WEBVTT - Money Monday with Brian James 0:00:00.030 --> 0:00:01.050 The Talk Station. 0:00:01.050 --> 0:00:06.900 8.05 on a Monday. Of course, it's that time of week. 0:00:06.960 --> 0:00:10.060 Regular listeners know. Money Monday with Brian James from Allworth Financial. 0:00:10.420 --> 0:00:12.080 He's a financial planner, and he's trying to keep us 0:00:12.140 --> 0:00:14.780 on the right direction. He's got all kinds of information 0:00:14.800 --> 0:00:16.070 about what we need to do, what we need to 0:00:16.090 --> 0:00:18.570 think about when we're thinking about our future, our retirement. 0:00:19.230 --> 0:00:21.210 I'll echo what Brian James will tell you all day long. 0:00:21.250 --> 0:00:23.029 It's a good thing to get a financial planner on 0:00:23.070 --> 0:00:26.300 your side to help you, well, make... Proper decisions like, 0:00:26.480 --> 0:00:29.940 wait a second, should I invest in artificial intelligence companies? 0:00:29.960 --> 0:00:32.220 Welcome back, Brian James. Appreciate you being on the program 0:00:32.240 --> 0:00:34.699 every Monday. Good morning, Brian Thomas. 0:00:34.729 --> 0:00:36.669 I appreciate the opportunity to talk to you and your 0:00:36.710 --> 0:00:37.489 listeners every Monday. 0:00:37.690 --> 0:00:40.490 Well, I keep reading about this inevitable bubble that's going 0:00:40.510 --> 0:00:42.330 to burst. And if you look at all the billions 0:00:42.370 --> 0:00:44.670 and billions of dollars that these tech giants are throwing 0:00:44.710 --> 0:00:50.279 into artificial intelligence, and yet widely reported that, wait a second, 0:00:50.320 --> 0:00:54.170 where are the earnings? Alphabet got a record day drop 0:00:54.210 --> 0:00:57.910 of $ 500 billion in market value. Is that directly related 0:00:57.930 --> 0:01:00.190 to AI? I kind of wonder, maybe you can explain 0:01:00.210 --> 0:01:02.840 to me and my listening audience how AI generates a 0:01:02.880 --> 0:01:06.120 profit other than just hoovering up individual information and selling 0:01:06.160 --> 0:01:07.660 it off to people who might want to know who 0:01:07.700 --> 0:01:08.100 we are. 0:01:09.620 --> 0:01:12.060 Yeah, that's a good question to ask these days, isn't it? 0:01:12.110 --> 0:01:14.410 So yeah, we do appear to be in what we 0:01:14.430 --> 0:01:17.630 would commonly refer to as a bubble. The investing public 0:01:17.709 --> 0:01:20.319 is in general excited about a thing. And we're all 0:01:20.360 --> 0:01:22.640 kind of used to this now. Most people who are 0:01:22.700 --> 0:01:27.560 paying attention and have significant wealth Probably were invested 30 0:01:27.560 --> 0:01:30.000 years ago when we first started talking about the Internet 0:01:30.060 --> 0:01:32.280 Wave 1, which was just a bunch of cool websites, 0:01:32.319 --> 0:01:33.840 and we learned how to buy stuff online. 0:01:34.569 --> 0:01:37.530 Obviously, we're a few generations past that now. So AI 0:01:37.630 --> 0:01:40.270 is obviously a very powerful tool. Not going away. This 0:01:40.290 --> 0:01:41.350 is not a fad, right? No. 0:01:41.690 --> 0:01:43.850 There's a lot of opportunity to make things more efficient. 0:01:44.190 --> 0:01:46.480 create things that didn't exist before. So it is a 0:01:46.530 --> 0:01:49.620 thing and it can transform the economy. That also means 0:01:49.760 --> 0:01:53.460 it becomes something that can disappoint investors who pay too much. So, 0:01:53.540 --> 0:01:56.340 you know, today's evidence supports owning these profitable businesses. If 0:01:56.360 --> 0:01:58.850 you're going to do it through a diversified portfolio and 0:01:58.890 --> 0:02:02.310 being selective about adding more of them. The questions are, 0:02:02.350 --> 0:02:05.290 does AI become more useful than it currently is? Do 0:02:05.370 --> 0:02:07.470 companies make money off of it? And will somebody buying 0:02:07.490 --> 0:02:09.410 these stocks today, you know, are they going to earn 0:02:09.430 --> 0:02:12.390 an attractive return from the levels we're currently sitting at? 0:02:13.070 --> 0:02:15.190 You know, I think right now we can answer yes 0:02:15.220 --> 0:02:17.380 to the first two and then still get that third 0:02:17.460 --> 0:02:18.400 one wrong, unfortunately. 