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Oil Prices Surge and Jobs Disappoint: Is the Economy Starting to Crack? · The Financial Exchange Show

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  Speaker 2: Good morning, Welcome back to the Financial Exchange on a
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  Speaker 2: very busy Friday here as we close out a very
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  Speaker 2: busy week on the Financial Exchange, oil prices moving up
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  Speaker 2: significantly higher today. We've got prices now up about thirty
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  Speaker 2: percent from where we closed out on Friday of last week.
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  Speaker 2: Gas prices hitting their highest level nationally since.
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  Speaker 3: Twenty twenty four.
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  Speaker 2: And then beyond everything going on in Iran, which there's
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  Speaker 2: a lot of, we also received a jobs report this
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  Speaker 2: morning that was pretty abysmal, retail sales report at eight
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  Speaker 2: thirty as well. And then we're gonna jam packed with
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  Speaker 2: guests on the program today too. We've got Mary Burke
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  Speaker 2: who has joined us once more once before. She is
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  Speaker 2: a principal economist and policy advisor with the New England
• 1:56
  Speaker 2: Public Policy Center inside the Federal Reserve Bank of Boss
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  Speaker 2: talking to us about basebook and what she's seeing regionally
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  Speaker 2: in the New England area after a blockbuster year for
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  Speaker 2: snow and shutdowns and school shutdowns and business shutdowns. So
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  Speaker 2: she'll be joining us, and then Paula Monica also joining
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  Speaker 2: us in the second hour of the program today. So,
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  Speaker 2: like I said, jam packed show, Let's get right into
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  Speaker 2: it with that job's report that was released Paul this
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  Speaker 2: morning at eight thirty am. Headline numbers here to focus
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  Speaker 2: on were significant job loss in the month of February
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  Speaker 2: after significant job gains in the month of January. And
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  Speaker 2: we'll get to the seasonality of all this. But what
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  Speaker 2: were the headlines for you to keep an eye on?
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  Speaker 3: Here?
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  Speaker 4: Not a great report, Mike. We saw jobs fall in
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  Speaker 4: ninety two. We saw ninety two thousand jobs lost in
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  Speaker 4: the month of February. That pales in comparison to an
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  Speaker 4: estimate of anywhere of fifty nine thousand of job gained
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  Speaker 4: that economists had projected heading into this report. It now
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  Speaker 4: marks three times in the past five months that we've
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  Speaker 4: seen pyrolls decline. We also saw headline unemployment tick up
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  Speaker 4: from four point three percent to four point four percent.
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  Speaker 4: On the slightly positive side of things. As much as
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  Speaker 4: those headlines are not great, we did also see some
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  Speaker 4: downward revisions I would add to the month of January's
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  Speaker 4: data and the month of December's data to take more
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  Speaker 4: job gains away.
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  Speaker 3: Big revisions to December, yeah.
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  Speaker 4: Really large ones. On the positive front, we did see
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  Speaker 4: some pretty significant wage gains. The average hourly earnings growth
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  Speaker 4: for the month of February was close to a half percent.
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  Speaker 4: If you ran that annuallyzed to be closer to you know,
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  Speaker 4: four or five percent year over year if we continued
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  Speaker 4: at that pace. If you do look back a year,
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  Speaker 4: wages have gained about three point eight percent, that is
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  Speaker 4: above where inflation has run close to three percent. So
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  Speaker 4: that was a positive and to me, Mike, the real
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  Speaker 4: biggest takeaway from this, or perhaps what could be pointing
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  Speaker 4: to the case that maybe this is just some noise
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  Speaker 4: for a monthly report, is really the impact of the
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  Speaker 4: healthcare sector. For those that don't know, the healthcare sector
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  Speaker 4: has been the fulcrum of job growth over the course
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  Speaker 4: of the last year, so it has really been the
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  Speaker 4: only sector where we have seen significant job gains, where
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  Speaker 4: many other sectors have been relatively weak or have lost
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  Speaker 4: jobs over that period of time. Four hundred thousand jobs
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  Speaker 4: in the healthcare sector were added last year in twenty
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  Speaker 4: twenty five. In comparison, the US payroll growth over the
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  Speaker 4: course that year was about one hundred and eighty one thousand.
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  Speaker 4: So in this report, there was a decline on the
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  Speaker 4: healthcare sector of about twenty eight thousand jobs. A lot
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  Speaker 4: of that had to do with a strike that we
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  Speaker 4: saw at Kaiser Permanente that sidelined thirty thousand workers in
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  Speaker 4: Hawaii and California. So not having that healthcare sector, which
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  Speaker 4: has ranged anywhere between forty to fifty thousand or more
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  Speaker 4: jobs being added a month and it reporting a declient
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  Speaker 4: I think that played into the weak numbers.
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  Speaker 3: We're seeing here.
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  Speaker 2: So we talked a bit about visions again. Headline numbers here,
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  Speaker 2: we saw February employments declined by ninety some odd thousand,
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  Speaker 2: after seeing January the employment number was up a byer
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  Speaker 2: revised one hundred twenty six thousand jobs. So again net
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  Speaker 2: net here we still have job creation over the last
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  Speaker 2: two months, but barely with the revisions to December in particular,
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  Speaker 2: I'm looking at now calendar year twenty twenty five. In December,
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  Speaker 2: the net job loss was revised, and so you actually
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  Speaker 2: saw job loss of seventeen thousand after previously, you know,
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  Speaker 2: thinking that we had seen job creation in the month
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  Speaker 2: of December. Again, this stuff will continue to be revised,
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  Speaker 2: but the year over year numbers now for twenty twenty
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  Speaker 2: five indicate that total job creation for the entire year
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  Speaker 2: came in at one hundred sixteen thousand for twenty twenty five.
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  Speaker 4: Yeah, that revised my one to eighty one I quoted
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  Speaker 4: because that was without this revision, right.
