Latest / The Financial Exchange Show / Hot inflation raises the stakes on tariffs

Transcript

Hot inflation raises the stakes on tariffs · The Financial Exchange Show

0:00
Speaker 1: The Financial Exchange is produced by Money Matters Radio and
0:03
Speaker 1: is hosted by employees of the Armstrong Advisory Group, a
0:05
Speaker 1: registered investment advisor. All opinions expressed are solely those of
0:08
Speaker 1: the hosts. Do not reflect the opinions of Armstrong Advisory
0:11
Speaker 1: or anyone else. Investments can lose money. This program does
0:14
Speaker 1: not offer any specific financial or investment advice. Please consult
0:17
Speaker 1: your own financial, tax, and estate planning advisors before making
0:20
Speaker 1: any investment decisions. Armstrong Advisory and the advertisers heard on
0:23
Speaker 1: this program do not endorse each other or their services.
0:26
Speaker 1: Armstrong and Money Matters Radio do not compensate each other
0:28
Speaker 1: for referrals and are not affiliated. This is the Financial
0:34
Speaker 1: Exchange with Chuck Zada and Mike Armstrong, your exclusive look
0:39
Speaker 1: at business and financial news affecting your day, your city,
0:42
Speaker 1: your world. Stay informed and up to date about economic
0:46
Speaker 1: and market trends, plus breaking business news every day. The
0:50
Speaker 1: Financial Exchange is a proud partner of the Disabled American
0:53
Speaker 1: Veterans Department of Massachusetts. Help us support our great American
0:57
Speaker 1: heroes by visiting dav five K DOC Boston and making
1:01
Speaker 1: a donation today. This is the Financial Exchange with Chuck
1:06
Speaker 1: Zada and Mike.
1:07
Speaker 2: Armstrong Valentine's Day here on the Financial Exchange, Chuck, Mike
1:14
Speaker 2: and talker with you and uh sending out love bombs
1:18
Speaker 2: to everyone listening right now, because well, I love you.
1:22
Speaker 3: If you listen to us, thank you. We really do
1:25
Speaker 3: appreciate it. I mean that.
1:26
Speaker 2: I know sometimes I say things in ingest, but honestly,
1:29
Speaker 2: if you are listening to us, we certainly appreciate it
1:33
Speaker 2: that you choose to spend a little bit of your
1:35
Speaker 2: day with us trying to figure out what the heck's
1:39
Speaker 2: going on in the economy and markets.
1:41
Speaker 4: Chuck, you missed out on a great Valentine's Day story yesterday.
1:44
Speaker 3: I think it was it from Bloomberg, Tucker.
1:47
Speaker 4: I think it was from Bloomberg, and it was all
1:49
Speaker 4: about how we need to reinstate the stigma about being
1:52
Speaker 4: single as an adult.
1:55
Speaker 2: So solid I hope it's from Bloomberg because that really
1:58
Speaker 2: follows their tradition of if an opinion piece, if inflation's
2:02
Speaker 2: too high, let your pet die. That was their piece
2:05
Speaker 2: from twenty two or twenty three. I think, so this
2:09
Speaker 2: one is, hey, if no one loves you, you should be
2:11
Speaker 2: called a loser.
2:12
Speaker 4: And it was basically that we need to be more
2:15
Speaker 4: comfortable with settling to increase the birth rate.
2:19
Speaker 2: No, no, no, no, no, no no.
2:23
Speaker 3: I it was a good if.
2:25
Speaker 2: I missed that, A plus val pre Valentine's Day story.
2:28
Speaker 2: It was just it was spot on. Not sure if
2:31
Speaker 2: you like that person, go have a kid with them
2:34
Speaker 2: and tell us how it goes.
2:37
Speaker 1: Man.
2:37
Speaker 2: Well, anyways, I can't sorry I missed that. No, it's
2:42
Speaker 2: one of my biggest regrets this year so far. And gosh,
2:46
Speaker 2: let's talk a little bit about what we did see yesterday,
2:49
Speaker 2: which is at one pm, President Trump announced that his
2:54
Speaker 2: administration was going to impose reciprocal tariffs every someday, everywhere,
3:01
Speaker 2: and some day everywhere, maybe on April first.
3:04
Speaker 1: Yea.
3:04
Speaker 2: And here's why this is a little bit confusing in
3:08
Speaker 2: terms of what it is. I'm gonna quote here from Bloomberg.
3:14
Speaker 2: The President on Thursday signed a measure directing the US
3:16
Speaker 2: Trade Representative and Commerce Secretary to propose new levies on
3:19
Speaker 2: a country by country basis in an effort to rebalance
3:22
Speaker 2: trade relations, a sweeping process that could take weeks or
3:24
Speaker 2: months to complete. Howard et, Trump's nominee to lead the
3:28
Speaker 2: Commerce Department, told reporters all studies should be complete by
3:30
Speaker 2: April first, and Trump could act immediately afterwards. Now here's
3:36
Speaker 2: there are a few notes on this in terms of
3:39
Speaker 2: you know, what do we mean by a reciprocal tariff?
3:42
Speaker 2: Because again, like you look at this and you say, okay,
3:46
Speaker 2: like tell me how you're defining this, because it kind
3:49
Speaker 2: of matters actually, and so when you look at how
3:53
Speaker 2: the Trump administration is going to define reciprocal tariffs, part
3:58
Speaker 2: of it what they are defined as it are are
4:01
Speaker 2: what are called value added taxes, which are more or
4:04
Speaker 2: less sales taxes, not on goods that necessarily come in
4:09
Speaker 2: from outside the country, but even goods that are transacted
4:12
Speaker 2: within the country. So most of Europe uses vats in
4:16
Speaker 2: one way or another. VAT is value added tax, that's
4:18
Speaker 2: what you know that stands for. And so if you
4:23
Speaker 2: have a VAT that you are using, that is going
4:26
Speaker 2: to be interpreted by the current administration as a tariff,
4:30
Speaker 2: even though it's being applied to domestic goods as well.
4:35
Speaker 2: So you start Canada, don't know, honestly, don't know. Uh
4:41
Speaker 2: So this starts to get pretty expansive pretty pretty quickly.
