Latest / The Financial Exchange Show / Inflation data is still not showing an impact from tariffs

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Inflation data is still not showing an impact from tariffs · The Financial Exchange Show

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  Speaker 2: Good morning, and welcome back to the Financial Exchange. It
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  Speaker 2: was shaping up to be a busy Tuesday in a
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  Speaker 2: busy week here on the Financial Exchange, and it is proving.
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  Speaker 2: It is proving such. So I'm gonna talk really fast
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  Speaker 2: the entire show to make sure we have time to
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  Speaker 2: get all of it. Does that sound good to you, Tucker?
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  Speaker 2: Does that make for a good Medea problem?
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  Speaker 3: Awesome radio?
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  Speaker 2: Okay, let's see how fast we can go, and we'll
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  Speaker 2: get through this as quickly as possible. At a thirty
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  Speaker 2: this morning, we had inflation data released by the Bureau
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  Speaker 2: of Labor Statistics, so the CPI came out, will be
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  Speaker 2: covering that, we've got major bank earnings from the likes
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  Speaker 2: of JP Morgan, Wells, Fargo and others. We'll be diving
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  Speaker 2: in there, and then major news for in video when
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  Speaker 2: it comes to China being announced as well. That was
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  Speaker 2: not on the docket and a bit of a surprise
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  Speaker 2: to investors this morning, so we'll be jumping in there
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  Speaker 2: as well. But I do want to start with that
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  Speaker 2: all important inflation data. And I call it all important
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  Speaker 2: because we on this program and every major economic analyst
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  Speaker 2: out there has been talking and wondering about when and
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  Speaker 2: if we will see inflation data start to print evidence
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  Speaker 2: of tariffs, and to this point, there has been We
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  Speaker 2: talked about this yesterday, Chuck and I hesitated to come
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  Speaker 2: up with a single economic data point that you could
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  Speaker 2: look at and say, definitively, here is your evidence of
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  Speaker 2: tariff effect on the overall economy. And when we get
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  Speaker 2: the inflation data this morning, I can't say that we
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  Speaker 2: can really look at it definitively and prove that out either.
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  Speaker 2: So let's start with the headline numbers. The CPI print
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  Speaker 2: came in month over month at zero point three percent.
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  Speaker 2: A couple things about that. It's right where it was
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  Speaker 2: anticipated to be. It's also the highest reading we've gotten
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  Speaker 2: month over month since January. So January came in at
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  Speaker 2: half a percent month over month. This came in at
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  Speaker 2: zero point three percent. When we look at that year
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  Speaker 2: over year number, we're looking at two point seven percent
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  Speaker 2: on the headline inflation two point nine percent. When we
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  Speaker 2: look at that core number, core, if you may recall,
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  Speaker 2: strips out the impact of food and energy. Core is
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  Speaker 2: a way that some economists use to look at. Okay,
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  Speaker 2: when we strip out really volatile items that interest rates
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  Speaker 2: setting policy probably doesn't have anything to do with what's
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  Speaker 2: the real rate that we're seeing here still printing in
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  Speaker 2: here under three percent. I think most are going to
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  Speaker 2: take that as good news. When we look at the
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  Speaker 2: month over a month on core, so again, take out
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  Speaker 2: the impact of food, take out the impact of energy
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  Speaker 2: because those are volatile. We saw prices only increasing zero
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  Speaker 2: point two percent month over month. We're going to dive
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  Speaker 2: in here into the weeds and start looking through some
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  Speaker 2: of the individual points here and see if there's any
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  Speaker 2: real evidence of tariff inflation. But I think one thing
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  Speaker 2: is certain. The President is going to use this once
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  Speaker 2: again as evidence that, look, there is no tariff effect
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  Speaker 2: on inflation.
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  Speaker 3: FED can lower rates. They should be lowering rates.
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  Speaker 2: Already, and quite honestly, there's nothing in this report I
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  Speaker 2: think that contradicts that statement terribly. Yes, underlying inflation is
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  Speaker 2: higher than where the FED would like it long term,
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  Speaker 2: but our reading like this does not change the overall narrative,
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  Speaker 2: which is inflation's pretty low and it's been remaining pretty low.
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  Speaker 3: Yeah.
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  Speaker 4: That seems to be my takeaway, Mike, is just that
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  Speaker 4: we've been trying to glean anything that we can from
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  Speaker 4: these recent economic reports to get any indication that we
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  Speaker 4: are seeing impacts from tariffs. But you look through this
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  Speaker 4: particular report and the headline number, like you mentioned, a
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  Speaker 4: little bit hotter than anticipated. Some of that on the
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  Speaker 4: headline CPI is probably tied to the fact that we
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  Speaker 4: did see energy and energy prices increase point nine percent
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  Speaker 4: month over month. That's something that's not likely to repeat itself,
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  Speaker 4: so that contributed to the higher number. And then you
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  Speaker 4: have some anomalies on the downside to where you have
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  Speaker 4: negative impact from the decrease in price is for used
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  Speaker 4: and new vehicles, sort of softening out that energy increase.
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  Speaker 4: But if you want to make the tariff argument, and
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  Speaker 4: I'm not saying I'm making it, you did see a
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  Speaker 4: little bit of an uptick on the apparel side of things.
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  Speaker 4: To be clear, we import a significant amount of apparel
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  Speaker 4: from overseas. The T shirts, shirts, shoes, et cetera. That
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  Speaker 4: most of us are wearing comes from overseas. We did
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  Speaker 4: see an increase month over month zero point four percent
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  Speaker 4: on apparel. You saw furnishings as well as some other
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  Speaker 4: areas where we did see some uptick in prices. But
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  Speaker 4: I'm not going to sit here and tell you that
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  Speaker 4: that is, you know, clear cut evidence that there were
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  Speaker 4: seeing some substantial impact.
