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Are investors doubting that tariffs will be here long term? · The Financial Exchange Show

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Speaker 2: Good morning, Happy April. I didn't prepare any April Fools
1:15
Speaker 2: pranks for the radio today.
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Speaker 3: They're not allowed, so you don't have to worry about it.
1:19
Speaker 2: Well, I mean, you can't do like, you know, alien
1:22
Speaker 2: invasion type April Fools pranks, but I'm sure I could
1:25
Speaker 2: get away with something fun radio I won't allow it.
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Speaker 2: Well in either case. My my method this morning was
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Speaker 2: the good old food coloring on the kids toothbrushes, and
1:35
Speaker 2: that went off very well. Why because it dies your
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Speaker 2: mouth whatever color you used.
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Speaker 3: Color freaking shoulder.
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Speaker 2: No, okay, god, my kid No, I did it to them,
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Speaker 2: not on myself. No, I know, I know, Okay, they
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Speaker 2: all had to go to school today with blue teeth.
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Speaker 2: It was kind of fun. So I got my April
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Speaker 2: Fools prank out of the way. Wrong with.
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Speaker 4: A lot of things, Mark.
1:59
Speaker 2: Glutton for Punishment. Yeah, usually I do the saran wrap
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Speaker 2: on the toilets, but that's just a prank on myself
2:04
Speaker 2: because my kids don't clean anything. So yeah, anyway, moving
2:09
Speaker 2: on here, we're entering the first day of the second
2:12
Speaker 2: quarter after a pretty abysmal stock market performance for the
2:17
Speaker 2: first quarter of the year. As Wall Street Journal and
2:20
Speaker 2: Bloomberg and everybody else is quick to point out is
2:23
Speaker 2: the worst quarter since twenty twenty two in equity markets,
2:28
Speaker 2: especially in the Nasdaq. To be clear, worst quarter since
2:32
Speaker 2: twenty twenty two is not really saying much in the
2:36
Speaker 2: grand scheme of markets, right Like, so what the S
2:38
Speaker 2: and P five hundred.
2:39
Speaker 4: Is down four and a half per Don't get me wrong,
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Speaker 4: I wrote that in our little update.
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Speaker 2: Yeah it's catchy, but so what it's catchy? Worst quarter
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Speaker 2: in three years? It does certainly catch the headline comment
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Speaker 2: every day you got to write, that's the answer here.
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Speaker 2: And so the conjecture begins about tomorrow and Liberation Day
3:01
Speaker 2: or D Day in tariffs as it's being described. Mark's
3:05
Speaker 2: gonna get very frustrated this episode.
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Speaker 4: So what do we be? Never mind, it doesn't point
3:09
Speaker 4: we are.
3:10
Speaker 2: We are being liberated from the unfair trade policies of
3:13
Speaker 2: our so called allies. That's that's probably what the answer is, Mark,
3:17
Speaker 2: So just deal with it. The questions to me, first
3:23
Speaker 2: of all, for all the people out there that are listening, investing,
3:26
Speaker 2: trying to digest and figure out what is going to
3:28
Speaker 2: come next, just stop, Just don't bother. I'm not saying
3:33
Speaker 2: don't listen. I'm just saying, don't try and guess what
3:35
Speaker 2: the president and his and his administration are trying to
3:39
Speaker 2: do on trade policy ahead of time, because it is
3:42
Speaker 2: not working, I think, is my main message that we've
3:45
Speaker 2: been trying to deliver hero over the last few weeks.
3:48
Speaker 2: For some evidence that in that front, on Sunday of
3:53
Speaker 2: last weekend, so a week ago Sunday, the Wall Street
3:56
Speaker 2: Journal reported, according to sources inside the White House, that
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Speaker 2: there were unlikely to be any sector specific tariffs coming
4:02
Speaker 2: from the Trump administration. Three days later, the Trump administration
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Speaker 2: rolled out the most significant auto tariffs that we've probably
4:08
Speaker 2: ever seen in the United States. So that was wrong.
4:12
Speaker 2: That same day, President Trump alluded to the idea that,
4:15
Speaker 2: you know, his Liberation Day this week that comes tomorrow
4:19
Speaker 2: was going to not be quite as bad as some
4:21
Speaker 2: media outlets were thinking, and then everybody was going to
4:24
Speaker 2: be surprised by it. Equity markets got a little bit
4:28
Speaker 2: excited about that. Then over the weekend of this weekend,
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Speaker 2: he said, no, it's going to affect just about every country.
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Speaker 2: It's not just going to be some small group of
4:34
Speaker 2: ten to fifteen nations were going big. So my point
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Speaker 2: with all of this is that the news has been
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Speaker 2: really volatile on this front, and anybody that's tried to
4:43
Speaker 2: make a buck on day trading this stuff, I would
4:46
Speaker 2: imagine has gotten absolutely demolished on the news. A few things.
4:52
Speaker 2: You know, Equity markets are not quite ten percent off
4:55
Speaker 2: their highs. We said that the S and P, you know,
4:57
Speaker 2: saw its worse quarter since twenty twenty two, which is true,
5:00
Speaker 2: still only down like four point six percent. The Nasdaq
5:03
Speaker 2: fared worst, down about eight point three percent in the
5:05
Speaker 2: first quarter. I think, grand scheme of things, that's not
5:09
Speaker 2: anything that I lose sleep about. Do you lose sleep
5:12
Speaker 2: about the S and P? Losing four point six percent
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Speaker 2: in three months?
5:16
Speaker 4: In a vacuum? In a vacuum.
5:18
Speaker 2: Now, I know that there are other reasons to be,
5:20
Speaker 2: you know, concerned about what that might happen next here,
5:23
Speaker 2: But in a vacuum.
5:23
Speaker 4: That's a little like saying, don't worry about that mole. Yeah, yeah,
5:28
Speaker 4: but you said it was malignant. Well yeah, but would
5:31
Speaker 4: you normally worry about them?
5:32
Speaker 1: All right?