0:02:18.720 --> 0:02:22.060 Yeah, and obviously it's going to be transformative in ways 0:02:22.080 --> 0:02:24.019 that you and I probably can't even think of yet. 0:02:24.080 --> 0:02:25.420 But I guess. 0:02:26.010 --> 0:02:30.570 The clamoring for government regulation springs from all these gloom 0:02:30.610 --> 0:02:33.150 and doom and dire predictions. Some, I suppose, are accurate 0:02:33.190 --> 0:02:35.490 or legitimate to at least think about. But how can 0:02:35.530 --> 0:02:38.049 you predict, and no one can in any industry, where 0:02:38.090 --> 0:02:39.990 this is going to go in terms of governmental intervention? 0:02:40.010 --> 0:02:41.970 Because if you're invested in AI and the government comes 0:02:42.010 --> 0:02:44.660 in and then says, no, this is too dangerous for 0:02:44.720 --> 0:02:48.040 us to play with, and then it disappears or it 0:02:48.080 --> 0:02:50.420 doesn't exist in its least current form investment-wise. 0:02:51.910 --> 0:02:54.350 Yeah, that's absolutely true. And that remains to be seen, right? 0:02:54.410 --> 0:02:58.130 Because we have the powers that be are generally in 0:02:58.169 --> 0:03:01.810 the pockets of our leaders who decide the rules and 0:03:01.850 --> 0:03:05.100 regulations around how this operates. And we don't, as a country, 0:03:05.139 --> 0:03:08.300 we don't tend to put too many reins on business. 0:03:09.000 --> 0:03:11.419 I say this gets perceived as a bad thing sometimes, 0:03:11.440 --> 0:03:13.400 but I always say we are the United States of 0:03:13.440 --> 0:03:16.410 profit margin, meaning we're We make our decisions based off 0:03:16.470 --> 0:03:19.070 what will make our decisions most successful. And we tend 0:03:19.110 --> 0:03:21.970 to sacrifice things, good, bad or indifferent. Right. There are 0:03:21.990 --> 0:03:25.310 good reasons and bad reasons to do that. Sacrifice things 0:03:25.350 --> 0:03:28.000 that that stand in the way of that. So, yeah, 0:03:28.080 --> 0:03:31.240 regulation is definitely a problem. You know, so you're kind 0:03:31.280 --> 0:03:35.060 of making an assumption about technology and profits and what 0:03:35.100 --> 0:03:38.210 the government's going to allow that company to do. Currently, 0:03:38.490 --> 0:03:42.130 Washington seems to favor expansion with some safeguards in place. 0:03:42.150 --> 0:03:45.000 So back in March of 2026, there was a legislative 0:03:45.030 --> 0:03:49.920 framework that kind of accelerated the permitting process and just 0:03:49.940 --> 0:03:53.840 kind of a consistent national approach in protection against stuff 0:03:53.880 --> 0:03:56.110 like child exploitation, fraud, all that kind of stuff. 0:03:56.150 --> 0:03:56.310 Mm-hmm. 0:03:56.550 --> 0:03:59.910 That's a proposal that happened last spring, not an inactive 0:04:00.110 --> 0:04:02.850 AI law. And then there was a June executive order 0:04:03.170 --> 0:04:06.370 that put a voluntary process for government evaluation of some 0:04:06.390 --> 0:04:07.810 of these things in place as well. 0:04:08.570 --> 0:04:10.970 States themselves are moving aggressively. 0:04:10.990 --> 0:04:15.060 There's been over 1,500 AI-related bills in 2026, but only 0:04:15.060 --> 0:04:17.820 280 of those have crossed the finish line as of 0:04:17.860 --> 0:04:21.500 early October. So early stages of what the government is 0:04:21.520 --> 0:04:23.040 going to do in response to the AI boom. 0:04:23.450 --> 0:04:26.210 Well, and my suspicions is if the federal government does 0:04:26.250 --> 0:04:27.810 decide to act in some way, it's going to be 0:04:27.870 --> 0:04:32.220 sort of an interstate commerce-driven directive that federal law supersedes 0:04:32.700 --> 0:04:35.500 and trumps local state laws, which is typically the case 0:04:35.560 --> 0:04:38.140 in a heavily regulated area. I'm guessing it's going to 0:04:38.160 --> 0:04:39.339 end up being heavily regulated. 