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Economic concerns for the second half of the year · The Financial Exchange Show

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Speaker 2: Good morning, Happy Tuesday, on a jobs week here on
1:16
Speaker 2: the Financial Exchange, It's Mike, Paul and Tucker with you
1:20
Speaker 2: on a Tuesday. As I mentioned, it's a jobs heavy
1:23
Speaker 2: week here with the JILT report released just six minutes ago.
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Speaker 2: We'll dive in once Paul and I actually have a
1:29
Speaker 2: few minutes to read it here. But the big headline
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Speaker 2: here no massive changes month over month when it comes
1:35
Speaker 2: to this separation and Turnover survey that we get on
1:38
Speaker 2: a monthly basis on Thursday of this week usually comes
1:41
Speaker 2: out on Friday, but on Thursday of this week we
1:43
Speaker 2: will be getting the real big jobs report that's released
1:47
Speaker 2: once a month for the month of June. We're also
1:50
Speaker 2: going to be getting the weekly jobless claims, which usually
1:54
Speaker 2: come out of day separate this week because of the
1:56
Speaker 2: July fourth holiday, we'll be getting both on the same day. Tomorrow,
1:59
Speaker 2: you've got the ADP Employment Report, which nobody cares about.
2:03
Speaker 2: And speaking of employment, our lawmakers are pretty busy in
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Speaker 2: DC as they pull an all night or trying to
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Speaker 2: get this tax bill done. But before we even get
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Speaker 2: to the tax bill, I think just you're talking for
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Speaker 2: a minute about markets as we complete the first half
2:18
Speaker 2: of the year here. We just closed in on second
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Speaker 2: half of the year July one, July fourth week, and
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Speaker 2: it's been a pretty remarkable second quarter after a pretty
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Speaker 2: abysmal first quarter here in markets S and P five
2:32
Speaker 2: hundred year to date only up about five and a
2:35
Speaker 2: half percent, but a pretty rip roaring quarter after sinking
2:38
Speaker 2: towards the end of the first and into the beginning
2:41
Speaker 2: of the second quarter on tariff concerns, a rally to
2:44
Speaker 2: good seven or eight percent in the second quarter of
2:47
Speaker 2: this year, one of the best quarters we've seen in
2:49
Speaker 2: years here, and so as we head into the second half,
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Speaker 2: I'm just kind of curious in your mind, what are
2:54
Speaker 2: the big potential pitfalls for markets? What are the big
2:58
Speaker 2: opportunities where you know, give me the argument one case
3:00
Speaker 2: or another as to where stocks go from here is
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Speaker 2: always what people are wondering.
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Speaker 3: Yeah, So the major areas of concern that are worth
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Speaker 3: monitoring heading into the second half of the year has
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Speaker 3: got to be tariffs and the impact of them and
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Speaker 3: potentially any inflationary pressure that would come from them. That's
3:15
Speaker 3: going to be of tremendous focus. And the labor market.
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Speaker 3: I would say that those are probably the two largest
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Speaker 3: risks that I can think of anything from a debt perspective.
3:25
Speaker 3: While perhaps the fiscal discipline of the country is something
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Speaker 3: that is concerning, I don't feel as if it's going
3:33
Speaker 3: to rear its ugly head any negative ramifications from the
3:37
Speaker 3: passing of the bill, which will increase the deficit significantly.
3:41
Speaker 3: I don't think that we're going to feel the effects
3:43
Speaker 3: of that in the second half the year. So that's
3:45
Speaker 3: on the areas of concern side. On the positive side
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Speaker 3: of things, you clearly have had a market that's really resilient,
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Speaker 3: and if I were to argue the other way that
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Speaker 3: perhaps what we're seeing from a pricing perspective MIC on
3:58
Speaker 3: inflation is what is going to be the trend for
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Speaker 3: the second half of this year, where we're going to
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Speaker 3: see minimal impact from inflation and from tariffs in place,
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Speaker 3: and as a result of that, the focus can be
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Speaker 3: more on perhaps concluding some of these trade negotiations that
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Speaker 3: will be put behind us, and the focus can be
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Speaker 3: on the economy and its growth going forward. You still
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Speaker 3: have very low energy prices and perhaps a consumer that
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Speaker 3: will continue to stay resilient if some of those issues
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Speaker 3: can subside. So I think that would be the positive
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Speaker 3: versus the negative case.
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Speaker 2: Yeah, I mean, Bloomberg laid out a number of things.
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Speaker 2: You know, this year has been a geopolitical hot mess.
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Speaker 2: Russia's you wre in Ukraine has continued, obviously, Israel Iran
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Speaker 2: tension has reared its ugly head. There's been the underlying
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Speaker 2: thread of NATO, and you know what will the United
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Speaker 2: States do there? I don't think any of that stuff
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Speaker 2: matters for equity market. No, I think it matters. People
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Speaker 2: are dying. It's going to shape the world order ten
4:58
Speaker 2: twenty thirty years from now. But markets have no idea
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Speaker 2: how to digest that sort of thing, and I, as
5:03
Speaker 2: an investor, I have no idea how to place my bet.
5:07
Speaker 2: If I believe that the war in Russia and Ukraine
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Speaker 2: is going to escalate, I don't know what that means
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Speaker 2: for stocks likewise, you know, NATO or Iran in Israel,
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Speaker 2: massive ramifications for where the US stands in the future
5:19
Speaker 2: and all of that, But what it means for stocks
5:21
Speaker 2: in the short term don't know. The markets have reacted
5:23
Speaker 2: to the ones that have a pretty straight line. You know.
5:27
Speaker 2: The only real problem to challenge equity markets this year
5:31
Speaker 2: was the tariff threat because it had pretty understandable consequences.
