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What is happening in the bond market is stunning · The Financial Exchange Show

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Speaker 1: a donation today. This is the Financial Exchange with Chuck
1:05
Speaker 1: Zada and Mike Armstrong.
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Speaker 2: It's Friday here on the Financial Exchange, and what has
1:12
Speaker 2: been just quite honestly, you know, it's one of those
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Speaker 2: weeks that I am going to remember for my entire life,
1:20
Speaker 2: just because you get very few that are actually you know,
1:24
Speaker 2: that have such momentous happenings and things going on, and
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Speaker 2: so this is one. You can put it back there with,
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Speaker 2: you know, the week of March twelfth, back in twenty twenty.
1:36
Speaker 2: You can put it back there with October tenth, two
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Speaker 2: thousand and eight. You know, there's a handful where it's like, yeah, yeah,
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Speaker 2: I remember that this is gonna be one of them.
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Speaker 2: And where we stand right now on the tariff side
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Speaker 2: of things. The only thing that matters, by the way,
1:53
Speaker 2: at this point from a tariff perspective in terms of,
1:55
Speaker 2: you know, kind of where things can be adjusted, I think,
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Speaker 2: is what's going on with the US and China, where
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Speaker 2: China overnight announced that they were raising their rate of
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Speaker 2: tariffs on imported US goods to one hundred and twenty
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Speaker 2: five percent and added a note, this will be our
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Speaker 2: last escalation because quite honestly, at this point it doesn't
2:14
Speaker 2: matter anymore.
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Speaker 3: Which is what we said yesterday, So been spot on there.
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Speaker 2: They literally were just like I wish I had the
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Speaker 2: actual quote here, but it quite literally I'm paraphrasing, was
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Speaker 2: we will not be raising tariffs any further as we
2:29
Speaker 2: do not believe this will have any impact on the
2:31
Speaker 2: matter going forward.
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Speaker 1: This from the.
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Speaker 4: Ministry even if the if US, even if the US
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Speaker 4: continues to impose higher terrrifts, it will no longer make
2:40
Speaker 4: economic sense. It will become a joke in the history
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Speaker 4: of world economy. End quote.
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Speaker 5: So that's what they said from the Chinese. Okay, so
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Speaker 5: there's that they're also right. So okay, this is where
2:52
Speaker 5: we are right now, and in terms of what we're
2:55
Speaker 5: actually seeing. Just to tell you how other companies are
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Speaker 5: starting to respond to this. Five below, By the way,
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Speaker 5: I had no idea what this company was the first
3:07
Speaker 5: time I saw I thought it was a jacket company.
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Speaker 3: It turned out to be a discount.
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Speaker 4: Yeah, I thought it was like a snow company. I
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Speaker 4: didn't know jacket company.
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Speaker 5: But we were talking like ten years ago when they
3:16
Speaker 5: first came out, Right, you're not talking about like this week.
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Speaker 5: You realize that five below is a dollar store. I'll
3:20
Speaker 5: say maybe like three years ago. Still wasn't quite sure
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Speaker 5: what they were.
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Speaker 3: Maga share, they've been around for a while.
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Speaker 4: It was a logo threw me off.
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Speaker 2: So basically what you have here, Five below has now
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Speaker 2: asked their vendors to send products back to China rather
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Speaker 2: than bringing them into the US and paying tariffs. Where
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Speaker 2: are they on boats?
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Speaker 3: The products right tun around?
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Speaker 2: Don't want it? Send it back is pretty much the message.
3:48
Speaker 2: And I'll quote here from Bloomberg Shipping Giant APMLE or
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Speaker 2: Marisk So Marisk is there more commonly known, sent the
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Speaker 2: letter to suppliers on behalf of the discount retail chain,
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Speaker 2: saying that the company has elected to suspend its cargo
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Speaker 2: shipments following the US and China tear impact. It was
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Speaker 2: unclear if the memo went out to all five below
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Speaker 2: vendors or a subset, but the letter says that no
4:09
Speaker 2: containers to be delivered to the yards starting April tenth,
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Speaker 2: and all containers that are loaded must be unpacked and
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Speaker 2: returned to the carrier.
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Speaker 3: So what's five below planning on selling?
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Speaker 2: Precisely, so it's it's not just five below that is
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Speaker 2: in this situation. If if you look at like the
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Speaker 2: retailers that have really high exposure to China. Interestingly, Walmart's
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Speaker 2: not one of them. Walmart came out very strongly after
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Speaker 2: they reiterated their guidance a couple days ago. They said, look,
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Speaker 2: two thirds of our products are US based, and of
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Speaker 2: the remaining ones, China is not a significant is not
4:48
Speaker 2: you know, a like the most important component that's fascinating.
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Speaker 3: Do you think that's mainly because of grocery, Yes, it is.
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Speaker 5: It's because when they're talking about are they talking about
4:59
Speaker 5: dollars or are they talking about No?
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Speaker 2: No, I didn't get a specification there, but Walmart literally said,
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Speaker 2: we expect to see an uptake, an uptick in our
5:10
Speaker 2: market share and performance as a result of this.
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Speaker 3: Like Walmart thinks this is good.
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Speaker 2: For them because they don't have as much stuff that
5:18
Speaker 2: they import from Amazon on a relative basis, as a
5:20
Speaker 2: proportion of their from China.
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Speaker 3: Yes, as a proportion of their business.
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Speaker 2: Companies that you got to work out for anything Dollar
5:28
Speaker 2: Store related, Yeah, Dollar Tree, Dollar General. They got issues.
5:31
Speaker 2: Target is a big importer from China. Wayfair, local company,
5:35
Speaker 2: huge importer from China, So you like you best buy
5:39
Speaker 2: big China importer. Like, think of all the all the
5:41
Speaker 2: electronics that aren't like critical important like not like you know,
5:47
Speaker 2: you're you're not talking about the stuff that is you know,
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Speaker 2: ultra high tech, but hey, routers and network switches and
5:55
Speaker 2: you know, remote controls and all that stuff.
5:59
Speaker 5: Lenovo's a China the company, right My think pad here
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Speaker 5: is probably made in China.