0:04:40.570 --> 0:04:41.750 I can't imagine it won't be. 0:04:42.050 --> 0:04:44.900 How many scary headlines are there about how it escaped 0:04:44.940 --> 0:04:45.400 its box? 0:04:45.440 --> 0:04:47.140 These things sound like 80s movies. 0:04:48.339 --> 0:04:49.800 It got out of its box and it's here to 0:04:49.839 --> 0:04:52.500 haunt us and all that kind of stuff. So yeah, 0:04:52.800 --> 0:04:54.940 that wouldn't be shocking at all. And I have a feeling, 0:04:55.160 --> 0:04:58.120 my gut says we're probably going to over-regulate and then 0:04:58.180 --> 0:05:01.090 back off. That is what we normally do, overreact to 0:05:01.110 --> 0:05:04.430 things and then settle into what the actual reality is 0:05:04.450 --> 0:05:04.790 going to be. 0:05:04.810 --> 0:05:05.430 It just takes time. 0:05:05.529 --> 0:05:07.630 And I agree with your assessment on that. The question is, 0:05:08.010 --> 0:05:10.760 this has always been placed in terms of, well, If 0:05:10.900 --> 0:05:14.980 we don't dominate it, control it, get ahead of it, America, 0:05:15.120 --> 0:05:17.380 and be more successful than our rivals, and I think 0:05:17.400 --> 0:05:20.480 the only rival on the level that we've got is China, 0:05:20.940 --> 0:05:24.200 they're of course working on AI, that allows China to 0:05:24.240 --> 0:05:27.420 move forward with it. So in a heavily regulated, let's 0:05:27.440 --> 0:05:31.060 say confiscatorily so, regulated environment here in the United States, 0:05:31.700 --> 0:05:34.940 China then could advance as it sees fit, might be frightening, 0:05:35.000 --> 0:05:38.330 but Does that create an investment opportunity for Americans to 0:05:38.370 --> 0:05:40.789 invest in Chinese companies who maybe will go on and 0:05:40.830 --> 0:05:41.729 dominate the industry? 0:05:43.210 --> 0:05:44.290 For sure. 0:05:44.550 --> 0:05:47.910 Setting aside the geopolitical concerns of investing, that's a whole 0:05:47.950 --> 0:05:50.390 different thing. You could make up a fake name of 0:05:50.450 --> 0:05:53.600 a country and make the same argument. Somebody is going 0:05:53.620 --> 0:05:56.719 to take the lead and be the most productive. Over 0:05:56.760 --> 0:05:59.300 the last century, it's usually been the United States because 0:05:59.360 --> 0:06:01.880 we are, like I said, that's the positive thing about 0:06:01.920 --> 0:06:03.720 being the United States of profit margin. We are the 0:06:03.760 --> 0:06:07.260 best place in the universe to have an idea, set 0:06:07.300 --> 0:06:09.480 up a business, and squeeze a bunch of profit. 0:06:09.160 --> 0:06:09.450 Out of it. 0:06:09.760 --> 0:06:12.620 Historically, we have led the charge. But right now, we're 0:06:12.640 --> 0:06:14.440 spending a lot more energy than we have in the 0:06:14.480 --> 0:06:18.320 past fighting politically, trying to push the pendulum from one 0:06:18.360 --> 0:06:21.730 extreme to the other every single election. And we sometimes, 0:06:21.760 --> 0:06:24.530 I think, lose sight of those original things that the 0:06:24.570 --> 0:06:26.430 country was founded on that make it such a great 0:06:26.450 --> 0:06:28.830 place to make a profit. So China, on the other hand, 0:06:28.890 --> 0:06:31.910 doesn't really care about its constituents and the people that 0:06:31.950 --> 0:06:34.870 are there. They get abused, and that's where they find 0:06:34.910 --> 0:06:36.910 their profit margin, in the people themselves. 0:06:37.430 --> 0:06:40.979 It's something you follow in terms of whether artificial intelligence 0:06:41.000 --> 0:06:44.540 is a decent investment or not, regardless of the geopolitical ramifications. 