4:44
Speaker 2: Uh They also indicated that in addition to you know, tariffs,
4:50
Speaker 2: they would also consider just the general fairness of trade
4:53
Speaker 2: with the country. So there's plenty of leeway for Hey,
4:56
Speaker 2: whatever we want to put in place as a tariff,
4:59
Speaker 2: we can put the in place as a tariff. But
5:03
Speaker 2: ultimately it's pointing towards Hey, six weeks or now, we
5:08
Speaker 2: may or may not have clarity on exactly what the
5:10
Speaker 2: tariff picture looks like. And I say may or may
5:14
Speaker 2: not because we've had a couple of deadlines that have
5:16
Speaker 2: come and gone, and we haven't gotten the clarity that
5:18
Speaker 2: you know, I think I'll be. We haven't gotten the
5:22
Speaker 2: clarity that I would like to see.
5:24
Speaker 3: And it's not just me.
5:26
Speaker 2: I was talking over the weekend last week, and I
5:29
Speaker 2: know this is my first day. I'm doing the show
5:31
Speaker 2: this week to a couple different people in business, one
5:35
Speaker 2: of whom is pretty high up at a consumer goods
5:38
Speaker 2: company and another one who is in the healthcare space,
5:44
Speaker 2: and both of them are, you know, again pretty pugged
5:47
Speaker 2: into what's going on in their respective industries. And where
5:51
Speaker 2: we're there at this point is look institute the tariffs
5:55
Speaker 2: or don't, but the limbo is killing their ability to
5:59
Speaker 2: actually operate. And just as an example, one of them
6:02
Speaker 2: was saying, look, I have two deals that are on
6:04
Speaker 2: the table that I want to go and move forward with,
6:09
Speaker 2: but I can't do it because they import a lot
6:11
Speaker 2: of their goods and I have no idea if all
6:13
Speaker 2: the profit margins are going to get eaten up by
6:15
Speaker 2: tariffs or if I'm going to have an actual business
6:18
Speaker 2: that I can buy there. And so I think this
6:21
Speaker 2: is where I'm starting to get to now, which is, look,
6:25
Speaker 2: it's if you want to impose tariffs, let's go ahead, Like,
6:29
Speaker 2: let's let's go Like I'm I'm not saying this because
6:33
Speaker 2: I'm some huge proponent of tariffs. I think they can
6:35
Speaker 2: be useful in certain situations, and quite honestly, I'm interested
6:38
Speaker 2: in seeing what the Trump administration does with them because
6:41
Speaker 2: I think they're proposing some really interesting things to.
6:44
Speaker 3: Try to square away the trade picture.
6:47
Speaker 4: And there are some obvious cases like I know a
6:49
Speaker 4: big deal for Insance has been made of this Harley
6:51
Speaker 4: Davidson story in India and the one hundred percent tariff
6:53
Speaker 4: that that company faced, And I think there are some
6:55
Speaker 4: where you look at and you say, okay, here's an
6:57
Speaker 4: obvious case where we're facing unreasonable trade rules in a
7:03
Speaker 4: certain country and I think it would be reasonable for
7:06
Speaker 4: the administration to go after that.
7:09
Speaker 2: The confusion comes reasonable or not, Like, I'm more, look,
7:13
Speaker 2: let's move forward with some clarity so businesses can plan.
7:16
Speaker 2: Because what I'm starting to hear from businesses that have
7:20
Speaker 2: to transact goods across borders because of where existing supply
7:23
Speaker 2: lines are is they're saying, guys, we can't really do
7:27
Speaker 2: anything until you tell us what the playing.
7:29
Speaker 4: Field's going to look like. Yeah, and that's not what
7:32
Speaker 4: you want. You don't want businesses afraid to invest.
7:34
Speaker 3: If you tell.
7:35
Speaker 2: Businesses today, hey, we're doing ten percent blanket tariffs on
7:39
Speaker 2: everyone and sixty percent on China, they might go, okay,
7:43
Speaker 2: don't like that, But at.
7:44
Speaker 3: Least then they can begin planning for it.
7:46
Speaker 2: Right now, it's okay, it's going to be six more
7:48
Speaker 2: weeks of studying what kind of tariffs are going to
7:51
Speaker 2: be put in place on different countries. And so if
7:55
Speaker 2: you're a business trying to figure out where you're going
7:58
Speaker 2: to spend money on expansion this year, the question is
8:01
Speaker 2: what do you do for the next six weeks if
8:03
Speaker 2: you don't know what's coming down the road.
8:04
Speaker 4: I would also say to take that a step further
8:07
Speaker 4: if you're that same business, I don't think you have
8:10
Speaker 4: a lot of confidence that even once implemented, these are
8:12
Speaker 4: here to stick. And so that's where it starts to
8:16
Speaker 4: well Mexico and Canada for example, but those who never
8:19
Speaker 4: been implemented, but they kind of were, they were said, hey,
8:23
Speaker 4: this is in effect now, and then by two hours
8:26
Speaker 4: later they had been canceled and so not canceled, suspended,
8:31
Speaker 4: you know, waited on. And so that I think is
8:34
Speaker 4: the other piece of all this is I'm not sure
8:36
Speaker 4: that businesses are going to be able to get that
8:39
Speaker 4: certainty at least anytime in the near future. And I
8:42
Speaker 4: think this might be kind of the new normal to
8:44
Speaker 4: live under, is this is the negotiation tactic.
8:48
Speaker 3: You can't assume what the rules are of the road
8:50
Speaker 3: are going to be for now. And yes, there are
8:52
Speaker 3: a lot of businesses.
8:56
Speaker 2: Liquor exporters and vehicle manus who are probably going to
9:01
Speaker 2: say we are not going to invest in a new
9:04
Speaker 2: supply chain, in a new bottling facility, in a new
9:07
Speaker 2: manufacturing facility this year because there's too much uncertainty about
9:12
Speaker 2: what goes forward. You talk about just about any business
9:15
Speaker 2: that has any business that deals with hard goods right
9:20
Speaker 2: is in that situation and if you're a homebuilder, Okay,
9:24
Speaker 2: there is a pause on Canada tariffs for thirty days.
9:28
Speaker 2: Things don't exactly seem warm and friendly between the US,
9:30
Speaker 2: and like the subsequent what have we been.
9:32
Speaker 3: Like fourteen days? Now? Sure?
9:36
Speaker 2: Okay, So am I going to pull a permit for
9:39
Speaker 2: a new house not knowing what the cost of lumber
9:41
Speaker 2: is going to be?
