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Consumer angst is striking all income levels · The Financial Exchange Show

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Speaker 1: Chuck Zada and Mark Fandetti.
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Speaker 2: Continuing through the week here on the Financial Exchange is
1:15
Speaker 2: Chuck Mark, and we got Ben filling in for Tucker today,
1:21
Speaker 2: changing the locks on the studio and uh, we're we're
1:24
Speaker 2: all on team Ben now. So yeah, it's going great.
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Speaker 3: I'll suck up to who's ever in charge, Chuck. You know,
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Speaker 3: you know that just just point me in the right direction.
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Speaker 2: It's a redeeming quality you have. Let's talk a little
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Speaker 2: bit about this piece in the Wall Street Journal. We've
1:41
Speaker 2: got a couple of these actually here, I'll read both
1:44
Speaker 2: the headlines and these are both in the in the
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Speaker 2: Journal this morning. Consumer angst is striking all income levels
1:50
Speaker 2: is one, and the second is shoppers are skipping on cigarettes, Doritos,
1:54
Speaker 2: and Twinkies. Twinkies they say, so. In looking at this,
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Speaker 2: there's a couple of things here. The first is, I
2:03
Speaker 2: do think there is some consumer angst out there. We've
2:06
Speaker 2: gotten a number of different companies that have you know, reported,
2:10
Speaker 2: you know, some things that they are seeing as far
2:13
Speaker 2: as how consumer spending habits may have shifted in the
2:17
Speaker 2: past month or so. They range from Walmart to McDonald's
2:22
Speaker 2: to Costco to Delta to Cole's. It's like there's no
2:27
Speaker 2: one thing that ties these companies together. They're all different
2:30
Speaker 2: sex staples of the consumer.
2:32
Speaker 3: Market or a number of staples. The only thing I
2:33
Speaker 3: could find I was going through the same exercise is
2:35
Speaker 3: a few Staples companies, which not un coincidentally, I guess
2:39
Speaker 3: have done pretty well is year relatively speaking. Yeah, it's
2:41
Speaker 3: not price wise.
2:42
Speaker 2: And Macy's you can throw on the list also, which
2:44
Speaker 2: not really a staples company, you know. Kind of a
2:47
Speaker 2: point again, so it's it's kind of something that's happening
2:50
Speaker 2: out there. But the piece that I keep coming back
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Speaker 2: to on this is that despite all of the soft
2:59
Speaker 2: data that we are expressing concern about the economy right now,
3:04
Speaker 2: the actual hard data is remarkably unmoved by it, aside
3:09
Speaker 2: from a few areas. And we saw more evidence of
3:13
Speaker 2: this this morning where look, I woke up this morning,
3:16
Speaker 2: and generally on Thursdays I don't really think about very
3:20
Speaker 2: much because you don't have major economic releases on Thursdays.
3:23
Speaker 2: I don't know why that is, but they're all typically
3:26
Speaker 2: either Tuesdays, Wednesdays, or Fridays. Don't know why, but it's
3:29
Speaker 2: just how the calendar is structured. The one thing that
3:32
Speaker 2: we do get every Thursday is weekly jobbles claims, And honestly,
3:36
Speaker 2: for the past, for the past twelve years, there have
3:43
Speaker 2: been maybe a grand total of six months that you've
3:49
Speaker 2: had to really watch those and be concerned about them.
3:52
Speaker 2: Other than that, it's just kind of been, Hey, they
3:55
Speaker 2: flutter around, they're fine. Sometimes they go up a little bit,
3:58
Speaker 2: sometimes they go down. But we had a month or
4:00
Speaker 2: two back in the last couple of years that you
4:01
Speaker 2: had to pay attention to. Obviously March to twenty twenty
4:04
Speaker 2: you had to pay attention to, but other than that,
4:06
Speaker 2: pretty much since twenty twelve you can kind of say, Okay,
4:10
Speaker 2: weekly jobless claims, they're gonna do this, they're gonna do that,
4:12
Speaker 2: and you don't really need to pay attention to them.
4:15
Speaker 2: The reason that I am watching them right now as
4:18
Speaker 2: closely as I ever have is not because there's anything
4:21
Speaker 2: remarkable going on there, but more hey, you're hearing all
4:24
Speaker 2: of the anecdotes about government workers X being fired and
4:29
Speaker 2: private sector workers why being fired, and this and that,
4:33
Speaker 2: and the remarkable thing is that there is nothing showing
4:39
Speaker 2: up in jobless claims statistically unchanged from prior years in
4:45
Speaker 2: terms of what we're seeing, and you kind of look
4:49
Speaker 2: at it and you're like, Okay, what's actually happening here, Like,
4:52
Speaker 2: what gives man? Because you've got companies that are announcing layoffs,
4:56
Speaker 2: you have Elon Muskin Dog announcing layoffs at you know,
5:00
Speaker 2: the federal government. There's nothing showing up there, and so
5:06
Speaker 2: you're kind of like, okay, it's got to print at
5:08
Speaker 2: some point. And look, there are perfectly good reasons now
5:12
Speaker 2: why you may have differences in how jobbles claims are
5:15
Speaker 2: processed from before. The big one that a lot of
5:18
Speaker 2: economists point to is, hey, you've got all of these
5:23
Speaker 2: you know, gig economy things that are out there where
5:26
Speaker 2: someone loses a job now and instead of filing for
5:27
Speaker 2: unemployment they start driving for Uber, or instead of filing
5:31
Speaker 2: for unemployment they start driving for DoorDash or something like that,
5:34
Speaker 2: or they become you know, a dog walker on rover,
5:36
Speaker 2: Like you have all these other things that are out there,
5:41
Speaker 2: and economists have kind of looked at and been like,
5:43
Speaker 2: is this something that we're seeing. It possibly mutes the
5:46
Speaker 2: effect there. The other thing that you may be seeing
5:49
Speaker 2: is just a delay in you know, the reporting of this,
5:52
Speaker 2: because hey, it still has only been six weeks since
5:57
Speaker 2: the Trump administration took office, and maybe just have a
6:00
Speaker 2: delay in terms of, you know, when the firings are
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Speaker 2: actually made official and when someone claims so it it's
6:06
Speaker 2: very possible to just like in a few weeks. But
6:10
Speaker 2: it's also something where you look at and you just go, hey,
6:12
Speaker 2: maybe there's just not as much happening, and it's just
6:15
Speaker 2: there's more announcements of the happenings than any meaningful change
6:20
Speaker 2: in what's happening, either in the private sector or public sector.
