December 29, 2025 • 39 mins
Chuck Zodda and Marc Fandetti preview another shortened holiday week in terms of expected economic data points due out, including Fed Meeting minutes. How are investors preparing for the next Fed Chairman? Also, the latest on the labor market and why companies may not be prioritizing hiring in 2026. And, how did investors fare who "did nothing" this year?
Mark as Played
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Episode Transcript
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Speaker 1 (00:00):
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(01:06):
and Mark Fandetti, Chuck.
Speaker 2 (01:14):
Mark and Tucker with you here on Monday's pretty quiet week,
quite honestly, and so if you're recovering from a little
bit of overeating on Christmas, as I've been known to do,
then we're in the same boat and we can just
kind of take it easy. We do have some economic
(01:36):
data that comes out this week. Casehal our Home Price
Index will be out tomorrow along with the FHFA Home
Price Index. We're going to be getting fed Minutes tomorrow
as well, and then Wednesday we are going to be
getting some jobless claims.
Speaker 3 (01:50):
But overall, just.
Speaker 2 (01:52):
A pretty quiet week and a nice way for us
to digest our food Digest twenty twenty five and get
ready for which twenty twenty six. Trading starts this Friday.
It's gonna be one of these weird things where you
have one day of trading in the new year, and
then hey, take another two day break because of the weekend,
and really get into it on Monday the fifth. But
(02:13):
in any case, there is still some stuff that is
moving around and some things that I think are worth
talking about at this time of the year.
Speaker 3 (02:21):
Things that are not worth talking about.
Speaker 2 (02:23):
Twenty twenty six s and P five hundred price targets useless,
don't care, not gonna do it, So we're gonna skip
over that. But what I do want to discuss is
we are going to have a new FED chair in
the first half of next year. The actual timeline for
this is Powell's term is up in May, and so
(02:43):
in theory he's going to finish out his term. I
think he will, just because I think he've used it
as something that's important.
Speaker 3 (02:50):
But we're very likely to get.
Speaker 2 (02:51):
An announcement on who that next FED chair is going
to be sometime in January. And at this point, I
think we've got the two keV are in the running.
We've got Kevin Hassett and Kevin Warsh. Waller is in
the running. Chris Waller, who is the Where's he the
FED governor?
Speaker 4 (03:11):
Or?
Speaker 3 (03:11):
Is he just on the is he just he's a governor?
He's a governor. I can't remember which which one he's.
Speaker 5 (03:17):
I don't associate them with the geographic that may be
the case. I just think of governor's is floating as
opposed to presidents of FED banks who.
Speaker 3 (03:24):
Oh, okay, I meant he was a president. He's not
a president.
Speaker 2 (03:29):
So those are the three names that have been bandied about.
I still think there's an outside chance, we little chance,
maybe I don't know, ten twelve percent chance that Scott Besson,
current Treasury Secretary, ends up in the role. But this
is kind of where we are right now. Is there
is going to be a new FED chair about five
(03:50):
months from now, and there's a piece in the Wall
Street Journal how investors are preparing for a new FED?
How are they preparing?
Speaker 5 (03:58):
Mark Well, I don't. I think you have to think
about this in terms of what the Fed's job. If
I may just, I don't want to go on a
diatribe here about the FED being compromised. Maybe we should
get into that because it's unavoidable and it directly impacts
financial markets. But first, remember what the FED does. It's
the economy's thermostat the FED can It's useful to think
about the FED is controlling demand before inflation, so the
(04:22):
FED can control the growth rate of the economy. I'm
oversimplifying a little bit, and a monetary economist would slap
me on the wrist for this, but just think about
it that way, and demand overall consists of an inflation
component and a real or an after inflation component. But
so the Fed, because it can print money, it can
effectively control. Again I'm oversimplifying the rate of inflation. Things
(04:43):
can get out of hand as a result. If the
FED is too lax with respect to one component of
its dual mandate, which is to keep inflation low and stable,
which the FED defines is two percent. That's still the
Fed's job. It's important, I think, to keep that in
n The reason I opened with saying, well, the FED
is compromised is because the administration doesn't care about the
(05:06):
two percent goal. They've made that clear. The administration wants
the FED to just print a lot of money. When
they say they want interest rates low. That's synonymous with
printing a lot of money. To the extent that that
influences inflation expectations which are elevated, you've got a problem.
And to the extent that that feeds into demand and
pushes demand above the economy's productive capacity, you've got a problem.
(05:32):
Let me ask inflation problem.
Speaker 2 (05:33):
Let me ask you a question, because this is one
that I'm sure listeners are thinking right now. Previous presidents
have made similar not the same type, but have have
similarly tried to jawbone the FED into moving rates lower,
not in.
Speaker 5 (05:50):
The modern era, not since snot since Clinton.
Speaker 2 (05:53):
Well, I was going to go back even further. I
mean Clinton and Johnson are the two examples that I
was going to give that.
Speaker 5 (05:58):
Are Clinton and Clinton was a good example, Johnson a
bad example.
Speaker 2 (06:03):
So I guess my question on this is we've seen
this previously from other presidents. Is there a difference here
in terms of how you view that the FED could
be influenced because again, previous presidents like yeah, again, Johnson
did Nixon certainly?
Speaker 5 (06:23):
And what happened after that? We had the Great Inflation?
Speaker 3 (06:27):
Correct?
Speaker 2 (06:27):
I guess do you draw a straight line from point
eight se b or were their exogenous factors that contributed,
especially with.
Speaker 5 (06:35):
Nick Yeah, well, okay, Johnson needed to finance great society
in the Vietnam War, so we had easy fiscal, easy
monetary policy. Inflation started to pick up in sixty six
sixty seven. Then we were off to the races. We
had two oil shocks in the seventies just exacerbating things,
but the trend was up. Nixon, similarly worried about his
(06:56):
reelection appoints his buddy Arthur Burns, who was who was
the pre eminent business cycle economists is.
Speaker 3 (07:02):
Very well regarded. Before his time.
Speaker 5 (07:04):
He was brilliant, brilliant, right, He spent a lot of
time doing forecasting, effectively invented the concept along with a
couple of other guys. I say guys generically they happen
to be man of business cycles and forecasting them. Johnson
and Nixon broke the FED. It was it was already.
It was already, you know, tenuous because it was still new,
(07:25):
this idea of independent monetary policy. Trump's gonna break the
FED again. He arguably already has if you look at
inflation expectations, and we're gonna have to relearn the lesson
of the importance of independence and FED credibility all over again.
Speaker 2 (07:40):
Let me ask you another question, then, because there's an
assumption I think embedded in this. Let me ask you,
is there an assumption embedded in this that whoever is
the FED chair is actually going to follow through on
what President Trump is explicitly like again week or two,
(08:00):
like explicitly saying I want someone who's going to lower rates.
Speaker 5 (08:03):
I don't if you look at how the and this
is this goes a little bit beyond finance. But he's
getting his way. In other areas, you could say you
think that's great, or you think it's not great. I'm
not gonna comment on that, sure, but if he wants it,
he's getting it. He's being a very aggressive, empowered, energetic
chief executive. I guess, yeah, I have to take a
bit of a leap and say I find it hard
to believe whoever he puts at the FED is not
effectively a puppet, and a puppet sounds derogatory, but I
(08:27):
think Trump, if he asked him, he'd say, yeah, I
want a puppet at the FED.
Speaker 2 (08:31):
This leads me to my final question that I think
we'll get to where I'm really going with this, and
then I will conclude my opening arguments. Scott Bessen, Yeah,
the year before he became Treasury Secretary, was very publicly
criticizing Janet Yellen, who was Treasury Secretary at the time,
saying I don't like how she's managing the mix between
(08:51):
short term bills and long term bonds, like you know,
wrote multiple white papers on this, and you know it
was on different news networks, you know, talking about this
and so on and so forth. Comes into the position
of Treasury Secretary this year and has kept doing exactly
what Janet Yellen was doing because he looked at the
situation and was like, Yeah, of course I'm going to
(09:12):
keep doing this because I want to keep my job.
I guess my question is regardless of who comes in,
whether it's one of the Kevins, whether it's Best, whether
it's Wall or whoever it might be, whether it's you know,
someone who we haven't mentioned yet, which I don't think
is the case, because it seems fairly, you know, far
(09:32):
along in the process.