5:32
Speaker 4: Well no, but this one you said was so I
5:35
Speaker 4: don't know, Mike, I guess I have the premise, but
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Speaker 4: I know what.
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Speaker 2: You're getting at the I think the point that I
5:40
Speaker 2: would make was, it'd be quite frankly, if the terriffs
5:43
Speaker 2: that are being threatened to go and stay into place
5:45
Speaker 2: for a long period of time, I would honestly expect
5:48
Speaker 2: equity markets to perform a heck of a lot worse
5:50
Speaker 2: than what they have done so far. And so I
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Speaker 2: think there are still a lot of investors that are
5:54
Speaker 2: still doubting the likelihood of these implementation of tariffs long term.
5:59
Speaker 2: And you know, I'm one of them. I'm not sure
6:00
Speaker 2: that they are going to be here long term. But
6:02
Speaker 2: that is one of my takeaways is there is still
6:04
Speaker 2: some relentless optimism. See markets yesterday, which started off the
6:08
Speaker 2: day down more than one percent, NASDAC often more than
6:11
Speaker 2: two and generally finished positive for the day.
6:15
Speaker 4: Yeah, there's a lot of inertia in the US economy.
6:17
Speaker 4: It's going to be hard. They're trying to fundamentally restructure it,
6:20
Speaker 4: which is an enormous gamble. The Soviets tried it. It
6:24
Speaker 4: didn't work out well. I'm not saying tens of millions
6:27
Speaker 4: will die here of famine, but typically when big economies
6:31
Speaker 4: try to do an abrupt kind of one to eighty,
6:33
Speaker 4: it doesn't work out. Well, it's not. Some have said
6:37
Speaker 4: that that's the sort of purpose of this, This is
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Speaker 4: part of a grander scheme to return the US to
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Speaker 4: the halcyon days of the nineteenth century, or something like that.
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Speaker 4: I don't know, Mike. Are is the purpose to raise revenue?
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Speaker 4: Is the purpose to exclude exports and bring manufacturing jobs here?
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Speaker 4: Those two things are absolutely exclusive. If tariffs work, people
7:01
Speaker 4: will shift consumption to domestic goods, which may not, by
7:04
Speaker 4: the way, be cheaper, at which case they will not
7:08
Speaker 4: raise any revenue. And you can't say use them to
7:11
Speaker 4: offset to packer income tax elimination or something like that.
7:15
Speaker 4: So the stated purposes are intention or exclusive, or contradictory,
7:21
Speaker 4: whatever you want to call it. I don't know what
7:23
Speaker 4: the objective is. If you're just mad because we import
7:27
Speaker 4: more than we export, you can blame that on the
7:29
Speaker 4: fact that we don't save enough. That's the flip side
7:32
Speaker 4: of us being an attractive investment venue. That's a bit
7:35
Speaker 4: of a technical concept that I won't elaborate on right now,
7:38
Speaker 4: but trust me, it holds. There are better ways. If
7:42
Speaker 4: you're angry at the trade deficit, there's a surefire way
7:46
Speaker 4: to reduce it. It's and this sounds counterintuitive, but it's
7:48
Speaker 4: ironclad increase our savings rate and that could mean the
7:51
Speaker 4: government spending less two, which they're trying to do. But
7:55
Speaker 4: I've never heard any policy maker connect those two things,
7:58
Speaker 4: at least not recently.
7:59
Speaker 2: Here would be my point for tomorrow. The administration is
8:05
Speaker 2: very clearly on the path of higher trade barriers. I
8:07
Speaker 2: don't think there's really any debate or diverting from that path.
8:11
Speaker 2: And so what I would like to hear I don't
8:14
Speaker 2: know that I will. But what I would like to
8:16
Speaker 2: hear and or in casts, who's clearly, you know, influencing
8:20
Speaker 2: a lot of this administration is a very much non
8:25
Speaker 2: mainstream economist who has been promoting trade for an NBA. Okay,
8:30
Speaker 2: in any case, he's close to the administration as being
8:33
Speaker 2: and is being followed significantly here. And where does he
8:38
Speaker 2: work now, He's at the He's at some think tank.
8:43
Speaker 2: His point is with these tariffs, if you're going to
8:46
Speaker 2: use them, that there can be several purposes for them,
8:49
Speaker 2: one of which could be opposing countries like China, who
8:52
Speaker 2: we think are strategically important for us to oppose and
8:57
Speaker 2: change their influential patterns, and other might be to break
9:00
Speaker 2: down other countries trade barriers and get a okay, fair enough,
9:04
Speaker 2: and get a more open system of trade. By his
9:08
Speaker 2: own self admission, you're not really seeing any of that
9:11
Speaker 2: right now. And while I might not be really in
9:14
Speaker 2: favor of tariffs as a system to kind of guide
9:18
Speaker 2: the economy, this administration is. And so my hope is
9:21
Speaker 2: that if they're going to use them, there is more
9:24
Speaker 2: clarity about what the purpose is, because so far, I
9:27
Speaker 2: think that's been the single biggest frustration from businesses and
9:31
Speaker 2: other countries like Canada, some of our closest trade partners
9:35
Speaker 2: and allies, is you're imposing these The car ones were
9:38
Speaker 2: actually pretty clear, whether you agree or disagree. The car
9:42
Speaker 2: terriffts were pretty clear. We want to manufacture cars domestically,
9:46
Speaker 2: so we're imposing tariffs on all other vehicles.
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Speaker 4: Okay, you peel that back a layer, though, why why
9:52
Speaker 4: automotive manufacturing? Why not some other industry.
9:55
Speaker 2: I'm not saying I agree, but at least it was clear,
9:58
Speaker 2: right like, at least there was very very clear purpose
10:01
Speaker 2: behind them. We want to have more auto Is that.
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Speaker 4: The purpose though? Or is it rather to force Europe
10:07
Speaker 4: to open their markets? And this, by the way, may
10:10
Speaker 4: do nothing for the trade deficit. But let's put that aside.
10:13
Speaker 4: I've also heard that they are mad that Europe's markets
10:17
Speaker 4: are not more open to our cars, So.