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  Speaker 2: Yeah, I'm going to do what every major economist would
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  Speaker 2: tell you definitely don't do right now, and just go
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  Speaker 2: and look through the list of Okay, when we strip
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  Speaker 2: out food and energy, because I think most would admit
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  Speaker 2: that probably isn't tariff related. Sure, you know, if we
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  Speaker 2: have tariffs on certain types of ten, maybe food prices
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  Speaker 2: will go up for canned goods. But I'm going to
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  Speaker 2: ignore that for a moment and look at just all
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  Speaker 2: the other items outside of food and energy. What went
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  Speaker 2: up by more than one and a half percent on
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  Speaker 2: a month over month basis, That seems like a significant threshold.
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  Speaker 2: That would be eighteen percent annualized inflation if you got
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  Speaker 2: it for a year. Other linens, that's just a category.
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  Speaker 2: Those went up five and a half percent month over month.
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  Speaker 2: That's a pretty big jump. Other furniture one point six
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  Speaker 2: percent jump month over month. Major appliances up nearly two percent,
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  Speaker 2: and appliance is generally up about two percent. Non electric
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  Speaker 2: cookwaar and tableware up three point seven percent month of
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  Speaker 2: a month. So if you're looking for that, that's a
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  Speaker 2: fairly big jump there. Taking a look at other categories here,
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  Speaker 2: we saw men's shirts and sweaters up four point three
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  Speaker 2: percent and women's dresses up three point nine percent. I
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  Speaker 2: can't really explain why women's dresses went up by three
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  Speaker 2: point nine yet women's outer wear went down boy by
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  Speaker 2: three point three percent, which is why looking at these
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  Speaker 2: individual categories is usually not something that you want to do.
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  Speaker 2: But again, if you're cherry picking and looking for some
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  Speaker 2: form of tariff effect here, this is where you're finding it.
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  Speaker 2: Women's underwear, nightwear, swimwear, and accessories up one point six
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  Speaker 2: percent month over month, men's footwear up two point six
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  Speaker 2: and that really rounds out most of what I.
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  Speaker 3: Oh, sorry, no, toy prices is there?
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  Speaker 2: Up is another one, yep, recreation so other video equipment
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  Speaker 2: up four and a half percent. You mentioned toy prices already,
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  Speaker 2: so I don't need to highlight that. You really do
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  Speaker 2: need to go cherry picking in here to try and
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  Speaker 2: to find some sort of effective tariffs. And it'd be
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  Speaker 2: difficult for me to say that, oh, yeah, you know,
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  Speaker 2: toy prices and men's sweaters and shirts are the definitive evidence.
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  Speaker 3: Of tariffs that we were looking at.
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  Speaker 2: When you had other similar categories going down in pricing
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  Speaker 2: month over month, And so the answer on all of
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  Speaker 2: this is, at least for me today, my opinion would be,
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  Speaker 2: there are some categories that seem to be jumping. Overall
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  Speaker 2: inflation has not moved substantially from the effect of tariffs,
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  Speaker 2: and whether or not these individual categories that I mentioned
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  Speaker 2: are actually tariff impact or are just coincidence. Because you
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  Speaker 2: do just have random categories jumping month of a month.
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  Speaker 2: This is a this is a survey. They do not
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  Speaker 2: have the ability to the government does not monitor the
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  Speaker 2: pricing of every single item that gets sold every single month.
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  Speaker 2: That's not how they do this. They just go and
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  Speaker 2: sample a bunch of stuff. There are errors all over
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  Speaker 2: the place here. Time will tell us as to whether
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  Speaker 2: or not this slight uptick in inflation that we saw
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  Speaker 2: this month turns into any sort of trend later this year,
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  Speaker 2: or if it is simply noise that gets worked out
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  Speaker 2: in the details. When you speak to, you know, people
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  Speaker 2: in consumer branding company, consumer brand company, when you listen
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  Speaker 2: to their CEOs talk about these things, largely, what you've
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  Speaker 2: heard is, yeah, there is some teriff tariff effect, and
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  Speaker 2: we're trying to find our ways to avoid raising prices.
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  Speaker 2: I think there is a genuine concern about being the
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  Speaker 2: first one to raise prices. You saw Walmart and Amazon
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  Speaker 2: get dragged through the media for doing so, and specifically
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  Speaker 2: by the White House. You have a story that popped
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  Speaker 2: up the other day about Levi, the gene company, finding
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  Speaker 2: ways to basically limit the availability of products rather than
• 9:32
  Speaker 2: raise prices. So they just said, Okay, we're going to
• 9:34
  Speaker 2: kill a bunch of these products. That'll allow us to
• 9:38
  Speaker 2: save some money on the complexity of delivery and returns,
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  Speaker 2: and therefore we won't need to raise prices. So many
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  Speaker 2: companies are doing anything that they can to avoid at
• 9:47
  Speaker 2: least being first to the clubhouse when it comes to tariffs.
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  Speaker 2: That I think is also going to be the most
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  Speaker 2: commonly asked question during this earning season. What has been
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  Speaker 2: the effect of tariffs you raised prices, do you intend
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  Speaker 2: to in the future, and are you seeing an impact
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  Speaker 2: on your margins because you have not.
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  Speaker 3: Yet raised prices.
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  Speaker 2: We will see, but thus far, I don't think you
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  Speaker 2: can look at this CPI report and call it anything
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  Speaker 2: other than fine, not terrible, not amazing, No real evidence
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  Speaker 2: of tariff impact, and markets seem to be taking it
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  Speaker 2: that way as well. It's a bit of a weird
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  Speaker 2: market today. We've got the Dow off in the Nasdaq up,
• 10:29
  Speaker 2: which will be covering later, but largely investors shrugging this
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  Speaker 2: one off and continuing to say, let's wait and see
• 10:37
  Speaker 2: what the real tariff effects are, which has been the
• 10:39
  Speaker 2: right place so far.
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  Speaker 4: Yeah, looking forward, one of the things you might think
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  Speaker 4: about here with this inflation report is does this change
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  Speaker 4: the feeder reserve in its path in terms of interest rates?
