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Silver Mania, S&P 500 at 7,000 & What Investors Are Missing · The Financial Exchange Show

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Speaker 2: Good morning, welcome back to the Financial Exchange. It's Mike,
1:12
Speaker 2: Paul and Tucker with you on a government shutdown Tuesday.
1:16
Speaker 2: We've got plenty of stuff that was on the dock
1:19
Speaker 2: and for this week, but with the jolt support the
1:21
Speaker 2: job opening. Is labor turnover survey that was to be
1:24
Speaker 2: discussed this morning or released this morning at ten am
1:26
Speaker 2: has been relayed, delayed, not relayed. The Friday monthly jobs
1:31
Speaker 2: report is also being delayed as a result of the
1:35
Speaker 2: government shutdown, and so we'll get to those data points
1:38
Speaker 2: when we get them, but presumably also the weekly jobless
1:41
Speaker 2: claims numbers, which are collected at the state level but
1:44
Speaker 2: compiled by the federal government, will also not be released
1:47
Speaker 2: on Thursday this week. We will keep you tuned in
1:53
Speaker 2: on all those updates here, even though I think it's
1:55
Speaker 2: not expected this lasts a terribly long time, but nonetheless
1:59
Speaker 2: we will see how far delayed these things are. In
2:02
Speaker 2: the meantime, we do still have earnings pouring in as
2:05
Speaker 2: the week goes on, including from some of the biggest
2:07
Speaker 2: players out there. We mentioned earlier this week what we
2:11
Speaker 2: would be seeing, but we will be hearing from both
2:14
Speaker 2: Amazon and Google this week we will be sorry, Yeah,
2:19
Speaker 2: Google's parent company, Alphabet. We today we'll be hearing from AMD, MRK, Pfizer.
2:26
Speaker 2: Tomorrow in addition to Google's parent company, Alphabet, will be
2:29
Speaker 2: hearing from lily Ab, the Novartis Nova Nordisk Uber and
2:33
Speaker 2: then Thursday we will hear from Amazon and that'll pretty
2:37
Speaker 2: much be the major earnings of the week. We heard
2:39
Speaker 2: from Palaneer this morning, But quite honestly, all those earnings
2:43
Speaker 2: pieces I think probably should take a backseat to the
2:47
Speaker 2: wild and crazy moves that we continue to see in
2:50
Speaker 2: commodity markets, because this is fairly abnormal, No extremely abnormal,
2:56
Speaker 2: is the way that I would put it. I had
2:59
Speaker 2: Mark take a look for me yesterday just how infrequently
3:03
Speaker 2: gold prices or silver prices move by, you know, ten
3:07
Speaker 2: percentage points or more in a day, and it's very,
3:09
Speaker 2: very infrequent. As we are speaking right now, silver prices,
3:13
Speaker 2: which on Thursday or Friday of last week had touched
3:16
Speaker 2: as high as one hundred and twenty bucks an ounce,
3:19
Speaker 2: shot downwards on Friday of last week to seventy something
3:24
Speaker 2: dollars an ounce, and today are moving up fourteen percent
3:29
Speaker 2: to nearly eighty eight dollars per ounds gold following a
3:32
Speaker 2: similar format had touched over five thousand dollars an ounce,
3:35
Speaker 2: moving up six percent today, and ultimately, you know what
3:41
Speaker 2: is driving these things. There's been a lot of talk
3:43
Speaker 2: about Kevin worsh as the new Fed pick and being
3:46
Speaker 2: an inflation hawk. There's been discussion of central banks and
3:50
Speaker 2: currency risk and maybe those things stabilizing. You did have
3:54
Speaker 2: the dollar moving in a different direction recently. But I'll
3:57
Speaker 2: tell you the movements that we are seeing, especially in
4:01
Speaker 2: silver into a lesser degree gold, are giving me the
4:04
Speaker 2: same feelings that I got back in twenty twenty one
4:06
Speaker 2: when we were talking about game stop stock.