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Speaker 2: Probably, Yeah, don't know offhand, but in any case, like
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Speaker 2: these are the things that you have to look for.
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Speaker 2: And remember, if you're a big company, you can start
6:14
Speaker 2: to figure.
6:15
Speaker 3: Out other other things.
6:17
Speaker 2: If you're a small company not publicly traded, you know,
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Speaker 2: you're you know, five ten, twenty five employees and you
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Speaker 2: sell a bunch of stuff that might be made in China,
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Speaker 2: I don't really know what options you have right now.
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Speaker 2: Like it has to be one of these scariest times
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Speaker 2: for those kinds of businesses trying to figure out what
6:37
Speaker 2: to do. So ultimately where this matters is it's gonna
6:42
Speaker 2: be twofold number one the potential market impact and two
6:45
Speaker 2: all those small businesses that do employ an awful lot
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Speaker 2: of people, how do they figure out how to navigate
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Speaker 2: the longer this goes on, Because it's one thing to say, Okay,
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Speaker 2: I'm gonna pause my shipments.
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Speaker 3: For a week or two.
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Speaker 2: Maybe I was ordered to able to order some extra
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Speaker 2: invent and I can you know, deal with things that way.
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Speaker 2: I was able to you know, front loads some inventory
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Speaker 2: the last month or two. But you start going out
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Speaker 2: a couple more weeks and if this is still where
7:09
Speaker 2: we are, you go, how do those small businesses make
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Speaker 2: it that are in the business of selling stuff that
7:17
Speaker 2: they've been buying from China.
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Speaker 5: I will start by saying, so, yeah, absolutely correct, and
7:23
Speaker 5: I do wonder what some of those.
7:24
Speaker 2: I have two buddies who have quite literally like they've
7:27
Speaker 2: basically said, they've called it quits.
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Speaker 3: One of them.
7:29
Speaker 2: So I've talked about these guys before. One of them
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Speaker 2: is a sole proprietor. He sells little like toy figurines.
7:35
Speaker 2: He's like, I'm not bringing I have no business until
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Speaker 2: this is resolved. The other one, the board game maker,
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Speaker 2: is like, yep, I'm holding shipments in China. I can
7:43
Speaker 2: do that for a little bit, but ultimately I got
7:45
Speaker 2: like a thirty to sixty day colock before I need to,
7:47
Speaker 2: you know, figure out if I can keep my staff.
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Speaker 5: And breaking across the Bloomberg screen right now is that
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Speaker 5: a Chinese airline is delaying Boeing jet delivery as terrif escalates,
7:57
Speaker 5: so Boeing can't sell their jets to China. Fortunately, there's
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Speaker 5: a long wait list for other companies that to buy
8:02
Speaker 5: those be able to deliver them somewhere. I'm sure, ah,
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Speaker 5: but yeah, that's the type of thing we are talking
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Speaker 5: about here. I will state for a moment that even
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Speaker 5: though this is chaotic and crazy, we are in a
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Speaker 5: slightly better place than we were on Wednesday morning when
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Speaker 5: this was going in. It's much better, much better than
8:20
Speaker 5: you know, fighting this on sixty different fronts. We are
8:24
Speaker 5: in a better place here. But there's a lot of
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Speaker 5: trade that happens between the United States and China, and
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Speaker 5: at these rates of tariff, it is not that the
8:33
Speaker 5: prices go up, as Chuck said, it is that the
8:36
Speaker 5: trade itself does not occur. When you have one hundred
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Speaker 5: and forty five percent tariffs on Chinese made products coming
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Speaker 5: into the US.
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Speaker 2: Yeah, the importer just won't bring them in because they
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Speaker 2: they know they can't pass that off enough of it
8:50
Speaker 2: to be able to be profitable. So that is, you know,
8:53
Speaker 2: kind of what you're seeing on that front. Let's take
8:58
Speaker 2: a quick break here when we come back a couple
9:01
Speaker 2: things I want to go through. First, we did get
9:02
Speaker 2: a University of Michigan consumer sentiment data a little while ago,
9:06
Speaker 2: so I want to walk through what we're starting to
9:08
Speaker 2: see from that as people are breaking that down. And
9:11
Speaker 2: then we get this piece from the Wall Street Journal.
9:13
Speaker 2: It's titled market Route shatters long held beliefs on investing.
9:18
Speaker 2: What's discussed very important when we return.
9:21
Speaker 1: Market volatility is at its highest point since the pandemic.
9:25
Speaker 1: Keep it here for the most comprehensive coverage of the
9:27
Speaker 1: global trade war. This is the Financial Exchange Radio Network,
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10:12
Speaker 2: Ten am this morning, we got University of Michigan's consumer
10:15
Speaker 2: sentiment survey and what it showed. The previous reading came
10:19
Speaker 2: in at fifty seven. I don't really know, like what
10:22
Speaker 2: numbers mean in this. It's just lower ones are bad
10:25
Speaker 2: and higher ones are good.
10:26
Speaker 5: Yeah, And I think it ties out to sentiment back
10:28
Speaker 5: in the when the no, that's the other confidence survey.
10:31
Speaker 2: I don't All you need to know is higher numbers
10:34
Speaker 2: are better, lower numbers are bad, Yeah, at least for
10:36
Speaker 2: the sentiment piece. So sentiment declined from a reading of
10:39
Speaker 2: fifty seven to fifty point eight. Consumer expectations, meaning hey,
10:44
Speaker 2: not how do you feel about the economy now, but
10:45
Speaker 2: how do you feel about the future declined from fifty
10:48
Speaker 2: two six to forty seven to two. And the big
10:52
Speaker 2: piece that I think everyone really wanted to see here
10:54
Speaker 2: is look, what's happening to inflation expectations? And this is
10:57
Speaker 2: where we saw something really interesting, because inflation expectations went
11:02
Speaker 2: from a five percent over the next twelve months to
11:05
Speaker 2: six point seven percent. And what's interesting about this is
11:09
Speaker 2: normally inflation expectations tend to track one thing gas prices.