• 10:49
  Speaker 4: Looking at the CME FED futures probabilities, where they get
• 10:53
  Speaker 4: a sense for just what the likelihood we'd see a
• 10:56
  Speaker 4: ray cut ninety seven percent that the end of July
• 10:59
  Speaker 4: meeting we will see no raycut. That's largely been well
• 11:02
  Speaker 4: telegraphed if you look at the subsequent meeting in the
• 11:04
  Speaker 4: middle of September on the seventeenth. I haven't followed this
• 11:08
  Speaker 4: recently bike but right now showing a fifty six percent
• 11:11
  Speaker 4: probability that they would be a ray cut. I believe
• 11:14
  Speaker 4: the last time I looked at it was more like
• 11:16
  Speaker 4: sixty five or sixty six percent, So not a whole
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  Speaker 4: lot of change either. So not to say that this
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  Speaker 4: inflation report has moved those probabilities substantially.
• 11:26
  Speaker 2: Here, let's take a quick break when we come back.
• 11:28
  Speaker 2: We had a whole bunch of banks, big banks releasing
• 11:30
  Speaker 2: their earnings this morning. We'll cover them next on the
• 11:32
  Speaker 2: Financial Exchange.
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• 12:09
  Speaker 2: Well, Paul, we're kicking off earning season this week in
• 12:12
  Speaker 2: earnest with the big banks reporting today, we had JP Morgan, Wells, Fargo,
• 12:18
  Speaker 2: Blackrock City, and BNY Mellon all reporting prior to the bell.
• 12:24
  Speaker 2: In terms of later this week tomorrow, in terms of banks,
• 12:28
  Speaker 2: we're gonna have Bank America, Morgan, Stanley, Goldman, Sachs. Will
• 12:31
  Speaker 2: also have Johnson and Johnson reporting earnings tomorrow morning before
• 12:36
  Speaker 2: the bell. Finally, Thursday, banks are pretty much done at
• 12:40
  Speaker 2: that stage, but the biggest one out there, you will
• 12:42
  Speaker 2: have Netflix reporting earnings after the bell on Thursday. Geo Aerospace, Novardes,
• 12:49
  Speaker 2: Abbott Labs, some other big companies Pepsi also reporting all
• 12:54
  Speaker 2: this week as well, but kicking things off here with
• 12:57
  Speaker 2: the ten thousand pound gorilla b JP Morgan. Their earnings
• 13:03
  Speaker 2: not strong enough to lift the stock this morning, but
• 13:06
  Speaker 2: JP Morgan stock has been on a bit of a
• 13:09
  Speaker 2: tear this year before all this. They're up nearly or
• 13:12
  Speaker 2: more than nineteen and a half percent since the beginning
• 13:15
  Speaker 2: of this year. Stocks down about half a percent this morning.
• 13:19
  Speaker 2: What did we hear from Jamie Diamond and leadership at
• 13:22
  Speaker 2: JP Morgan in terms of their earnings, It.
• 13:24
  Speaker 4: Seems like a little bit more positive sentiment. JP Morgan
• 13:27
  Speaker 4: has a great pulse on what's going on from an
• 13:30
  Speaker 4: economic standpoint, and Jamie Diamond came out in their earnings
• 13:34
  Speaker 4: release stating that the US economy has remained resilient in
• 13:37
  Speaker 4: the quarter. The finalization of tax reform and potential deregulation
• 13:42
  Speaker 4: are positive for the economic outlook. Of course, risk persists,
• 13:46
  Speaker 4: and he goes on to mention the typical ones that
• 13:49
  Speaker 4: you would expect tariffs and geopolitical concernty in terms of
• 13:52
  Speaker 4: the underlying numbers. I would take away that seeing some
• 13:56
  Speaker 4: increase in merger and acquisitions activity fees that they were
• 14:00
  Speaker 4: generating there that was up about eight percent, as well
• 14:03
  Speaker 4: as a jump in the amount of revenue that they
• 14:06
  Speaker 4: took on from debt underwriting. So what that means is
• 14:10
  Speaker 4: there's more economic activity, there's more deal activity out there.
• 14:13
  Speaker 4: It seems as if that the fears that were significantly
• 14:17
  Speaker 4: present in Q one in terms of what is the
• 14:19
  Speaker 4: economic backdrop going to look like, perhaps pausing some mergers
• 14:23
  Speaker 4: or deal activity in general, a lot of that seems
• 14:26
  Speaker 4: to have subsided. That's what I would take away as
• 14:28
  Speaker 4: a positive from JP Morgan's earnings. Less so focusing on,
• 14:34
  Speaker 4: you know, their metrics on a year over year basis
• 14:36
  Speaker 4: or anything like that.
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  Speaker 2: I don't care about JP Morgan's details of what they
• 14:39
  Speaker 2: did in terms of interest, revenue and trading exactly a
• 14:41
  Speaker 2: year over year. Unless you are an analyst or shareholder
• 14:45
  Speaker 2: of the company. It's not really going to change your life.
• 14:47
  Speaker 2: But in terms of what are their big indications for
• 14:50
  Speaker 2: the US economy, I agree with you there. Analysts had
• 14:52
  Speaker 2: been predicting a fourteen percent decline in deal making revenue.
