'm gonna focus
on that part because reducing that is the equivalent of So, yeah,
(11:14):
it's not really what you asked, but I'm gonna say absolutely,
particularly when the economy is expanding, if you fixed the
budget deficit, it would alleviate to a degree the trade deficit.
Though if we continued to grow faster than the rest
of the world, we might still find our trade deficit
to be all to say large, without defining that. Like
in the late nineties, we grew really fast, we ended
(11:34):
up with a budget federal budget surplus. We still had
a pretty good sized trade deficit, though that was a
function of growing fast and not saving enough. So I think, yes, Paul,
if you we should fix the savings problem. If you
focus on the federal government's dissaving problem, it's it's it's
shameful addiction to debt, even to deficits, even in good
(11:54):
economic times, when you should be running surpluses.
Speaker 2 (11:58):
We're gonna take a quick break here on the Financial Exchange.
When we come back, we'll have a little bit of
trivia and much much more. That's right after this break
here on the Financial Exchange. Stick with us.
Speaker 1 (12:09):
Tara Fever is in high gear. We've got the latest
on what might be next and how long it might last.
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Speaker 5 (12:31):
All right time. Now for some trivia here on the
Financial Exchange Today's Jack Nicholson's eighty eighth birthdayson is widely
regarded as one of the greatest actors of the twentieth century,
often playing rebels fighting against the social structure. That might
be a little bit of a clue towards the question
here how many Academy Awards has Jack Nicholson won? How
(12:54):
many Academy Awards has Jack Nicholson won? Be the fifth
person who texts us at seven three six two, one
three eight five with the correct answer, and you'll win
a Financial Exchange.
Speaker 2 (13:05):
Show t shirt.
Speaker 5 (13:06):
The fifth correct response will be our winner. See the
complete contest rules at Financial Exchange Show dot com.
Speaker 2 (13:12):
Gold has hit thirty five hundred dollars announced as we
look at trading today, it's slightly blow that threshold, but
it did top over thirty five hundred dollars announced in
what's been a record setting run for gold over the
course of the last several months or so. And we'll
we'll take some time mark maybe just to talk about
(13:34):
how investors sometimes will use gold within their portfolio. I
think the biggest thing to take into stock from an
investment standpoint is that gold is a non correlated asset.
So as much as we talk about the markets on
a daily basis, it shows no true correlation to if
(13:56):
the markets are up, it does well, the markets are down,
it does well. There is no real statistical correlation that
can be drawn between those.
Speaker 4 (14:06):
Yeah, I think that's fair.
Speaker 3 (14:07):
If you look at the monthly change and the price
of gold and the monthly change in the value of
some measure of US stocks, like the S and P
five hundred index of the Russle one thousand index, you
will find that they tend not to move together at
the same time. And that's what you want. If you're
seeking to diversify your portfolio, you want things that are
technically only modestly correlated. And correlated it's just a fancy
(14:30):
way of expressing a relationship between any two things. In investments,
it's used a lot for obvious reasons. This is unlike
more traditional investments, like say small company stocks. If you
have a four to one K plan, you might have
seen an investment menu with large company stocks, small company stocks,
maybe mid sized company stocks, international stocks and international can
(14:52):
be broken down into developed and emerging, et cetera, et cetera.
The reason you have so many choices on your four
to one K menu, and if you have a pension fund,
these choices are there too, you just don't make them
a board. Does these allow you to spread your capital out,
not have all your eggs in one basket? Right, Gold,
it would seem, and this is true, but only less
so of other metals precious and industrial has the sort
(15:16):
of unique property that is very modestly correlated with traditional
asset classes like stocks and even bonds, although much more
correlated with bonds than it is with with stocks. It
seems well, I may have that, I may have said
that incorrectly. I don't think it's correlated with either one.
I was looking internally at just equities because that's our
area of interest. But anyway, so gold is interesting in
(15:37):
that it's pretty investible.
Speaker 4 (15:39):
Ben you're asking, how.
Speaker 5 (15:41):
Aside physical gold, how do you invest in gold?
Speaker 2 (15:45):
There are exchangtrated fund options out there in the investment
world which allow investors the ability to participate in the
price appreciation of gold and have some exposure to it.
I should say with that, so it's not.
Speaker 3 (16:02):
Hard to add it to a portfolio in this day
and age. It's been very investible in a very liquid way.
You can buy it and sell it throughout the day
for a long time, So it's easy to add it
to a portfolio if your objective is to make your
portfolio more robust to different possible market and economic climates,
if you will.
Speaker 2 (16:23):
Yeah, it serves more than thirty percent to start the year,
so certainly it's been off file.
Speaker 3 (16:27):
Yeah, a good start here, And this to me is
again part of the dollar story. If you think of
gold as a currency because of its historical treatment, as
its acceptance, it's treatment, it's characteristic, whatever you want to
call it as a currency, you can think of the
dollar depreciating against gold. When the price of gold goes up,
it takes more dollars to buy it, just like when
(16:50):
the euro dollar exchange rate goes up or down, depending
on what's in your numerator and what's in your denominator.
Let's just make it easy and say when the exchange
rate goes up, it's because the dollar strengthening, the dollars weakening.
The exchange rate goes down, it takes more dollars to
buy a euro in this example, similar thing seems to
be happening with gold.
Speaker 4 (17:06):
Is this happening with currencies?
Speaker 3 (17:07):
It takes more dollars to buy euro or yen or gold.
Speaker 2 (17:13):
Warren Buffett timed his Apple stock sale to perfection. What's next?
That's a headline from a Wall Street Journal piece. Here
eleven days from now, Warren Buffett will host the Woodstock
quote unquote Woodstock for Capitalist event. A lot of the
questions that he will likely receive will stem from the
significant pile of cash that Berkshire Hathaway is sitting on,
(17:35):
which is now up to about three hundred and eighteen billion. Notably,
they had sold a very large chunk of their Apple
shares that they had initially started investing in Apple back
in twenty sixteen. Apple obviously has lost about twenty five
percent of its value since it's December peak, and a
(17:57):
lot of the questions will be just what does you
know Warren Buffett? For see, from an economic perspective, is
this cash hoarde of his a strategic move to help
bail out you know, blue chip companies like he's done
in the past. I doubt we'll get a lot of
information as to what his plans or the firm's plans are.
But it is always interesting to hear his feedback. It's
(18:19):
amazing that he continues to host this event in the
upwards of his nineties. I don't know if he's ninety
five ninety two, he's you know, significantly up there. But
is always interesting to hear his feed doact just because
of his the career and the historical perspective that he brings.
Speaker 3 (18:36):
It doesn't mean he's soured on Apple. It just means
he thinks he can deploy his capital to a higher
and better use, maybe by sitting on it in the interim.
