July 3, 2025 • 38 mins
Mike Armstrong and Marc Fandetti discuss markets getting an unexpected boost from the monthly jobs report. Why the dollars value has declined by 10% this year. CEOs start saying the quiet part out loud: AI will wipe out jobs. What is in your 401(k)? Why you really should know. Paul LaMonica, Barron's, joins the show to chat about Robinhood.
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
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(00:43):
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(01:03):
Face is the Financial Exchange with Mike Armstrong and Mark Vandetdy.
Speaker 2 (01:12):
Good morning, Welcome back to the Financial Exchange. As all
of you make your way across the country to your
July fourth destination. We've got markets in strongly positive territory
on the back of a better than expected jobs report.
We've got interest rates up slightly on expectations or falling
(01:33):
expectations of a rate cut. And clocking in on a
few drives here, what do we want to see? Let's
see Boston to Chatham drive time right now looking like
two hours and fifty three minutes as we head into
the weekend.
Speaker 3 (01:47):
How about well, we're really going local this morning? We are?
Speaker 2 (01:50):
Yeah, I want to know what it would take me
to get to Lake Winnipesauke if I needed to leave
from Boston, right.
Speaker 3 (01:56):
For those joining us? Serious that place in New Hampshire.
Speaker 2 (02:01):
Yeah, it is not bad two hours and eight minutes
if I want to go to Winnipesaki.
Speaker 3 (02:05):
So I'll take it any other drive times you want
to check it? On down to.
Speaker 2 (02:09):
Narragansett Mark from here to rent Them, Rent Them. Mass
Chase is to hit the album no for no particular reason.
That's how Mark Fandetty celebrates his shopping at Gap on
the news of the Vietnam tariff.
Speaker 4 (02:20):
Lived there twenty years, been to the outlooks like twice.
Speaker 2 (02:22):
But yeah, okay, let's start off with a look at
this job's report again that we got at eight thirty
am this morning. It's a Thursday job It's a Thursday
jobs report usually comes the first Friday of every month. Obviously,
there's something going on tomorrow that's disrupting that. Very disappointed
that markets are closed and that I won't be able
to come in here on a Friday, but we'll all live.
(02:45):
Market's closed today at one pm. At eight thirty this morning,
we had a jobs report that reported one hundred and
forty seven thousand jobs created in the month of June,
according to the that comes from the Establishment Survey.
Speaker 3 (03:00):
Wow, I am drawn a blank there moment.
Speaker 2 (03:02):
The Establishment Survey, which surveys a number of businesses, indicated
job creation of one hundred and forty seven thousand, which
was well above expectations which were around one hundred thousand.
The unemployment rate, which had come in at four point
two percent over the last three readings, bumped down to
four point one percent. And overall, what you can take
away from this report is an economy that is defying
(03:26):
I think all expectations and remaining quite resilient, at least
when it comes to the labor market.
Speaker 4 (03:30):
In this moment, there was there were some concerns about
labor market softening. The drum beat was getting louder over
the past few weeks. It might be the case though
the labor market is just normalizing. The unemployment rate went
from fourteen percent to under four percent, so historically very high.
The highest the rate to reach during COVID was the
(03:54):
highest since the Great Depression. The lows reached post COVID,
following several rounds of stimulus fallow exceptional emergency action by
the Federal Reserve was the lowest more or less that
it had ever reached a couple of exceptions nineteen sixties,
late nineteen nineties. So in very good company. All measures point.
All measures now fast forwarding ahead to today, point to
(04:16):
a stable and strong labor market. For anything in the
fours mike or in the fives for that matter, providing
that that's not a way station to something much higher,
is very good for unemployment. It probably something in the fours,
something in the low fives is probably close to what
you might call full employment. What you might call a
natural rate, the rate that's not pushing inflation up. Think
(04:38):
of it as the economy speed limit. So the household survey,
as you've already pointed out, suggests an all clear as
of this snapshot anyway in time for the labor market. Similarly,
the Establishment survey, even including the adjustment you might want
to do in your head for the fact that it's
an estimate and we know it's plus or minus roughly
one hundred and thirty thousand jobs. In all like lelihood,
(05:00):
business is still added jobs last month. Wage growth came
in a little bit, which is good news for inflation,
and there's really not much to I don't think harp
on as being negative in This Morning Reporter, as you pointed.
Speaker 2 (05:13):
Out, So in the words of Mark Fandetti, stop complaining,
all you college grads.
Speaker 3 (05:18):
Is that what I'm hearing?
Speaker 5 (05:21):
No?
Speaker 4 (05:23):
Well, yeah, So there is this uncomfortable reality that according
to other reports like the Job Opening's Labor Turnover Survey
so called Jolt's Report, and other more anecdotal sources, the
jobs market is in something of a limbo. Not many
jobs being shed, thankfully, fewer, particularly for that cohort that
(05:47):
you mentioned recent graduates being added. What's going on there?
I don't really know, to tell you the truth, I'm
not a labor economist, not my area. There's some interesting speculation.
As with many things, we won't truly know what the
trend is, either in that segment of the labor market
or overall, or for that matter, with respect to the
price level and the change in the price level, which
(06:08):
we call inflation and moving up a level still economic growth.
We won't know for some time what's actually going on
in the economy right now.
Speaker 2 (06:18):
But you can take the good news for what it
is today, and investors seem to be doing so on
Wall Street.
Speaker 4 (06:24):
And the reaction makes sense.
Speaker 3 (06:25):
It makes perfect sense.
Speaker 4 (06:27):
Sometimes you can't explain it, and we chalk it up
to noise, which is a lazy way of saying we
don't get it. But today's reaction stocks up.
Speaker 3 (06:34):
It is.
Speaker 4 (06:37):
Well, it's a catch all category. When you don't know,
you say it's a miracle. In science, when we don't know,
we say, I say we like, I have never owned
a microscope, but you know what I mean. We as
a civilization, we say it's a miracle. That's the that's
the category we assigned the things we can't explain here.
We call it noise. Today's reactions makes sense. Bond yields
(06:57):
are up on stronger growth perhaps and maybe in slation expectations.
Maybe the idea that the FED needs to cut urgently.
That idea is the the urgency has subsided somewhat, maybe
a lot. So it makes sense that rates, especially short
term rates, like Ben Kitchen said in the last hour,
are up a lot. Makes perfect sense.
Speaker 3 (07:17):
Never once owned a microscope, I don't think of it.
Speaker 4 (07:20):
Why would I have a microscope? What do you do
with yours?
Speaker 2 (07:22):
Uh? We we bought them as a family, and it
was the most entertaining way to uh, most entertaining way
to look at the kid's head lice was under a
giant microscope. Those are fascinating little displase guys. Amish, Yeah, oh.
Speaker 4 (07:38):
That actually if you rumish, you would know ont a microscope? Correct,
you have like a ferret eating them out or eating
out the.
Speaker 2 (07:44):
Lice in reactiones industrial having U sound serious?
Speaker 3 (07:49):
Yeah, they're very well, well, they they're amish.
Speaker 4 (07:51):
They're not they're not satellite radio no, yeah, so the
heck with them?
Speaker 2 (07:54):
Dow Jones Industrial average up three hundred and sixty seven
points eight ten s and P five hundred fifty one
points eight tens of percent NAS that closing in on
a full percentage point higher in the Russell two thousand,
also up a little bit more than eight tenths of
a percent. In the bond market, as we've been talking
about interest rates moving a bit higher this morning, the
yield on the two year treasury yield up nearly nine
(08:16):
basis points to three point eight seven six percent, the
yearield on the ten year up about four to four
point three to three percent. And just because Mark did
not like all my Boston centric drive times, the drive
time from Manhattan to the Hampton's currently clocking into two
hours and forty two minutes. I have no idea what
it usually takes so irrelevant to me, but just in
case you were curious, quick break, we've got trivia here
(08:38):
next on the Financial Exchange.