10:19
Speaker 2: I guess that would be my point, Mark is we're
10:23
Speaker 2: going forth on this liberation Day, and my question for
10:26
Speaker 2: the administration, which they have no need to answer, because
10:30
Speaker 2: who am I to ask, is what sort of clarity
10:33
Speaker 2: are there to European countries, to Canada, to Mexico, to China.
10:37
Speaker 2: Of hey, this is the purpose of these and this
10:41
Speaker 2: is the new operating agreement under which the United States
10:44
Speaker 2: is operating. Rather than one day it's about fentanyl one day,
10:47
Speaker 2: it's about taxes, one day, it's about this, that or
10:49
Speaker 2: the other. If it remains that, then you've got a
10:52
Speaker 2: real problem because then I think, rather than Europe working
10:55
Speaker 2: to bring down trade barriers and set up a new system,
10:59
Speaker 2: the reaction is going to be, well, fine, if you're
11:01
Speaker 2: going to do it, we're going to do the same thing,
11:02
Speaker 2: and we're just going to continually accumulate new barriers to
11:05
Speaker 2: trade because there is no end outcome by which we
11:08
Speaker 2: can fix this problem. So in any case, it's kicking
11:12
Speaker 2: off tomorrow at a more significant degree as far as
11:14
Speaker 2: we know, and that's what I'll be looking for in
11:17
Speaker 2: all of this is not only what are the new
11:19
Speaker 2: rules of the road, but what is the purpose behind
11:23
Speaker 2: these new rules and how is it going to benefit Americans.
11:29
Speaker 2: That's what I'm trying to sort out from all those
11:31
Speaker 2: and that's what I think, yes, well, distinctly lacking.
11:33
Speaker 4: Unless somebody like hits their head and has some kind
11:35
Speaker 4: of revelation in the next twenty four hours, that ain't
11:37
Speaker 4: gonna happen. We're gonna hear a little preamble for too
11:40
Speaker 4: long these companies countries have been ripping us off. That
11:43
Speaker 4: ends it's not going to be anything more high minded
11:46
Speaker 4: or long term than some vindictive statement about revenge for
11:51
Speaker 4: getting ripped off. And consequently, we're going to apply these tariffs,
11:55
Speaker 4: which will probably all be removed within the next three
11:58
Speaker 4: to five days.
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Speaker 2: And the first part to me is fine, like if
12:01
Speaker 2: there was if there's a vindictiveness, because we want to
12:04
Speaker 2: stick it to Europe based on their own unfair trade practices,
12:07
Speaker 2: which there are some, right like, there are some unfair
12:10
Speaker 2: trade practices in Europe that I think are unreasonable, then
12:14
Speaker 2: state that and say great, and if we can, you know,
12:18
Speaker 2: get to a point where there's free trade, then we
12:20
Speaker 2: can bring down those barriers and return to a position
12:24
Speaker 2: of trading freely, because you know what, I'll go toe
12:27
Speaker 2: to toe to toe with German auto manufacturers and delivering
12:31
Speaker 2: a good product to American citizens here in the United
12:33
Speaker 2: States with no trade barriers every single day. I don't
12:36
Speaker 2: think we need those in order to compete. Does anybody
12:38
Speaker 2: look at an American made Toyota and say, Wow, what
12:41
Speaker 2: a rip off on that car? Like, No, they You're
12:45
Speaker 2: able to make it here domestically at a pretty reasonable price,
12:47
Speaker 2: and nobody's upset about the quality, And so that would
12:51
Speaker 2: be my long term mop. I'm with you, we have
12:53
Speaker 2: not gotten that to this point, and I'm hoping that
12:57
Speaker 2: you know, it's also only been two and a half
12:58
Speaker 2: months that as time goes on and we start to
13:00
Speaker 2: get more of that clarity, Let's take a quick break.
13:02
Speaker 2: When we come back, I want to dive more into
13:04
Speaker 2: this issue that has been permeating the idea of economics
13:10
Speaker 2: over the last few years here, which is trade deficits,
13:12
Speaker 2: what causes them, what does it actually mean, and what
13:16
Speaker 2: the Trump administration seems to be targeting right now. That's
13:18
Speaker 2: next year on the Financial Exchange.
13:21
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13:50
Speaker 2: Mark, I want to talk about an economic boogeyman, the
13:53
Speaker 2: notorious trade deficit. I think I don't know if it's
13:59
Speaker 2: just because the word deficits in there, and so it's
14:02
Speaker 2: you know, people affiliated with budget deficits, which I think
14:05
Speaker 2: are a much different and completely separate problem, but related.
14:09
Speaker 4: To the savings related through savings.
14:12
Speaker 2: We've been running deficit trade deficits in this country since
14:16
Speaker 2: what nineteen eighty nineteen.
14:18
Speaker 4: Eighty consistently since nineteen eighty eight, so a good.
14:20
Speaker 2: Forty five years we've been running deficits, and they've been
14:24
Speaker 2: widening pretty significantly. Yeah, there's a turn to that forty
14:27
Speaker 2: five year time periods. There's a big trend there. I guess.
14:32
Speaker 2: First things first, let's not trying to spell the boogeyman myth.
14:35
Speaker 2: Let's let's just start off with why deficits now more
14:39
Speaker 2: than more than in the past, and where to go
14:41
Speaker 2: from there.
14:43
Speaker 4: It's not a coincidence that trade deficits started to get
14:46
Speaker 4: really big in the nineteen eighties at the same time
14:47
Speaker 4: that budget deficits did, and at the same time that
14:50
Speaker 4: the personal savings rate fell. The trade deficit is a
14:52
Speaker 4: function of how much we save here. And that might
14:55
Speaker 4: sound counterintuitive. What are these who have to do with
14:57
Speaker 4: one another? They're directly related. When we when we buy
15:01
Speaker 4: an export, we send dollars abroad. Those dollars have to
15:05
Speaker 4: go somewhere. Those dollars end up coming back to US.