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Speaker 2: If you raise tariffs to such a level that trade
5:38
Speaker 2: can't be conducted, then a bunch of companies are going
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Speaker 2: to really struggle to make profits and grow. And so
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Speaker 2: that was the one that markets reacted to. So long
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Speaker 2: as that scenario doesn't rear its ugly head again, then
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Speaker 2: we probably won't have that type of massive distortion in
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Speaker 2: markets that we might otherwise have. The inflation side that
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Speaker 2: you mentioned, I would agree that that is a threat
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Speaker 2: to markets. I would can only consider it a threat
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Speaker 2: if we continue to not understand where tariff rates are
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Speaker 2: going to go, though I'm gonna play this out. Even
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Speaker 2: Let's say that negotiations don't go incredibly well and we
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Speaker 2: wind up in a tariff scenario of average effective tariffs
6:20
Speaker 2: across the globe of fifteen percent, which would be you know,
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Speaker 2: like three or four x where we were prior to
6:26
Speaker 2: the Trump administration, you will see a tariff an inflation impact.
6:31
Speaker 2: I think. I also think it will be one time.
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Speaker 2: I think it will be transitory. Justice Scott Besen has
6:36
Speaker 2: been describing and imploring the Fed to just lower rates
6:39
Speaker 2: because the way he sees it is look you're gonna
6:42
Speaker 2: have these tariffs in place, They're gonna be a one
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Speaker 2: time hit to prices. They're going to get adjusted upward.
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Speaker 2: There is nothing more transitory than terrorifts, is what he said.
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Speaker 2: I buy it. The problem is we are not getting
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Speaker 2: the certainty around tariffs, and if the uncertainty continues, then
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Speaker 2: we see more of what we saw in the spring
6:59
Speaker 2: when it comes to things like vehicle purchases. If I
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Speaker 2: don't know what the tariff rate is going to be
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Speaker 2: on one company versus another, one country versus another, then
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Speaker 2: I'm going to lock in my purchases now when I
7:11
Speaker 2: know what they're going to be, and price be damned,
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Speaker 2: I'm going to pull that purchase forward. And that's what
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Speaker 2: can lead to a more significant inflation problem followed by
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Speaker 2: a potential recession. Right If everybody pulls all their purchases
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Speaker 2: ahead because they're worried about what tariffs might be down
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Speaker 2: the road and not really sure where they go, and
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Speaker 2: then has to pull back on purchases because they're broke thereafter,
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Speaker 2: that becomes a real problem, right, and.
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Speaker 3: You risk creating a supply chain shock as a result
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Speaker 3: of that.
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Speaker 2: Yeah, the only other threat that I can look out
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Speaker 2: on the horizon to say, hey, this is a problem
7:44
Speaker 2: for equities is not a short term problem. The long
7:47
Speaker 2: term problem that I see for equities is that once
7:50
Speaker 2: again we are back at a place here in terms
7:52
Speaker 2: of valuations that's rich, that is very rich, and that
7:56
Speaker 2: you haven't really seen since dot com age. So how
8:01
Speaker 2: does that play itself out? Short term? Not really an
8:03
Speaker 2: issue because in the short term investors don't really care
8:07
Speaker 2: about valuations. They seem to matter quite a bit more
8:09
Speaker 2: when you take a look at the ten year return
8:11
Speaker 2: on stocks and where that goes. But could you convince
8:15
Speaker 2: me that the innovation going on in the market these days,
8:18
Speaker 2: and combined with tax policy and a more friendly environment
8:22
Speaker 2: for US businesses abroad, could allow these companies to grow
8:26
Speaker 2: into valuations over the next several years or at least
8:29
Speaker 2: the next six months. Absolutely, absolutely, you could convince me
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Speaker 2: of that argument.
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Speaker 3: How about the labor market, do you agree on the
8:36
Speaker 3: assessment that you've viewed as a concern for the second
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Speaker 3: half of the year.
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Speaker 2: Yes, Look, we are a consumer based economy. If people
8:44
Speaker 2: start losing their jobs, they're not gonna be able to
8:46
Speaker 2: buy things. If people are worried about losing their jobs jobs,
8:50
Speaker 2: they will voluntarily stop buying things. We have never seen
8:57
Speaker 2: a recession that's caused by the consumer. I mean, I'm
9:04
Speaker 2: trying to kind of work that phrase out in my mind.
9:07
Speaker 2: But generally speaking, when we see recessions in this country,
9:10
Speaker 2: it's caused by some external shock to the system that
9:12
Speaker 2: then causes the consumer to lose their job and lose
9:15
Speaker 2: their spending power. Not oh, everyone decided to just stop
9:18
Speaker 2: spending money voluntarily and it led us into a recession.
9:22
Speaker 2: And so those orders of operations sometimes get confused. Even
9:25
Speaker 2: in my own head, I would not expect a scenario where, oh,
9:28
Speaker 2: job loss causes a stock market sell off because people
9:31
Speaker 2: stop spending money. It almost always goes in the other direction.
9:35
Speaker 2: A stock market sell off sparked by some of the
9:37
Speaker 2: thing causes companies to tighten the belt, lay off their employees.
9:42
Speaker 2: And then once you're almost all the way through the
9:44
Speaker 2: recession and unemployment reaches a really uncomfortable level, then you
9:48
Speaker 2: start to see the spending die down as people finally
9:50
Speaker 2: tighten the belt. But it is almost never gone the
9:53
Speaker 2: other way. Sure, let's take a quick break when we
9:56
Speaker 2: come back. Want to jump into the big beautiful bill
10:00
Speaker 2: making its way through the halls of DC that's next
10:03
Speaker 2: here on the Financial Exchange.