9:42
Speaker 4: Well, I think what we're going to start seeing again
9:45
Speaker 4: that we saw back in twenty twenty was these kind
9:48
Speaker 4: of weird looking home building contracts for example, right, do
9:50
Speaker 4: you remember these where it was like, Okay, here's the
9:52
Speaker 4: price of the home, but you're gonna have a variable price.
9:55
Speaker 2: With I got an escalator, you know, of fifty k
9:58
Speaker 2: because I don't know what my lumber and PVC lost
10:01
Speaker 2: is going to be.
10:01
Speaker 4: Yeah, I think that might be the type of thing
10:03
Speaker 4: we do. I could see that, and again that's you
10:06
Speaker 4: can deal with that. But it's tough to get a mortgage.
10:09
Speaker 4: It's tough to you know, have a few steps in
10:11
Speaker 4: this process with that uncertainty, but you know, businesses will
10:14
Speaker 4: find their way around it eventually.
10:16
Speaker 2: I guess where I'm at on this is, Look if
10:18
Speaker 2: if there was ever convincing time to like not convincing time,
10:22
Speaker 2: like a time where you're like, look, just impose the tariffs.
10:24
Speaker 3: And let's let's go on this.
10:27
Speaker 2: It was kind of like, now, the US economy has
10:31
Speaker 2: been really strong for the last you know, three to
10:35
Speaker 2: six months now, after showing a little bit of weakness
10:37
Speaker 2: late summer, and it's strong enough that I think it
10:40
Speaker 2: could could stomach it, quite honestly. And the danger that
10:45
Speaker 2: you have now is, Okay, the uncertainty slows the US
10:48
Speaker 2: economy and then you impose tariffs on top of it.
10:51
Speaker 2: What does that potentially do again? I don't know that
10:54
Speaker 2: this materializes into anything, but this is just what I'm
10:58
Speaker 2: hearing in terms of, hey, can we get some certainty
11:01
Speaker 2: on the tariff side of things? And personally, i'd like
11:06
Speaker 2: to see it before April first. I'd like to see
11:09
Speaker 2: it sooner. But it is what it is. It's what
11:11
Speaker 2: it's going to be. This dovetails into this piece from
11:15
Speaker 2: the New York Times, hot inflation raises stakes of Trump's tariffs.
11:19
Speaker 2: I'm not buying inflation as a problem for this year.
11:23
Speaker 4: So are you not buying it as a problem because
11:27
Speaker 4: you're not buying the January report.
11:28
Speaker 3: You think there's a blip on the radar because it's
11:30
Speaker 3: bad data, not bad like because of like what actually happened.
11:35
Speaker 2: I think this is going to be very similar to
11:37
Speaker 2: what we saw last year, where the Q one inflation
11:39
Speaker 2: data came in a little hot and the Fed rightly
11:41
Speaker 2: looked through it, and I think they're right to look
11:43
Speaker 2: through it in this case. Also, I don't think inflation
11:47
Speaker 2: is going to be an issue as it relates to
11:50
Speaker 2: this year. A couple different reasons for that. The first is, again,
11:54
Speaker 2: you're starting to get a little bit more data out
11:56
Speaker 2: there showing just a modest cooling in the US economy,
11:59
Speaker 2: and that makes it little bit harder for inflation to
12:01
Speaker 2: stay elevated. The other piece that I keep looking at
12:05
Speaker 2: and thinking of it's been in the news a lot
12:07
Speaker 2: the last couple of days, is Hey, what's happening with
12:09
Speaker 2: the Russia Ukraine situation? And if there is some kind
12:12
Speaker 2: of piece deal that's agreed, you better believe there's going
12:15
Speaker 2: to be a part of that that includes Russian oil
12:18
Speaker 2: coming back to the global market. And that makes a
12:20
Speaker 2: big difference from an inflation perspective, And so I just
12:24
Speaker 2: don't buy the inflation side of things as being a
12:28
Speaker 2: real problem here, I'm poo pooing that and I'm much
12:32
Speaker 2: more concerned with Hey, are we potentially heading into a
12:35
Speaker 2: little bit of a slow down growth scare type of situation?
12:38
Speaker 2: Not the heads to recession necessarily, but just that slows
12:41
Speaker 2: down a little bit over the next three to six months.
12:44
Speaker 2: Let's take a quick break. When we come back, do
12:47
Speaker 2: you want to do any more tariff talk or you
12:49
Speaker 2: want to move to retail sales from this one, Let's
12:51
Speaker 2: go to retail sales.
12:54
Speaker 1: The latest news on inflation and how the markets are
12:56
Speaker 1: reacting every morning right here on the Financial Exchange Radio Network.
13:02
Speaker 1: If you missed any of today's show, catch up whenever
13:04
Speaker 1: you want on our YouTube page. Find daily show segments
13:07
Speaker 1: and full shows. Just go to YouTube dot com and
13:09
Speaker 1: search for the Financial Exchange. This is your home for
13:12
Speaker 1: breaking business and financial news. This is the Financial Exchange
13:17
Speaker 1: Radio Network.
13:19
Speaker 5: This segment of the Financial Exchange is brought to you
13:22
Speaker 5: part by the US Virgin Islands Department of Tourism. The
13:25
Speaker 5: US Virgin Islands are Saint Croix, Saint Thomas, and Saint John.
13:28
Speaker 5: And if you act now, you can take advantage of
13:31
Speaker 5: a special promotion to San Croi, experience a Vibe like
13:34
Speaker 5: no other, and get a two hundred and fifty dollars
13:37
Speaker 5: per person airline credit when you book a minimum five
13:40
Speaker 5: nights stay at participating hotels. Go to visit USVII dot
13:44
Speaker 5: com and use code Vibe twenty twenty five to reserve
13:48
Speaker 5: your trip today. Take your next vacation to Saint Croix
13:51
Speaker 5: and America's Crubean Paradise the United States Virgin Islands. Go
13:54
Speaker 5: to visit USVII dot com and use code Vibe twenty
13:58
Speaker 5: twenty five to book your trip. That's visit at USVII
14:01
Speaker 5: dot com and code Vibe twenty five.
14:04
Speaker 2: Mike, So, we got some bad retail sales data that
14:07
Speaker 2: came out this morning at eight thirty. Basically it was
14:12
Speaker 2: not good, down point nine percent month over month.