• 14:56
  Speaker 2: Instead they saw seven percent jump you think about right
• 15:00
  Speaker 2: now compared to the last time we heard from leadership
• 15:02
  Speaker 2: in mid April, it is a very different economic environment
• 15:06
  Speaker 2: right now. Mid April, we were just coming off the
• 15:08
  Speaker 2: tales of the UHCI tariff tariff announcements on April second,
• 15:14
  Speaker 2: the cancelation of those announcements on April ninth. Markets had
• 15:17
  Speaker 2: taken a brief but significant dive, and so there are
• 15:22
  Speaker 2: significant questions, Hey, our company is actually going to want
• 15:24
  Speaker 2: to announce mergers right now, you know, list new shares
• 15:28
  Speaker 2: on the markets in the midst of all of this,
• 15:30
  Speaker 2: And the answer from most in the community was no,
• 15:34
  Speaker 2: probably not. In our deal making activity might be pretty
• 15:36
  Speaker 2: pretty hampered by all this. With markets running up pretty significantly,
• 15:40
  Speaker 2: it looks like the second half of the quarter was
• 15:42
  Speaker 2: actually pretty good for deal making, and you can look
• 15:44
  Speaker 2: at that as a sign of confidence on the part
• 15:47
  Speaker 2: of not really JP Morgan because they're the ones just
• 15:50
  Speaker 2: facilitating the deals and getting the revenue on it, but
• 15:53
  Speaker 2: from you know, CEO's of major companies saying, hey, yeah,
• 15:56
  Speaker 2: we do have the confidence to go do that merger,
• 15:58
  Speaker 2: to go buy that company, to take the action we
• 16:01
  Speaker 2: might not have otherwise taken. So that was my main
• 16:03
  Speaker 2: takeaway from JP Morgan as well. Although stock not moving
• 16:07
  Speaker 2: a whole lot this morning in terms of Wells Fargo,
• 16:11
  Speaker 2: what we saw from them was more bad news. Stocks
• 16:15
  Speaker 2: down nearly five percent in early trading so far. Really,
• 16:20
  Speaker 2: what we saw the miss on was their net interest
• 16:22
  Speaker 2: income estimates. So what the heck does that mean? How
• 16:26
  Speaker 2: much did jur in lending out? How much did you
• 16:28
  Speaker 2: pay out an interest to customers on those deposits? That's
• 16:31
  Speaker 2: your net interest income. They didn't earn as much as
• 16:33
  Speaker 2: they were anticipating earning.
• 16:35
  Speaker 4: The biggest thing to point out here is something that
• 16:37
  Speaker 4: dates back to twenty seventeen on their earnings here where
• 16:41
  Speaker 4: we all recall the millions of unauthorized accounts that were
• 16:45
  Speaker 4: opened back in twenty seventeen.
• 16:46
  Speaker 3: The federalists, we forget, we're gonna bring that up every
• 16:48
  Speaker 3: time we talked.
• 16:49
  Speaker 4: We really stick it to them when we bring it.
• 16:51
  Speaker 4: But I think what they did merits us continuing to
• 16:54
  Speaker 4: mention over time, and the Fed felt that way too.
• 16:57
  Speaker 4: They took an unprecedented action of saying that we are
• 17:00
  Speaker 4: going to cap the amount of assets that you have
• 17:03
  Speaker 4: on your balance sheet as a bank. So back in
• 17:06
  Speaker 4: twenty seventeen Wells Fargo had close to two trillion dollars
• 17:10
  Speaker 4: in assets, they said back in twenty seventeen. The FED
• 17:13
  Speaker 4: this is that over the next eight years they have
• 17:17
  Speaker 4: to continue Wells Fargo to have their assets at that
• 17:19
  Speaker 4: same level. They could not grow their asset base. If
• 17:22
  Speaker 4: you're not able to grow your asset base as a bank,
• 17:25
  Speaker 4: you can't boost your loan volume, you can't generate more
• 17:28
  Speaker 4: profitability or deposits on the balance sheet. So in that
• 17:31
  Speaker 4: same period of time, where JP Morgan had a different
• 17:37
  Speaker 4: not bound by the same constraints, they went from two
• 17:39
  Speaker 4: and a half trillion in assets to four trillion in
• 17:41
  Speaker 4: assets over the last eight years, where Wells Fargo had
• 17:44
  Speaker 4: to sit at the same level for good reason. By
• 17:47
  Speaker 4: the way, I'm not saying that they should have been.
• 17:49
  Speaker 3: Able to grow, poor guys.
• 17:50
  Speaker 4: But the reason I bring that up is this is
• 17:52
  Speaker 4: the last quarter that you'll see the impacts from them
• 17:55
  Speaker 4: not being able to grow their assets on the balance sheet.
• 17:58
  Speaker 4: So perhaps the CEO mentioning Charlie Schaeff a Scharf that
• 18:02
  Speaker 4: this could be the final sort of negative headline that
• 18:06
  Speaker 4: they have behind them. They can now actually focus on
• 18:09
  Speaker 4: potentially growing their asset base eight years later, and over
• 18:13
  Speaker 4: that period of time you've seen JP Morgan and Goldman
• 18:16
  Speaker 4: Sachs well out earned the stock of Wells Fargo, which
• 18:19
  Speaker 4: has done okay, but it's been a period of time
• 18:22
  Speaker 4: for the markets that have done quite well from twenty
• 18:24
  Speaker 4: seventeen to twenty twenty five, but not as good as
• 18:26
  Speaker 4: some of other banking peers.
• 18:27
  Speaker 2: Finally, City Group reported their earnings this morning as well,
• 18:31
  Speaker 2: topping analyst expectations after they have really dramatically outperformed the market.
• 18:37
  Speaker 2: This stock is up some twenty seven and a half
• 18:40
  Speaker 2: percent this year. It's up another one point nine percent
• 18:43
  Speaker 2: this morning, their earnings caming in a dollar ninety six
• 18:46
  Speaker 2: per share versus a bucks sixty estimated revenue in at
• 18:49
  Speaker 2: twenty one point sixty seven billion versus twenty point nine
• 18:52
  Speaker 2: to eight billion estimated, And yeah, shares are moving up
• 18:57
  Speaker 2: in reaction to all of that as well. And equity
• 19:02
  Speaker 2: revenue alone rows six percent this year from City Group
• 19:05
  Speaker 2: and banking similar to JP Morgan up some eighteen percent
• 19:10
  Speaker 2: in the second quarter.
• 19:11
  Speaker 4: We'll get Goldman Sachs, Bank of America and Morgan Stanley.
• 19:15
  Speaker 4: They're set to report on Wednesday. That will, like you
• 19:18
  Speaker 4: mentioned earlier, in the program round out kind of the
• 19:20
  Speaker 4: earnings week here on the bank side of things.
• 19:23
  Speaker 2: Let's take a quick break. When we come back. Full
• 19:25
  Speaker 2: market update for you with Wall Street Watch.
• 19:42
  Speaker 1: Like us on Facebook and follow us on Twitter at
• 19:45
  Speaker 1: TFE show. Breaking business news is always first right here
• 19:49
  Speaker 1: on the Financial Exchange Radio Network. Time now for Wall
• 19:54
  Speaker 1: Street Watch a complete look at what's moving market so
• 19:57
  Speaker 1: far today right here on the final Ninchel Exchange Radio Network.