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  Speaker 2: So we're now sitting there saying, okay, for all of
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  Speaker 2: twenty twenty five, only one hundred and sixteen thousand net
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  Speaker 2: jobs were created in that calendar year. That is a
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  Speaker 2: pretty significant downward trend. If you take a look at
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  Speaker 2: year before, in twenty twenty four, one point four six
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  Speaker 2: million jobs were created. In calendar year twenty twenty three,
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  Speaker 2: two point five million jobs created, So we are talking
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  Speaker 2: about a substantial decline in the pace of job creation,
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  Speaker 2: which is not ultimately all that surprising given where this
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  Speaker 2: economy has bounced around, but it leads to a very
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  Speaker 2: obvious concern, which is, wow, if you are declining that
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  Speaker 2: quickly and draw a line through those data points, it
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  Speaker 2: leads you to a point where you're looking at net
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  Speaker 2: job loss in calendar year twenty twenty six. Were that
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  Speaker 2: to continue at that type of pace, right, Not that
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  Speaker 2: it will, but you know, that is the very obvious
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  Speaker 2: concern that is on the mind of many, including those
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  Speaker 2: at the Federal Reserve. Other highlights from this report, just
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  Speaker 2: to focus on, you know, one of the trends you
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  Speaker 2: talked about in terms of healthcare, So that has been
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  Speaker 2: the area that has led over the last several years. Frankly,
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  Speaker 2: it's been the area that's led over the last decade
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  Speaker 2: or so as we as a society age. If you
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  Speaker 2: take a look at health and social services employment and
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  Speaker 2: charted against the number of Americans over the age of
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  Speaker 2: sixty five, you can draw a pretty tight line between
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  Speaker 2: the two of them. So an unsurprising here, But healthcare employment,
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  Speaker 2: like you mentioned, in part due to strike activity, declining
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  Speaker 2: by twenty eight thousand in the month of February after
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  Speaker 2: a large increase in January, Information services continued to trend
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  Speaker 2: down in February lost eleven thousand net jobs.
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  Speaker 4: That's that's a where you'd see a related impacts.
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  Speaker 3: Just that little more color there.
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  Speaker 2: In February, federal employment continues to decline down ten thousand,
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  Speaker 2: and that number is down by three hundred and thirty
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  Speaker 2: thousand since October twenty twenty four, by about eleven percent.
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  Speaker 2: In total, social assistance actually moved up, as we've talked about,
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  Speaker 2: that's one of those areas that's tied to carrying for
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  Speaker 2: seniors transportation and warehousing changed little in February, down by
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  Speaker 2: about eleven thousand and so overall. Again, I don't think
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  Speaker 2: you go and nitpick the industry by industry here, but
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  Speaker 2: the message on the labor market from this report was
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  Speaker 2: continued weakening. After a surprise bead in January that had
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  Speaker 2: a lot of people kind of scratching their head saying,
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  Speaker 2: maybe this labor market is better than we thought.
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  Speaker 3: This, I think puts you right.
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  Speaker 2: Back on the trend line where we were for the
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  Speaker 2: second half of last year, saying job creation is weak,
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  Speaker 2: unemployment is trending higher. All else equal job loss or
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  Speaker 2: very low job gains are going to continue to define
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  Speaker 2: this labor market. And the question is where is the
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  Speaker 2: risk on all this. The one piece that I continue
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  Speaker 2: to feel nobody has a firm grasp on is that
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  Speaker 2: unemployment rate side of things. Because while we are seeing
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  Speaker 2: very weak job creation right now now, and it's being
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  Speaker 2: reflected in employee sentiment and a number of other factors,
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  Speaker 2: I have a tougher time getting at the tightness of
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  Speaker 2: the labor market, and that has everything to do mostly
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  Speaker 2: with deportations and that activity. Yes, there's the aging piece too,
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  Speaker 2: babying the baby boomers have been retiring for the better
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  Speaker 2: part of a decade. Now, that's not suddenly changing. What
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  Speaker 2: is suddenly changing is the state of immigration. And so
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  Speaker 2: therefore I have a very tough time understanding. Okay, if
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  Speaker 2: we see net no jobs created in twenty twenty six,
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  Speaker 2: what does that do to the unemployment rate? That's that's
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  Speaker 2: an important question here. We've got to take a quick break.
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  Speaker 2: When we come back, I want to stay on this
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  Speaker 2: job's reported. It is important. I want to talk about
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  Speaker 2: it in the context of the FED, who will be
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  Speaker 2: meeting in just a few weeks.
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  Speaker 3: Here, So quick break. We'll be right back with that.
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  Speaker 3: Next on the Financial Exchange.
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  Speaker 2: This morning, when I woke up, I saw S and
• 11:01
  Speaker 2: P futures off by about half to six tenths of
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  Speaker 2: a percent following the jobs report released.
• 11:07
  Speaker 3: Those have declined further.
• 11:08
  Speaker 2: The Dow, SMP and NASDAC all now down more than
• 11:11
  Speaker 2: one percent, and the rest of two thousand down more
• 11:13
  Speaker 2: than two percent. In early trading, the yield on the
• 11:17
  Speaker 2: ten yere treasury had been up higher on concerns about
• 11:21
  Speaker 2: oil markets, at declined as well. We are still up
• 11:24
  Speaker 2: on the day on the ten year treasury, but we're
• 11:25
  Speaker 2: sitting at four point one six three percent, which is
• 11:28
  Speaker 2: pretty close to where we closed out the day yesterday,
• 11:30
  Speaker 2: and an oil prices. However, this is the this is
• 11:34
  Speaker 2: the kind of push and pull in markets right now.
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  Speaker 2: Investors are concerned about the jobs decline, making them concerned
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  Speaker 2: about the state of the economy and I think hitting
• 11:43
  Speaker 2: stock prices further. At the same time, they're worried about
• 11:46
  Speaker 2: inflation due to oil price concerns. We are now sitting
• 11:48
  Speaker 2: at eighty eight point fifty per barrel on the West
• 11:51
  Speaker 2: Texas crewed benchmark. That's up another nine percent today, more
• 11:54
  Speaker 2: than thirty percent since where things closed out on Friday,
• 11:57
  Speaker 2: and so a lot of push and here we'll be
• 12:00
  Speaker 2: talking about oil throughout the program. But that's what you
• 12:03
  Speaker 2: have going on in different areas of the market right now.
