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US stocks face stiff test from tariffs this week · The Financial Exchange Show

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Speaker 2: Kick it off new week Here, Chuck, Mike, and Tucker
1:11
Speaker 2: with you.
1:11
Speaker 3: Last day of March and last day of Q one
1:16
Speaker 3: today and not off to a particularly good start in markets,
1:19
Speaker 3: with a negative open on all of the major US indices,
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Speaker 3: and this I think you can draw a straight line
1:27
Speaker 3: to over the weekend, a bunch of noise coming out
1:30
Speaker 3: of DC about the potential for additional tariff implementations on Wednesday.
1:36
Speaker 3: We still don't know these specifics of exactly what is
1:39
Speaker 3: going to be implemented, but I you know, I was
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Speaker 3: thinking on the way into the office this morning, you know,
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Speaker 3: kind of what's what's the framework that we should be
1:50
Speaker 3: trying to view this through. And ultimately I keep coming
1:54
Speaker 3: back to one thing, which is stop getting caught up
1:59
Speaker 3: in the headlines that shift from day to day and
2:03
Speaker 3: week to week. Last Sunday there's the big Wall Street
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Speaker 3: Journal headline, Hey, you know Trump administration planning, you know,
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Speaker 3: smaller tariffs than previously expected and no tariffs on sectors.
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Speaker 2: In the last five days.
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Speaker 3: Now it's been We're going to get auto tariffs and
2:19
Speaker 3: the tariffs might be bigger than expected.
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Speaker 2: Now I don't know much.
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Speaker 4: And by the way, on the day of the announcement
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Speaker 4: of the auto tariffs, I believe President Trump also stated
2:27
Speaker 4: that the reciprocal tariffs were not going to be as wide,
2:32
Speaker 4: sweeping or impactful as people were thinking, and then again
2:35
Speaker 4: reversing course over the weekend.
2:37
Speaker 3: So yes, I'm with you. So you can't have the
2:40
Speaker 3: tariffs be all of these things at once. They can't
2:42
Speaker 3: be not sector related and on autos, and they can't
2:45
Speaker 3: be narrower and then more broad. Those are fundamentally impossible.
2:50
Speaker 3: So I think, quite honestly, the best way to look
2:53
Speaker 3: at this is stop thinking about this in terms of
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Speaker 3: the headlines and trying to figure out policy certainty from
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Speaker 3: the headlines, because you're not going to be able to
3:05
Speaker 3: and it's going to cause you a whole bunch of
3:08
Speaker 3: angst and Tony Romo screaming inside of your head. It's
3:13
Speaker 3: just not worth it, and don't spend your time doing that. Instead,
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Speaker 3: the very simple framework, and we've talked about this since
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Speaker 3: the election back in November, by the way, is the
3:27
Speaker 3: Trump administration wants to impost tariffs. They've said that multiple
3:32
Speaker 3: times in multiple different venues with multiple people from the administration.
3:38
Speaker 3: As such, we should believe them when they say they
3:41
Speaker 3: want to, and the specifics will know when it's time
3:47
Speaker 3: when they're actually implemented. Beyond that, I think it's a
3:52
Speaker 3: waste of time to try to figure out, you know,
3:54
Speaker 3: what's it going to be on what day and how
3:56
Speaker 3: much they want to impost tariffs. The amount has yet
4:00
Speaker 3: to be determined, how long they stay in place yet
4:03
Speaker 3: to be determined, and you're just gonna have to take
4:06
Speaker 3: it as it comes.
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Speaker 4: Yeah, I think the lesson that some people are learning
4:10
Speaker 4: right now is and for good reason. In the first
4:14
Speaker 4: Trump administration, I think the takeaway for a lot of
4:17
Speaker 4: investors was take the president seriously, but not literally, and
4:22
Speaker 4: many have carried that forward to the second Trump administration
4:26
Speaker 4: and are being met with quite a surprise.
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Speaker 2: I don't even think it. I don't even know if
4:30
Speaker 2: it's that.
4:32
Speaker 3: I think for whatever reason, and by the way, I
4:37
Speaker 3: do like to toot our own horn on this. Shortly
4:39
Speaker 3: after the election, we were talking, you know, multiple times.
4:43
Speaker 3: I'm sure that if you wanted to listen to all
4:44
Speaker 3: of our old shows from November December, you'd be able
4:48
Speaker 3: to find this stuff. We said, look, this is a
4:51
Speaker 3: different setup, yep than the Trump administration was coming into
4:55
Speaker 3: during the first term, and they're talking about.
4:58
Speaker 4: It differently, and there's different people in place, as all
5:01
Speaker 4: of those things.
5:02
Speaker 3: To simply expect, Hey, we're gonna get tax cuts and
5:04
Speaker 3: everything's off to the races, we said that was not
5:08
Speaker 3: necessarily what you are going to get, and there was
5:11
Speaker 3: the potential for much more chop and a much more
5:18
Speaker 3: a much more challenging market environment than what you saw
5:21
Speaker 3: during the first Trump term, and thus far that's been
5:25
Speaker 3: born out. I mean, the S and P five hundred,
5:27
Speaker 3: if you look at it right now, look at all
5:30
Speaker 3: the major indices at the moment, the Dow is currently
5:33
Speaker 3: off two point seventy nine percent year to date, s
5:36
Speaker 3: Andp's off six and a quarter, Nasdaq's off twelve and
5:38
Speaker 3: a quarter, Russell two thousand through Friday off nine and
5:41
Speaker 3: a quarter just because the Russell I don't know what
5:44
Speaker 3: it is with the Russell and its composition, but you
5:46
Speaker 3: never get inter day updates in any data feed the
5:49
Speaker 3: way that you're supposed to. So that's from Friday. But
5:53
Speaker 3: this is not something that you saw during year one
5:56
Speaker 3: of Trump one point zero. It was straight up because
5:59
Speaker 3: it was Hey, cut taxes and the economies off to
6:01
Speaker 3: the races because you needed you know, there was room
6:05
Speaker 3: for more demand in the economy, and that was the playbook.
