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Is the US riskier than emerging markets? · The Financial Exchange Show

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  Speaker 1: Armstrong and Mark Vandetti.
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  Speaker 2: Good morning, Welcome back to the Financial Exchange. It's Mike,
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  Speaker 2: Mark and Tucker with you on the start of a
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  Speaker 2: busy earnings week. Amongst others, we'll be hearing from Alphabet
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  Speaker 2: and Tesla this week on how they did in the
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  Speaker 2: most recent quarter. Verizon Intel IBM Philip Morris all reporting
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  Speaker 2: as well, just not getting the same trillion dollar mentioned
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  Speaker 2: that Alphabet and Tesla do these days. In addition, ongoing,
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  Speaker 2: we have the negotiations between the United States and the
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  Speaker 2: European Union. We're staring down in August first deadline that
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  Speaker 2: I hesitate to even call a deadline given how many
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  Speaker 2: times they've been moved so far this year, but being
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  Speaker 2: taken seriously by some at least in terms of hitting
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  Speaker 2: that deadline. Most recent activity seems to be Germany going
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  Speaker 2: along with France now now in terms of preparing retaliatory
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  Speaker 2: measures against the United States should these teriffs go into place,
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  Speaker 2: But seems to be that all parties on the European
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  Speaker 2: negotiating side trying to avoid that potential outcome, even if
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  Speaker 2: it does mean slightly higher tariffs on European made goods
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  Speaker 2: being sold.
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  Speaker 3: I think that's where we have to end up on
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  Speaker 3: all this slightly higher tariffs. Yeah, across the board, the
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  Speaker 3: economy will adjust. It's not ideal, the hit to growth
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  Speaker 3: will be. I wouldn't poo poo any hit to growth
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  Speaker 3: because cumulatively that can be the impact can be huge.
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  Speaker 4: But that's where we.
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  Speaker 2: As I've put it before, Right, if you purely, which
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  Speaker 2: I don't think you can, but if you look at
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  Speaker 2: tariffs purely as a means of offsetting massive tax cuts
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  Speaker 2: that have just been put into place, then I have
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  Speaker 2: a much easier time of justifying that. Like you know,
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  Speaker 2: I don't think it's the greatest thing in the world.
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  Speaker 2: I would propose that we look at a different type
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  Speaker 2: of tax instead. But if you're going to look at
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  Speaker 2: it purely as hey, we just cut income taxes for
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  Speaker 2: every working American, made a bunch of the whole bunch
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  Speaker 2: of other taxes more permanent, and so this is our
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  Speaker 2: way of offsetting some of that revenue.
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  Speaker 3: Hit be a very weird suboptimal because tariffs are distortionary,
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  Speaker 3: they change the way goods are produced, so it will
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  Speaker 3: be a very suboptimal way to do it. But yeah, okay,
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  Speaker 3: honest people could disagree.
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  Speaker 2: I guess on that, sure, but again that's not how
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  Speaker 2: it's being phrased right now.
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  Speaker 4: It is that's the problem, isn't it.
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  Speaker 2: You know, it's it's an attempt to open up European
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  Speaker 2: markets one week, it's an attempt to punish the Chinese
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  Speaker 2: for fent and all the next week, and an attempt
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  Speaker 2: to bring manufacturing back to the United States next week.
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  Speaker 5: So it is tough to know.
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  Speaker 2: But we've made this case time and time again, and
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  Speaker 2: the recurring theme seems to be that we drive for
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  Speaker 2: a hard bargain until it starts distorting US equity markets
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  Speaker 2: or US bond markets, at which point we back away
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  Speaker 2: from some of the craziest ideas and come back down
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  Speaker 2: to earth. So we will see where things land. Because,
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  Speaker 2: as you mentioned right if all we're talking about here
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  Speaker 2: a year from now is predictable tariff rates in the
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  Speaker 2: ten to twenty percent range, to your point, suboptimal, but
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  Speaker 2: I think the economy just we can.
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  Speaker 4: Live with that all the operative. The keyword there is predictable.
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  Speaker 5: Yeah, the keyword is predicted.
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  Speaker 3: Put him in place, leave him in place. The economy
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  Speaker 3: will adapt. I don't love it, but again, yeah, I
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  Speaker 3: gotta raise revenue somehow.
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  Speaker 4: Will learn to live with it.
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  Speaker 3: Yeah, that's that's not the way it's being.
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  Speaker 4: As you pointed out, frand.
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  Speaker 2: Pieces from a few different sources claiming that Scott Bessett,
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  Speaker 2: the US Treasury Secretary, has been the main voice of
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  Speaker 2: reason in the Trump White House against firing FED Jair J.
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  Speaker 5: Powell.
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  Speaker 2: Some might find that somewhat ironic, given that he has
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  Speaker 2: been named as a potential contender for the FED chair role.
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  Speaker 2: Others have proposed slipping the FED into the Treasury's responsibility,
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  Speaker 2: and that would be a pretty extreme scenario, obviously, but nonetheless,
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  Speaker 2: apparently bestn't taking the kind of predictable middle path here
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  Speaker 2: and saying, look, there are a number of reasons you
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  Speaker 2: don't want to go and do this. And I think
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  Speaker 2: since the beginning of his role in this administration, has
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  Speaker 2: served that role successively in many different occasions. And I
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  Speaker 2: don't know how successful he has been, but has on
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  Speaker 2: many different occasions seemingly played the role of hey, this
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  Speaker 2: would be particularly disrupted.
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  Speaker 3: That's his job, though, the Treasury Secretary has to explain
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  Speaker 3: how capital markets are reacting and are likely too, So.
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  Speaker 5: It's a question of how good a job of he's doing.
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  Speaker 2: But we haven't replaced the FED chair yet, and we
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  Speaker 2: aren't facing average fifty percent tariffs on every country out
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  Speaker 2: there as of this moment, so seemingly somewhat successful there.