• 20:01
  Speaker 5: Busy day on tap as Wallstree reacts to the Consumer
• 20:04
  Speaker 5: Price Index for the latest measure of inflation, where consumer
• 20:08
  Speaker 5: prices increased two point seven percent on an annual basis,
• 20:12
  Speaker 5: slightly higher than estimates of two point six percent. Investor
• 20:16
  Speaker 5: is also sifting through second quarter bank earnings and also
• 20:19
  Speaker 5: reacting to major news from Nvidia. Right now, Dow is
• 20:23
  Speaker 5: off by half a percent, or two hundred and twenty
• 20:26
  Speaker 5: two points. SMP five hundred is edging six points higher
• 20:30
  Speaker 5: about a tenth per percent. Nasdaq is up by seven
• 20:33
  Speaker 5: tenths of one percent to one hundred and forty three points.
• 20:36
  Speaker 5: Rusted two thousand is off by four tenths of one percent.
• 20:39
  Speaker 5: Tenure Treasure reeled up by four basis points now at
• 20:42
  Speaker 5: four point four to seven percent, and crude oil is
• 20:45
  Speaker 5: off about six tenths of one percent trading and sixty
• 20:49
  Speaker 5: six dollars in fifty seven cents a barrel. JP Morgan
• 20:52
  Speaker 5: posted a better than expected quarterly profit on the heels
• 20:55
  Speaker 5: of its investment, banking and trading revenue. That stock is flats.
• 21:00
  Speaker 5: Fargo shares are falling nearly five percent after the bank
• 21:03
  Speaker 5: lowered its twenty twenty five net income guidance to roughly
• 21:06
  Speaker 5: in line with last year's levels. City Group beat second
• 21:10
  Speaker 5: quarter expectations, lifted by higher fees from deal making and trading.
• 21:15
  Speaker 5: That stock is up by two percent. And Blackrock reported
• 21:18
  Speaker 5: higher than expected quarterly earnings per share but disappointed on revenue,
• 21:23
  Speaker 5: sending that stock down five percent lower outside of bank earnings,
• 21:27
  Speaker 5: and Video shares jumping over four percent after the AI
• 21:30
  Speaker 5: and Chip Giant received assurances from the White House that
• 21:35
  Speaker 5: it can sell its eight twenty artificial chips in China.
• 21:38
  Speaker 5: Other chip makers, including AMD and Taiwan Semi, are seeing
• 21:41
  Speaker 5: gains on the news as well. More breaking news in
• 21:44
  Speaker 5: the tech space to report after Apple and minor NP
• 21:48
  Speaker 5: Materials announced to five hundred million dollars deal for rare
• 21:51
  Speaker 5: Earth magnets in the development of recycling facility that will
• 21:55
  Speaker 5: reinforce the iPhone maker's US supply chain. Apple shares are
• 21:59
  Speaker 5: up modestly, while MP material stock is surging twenty three percent.
• 22:05
  Speaker 5: Coreweave stock is up more than nine percent after the
• 22:08
  Speaker 5: company announced a six billion dollar AI data center project
• 22:12
  Speaker 5: in Pennsylvania. Trade Desk got by ten percent following news
• 22:15
  Speaker 5: that the advertising platform will join the S and P
• 22:18
  Speaker 5: five hundred on Friday, replacing ANSAs, which is being sold
• 22:22
  Speaker 5: to Synopsis. And Tomorrow morning ahead of the opening Bell,
• 22:25
  Speaker 5: Johnson and Johnson, Bank of America, Goldman Sachs, Morgan Stanley,
• 22:29
  Speaker 5: and ASML will report their second quarter results. I'm Tucker Silvan.
• 22:34
  Speaker 5: That is Wall Street Watch.
• 22:36
  Speaker 2: That in Vidia story is where I want to focus
• 22:39
  Speaker 2: on next. So the company Vidia designed a special chip,
• 22:43
  Speaker 2: the H twenty chip, to sell directly to the Chinese
• 22:46
  Speaker 2: customers that would comply with US export restrictions. Back in April,
• 22:51
  Speaker 2: the Trump administration banned it from being sold. Kind of
• 22:55
  Speaker 2: part of the overall China trade escalation back and forth
• 22:59
  Speaker 2: that we were experienced. So they restricted magnets, we restricted
• 23:03
  Speaker 2: certain semiconductors. Since then, Jensen Wong, the leader of Nvidia
• 23:08
  Speaker 2: has been pushing hard in DC to make sure that
• 23:11
  Speaker 2: this gets approved, and his argument has been basically, or
• 23:15
  Speaker 2: at least his public argument has been this, let us
• 23:19
  Speaker 2: sell these chips all across the world, even to countries
• 23:23
  Speaker 2: you might not like and trust all that much, because
• 23:26
  Speaker 2: if you don't, they're going to start their own research
• 23:29
  Speaker 2: and development and chip design and they are going to
• 23:31
  Speaker 2: catch up to us. What you want to do is
• 23:33
  Speaker 2: allow the US to be the dominant leader in chip design.
• 23:37
  Speaker 2: Don't let the Chinese research it quite as actively. We
• 23:41
  Speaker 2: will sell the chips into China, we will sell the
• 23:43
  Speaker 2: chips into the Middle East, and they won't be able
• 23:45
  Speaker 2: to research and catch up because we are going to
• 23:48
  Speaker 2: have that revenue, continue to develop the latest and greatest,
• 23:51
  Speaker 2: and continue to be the dominant player in the market.
• 23:56
  Speaker 2: Whether that argument worked or whether this was just, you know,
• 23:59
  Speaker 2: part of the exchange we needed with China in order
• 24:01
  Speaker 2: to get magnets back flowing into the United States, I'm
• 24:04
  Speaker 2: not entirely sure. In either case. I can understand the argument.
