May 22, 2024 • 37 mins
Chuck Zodda and Marc Fandetti analyze why so many economists got their recession predictions so very wrong. Omair Shariff, Founder - Inflation Insights, joins the show to discuss the current state of inflation. Why is gold so alluring to so many people right now? TV networks are throwing out the old playbook and embracing an 'age doesn't matter' philosophy. Where are all the young tech founders these days?
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:00):
The Financial Exchange is produced by MoneyMatters Radio and is hosted by employees of
the Armstrong Advisory Group, a registeredinvestment advisor that provides investment advisory services.
All opinions expressed are solely those ofthe hosts, do not reflect the opinions
of Armstrong Advisory or anyone else,and do not guarantee profit. Investments can
lose money. This program does notoffer any specific financial or investment advice.
(00:20):
Please consult your own financial, tax, and estate planning advisors before making any
investment decisions. Armstrong and Money MattersRadio do not compensate each other for referrals
and are not affiliated. This isThe Financial Exchange, with Chuck Zada and
Mark Van Daddy, your exclusive lookat business and financial news affecting your day,
(00:41):
your city, your world. Stayinformed and up to date about economic
and market trends plus breaking business newsevery day. The Financial Exchange is a
proud partner of the Disabled American VeteransDepartment of Massachusetts. Help us support our
great American heroes by visiting DAV fivek dot com Boston and making a donation
today. The DAV five K Bostonis presented by Veterans Development corporation face.
(01:07):
He's the Financial Exchange with Chuck Zadaand Mark Vandetti, Chuck, Mark and
Tucker with you right now, andreally boring day in markets. At the
moment, the Dow is down fourteenpoints, the SMP is up one,
and the Nasdaq is up nineteen,so no major index moving more than one
tenth of a percent at the moment. Tenure US Treasury, what's going on
(01:30):
there? Nothing, It's completely flatat four point four to one four percent.
Oil West Texas Intermedia down forty centsa barrel to seventy eight twenty six,
triple a national average. Four gasprices up one point three cents to
three sixty one to one tenth.This was following a brief one day drop
below three dollars and sixty cents agallon, so right back above it at
(01:53):
the moment. And then we've gotgold down thirty four dollars and ten cents
two twenty one and eighty cents.You know, it's funny, Chuck,
It seems boring to us, butit's like looking at a tug of war
where the midpoint doesn't move, butthere's intense activity on either side. You
know, I'm not saying that thingsare frantic out there, but they could
(02:15):
be and we wouldn't know it bylooking at movement in the averages. The
forces could be just enough to keepthings unchanged. There's any validity to that,
but it just occurred to me.We don't know what's going on now.
The big thing overall is that thisis a market that you know,
got up north of fifty three hundredI think a week ago. I think
it was his last Wednesday or Thursdaythat it did, and it's just kind
(02:37):
of been hovering. It's just kindof like, what do we do now
we're here? Do we keep going? You know, we we'll just we'll
hang tight here. So's it's kindof what we're It's funny how we give
the market a personality like that itis. I'm just making a it's it's
a it's a half baked philosophical pointnow that the market it's very anthropomorphic.
(02:57):
It's it has its own thoughts,its own desire, it it has foods,
it likes things that it doesn't liketo eat. And right now it's
out there and you know, theeighty nine degree sun saying I'm just gonna
chill to day, hanged by thepool relaxed. There is a commentator,
Jim Grant. Some of you've heardof him. I don't read him anymore.
Yeah, but he wrote a bookabout mister did Warren Buffett coin the
(03:20):
term mister Market somebody? It wasn'tJim Granted. It wasn't Warren Buffett.
It was an older It was likeBen Graham, they called it. They
gave it a beam personality, beGraham. Mister Market is sometimes mannic,
he sometimes depressed. He's never evenkeel except for right now. Except for
right now, mister Market is coolas a cucumber hanging outs or something.
(03:43):
Yeah, you know, if he'sgot it, you know, it's it's
what. As soon as he's offhis meds, we're screwed. That's how
it usually works. Let's talk alittle bit about why forecasts for a US
recession have been wrong over the lastcouple of years. Now, these first
started really popping up back half oftwenty twenty two, but even first half
was, hey, you know,rates are gonna go up because of inflation,
(04:06):
and you're likely to see a recessionas a result of this. Jamie
Diamond has been calling, you know, recession every six months like cockwork for
you know, the last two anda half years now, And the question
that's out there is, hey,look, despite all of the predictions and
calls for a recession, at eachinstance, really the end of twenty twenty
(04:27):
two and Q three of twenty three, at each instance where things could have
gone that way, we saw astrong US economic rebound. And the obvious
question is what gives mark. Economistsare terrible and these aren't all economists.
Some of them are just armchair typeswho like to give their opinion about the
direction of the economy. Economists arenot good at forecasting recessions. Many Nobel
(04:51):
Prize winners have said we just shouldn'tdo it. They just shouldn't do it.
There are different ways to forecast growth. You can sort of do top
down approaches, which I like becausethey're simple and someone with my training can
do it. Others employ much moresophisticated methods, like the PhDs that work
for the Federal Reserve. There's enormouslycomplicated rich models that tend to not do
(05:12):
a better job than the naive approachof saying I have growth went up last
quarter. Growth tends to be persistent. I expected to go up this quarter.
As well. You can apply alittle bit of judgment to that,
but that naive approach does just aswell as many of the more sophisticated approaches.
Strangely enough, so, I havenothing really insightful to say other than
that people should not try to forecastGDP, or we should take those predictions
with a grain of salt. Thereare just too many variables governed by randomness
(05:38):
that factor in and as a consequence, makes predictions dubious. Why is it
so fashionable to try to forecast recessions? Then for the same reason why we
speculate about the afterlife, in theexistence of a supreme being and the need
to know, the need to wantto know, the need to exert control
over uncertain things. So if Iforecast GDP, and I do do it
(06:01):
here using times simple time series methods, it gives me a little bit.
To see a number come out toa tenth of a percent gives me a
strange anybody's ever worked with a spreadsheetknows this. There's something very fulfilling about
doing a calculation I'll just say,in a spreadsheet and getting a number with
the seeming precision of a tenth orone hundredth of a percent. It empowers
us. It gives us a senseof control over something that is inherently uncertain
(06:25):
and unsettling. So people want toknow the future. It's the same reason
we go to astrologers, or someof us do. Anyway, when's the
last time you've been It's Jesus beenalmost a week. I need to Yeah,
I try to do three times aweek Monday, Wednesday, Friday.
But some people swear by it.No. They also they also have a
good sense of humor about it.They know they're just trying to exert control
(06:46):
over the uncertain and uncontrollable. AndI think that's why we like to hear
GDP forecasts predictions generally. What doyou think that's just my I totally,
I totally think you're nuts. No, I think that's seventy percent of it.
Thirty percent of it is in thisbusiness, if you call a recession
correctly, you make a name foryourself only briefly though, your flash in
(07:06):
the pan unless you can repeat it. But everyone keeps calling you to ask
for a month ago, and thenthey realize that you were the lucky coin
flipper. By that, I meanyou guessed right not to say your methods
weren't sophisticationd sure, but invariably againbecause chance is so dominant in this process
of GDP or inflation forecasting, anyeconomic variable. Really some are more persistent
(07:29):
than others, but largely they're governedby chance. So the economic forecaster getting
their fifteen minutes of fame, theytend to be again flashes in the pan,
I know I'm being redundant. ThereNo. And this also gets at
something that I think you have tobe really aware of. And I've talked
about this before, but whenever you'rereading something from whether it's an economist or
a market part disiccipant or whoever itmight be, you have to understand the
(07:51):
context of that person's past views.Because there are some people who are just
perma permables, and you can't trusttheir opinion because they only have one opinion
and it never changed. They arethe broken clock as a result. Correct.
The one that I always come backto is David Rosenberg, who has
been bearish on stocks since two thousandand two and just like constantly like,
(08:18):
oh, this is gonna be theyear that things fall apart like this,
and if you just read something byhim without understanding that context, it doesn't
really do justice to where he fitsin the mosaic of all the information that's
that's coming in. You know,there are lots of smart people also that
(08:39):
are just They might even be goodeconomists, but they're really bad at translating
what happens in the economy into whathappens in markets. Let me give you
a different angle on this. It'svery hard for people who aren't trained in
forecasting to distinguish between say whether meteorologyand economic forecast, those are different I'll
(09:01):
call them domains in weather forecasting.Over the short term, the models are
really good, right, We've shownthe data. It's like, if you're
looking at like one to three dayforecasts, you're like ninety percent. Why
Yeah, why is that? Iknow you know the answer. It's physics.