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10:49
Speaker 2: As the Senate works its way through the Big Beautiful
10:56
Speaker 2: Bill Act, is that genuinely the name for the Big
11:00
Speaker 2: Beautiful Bill Act? Senator Thune believes the GOP has a
11:05
Speaker 2: deal to pass the Trump Tax Bill. Is is the
11:07
Speaker 2: headline that's flying across the bloomberg right now. So we
11:10
Speaker 2: will see where that lands and then heads over to
11:13
Speaker 2: the House presumably, but we could see a vote on
11:16
Speaker 2: this thing any moment. In the meantime, the Yale Budget Lab,
11:20
Speaker 2: which has been studying this bill really since it got started,
11:25
Speaker 2: has a new piece out that's getting a fair bit
11:27
Speaker 2: of headline and fair bit of press and most certainly
11:30
Speaker 2: will get a fair bit of play by Democrats over
11:34
Speaker 2: the next few days. The richest twenty percent, which I
11:37
Speaker 2: was trying to figure out how they define rich if
11:39
Speaker 2: this is a wealth or an income metric here, because
11:45
Speaker 2: to me, rich means wealth, not income. But we have
11:48
Speaker 2: a very difficult time measuring wealth in this country. So
11:50
Speaker 2: I'm guessing it's actually the highest income twenty percent would
11:55
Speaker 2: get an average in six thousand dollars income boost from
11:59
Speaker 2: this new tax tax bill, whereas the bottom twenty percent
12:03
Speaker 2: would see an average cost increase of five hundred and
12:06
Speaker 2: sixty dollars. Here's how they did this. They compared. Really,
12:11
Speaker 2: what they're comparing here, I believe is how much that
12:16
Speaker 2: wealthiest twenty percent would see their income taxes go up
12:20
Speaker 2: where this bill not passed compared to this bill passing,
12:23
Speaker 2: And therefore, yeah, there's a big credit there. There's also
12:26
Speaker 2: things like the tax credits for sixty five plus year
12:31
Speaker 2: olds that go into place as an attempt to waive
12:33
Speaker 2: taxes on Social Security. Again, that's something that only benefits
12:37
Speaker 2: you if you're actually paying taxes. Right, if your only
12:40
Speaker 2: income is social Security and you're falling into that bottom
12:42
Speaker 2: twenty or forty percent, you weren't paying taxes in the
12:45
Speaker 2: first place, and so a tax a tax deduction doesn't
12:49
Speaker 2: really help you on that overall tax scenario, So no
12:52
Speaker 2: big change there. I have no idea if this is
12:56
Speaker 2: actually where it comes down, but it seems likely to
12:59
Speaker 2: me that, yes, a tax bill like this, whether or
13:03
Speaker 2: not it actually increases cost for the bottom twenty percent
13:06
Speaker 2: is probably up for debate because we have no idea
13:08
Speaker 2: how states are going to respond to things like Medicaid
13:11
Speaker 2: getting cut and food stamps getting cut, So that piece,
13:14
Speaker 2: I think is a big question mark. Yeah, most of
13:18
Speaker 2: the benefit to a tax cut like this does usually
13:21
Speaker 2: benefit the wealthy. That's the entire idea of trickle down
13:23
Speaker 2: economics and what Democrats have made their name on fighting
13:27
Speaker 2: against some Republicans have touted for decades. This is not
13:31
Speaker 2: surprising to me in any way.
13:32
Speaker 3: No, it ultimately comes back to a situation where when
13:36
Speaker 3: you're looking at these dollar differentials, part of that it's
13:39
Speaker 3: because of the income gap there, Right, it's going to
13:41
Speaker 3: be a more sizable dollar number for those people who
13:44
Speaker 3: make more income. I'd rather sort of assess it on
13:47
Speaker 3: a percent basis rather than using this dollar figure, because
13:50
Speaker 3: I think it construes things a little bit.
13:53
Speaker 2: I mean, but you're right, completely construes things. So let
13:55
Speaker 2: me talk about something from the Tax Foundation here. According
13:59
Speaker 2: to the latest tax data, the top one percent of
14:02
Speaker 2: income earners paid a twenty three point one percent average
14:08
Speaker 2: tax rate. They also accounted for hold on a minute
14:13
Speaker 2: share of federal tie. Yeah, the top one percent of
14:17
Speaker 2: income share fell from twenty six point three percent twenty
14:21
Speaker 2: one to twenty two point four percent. Its share of
14:24
Speaker 2: federal income taxes paid was forty percent. The top one
14:28
Speaker 2: percent paid to forty percent of all federal taxes, so
14:30
Speaker 2: the top twenty percent had to have paid the vast
14:33
Speaker 2: vast majority of total taxes. So it's no surprise to
14:36
Speaker 2: me that most of the benefit goes to the top
14:37
Speaker 2: twenty percent.
14:38
Speaker 3: Got it, Yeah, exactly. So if you look at some
14:41
Speaker 3: of the specific provisions, you're right, they are more beneficial
14:44
Speaker 3: to people who have higher incomes. Though with the over
14:48
Speaker 3: sixty five there are some caps in place that make
14:52
Speaker 3: it so, and we're going to get into that enhanced
14:53
Speaker 3: deduction that they won't for those people who are really
14:57
Speaker 3: making a lot of money in that over sixty five Democrat,
15:00
Speaker 3: they won't get the full bump from the way of
15:03
Speaker 3: combating not being able to go tax free on Social Security,
15:07
Speaker 3: but the state and local income tax the assault cap
15:11
Speaker 3: being bumped from ten thousand and forty thousand. Make no
15:13
Speaker 3: mistake about it. That certainly helps people who are hire
15:17
Speaker 3: income earners, not the ultra wealthy, because they do cap
15:20
Speaker 3: that off as well, but certainly a lot of people
15:22
Speaker 3: who live in states where you need to make a
15:24
Speaker 3: good salary of a couple hundred thousand to live in
15:26
Speaker 3: New York and New Jersey or California to benefit from
15:30
Speaker 3: that state and local income tax deduction piece there.