6:23
Speaker 3: Are DOGE casualties people getting laid off as a result
6:28
Speaker 3: of Dog's efforts. Are they still getting paid until September?
6:32
Speaker 2: It depends.
6:34
Speaker 3: Which makes this I withdraw my question.
6:37
Speaker 2: There are some cases where if people accepted that you know,
6:39
Speaker 2: fork in the Road offer, the interpretation of what I've
6:43
Speaker 2: heard from people that work in the federal government is yes,
6:46
Speaker 2: they are getting then, so they're still on the past,
6:48
Speaker 2: so they wouldn't be There are other cases where you
6:52
Speaker 2: have people, you know, subsequent to that in the last
6:55
Speaker 2: few weeks that are being laid off immediately across different agesies,
7:01
Speaker 2: and those you would expect to start showing up in
7:03
Speaker 2: the next couple weeks. Now what we have seen is
7:07
Speaker 2: if you're not familiar with how unemployment claims are filed
7:09
Speaker 2: and processed, the claims for federal workers is a separate system.
7:14
Speaker 2: It goes through what's called the UCFE claim system. What
7:20
Speaker 2: does that stand for? Unemployment Claims of Federal Employees? Okay,
7:23
Speaker 2: so it's a separate program. Typically, in a normal week,
7:29
Speaker 2: over the past couple of years, you would average maybe
7:32
Speaker 2: three to four hundred claims a week. That was the
7:34
Speaker 2: standard that you saw the last two weeks. Now you've
7:38
Speaker 2: bumped up to around sixteen hundred, So there has been
7:41
Speaker 2: like a fourfold increase or a threefold increase in those claims.
7:45
Speaker 2: But you're not seeing ten twenty thousand federal workers being
7:48
Speaker 2: laid off a week. It's just not something that is happening.
7:53
Speaker 2: It's not showing up in the claims numbers at least,
7:56
Speaker 2: And so I think that on that side, you're not
7:59
Speaker 2: really seeing anything where you say, gee, there's so many
8:01
Speaker 2: people that are losing jobs that it would cause, you know,
8:03
Speaker 2: an impact to demand or anything like that. It's again,
8:06
Speaker 2: it's just not printing on the regular claim side of things.
8:10
Speaker 2: And I'm looking at the non seasonally adjusted numbers just
8:13
Speaker 2: because the seasonal adjustments are you know, worth looking at,
8:16
Speaker 2: but the non seasonal adjustment ones give you better year
8:18
Speaker 2: to year comparisons. Two hundred and twelve thousand for the week,
8:22
Speaker 2: which is basically right in line with the last four
8:24
Speaker 2: non pandemic years that we've had. There's nothing happening there.
8:28
Speaker 2: There's no noise. So for all of the talk and look,
8:31
Speaker 2: I've looked at you know, hey, you know a number
8:33
Speaker 2: of companies announcing layoffs in recent weeks, it's not printing
8:37
Speaker 2: any material increase in the numbers here. And so the
8:40
Speaker 2: point that I continue to get to is, look, all
8:44
Speaker 2: the talk about recession is premature. This may still develop
8:47
Speaker 2: into that at some point if the worst fears are
8:51
Speaker 2: realized about how you know, the economy could progress from here.
8:55
Speaker 2: But to this point, there's not really much that's printing here.
8:59
Speaker 2: We've the data that's actually been bad has been one
9:02
Speaker 2: retail sales data point. The housing data has kind of
9:05
Speaker 2: been crappy all year. But like the housing data hasn't
9:09
Speaker 2: been good for the last couple of years. Like that's
9:10
Speaker 2: kind of table stakes at this point, I think. And
9:16
Speaker 2: other than that, you know, we've had like some ism
9:18
Speaker 2: reports that have been iffy here and there. There has
9:21
Speaker 2: not been this giant amalgamation of data where you're like, oh, no,
9:26
Speaker 2: recession happened now, like.
9:28
Speaker 3: One ever does happen that way?
9:29
Speaker 2: No, but like there aren't even the signs that it's
9:32
Speaker 2: really developing. In a lot of.
9:33
Speaker 3: Cases, there often aren't. Recessions are usually Fed induced. The
9:37
Speaker 3: FED slows demand and that eventually is reflected in slowing
9:41
Speaker 3: GDP because it's a big component of it and rising unemployment.
9:46
Speaker 3: So in that sense, it's sort of easy to see
9:48
Speaker 3: when the FED starts to tighten, the alarm bells go off,
9:51
Speaker 3: as they should because of the historical close historical connection
9:55
Speaker 3: between what the FED does and what the real economy does.
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Speaker 3: Others are the result of shot the oil price shocks
10:01
Speaker 3: of the seventies, for example, induced recessions, arguably according to
10:05
Speaker 3: a lot of work that was done on it. And
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Speaker 3: then there are those that just come out of left field.
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Speaker 3: And we're not going to count the COVID recession because
10:10
Speaker 3: that's really in a category of its own. But this
10:13
Speaker 3: idea that we should be able to foresee them is
10:16
Speaker 3: belied by the fact that nobody ever gets it right,
10:18
Speaker 3: including the best forecasters in the business. They tend to
10:22
Speaker 3: miss the turning points.