4:09
Speaker 3: It reeks of retail investor speculation, Reddit forums and everything
4:14
Speaker 3: that we saw back in twenty twenty one. Silver has
4:17
Speaker 3: become the new darling of the Reddit forums in terms
4:21
Speaker 3: of investment. Some of these volume numbers, Mike, you know,
4:23
Speaker 3: the price movement speak for themselves in terms of how
4:25
Speaker 3: crazy they are, but in terms of the trading volumes,
4:28
Speaker 3: if you looked back, they did a run on data
4:32
Speaker 3: from January twenty six in terms of the activity that
4:35
Speaker 3: we saw in silver trading, whether it's through exchange, shaded
4:38
Speaker 3: fronts or other vehicles out there. If you looked back
4:41
Speaker 3: a year ago in terms of the trading volume of
4:44
Speaker 3: the S and P five hundred, one of the commonly
4:46
Speaker 3: used ETFs for the S and P versus that of silver,
4:50
Speaker 3: there was seventy times more trading for the S and
4:53
Speaker 3: P five hundred to the silver activity that you saw
4:57
Speaker 3: sure makes up yesterday or genuine twenty six where this
5:00
Speaker 3: data came from, they were almost equal. And that really
5:03
Speaker 3: speaks to how just crazy the volume has got on silver.
5:08
Speaker 3: And you and I can attest doing the show for
5:11
Speaker 3: as long as we have over the last few years,
5:13
Speaker 3: we barely ever touched on silver on the show. Gold
5:17
Speaker 3: is something that we probably would touch on from time
5:19
Speaker 3: to time, but silver is a much smaller market and
5:22
Speaker 3: not nearly as well recognized when it comes to the
5:25
Speaker 3: investment community. But it truly has seen just these crazy
5:29
Speaker 3: price moves, a ton of volatility assessed to it, and
5:32
Speaker 3: we've seen individual traders just pour a bunch of money
5:37
Speaker 3: into this new speculator.
5:38
Speaker 2: In many cases probably a bunch of borrowed money too,
5:40
Speaker 2: sure yeah, And and important things to keep in mind
5:43
Speaker 2: there where you may look at this and just say,
5:47
Speaker 2: like the memestock mania that it was, you know, out
5:50
Speaker 2: there in some segment of the segment of the market
5:52
Speaker 2: that you are not you know, part of and influenced by.
5:55
Speaker 2: But when you have these massive price wings like you
5:59
Speaker 2: did on Friday of last week, where it came tumbling
6:02
Speaker 2: down what wasn't thirty percent? Ultimately that silver finished it down.
6:06
Speaker 2: When something like that happens, if we assume for a
6:09
Speaker 2: moment that people are borrowing money to participate in this
6:12
Speaker 2: trade via margin trading, in all likelihood, you see some
6:15
Speaker 2: other effects in markets. Right You see people in those
6:18
Speaker 2: cases getting called out of their trade, buy their custodian saying, hey,
6:23
Speaker 2: you need to put up cash in order to cover
6:26
Speaker 2: this loan that you took out to buy silver because
6:28
Speaker 2: it is no longer worth what we thought it was.
6:31
Speaker 2: You did see a bunch of commodities future exchanges increasing
6:35
Speaker 2: the margin requirements on precious metals in reaction directly to this.
6:41
Speaker 2: But again, when you see these massive price swings, people
6:44
Speaker 2: start getting blown out of trades. And what we mean
6:46
Speaker 2: by that is basically their custodian, if they're borrowing money
6:50
Speaker 2: to participate in trading, can force them to sell other
6:53
Speaker 2: holdings in their portfolio to cover the balance of the loan.
6:57
Speaker 2: And I suspect that, especially Friday of last week, we
7:00
Speaker 2: did see some of that in the pressured markets overall.
7:02
Speaker 2: Which is crazy to think about that movements in the
7:04
Speaker 2: price of silver could affect the stock market, but I
7:08
Speaker 2: think that they could. I will also point out this
7:10
Speaker 2: is not just a US centric centric trade at the moment.
7:14
Speaker 2: A lot of attention has been paid to traders across
7:18
Speaker 2: Asia who were participating it over the last few months.
7:20
Speaker 2: This is a global phenomenon that we are seeing with silver,
7:22
Speaker 2: not a domestic one, more akin to what we were
7:25
Speaker 2: seeing during the Meme stock craze of twenty twenty one,
7:29
Speaker 2: but nonetheless clearly continuing today with silver again popping over
7:36
Speaker 2: now thirteen and a half percent. I think the lesson
7:40
Speaker 2: here is not a new one, Paul. The lesson to
7:43
Speaker 2: something like this when it's getting as much mania and
7:46
Speaker 2: attention as it is, My lesson would be buyer, beware
7:52
Speaker 2: and understand what type of investing you are doing. We
7:56
Speaker 2: talk about this all the time, but are you investing
7:59
Speaker 2: because you feel you have an edge over anybody else?