11:14
Speaker 2: When gas prices go up, people think inflation's gonna be worse. Mike,
11:18
Speaker 2: according to the size is just plummeted according to the CPI,
11:21
Speaker 2: which again I know is not the be all end all,
11:23
Speaker 2: but gas prices over the last month went down six
11:27
Speaker 2: point three percent. According to the TRIPAA national average, they
11:32
Speaker 2: went down about six percent as well, So like somewhere
11:35
Speaker 2: in that ballpark. So ultimately, you have this thing that's
11:39
Speaker 2: happening where gas prices are down, yet inflation expectations they are up.
11:43
Speaker 2: Meaning looks there's one approximate cause there, and it's consumers
11:47
Speaker 2: are nervous about the impact of tariffs on prices. I'm
11:51
Speaker 2: gonna pull in like a few other stories that we're
11:53
Speaker 2: gonna cover at different points. JP Morgan reported earnings this morning,
11:58
Speaker 2: and what they have indicate is that they are seeing
12:02
Speaker 2: an uptick in credit card activity in the short term. Likely,
12:06
Speaker 2: they say, because consumers are starting to stockpile things, which
12:10
Speaker 2: in turn, by the way, can drive more inflation as
12:13
Speaker 2: supply and demand to get a little bit out of
12:15
Speaker 2: whack in the short term. So you've got kind of
12:18
Speaker 2: all this dovetailing here, you know, all of it kind
12:21
Speaker 2: of coming together. And the other interesting thing about this
12:25
Speaker 2: survey is we've talked about the divergences that we see
12:31
Speaker 2: in the responses across the political spectrum to the University
12:35
Speaker 2: of Michigan survey. Basically, hey, if your guys in the
12:38
Speaker 2: White House, you feel good about everything?
12:40
Speaker 3: Yep.
12:41
Speaker 2: The piece that's interesting on this is that even Republicans
12:44
Speaker 2: are now starting to see an uptick in their inflation expectations,
12:49
Speaker 2: which goes against what we have seen for the prior
12:52
Speaker 2: several months. So you're starting to see it broaden out
12:54
Speaker 2: in terms of where the inflation expectations are. There still
12:59
Speaker 2: is obviously like a divergence in terms of, you know,
13:02
Speaker 2: the breakdown by party affiliation, but everyone is now thinking
13:06
Speaker 2: inflation is going to be higher than they thought it
13:08
Speaker 2: was going to be a month ago.
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Speaker 5: So with that, Democrats are simming way worse independence right
13:14
Speaker 5: in the middle, and Republicans the least of all, but
13:16
Speaker 5: all of the movie, we're in that same direction, which
13:18
Speaker 5: is the the interesting and compelling piece here, correct.
13:21
Speaker 2: So let's get to this piece here from the Wall
13:24
Speaker 2: Street Journal, Market Route shatters long held beliefs on investing,
13:27
Speaker 2: which long held beliefs are being shattered Michael.
13:31
Speaker 5: The long held belief is when there's panic, people buy bonds,
13:34
Speaker 5: specifically US government bonds.
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Speaker 2: Is a longtime so what we've seen now this week
13:42
Speaker 2: is nothing short of kind of shocking. In let me,
13:47
Speaker 2: let me not misnce words. It's nothing short of shocking
13:49
Speaker 2: what we've seen in the bond market here, because the
13:54
Speaker 2: moves that you are seeing are simply not the ones
13:58
Speaker 2: that you typically see during a period of downward market
14:06
Speaker 2: volatility in stocks. It's it's usually okay, stocks are getting sold,
14:11
Speaker 2: bonds end up getting bid. And instead what we've seen
14:15
Speaker 2: now the ten year treasury as of right now up
14:17
Speaker 2: another eighteen basis points to four point five seven to
14:19
Speaker 2: seven percent the ten year last friday at one point
14:23
Speaker 2: was it three to eight and change. You now up
14:25
Speaker 2: almost three quarters of a percent in the last week.
14:29
Speaker 3: It is a.
14:30
Speaker 2: Violent, rapid move up in yields. And here's where this
14:34
Speaker 2: is going to impact, Like the average person you're trying
14:39
Speaker 2: to buy a home right now, if you were trying
14:41
Speaker 2: to buy last week, mortgage rates were six point six
14:44
Speaker 2: is somewhere in that range now seven if if this
14:46
Speaker 2: one actually prints, if we print like the ten year
14:49
Speaker 2: closing in the four or five like almost four to
14:51
Speaker 2: six range.
14:52
Speaker 5: You're gonna have rates back above seven percent nationally. Yeah,
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Speaker 5: seven a quarter wouldn't be shocking on that.
14:57
Speaker 2: The spring housing season just got cooked. If this stays
15:01
Speaker 2: in place for any extended period of time.
15:03
Speaker 5: So, if you're listening out there, you might be thinking, Chuck, well,
15:07
Speaker 5: we had this in twenty twenty two.
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Speaker 3: Why is it so unique? Right?
15:10
Speaker 5: We did have a twenty five percent stock market sell
15:13
Speaker 5: off in twenty twenty two, combined with a fifteen percent
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Speaker 5: bond market sell off. If I'm not mistaken, is that
15:18
Speaker 5: generally accurate? September of twenty twenty two, we got there,
15:21
Speaker 5: we did. What's different about this one? I mean, everything's
15:28
Speaker 5: a little bit different about this. So the stock market rallies.
15:32
Speaker 2: The single biggest thing that is different here is that
15:35
Speaker 2: even with rates moving up. And think about this from
15:38
Speaker 2: the perspective of if you're listening to our show, Let's
15:41
Speaker 2: say that you're poking around for savings accounts, which bank
15:46
Speaker 2: attracts you usually the one with the highest account with
15:50
Speaker 2: the highest savings rate. Sure, provided that it's not like
15:53
Speaker 2: Steve's awesome bank, you know, like, as long as it's
15:56
Speaker 2: a reputable institution, you generally track the highest rates. Like
16:01
Speaker 2: there's plenty of you listening who say, yeah, I shop
16:03
Speaker 2: around and try to find the highest CD and I
16:05
Speaker 2: move my money where that is. Yep, totally understand it. Likewise,
16:08
Speaker 2: there are large institutional investors all around the world that
16:12
Speaker 2: do the same thing. Not with CDs, but you know,
16:15
Speaker 2: basically like the large institutional equivalent of a CD, which
16:18
Speaker 2: is government bonds. Hey, you know US treasuries. The rates
16:22
Speaker 2: went down, Okay, I'm gonna move some money from there
16:25
Speaker 2: over to Japanese government bonds for.