• 12:06
  Speaker 3: And it leads.
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  Speaker 2: Me to think about the economists that the Federal Reserve
• 12:12
  Speaker 2: who are going to be trying to sort through what
• 12:14
  Speaker 2: to do next with this economy right now.
• 12:17
  Speaker 3: And I was.
• 12:18
  Speaker 2: Listening to Governor Christopher Waller. He was giving an interview
• 12:21
  Speaker 2: to Bloomberg this morning. It was before the job's report,
• 12:24
  Speaker 2: and he was being asked a lot about, you know,
• 12:26
  Speaker 2: his view on the labor market because he is of
• 12:29
  Speaker 2: all the federal Reserve members, and granted he was running
• 12:31
  Speaker 2: for the top job, he has been very public about
• 12:36
  Speaker 2: his belief that they Fed needs to lower interest rates
• 12:38
  Speaker 2: further because he is concerned about the labor market. And
• 12:41
  Speaker 2: the point that he made was, look, we saw a
• 12:43
  Speaker 2: really strong report in January. His concerns were that we've
• 12:48
  Speaker 2: seen strong January jobs reports in the past. He's concerned that,
• 12:53
  Speaker 2: you know, there's some seasonal adjustment problems here where those
• 12:56
  Speaker 2: don't accurately reflect what's going on. And so he said, look,
• 12:59
  Speaker 2: if we get another one hundred thousand plus jobs created
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  Speaker 2: in February, then that might shift my view on the
• 13:04
  Speaker 2: labor market. But right now, again this is coming from
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  Speaker 2: FED Governor Christopher Waller, the viewpoint was concerns about the
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  Speaker 2: labor market are going to persist. They are the labor
• 13:16
  Speaker 2: market has weekend and is continuing to weakend, the Fed
• 13:19
  Speaker 2: needs to cut rates, and nothing about the temporary situation
• 13:22
  Speaker 2: the Middle East and higher oil prices is going to lead.
• 13:25
  Speaker 3: Him to change his view on that.
• 13:27
  Speaker 2: So that was an interesting take and he was His
• 13:30
  Speaker 2: viewpoints were confirmed this morning at day thirty when the
• 13:32
  Speaker 2: jobs report came out and was far weaker than anticipated.
• 13:36
  Speaker 2: Job creation didn't exist. It was negative nine ninety two thousand.
• 13:41
  Speaker 2: Where was the actual ninety two thousand jobs lost in
• 13:45
  Speaker 2: the month of February, wiping out a lot of the
• 13:47
  Speaker 2: gains we saw in January, and I think reaffirming the
• 13:51
  Speaker 2: view that, hey, the pace of creation in this labor
• 13:53
  Speaker 2: market is going to be slow.
• 13:56
  Speaker 3: Now.
• 13:57
  Speaker 2: I suppose there could be some seasonal effects here. February
• 14:00
  Speaker 2: was a pretty rough month for weather across the nation,
• 14:04
  Speaker 2: so perhaps that's something to do with it here. But
• 14:07
  Speaker 2: I do wonder. Okay, you've got Chris Waller. We all
• 14:10
  Speaker 2: know what his viewpoint was. His viewpoint has been lower
• 14:14
  Speaker 2: interest rates, keep them coming down because the labor market
• 14:18
  Speaker 2: has weakened. What I mean, this meeting is occurring. Let
• 14:23
  Speaker 2: me take the look at the dates.
• 14:24
  Speaker 4: I want to say, March eighteenth, off of top of
• 14:27
  Speaker 4: my head.
• 14:27
  Speaker 2: You are correct, March eighteenth, So we are twelve days
• 14:31
  Speaker 2: out from a FED meeting. It's hard for me to
• 14:33
  Speaker 2: believe that the state of the events in Iran are
• 14:36
  Speaker 2: going to be significantly different than where they are right now.
• 14:38
  Speaker 2: It's coming up very very soon. But yep, who knows
• 14:41
  Speaker 2: the stuff changes every day? How are some of the
• 14:45
  Speaker 2: most important people to the state of the economy and markets.
• 14:48
  Speaker 2: Going to view these series of events in your mind.
• 14:51
  Speaker 4: One of my thoughts prepping for the show today was
• 14:54
  Speaker 4: another Friday where I just sit here and say, I'm
• 14:56
  Speaker 4: so glad I don't have to do the job of
• 14:58
  Speaker 4: a federalis I remember, not like I hate even have
• 15:00
  Speaker 4: close to sniffing the qualifications for it, but so difficult, Mike,
• 15:04
  Speaker 4: in the fact that the dual mandate of the FED
• 15:07
  Speaker 4: is to sort of oversee full employment or oversee the
• 15:13
  Speaker 4: labor market as well as inflation and trying to keep
• 15:17
  Speaker 4: that under their target of or keeping it at the
• 15:20
  Speaker 4: target of two percent. And what has just happened over
• 15:22
  Speaker 4: the course of the last few days is obviously inflation
• 15:26
  Speaker 4: has been something that we've talked about quite frequent on
• 15:28
  Speaker 4: the program because headline inflation if all trends continue the
• 15:32
  Speaker 4: way they have with energy prices for the month of March,
• 15:36
  Speaker 4: and again we're only six days into it, and we're
• 15:39
  Speaker 4: already seeing the impacts of it. Three twenty five a
• 15:41
  Speaker 4: gallon at the pump that is going to be significantly
• 15:44
  Speaker 4: impacted on the headline front by the increases and energy
• 15:48
  Speaker 4: here at the same time, we just have a jobs
• 15:50
  Speaker 4: report that is quite weak and sort of reinforces some
• 15:53
  Speaker 4: of the concerns in the labor market. So you almost
• 15:55
  Speaker 4: can think of, you know, some cartoon character like wy
• 15:59
  Speaker 4: Coode being between two different cliffs here, like sort of
• 16:01
  Speaker 4: being split in the middle where one concern is geez
• 16:04
  Speaker 4: inflation is going to pick up. That would preempt typically
• 16:07
  Speaker 4: a Federal Reserve administration to consider higher rates for longer.