15:08
Speaker 4: People say a German view, buy a German car, the
15:11
Speaker 4: example I used this morning. Internally, those dollars are then
15:14
Speaker 4: used by the German seller to buy Treasury bonds or
15:18
Speaker 4: to invest in other US assets. And the fact of
15:21
Speaker 4: the matter is we've been a relatively attractive relative to
15:25
Speaker 4: Europe and other developed countries, attractive investment venue for a
15:28
Speaker 4: very long time. That draws in investment dollars. Those dollars
15:32
Speaker 4: have to come from somewhere. They come from our trade deficit.
15:35
Speaker 4: If we saved more both, if the federal what do.
15:38
Speaker 2: You mean by we? What does that mean? In particular?
15:42
Speaker 4: It's an excellent question because I'm being a little fast
15:44
Speaker 4: and loose if we as individuals saved more, If personal
15:48
Speaker 4: the personal savings level was higher, we could meet more
15:51
Speaker 4: of the demand for capital by through our own savings. Here,
15:55
Speaker 4: if the federal government saved more i e. Ran a
15:58
Speaker 4: small had less dissaving more accurately, had a smaller deficit,
16:02
Speaker 4: our trade deficit would necessarily be smaller. That is not intuitive.
16:07
Speaker 4: The first time I heard it, it was in an Internet.
16:09
Speaker 4: You only get this an international economic And not only
16:12
Speaker 4: do you have to take an economic scopes, you have
16:13
Speaker 4: to take an international economics courts. Because they don't teach
16:16
Speaker 4: this in like macro micro It's obscure for most people.
16:20
Speaker 4: I remember having a lot of these discussions in nineteen
16:22
Speaker 4: ninety three when NAFTA was happening. I happened to be
16:25
Speaker 4: in college at the time, and it was a hot topic.
16:27
Speaker 4: And it's hard to get across to someone who's never
16:30
Speaker 4: because I was on the other side of the table.
16:32
Speaker 4: Teacher explain to me why Massachusetts should trade with Rhode Island.
16:36
Speaker 4: Why do we let Rhode Island workers in now we're
16:38
Speaker 4: in Massachusetts. On being mass Chusetts centric. Sure, part of
16:40
Speaker 4: our audience, I don't think they join us for half
16:41
Speaker 4: hours from Rhode Island, so I'll pick on them.
16:43
Speaker 2: Nice.
16:44
Speaker 4: Why should I buy anything made in Rhode Island? Why
16:46
Speaker 4: wouldn't I seport Massachusetts only? Well, the short answer is
16:49
Speaker 4: there are some things that Rhode Island does more efficiently,
16:51
Speaker 4: or Maine or New Hampshire, and others that Massachusetts does
16:54
Speaker 4: more efficiently. New Hampshire may ship US durable goods, we
16:58
Speaker 4: ship them financial services or tech support. That's because we
17:02
Speaker 4: do one relatively more efficiently. Now I'm moving now from
17:06
Speaker 4: why there's a trade deficit to gains from trade. These
17:09
Speaker 4: two things are related, and I got to tell you, Mike,
17:11
Speaker 4: these are non intuitive concepts. You really got to think
17:13
Speaker 4: about them. But once you do, you realize that the
17:15
Speaker 4: trade deficit is not inherently bad, as you said, nor
17:19
Speaker 4: is it inherently good. It follows from the level of
17:24
Speaker 4: capital opportunities we have here, the number of capital open
17:27
Speaker 4: opportunities for investment, and how much we we save.
17:31
Speaker 2: I do find that I have a tougher time calling
17:34
Speaker 2: the trade deficit good or bad. I have an easier
17:36
Speaker 2: time calling the United States debt yeah bad.
17:42
Speaker 4: Well, if it's not bad, it's used to win World
17:44
Speaker 4: War Two. It's not bad when it's used to fight
17:46
Speaker 4: a recession. It's bad when you are in economic recovery,
17:49
Speaker 4: as we have been for the past few years, and
17:51
Speaker 4: you're running huge structural deficits, as we've been doing now
17:55
Speaker 4: really for a generation, even in economic good times.
17:58
Speaker 2: So, as I've been saying any many times before, we
18:01
Speaker 2: have not seen the level of tariffs that are being
18:03
Speaker 2: discussed right now since the nineteen forties. And so anybody
18:05
Speaker 2: telling you that they know how it's going to play
18:07
Speaker 2: out in markets, the financial currencies, any of that stuff,
18:12
Speaker 2: I think is lying to you because nobody has any
18:16
Speaker 2: real idea. Nobody's been investing in the nineteen forties that's
18:18
Speaker 2: still alive today. But one of the things that catches
18:21
Speaker 2: my eye about all this is if you are implementing
18:24
Speaker 2: these trade barriers, I think we I think it's been
18:27
Speaker 2: generally accepted and most people understand that prices likely go
18:30
Speaker 2: up in those scenarios. But the downstream effects of this
18:33
Speaker 2: I don't think have been really figured out or spelled out.
18:35
Speaker 2: And one of them that comes to mind is less
18:38
Speaker 2: foreign investment into the United States, and that could mean a.
18:43
Speaker 4: Higher interest rates and a higher dollar, which and a
18:46
Speaker 4: higher dollar which in turn exacerbates the trade deficit. So
18:49
Speaker 4: you're in this vicious circle at that point, which is
18:51
Speaker 4: why people are talking about the dangers of a stronger
18:54
Speaker 4: dollar attendant with trade restrictions and the forces that will
18:59
Speaker 4: as a result push up interest rates. All these things
19:01
Speaker 4: are connected, sometimes in very obscure and nons.
19:05
Speaker 2: And that dollar dominance is a concerning one to me.
19:08
Speaker 2: Right if you suddenly have interest rates start creeping up
19:12
Speaker 2: on our massive amount of government debt because of less
19:16
Speaker 2: investment into the United States, more less purchasing of treasuries,
19:19
Speaker 2: less purchasing of dollars because there's just no dollars for
19:22
Speaker 2: those foreign countries to go into here, that that is
19:26
Speaker 2: a scenario that long term becomes much more concerning. Wall
19:29
Speaker 2: Street Watches next. Stay tuned.