Once things sort of line up,we know what direction the forces are
pointing in. We can say there'sa seventy percent likelihood of thunderstorms tomorrow and
(09:22):
in seven out of ten days,when the circumstances are similar leading up to
that point. You get that resultin economics you don't have in other soft
sciences. It's not just econ Youdon't have stable relationships with which to make
predictions. So Rosenberg's Achilles heel isthat he relies on valuations a lot.
(09:43):
The problem is the relationships or therelationship between valuations and future returns have broken
has broken down since the nineties,So models that worked really well up until
the nineties don't work well anymore.Similarly, models that related inflation to unemployment
worked really well well up until somewould say now is not always, but
they worked reasonably well up to theGreat Recession. Then those relationships decoupled,
(10:07):
they kind of fell apart. Sopast models failed. That's why economic forecasting
is so hard. These things arenot stable, I think hard that we
kind of have to cover in thatis it's another example of the power of
compounding in my opinion, where look, if you're looking at, you know,
forecasting what's going to happen three tofive days from now, there's just
(10:28):
less time that stuff can change.Like let's say that each day you are
losing one percent in accuracy, Sothe first day you're ninety nine percent accurate,
the next year ninety eight. Butremember if you're multiplying, eventually it
compounds and you get you know,it's a really bad accuracy pretty quickly and
In reality, it's more than youknow, one percent a day that you
lose in accuracy. It's probably closeto five. So like day one you're
(10:50):
ninety five percent accurate, day twoyou're eighty nine, day three you're eighty
three per Like, it goes downquickly in economics. When we talk about
recession four casting, most people aretrying to project out like six to twelve
months. Why would you expect tohave accuracy on that in something that,
as you note, it's it's notphysics. You know, we like to
(11:13):
think of economics as being physics,and you know, a hard science because
there are numbers involved, but thereare no like it's funny like there aren't.
It's far closer to like sociology thananything else. Tuck to any economists.
They get this, real economists,not the armchair journalist types who think
(11:33):
they can forecast GDP. But noeconomists takes forecasts all that seriously. It's
like people say, well, economistslike to no, Actually they're quite aware
of the limitations of the tools thatthey have at their disposal, Like I
generally don't feel comfortable looking out morethan about three months or so, and
even there, it's kind of likewell, there's a chance this could happen,
and there's a chance it. It'strying to predict things that are gonna
(11:56):
happen like a year in advance.I have no idea, quite honestly,
no one does. Let's take aquick break. When we come back,
we're going to be joined by AmirSharief talking about inflation. Right after this,
the latest news on inflation, theFED, the economy, and how
the markets are reacting. Every morningright here on the Financial Exchange Radio Network.
(12:20):
Miss any of the show, catchup at your convenience by visiting Financial
Exchange Show dot com and clicking theon demand icon, where you'll find all
of our interviews in full shows.This is your home for the latest business
and financial news in New England andaround the country. This is the Financial
Exchange Radio Network. As problems fromnow, joined by Amir Sharief. You're
(12:48):
to talk a little bit about thecurrent state of inflation here in the United
States, and Meir, how areyou today? I'm good, well,
thanks, how are you? We'redoing well as well. And when we
look at the inflationary picture, Iknow, you know, there's a lot
of excitement on the day of therelease last week because hey, we printed
you know, zero point three percentfor the month instead of you know,
(13:09):
point four, which had been outfor the first quarter. Is there a
sense that there's any meaningful progress beingmade or was this just more some storytelling
that hey, at least we didn'tprint point four again. Yeah. I
mean, look, I think there'stwo things. One is a sense of
relief that some of the you know, really strong readings we had in the
first quarter were sort of behind usand they're not indicative of you know,
(13:33):
that pace continuing for the rest ofthe year. So certainly that sense of
relief. But secondly, I thinkwhen you kind of dig through all the
various details of that report, Ithink there are some signs, especially on
that you know, long awaited slowdown and rent inflation that we've been waiting
for, but that's finally starting tohopefully take hold, and if that does,
that will go a long way inhelping us get down to the to
(13:54):
the fence target over time. Canyou explain to our listeners what's going on
with owner equivalent rent because it's somethingthat is a little bit inside baseball and
is still really important to what's goingon here. Yeah, it is,
so I think The most important thingto understand is it's not it's not home
prices. It doesn't measure, youknow, what the cost of your home
(14:15):
is. The idea is that,you know, the house is an investment
and you're sort of consuming a flowof services from living under there. So
the idea is almost like, youknow, what would you pay to have
a roof over your head? Essentially, that's the consumption part you want to
capture in a in a price index, and that has kind of stayed elevated
over time. And a lot ofthis really is just the way the index
(14:37):
is constructed. It's it's you know, what people are paying to lease the
new apartment, what maybe your renewallooks like if you are renewing your lease
and there's a lot of people inthe market who are obviously you know,
they're not renewing every single month,so it's really the average rent over time
sort of you know, run throughsome models to sort of look like what
(14:58):
it would cost a homeowner to rentto themselves. It's almost like the opportunity
cost of owning your home instead ofrunning it out to somebody else. And
this is a huge part of theindex. You know, in general,
home ownership is just so big inthe United States, so this is a
big part of the index, andwe've been waiting for it to slow down,
and it looks like, you know, we're getting some signals that that
(15:22):
slowdown could be coming this summer.This is one piece of the inflationary picture.
But one of the things that wehad noted over the first quarter was
that, yes, that's a majorfactor. Sure auto insurances too, but
there were a number of categories wherewe were starting to see signs of broadening
inflation. Is that something that reverseditself in the April report or is that
(15:43):
still a concern out there. Ithink it is definitely concentrated right now in
the shelter component in this rent andknow we are components because you know,
that's running north of five percent stilland we're waiting for that to slowly come
down over time. Auto insurance isrunning about I think twenty two percent year
every year, but you were seeinga slowed down in a lot of other
(16:07):
categories. So now we're finally startingto see, for example, new car
prices decline on the month of amonth basis more steadily than they have been
declining. Food prices at this stageare only up around I watched to say,
grocery store prices particular are only uparound one point two one point three
percent year every year. So youare seeing you know, slow down in
many more categories now than you wereeven let's say, you know, six
(16:32):
months ago, a lot of whatwe got in the first quarter that was
really strong inflation data was concentrated insome of these services in particular, like
auto insurance, like auto repair.But I think in April we've gotten back
to more of what we were seeingin the back half of last year,
when, as you remember, wegot a string of you know, much
much better inflation prints than we're expecting. And I think we're getting back to
(16:52):
that trend now starting with a stablereport. When whenever we talk about inflation,
you know, it's often referred toas a combination of you know,
factors that can feed into it.You can have too much demand to little
supply expectations. What are you seeingright now from the demand side of things,
because I feel like this is anarea that a lot of retailers are
reporting, you know, weak demandin different places, but it's not necessarily
(17:17):
matching up with the top line consumerspending numbers. That stay pretty strong right
now. Yeah, I will saywe did get a pretty soft, you
know, retail sales report in April. The last several months, I would
say we have started to see alittle bit more of a cooling on that
consumer demand side, But in general, you know, I think demand still
overall remains pretty pretty strong. Youcan take travel as a good example.
(17:41):
You know, you look at anyof the burnings reports of the airlines,
if you've floated all recently, youknow, the planes are still packed,
are still traveling. What's different nowis there's been much more stealing on the
supply side. Two years ago,we had only about ninety percent of airline
capacities that we had they're to twentynineteen before COVID. Now we're exceeding that
(18:03):
that amount, and you're getting backto a situation where you know, there's
less of an impact from jet fuelprices than there was even a year ago.
There's essentially more seats in the sky, and you know, we're we're
starting to see that put downward pressureon things like you know, airfares.
Even the overall travel demand is stillstrong. So to me, a lot
(18:25):
of it has been the healing onthe supply side has really helped quite a
lot. We've seen inventories increase alot of the last two years for things
like you know, furniture and appareland other items that were starting to become
a bit more difficult to manufacture andimport, and so that I think has
really helped quite a lot. Butoverall, I would say, you know,
wage growth moderation has also probably hasa margin helped. Wages of are
(18:48):
getting down to a level that theSEID would kind of like to see them
growing at now compared to where theywere let's say two or three years ago.