He's an active manager. He's an unusually long standing and
a successful one in some ways. And he's activist too,
Unlike many of the managers on say the menu in
(18:56):
your four one K plan to go back to that
for a second. He rolls up his sleeves and gets
involved in the management of the companies in most in
some cases that he owns. So it doesn't mean Apple's
prospects have deteriorate. It it's all relative with somebody like
with somebody like Buffett.
Speaker 2 (19:10):
They haven't made a significant acquisition in a bit, but
we'll see if there's any information that comes out at
the meeting in a week and a half or so.
Here taking a look around at markets, the S and
P five hundred still up over two percent in the
Dow Jones rallying eight hundred points as we hit two
hours into trading. We're going to take a quick break
here on the Fantasy Exchange. When we come back, we'll
(19:32):
have the answer to our trivia question and much more
right after this break.
Speaker 1 (19:41):
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Speaker 5 (20:05):
Today's trivia question was how many Academy Awards has Jack
Nicholson one? And your answer is three. Jack won two
Best Actor Oscars for One Flew Over the Cuckoo's Nest
and As Good as It Gets. He also won a
Best Supporting Actor for his role in Terms of Endearment.
Today's winner is Lynn from Agawam. She will be taking
home a Financial Exchange Show T shirt. We play trivia
(20:28):
every day here on the Financial Exchange See complete contest
rules at Financial Exchange show dot com.
Speaker 2 (20:34):
A wider federal workforce may shrink by one point two million.
A FED estimate shows the broader US federal workforce, according
to the Federal Reserve Bank of Atlanta, could shrink by
more than one million. This is reflecting an estimated reduction
in those indirectly employed by the government through contracts and grants.
(20:56):
Given the size of the federal workforce, this could have
an impact on the labor market. It's certainly something that
is worth falling. More than two point four million people
were directly employed by the federal government at the end
of twenty twenty four, before all these cost cutting measures
went into effect.
Speaker 4 (21:16):
Here, I totally forgot about this story.
Speaker 3 (21:18):
I've become so enraptured by the FED independence talk in
tariff talk that I forget about the coming tsunami of
the people affected second order, third order by federal layoffs.
I don't mean, I don't know what to say. Labor
economists kind of throw their hands up in the air.
(21:38):
All the guests guesses are large, but they are just guesses,
And it'll take months and months for this data to
trickle in.
Speaker 2 (21:47):
When do we get the next jobs report, it's probably
got to be next Friday, the second I would imagine here,
that's when we'll get some more information on the labor report.
Will take a look at that. It does look like
I would probably be Friday, March second, May second would
be my guess.
Speaker 3 (22:05):
Yeah, in a normal an a normal economy and one
that wasn't struggling to adjust to fluid shall we say,
tariff policy, you could probably.
Speaker 4 (22:15):
Absorb these losses.
Speaker 3 (22:16):
You know, millions of workers change jobs. It's like three
to five million every month. US economy is.
Speaker 4 (22:23):
It's gigantic.
Speaker 3 (22:24):
It's easy to lose sight of that. This would normally
be a drop in the bucket. But in light of
some of the other stresses that the economy is laboring under,
obviously not helpful. But maybe the changes, you know, need
to be made.
Speaker 4 (22:39):
Hard to say.
Speaker 5 (22:41):
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Speaker 2 (23:39):
A millionaire tax would generate about four hundred billion in revenue.
That's according to the budget lab at Yale, if you
were to tax those who make over a million dollars
at a forty percent rate all income rather over a
million dollars at a forty percent rate. The Congress will
(23:59):
get back together over the course of the next week
or so to discuss about what to do regarding Trump's
twenty seventeen cuts that are set to expire at the
end of this year. This will be of a tremendous
focus for many people out there. Obviously, the taxing jobs
cut at lowered a lot of the marginal tax rates,
(24:21):
but some of the new proposals that they're looking to
enact would significantly add to the federal deficits. So there's
going to need to be some sort of increase in
revenue generated to offset them, whether it's talking about no
taxing on overtime pay or not taxing Social Security. All
these measures, like I said, would cost a significant amount
(24:42):
of lost revenue for the United States, so it has
to be made up somewhere. A little surprising that it's
being bantered about the taxes over a million dollars from
the Republican side of things, It seems like that has
been disputed a little bit, but that's at least one
of the rumors that is being mentioned here as going
after the millionaire.
Speaker 3 (25:01):
Yeah, you know, things are pretty desperate when Republicans find
the need.
Speaker 4 (25:05):
I'm both to raise taxes too.
Speaker 3 (25:07):
My favorite tax rate would start and end with a zero,
But our situation is such that people like a certain
level of federal government services. I would prefer less, but
you know, this is a democracy. So we've got this
massive gap and it's growing, and the trend has been
negative for about the last twenty five years, the last
time we had a surplus, and something has to be done.
(25:29):
Drastic spending cuts don't seem feasible. Either political party doesn't
seem to have the I don't know four to two,
for lack.
Speaker 4 (25:38):
Of a better word, to pull that off.
Speaker 3 (25:40):
Democrats probably on an interest in cutting spending. Republicans in
theory are interested, but when the squealing starts, they quickly
pull back. And this is one way to close a
very small fraction of the gap. By the way, this
four hundred billion does not compare favorably to the five
trillion in additional debt that will have accumulated over the
next ten years according to the same source here, and
I'll mentioned in this article is prior work that they've
(26:01):
done that we will rack up over the next ten
years if all the spending increases and tax cuts that
Congress seems to like right now.
Speaker 4 (26:10):
Or are passed.
Speaker 3 (26:11):
So you could do this, but it's not going to
make up more than a fraction of the new debt
that will incur if all their favorite priorities make it
through into law.
Speaker 2 (26:21):
Unfortunately, when the Tax and Jobs Cut Act was implemented
in twenty seventeen, it was for eight years, and this
is where we are on the precipice of the sunset
of this act. They by law, it was set to
retroactively go back to what the rates were previously. Of course,
the discussions that are being held here over the course
the next couple weeks are discussing how they would either
(26:42):
extend that initiative add some new ones. That's all the
focus here, so we'll continue to keep a significant eye
on that. That certainly is an area of interest for
every you know.
Speaker 3 (26:55):
And at the same time, the average interest rate on
you and what really matters is the average rate on
government debt. That's what government has to pay to finance
to carry that debt on an ongoing basis. It used
to be like three percent. I used to say three
percent for years because that's roughly where it stood.
Speaker 4 (27:11):
It's now like four and a half.
Speaker 3 (27:12):
And we all know that the federal government paid more,
spent more, if you like, on interest last year than
it did on defense. And it's closing in on some
other big areas too, like a trillion bucks just an
interest that's not going down, so that alone is half
the budget deficit. All these numbers, they just start to
get bewildering because they're all really ugly, and they're all
really big in getting bigger. But the interest problem, if
(27:37):
you will, is baked into the cake and makes this
all the harder to deal with.
Speaker 2 (27:43):
We're going to take a quick break here on the
Finansed Exchange, but when we come back, we'll be doing
a little bit of stack roulette. Markets continue to be
in positive territory, with the Dow up over seven hundred points,
up over two percent, and the S and P five
hundred up two percent as well. Quick break here in
the Fincial Exchange, but stack roulette right after this.