19:31
Speaker 5: Folks like us on Facebook and follow us on Twitter
19:45
Speaker 5: at TFE show.
19:46
Speaker 6: Breaking business news is always first right here on the
19:50
Speaker 6: Financial Exchange Radio Network. Time now for Wall Street Watch
19:56
Speaker 6: a complete look at what's moving markets so far today.
19:59
Speaker 1: Right here Financial Exchange Radio Network.
20:02
Speaker 3: Markets are kicking off the second quarter in negative territory
20:07
Speaker 3: as investors eagerly await President Trump's tariff policy roll out
20:11
Speaker 3: tomorrow afternoon. The report from The Washington Post this morning
20:15
Speaker 3: said that the Trump administration is considering implementing tariffs of
20:20
Speaker 3: about twenty percent to most imports into the US. At
20:24
Speaker 3: the moment, the Dow is down by about one percent
20:27
Speaker 3: or three hundred and eighty nine points, SMP five hundred
20:30
Speaker 3: down by two thirds of a percent or thirty five points,
20:34
Speaker 3: and the Nasdaq is down by about four tenths of
20:36
Speaker 3: a percent or seventy three points of Russell two thousand
20:39
Speaker 3: down over one percent or twenty three points. Ten year
20:42
Speaker 3: Treasure Reel down by ten basis points this morning at
20:45
Speaker 3: four point one four percent, and crude oil up about
20:50
Speaker 3: half a percent higher, trading just below seventy two dollars
20:53
Speaker 3: a barrel. Johnson and Johnson shares down by over four
20:57
Speaker 3: percent after a judge dismissed the front meaceutical company's third
21:01
Speaker 3: attempt to resolve its mass talcum powder liabilities through Chapter
21:05
Speaker 3: eleven bankruptcy. Meanwhile, shares in PVH surging by over sixteen
21:11
Speaker 3: percent after the parent company to Calvin Klein and Tommy
21:14
Speaker 3: hillfigure posted stronger than expected fourth quarter earnings. Elsewhere, shares
21:19
Speaker 3: and XPANG are up by two thirds of a percent
21:22
Speaker 3: after the Chinese ev makers that had delivered thirty three
21:26
Speaker 3: two hundred and five vehicles last month, or an increase
21:30
Speaker 3: of more than two hundred and sixty percent from the
21:32
Speaker 3: same month a year ago. Several airline stocks are seeing
21:37
Speaker 3: modest losses on the day following downgrades by Jeffries to underperform.
21:42
Speaker 3: American Airlines down by four percent, Delta down by five percent,
21:46
Speaker 3: in Southwest down by just over three percent. Newsmax jumping
21:51
Speaker 3: another eighty three percent.
21:53
Speaker 1: I just turned on my mic I don't know why.
21:55
Speaker 3: Yeah, thanks. Newsmax up another eighty three percent after the
21:59
Speaker 3: cable news use network swored more than seven hundred percent
22:02
Speaker 3: yesterday and it's public debut on the New York Stock Exchange,
22:06
Speaker 3: and soft Bank agreed to lead a funding round of
22:09
Speaker 3: up to forty billion dollars in a subsidiary of open Ai,
22:12
Speaker 3: valuing the chat GPT maker at three hundred billion dollars.
22:19
Speaker 3: I'm Tucker Silvan.
22:20
Speaker 1: That's Wallstree Watch.
22:22
Speaker 2: We are taking a look at the calendar ahead here
22:25
Speaker 2: and there's a number of different reports on the economy
22:28
Speaker 2: coming out this week, all of them frankly kind of
22:32
Speaker 2: fall down when compared to the announcements. We're gonna get
22:34
Speaker 2: tomorrow on tariffs, but nonetheless we'll be getting some updates
22:37
Speaker 2: on the state of the labor market. We already got
22:39
Speaker 2: one this morning with the Job Opening Survey. That's the
22:42
Speaker 2: Joltz report that we report on once a month. Friday
22:45
Speaker 2: of this week will get the all important Jobs Report,
22:48
Speaker 2: So that comes out at eight thirty am on Friday
22:50
Speaker 2: and is the one that's traditionally looked at to get
22:53
Speaker 2: a fuller sense of the state of the employment situation
22:56
Speaker 2: in the United States. Thursday of this week will receive
22:59
Speaker 2: initial Jobe claims. Again, if you're trying to take a
23:01
Speaker 2: look at hey are layoffs starting to tick up in
23:04
Speaker 2: any meaningful way, you will find it there first, as
23:07
Speaker 2: that's the weekly jobless claims number. Important caveat there when
23:12
Speaker 2: we talk about government job cuts, they actually file for
23:14
Speaker 2: unemployment under a separate system, So, as far as I know,
23:17
Speaker 2: those cuts don't actually make it into the weekly Jobs
23:21
Speaker 2: weekly jobless claims. Right, Yeah, all the knock on stuff
23:23
Speaker 2: will see, right, That would be the I think the
23:26
Speaker 2: more important part when I think about government job cuts. Honestly,
23:30
Speaker 2: I'm not really worried about that in of itself driving
23:32
Speaker 2: up the unemployment rate. I think about the cuts at
23:35
Speaker 2: places like Harvard, at MGH. You all sorts of publicly
23:39
Speaker 2: funded institutions that are also looking at potential hot I
23:43
Speaker 2: know Harvard for instance, looking at a hiring freeze. In
23:45
Speaker 2: other places as well potentially looking at that depending on
23:48
Speaker 2: where the government funding goes. Those will show up in
23:51
Speaker 2: initial jobless claims if they start to. But to this point,
23:54
Speaker 2: layoffs have not been something that I've been hearing a
23:57
Speaker 2: lot about.