• 16:11
  Speaker 4: But at the same time, you have some weakness in
• 16:13
  Speaker 4: the labor market that would lean a typical Federal Reserve
• 16:17
  Speaker 4: member to say, oh, perhaps we need to cut to
• 16:20
  Speaker 4: stimulate more activity in the employment market. Just really difficult
• 16:23
  Speaker 4: to get navigate those two. Ultimately, I think it's leads
• 16:27
  Speaker 4: to staying pat at this most upcoming meeting because of
• 16:29
  Speaker 4: all the uncertainty. But how do you look at things
• 16:32
  Speaker 4: going further the next few months? And the problem is
• 16:34
  Speaker 4: none of us have the answer to this because we
• 16:36
  Speaker 4: don't really know, We have no idea when this conflict could,
• 16:40
  Speaker 4: how long it's going to go on for. And that's
• 16:42
  Speaker 4: I think the overarching thing with everything on the markets
• 16:44
  Speaker 4: right now.
• 16:45
  Speaker 2: And specifically where the oil price spike is going to lead.
• 16:48
  Speaker 2: We are seeing this massive thirty percent plus spike in
• 16:51
  Speaker 2: oil prices, and if it's completely reversed in a month,
• 16:55
  Speaker 2: then there is no impact. Yeah, I mean really, like
• 16:59
  Speaker 2: I know, we can't just wipe away history. Like you know,
• 17:02
  Speaker 2: there will still have been this oil price impact, but
• 17:05
  Speaker 2: it won't change anything if it's wiped away a month
• 17:07
  Speaker 2: from now. If a year from now oil prices are
• 17:10
  Speaker 2: in the eighties, then all bets are off on that front.
• 17:13
  Speaker 2: And I think that's what very much members of the
• 17:15
  Speaker 2: FED are struggling with and why it probably does make
• 17:18
  Speaker 2: sense to stand pat But we've made comparisons, for instance,
• 17:21
  Speaker 2: to twenty twenty two and taking a step back right,
• 17:26
  Speaker 2: like we had an invasion of another country, we had
• 17:29
  Speaker 2: FED thinking about what to do on interest rates, and
• 17:33
  Speaker 2: at that point in time they said, look, we see
• 17:36
  Speaker 2: some risks to inflation, but we're not sure how this
• 17:39
  Speaker 2: war in Ukraine is going to reshape things, and we're
• 17:41
  Speaker 2: going to hold off.
• 17:42
  Speaker 3: And by all accounts, they made the wrong call there.
• 17:46
  Speaker 2: It's pretty clear now you know, four years out from
• 17:49
  Speaker 2: those events that the events were inflationary. There was so
• 17:52
  Speaker 2: much pent up demand in the economy from COVID stimulus
• 17:55
  Speaker 2: that and by the way supply chain shocks that we
• 17:58
  Speaker 2: are going to get inflation, and they kind of missed
• 18:01
  Speaker 2: the ball on it and held off and arguably caused
• 18:05
  Speaker 2: more inflation by holding off than was otherwise necessary. The
• 18:10
  Speaker 2: conditions are completely different today. The labor market has been weak.
• 18:16
  Speaker 2: There is not a boatload of cash slashing around the
• 18:19
  Speaker 2: economy in twenty twenty six like there was we think
• 18:23
  Speaker 2: in twenty twenty two. So conditions are different. The labor
• 18:27
  Speaker 2: market has weakened. Inflation could be a concern, but again,
• 18:31
  Speaker 2: to have inflation, you have to have a few things happening. One,
• 18:35
  Speaker 2: you know, you have to have Yeah, something like an
• 18:38
  Speaker 2: oil price shock can cause inflation, but only if consumers
• 18:42
  Speaker 2: have the money to spend, if their money has to
• 18:45
  Speaker 2: go towards gas and be taken away from some other
• 18:48
  Speaker 2: area of spending. Right, Yeah, I had to fill up
• 18:52
  Speaker 2: the tank and it cost me thirty percent more than
• 18:54
  Speaker 2: it did last week. Might mean that I'm not going
• 18:57
  Speaker 2: out to dinner with the family and we're instead cooking
• 19:00
  Speaker 2: at home. It might mean that we are canceling the
• 19:02
  Speaker 2: summer trip that we're planning to go on. And I
• 19:05
  Speaker 2: think that those types of actions in today's economy, consumers
• 19:10
  Speaker 2: pulling back in some way. I don't know if they
• 19:12
  Speaker 2: will happen or not, but I think they're far more
• 19:14
  Speaker 2: likely to happen than they would have been in twenty
• 19:16
  Speaker 2: twenty two. So that is what the FED is trying
• 19:19
  Speaker 2: to juggle right now, and I don't think anybody has
• 19:21
  Speaker 2: a real answer. Let's take quick break when we come back.
• 19:24
  Speaker 2: Full market recap with Wall Street Watch coming up.
• 19:39
  Speaker 1: Like us on Facebook and follow us on Twitter at
• 19:41
  Speaker 1: TFE show. Breaking business news is always first right here
• 19:46
  Speaker 1: on the Financial Exchange Radio Network. Time out full Wall
• 19:51
  Speaker 1: Street Watch tracking the stocks, the data, and the headlines
• 19:54
  Speaker 1: driving markets so far today right here on the Financial
• 19:58
  Speaker 1: Exchange Radio Network.