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Speaker 3: This we said was a different economy that required a
6:11
Speaker 3: different playbook. The one that they've chosen is moving towards
6:15
Speaker 3: you know, more tariffs and those types of things, and
6:19
Speaker 3: so we're gonna have to see what the impact on
6:22
Speaker 3: the economy ends up looking like. But thus far, markets
6:26
Speaker 3: are starting to when I say starting, because it's still
6:28
Speaker 3: really early and they're not really pricing it a ton
6:31
Speaker 3: quite honestly, but markets are starting to price in the
6:33
Speaker 3: fact that this could be a growth negative policy that
6:37
Speaker 3: ends up slowing US growth significantly over the course of
6:41
Speaker 3: this year.
6:42
Speaker 4: The I was having a conversation with a client of
6:45
Speaker 4: mine the other day about this, who's right on the
6:47
Speaker 4: verge of retirement and.
6:51
Speaker 5: Not giving out too much information. He's a Trump supporter.
6:53
Speaker 4: He is a conservaive Trump supporter, voted for him twice,
6:56
Speaker 4: and likes the policy of the Trump and reministration. His
7:01
Speaker 4: assessment of this was, I think one of the more
7:03
Speaker 4: clear ones that I've gotten from somebody, which is this
7:07
Speaker 4: all might be really bad for me and like my
7:10
Speaker 4: portfolio long term could lose a lot of money because
7:13
Speaker 4: of this, and he wasn't certain about any of that,
7:16
Speaker 4: but he was looking at this and just saying, like,
7:18
Speaker 4: I think that this might happen. I think that it
7:20
Speaker 4: might result in inflation. I think, based on the fact
7:22
Speaker 4: that I live here in the Northeast, I'm not going
7:24
Speaker 4: to see a ton of new jobs come to here.
7:26
Speaker 4: But I fundamentally believe that this will make my grandchildren's
7:29
Speaker 4: lives better and it might literally take the rest of
7:32
Speaker 4: my life to see that come to fruition. So that
7:34
Speaker 4: was his assessment, and I thought that that was a
7:36
Speaker 4: really honest one. And then he also said, Hey, I
7:38
Speaker 4: was talking to somebody else at work who is also
7:41
Speaker 4: a Trump supporter, and he was still fascinated by the
7:44
Speaker 4: idea of the irs was going to get dissolved and
7:46
Speaker 4: he was never going to pay income taxes again. And
7:48
Speaker 4: I was like, and he was teasing that point of
7:50
Speaker 4: view as like, that's ludicrous and never going to happen.
7:53
Speaker 4: And I have to agree with his assessment, like, if
7:55
Speaker 4: this stuff works, it will not be overnight.
7:59
Speaker 5: And I think the Trump administration has started to be.
8:02
Speaker 4: Really clear about that that this is something that is
8:05
Speaker 4: going to take a long time and quite possibly a
8:08
Speaker 4: lot of pain to get through, and markets are I
8:12
Speaker 4: think finally now starting to take that seriously, although again
8:15
Speaker 4: we are still ten percent away from all time highs
8:18
Speaker 4: ever right now, so I don't want to overstate the
8:21
Speaker 4: depths of this downturn in equity markets.
8:24
Speaker 2: So let's take a quick break here.
8:25
Speaker 3: When we come back, let's talk about again kind of
8:28
Speaker 3: what is slated to happen this week, because there's been
8:31
Speaker 3: a lot of chatter. Will give the specifics that we
8:34
Speaker 3: have at the moment, and then talk about what we're
8:37
Speaker 3: seeing as far as Hey, how are economists looking at
8:42
Speaker 3: this in terms of the projected impact to the US
8:46
Speaker 3: economy that is coming up right after this?
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Speaker 2: So, in terms of.
9:45
Speaker 3: What is on the table for this week April second,
9:49
Speaker 3: we have the you know, reciprocal tariffs that the Trump
9:52
Speaker 3: administration is teased for probb of the last couple months now.
9:56
Speaker 3: We still don't know what format those are gonna take.
9:58
Speaker 3: We don't know how long they're gonna stick. We don't
9:59
Speaker 3: know if it's gonna a blanket rate across all of them.
10:01
Speaker 3: Several different rates are customized, one for any of the
10:03
Speaker 3: countries included.
10:05
Speaker 4: I'm still waiting to hear if he's going to delay
10:07
Speaker 4: that because my birthday or not. I submitted a request,
10:10
Speaker 4: but I don't know if Igot heard.
10:11
Speaker 2: Probably not.
10:12
Speaker 3: Yeah, there's already a one day there to be fair.
10:16
Speaker 3: Originally these were talked about going into place on April first,
10:19
Speaker 3: but the Trump administration was actually nervous people would think
10:21
Speaker 3: they were enable to fool's joke, and so that's why
10:24
Speaker 3: they pushed them to April second.
10:25
Speaker 5: That's fair.
10:26
Speaker 3: Uh So there's that. Uh so you've got those again,
10:30
Speaker 3: a lot of questions. Still don't know the exact format
10:32
Speaker 3: they'll take. April third, on Thursday, the auto tariffs on
10:36
Speaker 3: all US auto imports are stated to go into effect,
10:40
Speaker 3: with that being just on completed vehicles. Auto parts not
10:44
Speaker 3: included there until May.
10:46
Speaker 5: Yeah, I don't know that.
10:46
Speaker 4: We gotta find yeah, okay, it was May right with
10:48
Speaker 4: the final beginning of men date. Okay, yes, on the parts,
10:51
Speaker 4: and again the parts being a really important component here,
10:54
Speaker 4: because I do not believe that even Tesla uses more than.
11:01
Speaker 3: Is about eighty source in the US. Okay, it's I
11:05
Speaker 3: believe it's the highest out of any US automaker, but
11:07
Speaker 3: still not one hundred percent. Right, So in terms of
11:11
Speaker 3: what we are seeing now as far as projections, and
11:13
Speaker 3: I want to talk about the fine folks at Goldman Sachs, who,
11:16
Speaker 3: quite honestly, I give them a.
11:18
Speaker 2: Lot of crap normally.
