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Is it time to rethink your portfolio? · The Financial Exchange Show

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Speaker 1: making a donation today. This is the Financial Exchange with
1:06
Speaker 1: Chuck Zada, and Mike Armstrong.
1:11
Speaker 2: Kicking off another week. Hope you all had a great weekend. Chuck,
1:14
Speaker 2: Mike and Tucker with you here. And if you got
1:18
Speaker 2: questions about anything, you know, if if, if you're nervous,
1:25
Speaker 2: if you're not nervous, whatever it might be, we got
1:27
Speaker 2: the text line open. It's six one seven three six
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Speaker 2: two thirteen eighty five. Tucker will take those. He can
1:33
Speaker 2: send your questions over to us. But uh text us
1:37
Speaker 2: again six one seven three six two thirteen eighty five.
1:40
Speaker 2: Would love to hear from all of you listening us
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Speaker 2: to what questions you have, because here's here's some context
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Speaker 2: for you, just to put this all in perspective about
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Speaker 2: what we saw on Thursday and Friday of last week
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Speaker 2: and what's continuing into today. Uh, Thursday and Friday of
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Speaker 2: last week, we're or the fifth largest two day decline
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Speaker 2: in the S and P five hundred since nineteen fifty
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Speaker 2: The only other ones. Two of them include Black Monday
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Speaker 2: in nineteen eighty seven, just because Black Monday was you know,
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Speaker 2: so big, you know, twenty percent plus, So the nineteenth
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Speaker 2: and twentieth of nineteen eighty seven both are the largest
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Speaker 2: two day declines, even though it all was really in
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Speaker 2: one day March twelfth of twenty twenty, so the eleventh
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Speaker 2: into the twelfth was the second that was a thirteen
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Speaker 2: point nine percent decline over two days. Eleven twenty two
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Speaker 2: thousand and eight midst of the financial crisis was a
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Speaker 2: twelve point four percent decline over two days, and what
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Speaker 2: we just saw culminating on Friday was a ten point
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Speaker 2: five percent draw down in two days. Again, however you
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Speaker 2: want to phrase it, either the fourth or the fifth
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Speaker 2: largest in the last seventy five years. So good news.
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Speaker 2: You've seen some history. And on Thursday's show, Mike and
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Speaker 2: I were on and I was talking, I'm like, like,
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Speaker 2: this is like the calmest, like four percent sell off
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Speaker 2: i've seen. Like it was, you know, not overly a
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Speaker 2: rush to the exits. It was kind of orderly, if
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Speaker 2: you can describe it that way, and there were still
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Speaker 2: things staying alive.
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Speaker 1: R right.
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Speaker 2: You had some telecoms that you were like, this doesn't
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Speaker 2: feel like panic. Friday felt like panic. You had, you know,
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Speaker 2: the vix was blowing out into the mid forties. You
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Speaker 2: had everything just getting hammered, you know, pretty much regardless
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Speaker 2: of where it was. Even when you had I think
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Speaker 2: it was around maybe eleven o'clock, the floating of you know,
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Speaker 2: some some talks with Vietnam on you know, potential improvement
3:38
Speaker 2: in uh, you know, trade policy. There you got like
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Speaker 2: a half hour rally. Then stock started puking again. It
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Speaker 2: was just you know, just constant selling pressure. Friday was
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Speaker 2: the highest volume day in the history of Wall Street,
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Speaker 2: the most shares changed hands Friday out of any day ever.
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Speaker 2: And it was you know, a negative six percent day
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Speaker 2: on the and P five hundred. So again, if if
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Speaker 2: you're feeling nervous, or if you're feeling a little bit
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Speaker 2: overwhelmed by how things have moved, again, these are kind
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Speaker 2: of historic times, you know, like you I always not
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Speaker 2: kind of these are historically.
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Speaker 3: They are because they are market selloffs that have that
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Speaker 3: are being caused by something that's never caused them before.
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Speaker 2: So again, if you've got questions thoughts that you want
4:23
Speaker 2: to get in six, one, seven, three, six, two, thirteen
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Speaker 2: eighty five is the text number. Don't text well driving,
4:28
Speaker 2: please pull over to the side of the road and
4:30
Speaker 2: text us. Or if you are you know, sitting, you know,
4:33
Speaker 2: at the job and you know we want to text
4:35
Speaker 2: us from there safely, do so as well, not while
4:38
Speaker 2: driving a fork left, operating heavy machinery, or anything else
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Speaker 2: along those lines, please, good warnings. So let's talk a
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Speaker 2: little bit about I want to approach this a little differently.
4:49
Speaker 2: We we got a whole bunch of stuff to get through,
4:51
Speaker 2: but this is different, and I want to kind of
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Speaker 2: start at the beginning and kind of go back to
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Speaker 2: why people make investment decisions because I think this is
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Speaker 2: going to form It forms the crux of how I
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Speaker 2: am viewing the next five to ten years. And people
5:08
Speaker 2: will be like, Chuck, why do you care about the
5:09
Speaker 2: next five to ten years. It's because whatever this is
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Speaker 2: in the short term, it's gonna work itself out one
5:14
Speaker 2: way or another. But in the next five to ten years,
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Speaker 2: here's the thing. The reason why people make investment decisions
5:23
Speaker 2: is ultimately because of two things. Really, it's one thing,
5:27
Speaker 2: but I'll separate them into two. It's trust and stories. Mike,
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Speaker 2: what's the number one reason why you would advise someone
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Speaker 2: not to put money into a startup in China? Trust?
