Yahoo Finance

Welcome to the opening bid podcast. I'm Yahoo Finance executive editor Brian Sai. Like I always say, this is the podcast that will make you a better investor and a smarter leader. Before we get to our featured interview for today, have to do our stock of the day. Let's throw up that one minute timer clock. My stock of the day is in fact Tesla every day.This company is in the news. Shares are down 45% year to date. Investors awake today to see photos floating around X slash Twitter, whatever you want to call it, of President Trump getting inside of various, I think it was a red Model 3, I guess he was playing the Republican red vibe there in front of the White House with Elon Musk yesterday.There's a lot of concerns on Tesla's business. That's why ultimately the stock continues to go down. Sales overseas under pressure, sales in the US under pressure. Morgan Stanley, longtime Tesla Bull, Adam Jonas out with a new note saying that there could be some catalysts coming up for Tesla's stock, notably a potential Robotaxi day in a few weeks, a potential day where the company also talks about its Optimus robot.That's all fine and good, but I'm here to say what will get Tesla stock rocking again, or at least not going down in the tank anymore, is sales. It is that next earnings report when Tesla reports in late April, this company needs to get on that earnings call. Elon Musk, must say that sales are not going down anymore. There is stabilization. Things are getting better, especially at discounts are starting to hit on these.products until he does that, it is very likely Tesla shares will continue to be under pressure, and I'm out of time. That's why we have the one minute countdown clock. But let's keep talking about stocks and markets more broadly. Penny Pennington is here. Edward Jones, CEO. Penny, good to see you and finally meet you in person.

Thank you, Brian. Great to be here with you and your audience.

Yeah, so I'm not going to ask you about Tesla, but I'm going to ask you about markets because investors are seeing.I think a lot of turbulence that they were not used to last year. Everyone thought, well, stocks only go up into the right. You and I both know that's not the case. What are they seeing today, Marcus?

Well, you were right where you started. Uh, we've had a couple of pretty sanguine years and years where we didn't see the usual two or three pullbacks of 5 to 15%. That's a very typical thing to happen. And so in a moment where we've got uncertainty from.Uh, from policy and, and, uh, and tariffs and things like that, uh, the, the markets are reacting. It was to be expected.And so investors are reacting. Families who have great financial plans put together are saying, OK, you know, do I need to flex my plan? How do, how do I need to think about this? And that's what our financial advisers are there to do is to is to help them scenario plan around this uncertainty.

What are they telling those folks, those families that are now opening up their 401ks and wait a second, this isn't what I expected. I, I, I had a great past few years in markets and now wow, I'm, I'm guess I'm worth less on paper.

Well, one of the things that we would be saying is.We told you this was probably gonna happen at some point, right? That, that, that's exactly right. That's exactly right. So, uh, so what we say to investors is let's put in place a plan and a plan, a good plan is better than a bad prediction. Let's put in place a plan diversification of our investments, balancing multiple goals, ensuring that we are.Controlling what we can control, um, the way that we save the way that we invest what we borrow and when we borrow, and then flexing that when we need to right now as it relates to investment management, we're being rewarded for diversification in this moment where uh where a while back, why would I own a bond? No,

you just want to own the top what the mag 7 call it a day, get your money and get your Lamborghini.

Why would I invest in European stocks?Diversification really, really works. It works, uh uh uh in the, in the long term and it works in times of uncertainty. So when, uh, when the market is broadening out, becoming more defensive right now, rotating very quickly from those mag 7, the, the, the promise of diversification really plays out right

now. How does it feel like to you we've seen, uh, various major indices correct we've seen.I mentioned Tesla top of show these stocks have really had some major pullbacks. Max 7 has lagged. Does it feel like this is a a rolling correction and it can get worse or things feel or look wiped or washed out to you?