11:20
Speaker 3: You know, I've repeatedly referenced how you know, Matt Tybee
11:23
Speaker 3: referred to them as a vampire squid with its tentacles around,
11:26
Speaker 3: you know, American society, like you know, we we we
11:30
Speaker 3: talk about how hey, they tell you one thing publicly
11:33
Speaker 3: and then you know, give the real stuff, you know,
11:35
Speaker 3: and internally blah blah blah. Here's what I will say
11:38
Speaker 3: about Goldman Sachs whoever they're publicly facing GDP research team
11:43
Speaker 3: is they have been so plugged in the last two
11:46
Speaker 3: years that they've done a really, really good job. And again,
11:50
Speaker 3: longtime listeners know, I don't really like to compliment Goldman Sacks.
11:54
Speaker 3: It gives me a weird feeling in the pit of
11:56
Speaker 3: my stomach, you know, it's it's it. But I give
12:00
Speaker 3: credit where credits due, because for the last two years,
12:03
Speaker 3: every time the recessionary concerns have come up, Goldman's been
12:07
Speaker 3: there and they've been like, no, we're looking through this,
12:10
Speaker 3: we don't think there's a recession coming. And they've been
12:13
Speaker 3: right every time on exactly what's happened. And there's been
12:15
Speaker 3: a few of those right the summer of twenty twenty four,
12:18
Speaker 3: there have been three different ones. There was Silicon Valley
12:20
Speaker 3: Bank where people panicked and Goldman was like, twenty three yeah,
12:23
Speaker 3: and Goldman was like, don't even worry about this. This
12:26
Speaker 3: is a nothing Burger. Then summer of twenty three, we
12:28
Speaker 3: were heading towards the fall and wondering, g is the
12:31
Speaker 3: labor markets slowing? And Goldman once again was like, no,
12:34
Speaker 3: this isn't a thing, don't worry about it. And then
12:37
Speaker 3: last summer, same situation, heading towards the.
12:39
Speaker 2: End of the year.
12:39
Speaker 5: Yeah, we had a som rule recession indicator.
12:42
Speaker 3: Jeremy Siegulls on CNBC or Bloomberg screaming that we need
12:45
Speaker 3: one hundred and fifty bases points and rate cuts that week,
12:47
Speaker 3: and Goldman Sachs is like, please, Jeremy, don't don't say
12:51
Speaker 3: that and said, no, this is not a thing. So
12:55
Speaker 3: I do pay attention to what their GDP research team
12:57
Speaker 3: says because they've been really pugged into this market for
13:01
Speaker 3: the last couple of years now. And so couple things
13:05
Speaker 3: that they did over the weekend again I guess they
13:08
Speaker 3: work long hours there because this came out over the weekend. First,
13:13
Speaker 3: their Q one growth rate. They have downgraded four times
13:18
Speaker 3: in the last week and a half now, and it's
13:22
Speaker 3: been unfortunately consistently moving in one direction from them. Uh
13:27
Speaker 3: you look at kind of where they start and they
13:28
Speaker 3: were like, yeah, we're you know, one point eight percent,
13:31
Speaker 3: then one point six, then one point three, then one,
13:34
Speaker 3: then point six, then point two percent. So they now
13:37
Speaker 3: think Q one GDP growth is gonna be point two percent.
13:40
Speaker 3: They think you're gonna get a little bit of a
13:42
Speaker 3: bounce back in Q two. We talked about this last week,
13:45
Speaker 3: Sure Weather factors consumer spending. So they think Q two
13:48
Speaker 3: is gonna come in at one point five, Q three
13:51
Speaker 3: at one, and Q four at one point three. Overall,
13:54
Speaker 3: they think GDP growth is gonna come in at one
13:56
Speaker 3: percent full year, which is light light and below trend
14:01
Speaker 3: trend GDP in the US, given you know where population
14:05
Speaker 3: growth is and things like that, isn't the high ones
14:08
Speaker 3: one seven to two point one percent is kind of
14:10
Speaker 3: where you would expect it to be. So one is light.
14:14
Speaker 3: You kind of look at it, You're like, Okay, that's
14:16
Speaker 3: not great. The other thing they did, which I don't
14:18
Speaker 3: think really has a ton of value in and of itself,
14:23
Speaker 3: is they raise their probability of recession in the US
14:27
Speaker 3: from twenty percent to thirty five percent. The reason why
14:30
Speaker 3: I say, like this doesn't have much value is like,
14:34
Speaker 3: what does that fundamentally mean that there's a twenty percent
14:38
Speaker 3: versus a thirty five percent chance of recession. I know
14:41
Speaker 3: that from a technical perspective, it means, hey, we now
14:44
Speaker 3: think that recession is one point seventy five times as
14:46
Speaker 3: likely as we did.
14:48
Speaker 4: But yeah, one and three chants that we think that
14:51
Speaker 4: our GDP projections are a lot worse than we're stating recessions.
14:55
Speaker 3: Binary, you can't have a third of a recession. It
14:58
Speaker 3: doesn't work like that. And so the signal that I
15:01
Speaker 3: do think is interesting here is that when you look
15:05
Speaker 3: at Goldman and how they have changed their recession odds
15:10
Speaker 3: historically in the last few years, they are saying, hey,
15:14
Speaker 3: this is what we think is the highest likelihood of
15:16
Speaker 3: recession that we've seen in the last several years. So
15:21
Speaker 3: I get some signal from that in terms of relative probabilities,
15:25
Speaker 3: not so much. Hey, here's what this means in absolute terms,
15:28
Speaker 3: because I don't know what one does with a thirty
15:32
Speaker 3: five percent chance of recession.
15:35
Speaker 4: It's only useful if you're able to get like, Hey,
15:38
Speaker 4: the running average from Goldman Sachs over the last thirty
15:41
Speaker 4: years in terms of their recession probabilities was ten percent.
15:44
Speaker 5: Now they're at thirty five percent.
15:45
Speaker 4: That gives you some relative relative area, but I feel
15:48
Speaker 4: like generally from economists, their baseline is like a one
15:52
Speaker 4: to five chance of recession, and so thirty five percent
15:55
Speaker 4: is certainly elevated. I just don't know how elevated it is.