16:26
Speaker 3: A little bit.
16:27
Speaker 2: Oh now the US treasury rates are back up. I'm
16:29
Speaker 2: gonna move back there. But the point is, typically.
16:31
Speaker 3: Argentina in this example would be Steve's awesome bank.
16:34
Speaker 2: Right, Yes, Argentina is Steve's awesome bank. Continuing the analogy here, Yes,
16:39
Speaker 2: they have been in receivership multiple times and you just
16:43
Speaker 2: don't want to rely on them. So what you normally
16:47
Speaker 2: see is when US yields go up, investors flock to
16:51
Speaker 2: those those treasuries, and so the move that you typically
16:54
Speaker 2: see is yields up dollars stronger, because in order to
16:59
Speaker 2: buy treasuries, you need to dollars. You can't buy treasuries
17:02
Speaker 2: with yen, yuan, euros, whatever you want to you know,
17:07
Speaker 2: any other currency. So the interesting thing of what happens
17:11
Speaker 2: is happening here today, not just today, but this week.
17:14
Speaker 2: You got stocks down, rates up, and dollar down, the
17:19
Speaker 2: dollars being sold, dollars sold off about Oh, let's see
17:23
Speaker 2: right now this morning we're down about another one percent
17:25
Speaker 2: or so, which again, these are big swings on the
17:27
Speaker 2: dollar index. Normal daily swing on the dollar index is
17:30
Speaker 2: less than a quarter percent. You know, that's what you
17:32
Speaker 2: normally see the dollars since let me just get the
17:36
Speaker 2: date right, just because I want to make sure I
17:38
Speaker 2: nail this. The dollars since March twenty seventh, about a
17:40
Speaker 2: week before the tariffs went into effect, is off five percent.
17:43
Speaker 2: Now it's a huge currency move in a week now.
17:47
Speaker 2: The Trump administration, I am on record, you can like
17:50
Speaker 2: listen to our show from back in the fall. I
17:52
Speaker 2: do think they want a weeker dollar. There's an orderly
17:55
Speaker 2: way to get there, and there's a disorderly way to
17:57
Speaker 2: get there. We're kind of seeing the disorderly one this week.
17:59
Speaker 2: This is not a like if you look at the
18:02
Speaker 2: Trump first term. Actually, this is a great example if
18:04
Speaker 2: you want to go back and look at what an
18:07
Speaker 2: orderly moved down in the dollar looks like. It's twenty
18:10
Speaker 2: seventeen where the US dollars started twenty seventeen, the Dollar Index,
18:15
Speaker 2: I'm just gonna quote it, it was trading at about one
18:17
Speaker 2: hundred and three. By the end of the year, it
18:20
Speaker 2: was at ninety three, So it was a ten percent
18:22
Speaker 2: slide in the dollar relative to other currencies by.
18:25
Speaker 3: The end of the year. Did anyone say boo about it?
18:28
Speaker 1: Then?
18:29
Speaker 2: Did stock say boo about it? Did yields bark in
18:32
Speaker 2: any way, shape or form.
18:33
Speaker 3: No, Like it was.
18:34
Speaker 2: It was something where there was a very orderly move
18:37
Speaker 2: that happened over a span of ten months I'm sorry,
18:40
Speaker 2: twelve months, because that's how long a year is, and
18:43
Speaker 2: of ten percent, so you were moving, you know, call
18:45
Speaker 2: it zero point eight percent a month on average. This
18:49
Speaker 2: is five percent in two weeks. And like that scale
18:53
Speaker 2: of move. The problem is it disrupts other financial markets
18:56
Speaker 2: and it spooks international investors because here's what you get
18:59
Speaker 2: from international invents. Okay, I wanted to invest in US companies,
19:04
Speaker 2: but now if there's the potential that the dollar could
19:06
Speaker 2: be off five percent in a week, man like I
19:11
Speaker 2: got to rethink that if I'm an international investor, because
19:14
Speaker 2: I'm responsible to investors in my home country, I'm taking
19:16
Speaker 2: on a ton of currency risk.
19:17
Speaker 5: Now, we don't have time to continue this right now,
19:20
Speaker 5: but we need to come back to this conversation because
19:22
Speaker 5: this is the one that matters way more than the
19:25
Speaker 5: stock market conversation. Right now, We're gonna have Wall Street
19:27
Speaker 5: Watch next, but then return to bonds and currency right
19:30
Speaker 5: after this.
19:41
Speaker 1: Like us on Facebook and follow us on Twitter at
19:44
Speaker 1: TFE show. Breaking business news is always first right here
19:48
Speaker 1: on the Financial Exchange Radio Network. Time now for Wall
19:53
Speaker 1: Street Watch. A complete look at what's moving markets so
19:56
Speaker 1: far today right here on the Financial Exchange Radio Network.
20:01
Speaker 4: Markets remain volatile to wrap up a memorable week as
20:04
Speaker 4: investors continue to digest the tit for tat teriffs between
20:08
Speaker 4: the US and China. We also saw the Producer Price
20:11
Speaker 4: Index this morning, where a wholesale prices unexpectedly fell in
20:15
Speaker 4: March by zero point four percent versus expectations of a
20:19
Speaker 4: zero point two percent increase. At the moment, the Dow
20:23
Speaker 4: is down by about a half a percent, or one
20:25
Speaker 4: hundred and seventy seven points SMP five hundred, treating by
20:29
Speaker 4: a quarter of a percent. Nazac also down a quarter
20:32
Speaker 4: of a percent as well. Russell two thousand is down
20:34
Speaker 4: by eight tenths of a percent. Ten year Treasure reeled
20:38
Speaker 4: up by fourteen basis points this morning at four point
20:41
Speaker 4: five four percent, and crude oil pulling back by about
20:45
Speaker 4: a quarter percent. Trading just below sixty dollars a barrel.