Let's go back to where we were before this level of uncertainty began.Interest rates were actually at historic levels. It, it, uh, you know, a, a for handle on the tenure treasury is, is historically, uh, average. Uh, inflation was coming down. We weren't quite at 2%. We'll find out today about, uh, the CPI report.Uh, employment is very strong. Consumer spending is robust and corporate leaders were ready to invest. Now the reason that I say all that is that that's a pretty sanguine view. That's a view of a fairly strong economy.Uh, what we see today is that the economy is probably downshifting just a little bit from that level of strength. This uncertainty is, uh, it is for stalling consumers making decisions about new home purchases or renovations or new cars. Corporate leaders are in perhaps a bit of a pause mode right now.I think everything has to do with how long that lasts uh if that lasts and becomes a foregone conclusion, while we do not predict a recession, uh, we do expect growth to be to be pulling back but the the the key is we started from a position of strength,

isn't it?Is it? I, I'm here a lot of folks start to talk about recession. I talked to one, economist last week and they said we are in a recession. Does that, do you see signs that we are notat all? Well,

that's the thing you never know you're in a recession until afterwards, right? Um, we don't see that we're in a recession right now we don't believe that we're going into a recession. uh, the, the, the labor market is strong consumers are still spending.Um, frankly, our, our, our investors, our clients are spending at higher rates than they were the past several years, um, so we see them using the wealth that's been created over the past couple of years, uh, but, but beginning that pause of, well, I, I think I'll just wait for a few months until things calm down.And if that if that begins to to cycle for a longer period of time that's then what um what what sends us into a much lower growth mode.

What have you seen clients rotate into during this turbulence?

Yeah, well, hopefully they were taking our.Advice all through them. I'm sure they

I'm

sure. So, so how, so Brian, you know how that conversation sounds. Um, we'll be talking with the family and they'll say, why am I not making what the S&P 500 is making? Why haven't I done 20% the last two years?And we remind them that when you do that you're taking a fair amount of risk and perhaps perhaps the risk tolerance that they shared with us and the goals that we put in place together did not require that they take that much risk and so in this moment our clients are saying wow I'm not down I don't feel quite as bad as the headlines are trying to make me feel.I'm not down quite as much because our clients were diversified. They were diversified with fixed income, with equities, with international equities, and hopefully a broader array of equities beyond the mag 7 here in the US,

fist pump Edward Jones, that's some, that's a good, uh, that's some good work there. Are you surprised you've been doing this for, for a bit, um, that everybody just owned the Mag 7.And they still do, uh, they, while these investors in the Mag 7, they love these names and they've seen them lose a large amount of value this year they're still holding on to them. And what do you tell people like this?

Well, that's part of diversification. You want to look for, for, uh, for, uh, investments that are momentum investments that are growing with the trend those technology companies.Are leading the trend associated with technology and the promise of artificial intelligence. Those those are great names to own, but Brian, before the broadcast, you and I were talking about being in this business just before the technology bubble burst in 2000 people owned owned the promise of the Internet and the Internet of things at that time.And they were rewarded for that promise. The, the issue is to over-own those things is taking far too much risk for for most families and most investors. Has

abubble burst in the Mag 7? I mean to see Tesla down 45%, Microsoft down double digits, or is this just the stocks letting off some steam?

I, I, you're probably better at, at, at, uh, at making that assessment than I am.These are, these are great companies who have built a franchise and have new ideas, innovative ideas, talented people um they are, they are chasing and leading the promise of technology and intersecting with our lives with our with business uh in different ways than we've seen before um I wouldn't bet against them I just.Wouldn't own 80% of my portfolio.

It's a goodpoint. It's hard to bet against Nvidia. I mean, you read their annual report, I guess you can understand what they do. I mean, but this company is like leading in chips. What do you tell? We'll talk more about this after the break, but what do you, I imagine your position you talk to other leaders, other, um, high ranking executives. What's their biggest concerns with how policy is shaking out so far in the first few days of the Trump administration?