15:57
Speaker 2: But again, we even.
15:57
Speaker 3: Saw the stuff back at the end of twenty twenty two.
16:00
Speaker 3: We had Bloomberg saying there was one hundred percent chance
16:02
Speaker 3: of recession in the next twelve months. You had Jamie
16:05
Speaker 3: Diamond then being like, hey, you know, there's a there's
16:09
Speaker 3: a hurricane coming, and so I think you got to
16:12
Speaker 3: take all of this with a grain of salt. But
16:16
Speaker 3: I do pay attention to Goldman's GDP research team just
16:19
Speaker 3: because they've been right on the ball for the last
16:22
Speaker 3: two years. And that to me is something where hey,
16:26
Speaker 3: you got to understand, it's no different from watching March
16:30
Speaker 3: madness what we're seeing right now, which it's March like,
16:33
Speaker 3: isn't it. You watch a game and it's of a
16:37
Speaker 3: team that you have no idea who they are. Like
16:39
Speaker 3: you watch a first round game and you've got I
16:43
Speaker 3: don't know who who was a big first round upset
16:44
Speaker 3: this year.
16:45
Speaker 2: Time McNee McNeice. You're watching McNeese the first ten minutes
16:48
Speaker 2: of the McNeese game, You're watching them play Clemson and
16:52
Speaker 2: you're like, where the hell is McNeese.
16:54
Speaker 3: You're saying that first, but like anytime a McNee shooter
16:58
Speaker 3: gets the ball, you're not, like, you don't really know
16:59
Speaker 3: if you want them to shoot or not, because you
17:02
Speaker 3: don't know if they're any good at it by the
17:04
Speaker 3: time you've watched the end of that game. By the
17:07
Speaker 3: second round game, you got you know whoever it is
17:09
Speaker 3: for McNeice, and you're going, no, don't shoot it, because
17:12
Speaker 3: like you understand that you know that stuff it You're like, no,
17:15
Speaker 3: get it to this, get it to the shooter, get
17:16
Speaker 3: it to the open guy. It's the same thing when
17:19
Speaker 3: you're looking at GDP forecasting and really anything economics related
17:24
Speaker 3: in that, Hey, if you just look at these in
17:26
Speaker 3: the vacuum, like you have no idea if this means anything.
17:28
Speaker 3: But I do know that Goldman's GDP team has been
17:31
Speaker 3: on a heater for the last two years, and so
17:34
Speaker 3: given that, I put a little bit more weight internally,
17:36
Speaker 3: you know, in my own like thought process as to, hey,
17:40
Speaker 3: what are they saying right now? As opposed to Okay,
17:43
Speaker 3: Bill Gross came out with something. Guy hasn't been hot
17:46
Speaker 3: for two decades, like what are we doing here?
17:48
Speaker 4: And I think again, Goldman does not. They don't lick
17:53
Speaker 4: their finger and stick it up in the air to
17:54
Speaker 4: try and determine where recession is. Well, they do that,
17:56
Speaker 4: but it's a bit more technical, and this does I think,
18:01
Speaker 4: regardless of your perspective on tariffs, we have some pretty
18:04
Speaker 4: compelling evidence that consumers dramatically spent down, spent dramatically slowed
18:10
Speaker 4: down spending, not spent down slowing that would be a
18:12
Speaker 4: different thing.
18:14
Speaker 5: In January and February of this year.
18:16
Speaker 4: We've taken that to say, look, if that continues, it's
18:19
Speaker 4: a pretty clear recession.
18:20
Speaker 5: But there was other stuff going.
18:22
Speaker 4: On back in January and February besides tariff talk and
18:26
Speaker 4: government job cuts, and so you could take that to
18:30
Speaker 4: mean a, hey, it's going to get a lot worse
18:32
Speaker 4: because now people are worried about job cuts, recession, market
18:35
Speaker 4: sell off, et cetera. Or you could take it to
18:37
Speaker 4: me and hey, this could get a lot better because
18:39
Speaker 4: people were horribly sick and dealing with wildfires in January
18:42
Speaker 4: and February. But the risk is certainly higher because the
18:45
Speaker 4: slow down and spending already started.
18:48
Speaker 2: And here's the thing. If this is going to come.
18:51
Speaker 3: If you think recession is going to come to fruition,
18:54
Speaker 3: you're likely going to see the signs of it starting
18:56
Speaker 3: in the next few months, because otherwise here's what happened,
19:00
Speaker 3: and here here's the path to no recession. You got
19:02
Speaker 3: everyone all negative sentimentally right now or sentimentalitatively. There's a
19:08
Speaker 3: lot of sentiment feel bad. There's a lot of negative
19:11
Speaker 3: sentiment out there. If the economic data comes in better
19:14
Speaker 3: than people expect the next couple months, then both businesses
19:17
Speaker 3: and households start to say, gee, maybe there's no recession
19:20
Speaker 3: on the horizon. We start spending more and growth comes
19:22
Speaker 3: out of it. Otherwise you go the other way. But
19:26
Speaker 3: this is why the next few months Q two, it's
19:28
Speaker 3: a big one here, it's a big one to see
19:30
Speaker 3: where this puppy goes.
19:31
Speaker 2: Just take a quick break.
19:32
Speaker 3: We got Wall Street Watch 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
19:48
Speaker 1: on the Financial Exchange Radio Network. Time now for Wall
19:53
Speaker 1: Street Watch a complete look at what's moving markets so
19:56
Speaker 1: far today right here on the Financial Exchange Radio Network.
20:00
Speaker 6: On the final trading day of a rocky first quarter.
20:03
Speaker 6: Markets today are extending their losses as investors closely monitored
20:07
Speaker 6: developments on the terror front ahead of this week's deadline.
