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Trump vs China: He said, Xi said · The Financial Exchange Show

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1:08
Speaker 2: It's frid out here on the Financial Exchange. Chuck, Mike,
1:11
Speaker 2: and Tucker with you. It's been a weird week where
1:14
Speaker 2: I gotta tell you, the first two days of this
1:15
Speaker 2: week felt like they took a month. The last three
1:20
Speaker 2: days don't even know what happened. Feels like I just
1:23
Speaker 2: snap your fingers in there. Done. But here's where we
1:26
Speaker 2: are at this point. Our top story today continues to be,
1:30
Speaker 2: you know, focused on that US China trade embargo, trade war,
1:37
Speaker 2: however you want to, you know, phrase it. There's not
1:40
Speaker 2: much trade going on between the US and China at
1:42
Speaker 2: the moment, simply because the US has applied one hundred
1:45
Speaker 2: and forty five percent tariffs to all Chinese imports minus
1:49
Speaker 2: a couple of things. China has applied a one hundred
1:52
Speaker 2: and twenty five percent tariff to all US imports minus
1:55
Speaker 2: a couple of things. And I think there are two
1:58
Speaker 2: stories here that kind of get it where we are
2:00
Speaker 2: right now, which the first one is China may exempt
2:03
Speaker 2: some US goods from tariffs. Has cost rise? As costs rise,
2:07
Speaker 2: this from Bloomberg and specifically talking about I'll quote here,
2:13
Speaker 2: authorities are considering removing the additional levees for medical equipment
2:16
Speaker 2: and some industrial chemicals like ethane. Officials are also discussing
2:20
Speaker 2: waiving the tariff for plane leases. Like many airlines, Chinese
2:24
Speaker 2: carriers don't own all their aircraft and pay leasing fees
2:26
Speaker 2: to third party companies to some jets, payments that would
2:28
Speaker 2: have become financially ruinous with the additional tariff. So obviously,
2:34
Speaker 2: I think in looking at this, it's clear to me
2:39
Speaker 2: that both sides do not want to be in the
2:43
Speaker 2: same situation with one hundred and forty five percent tariffs
2:46
Speaker 2: in place for any extended period of time, because they
2:49
Speaker 2: view that as something that would be really bad for
2:53
Speaker 2: both of their economies.
2:54
Speaker 3: Fair fair also seemingly fair that neither wants to lose
2:59
Speaker 3: any sort of faith in this argument.
3:02
Speaker 2: Correct, which brings us to the second piece here, and
3:04
Speaker 2: it's in CNBC, but quite honestly, like if you look
3:08
Speaker 2: anywhere all over social media basically any other financial reporting today,
3:12
Speaker 2: it's Trump asserts trade talks with China are underway, with
3:15
Speaker 2: Beijing are underway, after Beijing denies any ongoing negotiations. They
3:19
Speaker 2: in fact.
3:20
Speaker 3: Called the news of negotiations to be fake news.
3:23
Speaker 2: So here's the thing. I don't know who's telling the truth,
3:27
Speaker 2: but I can tell you that both parties are lying right, Like, Yeah,
3:34
Speaker 2: So here's the thing. This is all being publicly negotiated.
3:38
Speaker 2: I am one hundred percent sure that President Trump is
3:41
Speaker 2: not telling the one hundred percent truth on this matter.
3:44
Speaker 2: I'm also one hundred percent sure that the Chinese State
3:47
Speaker 2: Media Agency and President g are not telling one hundred
3:49
Speaker 2: percent truth on this matter as well, because they are
3:52
Speaker 2: trying to leverage public sentiment in their respective countries to
3:55
Speaker 2: ensure that they maintain the political support that they want.
4:00
Speaker 2: Don't think that this is anything crazy to say. So
4:03
Speaker 2: what's actually going on? I don't know, but it's probably
4:06
Speaker 2: not nothing agreed. Yeah, we're not just sitting here saying
4:10
Speaker 2: we'll be fine.
4:12
Speaker 3: The Chinese are not sitting there saying we'll be fine
4:14
Speaker 3: if we can't get any more Boeing airplanes or you know,
4:18
Speaker 3: incredibly important medical equipment that we need to do MRIs.
4:22
Speaker 3: And likewise, the United States is not sitting here saying, well,
4:27
Speaker 3: maybe we can make F thirty five's out of plastic
4:30
Speaker 3: instead of this rare earth that comes from China.
4:33
Speaker 2: So I think, you know, there's a huge range of
4:35
Speaker 2: where things could be. It could be anything from like
4:38
Speaker 2: the staffers who get coffee talking to each other being like, hey,
4:41
Speaker 2: this is rough man. Huh, yeah, it's rough. You guys
4:43
Speaker 2: gonna do anything? Eh, I don't know. We'll see how
4:45
Speaker 2: it goes like. It could be anything from that all
4:48
Speaker 2: the way up to you know, Treasury Secretary Scott Best
4:51
Speaker 2: and having conversations at the IMF meeting this weekend. I
4:55
Speaker 2: have no idea. It could be anything in between. Yeah.
4:57
Speaker 2: So I'm not gonna speculate and be like, well, these
5:00
Speaker 2: are the people that are talking to these I have
5:03
Speaker 2: no clue, but it is very clear to me that
5:07
Speaker 2: we probably don't have President Trump and President g on
5:12
Speaker 2: the phone on a daily basis talking about this, and
5:14
Speaker 2: likewise we probably don't have any conversation going on. It's
5:18
Speaker 2: somewhere in the middle, and I'm not going to speculate
5:22
Speaker 2: on exactly what's going on is I have no freaking clue.
5:25
Speaker 3: Well, and remember too that the idea of no talks
5:27
Speaker 3: happening is crazy to begin with.