15:33
Speaker 2: I do have. This is really interesting to me, actually,
15:35
Speaker 2: So I have this table from the Tax Foundation that
15:39
Speaker 2: breaks down in twenty twenty four. Sorry this is latest
15:44
Speaker 2: day is twenty twenty two, so it's a little bit outdated,
15:46
Speaker 2: but it's still pretty interesting. So the top one percent
15:50
Speaker 2: of income earners, about one point five million people filed
15:54
Speaker 2: and count as the top one percent. They paid an
15:57
Speaker 2: average income tax bill of five hundred and sixty one thousand,
16:00
Speaker 2: accounted for forty percent of all federal taxes ode or paid. Rather,
16:06
Speaker 2: if you include the top five percent, that group accounts
16:09
Speaker 2: for sixty one percent of total federal taxes paid. If
16:12
Speaker 2: we include the top ten it's seventy two and if
16:15
Speaker 2: we include the top quarter of all taxpayers by income,
16:20
Speaker 2: they account for eighty seven point two percent of total
16:23
Speaker 2: taxes paid. So again, studies like this are are interesting,
16:28
Speaker 2: but you have to take it in context of Yeah,
16:30
Speaker 2: of course that's where most of the benefit is going,
16:33
Speaker 2: because that's what's all the taxes. I'm not saying right
16:38
Speaker 2: or wund by the way, like, there's plenty of justification
16:40
Speaker 2: for who's I think Susan Collins is pushing for a
16:46
Speaker 2: at tax on those for incomes over twenty million dollars.
16:49
Speaker 2: Like you know, there are plenty of different people that
16:51
Speaker 2: have different ideas of how this should be done. But
16:54
Speaker 2: we shouldn't be surprised by the idea that most of
16:59
Speaker 2: the benefit of a tax cut goes to the top
17:01
Speaker 2: income earners because most of taxes are paid by top
17:04
Speaker 2: income earners. The top fifty percent paid ninety seven percent
17:09
Speaker 2: of federal taxes, and so even if you don't feel wealthy,
17:13
Speaker 2: you know half of us are in that top fifty
17:17
Speaker 2: percent and are paying the vast, vast majority of total
17:20
Speaker 2: taxes when it comes to all of this. So I
17:23
Speaker 2: do believe this ends up getting done. I think there
17:26
Speaker 2: are still some holdouts here and there. I think it's
17:28
Speaker 2: going to pass narrowly. It's unclear to me. For instance,
17:32
Speaker 2: you know, just the dumbest objection that's out here. So
17:37
Speaker 2: there's an issue where they're saying, hey, we're having a
17:39
Speaker 2: tough time getting Lisa Murkowski on board, and so we're
17:42
Speaker 2: thinking about eliminating or shrinking the debt limit increase in
17:47
Speaker 2: order to get Rand Paul on board. That is the
17:51
Speaker 2: just sender. Rand Paul, I cannot understand where you're coming from.
17:54
Speaker 2: So what his argument is seems to be, I will
17:59
Speaker 2: vote for it tax bill that dramatically increases deficits, but
18:05
Speaker 2: I will not vote to increase the spending the borrowing
18:10
Speaker 2: limit on the total deficit. That is the most contradictory
18:15
Speaker 2: thing I've ever heard in my mind. I can't fathom
18:18
Speaker 2: how you come to that vote. Either you care about
18:22
Speaker 2: deficits and debt and bills that dramatically expand the total debt,
18:27
Speaker 2: which this one undoubtedly does. Like it or love it,
18:31
Speaker 2: like it or hate it like that's what this bill does.
18:33
Speaker 2: There's no way of you know, sugarcoating it. Yes, it
18:38
Speaker 2: makes some spending cuts. I think those spending cuts are
18:40
Speaker 2: justified and necessary. It also cuts taxes way more than
18:44
Speaker 2: those spending cuts would. And what Ran Paul is saying
18:47
Speaker 2: is I'm fine voting for all those things unless it
18:52
Speaker 2: increases the deficit, which it obviously does.
18:54
Speaker 3: He wants to put the cart out, but just not
18:56
Speaker 3: even bring out the horses. Yeah, I mean, because you're
18:59
Speaker 3: putting out the idea that you want depfinits higher in
19:02
Speaker 3: the future, but you're unwilling to vote for this use
19:04
Speaker 3: the mechanism to act that actually ensures that the higher
19:07
Speaker 3: defferenits are made.
19:08
Speaker 2: Are you what are you voting for here? Just Hey,
19:11
Speaker 2: I want to build that cuts taxes and raises debts,
19:15
Speaker 2: but I want some sort of magic pill to make
19:18
Speaker 2: sure we don't actually have to pay for that additional
19:21
Speaker 2: additional debt that we're going to have to raise as
19:22
Speaker 2: part of this bill. It's just crazy, crazy logic to me.
19:26
Speaker 2: We've got to take a quick break. When we come back.