20:11
Speaker 6: At the moment, the Dow is down by eighty three
20:13
Speaker 6: points or two tenths of a percent, SMP five hundred
20:16
Speaker 6: down about eight tenths of a percent or forty four
20:19
Speaker 6: points in the Nasdaq selling off by one in over
20:23
Speaker 6: one in three quarters of a percent or three hundred
20:26
Speaker 6: and fourteen points, Russell two thousands down one and two
20:29
Speaker 6: thirds of percent, Tenure Treasure Reel down by three basis
20:32
Speaker 6: points at four point two to one percent, and crude
20:35
Speaker 6: oil up about two percent higher, trading just below seventy
20:39
Speaker 6: one dollars a barrel. Auto stocks continue to garner attention
20:43
Speaker 6: ahead of the implementation of President Trump's tariffs on imported
20:46
Speaker 6: autos set to take place this week. General Motors down
20:50
Speaker 6: by a third of a percent, Forward up by one
20:52
Speaker 6: and a half percent, and Stilanta's shares are down about
20:56
Speaker 6: two and a half percent. Sticking with auto, Tesla down
20:59
Speaker 6: by seven percent after Stefel cut its price target of
21:03
Speaker 6: the stock, where the firm said that a slower than
21:06
Speaker 6: expected rollout of Tesla's new model hy and recent protests
21:11
Speaker 6: could weigh on sales in the near term. Meanwhile, after
21:14
Speaker 6: its disappointing IPO on Friday, shares and core Weave down
21:18
Speaker 6: by eight percent today. In Nvidia, who backs the cloud
21:22
Speaker 6: provider startup, is also seeing a loss of about five
21:24
Speaker 6: percent today. Elsewhere, Rocket Companies announced a definitive agreement to
21:29
Speaker 6: acquire mortgage firm Mister Cooper in an all stock ran
21:33
Speaker 6: transaction for nine point four billion dollars. Shares Mister Cooper
21:38
Speaker 6: up by sixteen percent, while Rocket stock is down by
21:41
Speaker 6: eight percent. Vaccine makers Moderna and Novavax down by twelve
21:45
Speaker 6: percent and seven percent, respectively, after the Wall Street Journal
21:49
Speaker 6: reported on Friday that the FDA's top vaccine official has
21:52
Speaker 6: been pushed out, and more volatility for a pall andeer
21:56
Speaker 6: where shares in the AI and defense tech company are
21:59
Speaker 6: down for percent today. Last week the stock fell more
22:03
Speaker 6: than five percent. I'm Tucker Silvan, that's Wall Street Watch.
22:07
Speaker 3: So let's talk a little bit about Core Weave. They
22:10
Speaker 3: were the company that iPod on Friday. They are basically
22:14
Speaker 3: the long and short of them. They buy a bunch
22:16
Speaker 3: of chips from Nvidia. They've got about two hundred and
22:18
Speaker 3: fifty thousand that they bought, they set up these big
22:20
Speaker 3: AI server farms, and then they leased the space out
22:24
Speaker 3: and the computing power out to companies that want the
22:28
Speaker 3: computing power for AI. Microsoft is their biggest customer at
22:30
Speaker 3: about sixty two percent of their revenue.
22:32
Speaker 5: They kind of came out of nowhere.
22:33
Speaker 1: Here.
22:34
Speaker 4: They were previously setting up mining centers to do crypto mining,
22:39
Speaker 4: so they had data centers being established across the country,
22:43
Speaker 4: and then quickly pivoted when they realized, oh yeah, companies
22:46
Speaker 4: are more than willing to lease these same data centers
22:49
Speaker 4: out at a significantly higher price than we're able to
22:52
Speaker 4: make mining mining ethereum for example, to run AI models
22:57
Speaker 4: and scale things up rather rapidly.
23:00
Speaker 5: I have to say that I don't.
23:02
Speaker 4: Really understand why this would be more attractive for a Microsoft. Well,
23:07
Speaker 4: obviously Microsoft's not going to go to Amazon to at
23:09
Speaker 4: least this type of stuff, but I don't fully understand
23:13
Speaker 4: why they just don't do it on their own. But
23:14
Speaker 4: in any case, yes, you've grown your revenue massively and
23:19
Speaker 4: Microsoft is your biggest customer, so you've got big customers
23:23
Speaker 4: growing rapidly.
23:24
Speaker 3: So they went through an IPO on Friday, which can
23:28
Speaker 3: quite honestly you know that we're not really prone to
23:31
Speaker 3: hyperbole on this show, but it can generously be described
23:35
Speaker 3: as a train wreck. By the way, Morgan Stanley, who
23:38
Speaker 3: was the lead underwriter on this, I want to get
23:40
Speaker 3: into just a little bit about how IPOs work, just
23:42
Speaker 3: because I.
23:42
Speaker 5: Was going to say we should probably start that.
23:44
Speaker 2: I think there's some meat here.
23:45
Speaker 3: So company Core we've comes out and says, hey, we
23:48
Speaker 3: want to go public, and we want to raise X
23:51
Speaker 3: number of dollars in going public, and they go and
23:55
Speaker 3: shop around to different banks, and the bank's basically their
23:58
Speaker 3: job is to do two things. Their job is to
24:02
Speaker 3: figure out how much demand there is for shares of
24:04
Speaker 3: the company and then price it appropriately so that there's
24:08
Speaker 3: a big pop shortly after the shares go public, because
24:12
Speaker 3: that's what maintains it's basically covering two things. You're helping
24:16
Speaker 3: the company to accomplish their financing needs and liquidity for
24:21
Speaker 3: their investors, and you're also helping your own bank being
24:25
Speaker 3: able to say, hey, here's you know what we were
24:28
Speaker 3: able to give our clients in terms of the pop
24:31
Speaker 3: later on, and it helps to maintain demand for future IPOs.
24:35
Speaker 3: Buy that same bank, because that's the whole idea.
24:38
Speaker 4: Is Hey, if you are a customer of that bank,
24:40
Speaker 4: you can go in and participate in that IPO and
24:42
Speaker 4: usually get big customers.
24:44
Speaker 5: And you're a big customer, they're a strategic customer. There.
24:46
Speaker 5: You get to.
24:47
Speaker 4: Buy your allotment of shares and if your average experience
24:51
Speaker 4: is that the day that it goes public, you get
24:52
Speaker 4: a big pop in the valve of your shares. Not
24:55
Speaker 4: only do you make some money, but you have something
24:56
Speaker 4: fun to talk about on the golf course.