5:29
Speaker 2: There are there's probably no official talks, but it's like,
5:33
Speaker 2: let's talk about the farming industry. There are Chinese buyers
5:38
Speaker 2: of soybeans who live full time in Iowa, whose job
5:42
Speaker 2: it is to inspect the crop and understand what's going
5:45
Speaker 2: to be coming into you think they're just like, ah, yeah,
5:48
Speaker 2: I can't let any Americans into my house this week
5:51
Speaker 2: because we are not supposed to talk to them. And
5:53
Speaker 2: here's like, here are the things that you can see
5:55
Speaker 2: in these things, in these kinds of negotiations. Then it's
5:58
Speaker 2: okay that those Chinese of soybeans, they're going to the
6:02
Speaker 2: farmers and saying, hey, we're not gonna be able to
6:06
Speaker 2: buy this stuff unless you know, X, Y and Z
6:09
Speaker 2: happen like that. That's how your you know, backdoor negotiations
6:14
Speaker 2: end up happening. That's how that's how all those back
6:16
Speaker 2: channel communications are. Tim Cook, I'm sure is talking to
6:20
Speaker 2: his suppliers in China, even as Apple, by the way,
6:22
Speaker 2: we'll talk about this later, talks about moving more iPhone
6:25
Speaker 2: production to India, which is not really surprising something they've
6:28
Speaker 2: been you know, doing for a little while now, but
6:31
Speaker 2: now you know, trying to ramp up and specifically manage
6:33
Speaker 2: the supply chain.
6:34
Speaker 3: I do think surprising the way it's being messaged, but
6:36
Speaker 3: not surprising in fact the action.
6:39
Speaker 2: Yeah, but Tim Cook, I'm sure is talking to his
6:42
Speaker 2: suppliers in China being like, Hey, I'm gonna need you
6:45
Speaker 2: to get me this pricing. And I'm sure the suppliers
6:47
Speaker 2: in China are saying, Okay, we can get you that pricing,
6:51
Speaker 2: but can you go back to the White House and
6:54
Speaker 2: tell them that we need X, Y, and Z in
6:56
Speaker 2: order to get you that pricing. Those are the kinds
6:59
Speaker 2: of conversations that are likely happening. Which ones and on
7:03
Speaker 2: which no clue, But it's obvious to me that there
7:07
Speaker 2: is neither no conversation nor significant president to president conversation
7:12
Speaker 2: going on, and it's likely somewhere in between because both
7:16
Speaker 2: sides realize this is untenable.
7:18
Speaker 3: Now conversations are all great, and we're already seeing some
7:22
Speaker 3: signs of these tensions, I don't know, weakening a little
7:28
Speaker 3: bit maybe here and there, at least compared to where
7:31
Speaker 3: we were on Monday. I think that you can say
7:33
Speaker 3: that the likelihood of some negotiation between the United States
7:36
Speaker 3: and China is more likely than we thought maybe a
7:38
Speaker 3: week ago. The question that I'm running in the back
7:41
Speaker 3: of my mind is how long before we start to
7:44
Speaker 3: notice Because I'll say you, you know, I go to
7:46
Speaker 3: the grocery store I go to Walmart, I go to
7:49
Speaker 3: local hardware store, I've noticed no change. Correct, in spite
7:53
Speaker 3: of the fact that, what's the volume of stuff coming
7:57
Speaker 3: into the United States down like seventy percent from China?
7:59
Speaker 2: Right, Well, it's not actually down yet. And this is
8:02
Speaker 2: the thing. So the volume of ships that left China
8:06
Speaker 2: in the first week of April was down sixty four percent.
8:10
Speaker 2: We reported this, by the way, about a week and
8:12
Speaker 2: a half ago, and it's showing up in print media now,
8:14
Speaker 2: which love to toote our own horn. If you want
8:17
Speaker 2: to know what's going to be in print media the
8:20
Speaker 2: next week, listen to our show the week before, and
8:22
Speaker 2: you generally have a pretty good idea of it. But
8:26
Speaker 2: I think here's the thing. Those ships left China the
8:30
Speaker 2: first week in April. It generally takes, depending on the
8:34
Speaker 2: exact port you're leaving in port you're coming to anywhere,
8:37
Speaker 2: from like eighteen to thirty days is kind of the
8:40
Speaker 2: range that it can take for goods to get from
8:43
Speaker 2: Asia to the United States. So we're sitting here on
8:47
Speaker 2: the twenty fifth. Now you're only starting to see the
8:50
Speaker 2: impact of that shipping drop today. And really you're not
8:54
Speaker 2: like the port of Los Angeles is still cranking pretty well.
8:56
Speaker 2: They're publicly available. There's publicly available data out there on
9:01
Speaker 2: what's coming into and out of the Port of Los Angeles.
9:04
Speaker 2: And you can see, actually this week year over year
9:08
Speaker 2: change is up fifty six percent. Okay, because these are
9:12
Speaker 2: all the ships that left the last week in March. Yeah,
9:15
Speaker 2: front running tariffs being like we gotta get out before April. Second, okay,
9:20
Speaker 2: let me tell you what we see the next two
9:22
Speaker 2: weeks right now, and again, this is all you can
9:25
Speaker 2: if you literally google Port of Los Angeles tracker, it's
9:29
Speaker 2: like one of the first few things that comes up there.
9:31
Speaker 2: It's free.
9:32
Speaker 3: You don't need a New York Times or Wall Street journ.
9:33
Speaker 2: Now I'm looking at it right now. I've paid them
9:35
Speaker 2: no money to do this. It's anyways, next week change
9:40
Speaker 2: from previous year down ten point six four percent. Now
9:44
Speaker 2: that's that. Again, these things happen because it's not linear
9:47
Speaker 2: like you see these you know fluctuations. May fourth to
9:50
Speaker 2: May tenth. Bookings for space at the Port of Los
9:56
Speaker 2: Angeles down thirty point eight one percent, and like you'll
10:01
Speaker 2: see that accelerate. So remember stuff gets shipped from China.