14:15
Speaker 4: Expectations for a decrease of point two percent correct point one, okay,
14:20
Speaker 4: And if you look at it excluding autos, it was
14:24
Speaker 4: down point four.
14:26
Speaker 2: So the auto decline was greater, which you would expect
14:28
Speaker 2: because autus had been strong the last couple months with
14:30
Speaker 2: people trying to front run tariffs, and so that minus
14:34
Speaker 2: point four was worse than the point three that was
14:37
Speaker 2: expected there.
14:38
Speaker 3: So couple different ways to look at this. One is, hey,
14:44
Speaker 3: this is.
14:45
Speaker 2: A tariff front running thing, and we're gonna have a
14:48
Speaker 2: couple months of week retail sales data because people were
14:51
Speaker 2: buying cars and expensive things, TVs and furniture and whatnot
14:56
Speaker 2: over the last couple months, and so that's gonna come
14:59
Speaker 2: back and bite us a little bit short term possible.
15:02
Speaker 2: So that's explanation number one. Explanation number two. The weather
15:07
Speaker 2: in January outside of you know what, we had here
15:09
Speaker 2: in the Northeast really bad and people probably weren't buying
15:14
Speaker 2: things as a result. Okay, Atlanta had school closed for
15:17
Speaker 2: four days, so parents were stuck inside with their kids
15:19
Speaker 2: for over a tenth of the month. And that was
15:21
Speaker 2: across like a lot of the Southeast. But I used
15:23
Speaker 2: Atlanta as an example.
15:24
Speaker 3: Hadn't considered that.
15:25
Speaker 4: But I do remember friends of mine going to Disney
15:28
Speaker 4: World with their kids and it being.
15:29
Speaker 3: Forty six degrees. It snowed in New Orleans.
15:32
Speaker 2: Yeah, other things that you saw during the month of January,
15:35
Speaker 2: wildfires in California. Los Angeles was kind of a mess then,
15:40
Speaker 2: and so probably not a ton of shopping going off.
15:43
Speaker 3: Yeah, so I used weather. I don't like to use
15:45
Speaker 3: weather as an excuse.
15:46
Speaker 2: But I'm just saying, hey, this could contribute a little
15:48
Speaker 2: bit to this because those are two areas that you
15:50
Speaker 2: typically don't see disrupted in that fashion at this time
15:53
Speaker 2: of year, and so from a seasonal adjustment perspective, yeah,
15:56
Speaker 2: that could cause something. Other things that are interesting to me.
16:01
Speaker 2: When you look at the data for the last five januaries,
16:06
Speaker 2: twenty twenty four came in at minus point six. Twenty
16:11
Speaker 2: three was strong, but that was just on the back
16:13
Speaker 2: of some pandemic stuff you had. Basically the last like
16:17
Speaker 2: four or five januaries have been bad. Sorry, I can't
16:20
Speaker 2: pull up the data going back further, so there might
16:22
Speaker 2: be like a seasonal adjustment remnant that's in here as well.
16:26
Speaker 2: Where the January data just doesn't look very good.
16:29
Speaker 4: There's one piece that I was trying to make sense of.
16:32
Speaker 4: So total vehicle sales when you looked at that, it's
16:37
Speaker 4: down two point eight percent in the month of January
16:39
Speaker 4: compared to December. Yes, we know the people maybe we
16:41
Speaker 4: are buying, you know, buying cars in December more than
16:44
Speaker 4: the January inflation number for used cars and trucks was
16:47
Speaker 4: up two and a half ish percent.
16:50
Speaker 3: Can't reconcile, and I just can't reconcile. I can't.
16:53
Speaker 2: Actually, the prior month data was up two point eight
16:57
Speaker 2: percent for vehicle sales. So my guess is that the
17:00
Speaker 2: dealers were like, oh, we have more demand, we can
17:02
Speaker 2: price more highly.
17:03
Speaker 3: Yeah, maybe, and then the demand went puff. Yeah.
17:05
Speaker 2: That's that's my guess as to how you can reconcile it,
17:08
Speaker 2: because we literally saw a two point eight percent jump
17:11
Speaker 2: right in vehicle sales.
17:12
Speaker 3: The prior month.
17:14
Speaker 2: So overall, this is one data point. Overall, retail has
17:18
Speaker 2: been pretty good over the last year, and really over
17:20
Speaker 2: the last six months in particular, you can point to
17:22
Speaker 2: it and say, hey, it's been one of the major
17:24
Speaker 2: things that's actually kept the US economy going.
17:27
Speaker 4: So for the full year twenty twenty four, we saw
17:29
Speaker 4: retail sales advancing four and a half almost four and
17:31
Speaker 4: a half percent.
17:32
Speaker 3: Yeah, so really good data, really really really.
17:34
Speaker 4: Strong, and you know, I think there's probably enough evidence
17:39
Speaker 4: to say that this is another blip on the radar,
17:41
Speaker 4: whether due to seasonality that isn't adjusted in this report,
17:45
Speaker 4: or just a cooling off from the prior month. The
17:50
Speaker 4: one other data point that we have talked about around
17:52
Speaker 4: inflation that I think bears watching are the expectations And
17:56
Speaker 4: according to the Michigan Sentiment Survey, you did you see
18:00
Speaker 4: inflation expectations jump from December to January by a full
18:03
Speaker 4: percentage point. That was not confirmed in the Federal Reserve's
18:07
Speaker 4: own survey data. And so the inflation expectations again consumers
18:13
Speaker 4: and investors herd mentality oftentimes wrong, oftentimes wrong about a
18:17
Speaker 4: lot of things. But We've talked at length about this before,
18:21
Speaker 4: and I'll reiterate it that expectations around inflation being high
18:27
Speaker 4: can create more inflation in the short term. And so
18:30
Speaker 4: you know, I suspect that that read on the Michigan
18:32
Speaker 4: Sentiment Survey had a lot to do with proposed tarifts
18:35
Speaker 4: that were being announced in January that then did not
18:37
Speaker 4: go into place. But should that continue to climb, that'll
18:41
Speaker 4: definitely be an area of interest and concern for me
18:44
Speaker 4: should expectations around inflation bump up more.
18:47
Speaker 2: So Again, bad retail sales report, I don't know that
18:50
Speaker 2: you really read much into it. It's a one off.