5:42
Speaker 2: You have no idea if you're gonna get your money back.
5:45
Speaker 2: You have no idea if you're gonna get your money back. Mike,
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Speaker 2: what's the number one reason historically, why you would tell
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Speaker 2: people to put your money into a three month US
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Speaker 2: Treasury bill. Same answer. Trust. You know you're gonna get
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Speaker 2: your money back, And every other investment falls somewhere in
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Speaker 2: between small cap US companies, large cap US companies, corporate bonds,
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Speaker 2: high yield that everything else falls like somewhere in between
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Speaker 2: those two things, small cap company, you know, startup in
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Speaker 2: China and US Treasury bond.
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Speaker 3: Yeah, I'm sure there's something that I can think of
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Speaker 3: that's less trustworthy than the startup in China.
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Speaker 2: But let's go with that point, right, Sending one hundred
6:23
Speaker 2: dollars into space and hoping that some Martians find it
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Speaker 2: somewhere and send it back. Yes, trustworthy, but you wouldn't
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Speaker 2: do that. You can't. The cost of doing so is high.
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Speaker 2: When we talk about trust, and when we talk about
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Speaker 2: what the US effectively has promised over the last eighty
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Speaker 2: years in the post World War two period, it's been
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Speaker 2: pretty simple. And I'm not saying that this is good
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Speaker 2: or bad, but I'm saying it is or it has been.
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Speaker 2: The United States will deploy the world's largest blue water
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Speaker 2: navy to patrol and maintain shipping lanes such that commerce
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Speaker 2: can actually occur between other countries. In return, the US
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Speaker 2: is going to ask you to provide us your labor
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Speaker 2: to make stuff, but then you get to sell into
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Speaker 2: the richest population on the planet and have access to
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Speaker 2: that market to sell your stuff into. And that's basically
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Speaker 2: been the deal for the last eighty years. I'm not
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Speaker 2: saying it's good, bad, or anything else. I'm saying that
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Speaker 2: has been the status quo that has existed that has
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Speaker 2: allowed the US to become what it is. It's the
7:32
Speaker 2: US often gets described as, you know, an insurance company
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Speaker 2: with an army. It's really an insurance company like a
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Speaker 2: hedge fund and an army all rolled together in one.
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Speaker 2: And so that's been, you know, the status quo. And
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Speaker 2: so the question is all of the money that has
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Speaker 2: come into the US from you know, foreign capital that's
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Speaker 2: been attracted to the idea of hey, you know, here's
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Speaker 2: you know, the promise that's been there for the last
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Speaker 2: eighty years. What Wednesday's announced it does is it throws
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Speaker 2: into question a major component of it, which is sorry, no, no, no,
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Speaker 2: what do you got.
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Speaker 3: I want to explain what that money coming into the
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Speaker 3: United States has meant because I think people get confused
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Speaker 3: by that because what they see is I think what
8:17
Speaker 3: people are hearing right now is well, all of our
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Speaker 3: dollars are going abroad, and what people are missing is
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Speaker 3: that money then turns around. It comes back to back
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Speaker 3: in a number of different forms and in a number
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Speaker 3: of ways, you know, not benefiting large portions of the
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Speaker 3: American population, which I think was correct some of what
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Speaker 3: this is all about, but important to understand that largely
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Speaker 3: comes back.
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Speaker 2: It comes back as investment effectively, and investment can take
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Speaker 2: any number of different forms. It can be the form
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Speaker 2: of I'm taking you know, one hundred million dollars and
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Speaker 2: putting it into a you know, investment in a data center.
8:57
Speaker 2: I am taking two million dollars and buying a New
9:00
Speaker 2: York studio apartment.
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Speaker 3: I am using the pension funds of Singapore and buying
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Speaker 3: a bunch of US publicly traded stocks or treasure rests,
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Speaker 3: or any number of different things. But it largely does
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Speaker 3: come back.
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Speaker 2: So here's the thing. The Trump administration is trying to
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Speaker 2: change the rules of the road, and in part because
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Speaker 2: when that money comes back. Over the last eighty years,
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Speaker 2: I think there's an argument that it has perhaps benefited
9:27
Speaker 2: the top more than the bottom of the population. At
9:30
Speaker 2: least that's part of the argument, and it's tough to
9:33
Speaker 2: measure that. But you know, we've seen growing wealth inequality.
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Speaker 2: We've seen you know, hollowing out of manufacturing jobs. I
9:40
Speaker 2: think everybody recognizes that.
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Speaker 3: But while those jobs disappeared, things turned around and moved
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Speaker 3: back into the United States.