23:59
Speaker 4: No, because the job market generally there are some exceptions
24:03
Speaker 4: to this, but generally it's a lagging indicator. Yeah, right
24:07
Speaker 4: when we get it. For the most part, when we
24:09
Speaker 4: get a data point on the job market, it usually
24:12
Speaker 4: reflects decisions made weeks months before the data is released,
24:17
Speaker 4: unlike some of the more timely that is more regularly
24:22
Speaker 4: updated stuff like the stock market, which although an imperfect one,
24:26
Speaker 4: it's viewed as a leading indicator. So not all of
24:29
Speaker 4: the things that we talk about, and we do have
24:30
Speaker 4: to talk about them all, but they're not all equal.
24:33
Speaker 4: Some are the equivalent of looking in the rearview mirror,
24:36
Speaker 4: others potentially more forward looking. I'm far more worried about
24:39
Speaker 4: the surveys, which some pooh pooh, I wouldn't because of
24:43
Speaker 4: confirming evidence in equities and more recently in spending. As
24:47
Speaker 4: I'm sure you and Chuck have talked.
24:48
Speaker 2: About not to mention too. I mean, if you are
24:50
Speaker 2: a private organization, a private company that employs people, laying
24:54
Speaker 2: them off is kind of one of your last resorts.
24:57
Speaker 2: Generally speaking, unless you're just the most generous business owner
25:01
Speaker 2: out there, you're not trying to employ a bunch of
25:02
Speaker 2: extra people that you do not need. That doesn't make
25:05
Speaker 2: you terribly competitive in your space. Instead, you try and
25:08
Speaker 2: run in a lean, efficient organization, and if you have
25:13
Speaker 2: to lay people off, it's usually not because you know,
25:18
Speaker 2: you just have extra people hanging around. It's a last
25:20
Speaker 2: resort to a business downturn. And so what you'll frequently
25:24
Speaker 2: see is things other than layoffs taking place in order
25:27
Speaker 2: to cut costs, like hey, we are pausing all business travel,
25:32
Speaker 2: or you know, no conferences this year, or the four
25:34
Speaker 2: to one k match is taking a hit this year,
25:37
Speaker 2: or bonuses are getting affected this year as a result
25:40
Speaker 2: of a business downturn. One of the last things to
25:42
Speaker 2: go is, hey, we're doing layoffs with a portion of
25:45
Speaker 2: our workforce, because quite frankly, they're inefficient and expensive. You
25:49
Speaker 2: end up firing more people than people that you likely
25:52
Speaker 2: still need but can't afford, and you end up having
25:55
Speaker 2: to pay things like severance and face potential lawsuits. It's
25:58
Speaker 2: usually an object of last resort.
26:00
Speaker 4: When the autonomy inevitably starts to expand again, you need
26:03
Speaker 4: to probably fill the position again, which is a lot
26:05
Speaker 4: more expensive than keeping somebody on board, even if they're
26:07
Speaker 4: not fully utilized.
26:09
Speaker 2: So to this point, unemployment rate has stayed remarkably steady.
26:12
Speaker 2: We're sitting at four point one percent, which is, yes,
26:15
Speaker 2: significantly higher than the all time or not all time,
26:18
Speaker 2: but significant low we got in twenty twenty three. I
26:23
Speaker 2: think March of twenty twenty four might have been down
26:27
Speaker 2: at three point four percent. I need to refresh my
26:29
Speaker 2: memory on that. But for context here, your four point
26:33
Speaker 2: one percent is a very very low unemployment rate. Did
26:36
Speaker 2: I don't think we even ever got down below five
26:38
Speaker 2: percent in the time between the dot com bubble and
26:40
Speaker 2: the Great Recession? Right, So, like unemployment going into the
26:44
Speaker 2: Great Recession was significantly higher than it is now, and
26:47
Speaker 2: I would think most people would describe two thousand and
26:49
Speaker 2: six as a pretty darn good economy. What did we
26:52
Speaker 2: receive this morning from the Bureau Labor Statistic, that monthly
26:55
Speaker 2: Joltz report that comes out. Where we looked at this
26:59
Speaker 2: in particular was back in twenty twenty two when we
27:03
Speaker 2: were seeing high inflation, there was that statistic that kept
27:06
Speaker 2: getting through and out. Look, there's two jobs open for
27:09
Speaker 2: every one person looking for work. Of course, wages are
27:12
Speaker 2: going up. Of course we're seeing bonuses getting paid to
27:14
Speaker 2: McDonald's workers. Like this is helping explain the phenomenon at
27:18
Speaker 2: the moment. What did we see from this report this morning?
27:21
Speaker 4: Status quo, Mike, is the bottom line a number of
27:24
Speaker 4: job opening So I'll just quote here from the Bureau
27:27
Speaker 4: of Labor Statistics was little change. They loved this phrase,
27:30
Speaker 4: little changed at seven point six million job openings in February.
27:35
Speaker 4: Over the month, they say hires, total separations held it
27:39
Speaker 4: blah blah blah. I don't need to go through every number.
27:42
Speaker 4: The bottom line is it's a status quot report. Some
27:45
Speaker 4: evidence of easing perhaps in the exceptionally tight labor market
27:51
Speaker 4: conditions we saw over the last couple of years. There
27:53
Speaker 4: is a modest downward trend in job openings. The question
27:57
Speaker 4: is does it matter? Does this statistic help us forecast.
28:01
Speaker 4: I think most people are interested at least I am
28:03
Speaker 4: does this help us forecast inflation? Is it a good
28:06
Speaker 4: measure of slack or tightness in the economy During the
28:09
Speaker 4: COVID economy and before too. In about the decade before
28:12
Speaker 4: this became a popular measure variable, more specifically for economists
28:17
Speaker 4: to include in their inflation forecasting models, it started to
28:21
Speaker 4: do a good job better than the unemployment rate. When
28:23
Speaker 4: you put both in your model. The unemployment rate became superfluous,
28:26
Speaker 4: so people started to gravitate towards this measure, as researchers say, hey,
28:30
Speaker 4: this helps us forecast that relationship. Now, as many do,
28:34
Speaker 4: it's sort of broken down. Wouldn't surprise me if in
28:36
Speaker 4: three to five years nobody cared about jolts anymore. Because
28:41
Speaker 4: relationships among economic variables, unfortunately or not.