10:05
Speaker 2: It takes three to four weeks generally to make it
10:08
Speaker 2: to the US, and then once it's in the US,
10:11
Speaker 2: it takes a couple of weeks to make it to
10:13
Speaker 2: where it's going, and then a couple weeks to get
10:16
Speaker 2: onto store shelves. So it's really like kind of a
10:18
Speaker 2: two month process from stuff leaves China warehouse too it
10:23
Speaker 2: gets on the shelf at Walmart.
10:24
Speaker 1: Ye.
10:25
Speaker 2: Now, remember companies have also done some stocking up in advance,
10:28
Speaker 2: like we see it just with the data here, so
10:30
Speaker 2: they've built up some inventory. You probably start to see
10:35
Speaker 2: the first signs of anything weird three weeks from now,
10:41
Speaker 2: right after Mother's Day, and I'll be honest, it's not
10:46
Speaker 2: gonna be widespread at that point.
10:47
Speaker 3: It won't be widespread at that point. But it also
10:50
Speaker 3: won't resolve itself with the snap of a finger.
10:54
Speaker 2: Because once again, it takes two months to get everything
10:57
Speaker 2: from China to the shelf.
11:00
Speaker 3: But what I'm worried about longer term is, let's say
11:03
Speaker 3: you do get something pretty massive on a trade deal
11:05
Speaker 3: with China, which I think is very unlikely. That we're
11:08
Speaker 3: in the same place with China that we are at Europe. Yes,
11:11
Speaker 3: three weeks from.
11:11
Speaker 2: Even the Wall Street Journal piece that came out on Wednesday,
11:14
Speaker 2: was talking about, say, hey, we might reduce tariffs to
11:16
Speaker 2: fifty to sixty five percent.
11:18
Speaker 3: But even if you got to zero and you are
11:21
Speaker 3: you're not going You're not going here.
11:22
Speaker 2: But even if you got to.
11:23
Speaker 3: Zero, would you as target be like, okay, yeah, load
11:28
Speaker 3: up the ship and send it all here. And I'm
11:30
Speaker 3: one hundred percent confident that I won't be facing sixty
11:32
Speaker 3: percent three weeks from now. I don't think I would.
11:36
Speaker 2: I still back the ship up. Yeah, Like what's my
11:39
Speaker 2: what's my choice? Otherwise, Like here's the thing. If I
11:42
Speaker 2: don't back the ship up, I'm dead. Anyways, Yeah, I
11:45
Speaker 2: might as well give it a run. So I do.
11:50
Speaker 3: Think that we are about to see some of this
11:54
Speaker 3: in a not very long time. It'll be you know
11:57
Speaker 3: here and there.
11:58
Speaker 2: Quite honestly like that. It'll it'll start to peak right
12:00
Speaker 2: around fourth of July.
12:01
Speaker 3: And it also won't be at I say peak, It'll
12:04
Speaker 3: start to be like noticeable. The large businesses won't be
12:07
Speaker 3: what you're talking about, Like there are we've talked about
12:09
Speaker 3: the game board maker and the likes of this. There
12:12
Speaker 3: are plenty of companies out there, for instance, in the
12:15
Speaker 3: toy space that facing one hundred and forty percent tariff.
12:19
Speaker 3: It's it's not as though what they can do is
12:21
Speaker 3: drive that cost to you and drive up inflation. They
12:24
Speaker 3: can't afford to make that dollar payment, well, they will,
12:27
Speaker 3: they will not be able to actually make the payment
12:30
Speaker 3: on the tariff. Here's one of the I don't think
12:32
Speaker 3: there's a lot of lending facilities for tariff pay.
12:34
Speaker 2: And again this is let's let's take a quick break.
12:37
Speaker 2: I want to talk a little bit just about again
12:40
Speaker 2: the places that you may see this start to pop
12:43
Speaker 2: up this summer, because it's it's clear to me that
12:47
Speaker 2: it's not going to be the smoothest summer for a
12:50
Speaker 2: whole lot of goods in the US, even if you
12:52
Speaker 2: get a resolution today, the longer this goes on there
12:56
Speaker 2: there is kind of a ticking clock here where, hey,
12:58
Speaker 2: the longer this goes, the worse it potentially gets because
13:00
Speaker 2: it's more time that there's stuff not being shipped from China.
13:04
Speaker 2: But let's talk about where some of these potential impacts
13:07
Speaker 2: could show up this year, and we'll do that when
13:10
Speaker 2: we return.
13:12
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13:50
Speaker 2: Mike, when it's ninety five degrees out in the middle
13:53
Speaker 2: of August, do you like to stay cool? I do? Yes.
13:59
Speaker 2: What are some of the is that you stay cool
14:01
Speaker 2: when it's air conditioning? Okay, let's talk a little bit
14:03
Speaker 2: about air conditioning, Mike. Do you know how air conditioning works?
14:09
Speaker 3: Pretty embarrassed to say a lot of electricity?
14:13
Speaker 2: It is a lot of electricity. That's exactly right. It's
14:15
Speaker 2: the entirely correct answer. And specifically, do you know how
14:19
Speaker 2: air conditioners typically start up? The answers no, here's how
14:22
Speaker 2: they start up. They're no, that's what starts up. Okay,
14:27
Speaker 2: But the way they start up. There's something called a
14:28
Speaker 2: capacitor in an air conditioner. And the capacitor it's not
14:32
Speaker 2: the flux capacitor, which is the device that makes time
14:35
Speaker 2: travel possible. It's a regular capacitor. Got it. And basically
14:39
Speaker 2: what a capacitor is, it's a battery. They cost I
14:43
Speaker 2: was looking on Amazon earlier. They cost about fifteen to
14:46
Speaker 2: twenty dollars, they're not particularly expensive. How many of them
14:49
Speaker 2: do we make in the US, chuck, not very many.
