September 30, 2024 • 38 mins
Chuck Zodda and Mike Armstrong discuss the market killing it right now, but what could kill the rally? What is going to be the financial impact of Hurrican Helene? The stock market isn't all about AI anymore. A week of shock and awe ignites China's stock markets. China has broken the 'critical materials' market.
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Episode Transcript
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Speaker 1 (00:00):
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(01:04):
by Veterans Development Corporation. This is the Financial Exchange with
Chuck Zutta and Mike Armstrong.
Speaker 2 (01:12):
It's Chuck, Mike, and Tucker here with the on the
final day of September twenty twenty four. And as we
sit here today, Mike, in what is historically the worst
month on record for the stock market based on historical
seasonal patterns, the S and P five hundred is still
(01:33):
up significantly for the month, a couple percentage points. And thus, again,
I know we haven't closed yet. I know there's still
a little bit of time.
Speaker 3 (01:41):
Yeah, we could sell off by ten percent today, but
sure we could.
Speaker 2 (01:45):
You know, look, all would take in order for us
to get you know, a down month would be you know,
a three percent sell off, which is still one hundred
and eighty points almost on the S and P five hundred,
and would.
Speaker 3 (01:53):
Be you know, a rather large late day move.
Speaker 2 (01:57):
But to this point it looks to be, you know,
increasingly likely that the S and P is going to
finish in positive territory. Despite the outcry on September ninth
that hey, it's just another down September for the S
and P five hundred, uh and gosh.
Speaker 3 (02:17):
We just better get used to it, And what do
you think about all that? Tucker? Did I introduce Bennis Tucker? Yeah,
you did. That's all right. Well, actually I don't know
if it's all right, Chuck, It's fine, it's totally totally.
That wasn't a very good Tucker impression. By the way,
you need to work on that. You listen to him
for like two hours every day. You gotta get his
voice down at this stage. How would you do a
(02:37):
Tucker impression? I don't. I don't do impressions. Okay, I'm
glad to hear that.
Speaker 2 (02:41):
In any case, So we've got a market that has
continued to move to all time highs, and naturally, all
time highs make people nervous because it feels like you
have further to fall, which is kind of true. But ultimately,
like at any point, you can lose one hundred percent,
so it's not really that you have further to fall.
You can always lose one hundred percent of your mark,
(03:02):
your money in the stock market.
Speaker 3 (03:03):
Yeah, I would say the all time high piece is
a little bit less relevant in a lot of people's
views compared to the different metrics you can use to
measure the priciness of the stock market. You know, we
hit new all time highs, but probably in the majority
of years, so you know, the all time high is
(03:24):
less relevant to me than how those stock prices compared
to the earnings that they generate and what that might
mean for future. And look, this is a market that
is priced deeeply right now. According to factsets earnings insight,
the forward twelve month PE ratio, meaning the ratio of
current prices to the next twelve months of earnings of
the S and P five hundred, which are just guesses,
(03:45):
which your guesses, is twenty one point six. And by
the way, this is what I'm gonna say, is gonna
sound weird. This is an expensive twenty one point six
times forward earnings. And what I mean by that is
over the next the next three quarters that we have
projection four really four quarters h Q three, earnings are
projected to be growing at four point six percent annually
(04:07):
Q four fourteen point nine, Q one of next year
fourteen to five, Q two of next year thirteen six.
So you got you know, basic like almost in calendar,
your twenty twenty five projections are for fifteen point one
percent earnings growth. So what I'm saying on this is
that the earnings growth that's priced in is robust as well.
If you had twenty one point six x you know
(04:27):
future earning, you know forward earnings, and forward earnings growth
is three percent, you can make a case that that's
a cheaper you know, multiple than what you're sticking on
less less to overcome.
Speaker 2 (04:39):
There's more than has to go right in order to
fill that value, this valuation than that one. So stocks
are priced expensively. And what this does mean is that, hey,
if something does go wrong recession, rebound, in inflation, war
in the Middle East that you know evolves over time,
there is further for the market to potent dip there
(05:01):
because things are priced more sharply. What valuations don't do
in any way, shape or form is tell you when
the market is going to dip. And this is an
important thing that you have to remember. Just because a
stock or an index is expensive doesn't mean that it's
going to fall apart imminently.
Speaker 3 (05:20):
How long did you know, Chuck, or can you look
up how long forward pes have been over twenty on
the S and P five hundred during this cycle, because
I think it's been over a year now, right, Uh,
we've had a couple brief dips below. I'll have to
see where I can pull that data from. Yeah, I
didn't have any way of actually figuring out what the
(05:41):
answer to that is, heyn I know a source that
I can use. Just keep talking to the point that
Chuck is making. We've been at an elevated price on
the stock market for some time now, and you know
we're less elevated now than we were in twenty twenty one.
And in neither of those cases did you have a
(06:04):
compelling long term devaluation of the stock market. And so
these things can tell you. Where it may be useful
is to come up and say, yeah, I mean, based
on the fact that we're at such a high starting
point with the markets at all time highs plus price
to earnings ratios, when you look at over the next decade,
it's tougher for me to find a reason why markets
(06:25):
would perform as well as the last decade. But gives
me nothing in terms of oh, and this is when
it's all going to come tumbling down.
Speaker 2 (06:32):
I got some data for you, Okay, So the S
and P five hundred, aside from a brief period earlier
this year, has been over a twenty x forward PE
really since like the end of January of this year,
so you know, almost nine months prior to that. It's
been most of twenty twenty through twenty twenty one over
(06:54):
that valuation, so almost a full two years. And the
last time prior to that that you were over that
was during the tech bubble, where one point we were
north of like twenty six twenty five twenty six x
forward earnings, but we were over. And again the data
I have here only goes back to nineteen ninety nine,
but the S and P five hundreds forward PE was
over twenty for pretty much all of ninety nine, two thousand,
(07:16):
two thousand and one, and a brief period twenty in
two thousand and two as well, despite the index falling
during that time. So again it's it's it's not something
where you just say, well, stocks are expensive, they have
to fall. It's no, stocks are expensive and if they
do fall, it could be a little bit worse, but
it's not that they have to fall now. And the
(07:38):
other thing that you have to remember stocks can correct
two different ways. I know, we hear the term stock correction,
we're like, oh, well, that means, you know, a ten
percent decline in a security or an index or whatever.
Speaker 3 (07:50):
But stocks can also correct through time.
Speaker 2 (07:53):
And I know that sounds like, oh, like stocks are
correcting through time, man, how do they do that?
Speaker 3 (08:00):
The answer is, hey, they might just not go anywhere.
Speaker 2 (08:03):
You know, you might have a twenty one multiple on
you know, the S and P five hundred now, and yeah,
one way that could resolve is by the S and
P going back down to forty five hundred. The other
way I could resolve is, hey, earnings could continue to grow,
but we could grow increasingly pessimistic about future earnings growth,
and so the S ANDP just stays, you know, between
(08:24):
six thousand and fifty five hundred for the next year,
and stocks become cheaper through that, so very much possible too,
or they might go up, Like just because something's expensive
doesn't mean it can't get more expensive, remember that too.
Speaker 3 (08:38):
So our friend Paula Monica writes today, you know, here's
what could kill the rally, and the answer seems to
be something that shifts the sentiment about the state of things.
Speaker 2 (08:51):
I mean, ultimately, what kills all rallies at some point
is either growth or inflation. Growth going down or inflation
going up. That is the death of rallies. We haven't
seen any of those problems this year. You know the
latest revision that we got on Q two, GDP up higher, yep,
three percent. Have you looked at GDP now recently the
(09:11):
Atlanta Fed. No, I have, And let me tell you it,
it looks. It looks wonderful. I'm not saying this will
or won't happen. The September twenty seventh update, last Friday's
update for GDP now three point one percent.
Speaker 3 (09:24):
Oh, it's cooking, it's hot, steamy. So the risk that
I think Paul speaks to here that slows down at
some point I would agree to is, Yeah, that slows
down at some point. And the fact of the matter
is that you never know what exactly a market is
pricing in. But does this read to you like a
market that is immensely concerned about looming recession?