0:06:45.300 --> 0:06:47.159 They seem to be having a difficult time getting adequate 0:06:47.200 --> 0:06:49.240 supplies in the form of the computer chips that they 0:06:49.260 --> 0:06:52.360 need to develop these facilities, whether or not they get developed. 0:06:53.100 --> 0:06:55.760 Do you see that supply chain issues ironing themselves out, 0:06:55.779 --> 0:06:57.609 or is that going to be a constant driver of 0:06:57.790 --> 0:06:59.789 increased cost in building these facilities? 0:07:00.660 --> 0:07:02.460 Yeah, I mean, I think in the short run, we're 0:07:02.500 --> 0:07:04.900 sprinting so fast to get these things off the ground. 0:07:04.940 --> 0:07:07.260 I mean, did anybody really think of a data center 0:07:07.300 --> 0:07:09.720 four or five years ago? All of a sudden, we 0:07:09.740 --> 0:07:12.250 have to have them everywhere, and they're in everybody's backyard. 0:07:13.940 --> 0:07:14.600 Look at Amazon. 0:07:14.660 --> 0:07:21.080 Amazon had approximately $ 220 billion in 2026 cash expenditures. Trailing 0:07:21.100 --> 0:07:25.770 12-month cash flow shifted from positive $ 14. 8 billion to negative 0:07:25.770 --> 0:07:28.710 $ 42. 4 billion. That's a rough year. If you do that 0:07:28.770 --> 0:07:31.670 in a household, the ship probably isn't floating very well anymore. 0:07:31.930 --> 0:07:34.210 And that's mostly because of what they're spending on property 0:07:34.230 --> 0:07:37.620 and equipment. with regard to the AI goals. So all 0:07:37.640 --> 0:07:40.460 of that is cash after capital spending. That's not the 0:07:40.500 --> 0:07:43.360 same measure as an accounting profit. So Microsoft's got a 0:07:43.400 --> 0:07:46.100 similar story. Yeah, we're in a period now where it's 0:07:46.140 --> 0:07:48.900 basically push all your chips on the table. Somebody's going 0:07:48.920 --> 0:07:51.600 to come out a leader and somebody's not. And there's 0:07:51.620 --> 0:07:53.810 an awful lot of corporate boardrooms out there that are 0:07:53.870 --> 0:07:55.710 with little beads of sweat on their foreheads trying to 0:07:55.730 --> 0:07:57.410 figure out what is the exact right move for us 0:07:57.450 --> 0:07:57.980 to make right now. 0:07:58.310 --> 0:08:01.340 Well, and the market's Overall, if you just look at this, 0:08:01.360 --> 0:08:03.640 this year, numbers are doing really well. But I've read 0:08:03.680 --> 0:08:07.760 that the vast majority of the market improvement is AI driven. 0:08:08.560 --> 0:08:11.450 Without that component in there, without AI right now, what 0:08:11.470 --> 0:08:13.330 would the economy look like or what would the growth 0:08:13.410 --> 0:08:13.970 look like here? 0:08:14.970 --> 0:08:17.230 Oh, it would certainly be a lot less. So, you know, 0:08:17.330 --> 0:08:21.050 the recent headlines, of course, are scary. Friday, the S & 0:08:20.250 --> 0:08:23.530 P 500 fell 1.8 percent overall. 0:08:23.570 --> 0:08:25.870 You already mentioned that Google went over the cliff a 0:08:25.890 --> 0:08:27.300 little bit. I think they're going to be fine. 0:08:27.690 --> 0:08:30.770 But there's a lot of grumpy Googlers out there, Google employees, 0:08:31.050 --> 0:08:34.250 not thrilled with what the 401K just did. NASDAQ was 0:08:34.290 --> 0:08:37.460 down 3%. That was a scary day. However, the S & 0:08:37.050 --> 0:08:39.760 P is still up over 10% for the year. We're 0:08:39.800 --> 0:08:42.320 still on our third or fourth double-digit year in a row. 0:08:42.800 --> 0:08:47.780 NASDAQ up almost double digits. Painful days followed by inside 0:08:47.800 --> 0:08:51.100 of a year that is still pretty strongly positive. Yes, 0:08:51.160 --> 0:08:54.260 that is mostly AI-driven because the market does perceive that 0:08:54.320 --> 0:08:57.560 companies out there who are already profitable can become more 0:08:57.660 --> 0:09:00.800 so with the opportunities that AI brings. But there's still 0:09:00.820 --> 0:09:02.580 a little bit of froth in the market because we 0:09:02.780 --> 0:09:06.179 are not yet demanding that these companies show actual profits. 