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Speaker 2: So again I remain in the camp of, hey, there's
10:30
Speaker 2: no recession that's printing right now. We're going to have
10:32
Speaker 2: to monitor because we're talking about some big changes to
10:34
Speaker 2: trade policy and big changes to economic policy that have
10:37
Speaker 2: the potential to have huge impacts over the next three
10:41
Speaker 2: over the rest of the year, but to this point
10:44
Speaker 2: it's not showing up in the economic data that we're getting.
10:47
Speaker 3: But stock prices are hard data. They're financial, but they're hard.
10:50
Speaker 3: Stocks are a leading indicator. They're not perfect, but they're
10:53
Speaker 3: included in most researchers models. So I would heed the
10:56
Speaker 3: warning coming from equity markets. It's not a blaring warning yet.
11:01
Speaker 2: No, And I think I've talked about this so many
11:04
Speaker 2: times this week that I apologize. I don't know who
11:06
Speaker 2: I've said it to and who I haven't. You get
11:09
Speaker 2: the ten percent sell off in stocks because they get
11:11
Speaker 2: nervous about something. We've been through a few of these
11:14
Speaker 2: in the last couple of years. Twenty twenty three we
11:16
Speaker 2: had them twice, once at the beginning of the year
11:18
Speaker 2: with Silicon Valley Bank, another one towards the end of
11:20
Speaker 2: the year with recession concerns in both cases, nothing bigger
11:24
Speaker 2: developed and you didn't fall more than that eight to
11:26
Speaker 2: ten percent. We had another one in August of last year,
11:29
Speaker 2: same thing, slowing labor market data, concerns about recession, some
11:33
Speaker 2: rule trigger like all this stuff, The data never printed
11:37
Speaker 2: beyond that, and you got this eight to ten percent
11:39
Speaker 2: dip in subsequent rebound. And so where I've kind of
11:42
Speaker 2: landed is the eight to ten percent dip in markets
11:47
Speaker 2: is caused by fear of something bad happening. To move
11:50
Speaker 2: further than that eight to ten percent, in my opinion,
11:54
Speaker 2: requires bad data to actually start printing, and we're just
11:57
Speaker 2: not seeing it yet.
12:00
Speaker 3: Yeah, as far as it goes, I guess that's that's right.
12:03
Speaker 3: But I wouldn't be so quick to dismit when looked
12:07
Speaker 3: at in the in terms of the totality of the evidence.
12:12
Speaker 3: Even the presidents saying, well, recessions possible, I.
12:14
Speaker 2: Don't know sure. Yes, there are some signs that even
12:18
Speaker 2: the administration's like, yeah, we could have some real issues.
12:21
Speaker 2: I mean, you had today on Bloomberg, Howard Lutnik, the
12:25
Speaker 2: Secretary of Commerce, was out saying, hey, you're not going
12:28
Speaker 2: to have Trump economy numbers until Q three or Q four.
12:30
Speaker 3: So what are Trump economy? I never mind, that's not
12:32
Speaker 3: a question.
12:32
Speaker 2: Just saying like these these are nine. I think what
12:35
Speaker 2: he's saying that like, No, I think what he's saying
12:37
Speaker 2: is these are He's saying the economy for Q one
12:41
Speaker 2: and Q two is not his. It's not his, it's
12:45
Speaker 2: And why would you associate yourself.
12:46
Speaker 3: Because they were bragging about the unemployment report last week?
12:49
Speaker 3: But I guess that's a different thing.
12:50
Speaker 2: I'm just saying, this is what they are. I just
12:52
Speaker 2: need to And so ultimately I think that, yeah, you
12:57
Speaker 2: have some signs even from the administration that hey, why
13:00
Speaker 2: why would you distance yourself from the data the next
13:03
Speaker 2: quarter or two if you thought the data was going
13:05
Speaker 2: to be good.
13:09
Speaker 3: I don't know.
13:10
Speaker 2: I don't either. That's the It's a rhetorical question, but
13:13
Speaker 2: that's the one that's out there. Let's take a quick
13:15
Speaker 2: break when we come back. Let's see, should we talk
13:21
Speaker 2: about wine? Can we do wine and wet?
13:26
Speaker 3: Oh?
13:27
Speaker 2: Yes, well, we'll have some wine and then talk about wine,
13:30
Speaker 2: and then we'll talk about some whiskey. And it's too
13:33
Speaker 2: early in the morning for whiskey, so we won't do that.
13:36
Speaker 2: But we're talking wine, whiskey and tariffs when we return.
13:40
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14:42
Speaker 2: All right, so we've got our latest little tip for
14:46
Speaker 2: tat terif escalation here. Who knows how this goes. This
14:49
Speaker 2: could all be resolved by later in the day like
14:51
Speaker 2: it was with Canada last week. I don't know, this
14:54
Speaker 2: could stay. Don't know. So yesterday the United States imposed
14:59
Speaker 2: twenty five five percent tariffs on steel and aluminum imports.
15:02
Speaker 2: The EU responded with counter tariffs on about twenty eight
15:07
Speaker 2: billion dollars worth of US goods starting in April, and
15:11
Speaker 2: they said specifically they were targeting things I think it
15:14
Speaker 2: was like whiskey and some other food imports and things
15:17
Speaker 2: like that, and basically they were trying to target like
15:20
Speaker 2: an equivalent dollar amount to say, hey, you're causing this
15:22
Speaker 2: impact our economy. We're going to cause this back to you.
15:25
Speaker 2: The President this morning announced a two hundred percent tariff
15:31
Speaker 2: on imported wines and spirits from the EU. And I
15:39
Speaker 2: don't know if it's said when that was going to
15:41
Speaker 2: go into effect.
15:43
Speaker 3: Does it even matter.
15:44
Speaker 2: I don't know that it was. Yeah, threat, I'll read
15:47
Speaker 2: the full quote here. The European Union one of the
15:50
Speaker 2: most hostile abuse of taxing and tariffing authorities in the
15:52
Speaker 2: world just put a nasty fifty percent tariff on whiskey.