Speaker 1 (09:47):
No?
Speaker 3 (09:48):
Does it look like a market to you that's worried
that the FED is going to have to pause their
rate cutting cycle because inflation rebounds. No, I also don't
think that should be a concern. I don't think so either.
But you know, any change to the narrative here, any
shift to the narrative about what's going to happen here
in terms of growth and people's feelings towards it would
be enough to kill the rally. Yes, yes, that's uh,
(10:09):
that's kind of where we are. Let's take a quick
break right now.
Speaker 2 (10:13):
I want to talk a little bit about what's going
on in the Carolinas right now after Hurricane Helene went
through there. I know we have, you know, some other
market stuff to talk about, but the start there, the
Hallen stuff matters and is quite honestly much more important
than what's going on with everything other than AI in markets.
So let's go to that and we'll talk about that
(10:34):
when we return.
Speaker 1 (10:35):
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Speaker 2 (11:35):
All right, I need to talk a little bit about
the situation in basically everywhere that's been impacted by Hurricane Helene.
Speaker 3 (11:43):
Carolina's Tennessee seems like some of the worst of it,
although I haven't seen much from Yeah, I mean, Rorna
just seems always more prepared for this that type of
thing at this stage. But I don't know they're more prepared.
Speaker 2 (11:53):
I mean, like the stuff on the Florida coast is
still pretty bad. But a few things to note about
how this impacts things economically. Obviously, Look, we could talk
at length about, you know, just how bad some of
the devastation and flooding is, but we are a business show. Ultimately,
we're looking at Hey, what's the potential economic impact of
(12:15):
all of this and a.
Speaker 3 (12:17):
Couple of things.
Speaker 2 (12:18):
The first thing is, look, in the short term, you're
obviously going to see a significantly decreased overall amount of
economic activity in those areas, just because, like as an example,
I've spent quite a bit of time on the west
coast of Florida in the Tampa Saint Pete area. The
beaches there are basically washed into the yards of houses
(12:38):
right now. You've got cars that are you know, put
through the first floors of houses and stuff like that.
The area is basically inaccessible to travel for the next
week or so at least until you can start to
get that beach of the sand just off the roads
and everything, like again four or five feet of sand
in some cases on these roads. So all the tourists
who are planning on heading down there, they can't go.
(13:00):
Any of your beachfront hotels and stuff are closed because
you can't even get there.
Speaker 3 (13:03):
Right now. Much of the Carolinas region and Mountain Redgion
there are no power, likely to no power.
Speaker 2 (13:11):
You got roads that are taken out by flooding water,
so they're inaccessible by road. Like you're not going to
be able to get to these areas for quite a while. Again,
from an economic activity standpoint, not as much generated there
when you talk about you know, the mountains of western
Carolinas and eastern Tennessee. There's not as much there, But
you still have some big communities that are obviously, look
(13:32):
on a personal level impacted, you know, really significantly. But
it's something where you try to figure out, Okay, what's
the overall economic impact, and the greater one is probably
down in Florida just because of the population size and
scale there. Georgia as well as you go through Atlanta.
But Atlanta seems to have been spared the worst of
the flooding, even though it still is quite swampy at
(13:54):
the moment. So you look at this and you say, okay,
and the short term there's going to be a decreased
in activity as result of this. Intermediate to long term, hey,
there's going to be a ton of rescue funds that
get devoted to you know, clean up and rebuilding and
things like that, and so that tends to be a
creative to the economy and the long term there. But
one of the wrinkles that we need to be prepared
(14:15):
for is the fact that big hurricanes can have a
big impact on jobs data sure and looking at data.
This was compiled by Renaissance Macro. I found it online here.
And if you look at, you know, the impact on
payrolls from large hurricanes. They look at some of the
(14:37):
big ones that have happened over the last you know,
twenty twenty five years, starting with Ivan in Florida, which
caused the subsequent month payroll to be about thirty thousand
lower than the previous one. Some of that can just
be you know, regular fluctuations and this and that. But
look what I can tell you is all the hurricanes
they cited here that you know, the major ones that
have hit in the last decade or two, they.
Speaker 3 (15:00):
All been you know, downward moves.
Speaker 2 (15:02):
Katrina obviously you know the size and scale there is,
you know, not unparalleled, but it's it's significant. You're talking
about a decrease in jobs from one month to the
next of about one hundred and thirty thousand jobs Wilma,
about fifty thousand, Ike, about twenty five thousand, Superstorm Sandy
(15:22):
about forty thousand, IRMA in Florida, about one hundred and
fifty thousand Aida in Louisiana about forty thousand barrel in
Texas about twenty five thousand. So you look at this
and you say, look, we've got something that's you know,
pretty significant, that's stretched across multiple states. It is very
very likely as a result of this, that the October
(15:44):
jobs data, which we're not going to get until the
first week in November. Remember, so this is looking out
a month now. It's very likely that you are going
to see that October jobs data be terrible to quite terrible. Yeah,
the payroll collection data, the the data window that happens
there is October six to twelve, So it starts next
(16:04):
Monday and goes for a week. You're not gonna have
these areas back to normal by then. And so regardless
of what we get this week for the September jobs report,
the October data is likely to be a complete train wreck.
And this is before you even get to the fact
that we have this doc worker strike that is looming
(16:25):
to night right tonight at midnight, and how that potentially
impacts other industries that might say, hey, we're going to
be you know, putting furloughing workers starting next week or
something like that. Right as this data collection begins. So
the October numbers could look really, really bad, is where
I'm going with this.
Speaker 3 (16:43):
So we've been obsessed over inflation data. If you look
back over the last couple of years, that's been the
only data point that matters. We've made the point on
this program that that's really irrelevant for the future of
markets at this point in time. It's not going to
shake things. Can you think of anything more important than
labor market readings over the next few months in terms
(17:03):
of just the overall economic narrative of this economy. No.
Speaker 2 (17:07):
And the problem is, like the October one you have
to disregard now like you are you already have to
just say, look, it's it's going to show either no
growth or contraction. Probably the only way that I think
you can even look at it like in any meaningful
way is if it comes in like close to where
it was, you know, pre if you come in anywhere
near like one hundred thousand, it's like, oh wow, there's
(17:28):
more strength here than we thought.
Speaker 3 (17:31):
But everything else is going to do.
Speaker 2 (17:32):
You have to expect it to be bad because this
is what we've seen with hurricanes and how they affect
payroll data.
Speaker 3 (17:37):
And this is a pretty bad one that's hit. Yeah,
and then the pilon effects of that looming dock workers strike,
which we will talk about, but you know, yeah, the
impact there for freight companies, for rail companies, for retailers,
all of the above in terms of product that's going
to be moving around the Eastern Seaboard of the next
(17:58):
few months. This has the to be severely disrupted on
the not only the retail side, but on the actual
labor market side too, because those forty five thousand DOC
workers certainly wouldn't be the only ones not working should
they go on strike.
Speaker 2 (18:11):
Well, look, and the other thing that you got to remember, Look,
dock workers go on strike.
Speaker 3 (18:16):
It's one thing.
Speaker 2 (18:18):
There's one group that really matters when it comes to strikes,
and that's the teamsters. Okay, the teamsters act in solidarity with.
Speaker 3 (18:25):
Their other unions.
Speaker 2 (18:27):
They're not going to just be like, yeah, we're gonna
be okay picking up you know, all these other goods,
and like a lot of times you're gonna see slow
downs in terms of what they agree to do as well. Yeah,
because they want to support other unions. I mean, it's
it's one. So this is something where if you're Ja
Powell and you're trying to figure out what the heck
to do.
Speaker 3 (18:48):
You're October dat.
Speaker 2 (18:49):
You're kind of like, well, I can't even use this
because it's just like it's going to show things are
really bad. Yeah, and you like, what am I going
to do with this? Because it's not because of anything
long term? The problem that you have then if you
have to basically say, look the October data, we have
(19:09):
to buy a large disregard on the labor front. Well,
now you're waiting to get the November data. You don't
get that until early December. Hey, a lot of cofferent
a couple months, and so you might be behind the
eight ball in either way if the economy's either slowing
and you're not realizing how much, or what if all
these doc workers strikes and things, what if they cause
more inflation because of good shortages and things like that?