Speaker 3 (09:33):
Now.
Speaker 2 (09:36):
I believe that to a certain extent, you get into
that chair, whatever the chair is, anywhere, and once you
realize how much power you have there at the helm
of the US financial system, despite your previous thoughts to
the contrary, maybe you generally tend to be like, yeah,
I guess I really can't, you know, push that button
(09:58):
the way that I want to. What happened with Besson,
I guess is what I'm getting at is, bessont you
know the whole year last year was I can't believe
Yellen's doing things this way. I can't believe she's doing
it this way. And then he's basically done the exact
same thing, and so part of me looks at this
and says, I know that, you know, there's this thought
(10:20):
that hey, whoever goes in there is going to you know,
harm the fed's independence and their credibility. But I guess
part of me looks at it and goes, I'm not
so sure. Based on what we've seen from Besson during
this administration.
Speaker 5 (10:33):
As well, maybe he pulls like a Thomas Beckett. If
you've ever seen the movie he was made archbishop and
then he started bucking the king and a Great Peril
Tool movie. Yeah, so maybe he does. And then of
course Trump pulls a Henry the Second on him. I
don't see the president, and if you haven't seen the
movie you may not, or you know, read about this episode,
you may not get that. But the point is, my
(10:54):
guess is that the president has been fierce about imposing
loyalty in his will. You think he'll brook uh a
FED chairman bucking him. I don't. He'll find a way
to fire.
Speaker 3 (11:05):
He has with Powell, and he appointed Powell only.
Speaker 5 (11:09):
He was we know he was on the brink of
firing him a couple of times, and but Bessant and
others walked him, who's going to be there to walk
him back this time. If Bessant decides FED integrity and
independence is too important to the stability of our financial system,
I'm sorry, mister President. I can't lower interest rates to
zero with inflation at about three and economic growth uh
(11:31):
seemingly above trend. I don't think the president is going
to talk This again, gets way beyond economic analysis. That
You've got to look at the way that the president
has maade in other areas. He does not brook opposition,
He's fierce about imposing loyalty, about demanding loyalty. Will he
suddenly respect the Fed's independence because it's his guy? Powell
(11:51):
was his guy?
Speaker 3 (11:52):
But that's what like.
Speaker 2 (11:53):
I guess what I'm saying is Poul was this guy.
He said, I don't like him anymore, but he still
hasn't moved on from him.
Speaker 5 (12:01):
I don't think he's going to make the same mistake twice. Interesting,
what in his view is a bit well, look at
how the president's behaved in other areas. He feels very empowered.
Why would he stop at the at the FED.
Speaker 3 (12:13):
Let's take a quick break.
Speaker 2 (12:14):
When we return, let's talk a little bit about labor
market expectations.
Speaker 3 (12:18):
In twenty twenty six, Miss.
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Peace In the.
Speaker 2 (13:39):
Wall Street Journal, it's the French language Wall Street Journal
that uh I can't read because I don't speak French.
I always struggle with crossword puzzles because of that, you know.
I get crossword puzzle as like at least two or
three French things in it, and I'm looking at and
I'm like, don't know, have to skip the clue, maybe
hopefully get it on the cross I've.
Speaker 3 (14:00):
No chance in those.
Speaker 2 (14:01):
But whatever companies they're outlining their hiring plans for twenty
twenty six, they don't look very good. And this is
meshing with the real time data that we are continuing
to get on the state of the labor market, which,
in my opinion, which might not be worth the paper
(14:21):
it's printed on, but usually it's worth at least the
paper it's printed on, because paper's pretty cheap these days.
US labor market continuing to slow. The latest data that
I have here and this.
Speaker 3 (14:32):
Is from a week ago.
Speaker 2 (14:34):
But and again you have to take this with a
grain of salt, just because year end numbers always get
a little wonky because of holiday schedules and floating holidays
and things like that. But when you look at the
current state of fight attacks withholding relative to last year,
(14:54):
this is the trend that we have been on now
over the last six month months. July of this year
saw a seven point four percent year over year increase
in FIGHTA withholding.
Speaker 3 (15:07):
And why this matters?
Speaker 2 (15:09):
Okay, Like why I think this matters as opposed to
like some of these other measures ultimately, fighter withholding measures.
One thing, how much income tax are employers and employees
withholding on a regular basis based on the actual wages
they are paying, specifically wages under about one hundred and
(15:29):
sixty thousand, because that's where the FIKA cap is. And
like it's basically how much money is the apt like
the normal person in the United States making? How much
growth are we seeing in that spending power of three
hundred and ten million people as opposed to you know,
the twenty million that make north of that or whatever
that number is. So in July of this year, FIGHTA
(15:52):
withholding growth was at seven point four percent.
Speaker 3 (15:55):
Which is pretty robust. Like it's pretty good.
Speaker 2 (15:57):
Like you generally, if you see anything historically like the
last ten years, if you're running like five to seven
percent growth, you're fine, there like that, that's where you
want to be. So seven four you're like, okay, this
is pretty good. August slows to seven to two. Negligible change. Honestly,
if if you just had like that little wiggle you
shrug it off. October down to four point three percent,
(16:21):
I'm sorry, September down to four point three percent. October
and November you have to aggregate them because of when
Halloween fell an end of month this year, but whatever,
you can do that down to three point eight percent.
You could look at that October and November number and say, yeah,
it fell to three eight but maybe that was because
of the shutdown, because that did have some delays in
(16:41):
you know, certain payments there, and government contractors might not
have been getting paid during that time, and so maybe
they weren't paying their employees. Whatever you can, you can
kind of like hand wave it away. December through December
twenty second is running half a percent year over year growth,
which hmm, in my opinion is below stall speed. And
(17:03):
the reason that I say that is, remember this is
the time of year where most employers are giving raises,
but in reality, raises happen all throughout the calendar year,
and I don't know what kind of raises anyone listening
may be receiving. Maybe you're retired and this is not,
you know, something that's relevant to you anymore. But in general,
what we see these days, I think anywhere from like
a one and a half to two and a half
(17:24):
percent raise is kind of standard throughout most companies. I think,
if we want to call it two percent, let's call
it two percent plus. You have people that are switching jobs,
and when you switch jobs, you're typically not switching to
a lower paying job. You're typically trying to move to
a higher paying one. And so I generally think the
baseline if you have like no job growth, which by
(17:45):
the way, is kind of what we've seen the last
few months, is yeah, you should still be eking out
like three to four percent in payroll tax withholding, because
that's kind of the natural order of Yeah, most people
are getting you know, one and a half to two
and a half percent raises, and if you're taking a
new job, you might get like a four to five
percent bump, and so you end up, in my opinion,
(18:07):
with like three to four percent fighta withholding growth being
a baseline for no job growth, that's how I get
there at least if we are, in reality seeing anything
near only half a percent fight attacks withholding growth yere
over year, it suggests to me that the pace of
job growth has turned negative, or that the only way
(18:30):
people are able to maintain jobs is by getting laid
off and then taking a lower paying job in order
to mitigate the damage, which also is not great for
spending power. Now, again, December is a little wonky, and
it's one month, so I'm gonna take that half percent
with a grain of salt and see what we get
in January and February. But the trend in the second
(18:50):
half of the year for actual fight of withholding this
is not I'm not talking about you know, hey indeed
says there are this many job openings or hey, you
know here what employers think about hiring and how they
feel man, because like, I don't really care what employers
feel about hiring. What I care about is how much
payroll tax is being withheld, because that tells me how
(19:11):
much payroll is actually being paid out and how much
the economy can grow on consumer spending. And so if
we see a further deceleration from here in the next
couple months, buckle up, because we got problems. Then if
we see this reverse and hey, this might just be
like wonky because of you know, Christmas falling on a
Thursday and the pay period lined up this way, and
(19:33):
I can buy that and just say, Okay, this doesn't
matter at all, like it's it's fine. But there's a
six month trend in place of payroll slowing, and that's
something that is of payroll tax withholding slowing, and that's
something that's a little bit concerning to me when I
see where we've slowed to now and where that can
potentially go in the next couple months.