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  Speaker 2: But he points to a few things, and I think
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  Speaker 2: we need to continue talking about why this truly matters,
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  Speaker 2: because what we're once considered pretty you know, far out,
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  Speaker 2: their ideas of the role of the Federal Reserve are
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  Speaker 2: making more and more of their way into the actual
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  Speaker 2: debate here, and it's important for us to kind of well.
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  Speaker 5: Call that stuff out.
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  Speaker 2: And so, according to report, at least best focused on
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  Speaker 2: three different areas to convince the president. One was that, hey,
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  Speaker 2: it's quite possible the FED is already moving towards cutting
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  Speaker 2: rates later this year, so just give them time. Two,
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  Speaker 2: there's probably big political and legal obstacles to removing the
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  Speaker 2: FED share, which is probably true, but I'm no legal expert.
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  Speaker 2: And then the one that I find most relevant is
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  Speaker 2: that removing the head of the Federal Reserve would very
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  Speaker 2: possibly have broad effects on the economy and the market.
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  Speaker 2: And that's the one that I think is worth focusing
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  Speaker 2: on because it's not look other than a few financial
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  Speaker 2: circles and us nobody really I doubt anybody could pick J.
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  Speaker 5: Powell out of a lineup, And I doubt.
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  Speaker 3: The Speaker of the House doesn't even know what the
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  Speaker 3: FED does is he revealed last week in interviews when
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  Speaker 3: he was pounding the table for cutting rates because the
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  Speaker 3: economy is too hot. That's like saying, no more cigarettes
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  Speaker 3: will take care of your heart problem.
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  Speaker 2: So it's the exact solution that Turkey came up with
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  Speaker 2: just a few years ago to de.
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  Speaker 3: And it's not like we haven't tried it over the
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  Speaker 3: course of our own history, both pre impost Federal Reserve.
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  Speaker 2: Yeah, but I think a few things are true. One,
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  Speaker 2: it's fair to say that any sitting US president is
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  Speaker 2: probably going to all else equal, want lower rates in
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  Speaker 2: an ideal world. It stokes growth, so long as it
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  Speaker 2: doesn't kick off a bout of high inflation.
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  Speaker 4: Again, we've been there.
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  Speaker 3: That's why the FED gradually moved from the seventies eighties
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  Speaker 3: to today toward complete insolerity from political pressures.
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  Speaker 1: Right.
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  Speaker 2: Generally speaking, presidents are going to want lower rates because
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  Speaker 2: it boosts the economy, and nothing gets you reelected better
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  Speaker 2: than astronomy.
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  Speaker 3: It does, as we learn in the seventies, up to
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  Speaker 3: a point, expectations changed. I'll mention his name because he's famous.
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  Speaker 3: He recently passed away. Robert Lucas. The Lucas critique, you
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  Speaker 3: got to keep it in mind. It says simply, if
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  Speaker 3: policymakers attempt to exploit statistical relationships past relationships, those relationships
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  Speaker 3: can change due to changing expectation, and people will eventually
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  Speaker 3: start to price in higher inflation, at which point the
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  Speaker 3: Fed can't goose the economy. So all you get at
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  Speaker 3: the end, Lucas and others taught us out of the
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  Speaker 3: experience of the seventies, all you get is higher inflation.
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  Speaker 2: The other pieces of all this why that central bank
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  Speaker 2: independence is so important. One I just spoke to how
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  Speaker 2: generally speaking, presidents for fifty some odd years more than
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  Speaker 2: that have wanted lower interest rates. They have pushed in
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  Speaker 2: their own way for those lower interest rates, and the
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  Speaker 2: FED has more and more maintained its independence and credibility.
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  Speaker 2: The problem if you do end up lowering rates due
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  Speaker 2: to political pressure, well, there's many potential problems, but one
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  Speaker 2: would be it doesn't even necessarily in many cases result
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  Speaker 2: in lower interest rates by way that you want that.
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  Speaker 3: It's because of expectations respect to the mechanism I was
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  Speaker 3: trying to get at the FED independence and expectations coming
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  Speaker 3: out of the experience of the nineteen seventies. These two
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  Speaker 3: things are tightly intertwined. It's no accident that we ended
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  Speaker 3: up with an autonomous, fairly insular FED, and it was
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  Speaker 3: a struggle. It took decades. Reagan was reasonably disciplined, never
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  Speaker 3: criticized the FED publicly. Behind the scenes, Schultz one of
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  Speaker 3: his Treasury secretaries, and others. Baker did try to push
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  Speaker 3: the FED, and Vulcar was like Number one, I wasn't
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  Speaker 3: going to raise rates anyway, so this isn't necessary anyway.
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  Speaker 4: It took. It took decades, Mike.
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  Speaker 3: But it seems like, as with many other things, are
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  Speaker 3: more the more we become removed from our history, the more,
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  Speaker 3: to sort of paraphrase Santaiana or whoever it was we
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  Speaker 3: said it, the more we become removed from history and
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  Speaker 3: thus forget it, the more we become destined to repeat it.
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  Speaker 3: We're destined to repeat it, and you just have to
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  Speaker 3: kind of live with that. We're doing it and other
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  Speaker 3: we're doing it with tariffs, sure, for example, suboptimal, but
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  Speaker 3: we're gonna we're gonna try it again.
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  Speaker 4: Vaccines.
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  Speaker 3: Let's try not taking them again. Let's see how that
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  Speaker 3: works out. We just seem to need to remind ourselves
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  Speaker 3: every once in a while.
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  Speaker 2: We don't even have to go that far back, by
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  Speaker 2: the way, to look at that weird relationship between sure
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  Speaker 2: and long term interest rates. Now, you could go back
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  Speaker 2: last two weeks last year, the US Federal Reserve cut
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  Speaker 2: their benchmark interest rates by a full percentage point. I
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  Speaker 2: don't remember this, that's exactly. But if you go take
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  Speaker 2: a look at longer term interest rates, mortgage rates, and
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  Speaker 2: tenure treasury rates during that exact time period, they went up. Yeah,
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  Speaker 2: those rates moved up because of expections.