Speaker 1 (08:41):
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Speaker 6 (09:20):
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Speaker 2 (10:20):
Mark I was I actually don't recall where I was
reading or listening to it, whether it's a podcast or
a news article, but it was from a left ish
leaning source, and it was speaking specifically about this text
bill that is being moved through and speaking about deficits
and the concerns that are being raised about deficits in particular.
Speaker 3 (10:40):
And one thing that.
Speaker 2 (10:41):
They narrowed in on that I thought was maybe just
a bit of a miscategorization was the move in the
dollar this year. So, as we've reported on, the dollar
is moved down about ten percent so far this year
in value compared to a basket.
Speaker 4 (10:56):
So it takes more dollars to buy a yen or
a euro or a Sweiddish corona or whatever.
Speaker 2 (11:02):
Devalued a bit makes makes makes us manufactured goods look
more attractive overseas if you're traveling overseas or you know,
owning dollars, you own a few less of them.
Speaker 3 (11:19):
And the point was.
Speaker 2 (11:21):
Made that, hey, you know there's already pressure on the dollar,
and this is this devaluing is happening at a time
when US interest rates are by and large higher than
elsewhere in the world, and already there's pressure on the dollar.
If you lump on a whole bunch of new additional
debt on top of that, what does it spell for
the state of the dollar. And I felt that that
was all factually accurate, but insinuated that the fall in
(11:46):
the dollar this year was already due to deficit concerns.
And I have to say, I'm not really sure I
agree there.
Speaker 4 (11:53):
So the dollar and all those other currencies we talked about,
they are assets. They're traded every day. In fact, it's
the biggest capital market in the way. I say this
because I didn't know this, Like as a student, it
didn't occur to me. The currencies get traded. What does
that even mean? People, you buy dollars, if you are
a Japanese business or their central bank, you can hold
(12:15):
them as dollars. More likely you hold them as US
assets like treasuries. So dollars have many uses here obviously
and abroad. Why would the dollar fall, Well, there's less
demand for it. Maybe it's because US interest rates are
coming down. That's the typical explanation. And you're right, Mike,
US interest rates are still higher than and I'm going
(12:36):
to just use the long term rate here when I
say interest rates, I'm thinking of the say, ten year treasury.
The ten year treasury equivalent is much lower in other countries,
not the UK necessarily, but Germany, Japan, certainly, Italy maybe
about the same. But it's on average we've got higher
interest rates than other countries. It's not so much that
(12:56):
that matters. I don't think as the expected future difference
in interest rates, and up until well really at eight
twenty nine this morning, people were expecting US interest rates
to come down, maybe quickly. So it's natural to expect
if that differential between US and foreign interest rates were
And by the way, I'm doing something else here that
I should explain. I'm equating what the FED does when
(13:18):
I say the FED will ease policy with what happens
in longer term interest rates. Doesn't at certain no, in
fact is often as not, it does not happen FED
cuts rates. Long term interest rates go up because inflation
expectations go up, or growth the expectations go up. So
people were probably misattributing the dollars declined to worries about
(13:38):
erratic trade policy, worries about the US deficit ballooning even
more rapidly than previously expected. The explanation is a lot
more mundane than that. It's that interest rates here were
expected to come down by more than they were expected
to come down elsewhere. That explains everything, and it also
explains what's happening today. If you have a theory, it's
got to explain not just what's happening right now, but
(14:01):
what's happened even if it wasn't consistent with what's happening
right now at previous points in time. And I think
it's just a matter of interest rate differentials.
Speaker 2 (14:07):
MIC it can be difficult to parse out because the
theory of the dollar devaluing foreign buyers of US assets
moving away from them due to deficit concerns, growth concerns,
tariff concerns, to me, is a sound theory that could
eventually take sure. Yeah, right, you can paint a picture
(14:28):
right if the US keeps running up such high debt bills,
they won't be able to pay it back. We're not
going to lend them money at four percent interest rates
or whatever you're lending the US at those rates because
you're worried that they're going to have to devalue the
currency in order to print the money to pay the
interest on the debt and pay back those loans.
Speaker 4 (14:46):
Yeah, they won't call it a devaluation. That's like when
a government deliberately wants its currency to be cheaper. Another
reason a foreign government might own dollars. They use dollars
to manipulate the value of their own currency. We don't
do that, at least not anymore. Just a technical point,
since we're on the subject, and it's a it's kind
of a it's a complicated subject.
Speaker 2 (15:06):
So how how that whole house of cards could come
crashing down? I think is a relatively sound theory that
she would someday take place, but you have to kind
of resist temptation to believe it at all times.
Speaker 4 (15:19):
There's never one single explanations are usually they could be right,
but they get yeah, they're probably wrong. It's very easy
to they're convenient, though. You just have to be willing
to question what you thought explained events yesterday today, you know,
because day date is constantly coming in and markets are shifting,
(15:42):
and if you're not, if you're not questioning what you
thought yesterday. You're not You're not doing a very good.
Speaker 2 (15:48):
Job CEOs publicly stating what they were previously kind of
skirting around the edges on, but coming out and saying
it a little bit more when it comes to artificial intelligence.
These days, Wall Street Journal reporting this that CEOs are
being much more public about their expectations and goals for
(16:08):
artificial intelligence than they were previously, and those goals are
pretty clear. We want to cut the cost of our
labor by shrinking headcount across the board. Here's what we
have seen so far from a few different leaders. Chief
executive Jim Farley said an interview quote, Artificial intelligence is
going to replace literally half of all white collar workers
(16:29):
in the United States. We had other projections from Marion Lake,
the CEO of JP Morgan Chase's consumer and community business,
telling investors in May that she could see its operations
headcount falling by ten percent in the coming years as
the company uses new AI tools and Amazon CEO Andy
(16:49):
Jasse wrote in and O to employees back in June
that he expected the company's overall corporate workforce to be
smaller in the coming years because of the once in
a lifetime AI technology so I think the Wall Street
Journal is correct in one thing, that CEOs are presenting
this more frequently to primarily investors about the future state
(17:12):
of their companies. I don't really believe that they're right,
that the CEOs are correct. I think more than likely
they are saying these things in order to get attention
from investors and paint a pretty picture of their future
earnings of what all of this stuff looks like. Quite honestly,
(17:33):
I think if you were to pin me down, or
pin the CEO of any of these major companies down
on what their expectations for artificial intelligence really are, it
would be to make their employees that exist today more
efficient with one goal in mind. Mark It's to grow,
(17:53):
right I mean, I mean if you were a CEO
of a publicly traded company, your goal is to grow revenue,
grow profits, and make your company larger if you can
utilize artificial intelligence. If you're a net result here is
that you have eliminated half of your employees because of
artificial intelligence.
Speaker 3 (18:09):
I view that as a failure. That means they might
might not grown.
Speaker 4 (18:13):
It might wipe out forward jobs at Ford, but it
will create jobs elsewhere. You know what else wiped out
a lot of jobs electricity did. Yes, a lot of
candle makers lost, they did jobs. There are tons of
examples like that. This is this is textbook progress.
Speaker 3 (18:29):
Forgive me.
Speaker 4 (18:29):
I don't mean to be glib about it, but we
have to ensure that those who are displaced get retrained.
But that's no reason to hold back. And nobody here
is suggesting regulating AI to hold back these advances. Just
AI like any technology, and there are far probably more
potent examples in our history. I mentioned one steam power
as another for Pete's sake. They push out the frontier
(18:50):
of what's possible. There are always disruptions, but on average
will be far better off. So might E at forward
if they're not properly positioned. But you can't extra popolate
to the larger economy from that.
Speaker 2 (19:01):
Right, I tend to agree. And again, if the only
result of all this is that we have fewer people
working in general, well it's not gonna happen.
Speaker 3 (19:11):
And be it's a.
Speaker 2 (19:13):
Very ugly picture not of just the US labor market,
but of the companies themselves if they are hallowed out
of their employees, because it means they've not found a
way to grow off of this technology. Quick break, full
market recap.
Speaker 3 (19:25):
Next with Wall Street.