• 20:00
  Speaker 5: Well, markets are currently off by quite a bit, but
• 20:03
  Speaker 5: it has been getting better over the last hour since
• 20:05
  Speaker 5: markets opened. The Dow Jones is off one point two percent,
• 20:08
  Speaker 5: or five hundred and sixty eight points. The S and
• 20:10
  Speaker 5: P five hundred is off just over one percent or
• 20:13
  Speaker 5: seventy one points, the NASDAK is off one hundred and
• 20:16
  Speaker 5: ninety two points, are just a little over eight tenths
• 20:19
  Speaker 5: of a percent. All this comes in as non farm
• 20:22
  Speaker 5: payrolls in February fell by ninety two thousand compared to
• 20:25
  Speaker 5: the estimate for fifty thousand and below the downwardly revised
• 20:28
  Speaker 5: January total of one hundred and twenty six thousand. GAP
• 20:33
  Speaker 5: stock is off by thirteen percent after Gap reported fourth
• 20:36
  Speaker 5: quarter earnings of forty five cents per share, just shy
• 20:38
  Speaker 5: of analysts forecast of forty six cents a share. GAP's
• 20:42
  Speaker 5: revenue came in line with expectations at four point twenty
• 20:45
  Speaker 5: four billion dollars. Marvel Technology, which makes integrated circuits and
• 20:49
  Speaker 5: semiconductor products, saw shares rise by eighteen percent on the
• 20:53
  Speaker 5: back of strong quarterly results led by artificial intelligence. Demand
• 20:57
  Speaker 5: Management said Marvel expects a year over year revene new
• 21:00
  Speaker 5: growth to increase each quarter in fiscal twenty twenty seven.
• 21:03
  Speaker 5: Guideware Software shares are up two and a half percent
• 21:06
  Speaker 5: after the software company for property and casualty insurance insurers
• 21:10
  Speaker 5: posted second quarter results that exceeded expectations. Guidewear Software posted
• 21:16
  Speaker 5: earnings of a dollar seventeen cents per share on an
• 21:19
  Speaker 5: adjusted basis on revenue of three hundred and fifty nine
• 21:22
  Speaker 5: point one million dollars. And finally, medical device company Cooper
• 21:26
  Speaker 5: Companies is off four percent after reporting revenue of one
• 21:29
  Speaker 5: point h two billion dollars for the fourth quarter that
• 21:31
  Speaker 5: match but did not top analyst expectations. However, Cooper raised
• 21:36
  Speaker 5: guidance for the full year, calling for adjusted earnings of
• 21:39
  Speaker 5: four dollars and fifty eight cents per share to four
• 21:41
  Speaker 5: dollars and sixty six cents per share. That tops the
• 21:44
  Speaker 5: FACTUS consensus of four dollars and fifty two cents per share.
• 21:47
  Speaker 5: I am ben Kitchen and that was Wall Street Watch
• 21:50
  Speaker 5: well as we discussed oil prices surging again this morning,
• 21:54
  Speaker 5: up nine percent on the West Texas Crew benchmark that
• 21:57
  Speaker 5: lands US an eighty eight dollars forty six sense.
• 22:00
  Speaker 3: It is a now thirty two.
• 22:04
  Speaker 2: Percent increase from where oil price is closed on Friday
• 22:09
  Speaker 2: of last week, and is the highest price we have
• 22:13
  Speaker 2: now seen since twenty twenty three on that Texas crewed bench.
• 22:18
  Speaker 2: Bark gas prices following in line, we now have the
• 22:21
  Speaker 2: national average for a gallon of gas according to tripa
• 22:24
  Speaker 2: A is sitting at three dollars thirty two cents. That's
• 22:26
  Speaker 2: the highest level we've seen since twenty twenty four and
• 22:29
  Speaker 2: a thirty cent increase in about a week. Diesel prices
• 22:33
  Speaker 2: now national average sitting at four dollars thirty three cents
• 22:36
  Speaker 2: a gallon a substantial increase there as well. And from
• 22:39
  Speaker 2: my very small understanding of it, the oil that we
• 22:43
  Speaker 2: get from this region tends to be very easily refinable
• 22:47
  Speaker 2: into both diesel and gas and tends to lead to
• 22:49
  Speaker 2: higher prices quicker at the pump there. Ultimately, as we've
• 22:54
  Speaker 2: talked about, an oil price spike in the short term
• 22:56
  Speaker 2: is not something that equity market are clearly all that
• 23:01
  Speaker 2: concerned about. It's not something that the Federal Reserve is
• 23:03
  Speaker 2: all that concerned about. But the duration of it is
• 23:06
  Speaker 2: the all important factor here and part of the drive
• 23:09
  Speaker 2: for higher rates this morning on oil prices is Mersk,
• 23:13
  Speaker 2: a real bell weather for trade, generally shipping containers and such.
• 23:19
  Speaker 2: I had temporarily suspended two of their services linking the
• 23:23
  Speaker 2: Middle East to Asia and Europe due to everything going
• 23:26
  Speaker 2: on in the Middle East. So not that much had
• 23:28
  Speaker 2: been moving anyway, but Meerst coming out and saying no,
• 23:32
  Speaker 2: we are effectively pausing or suspending these two services. One
• 23:38
  Speaker 2: is the FM one service which connects the Far East
• 23:40
  Speaker 2: to the Middle East, and then the eleven service linking
• 23:43
  Speaker 2: Middle East to Europe. At the moment, there's one hundred
• 23:46
  Speaker 2: and forty seven shipping containers left sheltering in the Persian Gulf.
• 23:50
  Speaker 2: And yeah, I mean again, we're all very used to
• 23:55
  Speaker 2: supply chain crunches at this point and what they can
• 23:57
  Speaker 2: do to prices, and I think we are seeing that
• 24:00
  Speaker 2: it's also coming at an interesting time for shipping. I
• 24:04
  Speaker 2: don't think this stuff dramatically affects shipping containers coming to
• 24:09
  Speaker 2: the United States generally, because a lot of that comes
• 24:11
  Speaker 2: from China doesn't cross through the Middle East. But yeah,
• 24:14
  Speaker 2: also coming at a time where tariffs were just wiped
• 24:17
  Speaker 2: out and a lot of US companies are trying to
• 24:19
  Speaker 2: import things quickly under the new temporary tariff rules, and
• 24:23
  Speaker 2: so yeah, just a fair bit of confusion out there
• 24:26
  Speaker 2: about where this could go next.