18:53
Speaker 2: It's it's kind of me It certainly isn't going to
18:56
Speaker 2: help with you know, the overall growth data. But let's
18:59
Speaker 2: see what the next couple look at before we decide
19:01
Speaker 2: that we're going to panic on this.
19:03
Speaker 3: I just I don't know that this.
19:05
Speaker 2: Really means anything, just because of any of the number
19:09
Speaker 2: of reasons that we just talked about here. So certainly
19:13
Speaker 2: not great data, but it is what it is, and
19:17
Speaker 2: I think we just need more information before we can
19:20
Speaker 2: say a thing conclusively about it.
19:21
Speaker 3: Just take a quick break here.
19:23
Speaker 2: When we come back, we got Wall Street Watch, and
19:26
Speaker 2: then we're talking TikTok.
19:40
Speaker 1: Like us on Facebook and follow us on Twitter at
19:43
Speaker 1: TFE show. Breaking business news is always first right here
19:47
Speaker 1: on the Financial Exchange Radio Network. Time now for Wall
19:52
Speaker 1: Street Watch. A complete look at what's moving market so
19:55
Speaker 1: far today right here on the Financial Exchange Radio Network.
20:00
Speaker 5: Well markets our mixed territory, mostly quiet as traders react
20:03
Speaker 5: to President Trump holding off on imposing new reciprocal tariffs. Also,
20:07
Speaker 5: we received a new retail sales data out this morning,
20:11
Speaker 5: where retail sales fell zero point nine percent in January,
20:15
Speaker 5: more than expectations of a zero point two percent decline.
20:19
Speaker 5: Right now, the Dow is off by sixty six points,
20:22
Speaker 5: SMP five hundred edging three points higher, and the Nasdaq
20:27
Speaker 5: creeping fourteen points higher as well. Russell two thousand is
20:30
Speaker 5: up just over a thirty percent, or eight points. Tenure
20:34
Speaker 5: Treasureel down by five basis points, now at four point
20:37
Speaker 5: four to seven percent, and crude oil off about a
20:40
Speaker 5: quarter percent, trading just above seventy one dollars a barrel.
20:44
Speaker 5: Maderner shares up by two percent after the biotech company
20:47
Speaker 5: posted a bigger than expected loss in the fourth quarter.
20:51
Speaker 5: Last month, Moderner slashed its twenty twenty five revenue guidance,
20:54
Speaker 5: has sales of its COVID nineteen and RSV vaccines remained
20:58
Speaker 5: sluggish again. Stock is up by two percent. Meanwhile, shares
21:03
Speaker 5: an Airbnb up by fourteen percent after the online short
21:07
Speaker 5: term rental platform swung a profit in the previous quarter
21:11
Speaker 5: while revenue beat expectations. The company also said it aims
21:16
Speaker 5: to build more business in Asia and Latin America elsewhere.
21:21
Speaker 5: Applied Materials reported higher than expected profit and revenue, but
21:24
Speaker 5: its sales outlook for the current quarter underwhelmed. Shares in
21:28
Speaker 5: the semiconductor equipment company are pulling back by five percent.
21:33
Speaker 5: Coinbase reported a surgeon quarterly revenue and profit, benefiting from
21:37
Speaker 5: a post election rally. However, that stock pulling back by
21:41
Speaker 5: six percent today. Speaking of crypto, CNBC is reporting that
21:45
Speaker 5: game Stop is considering investing in bitcoin and other cryptocurrencies. However,
21:51
Speaker 5: the video game retailer is still determining whether the move
21:54
Speaker 5: would be whether that would be a wise business move.
21:58
Speaker 5: Excuse me, GameStop jumping by five percent. Video stream company
22:03
Speaker 5: Roku reported a narrower than expected loss in revenue that
22:07
Speaker 5: top forecast, boosted by an increase in accounts and spending
22:11
Speaker 5: per household, that stock jumping by fourteen percent and shares
22:16
Speaker 5: in Boston based DraftKings also jumping by fourteen percent. After
22:20
Speaker 5: the online gambling giant reported quarterly results that missed the mark. However,
22:25
Speaker 5: it did raise its twenty twenty five revenue guidance. I'm
22:29
Speaker 5: Tucker Silvan, that's Wall Street watch.
22:32
Speaker 2: Is it bad that every time I hear about a
22:35
Speaker 2: gambling company raising revenue guidance, all I.
22:38
Speaker 3: Think of is more n They're taking more of your money. Yeah.
22:44
Speaker 4: I mean, look, that's the case for any company, but
22:46
Speaker 4: with a gambling company in particular, there's just no value.
22:49
Speaker 3: You received, no product for it. Yeah, I mean you
22:52
Speaker 3: can make the case. I guess. Look, it's entertainment, and
22:54
Speaker 3: we spend plenty of money and what's see a difference
22:56
Speaker 3: stra that in Netflix.
22:57
Speaker 2: Well, the difference is like the circus is addictive. You've
23:05
Speaker 2: seen one trapeeze artist, you've seen them all. Yeah, yeah,
23:09
Speaker 2: it's not to diminish trapez arsts, but there's a reason
23:11
Speaker 2: why they're generally not well compensated.
23:13
Speaker 4: Yeah again, I get it. But then we're drawing the
23:17
Speaker 4: line between the addictive nature of gambling versus gaming versus
23:22
Speaker 4: binge watching Netflix, which I do agree there's a there's
23:26
Speaker 4: a rolling grade there. But yeah, yeah, we pay for
23:29
Speaker 4: a lot of things that are not uh.
23:31
Speaker 2: Produce the thing if you have If you watch a
23:33
Speaker 2: bad Netflix show, you don't say, well, let me spend
23:38
Speaker 2: some more and watch a better one.
23:39
Speaker 3: You already subscribed.
23:41
Speaker 2: Yeah, you know, whereas with I digress, we don't need
23:46
Speaker 2: to go into all that.
23:47
Speaker 1: But it's just.
23:47
Speaker 2: Uh, hey, they raise their revenue guidance. Great, they're taking
23:51
Speaker 2: more money. Okay, fine? Uh Apple and Google, Uh they've
23:56
Speaker 2: got TikTok back in their app stores. Uh. This despite
24:00
Speaker 2: there being a law on the book saying you're not
24:02
Speaker 2: really supposed to operate. The Trump administration has said that
24:06
Speaker 2: they granted was it a how long was the window
24:08
Speaker 2: that they said they were seventy.