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Speaker 2: So if you are seeing a situation where effectively the
9:55
Speaker 2: the rules of the road are changing, and whether you're
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Speaker 2: an international investor you're a domestic investor, you have to
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Speaker 2: ask yourself what does this look like when it's all
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Speaker 2: said and done. And you can ask that in a
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Speaker 2: couple different places. The first is, hey, what am I
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Speaker 2: willing to pay for US stocks? Not knowing exactly what
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Speaker 2: it looks like after Maybe it's better, maybe it's worse,
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Speaker 2: I don't know. And if you're talking about US treasuries, Hey,
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Speaker 2: the promise has always been if I put my money
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Speaker 2: into US treasuries, I will get my money back from
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Speaker 2: the US and I generally, you know, the US dollar,
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Speaker 2: it's always been a strong currency and I don't have
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Speaker 2: to worry about that. Hey, especially if I'm an international investor. Hey,
10:35
Speaker 2: if we start talking about the dollar, weakening and things
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Speaker 2: like that. Now I'm taking on an additional risk. Am
10:40
Speaker 2: I comfortable with it? And I think this, in my
10:45
Speaker 2: mind explains part of what we're seeing right now, which is, Hey,
10:49
Speaker 2: the rules of the road are being changed dramatically, and
10:54
Speaker 2: if you aren't sure exactly what the next iteration of
10:57
Speaker 2: the US and or global economy is going to look like,
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Speaker 2: then you're not going to be as willing to pay
11:03
Speaker 2: as much for those assets in the short term. I
11:06
Speaker 2: want to take a quick break here, and when we
11:08
Speaker 2: come back, I want to talk about the other side
11:10
Speaker 2: of this, which is, hey, no matter how you slice it,
11:13
Speaker 2: these are some policies that in the short term our
11:15
Speaker 2: growth negative. What does it mean for the US economy
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Speaker 2: over the next six, twelve, eighteen months, and how do
11:23
Speaker 2: things potentially evolve from here? Quick break, we'll talk about
11:26
Speaker 2: that when we return.
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Speaker 2: I whant to just talk a little bit about what's
12:28
Speaker 2: going on in markets, because it's freaking insane, quite honestly,
12:32
Speaker 2: just what we're seeing right now. So the S and
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Speaker 2: P five hundred shortly after the open went down to
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Speaker 2: around forty eight forty eight thirty five, which is what
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Speaker 2: percentage sell off like from the top or from like
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Speaker 2: today today, like four to four. It was like a
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Speaker 2: four percentage point decline that we saw from fifty one
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Speaker 2: hundred almost five. It then subsequently rallied back up to
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Speaker 2: almost fifty two to fifty, so almost a ten percent
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Speaker 2: rally off the bottom. And the only thing that we've
13:03
Speaker 2: been able to figure out there is there's some stuff
13:05
Speaker 2: going around social media that Kevin Hassett, who runs the
13:09
Speaker 2: National Economic Council for President Trump, somewhere may have floated
13:16
Speaker 2: the idea of a pause in tariffs for ninety days
13:19
Speaker 2: except for China. But I can't find any attribution for it,
13:21
Speaker 2: quite honestly, so I don't know that there is any
13:25
Speaker 2: meat on that bone. But market's rallied about ten percent
13:28
Speaker 2: and then subsequently have sold off a couple more percent
13:30
Speaker 2: from there, So again I don't really there's a lot
13:36
Speaker 2: of fog of war. There's a lot of volatility here,
13:39
Speaker 2: and no one really knows what's going on. But this
13:42
Speaker 2: is the kind of stuff that, again, we're probably going
13:46
Speaker 2: to continue to see over the next few days. And
13:49
Speaker 2: I think this gets at a great question from the
13:53
Speaker 2: text line. We got a couple of texts that Tucker
13:55
Speaker 2: sent over to us. If you've got questions on anything
13:57
Speaker 2: that's going on. Text us six one seven three six
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Speaker 2: two thirteen eighty five. Okay, stocks are back down now. Uh,
14:05
Speaker 2: the SMP has now turned almost negative again. So it
14:08
Speaker 2: was up by more than two percent very shortly there. Yeah,
14:12
Speaker 2: so again just while but this is a text that
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Speaker 2: we got again. I don't know if I finished reading
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Speaker 2: the text line, but six one seven three six two
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Speaker 2: thirteen eighty five? Uh, should I change my portfolio to
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Speaker 2: the lowest possible risk until the tariffs are resolved? So
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Speaker 2: first thing, right off the bat, I don't know you
14:28
Speaker 2: who texted in, so I'm not going to give you
14:30
Speaker 2: personal advice, just because that's not how investment don't work.
14:33
Speaker 2: Don't know anything about you or your situation. I don't
14:35
Speaker 2: know if you're eighty forty twenty. I know nothing, So
14:38
Speaker 2: I'm not going to give you personalized advice. What I
14:41
Speaker 2: am going to tell you is, how do you know
14:43
Speaker 2: when the tariff issue is resolved? Right? What does that
14:46
Speaker 2: mean resolved?
14:47
Speaker 1: Like?
14:47
Speaker 2: When? When? When would you say that you feel comfortable
14:52
Speaker 2: deciding to move back in Because generally when issues present
14:56
Speaker 2: themselves in markets, the time when they're resolved is actually
14:59
Speaker 2: when it feels worst, you know, Like how many people
15:02
Speaker 2: in March of two thousand and nine actually said, Hey,
15:06
Speaker 2: the S and P five hundred just hit six seventy's
15:10
Speaker 2: it's not gonna go fifty six percent down. I'm gonna
15:15
Speaker 2: buy right and be honest, Like, if if you didn't,
15:18
Speaker 2: then don't lie to yourself. So when you're talking about, hey,
15:21
Speaker 2: should I reduce the risk in my portfolio until this
15:23
Speaker 2: is gone? I'll be completely honest. I work in this business.