Speaker 3 (19:53):
So we'll see where it goes. But this is this
is the actual stuff I'm looking at right now. Quick break.
When we return, it's Wall Street Watch.
Speaker 1 (20:10):
Liked us on Facebook and follow us on Twitter. Act
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 market so
far today right here on the Financial Exchange Radio Network.
Speaker 4 (20:29):
Well, the final trading week of twenty twenty five is
starting off in negative territory as trader is away to
small batch of economic data points do out this shortened
holiday week, including FED meeting minutes and jobless claims pending
home sales were released earlier this morning. Right now, the
Dow is down by four tenths of a percent or
two hundred and three points lower. SMP five hundred is
(20:52):
down three tenths of a percent or twenty one points.
NASDAC down nearly half a percent or one hundred and
nine points lower. RUSS two thousands off just over half
or percent, Tenyure Treasure reeled flat at four point one
two eight percent, and crude oil up about two and
a half percent. Hire today trading just above fifty eight
dollars a barrel. Shares in digital Bridge are jumping nearly
(21:16):
ten percent following news that Japan's soft Bank agreed to
buy data center investment firm digital Bridge for four billion dollars,
is part of its artificial intelligence push. Meanwhile, in Video,
shares are down almost two percent on the heels of
news from last week that the chip and AI giant
agreed to buy assets from Grock for twenty billion dollars
(21:36):
in cash. Grock is a nine year old chip startup
that designs high performance AI chips. The deal marks in
Video's largest purchase ever. Elsewhere, the Wall Street Journal is
reporting that Lulu Lemon founder Chip Wilson is launching a
proxy fight at the Athletic apparel retailer in an effort
to remake the company's board as the company searches for
(21:59):
a new CEO. Lulu stock is up over two percent,
and Disney's Avatar Fire and Ash retain the number one
spot in the domestic box office for second straight weekend.
Avatar and Disney's Utopia two where the two top performing
movies by worldwide ticket sales. Disney shares are edging higher.
I'm Tucker Silva and that is Wall Street Watch and
(22:21):
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Subscribe to our page and follow market activity all morning long,
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Speaker 3 (22:37):
He's in the Wall Street Journal.
Speaker 2 (22:39):
In a wild year for markets, investors who did nothing
did just fine. Mark is this kind of more often
than not. This is how it is.
Speaker 3 (22:50):
And the fact is about seventy percent.
Speaker 2 (22:52):
Of the time markets go up in the calendar year,
thirty percent of the time they don't. And I think
even in years like this where we have you know,
big intra year volatility the phrase that I tend to
like to use.
Speaker 3 (23:04):
I have two of them.
Speaker 2 (23:05):
The first is, look, the price of admission to markets
equity markets is the volatility that you see. And the
second one is, look, you can let the market do
the worrying for you. You know, if markets are nervous
about something, they will sell off. If that nervousness can
be resolved, they will go back up. And that's pretty simple.
I know investors only want to see their portfolio go up,
(23:27):
and they think that they can do that, but the
fact is you can't. It's not possible in equity markets,
and quite honestly, it's kind of an entitled view to
be like, oh, like, equity markets carried my portfolio up
by twenty percent this year, so that's my money. But no,
(23:47):
when markets go down, oh, I can't lose that at
Like how much hubris do you need to have to
be like? I can participate in the gains, but not
the losses of equity markets.
Speaker 5 (23:59):
I mean to understand and retrospect everything seems explainable and obvious,
just like history and retrospect seems obvious.
Speaker 3 (24:05):
Sure, so there's.
Speaker 5 (24:06):
That tendency to read history stock market history in this
case backwards and think something was inevitable and think that
you could detect the pattern in the future. But for
complexity reasons, those patterns don't hold up. So market timing,
like you said, is really hard. But you made a
powerful point when you started talking about this, which is
(24:27):
most of the time on a calendar your basis, stocks
go up. It's true monthly too, but the frequency is
a little bit more modest. It's like sixty some odd
percent of the time monthly and daily. By the way,
it's a fifty, it's about fifty one forty nine. It's
about fifty one to forty. And this makes sense when
you think about what stocks are there your ticket to
participating in economic growth. It's how it's how we hitch
(24:49):
our wagon to the train of economic growth in terms
of investments.
Speaker 2 (24:54):
So you can also say it's how labor hitches their
wagon to capital. How you can play on the same
team if you believe the house always wins and the
capital always wins. Aren't stocks the way that you can
hit your wagon to capital.
Speaker 5 (25:04):
They're one way, assuming it's publicly traded companies to benefit
from economic growth, which is an assumption underlying what I'm
saying here that seems to be the way things continue
to work.
Speaker 1 (25:14):
But.
Speaker 5 (25:16):
It's not. I wouldn't be too you know, dogmatic and
obnoxious about you know, by proclaiming that that's the way
things are going to continue to work. But all we
have is history. That frequency argument you made comes from history.
This is why the safest bet if you're a long
term investor, not if you can't afford to lose. I
(25:37):
was going to say twenty thirty, forty percent of your capital.
Those numbers sound scary, but those are sort of typical
stock market draw downs well.
Speaker 2 (25:44):
And it's also why people typically say, look, if you
have money for an emergency funded for buying a house
next year, for whatever it might be, that's a short
term need.
Speaker 3 (25:52):
That money belongs nowhere near the.
Speaker 2 (25:53):
Stock market, right because the volatility that you see, you
don't know when it's going to show up, you don't
know how stupid it's going to be, and you don't
know exactly when it's going to be resolved.
Speaker 5 (26:03):
But if somebody puts, you know, a metaphorical gun to
your head and says, what are Stock's going to do today,
you know the coin is loaded in Stock's favor. Just
in terms of the frequency argument, the historical argument, what
have stocks done daily, monthly, annually, So you'd be bucking
history unless you had a strong conviction going the other way,
(26:25):
and I we would look at you askance if you
said you did, because that would require a crystal ball
that of course doesn't exist. You would say stocks are
gonna go up.
Speaker 3 (26:32):
To a palanteer if you will.
Speaker 5 (26:34):
Yeah, right, those guys. You would say stocks are going
to go up today, or stocks are gonna go up
this month, with no other information. That should be your guess,
just taking if you were a literal like empiricist, which
is not the best way to approach the world necessarily.
Speaker 3 (26:48):
But probably not.
Speaker 5 (26:49):
But if you were just being very literal and you
were a rank empiricist looking at history, you would say
stocks are gonna go up today or this month or
this year because historically that's what they've always historically, that's
the tendency. Excuse me.
Speaker 2 (27:02):
Now, you can still have runs within that, just like
if you go to a roulette table.
Speaker 3 (27:05):
Absolutely you say, oh, you.
Speaker 2 (27:08):
Know, you go to the roulette table, Yes, and okay,
it's basically a fifty to fifty shot, which by the way,
now is getting worse. I don't know if anyone's been
to a casino lately, but roulette tables are adding a
triple zero now in order to make the house edge
even bigger than it already is. So that's fun because
they just can't get you know, greedy enough to you know, do.
Speaker 5 (27:26):
You know what that offhand? With that shifts the odds to.
Speaker 3 (27:28):
Well, think about it.
Speaker 2 (27:29):
I mean, if if you think about the number of
spots on a table and you're adding one more, that
is in favor of the house, because again, unless you're
betting that you're in that that is a suckers bet.
Every time you're probably losing another one and a half
to two percent to the house.
Speaker 5 (27:44):
So does it go thirty it's thirty five to one
right now? Is go thirty six to one?
Speaker 1 (27:48):
Am?
Speaker 2 (27:48):
I No payouts are going to be the same because
you still have the same number of numbers that are
on there.
Speaker 5 (27:54):
I know, I've never thought about this carefully enough. Okay,
I see what you're saying.
Speaker 2 (27:57):
Yeah, so it's again it adds to you know, the
house edge there because the casinos can't make enough money otherwise,
I guess. But in any case, you go to a
roulette table, and just because it came up black the
last two times doesn't mean it's definitively going to be
read fifty to fifty still means Hey, like, if you're
going through you know, five of these in a row, yeah,
(28:18):
you have pretty low odds of getting you know, the
same color each time.
Speaker 3 (28:22):
But it can happen. I mean, I'll tell the story.