Speaker 1 (28:06):
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(28:29):
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Speaker 5 (28:36):
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Speaker 2 (29:09):
All right, time for a little bit of stock roulette, Mark,
I will let you bet lead off. What do you
got first?
Speaker 3 (29:14):
I'm really bad at this segment, and this is in
this I picked the I pick the worst stories too,
because I always pick ones that don't summarize their point well.
But I'm gonna give this a shot from the Wall
Street Journal Real Estate section, why Florida's condo owners are
so desperate to sell. I'll just read the key points.
It's an interesting story. If you have a journal subscription,
(29:35):
check it out. Facing rise and costs due to insurance
hikes and special assessments. Okay, we're all kind of living
with that, even us here in the Northeast. I know
homeowners association rates are going up, and that's those insurance
hikes are baked into the HOA fee, as I understand it,
although you also.
Speaker 4 (29:51):
Pay for separate coverage for stuff within the dwelling, right
is that right?
Speaker 3 (29:56):
You have to buy a policy or that sounds right
okay for your I mean, if you want your personal
stuff covered, you got to buy a policy for that.
And I don't know if the HOA makes you buy
something for the interior of the dwelling for like water
damage and stuff, But anyway, so it's a double whammie there.
The insurance on the outsides of these structures is going up,
and on the stuff inside, condo prices have dipped. Unfortunately,
(30:19):
they don't tell me year over year over the past
five years what the decline has been. They just note
that condo prices have been steadily leaking declining for the
past several years. But the bottom line they don't say,
I just didn't realize that the problem was Apparently quite dire.
Lenders are wary. So this is like a systematic systemic
(30:42):
I should say, thing is going on whereby condos are blacklisted.
Lenders just won't make loans on those particular individual units
or buildings. And then the article goes on to detail
the sort of nightmare stories from a number of retire
couples who now find themselves having to move because they
(31:04):
simply can't afford HOA plus insurance costs and because the
market is so weak. Building thirty years are older, Okay,
here's one aggregate number and I'll wrap with this. Buildings
thirty years are older had depreciated twenty two percent in
the past twenty four months, according to one local real
estate firm. I had no idea the problem was that directs.
Speaker 4 (31:25):
But didn't know was.
Speaker 2 (31:25):
That it's fascinating. I just came back from a trip
with the family. We were down in Charleston, South Carolina,
and we had previously done trips to Florida and c
s to Key was one area we had done a
couple of years back, and that area obviously dramatically impacted
by some of the hurricanes, and my father I was
mentioning that just to your point, mark the real estate there,
(31:49):
there was a tremendous amount of surge in demand in
around COVID for people to move down there just because
of the climate, the things that the reasons that people
are always.
Speaker 4 (31:59):
Gravitate power or export, no doubt.
Speaker 2 (32:01):
But the brutal realization that isn't new necessarily the hurricanes
and the impact to the insurance industry down there has
just been dramatic, and in terms of the amount of
properties that are being listed at significantly lower values or
price cuts, where people are in a very difficult situation
(32:21):
where if you don't have the means to just self insured,
those costs can be too exorbitant to cover any type
of home owners insurance that you'd want to have on
the property. You risk even in the self insurance market,
you risk losing the asset entirely by not having any
sort of coverage. If you just say I'm going to
go pay off and not have any debt assess to it,
(32:42):
no mortgage, and just go without it, it's just a really,
really difficult spot.
Speaker 4 (32:47):
You do that if you're in a condo or a condo.
Speaker 2 (32:50):
I'm talking single families, standalone homes.
Speaker 3 (32:53):
The condor, which just makes the condo market a nightmare
because you are locked into all these arrangements.
Speaker 2 (32:58):
And the special assessments like you were alluding to, I've
talked with clients who are impacted by them. It is
just financially incredibly burned some and traumatic for them to
not have the fund set aside for upwards of twenty thousand,
forty thousand dollars commitment for all these condo ors to
pool together to redo a roof or reduce some of
(33:20):
the structuring within the units because they need to meet
certain codes to get the insurance coverage. It just it's
really really going to be difficult. I feel like, well, how.
Speaker 4 (33:31):
Do you plan for this?
Speaker 3 (33:32):
Suppose climate change driven? The Wall Street Journal dosn't mention it,
which is astonishing because at the root of all this
is whether or not you choose to believe it. The
climate is changing, weather it's getting more extreme. You don't
believe me, just ask your insurance company, right, they're strictly
dollars and cents about this, which is my preferred take
on it. And or look at the filings of any
major US corporation. They're all preparing to mitigate the effects
(33:55):
of climate change. And so with climate change becoming making
weather more severe, how do you plan for cost of
living down there?
Speaker 2 (34:03):
It's a great question, and I don't think that there
is an easy answer. The home ownership side of things,
for the second home market, you just feel like you
really are rolling the dice a little bit. It seems
like renting would just be a lot more appealing to
just rent a property if you're the classic Northeast you know,
or a Greater Boston area person who's looking for a
(34:25):
reason to get away for a little bit. It just
seems like at least you don't bear that cost of
the insurance coverage or all the potential ramifications that future
hurricanes could have. But it is something that it's not
going to get any better anytime soon, that's for sure.
Similar sort of train of thought here. The magic number
(34:45):
to retire has comfortably for people to repire comfortably is
now down to one point twenty six million. Previously, in
the study that was done last year, that number was
one point four six million. According to a new study
that was done by Northwestern Mutual where they pulled forty
six hundred adults in the month of January, what number,
(35:08):
basically do you need to retire comfortably? That was the
figure that they had come up with. The average four
one K balance in the fourth quarter, according to data
provided from Fidelity, was one hundred and thirty one thousand,
seven hundred dollars. Now that spans all ages, of course
when you're taking a look at the average balance, but
still well short of the magic number. And confidence for
(35:33):
those people looking to retire has dwindled a little bit,
you know. Some of the concerns are outliving their savings.
Of course, long term care costs are something that we
talk about our client with our clients quite a bit.
That has dented people's confidence in being able to retire.
So this is something that we deal with on a
(35:54):
daily basis. And now, of course you have macroeconomic and certainty.
Of course, there's always things like this that pop up,
but there's a lot of concern out there for retirees
who are approaching that.
Speaker 3 (36:06):
Do they give any explanation for the reduction and the
assets that people think? And I assume that's they don't say,
before tax, after tax, is that all your accounts is?
Speaker 2 (36:15):
That's I believe that's specific to pre tax dollars. Yes,
they basically break it out by doing that survey the
forty six hundred, but I don't feel as if it
really specifically says exactly why we saw that big of
(36:35):
a drop here they do talk about just you know,
that target savings rate they should have anywhere we typically
say rule thumb, ten to fifteen percent of your pay
should be going towards retirement. But the reason for this drop,
it doesn't seem like it is fully drawn out here,
and obviously it there is what area of the country
(36:56):
you're trying to retire into, right where that balance comes in.