15:55
Speaker 2: If this tariff is not removed immediately, the US will
15:57
Speaker 2: shortly place a two hundred percent tariff on all wine, champagnes,
15:59
Speaker 2: nowlcoholic products coming out of France and other EU represented
16:02
Speaker 2: com So start rounding up what I can tell you
16:07
Speaker 2: personally being a buyer of wine from like anywhere in
16:12
Speaker 2: the world, because like there's no monopoly on good wine,
16:15
Speaker 2: like you can find it anywhere like that, this represents
16:18
Speaker 2: like a fundamental problem to me. So like I might
16:21
Speaker 2: have done a little bit of a stock up this
16:22
Speaker 2: morning with an online order that I may have placed
16:24
Speaker 2: shortly after seeing this, because I don't know if it's
16:27
Speaker 2: going to go into effect or not. But ultimately it's
16:31
Speaker 2: something where I think that when you look at how
16:36
Speaker 2: this potentially plays out here, it's it's something where are
16:43
Speaker 2: we It's just difficult to figure out what the key
16:48
Speaker 2: goal is because a lot of this has been talked
16:50
Speaker 2: about in terms of, hey, we want to bring jobs
16:52
Speaker 2: back to America that went overseas and we want to
16:56
Speaker 2: you know, specifically focus on manufacturing. Yeah, so if you
17:02
Speaker 2: look at the you know, I don't know total number
17:08
Speaker 2: of people employed at vineyards in the US, and look
17:13
Speaker 2: at the historical data, I don't know if I'm even
17:16
Speaker 2: gonna be able to find anything on this. Okay, here
17:19
Speaker 2: we go. This is No, that's not the right place. No,
17:24
Speaker 2: I can't find it. But here's what I do know
17:27
Speaker 2: is that the wine industry in the United States, if
17:31
Speaker 2: you're not familiar with it, basically like really picked up
17:35
Speaker 2: kind of seventies and eighties with Robert Mundavi going out
17:37
Speaker 2: to California and like doing all this stuff, and then
17:39
Speaker 2: subsequently like moved through Oregon and Washington State as well.
17:44
Speaker 2: But there's no like great history of you know, American
17:47
Speaker 2: wine dating back hundreds of years and it suddenly got
17:50
Speaker 2: off short. It's just it's actually, again I don't have
17:53
Speaker 2: the data, but I suspect that, you know, US employed
17:57
Speaker 2: vineyard workers is probably pretty close to an all time
18:00
Speaker 2: high now relative to where it's been historically. And so
18:05
Speaker 2: this is also something where like one does not simply say, Okay,
18:08
Speaker 2: I'm going to go start a vineyard to produce the
18:09
Speaker 2: US wine if these tariffs are in place, like it's
18:11
Speaker 2: it's kind of an expensive thing to do. And you
18:15
Speaker 2: don't really get anything from it for quite a while
18:17
Speaker 2: because you can't just plant a grape in the spring
18:20
Speaker 2: and harvest it in the fall. That's not really how
18:22
Speaker 2: it works. So this is one of those areas where you, like,
18:27
Speaker 2: I try to figure out, Hey, what's the equilibrium that
18:30
Speaker 2: we get to and how does this impact the economy,
18:33
Speaker 2: And it just continues to be challenging to do so
18:35
Speaker 2: because you just don't know where the next place is
18:38
Speaker 2: going to be that's potentially impacted. It's just hard to
18:42
Speaker 2: sort through.
18:43
Speaker 3: He owes it as the previous president did and never
18:46
Speaker 3: delivered it to the American people to explain what the
18:48
Speaker 3: endgame is, how we're going to get there, why the
18:51
Speaker 3: pain is worth it. Every politician ought to be in,
18:54
Speaker 3: every leader at every level, whether it's the mayor of
18:56
Speaker 3: your town. We need to increase taxes, but it's going
18:58
Speaker 3: to result in cleaner streets, to fill those potholes. We're
19:01
Speaker 3: going to hire those special ed teachers, stuff like that.
19:04
Speaker 3: Nobody has explained the benefits that will come from the cost,
19:07
Speaker 3: which will almost certainly accrue.
19:10
Speaker 2: So this is one again we'll have to see how
19:13
Speaker 2: things play out over the next couple of days. We've had,
19:15
Speaker 2: you know, several instances of these types of situations being resolved,
19:20
Speaker 2: you know, over a period of hours or days. So
19:23
Speaker 2: I think part of this is, hey, like, you don't
19:25
Speaker 2: have to do anything, you know, crazy from an overreacting standpoint.
19:28
Speaker 2: But again, just there's a lot of noise coming and
19:31
Speaker 2: it's tough to sort through what's signal and what is
19:33
Speaker 2: noise out there. Let's take a quick break. When we
19:37
Speaker 2: come back, We've got Wall Street Watch.
19:42
Speaker 1: Like us on Facebook and follow us on Twitter. Act
19:45
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19:49
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19:54
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19:57
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20:02
Speaker 4: All Right, markets are on a little bit of a
20:04
Speaker 4: roller coaster today. They've been slipping as investors are digesting
20:07
Speaker 4: the latest TERARORFF threat from President Donald Trump while they
20:10
Speaker 4: poured through new US inflation figures. The Dow Jones is
20:15
Speaker 4: down over eighty two points, or two tenths of a percent,
20:17
Speaker 4: The S and P five hundred is down eighteen nineteen
20:20
Speaker 4: points or three tenths of a percent, and the Nasdaq
20:23
Speaker 4: is down one hundred and twenty four points, or seven
20:26
Speaker 4: tenths of a percent. Intel's stock is up sixteen percent
20:30
Speaker 4: after the company set it at a point in Litbou Tan,
20:33
Speaker 4: who was previously the chief executive of software company Cadence
20:37
Speaker 4: Design Systems, as its new CEO. Tan is replacing interim
20:41
Speaker 4: co CEOs David Zinzner and MJ. Holt House. Adobe shares
20:45
Speaker 4: are down eleven percent on the heels of Adobe issuing
20:48
Speaker 4: lackluster fiscal second quarter guidance. The company sees earnings of
20:52
Speaker 4: four dollars and ninety five cents per share to five
20:54
Speaker 4: dollars per share on revenue of five point seven seven
20:57
Speaker 4: billion twenty five point eight two billion. In the period,
21:01
Speaker 4: Analysts had penciled in earnings of five dollars per share
21:03
Speaker 4: on five point eight billion in revenue. Tesla shares are
21:07
Speaker 4: down over three and a half percent, reversing course from
21:09
Speaker 4: some of the gains seen in the previous sessions. The
21:12
Speaker 4: stock is down more than five percent on the week.