• 24:08
  Speaker 2: I can understand from the Trump administration why you allow
• 24:11
  Speaker 2: this to go, And certainly good news for Nvidia this morning,
• 24:14
  Speaker 2: whose stock is up big. These these chips, in particular
• 24:17
  Speaker 2: that in Vidia designs. They're manufactured by TSMC over in Taiwan.
• 24:21
  Speaker 2: They haven't been able to be shifted for some months.
• 24:24
  Speaker 2: Stock is now moving and dragging the entire market higher
• 24:27
  Speaker 2: in reaction to this overall news.
• 24:29
  Speaker 4: Yeah, Jensen Wong had said back in I believe it
• 24:32
  Speaker 4: was May that they had lost market share, going from
• 24:35
  Speaker 4: ninety five percent to fifty percent in China over the
• 24:38
  Speaker 4: course of the last several months when they were not
• 24:40
  Speaker 4: able to sell these eight twenty chips in terms of
• 24:42
  Speaker 4: a revenue impact. The reason that you're seeing in Vidia
• 24:44
  Speaker 4: tickup I believe four or five percent today is that
• 24:47
  Speaker 4: in Q one and Vidia indicated that they lost two
• 24:50
  Speaker 4: and a half billion of direct sales from this AH
• 24:54
  Speaker 4: twenty chip and had to take a four point five
• 24:56
  Speaker 4: billion dollar inventory charge. They were anticipating that it would
• 25:00
  Speaker 4: be an eight billion dollar drag on revenue in Q two,
• 25:03
  Speaker 4: So allowing this to resume selling would be a big
• 25:07
  Speaker 4: boost to them from a revenue perspective. So certainly that's
• 25:10
  Speaker 4: why the stock is trending upwards today on that news.
• 25:12
  Speaker 3: Now I'm going to take the other side of this argument.
• 25:15
  Speaker 2: Jensen Wong's entire reason for doing this is because China
• 25:17
  Speaker 2: is a massive market and it's going to affect his
• 25:19
  Speaker 2: stock price. That's his job, which is to increase the
• 25:22
  Speaker 2: profitability of this company. China is a massive market with
• 25:25
  Speaker 2: a lot of dough. He's getting this done so that
• 25:27
  Speaker 2: he can benefit himself, his shareholders, and his company.
• 25:31
  Speaker 3: Absolutely, that's your job.
• 25:35
  Speaker 2: The other side of this that I would point out
• 25:41
  Speaker 2: if you're the Chinese, put yourself in Chinese leadership's position.
• 25:45
  Speaker 2: This specific product is as important as critical rare earth
• 25:49
  Speaker 2: materials to the US. There is no way they're going
• 25:52
  Speaker 2: to sit back and say, yeah, we're happy to have
• 25:56
  Speaker 2: our entire supply of the latest and greatest semiconductors that
• 25:59
  Speaker 2: power every new technology that we're going to develop designed
• 26:03
  Speaker 2: and restricted in terms of sales to US.
• 26:05
  Speaker 3: By the United States government. Not a chance.
• 26:08
  Speaker 2: And so as such I want to turn to another
• 26:11
  Speaker 2: big company who saw some big dollar signs of the
• 26:13
  Speaker 2: course of the last decade. As a piece from the
• 26:16
  Speaker 2: Financial Times points out the title of the piece, which
• 26:19
  Speaker 2: is a really good read, how b WYD caught up
• 26:23
  Speaker 2: with Tesla in the global ev race. If you're not
• 26:25
  Speaker 2: familiar with BYD, they are now or soon to be
• 26:29
  Speaker 2: the largest seller of electric vehicles and one of the
• 26:32
  Speaker 2: largest vehicle producers in the world because they do more
• 26:36
  Speaker 2: than electric But in mid twenty twenty two, basically, you know,
• 26:43
  Speaker 2: this company was just starting to catch up with Tesla's
• 26:46
  Speaker 2: technology and starting to make some moves. At this point,
• 26:51
  Speaker 2: there's some evidence that it is better than technology that
• 26:54
  Speaker 2: Tesla is able to produce. Tesla entered the Chinese market
• 26:59
  Speaker 2: years and years ago. I forget when they actually opened
• 27:01
  Speaker 2: up their Chinese manufacturing facility, but effectively they saw the
• 27:07
  Speaker 2: same thing that everyone else did, which is, hey, this
• 27:10
  Speaker 2: is a massive market for us to be able to
• 27:12
  Speaker 2: sell into. It also happens to be one of the
• 27:14
  Speaker 2: best manufacturing country countries in the world, so if we
• 27:18
  Speaker 2: want to sell to other markets, it's a way too
• 27:20
  Speaker 2: cheapen our manufacturing process. While other Western carmakers were forced
• 27:27
  Speaker 2: to form joint ventures with local groups, China's kind of
• 27:30
  Speaker 2: changed their investment rules and allowed Tesla to fully own
• 27:33
  Speaker 2: and operate their Chinese subsidiary doing business in China via
• 27:39
  Speaker 2: these two massive plants that were used to produce the
• 27:42
  Speaker 2: producer stuff, and they kind of hoped that hey, you know,
• 27:45
  Speaker 2: even though Tesla's operating it's still going to give us
• 27:47
  Speaker 2: the expertise we need to learn. Tesla accepted that risk.
• 27:53
  Speaker 2: They knew that, hey, there's a risk of hardware and
• 27:55
  Speaker 2: IP being transferred, but decided it was worth it, and
• 27:59
  Speaker 2: guess what.
• 28:00
  Speaker 3: Few years later, By all accounts, these vehicles are as
• 28:04
  Speaker 3: good or approaching better.
• 28:05
  Speaker 2: At least their claims are that they're as good or
• 28:08
  Speaker 2: better than the Tesla evs that are being made today.
• 28:10
  Speaker 3: A few things that people have pointed to.