14:52
Speaker 2: They're almost all made in China, darn it. And so
14:55
Speaker 2: this is one of the interesting thing. Like again, you
14:57
Speaker 2: just the point of this is not to say this
14:59
Speaker 2: is going to be the problem, but rather, hey, a
15:01
Speaker 2: lot of times, if you're having trouble with your air conditioner,
15:04
Speaker 2: the way that it starts up is it uses this
15:06
Speaker 2: capacitor to provide a surge of electricity to get it moving.
15:10
Speaker 2: Because even though it's you know, pulling a bunch of
15:13
Speaker 2: electricity from your circuit breaker to begin with, it still
15:16
Speaker 2: needs extra juice to get moving because there's so much
15:18
Speaker 2: power involved. So a lot of times the easy fix
15:22
Speaker 2: on an air conditioner that won't start up is okay,
15:24
Speaker 2: replace the capacitor, and that, you know, helps and clears
15:27
Speaker 2: up the issue a decent chunk of the time. If
15:31
Speaker 2: you cannot get capacitors into the United States, what would
15:35
Speaker 2: be either a twenty dollars job if you're doing it yourself,
15:38
Speaker 2: or one hundred dollars job if you're hiring someone to
15:40
Speaker 2: do it for you becomes something that you just can't do,
15:43
Speaker 2: and so you end up replacing the entire unit instead
15:46
Speaker 2: or doing nothing.
15:48
Speaker 3: Which unclear to me that replacing the entire unit would
15:53
Speaker 3: also be feasible because I'm sure the capacitor is into
15:55
Speaker 3: the only item in the air conditioning unit that comes
15:57
Speaker 3: from China.
15:57
Speaker 2: And here's the thing, like, if you're buying like a
15:59
Speaker 2: SEP unit, it's like it probably usually has everything there.
16:03
Speaker 2: It's it's in the US waiting. But so these are
16:05
Speaker 2: the kinds of things where again it could be something
16:08
Speaker 2: like this other things that most of them are made
16:12
Speaker 2: in China. You guys ever have to buy like an
16:15
Speaker 2: ethernet splitter for your home, some kind of you know,
16:18
Speaker 2: switch like that. Yeah, most of those are made in China.
16:21
Speaker 2: And I'm not saying that they should be. I'm just saying, hey,
16:24
Speaker 2: you might not be able to get these things for
16:27
Speaker 2: some period of time if in fact, we you know,
16:30
Speaker 2: still have this as the status quo, because right now
16:33
Speaker 2: those things cost again, think about the capacitor issue. I
16:37
Speaker 2: want you to go through this. Right now, they're being
16:39
Speaker 2: sold for like seventeen dollars on Amazon. You slap one
16:43
Speaker 2: hundred and forty five percent terif on it. The cost
16:46
Speaker 2: of goods sold is probably going from like I don't know,
16:49
Speaker 2: three fifty up to seven, but then you still have
16:51
Speaker 2: all your import costs and everything. The cost goes up
16:55
Speaker 2: to just thirty dollars or something like that, which is manageable,
16:58
Speaker 2: But you still say, okay, is this going to work
17:02
Speaker 2: given the overall numbers? Like will will people buy these
17:04
Speaker 2: for air conditioning? Maybe they will if it's for other
17:08
Speaker 2: stuff that needs to get you know, put into buildings
17:11
Speaker 2: that are being constructed, appliances, plumbing, things along those lines.
17:17
Speaker 2: You know, how can you manage the cost of that?
17:21
Speaker 2: Especially if you have contracts that are fixed without allowances,
17:26
Speaker 2: that are built in the place I'm looking talking right
17:28
Speaker 2: now about any kind of municipal construction. You bid on
17:32
Speaker 2: those projects you are not in most cases you do
17:36
Speaker 2: not have significant allowances because the town does not have
17:39
Speaker 2: significant allowances. How many contractors out there sitting there going
17:44
Speaker 2: how do I bid on something for a year from now,
17:46
Speaker 2: not knowing what the costs are going to be? Well? Yeah,
17:50
Speaker 2: how do I bid on that?
17:51
Speaker 1: Even?
17:52
Speaker 2: Right?
17:52
Speaker 3: You likely go to the municipality and say you're gonna
17:55
Speaker 3: have to work this into your budget somehow.
17:57
Speaker 2: And the town, of course is like, I can't. I've
17:58
Speaker 2: already raised. My property tax is a pun over the
18:00
Speaker 2: last couple of years. I can't go doing this more.
18:03
Speaker 2: Do we just scrap the project for the new school,
18:05
Speaker 2: the new fire station, whatever it was going to be,
18:08
Speaker 2: because the bids are gonna come in fifteen percent higher
18:11
Speaker 2: than we thought they were.
18:12
Speaker 3: By the way this is I mean, look, these are
18:15
Speaker 3: serious concerns. As I've said before, We're in a far
18:18
Speaker 3: better place than we were two weeks ago when we
18:20
Speaker 3: thought that there were significant reciprocal tariffs on every country
18:23
Speaker 3: across the globe. July is also the timeframe when those
18:28
Speaker 3: ninety day suspensions expire. I think it's unlikely we go
18:33
Speaker 3: back to where we were, you know, two weeks ago
18:35
Speaker 3: in terms of the status quo on tariffs.
18:37
Speaker 2: I would be shocked.
18:38
Speaker 3: But that's all going to be operating in the background too,
18:42
Speaker 3: and certainly plays a role when, for instance, Tim Cook
18:46
Speaker 3: is talking about Apple phones being made in India instead
18:49
Speaker 3: of China. Now, I would think somebody as big as
18:53
Speaker 3: Tim Cook has some guarantee that India is not going
18:55
Speaker 3: to be facing these tariffs on the iPhones. But certainly,
18:58
Speaker 3: you know, if you're some small game board man manufacturer,
19:00
Speaker 3: you're not one hundred percent ready to go make a
19:03
Speaker 3: big investment in India or Vietnam on the possibility of
19:08
Speaker 3: further tariffs.