0:09:06.200 --> 0:09:08.120 We're in that phase of the bubble. We are. 0:09:08.460 --> 0:09:11.150 Well, and you've always talked about cool heads ultimately prevail 0:09:11.730 --> 0:09:13.850 for the best that don't get crazy and do crazy 0:09:13.910 --> 0:09:18.370 things in anticipation of perhaps an expectation of the bubble burst. Now, 0:09:18.410 --> 0:09:20.930 what would you advise your clients that are worried about 0:09:20.950 --> 0:09:23.689 the impending, inevitable, perhaps AI burst? 0:09:24.920 --> 0:09:27.359 Yeah, what I completely agree with is the word inevitable. 0:09:27.740 --> 0:09:31.470 What I don't agree with is impending because that implies 0:09:31.510 --> 0:09:32.510 that it's going to happen soon. 0:09:32.550 --> 0:09:33.250 We don't know. 0:09:33.790 --> 0:09:36.189 And you could have made similar arguments really over the 0:09:36.230 --> 0:09:38.410 last four years from just the market in general because 0:09:38.450 --> 0:09:40.390 we've just done nothing but go to the moon ever 0:09:40.440 --> 0:09:44.040 since the 2022 panic. So the thing to be looking 0:09:44.120 --> 0:09:48.220 at is the spending, right? Look at the expenses that 0:09:48.240 --> 0:09:50.690 these companies have, like we just talked about a little bit, 0:09:50.690 --> 0:09:53.900 and then look for the results, which won't be tomorrow. 0:09:53.900 --> 0:09:56.590 At some point, the market is going to render a 0:09:56.590 --> 0:10:00.100 full opinion on this. Right now, everything is positive. because 0:10:00.140 --> 0:10:02.220 there's nothing bad and nothing bad can ever happen again. 0:10:02.559 --> 0:10:05.570 But you can look through history and find all the 0:10:05.610 --> 0:10:08.290 places where we got excited about something and ran it 0:10:08.309 --> 0:10:10.530 a little bit too far. And then the bubble burst. 0:10:10.910 --> 0:10:13.350 That's when the panic happens. And I'll also throw out there, 0:10:13.390 --> 0:10:16.470 this is an election week. Obviously, there are folks out 0:10:16.490 --> 0:10:19.170 there with their finger on the rebalance button in their 0:10:19.190 --> 0:10:21.460 401k based on which team wins. And I want to 0:10:21.480 --> 0:10:23.360 tell you this, to put your mouse down and back 0:10:23.380 --> 0:10:25.840 slowly away, there is no headline coming this week with 0:10:25.900 --> 0:10:28.320 regard to the election or AI that should cause you 0:10:28.360 --> 0:10:30.980 to make a major pivot in your own financial plan 0:10:31.020 --> 0:10:32.819 as long as it was constructed correctly. 0:10:32.520 --> 0:10:34.580 To begin with. Unlike Brazil, huh? 0:10:36.750 --> 0:10:39.970 Well, yeah, other countries out there don't weather these types 0:10:40.030 --> 0:10:41.030 of things quite as. 0:10:41.010 --> 0:10:44.350 Well as we do. So that's why, yes, if I'm in. 0:10:44.290 --> 0:10:46.450 Brazil, I'm probably having a different conversation, but I would 0:10:46.470 --> 0:10:47.430 have been having a different. 0:10:47.250 --> 0:10:48.929 Career as well. 0:10:49.020 --> 0:10:50.480 See, that is absolutely true. 0:10:50.500 --> 0:10:50.959 Don't go away. 0:10:50.980 --> 0:10:52.880 Brian James will continue. We're going to talk about the Fed. 0:10:53.200 --> 0:10:55.220 They held tight on the interest rates. What are they 0:10:55.240 --> 0:10:57.260 going to do next, and what does that mean for 0:10:57.420 --> 0:10:59.520 us out here in the unwashed masses? 816 right now, 55KRC, 0:10:59.540 --> 0:11:00.060 the talk station. 0:11:00.080 --> 0:11:01.040 55KRC. Election Night Station. 