Speaker 1 (19:25):
Watch, bringing the latest financial news straight to your radio.
Every day. It's the Financial Exchange on the Financial Exchange
(19:47):
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 6 (20:00):
Well markets continue to rise today is traders continue to
digest this morning's monthly job support that came in higher
than expected. Non non farm payrolls increased to seasonally adjusted
one hundred and forty seven thousand for the month, higher
than the estimate of one hundred and ten thousand and
just above the upwardly revised one hundred and forty four thousand.
The Dow Jones is currently up over three hundred and
(20:21):
thirty six points or point seventy five percent, the S
and P five hundreds up over fifty points aer point
eight two percent, and the Nasdaq is up over two
hundred and seven points or just over one percent. The
two year bond is up eight basis points and the
ten year is up four basis points. Right now, shares
of the Silicon Valley chip designers, Synopsis and Cadence Design Systems,
(20:44):
each rallied over, are rallying over five percent. The US
government lifted restrictions on exporting chip design software to China.
According to announcements from companies in the industry, drone maker
Crados Defense and Security Solutions is up two point seven
percent after RBC Capital Market It's reiterated and outperform investment opinion.
The firm raised its twelve month price target to create
(21:07):
on Kratos, believing the small cap defense tech sector will
continue to outperform. Krispy Kreme said this morning that its
current CFO is leaving for another job, with international president
Raphael du Vivier set to take the job over next week.
The donut maker reported declining sales in May and recently
(21:27):
ended its partnership with McDonald's amid profitability concerns. Currently, Krispy
Kreme is about four percent off. I am Ben Kitchen
and that is Wall Street Watch. Today's trivia question was
how many Mission Impossible movies has Tom Cruise made? Your
correct answer would be eight. He is currently on his
(21:49):
eighth Mission Impossible movie. Today's winner is Susan in Bedford,
New Hampshire. She'll be taking home a Financial Exchange Show
T shirt. We will resume trivia next week.
Speaker 2 (22:00):
Do you guys remember the height of the Crispy Kream craze.
I don't remember how old I was, but I remember
there's a local shop owner who would drive something like
two hours every morning to go to a Krispy Kreme
across state lines, buy a bunch of Krispy Cremes and
then resell them at a at a markup to the
(22:21):
local residence.
Speaker 3 (22:22):
And it was a line out the door every time. Yeah.
That lasted like a week and a half.
Speaker 4 (22:26):
We all had heart attacks than the phase fast spired.
Speaker 3 (22:29):
Yeah, yeah, there you go. Uh Mark.
Speaker 2 (22:33):
We have a piece from MarketWatch today on four to
one k's and I find it interesting because we have
been talking a lot about looming changes to for a
one K plans that are being tossed out there. One
that came up I think last year was the inclusion
of new annuity products in for a one K plans,
(22:54):
And another is the discussion, you know, partly led by
by black Rock, but others as well, of including private
equity and private credit in for a one K plans.
As with anything else, I can't describe if any of
these things as universally good or bad.
Speaker 3 (23:11):
I don't think it's appropriate to do so.
Speaker 2 (23:14):
But I do think that you can definitively say that
four o one ks are on the cusp of getting
more complicated than they have been previously.
Speaker 4 (23:26):
Yeah, they're trying to make them. The overall theme of
the past really twenty five years, or since the Pension
Protection Act of two thousand and six anyways, to the
overall effort has been toward making four one ks more
automatic and more pension.
Speaker 2 (23:41):
Like unlike example that would be the automatic enrollment, automatic increase.
Speaker 4 (23:46):
Those things existed pre two thousand and six, but they
hadn't yet received the blessing, the categorical blessing of the
Department of Labor, to the point where an employer and
knew they wouldn't get suited if they offered them, right,
believe it or not, It was controversial before that, Yeah,
or at least legally questionable to default and roll somebody
into a plan and default them, that is, to do
it without asking them, but giving them the chance to
(24:08):
object if they didn't, they got put into it. Default
them into an investment that put their money in stocks,
which is what a target date fund does, of course,
and a balance controversial. Sure, you could lose money, and
there were suits prior to six After the clarity that
Pension Protection Act provided the target, so called target date
(24:28):
fund industry blossomed more recently, though it's not exactly a
new phenomenon in the effort again to make for one case,
more pension like offer an annuity distribution option. Most big
plans have for a very long time. Few people take
advantage of it though, maybe because of the the mixed
feelings people tend to have about annuities. Maybe for other reasons.
Speaker 3 (24:52):
But it's a scary word for people.
Speaker 4 (24:54):
And now we're moving. Yeah, you would, you would know, right,
there's there are Like with any financial tool, there are
good uses and there are misuses. And then the the
phase seems to be yeah, or maybe abuses. You're protected
against that to a degree in a four to one
K plan because your employer is a fiduciary. The legal
(25:16):
standard is for decision making there's very very high. The
next phase appears to be offering private market investments into
four oh one K plans. Pension plans have used them
for nearly for over thirty years. That's private equity, private credit.
Speaker 2 (25:29):
It is an important caveat that I don't think people
recognize that their employer has a fiduciary obligation when it
comes to their employees and their four one under federal law.
There are serious ramifications if they do intentionally adverse things.
Speaker 4 (25:45):
Not just that they have to be engaged, Mike like,
as a fiduciary, you have to exercise the same degree
of care that a reasonably prudent expert would. You can't
just sort of put it in place and hope for
the best because they're self directed. You have to ensure
that outcomes conform within a broad range to what's deemed appropriate.
Speaker 2 (26:08):
That having been said, there is a growing push I
think for I don't know if I would call it deregulation,
but inclusion of a lot more complexity when it comes
to these retirement plans. We've already seen it through the
introduction of wroth accounts decades ago, but those have become
(26:29):
much more prominent. I think they are a great thing,
but it's complex. The target date fund inclusion I think
a great improvement on where the four oh one k
has gone over years, but complicated in room for error
if you start including annuities and then private equity allocations
within target date funds, added complexity that potentially could be
a great thing for investors that know how to use
(26:51):
it and know how to vet it and look through it,
but large potential pitfalls as well. I think when it
comes to all of this, I would say the traditional
versus Roth question is the one that I most frequently
see people making mistakes on quite frankly, and there is
no fiduciary obligation for the four to one K provider,
(27:12):
to my knowledge, to tell you should you be doing
one versus THEA.
Speaker 4 (27:15):
No, indeed, they probably can't unless they offer advice and
you pay for it and it's monitored.
Speaker 3 (27:22):
Correct.
Speaker 2 (27:23):
So there are a number of these choices that, yeah,
the employer has this fiduciary obligation to.
Speaker 3 (27:28):
You, there are a number of them where you're on
your own. You need to.
Speaker 2 (27:31):
Figure this stuff out if you have a four to
oh one K account and you don't feel as though
you have a really firm grasp on some of these
things that we've discussed, Right, what's the appropriate amount for
me to be putting in? How much should I be
contributing to traditional versus Roth? What's the difference? How am
I going to be taxed when they come out down
(27:51):
the road. What if they do start including some sort
of pension like annuity within my plan. Should I or
should I not participate in it? How it will it
affect my financial future? These are complicated questions. I recognize
they're complicated. That's why we exist here at Armstrong is
to help you answer those complicated questions and build it
into your retirement strategy. Give us a ring at eight
(28:13):
hundred three nine three for zero zero one. I know
you're all sitting in traffic just like I'm about to be.
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(28:33):
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Speaker 2 (28:54):
I went a little bit long there, and I don't
want to keep him waiting. Paul lo Monica is going
to be joining us next for Baron's talking to us
about trading platform Robinhood. That's next here on the Financial Exchange.
Speaker 1 (29:07):
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Speaker 2 (29:43):
Joining us now is Paul Lamonica from Barons to talk
to us about rob Paul important. First question, how long
does it usually take to drive from Manhattan to the Hamptons.
Speaker 3 (29:55):
You know, no idea. I think it usually take your helicopter.
Speaker 5 (30:00):
Yeah, I take the helicopter.