• 24:29
  Speaker 4: This is the really emphasizes the significance of the Strait
• 24:33
  Speaker 4: of Hormez and something that may have not been of
• 24:37
  Speaker 4: top of mind for many people when you start of
• 24:40
  Speaker 4: study of the global supply chain, but it is extremely
• 24:43
  Speaker 4: critical from an energy standpoint, and all this uncertainty surrounding
• 24:47
  Speaker 4: it is led to these significant upticks that we're seeing here.
• 24:51
  Speaker 4: Four and a half percent of annual global trade goes
• 24:54
  Speaker 4: through that Straight of Hormez and you have you know,
• 24:57
  Speaker 4: many ships that are stuck in there right now, or
• 25:00
  Speaker 4: like you mentioned, mainships that are sheltered in the Persian
• 25:03
  Speaker 4: Gulf not even trying to go through that area. So
• 25:06
  Speaker 4: the longer this continues, the more substantial the impacts. If
• 25:10
  Speaker 4: it's resolved in shorter order, then it is something that
• 25:15
  Speaker 4: we won't be talking about a couple weeks from now.
• 25:17
  Speaker 2: I was making the point it was Monday or Tuesday
• 25:20
  Speaker 2: of this week, that the US economy generally is just
• 25:26
  Speaker 2: far less reliant on oil than it was in decades past,
• 25:29
  Speaker 2: you know, half a century ago. Obviously, anybody that lived
• 25:33
  Speaker 2: through the nineteen seventies can attest to just how strategically
• 25:38
  Speaker 2: important it was when the Iranian Revolution occurred and oil
• 25:43
  Speaker 2: prices spiked, and really, you know, the nineteen seventies were
• 25:47
  Speaker 2: defined by oil crisis after oil crisis, where you know,
• 25:50
  Speaker 2: prices would shoot up to levels that had never been
• 25:52
  Speaker 2: seen before. Everybody would look at and say, okay, well
• 25:55
  Speaker 2: we've moved past that one time spike, and then something
• 25:58
  Speaker 2: else would happen and oil prices would bike up again.
• 26:01
  Speaker 2: And you know, in some ways the attitude we're taking,
• 26:04
  Speaker 2: I think is the appropriate one, which is okay, well,
• 26:07
  Speaker 2: you know, let's see where this all goes. But again,
• 26:10
  Speaker 2: the nineteen seventies were very different. They were defined by
• 26:13
  Speaker 2: oh yeah, let's see where this goes. And then boom,
• 26:16
  Speaker 2: another spike on oil prices hit and it really demolished
• 26:19
  Speaker 2: the economy. What Mark Bloomberg, who printed this Bloomberg printed
• 26:25
  Speaker 2: that I thought was helpful, was putting some numbers behind
• 26:29
  Speaker 2: my point about the US economy not being quite as reliant.
• 26:32
  Speaker 2: So the oil intensity of GDP in the US is
• 26:35
  Speaker 2: down about seventy percent. It's about sixty percent worldwide compared
• 26:41
  Speaker 2: to the time during the nineteen seventies. So just means,
• 26:44
  Speaker 2: you know, the portion of GDP that is directly tied
• 26:49
  Speaker 2: to the oil prices is substantially lower than where it
• 26:52
  Speaker 2: was before. And an example of this would be the
• 26:55
  Speaker 2: share of US consumer spending that goes to gasoline another
• 26:59
  Speaker 2: motor fuel was only slightly less than two percent in December.
• 27:04
  Speaker 2: That is down from about five percent of total consumer
• 27:06
  Speaker 2: spending in nineteen seventy nine. So again you can you
• 27:11
  Speaker 2: can draw the line and understand why equity market investors,
• 27:14
  Speaker 2: at least at the moment, don't seem immensely concerned about
• 27:18
  Speaker 2: these events and seem to be shrugging them off pretty substantially. Again,
• 27:23
  Speaker 2: the S and P five hundred now sitting yet sixty
• 27:26
  Speaker 2: seven sixty three, five days ago when this all broke out,
• 27:32
  Speaker 2: Where were we at the close on Friday? But we
• 27:40
  Speaker 2: closed out the day on Friday the twenty seventh at
• 27:42
  Speaker 2: sixty eight seventy nine.
• 27:44
  Speaker 3: We're down.
• 27:45
  Speaker 2: I don't know what that is a percent and a
• 27:47
  Speaker 2: half per two percent from those highs that we reached
• 27:50
  Speaker 2: on Friday, And so by and large, I think that
• 27:53
  Speaker 2: equity investors are shrugging this off. And I don't necessarily
• 27:55
  Speaker 2: think that's the wrong move, but I think understanding the
• 27:58
  Speaker 2: context of it's not just the duration. I think there's
• 28:02
  Speaker 2: a strong expectation that this does wrap up rapidly and
• 28:05
  Speaker 2: oil prices do generally shift back down, if not all
• 28:08
  Speaker 2: the way down to the sixties, then somewhere substantially lower today.
• 28:12
  Speaker 2: There have been times in US history where that doesn't happen,
• 28:15
  Speaker 2: and those have typically been defined by some of the
• 28:17
  Speaker 2: worst economies that we've seen.
• 28:19
  Speaker 4: Yeah, it circles back to the point we've talked about
• 28:21
  Speaker 4: earlier this week on the show. From a political standpoint,
• 28:24
  Speaker 4: how long does the administration want to go through with
• 28:28
  Speaker 4: this with midterms looming and affordability being the crux of
• 28:33
  Speaker 4: the issues there.
• 28:33
  Speaker 3: Yeah, it's an important point.