You know, Massachusetts or Hawaii is a whole lot different
than Louisiana or North Shore or something.
Speaker 3 (37:04):
Would say it's easier than ever or easier than it's been. Well, yeah,
easier than ever to calculate what is the magic amount
for you with a retirem account If you have a
four oh one K they have such tools.
Speaker 4 (37:15):
Everybody's got them now, whether you're four one.
Speaker 3 (37:18):
Ka's administered by Fidelity, Vanguard or one of the smaller guys,
you can find out what your number is.
Speaker 4 (37:23):
Getting there, of course, is the assumptions.
Speaker 2 (37:25):
It's just always up for to date, right you know,
what inflation rate are you going to assume? What are
you going to know?
Speaker 1 (37:30):
Think?
Speaker 3 (37:31):
These calculators guide you through that, so more than ever,
individuals can figure out what their number is.
Speaker 4 (37:38):
There you'd be surprised.
Speaker 2 (37:39):
The input side of things, people have a very difficult
time trying to gather together what do I need to
live on in retirement?
Speaker 3 (37:46):
And so it's really the budget and the expense part
where you spend most of your time as if financial.
Speaker 2 (37:50):
That's a big part of it is trying to figure
that out. It It can certainly be challenging to put
together here, but that's all the time that we have
for this episode. Here of the and It's exchange took
in a look around at markets, all in positive territory
up over two percent across the board, dowd Jones up
almost eight hundred points, the S and P five hundred
up over one hundred points. We'll have Tesla's earnings at
(38:11):
the close of the bell today. We'll be covering that
and much more on tomorrow's show at ten am. Thanks
so much for joining us.
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
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your own financial, tax, and estate planning advisors before making
(00:20):
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Exchange with Paul Lane and Mark Fandetti, Your exclusive look
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(00:43):
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heroes by visiting DAV five dot Boston and making a
donation today. Face is the Financial Exchange with Paul Lane
(01:06):
and Mark Vandetti.
Speaker 2 (01:11):
Kicking off the second hour of the Financial Exchange, Paul Lane,
Mark Vendetti, and Ben Kitchen here with you. All US
markets up over two percent, making back some of the
losses from yesterday's sell off. We start the second hour
of our program by previewing some earnings that we have
coming after the bell today. Tesla is going to be
(01:32):
reporting its earnings. They had earlier in this month reported
that they saw a thirteen percent decline in deliveries. Obviously,
they've been in the headlines quite a bit because of
Elon Musk's involvement in the Trunk administration. The stock is
off about fifty percent from where it was before Trump
(01:52):
took office. It had had a significant run up from
November to January, but since then has has really created
quite a bit, and sales are slowing across many different markets,
whether you look at the European market. There's also tremendous
challenges that they face in China to gain market share,
or rather to maintain market share. They're really losing there,
(02:14):
So it'll be interesting to see what we get out
of Tesla at the close of market today. It's anticipated
that their revenue grew less than one percent for this
most recent quarter here.
Speaker 3 (02:25):
So yeah, strange reversal of well, not strange. We know
exactly what it's attributable to. Some of it may be fair,
some of it may be unfair. But if you look
at analysts who follow the company, their comments have turned
from the fine tuning things he needs to do to
how to save it. And you would not have thought
that fortunes could have turned that quickly. But those are
(02:45):
the risks you take when you become vocal.
Speaker 2 (02:48):
Yes, and he being involved in the headlines. Yeah, like
I you know it just it seems as if a
lot of the buyers have been alienated just because of
some of the local views. And it goes back to
that Michael Jordan line that we always reference to the
show that you know both sides by by shoes er
in this case, by electric vehicles. So be interesting. Like
(03:10):
I said, actually, but I think the.
Speaker 4 (03:14):
Yeah, that's true, talk about this.
Speaker 3 (03:17):
Eli is a very smart guy, I think, right, Oh, definitely, Okay,
so he knows this, so uh, I guess he thought
it was worth it.
Speaker 2 (03:24):
The full year results, like I mentioned, uh, probably won't
be that tremendous. As I mentioned, the thirteen percent year
over year dropping vehicles in Q one has been concerning,
and this is coming off a year previously where they
had seen slowing sales growth. So that had really been
the story with Tesla that as much as you'd want
to beat them up from a valuation perspective, which I
(03:46):
think all of us traditional valuation people out there had
in terms of what it was trading at, from a
prist earnings perspective, at least they could previously promise that
there's sort of this hockey hockey shape hockey stick shape
revenue growth, but that has really plateaued a bit here.
And then the other reason that you'd be a Tesla
buyers just the optimism around Elon Musk and the company's
(04:10):
propensity for innovation, and none of those bets have really
proven just yeah, you know, in terms of the cyber tax,
the robotaxity, Yeah, that's probably the insue story.
Speaker 3 (04:21):
Certainly, the uncertainty around electric vehicle, I was electrical ownership
is not quite the way a way I want to
put it, but I'll go with that. You know, four
years ago, they were shoving these things aggressively down everybody's
start out almost felt like I'd have to buy one
at some point now, I feel like if I had
bought one, I might not be able to charge it
(04:42):
because the FEDS have backed off the larger theme. They're
backing off supporting charging infrastructure. This type of whip sawing
policy is not helpful.
Speaker 4 (04:55):
And if I'm.
Speaker 3 (04:56):
Feeling it a little idio bit as a consumer, I
can only imagine what businesses who have to make investment
and in the short term inventory decisions based on say,
tariff policy might be.
Speaker 4 (05:05):
It's really the.
Speaker 3 (05:08):
Uncertainty with respect to prospects for electric vehicles and the
degree to which the government will support them has got
to be really anxiety provoking for some people to climate
has changed so radically in such a short period and
it could flip back in three years or eight years
or one.
Speaker 2 (05:24):
Yeah, you've seen the major auto manufacturers that first of all,
they're dealing with enough as it is with everything that's
going on from a tear front now. But also they
had pulled back on a lot of their ev initiatives
to begin with to begin with, and so there's just
really not a lot of momentum there. Not to mention,
if you're battling on the global market field like Tesla is,
(05:45):
you've got a lot of Chinese vehicles that are taking
a lot of market share away at some of these
subsidized prices. So it's a challenging business environment out there,
that is for sure. Piece here from CNBC is the
dollar falters the World Center Bank trends a tightrope to
devalue their currency or not. As I mentioned earlier in
(06:07):
the program, we've seen the dollar index down more than
nine percent so far this year. Other currencies out there
have appreciated against it, such as the Japanese gen and
the Swiss franc. So now there's this piece here as
to know what we do about that drop in the
dollar index and is that an area of concern.