Speaker 7 (30:01):
And I grew up on Long Island near beaches that
you didn't need as much money to hang out in,
So never really went out to the Hamptons, you know,
taking the jitney.
Speaker 5 (30:14):
It's it's like a couple hours.
Speaker 3 (30:16):
Okay, fair enough.
Speaker 1 (30:17):
I was.
Speaker 2 (30:18):
We were looking at traffic patterns ahead of the holiday,
and I had no benchmark for what that would normally take.
Speaker 3 (30:24):
We're speaking today.
Speaker 2 (30:25):
About Robin Hood, Paul, and you have a really interesting
piece here on their dominance and their recent stock success
as well. But I have to be honest that if
I was sitting here back in twenty twenty, when I
was sitting here back in twenty twenty and twenty twenty
one and looking at the retail investor landscape back then,
when you had Roaring Kitty dominating the news, when you
(30:46):
had Dave Portnoy saying he was a better investor than
Warren Buffett, and you had all these meme stocks and spacks,
my guess at that time was you're gonna have a
whole bunch of investors get burnt, which they did, and
they're going to lose interest and we're not going to
continue to see this same retail investor interest and dominance
(31:08):
with the with the dumb money kind of leading things
when it comes to the markets in twenty twenty five.
We've seen some of that pullback, but I can't say
that we've seen it entirely reverse the trend that we
have been on recently. What's your take overall, Am I
misreading it?
Speaker 3 (31:25):
No?
Speaker 7 (31:26):
I mean, I think what's fascinating is that in twenty twenty,
twenty twenty one, you know, with everyone maybe sitting at
home and you know, being bored with what was going
on with the pandemic, there was this sense that, you know,
the retail investor was in some respects maybe trying to
(31:48):
ward one over on institutional investors, and they were buying
stocks with more questionable fundamentals like game Stop, like AMC,
and there was this sort of sense of let's really
show the quote unquote big money, smart money institutional investors
(32:09):
that we can't be bullied, we can't be pushed around.
I think what's happening in the past couple of years
is that retail investors have maybe grown up a little bit,
and I don't think they're chasing as much these speculative companies.
Speaker 5 (32:24):
They're you know, riding the wave that the institutions are,
which are the mag seven, the NVIDIAs of the world,
and Meta and Microsoft, all these AI.
Speaker 7 (32:35):
Leaders, and those are stocks that have done quite well.
And you know, I think Robinhood has benefited from the
broader market rebound of you know, even this year.
Speaker 5 (32:46):
Of course, you know, we had such a big.
Speaker 7 (32:48):
Sell off in April around Liberation Day and it was
kind of a blink and you missed it sort of moment.
Because now we're back at all time highs on almost
all the major indexes. And I think retail investors haven't
been sitting on the sidelines.
Speaker 5 (33:01):
They've been leading the charge.
Speaker 2 (33:04):
To a point you made earlier, I don't think there
was a sense that retail investors were trying to pull
one over on big hedge funds and the smart money.
It was a pretty explicit stated goal of some of
the retail investors that were there.
Speaker 5 (33:17):
Such tis yeah, definitely.
Speaker 3 (33:20):
When we take a look at robin Hood.
Speaker 2 (33:21):
I saw the story published just the other day about
now I don't I frankly don't even know what this means,
which is why I'm asking you tokenizing investments in US
stocks and indices for foreign owners or for foreign investors
investing in US markets. I don't even understand fully what
(33:42):
that means. To do something like that but is the
overall move here just hey, what are new ways that
we can appeal to investors that have an interest in
the crypto industry.
Speaker 5 (33:53):
Yeah, that basically is it.
Speaker 7 (33:54):
It is a bit opaque, and there's been some controversy too,
because the organization aspect your Robinhood is claiming that they
will be able to sell these tokens in private companies
like SpaceX and open ai that could be like an
equity investment, and open Ai is shot back and said,
(34:18):
we have no involvement in this, we do not endorse it,
we do not approve it. And then you have robin
Hood CEO Vlad Tenev going on you know x Twitter.
You're kind of walking things back a little bit saying, yes,
these are not real equity investments.
Speaker 5 (34:34):
We get that.
Speaker 7 (34:36):
All that being said, I think robin Hood clearly is
a company that recognizes that, you know, there's retail demand
for not just traditional stocks, but also bitcoin and other
cryptos and as well as some of these more esoteric
you know, tokens that are out there as well, and
(34:58):
you know, robin Hood are trying to you'll gain exposure
in that market. And the stock, you know, did take
a nice pop earlier this week on that announcement.
Speaker 5 (35:07):
It's down a little bit today.
Speaker 7 (35:09):
I think there was some speculation they would get into
the SMP five hundred, you know, but you know they didn't.
You know, Data Dog was chosen to be the replacement company,
if you will, for Juniper Networks, which just got bought
by Hewlett Packard Enterprise.
Speaker 5 (35:24):
So robin Hood stock is coming down a.
Speaker 7 (35:27):
Little bit today, and have a piece up on Barons
right now about why that might be short sighted because
Robinhood maybe didn't get in today, but they're probably going
to get in eventually. They're too big to ignore. Companies
like Tesla and Coinbase. They also had to wait a
little bit longer than retail investors expected, but they eventually
got in.
Speaker 2 (35:46):
Speaking of Tesla, I see some points of comparison here, right,
I mean, this is a obviously growing company that's trading
at quite a premium. Ultimately though they are just a
brokerage platform. There are other publicly traded, much larger broke
brokerage platforms out there, like Charles Schwab and others. What
is the premium that people are paying for this stock
(36:06):
and what's the reasoning behind it?
Speaker 7 (36:07):
In your mind, Yeah, it's it is a difficult sort
of argument to make that a company like Robinhood deserves
that much of a premium to say Schwab or Morgan
Stanley which owns E Trade. I think that the argument
is that because demographics, you're going to continue to see
(36:29):
this market share shift to companies like Robinhood, maybe to
a lesser extent a company like e Toro, and you
know companies like Coinbase and.
Speaker 5 (36:40):
Galaxy for crypto.
Speaker 7 (36:42):
That you know, we are in a mobile first world
and that's where investors you want to be accessing their money.
So if you believe that there are these demographic shifts
that will continue to take place, then inevitably you're going
to see growth further slow for companies like Schwab and
(37:02):
Morgan Stanley. You know, of course, Morgan Stanley is a
lot more diversified and has huge investment banking business and
asset management business as well.
Speaker 5 (37:11):
But you know, a company like Schwab.
Speaker 7 (37:13):
I think, you know there are going to be continued
questions about where it fits in the retail landscape going forward.
But you know, again they did buy td rort rates,
so that helps them a lot, I think as well.
Speaker 2 (37:24):
Paul la Monica from Baron's joining us today to talk
about robin Hood and the continued trends since twenty twenty
in markets with retail investors. Paul, thanks so much for
joining us. Appreciate and have a great fourth Thanks.
Speaker 5 (37:38):
A lot, send you guys have a good moment weekend.
Speaker 3 (37:40):
Triple A reporting to us the best and worst times
to travel around the holiday if you're if you're making
your moves today around New England, the absolute worst time
to be on the road is between two and six pm,
so beware. Tomorrow You're worst time in twelve to seven pm,
and Saturday anytime between eleven and five try and avoid
the road ways. That's all the time we have for
(38:02):
this week on the Financial Exchange. Markets are open and
strongly in positive territory. As we close out the week,
we'll be right back at it on Monday. Folks, have
a great July fourth
The Financial Exchange is produced by Money Matters Radio and
is hosted by employees of the Armstrong Advisory Group, a
registered investment advisor. All opinions expressed are solely those of
the hosts. Do not reflect the opinions of Armstrong Advisory
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(00:20):
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(01:03):
Face is the Financial Exchange with Mike Armstrong and Mark Vandetdy.
Speaker 2 (01:12):
Good morning, Welcome back to the Financial Exchange. As all
of you make your way across the country to your
July fourth destination. We've got markets in strongly positive territory
on the back of a better than expected jobs report.