19:28
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20:01
Speaker 4: Markets in mixed territory as traders continue to monitor developments
20:05
Speaker 4: out of Washington regarding President Trump's tax bill, seemingly inch
20:09
Speaker 4: and closer to the finish line in the Senate. Wall
20:11
Speaker 4: Street's also digesting fresh economic data points released this morning
20:16
Speaker 4: on the manufacturing front, as well as job openings. Right now,
20:21
Speaker 4: the DOWS up by six tenths of one percent or
20:24
Speaker 4: two hundred and seventy points, SMP five hundreds down by
20:27
Speaker 4: two tenths of one percent or thirteen points. Nasdaq is
20:31
Speaker 4: off by two thirds of a percent or one hundred
20:33
Speaker 4: and thirty one points. RUSSA two thousand is flat, dipping
20:37
Speaker 4: into negative territory. Tenure Treasure reeled up two basis points
20:41
Speaker 4: at four point two five percent. In crude oil up
20:44
Speaker 4: about a third of a percent higher, trading at sixty
20:47
Speaker 4: five dollars and thirty cents a barrel. Well Tesla stock
20:51
Speaker 4: is in the spotlight again on the heels of an
20:54
Speaker 4: increased spat between CEO Elon Musk and President Trump. After
20:58
Speaker 4: a series of critical posts from US about the Big
21:01
Speaker 4: Beautiful tax bill, President Trump shot back, saying that the
21:05
Speaker 4: US Department of Government Efficiency or doge should look at
21:08
Speaker 4: subsidies for musks companies for potential cost cutting measures. Tesla
21:13
Speaker 4: shares are down by four percent. Meanwhile, Robinhood announced it
21:17
Speaker 4: is launching new cryptocurrency services designed to make it a
21:20
Speaker 4: hub for digital assets. After rallying thirteen percent yesterday on
21:24
Speaker 4: the heels of that news, shares are extending their gains
21:27
Speaker 4: by three percent today. Elsewhere, Meta pulling back slightly after
21:33
Speaker 4: CEO Mark Zuckerbergunfield a new superintelligence division at the Facebook
21:38
Speaker 4: and Instagram parent company. Goldman Sachs upgraded Hasbro to buy
21:42
Speaker 4: from neutral, with the bank said that new sets from
21:46
Speaker 4: Magic the Gathering could help Hasbro's sales. Shares are up
21:49
Speaker 4: by three percent there and aero Vironment shares down by
21:53
Speaker 4: seven percent after the defense contractor announced proposed offerings of
21:57
Speaker 4: seven hundred and fifty million dollars in common stock and
22:00
Speaker 4: six hundred million dollars in convertible senior notes. DO twenty thirty.
22:04
Speaker 4: I'm Tucker Silvan. That is Wall Street Watch.
22:07
Speaker 2: So for those who are listening on radio and don't
22:10
Speaker 2: have don't have a video clip right now, Paul is
22:12
Speaker 2: wearing one of the busiest shirts I've ever seen, and
22:15
Speaker 2: it's his Happy Gilmore shirt.
22:16
Speaker 4: I am very busy.
22:17
Speaker 2: Earlier wagered my entire life savings on the fact that
22:20
Speaker 2: that was a Father's Day gift. Can you pay that
22:22
Speaker 2: off for me, Paul? Was it a Father's Day present?
22:24
Speaker 3: No, we have an as.
22:27
Speaker 2: We have an E Tucker O. Wow. Congratulations.
22:31
Speaker 3: We have an annual golf tournament every year back where
22:34
Speaker 3: I went to school, and there is always a prize
22:37
Speaker 3: for the best slash worst dressed, and so we always
22:41
Speaker 3: try to put together the most outrageous outfits. And so
22:44
Speaker 3: I busted this one out because it is a slow week.
22:46
Speaker 3: Hopefully no one's coming in the office today and I
22:51
Speaker 3: don't see any important clients.
22:53
Speaker 2: Yeah yeah, but check me out on YouTube. Yeah yeah, face.
22:56
Speaker 2: It's a pretty top.
22:57
Speaker 4: The Financial Exchange on YouTube.
22:58
Speaker 3: But I guess the new Happy Gilmour movie is coming
23:00
Speaker 3: out soon, so I think laxt weekend. My timing was okay, I.
23:03
Speaker 2: Think you can wear this every day for the next
23:05
Speaker 2: six months or so, right through the end of twenty
23:07
Speaker 2: twenty five.
23:08
Speaker 3: If you're going to give me that repersentive approval, then.
23:11
Speaker 2: Do it to it to go. At ten am this morning,
23:15
Speaker 2: we had the job openings and labor Turnover Survey released
23:18
Speaker 2: by the Bureau of Labor Statistics. This is the report
23:22
Speaker 2: that we got the statistic that everyone recalls back in
23:25
Speaker 2: twenty twenty two, when we had a really tight labor
23:28
Speaker 2: market and McDonald's was offering signing bonuses, there were two
23:31
Speaker 2: jobs open for every one person looking for work. As
23:35
Speaker 2: of this report, we're now down to one point one.
23:38
Speaker 2: A very balanced labor market is how most would call it.
23:42
Speaker 2: The one piece of this report. So every month they measure, hey,
23:45
Speaker 2: how many job openings are there, how many listings are
23:47
Speaker 2: there for employment, how many people got laid off, how
23:50
Speaker 2: many people quit voluntarily. The big thing to know this
23:53
Speaker 2: month is that there were very few changes to the
23:55
Speaker 2: previous month when it came to layoffs, quits, raid, any
23:59
Speaker 2: of that stuff. Pretty steady. The one piece that we
24:01
Speaker 2: did see some upward pressure, which is good actually, was
24:07
Speaker 2: that the available positions increased by three hundred and seventy
24:11
Speaker 2: four thousands. So this is the total job openings increased
24:14
Speaker 2: to seven point seven million according to the BLS. Interestingly
24:20
Speaker 2: and kind of lines up with what we've been hearing,
24:23
Speaker 2: the hospitality sector accounted for three quarters. That may increase,
24:27
Speaker 2: So you go talk to hotel owners, you go talk
24:30
Speaker 2: to farmers. What you are hearing, by and large is, look,
24:34
Speaker 2: I have employees that are legal, they are allowed to
24:37
Speaker 2: work here, they have work visas. They are not showing
24:39
Speaker 2: up to work because they're concerned about deportations. Even if
24:43
Speaker 2: they are allowed to work here, they're concerned about it,
24:45
Speaker 2: and they're not showing up to work. So I'm not
24:47
Speaker 2: shocked that we're seeing these job openings and these vacancies
24:50
Speaker 2: in that specific sector. What I am confused about is
24:53
Speaker 2: why sixteen to nineteen year olds can't seem to find out.