So all of those factors supply,the supply side healing has probably been
the biggest one. But now therest of the macro factors, like a
bit of a cooling in the labormarket for example, cooling wage growth,
those are also I think starting tostick in and help to put downward pressure
(19:10):
on the overall inplace picture. Verygood, Amir, thanks so much for
joining us today. We appreciate itand we will catch up with you soon.
Thank you. That is Amir Sa. We've talking about the current state
of inflation in the United States.Quick break here. When we come back,
we've got trivia and we're talking gold. Bringing the latest financial news straight
(19:45):
to your radio every day. It'sthe Financial Exchange on the Financial Exchange Radio
Network. Find daily interviews and fullshows of the Financial Exchange on our YouTube
page. Like us on YouTube andget caught up on anything and everything you
might have missed. This is theFinancial Exchange Radio Network. Mirk. Let's
talk a little bit about gold.There's a piece in the Wall Street Journal.
(20:07):
It's titled Gold's Latest Allure. Itsanctions proof your thoughts on this piece.
There are lots of reasons to takegold seriously. Institutional investors tend to
pooh poo it, not all,but many because it isn't generative unlike stocks.
For example, it doesn't participate ineconomic growth via earnings. When you
(20:30):
buy a company, you buy ashare of its future growth or better yet,
when you buy an index fund,you buy a share in all publicly
traded companies sure future growth. Soif the economy grows, which it will,
unless things go horribly off the rails, stocks should, over long periods
of time go up. I'm sorryfor all the background, but that's a
fundamental point that all so called acidallocators follow when they're investing your retirement money.
(20:55):
Gold's different. It's not generative.It is no dividend, and though
it is an input like other metalsinto making things, it doesn't have It
doesn't have a yield, which Iguess is the same thing as saying there's
no dividend. Yet we own itbecause there have been times like the seventies
when it went up with inflation,so you could call it an inflation headge,
even though it's relationship with inflation isway more complicated than the experience of
(21:17):
the seventies would suggest. Yep.And then, and it is a long
winded answer, but I want topoint out that it's easy to get excited
about gold right now, and thereare valid reasons to own it. But
in real terms, and by thatI mean deflated or inflation adjusted terms,
it was higher in many periods overthe last say four and a half decades.
(21:37):
So the price of goal we allknow is about twenty four hundred right
now. I'm looking at month enddata here, so I adjusted that for
inflation went back as long as littledatabase we use provides gold prices for and
you would think that twenty four hundredwould be some kind of record, and
it's like not even in the topten month end inflation adjusted prices since nineteen
(22:00):
eighty. It's the highest you havenineteen eighty. Thanks for asking. January
nineteen eighty in nineteen eighty four dollars. This is the deflator that we use.
I'm sorry for all the numbers,but I feel like you have to
say that otherwise you run the riskof giving the wrong impression in deflated dollars
using the CPI, which is theright way to think about the price of
(22:22):
anything. You want to compare itto other periods. In apples to Apple's
terms, eight hundred and thirty sevendollars reached in January of nineteen eighty.
The inflation adjusted price today I'm usingmonth and April data is seven hundred and
thirty six dollars. That means ifyou bought it in nineteen eighty and held
it, you would have made whaton the S and P like twenty five
times your money. I'm pulling thatout of thing, but it's probably not
(22:45):
that far off. On gold,you would have lost money. Now,
I just did. I just didcompare real tohenomenal there. I apologize.
It's probably more like twelve to thirteentimes your money. In stocks and real
terms, whereas gold you would havelost money. But you might be thinking,
but I've owned gold for at leasta couple decades, I've made money.
And it is true that depending onwhen you start, for example,
the rolling twenty year return on goldis a little over ten percent, I'm
(23:08):
now doing no, I'm I'm doingnominally or not real So it's looked good
relative to stocks over the past twentyyears, but over the past forty five,
which is probably closer to say aretirement investors horizon, it don't look
so good. The fascinating thing withgolden stocks, and I say this quite
often, is in a I wishI had a better way to explain why
(23:29):
this is the behavior that we seeinvestor behavior with regards to them should be
flipped because investors love to just tradeit and out of stocks. They're like,
oh, the economy's slown down,I'm gonna sell my stocks. All
the economy is speeding up, I'mgonna buy them, when in reality,
unless you're like really good at doingthis, and generally like, if you're
just managing money for yourself, you'reprobably not because you could make a lot
(23:55):
more money managing it for someone elseand not taking the risk personally. Then
unless you're like really really good atit, the best thing to do in
most cases is you just as younoted, own stocks for the long term,
because most people are not good attiming those entries and exits. On
the other hand, with gold,people say I got to own it for
the long term, like it's along term inflation edge, when the data
(24:17):
suggests, hey, most of themoney is made in these really short periods
of time where it goes up invalue dramatically over like a one to three
year period. This is true.It's actually much more useful as a trading
instrument because most of the growth happensin short periods of time and that does
nothing for like eight or nine years. But investors behave the exact opposite way
on it. They love to owngold forever and trade in and out of
(24:41):
their stocks, whereas the data suggestsyou're better off doing the opposite. Yeah,
excellent point. I think understand thecharacteristics of what you own and what
it's supposed to do in your portfolio. Yeah, stocks are generative, they're
tied to the fate of the economy. Gold is there for something. If
you own gold, a gold orany commodity is there for something to do.
Some people own it to a hedgeinflation. I think its relationship there
(25:03):
is flimsy. Others own it asa hedge against crisis or against the dollar,
say losing credibility. That's a legitimatereason as long as it's owned in
moderation, I guess, but verydifferent from serves a very different role than
equities that stocks. And also rememberif you are owning it for that reason,
you know, hey, what happens? If there's instability, then you're
(25:26):
often talking about owning physical gold.And if that's the case, it's how
do you secure it? How doyou make sure that it's you know,
safe in like, how do youtake care of it? Because that's something
that you have to deal with withsomething physical that's very valuable that you don't
have to worry about if it's inan investment account. The US Virgin Islands
is the perfect destination for your nextvacation. Visits Saint Croix, Saint Thomas,
(25:48):
or Saint John and experience incredible weather, iconic history, pristine beaches,
world class cuisine, and a vibrantnightlife. Book now and you might just
make it in time. For theSaint Croix Angle Meinlee in July seventh.
The family friendly event offers food demonstrationsand tastings, cultural dance performances, and
the ever popular mango eating contest.From the moment you arrive, you'll fall
(26:11):
naturally in rhythm with the heartbeat ofthe islands. There's no money to exchange,
no passport required, and travel fromNew England could not be easier.
Make your plans now by going tovisit USVII dot com. Learn about all
three islands and plan the ideal vacationfor you and your family. America's Caribbean
paradise is waiting for you. SoI had to visit USVII dot com for
(26:33):
more information and to reserve your triptoday. That's visit USVII dot com.
I want to talk about this pieceon the Wall Street Journalists titled TV Networks
Embrace their aging audience with new mantraIt doesn't age doesn't matter, And what
this piece is talking about is howyou've got TV networks now. They're kind
of leaning in two directions. Thefirst is anything millennial related, because millennials
(26:56):
are now the largest generation in thecountry, but the second largest is still
the baby boomers, and so you'vegot you know, when you look at
legacy traditional TV programming, it's reallyskewing towards the boomers because most of the
millennials have gone towards streaming services.And so you've got things like the Bachelor
(27:17):
franchise that rolled out their Golden Bachelorthat was you know, this year,
the star was not you know,some twenty eight year old with a spray
tan and you know, bulging musclesin this and it was a seventy two
year old. And they're kind ofleaning into Yeah, our audience is older,
but they've got a boatload of money. Wouldn't you want to advertise to
that audience? And I think that'skind of cool. Yeah, that's one
(27:41):
thing we should have seen coming.Because demographics are baked into the cake.
I have another tangent that I wantto take on this and not related to
the television industry. I want totalk about tech mark who are the when
you think of like the five Ihave tech founders in the United States that
(28:03):
have had kind of the most wideranging impact. Name them for him.
