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Gold and Silver's dramatic reversal · The Financial Exchange Show

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Speaker 1: Face is the Financial Exchange with Mike Armstrong and Mark Vandetti.
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Speaker 2: Good morning, Glad you're starting off the week with us
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Speaker 2: here on the Financial Exchange. It's Mike, Mark and Tucker
1:18
Speaker 2: with you here as we kick off another busy week
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Speaker 2: of earnings and economic data. It follows Friday, which for
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Speaker 2: stocks wasn't all that crazy, but in commodity markets we
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Speaker 2: had well the worst day for silver and close to
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Speaker 2: half a century, and a pretty wild day across those markets,
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Speaker 2: including crypto and others which we'll be diving into. Last week,
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Speaker 2: we got the pick for Kevin worsh as the new
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Speaker 2: chair of the Federal Reserve'll be talking to Mark about that,
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Speaker 2: who always has colorful opinions about anyone doing work at
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Speaker 2: the Federal Reserve. So that'll be on the docket, but
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Speaker 2: this week in general, just to set the groundwork for
1:56
Speaker 2: what we are looking at here today, we either have
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Speaker 2: already heard or we'll hear from both Disney and Pallenteer
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Speaker 2: on earnings, we'll get the we just got the ISM
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Speaker 2: manufacturing survey at ten am, so seven minutes ago. Tomorrow
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Speaker 2: we'll be hearing from AMD, MERK, Pfizer will get the
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Speaker 2: Joltz report as well as the IM Services report. Wednesday
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Speaker 2: of this week, we'll be hearing from Alphabet, so that's
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Speaker 2: the ten thousand pound Guerrill in the room, but also
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Speaker 2: Eli Lilly, Massive Company, Avvi, Novartis, Nova, Nordisk Uber and
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Speaker 2: then Wednesday also is the ADP employment report. Thursday we've
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Speaker 2: got the Amazon earnings call as well as initial jobless claims.
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Speaker 2: And then Friday, in addition to hearing how many cigarettes
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Speaker 2: got sold over at Philip Morris will be getting the
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Speaker 2: monthly jobs report for the month of January. So, like
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Speaker 2: I mentioned, jam packed week. But before we go there, well,
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Speaker 2: let me ask you, do you want to start with warsaw?
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Speaker 2: Do you want to start with commodity markets? Because both
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Speaker 2: were pretty fascinating Lispecks. Let's start off with the new
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Speaker 2: FED nominee, Kevin wad and just where he comes from,
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Speaker 2: what background he has, and how he beat out the
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Speaker 2: other three. I don't know how he beat out the
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Speaker 2: other three contenders for FED chair. I don't know that
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Speaker 2: that part's relevant now that it's in the background. But
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Speaker 2: let's just start off with his tenure. He's been at
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Speaker 2: the Federal Reserve before. He's a very much known entity
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Speaker 2: to those on Wall Street who follow the Federal Reserve
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Speaker 2: and we're not guessing at his previous theories on major
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Speaker 2: economic decisions over the course of the last two decades
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Speaker 2: since he has had some role at the Federal Reserve.
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Speaker 2: So give me, I guess. For the layman out there
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Speaker 2: who's listening now doesn't pay very close attention to J.
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Speaker 2: Powell today, what should they know about the likely incoming
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Speaker 2: FED chair Kevin Walsh.
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Speaker 3: I don't know any more about his background than you
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Speaker 3: just summarized, to be honest with you, but he does
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Speaker 3: have experience in managing monetary policy because he was a
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Speaker 3: voting member of the Open Market Committee during the GFC
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Speaker 3: during the Global Financial crisis. And that's always handy because
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Speaker 3: it's the extreme situations where someone is tested when things
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Speaker 3: are going okay. Maybe inflation is a little too hot,
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Speaker 3: little too cold, maybe unemployment is a little above the
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Speaker 3: non inflationary rate, a little bit below. There's a standard
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Speaker 3: operating procedure. You could take that off the shelf. You
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Speaker 3: know what you're supposed to do. You don't need to
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Speaker 3: get too creative if you're.
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Speaker 1: On the FOMC.
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Speaker 3: And I don't mean to be cavalier, mic, I just
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Speaker 3: mean using the analogy of fedi's thermostat.
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Speaker 2: You know, when the.
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Speaker 3: Room gets chilli, you bump it up. Now the Feds
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Speaker 3: and vice versa. Now, the economy does not always tell
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Speaker 3: you what the temperature is. That's the challenge. And when
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Speaker 3: you change the Fed's thermostat, you're changing the temperature in
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Speaker 3: the house six months from now, not today. So it's
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Speaker 3: not a perfect analogy, but you know what I mean.
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Speaker 3: Much of it is pretty routine, like running anything from
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Speaker 3: day to day might be a normal day.
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Speaker 2: I might be able to.
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Speaker 3: Kind of mail it in. Now you know what hits
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Speaker 3: the fan? What kind of FED chair is he going
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Speaker 3: to be? You asked me about his background. I don't
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Speaker 3: profess to be an expert, but he does have crisis
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Speaker 3: managem and experience. Yes, he's useful, and he does seem
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Speaker 3: like sort of an unflappable kind of guy, which might
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Speaker 3: be useful. I've got much harsher things to say about it,
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Speaker 3: as you know, but that's.
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Speaker 2: So I want to take it from the perspective of
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Speaker 2: h He's been fairly critical of the Federal Reserve as
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Speaker 2: an institution and some of its policies, fairly consistently since
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Speaker 2: his days leaving the FED, which I think was the.