What we have to remind ourselves first is to step back and take a breath, lower the temperature.We knew that this administration was going to pursue policies and approaches that were different that they probably were gonna pursue those rapidly and that there would be a period of uh uh of change and maybe maybe a little uncertainty.Um, it, the trick is when we get into that we forget that we knew that that was going to happen and so that's why we've got to slow down, step back, take a breath, uh, we are all waiting for a little more certainty and hoping for, uh, a, a little more certainty around things like tariffs. Um, we, we got some good news last night that, uh, that it looks like we're, we're coming to reconciliation across the, uh.Across the houses of Congress associated with averting a government shutdown, good thing that, that, that's

I guess that,

that, that's exactly right. That, that would be one more level of uncertainty that, that, you know, we don't need right now. All

right, hangwith us, uh, Penny. We're going to be right back on opening bid.Alright, welcome back to Opening bid. Having a fun chat here with Penny Pennington, Edward Jones, CEO. You know there was a big expectation coming into this year that regulation is gonna be rolled back. Companies were do great, and I think to your position you're on, uh, about the board of FINRA, um, have you heard anything about regulations, let's say in.Financial services being rolled back and and if not when could these things happen because I think financial stocks have run in anticipation of that happening but I haven't really seen any of that so far. Yeah,

well, the, the promise of of deregulation was also one that this administration put forward, uh, during the campaign season.That deregulation across a number of different industries is something that uh that corporate leaders and investors felt that there was promise for um one of the we we talked a lot about sequence of returns, right?Um, the sequence associated with how the administration would pursue their policies was an important conversation. Would, would tariffs and cost cutting government efficiency come first and then later the promise of deregulation and tax cuts, um.Or would that be flipped and we would see the promise of deregulation impact the markets positively and a pull back that might be created by tariffs happening later in the year it's pretty clear what the sequence is, um, the uncertainty associated with tariffs and and cost cutting.Uh, is impacting the markets more right now. So all of that is to say that deregulation is a market friendly, a market desirable, uh, stance for the administration to take, and that's going to occur across a number of industries. You, you really focused it on financial services, um, the, the, the, the financial services industry has, um has helped Americans where.North American company has helped North Americans build establish, build, grow, and pass on wealth for generations. The root of that is growth and innovation funding new ideas. Our financial services industry and the regulators who regulate that industry try to keep that in balance with protecting consumers and making sure that things are, uh, don't get, don't get out of control.Um, there are some who felt that that balance was wrong for, uh, for, for the past several years. So as it relates to financial services deregulation, uh, take a look at banking regulation, uh, conversations around how our banks and financial system are regulated in a, in a way that protects consumers and and makes that a sound and safe system.Uh, as it relates to the, the brokerage and investment advisory business, uh, our regulators are, uh, are in, in conversations about things, especially like cryptocurrency, who should hold that and in what forms conversations about the innovation around AI and how it can be, uh, how it can.Be used for growth and innovation but also used in sound and responsible ways that uh that are good for the American investor. Is it

on what you mentioned crypto and that's the one area where we've seen deregulation to some extent. Is it a sound responsible thing that we have a Bitcoin reserve? Is it a sound responsible thing that you know Edward Jones' clients could diversify into an asset that's just out there somewhere in the sky, you know, you can't see, feel, or touch it.

Well, Edward Jones investors can't invest directly in crypto, not yet, not, not yet. Now, um, we, we said, we said a number of months ago, um, we, we, we wanted to watch this. We, we wanted to see what was happening in terms of the development of this market.I don't see crypto as an asset class. There is not a fundamental value that stands behind crypto. However, it is becoming an innovation in our marketplace associated with with blockchain innovations and that kind of thing.Um, that is, that is a very real thing and, and will have a positive impact on our industry and on investors. It's a matter of, uh, uh, of determining the right way to go into those sorts of investments and I, I'll get back to the way that we talk about our talk to our clients helping our clients understand what it is now many of our clients say, you know, I, I wanna be a part of what's going on. I wanna understand this better.That doesn't mean that you need to invest in it, um, but understanding it better really is a very smart thing. It's gonna be with us it's gonna be part of our, our financial system, I believe, and it will be the root of innovation associated with things that will become, um, uh, become more mainstream over time.