24:55
Speaker 2: That's exactly what came to my mind. We covered this
24:58
Speaker 2: yesterday where the unemployment rate for sixteen to nineteen year
25:00
Speaker 2: olds for those summer jobs is really high right now,
25:03
Speaker 2: not quite as high as it was post COVID, when
25:06
Speaker 2: you know, twenty ten, when that rate was like twenty
25:08
Speaker 2: five percent and you had PhD financial crisis. I said,
25:11
Speaker 2: post COVID didn't. Yeah, sorry, post great financial crisis, when
25:15
Speaker 2: you had PhDs, you know, delivering pizzas and nobody could
25:19
Speaker 2: get that summer job. But this would be a moment
25:21
Speaker 2: that I'm just continued to be surprised by, and I
25:25
Speaker 2: can't really make a whole lot of sense of why
25:27
Speaker 2: that youth unemployment rate is ticking up when you do
25:29
Speaker 2: have so many of these vacancies in what I would
25:32
Speaker 2: consider to be pretty typical summer jobs. So we'll see
25:37
Speaker 2: this stuff. You know, you can have data anomalies for
25:38
Speaker 2: a period of time. Jerome Powell is out in Portugal
25:43
Speaker 2: right now for an ECB conference and was asked this
25:47
Speaker 2: morning about the direction of interest rates, and during his panel,
25:51
Speaker 2: he was asked specifically if the Fed would have lowered
25:54
Speaker 2: rates again by now had Trump not announced the levees
25:57
Speaker 2: for many foreign trading partners, and his quoted answer was, quote,
26:01
Speaker 2: I think that's right. In effect, we went on hold
26:04
Speaker 2: when we saw the size of the tariffs, and essentially
26:07
Speaker 2: all inflation forecasts for the United States went up materially
26:10
Speaker 2: as a consequence of the tariffs. So J. Powell has
26:14
Speaker 2: been under immense pressure, obviously from the White House. President
26:17
Speaker 2: Trump stepped up some of that pressure campaign just yesterday
26:20
Speaker 2: with a handwritten I don't know that you call it
26:23
Speaker 2: a handwritten note if they immediately gave it to the
26:25
Speaker 2: press and told them to hold it in front of
26:27
Speaker 2: the camera and say.
26:28
Speaker 4: It was handwriting.
26:29
Speaker 2: Hands Here's the well. But it's not a note.
26:31
Speaker 3: How is the penmanship.
26:32
Speaker 2: It's not a.
26:32
Speaker 4: Note, so excellent penmanship.
26:35
Speaker 2: A note implies, hey, I wrote something and I sent
26:37
Speaker 2: it to somebody, not I wrote something on a piece
26:39
Speaker 2: of paper and showed it to a camera. But nonetheless
26:43
Speaker 2: we can disagree on terms. But the argument he put out,
26:48
Speaker 2: which is a reasonable one to have, which is basically
26:50
Speaker 2: that the United States has the highest FED funds raised,
26:53
Speaker 2: the highest central bank interest rate of most developed countries.
26:56
Speaker 2: There are several that are lower than us, that are
26:58
Speaker 2: attracting investment at the moment, and we need to counteract
27:03
Speaker 2: that with the FED lowering interest rates. And I think
27:08
Speaker 2: that's probably where we end up because I just I
27:10
Speaker 2: just talked to Paul during the last segment about how,
27:13
Speaker 2: in my view, even if you had tariffs in place,
27:16
Speaker 2: that's a very transitory inflation problem. Prices get a one
27:20
Speaker 2: time adjustment based on where those tariffs come in, and
27:24
Speaker 2: then you move along and we're all unhappy, but fine, right,
27:29
Speaker 2: we all hate inflation, but it probably doesn't lead to
27:31
Speaker 2: a self fulfilling increase in inflation. The problem that I
27:37
Speaker 2: think President Trump is putting J. Powell in at this
27:40
Speaker 2: stage is a fewfold. So let's take a step back.
27:44
Speaker 2: If you are jer Own Powell, you have several jobs.
27:48
Speaker 2: The most important one is achieving the dual mandate of
27:51
Speaker 2: inflation and stable prices and full employment. That's the number
27:57
Speaker 2: one mandate. You're also in charge of some bank regulation.