24:58
Speaker 3: So obviously this has been kind of a negative market
25:01
Speaker 3: to start the year. First quarter is not gone how
25:04
Speaker 3: you know you would like to see it with all
25:06
Speaker 3: the major indices in the US in negative territory. So
25:10
Speaker 3: you got coreweve who wants to go through this ipo
25:12
Speaker 3: they need to and they decide, okay, we're gonna go
25:17
Speaker 3: with Morgan Stanley as the underwriter on this. And Morgan
25:20
Speaker 3: Stanley's Tech desk is basically considered the gold standard of
25:25
Speaker 3: underwriting for tech IPOs, like they are the company that
25:29
Speaker 3: you go to in order to do a big tech IPO.
25:33
Speaker 3: And pretty much what was going on is during you
25:36
Speaker 3: know the IPO roadshow where they go around and they
25:39
Speaker 3: you know, Corewave's CEO and CFO and everyone. They're all
25:42
Speaker 3: going around to you know, different parts of the country
25:45
Speaker 3: and pitching you know, local branches on the IPO so
25:48
Speaker 3: that they can sell it to their clients. They were saying, Okay,
25:51
Speaker 3: we want to raise two and a half billion dollars
25:54
Speaker 3: and that's gonna be somewhere between. I think it was
25:56
Speaker 3: like fifty and fifty seven dollars a shares is like
25:58
Speaker 3: what it ended up what they were saying. And late
26:01
Speaker 3: last week it's like, hey, the demand isn't really there,
26:06
Speaker 3: and so we're going to downsize the IPO and they
26:09
Speaker 3: end up downsizing the issuance sized by like almost thirty percent.
26:14
Speaker 3: They downsize the price by twenty percent from fifty dollars
26:17
Speaker 3: a share down to forty. And Morgan Stanley again I
26:23
Speaker 3: got to give them credit on this core. We've closed
26:27
Speaker 3: on Friday at forty dollars a share, and you know,
26:30
Speaker 3: Morgan Stanley's brokers were working overtime to be like, that
26:34
Speaker 3: thing is not going to trade under forty at the
26:37
Speaker 3: close because it would it would look bad for us.
26:40
Speaker 3: And again, the job of the underwriter is not to
26:45
Speaker 3: you know, make the stock a lot of money once
26:47
Speaker 3: it's public. But it's basically to say, hey, did did
26:49
Speaker 3: we fairly price this stock? And this is a tough
26:51
Speaker 3: market to do this in again, you had, you know,
26:53
Speaker 3: a market because that's going on on Friday.
26:56
Speaker 2: You got a lot of uncertainty.
26:58
Speaker 3: And so the work that Morgan's family did, I actually
27:00
Speaker 3: kind of commended them because it was like, this was
27:03
Speaker 3: a tough one to be able to pull off in
27:04
Speaker 3: this environment. Having said that, the actual IPO, the reason
27:09
Speaker 3: I describe it as a train wreck is because look
27:11
Speaker 3: when you have to downsize your IPO by forty five percent.
27:14
Speaker 3: And then in video, who is core Weave's biggest vendor.
27:18
Speaker 3: The core Weave has bought all of these chips from Nvidio,
27:21
Speaker 3: meaning they've they've sent them billions.
27:22
Speaker 5: Of dollars, borrowed a ton of money to do so.
27:25
Speaker 3: In Video says on Thursday night, hey, we're going to
27:28
Speaker 3: take two hundred and fifty million dollars and put it
27:30
Speaker 3: into your IPO because otherwise your IPO is not going
27:32
Speaker 3: off successfully. So it's just you know, okay, so Core
27:37
Speaker 3: We've paid in Video a bunch of money, and Video
27:39
Speaker 3: is paying it back to Core. We've like, we see
27:42
Speaker 3: what's going on here? Today the shares are down almost
27:45
Speaker 3: ten percent trading it you know, thirty six bucks in
27:47
Speaker 3: change right now. And there's a story in CNBC talking about, Look,
27:53
Speaker 3: you know, Core, We've was this company that was doing
27:55
Speaker 3: all this crypto stuff and inn Vidia helped them, you know,
27:58
Speaker 3: pivot to AI. And the piece that I keep coming
28:03
Speaker 3: back to on AI that that's really.
28:06
Speaker 2: Interesting to me.
28:09
Speaker 3: Is, hey, what if AI actually is you know, pretty
28:11
Speaker 3: useful and you know, deflationary in some respects, not not
28:15
Speaker 3: to the scale that you know, some of the stuff
28:17
Speaker 3: being claimed is where it's like, hey, all of our
28:19
Speaker 3: doctors are going to be AI in ten years, But
28:21
Speaker 3: what if it just helps doctors to be much more productive,
28:24
Speaker 3: and it helps writers to be much more productive, and
28:26
Speaker 3: it helps you know, wealth managers to be more whatever,
28:30
Speaker 3: just you know, white collar workers who can be more
28:32
Speaker 3: productive using generative AI.
28:33
Speaker 2: I can buy that story.
28:36
Speaker 3: But ultimately, isn't it also kind of commoditized in that
28:42
Speaker 3: a lot of that work you don't need to be
28:43
Speaker 3: on any one particular platform to do. And it's not
28:47
Speaker 3: like Microsoft Word where it needs to like ship with
28:49
Speaker 3: the operating system and stuff like that. These are all
28:52
Speaker 3: web based apps, and so what if it's you know,
28:56
Speaker 3: meaningfully deflationary. But also there's no margins and no pro
29:00
Speaker 3: in the long run because it's it's basically just hey,
29:04
Speaker 3: build all this stuff and then sell it as cheaply
29:07
Speaker 3: as possible, which is kind of how it usually is
29:09
Speaker 3: in the computer space.
29:10
Speaker 5: It's gonna say it kind of like the Internet.
29:13
Speaker 3: Yeah, Well, here's the thing. There's some companies in the
29:16
Speaker 3: Internet that do make a lot of money.