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  Speaker 3: We talk about what the Fed actually does. They control
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  Speaker 3: the money supply. They target short term rates, they call
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  Speaker 3: it the Federal Fund rate, and that reverberates across all
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  Speaker 3: rates at the very short end of the spectrum, so
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  Speaker 3: they can virtually control short term interest rates. Longer term rates, though,
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  Speaker 3: are a function of expected future short term rates maybe
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  Speaker 3: the Fed's got to increase rates later to make up
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  Speaker 3: for its laxity now, and a function two of how
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  Speaker 3: much people expect investors, specifically capital market participants, expect those
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  Speaker 3: rates to jump around something researchers called the term premium.
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  Speaker 3: The FED cannot control unless it decides to print money
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  Speaker 3: and buy long term treasuries, which it is done Yep,
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  Speaker 3: nothing new, which led to massive inflation in the very
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  Speaker 3: late forties early nineteen fifties, which led to an accord
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  Speaker 3: between the Treasury and the Fed, as I'm sure you
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  Speaker 3: and Chuck and others talked about last week, which led
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  Speaker 3: grudgingly on the part of politicians and very gradually and
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  Speaker 3: fitfully to FED independence, the independence and the stability that
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  Speaker 3: we enjoy today. But again, we've seem destined to repeat
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  Speaker 3: some of those to have to relearn some of those
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  Speaker 3: hard earned lessons, and I think that's normal.
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  Speaker 2: Let's take a quick break when we come back, going
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  Speaker 2: Mark the New York Times ask today is the US
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  Speaker 2: riskier than emerging markets? I wanted to just say nope,
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  Speaker 2: which I wrote on my sheet of paper, and move
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  Speaker 2: to the next story. But you you've apparently pulled some
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  Speaker 2: data that would what contradict my I was just surprised
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  Speaker 2: that very confident viewpoint.
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  Speaker 3: When I hear risk, I think of how much returns
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  Speaker 3: fluctuate around their their mean, That's the way a researcher
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  Speaker 3: would think about it.
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  Speaker 4: In standard deviation.
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  Speaker 3: If you're familiar with it, that it doesn't really matter, though.
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  Speaker 5: The point is volatility of return.
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  Speaker 4: Volatility is a.
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  Speaker 3: Great Yeah, yeah, it's probably more accessible in standard aviation.
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  Speaker 4: But yes, thank you, Mike.
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  Speaker 3: There used to be the case that emerging markets, and
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  Speaker 3: by that we mean developing what we would somewhat condescendingly
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  Speaker 3: call developing economies. Think South Korea, think any reason, really
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  Speaker 3: any Asian economy, with the exception of Japan, think of
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  Speaker 3: Central and Latin and South America. They tend to have
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  Speaker 3: high growth rates. Yeah, Africa is a little bit spotty
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  Speaker 3: that that's more frontier, but yeah, you might find some
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  Speaker 3: in there high growth rates, high birth rates, but volatile,
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  Speaker 3: volatile economies, volatile markets. The volatility of emerging markets as
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  Speaker 3: a basket relative to US markets has actually decreased a lot.
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  Speaker 3: They're about even decreased a lot over the past roughly
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  Speaker 3: thirty years.
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  Speaker 4: That's all.
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  Speaker 3: I loved at nothing fancy. That surprised me a little
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  Speaker 3: bit because historically EM emerging markets have been a lot
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  Speaker 3: more volatile as you would expect. Their growth is more
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  Speaker 3: volatile because their economies are smaller, less mature.
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  Speaker 4: They're catching up if you like.
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  Speaker 3: Though that's a bit of a misleading way to think
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  Speaker 3: about their economic growth relative to ours.
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  Speaker 2: I mean, I have a tough time just attributing data
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  Speaker 2: that you pull, but it does seem logical to me that,
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  Speaker 2: for instance, the Chinese market, which has.
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  Speaker 4: I'm not talking about as a group.
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  Speaker 2: Yeah, but if I think about the EM and I
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  Speaker 2: waited by market, how much of that is going to
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  Speaker 2: be China?
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  Speaker 4: Yeah, more than half, nour a fifty sixty percent, right, So.
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  Speaker 2: I think about the development of China and the maturity
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  Speaker 2: of the Chinese economy and markets, not that they aren't volatile,
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  Speaker 2: but that yeah, I'm not I guess I'm not surprised
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  Speaker 2: when we put it that way, that they have decreased
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  Speaker 2: in their volatility of return.
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  Speaker 3: In other ways, they're looking and this has always been
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  Speaker 3: the argument for emerging markets, their debt to GDP, no
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  Speaker 3: matter how you want to defind the numerator and the
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  Speaker 3: denominator in that looking good relative to it, we're on
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  Speaker 3: an unsustainable train wreck of a fiscal trajectory.
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  Speaker 2: In this it's actually a really interesting viewpoint, right if
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  Speaker 2: you want to look at it from that perspective. Many
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  Speaker 2: developed markets are in a absolutely ugly disastrous place when
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  Speaker 2: it comes to debt to GDP, whether it's.
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  Speaker 5: The United States, Japan, Greece.
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  Speaker 2: Not that Greece is the most developed nation, but you
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  Speaker 2: know what I mean there, across Europe as well as
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  Speaker 2: across several other developed nations, they have really if you
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  Speaker 2: will take advantage of that debt issuance benefit that developed
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  Speaker 2: countries have and run up that debt.
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  Speaker 3: Story so better long term debt trajectory, debt relative debt
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  Speaker 3: sustainability is a better way to put it. They look
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  Speaker 3: better than we do. And I'll just when we I
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  Speaker 3: just mean the United States demographics, they look better. We
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  Speaker 3: are headed for a demographic train wreck. The number of
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  Speaker 3: people who are dependent on the government for healthcare and
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  Speaker 3: their pension is growing relative to the number of people
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  Speaker 3: who are supporting them. That ratio will have effectively changed
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  Speaker 3: for the worse by something like fifty percent relative to
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  Speaker 3: the twenty five years before it, by like twenty There
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  Speaker 3: are lots of.