28:44
Speaker 2: Stay you're ever changing. I think one thing it does
28:46
Speaker 2: seem to I guess confirm and if you've spoken to
28:50
Speaker 2: somebody that's out of a job right now, or maybe
28:52
Speaker 2: a graduating senior from a local university you've been chatting with,
28:56
Speaker 2: the narrative that I continue to hear is that it's
28:59
Speaker 2: a very challenging market for that segment of the population.
29:01
Speaker 2: There are a lot of companies that are on hiring
29:04
Speaker 2: freezes around here. There are a number of companies that
29:06
Speaker 2: are just not looking to make a hire without a
29:09
Speaker 2: high level of experience. I suspect that is purely because
29:13
Speaker 2: of business uncertainty. There's also been conjecture around the role
29:16
Speaker 2: of artificial intelligence impacting younger persons jobs, but I just
29:20
Speaker 2: I haven't seen enough evidence to support that theory that
29:23
Speaker 2: hey AI is cutting investment banking jobs or entry level
29:27
Speaker 2: accounting jobs, for example. Maybe it's happening, but to this point,
29:30
Speaker 2: I don't think there's enough evidence to confirm it.
29:32
Speaker 4: Now, just anecdotes. Some investment managers say they're now using
29:36
Speaker 4: software to help them read the introductory materials sent to
29:41
Speaker 4: them by a perspective sent to them by a firm
29:46
Speaker 4: in which they're considering making or an investment in which
29:49
Speaker 4: they're considering making an investment. Some are using that, but
29:52
Speaker 4: you still need a human being to sort through much
29:55
Speaker 4: of it.
29:56
Speaker 2: I don't think there's not a show when I talked
29:57
Speaker 2: about this, but my first job at this company, Armstrong
30:00
Speaker 2: Advisor Group, twelve years ago is basically falling people around
30:04
Speaker 2: and taking notes for them. That job isn't almost entirely
30:09
Speaker 2: unnecessary in the day of days of artificial intelligence, right,
30:12
Speaker 2: If you want to use an AI note taking tool,
30:15
Speaker 2: whether you're at a doctor's office, whether you're in a
30:17
Speaker 2: financial advisor's office, you can generally do so, and it's
30:20
Speaker 2: probably going to do very nearly as good a job
30:23
Speaker 2: as I once did as a twenty two year twenty.
30:27
Speaker 2: I don't know how that was when I started doing
30:29
Speaker 2: that twenty five maybe or nearly as or perhaps even
30:32
Speaker 2: better than I could have by transcribing every word. So
30:37
Speaker 2: there are some jobs that I do believe are on
30:39
Speaker 2: their way out, that one being a good example of them.
30:43
Speaker 2: But yeah, I just don't think we've seen any evidence
30:47
Speaker 2: of that really taking grip in the labor market yet.
30:49
Speaker 2: So more status quo from this job, from this job's report,
30:53
Speaker 2: the Jolts report, companies are not massively hiring, nor are
30:56
Speaker 2: they massively firing, and employees are doing in a bit
31:00
Speaker 2: of the same. They're not jumping ship for that new
31:02
Speaker 2: job and are are kind of settling in, seems to
31:05
Speaker 2: be the message from this report. Let's take a quick
31:07
Speaker 2: break when we come back Sweden's approach to social security.
31:11
Speaker 2: What did they get right? What did they get wrong?
31:13
Speaker 2: And can it be applied here in the United States.
31:15
Speaker 2: That's next.
31:17
Speaker 1: Thankst us six one, seven, three, six, two, thirteen eighty
31:20
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31:23
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31:25
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31:50
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32:20
Speaker 2: Years ago, Sweden faced a similar problem to what we
32:23
Speaker 2: do here in the United States, which was, hey, our
32:25
Speaker 2: population of working class at Swedes is not growing fast
32:31
Speaker 2: enough to support our future retirees, I almost said Americans,
32:33
Speaker 2: which was not what they are, and so we need
32:37
Speaker 2: to do something differently. And what they did seemingly worked
32:41
Speaker 2: pretty well. They took a portion of the payroll tax,
32:44
Speaker 2: which you know right now is your FIKA, the portion
32:47
Speaker 2: of your income that goes towards Social Security. Your employer
32:50
Speaker 2: also contributes an equal amount, and they started putting it
32:53
Speaker 2: into a government sponsored basically investment pension plan, so you
32:59
Speaker 2: could go in and chew is one of five different options,
33:01
Speaker 2: and quite frankly, it sounds very similar to the thrift
33:04
Speaker 2: Savings Plan the TSP here in the United States for
33:07
Speaker 2: federal employees. If anybody is familiar with that, that's listening.
33:10
Speaker 2: There's like five options. They are incredibly cheap and they're
33:15
Speaker 2: just broad based investment options for you. And the point
33:19
Speaker 2: was made that, hey, that grew the fund fast enough
33:22
Speaker 2: in order to keep pace with the problems that the
33:25
Speaker 2: pension system was facing. And you know, it's quasi privatization
33:31
Speaker 2: of the Swedish pension system, which I know a lot
33:33
Speaker 2: of Americans are afraid of, but generally I don't think
33:37
Speaker 2: that I'm opposed to this idea. What I am opposed
33:40
Speaker 2: to is pretending that it is going to fix our
33:42
Speaker 2: problems with our so security system here in the United States,
33:46
Speaker 2: because we're starting way too late. Had somebody dreamed up
33:48
Speaker 2: this idea forty years ago, maybe we would have been
33:52
Speaker 2: okay here to say, yeah, the portion that's gone into
33:56
Speaker 2: that private, stock market based pension system more than makes
34:00
Speaker 2: up for the losses we are seeing now in the
34:02
Speaker 2: deficits and the trust fund. But we didn't do that,
34:04
Speaker 2: and instead we are staring down a sociecurity issued like five.