• 28:35
  Speaker 2: I can speak until my face turns blue about how
• 28:37
  Speaker 2: the US economy is not as reliant on oil as
• 28:40
  Speaker 2: it was before. All of you listening don't give a damn.
• 28:44
  Speaker 2: I don't give it like you're practically speaking. Gas prices specifically, are,
• 28:49
  Speaker 2: in my opinion, the most impactful single price that we
• 28:54
  Speaker 2: have on consumer sentiment. I don't think anything is more important.
• 28:57
  Speaker 2: I don't think food prices are more important. Don't think
• 29:00
  Speaker 2: that housing prices are more important. Many of those, by
• 29:03
  Speaker 2: the way, make up bigger components of all of our budgets,
• 29:06
  Speaker 2: and all of CPI, like shelter costs, are farm But
• 29:10
  Speaker 2: what's not true about those things is that they don't
• 29:13
  Speaker 2: They're not in your face. You don't see them every
• 29:16
  Speaker 2: single day. You cannot Most Americans cannot escape a single
• 29:22
  Speaker 2: day without knowing what gas prices are because most of
• 29:24
  Speaker 2: us drive by that same gas station every day on
• 29:26
  Speaker 2: our way to work, and so it's right in your face.
• 29:29
  Speaker 2: And so even though it's only represents two percent of
• 29:32
  Speaker 2: overall spending in terms of how people feel about.
• 29:36
  Speaker 4: The psychological heavier costs.
• 29:39
  Speaker 2: It moves those expectations on where people think prices are
• 29:42
  Speaker 2: going to be in the future more than any good
• 29:44
  Speaker 2: out there that I.
• 29:45
  Speaker 3: Can think of.
• 29:46
  Speaker 2: Let's take a quick break when we come back anymore
• 29:50
  Speaker 2: on Iran Paul.
• 29:51
  Speaker 3: Are we ready to move on?
• 29:52
  Speaker 4: Ready to move on?
• 29:53
  Speaker 2: Let's talk about SoftBank? Who wants to borrow a bunch
• 29:55
  Speaker 2: of money to do? What we'll tell you next on
• 29:57
  Speaker 2: the Financial Exchange.
• 29:59
  Speaker 1: Text us on seven three six two one three eight
• 30:01
  Speaker 1: five with your comments and questions about today's show and
• 30:04
  Speaker 1: let us know what you think about the stories we
• 30:06
  Speaker 1: are covering. This is the Financial Exchange Radio Network. The
• 30:11
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• 30:14
  Speaker 1: our page and follow the markets all morning longs only
• 30:17
  Speaker 1: here on the Financial Exchange Radio Network.
• 30:35
  Speaker 2: For those of you unfamiliar, we we've talked about SoftBank
• 30:38
  Speaker 2: quite a bit on this program. Their chairman, mach Mas
• 30:42
  Speaker 2: Masioshi Son has led it for I think decades now,
• 30:46
  Speaker 2: and you know it makes a lot of splashes and
• 30:50
  Speaker 2: big headline news as they talk about their major investments
• 30:53
  Speaker 2: and many of which have gone.
• 30:56
  Speaker 3: Pretty far south over the last decade or so.
• 30:59
  Speaker 2: Not exactly I think highlighted or defined as a Warren
• 31:05
  Speaker 2: Buffett of his aim.
• 31:06
  Speaker 3: He's basically the polar opposite of one.
• 31:09
  Speaker 4: He is like just like that friend that you have
• 31:12
  Speaker 4: who goes gambling in Vegas or wherever and just will
• 31:16
  Speaker 4: hit the highs of highs and probably be up, you know,
• 31:18
  Speaker 4: thousands of dollars, and then all of a sudden we'll
• 31:20
  Speaker 4: be like destitute, like hitting the ATM for more and
• 31:23
  Speaker 4: more withdrawals and incurring his substantial fees. Like that's how
• 31:27
  Speaker 4: he That's how I'm not even gonna do his name justice,
• 31:30
  Speaker 4: but much son, that's how he plays in the investing world.
• 31:36
  Speaker 4: His big hits like Ali Baba and arms Ipo and
• 31:41
  Speaker 4: Bite Dance and Doritas, but some big losses with we
• 31:44
  Speaker 4: work and some other major failure.
• 31:46
  Speaker 2: Yeah. And honestly, I kind of look at his actions
• 31:49
  Speaker 2: sometimes and say, okay, does this mark the ultimate high
• 31:53
  Speaker 2: on on where we are reached? But to further the
• 31:57
  Speaker 2: analogy that Paul was just making Sun's ATM did not
• 32:02
  Speaker 2: work so well. There was no cash left, and so
• 32:05
  Speaker 2: he has turned to lending facilities to borrow a record
• 32:09
  Speaker 2: forty billion dollars to make an investment in open AI.
• 32:14
  Speaker 2: I was gonna say the only piece of this that
• 32:16
  Speaker 2: would make it more just iconic and defining the AI
• 32:22
  Speaker 2: moment we're in, as if in Video was the one
• 32:24
  Speaker 2: lending it to them. But it turns out JP Morgan
• 32:28
  Speaker 2: will be organizing the funding round. There'll be the underwriting
• 32:32
  Speaker 2: facility on this. It'd be a bridge alan with a
• 32:34
  Speaker 2: tenor of about twelve months. Four lenders, including JP Morgan,
• 32:38
  Speaker 2: will be the underwriting facility here as they attempt to
• 32:41
  Speaker 2: borrow some forty billion dollars to keep the AI gravy
• 32:45
  Speaker 2: train moving here and make a big investment in open Ai.
• 32:49
  Speaker 4: Another big investment in Yeah, to be clear, they've already
• 32:51
  Speaker 4: dumped in thirty billion bucks already.
• 32:54
  Speaker 3: So look, I can say two things here.
• 32:57
  Speaker 2: One, plenty of investors out there go and borrow money
• 33:01
  Speaker 2: to invest.