Speaker 2 (28:25):
I was out at the MGM in Springfield about a
year and a half ago, and wildest thing I've ever seen.
I'm sitting there and I'm at the roulette table with
a couple buddies. We've been out on like a golfing
trip in the area, and we were staying there for
the night, and this guy walks up with you know,
I don't know, thirty bucks or something like that and
puts it all on thirty three and gets thirty three
(28:49):
maybe it like a thousand bucks his first minute at
the roulette table, and all of us are sitting there,
We're like, oh, this guy's crazy, Like we've all seen
this like a casinos are like, oh, I can't.
Speaker 3 (28:58):
Believe that happened.
Speaker 2 (29:00):
And then, you know, get everything set up for him
and he just keeps it on thirty three and again,
like you know, it's you know, unlikely chance. Like now
you're talking like a three percent of a three percent chance,
so you're talking like a point zho nine percent chance
of back to back. The guy landed a thirty. The
guy made thirty grand in a span of two minutes.
I mean it was actually like ten just because they
(29:21):
had to count all the money up, because it's like
when you're paying at thirty grand to chips, it's kind
of a lot. But the guy made thirty grand in
two minutes because it just happened to be lucky. Now,
is that repeatable or investible? No, not in any way,
shape or form. So like weird things can happen at
the rule Lett table, just like weird things can happen
in markets. But that's all part of like how the
(29:45):
actual odds end up playing out. Like you don't just
get markets going red black, red black, red black from
day to day. Sometimes you have seven days down on
the S and P in a row. Sometimes you have
nine days up on the Nasdaq in a row like that.
That happens too, but ultimately this stuff balances out in
the long term day to day and you end up
with pretty close to that fifty to fifty split.
Speaker 5 (30:07):
Now, there are decades like the two thousands when stocks
underperform everything including bonds and cash. Thankfully they're rare. But
if you remember periods like that, again, thankfully they're rare.
So if you're not of a certain age, you weren't
even investing, then for others of us who were, that's
seared in our memory. That reinforces the caveat that you conveyed,
(30:30):
which is, if you don't have a long enough timeframe.
I don't know what a long enough time frame is,
seven ten years, maybe ten years, Yeah, then don't put
whatever that a long enough time frame associated with whatever
the goal for that money is. Equities are probably not
the right place for it.
Speaker 2 (30:46):
And this is before we even get into the fact
that what we're saying about US markets does not apply
to international ones in any way, shape or form. The
return distribution chart is entirely different. If you're looking at
European equities, it's entirely different if you're looking at like
it's this is not consistent across markets because those markets
have different rules by which they play. Sometimes the rules
(31:07):
are better, sometimes they're worse. But like this is, it's
it's not something it's not physics that we are talking
about here. It is inherently unpredictable in terms of specific outcomes.
But you can map these, you know, outcome distribution charts
over different periods and see what you get in different markets.
Speaker 3 (31:27):
Let's take a quick break.
Speaker 2 (31:28):
When we return, let's talk a little bit about what's
going on in the Boston areas as it relates to
jobs and housing.
Speaker 1 (31:38):
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Speaker 2 (32:09):
Piece in the Boston Globe today. It's titled Forever Renters
from any in Greater Boston. American dream of home ownership
no longer exists. And two things are true in my opinion,
right now, home prices in the Boston area are unaffordable
for a large number of people who live in the
Boston area. So they may feel this way right now,
(32:31):
But I think it is a horrible mistake to extrapolate
what's going on right now and say that it is
anything permanent into evidence. I would like to enter two
different things in support of this. The first, Mark Tucker, actually,
can you fire up the way back machines time us?
Speaker 3 (32:48):
Okay, we don't need to go too far.
Speaker 2 (32:50):
We're going to head back to late late twenty early
twenty twenty one. And I remember this time. Remember this
is like peak pandemic. This is when you have the
pieces that were being published like, hey, no one's ever
gonna live in cities again, man, and the Northeast is dead,
and like, ultimately, like what we found is, hey, people
(33:11):
like to live in cities because they like to be
you know, close to their other humans and stuff.
Speaker 3 (33:16):
It's not for everyone.
Speaker 2 (33:17):
I get that, But there's a reason why cities have
existed over time and generally gotten bigger, and it's because
people like to be around other people in the services
provided by them. And so like that wasn't gonna change,
and so I think ultimately, like I look at that
and like those predictions were really bad. The other one, Tucker,
can you take us back a little bit further now,
(33:37):
I need to go back to twenty twelve, so eight
more years.
Speaker 3 (33:40):
If you could Ah, it's twenty twelve.
Speaker 2 (33:44):
Now the world is gripped by fears of gregsit and Italy.
Speaker 1 (33:48):
Eve.
Speaker 2 (33:48):
Remember this was when like all the pigs were talking
pigs was Portugal, Italy, Ireland, Greece and Spain. They were
talking about leaving the Eurozone, or rather being booted out
of the Eurozone by the better behaved Germans and French
and everywhere.
Speaker 5 (34:02):
They've done it.
Speaker 2 (34:03):
Yea, it's not your point, No, it's fine, Like, I
appreciate where you're coming from. In any case, where was I, Oh,
here's where I was going with this. This was the
time when you had a bunch of people saying millennials
are never going to amount to anything financially, they'll never
own homes.
Speaker 3 (34:20):
Avocado toast eaters, you losers.
Speaker 2 (34:23):
Like that was what was going on then, And now
you have the pieces being published ten years, you know,
twelve years later being like, oh, you guys, actually you know,
did stop hopping around on jobs once you had kids,
And yeah, you figured out how to save some money
and buy homes and you're actually buying homes at a
greater rate than your parents were. And so gee, all
those prognostications were wrong. So what I would say to
(34:46):
anyone in their twenties and thirties that feels locked out
of the Boston housing market, Yes, it sucks right now
for you, but no, it might not be like this forever.
And be open to the idea that the affordability picture
on housing change dramatically in a three to five year period.
And don't give up. If you still have dreams of
home ownership, just understand it might take you a little
(35:07):
bit longer to get there. But I've seen enough publications
of you know, things that are like, oh, this is
how it's gonna be for this group, and this is
how it's gonna be for that one, And it's most
people like really overestimate how permanent any shift is. And
I suspect this shift of unaffordability is one that's temporary
as well, because by its very nature, it's hard for
(35:28):
it to be permanent when more and more people can't
afford these properties.
Speaker 4 (35:31):
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Speaker 3 (36:42):
Now.
Speaker 2 (36:42):
The other piece to add on this in terms of hey,
how could the worm turn as far as Boston home prices.
Boston is a great exporter of two things, and I
say export, not to like other countries, but just in general,
Boston is a great exporter of two things, seafood and nerds,
and specifically the engine that makes the Massachusetts economy run
(37:03):
and by virtue of that, the New England economy run,
because again, like it all kind of gets powered by Boston.
As much as I hate to admit it, like that's
it's just how it is. Like without Boston as this
you know, center of economic activity, the rest.
Speaker 3 (37:16):
Wouldn't be quite what it is.
Speaker 2 (37:20):
The fact is, Boston has historically, over the last one
hundred years or so, been more stable than the rest
of the US economy because its main drivers have been
education and healthcare, and those are areas that typically are
less susceptible to booms and bust cycles than places like construction.
And what we are seeing now is that the labor
(37:42):
market for you know, very highly educated workers, the folks
with you know, the PhDs, multiple MBAs and all that stuff,
it's weakening in the Boston area for a number of reasons.
And so this is another thing that I come back to.
If you are someone without the PhD, without you know,
a master's and ana and this and that, you've probably
(38:03):
you know, been competing against people with way higher salaries
than you for the last you know, dozen twenty years
for housing stock. If the job market for those very
highly educated employees is shifting, then, as an example, the
family outlined in one of these pieces that you know,
the two of them combined make one hundred and seventy
(38:23):
five thousand dollars, start to become people who are going
to be in the driver's seat for buying property in
the Boston area once the family's making you know, four
hundred thousand don't exist in the Boston area in the
same concentrations anymore. In any case, let's take a quick break.
By the way, four hundred thousand dollars worth of lobster
has disappeared from a Taunton warehouse. Don't know where it is,
(38:45):
but it's a lot of lobster. Quick Break Hour two
coming up in a bit.