24:10
Speaker 4: Three and a half days now I think it was
24:12
Speaker 4: ninety day window, or it might have been seventy five day.
24:15
Speaker 2: So they're trying to figure out a way to come
24:18
Speaker 2: to a deal that would basically allow it to pass
24:22
Speaker 2: muster with the law that was passed by Congress for
24:24
Speaker 2: last year. The pair company of TikTok Byte Dance has
24:27
Speaker 2: pretty much said, look, we're not really interested in the deal,
24:30
Speaker 2: which if they actually mean that, I mean, I just
24:35
Speaker 2: want to like get to why I well, those of
24:38
Speaker 2: you listening know why I really don't like TikTok. It's
24:40
Speaker 2: because it's owned by a Chinese company who buy law
24:43
Speaker 2: has to turn money a turn data over to the
24:46
Speaker 2: Chinese government, and by virtue of that over to the
24:49
Speaker 2: Chinese military if requested. And so the idea that hey,
24:53
Speaker 2: you've got a social media network that is required by
24:56
Speaker 2: law to turn data over to the Chinese military if needed,
25:00
Speaker 2: well with me, you know, like that's kind of a problem.
25:02
Speaker 4: And I gotta just draw this difference out here for
25:05
Speaker 4: a moment that is fundamentally different. You might say like, well,
25:09
Speaker 4: you know, the same thing kind of exists with secret
25:11
Speaker 4: courts in the United States. When it comes to things
25:13
Speaker 4: like terrorism and things like that. And to a limited
25:15
Speaker 4: extent that's true. But does everybody remember a few years
25:18
Speaker 4: ago the mass shooting in California that shot up I
25:22
Speaker 4: think it was a government office.
25:23
Speaker 3: Was former employees? Yeah, was that right?
25:25
Speaker 4: And the government took Apple to court to say, we
25:29
Speaker 4: need you to encrypt the message traffic are these places?
25:32
Speaker 4: And Apple said no and didn't do it, and they
25:34
Speaker 4: still sell plenty of smartphones in the US. And so
25:37
Speaker 4: again key fundamental difference between how the US system works
25:41
Speaker 4: and the Chinese system works.
25:43
Speaker 2: Moving on anyways, Uh, where was I going with this?
25:47
Speaker 2: So here's here's why I think if if bike Dance
25:51
Speaker 2: actually means it when they say no, we're not interested
25:54
Speaker 2: in selling. We're either going to shut it down or
25:56
Speaker 2: continue to operate it ourselves, it means one thing.
26:01
Speaker 3: It means they don't.
26:01
Speaker 2: Care about the money, right, They don't care about the product.
26:05
Speaker 2: All they care about is the data and the access
26:08
Speaker 2: to it.
26:08
Speaker 4: Now, if they actually were of that position, I tend
26:12
Speaker 4: to think that we would be hearing more news about
26:15
Speaker 4: the TikTok band and the company saying this is not happening,
26:17
Speaker 4: this is not happening.
26:18
Speaker 3: The fact that we actually haven't heard a whole lot
26:20
Speaker 3: of it.
26:20
Speaker 4: Of course, the last two weeks makes me think that
26:22
Speaker 4: there could be progress being made, because again, if there's
26:26
Speaker 4: actually potentially a deal that is being talked about here,
26:30
Speaker 4: I don't think the parties would be talking about it publicly.
26:33
Speaker 4: If there was nothing happening and they were butting heads
26:35
Speaker 4: and saying this isn't working, then I think it would
26:37
Speaker 4: be fairly public.
26:38
Speaker 3: So I actually take the silence and.
26:41
Speaker 4: The fact that Apple and Google now have the confidence
26:43
Speaker 4: to restore the TikTok app to the App Store to
26:46
Speaker 4: be an indication of some progress. My concern is that
26:50
Speaker 4: we could land in a deal that does not do
26:52
Speaker 4: enough to divest Chinese authorities of TikTok sorry by dance
26:57
Speaker 4: of TikTok, and therefore the data flow of TikTok, and
27:01
Speaker 4: that would be a really disappointing place to end up.
27:04
Speaker 3: Yeah, so well.
27:05
Speaker 2: And the other thing that's kind of bothersome to me
27:07
Speaker 2: about this is with the deep Seek news from a
27:10
Speaker 2: few weeks ago. Remember deep Seek is the Chinese created
27:14
Speaker 2: AI platform. You've got all kinds of buzz right now
27:17
Speaker 2: about banning deep Seek because of national security concerns.
27:22
Speaker 3: Well, if you're gonna be.
27:22
Speaker 2: Logically consistent, you're saying, hey, this is a Chinese app
27:25
Speaker 2: that we don't want our people putting data into. And
27:28
Speaker 2: you've got another one here that people are putting data
27:30
Speaker 2: into in the form of you know, videos and location
27:32
Speaker 2: and all this. What are we really doing here?
27:37
Speaker 3: Yeah, it's like.
27:38
Speaker 4: We're benefiting TikTok because people because people like it. Yeah,
27:42
Speaker 4: you know, it's it's not a popularity contest, folks. It's
27:46
Speaker 4: I just kind of is, but it shouldn't be.
27:49
Speaker 2: Look, it's either China's an adversary or they aren't. In
27:52
Speaker 2: my opinion, like it's it can't be like kind of
27:54
Speaker 2: for this but not for that. It either is or
27:57
Speaker 2: it isn't. So out of we'll see where this ends
28:01
Speaker 2: up going. Just take a quick break here. When we
28:04
Speaker 2: come back, let's talk a little bit about tapping into
28:09
Speaker 2: your retirement funds and some of the tax pitfalls that
28:13
Speaker 2: it could have run into if you're not being careful.
28:17
Speaker 1: Breaking business and financial news first throughout the day only
28:21
Speaker 1: here on the Financial Exchange Radio Network. Find daily interviews
28:26
Speaker 1: and full shows of the Financial Exchange on how are
28:28
Speaker 1: YouTube page get cut up on anything and everything you
28:32
Speaker 1: might have missed. This is the Financial Exchange Radio Network.
28:46
Speaker 3: All right, good.
28:47
Speaker 2: Piece here from the Wall Street Journal. It's titled rating
28:49
Speaker 2: your retirement funds. Here's how to avoid hidden tax traps. Remember,
28:55
Speaker 2: most retirement funds either pre tax and you've got some
28:59
Speaker 2: kinds of penal that might be associated with them. Or
29:02
Speaker 2: you might even have tax free funds in a row IRA,
29:04
Speaker 2: but you don't always necessarily have the ability to make
29:07
Speaker 2: tax free withdrawals from there in all situations.