Speaker 3 (06:29):
So the dollar is falling, presumably, and there may be
other reasons, but the main story is that people are
fleeing US assets. They're fleeing treasuries, they're fleeing stocks to
I'm talking about international investors now, and there's hard evidence
for this. They have maybe less confidence that, say, the
Fed won't inflate our debts away if it comes under
(06:50):
political control, or they just don't like the policy uncertainty
here generally, or they're doing it out of spite, they're
being a little bit vindictive. Oh you're going to teriff us.
Speaker 4 (06:58):
We're not going to buy your assets. And it's worth reminding.
Speaker 3 (07:02):
Ourselves that all those dollars we send abroad when we
buy Chinese goods, lows or Japanese electronics, those dollars get
recycled back into US investments. The recycling part into investments
is called the capital account. You hear about the current
account or the trade deficit a lot you don't hear
about the flip side of that, which is what foreigners
do with those dollars.
Speaker 4 (07:22):
They invest them.
Speaker 3 (07:23):
The reason is we don't save enough here to support
our own investment needs. We're a very attractive investment location
the US is, but we don't save enough. So the
point I guess I want to make getting a little
bit sidetracked, but I think it's worthwhile reminding ourselves myself included,
is that the trade deficit as a result of us
not saving enough. It's not a result of anybody playing
(07:45):
of stacking the deck against us.
Speaker 4 (07:48):
Necessarily.
Speaker 3 (07:49):
There might be a little bit of that China might
you know, some currency manipulation might be going on, but
that's not the primary reason behind the trade deficit. This
article points out that as the dollar is weakened lately
because people are fleeing US assets right, other countries are
now finding themselves in less favorable in a less favorable
competitive position. If you're a Japanese exporter, your export's just
(08:12):
got more expensive because the yen is appreciating. So now
the Japanese Central Bank has to think about Bank of
Japan has to think about the yen, its value, and
how it makes monetary how its monetary policy affects the
value of the yen. It gets quite involved, is my
wandering commentary here suggests.
Speaker 2 (08:35):
Similarly, a similar story that ties into this discussion is JD.
Vance is on a tour where he was speaking recently
in India calling for US India ties to sort of
tighten and create a win win partnership where they would
leverage one another more than they have previously. Certainly from
(08:56):
a business perspective, Apple has been in the headlines that's
trying to divert of its manufacturing of the Apple iPhone
to India, and there's been a lot of pieces that
have been written about this idea that India can be
the next manufacturing frontier. They still have a tremendous amount
of ground to make up when it comes to competing
with China on the manufacturing front. But JD Vance was
(09:18):
out there encouraging them not only to work with the
US and create closer ties, but also encouraging them to
purchase more American goods, in particular energy and military equipment,
as well as the potential of purchasing American F thirty
five warplanes to strengthen the Indian Air Force.
Speaker 3 (09:39):
Fine, great, you want to be the it's a good
role for the vice president. You're sort of the unofficial
head of the US Chamber of Commerce or something that's
always been an appropriate role for politicians. Don't fool yourself though,
into thinking this will and I don't think we need
to fix the trade deficit. By the way, it's not
a bad thing that we ship fewer goods abroad than
we buy from abroad. That makes us all better off.
(10:01):
And again the flip side to that is that we
export investments and services. That aside, we had about a
fifty billion dollar so called trade deficit. We bought fifty
billion dollars more in Indian goods last year than we exported.
If you brought that to zero, because again, the trade
deficit is it root a savings deficit you have to
(10:23):
keep it's it's non intuitive. First time I learned it,
I didn't believe it. Second time I learned it, I
was a little more open to it, and it took
me like, probably years for it to sink in. So
I understand this is it's a weird concept. But the
trade deficit is just going to go someplace else because
we're not fixing the root of the problem, which is
low savings. And that savings problem includes federal government disssavings
(10:46):
or the federal budget deficit. All these things are tied together.
Speaker 2 (10:49):
Should we be fixing the savings.
Speaker 3 (10:52):
I wouldn't mind seeing incentives for I think our savings
rate is probably too low as evit look, given the
level of services. There are a couple I'm sorry, I'm
answering your question now three different ways, and I've stopped
each time and started to answer it differently. We got
a big we got a big federal budget debt and deficit.
Federal debt, federal budget deficit problem. So I'm gonna focus
on that part because reducing that is the equivalent of So, yeah,
(11:14):
it's not really what you asked, but I'm gonna say absolutely,
particularly when the economy is expanding, if you fixed the
budget deficit, it would alleviate to a degree the trade deficit.
Though if we continued to grow faster than the rest
of the world, we might still find our trade deficit
to be all to say large, without defining that. Like
in the late nineties, we grew really fast, we ended
(11:34):
up with a budget federal budget surplus. We still had
a pretty good sized trade deficit, though that was a
function of growing fast and not saving enough. So I think, yes, Paul,
if you we should fix the savings problem. If you
focus on the federal government's dissaving problem, it's it's it's
shameful addiction to debt, even to deficits, even in good
(11:54):
economic times, when you should be running surpluses.
Speaker 2 (11:58):
We're gonna take a quick break here on the Financial Exchange.
When we come back, we'll have a little bit of
trivia and much much more. That's right after this break
here on the Financial Exchange. Stick with us.
Speaker 1 (12:09):
Tara Fever is in high gear. We've got the latest
on what might be next and how long it might last.
Only here on the Financial Exchange Radio Network. The Financial
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Speaker 5 (12:31):
All right time. Now for some trivia here on the
Financial Exchange Today's Jack Nicholson's eighty eighth birthdayson is widely
regarded as one of the greatest actors of the twentieth century,
often playing rebels fighting against the social structure. That might
be a little bit of a clue towards the question
here how many Academy Awards has Jack Nicholson won? How
(12:54):
many Academy Awards has Jack Nicholson won? Be the fifth
person who texts us at seven three six two, one
three eight five with the correct answer, and you'll win
a Financial Exchange.
Speaker 2 (13:05):
Show t shirt.
Speaker 5 (13:06):
The fifth correct response will be our winner. See the
complete contest rules at Financial Exchange Show dot com.
Speaker 2 (13:12):
Gold has hit thirty five hundred dollars announced as we
look at trading today, it's slightly blow that threshold, but
it did top over thirty five hundred dollars announced in
what's been a record setting run for gold over the
course of the last several months or so. And we'll
we'll take some time mark maybe just to talk about
(13:34):
how investors sometimes will use gold within their portfolio. I
think the biggest thing to take into stock from an
investment standpoint is that gold is a non correlated asset.
So as much as we talk about the markets on
a daily basis, it shows no true correlation to if
(13:56):
the markets are up, it does well, the markets are down,
it does well. There is no real statistical correlation that
can be drawn between those.
Speaker 4 (14:06):
Yeah, I think that's fair.