15:28
Speaker 2: I do this each and every day. I don't know
15:31
Speaker 2: when this is going to be, you know, a non
15:33
Speaker 2: issue anymore. It could be tomorrow, it could be a
15:36
Speaker 2: month from now, it could be a year, and I
15:40
Speaker 2: I try to, you know, handle things humbly because you
15:43
Speaker 2: don't know exactly what's gonna happen. So what I will
15:46
Speaker 2: say is the approach that I think does make sense
15:50
Speaker 2: is even when things are good in markets, ask yourself,
15:54
Speaker 2: am I comfortable with the risk that I'm taking? And
15:57
Speaker 2: can I stomach the losses of what I've gained over
16:00
Speaker 2: the last two, three, four years, because that's something that
16:04
Speaker 2: is always present as a risk in market. And if
16:06
Speaker 2: the answer is no, I can't stomach that, the time
16:09
Speaker 2: to be making those changes is usually when things are good,
16:12
Speaker 2: actually right and and or Okay, hey, how do I
16:17
Speaker 2: want to adjust my my risk going forward? Okay, maybe
16:20
Speaker 2: I do it in little chunks over the next couple
16:22
Speaker 2: of years or so, because just saying hey, should I,
16:25
Speaker 2: you know, put the brakes on until this is resolved. Well,
16:28
Speaker 2: I don't know who's to say that. We don't get
16:29
Speaker 2: a headline tonight saying all tariffs are you know, gone?
16:32
Speaker 2: And this is I'm not saying that we will, but
16:35
Speaker 2: how do you how would you feel if you moved
16:37
Speaker 2: to that most conservative bucket and then immediately after the
16:42
Speaker 2: SMP goes up fifteen percent, which I'm not saying it will,
16:45
Speaker 2: but I'm saying good. I don't know, like you just
16:48
Speaker 2: you never know on these things. So I hope that
16:51
Speaker 2: answered that question generally, just because I can't tell you
16:54
Speaker 2: what to do specifically.
16:55
Speaker 3: Yeah, rarely, if ever are you able to time a
17:01
Speaker 3: market that's in free fall perfectly? And rarely, if ever
17:05
Speaker 3: are you going to be the first to know when
17:07
Speaker 3: something like this is resolved?
17:09
Speaker 2: Correct? Another question that's I think a really good one.
17:13
Speaker 2: This is from someone else. I haven't heard anyone explain
17:16
Speaker 2: how and when a tariff is paid, who enforces it
17:18
Speaker 2: the correct amount of being paid. So tariff enforcement is
17:22
Speaker 2: done by US Customs and Border Patrol the CBP, and
17:26
Speaker 2: it's basically at all of the ports of entry to
17:28
Speaker 2: the United States. They collect the tariffs at the time
17:33
Speaker 2: of clearance, and generally this is done through the company
17:39
Speaker 2: that is shipping the goods. So if you have DHL
17:42
Speaker 2: sending you something from China, DHL pays the tariff and
17:45
Speaker 2: then passes that cost on to their end buyer. And
17:50
Speaker 2: so as an example, I have a buddy of mine
17:52
Speaker 2: who's a board game maker, and he imports everything from
17:55
Speaker 2: China just because there aren't factories in the United States
17:59
Speaker 2: to make enough dice for all of the board games
18:02
Speaker 2: that we consume. It's just what it is. Go try
18:06
Speaker 2: to start a dice factory in the United States and
18:08
Speaker 2: tell me how it goes. And so, as in this example,
18:13
Speaker 2: he pays about twenty dollars for his product right now
18:17
Speaker 2: as of Wednesday, that will have a fifty four percent
18:22
Speaker 2: tariff that gets attached to it. So if you do
18:25
Speaker 2: the math, you say, okay, instead of paying twenty dollars
18:27
Speaker 2: per product, now he's paying thirty dollars and eighty cents.
18:32
Speaker 2: And what that means is he's got that cost that
18:35
Speaker 2: he has to figure out what to do with. If
18:37
Speaker 2: you look at you know, his wholesaling cost and all
18:40
Speaker 2: this stuff and this and that. Basically in talking to him,
18:44
Speaker 2: in his numbers, it's gonna be about five million extra
18:47
Speaker 2: dollars this year that he has to pay in tariffs
18:52
Speaker 2: that he was not anticipating. He's hoping to be able
18:55
Speaker 2: to negotiate with the companies that he wholesales into for
18:58
Speaker 2: them to pick up some of it. He understands that
19:00
Speaker 2: he's going to have to eat some of it as well,
19:03
Speaker 2: and that some of the money, the money that you know,
19:05
Speaker 2: the wholesaling company picks up, Okay, they're going to have
19:08
Speaker 2: to pass that along to end consumers. But ultimately it's
19:12
Speaker 2: the importer is paying that tariff cost, and it's it's
19:17
Speaker 2: what they have to end up paying to customs and
19:20
Speaker 2: border patrol there. So I think that when you look
19:23
Speaker 2: at it, this is why you have so many questions
19:25
Speaker 2: about how it impacts growth, because it potentially reduces profits
19:28
Speaker 2: and drives up cost and that's that's not a great
19:32
Speaker 2: situation in the short term. Quick break more after this,
19:35
Speaker 2: including Wall Street Watch when we come back.
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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
19:55
Speaker 1: Street Watch, a complete look at what's moving markets so
19:58
Speaker 1: far today right here on the Financial Exchange Radio Network.