19:08
Speaker 2: Well, and I've told this story before, but it's a
19:11
Speaker 2: great one. I have someone who once tried to move
19:14
Speaker 2: manufacturing from China to Vietnam, and they asked their Vietnamese supplier, Hey,
19:18
Speaker 2: can you can you do this? They came back and
19:21
Speaker 2: were like, I'm sorry not They came back. Their Chinese
19:24
Speaker 2: supplier then came back and was like, why is your
19:25
Speaker 2: Vietnamese contact reaching out to us? Because all they were
19:28
Speaker 2: trying to do was source the stuff from China too.
19:31
Speaker 2: Let's take a quick break here. When we come back,
19:33
Speaker 2: we got Wall Street Watch after this.
19:42
Speaker 1: Like us on Facebook and follow us on Twitter. Act
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 Financial Exchange Radio Network.
20:01
Speaker 4: Markets are taking a little bit of a breather today
20:04
Speaker 4: as Wall Street reacts to mixed messaging between the US
20:07
Speaker 4: and China regarding trade negotiations. Investors are also sifting through
20:12
Speaker 4: more corporate earnings, including from tech giant alphabets. At the moment,
20:17
Speaker 4: the Dow is down by just over three quarters of
20:19
Speaker 4: a percent, or three hundred and fourteen points, SMP five
20:23
Speaker 4: hundred is off three tenths of a percent or fifteen points,
20:27
Speaker 4: and the Nasdaq is actually edging four points higher. 'russe
20:31
Speaker 4: two thousands off by over two thirds of a percent.
20:33
Speaker 4: Ten year Treasure reeled down by two basis points at
20:36
Speaker 4: four point two seven percent, and crude oil off four
20:40
Speaker 4: tenths of a percent, trading at sixty two dollars and
20:43
Speaker 4: fifty three cents a barrel. Alphabet up by two percent
20:47
Speaker 4: after the Google parent company reported first quarter results that
20:50
Speaker 4: surpassed street expectations, where the company generated just over ninety
20:55
Speaker 4: billion dollars in revenue and operating income of thirty point
20:59
Speaker 4: six billion dollars. Chuck and Michael have more on Alphabet's
21:02
Speaker 4: earnings in the next hour. Meanwhile, according to CNBC, Meta
21:06
Speaker 4: has laid off employees in its Reality Labs division that
21:10
Speaker 4: is tasked with developing virtual reality, augmented reality, and related
21:14
Speaker 4: wearable devices. This comes after the social media and tech
21:19
Speaker 4: giant laid off five percent of its overall workforce back
21:23
Speaker 4: in February. Meta up by one percent elsewhere. Intel posted
21:27
Speaker 4: a quarterly loss and offered a week revenue outlook. The
21:30
Speaker 4: chip makers and executives said tariffs would boost costs and
21:33
Speaker 4: sap demand after an initial rush to buy ahead of
21:36
Speaker 4: the levies. Intel also announced plans to reduce its operational
21:40
Speaker 4: and capital expenses. Intel down by eight percent, t Mobile
21:45
Speaker 4: pulling back nine percent after the telecom telecom company reported
21:50
Speaker 4: fewer first quarter wireless phone subscribers then expected. Its earnings
21:54
Speaker 4: and revenue did, however, beat Street forecast. Gilead Science has
21:58
Speaker 4: posted mixed first quarter results on earnings but missing on revenue.
22:01
Speaker 4: That stocked down by three percent, and Sketcher is off
22:04
Speaker 4: by four percent after the foot after the footwear maker
22:08
Speaker 4: posted lower than expected quarterly revenue and withdrew its twenty
22:12
Speaker 4: twenty five outlook due to macro economic uncertainty stemming from
22:17
Speaker 4: global trade policies. I'm Tucker Silva and that's Wallstreet Watch.
22:21
Speaker 2: So it's a nice segue into this piece from the
22:24
Speaker 2: Wall Street Journal titled Corporate Giants shred outlooks over tariff uncertainty.
22:29
Speaker 2: And we're right in the middle of earning season right now.
22:32
Speaker 2: You've got all kinds of companies reporting. I think we
22:34
Speaker 2: had like eighty companies from the S and P five
22:36
Speaker 2: hundred reporting this week. Next week I think is somewhere
22:38
Speaker 2: in the range eighty two one hundred as well. So
22:40
Speaker 2: this is you know, kind of big time heavy duty
22:43
Speaker 2: earning season right now, and just a couple of things
22:47
Speaker 2: that we've seen the And again it's it's across different areas,
22:50
Speaker 2: which is why this is meaningful. Tucker noted that the
22:52
Speaker 2: Sketcher's company pulling their outlook. Okay, so that's you know,
22:58
Speaker 2: consumer discretionary. You've got Pepsi saying hey, we're gonna have
23:04
Speaker 2: some headwinds from tariffs as well. Pepsi kind of classify
23:07
Speaker 2: more in that consumer staples area. I mean right for better,
23:10
Speaker 2: for worse, soda and chips Man. That's a staple. There's
23:13
Speaker 2: no discretion about that. That is the stuff you're buying,
23:15
Speaker 2: no matter what the economy's doing. Am I wrong?
23:18
Speaker 3: Yeah, you might even buy more of it if the
23:20
Speaker 3: economy is.
23:20
Speaker 2: Not, you might well. And they're saying, hey, we're gonna
23:23
Speaker 2: have some impact from tariffs, and we're seeing a little
23:25
Speaker 2: bit of softness showing up on the retail side. Other
23:27
Speaker 2: places you're seeing it, certainly airlines saying, hey, that the
23:30
Speaker 2: picture for domestic travel is weakening. The airline with the
23:34
Speaker 2: worst outlook on this is Southwest, who does not have
23:37
Speaker 2: any international business.