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Speaker 3: Wrong as a Democrat was in office, he argued for
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Speaker 3: higher rates and shrinking the balance sheet. Yeah, and that's
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Speaker 3: my that's my problem.
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Speaker 2: That's that's my use too. He was a bit political,
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Speaker 2: But I guess he's been painted as a hawk, right,
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Speaker 2: He's been painted as somebody who wants to keep interest
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Speaker 2: rates gry.
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Speaker 3: Obama's presidency, in Biden's presidency, Yeah, he was a hawk.
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Speaker 2: And I don't know. I didn't see any real quotes
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Speaker 2: from him back during pardon me, back during the first
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Speaker 2: Trump administration. I know he was a contender for the
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Speaker 2: role there too.
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Speaker 3: Silent, He went silent for three for four year.
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Speaker 1: No.
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Speaker 3: Researchers have been having fun with this over the weekend.
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Speaker 3: I used to like wash ideologically because I'm sort of
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Speaker 3: a hard money guy. For those of you who don't
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Speaker 3: speak like late nineteenth century monetary policy, that just means
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Speaker 3: I'm much more worried about inflation yea than unemployment, and
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Speaker 3: that makes me kind of a bastard when it comes
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Speaker 3: to monetary policy. I always thought he was a hawk.
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Speaker 3: You could call me a hawker be more politely, No,
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Speaker 3: but I always favored the inflation part of the mandate.
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Speaker 3: I don't like the idea of trying to find you
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Speaker 3: in the economy, and I always thought Warsh was in
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Speaker 3: that camp. And then I realized, oh wait, when a
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Speaker 3: Republican's in office, I didn't realize it. Many have done
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Speaker 3: a work on his remarks. He goes quiet or he
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Speaker 3: becomes dubbish, and I guess, so, I don't know, I
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Speaker 3: don't know what we got here, Mike.
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Speaker 2: That was kind of my point here too, is he
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Speaker 2: came across as hawkish because quite frankly, the Federal Reserve
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Speaker 2: for the last two decades, I think you can make
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Speaker 2: a compelling argument, has been dubbish, probably more than two decades,
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Speaker 2: but certainly for the last two.
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Speaker 3: He's done a lot of crazy stuff.
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Speaker 2: Since the GFC, the FED has been pretty dubbish, and
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Speaker 2: his favored lower interest rates, favored concerns about the employment
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Speaker 2: mandate over the inflation mandate, and that finally, you know,
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Speaker 2: came to roosts back in twenty twenty two when inflation
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Speaker 2: shot up. And so I guess my point would be,
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Speaker 2: if you are going to be a FED critic over
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Speaker 2: the course of the last two decades, like Walsh has
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Speaker 2: been right, he's criticized the actions of Bernanki at different
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Speaker 2: times he's criticized the actions of every FED share since then,
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Speaker 2: you kind of will come across as a hawk, regardless
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Speaker 2: of whether or not that's your actual perspective and so
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Speaker 2: and so I'm wondering if that's genuinely his perspective, or,
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Speaker 2: like you pointed out, if it's just Hey, as a
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Speaker 2: critic of the FED, if you're criticizing of the last
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Speaker 2: two decades, really the only thing to criticize is that
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Speaker 2: they've kept interest rates too low for too long and
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Speaker 2: expanded their balance sheet more than they should have. And
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Speaker 2: so subject it's I'm a bit confounded too, because yes, consistently,
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Speaker 2: you know, post Great Financial Crisis, he was pounding the
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Speaker 2: desk saying, Hey, we should have put more on Congress here,
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Speaker 2: We shouldn't have taken the sole leadership rule in getting
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Speaker 2: this economy back out of the ABYSS. We shouldn't have
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Speaker 2: expanded balance sheet so much. We need to be worried
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Speaker 2: about inflation. He was wrong for a decade. During the
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Speaker 2: Obama administration, as you pointed out, he criticized the FED
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Speaker 2: for keeping rates too low again during Powell. During the
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Speaker 2: Biden administration, he criticized it there and it's easy to
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Speaker 2: come away from that in my mind saying, Okay, well
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Speaker 2: this guy is going to be a hawk, he's going
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Speaker 2: to be keeping interest rates higher. But I guess the
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Speaker 2: point would be I'm just not sure which version of
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Speaker 2: this guy we're getting, because since January of this year,
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Speaker 2: all he has done is criticized J. Powell by saying
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Speaker 2: interest rates are too high.
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Speaker 3: You don't want a fanatic at the FED. I would
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Speaker 3: be a very bad FED chairman because I'm kind of
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Speaker 3: fanatical about inflation.
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Speaker 2: I admit it.
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Speaker 3: I would need to be surrounded and do not that
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Speaker 3: I have to worry about having this problem, but I
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Speaker 3: admit it. I have blinders, ideological blinders, biases. I don't
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Speaker 3: think he's a fanatic. I think he's more of a
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Speaker 3: political weather vein. I think he's been gunning. I don't think.
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Speaker 3: I mean he has been openly promoting himself for this
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Speaker 3: position for at least a decade. He wants it too bad, Mike,
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Speaker 3: and he doesn't have the technical skills. I'm really sorry,
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Speaker 3: but unless you've done graduate work in economics, you don't
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Speaker 3: understand what the staff is doing. He's got when we
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Speaker 3: can get into this, he doesn't have the he doesn't
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Speaker 3: have the intellectual chops to do monetary policy. Does that
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Speaker 3: mean he doesn't have good judgment? He might, but he's
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Speaker 3: not going to fully understand what staff is presenting to
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Speaker 3: him without the training that you can only get from
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Speaker 3: doing economics after college. Powell too, But.