20:49
Speaker 4: Wall Street is sifting through first quarter bank earnings this morning.
20:52
Speaker 4: JP Morgan up by one percent after the bank's first
20:55
Speaker 4: quarter revenue surpass Street forecast, generating forty six billion dollars
21:00
Speaker 4: higher than expectations of forty four billion dollars. CEO Jamie
21:04
Speaker 4: Diamond did, however, warn that the economy is facing considerable
21:08
Speaker 4: considerable turbulence. Morgan Stanley, Blackrock, and Wells Fargo also reported
21:13
Speaker 4: for first quarter earnings this morning. Morgan Stanley saw its
21:17
Speaker 4: quarterly revenue excuse me, quarterly profit jump, driven by a
21:21
Speaker 4: surge and trading revenue. The bank's earnings and revenue also
21:24
Speaker 4: beat estimates. Blackrock beat earnings expectations, Whilt's revenue came in
21:28
Speaker 4: below forecasts, and Wells Fargo's first quarter earnings saw a
21:32
Speaker 4: sixteen percent increase compared to a year ago. However, revenue
21:36
Speaker 4: missed expectations. Morgan Stanley down by two percent, Wells Fargo
21:40
Speaker 4: down by five percent, and Blackrock is up by about
21:44
Speaker 4: half a percent. Meanwhile, gpay company Stilantis said vehicle shipments
21:48
Speaker 4: in North America dropped twenty percent last quarter. That stock
21:52
Speaker 4: down by two percent. Elsewhere, drug maker Novardes said it
21:55
Speaker 4: promised to spend twenty three billion dollars to expand its
22:00
Speaker 4: US footprint. That stock up by two percent and earnings
22:04
Speaker 4: on tap for next week include Goldman Sachs, Bank of America,
22:07
Speaker 4: Johnson Johnson, City Group, ASML, Taiwan Semiconductor, United Health, AMX,
22:13
Speaker 4: and Netflix. I'm Tucker Silvan, that's Wall Street.
22:16
Speaker 3: Watch what are we gonna cover? Mike Bonds Currncy.
22:21
Speaker 5: Why this matters more than what's happening in the stock market.
22:25
Speaker 5: And you have to have some context for this conversation,
22:30
Speaker 5: because the US treasury market is the most liquid market,
22:36
Speaker 5: the most it's the biggest, most liquid, the most stable
22:39
Speaker 5: market in the world, in the world. Nothing else that's
22:42
Speaker 5: even a close, nothing that compares. And so over the
22:46
Speaker 5: last twenty five years, I suppose more so, but the
22:50
Speaker 5: last fifty years, whenever we Americans would go send money
22:56
Speaker 5: to China for buying a bunch of stuff there. That
22:58
Speaker 5: money would turn around and the Chinese company that received
23:02
Speaker 5: those dollars would be wondering what do we do with it?
23:04
Speaker 5: And buy and large a lot of it would go
23:07
Speaker 5: into US treasuries. Japanese too, right, you buy that toyota,
23:11
Speaker 5: you buy that semiconductor. Those banks then turn around and say,
23:15
Speaker 5: all right, what do we do with these dollars? Aren't
23:17
Speaker 5: they use them, for instance, to stabilize their own currencies.
23:20
Speaker 5: They can sell them, they can buy their own currency
23:23
Speaker 5: to manipulate things. But generally speaking, when markets turned down,
23:30
Speaker 5: when there is concern, when there is global recession risk
23:34
Speaker 5: or fear, the world turns to the US treasury market
23:38
Speaker 5: and that is not happening this time.
23:42
Speaker 3: What does it mean?
23:43
Speaker 2: Well, there's a few different things to look at here.
23:46
Speaker 2: The first thing that I will say is during periods
23:50
Speaker 2: of significant market dislocation, you can get all kinds of
23:54
Speaker 2: weird pricing that happens, and so you do have to
23:59
Speaker 2: discount a little bit what you're seeing, which I know
24:01
Speaker 2: is kind of like counterintuitive. It's like, no, like if
24:04
Speaker 2: if the price is showing that that's what it is,
24:06
Speaker 2: but you get all kinds of forced you know, forced
24:08
Speaker 2: selling and forced buying that happens during this stuff, and
24:12
Speaker 2: so you don't necessarily know that what you're seeing is
24:15
Speaker 2: going to stick. So the first thing that I will
24:17
Speaker 2: say is, we need to see how this plays out
24:20
Speaker 2: over like a two or three week period from here. Like,
24:22
Speaker 2: if we're still sitting here at the end of April
24:24
Speaker 2: having these conversations, then it means something completely different from
24:28
Speaker 2: you know, just the last few days. But here's what
24:30
Speaker 2: it does mean is at some level, the marginal demand
24:35
Speaker 2: for US treasuries is not.
24:38
Speaker 3: What it was a week ago. Okay, so who cares
24:43
Speaker 3: all of us?
24:43
Speaker 2: And here's why. There are a few different reasons why
24:46
Speaker 2: this matters. The first is, look, if if your bonds
24:49
Speaker 2: are selling off but your currency is strong, you don't
24:51
Speaker 2: have a problem because ultimately, yes, you are going to
24:55
Speaker 2: be paying more in interest, but you are being rewarded
24:57
Speaker 2: with greater buying power with your currency. Okay, that's that's
25:00
Speaker 2: a pretty good trade off. Sure, I'm if I have
25:02
Speaker 2: to borrow, it's gonna be more expensive, but I can
25:04
Speaker 2: buy more stuff with my money, So fine, Like that's okay.
25:07
Speaker 2: Dec that you have here is Okay, it's gonna be
25:10
Speaker 2: more expensive for me to finance stuff and my purchasing
25:13
Speaker 2: power is going down that that doesn't feel particularly good.