29:17
Speaker 4: I mean Google does, But but the core providers of
29:21
Speaker 4: the Internet did not. I mean, think about the core
29:24
Speaker 4: providers of the Internet today or what they were back then,
29:27
Speaker 4: right AOL, Time, Warner, Verizon, Comcast. These are big I'm
29:32
Speaker 4: not saying these are big, unprofitable companies, that's not it
29:35
Speaker 4: at all, but they are certainly not large contributors to growth.
29:38
Speaker 3: And even on the companies that do make money on
29:41
Speaker 3: the Internet, do most Internet based companies do they make money?
29:46
Speaker 3: Do they make their money selling a bunch of stuff
29:48
Speaker 3: on the Internet?
29:50
Speaker 2: What do they sell?
29:51
Speaker 4: The bandwidth ads? Yeah, they sell advertising, like Google, companies
29:56
Speaker 4: that make a bunch of money on the Internet.
29:57
Speaker 3: You look at the companies that like have made a
29:59
Speaker 3: bun Google Meta like, it's not like metas sits there
30:03
Speaker 3: and is like, hey, we sold a bunch of stuff
30:06
Speaker 3: to people. Know, Meta makes their money by selling a
30:09
Speaker 3: bunch of ads. And so if you're no longer in
30:12
Speaker 3: the business of selling ads, but now you're selling services,
30:16
Speaker 3: isn't it a race to the bottom on something like
30:18
Speaker 3: this that's you know, increasingly commoditized and that people still
30:23
Speaker 3: don't want to pay for because they're used to how
30:26
Speaker 3: the internet works. You know, when you go online, mic,
30:29
Speaker 3: how often do you pay for accessing a part of
30:32
Speaker 3: the Internet?
30:34
Speaker 5: Rarely? You don't it?
30:36
Speaker 4: I mean, yeah, occasionally for a newspaper publication or or
30:40
Speaker 4: a TV subscription, but buy and large Now, TV.
30:43
Speaker 2: Subscription isn't access on the internet.
30:44
Speaker 3: It's just where we're like when when you're going around
30:47
Speaker 3: browsing the internet, how often do you pay for something?
30:50
Speaker 5: Rarely?
30:50
Speaker 3: And so if the default use of most users is
30:53
Speaker 3: I don't want to pay for the Internet, how are
30:58
Speaker 3: you gonna get money in that is? Where is it
31:00
Speaker 3: going to come from?
31:01
Speaker 5: Yeah?
31:01
Speaker 4: That said, I don't I don't know that that's what's
31:05
Speaker 4: caused the IPO to go off so horribly on this week.
31:07
Speaker 4: I don't think that there is that fully thought out process.
31:11
Speaker 4: But It's an interesting question.
31:13
Speaker 3: I think it's something that we're starting to see given
31:17
Speaker 3: you know, Microsoft last week saying that I don't know
31:20
Speaker 3: if they said it or if it was just you know,
31:22
Speaker 3: someone found out that, hey, they're canceling a couple of
31:24
Speaker 3: their data centers that they were previously building. You got
31:27
Speaker 3: this IPO that's going off badly. There's something that's a
31:31
Speaker 3: little bit you know, stinky. They're not I won't say rotten,
31:34
Speaker 3: just because again, these companies are all making boatloads of
31:37
Speaker 3: money still and video still is hugely profitable.
31:39
Speaker 2: Microsoft is Microsoft, you know.
31:40
Speaker 3: Like sure, there's a way to say, hey, the bloom
31:43
Speaker 3: is off the rows without it being the end of
31:45
Speaker 3: the world, and that could just be what this is.
31:48
Speaker 3: It's okay, Like sure, Cisco and Intel are still here
31:52
Speaker 3: from the original tech bubble, but they're not what people
31:55
Speaker 3: thought they.
31:55
Speaker 2: Were going to be.
31:56
Speaker 3: We've still had huge advances, and if you look at
31:58
Speaker 3: what we're doing technologically now compared to twenty five years ago,
32:01
Speaker 3: it's night and day. But ultimately those technologies were really
32:05
Speaker 3: deflationary and they helped to lower cost while ultimately not
32:09
Speaker 3: generating a ton of profit. Of the companies that people
32:11
Speaker 3: thought would be hugely profitable. Maybe that's where we're going
32:14
Speaker 3: with this round, and that could be just fine for
32:16
Speaker 3: all of us, but maybe it's not great for the
32:21
Speaker 3: margins and profits of these companies in the long run.
32:23
Speaker 2: Well, I don't know. We'll have to see.
32:25
Speaker 3: Let's take a quick break here. When we come back, Uh,
32:30
Speaker 3: let's see. Yeah, when we come back, we're gonna be
32:31
Speaker 3: joined by Todd Lutsky from the law firm of Krishingan Dolan.
32:34
Speaker 1: Right after this text US six one seven three, six
32:38
Speaker 1: two thirteen eighty five with your comments and questions about
32:41
Speaker 1: today's show, and let us know what you think about
32:44
Speaker 1: the stories we are covering. This is the Financial Exchange
32:47
Speaker 1: Radio Network. If you missed any of today's show, catch
32:51
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32:59
Speaker 1: home or breaking business and financial news. This is the
33:03
Speaker 1: Financial Exchange Radio Network.
33:09
Speaker 3: All right, as promised, we are now joined by the
33:12
Speaker 3: one and only Todd Lutsky from the law firm of
33:17
Speaker 3: Cushing and Dolan.
33:18
Speaker 2: Mister Lutsky, how are you?
33:20
Speaker 7: I am never better?
33:21
Speaker 3: In?
33:21
Speaker 2: You doing great? Here?
33:23
Speaker 5: Todd?
33:23
Speaker 3: If someone has a life estate. If the primary residence
33:27
Speaker 3: is in a life estate, does that mean that they
33:29
Speaker 3: are protected against creditor claims from a long term care situation.
33:34
Speaker 7: It does, but of course nothing is that easy. So
33:39
Speaker 7: while this may be one benefit, the first issue you
33:41
Speaker 7: have is the moment you set it up. You make
33:44
Speaker 7: if the life estate is in the hands of the
33:46
Speaker 7: children and you I'm sorry, the life estate is in
33:49
Speaker 7: your hands and you gave the remainder interest to the children,
33:53
Speaker 7: You've made a completed gift which you need to address.