(19:32):
You got some real potential problems here. Coming to take
a quick break. When we come back, it's Wall Street Watch.
Speaker 1 (19:42):
Like us on Facebook and follow us on Twitter at
TFE show. Breaking business news is always first right here
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. Well.
Speaker 4 (20:03):
Markets are currently down as we make our way through
the last trading day of the month. The Dow is
down fifty eight points, or just over one tenth of
a percent, The S and P five hundred is down
three point eight points or just under a tenth of
a percent, and the Nasdaq is down ten points as well.
(20:24):
Neo shares are down or up twelve percent after the
Chinese electric vehicle maker announced it will receive a cash
injection of thirteen point three billion yuan for its Neo China.
Strategic Investors will provide three point three billion yuan of
that injection, with the rest coming from Neo Inc. The transactions,
which are expected to be completed by the end of
the year, will reduce Neo inc. Steake in Neo China
(20:46):
to eighty eight point three percent, down from ninety two
point one percent. Stillanta's shares are down thirteen percent after
the automaker trimmed its full year outlook, citing a deteriorating
global industry backdrop. Ford and GM we're also lower in sympathy.
Ali Baba's stock is up two point five percent after
China's Central Bank announced it would tell banks to cut
(21:07):
mortgage rates on existing home loans before the end of
next month. This also spurred a broader rally among China stocks,
which saw their best day of trading since two thousand
and eight. Rocket rocket Lab shares are up two point
seven percent, extending the more than twelve percent gain seen
during Friday session. On Friday, the aerospace and defense name
received a price target increase from Key Bank Capital Markets,
(21:31):
which cited increased visibility in rocket Lab's ability to scale
its business. And finally, CVS healthstock is up three percent
after The Wall Street Journal reported that hedge fund glen
View Capital, a major shareholder in the company, was expected
to meet with CVS leadership on Monday to propose fixes
for the struggling business. This could be the first step
(21:52):
in an activist push. I am Ben Kitchen, and that
was Wall Street Watch.
Speaker 2 (21:57):
Mike, there's a piece here in the Wall Street Journal
talking about how in the last three months we've seen
a pretty decent sized shift in markets in terms of, Hey,
what's been you know, really acting as leadership here? And
it's not the stuff that's been acting as leadership for
you know, the the year and a half going into Q.
Speaker 3 (22:16):
Three broadening away from artificial intelligence is what's being discussed here.
Here are the best performing sectors in Q three in
order utilities. It's not really interesting, not really technology.
Speaker 2 (22:31):
We've got real estate, we have industrials, we have consumer discretionary,
we have Sorry, I'm just trying to match up like
colors and things on my screen to what is what
materials is next? Consumer staples, healthcare, communications services, technology and
(22:56):
then energy. Technology has been the second worst performing sector
over the last three months. It's in the S and
P five hundred, which is.
Speaker 3 (23:03):
Kind of wild. Like you, yeah, you think about what's
drive driven all the returns over the last two years.
Speaker 2 (23:07):
Yeah, so the last three months has been very different
in terms of you know, what we've what we've seen here.
The question, this is the the trillion dollar question in investing,
is what I am seeing temporary or permanent? Didn't look
and investing Nothing is permanent. But by permanent, I just mean, hey,
(23:28):
is this is a long enough shift that you know
it's going to stick around? And look, technology has been
driven by a small group of companies that have benefited
from the AI boom, Video, Microsoft MD. They're not going
out of business anytimes. It's not that, but you can
(23:48):
have companies that get ahead of themselves as far as
valuation and projections and things like that. And so ultimately
what's going to determine this, in my opinion, is whether
AI can actually eat the world old or not.
Speaker 3 (24:01):
Yeah, there's a few things happening here at once. On
the technology side, in particular, it does seem as though
more questions are being asked of these tech titans as
to what's the long term plan here? Or forget about
the long term plan, like what's the next few quarters
plan here? In terms of what you're spending and when
it's actually going to pay off for shareholders? And that's
(24:24):
maybe less of a question for Nvidia and more of
a question for Microsoft and others, but for in Vidio
it's just you know, hey, if these questions are being
asked of Microsoft, how long can you can continue to
sell these semiconductors. On the everything else part of the market,
there seems to be an acceptance of, I don't know,
(24:47):
increased optimism about the soft landing. That's I think where
I would land on everything else. I mean, yeah, utilities
are having their heyday right now because you know, related
to some of the tech stuff, real estate has not
gone through the calamity that everybody was worried about, and
we're seeing rates coming down substantially. There are other factors
(25:09):
at work here, but they all seem to tie into
when we talk about everything other than artificial intelligence. A
lot of it ties into me of this optimism about
and I'm optimistic too, about what this economy could look
like if we don't end up at five percent unemployment. Right,
just imagine for a moment what this economy looks like
(25:30):
if you keep unemployment under four and a half percent,
but by this time next year you've got interest rates
on thirty year mortgages with a five in front of them.
That's a very different time. I don't know if they
get there though.
Speaker 2 (25:42):
That's the thing, like, if you don't see unemployment move
up in that fashion, I don't know if you necessarily
get to thirty year fixed rate mortgages with a five
in front of you, you might not.
Speaker 3 (25:53):
I mean, we're here at what six, We've been pretty close.
We've been as low as what six one five on
the thirty years six to two right now. I don't
think it would shock me to get into the high fives.
That's not that far of a swing. But you're right,
I mean, without a devastating recession, it is tough to
envision exactly how you get to a five point eight
(26:13):
percent mortgage. For example. Let's take a quick break here.
Speaker 2 (26:16):
When we come back, we're talking China when we return,
and then Uranium.
Speaker 1 (26:23):
This is your home for the most comprehensive coverage of
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Speaker 3 (26:46):
To talk a little bit about China. Here. China.
Speaker 2 (26:51):
Just over the last week, it's like every day just announcing, hey,
we got this policy to stimulate the economy in full
Oprah style. You get some yuan, and you get some yuan,
and you get some yuan at a discounted rates. And
that's kind of what we've been seeing here. And so
Chinese markets have just been rocking and rolling for the
(27:12):
first time.
Speaker 3 (27:13):
In a while.
Speaker 2 (27:13):
And again, here's the thing. Chinese stock markets they shut
down tomorrow for another week.
Speaker 3 (27:20):
For a week.
Speaker 2 (27:21):
Yeah, okay, it's Golden Week in China, which means there
is no trading that's going to happen then, so there's
all this excitement in advance of it. But we've seen
stimulus attempts from China before in the last couple of years,
and they kind of flutter for a few you know,
days or weeks and then fizzle out. This is different
to a certain extent in terms of the scale, but
(27:42):
I don't.
Speaker 3 (27:43):
Know if it's there. I mean, there are many people
who are further experts on China than I am who
are calling it different this time.
Speaker 2 (27:49):
It still is just somewhat droppy in a bucket e
in terms of how big it is compared to you know,
the size of the overall Chinese economy, and some of
it might just be, hey, this is preventing the Chinese
economy from falling apart rather than actually stimulating it to
go anywhere, right.
Speaker 3 (28:08):
So I mean things, you have seen one some of
the best stock market performance you've seen out of China
in over a decade, so you know, nothing as needs
at there that's been significant. You have seen the biggest
bank in the country announce pretty significant cuts to interest
rates really across the board, the government releasing restrictions on
(28:31):
investments and ownership in second properties, So investment properties there
were you know, higher interest rates, higher deposit requirements there
for second properties. They are releasing a whole bunch of
those and just generally cutting rates across the board and
putting more in the way of stimulus. I think the
(28:53):
question b does this solve what are you know, pretty
widely accepted to be some of the big problems with
the Chinese economy. One, you have a youth unemployment rate
that they finally stopped, you know, discussing and reporting on
because it got so was it like a fifth of
young China twenty five percent.