How far back do you want togo as far as you want? Medison
No last seventy years Watson most WorldWar Two. Please, I guess Gates
was in the act. I wasgonna say jobs, but I think of
him as more of a salesman.Throw there, he's still in sure the
Google guys, Sure, Uh,Larry Ellison, you'd probably remissed to the
(28:29):
Oracle guysuck. I suppose he hada little reluded. I'm not saying that
I love the guy, but I'msaying like his influence is undeniable, undeniable,
and there are a bunch of othersprobably, right, do you guys
who are the like big up andcoming tech companies now? Who are the
ones that people are excited about today? And video? Who else? Open?
(28:51):
Right? Do you guys find ita little curious that all of the
previous you know, the you knowstuff that was amazing, that was you
know, next level, next genin technology was created by a bunch of
twenty two and twenty three year olds. That's when your mind is most plastic
and fertile. There is no companyout there right now that's doing that stuff
(29:18):
with founders that age, and Ijust I don't know what to make of
that, but like, well wedon't know about it, but they're getting
scooped up so quickly, right,it's got to be check. Maybe kid
on TV right now, this kidwho just rolled out of bed the I'm
not even I don't even know thecontext. All I know is scale AI
presumably which he represents because he doesn'tlook like a reporter just raised a billion
(29:38):
dollars. All I'm saying is thatlike the most exciting technology companies that everyone's
talking about it, like people weretalking about Facebook, like not when it
went public. It was a highlyanticipated IPO because it was huge ten years
not ten years, but five yearsbefore it went public, you know,
Microsoft. We saw how that transformedthe world over the fifteen years after it
(30:00):
went public into the nineteen nineties,Like you could see what was what was
happening there. And I find itreally interesting that when you look at who
leads like the biggest and strongest andmost you know, dominant technology companies now
and kind of we're trying to figureout what comes next, even the people
that are leading those what comes nextnext companies are not in their twenties.
(30:25):
They're in their forties fifties. Andthe people doing the innovating might be,
but we're not like who are they? Like the everyone knew who Mark Zuckerberg
was due here, but but sorry, I'm look at him. I don't
know who that guy is. Hehas no name. He just raised a
Alexander Wang. I don't care,Like you don't know what if I said
Alexander Wang to anyone. A lotof people don't, like I don't know
(30:47):
who check everybody in Who Bill Gateswas in nineteen eighty eight. No,
but he made like he was thedifference maker. Yeah he was. When
you look at the Google guys,everyone knew who they were in two thousand,
right, but not but not innineteen ninety would ever they started three?
Right? But missy, what's thecompany that was started three years ago?
Now that's huge that everyone knows thetwenty two year old open Ai.
(31:08):
The guy who runs is forty ohokay, Like Sam Altman's a forty year
old his first company was like hewas one of the PayPal guys or something
that I under standpoint like who's thetwenty three year old who dropped out of
college four years ago that has thecompany that everyone knows about? Don't know?
That's the point, Like, notthe guy who's starting the company today,
(31:29):
but who's the guy who is doingthat. We don't have any names.
Where's I like I remember back inthat, Even like as much as
I rip on the last vintage oftech companies because they're not really tech companies,
everyone knew who Mark Zuckerberg was,you know, like that name was
out there before you know, thecompany went public. You talk about,
(31:52):
you know, the the Uber guys, Travis Kollanek, and like people knew
who they were, the Google guysback in the day. You know,
Jeff Bezi has had pieces written abouthim. And who are the twenty two
and twenty three year olds that peopleare right there have to be? I
don't know, but all I knowis that this the history of tech innovation
in the US for the last fiftyyears is littered with the twenty two and
(32:15):
twenty three year old who came upwith the idea that no one else had
and then made it happen. Theywere all softly, These were all good
coders like Gates and Zuckerberg. Nowthe Apple guys were hardware guys. Well
Loasniak I guess was the yeah,yeah, so I that may be the
exception that sort of proves the I'mthinking about the guys who really were the
(32:36):
subject matter experts. This is notmy area, so I'm probably overlooking something
simple. I mean, I don'tthink you have to be. Maybe I
think I'm missing your bigger point,which is what you were opportunities for innovation.
No, but the point that Ithink I'm just trying to wrap my
head around, and if it meansanything, is the emerging technologies used to
be dominated by twenty year olds,the companies that we're talking about the people
(33:00):
are excited about. Now on thatfront, they're not, And I like,
I find that interesting. You know, it's all of that. There
was this again, just if youlook at the last like three cycles that
we've gone through, kind of thatnineteen eighties tech bubble and then twenty ten
cycle for you know, VC investmentand where's the money going, it was
(33:23):
dominated by people in their early twentiesraising money and starting companies and those being
kind of the dominant companies that pushthings forward. And now it's kind of
older tech companies that are trying toreinvent themselves but are still getting the dominant
share of the action. And Idon't know what to make of that other
than it's not how it's been forthe last fifty years. Let's take a
(33:45):
quick break here. When we comeback, it's stack Roulette. Text us
six one, seven, three sixtwo thirteen eighty five with your comments and
questions about today's show, and letus know what you think about the stories
we're covering. This is the Financialliks Change Radio Network. The Financial Exchange
streams live on YouTube. Like ourpage and stay up to date on breaking
(34:07):
business news all morning. Loan Baseis the Financial Exchange Radio Network. The
Financial Exchange has built an incredible partnershipwith the Disabled American Veterans Department of Massachusetts.
We can't wait to take part inthis year's DAV five K sat for
Saturday November ninth at Fort Independence onCastle Island, and registrations now open.
(34:30):
You can help our great American heroesby walking, running, or simply making
a donation. Your gifts will supportservices such as the Veteran Advancement Program,
which offers permanent and affordable housing opportunitiesfor veterans and their dependents. Learn more
at DAV FIVEK dot Boston. TheDAV five K Boston is presented by Veterans
Development Corporation. Trivia question Today,how many Sherlock Holmes novels did Arthur Conan
(34:54):
Doyle write that would be four?Ed from Falmouth, Mass is our winner
today, taking home a Financial ExchangeShow t shirt. Congrats to Ed,
and we played trivia every day hereon the Financial Exchange. Tune in tomorrow
for your chance to win. Seecomplete contest rules at Financial Exchange Show dot
com. Mark, what do yougot for me? For stack Roulette?
Chuck? You've probably heard, becauseit's been so widely reported that pricers are
(35:16):
dropping for thousands of items at Targetand Walmart. Two. What items can
I get back to you on that? Well, yesterday's article gave some examples.
Some of them are brand name things, but no, it's a legit
question though, And that was actuallythe point that I was going to make.
The theme the tone of the reportingon this stuff suggests that this will
(35:37):
be good for inflation and all lseql. I guess that's true, but don't
be fooled by some prices falling.We don't know what the rest are doing.
This is a simple point, butit's worth keeping it in mind again
because of the spirit that some ofthese reports are being presented in or with
(35:59):
inflation. Is the increase or decreasein average prices. Some prices are very
flexible, like gasoline and oil andfood, they change every day or throughout
the day. Others are quite sticky, they only change periodically. Targets prices,
even in this digital age, youare pretty sticky. So this may
be good for inflation. Maybe not, because the other piece that we don't
(36:19):
know is, Okay, if peoplesave more at target, then do they
go and spend more at almost defunctred lobster. So this gets to the
bigger question of the cause of inflation, which people who do this bottom up
forecasting kind of miss, which isis there too much and neu hnded at
this and you're in an earlier segment, is inflation the result of too much
demand in the economy because monetary policyis too accommodative. I don't have the
(36:42):
answer to that cause, none ofus really. The evidence seems to point
in that direction, but I don'thave a definitive answer. Now. Taking
a look at markets now slipping slightlynegative, the DOWS off eighty seven points,
the S and P's off six,NASDAK down just three, but all
three major US indices are now inthe red after being slightly positive to in
the day ten youre Treasury rep sixtenths of a basis point to four point
(37:05):
four to two percent, so notmuch movement there. But all eyes are
on in Nvidia today as they reportearnings after the bell. I'm sure that
we'll be covering that tomorrow. We'realso going to be getting jobless claims tomorrow,
so we'll cover those, and weget new home sales data as well.
All that more on the financial exchangetomorrow. We'll see you then,
The Financial Exchange is produced by MoneyMatters Radio and is hosted by employees of
the Armstrong Advisory Group, a registeredinvestment advisor that provides investment advisory services.
All opinions expressed are solely those ofthe hosts, do not reflect the opinions
of Armstrong Advisory or anyone else,and do not guarantee profit. Investments can
lose money. This program does notoffer any specific financial or investment advice.