We've got interest rates up slightly on expectations or falling
(01:33):
expectations of a rate cut. And clocking in on a
few drives here, what do we want to see? Let's
see Boston to Chatham drive time right now looking like
two hours and fifty three minutes as we head into
the weekend.
Speaker 3 (01:47):
How about well, we're really going local this morning? We are?
Speaker 2 (01:50):
Yeah, I want to know what it would take me
to get to Lake Winnipesauke if I needed to leave
from Boston, right.
Speaker 3 (01:56):
For those joining us? Serious that place in New Hampshire.
Speaker 2 (02:01):
Yeah, it is not bad two hours and eight minutes
if I want to go to Winnipesaki.
Speaker 3 (02:05):
So I'll take it any other drive times you want
to check it? On down to.
Speaker 2 (02:09):
Narragansett Mark from here to rent Them, Rent Them. Mass
Chase is to hit the album no for no particular reason.
That's how Mark Fandetty celebrates his shopping at Gap on
the news of the Vietnam tariff.
Speaker 4 (02:20):
Lived there twenty years, been to the outlooks like twice.
Speaker 2 (02:22):
But yeah, okay, let's start off with a look at
this job's report again that we got at eight thirty
am this morning. It's a Thursday job It's a Thursday
jobs report usually comes the first Friday of every month. Obviously,
there's something going on tomorrow that's disrupting that. Very disappointed
that markets are closed and that I won't be able
to come in here on a Friday, but we'll all live.
(02:45):
Market's closed today at one pm. At eight thirty this morning,
we had a jobs report that reported one hundred and
forty seven thousand jobs created in the month of June,
according to the that comes from the Establishment Survey.
Speaker 3 (03:00):
Wow, I am drawn a blank there moment.
Speaker 2 (03:02):
The Establishment Survey, which surveys a number of businesses, indicated
job creation of one hundred and forty seven thousand, which
was well above expectations which were around one hundred thousand.
The unemployment rate, which had come in at four point
two percent over the last three readings, bumped down to
four point one percent. And overall, what you can take
away from this report is an economy that is defying
(03:26):
I think all expectations and remaining quite resilient, at least
when it comes to the labor market.
Speaker 4 (03:30):
In this moment, there was there were some concerns about
labor market softening. The drum beat was getting louder over
the past few weeks. It might be the case though
the labor market is just normalizing. The unemployment rate went
from fourteen percent to under four percent, so historically very high.
The highest the rate to reach during COVID was the
(03:54):
highest since the Great Depression. The lows reached post COVID,
following several rounds of stimulus fallow exceptional emergency action by
the Federal Reserve was the lowest more or less that
it had ever reached a couple of exceptions nineteen sixties,
late nineteen nineties. So in very good company. All measures point.
All measures now fast forwarding ahead to today, point to
(04:16):
a stable and strong labor market. For anything in the
fours mike or in the fives for that matter, providing
that that's not a way station to something much higher,
is very good for unemployment. It probably something in the fours,
something in the low fives is probably close to what
you might call full employment. What you might call a
natural rate, the rate that's not pushing inflation up. Think
(04:38):
of it as the economy speed limit. So the household survey,
as you've already pointed out, suggests an all clear as
of this snapshot anyway in time for the labor market. Similarly,
the Establishment survey, even including the adjustment you might want
to do in your head for the fact that it's
an estimate and we know it's plus or minus roughly
one hundred and thirty thousand jobs. In all like lelihood,
(05:00):
business is still added jobs last month. Wage growth came
in a little bit, which is good news for inflation,
and there's really not much to I don't think harp
on as being negative in This Morning Reporter, as you pointed.
Speaker 2 (05:13):
Out, So in the words of Mark Fandetti, stop complaining,
all you college grads.
Speaker 3 (05:18):
Is that what I'm hearing?
Speaker 5 (05:21):
No?
Speaker 4 (05:23):
Well, yeah, So there is this uncomfortable reality that according
to other reports like the Job Opening's Labor Turnover Survey
so called Jolt's Report, and other more anecdotal sources, the
jobs market is in something of a limbo. Not many
jobs being shed, thankfully, fewer, particularly for that cohort that
(05:47):
you mentioned recent graduates being added. What's going on there?
I don't really know, to tell you the truth, I'm
not a labor economist, not my area. There's some interesting speculation.
As with many things, we won't truly know what the
trend is, either in that segment of the labor market
or overall, or for that matter, with respect to the
price level and the change in the price level, which
(06:08):
we call inflation and moving up a level still economic growth.
We won't know for some time what's actually going on
in the economy right now.
Speaker 2 (06:18):
But you can take the good news for what it
is today, and investors seem to be doing so on
Wall Street.
Speaker 4 (06:24):
And the reaction makes sense.
Speaker 3 (06:25):
It makes perfect sense.
Speaker 4 (06:27):
Sometimes you can't explain it, and we chalk it up
to noise, which is a lazy way of saying we
don't get it. But today's reaction stocks up.
Speaker 3 (06:34):
It is.
Speaker 4 (06:37):
Well, it's a catch all category. When you don't know,
you say it's a miracle. In science, when we don't know,
we say, I say we like, I have never owned
a microscope, but you know what I mean. We as
a civilization, we say it's a miracle. That's the that's
the category we assigned the things we can't explain here.
We call it noise. Today's reactions makes sense. Bond yields
(06:57):
are up on stronger growth perhaps and maybe in slation expectations.
Maybe the idea that the FED needs to cut urgently.
That idea is the the urgency has subsided somewhat, maybe
a lot. So it makes sense that rates, especially short
term rates, like Ben Kitchen said in the last hour,
are up a lot. Makes perfect sense.
Speaker 3 (07:17):
Never once owned a microscope, I don't think of it.
Speaker 4 (07:20):
Why would I have a microscope? What do you do
with yours?
Speaker 2 (07:22):
Uh? We we bought them as a family, and it
was the most entertaining way to uh, most entertaining way
to look at the kid's head lice was under a
giant microscope. Those are fascinating little displase guys. Amish, Yeah, oh.
Speaker 4 (07:38):
That actually if you rumish, you would know ont a microscope? Correct,
you have like a ferret eating them out or eating
out the.
Speaker 2 (07:44):
Lice in reactiones industrial having U sound serious?
Speaker 3 (07:49):
Yeah, they're very well, well, they they're amish.
Speaker 4 (07:51):
They're not they're not satellite radio no, yeah, so the
heck with them?
Speaker 2 (07:54):
Dow Jones Industrial average up three hundred and sixty seven
points eight ten s and P five hundred fifty one
points eight tens of percent NAS that closing in on
a full percentage point higher in the Russell two thousand,
also up a little bit more than eight tenths of
a percent. In the bond market, as we've been talking
about interest rates moving a bit higher this morning, the
yield on the two year treasury yield up nearly nine
(08:16):
basis points to three point eight seven six percent, the
yearield on the ten year up about four to four
point three to three percent. And just because Mark did
not like all my Boston centric drive times, the drive
time from Manhattan to the Hampton's currently clocking into two
hours and forty two minutes. I have no idea what
it usually takes so irrelevant to me, but just in
case you were curious, quick break, we've got trivia here
(08:38):
next on the Financial Exchange.
Speaker 1 (08:41):
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(09:04):
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Speaker 6 (09:20):
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Speaker 2 (10:20):
Mark I was I actually don't recall where I was
reading or listening to it, whether it's a podcast or
a news article, but it was from a left ish
leaning source, and it was speaking specifically about this text
bill that is being moved through and speaking about deficits
and the concerns that are being raised about deficits in particular.
Speaker 3 (10:40):
And one thing that.
Speaker 2 (10:41):
They narrowed in on that I thought was maybe just
a bit of a miscategorization was the move in the
dollar this year. So, as we've reported on, the dollar
is moved down about ten percent so far this year
in value compared to a basket.
Speaker 4 (10:56):
So it takes more dollars to buy a yen or
a euro or a Sweiddish corona or whatever.