28:01
Speaker 2: But you know what goes into achieving that mandate. What's
28:04
Speaker 2: pretty central to it is both US and foreign investors
28:11
Speaker 2: believing that the Central Bank is independent of the White
28:16
Speaker 2: House and can truly control inflation and inflict opinions on
28:21
Speaker 2: inflation and genuinely control all of that. And so a
28:25
Speaker 2: third objective if you're j Powell at this point in time,
28:28
Speaker 2: is to convince the world that you're independent of the
28:30
Speaker 2: White House. It's not, you know, part of the standard job,
28:34
Speaker 2: but that's kind of part of your role right now,
28:37
Speaker 2: is Hey, we need to maintain and make sure that
28:40
Speaker 2: if you are a Japanese buyer of US treasuries, you're
28:44
Speaker 2: not worried about the idea that I, Jerome Powell, am
28:47
Speaker 2: going to cave to the President and shoot interest rates
28:50
Speaker 2: down and make inflation go through the roof and make
28:53
Speaker 2: you concerned as a Japanese investor that I want to
28:55
Speaker 2: buy those treasuries, because if they don't, then our whole
28:58
Speaker 2: system kind of comes crashing down here. And for that reason,
29:02
Speaker 2: a handwritten note like this that gets pressed all over
29:05
Speaker 2: the media, as well as these comments calling him stupid
29:08
Speaker 2: into lower interest rates, you mostly ignore, but it adds
29:14
Speaker 2: another quiver into the idea that, Okay, I really have
29:16
Speaker 2: to have a well thought out argument and a lot
29:19
Speaker 2: of evidence before I cut interest rates, because otherwise there's
29:24
Speaker 2: gonna be a lot of people who are just saying, hey,
29:25
Speaker 2: you cave to the White House again. I don't think
29:28
Speaker 2: that's the first thing that they talk about every day,
29:31
Speaker 2: but it is in the back of your mind. It's
29:33
Speaker 2: in the back of your mind saying, Okay, if I
29:35
Speaker 2: were going to cut interest rates anyway, can I really
29:38
Speaker 2: lay out the evidence to make a compelling argument, Because
29:40
Speaker 2: if I can't, I'm going to be accused of caving
29:43
Speaker 2: to the White House. It's going to be viewed as
29:46
Speaker 2: an encroachment on my independence, and I don't want that
29:50
Speaker 2: for the stability of the US financial system.
29:52
Speaker 3: I agree with your overall sentim, but don't think it's
29:55
Speaker 3: going to be something that is a conflict that's realized
30:00
Speaker 3: because just what we're looking at here is. I mean,
30:03
Speaker 3: Powell is just recently quoted as saying I would probably
30:05
Speaker 3: have considered cutting rates if the tariffs weren't to arise.
30:08
Speaker 3: So outside of this meeting coming up at the end
30:11
Speaker 3: of July, for future meetings, I don't feel as if
30:15
Speaker 3: if they were to cut in September or December or November,
30:19
Speaker 3: there would be any sort of scrutiny that they would
30:22
Speaker 3: feel from the global economic community because of pressure from
30:27
Speaker 3: the President. Though I agree from a longer term perspective,
30:29
Speaker 3: I share the same sentiments that it is really important
30:33
Speaker 3: to have this nonpartisan sort of separation of the Federal
30:38
Speaker 3: Reserve and the White House, and some of these comments
30:43
Speaker 3: challenge that, And in particular, I believe there was a
30:45
Speaker 3: quote saying that the next FED chair has to be
30:48
Speaker 3: willing to lower interest rates and that's not really what
30:53
Speaker 3: their mandate is, and that to me is concerning You're
30:57
Speaker 3: entitled to your opinion as to whether or not where
31:00
Speaker 3: rates to go, but that independence is central to the
31:04
Speaker 3: US economy.
31:04
Speaker 2: My only point would be that I think there's a
31:07
Speaker 2: compelling argument had the White House been completely mute on
31:11
Speaker 2: FED policy this year, that we might not be talking
31:13
Speaker 2: about September. We might be talking about July for the
31:16
Speaker 2: next FED cut, might be talking about June, might have
31:18
Speaker 2: talked about earlier than it otherwise would have been in
31:21
Speaker 2: the absence of White House pressure on interest rates.
31:24
Speaker 3: Well, the other thing is a lot of this stuff
31:25
Speaker 3: isn't fully resolved on the tearfront. If they're playing the
31:28
Speaker 3: card that they're not sure as to what the impact
31:32
Speaker 3: of tariffs is going to be. That's part of the
31:34
Speaker 3: reason why July is off the table is because this
31:37
Speaker 3: July ninth deadline that's looming.
31:38
Speaker 2: That we have no idea where tariffs are going to be.
31:41
Speaker 3: They're going to likely be extended to the negotiation period
31:44
Speaker 3: will likely be a stunty.
31:45
Speaker 2: Let's take a quick break. When we come back, I
31:48
Speaker 2: want to talk about the US real estate market. A
31:50
Speaker 2: couple pieces in Bloomberg, specifically about Florida and what's going
31:53
Speaker 2: on there. That's next here on the Financial Exchange.
31:56
Speaker 1: Breaking business news as it happens, only here on the
32:00
Speaker 1: Financial Exchange Radio Network. The Financial Exchange streams live on YouTube.
32:06
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32:09
Speaker 1: breaking business news. All morning. Long Face is the Financial
32:12
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32:18
Speaker 2: We've got a pair of pieces from Wall Street Journal
32:21
Speaker 2: as well as Bloomberg on the state of the housing market,
32:25
Speaker 2: which we've talked about over and over at this point,
32:27
Speaker 2: but suffice to say, inventories are ticking up all across
32:32
Speaker 2: the country, but especially in a few specific areas. They're
32:35
Speaker 2: taking longer to sell. And I think those five d's
32:42
Speaker 2: of dodgeball, dodge, dip, duck, dive and dodge, five days
32:46
Speaker 2: of housing, divorce, downsizing, diapers, diamonds, and death. Like, the
32:49
Speaker 2: whole idea here has been for a lot of folks
32:52
Speaker 2: that they wanted to hold onto that lower interest rate,
32:56
Speaker 2: and that lower interest rate. You know, nationally more than
32:59
Speaker 2: seven percent of existing homeowners had mortgage rates below five
33:04
Speaker 2: percent in the first quarter of this year. And so
33:07
Speaker 2: the entire idea, I think has been if I can
33:10
Speaker 2: just hold on a few more months, if I can
33:13
Speaker 2: just hold on a few more years, then interest rates
33:15
Speaker 2: will come down, I can sell this home that doesn't
33:17
Speaker 2: really fit my lifestyle, and I'll just get a new
33:20
Speaker 2: mortgage at those lower rates. And it hasn't happened. We've
33:23
Speaker 2: gotten a few years out. I think there's not a
33:25
Speaker 2: lot of compelling evidence that it's going to happen. And
33:28
Speaker 2: so finally that stuff's starting to hit the market and
33:30
Speaker 2: starting to take a while to sell because, as I
33:33
Speaker 2: just laid out, people don't want seven percent mortgage rates
33:36
Speaker 2: right now, and so it's it's becoming more difficult. I
33:41
Speaker 2: will bring up something that Warren Buffett brought up several
33:44
Speaker 2: times throughout his career, which is the mortgage is one
33:48
Speaker 2: of the best deals out there. You get to borrow
33:52
Speaker 2: money at thirty years at a fixed interest rate, and
33:56
Speaker 2: the rate can only go down.