• 33:02
  Speaker 3: This is not new.
• 33:03
  Speaker 2: You know, if you've ever heard of margin trading, that is,
• 33:07
  Speaker 2: you know a version of this where people borrow on
• 33:10
  Speaker 2: their existing holdings in order to make further investments. Do
• 33:13
  Speaker 2: I view this as a healthy indicator for the state
• 33:17
  Speaker 2: of the AI.
• 33:19
  Speaker 3: Boom and soft bank in general? No, I do not.
• 33:24
  Speaker 2: I do not look at it as an ultimately healthy
• 33:27
  Speaker 2: indicator of where things are to go, and like we
• 33:30
  Speaker 2: talked about on several different occasions, soft Bank has kind
• 33:33
  Speaker 2: of marked the top of different trends that are out there,
• 33:37
  Speaker 2: and not that that is definitively what's happening here, but
• 33:41
  Speaker 2: it does just give you pause to say, Okay, you
• 33:44
  Speaker 2: are looking to borrow forty billion to put into Open
• 33:49
  Speaker 2: Ai at a time when quite honestly, a lot of
• 33:51
  Speaker 2: people are asking questions not so much of the AI
• 33:53
  Speaker 2: trade in general, but Open Ai and chatchy Te specifically,
• 33:56
  Speaker 2: and how much of a lead they still have on
• 33:59
  Speaker 2: the likes of Gemini and Claude.
• 34:00
  Speaker 4: It's a lot of this goes out saying it's a
• 34:03
  Speaker 4: lot of debt to take on forty billion dollars, no doubt, Paul.
• 34:08
  Speaker 4: But usually in I don't have the numbers from me,
• 34:10
  Speaker 4: but typically this SoftBank venturephone was flushed with cash.
• 34:14
  Speaker 3: So it's it is.
• 34:15
  Speaker 4: Even more concerning that a lot of this is funded
• 34:18
  Speaker 4: by debt, which, as we know, historically only compounds your
• 34:21
  Speaker 4: problems when you're making these big bets. But he keeps
• 34:24
  Speaker 4: things interesting and for people who do a radio show,
• 34:27
  Speaker 4: fantastic content.
• 34:28
  Speaker 3: Great entertainment value.
• 34:29
  Speaker 2: The point that I was making the joke that Paul
• 34:32
  Speaker 2: responded to of Nvidia being the one to lend the
• 34:34
  Speaker 2: money was a joke. They are not from any indication
• 34:36
  Speaker 2: that we see, but it does kind of define the
• 34:39
  Speaker 2: moment that we've seen recently of self dealing within the
• 34:43
  Speaker 2: AI industry. And open ai obviously a very big customer
• 34:48
  Speaker 2: of Invidias, and so Innvidia would love to see open
• 34:50
  Speaker 2: Ai get their hands on forty billion because it would
• 34:53
  Speaker 2: probably go directly to Innvidia in terms of chip sales,
• 34:57
  Speaker 2: right back to those companies. So it was a joke
• 35:00
  Speaker 2: that there was no involvement there, but you know, you
• 35:03
  Speaker 2: can imagine the incentive structure that's built in there for
• 35:07
  Speaker 2: these big AI infrastructure providers to get this type of funding.
• 35:11
  Speaker 4: It's basically the always sunny and Philadelphia like sketchboard of
• 35:15
  Speaker 4: all these different connections everywhere that is AI right now,
• 35:18
  Speaker 4: and the circular financing that's gone on between all these
• 35:21
  Speaker 4: big players. But Mike makes a clear point.
• 35:23
  Speaker 3: He's just joking.
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  Speaker 5: That's visit USVII dot com.
• 36:30
  Speaker 3: In another indication that.
• 36:34
  Speaker 2: AI is going to have its positives and negatives and
• 36:38
  Speaker 2: all sorts of problems created by it andthropics. Claude is
• 36:42
  Speaker 2: finding that it's very good at sniffing out all sorts
• 36:45
  Speaker 2: of different bugs and flaws in softwares, which, on the
• 36:49
  Speaker 2: surface sale, that's great, that's going to make it so
• 36:52
  Speaker 2: my software works better. And while technically true, the bigger
• 36:56
  Speaker 2: opportunity here is for hackers to use tools like this
• 37:00
  Speaker 2: to find those bugs and then exploit the living hell
• 37:03
  Speaker 2: out of them. So what we mean by this is
• 37:06
  Speaker 2: when there are these bugs or flaws in a software program,
• 37:10
  Speaker 2: it can sometimes leave the door open for hackers to
• 37:13
  Speaker 2: be able to insert themselves into systems that we would
• 37:19
  Speaker 2: prefer they don't get access to, such as Alexis Nexis
• 37:24
  Speaker 2: database holding a bunch of personal information on you, me,
• 37:26
  Speaker 2: and everybody else. And again, so far, what we've been
• 37:30
  Speaker 2: seeing in terms of AI's improvement for scammers and hackers
• 37:34
  Speaker 2: has been largely around making scams more convincing, so that
• 37:39
  Speaker 2: phishing text that you get, which used to be riddled
• 37:42
  Speaker 2: with spelling errors and grammatical issues, is now sounding a
• 37:45
  Speaker 2: lot more like a human being from the United States.
• 37:49
  Speaker 2: This is kind of the next step, in my view,
• 37:51
  Speaker 2: would be making it so that genuine hackers who are
• 37:55
  Speaker 2: actually trying to access systems are able to do so
• 37:58
  Speaker 2: a lot faster and easier than was previously possible.
• 38:03
  Speaker 3: We've got to take a quick break.
• 38:04
  Speaker 2: When we come back, we're going to be joined in
• 38:08
  Speaker 2: the next in the second segment of the show by
• 38:10
  Speaker 2: Mary Burke from the Boston Federal Reserve, we'll have a
• 38:13
  Speaker 2: full market update and more. That's next on the Financial
• 38:16
  Speaker 2: Exchange