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  Speaker 4: Different ways to look at it.
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  Speaker 3: It's not important to get bogged down in the specifics.
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  Speaker 3: So the point is our demography stinks. And this is
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  Speaker 3: true of other developed countries like in Western Europe for example,
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  Speaker 3: EM younger, higher birth rate. That should all elseql translate
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  Speaker 3: into higher growth, and it'll be a while before they
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  Speaker 3: hit some of the same challenges in terms of funding
• 17:04
  Speaker 3: a big welfare state that we in Europe are are
• 17:06
  Speaker 3: faced with. So for statistical reasons, Mike, and for long
• 17:09
  Speaker 3: term demographic reasons, I can see the case for a
• 17:13
  Speaker 3: relatively more growth optimistic growth outlook for EM. That's been
• 17:17
  Speaker 3: the case for a long time. Though the arguments I
• 17:19
  Speaker 3: just recited could have been made twenty five and would
• 17:21
  Speaker 3: have been made twenty five years ago by saying.
• 17:23
  Speaker 2: Manager equity markets dominated those out of emerging markets for
• 17:26
  Speaker 2: that time they did.
• 17:27
  Speaker 3: There were a time when that looked like it was
• 17:29
  Speaker 3: being born out in em but that faded and since yeah, yeah,
• 17:33
  Speaker 3: you're right, which means obviously nothing for future returns, but
• 17:37
  Speaker 3: it is a good cautionary tale.
• 17:39
  Speaker 2: There, speaking of crappy demographics, SO Security needs to fix
• 17:42
  Speaker 2: more than ever after the Big Beautiful Bill, according to
• 17:47
  Speaker 2: the most recent number. So first of all, there's a
• 17:50
  Speaker 2: lot of confusion about the Big Beautiful Bill and its
• 17:52
  Speaker 2: effect on Social Security. There's an email sent out from
• 17:55
  Speaker 2: soci Security Administration themselves saying that the bill ended taxation
• 17:59
  Speaker 2: of SO Security benefits.
• 18:01
  Speaker 5: It didn't.
• 18:01
  Speaker 2: It provided a new tax deduction for those over the
• 18:05
  Speaker 2: age of sixty five. You can collect sociecurity as early
• 18:07
  Speaker 2: as sixty two. You wouldn't benefited by that, but it
• 18:10
  Speaker 2: does provide a new deduction for a lot of Social
• 18:13
  Speaker 2: Security recipients and effect does wipe out taxation on benefits
• 18:17
  Speaker 2: and other income for that group of people. The other
• 18:20
  Speaker 2: thing it does is it makes the point at which
• 18:23
  Speaker 2: the administration's trust fund is going to run out of
• 18:26
  Speaker 2: money even sooner. These funds are now expected to run
• 18:29
  Speaker 2: dry in just seven years from today twenty thirty two,
• 18:34
  Speaker 2: at which point retirees would face a twenty four percent
• 18:37
  Speaker 2: across the board benefit cut. That's according to the most
• 18:40
  Speaker 2: recent analysis done again, that twenty four percent cut across
• 18:44
  Speaker 2: the board only comes into place if Congress chooses to
• 18:47
  Speaker 2: do nothing and pass no new legislation to broaden these benefits,
• 18:51
  Speaker 2: broad the taxation of the benefits, change the program in.
• 18:55
  Speaker 5: Some meaningful way. But as we point out over and
• 18:58
  Speaker 5: over and over again, the longer wait to deal with
• 19:00
  Speaker 5: this problem, and the more things you pass, like the
• 19:03
  Speaker 5: Social Security Fairness Act and the One Big Beautiful Bill Act,
• 19:07
  Speaker 5: the worse you make the problem and the tougher you
• 19:09
  Speaker 5: make it to fix.
• 19:10
  Speaker 3: Maybe we talk about this on the other side, but
• 19:12
  Speaker 3: this could be an example of why this tax bill
• 19:15
  Speaker 3: ends up ends up to be fiscally contractionary contrary to work.
• 19:20
  Speaker 2: That's a really interesting idea, changing expectations for retires.
• 19:24
  Speaker 5: Let's say a quick break.
• 19:25
  Speaker 2: When we come back, we're going to have Wall Street Watch,
• 19:27
  Speaker 2: and then we're gonna talk about the One Big Beautiful
• 19:29
  Speaker 2: Bill Act.
• 19:29
  Speaker 5: That's next.
• 19:40
  Speaker 1: Bringing the latest financial news straight to your radio. Every day,
• 19:45
  Speaker 1: it's the Financial Exchange on the Financial Exchange Radio Network.
• 19:50
  Speaker 1: Time Now for Wall Street Watch, a complete look at
• 19:53
  Speaker 1: what's moving markets so far today. Right here on the
• 19:57
  Speaker 1: Financial Exchange Radio Network.
• 20:00
  Speaker 6: Another busy week on tap for markets is earning season
• 20:03
  Speaker 6: escalates here with major names including this week UH, Tesla, Alphabet, Intel, IBM,
• 20:09
  Speaker 6: Coca Cola, and many many more. Right now, the Nasdaq
• 20:13
  Speaker 6: and S and P five hundred hit record highs today.
• 20:17
  Speaker 6: Dow is up by nearly half a percent, or two
• 20:19
  Speaker 6: hundred and fourteen points, SMP five hundred is up six
• 20:23
  Speaker 6: tenths of one percent or thirty nine points, and the
• 20:25
  Speaker 6: Nasdaq is up nearly eight tenths of one percent or
• 20:28
  Speaker 6: one hundred and fifty eight points. Russell two thousand is
• 20:31
  Speaker 6: up nearly eight tenths of one percent or seventeen points higher.