0:11:06.230 --> 0:11:07.829 It is 820 on a Monday. We're doing that money, 0:11:07.870 --> 0:11:10.910 money thing with Brian James from Wallet Financial. Of course, 0:11:10.950 --> 0:11:15.160 the Federal Open Market Committee, which Ed Finke used to 0:11:15.179 --> 0:11:17.980 call the Federal Open Mouth Committee, met in late October 0:11:18.380 --> 0:11:20.280 and voted 10 to 2 to keep the benchmark rate 0:11:20.300 --> 0:11:23.699 steady at 3.75 to 4. What are they going to 0:11:23.740 --> 0:11:26.360 do next, Brian? Because apparently rumor has it we're looking 0:11:26.420 --> 0:11:27.530 for at least a. 0:11:27.340 --> 0:11:28.040 25 increase. 0:11:28.330 --> 0:11:30.210 And where are you on this one, Brian James? 0:11:33.460 --> 0:11:33.880 Well, yeah. 0:11:33.900 --> 0:11:36.060 So, yeah, as expected last week, like I said, the 0:11:36.140 --> 0:11:39.500 Federal Reserve left rates at 375 to 4 percent last week. 0:11:39.520 --> 0:11:41.990 But there were two members that dissented in favor of 0:11:42.020 --> 0:11:44.590 a hike. So there is some division among the committee 0:11:44.710 --> 0:11:47.490 about how much tightening we actually need to bring down inflation. 0:11:48.270 --> 0:11:51.670 You know, obviously, we have an election this week and 0:11:51.710 --> 0:11:55.410 we tend to prefer to keep things super quiet around elections, 0:11:55.809 --> 0:12:00.069 the politicians that be. And so there's an understandable suspicion there. 0:12:00.090 --> 0:12:01.960 So maybe the Fed is sitting on its hands until 0:12:01.980 --> 0:12:04.160 the voting is over. Then we get the rate hikes. 0:12:04.240 --> 0:12:06.600 But history says it's a little more complicated than that. 0:12:06.620 --> 0:12:10.500 So historically speaking, the Fed has raised them before elections, 0:12:10.580 --> 0:12:12.880 raised them right after, cut them on both sides of 0:12:12.920 --> 0:12:16.640 Election Day. And most recently in 2022, where we had 0:12:16.660 --> 0:12:18.620 a significant hike within. 0:12:18.420 --> 0:12:20.210 About a week of the actual election. 0:12:20.230 --> 0:12:22.710 Now, that was obviously a pretty crazy period with regard 0:12:22.750 --> 0:12:24.929 to inflation and all that. And there just was no choice. 0:12:25.290 --> 0:12:29.670 the inflationary pressures that we were suffering through as a 0:12:29.690 --> 0:12:33.340 result of the COVID pandemic forced the hand and made 0:12:33.360 --> 0:12:34.640 the election a little bit less impossible. 0:12:34.660 --> 0:12:36.540 Well, that was all the money that got thrown into 0:12:36.559 --> 0:12:39.600 the economy through the various paycheck protection loans and the 0:12:39.860 --> 0:12:42.400 Inflation Reduction Act money and all that. I mean, that's 0:12:42.440 --> 0:12:43.440 what caused the inflation. 0:12:44.240 --> 0:12:47.640 Oh, over liquidity, for sure. But that forced the– think 0:12:47.660 --> 0:12:48.140 of it this way. 0:12:49.190 --> 0:12:52.190 The powers that be, whoever is in office– generally don't 0:12:52.250 --> 0:12:54.949 want the headline that, hey, we have to hike by 0:12:55.130 --> 0:12:56.849 three quarters of a point. 0:12:57.210 --> 0:12:58.170 That was a big one, too. 0:12:58.230 --> 0:13:00.270 Normally, we like to tap the brakes and tap the gas, 0:13:00.290 --> 0:13:03.030 but that was a really big one right before the election. Now, 0:13:03.130 --> 0:13:05.229 that was such a chaotic year. I don't think it 0:13:05.270 --> 0:13:08.210 had the loud impact that the concern was because by 0:13:08.230 --> 0:13:10.430 this point, the market was down. Matter of fact, the 0:13:10.450 --> 0:13:14.450 market bottomed right before the election, right around Halloween of 0:13:14.450 --> 0:13:15.770 22 was the market bottom. 0:13:15.790 --> 0:13:17.170 And so people were grumpy anyway. 0:13:17.530 --> 0:13:20.020 And that headline kind of just faded into the woodwork 0:13:20.059 --> 0:13:22.540 of everything else we had to be grumpy about. But 0:13:22.780 --> 0:13:24.920 the incumbents never want to hear a rate hike right 0:13:24.940 --> 0:13:26.400 before people are about to go hit the ballot box. 0:13:26.730 --> 0:13:27.469 Without question. 0:13:27.530 --> 0:13:29.910 But where is inflation now that would justify an increase 0:13:30.150 --> 0:13:32.230 after the election, which is what's expected? 