23:38
Speaker 1: Yeah.
23:39
Speaker 2: The other carriers that are you know, do have international business,
23:42
Speaker 2: are still saying, hey, we're getting you know, good traction
23:45
Speaker 2: in US to overseas, not as much you know, coming
23:48
Speaker 2: back obviously, so we're trying to manage that. But we
23:50
Speaker 2: still have plenty of people from the US who are
23:53
Speaker 2: looking to travel to Europe, Asia, Australia, like South America,
23:56
Speaker 2: you name it. The international bookings are strong for US
24:01
Speaker 2: citizens that are looking to travel overseas.
24:03
Speaker 3: Robert I, some chief executive of American Airlines, quote, we
24:06
Speaker 3: don't know what is going to happen. What does that mean.
24:09
Speaker 3: It means that we don't hire as much. It means
24:11
Speaker 3: that we don't bring on as many planes. Potentially it
24:13
Speaker 3: means a reduction in overall economic activity. I don't know
24:19
Speaker 3: how much of an early indicator airlines might be here,
24:24
Speaker 3: but pretty discretionary, both from the business traveler standpoint as
24:29
Speaker 3: well as the individual vacation or standpoint. Right, I mean,
24:33
Speaker 3: if you want to cut costs at you're at your business,
24:36
Speaker 3: you may cut the travel budget, so you might say
24:40
Speaker 3: do that meeting via zoom or fly coach instead of
24:43
Speaker 3: business for the next few quarters. If you are you know,
24:47
Speaker 3: it's a lot easier to understand that. On the individual side,
24:50
Speaker 3: you just don't book that vacation. You're going on a
24:53
Speaker 3: local New England vacation that you can drive to instead
24:55
Speaker 3: of flying down to Europe.
24:58
Speaker 2: This summer, the Verizon CEO was talking about, you know
25:02
Speaker 2: what impact tariffs could have on new handset pickups a
25:08
Speaker 2: quote that they had when talking about, hey, would Verizon
25:10
Speaker 2: absorb the tariff costs? He said, if the tariff is
25:12
Speaker 2: going to be as high as they say on the handset,
25:14
Speaker 2: it's not going to be possible. The AT and T CEO,
25:17
Speaker 2: Unfortunately for the customer, we're going to have to come
25:19
Speaker 2: up with some new ways for them to figure out
25:20
Speaker 2: how to digest that increase.
25:22
Speaker 3: Which by the way, has been exempted temporarily now, but
25:26
Speaker 3: they are The Trump White House has talked about specific
25:31
Speaker 3: tariffs on electronic goods in semiconductors coming into the US.
25:34
Speaker 2: So these are some of the things that again companies
25:37
Speaker 2: are starting to tell us. The interesting thing and again
25:40
Speaker 2: this is remember the corporate earnings that we're going through
25:43
Speaker 2: at this point, are through March, and the guidance that
25:46
Speaker 2: they are giving is cautious, but not really you know,
25:51
Speaker 2: giving us any it's not giving us any huge downside.
25:55
Speaker 2: From what we've seen to this point, it's kind of
25:56
Speaker 2: been They've been indicating a modest deceleration. It's been three
26:02
Speaker 2: weeks since the tariff announcements, and so I think we're
26:05
Speaker 2: gonna have to see how this evolves going forward, because
26:08
Speaker 2: again there's kind of this ticking clock where each day
26:11
Speaker 2: the impacts potentially get larger and larger, and we'll have
26:15
Speaker 2: to see where we are in a couple weeks here,
26:18
Speaker 2: because quite honestly, if we're still here on Mother's Day,
26:22
Speaker 2: which this year for all you listening out there, remember
26:25
Speaker 2: Mother's Day, it's a big one. It's on May eleventh
26:29
Speaker 2: this year. For still, if we come in on May
26:32
Speaker 2: twelfth and we still have the rates of tariff that
26:35
Speaker 2: we do between the US and China, I can see
26:39
Speaker 2: things starting to get fairly gnarly as we get into
26:43
Speaker 2: late June, July August.
26:45
Speaker 3: I think my answer is there's no way that we
26:47
Speaker 3: stay here. It's been very clear over the course of
26:49
Speaker 3: the last two weeks that the president is hearing the
26:54
Speaker 3: concerns of executives, He's hearing the concerns of those who
26:58
Speaker 3: are speaking with him individually. Remember he had the I
27:00
Speaker 3: think it was the roundtable with what with Walmart, Target,
27:03
Speaker 3: and Home Depot CEOs. This week, you've heard Jamie Diamond
27:08
Speaker 3: and others going on Fox News intentionally trying to get
27:12
Speaker 3: the message out to the President and his voters. And
27:15
Speaker 3: so he is very much hearing the message of this
27:19
Speaker 3: could be very disruptive, and therefore we are having conversations.
27:22
Speaker 3: And gets me back to something that I've spoken about
27:27
Speaker 3: before to both clients and on air, and I'm just
27:31
Speaker 3: uncertain of exactly how it plays out. But I do
27:34
Speaker 3: fundamentally believe that this president, especially ties his success to
27:42
Speaker 3: the outcome of the economy and the markets, and therefore
27:46
Speaker 3: cares a lot about what the stock markets do. I
27:49
Speaker 3: don't know if it drives his decision making process, but
27:52
Speaker 3: I do believe he cares about that legacy.
27:54
Speaker 2: Let's take a quick break here. When we come back,
27:57
Speaker 2: we'll talk about what we are seeing in the housing
27:59
Speaker 2: market right after this.