• 20:35
  Speaker 6: Ten year Treasure Reel down seven basis points at four
• 20:38
  Speaker 6: point three five six percent, and crude oil is off
• 20:42
  Speaker 6: about half a percent today, trading just above sixty seven
• 20:45
  Speaker 6: dollars a barrel. Verizon reported better than expected earnings and
• 20:49
  Speaker 6: revenue for the previous quarter, where the telecommunications giant also
• 20:52
  Speaker 6: raised its annual earnings forecast. That stock is up by
• 20:56
  Speaker 6: four percent. Meanwhile, pizza chain Dominos saw its same store
• 21:01
  Speaker 6: sales climb three point four percent during the second quarter,
• 21:04
  Speaker 6: above expectations. The company's revenue also met expectations for the period, however,
• 21:10
  Speaker 6: its earnings did miss. That stock is actually now up
• 21:14
  Speaker 6: seven tenths of one percent after trading in negative territory earlier. Elsewhere,
• 21:19
  Speaker 6: steel producer Cleveland Cliffs posted a smaller than expected quarterly
• 21:23
  Speaker 6: net loss, sending that stock up thirteen percent. Now Core
• 21:27
  Speaker 6: Weave up by seven percent after it said it plans
• 21:30
  Speaker 6: to sell one and a half billion dollars worth of bonds.
• 21:34
  Speaker 6: Block shares arising by about eight percent following news that
• 21:37
  Speaker 6: the parent company to the cash app will officially join
• 21:40
  Speaker 6: the S and P five hundred on July twenty third,
• 21:43
  Speaker 6: replacing hetz Hess, which has been acquired by Chevron. And
• 21:48
  Speaker 6: Target was downgraded by Barclays to underweight from equal weight,
• 21:52
  Speaker 6: where the financial firm said it expects that sales at
• 21:54
  Speaker 6: the retailer will continue to underperform without a bigger strategic
• 21:59
  Speaker 6: strategic shift. Shares and Target are dipping so far today.
• 22:04
  Speaker 4: I'm Tucker Silvan.
• 22:05
  Speaker 6: That is Wall Street Watch, and the previous segment we
• 22:08
  Speaker 6: asked the trivia question what was Ernest Hemingway's final novel?
• 22:13
  Speaker 6: That would be The Old Man and the Sea. Lewis
• 22:16
  Speaker 6: from Warwick Rhode Island is our winner today, taking home
• 22:19
  Speaker 6: the Financial Exchange Show t shirt. Congress to Lewis and
• 22:23
  Speaker 6: we played trivia every day here in the Financial Exchange.
• 22:25
  Speaker 6: See complete contest rules at Financial Exchange Show dot com.
• 22:29
  Speaker 2: Mark Before the break, we were talking about the One
• 22:32
  Speaker 2: Big Beautiful Bill Act, and generally speaking, when you pass
• 22:37
  Speaker 2: tax cuts, you expect them to be expansionary, and you know,
• 22:40
  Speaker 2: from my personal perspective, I'm guessing this one will be too.
• 22:44
  Speaker 5: But to be clear, this tax cut wasn't that substantial.
• 22:49
  Speaker 3: Umo Star, I'm not just trying to be mindless the contrary,
• 22:51
  Speaker 3: and here most do stimulate consumption a little bit.
• 22:54
  Speaker 4: People do end up spending more than they otherwise.
• 22:56
  Speaker 2: What this bill is a little bit unique because the main,
• 23:00
  Speaker 2: the main run up in deficit spend that this tax
• 23:03
  Speaker 2: cut did was preventing taxes from going back to where
• 23:07
  Speaker 2: they were before, which have been a big run up
• 23:09
  Speaker 2: in taxes, but in this case it kind of just
• 23:12
  Speaker 2: locked in where we were previously, and so that makes
• 23:15
  Speaker 2: it a little bit different. But you're talking about something
• 23:17
  Speaker 2: else here where it's related them. Could the act of
• 23:21
  Speaker 2: cutting taxes and the effect on things like the Social
• 23:26
  Speaker 2: Security program, the effect on things like Medicare, Medicaid. The
• 23:30
  Speaker 2: effect on medicare too, Actually, we can talk about that
• 23:33
  Speaker 2: the effect on the deficit as a whole. Could that
• 23:37
  Speaker 2: change consumer expectations based on how it changes those future outcomes.
• 23:41
  Speaker 3: There's a school of thought that says that because tax
• 23:46
  Speaker 3: cuts are have to be offset by future tax increases
• 23:49
  Speaker 3: to pay down the debt, that they have no effect
• 23:52
  Speaker 3: on consumption. And you could think of that as the
• 23:54
  Speaker 3: government issuing a bond to provide you with money that
• 23:57
  Speaker 3: you in turn used to buy at the bond. All
• 24:00
  Speaker 3: you're going to do is save the bond and its
• 24:02
  Speaker 3: interest and use that to pay the government back in
• 24:04
  Speaker 3: twenty years. It has no effect on consumption. That is
• 24:09
  Speaker 3: a sort of radical view, though that's not borne out
• 24:11
  Speaker 3: by the evidence.
• 24:12
  Speaker 4: The point I was.
• 24:13
  Speaker 3: Making doesn't require the strict assumptions and make the sort
• 24:18
  Speaker 3: of rigid, unrealistic predictions that that equivalence between raising taxes
• 24:26
  Speaker 3: or issuing debt to pay for a tax cut or
• 24:29
  Speaker 3: more spending today does. The point I was making is
• 24:31
  Speaker 3: simply that some fiscal some expansions, fiscal expansions meaning government
• 24:36
  Speaker 3: taxing and spending like two thousand and one might actually
• 24:40
  Speaker 3: prove to be not expansionary but contractionary. People may look
• 24:44
  Speaker 3: at its effect on and I use two thousand and
• 24:46
  Speaker 3: one as an example, because there's no evidence that tax
• 24:49
  Speaker 3: cut stimulated consumption meaningfully, which is kind of odd, or
• 24:52
  Speaker 3: I should say, the bulk of the evidence is such.