Speaker 2 (11:02):
Devalued a bit makes makes makes us manufactured goods look
more attractive overseas if you're traveling overseas or you know,
owning dollars, you own a few less of them.
Speaker 3 (11:19):
And the point was.
Speaker 2 (11:21):
Made that, hey, you know there's already pressure on the dollar,
and this is this devaluing is happening at a time
when US interest rates are by and large higher than
elsewhere in the world, and already there's pressure on the dollar.
If you lump on a whole bunch of new additional
debt on top of that, what does it spell for
the state of the dollar. And I felt that that
was all factually accurate, but insinuated that the fall in
(11:46):
the dollar this year was already due to deficit concerns.
And I have to say, I'm not really sure I
agree there.
Speaker 4 (11:53):
So the dollar and all those other currencies we talked about,
they are assets. They're traded every day. In fact, it's
the biggest capital market in the way. I say this
because I didn't know this, Like as a student, it
didn't occur to me. The currencies get traded. What does
that even mean? People, you buy dollars, if you are
a Japanese business or their central bank, you can hold
(12:15):
them as dollars. More likely you hold them as US
assets like treasuries. So dollars have many uses here obviously
and abroad. Why would the dollar fall, Well, there's less
demand for it. Maybe it's because US interest rates are
coming down. That's the typical explanation. And you're right, Mike,
US interest rates are still higher than and I'm going
(12:36):
to just use the long term rate here when I
say interest rates, I'm thinking of the say, ten year treasury.
The ten year treasury equivalent is much lower in other countries,
not the UK necessarily, but Germany, Japan, certainly, Italy maybe
about the same. But it's on average we've got higher
interest rates than other countries. It's not so much that
(12:56):
that matters. I don't think as the expected future difference
in interest rates, and up until well really at eight
twenty nine this morning, people were expecting US interest rates
to come down, maybe quickly. So it's natural to expect
if that differential between US and foreign interest rates were
And by the way, I'm doing something else here that
I should explain. I'm equating what the FED does when
(13:18):
I say the FED will ease policy with what happens
in longer term interest rates. Doesn't at certain no, in
fact is often as not, it does not happen FED
cuts rates. Long term interest rates go up because inflation
expectations go up, or growth the expectations go up. So
people were probably misattributing the dollars declined to worries about
(13:38):
erratic trade policy, worries about the US deficit ballooning even
more rapidly than previously expected. The explanation is a lot
more mundane than that. It's that interest rates here were
expected to come down by more than they were expected
to come down elsewhere. That explains everything, and it also
explains what's happening today. If you have a theory, it's
got to explain not just what's happening right now, but
(14:01):
what's happened even if it wasn't consistent with what's happening
right now at previous points in time. And I think
it's just a matter of interest rate differentials.
Speaker 2 (14:07):
MIC it can be difficult to parse out because the
theory of the dollar devaluing foreign buyers of US assets
moving away from them due to deficit concerns, growth concerns,
tariff concerns, to me, is a sound theory that could
eventually take sure. Yeah, right, you can paint a picture
(14:28):
right if the US keeps running up such high debt bills,
they won't be able to pay it back. We're not
going to lend them money at four percent interest rates
or whatever you're lending the US at those rates because
you're worried that they're going to have to devalue the
currency in order to print the money to pay the
interest on the debt and pay back those loans.
Speaker 4 (14:46):
Yeah, they won't call it a devaluation. That's like when
a government deliberately wants its currency to be cheaper. Another
reason a foreign government might own dollars. They use dollars
to manipulate the value of their own currency. We don't
do that, at least not anymore. Just a technical point,
since we're on the subject, and it's a it's kind
of a it's a complicated subject.
Speaker 2 (15:06):
So how how that whole house of cards could come
crashing down? I think is a relatively sound theory that
she would someday take place, but you have to kind
of resist temptation to believe it at all times.
Speaker 4 (15:19):
There's never one single explanations are usually they could be right,
but they get yeah, they're probably wrong. It's very easy
to they're convenient, though. You just have to be willing
to question what you thought explained events yesterday today, you know,
because day date is constantly coming in and markets are shifting,
(15:42):
and if you're not, if you're not questioning what you
thought yesterday. You're not You're not doing a very good.
Speaker 2 (15:48):
Job CEOs publicly stating what they were previously kind of
skirting around the edges on, but coming out and saying
it a little bit more when it comes to artificial intelligence.
These days, Wall Street Journal reporting this that CEOs are
being much more public about their expectations and goals for
(16:08):
artificial intelligence than they were previously, and those goals are
pretty clear. We want to cut the cost of our
labor by shrinking headcount across the board. Here's what we
have seen so far from a few different leaders. Chief
executive Jim Farley said an interview quote, Artificial intelligence is
going to replace literally half of all white collar workers
(16:29):
in the United States. We had other projections from Marion Lake,
the CEO of JP Morgan Chase's consumer and community business,
telling investors in May that she could see its operations
headcount falling by ten percent in the coming years as
the company uses new AI tools and Amazon CEO Andy
(16:49):
Jasse wrote in and O to employees back in June
that he expected the company's overall corporate workforce to be
smaller in the coming years because of the once in
a lifetime AI technology so I think the Wall Street
Journal is correct in one thing, that CEOs are presenting
this more frequently to primarily investors about the future state
(17:12):
of their companies. I don't really believe that they're right,
that the CEOs are correct. I think more than likely
they are saying these things in order to get attention
from investors and paint a pretty picture of their future
earnings of what all of this stuff looks like. Quite honestly,
(17:33):
I think if you were to pin me down, or
pin the CEO of any of these major companies down
on what their expectations for artificial intelligence really are, it
would be to make their employees that exist today more
efficient with one goal in mind. Mark It's to grow,
(17:53):
right I mean, I mean if you were a CEO
of a publicly traded company, your goal is to grow revenue,
grow profits, and make your company larger if you can
utilize artificial intelligence. If you're a net result here is
that you have eliminated half of your employees because of
artificial intelligence.
Speaker 3 (18:09):
I view that as a failure. That means they might
might not grown.
Speaker 4 (18:13):
It might wipe out forward jobs at Ford, but it
will create jobs elsewhere. You know what else wiped out
a lot of jobs electricity did. Yes, a lot of
candle makers lost, they did jobs. There are tons of
examples like that. This is this is textbook progress.
Speaker 3 (18:29):
Forgive me.
Speaker 4 (18:29):
I don't mean to be glib about it, but we
have to ensure that those who are displaced get retrained.
But that's no reason to hold back. And nobody here
is suggesting regulating AI to hold back these advances. Just
AI like any technology, and there are far probably more
potent examples in our history. I mentioned one steam power
as another for Pete's sake. They push out the frontier
(18:50):
of what's possible. There are always disruptions, but on average
will be far better off. So might E at forward
if they're not properly positioned. But you can't extra popolate
to the larger economy from that.
Speaker 2 (19:01):
Right, I tend to agree. And again, if the only
result of all this is that we have fewer people
working in general, well it's not gonna happen.
Speaker 3 (19:11):
And be it's a.
Speaker 2 (19:13):
Very ugly picture not of just the US labor market,
but of the companies themselves if they are hallowed out
of their employees, because it means they've not found a
way to grow off of this technology. Quick break, full
market recap.
Speaker 3 (19:25):
Next with Wall Street.
Speaker 1 (19:25):
Watch, bringing the latest financial news straight to your radio.
Every day. It's the Financial Exchange on the Financial Exchange
(19:47):
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 6 (20:00):
Well markets continue to rise today is traders continue to
digest this morning's monthly job support that came in higher
than expected. Non non farm payrolls increased to seasonally adjusted
one hundred and forty seven thousand for the month, higher
than the estimate of one hundred and ten thousand and
just above the upwardly revised one hundred and forty four thousand.