21:15
Speaker 4: Dollar General stock is up seven and a half percent
21:17
Speaker 4: after its fourth quarter revenue beat analyst expectations. Dollar General
21:22
Speaker 4: CEO Todd Vasso said on Thursday that inflation continues to
21:26
Speaker 4: hurt the discounter's customers and the macroeconomic environment won't improve
21:31
Speaker 4: this year. And finally, Wells Fargo stock is up seven
21:34
Speaker 4: tenths of a percent after an upgrade to outperform from
21:38
Speaker 4: sector perform at RBC Capital Markets. I am ben Kitchen
21:42
Speaker 4: and that was Wall Street watch Mark.
21:45
Speaker 2: So we got a piece here in Bloomberg and oh no, sorry,
21:49
Speaker 2: the Financial Times. It's titled Elon Musk's cuts failed to
21:52
Speaker 2: stop US federal spending from hitting a new record. And
21:56
Speaker 2: so as you you know, sort through this, one of
22:00
Speaker 2: the tools that I have been using on this is
22:04
Speaker 2: the Brookings Institute, which is a think tank I think
22:08
Speaker 2: is the best way to describe them. They about maybe
22:12
Speaker 2: two or three weeks ago, published a tracker of federal
22:16
Speaker 2: expenditures and basically what they do they've tapped into an
22:21
Speaker 2: API that the US Treasury Department has available, and pretty
22:25
Speaker 2: much what they are doing is saying, hey, this is
22:27
Speaker 2: the money that the US Treasury is dispersing on a
22:31
Speaker 2: daily basis. They're not saying where it's going. Actually, they
22:35
Speaker 2: can specify like what agency it goes to, because the
22:37
Speaker 2: Treasury specifies what agencies the money is given out. To
22:40
Speaker 2: Remember that the US Treasury does not pay anyone directly.
22:45
Speaker 2: Even if you get a refund check from the IRS,
22:49
Speaker 2: it is a Treasury check that is signed by them.
22:51
Speaker 2: But the Treasury has made the appropriations to the IRS
22:55
Speaker 2: specifically in order to be able to process that. So
23:00
Speaker 2: when when you look at this through March eleventh, and
23:03
Speaker 2: this is data from the US Department of Treasury that
23:06
Speaker 2: is available, they do a I think it's either a
23:08
Speaker 2: four or five pm update every afternoon. Uh so you
23:12
Speaker 2: get a pretty real time picture on this. Through March
23:15
Speaker 2: eleventh of twenty twenty four, the US federal government or
23:18
Speaker 2: the US Treasury, had outlays of one point four nine
23:22
Speaker 2: two trillion dollars. Through March eleventh of twenty twenty five,
23:27
Speaker 2: it is coming in at one point five six nine
23:30
Speaker 2: trillion dollars. So if you do the math out and
23:35
Speaker 2: say what is you know, what's the rate of change here?
23:40
Speaker 2: The US government through the same number of calendar days
23:43
Speaker 2: this year, actually through one fewer calendar day because remember
23:45
Speaker 2: there was a leap year last year, so we had
23:47
Speaker 2: a February twenty ninth, is spending five percent more in
23:51
Speaker 2: outlays this year than it did at the same point
23:55
Speaker 2: last year. I'm going to repeat that the US government
24:00
Speaker 2: this year is spending five percent more than it was
24:04
Speaker 2: at this point last year. So for all of the
24:09
Speaker 2: talk about you know, oh, you know, we're cutting this
24:11
Speaker 2: and we're cutting that, it's not showing up in federal
24:13
Speaker 2: outlays yet from the Treasury.
24:15
Speaker 3: Yeah. And it's not that they're not trying. I'm sure
24:17
Speaker 3: they are. I'm sure it's that this is the wrong strategy.
24:21
Speaker 3: It is a worthwhile effort. But if you're going to
24:23
Speaker 3: spend political capital, and he's taking a lot of flak
24:26
Speaker 3: the president is or Musk is, if you're going to
24:28
Speaker 3: spend political capital, make the target a big one, and
24:31
Speaker 3: they're not going because you know where I'm going.
24:34
Speaker 2: It has to be the stuff that unfortunately no one
24:36
Speaker 2: wants to touch.
24:37
Speaker 3: I know what you're saying, those of you listening, But
24:39
Speaker 3: they're trying. No one's ever tried. Stop picking on Elon,
24:41
Speaker 3: stop picking on the president of not enough meat there.
24:43
Speaker 3: I'm not picking on them, Well, I guess i am.
24:45
Speaker 3: I'm saying it's the wrong strategy, everybody. And you'll see
24:48
Speaker 3: it when the deficit numbers come in a year and
24:50
Speaker 3: it's bigger next year than it was last it's the
24:53
Speaker 3: wrong way to spend your.
24:54
Speaker 2: Pay not be I don't know if it's going to
24:56
Speaker 2: be bigger next Like.
24:56
Speaker 3: I bet, I'll bet anybody it's good gentleman's But I'm
24:59
Speaker 3: not gonna you know, I guess it has I'm not
25:01
Speaker 3: going to knock them for something hasn't happened yet. Well,
25:03
Speaker 3: we're gonna cut taxes, We're going to be spending more
25:06
Speaker 3: on healthcare that goes up by a predictable percentage every year.