29:10
Speaker 4: Just you know how oftentimes we talk about how things
29:13
Speaker 4: like fundamentally on this show are pretty common sense, and
29:16
Speaker 4: if you just think about them for a little bit
29:18
Speaker 4: and like read a little bit to understand, then you
29:22
Speaker 4: can generally come to a conclusion that's logical about things
29:25
Speaker 4: like inflation or other economic things. Sure that does not
29:29
Speaker 4: apply to retirement account rules. They have no logic. They
29:32
Speaker 4: are not logical. No, they don't make a ton of sense.
29:35
Speaker 4: They contradicting each other sometimes, and the purpose behind them
29:39
Speaker 4: is sometimes unclear, and oftentimes the rule is just in
29:42
Speaker 4: place because it's a story of well that's always been
29:45
Speaker 4: the rule. And there's an example that's given here that
29:47
Speaker 4: I totally understand from somebody who made a bad decision
29:52
Speaker 4: and just didn't understand the rules.
29:54
Speaker 3: And here's the story.
29:56
Speaker 4: Somebody took a early distribution out of their four oh
29:59
Speaker 4: one K order to pay for down payment on a
30:02
Speaker 4: first time home purchase and PhD education go ahead.
30:05
Speaker 2: Not just someone, This is a professor of accounting.
30:09
Speaker 3: Right, so this is not a dummy.
30:11
Speaker 2: This is someone who's familiar with numbers and generally understands
30:15
Speaker 2: how they work.
30:16
Speaker 4: So took thirty grand out of his four oh one
30:18
Speaker 4: K to help pay for his PhD and first home.
30:21
Speaker 4: He then ended up getting slapped with a ten percent penalty.
30:24
Speaker 4: And here's the deal. You can take a retirement account
30:27
Speaker 4: distribution for a first time home purchase and as well
30:33
Speaker 4: as you know higher education expenses. It just has to
30:37
Speaker 4: be from an IRA, not a four oh one K.
30:39
Speaker 4: And he would have been totally eligible to do this
30:41
Speaker 4: if he had first taken the money out of the
30:43
Speaker 4: four oh one K, rolled it to an IRA, and
30:45
Speaker 4: then done the distribution. He would have still paid the
30:48
Speaker 4: taxes but avoided the penalty. And that's dumb, That makes
30:50
Speaker 4: no sense. I believe there's a limit on it as well.
30:53
Speaker 4: I think it's a ten thousand dollars limit. You're limited
30:55
Speaker 4: to so like, okay, you could do it for part
30:57
Speaker 4: of the down payment, but not all the penalties.
31:00
Speaker 2: So basically the IRS was like, hey, you can't do this,
31:05
Speaker 2: and he you know, got into a whole thing with them,
31:08
Speaker 2: and eventually it was like, Okay, I have to pay
31:10
Speaker 2: this because the judge in the case said, yeah, I
31:12
Speaker 2: feel bad for you, but the law's the law.
31:14
Speaker 3: Right.
31:15
Speaker 4: There are again the rules on this don't make a
31:18
Speaker 4: ton of sense. But for example, if you have a
31:21
Speaker 4: roth account, you can generally get some of the money
31:23
Speaker 4: out without a penalty, and there's logic to that because
31:25
Speaker 4: you're not getting the tax deduction on it, and so
31:27
Speaker 4: they allowed you to get some of your principal back
31:30
Speaker 4: out without penalties. There's also one of the most complicated
31:34
Speaker 4: rules in IRS Statute seventy seventy, the seventy two T distribution, which,
31:41
Speaker 4: without going into the details, can be a pretty successful
31:44
Speaker 4: strategy if somebody is needing money out of their retirement
31:48
Speaker 4: plan pre fifty nine and a half and is at
31:50
Speaker 4: least close to retirement or already retired.
31:54
Speaker 2: Having said that, if you if you execute it incorrectly,
31:57
Speaker 2: oh you're screwed. You have all kinds of penalties and problems.
32:00
Speaker 4: Yeah, you're absolutely demolished if you get this done incorrectly.
32:03
Speaker 4: So I think there's a few lessons from all this.
32:06
Speaker 3: One. The retirement account probably should be one.
32:09
Speaker 4: Of the last sources you go to look for for money,
32:13
Speaker 4: because the taxes and penalties that compound on there when
32:16
Speaker 4: you go and do so.
32:17
Speaker 3: Are pretty extraordinary. The other trouble with it is the
32:21
Speaker 3: rules around it are so darn complicated that you run
32:25
Speaker 3: the risk of stepping in it without taking very determined
32:30
Speaker 3: and educated steps on how to do all of this.
32:32
Speaker 4: And so I generally feel like, hey, it actually can
32:35
Speaker 4: make sense, right if there's high expense debt out there,
32:38
Speaker 4: I would much rather somebody take money out of a
32:40
Speaker 4: retirement plan than a payday loan or a loan shark,
32:43
Speaker 4: or pay thirty percent interest on a credit card. But
32:47
Speaker 4: if you don't understand the rules, if you do not
32:49
Speaker 4: follow the rules directly, and if you don't get a
32:52
Speaker 4: lot of advice from tax experts financial planning experts, then
32:56
Speaker 4: it can not only damage your financial future but really
33:01
Speaker 4: kind of screw you over in the short term. Two
33:03
Speaker 4: with the tax penalties that get assessed. But there are
33:07
Speaker 4: appropriate ways to deal with this sort of thing. And
33:10
Speaker 4: if you are finding yourself in a place where you
33:12
Speaker 4: are someone you know is planning on taking or starting
33:14
Speaker 4: retirement account distributions. Maybe it's prior to the fifty nine
33:19
Speaker 4: and a half age, maybe it's after, and you are
33:21
Speaker 4: just approaching retirement and you have these different buckets and
33:24
Speaker 4: just aren't sure which sequence makes sense.
33:26
Speaker 3: To start from.