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Speaker 2: Let's say quick Bran, I want to discuss that a
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Speaker 2: little bit further, because, as you just mentioned, Powell kind
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Speaker 2: of falls in the same category here in terms.
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Speaker 3: Of lack of and he was wrong footed for the
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Speaker 3: same reasons.
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Speaker 2: Higher economic background than say some of the previous Fed shares.
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Speaker 2: Let's say quick break and talk a little bit more
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Speaker 2: about that and the Federal reserves role. Next on The
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Speaker 2: All right, Mark, we were talking about the new nominee
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Speaker 2: for the head of the Federal Reserve. J Powell's term
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Speaker 2: is up in May. Kevin Warsh was nominated on Friday
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Speaker 2: of last week, and frankly, you know, markets on interest
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Speaker 2: rates nor anything else really moved on the nomination. He's
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Speaker 2: a very well known entity to Wall Street. He's served
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Speaker 2: at the Federal Reserve before under the chairmanship of Ben
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Speaker 2: bernanke and you were making a point before the break
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Speaker 2: about his scholarly or lack thereof background, so.
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Speaker 3: And it sounds snobby, but it's not. He's got a
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Speaker 3: law degree, he's got jd from Stanford, so it's clearly
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Speaker 3: not stupid. But he's not up for Supreme Court justice.
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Speaker 3: He's up for head of the Federal Reserve. It's a
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Speaker 3: much more technocratic position. Just as it would be laughable
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Speaker 3: to appoint a non lawyer to the Supreme Court in
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Speaker 3: the modern era, it would, it seems to me, given
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Speaker 3: how technical monetary policy is, that with all the great
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Speaker 3: researchers out there, of all kinds of political stripes, they
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Speaker 3: can't find a PhD economist who can who will understand
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Speaker 3: the where the results that staff the economists who work
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Speaker 3: on staff there where they get the results that they
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Speaker 3: present to him, and is able to push back on substance.
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Speaker 3: He likes to criticize models, but his criticisms are incoherent
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Speaker 3: and vague. He doesn't fully understand them, and so and
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Speaker 3: he couldn't, by the way, he's very busy getting a
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Speaker 3: j d at Stanford, which is a full time job.
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Speaker 3: I'm not He's not a dumb person.
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Speaker 2: I'm not saying that at all.
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Speaker 3: I'm just lamenting the fact that. I'm just lamenting that fact.
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Speaker 2: So neither did J. Powell, And I think you would
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Speaker 2: point out to hurt it hurt him during his tenure
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Speaker 2: at the.
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Speaker 3: Time his press conferences were often garbled. He would throw
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Speaker 3: economic terminology in there that he heard at a staff meeting,
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Speaker 3: but not use it correctly. That just doesn't inspire confidence.
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Speaker 3: It'd be like your doctor getting your mixing up your
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Speaker 3: systolic and your diastolic the ratio. I think I just
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Speaker 3: looked it up, the blood pressure reading. Mixing those two
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Speaker 3: things up. It's it's cringey.
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Speaker 2: So I'm not actually sure that I buy the argument
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Speaker 2: that I'm about to make, but I'm gonna make it
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Speaker 2: anyway that I am unconvinced. I think there's an argument
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Speaker 2: that a PhD in economics or masters or written content about,
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Speaker 2: you know, peer reviewed articles about the economies and interest rates,
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Speaker 2: are they important for the chair person of the Federal Reserve.
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Speaker 2: And you've clearly made your argument why, and I do
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Speaker 2: take it to be a good point. But let's compare. Okay,
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Speaker 2: So we have now Kevin Warsh, who is likely to
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Speaker 2: take the helm. We had J. Powell before him, and
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Speaker 2: your criticism would be that while a smart guy in
13:46
Speaker 2: a good order, maybe J. Powell's message on inflation when
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Speaker 2: hit by a crisis was not really on point. Before that,
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Speaker 2: we had Janet Yellen very much a PhD published economist,
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Speaker 2: and she was.
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Speaker 3: A monetary She's a labor economist monitory, but she understands
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Speaker 3: the language and she can read a paper in economics.
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Speaker 2: And before that we had Ben Bernanki, who.
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Speaker 3: Was the epitome. He was a monetary scholar, specific a
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Speaker 3: great depression monetary scholar specifically.
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Speaker 2: I guess my point would be, I would make an
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Speaker 2: argument that for the chairperson of the Federal Reserve, two
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Speaker 2: as important as a full background and understanding of how
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Speaker 2: the monetary policy works and how it affects labor and
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Speaker 2: interest rates and inflation, and being able to read the models.
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Speaker 2: As important as those features are, being able to convince
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Speaker 2: the American public of something is equally important, if not
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Speaker 2: maybe more important for the for the chairperson of the
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Speaker 2: Federal Reserve. I just think back to the days of Bernanki,
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Speaker 2: and had you had somebody perhaps like Powell or this
14:51
Speaker 2: is going to come across as a bit sexist, and
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Speaker 2: truly she wasn't tested. But Janet Yellen, when I think
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Speaker 2: back to her press conferences, they were in the weeds, uninspired, hiring,
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Speaker 2: and a little bit sleepy, quite honestly, And I'm not
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Speaker 2: saying that you want somebody at the chair of the
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Speaker 2: Federal Reserve, uh, you know, trying to light fireworks and
15:11
Speaker 2: get the American public hyped up. But there is something
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Speaker 2: to be said for the moment of crisis being able
15:16
Speaker 2: to get everybody in line and do what Bernanki did
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Speaker 2: at the time, which was convince the American public that
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Speaker 2: he's not going to let the system fail. And so
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Speaker 2: I think you can find somebody with both of those
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Speaker 2: qualities and understanding of the models, as well as the
15:32
Speaker 2: ability to speak publicly. But I guess I disagree. You
15:37
Speaker 2: disagree that the importance of Bernanki.