(00:20):
Please consult your own financial, tax, and estate planning advisors before making any
investment decisions. Armstrong and Money MattersRadio do not compensate each other for referrals
and are not affiliated. This isThe Financial Exchange, with Chuck Zada and
Mark Van Daddy, your exclusive lookat business and financial news affecting your day,
(00:41):
your city, your world. Stayinformed and up to date about economic
and market trends plus breaking business newsevery day. The Financial Exchange is a
proud partner of the Disabled American VeteransDepartment of Massachusetts. Help us support our
great American heroes by visiting DAV fivek dot com Boston and making a donation
today. The DAV five K Bostonis presented by Veterans Development corporation face.
(01:07):
He's the Financial Exchange with Chuck Zadaand Mark Vandetti, Chuck, Mark and
Tucker with you right now, andreally boring day in markets. At the
moment, the Dow is down fourteenpoints, the SMP is up one,
and the Nasdaq is up nineteen,so no major index moving more than one
tenth of a percent at the moment. Tenure US Treasury, what's going on
(01:30):
there? Nothing, It's completely flatat four point four to one four percent.
Oil West Texas Intermedia down forty centsa barrel to seventy eight twenty six,
triple a national average. Four gasprices up one point three cents to
three sixty one to one tenth.This was following a brief one day drop
below three dollars and sixty cents agallon, so right back above it at
(01:53):
the moment. And then we've gotgold down thirty four dollars and ten cents
two twenty one and eighty cents.You know, it's funny, Chuck,
It seems boring to us, butit's like looking at a tug of war
where the midpoint doesn't move, butthere's intense activity on either side. You
know, I'm not saying that thingsare frantic out there, but they could
(02:15):
be and we wouldn't know it bylooking at movement in the averages. The
forces could be just enough to keepthings unchanged. There's any validity to that,
but it just occurred to me.We don't know what's going on now.
The big thing overall is that thisis a market that you know,
got up north of fifty three hundredI think a week ago. I think
it was his last Wednesday or Thursdaythat it did, and it's just kind
(02:37):
of been hovering. It's just kindof like, what do we do now
we're here? Do we keep going? You know, we we'll just we'll
hang tight here. So's it's kindof what we're It's funny how we give
the market a personality like that itis. I'm just making a it's it's
a it's a half baked philosophical pointnow that the market it's very anthropomorphic.
(02:57):
It's it has its own thoughts,its own desire, it it has foods,
it likes things that it doesn't liketo eat. And right now it's
out there and you know, theeighty nine degree sun saying I'm just gonna
chill to day, hanged by thepool relaxed. There is a commentator,
Jim Grant. Some of you've heardof him. I don't read him anymore.
Yeah, but he wrote a bookabout mister did Warren Buffett coin the
(03:20):
term mister Market somebody? It wasn'tJim Granted. It wasn't Warren Buffett.
It was an older It was likeBen Graham, they called it. They
gave it a beam personality, beGraham. Mister Market is sometimes mannic,
he sometimes depressed. He's never evenkeel except for right now. Except for
right now, mister Market is coolas a cucumber hanging outs or something.
(03:43):
Yeah, you know, if he'sgot it, you know, it's it's
what. As soon as he's offhis meds, we're screwed. That's how
it usually works. Let's talk alittle bit about why forecasts for a US
recession have been wrong over the lastcouple of years. Now, these first
started really popping up back half oftwenty twenty two, but even first half
was, hey, you know,rates are gonna go up because of inflation,
(04:06):
and you're likely to see a recessionas a result of this. Jamie
Diamond has been calling, you know, recession every six months like cockwork for
you know, the last two anda half years now, And the question
that's out there is, hey,look, despite all of the predictions and
calls for a recession, at eachinstance, really the end of twenty twenty
(04:27):
two and Q three of twenty three, at each instance where things could have
gone that way, we saw astrong US economic rebound. And the obvious
question is what gives mark. Economistsare terrible and these aren't all economists.
Some of them are just armchair typeswho like to give their opinion about the
direction of the economy. Economists arenot good at forecasting recessions. Many Nobel
(04:51):
Prize winners have said we just shouldn'tdo it. They just shouldn't do it.
There are different ways to forecast growth. You can sort of do top
down approaches, which I like becausethey're simple and someone with my training can
do it. Others employ much moresophisticated methods, like the PhDs that work
for the Federal Reserve. There's enormouslycomplicated rich models that tend to not do
(05:12):
a better job than the naive approachof saying I have growth went up last
quarter. Growth tends to be persistent. I expected to go up this quarter.
As well. You can apply alittle bit of judgment to that,
but that naive approach does just aswell as many of the more sophisticated approaches.
Strangely enough, so, I havenothing really insightful to say other than
that people should not try to forecastGDP, or we should take those predictions
with a grain of salt. Thereare just too many variables governed by randomness
(05:38):
that factor in and as a consequence, makes predictions dubious. Why is it
so fashionable to try to forecast recessions? Then for the same reason why we
speculate about the afterlife, in theexistence of a supreme being and the need
to know, the need to wantto know, the need to exert control
over uncertain things. So if Iforecast GDP, and I do do it
(06:01):
here using times simple time series methods, it gives me a little bit.
To see a number come out toa tenth of a percent gives me a
strange anybody's ever worked with a spreadsheetknows this. There's something very fulfilling about
doing a calculation I'll just say,in a spreadsheet and getting a number with
the seeming precision of a tenth orone hundredth of a percent. It empowers
us. It gives us a senseof control over something that is inherently uncertain
(06:25):
and unsettling. So people want toknow the future. It's the same reason
we go to astrologers, or someof us do. Anyway, when's the
last time you've been It's Jesus beenalmost a week. I need to Yeah,
I try to do three times aweek Monday, Wednesday, Friday.
But some people swear by it.No. They also they also have a
good sense of humor about it.They know they're just trying to exert control
(06:46):
over the uncertain and uncontrollable. AndI think that's why we like to hear
GDP forecasts predictions generally. What doyou think that's just my I totally,
I totally think you're nuts. No, I think that's seventy percent of it.
Thirty percent of it is in thisbusiness, if you call a recession
correctly, you make a name foryourself only briefly though, your flash in
(07:06):
the pan unless you can repeat it. But everyone keeps calling you to ask
for a month ago, and thenthey realize that you were the lucky coin
flipper. By that, I meanyou guessed right not to say your methods
weren't sophisticationd sure, but invariably againbecause chance is so dominant in this process
of GDP or inflation forecasting, anyeconomic variable. Really some are more persistent
(07:29):
than others, but largely they're governedby chance. So the economic forecaster getting
their fifteen minutes of fame, theytend to be again flashes in the pan,
I know I'm being redundant. ThereNo. And this also gets at
something that I think you have tobe really aware of. And I've talked
about this before, but whenever you'rereading something from whether it's an economist or
a market part disiccipant or whoever itmight be, you have to understand the
(07:51):
context of that person's past views.Because there are some people who are just
perma permables, and you can't trusttheir opinion because they only have one opinion
and it never changed. They arethe broken clock as a result. Correct.
The one that I always come backto is David Rosenberg, who has
been bearish on stocks since two thousandand two and just like constantly like,
(08:18):
oh, this is gonna be theyear that things fall apart like this,
and if you just read something byhim without understanding that context, it doesn't
really do justice to where he fitsin the mosaic of all the information that's
that's coming in. You know,there are lots of smart people also that
(08:39):
are just They might even be goodeconomists, but they're really bad at translating
what happens in the economy into whathappens in markets. Let me give you
a different angle on this. It'svery hard for people who aren't trained in
forecasting to distinguish between say whether meteorologyand economic forecast, those are different I'll
(09:01):
call them domains in weather forecasting.Over the short term, the models are
really good, right, We've shownthe data. It's like, if you're
looking at like one to three dayforecasts, you're like ninety percent. Why
Yeah, why is that? Iknow you know the answer. It's physics.
Once things sort of line up,we know what direction the forces are
pointing in. We can say there'sa seventy percent likelihood of thunderstorms tomorrow and
(09:22):
in seven out of ten days,when the circumstances are similar leading up to
that point. You get that resultin economics you don't have in other soft
sciences. It's not just econ Youdon't have stable relationships with which to make
predictions. So Rosenberg's Achilles heel isthat he relies on valuations a lot.