25:18
Speaker 2: And and by the way, this is the exact situation
25:21
Speaker 2: that did in the uh Liz Trust administration over in
25:25
Speaker 2: the UK several years ago, where they came out with
25:28
Speaker 2: a completely Kaka Mamy budget that just had like Hakka Mamy.
25:32
Speaker 3: You like that one I did. I was trying to
25:34
Speaker 3: get a little British with it. I was gonna go wonky,
25:36
Speaker 3: but that was definitely uh, that was British.
25:38
Speaker 2: Yeah, and again it was so insane that it literally
25:40
Speaker 2: forced her out of office within three weeks. She made
25:43
Speaker 2: it like one and a half Scaramucci's I think like
25:45
Speaker 2: it was you know, it was real real tight there.
25:48
Speaker 2: So in any case, you've got this situation that's developing
25:52
Speaker 2: here where you start to wonder, Okay, what are the
25:56
Speaker 2: things that this could be, because here's the other thing,
25:58
Speaker 2: like none of us know, Like we can also speculate like,
26:01
Speaker 2: oh it's China dumping treasuries. There's no evidence that is
26:04
Speaker 2: available today. It might turn out to be any of
26:08
Speaker 2: these things, but yeah.
26:08
Speaker 5: That state, like I know, there's been a lot of
26:10
Speaker 5: conjecture like, oh, the Japanese and Chinese were uh dumping
26:14
Speaker 5: a bunch of treasuries into the market. We won't know
26:17
Speaker 5: until it could be, but we won't know until they file,
26:20
Speaker 5: which comes months later how much they had previously and
26:24
Speaker 5: how much they have now in terms of treasury, So
26:26
Speaker 5: we just we won't know for a little while.
26:28
Speaker 3: Right here are the things that this could be.
26:31
Speaker 2: It could be any one particular country saying, yep, I
26:34
Speaker 2: want to sell some treasuries to put pressure on the US.
26:37
Speaker 3: Okay, possible.
26:38
Speaker 2: It could be anyone particularly country saying I want to
26:41
Speaker 2: sell some treasuries because I don't really trust.
26:43
Speaker 3: The relationship with the US anymore. Yep.
26:46
Speaker 2: It could be a hedge fund who is all levered
26:49
Speaker 2: up being long treasuries, getting blown out by their prime
26:52
Speaker 2: broker because they need to make a margin call and
26:54
Speaker 2: they're being forced to sell.
26:56
Speaker 5: Yeah, I want to explain that one there. Sometimes a
26:59
Speaker 5: big hedge fund under a big institution is required to
27:02
Speaker 5: sell a bunch of stuff because they borrow too much
27:04
Speaker 5: money and they might not be able to pay it back,
27:06
Speaker 5: or they have just you know, things that they need
27:09
Speaker 5: to pay and they have to choose something to sell.
27:11
Speaker 5: And what's different about that today than thirty years ago
27:15
Speaker 5: is a whole bunch of these institutions money. Like let's
27:17
Speaker 5: say you're the Harvard Endowment, or you are mass General
27:20
Speaker 5: Hospital's giant pension fund Sir, you used to own like
27:24
Speaker 5: ten to fifteen percent of your portfolio in illiquid, unsellable.
27:28
Speaker 2: Stuff, private equity, hedge funds, things like that.
27:31
Speaker 5: Today, according to the estimates I'm seeing, it's closer to
27:34
Speaker 5: forty percent of their portfolios.
27:36
Speaker 3: Is that stuff?
27:36
Speaker 5: So could that explain a bunch of the volatility in
27:39
Speaker 5: both equity markets and treasuries?
27:40
Speaker 3: Absolutely it could.
27:42
Speaker 2: So it could be any combination of all these things.
27:44
Speaker 2: And it's fair to say that, Like, again, you're not
27:48
Speaker 2: off base if you like have these thoughts about could
27:51
Speaker 2: it be any of these? But we just don't know yet,
27:54
Speaker 2: and we're not going to know for a little bit
27:56
Speaker 2: because there's so much, so much confusion, and things are
28:01
Speaker 2: still moving so quickly in war markets.
28:05
Speaker 5: We are in a war. It's not a fighting war,
28:08
Speaker 5: it's a trade war. And there's a lot of fog
28:11
Speaker 5: of war right now.
28:12
Speaker 2: Yes, So if if you're trying to untangle what's going on,
28:16
Speaker 2: there's a lot of possibilities, but we don't know anything
28:18
Speaker 2: definitively at the moment.
28:20
Speaker 3: Here.
28:22
Speaker 5: Let's see, let's take a break. When we come back,
28:25
Speaker 5: I do want to get back to We've been having
28:28
Speaker 5: some very high level conversations. I want to get back
28:30
Speaker 5: to what it actually means for every day Joe, human, humans, humans, humorans.
28:39
Speaker 5: We can talk about what it might mean for Chinese later,
28:40
Speaker 5: but let's talk about what it actually means for the
28:42
Speaker 5: everyday person.
28:43
Speaker 3: Because we're getting a little bit high minded. Yeah we are.
28:46
Speaker 2: Sometimes it happens, and for that we apologize, but we'll
28:49
Speaker 2: do better next segment.
28:50
Speaker 1: Right after this, Tara Spears continue to grip markets. Get
28:54
Speaker 1: the latest straight from Wall Street right here on the
28:57
Speaker 1: Financial Exchange Radio Network. Miss any of the show, catch
29:02
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29:08
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29:11
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29:14
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29:18
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29:28
Speaker 3: All right.
29:29
Speaker 2: So, as Mike said at the end of last segment,
29:32
Speaker 2: bring this back to kind of day to day. What's
29:35
Speaker 2: this all mean, and I think do we have to
29:39
Speaker 2: start with the assumption that these China tariffs are in
29:41
Speaker 2: place for an extended period of time.
29:43
Speaker 5: You always start with the status quo. Okay, what status
29:45
Speaker 5: quo is tariffs are in place for a while. Here's
29:48
Speaker 5: where things look like they are right now. Then borrowing
29:51
Speaker 5: costs gonna be moving up. If you're trying to buy
29:53
Speaker 5: a home, a car, things like that in the near future,
29:56
Speaker 5: those borrowing costs are going to be higher than they were.