Speaker 2 (29:14):
They got rid of the series for like nine months
and then brought it back and it was magically at
like fifteen percent.
Speaker 3 (29:19):
Right, So nobody buys that. But nonetheless, youth unemployment massive
issue in that country. Real estate sector a complete and
utter mess, uh, because they allowed it to become a
bubble and then had to slowly release that bubble and
now seemed to be trying to maybe just reinflate that bubble,
I guess. And then the third piece, which is I
(29:42):
guess more of an overall long term issue, which is
you know, Chinese citizens' willingness and ability to support the
economy through consumerism. And so you know, I'm not sure which,
if any of these those stimulus measures fix. But what
(30:02):
seems different this time is at least language that seems
very committed to not only are we doing this now,
but we're going to remain supportive of these sectors for
a longer period of time. Yep. So again, I don't
know if that's enough to change things on the ground.
And I think it could prop up the real estate sector.
I don't think it really does much of anything in
(30:24):
regard to the sentiment in China the average consumer of Hey,
can I afford to spend my savings? Will I have
any comfort whatsoever that there will be a safety net
if I fall down?
Speaker 2 (30:35):
Here folks, The Armstrong Advisory Group has a guide available
this month, and if you check your calendars, it's September thirtieth,
which means it's the last day of September, last chance
to get the guide. It's titled Frequently Asked Questions about
RMD's Required minimum Distributions. And I answer some of the
big questions that people have about require distributions. Who needs
(30:58):
to take them? When do you need tom? How are
they calculating how much do you need to take? What
are the penalties on these How does it work with
inherited iras now that they've changed the rules, you know,
almost well almost half a dozen times.
Speaker 3 (31:11):
Yeah, I think that's accurate.
Speaker 2 (31:12):
And so this guide helps to work through some of
those questions that you have to make sure you stay
on the right side of the law and regulations and
are taking those rmds so that you don't end up penalized.
Speaker 3 (31:24):
How do you get it?
Speaker 2 (31:25):
Call eight hundred three nine three four zero zero one. Again,
this is the last day that this guide is going
to be offered, So you call eight hundred three nine
three four zero zero one, and that is how you
request the guide. Frequently ask questions about rmds. That number
(31:45):
again is eight hundred three nine three four zero zero one,
and this is the last day to get the guide.
Frequently ask questions about rmds.
Speaker 1 (31:54):
The proceeding was paid for by Armstrong Advisory Group, a
registered investment advisor. Nothing in the ad or in any
arms Strung guide to 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, like.
Speaker 2 (32:10):
Let's talk a little bit about cobalt and lithium, two
things that sound really interesting, but ultimately we don't know
anything about What do you mean we like you and
I not the collective universe now humans do you and I?
I have no idea about lithium. I know it's used
in batteries. I know it's important. I have no idea
anything else about it, if I'm being honest, Yeah, fair enough.
Speaker 3 (32:31):
I know one thing I knew about it was it
seemed like we sure didn't have enough of it to
satisfy the demand from electric vehicles and other battery storage.
A few years ago. That was sure. He was being
talked about in the same way that oil was going
to you know, the end of oil, peak oil. Same
arguments were being made about lithium. It's so impossible to
(32:52):
get out of the ground, really difficult, dirty, It's all
in China. What's going to happen here? There are a
lot of I think harrisons that could have been made
to the arguments over big oil, you know, or peak oil,
rather from I don't know. Peak oil has been discussed
many times, but you know, nineties comes to mind.
Speaker 2 (33:11):
Sure, And so ultimately what this piece here from Bloomberg
is talking about is, hey, you do have these these
minerals you know, with them and cobalt and things like
that that are important for either building batteries or electric motors.
And when you look at you know, how these markets
(33:32):
are functioning right now? The prices have come down significantly
because the demand simply hasn't been there in the quantities
that people thought it would be.
Speaker 3 (33:40):
It's two sides as well. I mean, there's there's a
demand side where yes, many automakers are now pulling back
on their EV production plans. But China also apparently either
misread or didn't care about the state of the market here,
and probably a little bit of both oversupplied things pretty
considerably in that space.
Speaker 2 (34:00):
And so you've got these inventories that have just been accumulating.
I'll quota from the piece, even the most optimistic I
think it would take eighteen to twenty four months to
clear the surplus. More circumspect observers talk about five years
or longer. And so you've just seen a complete collapse
in the pricing on these and what that means is, look,
let's say that you do see ramped up demand for these,
(34:22):
you might not see increased production because companies that ramped
up production previously, not inside of China, are feeling a
little bit snake bit by it. They're saying, look, we
spent all this money and prices fell apart, like we
didn't get any return on investment. Maybe we're even going
out of business as a result of this. And it's
kind of similar to the twenty fifteen situation that we
saw develop in energy markets where Russia said, look, we're
(34:45):
gonna pump as much as we can in order to
try to flood the market and put a bunch of
US shale producers out of business. And now, as a result,
a full decade later, your energy companies are sitting there saying, yeah,
we've had some profits, but we're not gonna get greedy
on this, because we tried that once before and it
worked badly. So no, we're not going to increase production, which,
by the way, has turned out to be the right
(35:05):
thing is demand has been lighter on oil going forward
than people expected. But in you know, these commodity markets,
you don't know exactly how it's gonna end up.
Speaker 3 (35:15):
Playing. This article is once again pointed in or produced
in a way that makes it seem as though China
very intentionally brought the market for lithium and cobalt to
its knees and has now oversupplied the world with these
products and prices plunging. This is not a desirable outcome
(35:39):
for China. No, China has invested likely billions of dollars
in mining of rare earth materials here and has now
oversupplied the market like they have with other areas such
as automobiles, where prices are now plunging globally for these
for these rare earth materials. And again, all a lot
(36:00):
of this depends on whether or not the United States
and other countries choose to import this stuff from China
or slap massive tariffs on it. But it has the
potential to make battery production globally a fair bit cheaper.
And again, I just go back to this worry we
seem to have at Oh, you know, China's got their
act together. They can snap their fingers and you know,
(36:23):
suddenly supply the world with cobalt and put us all
out of business. And that's true. They did seem to
be able to snap their fingers and quickly, you know,
supply the world with cobalt and lithium, but they also
seemingly have no idea what the future demand is going
to look like for some of these things, and completely
misread markets on many many occasions.
Speaker 2 (36:43):
Yeah, I don't think this was intentional. It might have
just been that they didn't care about the concerns. Maybe,
you know, like they might we don't care about the mark.
Who cares if we lose money on this, right, like,
just get us the lithium. Yeah, and that is it
necess necessarily a winning strategy.
Speaker 3 (37:01):
In the long run. Yeah, you're right. I don't know, like,
did they want to just say we don't want anyone
else in the world to be able to do this profitably,
so we're going to take the market the same thing
they've done with solar panels, for example, where you pretty
much cannot make solar panelers anywhere other than China because
they just oversupply the entire market and creater prices.
Speaker 2 (37:22):
Yeah, it's it's one of those situations where you're trying
to figure out is this due to malice or incompetence,
and it's.
Speaker 3 (37:30):
The answer is it doesn't. Sometimes it doesn't really matter,
It doesn't necessarily matter. It's probably a little bit of both.
Speaker 2 (37:35):
And the other thing that I do find interesting on
this stuff, it's like, look, if you got all these
excess inventories, all right, like someone out there, if you're
smart and you have you know, no immediate term horizon
for you know, needing this. Okay, Like, I don't know
how you store lithium. I don't know if it like
sure it doesn't spoil like eggs, you know, but I
don't know if like there's things where you can't store
(37:57):
it for like five years.
Speaker 3 (37:59):
Do you think can that can store lithium in the
same place that they keep their strategic maple syrup reserve.
Speaker 2 (38:03):
They can wrap it in the maple syrup to prevent degradation.
Now we're talking sounds great. Actually it's probably awful.
Speaker 3 (38:14):
Yum lithium.
Speaker 2 (38:15):
It's probably very bad. Let's take a quick break here.