33:56
Speaker 7: So it's make sure you handle filing any gift tax
33:59
Speaker 7: returns that are new need to be done. And also,
34:01
Speaker 7: of course it takes five years, right, You've got to
34:04
Speaker 7: wait to five years in order.
34:06
Speaker 5: To get there.
34:08
Speaker 7: But ultimately at the end of the day, after five years,
34:11
Speaker 7: it will be protected from the nursing home and you
34:13
Speaker 7: would get a step up in basis. So those are
34:15
Speaker 7: the two benefits perhaps of it. But please look into
34:19
Speaker 7: it because there's a lot more negatives I think than
34:22
Speaker 7: there are benefits.
34:24
Speaker 3: What about the use of an irrevocable trust there does
34:27
Speaker 3: that take away some of those negatives that a life
34:30
Speaker 3: estate may possess.
34:31
Speaker 7: I think it takes away pretty much all of them, actually,
34:35
Speaker 7: So I guess there's a right way and a wrong
34:37
Speaker 7: way to do a life estate, folks. I think the
34:40
Speaker 7: better way if we're going to do it, which also
34:43
Speaker 7: is only done perhaps by us by maybe three different times.
34:46
Speaker 7: But when we do life estates for people, we always
34:51
Speaker 7: do them with the remainder interest in the hands of
34:54
Speaker 7: an irrevocable trust versus in the hands of the children.
35:00
Speaker 7: The biggest reasons are one, you keep control over the house.
35:03
Speaker 7: You can sell it, you can move, you can control
35:06
Speaker 7: the money, you can buy another house, you can change
35:09
Speaker 7: your beneficiaries can't do. It's so much harder to do
35:12
Speaker 7: that when it's in the hands of the children, because
35:14
Speaker 7: you need their permission, you need to deal with their signatures,
35:17
Speaker 7: and of course there's a huge allocation of the proceeds
35:20
Speaker 7: that go to them, and then you don't have as
35:22
Speaker 7: many of the proceeds as you might need as the
35:24
Speaker 7: life tenant to buy your next house or move. So
35:28
Speaker 7: there are plenty of negatives that go with it and positives.
35:32
Speaker 7: But folks, if you're thinking about getting a life estate
35:36
Speaker 7: or you have one, get the guide. It's the end
35:38
Speaker 7: of the month. The guide will help you understand what
35:41
Speaker 7: it is you actually have, because you may not fully
35:44
Speaker 7: understand what's included or not included in the life estate.
35:47
Speaker 7: And if you're thinking of getting one, before you get one,
35:51
Speaker 7: get the guide and say, yeah, it seems like a shortcut,
35:54
Speaker 7: but you know, maybe there are negatives associated with a
35:58
Speaker 7: life estate arrangement that I would like, and you can
36:01
Speaker 7: figure out which one is right for you, So call
36:04
Speaker 7: and get the guide. Calculating the consequences of a life estate.
36:07
Speaker 7: It is the end of the month and is going
36:09
Speaker 7: away Folks eight six six eight four eight five six
36:13
Speaker 7: nine nine or Legal Exchange Show dot com again eight
36:17
Speaker 7: six six eight four eight five six nine nine or
36:21
Speaker 7: Legal Exchange Show dot com.
36:25
Speaker 2: Bye Todd, thank you.
36:27
Speaker 1: The proceeding was paid for and the views express are
36:29
Speaker 1: solely those of Cushing and Dolan. Cushing and Dolan and
36:31
Speaker 1: or Armstrong Advisory may contact you offering legal or investment services.
36:35
Speaker 1: Cushing and Armstrong do not endorse each other and are
36:37
Speaker 1: not affiliated.
36:41
Speaker 4: Just had a funny snaffoo here in the AI, which
36:45
Speaker 4: is always it's.
36:46
Speaker 3: Fine, So New York Times eighty thousand pounds of beef
36:52
Speaker 3: stolen from Tennessee slaughterhouse. I mean, this is only second
36:56
Speaker 3: to the I didn't mean they make all of it
36:59
Speaker 3: famous Egg High February of this year, when approximately one
37:02
Speaker 3: hundred thousand organic eggs were stolen from Greencastle, Pennsylvania.
37:07
Speaker 5: The eggs at least will last a little while. What
37:11
Speaker 5: are you gonna do with eighty thousand pounds of beef?
37:13
Speaker 2: If you dry agent, that'll give you some time at least.
37:16
Speaker 5: Yeah, I suppose you could dry age.
37:18
Speaker 2: Other things that I find funny about this.
37:20
Speaker 3: Again, there's nothing really funny about eighty thousand pounds being
37:23
Speaker 3: stolen from a slaughterhouse other than eighty thousand pounds of
37:25
Speaker 3: beef being stolen from a slaughterhouse. But the second sentence here,
37:31
Speaker 3: they can't figure out where the beef is. But a
37:33
Speaker 3: fake trucking company made off with enough meat to make
37:36
Speaker 3: about three hundred and twenty thousand quarter pounders, so.
37:38
Speaker 5: You can multiply by four.
37:40
Speaker 3: Did you really have to figure out that there's a
37:43
Speaker 3: quarter pound of beef in every quarter pounder and there's
37:48
Speaker 3: four quarters in a pound, and thus, hey, this is
37:52
Speaker 3: how many quarter pounders you could make.
37:54
Speaker 4: This was purely the New York Times tossing something to
37:58
Speaker 4: CHATJPT or whatever they use and saying, hey, I need
38:01
Speaker 4: like another few pages of filler.
38:03
Speaker 5: Here what you got?
38:04
Speaker 3: The shipments, valued at three hundred and fifty thousand dollars,
38:07
Speaker 3: remained missing as of Friday.
38:09
Speaker 6: Headline should have been where's the beef?
38:11
Speaker 2: Sorry dropped the ball?
38:12
Speaker 5: True?
38:13
Speaker 2: I bet the post had that. The post probably had that.
38:16
Speaker 1: Yeah, it's a layup.
38:17
Speaker 2: Let's take a quick break here. Hour two coming up
38:20
Speaker 2: in just a little bit.