29:58
Speaker 3: A few weeks ago.
30:01
Speaker 2: Because of the tariffs that are in place, not on China,
30:04
Speaker 2: but on things like stealing aluminum imports on autos. The
30:08
Speaker 2: ten percent blanket prices are going to be moving up
30:12
Speaker 2: in a number of different areas. The estimates that we've
30:14
Speaker 2: seen are that over the course of a year, the
30:18
Speaker 2: average American family probably somewhere between two thousand and four
30:22
Speaker 2: thousand in additional cost. The reason I say between there
30:25
Speaker 2: the estimates that are closer to four thousand include like
30:28
Speaker 2: the effect of China tariff pricing, but don't strip out
30:30
Speaker 2: the fact that a lot of that stuff just might
30:32
Speaker 2: not get shipped, and so that's what you could potentially
30:36
Speaker 2: be seeing. I think that if these China tariffs are
30:39
Speaker 2: still in place over the next couple months. If we're
30:43
Speaker 2: still sitting here on Memorial Day and they are fully
30:45
Speaker 2: in place at these rates.
30:46
Speaker 3: Five below doesn't exist.
30:48
Speaker 2: There are a lot of businesses that can't exist anymore.
30:51
Speaker 2: And it's not just ones that sell goods. The other
30:55
Speaker 2: thing that I've been thinking about, if you are a
30:59
Speaker 2: business that relies on, you know, processing credit card transactions,
31:02
Speaker 2: how many of like the credit card things are made
31:06
Speaker 2: in China just because it's the cheapest place to make them. Like,
31:09
Speaker 2: if you're trying to open a new business or get
31:11
Speaker 2: replacement parts for that stuff, it might not just affect
31:14
Speaker 2: goods retailers, it might affect services retailers and how they
31:18
Speaker 2: actually operate. If you are a you know, if you're
31:23
Speaker 2: a restaurant that you know, again, think about appliances that
31:26
Speaker 2: gets sourced from China and stuff like that. Sure, if
31:29
Speaker 2: you're trying to start a new restaurant, can't like, are
31:31
Speaker 2: you going to have the inventory to be able to
31:34
Speaker 2: do so of the stuff you need to open?
31:36
Speaker 5: What a just dumb twenty to thirty year policy we've
31:41
Speaker 5: had of allowing such important goods to be concentrated in
31:44
Speaker 5: specific countries.
31:45
Speaker 3: Well, yeah, forget about China for a moment.
31:47
Speaker 5: We're gonna talk about Taiwan later on in the show too,
31:49
Speaker 5: Like heah, yeah, it's way too messy to allow Americans
31:53
Speaker 5: to deal with these rare earth materials. There's gonna be
31:56
Speaker 5: a bunch of people have cancer, So let's do it
31:58
Speaker 5: in some Asian country and dead like that won't create
32:01
Speaker 5: any problems. But anyway, what do you do if you
32:04
Speaker 5: are approaching retirement here? Like, yeah, forget about the unknowns
32:10
Speaker 5: on prices, Like, what do I do about my portfolio?
32:13
Speaker 3: Because there's been a lot of.
32:17
Speaker 5: Well, there's been a lot of negative thinking, a lot
32:18
Speaker 5: of negative responses to surveys.
32:21
Speaker 3: I feel like there's also.
32:22
Speaker 5: Been a lot of just fatalistic thinking, and that's not
32:24
Speaker 5: terribly useful when you're thinking about your investment point.
32:27
Speaker 3: No, I mean, here's the thing.
32:30
Speaker 2: Everything always looks really bad when like you're at the
32:33
Speaker 2: scariest point. And this is not to say that this
32:35
Speaker 2: is the scariest point, like it might get scarier in markets.
32:38
Speaker 3: I acknowledge that, sure, But.
32:41
Speaker 2: Things are never as good as they look at the peak,
32:42
Speaker 2: and they're never as bad as they look when you're
32:44
Speaker 2: you know, at the bottom. So I think just having
32:46
Speaker 2: kind of again a little bit of the calm that
32:49
Speaker 2: I think you can find is through Hey, I built
32:53
Speaker 2: a portfolio understanding that there might be you know, twenty
32:57
Speaker 2: to thirty percent ups and downs that happened from time
32:59
Speaker 2: to time. I'm in markets that is normal, and my
33:03
Speaker 2: income in order to supply my you know, daily and
33:05
Speaker 2: monthly needs is going to still be able to come
33:07
Speaker 2: from places X, Y and Z. Or Hey, if you're
33:11
Speaker 2: younger and listening to us, if you're twenty five, look
33:14
Speaker 2: when you were born. I don't think like anyone can
33:17
Speaker 2: sceptualize that on this day in twenty twenty five, we
33:19
Speaker 2: were going to be in this exact situation. Likewise, if
33:22
Speaker 2: you're nervous because you've just started working, and you know,
33:24
Speaker 2: you're trying to figure out, hey, where what's the thing?
33:26
Speaker 2: What are things going to look like forty fifty years
33:28
Speaker 2: from now? Honestly, don't worry about that, right because you
33:30
Speaker 2: won't be You have no idea. They're gonna be way
33:32
Speaker 2: wilder and way more different. Way way different, yes, more correct, yeah,
33:36
Speaker 2: way different direction.
33:38
Speaker 3: It's gonna be the differentest world you've ever seen.
33:41
Speaker 5: Furthermore, the other not useful thinking that I get all
33:44
Speaker 5: the time is the pure like mad Max scenario, which
33:49
Speaker 5: I get that that's kind of like fun and sci
33:51
Speaker 5: fi to talk about, and maybe not fun, maybe terrifying
33:54
Speaker 5: to talk about, like what happens if war breaks out?
33:56
Speaker 5: What happens if you know institutions banking? You know all
33:59
Speaker 5: the finance institutions fail? I think the reminder there the
34:03
Speaker 5: United States will not turn into a desert. And second,
34:07
Speaker 5: if that's what you're worried about, then there's really nothing
34:10
Speaker 5: to do to your portfolio to prepare for that.