When we come back, we got hour two coming up.
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(00:20):
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(01:04):
by Veterans Development Corporation. This is the Financial Exchange with
Chuck Zutta and Mike Armstrong.
Speaker 2 (01:12):
It's Chuck, Mike, and Tucker here with the on the
final day of September twenty twenty four. And as we
sit here today, Mike, in what is historically the worst
month on record for the stock market based on historical
seasonal patterns, the S and P five hundred is still
(01:33):
up significantly for the month, a couple percentage points. And thus, again,
I know we haven't closed yet. I know there's still
a little bit of time.
Speaker 3 (01:41):
Yeah, we could sell off by ten percent today, but
sure we could.
Speaker 2 (01:45):
You know, look, all would take in order for us
to get you know, a down month would be you know,
a three percent sell off, which is still one hundred
and eighty points almost on the S and P five hundred,
and would.
Speaker 3 (01:53):
Be you know, a rather large late day move.
Speaker 2 (01:57):
But to this point it looks to be, you know,
increasingly likely that the S and P is going to
finish in positive territory. Despite the outcry on September ninth
that hey, it's just another down September for the S
and P five hundred, uh and gosh.
Speaker 3 (02:17):
We just better get used to it, And what do
you think about all that? Tucker? Did I introduce Bennis Tucker? Yeah,
you did. That's all right. Well, actually I don't know
if it's all right, Chuck, It's fine, it's totally totally.
That wasn't a very good Tucker impression. By the way,
you need to work on that. You listen to him
for like two hours every day. You gotta get his
voice down at this stage. How would you do a
(02:37):
Tucker impression? I don't. I don't do impressions. Okay, I'm
glad to hear that.
Speaker 2 (02:41):
In any case, So we've got a market that has
continued to move to all time highs, and naturally, all
time highs make people nervous because it feels like you
have further to fall, which is kind of true. But ultimately,
like at any point, you can lose one hundred percent,
so it's not really that you have further to fall.
You can always lose one hundred percent of your mark,
(03:02):
your money in the stock market.
Speaker 3 (03:03):
Yeah, I would say the all time high piece is
a little bit less relevant in a lot of people's
views compared to the different metrics you can use to
measure the priciness of the stock market. You know, we
hit new all time highs, but probably in the majority
of years, so you know, the all time high is
(03:24):
less relevant to me than how those stock prices compared
to the earnings that they generate and what that might
mean for future. And look, this is a market that
is priced deeeply right now. According to factsets earnings insight,
the forward twelve month PE ratio, meaning the ratio of
current prices to the next twelve months of earnings of
the S and P five hundred, which are just guesses,
(03:45):
which your guesses, is twenty one point six. And by
the way, this is what I'm gonna say, is gonna
sound weird. This is an expensive twenty one point six
times forward earnings. And what I mean by that is
over the next the next three quarters that we have
projection four really four quarters h Q three, earnings are
projected to be growing at four point six percent annually
(04:07):
Q four fourteen point nine, Q one of next year
fourteen to five, Q two of next year thirteen six.
So you got you know, basic like almost in calendar,
your twenty twenty five projections are for fifteen point one
percent earnings growth. So what I'm saying on this is
that the earnings growth that's priced in is robust as well.
If you had twenty one point six x you know
(04:27):
future earning, you know forward earnings, and forward earnings growth
is three percent, you can make a case that that's
a cheaper you know, multiple than what you're sticking on
less less to overcome.
Speaker 2 (04:39):
There's more than has to go right in order to
fill that value, this valuation than that one. So stocks
are priced expensively. And what this does mean is that, hey,
if something does go wrong recession, rebound, in inflation, war
in the Middle East that you know evolves over time,
there is further for the market to potent dip there
(05:01):
because things are priced more sharply. What valuations don't do
in any way, shape or form is tell you when
the market is going to dip. And this is an
important thing that you have to remember. Just because a
stock or an index is expensive doesn't mean that it's
going to fall apart imminently.
Speaker 3 (05:20):
How long did you know, Chuck, or can you look
up how long forward pes have been over twenty on
the S and P five hundred during this cycle, because
I think it's been over a year now, right, Uh,
we've had a couple brief dips below. I'll have to
see where I can pull that data from. Yeah, I
didn't have any way of actually figuring out what the
(05:41):
answer to that is, heyn I know a source that
I can use. Just keep talking to the point that
Chuck is making. We've been at an elevated price on
the stock market for some time now, and you know
we're less elevated now than we were in twenty twenty one.
And in neither of those cases did you have a
(06:04):
compelling long term devaluation of the stock market. And so
these things can tell you. Where it may be useful
is to come up and say, yeah, I mean, based
on the fact that we're at such a high starting
point with the markets at all time highs plus price
to earnings ratios, when you look at over the next decade,
it's tougher for me to find a reason why markets
(06:25):
would perform as well as the last decade. But gives
me nothing in terms of oh, and this is when
it's all going to come tumbling down.
Speaker 2 (06:32):
I got some data for you, Okay, So the S
and P five hundred, aside from a brief period earlier
this year, has been over a twenty x forward PE
really since like the end of January of this year,
so you know, almost nine months prior to that. It's
been most of twenty twenty through twenty twenty one over
(06:54):
that valuation, so almost a full two years. And the
last time prior to that that you were over that
was during the tech bubble, where one point we were
north of like twenty six twenty five twenty six x
forward earnings, but we were over. And again the data
I have here only goes back to nineteen ninety nine,
but the S and P five hundreds forward PE was
over twenty for pretty much all of ninety nine, two thousand,
(07:16):
two thousand and one, and a brief period twenty in
two thousand and two as well, despite the index falling
during that time. So again it's it's it's not something
where you just say, well, stocks are expensive, they have
to fall. It's no, stocks are expensive and if they
do fall, it could be a little bit worse, but
it's not that they have to fall now. And the
(07:38):
other thing that you have to remember stocks can correct
two different ways. I know, we hear the term stock correction,
we're like, oh, well, that means, you know, a ten
percent decline in a security or an index or whatever.
Speaker 3 (07:50):
But stocks can also correct through time.
Speaker 2 (07:53):
And I know that sounds like, oh, like stocks are
correcting through time, man, how do they do that?
Speaker 3 (08:00):
The answer is, hey, they might just not go anywhere.
Speaker 2 (08:03):
You know, you might have a twenty one multiple on
you know, the S and P five hundred now, and yeah,
one way that could resolve is by the S and
P going back down to forty five hundred. The other
way I could resolve is, hey, earnings could continue to grow,
but we could grow increasingly pessimistic about future earnings growth,
and so the S ANDP just stays, you know, between
(08:24):
six thousand and fifty five hundred for the next year,
and stocks become cheaper through that, so very much possible too,
or they might go up, Like just because something's expensive
doesn't mean it can't get more expensive, remember that too.
Speaker 3 (08:38):
So our friend Paula Monica writes today, you know, here's
what could kill the rally, and the answer seems to
be something that shifts the sentiment about the state of things.
Speaker 2 (08:51):
I mean, ultimately, what kills all rallies at some point
is either growth or inflation. Growth going down or inflation
going up. That is the death of rallies. We haven't
seen any of those problems this year. You know the
latest revision that we got on Q two, GDP up higher, yep,
three percent. Have you looked at GDP now recently the
(09:11):
Atlanta Fed. No, I have, And let me tell you it,
it looks. It looks wonderful. I'm not saying this will
or won't happen. The September twenty seventh update, last Friday's
update for GDP now three point one percent.
Speaker 3 (09:24):
Oh, it's cooking, it's hot, steamy. So the risk that
I think Paul speaks to here that slows down at
some point I would agree to is, Yeah, that slows
down at some point. And the fact of the matter
is that you never know what exactly a market is
pricing in. But does this read to you like a
market that is immensely concerned about looming recession?
Speaker 1 (09:47):
No?
Speaker 3 (09:48):
Does it look like a market to you that's worried
that the FED is going to have to pause their
rate cutting cycle because inflation rebounds. No, I also don't
think that should be a concern. I don't think so either.