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Speaker 3: It was nothing Bernanky said. He wasn't Winston Churchill. He
15:41
Speaker 3: flooded the system with liquidity and basically and and H
15:46
Speaker 3: and allowed banks to mark two uh fantasy prices. That's
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Speaker 3: what saved the fight. It was what he did, not
15:51
Speaker 3: what he said.
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Speaker 2: I don't know.
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Speaker 3: First I would say that's what he said. We had
15:55
Speaker 3: we had bad leadership at the time. Bush was who
15:57
Speaker 3: I voted for. This isn't meant as a this this
16:00
Speaker 3: is gonna sound very critical, but I liked him generally.
16:03
Speaker 3: Bush was floundering. He had he had no grasp of
16:05
Speaker 3: the situation.
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Speaker 2: That's precisely my point. His leadership failed during the time.
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Speaker 2: I think I think leadership Congress's leadership failed at the
16:11
Speaker 2: time of crisis. And I genuinely believe that a big
16:16
Speaker 2: piece of what rescued things out was Bernanke's public statements
16:20
Speaker 2: and statements to bankers and other groups.
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Speaker 3: I don't he couldn't. He could have done nothing, and
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Speaker 3: he could have said nothing. Excuse me. It was his
16:27
Speaker 3: actions that that that mattered, that fed I mean, Volker
16:31
Speaker 3: didn't regularly make speeches to the American people about getting
16:34
Speaker 3: inflation down. He just did it, and he had credibility. Uh,
16:37
Speaker 3: credibility is the important thing, Wosh, because he is a
16:41
Speaker 3: political animal, has to earn that.
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Speaker 2: So I guess ultimately we had some market react We
16:49
Speaker 2: didn't really have many much in the way of market
16:51
Speaker 2: reactions when it came to wash. But ultimately the question
16:56
Speaker 2: that I think that matters going forward because quite honestly,
16:59
Speaker 2: while you and I might prefer a PhD economists to
17:02
Speaker 2: be sitting at the chairperson of the Federal Reserve, that's apparently
17:04
Speaker 2: not what's going to be happening. He has made a selection,
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Speaker 2: and this is who we're getting. I think the really
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Speaker 2: unanswerable question that will have to be answered here when
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Speaker 2: it comes to Kevin Walsh is how does he genuinely
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Speaker 2: view the economy and is he again? Why this is
17:22
Speaker 2: so important is because his criticisms since twenty ten about
17:27
Speaker 2: the economy and what the Federal Reserve has done have
17:30
Speaker 2: been fairly consistent. He believes that they have been too interventionist.
17:34
Speaker 2: He believed that they abandoned their balance sheet too much.
17:38
Speaker 2: He believed that interest rates what he's wrong to everything
17:42
Speaker 2: he was again.
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Speaker 3: And he's never he's never at least publicly introspected about
17:48
Speaker 3: why he was wrong.
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Speaker 2: The only thing that I think you might be able
17:52
Speaker 2: to make some well, actually I don't know what he
17:53
Speaker 2: was arguing during twenty twenty. I assume that he was
17:55
Speaker 2: arguing first.
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Speaker 3: Silent when forgetting that's part of the problem.
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Speaker 2: And so this consistent argument, to your point can be
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Speaker 2: a taken as hey a genuine viewpoint on the FED
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Speaker 2: that it needs to be lesson for interventionists, you know,
18:11
Speaker 2: reduce its balance sheet, or it can be taken as
18:16
Speaker 2: political meandering to be able to get appointed to the
18:21
Speaker 2: Federal Reserve. And we will have to kind of wait until.
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Speaker 3: Nobody doubts that he's a climber. I mean that he does.
18:27
Speaker 3: He doesn't. He did engage in machinations consistently, and he
18:30
Speaker 3: did keep his mouth. Look, if he's a hard money guy,
18:32
Speaker 3: I welcome it.
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Speaker 2: But that's my point. We don't know. Yeah, that's my
18:35
Speaker 2: point is we don't know what I mean saying.
18:37
Speaker 3: It can be he's prejudging the matter in front of him.
18:39
Speaker 3: We got to lower interest rates. AI is gonna boost productivity,
18:42
Speaker 3: therefore should lower interest rates. First of all, that's wrong.
18:44
Speaker 3: That statement is wrong, and if he knew economics better,
18:47
Speaker 3: he would know not to make it. Secondly, he's pre
18:50
Speaker 3: judging the issue. He's going to come in guns blazing
18:52
Speaker 3: for lower interest rates. That's not how you were incredibility.
18:55
Speaker 2: See, I'm unconvinced of that point.
18:57
Speaker 3: What that he's doing.
18:58
Speaker 2: He's going to come in guns blazing lower straight. Yeah.
19:01
Speaker 2: I think he's had to say it in no order
19:02
Speaker 2: to get the job.
19:03
Speaker 3: But ultimately he's going to cross the president.
19:05
Speaker 2: I ultimately will give somebody credit until they until they
19:10
Speaker 2: prove me wrong. Right. I think there's a lot to
19:12
Speaker 2: be said for what somebody says to get nominated elected,
19:16
Speaker 2: whatever it might be. On the campaign trail versus what
19:18
Speaker 2: they do when they actually hold that power, and that
19:22
Speaker 2: to me is going to be the ultimate job. And
19:24
Speaker 2: if nine months from now we have that going on,
19:27
Speaker 2: then I'll judge it at that point. Quick Break Wall
19:30
Speaker 2: Street Watch is next.