(09:43):
The problem is the relationships or therelationship between valuations and future returns have broken
has broken down since the nineties,So models that worked really well up until
the nineties don't work well anymore.Similarly, models that related inflation to unemployment
worked really well well up until somewould say now is not always, but
they worked reasonably well up to theGreat Recession. Then those relationships decoupled,
(10:07):
they kind of fell apart. Sopast models failed. That's why economic forecasting
is so hard. These things arenot stable, I think hard that we
kind of have to cover in thatis it's another example of the power of
compounding in my opinion, where look, if you're looking at, you know,
forecasting what's going to happen three tofive days from now, there's just
(10:28):
less time that stuff can change.Like let's say that each day you are
losing one percent in accuracy, Sothe first day you're ninety nine percent accurate,
the next year ninety eight. Butremember if you're multiplying, eventually it
compounds and you get you know,it's a really bad accuracy pretty quickly and
In reality, it's more than youknow, one percent a day that you
lose in accuracy. It's probably closeto five. So like day one you're
(10:50):
ninety five percent accurate, day twoyou're eighty nine, day three you're eighty
three per Like, it goes downquickly in economics. When we talk about
recession four casting, most people aretrying to project out like six to twelve
months. Why would you expect tohave accuracy on that in something that,
as you note, it's it's notphysics. You know, we like to
(11:13):
think of economics as being physics,and you know, a hard science because
there are numbers involved, but thereare no like it's funny like there aren't.
It's far closer to like sociology thananything else. Tuck to any economists.
They get this, real economists,not the armchair journalist types who think
(11:33):
they can forecast GDP. But noeconomists takes forecasts all that seriously. It's
like people say, well, economistslike to no, Actually they're quite aware
of the limitations of the tools thatthey have at their disposal, Like I
generally don't feel comfortable looking out morethan about three months or so, and
even there, it's kind of likewell, there's a chance this could happen,
and there's a chance it. It'strying to predict things that are gonna
(11:56):
happen like a year in advance.I have no idea, quite honestly,
no one does. Let's take aquick break. When we come back,
we're going to be joined by AmirSharief talking about inflation. Right after this,
the latest news on inflation, theFED, the economy, and how
the markets are reacting. Every morningright here on the Financial Exchange Radio Network.
(12:20):
Miss any of the show, catchup at your convenience by visiting Financial
Exchange Show dot com and clicking theon demand icon, where you'll find all
of our interviews in full shows.This is your home for the latest business
and financial news in New England andaround the country. This is the Financial
Exchange Radio Network. As problems fromnow, joined by Amir Sharief. You're
(12:48):
to talk a little bit about thecurrent state of inflation here in the United
States, and Meir, how areyou today? I'm good, well,
thanks, how are you? We'redoing well as well. And when we
look at the inflationary picture, Iknow, you know, there's a lot
of excitement on the day of therelease last week because hey, we printed
you know, zero point three percentfor the month instead of you know,
(13:09):
point four, which had been outfor the first quarter. Is there a
sense that there's any meaningful progress beingmade or was this just more some storytelling
that hey, at least we didn'tprint point four again. Yeah. I
mean, look, I think there'stwo things. One is a sense of
relief that some of the you know, really strong readings we had in the
first quarter were sort of behind usand they're not indicative of you know,
(13:33):
that pace continuing for the rest ofthe year. So certainly that sense of
relief. But secondly, I thinkwhen you kind of dig through all the
various details of that report, Ithink there are some signs, especially on
that you know, long awaited slowdown and rent inflation that we've been waiting
for, but that's finally starting tohopefully take hold, and if that does,
that will go a long way inhelping us get down to the to
(13:54):
the fence target over time. Canyou explain to our listeners what's going on
with owner equivalent rent because it's somethingthat is a little bit inside baseball and
is still really important to what's goingon here. Yeah, it is,
so I think The most important thingto understand is it's not it's not home
prices. It doesn't measure, youknow, what the cost of your home
(14:15):
is. The idea is that,you know, the house is an investment
and you're sort of consuming a flowof services from living under there. So
the idea is almost like, youknow, what would you pay to have
a roof over your head? Essentially, that's the consumption part you want to
capture in a in a price index, and that has kind of stayed elevated
over time. And a lot ofthis really is just the way the index
(14:37):
is constructed. It's it's you know, what people are paying to lease the
new apartment, what maybe your renewallooks like if you are renewing your lease
and there's a lot of people inthe market who are obviously you know,
they're not renewing every single month,so it's really the average rent over time
sort of you know, run throughsome models to sort of look like what
(14:58):
it would cost a homeowner to rentto themselves. It's almost like the opportunity
cost of owning your home instead ofrunning it out to somebody else. And
this is a huge part of theindex. You know, in general,
home ownership is just so big inthe United States, so this is a
big part of the index, andwe've been waiting for it to slow down,
and it looks like, you know, we're getting some signals that that
(15:22):
slowdown could be coming this summer.This is one piece of the inflationary picture.
But one of the things that wehad noted over the first quarter was
that, yes, that's a majorfactor. Sure auto insurances too, but
there were a number of categories wherewe were starting to see signs of broadening
inflation. Is that something that reverseditself in the April report or is that
(15:43):
still a concern out there. Ithink it is definitely concentrated right now in
the shelter component in this rent andknow we are components because you know,
that's running north of five percent stilland we're waiting for that to slowly come
down over time. Auto insurance isrunning about I think twenty two percent year
every year, but you were seeinga slowed down in a lot of other
(16:07):
categories. So now we're finally startingto see, for example, new car
prices decline on the month of amonth basis more steadily than they have been
declining. Food prices at this stageare only up around I watched to say,
grocery store prices particular are only uparound one point two one point three
percent year every year. So youare seeing you know, slow down in
many more categories now than you wereeven let's say, you know, six
(16:32):
months ago, a lot of whatwe got in the first quarter that was
really strong inflation data was concentrated insome of these services in particular, like
auto insurance, like auto repair.But I think in April we've gotten back
to more of what we were seeingin the back half of last year,
when, as you remember, wegot a string of you know, much
much better inflation prints than we're expecting. And I think we're getting back to
(16:52):
that trend now starting with a stablereport. When whenever we talk about inflation,
you know, it's often referred toas a combination of you know,
factors that can feed into it.You can have too much demand to little
supply expectations. What are you seeingright now from the demand side of things,
because I feel like this is anarea that a lot of retailers are
reporting, you know, weak demandin different places, but it's not necessarily
(17:17):
matching up with the top line consumerspending numbers. That stay pretty strong right
now. Yeah, I will saywe did get a pretty soft, you
know, retail sales report in April. The last several months, I would
say we have started to see alittle bit more of a cooling on that
consumer demand side, But in general, you know, I think demand still
overall remains pretty pretty strong. Youcan take travel as a good example.
(17:41):
You know, you look at anyof the burnings reports of the airlines,
if you've floated all recently, youknow, the planes are still packed,
are still traveling. What's different nowis there's been much more stealing on the
supply side. Two years ago,we had only about ninety percent of airline
capacities that we had they're to twentynineteen before COVID. Now we're exceeding that
(18:03):
that amount, and you're getting backto a situation where you know, there's
less of an impact from jet fuelprices than there was even a year ago.
There's essentially more seats in the sky, and you know, we're we're
starting to see that put downward pressureon things like you know, airfares.
Even the overall travel demand is stillstrong. So to me, a lot
(18:25):
of it has been the healing onthe supply side has really helped quite a
lot. We've seen inventories increase alot of the last two years for things
like you know, furniture and appareland other items that were starting to become
a bit more difficult to manufacture andimport, and so that I think has
really helped quite a lot. Butoverall, I would say, you know,
wage growth moderation has also probably hasa margin helped. Wages of are
(18:48):
getting down to a level that theSEID would kind of like to see them
growing at now compared to where theywere let's say two or three years ago.
So all of those factors supply,the supply side healing has probably been
the biggest one. But now therest of the macro factors, like a
bit of a cooling in the labormarket for example, cooling wage growth,
those are also I think starting tostick in and help to put downward pressure
(19:10):
on the overall inplace picture. Verygood, Amir, thanks so much for
joining us today. We appreciate itand we will catch up with you soon.
Thank you. That is Amir Sa. We've talking about the current state
of inflation in the United States.Quick break here. When we come back,
we've got trivia and we're talking gold. Bringing the latest financial news straight
(19:45):
to your radio every day. It'sthe Financial Exchange on the Financial Exchange Radio
Network. Find daily interviews and fullshows of the Financial Exchange on our YouTube
page. Like us on YouTube andget caught up on anything and everything you
might have missed. This is theFinancial Exchange Radio Network. Mirk. Let's
talk a little bit about gold.There's a piece in the Wall Street Journal.