But you know, any change to the narrative here, any
shift to the narrative about what's going to happen here
in terms of growth and people's feelings towards it would
be enough to kill the rally. Yes, yes, that's uh,
(10:09):
that's kind of where we are. Let's take a quick
break right now.
Speaker 2 (10:13):
I want to talk a little bit about what's going
on in the Carolinas right now after Hurricane Helene went
through there. I know we have, you know, some other
market stuff to talk about, but the start there, the
Hallen stuff matters and is quite honestly much more important
than what's going on with everything other than AI in markets.
So let's go to that and we'll talk about that
(10:34):
when we return.
Speaker 1 (10:35):
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Speaker 4 (11:00):
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Speaker 2 (11:35):
All right, I need to talk a little bit about
the situation in basically everywhere that's been impacted by Hurricane Helene.
Speaker 3 (11:43):
Carolina's Tennessee seems like some of the worst of it,
although I haven't seen much from Yeah, I mean, Rorna
just seems always more prepared for this that type of
thing at this stage. But I don't know they're more prepared.
Speaker 2 (11:53):
I mean, like the stuff on the Florida coast is
still pretty bad. But a few things to note about
how this impacts things economically. Obviously, Look, we could talk
at length about, you know, just how bad some of
the devastation and flooding is, but we are a business show. Ultimately,
we're looking at Hey, what's the potential economic impact of
(12:15):
all of this and a.
Speaker 3 (12:17):
Couple of things.
Speaker 2 (12:18):
The first thing is, look, in the short term, you're
obviously going to see a significantly decreased overall amount of
economic activity in those areas, just because, like as an example,
I've spent quite a bit of time on the west
coast of Florida in the Tampa Saint Pete area. The
beaches there are basically washed into the yards of houses
(12:38):
right now. You've got cars that are you know, put
through the first floors of houses and stuff like that.
The area is basically inaccessible to travel for the next
week or so at least until you can start to
get that beach of the sand just off the roads
and everything, like again four or five feet of sand
in some cases on these roads. So all the tourists
who are planning on heading down there, they can't go.
(13:00):
Any of your beachfront hotels and stuff are closed because
you can't even get there.
Speaker 3 (13:03):
Right now. Much of the Carolinas region and Mountain Redgion
there are no power, likely to no power.
Speaker 2 (13:11):
You got roads that are taken out by flooding water,
so they're inaccessible by road. Like you're not going to
be able to get to these areas for quite a while. Again,
from an economic activity standpoint, not as much generated there
when you talk about you know, the mountains of western
Carolinas and eastern Tennessee. There's not as much there, But
you still have some big communities that are obviously, look
(13:32):
on a personal level impacted, you know, really significantly. But
it's something where you try to figure out, Okay, what's
the overall economic impact, and the greater one is probably
down in Florida just because of the population size and
scale there. Georgia as well as you go through Atlanta.
But Atlanta seems to have been spared the worst of
the flooding, even though it still is quite swampy at
(13:54):
the moment. So you look at this and you say, okay,
and the short term there's going to be a decreased
in activity as result of this. Intermediate to long term, hey,
there's going to be a ton of rescue funds that
get devoted to you know, clean up and rebuilding and
things like that, and so that tends to be a
creative to the economy and the long term there. But
one of the wrinkles that we need to be prepared
(14:15):
for is the fact that big hurricanes can have a
big impact on jobs data sure and looking at data.
This was compiled by Renaissance Macro. I found it online here.
And if you look at, you know, the impact on
payrolls from large hurricanes. They look at some of the
(14:37):
big ones that have happened over the last you know,
twenty twenty five years, starting with Ivan in Florida, which
caused the subsequent month payroll to be about thirty thousand
lower than the previous one. Some of that can just
be you know, regular fluctuations and this and that. But
look what I can tell you is all the hurricanes
they cited here that you know, the major ones that
have hit in the last decade or two, they.
Speaker 3 (15:00):
All been you know, downward moves.
Speaker 2 (15:02):
Katrina obviously you know the size and scale there is,
you know, not unparalleled, but it's it's significant. You're talking
about a decrease in jobs from one month to the
next of about one hundred and thirty thousand jobs Wilma,
about fifty thousand, Ike, about twenty five thousand, Superstorm Sandy
(15:22):
about forty thousand, IRMA in Florida, about one hundred and
fifty thousand Aida in Louisiana about forty thousand barrel in
Texas about twenty five thousand. So you look at this
and you say, look, we've got something that's you know,
pretty significant, that's stretched across multiple states. It is very
very likely as a result of this, that the October
(15:44):
jobs data, which we're not going to get until the
first week in November. Remember, so this is looking out
a month now. It's very likely that you are going
to see that October jobs data be terrible to quite terrible. Yeah,
the payroll collection data, the the data window that happens
there is October six to twelve, So it starts next
(16:04):
Monday and goes for a week. You're not gonna have
these areas back to normal by then. And so regardless
of what we get this week for the September jobs report,
the October data is likely to be a complete train wreck.
And this is before you even get to the fact
that we have this doc worker strike that is looming
(16:25):
to night right tonight at midnight, and how that potentially
impacts other industries that might say, hey, we're going to
be you know, putting furloughing workers starting next week or
something like that. Right as this data collection begins. So
the October numbers could look really, really bad, is where
I'm going with this.
Speaker 3 (16:43):
So we've been obsessed over inflation data. If you look
back over the last couple of years, that's been the
only data point that matters. We've made the point on
this program that that's really irrelevant for the future of
markets at this point in time. It's not going to
shake things. Can you think of anything more important than
labor market readings over the next few months in terms
(17:03):
of just the overall economic narrative of this economy. No.
Speaker 2 (17:07):
And the problem is, like the October one you have
to disregard now like you are you already have to
just say, look, it's it's going to show either no
growth or contraction. Probably the only way that I think
you can even look at it like in any meaningful
way is if it comes in like close to where
it was, you know, pre if you come in anywhere
near like one hundred thousand, it's like, oh wow, there's
(17:28):
more strength here than we thought.
Speaker 3 (17:31):
But everything else is going to do.
Speaker 2 (17:32):
You have to expect it to be bad because this
is what we've seen with hurricanes and how they affect
payroll data.
Speaker 3 (17:37):
And this is a pretty bad one that's hit. Yeah,
and then the pilon effects of that looming dock workers strike,
which we will talk about, but you know, yeah, the
impact there for freight companies, for rail companies, for retailers,
all of the above in terms of product that's going
to be moving around the Eastern Seaboard of the next
(17:58):
few months. This has the to be severely disrupted on
the not only the retail side, but on the actual
labor market side too, because those forty five thousand DOC
workers certainly wouldn't be the only ones not working should
they go on strike.
Speaker 2 (18:11):
Well, look, and the other thing that you got to remember, Look,
dock workers go on strike.
Speaker 3 (18:16):
It's one thing.
Speaker 2 (18:18):
There's one group that really matters when it comes to strikes,
and that's the teamsters. Okay, the teamsters act in solidarity with.
Speaker 3 (18:25):
Their other unions.
Speaker 2 (18:27):
They're not going to just be like, yeah, we're gonna
be okay picking up you know, all these other goods,
and like a lot of times you're gonna see slow
downs in terms of what they agree to do as well. Yeah,
because they want to support other unions. I mean, it's
it's one. So this is something where if you're Ja
Powell and you're trying to figure out what the heck
to do.
Speaker 3 (18:48):
You're October dat.
Speaker 2 (18:49):
You're kind of like, well, I can't even use this
because it's just like it's going to show things are
really bad. Yeah, and you like, what am I going
to do with this? Because it's not because of anything
long term? The problem that you have then if you
have to basically say, look the October data, we have
(19:09):
to buy a large disregard on the labor front. Well,
now you're waiting to get the November data. You don't
get that until early December. Hey, a lot of cofferent
a couple months, and so you might be behind the
eight ball in either way if the economy's either slowing
and you're not realizing how much, or what if all
these doc workers strikes and things, what if they cause
more inflation because of good shortages and things like that?