25:08
Speaker 3: Where is the boost going to come from? I'll just
25:13
Speaker 3: be again. I'll even say, look, there could be something
25:15
Speaker 3: around the edges. Maybe it ends up producing federal outlays
25:18
Speaker 3: by half a percent.
25:20
Speaker 2: I don't know. I'm not saying that it will or won't,
25:22
Speaker 2: but I'm acknowledging. Hey, I don't know how the next
25:24
Speaker 2: nine months of twenty twenty five is going to play out.
25:27
Speaker 3: Yeah, Well, I'm assuming growth slows closer to trend, not
25:30
Speaker 3: recession or anything. Just slows a bit.
25:32
Speaker 2: Because we are about I'm willing to leave this. I
25:36
Speaker 2: never punish someone for something that they haven't done yet
25:39
Speaker 2: or that hasn't happened yet.
25:39
Speaker 3: But you can punish someone from making a claim that's fanciful.
25:43
Speaker 2: I'll make the for the lat for the first six
25:46
Speaker 2: weeks and look for the first six weeks of the
25:49
Speaker 2: administration if you go back to inauguration day, which was
25:52
Speaker 2: January twentieth, because Brooking says, again, I got all the
25:55
Speaker 2: data going back there on January twentieth. Okay, the total
26:00
Speaker 2: outlays from last year were fifty billion dollars higher than
26:06
Speaker 2: the prior year. So there was a chunk of this
26:08
Speaker 2: that came like during the last three weeks of the
26:10
Speaker 2: Biden administration. But that gap has widened by an additional
26:14
Speaker 2: twenty billion dollars over the next six weeks, and so
26:19
Speaker 2: it's not narrowing. So the point that I would make
26:23
Speaker 2: is look, Unfortunately, if you want to actually go after
26:27
Speaker 2: something that's going to make the difference on the deficit,
26:30
Speaker 2: there are three and only three places that you can
26:32
Speaker 2: look DoD Social Security, medicare Those are usually not popular
26:41
Speaker 2: places to touch. Headcount is such a small piece of
26:46
Speaker 2: the actual federal budget, like most of the federal budget
26:49
Speaker 2: is not headcount right the federal bus.
26:53
Speaker 3: These people going to cut the deficit in the next year.
26:55
Speaker 2: The federal budget is depending on the year, and like
26:58
Speaker 2: the exact programs in place fifteen to twenty percent head counts.
27:03
Speaker 2: So it's it's just not big enough. If you got
27:06
Speaker 2: rid of everyone at the federal government, every single person,
27:11
Speaker 2: it still doesn't make the budget balanced.
27:14
Speaker 3: And now you hesitant to say the deficit, whether measured
27:17
Speaker 3: is a percentage of your GDP or measured in absolute terms,
27:20
Speaker 3: it was one point eight trillion last year. Why you
27:21
Speaker 3: hesitant to say it'll be bigger next year? Wouldn' wouldn't
27:24
Speaker 3: that be your best guess?
27:25
Speaker 2: I don't know the magnitude of what they actually end
27:28
Speaker 2: up realizing in savings. And I don't know what they
27:31
Speaker 2: do with any of these other programs either.
27:33
Speaker 3: Even if dose is wildly successful, and I don't doubt
27:35
Speaker 3: that they've been diligently trying to cut spend.
27:36
Speaker 2: It here, Mark, they haven't passed any tax plan yet.
27:39
Speaker 2: I don't know what it's going to look like. I
27:41
Speaker 2: don't know how it may impact spend.
27:43
Speaker 3: You think there'll be more a fewer tax cuts.
27:45
Speaker 2: I don't know, Mark, I don't know what there's going
27:49
Speaker 2: to be. In twenty seventeen, didn't everyone say, hey, they're
27:53
Speaker 2: going to overhaul Obamacare? Did they? No? They they didn't,
28:00
Speaker 2: So that's I can't, like, I don't know what anything's
28:05
Speaker 2: going to look like because there hasn't been a bill passed.
28:07
Speaker 2: And I'm pretty consistent on the issue that until a
28:10
Speaker 2: bill actually passes Congress and assigned by the President, I
28:13
Speaker 2: don't believe it's real because it actually has to pass.
28:17
Speaker 2: Like I've seen so many bills that, oh, like, this
28:19
Speaker 2: is definitely going to pass, and then it just flops
28:21
Speaker 2: and doesn't get anywhere. So until I see what is
28:25
Speaker 2: actually going to pass, I can't punish them for something
28:29
Speaker 2: that hasn't happened yet.
28:30
Speaker 3: I'm not punishing them, I'm making a ration. I'm rationally extrapagy.
28:35
Speaker 2: Because you're saying they're not gonna be able to do it.
28:36
Speaker 3: They're not gonna cut the devast over But if they
28:38
Speaker 3: increased if they if they introduce more tax cuts and
28:41
Speaker 3: they don't meaningfully cut spending, and you've already pointed out
28:44
Speaker 3: that they've taken a lot of that stuff off the table,
28:46
Speaker 3: the deficit will increase.
28:48
Speaker 2: But those are ifs that haven't happened yet, and so
28:51
Speaker 2: I'm not willing to say that that's like what we're
28:53
Speaker 2: gonna get.
28:54
Speaker 3: But we're here to comment on the feasibility and the
28:57
Speaker 3: wisdom of proposals. You can't do that without you're imagining, well, the.
29:00
Speaker 2: Feasibility involves them passing, and like in a majority where
29:03
Speaker 2: you have three seats of you know, wiggle room, I
29:07
Speaker 2: don't know what's going to pass.
29:10
Speaker 3: Well, okay, not a member of Congress, so I guess,
29:13
Speaker 3: but I think you're.
29:14
Speaker 2: My point is simply, I don't know what's going to
29:16
Speaker 2: pass or not. And so until we have something concrete
29:21
Speaker 2: that we can point to where we're like, Okay, here's
29:23
Speaker 2: the bill and it's it's gone somewhere, how how am
29:27
Speaker 2: I going to say that they either have or haven't
29:28
Speaker 2: done something right.