• 24:55
  Speaker 4: That that tax cut wasn't really effective.
• 24:58
  Speaker 3: People may unlike the tax increases of the early nineties,
• 25:01
  Speaker 3: as there were two ninety and ninety three. Ninety three
• 25:05
  Speaker 3: was an example of working through. Ninety three was an
• 25:09
  Speaker 3: example of a tax increase that may have actually stimulated
• 25:12
  Speaker 3: economic growth because it put us on a better, more
• 25:15
  Speaker 3: manageable that is, debt trajectory. Interest rates came down throughout
• 25:19
  Speaker 3: the nineteen nineties as our fiscal situation improved because of that.
• 25:24
  Speaker 3: I remember the time I hated it in nineteen ninety three.
• 25:27
  Speaker 3: Wall Street Journal hated it. All the usual free market
• 25:29
  Speaker 3: fanatics like me. In the sources that we read, like
• 25:33
  Speaker 3: the Wall Street Journal editorial board, they were predicting recession
• 25:36
  Speaker 3: didn't happen. The economy did slow a little bit in
• 25:39
  Speaker 3: ninety four, ninety five, ninety four, but anyway, quite the
• 25:42
  Speaker 3: opposite happened. And the reason is that people's expectations of
• 25:45
  Speaker 3: the government's future fiscal position changed, so cutting taxes now
• 25:50
  Speaker 3: is or even maintaining tax cuts that were made previously
• 25:53
  Speaker 3: is not necessarily a recipe for stimulating growth because of expectations.
• 25:58
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• 27:08
  Speaker 2: Tucker, I know you do, Mark. I assume that you
• 27:10
  Speaker 2: have Amazon Prime. Oh yeah, I have rarely run into
• 27:15
  Speaker 2: somebody who doesn't have Amazon Prime. Do you remember back
• 27:18
  Speaker 2: in March or April it was that both Walmart and
• 27:22
  Speaker 2: Amazon came out and they had different ways of doing it.
• 27:25
  Speaker 2: But Amazon mentioned that they were going to start listing
• 27:28
  Speaker 2: the effect of tariffs on their products. Walmart said that
• 27:31
  Speaker 2: they were going to start raising prices on a number
• 27:33
  Speaker 2: of different products. They both got dragged through the media
• 27:37
  Speaker 2: by the President of the White House and others, and
• 27:40
  Speaker 2: they kind of reversed course on those announcements, pledging to
• 27:42
  Speaker 2: keep prices low and do what they could to help
• 27:45
  Speaker 2: manage the effects of tariffs.
• 27:47
  Speaker 5: Well, it's been a few.
• 27:48
  Speaker 2: Months and the Wall Street Journal has taken a look
• 27:52
  Speaker 2: at what actually happened here, and funny enough, they've found
• 27:55
  Speaker 2: some different results on that front.
• 27:58
  Speaker 5: This is one of the first.
• 28:00
  Speaker 2: Analysis that I've seen that I find to be actually
• 28:05
  Speaker 2: somewhat thorough and useful when it comes to looking at
• 28:08
  Speaker 2: prices of items, and what it generally found is that
• 28:12
  Speaker 2: Walmart really did follow through on that pledge. They actually
• 28:16
  Speaker 2: lowered prices on twelve hundred of their cheapest household goods
• 28:22
  Speaker 2: by around two percent. Amazon, on the other hand, appears
• 28:25
  Speaker 2: to have raised prices on those same twelve hundred cheapest
• 28:29
  Speaker 2: items by somewhere in the range of five percent over
• 28:33
  Speaker 2: that same course of time.
• 28:35
  Speaker 5: And I'll tell you what, I am extremely guilty of this.
• 28:38
  Speaker 5: My wife's even guiltier of it.
• 28:40
  Speaker 2: But the idea of comparing prices on a six dollars
• 28:45
  Speaker 2: item that we're buying on Amazon, it just doesn't happen.
• 28:50
  Speaker 2: But according to this at least that those same items
• 28:53
  Speaker 2: are quite a bit cheaper on Walmart right now, and
• 28:56
  Speaker 2: may pay to actually search on both of them, because
• 29:00
  Speaker 2: if you're not aware, Walmart and Amazon by and large
• 29:04
  Speaker 2: sell a ton of the same items on both of
• 29:07
  Speaker 2: their sites because they're all dominated by third party sellers
• 29:09
  Speaker 2: that offer those ideas.
• 29:10
  Speaker 3: If you tell Amazon something cheaper on Walmart dot Com,
• 29:13
  Speaker 3: won't they match the price?
• 29:16
  Speaker 5: I believe they will not through the third party sellers.
• 29:19
  Speaker 4: Oh third party. Oh well they have no control.
• 29:21
  Speaker 2: Yeah, they don't have any control over that. I don't
• 29:23
  Speaker 2: know if Amazon will price match to answer your question,
• 29:28
  Speaker 2: not for a while. I know the best Buy once match.
• 29:32
  Speaker 3: This item in my card is available at best Buy
• 29:35
  Speaker 3: dots Tell who, I'm sorry you chat with an Amazon
• 29:38
  Speaker 3: agent yelling at my screen.
• 29:42
  Speaker 4: Yeah you a nope, see you.
• 29:46
  Speaker 5: And that's the thing, and that takes time.
• 29:48
  Speaker 2: That's been the smart thing on Amazon's part when you
• 29:50
  Speaker 2: go take a look at more expensive items. According to
• 29:53
  Speaker 2: Wall Street Journal, whether it's Amazon or Walmart or Target,
• 29:56
  Speaker 2: they've all lowered prices on those high ticket items because
• 29:59
  Speaker 2: I think they know that people price shop on them
• 30:02
  Speaker 2: when it comes to they looked at a few different items,
• 30:05
  Speaker 2: but they looked at, for example, a day g Low
• 30:09
  Speaker 2: Spectrum diversified stackable basket that's just you know, important stuff
• 30:15
  Speaker 2: to keep an eye on. Amazon brought up that price
• 30:19
  Speaker 2: from nine bucks and thirty cents to twenty bucks.