The Dow Jones is currently up over three hundred and
(20:21):
thirty six points or point seventy five percent, the S
and P five hundreds up over fifty points aer point
eight two percent, and the Nasdaq is up over two
hundred and seven points or just over one percent. The
two year bond is up eight basis points and the
ten year is up four basis points. Right now, shares
of the Silicon Valley chip designers, Synopsis and Cadence Design Systems,
(20:44):
each rallied over, are rallying over five percent. The US
government lifted restrictions on exporting chip design software to China.
According to announcements from companies in the industry, drone maker
Crados Defense and Security Solutions is up two point seven
percent after RBC Capital Market It's reiterated and outperform investment opinion.
The firm raised its twelve month price target to create
(21:07):
on Kratos, believing the small cap defense tech sector will
continue to outperform. Krispy Kreme said this morning that its
current CFO is leaving for another job, with international president
Raphael du Vivier set to take the job over next week.
The donut maker reported declining sales in May and recently
(21:27):
ended its partnership with McDonald's amid profitability concerns. Currently, Krispy
Kreme is about four percent off. I am Ben Kitchen
and that is Wall Street Watch. Today's trivia question was
how many Mission Impossible movies has Tom Cruise made? Your
correct answer would be eight. He is currently on his
(21:49):
eighth Mission Impossible movie. Today's winner is Susan in Bedford,
New Hampshire. She'll be taking home a Financial Exchange Show
T shirt. We will resume trivia next week.
Speaker 2 (22:00):
Do you guys remember the height of the Crispy Kream craze.
I don't remember how old I was, but I remember
there's a local shop owner who would drive something like
two hours every morning to go to a Krispy Kreme
across state lines, buy a bunch of Krispy Cremes and
then resell them at a at a markup to the
(22:21):
local residence.
Speaker 3 (22:22):
And it was a line out the door every time. Yeah.
That lasted like a week and a half.
Speaker 4 (22:26):
We all had heart attacks than the phase fast spired.
Speaker 3 (22:29):
Yeah, yeah, there you go. Uh Mark.
Speaker 2 (22:33):
We have a piece from MarketWatch today on four to
one k's and I find it interesting because we have
been talking a lot about looming changes to for a
one K plans that are being tossed out there. One
that came up I think last year was the inclusion
of new annuity products in for a one K plans,
(22:54):
And another is the discussion, you know, partly led by
by black Rock, but others as well, of including private
equity and private credit in for a one K plans.
As with anything else, I can't describe if any of
these things as universally good or bad.
Speaker 3 (23:11):
I don't think it's appropriate to do so.
Speaker 2 (23:14):
But I do think that you can definitively say that
four o one ks are on the cusp of getting
more complicated than they have been previously.
Speaker 4 (23:26):
Yeah, they're trying to make them. The overall theme of
the past really twenty five years, or since the Pension
Protection Act of two thousand and six anyways, to the
overall effort has been toward making four one ks more
automatic and more pension.
Speaker 2 (23:41):
Like unlike example that would be the automatic enrollment, automatic increase.
Speaker 4 (23:46):
Those things existed pre two thousand and six, but they
hadn't yet received the blessing, the categorical blessing of the
Department of Labor, to the point where an employer and
knew they wouldn't get suited if they offered them, right,
believe it or not, It was controversial before that, Yeah,
or at least legally questionable to default and roll somebody
into a plan and default them, that is, to do
it without asking them, but giving them the chance to
(24:08):
object if they didn't, they got put into it. Default
them into an investment that put their money in stocks,
which is what a target date fund does, of course,
and a balance controversial. Sure, you could lose money, and
there were suits prior to six After the clarity that
Pension Protection Act provided the target, so called target date
(24:28):
fund industry blossomed more recently, though it's not exactly a
new phenomenon in the effort again to make for one case,
more pension like offer an annuity distribution option. Most big
plans have for a very long time. Few people take
advantage of it though, maybe because of the the mixed
feelings people tend to have about annuities. Maybe for other reasons.
Speaker 3 (24:52):
But it's a scary word for people.
Speaker 4 (24:54):
And now we're moving. Yeah, you would, you would know, right,
there's there are Like with any financial tool, there are
good uses and there are misuses. And then the the
phase seems to be yeah, or maybe abuses. You're protected
against that to a degree in a four to one
K plan because your employer is a fiduciary. The legal
(25:16):
standard is for decision making there's very very high. The
next phase appears to be offering private market investments into
four oh one K plans. Pension plans have used them
for nearly for over thirty years. That's private equity, private credit.
Speaker 2 (25:29):
It is an important caveat that I don't think people
recognize that their employer has a fiduciary obligation when it
comes to their employees and their four one under federal law.
There are serious ramifications if they do intentionally adverse things.
Speaker 4 (25:45):
Not just that they have to be engaged, Mike like,
as a fiduciary, you have to exercise the same degree
of care that a reasonably prudent expert would. You can't
just sort of put it in place and hope for
the best because they're self directed. You have to ensure
that outcomes conform within a broad range to what's deemed appropriate.
Speaker 2 (26:08):
That having been said, there is a growing push I
think for I don't know if I would call it deregulation,
but inclusion of a lot more complexity when it comes
to these retirement plans. We've already seen it through the
introduction of wroth accounts decades ago, but those have become
(26:29):
much more prominent. I think they are a great thing,
but it's complex. The target date fund inclusion I think
a great improvement on where the four oh one k
has gone over years, but complicated in room for error
if you start including annuities and then private equity allocations
within target date funds, added complexity that potentially could be
a great thing for investors that know how to use
(26:51):
it and know how to vet it and look through it,
but large potential pitfalls as well. I think when it
comes to all of this, I would say the traditional
versus Roth question is the one that I most frequently
see people making mistakes on quite frankly, and there is
no fiduciary obligation for the four to one K provider,
(27:12):
to my knowledge, to tell you should you be doing
one versus THEA.
Speaker 4 (27:15):
No, indeed, they probably can't unless they offer advice and
you pay for it and it's monitored.
Speaker 3 (27:22):
Correct.
Speaker 2 (27:23):
So there are a number of these choices that, yeah,
the employer has this fiduciary obligation to.
Speaker 3 (27:28):
You, there are a number of them where you're on
your own. You need to.
Speaker 2 (27:31):
Figure this stuff out if you have a four to
oh one K account and you don't feel as though
you have a really firm grasp on some of these
things that we've discussed, Right, what's the appropriate amount for
me to be putting in? How much should I be
contributing to traditional versus Roth? What's the difference? How am
I going to be taxed when they come out down
(27:51):
the road. What if they do start including some sort
of pension like annuity within my plan. Should I or
should I not participate in it? How it will it
affect my financial future? These are complicated questions. I recognize
they're complicated. That's why we exist here at Armstrong is
to help you answer those complicated questions and build it
into your retirement strategy. Give us a ring at eight
(28:13):
hundred three nine three for zero zero one. I know
you're all sitting in traffic just like I'm about to be.
Give us a ring at eight hundred. Well, don't whip
out your phone and do it, but you know call
us at eight hundred three nine three for zero zero one.
You can also, when you're done driving, go to Armstrong
Advisory dot com and just book a time for us
to call you back at your convenience. But once again
(28:33):
it's the Armstrong Advisory Group. The numbers eight hundred three
nine three four zero zero one.
Speaker 1 (28:39):
The proceeding was paid for by Armstrong Advisory Group, a
registered investment advisor. Nothing in the ad or in any
Armstrong guide a specific financial, legal or tax advice. Consult
your own financial tax into state planning advisors before making
any investment decisions. Armstrong may contact you to offer investment
advisory services.
Speaker 2 (28:54):
I went a little bit long there, and I don't
want to keep him waiting. Paul lo Monica is going
to be joining us next for Baron's talking to us
about trading platform Robinhood. That's next here on the Financial Exchange.
Speaker 1 (29:07):
Find daily interviews and full shows of the Financial Exchange
on our YouTube page. Subscribe to our page and get
caught up on anything and everything you might have missed.