19:40
Speaker 1: Like us on Facebook and follow us on Twitter at
19:43
Speaker 1: TFE show. Breaking business news is always first right here
19:47
Speaker 1: on the Financial Exchange Radio Network. Time now for Wall
19:52
Speaker 1: Street Watch. A complete look at what's moving market so
19:55
Speaker 1: far today right here on the Financial Exchange Radio Network.
20:03
Speaker 4: The seem some volatility to begin the week, especially in
20:06
Speaker 4: commodities as investors continue to assess President Trump's selection of
20:09
Speaker 4: Kevin Warsh as the next chairman of the FED. Traders
20:12
Speaker 4: are also writing for a busy week ahead that includes
20:15
Speaker 4: more big tech earnings from the likes of Alphabet and Amazon,
20:18
Speaker 4: followed by a job's report on Friday. Right now, the
20:22
Speaker 4: Dow's up eight tenths of a percent or three hundred
20:24
Speaker 4: and eighty four points, SMP five hundred up a half
20:27
Speaker 4: a percent, NASDAC up two thirds of a percent or
20:30
Speaker 4: one hundred and forty nine points higher. RUSS two thousand
20:32
Speaker 4: is up over nine tenths of a percent. Tenure Treasure
20:35
Speaker 4: reeled up three basis points at four point two seven
20:38
Speaker 4: seven percent, and Crew to Oil retreating four and a
20:41
Speaker 4: half percent today trading at sixty two dollars and twenty
20:45
Speaker 4: seven cents a barrel. Disney reported earnings ahead of the
20:48
Speaker 4: bell this morning with a media in entertainment giant saw
20:51
Speaker 4: its streaming profits surge in the December quarter, while its
20:54
Speaker 4: theme parks and cruises delivered record performance. Disney said operating
20:58
Speaker 4: income for its Disney Play US in Hulu streaming services
21:02
Speaker 4: grew seventy two percent from the same quarter a year
21:04
Speaker 4: ago to four hundred and fifty million dollars, above Street forecasts.
21:09
Speaker 4: The company is also expected to announce its next chief
21:13
Speaker 4: executive as soon as this week. However, Disney shares are
21:17
Speaker 4: down over six percent meanwhile, and Video shares are off
21:20
Speaker 4: over one percent after The Wall Street Journal reported on
21:23
Speaker 4: Friday that the AI and chip maker's plan to invest
21:26
Speaker 4: up to one hundred billion dollars into Open AI has stalled. Elsewhere,
21:30
Speaker 4: several rare earth stocks are garnering attention after Bloomberg reported
21:34
Speaker 4: that President Trump is set to invest twelve billion dollars
21:37
Speaker 4: in critical mineral stockpile to counter China oracle shares rising
21:41
Speaker 4: nearly two percent after the company announced a plan to
21:44
Speaker 4: raise up to fifty billion dollars to increase AI capacity
21:48
Speaker 4: for its customers. And after today's closing bill, we'll see
21:52
Speaker 4: quarterly results from Pallenteer and NXP Semiconductors. I'm Tucker Silva
21:57
Speaker 4: and that is Wallstreet watch Mark.
21:59
Speaker 2: I want to talk a bit of about commodities because
22:02
Speaker 2: what we saw Friday was we're seeing it at the
22:05
Speaker 2: beginning of the show when Chuck and I were broadcasting live,
22:09
Speaker 2: but it ended up in well a record breaking day
22:15
Speaker 2: by some accounts, at least in silver pricing. So what
22:18
Speaker 2: you saw in silver at the high on Thursday of
22:22
Speaker 2: last week, you saw prices hit as high as one
22:26
Speaker 2: hundred and twenty ish dollars per ounce. I think it
22:29
Speaker 2: got a little bit higher than that on Thursday, but
22:31
Speaker 2: not much. A little bit over one hundred and twenty
22:33
Speaker 2: bucks anounce by the close on Friday, and where it
22:38
Speaker 2: still remains today, you would crash down to about seventy
22:41
Speaker 2: eight bucks announce on silver. Now, what you've seen in
22:44
Speaker 2: silver prices over the course of the last year is
22:47
Speaker 2: nothing short of incredible for those who have held on
22:50
Speaker 2: to it. I mean you had the low over the
22:52
Speaker 2: last twelve months down below thirty bucks an ounce, and
22:55
Speaker 2: it's rallied all the way up there. With this price movement,
22:58
Speaker 2: you're only returning to price that you saw back in January.
23:01
Speaker 2: But here's my question. We have not seen, for instance,
23:06
Speaker 2: corresponding volatility in currencies. It's not as though you've seen
23:11
Speaker 2: currencies moving dramatically to cause all of this. I don't
23:16
Speaker 2: think we've seen a giant shift in monetary policy or
23:22
Speaker 2: you know, arguments about the debasement trade over the course
23:25
Speaker 2: of just the last week. And so I'm left sitting
23:29
Speaker 2: here looking at silver into a lesser degree gold and saying, Okay,
23:34
Speaker 2: it looks like a lot of this price movement was
23:36
Speaker 2: just wild speculation and unwinding of bets that people were
23:40
Speaker 2: speculating on, which is again not out of this world
23:44
Speaker 2: for you know, commodity prices. That's happened before. When you know,
23:47
Speaker 2: for instance, the Hunt Brothers tried to corner the silver
23:50
Speaker 2: market back in nineteen eighty and that's the last time
23:52
Speaker 2: you saw price crashes like this. Here's my question, though,
23:58
Speaker 2: how do you continue to make in art argument? I
24:01
Speaker 2: guess what arguments should be made about the place that
24:04
Speaker 2: commodities serve in a portfolio, because the arguments that I've
24:08
Speaker 2: heard are, well, I'm holding this in case of a
24:12
Speaker 2: world ending catastrophe, in which case I don't want to
24:16
Speaker 2: hold the ETF or index attracts that I want to
24:18
Speaker 2: hold the physical commodity, or maybe I'm holding it because
24:24
Speaker 2: you know it's going to be a hedge against inflation
24:27
Speaker 2: or a safe haven asset. And I feel like a
24:29
Speaker 2: lot of those arguments were pretty much flipped on their
24:32
Speaker 2: heads over the course of the last several months and
24:35
Speaker 2: over the close of the last year. How should somebody
24:38
Speaker 2: evaluate this at this point, Well.