0:13:33.280 --> 0:13:37.960 Yeah, so corporate earnings are looking good, ultimately following the economy. 0:13:38.140 --> 0:13:41.040 And inflation is still a problem. It has kind of 0:13:41.059 --> 0:13:47.130 basically held steady. So the status quo is probably that 0:13:47.150 --> 0:13:49.630 we need to be prepared for more rate hikes because 0:13:49.670 --> 0:13:52.870 that is simply the only way to slow things down. 0:13:53.490 --> 0:13:56.189 Chair Warsh spent a bunch of his press conference recently 0:13:56.330 --> 0:14:00.079 discussing the overall financial conditions and saying that things have 0:14:00.140 --> 0:14:02.020 indeed tightened since the last meeting. 0:14:02.660 --> 0:14:05.440 And these weren't one sided comments either. Right. 0:14:05.500 --> 0:14:08.460 So he also reiterated inflation is too high. The Fed 0:14:08.540 --> 0:14:10.730 is focused on bringing it down to its two percent target, 0:14:10.750 --> 0:14:11.730 which that's that's. 0:14:11.570 --> 0:14:12.290 We hear that all the time. 0:14:12.330 --> 0:14:15.170 That is basically the primary role of the Fed. We 0:14:15.210 --> 0:14:17.489 want two percent and we want it yesterday. And how 0:14:17.550 --> 0:14:19.640 are we going to get there? So as for how 0:14:19.680 --> 0:14:23.260 the markets reacted to it, pretty much neutral. The odds 0:14:23.300 --> 0:14:26.620 of December hike are around 85 to 90 percent. before 0:14:26.740 --> 0:14:28.540 and after the meeting. So in other words, to answer 0:14:28.580 --> 0:14:31.110 your question, yeah, we're probably looking at more rate hikes 0:14:31.140 --> 0:14:33.870 sooner rather than later. And the likelihood of that did 0:14:33.930 --> 0:14:35.890 not change because of the Fed meeting. 0:14:36.170 --> 0:14:38.570 Well, what needs specifically to be slowed down? If you 0:14:38.610 --> 0:14:41.370 listen to the gloom and doom reporting that's out there 0:14:41.570 --> 0:14:43.970 all over the place, oh, my God, price of gas. Oh, 0:14:43.990 --> 0:14:45.330 my God, this is too expensive. 0:14:45.390 --> 0:14:45.710 Oh, my God. 0:14:46.100 --> 0:14:48.260 Well, I mean, I would think that people are already 0:14:48.320 --> 0:14:51.820 in belt tightening mode. So where's this driver coming from? 0:14:51.840 --> 0:14:52.780 What needs to be slowed down? 0:14:54.070 --> 0:14:58.540 Well, just the overall– that's the hard part, Brian, isn't it? 0:14:58.650 --> 0:15:02.290 I mean, because it is fairly widespread. It's not located 0:15:02.380 --> 0:15:06.280 in just one or two areas. When it comes out 0:15:06.320 --> 0:15:09.100 of the energy sector, that affects everything because it costs 0:15:09.260 --> 0:15:13.400 energy to move stuff across the country. Therefore, you can 0:15:13.440 --> 0:15:16.420 apply that to absolutely every industry out there as opposed 0:15:16.440 --> 0:15:19.320 to we can't have situations where, for example, housing runs 0:15:19.380 --> 0:15:20.730 amok and there's nothing we can do about that. 0:15:20.750 --> 0:15:21.230 We had that. 0:15:22.870 --> 0:15:26.250 In 2006, 2007, inflation was largely under control with the 0:15:26.290 --> 0:15:29.210 exception of housing prices. And then there have been other 0:15:29.250 --> 0:15:31.510 bubbles since then where it's localized. But this time when 0:15:31.530 --> 0:15:35.010 it's focused on energy, then it is fairly widespread and 0:15:35.050 --> 0:15:37.480 we need everything to cool down a bit. 0:15:37.520 --> 0:15:40.220 And that starts with the oil industry. All right. 0:15:40.240 --> 0:15:42.320 Well, real quick here for you, Park Company, on this 0:15:42.400 --> 0:15:45.740 topic and then move over to the post-election economy and 0:15:45.920 --> 0:15:49.020 general ideas about that. How would a rate hike impact 0:15:49.060 --> 0:15:51.790 in terms of mortgages, credit cards, and perhaps savings accounts? 