Howwould Edward Jones get involved in crypto? I mean, do you see that day happening anytimesoon?

I don't wanna front run our product review folks and our research folks that that that the work that they do for the benefit of our clients um is it is work that I am so proud of and admire a lot. I know that they're watching this very, very carefully.Um, they're looking for places that it does make sense, uh, packaged in, uh, in the types of products that provide a, a, an easier experience for clients. One of the things that that I think we've got to be really thoughtful about is, um, clients have an expectation of an experience in an investment management product.Where um they know for example that they can get in and out very quickly um that liquidity is there for them that the price is discoverable and and somewhat predictable based on on on cues that they can see or or or movement in the market.As I described those things, Brian, you probably are ticking off crypto for example against that or private equity or private credit for example and saying you know that's that's quite different from a client experience liquidity predictability price discovery those experiences that clients have with a particular asset class or a particular kind of asset are something that we're very thoughtful about as well and the reason that we're thoughtful about that.Is that we help clients have an easier ride in the investment markets. Now that doesn't mean that anybody is promising up or down at a particular level, but the point is to give clients uh some certainty so that they can take a look at their risk appetite at the goals that they're setting medium and long term.And uh and and have some sense of uh of predictability about the ride they're gonna have in the investmentmarkets

when I think Edward Jones, I think financial advisors, of course I think longer term wealth building investing.And that's where we, uh, are gonna come up here with our hot tape. We always love to ask this at the end of our interviews. How do you think the, the transfer of wealth from boomers to millennials like myself? Yes, I see you out there, my parents, I know you always watch opening bid, so this is coming at you, uh, for this. How is that going to impact markets longer term?

So the statistics say there's $124 trillion of assets that are gonna to transfer from the generation who owns them today to the next two generations over the next 20 years or so. That's a, it's a lot of assets. Here's a remarkable. I I love that you just shouted out your parents. Here's a remarkable piece of research.50% of Americans one way or another are gonna get something in this wealth transfer. I don't think I'm getting anything, but just I'm sorry so they actually not get anything than to have to talk to their family about it. It's such a this is a fraught conversation. It's awkward. Do you talk about this at the Thanksgiving

table in my head because I was actually thinking about this a week ago. No, I don't, I don't want to have this conversation.Um, in part because it's, uh, it's uncomfortable, but I don't want to know the answers. I don't want them to tell me that you're not getting anything because you can take out the trash at age 5. I just don't wanna hear it. I don't even want to put in that position, and it's morbid. Let's just be real.

So this is where a great financial advisor comes into play.They take a little emotion out of this with the family they describe to a family you don't have to talk about the dollars and cents and you don't have to go all the way back to your chores when you were a teenager. Um, what's important in the conversation today is to talk about the legacy that a family is leaving.How they develop that those assets that wealth, what they were thinking about about their relationship with money teaching the next generation, even people my age, your age about this is part of family legacy and that's what we are, we are seeking to do with our clients and our families multi-generationally we, we serve 4 or 5 generations of investors at a time today and helping them.Um, helping them move through this process as a family is a very, very rewarding thing for, for us to be able to do. In fact, it's a privilege. Now what is happening with this wealth transfer is the face of those who hold that wealth is changing dramatically, their values, their experiences, how they develop their relationship with money, the kinds of things they want to invest in.And so firms like ours, great firms like ours, are working to stay ahead of that to really understand what what you desire, what the next two generations of investors expect and desire. Uh, we want to help them form great plans associated with their long term hopes and dreams. Well,

Iwill just say this to my parents watching. I expect nothing. I would.Some photos and don't give me any debt. So let's leave it there. Penny Pennington, uh, Edward Jones, CEO, really nice to see you. I mean, just really, uh, look forward to staying in touch. Thank you. Uh, and that's it for the latest episode of Opening bid. Continue to hit us with those, uh, 5 stars on the podcast platforms. Uh, podcast is blowing up. I appreciate the feedback and hit us with those thumbs up on YouTube. Appreciate the feedback there as well. I always try to answer all of your questions. We'll talk to you soon.