29:30
Speaker 3: That's why I'm I'm prefacing it with we're talking about
29:33
Speaker 3: the future. So it's presumed that I'm making a maybe
29:37
Speaker 3: not fully but somewhat educated guess given what I what
29:41
Speaker 3: is likely to happen to GDP. It's not going to
29:43
Speaker 3: continue to grow it above trend forever. Sure, it is
29:46
Speaker 3: likely to happen.
29:47
Speaker 2: I think that part. I'll agree with that, okay, but
29:48
Speaker 2: I have no idea what's going to happen with the rest.
29:52
Speaker 3: Federal expenditures, including tax cuts, will probably increase because they've
29:56
Speaker 3: promised a lot of additional tax cuts. I assume they're
29:58
Speaker 3: going to get some of those through. The President wants them.
29:59
Speaker 3: In the majority, It's not a big sure, but the
30:02
Speaker 3: majority wants them. If those things happen, the deficit will grow.
30:04
Speaker 3: That's all I'm saying, Chuck. I'm not saying I know
30:06
Speaker 3: the future.
30:06
Speaker 2: I'm saying all the big ifs in my book because
30:10
Speaker 2: I I don't know. I don't trust Congress to pass
30:13
Speaker 2: any legislation like that. That's that's my starting point on everything.
30:18
Speaker 2: I've seen so many bills where it's, hey, this is
30:21
Speaker 2: going to pass, and then it doesn't. And those with
30:24
Speaker 2: wider man.
30:24
Speaker 3: Can't qualify my assertion with if those things, if the
30:27
Speaker 3: President gets his way, the deficit will be bigger, not smaller.
30:31
Speaker 2: Potential. Again, I still need to see the actual bill,
30:35
Speaker 2: and they're like, we're not close to that yet, you know,
30:39
Speaker 2: like we don't. We don't have anything out there for
30:40
Speaker 2: tax reform or anything.
30:42
Speaker 3: We gotta, we gotta. We got a resolution last week,
30:43
Speaker 3: we got an outline. They've committed to a dollar amount
30:46
Speaker 3: of spending and a dollar.
30:48
Speaker 2: But we don't know any specifics in terms of like,
30:50
Speaker 2: here's the thing you can frontload that in certain years,
30:52
Speaker 2: you can backload it like it's it's saying over this
30:55
Speaker 2: ten year period, you can have things that are in
30:56
Speaker 2: place now that sunset during that time period. There's all
30:59
Speaker 2: kinds of stuff that you can do, and by the way,
31:01
Speaker 2: all kinds of stuff that administrations do through these reconciliation
31:05
Speaker 2: bills to make them look better where it's like, hey,
31:08
Speaker 2: we're gonna, you know, have this be you know, it's
31:10
Speaker 2: gonna be a three trillion dollar tax cut, but all
31:13
Speaker 2: of the you know, spending cuts are actually backloaded, so
31:16
Speaker 2: they're not gonna actually happen.
31:18
Speaker 3: Can we agree at least that dose, well intentioned and
31:20
Speaker 3: probably necessary, ain't gonna make a dent. It's just big.
31:24
Speaker 2: Enough, full agreement on that, all right, I can live
31:27
Speaker 2: with that. Yes, I think based on just where the
31:31
Speaker 2: construction of the federal budget is, I don't think that
31:35
Speaker 2: you can get there just by cutting head count unless
31:38
Speaker 2: you're willing to basically get rid of everyone, and then
31:41
Speaker 2: you've got some problems actually providing services that people do
31:44
Speaker 2: want and like, you know, things like Social Security and
31:46
Speaker 2: Medicare and stuff like that. You know, let's take a
31:49
Speaker 2: quick break. When we come back let's see what do
31:53
Speaker 2: we want to do. Can we talk oil prices after this?
31:56
Speaker 2: I think we can.
32:04
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32:45
Speaker 2: Talk a little bit about oil, just because I think
32:49
Speaker 2: this is a really interesting UH area to discuss. Trump
32:55
Speaker 2: administration obviously trying to really push for lower oil prices.
32:58
Speaker 2: One of the ways that they've talked about doing this
32:59
Speaker 2: is through reproducing three million additional barrels of oil in
33:03
Speaker 2: the United States. But the catch twenty two on this
33:06
Speaker 2: is that the cost of producing oil in the United
33:08
Speaker 2: States typically at this point, like most new development is
33:12
Speaker 2: done through fracking, hydraulic hydraulic fracturing, or you know, horizontal
33:17
Speaker 2: drilling and stuff like that, things that typically, if you
33:19
Speaker 2: look at the break even costs are even at this
33:22
Speaker 2: point somewhere in the fifty to sixty five dollars range.
33:26
Speaker 2: And so the question on this it's not really a question.
33:30
Speaker 2: I think you can have one of two things. I
33:32
Speaker 2: think that you can have more domestic production or oil
33:37
Speaker 2: prices in the fifties, but not both.
33:41
Speaker 3: Yeah, I think I understand your reasoning.
33:43
Speaker 2: And so the question that this piece of the Financial
33:45
Speaker 2: Times raises is, hey, would fifty dollars oil really be
33:48
Speaker 2: good for the US?
33:49
Speaker 3: Now?
33:49
Speaker 2: The answer where our show is based here in New
33:51
Speaker 2: England is unambiguously yes, because Mark, how many people do
33:55
Speaker 2: you know that work in oil production in the New
33:57
Speaker 2: England region?
33:58
Speaker 3: I don't think I've met anybody.
34:01
Speaker 2: Yeah, I don't know any at all.
34:03
Speaker 3: Are there oil deposits anywhere in the in like New England?
34:06
Speaker 3: There might be, it's just not worth whale oil. There's
34:10
Speaker 3: a spread, Oh that's sperm oil carcass in my front yard.
34:13
Speaker 2: Yeah, I'm heading out to uh, you know, the Flemish Cap.