20:02
Speaker 4: Well after its worst two day performance since March of
20:05
Speaker 4: twenty twenty. Last week. Markets are incredibly volatile to begin
20:09
Speaker 4: this week, where the vis or the volatility Indix is
20:12
Speaker 4: hovering just below fifty, its highest mark since the start
20:16
Speaker 4: of the pandemic. At the open the day, markets were
20:19
Speaker 4: selling off by as much as four percent around ten
20:22
Speaker 4: point fifteen. However, markets are sharp reversal and rally two percent,
20:27
Speaker 4: but right now it is continuing its wild swings. The
20:31
Speaker 4: Dow is now down by one point three percent, or
20:34
Speaker 4: four hundred and ninety five points, SMP five hundred down
20:38
Speaker 4: by two thirds of percent, now three quarters of a
20:40
Speaker 4: percent lower, and the Nasdaq is down about a quarter
20:43
Speaker 4: percent or forty two points. So Russell two thousand is
20:46
Speaker 4: up by two point seven percent. Ten year Treasure reeled
20:49
Speaker 4: up by eleven basis points at four point one zero percent,
20:53
Speaker 4: and crude oil is trading at sixty two dollars a barrel.
20:59
Speaker 4: Auto makers continue to see losses in reaction to President
21:03
Speaker 4: Trump's tariff policy. Jeep maker Stillant is down by four percent,
21:07
Speaker 4: for it also down by four percent. General Motor Stock
21:10
Speaker 4: is down by three percent. Separately, Bernstein downgrade a GM
21:13
Speaker 4: to underperform and notorious Tesla bull Dan Ives of Webbush
21:18
Speaker 4: Securities cut his price target of the ev maker stock
21:22
Speaker 4: over self created brand issues, Tesla down by six percent today.
21:27
Speaker 4: On the year, Tesla is down now by more than
21:30
Speaker 4: forty percent. Meanwhile, Big tech continues to take somewhat of
21:34
Speaker 4: a hit today. Kind of a mixed bag at the moment.
21:36
Speaker 4: Apple shares down by three percent as the tech giant
21:39
Speaker 4: manufacturer's devices in China and video down by about half
21:44
Speaker 4: a percent. Alphabet shares a flat, Microsoft and Amazon are
21:48
Speaker 4: down by about one Excuse me, Microsoft is down by
21:51
Speaker 4: one percent, while Amazon and Meta are actually edging higher
21:54
Speaker 4: so far today. Elsewhere, bank Stock's pulling back today over
21:58
Speaker 4: worries about a potential session. JP Morgan's CEO, Jamie Dimond
22:02
Speaker 4: also warned in his annual shareholder letter that new tariffs
22:05
Speaker 4: would boost inflation and hurt the US economy. JP Morgan
22:09
Speaker 4: shares dipping, Goldman Sacks down by three percent. In Citygroup
22:13
Speaker 4: shares it down by about three quarters of a percent.
22:15
Speaker 4: In bitcoin based stocks including Coinbase and micro Strategy, down
22:19
Speaker 4: by three and six percent, respectively, after bitcoin plunge below
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Speaker 4: seventy seven thousand dollars and is now at seventy nine
22:27
Speaker 4: thousand dollars on Tucker Silvan that's Wall Street Watch.
22:31
Speaker 2: So in the last segment, the S and P five hundred,
22:34
Speaker 2: we noted it, it rose a little over eight percent
22:37
Speaker 2: in a span of about five minutes. In the subsequent
22:40
Speaker 2: ten minutes, and this after the White House reportedly told
22:45
Speaker 2: CNBC that the ninety day pause on tariffs is fake news.
22:51
Speaker 2: The S and P five hundred is now subsequently fallen
22:53
Speaker 2: five percent again, and I was down about one and
22:55
Speaker 2: a half. So again, all I can say on day's
23:00
Speaker 2: like this is just be careful, just like, yeah, don't
23:04
Speaker 2: nobody knows anything On days like this, it's coming at
23:08
Speaker 2: everyone like a fire hose, and just take it as
23:12
Speaker 2: it comes and realize that there's gonna be a ton
23:16
Speaker 2: of headline risk out there in both directions, and sometimes
23:19
Speaker 2: you just need to see how it all plays out
23:21
Speaker 2: before making any determinations about anything, because nobody knows anything.
23:26
Speaker 2: I want to talk a little bit about kind of
23:28
Speaker 2: the next let's talk about the second quarter, because we're
23:31
Speaker 2: right at the beginning, we're seven days into the second
23:33
Speaker 2: quarter right now, we've got eighty three left, and so
23:37
Speaker 2: I think the question is okay, now that we have
23:40
Speaker 2: this announcement that has coming on, we've got the things
23:42
Speaker 2: that are in place right now. Twenty five percent tariff
23:45
Speaker 2: on all auto imports. Ten percent tariff on all imports
23:49
Speaker 2: that went into place on Saturday.
23:51
Speaker 3: Other than goods that comply with the USMCA. Well that's
23:55
Speaker 3: from the Canada, Mexico stuff before. Yeah, so back again,
23:58
Speaker 3: but like, yeah, we import a lot stuff from we
24:00
Speaker 3: do in Mexico, and so long as it's USMCA compliant,
24:03
Speaker 3: it's not facing a tariff to this point.
24:06
Speaker 2: So let's talk about just the lay of the land
24:08
Speaker 2: and what this means for the US economy in the
24:10
Speaker 2: short term. It does mean that those import costs are
24:15
Speaker 2: moving up or in some cases you're just not going
24:19
Speaker 2: to see product availability. As an example this morning, Volkswagen,
24:26
Speaker 2: I just want to make sure that I quote this
24:27
Speaker 2: correctly here, just to just bear with me for a second.