• 28:14
  Speaker 2: One they just recently in February announced the BYD did
• 28:18
  Speaker 2: announce their God's Eye and Advanced Driver Assistance system that's
• 28:22
  Speaker 2: a precursor to fully autonomous vehicles, so that has been
• 28:25
  Speaker 2: one of the main selling points of Tesla. They also
• 28:27
  Speaker 2: announced a new battery charging system that's allegedly capable of
• 28:31
  Speaker 2: adding a driving range of about four hundred and seventy
• 28:34
  Speaker 2: kilometers in five minutes. My only point is this is
• 28:41
  Speaker 2: only the latest in stories of major American and other
• 28:46
  Speaker 2: foreign manufacturers, industrial companies, technology companies entering the Chinese market
• 28:51
  Speaker 2: because they see dollar signs having their IP ripped off,
• 28:55
  Speaker 2: and then those Chinese manufacturers making either close to US
• 28:59
  Speaker 2: go product at a cheaper price or a better product
• 29:02
  Speaker 2: eventually at a cheaper price and putting those companies out
• 29:06
  Speaker 2: of business, or at least putting their Chinese business out
• 29:09
  Speaker 2: of business, right Like you know, China's ability to rip
• 29:12
  Speaker 2: off Fords Technology thirty years ago did not put Forward
• 29:16
  Speaker 2: out of business, but it pretty much put them out
• 29:18
  Speaker 2: of business in China.
• 29:19
  Speaker 4: Mm well, I mean, ultimately, if you're Tesla, though I
• 29:24
  Speaker 4: agree with all that you're saying there, you have to
• 29:26
  Speaker 4: keep you have to innovate to keep up right. And
• 29:28
  Speaker 4: the bottom line is they haven't. You know, they haven't
• 29:31
  Speaker 4: come out with a new model in a long period
• 29:34
  Speaker 4: of time, and Bid has been able to come in
• 29:37
  Speaker 4: and undercut them on price. And now the quality piece
• 29:41
  Speaker 4: is reaching that level too, where you're seeing that from
• 29:44
  Speaker 4: twenty twenty to twenty twenty four, Tesla had sold five
• 29:47
  Speaker 4: hundred thousand vehicles in twenty twenty up to one point
• 29:50
  Speaker 4: eight million in twenty twenty four. However, during that same
• 29:54
  Speaker 4: span of time, you've got Bid now selling one point
• 29:58
  Speaker 4: seventy six million in just evs alone last year in
• 30:01
  Speaker 4: twenty twenty four and four point two million cars total,
• 30:05
  Speaker 4: ten times more than what they were selling back in
• 30:08
  Speaker 4: twenty twenties.
• 30:09
  Speaker 2: I think My primary point with this is, yes, Tesla
• 30:12
  Speaker 2: execution problems, Elon Musk being distracted over the last eighteen
• 30:15
  Speaker 2: months and not focusing on his core business, all sorts
• 30:18
  Speaker 2: of other issues that rattled Tesla. There are dozens of
• 30:24
  Speaker 2: dead companies or dying companies that face the same thing.
• 30:27
  Speaker 2: Go to China for the dollars have your IP ripped
• 30:30
  Speaker 2: off if we don't go in eyes wide open with
• 30:33
  Speaker 2: in Nvidia and their own products entering the Chinese market
• 30:36
  Speaker 2: and how that IP is going to get ripped off
• 30:38
  Speaker 2: again they're not manufacturing in mainland China. I just I
• 30:41
  Speaker 2: think that there is a severe risk of that happening.
• 30:44
  Speaker 2: And I think again, I don't think it's going to
• 30:46
  Speaker 2: put in Vidiata business. But if you're China, you have
• 30:49
  Speaker 2: one goal when it comes to the semiconductor industry, learn
• 30:53
  Speaker 2: how to design and manufacture these things domestically so you
• 30:56
  Speaker 2: don't have to be dependent on a US company.
• 30:58
  Speaker 4: Yeah, I mean that's the competition and mistake though, you know,
• 31:01
  Speaker 4: and Video has got to innovate too, because believe it
• 31:03
  Speaker 4: or you know, China is not the only one doing this.
• 31:06
  Speaker 4: You know, they have and Videos reached a four and
• 31:08
  Speaker 4: a half trillion dollar market cap. So there's domestic competitors
• 31:11
  Speaker 4: who want to beat them, sure too, and that's just
• 31:13
  Speaker 4: the way things go, and that to us as end
• 31:16
  Speaker 4: consumers is to our benefit for more competition from more
• 31:19
  Speaker 4: advanced technology. So it's an interesting feel, but you're right,
• 31:23
  Speaker 4: they're nipping at our heels, that's for sure.
• 31:25
  Speaker 2: Let's take a quick break here. When we come back,
• 31:30
  Speaker 2: Big American rare Earth producer trying to make a play
• 31:34
  Speaker 2: to end China's dominance, will be cover that next. On
• 31:36
  Speaker 2: The Financial Exchange.
• 31:38
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• 31:41
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• 31:47
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• 32:03
  Speaker 5: Now it's a great time to register for the DAV
• 32:06
  Speaker 5: five k, taking place on Saturday November eighth at Fort
• 32:10
  Speaker 5: Independence on Castle Island. The race has sold out each
• 32:13
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• 32:16
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• 32:19
  Speaker 5: dot Boston and reserve your spot or join our team
• 32:23
  Speaker 5: here at the Financial Exchange by registering under Team TFE.
• 32:27
  Speaker 5: That's Saturday, November eighth for this year's DAV five k.
• 32:30
  Speaker 5: Sign up now at DAV fivek dot Boston.
• 32:34
  Speaker 2: Tucker mentioned it briefly earlier, but Apple has inked a
• 32:37
  Speaker 2: five hundred million dollars deal for rare earth magnets from
• 32:43
  Speaker 2: little known company before before last week, MP Materials. So
• 32:47
  Speaker 2: this is the the Fort Worth, Texas company that is
• 32:51
  Speaker 2: working on making the United States something of a presence
• 32:56
  Speaker 2: when it comes to producing magnets where we have almost
• 32:59
  Speaker 2: none today. General Motors is signed to start taking.
• 33:03
  Speaker 3: Deliveries later this year. And obviously this.
• 33:05
  Speaker 2: Is the same company who saw an investment from the Pentagon.
• 33:09
  Speaker 2: Was it just last week, Paul? I think you guys
• 33:11
  Speaker 2: covered this just last week. Look, this is an open question.