24:40
Speaker 3: Just because something goes down a lot, it doesn't necessarily
24:43
Speaker 3: invalidate the thesis behind it. Sure stocks go down by
24:47
Speaker 3: a lot from time to time. Absolutely, long term or
24:50
Speaker 3: long term growth ticket bonds go down by a lot
24:53
Speaker 3: from time to time. You'd still hold them because they're
24:55
Speaker 3: a good diversifier of equity risk.
24:58
Speaker 2: I forgot to mention one. The other one that I
24:59
Speaker 2: hear chat it all the time is, oh, it's my
25:01
Speaker 2: hedge against catastrophe. Right, maybe war breaks out and the
25:04
Speaker 2: price is going to go up again. We did not
25:08
Speaker 2: sign a peace treaty with anybody on Friday of last week.
25:11
Speaker 2: So I question these things.
25:13
Speaker 3: As part of any price, you've got a fundamental component
25:15
Speaker 3: and a speculative or bubble component. Sometimes the bubble component
25:19
Speaker 3: is irrational. Sometimes it can actually be rational. We don't
25:23
Speaker 3: have to get too deeply into like finance theory, but
25:25
Speaker 3: suffice it to say, sure part of any price is
25:30
Speaker 3: investor exuberance, enthusiasm or pessimism. I suspect that gold has
25:36
Speaker 3: gone up by a lot just given the timing, up
25:39
Speaker 3: something like sixty percent now since Trump became president because
25:45
Speaker 3: he does want lower interest rates because deficits not his fault.
25:49
Speaker 3: But he's not going to fix it either. Nobody could
25:51
Speaker 3: arguably deficits and debt will continue to grow. That will
25:55
Speaker 3: put pressure on him or any other president to inflate
26:00
Speaker 3: partly debt away.
26:00
Speaker 2: Go ahead, draw the line there. Why do lower interest
26:03
Speaker 2: rates benefit gold prices?
26:04
Speaker 3: Because and this is just the theory, obviously there could
26:07
Speaker 3: be other reasons. Think about if gold is a safe
26:10
Speaker 3: If gold is a safe haven asset, I say, if
26:12
Speaker 3: I happen to think that's plausible, but there's there's no
26:15
Speaker 3: way to kind of prove it. Uh, it's competing with
26:18
Speaker 3: other safe haven assets like US treasuries. US treasuries, because
26:22
Speaker 3: they're backed by the full faith and credit the UF
26:24
Speaker 3: government government are are considered US government are considered a
26:27
Speaker 3: safe haven asset. They're likely to be money good in
26:30
Speaker 3: in in times of catastrophe. If the rate, if the
26:33
Speaker 3: yield on US government debt goes down, the opportunity cost
26:38
Speaker 3: of holding gold goes.
26:39
Speaker 2: Down because it doesn't pay you a diffidend to on
26:41
Speaker 2: gold is.
26:42
Speaker 3: Not generative, it has no yield, so they could be
26:45
Speaker 3: viewed as competing safe assets. Thus, there is this negative
26:49
Speaker 3: correlation when one zig the other. When one zig's on average,
26:53
Speaker 3: not always, but on average, the other one zags. But so,
26:57
Speaker 3: anyway back to your original question, does what happened last
27:00
Speaker 3: end of last week in validate if you are in
27:04
Speaker 3: the I hold gold as as a hedge against a
27:07
Speaker 3: policy stupidity and relatedly inflation, big deficits, geopolitical turmoil. No,
27:13
Speaker 3: I don't think it invalidates any of those thesis. There
27:15
Speaker 3: is a speculative component to it, and sometimes that causes
27:18
Speaker 3: bubbles which can deflate quickly.