34:15
Speaker 2: We'll see if we can get some oil for the winter.
34:17
Speaker 2: Like you know, it's I think that's basically.
34:20
Speaker 3: It's a good point. We were the kerosene oil.
34:22
Speaker 2: We were kind of we were the whale capital of
34:24
Speaker 2: the world. I mean, that was a huge industry for
34:26
Speaker 2: the United for the for the New England region. But
34:29
Speaker 2: at this point, honestly, I don't know if there's a
34:31
Speaker 2: single oil well that's still producing any meaningful amount of
34:34
Speaker 2: oil in New England. I'm sure if anyone has any
34:38
Speaker 2: ideas on this Texas.
34:39
Speaker 4: Six here that says there is no oil or gas
34:42
Speaker 4: activity in Massachusetts due to limited crude oil and natural
34:45
Speaker 4: gas reserves.
34:47
Speaker 3: Limited but not non existent. It's just not economical to
34:50
Speaker 3: extract and probably not legal to extract whatever we've got.
34:53
Speaker 2: We've got to have some let's see here, I've got
34:58
Speaker 2: proposals for Oh no, that's not really no, I'm not
35:03
Speaker 2: seeing anything in here. The first page of search results
35:07
Speaker 2: is inconclusive at least, so I don't think we really
35:09
Speaker 2: produced much. So if you're talking about fifty dollars oil
35:12
Speaker 2: for the New England region, huge net positive because there
35:16
Speaker 2: would be no job loss associated with it, and the
35:19
Speaker 2: offsetting economic benefits of hey, all of that gas money
35:23
Speaker 2: being able to be used on other discretionary purchases. Is huge.
35:27
Speaker 2: On the other hand, if you talk to anyone in Houston, Texas,
35:29
Speaker 2: fifty dollars oil probably makes them a little bit nervous
35:32
Speaker 2: because they are not nearly as profitable. They're probably laying
35:35
Speaker 2: people off, not you know, opening up new deposits and
35:39
Speaker 2: things like that, and so it very much is a
35:41
Speaker 2: regional thing. If you net it all out. For the
35:44
Speaker 2: United States, I think it's probably a push because we
35:47
Speaker 2: do export a significant amount of oil at this point,
35:51
Speaker 2: and so it's not it's not what it was twenty
35:54
Speaker 2: five years ago, where you're looking at it saying, gee,
35:57
Speaker 2: you know every dollar in oil price is down is
35:59
Speaker 2: a huge boom too. You know, the US as a
36:01
Speaker 2: whole now it's yes, very much a positive in the Northeast.
36:06
Speaker 2: It is a positive throughout much of the Midwest, but
36:08
Speaker 2: not all of it. I mean even you're starting to
36:10
Speaker 2: get you know, some drilling that's opening up, you know,
36:12
Speaker 2: kind of as you go out that way a little
36:14
Speaker 2: bit here. Uh, you know, Colorado has a ton of
36:16
Speaker 2: drilling that's going on now. So not great for them obviously, Texas, Oklahoma.
36:21
Speaker 2: The offshore stuff, you know, when you get to Louisiana
36:24
Speaker 2: and Florida is still massive, So I think fifty dollars
36:28
Speaker 2: oil it's probably on a net basis, maybe a little
36:32
Speaker 2: bit of a positive for the US. But remember not
36:34
Speaker 2: every part of the United States is you know, New England,
36:38
Speaker 2: And obviously it also really depends on what industry you
36:40
Speaker 2: work in. If you are in the oil industry, fifty
36:43
Speaker 2: dollars oil is really bad for you. If you're in
36:47
Speaker 2: Texas but not associated with it, there's still a negative
36:50
Speaker 2: impact from the money being sucked out of it, But
36:52
Speaker 2: on a personal level, you might still say, hey, it's
36:54
Speaker 2: nice filling up my tank more cheaply, and it might
36:56
Speaker 2: benefit you personally in that way, even if the region
36:59
Speaker 2: is a whole has lower economic activity.
37:01
Speaker 3: That used to be the case that it was unambiguous
37:04
Speaker 3: that a rise in the price of oil was effectively
37:06
Speaker 3: a tax increase. It was bad for growth, as you
37:08
Speaker 3: said a generation ago. It's no longer the case. Now
37:11
Speaker 3: it's ambiguous to even possibly positive because of our reliance
37:15
Speaker 3: on those that produce it to spend. Where do they
37:19
Speaker 3: get fifty bucks a barrel from anyway? Is that just
37:22
Speaker 3: sort of a because that's that's that's about the break
37:24
Speaker 3: even why fifty dollars for a target for.
37:28
Speaker 2: I don't know, it's a lot cheaper than it's been.
37:29
Speaker 3: It's just like cheaper, and it's a round number.
37:31
Speaker 2: Yeah, I mean, I don't think there's any magic number
37:34
Speaker 2: for well. I mean, I think the one that people
37:36
Speaker 2: pay attention to is, hey, what's the what's the first digit?
37:39
Speaker 2: You know, it's down in the twos in a lot
37:41
Speaker 2: of parts of the country now, and that obviously is
37:42
Speaker 2: something that you know, people like seeing a two instead
37:45
Speaker 2: of a three for that first digit. I think beyond that,
37:49
Speaker 2: I don't know that there's you know, sure like you
37:52
Speaker 2: feel the difference obviously between you know, three ten and
37:55
Speaker 2: three fifty. But I think that first digit, hey, how
37:57
Speaker 2: do you get that into the twos? Yeah, optically, like
38:00
Speaker 2: it feels great to be able to pay like, you know,
38:03
Speaker 2: two ninety instead of three ten, Like, yeah, like it
38:06
Speaker 2: feels a lot better, doesn't it. I don't know, I
38:08
Speaker 2: think it does.
38:09
Speaker 1: Yeah.
38:09
Speaker 3: Yeah, yeah.
38:10
Speaker 2: Let's take a quick break here. We've got hour two
38:13
Speaker 2: coming up in just a little bits.