• 30:22
  Speaker 3: Let's look at it right now. That's been put out.
• 30:24
  Speaker 5: Yeah, that's been published. I'm sure it's changed.
• 30:27
  Speaker 2: Whereas Walmart dropped the price more than in half and
• 30:30
  Speaker 2: quite Honestly, I think the answer is nobody's going to
• 30:33
  Speaker 2: go in price shop on Very few people are actually
• 30:36
  Speaker 2: price price shopping on a twenty dollars item. I think
• 30:39
  Speaker 2: many just assume that, hey, if I'm getting it on Amazon,
• 30:42
  Speaker 2: it's going to be the cheapest price available. I guess
• 30:45
  Speaker 2: the advice would be pop up in that Walmart app
• 30:48
  Speaker 2: and actually price compared. Don't get so comfortable with the
• 30:51
  Speaker 2: fact that Amazon's going to be the lowest price out there,
• 30:53
  Speaker 2: because they.
• 30:53
  Speaker 5: Are frequently not.
• 30:55
  Speaker 1: Right.
• 30:55
  Speaker 5: Now, let's say quick break. When we come back, Stack Roulette.
• 31:01
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• 32:11
  Speaker 5: Time for a stack rou lette, Mark, what do you
• 32:13
  Speaker 5: have for us?
• 32:13
  Speaker 4: Mike?
• 32:14
  Speaker 3: You spent a lot of time in public bathrooms?
• 32:15
  Speaker 2: Oh that's where I was gonna go too. All right, No,
• 32:18
  Speaker 2: go go with your take. Please, let's let's hear about
• 32:21
  Speaker 2: public restrooms.
• 32:22
  Speaker 3: You want to do the overview because I just have
• 32:24
  Speaker 3: one comment about the cost of public restrooms that blew
• 32:26
  Speaker 3: me away. So maybe yours is higher level and better
• 32:28
  Speaker 3: thought out as it usually is. Then I'll say something
• 32:31
  Speaker 3: snarky and no.
• 32:32
  Speaker 5: No, you go ahead. I do want to hear your
• 32:35
  Speaker 5: your stats that you pulled on public rest.
• 32:37
  Speaker 4: No, I'm only citing what's in the article.
• 32:39
  Speaker 5: I think that we do a terrible job with public rests, right.
• 32:42
  Speaker 4: Something we've never been able to get right.
• 32:44
  Speaker 5: In this country, and it has a really easy economic
• 32:47
  Speaker 5: solution in my mind. But go ahead, did you?
• 32:49
  Speaker 3: And is the easy economic solution something like these autonomous throne.
• 32:53
  Speaker 5: Yeah, so this is.
• 32:55
  Speaker 2: But I think they're not taking it farf I think
• 32:56
  Speaker 2: you just have to charge, not market ray, just charge something.
• 33:00
  Speaker 3: Well, some jurisdictions have tried that. It's just it's just
• 33:03
  Speaker 3: been met with such pushback.
• 33:05
  Speaker 5: Let's take a step back and tell us what. Let's
• 33:07
  Speaker 5: talk about these public restrooms that they're talking.
• 33:09
  Speaker 4: Well, im assuming.
• 33:09
  Speaker 3: Everybody knows how to go to the bathroom, Yeah right, correct,
• 33:12
  Speaker 3: square one? Yeah, so these are square five, so called
• 33:16
  Speaker 3: smart restrooms. As the name suggests, these are booth like
• 33:19
  Speaker 3: structures that after every use, are periodically clean themselves, like
• 33:25
  Speaker 3: ceiling to floor and throughout they thoroughly clean and sanitize themselves,
• 33:30
  Speaker 3: so appealing from that point of view.
• 33:32
  Speaker 4: They're autonomous.
• 33:33
  Speaker 3: By that, I just mean nobody has to like check
• 33:36
  Speaker 3: in on them, though the company that maintains them presumably
• 33:39
  Speaker 3: has to do so once in a while. What blew
• 33:41
  Speaker 3: me away was the cost of installing or renovating a
• 33:45
  Speaker 3: public toilet. I don't know how representative San Francisco is.
• 33:48
  Speaker 3: The example cited in the article.
• 33:50
  Speaker 2: Well, they cannot with like the three million dollar trash cans,
• 33:52
  Speaker 2: so I'm sure it's not very affordable.
• 33:54
  Speaker 3: What's the case you saw the number one point seven
• 33:56
  Speaker 3: million dollars just to install one public toilet, which is
• 34:01
  Speaker 3: I assume I assume it's you mentioned that I did
• 34:07
  Speaker 3: a terrible job setting up Wall Street Journal looks.
• 34:08
  Speaker 2: Like so, I mean the idea of the public restrooms,
• 34:11
  Speaker 2: I mean all over New York City they are just
• 34:14
  Speaker 2: constantly shut down. I'm sure Boston's and if we think
• 34:17
  Speaker 2: through the problems with them, one they're always filthy. I
• 34:23
  Speaker 2: remember having to take one of my kids to the
• 34:25
  Speaker 2: restrooms in South Station once, which you never want to do,
• 34:28
  Speaker 2: and there were, you know, multiple homeless people living in them.
• 34:31
  Speaker 2: There was actually blood on the floor in the restroom
• 34:34
  Speaker 2: when I was taking my two year old in there,
• 34:36
  Speaker 2: and we quickly left and went to a restaurant instead
• 34:39
  Speaker 2: to go find a restroom because it was it was
• 34:41
  Speaker 2: that bad. But those are the types of problems that
• 34:43
  Speaker 2: you are faced with when it comes to public restrooms.