0:15:51.830 --> 0:15:53.270 It's going to be notched up, aren't they? 0:15:54.510 --> 0:15:55.030 Yeah. 0:15:55.070 --> 0:15:57.830 So the silver lining to this, if there is one, 0:15:57.890 --> 0:15:59.720 I'll start with the last thing you said there, which 0:15:59.750 --> 0:16:02.580 is you finally can get a respectable amount of interest 0:16:02.680 --> 0:16:06.270 off of your your depository accounts, and treasury bonds. And 0:16:06.930 --> 0:16:09.050 I bonds, remember the ones that are based off inflation, 0:16:09.350 --> 0:16:11.490 they're not the 9% that we fell in love with 0:16:11.530 --> 0:16:15.210 four or five years ago, but they're sneaking up around 5.5%. 0:16:15.210 --> 0:16:19.270 So if that's something that floats your boat, then. 0:16:18.370 --> 0:16:19.470 There are good opportunities there. 0:16:19.510 --> 0:16:22.290 On the other side, if you are somebody who bought 0:16:22.310 --> 0:16:25.730 a house with an adjustable rate mortgage four years ago 0:16:25.830 --> 0:16:28.630 or so, then you better be watching that calendar because 0:16:28.650 --> 0:16:31.190 you're going to, and starting to budget for an increase 0:16:31.250 --> 0:16:32.230 in your mortgage payment. 0:16:33.050 --> 0:16:35.950 So that can be a tough challenge if you wound 0:16:36.010 --> 0:16:36.730 up staying put. 0:16:37.290 --> 0:16:40.650 But make sure you can see what's coming. I wouldn't 0:16:40.700 --> 0:16:42.560 worry so much if you have a credit card balance. 0:16:42.600 --> 0:16:44.920 I wouldn't worry so much about the interest rate. You're 0:16:45.000 --> 0:16:49.400 already paying a ridiculous amount of interest. If it goes 0:16:49.420 --> 0:16:51.340 to 32, the problem is still the same. Yeah, and 0:16:51.380 --> 0:16:53.900 at some point, somebody's going to declare it's usurious. Don't 0:16:53.920 --> 0:16:54.260 go away. 0:16:54.280 --> 0:16:57.060 We're going to get his tea leaf reading, key economic 0:16:57.080 --> 0:16:59.040 scenarios and forecasts post-election. 0:16:59.380 --> 0:17:03.670 Talk stations. It's 8.30 here at 55KRCD Talk Station. 0:17:05.170 --> 0:17:07.010 Monday, Monday is Brian James on the line, as he 0:17:07.090 --> 0:17:09.629 is every Monday, for a few segments here talking about things. 0:17:09.710 --> 0:17:13.150 And now, forecasting the future. Brian James, I joked around 0:17:13.190 --> 0:17:16.140 about Brazil earlier. Obviously, not a great market day after 0:17:16.180 --> 0:17:18.820 that election. And one might say, well, listen, the Libs 0:17:18.859 --> 0:17:23.180 won in Brazil, and therefore, if they win here, the 0:17:23.220 --> 0:17:25.580 market will crash. It's a little bit more complicated than that, 0:17:25.700 --> 0:17:27.500 isn't it, Brian James? What do you expect? 0:17:28.660 --> 0:17:29.860 Oh, just a little bit. 0:17:29.900 --> 0:17:34.700 Let's go for some big long-term historical perspective here. The 0:17:34.760 --> 0:17:38.220 market does not care who's sitting on the throne, whether 0:17:38.240 --> 0:17:42.410 that's the top throne in the president's office or Congress 0:17:42.490 --> 0:17:45.310 or so forth. The market really just cares about whether 0:17:45.350 --> 0:17:48.119 companies can make money or not. And you can go 0:17:48.200 --> 0:17:51.230 all the way back through history and compare Democratic versus 0:17:51.270 --> 0:17:54.750 Republican regimes, and all of them are generally positive throughout 0:17:54.790 --> 0:17:58.170 the terms of presidential elections and congressional because the market 0:17:58.210 --> 0:18:00.450 goes up, not down. I do have people who occasionally say, 0:18:00.850 --> 0:18:03.290 I lost so much money when Obama was elected, and 0:18:03.310 --> 0:18:05.570 I have to look at what they're invested in because 0:18:05.609 --> 0:18:08.429 the market went up for that entire eight-year period as 0:18:08.510 --> 0:18:11.870 it did for the most part of the prior eight 0:18:11.910 --> 0:18:19.540