34:12
Speaker 2: Your broker won't be able to answer your call in
34:14
Speaker 2: that situation.
34:15
Speaker 5: So like again, I do sometimes answer those questions like
34:18
Speaker 5: well what if what if the dollar is no longer
34:21
Speaker 5: the reserve currency or we stop paying on treasures?
34:24
Speaker 3: I'm like, well, honestly, don't.
34:25
Speaker 5: Worry about it because your banks probably don't exist at
34:28
Speaker 5: that stage. So those aren't useful exercises to go through.
34:32
Speaker 5: I think, what are useful exercises to go through or
34:35
Speaker 5: to ask yourself several questions like Hey, could I handle
34:39
Speaker 5: a disruption to my income of six months? Could I
34:44
Speaker 5: handle a big emergency repair on my home? Have I
34:48
Speaker 5: thought through my investment portfolio strategy. If we go through
34:54
Speaker 5: a twenty percent market decline from where we already are,
34:58
Speaker 5: which is down fourteen percent, yep, those are useful exercises
35:02
Speaker 5: to go through, right like that is an important piece
35:05
Speaker 5: of this process. You know, where is my diversification coming from?
35:11
Speaker 5: If you maybe you've undergone that, maybe you could use
35:15
Speaker 5: that second opinion, or maybe you have no.
35:17
Speaker 3: Idea what I'm talking about.
35:18
Speaker 5: In any of those cases, it might make sense to
35:22
Speaker 5: give somebody a call and get a little bit more
35:24
Speaker 5: information and just a second opinion. And if you'd like one,
35:27
Speaker 5: you can call us at the Armstrong Advisory Group. The
35:29
Speaker 5: number is eight hundred three nine three four zero zero one.
35:33
Speaker 5: Let us take a look at your big picture financial situation.
35:36
Speaker 5: Whether that's your investment portfolio with your four oh one
35:38
Speaker 5: ks and other stuff. Maybe it is your pure financial situation.
35:43
Speaker 5: You're in your forties, you're still working and saving, but
35:45
Speaker 5: worried about some of those potential pitfalls that I mentioned.
35:48
Speaker 5: The number again for the Armstrong Advisory Group to talk
35:51
Speaker 5: to a real life human being is eight hundred three
35:53
Speaker 5: nine three for zero zero one.
35:56
Speaker 1: The proceeding was paid for by Armstrong Advisory Group, a
35:58
Speaker 1: registered investment advice. Nothing in the ad or in any
36:01
Speaker 1: Armstrong guide a specific financial, legal, or tax advice. Consult
36:04
Speaker 1: your own financial tax send to state planning advisors before
36:07
Speaker 1: making any investment decisions. Armstrong make contact you to offer
36:09
Speaker 1: investment advisory services.
36:12
Speaker 2: If you're getting excited for four to twenty, so is JM.
36:15
Speaker 3: Smucker.
36:15
Speaker 2: They're sending a munchiemobile on a road trip to celebrate
36:18
Speaker 2: April twentieth, promoting Twinkies, ding dongs and donuts.
36:22
Speaker 3: Gotta let my father know. They're just leaning.
36:25
Speaker 2: They're leaning into the stoners a week and a half
36:28
Speaker 2: from now. I mean, like, what a headline again, this
36:35
Speaker 2: is from the Wall Street Journal. Twinki's new owner courts
36:37
Speaker 2: a novel group of snackers stoners Like just hey, we're
36:42
Speaker 2: gonna send a bunch of what do you call these? Like,
36:46
Speaker 2: it's just it's not snacks, Like this is meteior than
36:50
Speaker 2: a snack, junk food, guilty, a bunch of junk food,
36:54
Speaker 2: junk food. We're gonna go find a bunch of high
36:56
Speaker 2: people and send them some junk food.
36:59
Speaker 5: I mean, this is right in line with the girl
37:00
Speaker 5: scouts who set up right outside of the cannabis shops.
37:03
Speaker 3: Do they do that. Now I've seen that. Yeah, top notch,
37:05
Speaker 3: it's top notch. It'd spot.
37:08
Speaker 4: But it literally says munchiemobile on.
37:11
Speaker 2: Yeah, it's got right there. It looks like it's right
37:13
Speaker 2: out of Scooby Doo. It's got like the little hazy
37:15
Speaker 2: like things and everything.
37:16
Speaker 5: I know that we frequently cover stories that are not mainstream,
37:19
Speaker 5: but the Wall Street Journal publishing this, like how close
37:21
Speaker 5: are we too federally legalizing cannabis based on this?
37:25
Speaker 3: Like this has got to be within the next ten.
37:26
Speaker 1: Yes, I just got maybe five.
37:28
Speaker 2: The Munchimobile truck over the next few weeks will hand
37:30
Speaker 2: out free snacks outside cannabis dispensaries in New York, Massachusetts, Connecticut, Maryland,
37:35
Speaker 2: and New Jersey every day at four to twenty pm,
37:38
Speaker 2: eventually parking for six hours in Brooklyn, New York, of.
37:41
Speaker 3: Course on four to twenty itself.
37:43
Speaker 4: Why won't you just sell them? Why why are you
37:45
Speaker 4: handing them away for free? This makes sense, it makes money.
37:48
Speaker 5: It's a lost leader, Tucker. Yeah, you know it's gen
37:53
Speaker 5: zs don't know what a twinkie is. They need to
37:54
Speaker 5: get back on the Twinkie mobile.
37:56
Speaker 2: Yeah so yeah, I thought this story was uh It
38:01
Speaker 2: was just great because it's uh again. I always have
38:06
Speaker 2: said that there should be a Taco Bell Co. Located
38:08
Speaker 2: with every dispensary out there.
38:11
Speaker 3: Yeah, well, host, this is on it.
38:14
Speaker 2: Let's take a quick break here. We got our two
38:15
Speaker 2: coming up in just a little bit. Still a lot
38:17
Speaker 2: more to get through on the financial exchange