(19:32):
You got some real potential problems here. Coming to take
a quick break. When we come back, it's Wall Street Watch.
Speaker 1 (19:42):
Like us on Facebook and follow us on Twitter at
TFE show. Breaking business news is always first right here
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. Well.
Speaker 4 (20:03):
Markets are currently down as we make our way through
the last trading day of the month. The Dow is
down fifty eight points, or just over one tenth of
a percent, The S and P five hundred is down
three point eight points or just under a tenth of
a percent, and the Nasdaq is down ten points as well.
(20:24):
Neo shares are down or up twelve percent after the
Chinese electric vehicle maker announced it will receive a cash
injection of thirteen point three billion yuan for its Neo China.
Strategic Investors will provide three point three billion yuan of
that injection, with the rest coming from Neo Inc. The transactions,
which are expected to be completed by the end of
the year, will reduce Neo inc. Steake in Neo China
(20:46):
to eighty eight point three percent, down from ninety two
point one percent. Stillanta's shares are down thirteen percent after
the automaker trimmed its full year outlook, citing a deteriorating
global industry backdrop. Ford and GM we're also lower in sympathy.
Ali Baba's stock is up two point five percent after
China's Central Bank announced it would tell banks to cut
(21:07):
mortgage rates on existing home loans before the end of
next month. This also spurred a broader rally among China stocks,
which saw their best day of trading since two thousand
and eight. Rocket rocket Lab shares are up two point
seven percent, extending the more than twelve percent gain seen
during Friday session. On Friday, the aerospace and defense name
received a price target increase from Key Bank Capital Markets,
(21:31):
which cited increased visibility in rocket Lab's ability to scale
its business. And finally, CVS healthstock is up three percent
after The Wall Street Journal reported that hedge fund glen
View Capital, a major shareholder in the company, was expected
to meet with CVS leadership on Monday to propose fixes
for the struggling business. This could be the first step
(21:52):
in an activist push. I am Ben Kitchen, and that
was Wall Street Watch.
Speaker 2 (21:57):
Mike, there's a piece here in the Wall Street Journal
talking about how in the last three months we've seen
a pretty decent sized shift in markets in terms of, Hey,
what's been you know, really acting as leadership here? And
it's not the stuff that's been acting as leadership for
you know, the the year and a half going into Q.
Speaker 3 (22:16):
Three broadening away from artificial intelligence is what's being discussed here.
Here are the best performing sectors in Q three in
order utilities. It's not really interesting, not really technology.
Speaker 2 (22:31):
We've got real estate, we have industrials, we have consumer discretionary,
we have Sorry, I'm just trying to match up like
colors and things on my screen to what is what
materials is next? Consumer staples, healthcare, communications services, technology and
(22:56):
then energy. Technology has been the second worst performing sector
over the last three months. It's in the S and
P five hundred, which is.
Speaker 3 (23:03):
Kind of wild. Like you, yeah, you think about what's
drive driven all the returns over the last two years.
Speaker 2 (23:07):
Yeah, so the last three months has been very different
in terms of you know, what we've what we've seen here.
The question, this is the the trillion dollar question in investing,
is what I am seeing temporary or permanent? Didn't look
and investing Nothing is permanent. But by permanent, I just mean, hey,
(23:28):
is this is a long enough shift that you know
it's going to stick around? And look, technology has been
driven by a small group of companies that have benefited
from the AI boom, Video, Microsoft MD. They're not going
out of business anytimes. It's not that, but you can
(23:48):
have companies that get ahead of themselves as far as
valuation and projections and things like that. And so ultimately
what's going to determine this, in my opinion, is whether
AI can actually eat the world old or not.
Speaker 3 (24:01):
Yeah, there's a few things happening here at once. On
the technology side, in particular, it does seem as though
more questions are being asked of these tech titans as
to what's the long term plan here? Or forget about
the long term plan, like what's the next few quarters
plan here? In terms of what you're spending and when
it's actually going to pay off for shareholders? And that's
(24:24):
maybe less of a question for Nvidia and more of
a question for Microsoft and others, but for in Vidio
it's just you know, hey, if these questions are being
asked of Microsoft, how long can you can continue to
sell these semiconductors. On the everything else part of the market,
there seems to be an acceptance of, I don't know,
(24:47):
increased optimism about the soft landing. That's I think where
I would land on everything else. I mean, yeah, utilities
are having their heyday right now because you know, related
to some of the tech stuff, real estate has not
gone through the calamity that everybody was worried about, and
we're seeing rates coming down substantially. There are other factors
(25:09):
at work here, but they all seem to tie into
when we talk about everything other than artificial intelligence. A
lot of it ties into me of this optimism about
and I'm optimistic too, about what this economy could look
like if we don't end up at five percent unemployment. Right,
just imagine for a moment what this economy looks like
(25:30):
if you keep unemployment under four and a half percent,
but by this time next year you've got interest rates
on thirty year mortgages with a five in front of them.
That's a very different time. I don't know if they
get there though.
Speaker 2 (25:42):
That's the thing, like, if you don't see unemployment move
up in that fashion, I don't know if you necessarily
get to thirty year fixed rate mortgages with a five
in front of you, you might not.
Speaker 3 (25:53):
I mean, we're here at what six, We've been pretty close.
We've been as low as what six one five on
the thirty years six to two right now. I don't
think it would shock me to get into the high fives.
That's not that far of a swing. But you're right,
I mean, without a devastating recession, it is tough to
envision exactly how you get to a five point eight
(26:13):
percent mortgage. For example. Let's take a quick break here.
Speaker 2 (26:16):
When we come back, we're talking China when we return,
and then Uranium.
Speaker 1 (26:23):
This is your home for the most comprehensive coverage of
the economy and the trends on Wall Street. This is
the Financial Exchange Radio Network. Missed one of our shows.
Catch up anytime by asking your Alexis Smart speaker to
play the Financial Exchange. This is the Financial Exchange Radio Network.
Speaker 3 (26:46):
To talk a little bit about China. Here. China.
Speaker 2 (26:51):
Just over the last week, it's like every day just announcing, hey,
we got this policy to stimulate the economy in full
Oprah style. You get some yuan, and you get some yuan,
and you get some yuan at a discounted rates. And
that's kind of what we've been seeing here. And so
Chinese markets have just been rocking and rolling for the
(27:12):
first time.
Speaker 3 (27:13):
In a while.
Speaker 2 (27:13):
And again, here's the thing. Chinese stock markets they shut
down tomorrow for another week.
Speaker 3 (27:20):
For a week.
Speaker 2 (27:21):
Yeah, okay, it's Golden Week in China, which means there
is no trading that's going to happen then, so there's
all this excitement in advance of it. But we've seen
stimulus attempts from China before in the last couple of years,
and they kind of flutter for a few you know,
days or weeks and then fizzle out. This is different
to a certain extent in terms of the scale, but
(27:42):
I don't.
Speaker 3 (27:43):
Know if it's there. I mean, there are many people
who are further experts on China than I am who
are calling it different this time.
Speaker 2 (27:49):
It still is just somewhat droppy in a bucket e
in terms of how big it is compared to you know,
the size of the overall Chinese economy, and some of
it might just be, hey, this is preventing the Chinese
economy from falling apart rather than actually stimulating it to
go anywhere, right.
Speaker 3 (28:08):
So I mean things, you have seen one some of
the best stock market performance you've seen out of China
in over a decade, so you know, nothing as needs
at there that's been significant. You have seen the biggest
bank in the country announce pretty significant cuts to interest
rates really across the board, the government releasing restrictions on
(28:31):
investments and ownership in second properties, So investment properties there
were you know, higher interest rates, higher deposit requirements there
for second properties. They are releasing a whole bunch of
those and just generally cutting rates across the board and
putting more in the way of stimulus. I think the
(28:53):
question b does this solve what are you know, pretty
widely accepted to be some of the big problems with
the Chinese economy. One, you have a youth unemployment rate
that they finally stopped, you know, discussing and reporting on
because it got so was it like a fifth of
young China twenty five percent.