33:58
Speaker 3: It's nice, it's amazing that you have the power to
34:01
Speaker 3: dictate when.
34:04
Speaker 2: Only go down. Yeah, goes up, you don't care, you're
34:07
Speaker 2: locked in. Goes down, you refinance. That is a one
34:09
Speaker 2: way bet that does not really exist anywhere else in
34:13
Speaker 2: the world for real estate and in the universe for investments.
34:16
Speaker 2: And so it's not to say that housing is affordable
34:20
Speaker 2: or any of those things. It's just a really rare
34:22
Speaker 2: deal that you can get as an American buying a
34:24
Speaker 2: home in.
34:24
Speaker 3: The fixed income market. You'll see it a little bit
34:26
Speaker 3: with the call provisions that some issuers will have, but
34:31
Speaker 3: those not to get too in the weeds of it.
34:34
Speaker 3: Some of them are not just whenever you want. Usually
34:37
Speaker 3: it's one specific date that you have, so it is.
34:41
Speaker 3: It is a tremendous power. What's interesting is just the
34:44
Speaker 3: continued dichotomy of the real estate market here around where
34:47
Speaker 3: our listener base is a lot of the New England
34:49
Speaker 3: region versus nationally in these areas that you cover here
34:52
Speaker 3: where it's almost puzzling. I mean, it's obvious we know
34:55
Speaker 3: what's going on in Florida, but to see some of
34:57
Speaker 3: these numbers in terms of price to prease's sales volume decline,
35:01
Speaker 3: the increased amount of inventory out there, it's just so
35:03
Speaker 3: contrary to what we have.
35:06
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36:07
Speaker 2: We've spoken a lot about the state by state data.
36:09
Speaker 2: I got a little bit more granular this morning because
36:12
Speaker 2: I kind of just get interested in this data on housing.
36:16
Speaker 2: So what I did is I took a look at
36:17
Speaker 2: twenty nineteen versus twenty twenty five again May listings and pricing,
36:21
Speaker 2: and I dove in by city instead, And I had
36:24
Speaker 2: to filter a bunch of stuff out because quite honestly, I
36:27
Speaker 2: don't think anyone cares about, you know, the housing supply
36:30
Speaker 2: on Nantucket. It's not really indicative of what's going on
36:33
Speaker 2: in the overall market. So I said, you know, just
36:35
Speaker 2: give me markets where there's at least five hundred active
36:38
Speaker 2: listings today. And so Florida, obviously, you know, takes a
36:42
Speaker 2: lot of a lot of the cake here. If you
36:45
Speaker 2: go take a look, for instance, at Wildwood the villages
36:48
Speaker 2: in Florida. The jump in listings is about fifty percent.
36:54
Speaker 2: So there were three hundred and seventy six listings back
36:56
Speaker 2: in twenty nineteen. There's now seven hundred and sixty four listings.
36:59
Speaker 2: In twenty twenty five. You know, Cape Corral, Florida was
37:03
Speaker 2: mentioned the increase in listings there. They're up a good
37:06
Speaker 2: thirty percent sixteen sorry, no, thirteen seven hundred listings right
37:12
Speaker 2: now in Cape Corral, up from ninety six hundred. Why
37:16
Speaker 2: in my mind, these things aren't moving. Why there aren't
37:19
Speaker 2: price giant price reductions, So staying on Cape Coral, Florida,
37:23
Speaker 2: Fort Myers, Florida. It's the combination of that area. There
37:26
Speaker 2: were the median listing price in twenty nineteen was two
37:30
Speaker 2: hundred and ninety five thousand dollars. The median listing price
37:33
Speaker 2: now is four hundred thirty thousand dollars. There's just nobody
37:38
Speaker 2: underwater on their mortgages there. There's there's not a whole
37:41
Speaker 2: lot of situations where people are saying, oh boy, I
37:44
Speaker 2: have to sell because I can't afford this. They've seen
37:47
Speaker 2: massive price run ups and so yeah, if you bought
37:49
Speaker 2: one in twenty twenty, you might be losing your shirt
37:51
Speaker 2: on this. Prices are down in this metro area over
37:54
Speaker 2: the last two years, but that's not the majority of
37:56
Speaker 2: the housing stock, right, The majority of the housing stock
37:59
Speaker 2: people have been there for a while while, and so
38:01
Speaker 2: you're starting to see some loosening here. But by and large,
38:04
Speaker 2: this is what's taking place across the country is Yeah,
38:07
Speaker 2: listings are going up, but compared to five years ago,
38:10
Speaker 2: prices are still through the roof. Markets are in mixed territory.
38:13
Speaker 2: We'll have a full recap for you in the next hour.
38:15
Speaker 2: Stay tuned, folks. When we were at back