33:27
Speaker 4: Give the folks at arm Strong Advisory Group of calls
33:29
Speaker 4: so we can educate you on all the different rules
33:32
Speaker 4: that apply to retirement account distributions, whether it's in the
33:35
Speaker 4: four oh one K, the TSP, the IRA, there's all
33:38
Speaker 4: different sorts of rules that apply to how and when
33:41
Speaker 4: you take this money out and the penalties that could
33:44
Speaker 4: be applied if you do. Give the folks at arms
33:46
Speaker 4: Strong Advisory Group of call the numbers eight hundred three
33:49
Speaker 4: nine three four zero zero one. We offer free consultations
33:53
Speaker 4: and are here to answer your questions about your financial future.
33:57
Speaker 4: That number again, eight hundred three nine three four zero
34:00
Speaker 4: zero one.
34:02
Speaker 1: The proceeding was paid for by Armstrong Advisory Group, a
34:04
Speaker 1: registered investment advisor. Nothing in the ad or in any
34:07
Speaker 1: Armstrong guide a specific financial, legal or tax advice. Consult
34:10
Speaker 1: your own financial tax into state planning advisors before making
34:12
Speaker 1: any investment decisions. Armstrong may contact you to offer investment
34:16
Speaker 1: advisory services.
34:17
Speaker 2: Tucker mentioned it briefly during Wall Street Watch, but I
34:20
Speaker 2: want to spend some time on this game Stop story, please,
34:24
Speaker 2: So GameStop, if you're not familiar with them, they are
34:27
Speaker 2: a video game retailer who has been generally not very
34:32
Speaker 2: successful doing their main business in recent years because the
34:35
Speaker 2: way people have bought video games has changed dramatically over
34:38
Speaker 2: the last two decades or so. They do about four
34:42
Speaker 2: billion dollars a year in revenue right now. Their peak
34:45
Speaker 2: was back in April of twenty eleven, so Q two
34:48
Speaker 2: of twenty eleven, when they were doing about nine and
34:51
Speaker 2: a half billion, and they've been on a steady decline
34:53
Speaker 2: since then.
34:54
Speaker 3: So revenue is shrinking.
34:56
Speaker 2: So when you have a company where revenue is shrinking,
34:58
Speaker 2: you generally say, Okay, what can I do in order
35:01
Speaker 2: to boost revenue? How can I reinvent the business? Blah
35:03
Speaker 2: blah blah or.
35:04
Speaker 3: Start cutting costs pretty rapidly correct.
35:06
Speaker 2: GameStop is, you know, saying that they're exploring whether or
35:10
Speaker 2: not they should be investing in bitcoin.
35:13
Speaker 4: Oh, how's that gonna help them with their slowing sales. Chuck,
35:18
Speaker 4: it's not a video games and consoles, it's not sure,
35:23
Speaker 4: and bitcoin seemingly does some amazing things.
35:26
Speaker 2: Here's something that's just kind of strange right now. And again,
35:29
Speaker 2: I have no idea what's gonna happen with bitcoin in
35:32
Speaker 2: the short term, long term, or any other term.
35:34
Speaker 3: Like I I don't.
35:35
Speaker 2: Know, but I do know that this is something that
35:39
Speaker 2: fundamentally is not actually.
35:43
Speaker 3: Doing business.
35:45
Speaker 2: If the valuation, if your idea to you know, drive
35:49
Speaker 2: the stock price at your company is not actually creating
35:52
Speaker 2: a business that has meaningful value for your customers, but
35:56
Speaker 2: instead is, hey, can we buy an asset that might
35:59
Speaker 2: go up in price. I'm not sure you're really a company.
36:05
Speaker 2: It's it's kind of grifty, quite honestly.
36:08
Speaker 4: Yeah, And you know, it's easy to just kind of
36:10
Speaker 4: joke and make fun of this company as being ridiculous.
36:14
Speaker 4: And I do think that this decision is absolutely preposterous.
36:17
Speaker 4: Can you can you imagine a few decades ago, for example, uh,
36:21
Speaker 4: General Electric saying, hey, we're having a slowdown in our business,
36:24
Speaker 4: so you know what we're gonna do. We're gonna speculate
36:26
Speaker 4: on the price of gold.
36:27
Speaker 2: Right, We're buying a bunch of platinum and we're gonna
36:29
Speaker 2: see how it goes. Pardon me, Like, no, that's not
36:33
Speaker 2: really what you do.
36:35
Speaker 4: My concern about this and a few other things that
36:38
Speaker 4: we've been seeing in markets, whether it's zero day options,
36:42
Speaker 4: whether it is you know, we've always had leveraged ets,
36:47
Speaker 4: but leveraged ETFs on very specific assets. For example, we
36:52
Speaker 4: are very much today. Oh and actually, didn't a custodian
36:56
Speaker 4: investment custodian announce that they were going to allow sports
36:58
Speaker 4: gambling on the investment platform via ETFs.
37:03
Speaker 3: I think that I saw.
37:04
Speaker 2: Someone's doing I think that I think someone's doing prediction markets.
37:07
Speaker 3: I don't know, so maybe.
37:09
Speaker 4: In any case, we are getting to a point now
37:11
Speaker 4: where we are significantly blurring the lines between investing and gambling.
37:18
Speaker 4: And that's my concern is.
37:20
Speaker 3: It's fine until Look, it's fine until it isn't.
37:22
Speaker 4: Yeah, it will potentially reach a breaking point where Americans
37:28
Speaker 4: just lose confidence in the idea of investing because they
37:31
Speaker 4: no longer know what it is and they are mixing speculation, gambling,
37:36
Speaker 4: and investing all in one place.
37:37
Speaker 2: Like which, by the way, this is why US security
37:41
Speaker 2: laws were developed in the nineteen thirties was because everyone
37:44
Speaker 2: got roasted at the end of the nineteen twenties.
37:47
Speaker 4: Yeah, I just I can you imagine having some of
37:49
Speaker 4: these things in like an Ira. But that's where we
37:53
Speaker 4: are heading is, Yeah, you can do a lot of
37:55
Speaker 4: this stuff, and I think a lot of people are
37:57
Speaker 4: educated on it, but a lot of folks just don't
37:59
Speaker 4: fight to mentally understand the difference between gambling and investing.
38:03
Speaker 2: Let's take a quick break here, still a lot more
38:05
Speaker 2: to come, including are millennials the reason why rents are
38:10
Speaker 2: so high?
38:11
Speaker 5: Man?
38:12
Speaker 2: Ah, that's right, a little bit of millennial talk. Kicking
38:17
Speaker 2: off our two in a little bit