24:30
Speaker 2: Here we go Volkswagen's Audi spokesperson. This, according to Reuter's,
24:34
Speaker 2: confirms memo to auto dealers that cars arriving in US
24:38
Speaker 2: ports after April second will be held until further notice
24:42
Speaker 2: due to a twenty five percent tariff. So what Audi
24:45
Speaker 2: is telling you there is they are pausing the import
24:49
Speaker 2: of their vehicles temporarily until they can get clarification on
24:52
Speaker 2: whether this tariff is staying in place yep. And so
24:56
Speaker 2: that means that the new inventory is not going to
24:59
Speaker 2: make it to dealers. But because you don't pay the
25:01
Speaker 2: tariff when it arrives in the port, you pay when
25:03
Speaker 2: it disembarks and actually crosses into the US. Send it
25:05
Speaker 2: somewhere else if you're cressing this tariff. So that's one
25:10
Speaker 2: option that you have. Is in some situations imports of
25:13
Speaker 2: you know, high priced vehicles and things like that, you
25:16
Speaker 2: have a couple of companies that have said, yeah, we're
25:18
Speaker 2: just gonna kind of wait and see on this. Beyond that,
25:23
Speaker 2: you know, big public companies.
25:24
Speaker 3: I want to bring up a few conversations that I've
25:26
Speaker 3: just been having with smaller scale stuff.
25:29
Speaker 2: Right.
25:30
Speaker 3: So, I have a somebody I know who works in
25:33
Speaker 3: private equity and he takes companies public. It works with
25:39
Speaker 3: a lot of different types of companies. But his main
25:41
Speaker 3: message to me yesterday and just passing conversation was dried
25:45
Speaker 3: up entirely. Companies that were considering going public are delaying
25:48
Speaker 3: or pulling those IPOs, and anyone trying to raise money
25:51
Speaker 3: for private equity investment. These new funds that are out,
25:54
Speaker 3: it's dried up for the time being while they figure
25:57
Speaker 3: stuff out. Somebody else I know was considering making a
26:01
Speaker 3: small investment into a restaurant in Worcester basically told the
26:06
Speaker 3: person who you know, it sounds like it was a
26:08
Speaker 3: personal friend type situation. Basically told the person I got
26:11
Speaker 3: to buckle down. I can't possibly shell out cash for
26:14
Speaker 3: an investment like that right now. You know, Sorry, but
26:17
Speaker 3: not going to happen.
26:18
Speaker 1: Sure.
26:19
Speaker 3: I think those two stories to me read one thing,
26:22
Speaker 3: which is the uncertainty that's out there. The uncertainty and
26:26
Speaker 3: market the downturns and markets are leading some people, probably
26:30
Speaker 3: not all, but some people to pull back on discretionary
26:33
Speaker 3: spending of one sort or another, pull back on investment,
26:36
Speaker 3: most particularly because I think most people are having a
26:39
Speaker 3: very difficult time right now understanding you know, what's something
26:44
Speaker 3: that was worth a million dollars on Tuesday of last
26:47
Speaker 3: week is now worth today.
26:49
Speaker 2: Well, that's the thing is when when you don't know
26:51
Speaker 2: what the rules of the road are going to be,
26:53
Speaker 2: it's not that you inherently say it's going to be
26:56
Speaker 2: bad or good, like you don't know, you just say, hey,
26:58
Speaker 2: I can't price this right now, and so I'm just
27:00
Speaker 2: gonna sit and wait. And the issue that you end
27:04
Speaker 2: up with is that, hey, that sucks activity out of
27:07
Speaker 2: the US economy, and so it does present downside risks
27:11
Speaker 2: to the near term economic data. If deals aren't happening,
27:15
Speaker 2: if businesses aren't being launched in those types of things,
27:18
Speaker 2: that's the potential downside risk in the short term. It's
27:22
Speaker 2: not that the tariffs in and of themselves, just cause
27:25
Speaker 2: you know, businesses to throw up their hands and say, well,
27:27
Speaker 2: like we're out of business. It does in some cases,
27:30
Speaker 2: but it's much more the broader impact of, hey, we
27:34
Speaker 2: don't know if these are gonna stay in place or not.
27:36
Speaker 2: We're not sure what markets are gonna look like. We're
27:39
Speaker 2: not sure you know, what's a fair valuation. Now, why
27:42
Speaker 2: don't we just take a break and see what happens.
27:44
Speaker 2: And that's kind of what Audi's doing with like their cars.
27:48
Speaker 2: They're saying, yeah, we're just gonna hold these at the
27:50
Speaker 2: port right now because we need to see what's going
27:54
Speaker 2: to happen. We may raise prices later, we may not,
27:57
Speaker 2: depending on how things are resolved. But those cars aren't
28:01
Speaker 2: going into the United States and that's activity, then that's
28:04
Speaker 2: not going to take place because they're just sitting on
28:06
Speaker 2: the port right.
28:09
Speaker 3: So again, this is impossible to judge because nobody knows
28:13
Speaker 3: what happens next. But I think we should continue to
28:15
Speaker 3: operate with the assumption that what we know today is
28:19
Speaker 3: still the fact a week from now, and what we
28:22
Speaker 3: know today is substantially more tariffs going into place on
28:24
Speaker 3: Wednesday of this week, and should that occur, it seems
28:30
Speaker 3: recessions baked at that point. It seems to me that
28:33
Speaker 3: should that occur without change over the course of the
28:36
Speaker 3: next several weeks, that the next step logically would be
28:41
Speaker 3: announcements of layoffs eventually maybe some announcements of manufacturing jobs
28:48
Speaker 3: coming back to the US. But it's not clear at
28:51
Speaker 3: all to me what sort of timeline that is on
28:53
Speaker 3: versus say, look, if Delta Airlines sees bookings plummet by
28:57
Speaker 3: thirty percent, they're gonna be pretty quick to or low pilots.