• 33:16
  Speaker 2: I would view it as one of those areas that's
• 33:19
  Speaker 2: fairly critical for the government to be involved in because
• 33:24
  Speaker 2: China has pretty much a ninety nine percent market share
• 33:27
  Speaker 2: on these types of rare earth magnets. They go into
• 33:30
  Speaker 2: all sorts of defense items that we need, and we
• 33:34
  Speaker 2: saw the stranglehold that they can put on the United
• 33:36
  Speaker 2: States and the event of any sort of conflict over
• 33:40
  Speaker 2: the course of the last few months here. So I
• 33:42
  Speaker 2: agree with everything that's being done. I think where history
• 33:47
  Speaker 2: would tell us this might go is that the unas
• 33:50
  Speaker 2: might need to be, might need to remain very involved
• 33:53
  Speaker 2: in this for quite some time in order to make
• 33:55
  Speaker 2: it actually successful and actually profitable, because can dump this
• 34:00
  Speaker 2: stuff onto the markets and try and put them out
• 34:02
  Speaker 2: of business down the road.
• 34:03
  Speaker 4: Yeah, I think that investors have to be a little
• 34:07
  Speaker 4: bit wary or going in with eyes wide open. That
• 34:10
  Speaker 4: this has been an industry that the US has struggled
• 34:13
  Speaker 4: to compete really since the nineties and two thousands. It
• 34:15
  Speaker 4: fell apart entirely domestically, and there have been multiple attempts
• 34:19
  Speaker 4: to try and make a US presence, But because trying
• 34:21
  Speaker 4: to control so much of the market share, they're able
• 34:25
  Speaker 4: to flood materials onto the market and crash prices down
• 34:28
  Speaker 4: and put these companies and it's really just empy materials
• 34:32
  Speaker 4: if you're talking about a domestic option in a very
• 34:34
  Speaker 4: difficult spot from a profitability standpoint. So to Mike's point,
• 34:38
  Speaker 4: the backstopping of the DoD and others are really going
• 34:42
  Speaker 4: to be necessary to get this business to continue to
• 34:46
  Speaker 4: move off the ground some of the trading that we're
• 34:49
  Speaker 4: seeing today. A lot of enthusiasm around this announcement, but
• 34:54
  Speaker 4: there are a couple of years away from really even
• 34:57
  Speaker 4: just putting these magnets out there.
• 34:59
  Speaker 3: What do you mean?
• 35:00
  Speaker 2: Seems pretty easy to just dig a mine and start
• 35:03
  Speaker 2: getting the raw earths out of the ground and then
• 35:06
  Speaker 2: transferring those into magnets that Apple will want to use
• 35:09
  Speaker 2: in its technology, right.
• 35:10
  Speaker 3: That seems My head.
• 35:11
  Speaker 4: Started spinning on the sixth step process that they laid
• 35:14
  Speaker 4: out here in the Wall Street Journal piece, which was
• 35:16
  Speaker 4: supposed to be a very easy way to digest it. Yeah,
• 35:21
  Speaker 4: not easy business and not something that there's a ton
• 35:25
  Speaker 4: of talent here either for this type of work.
• 35:28
  Speaker 3: You bring that up.
• 35:29
  Speaker 2: I have my wife's cousin as well as her husband,
• 35:32
  Speaker 2: both attended the Colorado School of Mines, which I didn't
• 35:35
  Speaker 2: know existed until recently. Their work options that they found
• 35:39
  Speaker 2: after graduating were Western Canada, about an hour and a
• 35:44
  Speaker 2: half outside of Tucson. Or what they chose to do,
• 35:47
  Speaker 2: which is moved to Australia and work for mining companies
• 35:50
  Speaker 2: out in Australia.
• 35:51
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• 36:40
  Speaker 5: you think. The US Virgin Islands, where summer never ends.
• 36:43
  Speaker 5: Book your trip today at visit USVII dot com.
• 36:48
  Speaker 2: Uh the Bloomberg, The Bloomberg, Let's go with the Bloomberg
• 36:53
  Speaker 2: has a piece this morning from an opinion piece from
• 36:56
  Speaker 2: Clive Crook, asking is the dollars era of exorbitant privilege ending.
• 37:01
  Speaker 2: We've talked about this at length, the dollars having its
• 37:03
  Speaker 2: worst year compared to a basket of major's currency since
• 37:06
  Speaker 2: the nineteen seventies. A lot of people asking the same question, Hey,
• 37:10
  Speaker 2: with deficits this large, with trade imbalance, with trade wars,
• 37:14
  Speaker 2: could this lead to the end of an era? And
• 37:17
  Speaker 2: I think eventually all of this stuff starts to matter
• 37:20
  Speaker 2: and could have a real glaring impact on the dollar.
• 37:25
  Speaker 2: I will also point out that I spent a little
• 37:28
  Speaker 2: bit of time this morning looking for articles going all
• 37:30
  Speaker 2: the way back to the nineteen seventies and eighties detailing
• 37:34
  Speaker 2: theories as to why the dollar's dominance was going to
• 37:37
  Speaker 2: be on the verge of ending any moment now, and
• 37:41
  Speaker 2: we've so far made it another five decades without that happening.
• 37:44
  Speaker 2: So I'd be awfully surprised if twenty twenty five happened
• 37:48
  Speaker 2: to be the year where the dollars dominance and deficits
• 37:51
  Speaker 2: and all this stuff started to really matter for American investors.
• 37:54
  Speaker 2: I have grave concerns about how much debt our nation
• 37:57
  Speaker 2: has and how terribly that's going to play out. I'm
• 38:00
  Speaker 2: merely saying that We've been calling for the death of
• 38:02
  Speaker 2: the dollar and the death of the dominance for five decades,
• 38:06
  Speaker 2: half a century, and it hasn't happened yet.
• 38:09
  Speaker 3: Quick break, A lot more to cover.
• 38:10
  Speaker 2: In the second hour, two of the three major industries
• 38:13
  Speaker 2: have turned negative for the day. We'll be covering that
• 38:15
  Speaker 2: in a lot more Next on the financial exchange.