(20:07):
It's titled Gold's Latest Allure. Itsanctions proof your thoughts on this piece.
There are lots of reasons to takegold seriously. Institutional investors tend to
pooh poo it, not all,but many because it isn't generative unlike stocks.
For example, it doesn't participate ineconomic growth via earnings. When you
(20:30):
buy a company, you buy ashare of its future growth or better yet,
when you buy an index fund,you buy a share in all publicly
traded companies sure future growth. Soif the economy grows, which it will,
unless things go horribly off the rails, stocks should, over long periods
of time go up. I'm sorryfor all the background, but that's a
fundamental point that all so called acidallocators follow when they're investing your retirement money.
(20:55):
Gold's different. It's not generative.It is no dividend, and though
it is an input like other metalsinto making things, it doesn't have It
doesn't have a yield, which Iguess is the same thing as saying there's
no dividend. Yet we own itbecause there have been times like the seventies
when it went up with inflation,so you could call it an inflation headge,
even though it's relationship with inflation isway more complicated than the experience of
(21:17):
the seventies would suggest. Yep.And then, and it is a long
winded answer, but I want topoint out that it's easy to get excited
about gold right now, and thereare valid reasons to own it. But
in real terms, and by thatI mean deflated or inflation adjusted terms,
it was higher in many periods overthe last say four and a half decades.
(21:37):
So the price of goal we allknow is about twenty four hundred right
now. I'm looking at month enddata here, so I adjusted that for
inflation went back as long as littledatabase we use provides gold prices for and
you would think that twenty four hundredwould be some kind of record, and
it's like not even in the topten month end inflation adjusted prices since nineteen
(22:00):
eighty. It's the highest you havenineteen eighty. Thanks for asking. January
nineteen eighty in nineteen eighty four dollars. This is the deflator that we use.
I'm sorry for all the numbers,but I feel like you have to
say that otherwise you run the riskof giving the wrong impression in deflated dollars
using the CPI, which is theright way to think about the price of
(22:22):
anything. You want to compare itto other periods. In apples to Apple's
terms, eight hundred and thirty sevendollars reached in January of nineteen eighty.
The inflation adjusted price today I'm usingmonth and April data is seven hundred and
thirty six dollars. That means ifyou bought it in nineteen eighty and held
it, you would have made whaton the S and P like twenty five
times your money. I'm pulling thatout of thing, but it's probably not
(22:45):
that far off. On gold,you would have lost money. Now,
I just did. I just didcompare real tohenomenal there. I apologize.
It's probably more like twelve to thirteentimes your money. In stocks and real
terms, whereas gold you would havelost money. But you might be thinking,
but I've owned gold for at leasta couple decades, I've made money.
And it is true that depending onwhen you start, for example,
the rolling twenty year return on goldis a little over ten percent, I'm
(23:08):
now doing no, I'm I'm doingnominally or not real So it's looked good
relative to stocks over the past twentyyears, but over the past forty five,
which is probably closer to say aretirement investors horizon, it don't look
so good. The fascinating thing withgolden stocks, and I say this quite
often, is in a I wishI had a better way to explain why
(23:29):
this is the behavior that we seeinvestor behavior with regards to them should be
flipped because investors love to just tradeit and out of stocks. They're like,
oh, the economy's slown down,I'm gonna sell my stocks. All
the economy is speeding up, I'mgonna buy them, when in reality,
unless you're like really good at doingthis, and generally like, if you're
just managing money for yourself, you'reprobably not because you could make a lot
(23:55):
more money managing it for someone elseand not taking the risk personally. Then
unless you're like really really good atit, the best thing to do in
most cases is you just as younoted, own stocks for the long term,
because most people are not good attiming those entries and exits. On
the other hand, with gold,people say I got to own it for
the long term, like it's along term inflation edge, when the data
(24:17):
suggests, hey, most of themoney is made in these really short periods
of time where it goes up invalue dramatically over like a one to three
year period. This is true.It's actually much more useful as a trading
instrument because most of the growth happensin short periods of time and that does
nothing for like eight or nine years. But investors behave the exact opposite way
on it. They love to owngold forever and trade in and out of
(24:41):
their stocks, whereas the data suggestsyou're better off doing the opposite. Yeah,
excellent point. I think understand thecharacteristics of what you own and what
it's supposed to do in your portfolio. Yeah, stocks are generative, they're
tied to the fate of the economy. Gold is there for something. If
you own gold, a gold orany commodity is there for something to do.
Some people own it to a hedgeinflation. I think its relationship there
(25:03):
is flimsy. Others own it asa hedge against crisis or against the dollar,
say losing credibility. That's a legitimatereason as long as it's owned in
moderation, I guess, but verydifferent from serves a very different role than
equities that stocks. And also rememberif you are owning it for that reason,
you know, hey, what happens? If there's instability, then you're
(25:26):
often talking about owning physical gold.And if that's the case, it's how
do you secure it? How doyou make sure that it's you know,
safe in like, how do youtake care of it? Because that's something
that you have to deal with withsomething physical that's very valuable that you don't
have to worry about if it's inan investment account. The US Virgin Islands
is the perfect destination for your nextvacation. Visits Saint Croix, Saint Thomas,
(25:48):
or Saint John and experience incredible weather, iconic history, pristine beaches,
world class cuisine, and a vibrantnightlife. Book now and you might just
make it in time. For theSaint Croix Angle Meinlee in July seventh.
The family friendly event offers food demonstrationsand tastings, cultural dance performances, and
the ever popular mango eating contest.From the moment you arrive, you'll fall
(26:11):
naturally in rhythm with the heartbeat ofthe islands. There's no money to exchange,
no passport required, and travel fromNew England could not be easier.
Make your plans now by going tovisit USVII dot com. Learn about all
three islands and plan the ideal vacationfor you and your family. America's Caribbean
paradise is waiting for you. SoI had to visit USVII dot com for
(26:33):
more information and to reserve your triptoday. That's visit USVII dot com.
I want to talk about this pieceon the Wall Street Journalists titled TV Networks
Embrace their aging audience with new mantraIt doesn't age doesn't matter, And what
this piece is talking about is howyou've got TV networks now. They're kind
of leaning in two directions. Thefirst is anything millennial related, because millennials
(26:56):
are now the largest generation in thecountry, but the second largest is still
the baby boomers, and so you'vegot you know, when you look at
legacy traditional TV programming, it's reallyskewing towards the boomers because most of the
millennials have gone towards streaming services.And so you've got things like the Bachelor
(27:17):
franchise that rolled out their Golden Bachelorthat was you know, this year,
the star was not you know,some twenty eight year old with a spray
tan and you know, bulging musclesin this and it was a seventy two
year old. And they're kind ofleaning into Yeah, our audience is older,
but they've got a boatload of money. Wouldn't you want to advertise to
that audience? And I think that'skind of cool. Yeah, that's one
(27:41):
thing we should have seen coming.Because demographics are baked into the cake.
I have another tangent that I wantto take on this and not related to
the television industry. I want totalk about tech mark who are the when
you think of like the five Ihave tech founders in the United States that
(28:03):
have had kind of the most wideranging impact. Name them for him.
How far back do you want togo as far as you want? Medison
No last seventy years Watson most WorldWar Two. Please, I guess Gates
was in the act. I wasgonna say jobs, but I think of
him as more of a salesman.Throw there, he's still in sure the
Google guys, Sure, Uh,Larry Ellison, you'd probably remissed to the
(28:29):
Oracle guysuck. I suppose he hada little reluded. I'm not saying that
I love the guy, but I'msaying like his influence is undeniable, undeniable,
and there are a bunch of othersprobably, right, do you guys
who are the like big up andcoming tech companies now? Who are the
ones that people are excited about today? And video? Who else? Open?