Speaker 2 (29:14):
They got rid of the series for like nine months
and then brought it back and it was magically at
like fifteen percent.
Speaker 3 (29:19):
Right, So nobody buys that. But nonetheless, youth unemployment massive
issue in that country. Real estate sector a complete and
utter mess, uh, because they allowed it to become a
bubble and then had to slowly release that bubble and
now seemed to be trying to maybe just reinflate that bubble,
I guess. And then the third piece, which is I
(29:42):
guess more of an overall long term issue, which is
you know, Chinese citizens' willingness and ability to support the
economy through consumerism. And so you know, I'm not sure which,
if any of these those stimulus measures fix. But what
(30:02):
seems different this time is at least language that seems
very committed to not only are we doing this now,
but we're going to remain supportive of these sectors for
a longer period of time. Yep. So again, I don't
know if that's enough to change things on the ground.
And I think it could prop up the real estate sector.
I don't think it really does much of anything in
(30:24):
regard to the sentiment in China the average consumer of Hey,
can I afford to spend my savings? Will I have
any comfort whatsoever that there will be a safety net
if I fall down?
Speaker 2 (30:35):
Here folks, The Armstrong Advisory Group has a guide available
this month, and if you check your calendars, it's September thirtieth,
which means it's the last day of September, last chance
to get the guide. It's titled Frequently Asked Questions about
RMD's Required minimum Distributions. And I answer some of the
big questions that people have about require distributions. Who needs
(30:58):
to take them? When do you need tom? How are
they calculating how much do you need to take? What
are the penalties on these How does it work with
inherited iras now that they've changed the rules, you know,
almost well almost half a dozen times.
Speaker 3 (31:11):
Yeah, I think that's accurate.
Speaker 2 (31:12):
And so this guide helps to work through some of
those questions that you have to make sure you stay
on the right side of the law and regulations and
are taking those rmds so that you don't end up penalized.
Speaker 3 (31:24):
How do you get it?
Speaker 2 (31:25):
Call eight hundred three nine three four zero zero one. Again,
this is the last day that this guide is going
to be offered, So you call eight hundred three nine
three four zero zero one, and that is how you
request the guide. Frequently ask questions about rmds. That number
(31:45):
again is eight hundred three nine three four zero zero one,
and this is the last day to get the guide.
Frequently ask questions about rmds.
Speaker 1 (31:54):
The proceeding was paid for by Armstrong Advisory Group, a
registered investment advisor. Nothing in the ad or in any
arms Strung guide to 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, like.
Speaker 2 (32:10):
Let's talk a little bit about cobalt and lithium, two
things that sound really interesting, but ultimately we don't know
anything about What do you mean we like you and
I not the collective universe now humans do you and I?
I have no idea about lithium. I know it's used
in batteries. I know it's important. I have no idea
anything else about it, if I'm being honest, Yeah, fair enough.
Speaker 3 (32:31):
I know one thing I knew about it was it
seemed like we sure didn't have enough of it to
satisfy the demand from electric vehicles and other battery storage.
A few years ago. That was sure. He was being
talked about in the same way that oil was going
to you know, the end of oil, peak oil. Same
arguments were being made about lithium. It's so impossible to
(32:52):
get out of the ground, really difficult, dirty, It's all
in China. What's going to happen here? There are a
lot of I think harrisons that could have been made
to the arguments over big oil, you know, or peak oil,
rather from I don't know. Peak oil has been discussed
many times, but you know, nineties comes to mind.
Speaker 2 (33:11):
Sure, And so ultimately what this piece here from Bloomberg
is talking about is, hey, you do have these these
minerals you know, with them and cobalt and things like
that that are important for either building batteries or electric motors.
And when you look at you know, how these markets
(33:32):
are functioning right now? The prices have come down significantly
because the demand simply hasn't been there in the quantities
that people thought it would be.
Speaker 3 (33:40):
It's two sides as well. I mean, there's there's a
demand side where yes, many automakers are now pulling back
on their EV production plans. But China also apparently either
misread or didn't care about the state of the market here,
and probably a little bit of both oversupplied things pretty
considerably in that space.
Speaker 2 (34:00):
And so you've got these inventories that have just been accumulating.
I'll quota from the piece, even the most optimistic I
think it would take eighteen to twenty four months to
clear the surplus. More circumspect observers talk about five years
or longer. And so you've just seen a complete collapse
in the pricing on these and what that means is, look,
let's say that you do see ramped up demand for these,
(34:22):
you might not see increased production because companies that ramped
up production previously, not inside of China, are feeling a
little bit snake bit by it. They're saying, look, we
spent all this money and prices fell apart, like we
didn't get any return on investment. Maybe we're even going
out of business as a result of this. And it's
kind of similar to the twenty fifteen situation that we
saw develop in energy markets where Russia said, look, we're
(34:45):
gonna pump as much as we can in order to
try to flood the market and put a bunch of
US shale producers out of business. And now, as a result,
a full decade later, your energy companies are sitting there saying, yeah,
we've had some profits, but we're not gonna get greedy
on this, because we tried that once before and it
worked badly. So no, we're not going to increase production, which,
by the way, has turned out to be the right
(35:05):
thing is demand has been lighter on oil going forward
than people expected. But in you know, these commodity markets,
you don't know exactly how it's gonna end up.
Speaker 3 (35:15):
Playing. This article is once again pointed in or produced
in a way that makes it seem as though China
very intentionally brought the market for lithium and cobalt to
its knees and has now oversupplied the world with these
products and prices plunging. This is not a desirable outcome
(35:39):
for China. No, China has invested likely billions of dollars
in mining of rare earth materials here and has now
oversupplied the market like they have with other areas such
as automobiles, where prices are now plunging globally for these
for these rare earth materials. And again, all a lot
(36:00):
of this depends on whether or not the United States
and other countries choose to import this stuff from China
or slap massive tariffs on it. But it has the
potential to make battery production globally a fair bit cheaper.
And again, I just go back to this worry we
seem to have at Oh, you know, China's got their
act together. They can snap their fingers and you know,
(36:23):
suddenly supply the world with cobalt and put us all
out of business. And that's true. They did seem to
be able to snap their fingers and quickly, you know,
supply the world with cobalt and lithium, but they also
seemingly have no idea what the future demand is going
to look like for some of these things, and completely
misread markets on many many occasions.
Speaker 2 (36:43):
Yeah, I don't think this was intentional. It might have
just been that they didn't care about the concerns. Maybe,
you know, like they might we don't care about the mark.
Who cares if we lose money on this, right, like,
just get us the lithium. Yeah, and that is it
necess necessarily a winning strategy.
Speaker 3 (37:01):
In the long run. Yeah, you're right. I don't know, like,
did they want to just say we don't want anyone
else in the world to be able to do this profitably,
so we're going to take the market the same thing
they've done with solar panels, for example, where you pretty
much cannot make solar panelers anywhere other than China because
they just oversupply the entire market and creater prices.
Speaker 2 (37:22):
Yeah, it's it's one of those situations where you're trying
to figure out is this due to malice or incompetence,
and it's.
Speaker 3 (37:30):
The answer is it doesn't. Sometimes it doesn't really matter,
It doesn't necessarily matter. It's probably a little bit of both.
Speaker 2 (37:35):
And the other thing that I do find interesting on
this stuff, it's like, look, if you got all these
excess inventories, all right, like someone out there, if you're
smart and you have you know, no immediate term horizon
for you know, needing this. Okay, Like, I don't know
how you store lithium. I don't know if it like
sure it doesn't spoil like eggs, you know, but I
don't know if like there's things where you can't store
(37:57):
it for like five years.
Speaker 3 (37:59):
Do you think can that can store lithium in the
same place that they keep their strategic maple syrup reserve.
Speaker 2 (38:03):
They can wrap it in the maple syrup to prevent degradation.
Now we're talking sounds great. Actually it's probably awful.
Speaker 3 (38:14):
Yum lithium.
Speaker 2 (38:15):
It's probably very bad. Let's take a quick break here.
When we come back, we got hour two coming up.
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