34:07
Speaker 4: Years can I does everybody have amnesia? Or is everybody
34:09
Speaker 4: us just under forty five? Now let me read you
34:12
Speaker 4: a press release from the White House in two thousand
34:14
Speaker 4: and five, George W. Bush. As we fix social security,
34:18
Speaker 4: we must make it a better deal for our younger
34:19
Speaker 4: workers by allowing them to put part of their payroll
34:21
Speaker 4: taxes in personal accounts. This would be entirely voluntary. The
34:25
Speaker 4: mix would the money would go into a conservative mix,
34:27
Speaker 4: et cetera, et cetera. My point is twenty years ago,
34:31
Speaker 4: non ancient history would have been actually a very difficult
34:34
Speaker 4: time because two years later markets crashed.
34:36
Speaker 2: Yeah, your money.
34:38
Speaker 4: So my point is this was proposed. This trial balloon
34:42
Speaker 4: didn't even get like five feet off the ground. It
34:45
Speaker 4: got shredded dead on arrival.
34:47
Speaker 2: Yep.
34:48
Speaker 4: The government guarantee associated with every dollar of Social Security
34:51
Speaker 4: is sacrisanct was the political lesson. This is never going
34:55
Speaker 4: to happen until Social Security unfortunately unable to pay out
34:59
Speaker 4: benefits at all and they have to introduce something to
35:02
Speaker 4: placate people running at Washington with.
35:04
Speaker 2: PAP by the way, then it's too late. Again. You
35:06
Speaker 2: could do this today, right like if you started, if
35:09
Speaker 2: you started now taking a portion of Social Security payroll
35:13
Speaker 2: taxes and instead saying forget about a TSP, forget about
35:16
Speaker 2: self directed. It's all run by somebody in the government
35:19
Speaker 2: who just puts it all into the stock market and
35:21
Speaker 2: and and the next fund and hopes that it goes. Well.
35:24
Speaker 2: You've only got like seven years. There's not enough time
35:26
Speaker 2: to make up for.
35:29
Speaker 1: This.
35:30
Speaker 2: Guy fails to mention it in a three page article.
35:32
Speaker 4: You don't mention the Bush proposal and what happened to it.
35:36
Speaker 4: That's why I.
35:37
Speaker 2: Poo pooed it. I'm with you.
35:40
Speaker 4: I'm not it. I like it. I'm just pointing out
35:42
Speaker 4: that it's it was.
35:44
Speaker 2: Put the article, not the not the.
35:46
Speaker 4: Not I'm disappointed in the lack of resourcefulness on the
35:50
Speaker 4: part of the author who didn't bother to google it.
35:52
Speaker 2: So the fact of the matter remains that regardless of
35:56
Speaker 2: solutions like this, we face an immense social security problem
35:59
Speaker 2: that is looming out here within the next decade. It
36:02
Speaker 2: does not seem to be getting addressed in any serious fashion. Instead,
36:05
Speaker 2: we're you know, cutting around the edges, such as the
36:07
Speaker 2: employees which do not contribute to the trust fund or
36:10
Speaker 2: detract from the trust Fund whatsoever. And I think there
36:13
Speaker 2: are millions of Americans who are frankly quite concerned and
36:16
Speaker 2: disappointed about where this is going. If you have questions
36:19
Speaker 2: about your own Social Security benefits, how they're going to
36:22
Speaker 2: work in your retirement, and the risk of them all
36:24
Speaker 2: being cut by twenty percent in a decade, which, to
36:26
Speaker 2: be fair, I've said publicly and I still feel is
36:29
Speaker 2: unlikely to happen in the way that it's being described.
36:31
Speaker 2: I think that they will come up with a fix.
36:33
Speaker 2: But if you have questions along those lines and you're
36:35
Speaker 2: trying to sort them through and what it means for you.
36:38
Speaker 2: Maybe you're in your mid fifties and are staring this
36:40
Speaker 2: down and quite concerned about it. Calls at the Armstrong
36:43
Speaker 2: Advisory Group eight hundred three nine three four zero zero
36:46
Speaker 2: one free consultations across New England. As you've heard eight
36:49
Speaker 2: hundred three nine three four zero zero one.
36:53
Speaker 1: The proceeding was paid for by Armstrong Advisory Group, a
36:55
Speaker 1: registered investment advisor. Nothing in the ad or in any
36:58
Speaker 1: Armstrong guide a specific financial legal tax advice. Consult your
37:01
Speaker 1: own financial tax into state planning advisors before making any
37:04
Speaker 1: investment decisions. Armstrong may contact you to offer investment advisory services.
37:08
Speaker 2: Mark the free ride for borrowers on buy Now, Pay
37:13
Speaker 2: Later service Klarna or Affirm Sorry, Affirm, one of the
37:18
Speaker 2: big ones out there. They are now going to begin
37:21
Speaker 2: reporting these mini loans to major credit reporting agency Experience.
37:27
Speaker 2: And so we had brought this up as kind of
37:30
Speaker 2: silly that things like non payments of student loans, non
37:34
Speaker 2: payments of healthcare related debt, or non payments of loans
37:39
Speaker 2: like this to companies Affirm to help you buy burritos
37:43
Speaker 2: weren't getting paid to credit monitoring agencies. They will now
37:46
Speaker 2: begin getting reported, and so I'm sure that there are
37:50
Speaker 2: a handful more than a handful of young American Americans
37:54
Speaker 2: who use the service who are going to see their
37:55
Speaker 2: credit scores take a big hit because of all of this,
37:59
Speaker 2: Not only just because you have defaulted on it, which
38:01
Speaker 2: that would be a big problem, but even using it, because.
38:06
Speaker 4: This adds to the number of open accounts and the amount.
38:08
Speaker 2: Correct quick break, but a lot more to cover In
38:11
Speaker 2: the second hour. The financial exchange will be right back folks.
38:14
Speaker 2: Markets have evened up for the day, so we'll be
38:16
Speaker 2: covering that next