(28:51):
Right? Do you guys find ita little curious that all of the
previous you know, the you knowstuff that was amazing, that was you
know, next level, next genin technology was created by a bunch of
twenty two and twenty three year olds. That's when your mind is most plastic
and fertile. There is no companyout there right now that's doing that stuff
(29:18):
with founders that age, and Ijust I don't know what to make of
that, but like, well wedon't know about it, but they're getting
scooped up so quickly, right,it's got to be check. Maybe kid
on TV right now, this kidwho just rolled out of bed the I'm
not even I don't even know thecontext. All I know is scale AI
presumably which he represents because he doesn'tlook like a reporter just raised a billion
(29:38):
dollars. All I'm saying is thatlike the most exciting technology companies that everyone's
talking about it, like people weretalking about Facebook, like not when it
went public. It was a highlyanticipated IPO because it was huge ten years
not ten years, but five yearsbefore it went public, you know,
Microsoft. We saw how that transformedthe world over the fifteen years after it
(30:00):
went public into the nineteen nineties,Like you could see what was what was
happening there. And I find itreally interesting that when you look at who
leads like the biggest and strongest andmost you know, dominant technology companies now
and kind of we're trying to figureout what comes next, even the people
that are leading those what comes nextnext companies are not in their twenties.
(30:25):
They're in their forties fifties. Andthe people doing the innovating might be,
but we're not like who are they? Like the everyone knew who Mark Zuckerberg
was due here, but but sorry, I'm look at him. I don't
know who that guy is. Hehas no name. He just raised a
Alexander Wang. I don't care,Like you don't know what if I said
Alexander Wang to anyone. A lotof people don't, like I don't know
(30:47):
who check everybody in Who Bill Gateswas in nineteen eighty eight. No,
but he made like he was thedifference maker. Yeah he was. When
you look at the Google guys,everyone knew who they were in two thousand,
right, but not but not innineteen ninety would ever they started three?
Right? But missy, what's thecompany that was started three years ago?
Now that's huge that everyone knows thetwenty two year old open Ai.
(31:08):
The guy who runs is forty ohokay, Like Sam Altman's a forty year
old his first company was like hewas one of the PayPal guys or something
that I under standpoint like who's thetwenty three year old who dropped out of
college four years ago that has thecompany that everyone knows about? Don't know?
That's the point, Like, notthe guy who's starting the company today,
(31:29):
but who's the guy who is doingthat. We don't have any names.
Where's I like I remember back inthat, Even like as much as
I rip on the last vintage oftech companies because they're not really tech companies,
everyone knew who Mark Zuckerberg was,you know, like that name was
out there before you know, thecompany went public. You talk about,
(31:52):
you know, the the Uber guys, Travis Kollanek, and like people knew
who they were, the Google guysback in the day. You know,
Jeff Bezi has had pieces written abouthim. And who are the twenty two
and twenty three year olds that peopleare right there have to be? I
don't know, but all I knowis that this the history of tech innovation
in the US for the last fiftyyears is littered with the twenty two and
(32:15):
twenty three year old who came upwith the idea that no one else had
and then made it happen. Theywere all softly, These were all good
coders like Gates and Zuckerberg. Nowthe Apple guys were hardware guys. Well
Loasniak I guess was the yeah,yeah, so I that may be the
exception that sort of proves the I'mthinking about the guys who really were the
(32:36):
subject matter experts. This is notmy area, so I'm probably overlooking something
simple. I mean, I don'tthink you have to be. Maybe I
think I'm missing your bigger point,which is what you were opportunities for innovation.
No, but the point that Ithink I'm just trying to wrap my
head around, and if it meansanything, is the emerging technologies used to
be dominated by twenty year olds,the companies that we're talking about the people
(33:00):
are excited about. Now on thatfront, they're not, And I like,
I find that interesting. You know, it's all of that. There
was this again, just if youlook at the last like three cycles that
we've gone through, kind of thatnineteen eighties tech bubble and then twenty ten
cycle for you know, VC investmentand where's the money going, it was
(33:23):
dominated by people in their early twentiesraising money and starting companies and those being
kind of the dominant companies that pushthings forward. And now it's kind of
older tech companies that are trying toreinvent themselves but are still getting the dominant
share of the action. And Idon't know what to make of that other
than it's not how it's been forthe last fifty years. Let's take a
(33:45):
quick break here. When we comeback, it's stack Roulette. Text us
six one, seven, three sixtwo thirteen eighty five with your comments and
questions about today's show, and letus know what you think about the stories
we're covering. This is the Financialliks Change Radio Network. The Financial Exchange
streams live on YouTube. Like ourpage and stay up to date on breaking
(34:07):
business news all morning. Loan Baseis the Financial Exchange Radio Network. The
Financial Exchange has built an incredible partnershipwith the Disabled American Veterans Department of Massachusetts.
We can't wait to take part inthis year's DAV five K sat for
Saturday November ninth at Fort Independence onCastle Island, and registrations now open.
(34:30):
You can help our great American heroesby walking, running, or simply making
a donation. Your gifts will supportservices such as the Veteran Advancement Program,
which offers permanent and affordable housing opportunitiesfor veterans and their dependents. Learn more
at DAV FIVEK dot Boston. TheDAV five K Boston is presented by Veterans
Development Corporation. Trivia question Today,how many Sherlock Holmes novels did Arthur Conan
(34:54):
Doyle write that would be four?Ed from Falmouth, Mass is our winner
today, taking home a Financial ExchangeShow t shirt. Congrats to Ed,
and we played trivia every day hereon the Financial Exchange. Tune in tomorrow
for your chance to win. Seecomplete contest rules at Financial Exchange Show dot
com. Mark, what do yougot for me? For stack Roulette?
Chuck? You've probably heard, becauseit's been so widely reported that pricers are
(35:16):
dropping for thousands of items at Targetand Walmart. Two. What items can
I get back to you on that? Well, yesterday's article gave some examples.
Some of them are brand name things, but no, it's a legit
question though, And that was actuallythe point that I was going to make.
The theme the tone of the reportingon this stuff suggests that this will
(35:37):
be good for inflation and all lseql. I guess that's true, but don't
be fooled by some prices falling.We don't know what the rest are doing.
This is a simple point, butit's worth keeping it in mind again
because of the spirit that some ofthese reports are being presented in or with
(35:59):
inflation. Is the increase or decreasein average prices. Some prices are very
flexible, like gasoline and oil andfood, they change every day or throughout
the day. Others are quite sticky, they only change periodically. Targets prices,
even in this digital age, youare pretty sticky. So this may
be good for inflation. Maybe not, because the other piece that we don't
(36:19):
know is, Okay, if peoplesave more at target, then do they
go and spend more at almost defunctred lobster. So this gets to the
bigger question of the cause of inflation, which people who do this bottom up
forecasting kind of miss, which isis there too much and neu hnded at
this and you're in an earlier segment, is inflation the result of too much
demand in the economy because monetary policyis too accommodative. I don't have the
(36:42):
answer to that cause, none ofus really. The evidence seems to point
in that direction, but I don'thave a definitive answer. Now. Taking
a look at markets now slipping slightlynegative, the DOWS off eighty seven points,
the S and P's off six,NASDAK down just three, but all
three major US indices are now inthe red after being slightly positive to in
the day ten youre Treasury rep sixtenths of a basis point to four point
(37:05):
four to two percent, so notmuch movement there. But all eyes are
on in Nvidia today as they reportearnings after the bell. I'm sure that
we'll be covering that tomorrow. We'realso going to be getting jobless claims tomorrow,
so we'll cover those, and weget new home sales data as well.
All that more on the financial exchangetomorrow. We'll see you then,
Popular Podcasts
Stuff You Should Know
If you've ever wanted to know about champagne, satanism, the Stonewall Uprising, chaos theory, LSD, El Nino, true crime and Rosa Parks, then look no further. Josh and Chuck have you covered.
Dateline NBC
Current and classic episodes, featuring compelling true-crime mysteries, powerful documentaries and in-depth investigations. Special Summer Offer: Exclusively on Apple Podcasts, try our Dateline Premium subscription completely free for one month! With Dateline Premium, you get every episode ad-free plus exclusive bonus content.
On Purpose with Jay Shetty
I’m Jay Shetty host of On Purpose the worlds #1 Mental Health podcast and I’m so grateful you found us. I started this podcast 5 years ago to invite you into conversations and workshops that are designed to help make you happier, healthier and more healed. I believe that when you (yes you) feel seen, heard and understood you’re able to deal with relationship struggles, work challenges and life’s ups and downs with more ease and grace. I interview experts, celebrities, thought leaders and athletes so that we can grow our mindset, build better habits and uncover a side of them we’ve never seen before. New episodes every Monday and Friday. Your support means the world to me and I don’t take it for granted — click the follow button and leave a review to help us spread the love with On Purpose. I can’t wait for you to listen to your first or 500th episode!