8:03
Speaker 2: Are you investing because you intend to be there and
8:06
Speaker 2: do it for ten to twenty years and so your
8:08
Speaker 2: outlook is on that timeframe, or are you a day
8:11
Speaker 2: trader that is going to follow the price of something
8:14
Speaker 2: very closely, and or you're trying to take advantage of
8:16
Speaker 2: a single day or single hour price movement. And if
8:21
Speaker 2: you can't bucket yourself into one of those groups and
8:24
Speaker 2: you're still participating in a trade, nonetheless, that's where I
8:27
Speaker 2: think people get most harshly burned. Whether it's this asset
8:31
Speaker 2: class or crypto or meme stocks or any of the above.
8:36
Speaker 2: Plenty of people may boatloads of money and probably will
8:39
Speaker 2: continue to do so on these different trades. But if
8:42
Speaker 2: you can't identify what you are trying to accomplish by
8:44
Speaker 2: doing so, who buyer? Beware because this stuff can burn
8:47
Speaker 2: you quick. Yeah.
8:48
Speaker 3: I've read some statistics in regards to daytraining that blew
8:51
Speaker 3: my mind within the last three or four months, which
8:53
Speaker 3: is just basically a heavy percentage of those people who
8:56
Speaker 3: try call it. This may not be the exact percentage,
8:58
Speaker 3: eighty five to ninety percent of people who try in
9:00
Speaker 3: daytrade on a consistent basis over a long time get
9:03
Speaker 3: washed out.
9:03
Speaker 1: Of the business.
9:03
Speaker 3: It's just such a ruthless job. So i'd almost double
9:08
Speaker 3: emphasize your sort of.
9:10
Speaker 1: Warning on buyer.
9:11
Speaker 3: Beware for the people who fall in that bucket, because
9:13
Speaker 3: it's a.
9:14
Speaker 2: More similar to what you do when you go on
9:16
Speaker 2: your sports betting app right, or what you do when
9:19
Speaker 2: you go to the casino. Yeah, because when you're talking
9:21
Speaker 2: about some of that stuff, that's more akin to enter two.
9:24
Speaker 2: The odds that you are looking at and the entertainment
9:26
Speaker 2: that you're looking at is Okay, let's compare this to
9:30
Speaker 2: what it really is, which is in many cases not
9:34
Speaker 2: investing in more gambling.
9:35
Speaker 3: And specific to gold and silver, we should probably talk
9:38
Speaker 3: to a second. I'm sure we've approached another shows before,
9:41
Speaker 3: but usually gold and silver within investment portfolios from a
9:45
Speaker 3: long term allocation standpoint, have usually been used for a diversifier,
9:50
Speaker 3: a sort of hedge in place, but not something that
9:54
Speaker 3: you really have hung your hat on if you look
9:57
Speaker 3: at the long term historical turns that outpace the return
10:00
Speaker 3: of the market.
10:01
Speaker 2: I've always very much questioned that hedging yeah theory at
10:06
Speaker 2: least like a hedge against what, because for me, that
10:10
Speaker 2: narrative has changed so many times. Right, it was a
10:12
Speaker 2: hedge against inflation. Well, then we got the worst inflation
10:15
Speaker 2: we had seen in forty years in gold. Before the
10:17
Speaker 2: correlation can be spotty. The hedges against global turmoil and
10:23
Speaker 2: you know, the financial world or order falling apart. Great,
10:27
Speaker 2: then why do you hold it in your IRA? How's
10:29
Speaker 2: that going to help you? I just question. I think
10:35
Speaker 2: it's very clearly at times a non correlating asset, which
10:38
Speaker 2: is nice. But in this moment in time, you know,
10:40
Speaker 2: can you make an argument that it's really a hedge
10:42
Speaker 2: against market volatility?
10:44
Speaker 1: No?
10:44
Speaker 2: Absolutely, not most recently absolutely it has not been that.
10:49
Speaker 2: So again, define what you're trying to do before you
10:53
Speaker 2: make an investment. Understand what it is you're trying to accomplish,
10:57
Speaker 2: what it is you're owning before going and risking your
10:59
Speaker 2: heart earned money. I think is the major takeaway. Let's
11:02
Speaker 2: take a quick break. When we come back, everyone's talking
11:06
Speaker 2: about s and P. Seven thousand, where we're sitting at
11:09
Speaker 2: today sixty nine forty one. Let's talk about that kind
11:13
Speaker 2: of mental hurdle when we come back.