Speaker 1 (39:00):
Four
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(01:06):
and Mark Fandetti, Chuck.
Speaker 2 (01:14):
Mark and Tucker with you here on Monday's pretty quiet week,
quite honestly, and so if you're recovering from a little
bit of overeating on Christmas, as I've been known to do,
then we're in the same boat and we can just
kind of take it easy. We do have some economic
(01:36):
data that comes out this week. Casehal our Home Price
Index will be out tomorrow along with the FHFA Home
Price Index. We're going to be getting fed Minutes tomorrow
as well, and then Wednesday we are going to be
getting some jobless claims.
Speaker 3 (01:50):
But overall, just.
Speaker 2 (01:52):
A pretty quiet week and a nice way for us
to digest our food Digest twenty twenty five and get
ready for which twenty twenty six. Trading starts this Friday.
It's gonna be one of these weird things where you
have one day of trading in the new year, and
then hey, take another two day break because of the weekend,
and really get into it on Monday the fifth. But
(02:13):
in any case, there is still some stuff that is
moving around and some things that I think are worth
talking about at this time of the year.
Speaker 3 (02:21):
Things that are not worth talking about.
Speaker 2 (02:23):
Twenty twenty six s and P five hundred price targets useless,
don't care, not gonna do it, So we're gonna skip
over that. But what I do want to discuss is
we are going to have a new FED chair in
the first half of next year. The actual timeline for
this is Powell's term is up in May, and so
(02:43):
in theory he's going to finish out his term. I
think he will, just because I think he've used it
as something that's important.
Speaker 3 (02:50):
But we're very likely to get.
Speaker 2 (02:51):
An announcement on who that next FED chair is going
to be sometime in January. And at this point, I
think we've got the two keV are in the running.
We've got Kevin Hassett and Kevin Warsh. Waller is in
the running. Chris Waller, who is the Where's he the
FED governor?
Speaker 4 (03:11):
Or?
Speaker 3 (03:11):
Is he just on the is he just he's a governor?
He's a governor. I can't remember which which one he's.
Speaker 5 (03:17):
I don't associate them with the geographic that may be
the case. I just think of governor's is floating as
opposed to presidents of FED banks who.
Speaker 3 (03:24):
Oh, okay, I meant he was a president. He's not
a president.
Speaker 2 (03:29):
So those are the three names that have been bandied about.
I still think there's an outside chance, we little chance,
maybe I don't know, ten twelve percent chance that Scott Besson,
current Treasury Secretary, ends up in the role. But this
is kind of where we are right now. Is there
is going to be a new FED chair about five
(03:50):
months from now, and there's a piece in the Wall
Street Journal how investors are preparing for a new FED?
How are they preparing?
Speaker 5 (03:58):
Mark Well, I don't. I think you have to think
about this in terms of what the Fed's job. If
I may just, I don't want to go on a
diatribe here about the FED being compromised. Maybe we should
get into that because it's unavoidable and it directly impacts
financial markets. But first, remember what the FED does. It's
the economy's thermostat the FED can It's useful to think
about the FED is controlling demand before inflation, so the
(04:22):
FED can control the growth rate of the economy. I'm
oversimplifying a little bit, and a monetary economist would slap
me on the wrist for this, but just think about
it that way, and demand overall consists of an inflation
component and a real or an after inflation component. But
so the Fed, because it can print money, it can
effectively control. Again I'm oversimplifying the rate of inflation. Things
(04:43):
can get out of hand as a result. If the
FED is too lax with respect to one component of
its dual mandate, which is to keep inflation low and stable,
which the FED defines is two percent. That's still the
Fed's job. It's important, I think, to keep that in
n The reason I opened with saying, well, the FED
is compromised is because the administration doesn't care about the
(05:06):
two percent goal. They've made that clear. The administration wants
the FED to just print a lot of money. When
they say they want interest rates low. That's synonymous with
printing a lot of money. To the extent that that
influences inflation expectations which are elevated, you've got a problem.
And to the extent that that feeds into demand and
pushes demand above the economy's productive capacity, you've got a problem.
(05:32):
Let me ask inflation problem.
Speaker 2 (05:33):
Let me ask you a question, because this is one
that I'm sure listeners are thinking right now. Previous presidents
have made similar not the same type, but have have
similarly tried to jawbone the FED into moving rates lower,
not in.
Speaker 5 (05:50):
The modern era, not since snot since Clinton.
Speaker 2 (05:53):
Well, I was going to go back even further. I
mean Clinton and Johnson are the two examples that I
was going to give that.
Speaker 5 (05:58):
Are Clinton and Clinton was a good example, Johnson a
bad example.
Speaker 2 (06:03):
So I guess my question on this is we've seen
this previously from other presidents. Is there a difference here
in terms of how you view that the FED could
be influenced because again, previous presidents like yeah, again, Johnson
did Nixon certainly?
Speaker 5 (06:23):
And what happened after that? We had the Great Inflation?
Speaker 3 (06:27):
Correct?
Speaker 2 (06:27):
I guess do you draw a straight line from point
eight se b or were their exogenous factors that contributed,
especially with.
Speaker 5 (06:35):
Nick Yeah, well, okay, Johnson needed to finance great society
in the Vietnam War, so we had easy fiscal, easy
monetary policy. Inflation started to pick up in sixty six
sixty seven. Then we were off to the races. We
had two oil shocks in the seventies just exacerbating things,
but the trend was up. Nixon, similarly worried about his
(06:56):
reelection appoints his buddy Arthur Burns, who was who was
the pre eminent business cycle economists is.
Speaker 3 (07:02):
Very well regarded. Before his time.
Speaker 5 (07:04):
He was brilliant, brilliant, right, He spent a lot of
time doing forecasting, effectively invented the concept along with a
couple of other guys. I say guys generically they happen
to be man of business cycles and forecasting them. Johnson
and Nixon broke the FED. It was it was already.
It was already, you know, tenuous because it was still new,
(07:25):
this idea of independent monetary policy. Trump's gonna break the
FED again. He arguably already has if you look at
inflation expectations, and we're gonna have to relearn the lesson
of the importance of independence and FED credibility all over again.
Speaker 2 (07:40):
Let me ask you another question, then, because there's an
assumption I think embedded in this. Let me ask you,
is there an assumption embedded in this that whoever is
the FED chair is actually going to follow through on
what President Trump is explicitly like again week or two,
(08:00):
like explicitly saying I want someone who's going to lower rates.
Speaker 5 (08:03):
I don't if you look at how the and this
is this goes a little bit beyond finance. But he's
getting his way. In other areas, you could say you
think that's great, or you think it's not great. I'm
not gonna comment on that, sure, but if he wants it,
he's getting it. He's being a very aggressive, empowered, energetic
chief executive. I guess, yeah, I have to take a
bit of a leap and say I find it hard
to believe whoever he puts at the FED is not
effectively a puppet, and a puppet sounds derogatory, but I
(08:27):
think Trump, if he asked him, he'd say, yeah, I
want a puppet at the FED.
Speaker 2 (08:31):
This leads me to my final question that I think
we'll get to where I'm really going with this, and
then I will conclude my opening arguments. Scott Bessen, Yeah,
the year before he became Treasury Secretary, was very publicly
criticizing Janet Yellen, who was Treasury Secretary at the time,
saying I don't like how she's managing the mix between
(08:51):
short term bills and long term bonds, like you know,
wrote multiple white papers on this, and you know it
was on different news networks, you know, talking about this
and so on and so forth. Comes into the position
of Treasury Secretary this year and has kept doing exactly
what Janet Yellen was doing because he looked at the
situation and was like, Yeah, of course I'm going to
(09:12):
keep doing this because I want to keep my job.
I guess my question is regardless of who comes in,
whether it's one of the Kevins, whether it's Best, whether
it's Wall or whoever it might be, whether it's you know,
someone who we haven't mentioned yet, which I don't think
is the case, because it seems fairly, you know, far
(09:32):
along in the process.
Speaker 3 (09:33):
Now.