• 34:46
  Speaker 2: And so the solutions the smart restrooms, how how they
• 34:49
  Speaker 2: can fix some of these problems. One the self sanitizing
• 34:52
  Speaker 2: and all those cleaning things would be important. But two,
• 34:56
  Speaker 2: the economic fixed to some of this is what they
• 34:59
  Speaker 2: do Europe, which is charged to use the restroom and
• 35:02
  Speaker 2: they're fully autonomous.
• 35:05
  Speaker 5: Sorry, go Aheadmarin, No I was gonna say.
• 35:06
  Speaker 3: What I didn't mention is the cost of one of
• 35:08
  Speaker 3: these things. This is annual operating ninety k, so better.
• 35:12
  Speaker 5: Than one point seven million.
• 35:13
  Speaker 3: And the tens of thousands that they say go into
• 35:15
  Speaker 3: maintaining public they couldn't even put a number on it.
• 35:18
  Speaker 3: I assume tens of thousands is somewhere between thirty and
• 35:20
  Speaker 3: one hundred just to maintain a public toilet.
• 35:23
  Speaker 6: And you still get to simplify it. It sounds like
• 35:26
  Speaker 6: it's the Uber for bathrooms. How so you authenticate before
• 35:30
  Speaker 6: you enter?
• 35:31
  Speaker 5: Yeah, they do.
• 35:32
  Speaker 2: They do require, yeah, download an app authenticate to use
• 35:35
  Speaker 2: the bathroom, and that way they can do a few things. One,
• 35:38
  Speaker 2: they can charge you for it, so you're not going
• 35:40
  Speaker 2: to try and live out of the thing because you're
• 35:43
  Speaker 2: being charged every time you enter.
• 35:44
  Speaker 3: One.
• 35:45
  Speaker 2: Two they put a timer on it, so if you're
• 35:46
  Speaker 2: in there for more than ten minutes, the thing starts
• 35:48
  Speaker 2: flashing and the door just opens, So that's not gonna
• 35:51
  Speaker 2: be comfortable for you. If you're trying to make it
• 35:53
  Speaker 2: your home. They also, you know, drip water into it
• 35:56
  Speaker 2: frequently to clean it. So again, you're not going to
• 35:59
  Speaker 2: make this thing your personal.
• 36:00
  Speaker 3: I don't say this in jest, but that may not
• 36:02
  Speaker 3: work for some elderly It.
• 36:04
  Speaker 2: Might not work terribly well for some elderly folks. You're right,
• 36:06
  Speaker 2: but I can make do with that. But the other
• 36:09
  Speaker 2: smart thing they do.
• 36:11
  Speaker 3: You can be parted til you're walking by and the
• 36:13
  Speaker 3: door swings open, and you I'm very something. You can't
• 36:17
  Speaker 3: hurting my eyes, mark, nobody's that fast.
• 36:19
  Speaker 2: The other smart thing they do here is like, Okay,
• 36:23
  Speaker 2: if I have an app, or even if I just
• 36:24
  Speaker 2: use my credit card to open one of these things
• 36:26
  Speaker 2: and I end up destroying the public bathroom one, I
• 36:30
  Speaker 2: can pretty easily track that person down and have the
• 36:34
  Speaker 2: police charge them with something or the very least, I'm
• 36:37
  Speaker 2: never going to let that person back in this bathroom again,
• 36:40
  Speaker 2: and problem solved.
• 36:42
  Speaker 5: So I do like this idea.
• 36:45
  Speaker 2: I know that we in the United States hesitate to
• 36:49
  Speaker 2: charge for what's generally deemed a public service like a restroom,
• 36:53
  Speaker 2: but can everyone just admit that the current system ain't
• 36:56
  Speaker 2: working too well? A bathroom in public spaces.
• 36:59
  Speaker 1: It's awful.
• 37:00
  Speaker 5: What do you do when you need a bathroom in
• 37:02
  Speaker 5: a pelp space?
• 37:02
  Speaker 2: You go, you hold your kid's hand, and you say,
• 37:05
  Speaker 2: you know, to the hostess at the restaurant, please, can
• 37:07
  Speaker 2: we just use your bathroom so my kid doesn't, you know,
• 37:09
  Speaker 2: peel all over the floor. Because using a public restroom
• 37:13
  Speaker 2: almost anywhere in the country other than I will say,
• 37:16
  Speaker 2: service areas on the highway are usually generally generally pretty good.
• 37:19
  Speaker 2: But other than those options, it's pretty terrible out there.
• 37:25
  Speaker 5: What were you gonna say?
• 37:25
  Speaker 6: No, I was just gonna say, you do have restaurants
• 37:27
  Speaker 6: that just flat out turn people away. I mean, for
• 37:29
  Speaker 6: the most part they're accommodating to kids, but once a time, Yeah,
• 37:33
  Speaker 6: I mean, I don't blame them.
• 37:34
  Speaker 2: If I walk in there holding my five year olds hand,
• 37:37
  Speaker 2: I'm going to get a much likelier yes than Mark
• 37:40
  Speaker 2: Fandetti walking in without his kid right straight up, even.
• 37:43
  Speaker 3: If I'm the one who that's the kind of country
• 37:45
  Speaker 3: I want to live in.
• 37:46
  Speaker 5: Yeah.
• 37:46
  Speaker 2: Well again, public restrooms that just charge. We've got an
• 37:49
  Speaker 2: economic solution to any crappy problem.
• 37:52
  Speaker 4: But it's not politically palatable.
• 37:54
  Speaker 5: Ah, get over yourselves, folks.
• 37:57
  Speaker 2: Let's take a quick break for the rest of the day,
• 37:59
  Speaker 2: Marcus strongly in positive territory and making new record highs Dow, SMPN,
• 38:04
  Speaker 2: NASDAK all up more than a half percent, NASDAK leading
• 38:08
  Speaker 2: the way. We'll have much more for you the rest
• 38:10
  Speaker 2: of this week with big earnings weeks coming for the
• 38:13
  Speaker 2: likes of Google and Tesla.
• 38:15
  Speaker 5: That's all the time we have. Have a great rest
• 38:17
  Speaker 5: your day, folks,