Speaker 3 (14:07):
If you look at the monthly change and the price
of gold and the monthly change in the value of
some measure of US stocks, like the S and P
five hundred index of the Russle one thousand index, you
will find that they tend not to move together at
the same time. And that's what you want. If you're
seeking to diversify your portfolio, you want things that are
technically only modestly correlated. And correlated it's just a fancy
(14:30):
way of expressing a relationship between any two things. In investments,
it's used a lot for obvious reasons. This is unlike
more traditional investments, like say small company stocks. If you
have a four to one K plan, you might have
seen an investment menu with large company stocks, small company stocks,
maybe mid sized company stocks, international stocks and international can
(14:52):
be broken down into developed and emerging, et cetera, et cetera.
The reason you have so many choices on your four
to one K menu, and if you have a pension fund,
these choices are there too, you just don't make them
a board. Does these allow you to spread your capital out,
not have all your eggs in one basket? Right, Gold,
it would seem, and this is true, but only less
so of other metals precious and industrial has the sort
(15:16):
of unique property that is very modestly correlated with traditional
asset classes like stocks and even bonds, although much more
correlated with bonds than it is with with stocks. It
seems well, I may have that, I may have said
that incorrectly. I don't think it's correlated with either one.
I was looking internally at just equities because that's our
area of interest. But anyway, so gold is interesting in
(15:37):
that it's pretty investible.
Speaker 4 (15:39):
Ben you're asking, how.
Speaker 5 (15:41):
Aside physical gold, how do you invest in gold?
Speaker 2 (15:45):
There are exchangtrated fund options out there in the investment
world which allow investors the ability to participate in the
price appreciation of gold and have some exposure to it.
I should say with that, so it's not.
Speaker 3 (16:02):
Hard to add it to a portfolio in this day
and age. It's been very investible in a very liquid way.
You can buy it and sell it throughout the day
for a long time, So it's easy to add it
to a portfolio if your objective is to make your
portfolio more robust to different possible market and economic climates,
if you will.
Speaker 2 (16:23):
Yeah, it serves more than thirty percent to start the year,
so certainly it's been off file.
Speaker 3 (16:27):
Yeah, a good start here, And this to me is
again part of the dollar story. If you think of
gold as a currency because of its historical treatment, as
its acceptance, it's treatment, it's characteristic, whatever you want to
call it as a currency, you can think of the
dollar depreciating against gold. When the price of gold goes up,
it takes more dollars to buy it, just like when
(16:50):
the euro dollar exchange rate goes up or down, depending
on what's in your numerator and what's in your denominator.
Let's just make it easy and say when the exchange
rate goes up, it's because the dollar strengthening, the dollars weakening.
The exchange rate goes down, it takes more dollars to
buy a euro in this example, similar thing seems to
be happening with gold.
Speaker 4 (17:06):
Is this happening with currencies?
Speaker 3 (17:07):
It takes more dollars to buy euro or yen or gold.
Speaker 2 (17:13):
Warren Buffett timed his Apple stock sale to perfection. What's next?
That's a headline from a Wall Street Journal piece. Here
eleven days from now, Warren Buffett will host the Woodstock
quote unquote Woodstock for Capitalist event. A lot of the
questions that he will likely receive will stem from the
significant pile of cash that Berkshire Hathaway is sitting on,
(17:35):
which is now up to about three hundred and eighteen billion. Notably,
they had sold a very large chunk of their Apple
shares that they had initially started investing in Apple back
in twenty sixteen. Apple obviously has lost about twenty five
percent of its value since it's December peak, and a
(17:57):
lot of the questions will be just what does you
know Warren Buffett? For see, from an economic perspective, is
this cash hoarde of his a strategic move to help
bail out you know, blue chip companies like he's done
in the past. I doubt we'll get a lot of
information as to what his plans or the firm's plans are.
But it is always interesting to hear his feedback. It's
(18:19):
amazing that he continues to host this event in the
upwards of his nineties. I don't know if he's ninety
five ninety two, he's you know, significantly up there. But
is always interesting to hear his feed doact just because
of his the career and the historical perspective that he brings.
Speaker 3 (18:36):
It doesn't mean he's soured on Apple. It just means
he thinks he can deploy his capital to a higher
and better use, maybe by sitting on it in the interim.
He's an active manager. He's an unusually long standing and
a successful one in some ways. And he's activist too,
Unlike many of the managers on say the menu in
(18:56):
your four one K plan to go back to that
for a second. He rolls up his sleeves and gets
involved in the management of the companies in most in
some cases that he owns. So it doesn't mean Apple's
prospects have deteriorate. It it's all relative with somebody like
with somebody like Buffett.
Speaker 2 (19:10):
They haven't made a significant acquisition in a bit, but
we'll see if there's any information that comes out at
the meeting in a week and a half or so.
Here taking a look around at markets, the S and
P five hundred still up over two percent in the
Dow Jones rallying eight hundred points as we hit two
hours into trading. We're going to take a quick break
here on the Fantasy Exchange. When we come back, we'll
(19:32):
have the answer to our trivia question and much more
right after this break.
Speaker 1 (19:41):
Bringing the latest financial news straight to your radio. Every day,
it's the Financial Exchange on the Financial Exchange Radio Network.
The Financial Exchange Show podcast drops every day on Apple, Spotify,
and iHeartRadio. Hit that subscribe button then leave us a
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Speaker 5 (20:05):
Today's trivia question was how many Academy Awards has Jack
Nicholson one? And your answer is three. Jack won two
Best Actor Oscars for One Flew Over the Cuckoo's Nest
and As Good as It Gets. He also won a
Best Supporting Actor for his role in Terms of Endearment.
Today's winner is Lynn from Agawam. She will be taking
home a Financial Exchange Show T shirt. We play trivia
(20:28):
every day here on the Financial Exchange See complete contest
rules at Financial Exchange show dot com.
Speaker 2 (20:34):
A wider federal workforce may shrink by one point two million.
A FED estimate shows the broader US federal workforce, according
to the Federal Reserve Bank of Atlanta, could shrink by
more than one million. This is reflecting an estimated reduction
in those indirectly employed by the government through contracts and grants.
(20:56):
Given the size of the federal workforce, this could have
an impact on the labor market. It's certainly something that
is worth falling. More than two point four million people
were directly employed by the federal government at the end
of twenty twenty four, before all these cost cutting measures
went into effect.
Speaker 4 (21:16):
Here, I totally forgot about this story.
Speaker 3 (21:18):
I've become so enraptured by the FED independence talk in
tariff talk that I forget about the coming tsunami of
the people affected second order, third order by federal layoffs.
I don't mean, I don't know what to say. Labor
economists kind of throw their hands up in the air.
(21:38):
All the guests guesses are large, but they are just guesses,
And it'll take months and months for this data to
trickle in.
Speaker 2 (21:47):
When do we get the next jobs report, it's probably
got to be next Friday, the second I would imagine here,
that's when we'll get some more information on the labor report.
Will take a look at that. It does look like
I would probably be Friday, March second, May second would
be my guess.
Speaker 3 (22:05):
Yeah, in a normal an a normal economy and one
that wasn't struggling to adjust to fluid shall we say,
tariff policy, you could probably.