Speaker 2 (09:36):
I believe that to a certain extent, you get into
that chair, whatever the chair is, anywhere, and once you
realize how much power you have there at the helm
of the US financial system, despite your previous thoughts to
the contrary, maybe you generally tend to be like, yeah,
I guess I really can't, you know, push that button
(09:58):
the way that I want to. What happened with Besson,
I guess is what I'm getting at is, bessont you
know the whole year last year was I can't believe
Yellen's doing things this way. I can't believe she's doing
it this way. And then he's basically done the exact
same thing, and so part of me looks at this
and says, I know that, you know, there's this thought
(10:20):
that hey, whoever goes in there is going to you know,
harm the fed's independence and their credibility. But I guess
part of me looks at it and goes, I'm not
so sure. Based on what we've seen from Besson during
this administration.
Speaker 5 (10:33):
As well, maybe he pulls like a Thomas Beckett. If
you've ever seen the movie he was made archbishop and
then he started bucking the king and a Great Peril
Tool movie. Yeah, so maybe he does. And then of
course Trump pulls a Henry the Second on him. I
don't see the president, and if you haven't seen the
movie you may not, or you know, read about this episode,
you may not get that. But the point is, my
(10:54):
guess is that the president has been fierce about imposing
loyalty in his will. You think he'll brook uh a
FED chairman bucking him. I don't. He'll find a way
to fire.
Speaker 3 (11:05):
He has with Powell, and he appointed Powell only.
Speaker 5 (11:09):
He was we know he was on the brink of
firing him a couple of times, and but Bessant and
others walked him, who's going to be there to walk
him back this time. If Bessant decides FED integrity and
independence is too important to the stability of our financial system,
I'm sorry, mister President. I can't lower interest rates to
zero with inflation at about three and economic growth uh
(11:31):
seemingly above trend. I don't think the president is going
to talk This again, gets way beyond economic analysis. That
You've got to look at the way that the president
has maade in other areas. He does not brook opposition,
He's fierce about imposing loyalty, about demanding loyalty. Will he
suddenly respect the Fed's independence because it's his guy? Powell
(11:51):
was his guy?
Speaker 3 (11:52):
But that's what like.
Speaker 2 (11:53):
I guess what I'm saying is Poul was this guy.
He said, I don't like him anymore, but he still
hasn't moved on from him.
Speaker 5 (12:01):
I don't think he's going to make the same mistake twice. Interesting,
what in his view is a bit well, look at
how the president's behaved in other areas. He feels very empowered.
Why would he stop at the at the FED.
Speaker 3 (12:13):
Let's take a quick break.
Speaker 2 (12:14):
When we return, let's talk a little bit about labor
market expectations.
Speaker 3 (12:18):
In twenty twenty six, Miss.
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Speaker 3 (13:38):
Peace In the.
Speaker 2 (13:39):
Wall Street Journal, it's the French language Wall Street Journal
that uh I can't read because I don't speak French.
I always struggle with crossword puzzles because of that, you know.
I get crossword puzzle as like at least two or
three French things in it, and I'm looking at and
I'm like, don't know, have to skip the clue, maybe
hopefully get it on the cross I've.
Speaker 3 (14:00):
No chance in those.
Speaker 2 (14:01):
But whatever companies they're outlining their hiring plans for twenty
twenty six, they don't look very good. And this is
meshing with the real time data that we are continuing
to get on the state of the labor market, which,
in my opinion, which might not be worth the paper
(14:21):
it's printed on, but usually it's worth at least the
paper it's printed on, because paper's pretty cheap these days.
US labor market continuing to slow. The latest data that
I have here and this.
Speaker 3 (14:32):
Is from a week ago.
Speaker 2 (14:34):
But and again you have to take this with a
grain of salt, just because year end numbers always get
a little wonky because of holiday schedules and floating holidays
and things like that. But when you look at the
current state of fight attacks withholding relative to last year,
(14:54):
this is the trend that we have been on now
over the last six month months. July of this year
saw a seven point four percent year over year increase
in FIGHTA withholding.
Speaker 3 (15:07):
And why this matters?
Speaker 2 (15:09):
Okay, Like why I think this matters as opposed to
like some of these other measures ultimately, fighter withholding measures.
One thing, how much income tax are employers and employees
withholding on a regular basis based on the actual wages
they are paying, specifically wages under about one hundred and
(15:29):
sixty thousand, because that's where the FIKA cap is. And
like it's basically how much money is the apt like
the normal person in the United States making? How much
growth are we seeing in that spending power of three
hundred and ten million people as opposed to you know,
the twenty million that make north of that or whatever
that number is. So in July of this year, FIGHTA
(15:52):
withholding growth was at seven point four percent.
Speaker 3 (15:55):
Which is pretty robust. Like it's pretty good.
Speaker 2 (15:57):
Like you generally, if you see anything historically like the
last ten years, if you're running like five to seven
percent growth, you're fine, there like that, that's where you
want to be. So seven four you're like, okay, this
is pretty good. August slows to seven to two. Negligible change. Honestly,
if if you just had like that little wiggle you
shrug it off. October down to four point three percent,
(16:21):
I'm sorry, September down to four point three percent. October
and November you have to aggregate them because of when
Halloween fell an end of month this year, but whatever,
you can do that down to three point eight percent.
You could look at that October and November number and say, yeah,
it fell to three eight but maybe that was because
of the shutdown, because that did have some delays in
(16:41):
you know, certain payments there, and government contractors might not
have been getting paid during that time, and so maybe
they weren't paying their employees. Whatever you can, you can
kind of like hand wave it away. December through December
twenty second is running half a percent year over year growth,
which hmm, in my opinion is below stall speed. And
(17:03):
the reason that I say that is, remember this is
the time of year where most employers are giving raises,
but in reality, raises happen all throughout the calendar year,
and I don't know what kind of raises anyone listening
may be receiving. Maybe you're retired and this is not,
you know, something that's relevant to you anymore. But in general,
what we see these days, I think anywhere from like
a one and a half to two and a half
(17:24):
percent raise is kind of standard throughout most companies. I think,
if we want to call it two percent, let's call
it two percent plus. You have people that are switching jobs,
and when you switch jobs, you're typically not switching to
a lower paying job. You're typically trying to move to
a higher paying one. And so I generally think the
baseline if you have like no job growth, which by
(17:45):
the way, is kind of what we've seen the last
few months, is yeah, you should still be eking out
like three to four percent in payroll tax withholding, because
that's kind of the natural order of Yeah, most people
are getting you know, one and a half to two
and a half percent raises, and if you're taking a
new job, you might get like a four to five
percent bump, and so you end up, in my opinion,
(18:07):
with like three to four percent fighta withholding growth being
a baseline for no job growth, that's how I get
there at least if we are, in reality seeing anything
near only half a percent fight attacks withholding growth yere
over year, it suggests to me that the pace of
job growth has turned negative, or that the only way
(18:30):
people are able to maintain jobs is by getting laid
off and then taking a lower paying job in order
to mitigate the damage, which also is not great for
spending power. Now, again, December is a little wonky, and
it's one month, so I'm gonna take that half percent
with a grain of salt and see what we get
in January and February. But the trend in the second
(18:50):
half of the year for actual fight of withholding this
is not I'm not talking about you know, hey indeed
says there are this many job openings or hey, you
know here what employers think about hiring and how they
feel man, because like, I don't really care what employers
feel about hiring. What I care about is how much
payroll tax is being withheld, because that tells me how
(19:11):
much payroll is actually being paid out and how much
the economy can grow on consumer spending. And so if
we see a further deceleration from here in the next
couple months, buckle up, because we got problems. Then if
we see this reverse and hey, this might just be
like wonky because of you know, Christmas falling on a
Thursday and the pay period lined up this way, and
(19:33):
I can buy that and just say, Okay, this doesn't
matter at all, like it's it's fine. But there's a
six month trend in place of payroll slowing, and that's
something that is of payroll tax withholding slowing, and that's
something that's a little bit concerning to me when I
see where we've slowed to now and where that can
potentially go in the next couple months.
Speaker 3 (19:53):
So we'll see where it goes. But this is this
is the actual stuff I'm looking at right now. Quick break.
When we return, it's Wall Street Watch.
Speaker 1 (20:10):
Liked us on Facebook and follow us on Twitter. Act
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 market so
far today right here on the Financial Exchange Radio Network.