27:20
Speaker 2: Right, and yeah, what we saw on Friday, you know,
27:23
Speaker 2: in no uncertain terms, there was some bit of speculative
27:28
Speaker 2: draw down on you, especially silver prices. You had some
27:32
Speaker 2: markets increasing margin requirements for holdings of commodities. What that
27:38
Speaker 2: just means is, you know, again, maybe you have a
27:41
Speaker 2: portfolio of stocks and you're borrowing money from that custodian
27:45
Speaker 2: to buy maybe more silver, maybe more gold. Maybe they
27:49
Speaker 2: are lending you money off of your silver or gold
27:52
Speaker 2: and they're willing to say, hey, you can borrow up
27:54
Speaker 2: to half of the value of that commodity. Some of
27:57
Speaker 2: these brokers basically said, hey, we're not going to lend
27:59
Speaker 2: you that much anymore. We need you to put cash
28:02
Speaker 2: in your portfolio to basically cover those things. There were
28:04
Speaker 2: probably some margin calls that happened on Friday that contributed
28:07
Speaker 2: to all of this. In any case, today you are
28:11
Speaker 2: not seeing that. I take that back, you were not
28:14
Speaker 2: seeing much of that same volatility. Today. Once again, you
28:17
Speaker 2: have gold prices selling off a bit down seventy dollars
28:22
Speaker 2: per ounce about one and a half percent, silver down
28:26
Speaker 2: nearly two percent. That is again something that recently we
28:30
Speaker 2: have been normalized to. But those types of price movements
28:33
Speaker 2: are not typical. I don't know them off the back
28:37
Speaker 2: of my head, just like I do. You know, Hey,
28:39
Speaker 2: how often does do stocks move one percent? But I
28:42
Speaker 2: do believe that price movements of two percent on major
28:45
Speaker 2: commodities like that are somewhat abnormal, and they are continuing
28:50
Speaker 2: as we go this week. So yeah, what we saw again,
28:54
Speaker 2: what we saw in terms of price movements on silver,
28:56
Speaker 2: specifically on Friday, was a percentage move that you have
29:00
Speaker 2: not seen in close to half a century. And that
29:03
Speaker 2: was the piece that was historic gold moved to. But
29:06
Speaker 2: a lot of people again calling it a question what
29:08
Speaker 2: drove this stuff up? There was a Wall Street Journal
29:12
Speaker 2: article that we covered just Monday of last week, and
29:15
Speaker 2: throughout these five reasons as to why gold was surging
29:18
Speaker 2: over five thousand dollars per ounce. There was the debasement trade,
29:22
Speaker 2: there was lower interest rates. Like Mark just mentioned, central
29:25
Speaker 2: bank buying blaming expensive stocks. But what seems like at
29:30
Speaker 2: least the recent price action had most to do with
29:33
Speaker 2: was momentum and speculation, and that can reverse itself pretty
29:39
Speaker 2: darn quickly, even with what's considered to be safe haven assets.
29:43
Speaker 2: Let's take a quick break here when we come back,
29:48
Speaker 2: moving over onto different type of commodity, but the president
29:52
Speaker 2: is talking about a critical mineral stock pile. We'll be
29:55
Speaker 2: talking about that next Financial Exchange.
29:58
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30:01
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30:04
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30:29
Speaker 2: I had one of my classic slips during the last segment,
30:32
Speaker 2: so thanks to eight and six to so for calling
30:33
Speaker 2: me out on it. I think I was trying to
30:36
Speaker 2: say I know it in the back of my head,
30:38
Speaker 2: but instead said I know it like the back of
30:40
Speaker 2: my head, which probably got confused for the back of
30:43
Speaker 2: my hand. But anybody that knows me does know that
30:46
Speaker 2: I frequently walk around with two mirrors in my hands,
30:50
Speaker 2: just constantly looking at the back of my head, so
30:52
Speaker 2: it works either way in my case. But thank you
30:55
Speaker 2: eight for calling me out on my.
30:56
Speaker 4: No, you never have these misrepresentations to whatever all, No.
31:01
Speaker 2: Like like this, maybe knock the cover off the doors. Yes, yeah,
31:05
Speaker 2: knocked the cover off the doors, just like those ones.
31:08
Speaker 2: Thank you, Tucker Love have a permanent recording of all
31:12
Speaker 2: of my slips and stupid phrases, So thank you very
31:16
Speaker 2: much for the knocked cover off the doors. The Trump
31:20
Speaker 2: administration is launching a twelve billion dollar critical mineral stockpile,
31:25
Speaker 2: hoping to blunt the reliance on China problem is obviously
31:28
Speaker 2: it's tough to fill that stockpile without critical minerals from
31:32
Speaker 2: China at the moment. But taking a look at this,
31:35
Speaker 2: so the details of the deal of the idea are
31:38
Speaker 2: pretty scant at this point. The venture dubbed Project Vault.
31:41
Speaker 2: It's set to tie up both private capital with a
31:45
Speaker 2: ten billion dollar loan from the US Export Import Bank.
31:49
Speaker 2: And I guess when I look at this, I think,
31:54
Speaker 2: if you are a proponent of having, for instance, a
31:58
Speaker 2: US oil stockpile like we do the critical oil stockpile,
32:01
Speaker 2: I don't know that this is any worse of an
32:04
Speaker 2: idea than that. I can see why the desire to
32:06
Speaker 2: have it would would you know, would be a pretty
32:09
Speaker 2: good idea in the case of wartime. You're shaking your
32:13
Speaker 2: head like this is the dumbest thing out there.
32:14
Speaker 3: There's not the dumb Well, as you say, there's precedent
32:17
Speaker 3: for the dumbest thing out there, So like why not,
32:19
Speaker 3: and let's add you know, uh, peanuts and sustenance to it.
32:25
Speaker 3: And I mean, you know, stockpile for what for how long?
32:29
Speaker 3: What will it do to the market price?
32:31
Speaker 2: It could just be droned up.
32:32
Speaker 3: Look, it's it's one of the as you said, Mike,
32:37
Speaker 3: we already stockpile oil. Yes, if if I mean relevant, Yeah,
32:46
Speaker 3: right now, it's true because we we we pump.
32:48
Speaker 2: So much and we don't really conduct war that way
32:50
Speaker 2: either anymore.
32:51
Speaker 3: Yeah. But in light of I mean, it's his trade
32:55
Speaker 3: war that got China to clamp down on exports. So
32:58
Speaker 3: once again, shoot self in foot, bandage foot and take credit.
33:02
Speaker 3: We wouldn't be we wouldn't have adja over these over look,
33:07
Speaker 3: in the long run, we should be diversifying away from it.