29:01
Speaker 2: Sure, yeah, it's I think we need to be very
29:05
Speaker 2: much aware that the places that we need to look
29:09
Speaker 2: at economic data and not the jobs. Anything from March.
29:13
Speaker 2: Throwout anything from March, you can throw it's it's a
29:17
Speaker 2: different world today than it was before April second, and
29:22
Speaker 2: so any of the old economic data toss out. We're
29:26
Speaker 2: we're building entirely new, you know, data sets that you
29:29
Speaker 2: have to look at from April second onward. That's that's
29:32
Speaker 2: basically how you have to view it. The real time
29:35
Speaker 2: data that we will be getting. So we get weekly
29:38
Speaker 2: jobles claims they still operate on. I think it's one
29:41
Speaker 2: week delay, maybe not two week delay, but okay, you
29:44
Speaker 2: get out towards the end of April. What are we
29:46
Speaker 2: seeing any kind of inflection in jobbles claims? And I'm
29:49
Speaker 2: not saying that you will or won't be ye, I'm saying,
29:52
Speaker 2: quite honestly, I expect that you will start to see
29:55
Speaker 2: an upward inflection.
29:56
Speaker 3: If what's in place continues would be my takeaway, or
29:59
Speaker 3: you might be either way. But I think if this continues,
30:02
Speaker 3: then I would expect that in the short term.
30:04
Speaker 2: When we say this, do we mean like the full implementation?
30:07
Speaker 2: I would say, because here's what I don't think is good. Again,
30:11
Speaker 2: we're all just speculating. I don't think the blank at
30:15
Speaker 2: ten percent is not going.
30:16
Speaker 3: Anywhere, right, Yeah, I would say it has to be
30:18
Speaker 3: significant progress because you're right, if you wave tariffs on Israel.
30:23
Speaker 3: That may be enough to move markets in one direction
30:26
Speaker 3: or another. It's not going to be enough to move
30:28
Speaker 3: employment decisions one way or another, because to markets it
30:31
Speaker 3: might be an indication.
30:32
Speaker 2: Oh yeah, there's room for negotiation here. Let's move markets.
30:36
Speaker 2: And by the way, I think you'll probably get some
30:38
Speaker 2: announcements about negotiation in the next day or two. I'm
30:41
Speaker 2: surprised you didn't get them over the weekend. Frankly, I'm not.
30:45
Speaker 2: It's if you think about it from a negotiating perspective,
30:48
Speaker 2: you want to maintain your leverage into the eleventh hour
30:51
Speaker 2: to get the best deal possible. I suspect that you
30:55
Speaker 2: start to get stuff coming out tomorrow afternoon. Yeah, but
30:59
Speaker 2: there's new there's the meeting with net Nyahou today, which
31:02
Speaker 2: I think it's a big one, just to see how
31:04
Speaker 2: this plays out and if you get some movement there.
31:07
Speaker 2: But the blank at ten percent is already in effect.
31:11
Speaker 2: You don't put that in effect in that like if
31:13
Speaker 2: you're planning on walking that back, I think it's much more. Hey,
31:18
Speaker 2: the places I'm looking, do you see thing? Do you
31:20
Speaker 2: see deals or things coming together with India, Vietnam, Japan,
31:25
Speaker 2: South Korea, those are kind of the big four. I'm
31:28
Speaker 2: not particularly optimistic on the EU and China right decent
31:32
Speaker 2: chance those could just be sitting there for the next
31:34
Speaker 2: six to nine months. And if that's the case, those
31:35
Speaker 2: are big chunks. Given the size of those trading partners, like,
31:39
Speaker 2: it doesn't just mean nothing. So I think the next
31:42
Speaker 2: few months, Jobo's claims are going to be one of
31:45
Speaker 2: the first places that you start to see what's going on.
31:48
Speaker 2: The housing data. Remember, most housing data is like two
31:50
Speaker 2: or three months out of date, and even then, someone
31:54
Speaker 2: who bought a house today made that decision in January
31:58
Speaker 2: or February, so it's even more out of date by
32:00
Speaker 2: the time you get it, so that the housing data
32:02
Speaker 2: you're not gonna have anything good on until August September,
32:08
Speaker 2: you know, kind of in that range. Jobs data will
32:10
Speaker 2: start to become relevant on a monthly basis, probably starting
32:14
Speaker 2: in June, once you get like the May report, I
32:16
Speaker 2: think that's where you start to say, Okay, we can
32:18
Speaker 2: put some of this together, but we're gonna be in
32:20
Speaker 2: this weird situation where there's gonna be a lot of
32:23
Speaker 2: data coming out over the next month or so, and
32:26
Speaker 2: you're gonna hear Mike and I just whether it's good
32:28
Speaker 2: or bad, just kind of being like, Okay, this is
32:31
Speaker 2: what it was.
32:31
Speaker 3: Yeah, it's usually the focus of this program, and it's
32:34
Speaker 3: just not. It won't be for the next month. It
32:36
Speaker 3: just won't be.