Speaker 4 (22:15):
Absorb these losses.
Speaker 3 (22:16):
You know, millions of workers change jobs. It's like three
to five million every month. US economy is.
Speaker 4 (22:23):
It's gigantic.
Speaker 3 (22:24):
It's easy to lose sight of that. This would normally
be a drop in the bucket. But in light of
some of the other stresses that the economy is laboring under,
obviously not helpful. But maybe the changes, you know, need
to be made.
Speaker 4 (22:39):
Hard to say.
Speaker 5 (22:41):
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Speaker 2 (23:39):
A millionaire tax would generate about four hundred billion in revenue.
That's according to the budget lab at Yale, if you
were to tax those who make over a million dollars
at a forty percent rate all income rather over a
million dollars at a forty percent rate. The Congress will
(23:59):
get back together over the course of the next week
or so to discuss about what to do regarding Trump's
twenty seventeen cuts that are set to expire at the
end of this year. This will be of a tremendous
focus for many people out there. Obviously, the taxing jobs
cut at lowered a lot of the marginal tax rates,
(24:21):
but some of the new proposals that they're looking to
enact would significantly add to the federal deficits. So there's
going to need to be some sort of increase in
revenue generated to offset them, whether it's talking about no
taxing on overtime pay or not taxing Social Security. All
these measures, like I said, would cost a significant amount
(24:42):
of lost revenue for the United States, so it has
to be made up somewhere. A little surprising that it's
being bantered about the taxes over a million dollars from
the Republican side of things, It seems like that has
been disputed a little bit, but that's at least one
of the rumors that is being mentioned here as going
after the millionaire.
Speaker 3 (25:01):
Yeah, you know, things are pretty desperate when Republicans find
the need.
Speaker 4 (25:05):
I'm both to raise taxes too.
Speaker 3 (25:07):
My favorite tax rate would start and end with a zero,
But our situation is such that people like a certain
level of federal government services. I would prefer less, but
you know, this is a democracy. So we've got this
massive gap and it's growing, and the trend has been
negative for about the last twenty five years, the last
time we had a surplus, and something has to be done.
(25:29):
Drastic spending cuts don't seem feasible. Either political party doesn't
seem to have the I don't know four to two,
for lack.
Speaker 4 (25:38):
Of a better word, to pull that off.
Speaker 3 (25:40):
Democrats probably on an interest in cutting spending. Republicans in
theory are interested, but when the squealing starts, they quickly
pull back. And this is one way to close a
very small fraction of the gap. By the way, this
four hundred billion does not compare favorably to the five
trillion in additional debt that will have accumulated over the
next ten years according to the same source here, and
I'll mentioned in this article is prior work that they've
(26:01):
done that we will rack up over the next ten
years if all the spending increases and tax cuts that
Congress seems to like right now.
Speaker 4 (26:10):
Or are passed.
Speaker 3 (26:11):
So you could do this, but it's not going to
make up more than a fraction of the new debt
that will incur if all their favorite priorities make it
through into law.
Speaker 2 (26:21):
Unfortunately, when the Tax and Jobs Cut Act was implemented
in twenty seventeen, it was for eight years, and this
is where we are on the precipice of the sunset
of this act. They by law, it was set to
retroactively go back to what the rates were previously. Of course,
the discussions that are being held here over the course
the next couple weeks are discussing how they would either
(26:42):
extend that initiative add some new ones. That's all the
focus here, so we'll continue to keep a significant eye
on that. That certainly is an area of interest for
every you know.
Speaker 3 (26:55):
And at the same time, the average interest rate on
you and what really matters is the average rate on
government debt. That's what government has to pay to finance
to carry that debt on an ongoing basis. It used
to be like three percent. I used to say three
percent for years because that's roughly where it stood.
Speaker 4 (27:11):
It's now like four and a half.
Speaker 3 (27:12):
And we all know that the federal government paid more,
spent more, if you like, on interest last year than
it did on defense. And it's closing in on some
other big areas too, like a trillion bucks just an
interest that's not going down, so that alone is half
the budget deficit. All these numbers, they just start to
get bewildering because they're all really ugly, and they're all
really big in getting bigger. But the interest problem, if
(27:37):
you will, is baked into the cake and makes this
all the harder to deal with.
Speaker 2 (27:43):
We're going to take a quick break here on the
Finansed Exchange, but when we come back, we'll be doing
a little bit of stack roulette. Markets continue to be
in positive territory, with the Dow up over seven hundred points,
up over two percent, and the S and P five
hundred up two percent as well. Quick break here in
the Fincial Exchange, but stack roulette right after this.
Speaker 1 (28:06):
The global trade war is in full swing. How long
will it last? Is anyone's gus? Keep it here for
the most up to date information plus breaking news every
day right here on the Financial Exchange Radio Network. Find
daily interviews and full shows of the Financial Exchange on
our YouTube page. Like us on YouTube and get caught
up on anything and everything you might have missed. This
(28:29):
is the Financial Exchange Radio Network.
Speaker 5 (28:36):
The Financial Exchange is proud of our partnership with the
Disabled American Veterans Department of Massachusetts. This year's five K
is Saturday, November eighth, and registration is now open. The
race has sold out each of the past four years
and slots will fill up quickly, so don't delay. Visit
DAV fivek dot Boston today and reserve your spot, or
(28:57):
join our team here at the Financial Exchange by register
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five kt Boston.
Speaker 2 (29:09):
All right, time for a little bit of stock roulette, Mark,
I will let you bet lead off. What do you
got first?
Speaker 3 (29:14):
I'm really bad at this segment, and this is in
this I picked the I pick the worst stories too,
because I always pick ones that don't summarize their point well.
But I'm gonna give this a shot from the Wall
Street Journal Real Estate section, why Florida's condo owners are
so desperate to sell. I'll just read the key points.
It's an interesting story. If you have a journal subscription,
(29:35):
check it out. Facing rise and costs due to insurance
hikes and special assessments. Okay, we're all kind of living
with that, even us here in the Northeast. I know
homeowners association rates are going up, and that's those insurance
hikes are baked into the HOA fee, as I understand it,
although you also.
Speaker 4 (29:51):
Pay for separate coverage for stuff within the dwelling, right
is that right?
Speaker 3 (29:56):
You have to buy a policy or that sounds right
okay for your I mean, if you want your personal
stuff covered, you got to buy a policy for that.
And I don't know if the HOA makes you buy
something for the interior of the dwelling for like water
damage and stuff, But anyway, so it's a double whammie there.
The insurance on the outsides of these structures is going up,
and on the stuff inside, condo prices have dipped. Unfortunately,
(30:19):
they don't tell me year over year over the past
five years what the decline has been. They just note
that condo prices have been steadily leaking declining for the
past several years. But the bottom line they don't say,
I just didn't realize that the problem was Apparently quite dire.