28:01
Speaker 1: The global trade war has royal markets and a recession
28:04
Speaker 1: could be next. Keep it here for breaking business news
28:07
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29:00
Speaker 2: Home sales in March fell five point nine percent on
29:02
Speaker 2: an annualized basis biggest drop since twenty twenty two. Now,
29:07
Speaker 2: I actually don't think that you can really attribute this
29:09
Speaker 2: to anything as it relates to trade uncertainty or economic uncertainty,
29:14
Speaker 2: and the reason being if you were closing on a
29:17
Speaker 2: property in March, you had made the decision to look
29:19
Speaker 2: for how somewhere last fall, and likely made your offer
29:23
Speaker 2: sometime in January, maybe February if you had a quick close.
29:27
Speaker 2: Most of the uncertainty that we've seen from an economic
29:30
Speaker 2: perspective has been in the last six weeks. I don't
29:34
Speaker 2: think this has anything to do with what's been going
29:38
Speaker 2: on from a tariff perspective. Yeah, I would tend to agree.
29:42
Speaker 2: There are not very many home sales that develop this quickly.
29:45
Speaker 2: So what can we attribute to the drop?
29:47
Speaker 3: To your view, I mean, inventory is up March over March,
29:51
Speaker 3: rates are flat.
29:54
Speaker 2: Well, remember if you were buying a place in March,
29:56
Speaker 2: you were likely locking your rates in somewhere in Januaryanuary. Like,
30:00
Speaker 2: that's again, I'm just kind of going through the path
30:04
Speaker 2: that people would follow here, and so ultimately, like you
30:09
Speaker 2: kind of look back and you say, Okay, what were
30:10
Speaker 2: we seeing on mortgage rates over the last few months here?
30:15
Speaker 2: If you go back to January, rates were in the
30:19
Speaker 2: low sevens. They peaked actually at seven and a quarter
30:21
Speaker 2: on January fourteenth. I think, to me, this messes up
30:26
Speaker 2: with the week pending data that we had in January
30:28
Speaker 2: and February. As such, I would expect the April numbers
30:32
Speaker 2: to actually be pretty good because rates had come down
30:35
Speaker 2: in February. Remember that by the end of February we
30:38
Speaker 2: were at six seven four, and then in most of
30:39
Speaker 2: March we were hanging out right in that range. So
30:42
Speaker 2: I kind of look at this and I say, yeah,
30:44
Speaker 2: this to me is a reflection of where rates were
30:46
Speaker 2: in January more than anything else. And I don't think
30:51
Speaker 2: it necessarily says a lot. Now. What I do think
30:54
Speaker 2: is going to be interesting, and what we are starting
30:56
Speaker 2: to see is potentially a little bit of new weakness
30:59
Speaker 2: developing as far as sales that are gonna close in
31:02
Speaker 2: June and July. Sure like that may be starting to
31:06
Speaker 2: show up, but it's not there yet. The first few
31:09
Speaker 2: weeks of April we're pretty good from a new pendings standpoint,
31:13
Speaker 2: according to data from our buddy Mike Simonson and we
31:16
Speaker 2: have on occasionally. And so I think that when you
31:19
Speaker 2: look at this, April and May are probably gonna be
31:22
Speaker 2: pretty okay, probably a rebound from this, and then you
31:25
Speaker 2: get into the questions of what do we look like
31:28
Speaker 2: in June, July, and August. But we're not gonna know
31:30
Speaker 2: that for a while, obviously, because you know, we haven't
31:33
Speaker 2: invented time travel yet, And.
31:34
Speaker 3: I gotta say, I don't know that tariff and recession
31:38
Speaker 3: concern would dramatically reshape my.
31:42
Speaker 2: Home buying process.
31:43
Speaker 3: Right, You're assuming I was in a rental like forget
31:45
Speaker 3: about you know, lucky US with our three percent mortgage rates. Like, Okay,
31:49
Speaker 3: that that's a different story. Of course we're not looking.
31:51
Speaker 3: But yeah, if you're out there looking for a home
31:53
Speaker 3: right now or buying a car, yes, you might be
31:56
Speaker 3: concerned in certain industries about your job. But that's not everybody, right,
32:01
Speaker 3: that's not everybody. Not everybody works in tech or is
32:05
Speaker 3: a university professor. You might be saying, look, I am
32:11
Speaker 3: not sure what it would cost to build a home
32:13
Speaker 3: a year from now. I know that I want to
32:15
Speaker 3: own a home. I don't love the mortgage rate, but
32:19
Speaker 3: prices could be hire a year from now. Why don't
32:22
Speaker 3: I just go do this? I think we might actually
32:24
Speaker 3: see some reasonably good data through the spring, unless and
32:28
Speaker 3: until you see that unemployment rate start to tick up.
32:31
Speaker 2: Yeah, I think that's a reasonable case.
32:32
Speaker 3: Yeah, I think it actually could be just fine on
32:36
Speaker 3: that front. But these are the types of decisions that
32:40
Speaker 3: American households are facing every day and are going to
32:43
Speaker 3: shape the future state of all of this. I do
32:47
Speaker 3: worry about that average person out there who is evaluating
32:50
Speaker 3: the decision on Hey, do I have enough saved up
32:52
Speaker 3: to buy that home? Do I have enough to know
32:55
Speaker 3: fix my car or fix my air conditioning unit if
32:58
Speaker 3: something does happen, If you you are approaching the retirement
33:03
Speaker 3: stage of life right now and you are seeing markets
33:08
Speaker 3: play out in a much more volatile fashion than they
33:11
Speaker 3: have for the last few years, and trying to evaluate
33:14
Speaker 3: what you do next. I've been having a lot of
33:16
Speaker 3: these conversations recently, Chuck, where folks maybe we're sitting out
33:20
Speaker 3: the markets in twenty two and twenty three to some degree,
33:24
Speaker 3: or got spooked in twenty twenty two and weren't as
33:26
Speaker 3: aggressive as they could have been with markets in their
33:29
Speaker 3: portfolio in twenty three and twenty four, and so we're
33:32
Speaker 3: trying to do a bit of makeup here, and they
33:33
Speaker 3: are suddenly finding themselves in a place where they're not
33:37
Speaker 3: as comfortable as they expected to be in twenty twenty
33:41
Speaker 3: five with the state of the markets and the economy.