32:37
Speaker 2: Let's take a quick break here. When we come back,
32:41
Speaker 2: let's see what do we want to do? Tariffs, tariffs, tariffs,
32:45
Speaker 2: fed sure Paul's spoken spoke on Friday. Well, le's talk
32:49
Speaker 2: about Yeah, let's talk about Jay Pallin what he said
32:51
Speaker 2: on Friday.
32:53
Speaker 1: If you missed any of today's show, catch up whenever
32:56
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33:32
Speaker 2: All right, all right, all right. J Powell on Friday
33:38
Speaker 2: was chatting. Where's he chatting?
33:42
Speaker 1: Is there's Virginia.
33:43
Speaker 3: Yeah, I don't remember to whom, some business roundtable. I
33:46
Speaker 3: think Virginia's for lovers, what they say. So he was
33:51
Speaker 3: hanging out there you know, talking shop and Tim Dwee,
33:54
Speaker 3: who is an economist for SGH Macroadvisors.
33:57
Speaker 2: I think he's been a professor at the University of Oregon.
33:59
Speaker 2: He someone I've followed online for the last ten years,
34:02
Speaker 2: like smart dude, very plugged into the fed world. And
34:07
Speaker 2: this is his quote. He said, we anticipated Powell would
34:10
Speaker 2: lean hawkish on Friday, but he went a step further.
34:12
Speaker 2: Even his equities were crashing and market participants may have
34:15
Speaker 2: missed a key insight scary as it might be, and
34:19
Speaker 2: specifically talking about, you know, language describing inflation expectations, and
34:25
Speaker 2: so he said, Powell got rid of this language. If
34:28
Speaker 2: the economy remained strong, but inflation does not continue to
34:31
Speaker 2: move sustainably towards two percent, we can maintain policy restraint
34:34
Speaker 2: for longer. If the labor market were to weaken unexpectedly
34:36
Speaker 2: or inflation were to fall more quickly, we can use
34:38
Speaker 2: policy accordingly. And Tim basically says I'll quote him again
34:42
Speaker 2: to be sure, there's no explicit talk of hikes now,
34:44
Speaker 2: but hikes are no longer explicitly excluded. Powell new markets
34:48
Speaker 2: were in free fall when he made this change. That's
34:49
Speaker 2: not being tone deaf, that's being deliberate, and so there's
34:55
Speaker 2: two ways to look at this. The first is, hey,
34:57
Speaker 2: is Powell missing the boat? Possible? But the Pal's generally
35:00
Speaker 2: been pretty dubbish when allowed to be dubbished over the
35:03
Speaker 2: last couple of years, so I see transitory discussion. I
35:07
Speaker 2: don't know that he would, you know, miss the boat necessarily,
35:10
Speaker 2: Like generally the approach that the Fed has taken has
35:12
Speaker 2: been too dubbish rather than not, you know, dubbish enough
35:16
Speaker 2: over the last few years. The other piece is, Okay,
35:19
Speaker 2: what kind of message is Powell trying to send? If
35:21
Speaker 2: you're nervous that inflation expectations may get out of control,
35:25
Speaker 2: the best way to nip that in the bud is
35:27
Speaker 2: to talk hawkishly at first, so you don't have to
35:31
Speaker 2: talk hawkishly later. Maybe that's kind of the what he's
35:35
Speaker 2: trying to do here. I don't know, We're all just
35:37
Speaker 2: speculating on it.
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Speaker 1: or Armstrong Advisory may contact you offering legal or investment services.
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36:50
Speaker 2: Over the weekend, byte Edance confirmed that they are in
36:52
Speaker 2: discussions with the US government about trying to keep TikTok
36:56
Speaker 2: running in the US. This is just after President Trump
36:59
Speaker 2: extended seventy five day deadline for the Chinese company to
37:04
Speaker 2: divest the app to basically, you know, not be a
37:08
Speaker 2: national security problem. And so this is something where we
37:14
Speaker 2: still don't have a resolution on this. Remember that TikTok
37:16
Speaker 2: was originally supposed to be divested by the was the
37:21
Speaker 2: day before the inauguration or the day after around then?
37:25
Speaker 3: It was right right around the I think it was
37:26
Speaker 3: before the inauguration in the Biden administration said we'll punt
37:29
Speaker 3: it to the to the Trump administration because it's the
37:31
Speaker 3: last days of office.
37:33
Speaker 2: So I don't know much, but I do know that
37:35
Speaker 2: national security doesn't have a seventy five day delay, right,
37:41
Speaker 2: Like you're it's either a national security issue or it's not.
37:44
Speaker 2: So I again, I continue to say, look, this thing
37:48
Speaker 2: needs to be done one way or another, whether TikTok
37:51
Speaker 2: is no longer operating in the US, or whether it
37:52
Speaker 2: gets sold to McDonald's app loven or Burger King or
37:56
Speaker 2: Amazon or whoever wants to buy this thing. Uh, No,
37:59
Speaker 2: Burger was in the running. The King is always out there,
38:03
Speaker 2: you know, just doing his thing, David Buster or something
38:05
Speaker 2: like that. Yeah, it sounds like one of their games. Yeah, yeah,
38:10
Speaker 2: just tiktoking David Busters. It's a match made in heaven.
38:13
Speaker 2: You know you get five extra credits when you post
38:16
Speaker 2: a reel once a day. Let's take a quick break here,
38:19
Speaker 2: we got more an hour two. Keep texting us your
38:22
Speaker 2: questions at six one, seven, three, six two thirteen eighty five.