This is the Financial Exchange Radio Network. Here the Financial
Exchange every day from eleven to noon non Serious XM's
business radio channel one thirty two. Keep it here for
(29:28):
the latest business and financial news and the trends on
Wall Street. The Financial Exchange is now life on Serious
XM's business radio channel one thirty two. This He's the
Financial Exchange Radio Network.
Speaker 2 (29:43):
Joining us now is Paul Lamonica from Barons to talk
to us about rob Paul important. First question, how long
does it usually take to drive from Manhattan to the Hamptons.
Speaker 3 (29:55):
You know, no idea. I think it usually take your helicopter.
Speaker 5 (30:00):
Yeah, I take the helicopter.
Speaker 7 (30:01):
And I grew up on Long Island near beaches that
you didn't need as much money to hang out in,
So never really went out to the Hamptons, you know,
taking the jitney.
Speaker 5 (30:14):
It's it's like a couple hours.
Speaker 3 (30:16):
Okay, fair enough.
Speaker 1 (30:17):
I was.
Speaker 2 (30:18):
We were looking at traffic patterns ahead of the holiday,
and I had no benchmark for what that would normally take.
Speaker 3 (30:24):
We're speaking today.
Speaker 2 (30:25):
About Robin Hood, Paul, and you have a really interesting
piece here on their dominance and their recent stock success
as well. But I have to be honest that if
I was sitting here back in twenty twenty, when I
was sitting here back in twenty twenty and twenty twenty
one and looking at the retail investor landscape back then,
when you had Roaring Kitty dominating the news, when you
(30:46):
had Dave Portnoy saying he was a better investor than
Warren Buffett, and you had all these meme stocks and spacks,
my guess at that time was you're gonna have a
whole bunch of investors get burnt, which they did, and
they're going to lose interest and we're not going to
continue to see this same retail investor interest and dominance
(31:08):
with the with the dumb money kind of leading things
when it comes to the markets in twenty twenty five.
We've seen some of that pullback, but I can't say
that we've seen it entirely reverse the trend that we
have been on recently. What's your take overall, Am I
misreading it?
Speaker 3 (31:25):
No?
Speaker 7 (31:26):
I mean, I think what's fascinating is that in twenty twenty,
twenty twenty one, you know, with everyone maybe sitting at
home and you know, being bored with what was going
on with the pandemic, there was this sense that, you know,
the retail investor was in some respects maybe trying to
(31:48):
ward one over on institutional investors, and they were buying
stocks with more questionable fundamentals like game Stop, like AMC,
and there was this sort of sense of let's really
show the quote unquote big money, smart money institutional investors
(32:09):
that we can't be bullied, we can't be pushed around.
I think what's happening in the past couple of years
is that retail investors have maybe grown up a little bit,
and I don't think they're chasing as much these speculative companies.
Speaker 5 (32:24):
They're you know, riding the wave that the institutions are,
which are the mag seven, the NVIDIAs of the world,
and Meta and Microsoft, all these AI.
Speaker 7 (32:35):
Leaders, and those are stocks that have done quite well.
And you know, I think Robinhood has benefited from the
broader market rebound of you know, even this year.
Speaker 5 (32:46):
Of course, you know, we had such a big.
Speaker 7 (32:48):
Sell off in April around Liberation Day and it was
kind of a blink and you missed it sort of moment.
Because now we're back at all time highs on almost
all the major indexes. And I think retail investors haven't
been sitting on the sidelines.
Speaker 5 (33:01):
They've been leading the charge.
Speaker 2 (33:04):
To a point you made earlier, I don't think there
was a sense that retail investors were trying to pull
one over on big hedge funds and the smart money.
It was a pretty explicit stated goal of some of
the retail investors that were there.
Speaker 5 (33:17):
Such tis yeah, definitely.
Speaker 3 (33:20):
When we take a look at robin Hood.
Speaker 2 (33:21):
I saw the story published just the other day about
now I don't I frankly don't even know what this means,
which is why I'm asking you tokenizing investments in US
stocks and indices for foreign owners or for foreign investors
investing in US markets. I don't even understand fully what
(33:42):
that means. To do something like that but is the
overall move here just hey, what are new ways that
we can appeal to investors that have an interest in
the crypto industry.
Speaker 5 (33:53):
Yeah, that basically is it.
Speaker 7 (33:54):
It is a bit opaque, and there's been some controversy too,
because the organization aspect your Robinhood is claiming that they
will be able to sell these tokens in private companies
like SpaceX and open ai that could be like an
equity investment, and open Ai is shot back and said,
(34:18):
we have no involvement in this, we do not endorse it,
we do not approve it. And then you have robin
Hood CEO Vlad Tenev going on you know x Twitter.
You're kind of walking things back a little bit saying, yes,
these are not real equity investments.
Speaker 5 (34:34):
We get that.
Speaker 7 (34:36):
All that being said, I think robin Hood clearly is
a company that recognizes that, you know, there's retail demand
for not just traditional stocks, but also bitcoin and other
cryptos and as well as some of these more esoteric
you know, tokens that are out there as well, and
(34:58):
you know, robin Hood are trying to you'll gain exposure
in that market. And the stock, you know, did take
a nice pop earlier this week on that announcement.
Speaker 5 (35:07):
It's down a little bit today.
Speaker 7 (35:09):
I think there was some speculation they would get into
the SMP five hundred, you know, but you know they didn't.
You know, Data Dog was chosen to be the replacement company,
if you will, for Juniper Networks, which just got bought
by Hewlett Packard Enterprise.
Speaker 5 (35:24):
So robin Hood stock is coming down a.
Speaker 7 (35:27):
Little bit today, and have a piece up on Barons
right now about why that might be short sighted because
Robinhood maybe didn't get in today, but they're probably going
to get in eventually. They're too big to ignore. Companies
like Tesla and Coinbase. They also had to wait a
little bit longer than retail investors expected, but they eventually
got in.
Speaker 2 (35:46):
Speaking of Tesla, I see some points of comparison here, right,
I mean, this is a obviously growing company that's trading
at quite a premium. Ultimately though they are just a
brokerage platform. There are other publicly traded, much larger broke
brokerage platforms out there, like Charles Schwab and others. What
is the premium that people are paying for this stock
(36:06):
and what's the reasoning behind it?
Speaker 7 (36:07):
In your mind, Yeah, it's it is a difficult sort
of argument to make that a company like Robinhood deserves
that much of a premium to say Schwab or Morgan
Stanley which owns E Trade. I think that the argument
is that because demographics, you're going to continue to see
(36:29):
this market share shift to companies like Robinhood, maybe to
a lesser extent a company like e Toro, and you
know companies like Coinbase and.
Speaker 5 (36:40):
Galaxy for crypto.
Speaker 7 (36:42):
That you know, we are in a mobile first world
and that's where investors you want to be accessing their money.
So if you believe that there are these demographic shifts
that will continue to take place, then inevitably you're going
to see growth further slow for companies like Schwab and
(37:02):
Morgan Stanley. You know, of course, Morgan Stanley is a
lot more diversified and has huge investment banking business and
asset management business as well.
Speaker 5 (37:11):
But you know, a company like Schwab.
Speaker 7 (37:13):
I think, you know there are going to be continued
questions about where it fits in the retail landscape going forward.
But you know, again they did buy td rort rates,
so that helps them a lot, I think as well.
Speaker 2 (37:24):
Paul la Monica from Baron's joining us today to talk
about robin Hood and the continued trends since twenty twenty
in markets with retail investors. Paul, thanks so much for
joining us. Appreciate and have a great fourth Thanks.
Speaker 5 (37:38):
A lot, send you guys have a good moment weekend.
Speaker 3 (37:40):
Triple A reporting to us the best and worst times
to travel around the holiday if you're if you're making
your moves today around New England, the absolute worst time
to be on the road is between two and six pm,
so beware. Tomorrow You're worst time in twelve to seven pm,
and Saturday anytime between eleven and five try and avoid
the road ways. That's all the time we have for
(38:02):
this week on the Financial Exchange. Markets are open and
strongly in positive territory. As we close out the week,
we'll be right back at it on Monday. Folks, have
a great July fourth
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