Speaker 4 (20:29):
Well, the final trading week of twenty twenty five is
starting off in negative territory as trader is away to
small batch of economic data points do out this shortened
holiday week, including FED meeting minutes and jobless claims pending
home sales were released earlier this morning. Right now, the
Dow is down by four tenths of a percent or
two hundred and three points lower. SMP five hundred is
(20:52):
down three tenths of a percent or twenty one points.
NASDAC down nearly half a percent or one hundred and
nine points lower. RUSS two thousands off just over half
or percent, Tenyure Treasure reeled flat at four point one
two eight percent, and crude oil up about two and
a half percent. Hire today trading just above fifty eight
dollars a barrel. Shares in digital Bridge are jumping nearly
(21:16):
ten percent following news that Japan's soft Bank agreed to
buy data center investment firm digital Bridge for four billion dollars,
is part of its artificial intelligence push. Meanwhile, in Video,
shares are down almost two percent on the heels of
news from last week that the chip and AI giant
agreed to buy assets from Grock for twenty billion dollars
(21:36):
in cash. Grock is a nine year old chip startup
that designs high performance AI chips. The deal marks in
Video's largest purchase ever. Elsewhere, the Wall Street Journal is
reporting that Lulu Lemon founder Chip Wilson is launching a
proxy fight at the Athletic apparel retailer in an effort
to remake the company's board as the company searches for
(21:59):
a new CEO. Lulu stock is up over two percent,
and Disney's Avatar Fire and Ash retain the number one
spot in the domestic box office for second straight weekend.
Avatar and Disney's Utopia two where the two top performing
movies by worldwide ticket sales. Disney shares are edging higher.
I'm Tucker Silva and that is Wall Street Watch and
(22:21):
remember the Financial Exchange streams every day live on YouTube.
Subscribe to our page and follow market activity all morning long,
only here in the Financial Exchange Radio network. Just search
the Financial Exchange on YouTube and hit that subscribe button.
Speaker 3 (22:37):
He's in the Wall Street Journal.
Speaker 2 (22:39):
In a wild year for markets, investors who did nothing
did just fine. Mark is this kind of more often
than not. This is how it is.
Speaker 3 (22:50):
And the fact is about seventy percent.
Speaker 2 (22:52):
Of the time markets go up in the calendar year,
thirty percent of the time they don't. And I think
even in years like this where we have you know,
big intra year volatility the phrase that I tend to
like to use.
Speaker 3 (23:04):
I have two of them.
Speaker 2 (23:05):
The first is, look, the price of admission to markets
equity markets is the volatility that you see. And the
second one is, look, you can let the market do
the worrying for you. You know, if markets are nervous
about something, they will sell off. If that nervousness can
be resolved, they will go back up. And that's pretty simple.
I know investors only want to see their portfolio go up,
(23:27):
and they think that they can do that, but the
fact is you can't. It's not possible in equity markets,
and quite honestly, it's kind of an entitled view to
be like, oh, like, equity markets carried my portfolio up
by twenty percent this year, so that's my money. But no,
(23:47):
when markets go down, oh, I can't lose that at
Like how much hubris do you need to have to
be like? I can participate in the gains, but not
the losses of equity markets.
Speaker 5 (23:59):
I mean to understand and retrospect everything seems explainable and obvious,
just like history and retrospect seems obvious.
Speaker 3 (24:05):
Sure, so there's.
Speaker 5 (24:06):
That tendency to read history stock market history in this
case backwards and think something was inevitable and think that
you could detect the pattern in the future. But for
complexity reasons, those patterns don't hold up. So market timing,
like you said, is really hard. But you made a
powerful point when you started talking about this, which is
(24:27):
most of the time on a calendar your basis, stocks
go up. It's true monthly too, but the frequency is
a little bit more modest. It's like sixty some odd
percent of the time monthly and daily. By the way,
it's a fifty, it's about fifty one forty nine. It's
about fifty one to forty. And this makes sense when
you think about what stocks are there your ticket to
participating in economic growth. It's how it's how we hitch
(24:49):
our wagon to the train of economic growth in terms
of investments.
Speaker 2 (24:54):
So you can also say it's how labor hitches their
wagon to capital. How you can play on the same
team if you believe the house always wins and the
capital always wins. Aren't stocks the way that you can
hit your wagon to capital.
Speaker 5 (25:04):
They're one way, assuming it's publicly traded companies to benefit
from economic growth, which is an assumption underlying what I'm
saying here that seems to be the way things continue
to work.
Speaker 1 (25:14):
But.
Speaker 5 (25:16):
It's not. I wouldn't be too you know, dogmatic and
obnoxious about you know, by proclaiming that that's the way
things are going to continue to work. But all we
have is history. That frequency argument you made comes from history.
This is why the safest bet if you're a long
term investor, not if you can't afford to lose. I
(25:37):
was going to say twenty thirty, forty percent of your capital.
Those numbers sound scary, but those are sort of typical
stock market draw downs well.
Speaker 2 (25:44):
And it's also why people typically say, look, if you
have money for an emergency funded for buying a house
next year, for whatever it might be, that's a short
term need.
Speaker 3 (25:52):
That money belongs nowhere near the.
Speaker 2 (25:53):
Stock market, right because the volatility that you see, you
don't know when it's going to show up, you don't
know how stupid it's going to be, and you don't
know exactly when it's going to be resolved.
Speaker 5 (26:03):
But if somebody puts, you know, a metaphorical gun to
your head and says, what are Stock's going to do today,
you know the coin is loaded in Stock's favor. Just
in terms of the frequency argument, the historical argument, what
have stocks done daily, monthly, annually, So you'd be bucking
history unless you had a strong conviction going the other way,
(26:25):
and I we would look at you askance if you
said you did, because that would require a crystal ball
that of course doesn't exist. You would say stocks are
gonna go up.
Speaker 3 (26:32):
To a palanteer if you will.
Speaker 5 (26:34):
Yeah, right, those guys. You would say stocks are going
to go up today, or stocks are gonna go up
this month, with no other information. That should be your guess,
just taking if you were a literal like empiricist, which
is not the best way to approach the world necessarily.
Speaker 3 (26:48):
But probably not.
Speaker 5 (26:49):
But if you were just being very literal and you
were a rank empiricist looking at history, you would say
stocks are gonna go up today or this month or
this year because historically that's what they've always historically, that's
the tendency. Excuse me.
Speaker 2 (27:02):
Now, you can still have runs within that, just like
if you go to a roulette table.
Speaker 3 (27:05):
Absolutely you say, oh, you.
Speaker 2 (27:08):
Know, you go to the roulette table, Yes, and okay,
it's basically a fifty to fifty shot, which by the way,
now is getting worse. I don't know if anyone's been
to a casino lately, but roulette tables are adding a
triple zero now in order to make the house edge
even bigger than it already is. So that's fun because
they just can't get you know, greedy enough to you know, do.
Speaker 5 (27:26):
You know what that offhand? With that shifts the odds to.
Speaker 3 (27:28):
Well, think about it.
Speaker 2 (27:29):
I mean, if if you think about the number of
spots on a table and you're adding one more, that
is in favor of the house, because again, unless you're
betting that you're in that that is a suckers bet.
Every time you're probably losing another one and a half
to two percent to the house.
Speaker 5 (27:44):
So does it go thirty it's thirty five to one
right now? Is go thirty six to one?
Speaker 1 (27:48):
Am?
Speaker 2 (27:48):
I No payouts are going to be the same because
you still have the same number of numbers that are
on there.
Speaker 5 (27:54):
I know, I've never thought about this carefully enough. Okay,
I see what you're saying.
Speaker 2 (27:57):
Yeah, so it's again it adds to you know, the
house edge there because the casinos can't make enough money otherwise,
I guess. But in any case, you go to a
roulette table, and just because it came up black the
last two times doesn't mean it's definitively going to be
read fifty to fifty still means Hey, like, if you're
going through you know, five of these in a row, yeah,
(28:18):
you have pretty low odds of getting you know, the
same color each time.
Speaker 3 (28:22):
But it can happen. I mean, I'll tell the story.
Speaker 2 (28:25):
I was out at the MGM in Springfield about a
year and a half ago, and wildest thing I've ever seen.