Lenders are wary. So this is like a systematic systemic
(30:42):
I should say, thing is going on whereby condos are blacklisted.
Lenders just won't make loans on those particular individual units
or buildings. And then the article goes on to detail
the sort of nightmare stories from a number of retire
couples who now find themselves having to move because they
(31:04):
simply can't afford HOA plus insurance costs and because the
market is so weak. Building thirty years are older, Okay,
here's one aggregate number and I'll wrap with this. Buildings
thirty years are older had depreciated twenty two percent in
the past twenty four months, according to one local real
estate firm. I had no idea the problem was that directs.
Speaker 4 (31:25):
But didn't know was.
Speaker 2 (31:25):
That it's fascinating. I just came back from a trip
with the family. We were down in Charleston, South Carolina,
and we had previously done trips to Florida and c
s to Key was one area we had done a
couple of years back, and that area obviously dramatically impacted
by some of the hurricanes, and my father I was
mentioning that just to your point, mark the real estate there,
(31:49):
there was a tremendous amount of surge in demand in
around COVID for people to move down there just because
of the climate, the things that the reasons that people
are always.
Speaker 4 (31:59):
Gravitate power or export, no doubt.
Speaker 2 (32:01):
But the brutal realization that isn't new necessarily the hurricanes
and the impact to the insurance industry down there has
just been dramatic, and in terms of the amount of
properties that are being listed at significantly lower values or
price cuts, where people are in a very difficult situation
(32:21):
where if you don't have the means to just self insured,
those costs can be too exorbitant to cover any type
of home owners insurance that you'd want to have on
the property. You risk even in the self insurance market,
you risk losing the asset entirely by not having any
sort of coverage. If you just say I'm going to
go pay off and not have any debt assess to it,
(32:42):
no mortgage, and just go without it, it's just a really,
really difficult spot.
Speaker 4 (32:47):
You do that if you're in a condo or a condo.
Speaker 2 (32:50):
I'm talking single families, standalone homes.
Speaker 3 (32:53):
The condor, which just makes the condo market a nightmare
because you are locked into all these arrangements.
Speaker 2 (32:58):
And the special assessments like you were alluding to, I've
talked with clients who are impacted by them. It is
just financially incredibly burned some and traumatic for them to
not have the fund set aside for upwards of twenty thousand,
forty thousand dollars commitment for all these condo ors to
pool together to redo a roof or reduce some of
(33:20):
the structuring within the units because they need to meet
certain codes to get the insurance coverage. It just it's
really really going to be difficult. I feel like, well, how.
Speaker 4 (33:31):
Do you plan for this?
Speaker 3 (33:32):
Suppose climate change driven? The Wall Street Journal dosn't mention it,
which is astonishing because at the root of all this
is whether or not you choose to believe it. The
climate is changing, weather it's getting more extreme. You don't
believe me, just ask your insurance company, right, they're strictly
dollars and cents about this, which is my preferred take
on it. And or look at the filings of any
major US corporation. They're all preparing to mitigate the effects
(33:55):
of climate change. And so with climate change becoming making
weather more severe, how do you plan for cost of
living down there?
Speaker 2 (34:03):
It's a great question, and I don't think that there
is an easy answer. The home ownership side of things,
for the second home market, you just feel like you
really are rolling the dice a little bit. It seems
like renting would just be a lot more appealing to
just rent a property if you're the classic Northeast you know,
or a Greater Boston area person who's looking for a
(34:25):
reason to get away for a little bit. It just
seems like at least you don't bear that cost of
the insurance coverage or all the potential ramifications that future
hurricanes could have. But it is something that it's not
going to get any better anytime soon, that's for sure.
Similar sort of train of thought here. The magic number
(34:45):
to retire has comfortably for people to repire comfortably is
now down to one point twenty six million. Previously, in
the study that was done last year, that number was
one point four six million. According to a new study
that was done by Northwestern Mutual where they pulled forty
six hundred adults in the month of January, what number,
(35:08):
basically do you need to retire comfortably? That was the
figure that they had come up with. The average four
one K balance in the fourth quarter, according to data
provided from Fidelity, was one hundred and thirty one thousand,
seven hundred dollars. Now that spans all ages, of course
when you're taking a look at the average balance, but
still well short of the magic number. And confidence for
(35:33):
those people looking to retire has dwindled a little bit,
you know. Some of the concerns are outliving their savings.
Of course, long term care costs are something that we
talk about our client with our clients quite a bit.
That has dented people's confidence in being able to retire.
So this is something that we deal with on a
(35:54):
daily basis. And now, of course you have macroeconomic and certainty.
Of course, there's always things like this that pop up,
but there's a lot of concern out there for retirees
who are approaching that.
Speaker 3 (36:06):
Do they give any explanation for the reduction and the
assets that people think? And I assume that's they don't say,
before tax, after tax, is that all your accounts is?
Speaker 2 (36:15):
That's I believe that's specific to pre tax dollars. Yes,
they basically break it out by doing that survey the
forty six hundred, but I don't feel as if it
really specifically says exactly why we saw that big of
(36:35):
a drop here they do talk about just you know,
that target savings rate they should have anywhere we typically
say rule thumb, ten to fifteen percent of your pay
should be going towards retirement. But the reason for this drop,
it doesn't seem like it is fully drawn out here,
and obviously it there is what area of the country
(36:56):
you're trying to retire into, right where that balance comes in.
You know, Massachusetts or Hawaii is a whole lot different
than Louisiana or North Shore or something.
Speaker 3 (37:04):
Would say it's easier than ever or easier than it's been. Well, yeah,
easier than ever to calculate what is the magic amount
for you with a retirem account If you have a
four oh one K they have such tools.
Speaker 4 (37:15):
Everybody's got them now, whether you're four one.
Speaker 3 (37:18):
Ka's administered by Fidelity, Vanguard or one of the smaller guys,
you can find out what your number is.
Speaker 4 (37:23):
Getting there, of course, is the assumptions.
Speaker 2 (37:25):
It's just always up for to date, right you know,
what inflation rate are you going to assume? What are
you going to know?
Speaker 1 (37:30):
Think?
Speaker 3 (37:31):
These calculators guide you through that, so more than ever,
individuals can figure out what their number is.
Speaker 4 (37:38):
There you'd be surprised.
Speaker 2 (37:39):
The input side of things, people have a very difficult
time trying to gather together what do I need to
live on in retirement?
Speaker 3 (37:46):
And so it's really the budget and the expense part
where you spend most of your time as if financial.
Speaker 2 (37:50):
That's a big part of it is trying to figure
that out. It It can certainly be challenging to put
together here, but that's all the time that we have
for this episode. Here of the and It's exchange took
in a look around at markets, all in positive territory
up over two percent across the board, dowd Jones up
almost eight hundred points, the S and P five hundred
up over one hundred points. We'll have Tesla's earnings at
(38:11):
the close of the bell today. We'll be covering that
and much more on tomorrow's show at ten am. Thanks
so much for joining us.
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