33:09
Speaker 3: Virtually everybody agrees with.
33:11
Speaker 1: Yeah.
33:11
Speaker 2: The fact of the matter is ninety eight percent of
33:13
Speaker 2: these critical earth materials currently come out of China. But
33:16
Speaker 2: while the idea of a critical mineral stockpile is interesting
33:19
Speaker 2: to me, what's much more compelling and interesting to me
33:21
Speaker 2: is finding ways to get it out of the ground
33:24
Speaker 2: if we have.
33:25
Speaker 3: A shortage domestic If we've agreed and this is this
33:27
Speaker 3: is not the right way to think about it economically,
33:29
Speaker 3: but I'll roll with it. If there is a shortage,
33:32
Speaker 3: if we're not producing enough, where's it going to come from?
33:34
Speaker 3: And if it's vital, don't we need it? Now? We're
33:36
Speaker 3: going to be putting it in a where most of
33:38
Speaker 3: this is just theatrics. I get that. And of all
33:42
Speaker 3: the of all the proposals that have come out of
33:44
Speaker 3: the White House in the last couple of weeks, preventing
33:46
Speaker 3: certain investors from buying homes, capping interest rates once again,
33:50
Speaker 3: allowing people to defer student longer payments, this is the
33:52
Speaker 3: least dumb. But how are you going to find the
33:55
Speaker 3: stuff to fill it?
33:56
Speaker 2: Yeah? The real problem here is that China. I don't
34:00
Speaker 2: know if they've directly said this. Yeah, I think they've
34:02
Speaker 2: pretty much directly said that they do not want Japan
34:06
Speaker 2: and other countries to stockpile this stuff. They want to
34:08
Speaker 2: be relied upon for this, and so their attitude towards
34:11
Speaker 2: the United States is not going to be any different. There.
34:13
Speaker 2: They are closely monitoring what gets exported in terms of
34:17
Speaker 2: these rare earth critical materials, and so right now China
34:24
Speaker 2: has us kind of cornered on this single issue. We
34:28
Speaker 2: have them cornered on other ones. But in terms of
34:31
Speaker 2: our ability to build a stockpile of critical minerals right now.
34:35
Speaker 2: It is entirely reliant on China's willingness to give them
34:38
Speaker 2: to us, to sell them to us, and were I them,
34:42
Speaker 2: I probably wouldn't be terribly willing.
34:44
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35:51
Speaker 2: We're a year in two or close to a year
35:54
Speaker 2: into the at least announcement of tariffs. Obviously, they've been
35:57
Speaker 2: going into place and then out of place on of
36:00
Speaker 2: a staggered basis. We are also awaiting an announcement from
36:03
Speaker 2: the Supreme Court, which again could be coming any day
36:06
Speaker 2: or week now, on the constitutionality of those teriffs implemented
36:11
Speaker 2: by the White House. But nonetheless, we're a year in here,
36:14
Speaker 2: and I think it's worth, you know, visiting exactly, you know,
36:17
Speaker 2: what they are doing to the US budget, to the
36:22
Speaker 2: average consumer, and to markets in general. And this piece
36:27
Speaker 2: from the New York Times, I believe, yeah, measures some
36:31
Speaker 2: of that stuff. So I guess the first piece that
36:33
Speaker 2: I find interesting of all this, the tariffs themselves collected
36:37
Speaker 2: and estimated two hundred and eighty seven billion dollars in customs,
36:41
Speaker 2: duties and fees last year. That's about triple the amount
36:43
Speaker 2: from twenty twenty four, for some context, two hundred and
36:46
Speaker 2: eighty seven billion dollars. We the United States pulls in
36:50
Speaker 2: about two trillion dollars annually from income taxes. So I
36:56
Speaker 2: looked at that, and the New York Times kind of
36:58
Speaker 2: put that as saying, well, this is a pretty small amount,
37:00
Speaker 2: frankly for tariffs to be bringing in that portion of
37:04
Speaker 2: US income taxes. That is a lot of revenue collected
37:07
Speaker 2: on tariff revenue, especially compared to where we were before.
37:12
Speaker 2: What other pieces of this can we really cite? I mean,
37:14
Speaker 2: obviously we can talk about inflation, but it's really tough
37:16
Speaker 2: to draw out.
37:17
Speaker 3: Let's just stick with spending because it's a speci a
37:19
Speaker 3: big subject. We could always let this carry over into
37:21
Speaker 3: the next hour if you want. Because their promise is
37:23
Speaker 3: about manufacturing, employment, and all the other great things tariffs
37:27
Speaker 3: are supposed to cure. Federal spending in the last fiscal
37:31
Speaker 3: year was up four hundred and fifteen billion dollars. Federal
37:36
Speaker 3: receipts were up one hundred and sixty five billion dollars.
37:40
Speaker 2: Net network we're read.
37:42
Speaker 3: Will yeah, the deficit, So yeah, that's that's exactly the point.
37:46
Speaker 3: But for the tariffs the deficit would have the deficit
37:48
Speaker 3: would have gone up. But actually the federal deficit, either
37:51
Speaker 3: measured an absolute terms or as a share of GDP,
37:53
Speaker 3: which is typical, was down about forty billion dollars. Without
37:56
Speaker 3: the tariffs, the deficit would have gone up. But if
37:58
Speaker 3: you are a spending hawk, things are not going in
38:02
Speaker 3: the right direction. Spending rows by a lot last year.
38:06
Speaker 2: Let's take a quick break. We've got a lot more
38:07
Speaker 2: to cover in the second hour of the financial Exchange.
38:11
Speaker 2: Stay tuned, folks, and we'll be right back.