I'm sitting there and I'm at the roulette table with
a couple buddies. We've been out on like a golfing
trip in the area, and we were staying there for
the night, and this guy walks up with you know,
I don't know, thirty bucks or something like that and
puts it all on thirty three and gets thirty three
(28:49):
maybe it like a thousand bucks his first minute at
the roulette table, and all of us are sitting there,
We're like, oh, this guy's crazy, Like we've all seen
this like a casinos are like, oh, I can't.
Speaker 3 (28:58):
Believe that happened.
Speaker 2 (29:00):
And then, you know, get everything set up for him
and he just keeps it on thirty three and again,
like you know, it's you know, unlikely chance. Like now
you're talking like a three percent of a three percent chance,
so you're talking like a point zho nine percent chance
of back to back. The guy landed a thirty. The
guy made thirty grand in a span of two minutes.
I mean it was actually like ten just because they
(29:21):
had to count all the money up, because it's like
when you're paying at thirty grand to chips, it's kind
of a lot. But the guy made thirty grand in
two minutes because it just happened to be lucky. Now,
is that repeatable or investible? No, not in any way,
shape or form. So like weird things can happen at
the rule Lett table, just like weird things can happen
in markets. But that's all part of like how the
(29:45):
actual odds end up playing out. Like you don't just
get markets going red black, red black, red black from
day to day. Sometimes you have seven days down on
the S and P in a row. Sometimes you have
nine days up on the Nasdaq in a row like that.
That happens too, but ultimately this stuff balances out in
the long term day to day and you end up
with pretty close to that fifty to fifty split.
Speaker 5 (30:07):
Now, there are decades like the two thousands when stocks
underperform everything including bonds and cash. Thankfully they're rare. But
if you remember periods like that, again, thankfully they're rare.
So if you're not of a certain age, you weren't
even investing, then for others of us who were, that's
seared in our memory. That reinforces the caveat that you conveyed,
(30:30):
which is, if you don't have a long enough timeframe.
I don't know what a long enough time frame is,
seven ten years, maybe ten years, Yeah, then don't put
whatever that a long enough time frame associated with whatever
the goal for that money is. Equities are probably not
the right place for it.
Speaker 2 (30:46):
And this is before we even get into the fact
that what we're saying about US markets does not apply
to international ones in any way, shape or form. The
return distribution chart is entirely different. If you're looking at
European equities, it's entirely different if you're looking at like
it's this is not consistent across markets because those markets
have different rules by which they play. Sometimes the rules
(31:07):
are better, sometimes they're worse. But like this is, it's
it's not something it's not physics that we are talking
about here. It is inherently unpredictable in terms of specific outcomes.
But you can map these, you know, outcome distribution charts
over different periods and see what you get in different markets.
Speaker 3 (31:27):
Let's take a quick break.
Speaker 2 (31:28):
When we return, let's talk a little bit about what's
going on in the Boston areas as it relates to
jobs and housing.
Speaker 1 (31:38):
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This is the Financial Exchange Radio Network. This is your
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(31:59):
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Speaker 2 (32:09):
Piece in the Boston Globe today. It's titled Forever Renters
from any in Greater Boston. American dream of home ownership
no longer exists. And two things are true in my opinion,
right now, home prices in the Boston area are unaffordable
for a large number of people who live in the
Boston area. So they may feel this way right now,
(32:31):
But I think it is a horrible mistake to extrapolate
what's going on right now and say that it is
anything permanent into evidence. I would like to enter two
different things in support of this. The first, Mark Tucker, actually,
can you fire up the way back machines time us?
Speaker 3 (32:48):
Okay, we don't need to go too far.
Speaker 2 (32:50):
We're going to head back to late late twenty early
twenty twenty one. And I remember this time. Remember this
is like peak pandemic. This is when you have the
pieces that were being published like, hey, no one's ever
gonna live in cities again, man, and the Northeast is dead,
and like, ultimately, like what we found is, hey, people
(33:11):
like to live in cities because they like to be
you know, close to their other humans and stuff.
Speaker 3 (33:16):
It's not for everyone.
Speaker 2 (33:17):
I get that, But there's a reason why cities have
existed over time and generally gotten bigger, and it's because
people like to be around other people in the services
provided by them. And so like that wasn't gonna change,
and so I think ultimately, like I look at that
and like those predictions were really bad. The other one, Tucker,
can you take us back a little bit further now,
(33:37):
I need to go back to twenty twelve, so eight
more years.
Speaker 3 (33:40):
If you could Ah, it's twenty twelve.
Speaker 2 (33:44):
Now the world is gripped by fears of gregsit and Italy.
Speaker 1 (33:48):
Eve.
Speaker 2 (33:48):
Remember this was when like all the pigs were talking
pigs was Portugal, Italy, Ireland, Greece and Spain. They were
talking about leaving the Eurozone, or rather being booted out
of the Eurozone by the better behaved Germans and French
and everywhere.
Speaker 5 (34:02):
They've done it.
Speaker 2 (34:03):
Yea, it's not your point, No, it's fine, Like, I
appreciate where you're coming from. In any case, where was I, Oh,
here's where I was going with this. This was the
time when you had a bunch of people saying millennials
are never going to amount to anything financially, they'll never
own homes.
Speaker 3 (34:20):
Avocado toast eaters, you losers.
Speaker 2 (34:23):
Like that was what was going on then, And now
you have the pieces being published ten years, you know,
twelve years later being like, oh, you guys, actually you know,
did stop hopping around on jobs once you had kids,
And yeah, you figured out how to save some money
and buy homes and you're actually buying homes at a
greater rate than your parents were. And so gee, all
those prognostications were wrong. So what I would say to
(34:46):
anyone in their twenties and thirties that feels locked out
of the Boston housing market, Yes, it sucks right now
for you, but no, it might not be like this forever.
And be open to the idea that the affordability picture
on housing change dramatically in a three to five year period.
And don't give up. If you still have dreams of
home ownership, just understand it might take you a little
(35:07):
bit longer to get there. But I've seen enough publications
of you know, things that are like, oh, this is
how it's gonna be for this group, and this is
how it's gonna be for that one, And it's most
people like really overestimate how permanent any shift is. And
I suspect this shift of unaffordability is one that's temporary
as well, because by its very nature, it's hard for
(35:28):
it to be permanent when more and more people can't
afford these properties.
Speaker 4 (35:31):
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Speaker 3 (36:42):
Now.
Speaker 2 (36:42):
The other piece to add on this in terms of hey,
how could the worm turn as far as Boston home prices.
Boston is a great exporter of two things, and I
say export, not to like other countries, but just in general,
Boston is a great exporter of two things, seafood and nerds,
and specifically the engine that makes the Massachusetts economy run
(37:03):
and by virtue of that, the New England economy run,
because again, like it all kind of gets powered by Boston.
As much as I hate to admit it, like that's
it's just how it is. Like without Boston as this
you know, center of economic activity, the rest.
Speaker 3 (37:16):
Wouldn't be quite what it is.
Speaker 2 (37:20):
The fact is, Boston has historically, over the last one
hundred years or so, been more stable than the rest
of the US economy because its main drivers have been
education and healthcare, and those are areas that typically are
less susceptible to booms and bust cycles than places like construction.
And what we are seeing now is that the labor
(37:42):
market for you know, very highly educated workers, the folks
with you know, the PhDs, multiple MBAs and all that stuff,
it's weakening in the Boston area for a number of reasons.
And so this is another thing that I come back to.
If you are someone without the PhD, without you know,
a master's and ana and this and that, you've probably
(38:03):
you know, been competing against people with way higher salaries
than you for the last you know, dozen twenty years
for housing stock. If the job market for those very
highly educated employees is shifting, then, as an example, the
family outlined in one of these pieces that you know,
the two of them combined make one hundred and seventy
(38:23):
five thousand dollars, start to become people who are going
to be in the driver's seat for buying property in
the Boston area once the family's making you know, four
hundred thousand don't exist in the Boston area in the
same concentrations anymore. In any case, let's take a quick break.
By the way, four hundred thousand dollars worth of lobster
has disappeared from a Taunton warehouse. Don't know where it is,
(38:45):
but it's a lot of lobster. Quick Break Hour two
coming up in a bit.
Speaker 1 (39:00):
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