33:44
Speaker 3: If you're finding yourself in those shoes, hey, I'm approaching
33:47
Speaker 3: a big life event. I am unsure about the allocation
33:52
Speaker 3: of my portfolio. I know that i might want to
33:55
Speaker 3: retire within the next decade, and I'm just unsure about
34:00
Speaker 3: what to do about it. Please give the folks at
34:02
Speaker 3: Armstrong Advisory Group a call. We do have these conversations regularly.
34:06
Speaker 3: You are not alone in this situation, and what we
34:09
Speaker 3: can do is sit down with you and evaluate how
34:11
Speaker 3: you are set up today and whether or not it's
34:13
Speaker 3: appropriate for your stage of life where you are right now.
34:17
Speaker 3: This does vary a lot from person to person, and
34:20
Speaker 3: it's not easy enough to just say, well, you're in
34:22
Speaker 3: that bucket of people who are five years out from retirement.
34:25
Speaker 3: There are too many questions that go along with that.
34:27
Speaker 3: Are you eligible for medicare are you going to sell
34:29
Speaker 3: your home? Do you still have a mortgage when you
34:31
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34:34
Speaker 3: your financial strategy, and we'd love to do it alongside you.
34:37
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34:51
Speaker 1: The proceeding was paid for by Armstrong Advisory Group, a
34:54
Speaker 1: registered investment advisor. Nothing in the ad or in any
34:56
Speaker 1: Armstrong guide a specific financial, legal, or tax advice. Consult
34:59
Speaker 1: your on financial tax into state planning advisors before making
35:02
Speaker 1: any investment decisions. Armstrong may contact you to offer investment
35:05
Speaker 1: advisory services.
35:07
Speaker 2: I want to talk about something in the Boston real
35:10
Speaker 2: estate market that we saw ninety nine High Street, which
35:13
Speaker 2: is an office building. It's thirty two story tower that
35:18
Speaker 2: was last sold back in two thousand and five. Closed
35:22
Speaker 2: on not closed, but the deal closed on Thursday for
35:26
Speaker 2: a two hundred and twenty seven million dollars sale That
35:30
Speaker 2: is approximately seventeen percent less than the two hundred and
35:36
Speaker 2: seventy three million that was paid for the building back
35:39
Speaker 2: in two thousand and five, and one hundred million dollars
35:42
Speaker 2: less than the assessed value of three hundred and twenty
35:45
Speaker 2: seven point seven million. So a couple things on this.
35:48
Speaker 2: The first is the reason why this deal closed at
35:51
Speaker 2: a lower price is because there's still a lot of
35:54
Speaker 2: debt outstanding on it. And so really it's basically, hey
35:58
Speaker 2: that the amount of debt and leverage that is there
36:00
Speaker 2: is what is driving the pricing on a lot of
36:03
Speaker 2: these Ultimately, the big question for not just the City
36:08
Speaker 2: of Boston, but a lot of cities that are in
36:10
Speaker 2: a similar situation is look, generally, one of the biggest
36:14
Speaker 2: revenue raisers for large urban cities, it's commercial property taxes.
36:22
Speaker 3: Yeah, and then that is a massive, massive portion of
36:26
Speaker 3: their budget.
36:27
Speaker 2: And so if the building is being sold for thirty
36:30
Speaker 2: percent less than what the assessed value is, you better
36:34
Speaker 2: believe that the owners, the new owners are going to
36:36
Speaker 2: be on the phone with you know, the City of
36:38
Speaker 2: Boston saying, hey, get your assessors out here as quickly
36:40
Speaker 2: as possible, saying yeah, we need you to, you know,
36:43
Speaker 2: kind of look at that assessment and see what you
36:46
Speaker 2: can do about it, because obviously this building is not
36:49
Speaker 2: worth that much today.
36:50
Speaker 3: By the way, that two hundred and seventy three million
36:52
Speaker 3: dollars purchase price back in oh five, if you take
36:54
Speaker 3: that to twenty twenty four dollars, that's four hundred and
36:57
Speaker 3: forty million dollars in today's inflation adjusted dollars.
37:00
Speaker 2: Yes, so it does tell you something about, you know,
37:02
Speaker 2: where that commercial property market is. You can't just look
37:04
Speaker 2: at it in nominal terms. You have to look at
37:06
Speaker 2: it in inflation adjusted terms. So the company that bought.
37:10
Speaker 2: It's a company called Synergy. They have been buying up
37:13
Speaker 2: different properties over you know, the last couple of years,
37:17
Speaker 2: and they've been paying significantly less than previous purchase prices.
37:21
Speaker 2: Thirty six percent for one hundred and one Arch Street,
37:24
Speaker 2: seventeen percent less for one Liberty Square, forty percent less
37:28
Speaker 2: for one seventy nine Lincoln Street. And so this is
37:32
Speaker 2: something where it's a trend that is certainly developing, and
37:36
Speaker 2: you have to watch this in a number of different
37:39
Speaker 2: cities because it represents a major potential threat to how
37:44
Speaker 2: they are financed. And the answer is very rarely, Hey,
37:48
Speaker 2: we're gonna cut services dramatically, because obviously that does not
37:52
Speaker 2: play well with the constituents. Neither does raising tax rates
37:56
Speaker 2: on either commercial or residential buildings or other things like that.
38:00
Speaker 2: And so either way, you're heading towards something that probably
38:04
Speaker 2: upsets upsets constituents of a number of major cities because
38:08
Speaker 2: there's no there's no free lunch, there's no easy way
38:11
Speaker 2: out of this. Let's take a quick break here and
38:14
Speaker 2: when we come back, we got our two coming up
38:16
Speaker 2: in a bit