11:15
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12:19
Speaker 2: Uh Paul. The SMP five hundred is sitting at sixty
12:22
Speaker 2: nine forty nine now approaching that seven thousand. Mark Barons
12:26
Speaker 2: has a piece why the sm P five hundred at
12:28
Speaker 2: seven thousand is raising red flags? I think red flags
12:33
Speaker 2: is definitely not the term that I would use for this.
12:37
Speaker 2: I do buy that there is some psychological effect out there.
12:42
Speaker 2: When you have major indsies reaching a certain round number,
12:46
Speaker 2: they can bounce, you know, bounce off of those a
12:48
Speaker 2: couple times in the short term. But red flag to
12:52
Speaker 2: me indicates like, oh, if it goes above this threshold,
12:54
Speaker 2: then watch out for a crash. And I don't. I
12:57
Speaker 2: don't really. I barely subscribe to the first theory that
13:00
Speaker 2: there's some psychological shift at the round numbers. And I'm
13:04
Speaker 2: not sure I buy that a red flag would be
13:07
Speaker 2: the S and P five hundred, or the Dow or
13:09
Speaker 2: the Nasdaq reaching a certain point figure on its overall index.
13:15
Speaker 3: No, the numerical number to me is of a no significance.
13:18
Speaker 3: I was on a meeting with a client yesterday and
13:20
Speaker 3: was having trouble rattling exactly where we were.
13:23
Speaker 1: I knew we were.
13:23
Speaker 3: Close to seven thousand, but it's not something that I
13:26
Speaker 3: could quote you on a day to day basis. But
13:28
Speaker 3: I'm pretty good at I don't care exactly good, but
13:31
Speaker 3: I'm pretty good at telling you the last four to
13:33
Speaker 3: five years of market performance from a percentage standpoint, because
13:36
Speaker 3: that is so much the musch focus for an investor.
13:40
Speaker 3: On a calendar year basis. You know, how did the
13:43
Speaker 3: market fare? But the number, whether it's fifty thousand like
13:47
Speaker 3: the Dow or seven thousand like the S and P
13:50
Speaker 3: five hundred, and obviously we prefer the S and P
13:52
Speaker 3: five hundred just because of its diversification, more companies and
13:56
Speaker 3: more sectors. It doesn't matter to me. It's really insignificant.
14:00
Speaker 3: And I always have trouble with these technical analysis pieces
14:04
Speaker 3: just because I don't prescribe to it as much as
14:06
Speaker 3: perhaps other people do out there. I just don't feel
14:10
Speaker 3: as if this is really what drives markets from a
14:14
Speaker 3: long term perspective. Really the story to me, or what
14:17
Speaker 3: I'm most focused on, are companies continuing to earn more
14:22
Speaker 3: and what is the economic environment that they're operating? Yeah,
14:25
Speaker 3: less so than the numbers on them.
14:26
Speaker 2: In fact, I think you used a tern that you
14:29
Speaker 2: wrote down on your piece of paper to describe this.
14:31
Speaker 2: That had to do with a bold and I'm not BS. Yeah,
14:35
Speaker 2: I'm not sure what that implies. But the other point
14:38
Speaker 2: that I'll just make about this, I mean, one, you
14:41
Speaker 2: do have to be like paying attention to your Bloomberg
14:45
Speaker 2: screen or whatever it might be, to even notice that
14:47
Speaker 2: the S and P is crossing that threshold. But two
14:49
Speaker 2: would be assuming you invest like most normal people out there,
14:54
Speaker 2: which is you buy index funds of some sort or
14:58
Speaker 2: another to replicate to the performance. So the S and
15:00
Speaker 2: P five hundred or try to mirror it, those aren't
15:05
Speaker 2: priced in the index level, right, you know, you go
15:08
Speaker 2: take a look at the price of the ETF that
15:11
Speaker 2: mimics the S and P five hundred. It's not approaching
15:13
Speaker 2: seven thousand dollars per share. No, So the idea that
15:17
Speaker 2: anyone thinks in these terms, I just yeah, I don't
15:20
Speaker 2: really draw that line. And so I'm sure, you know,
15:25
Speaker 2: could you have a few days where it approaches and
15:27
Speaker 2: that backs off from those levels, And there's some technical
15:29
Speaker 2: reason for that, quite possibly, But even if you bought that,
15:33
Speaker 2: I'm just unsure what you would do with that information.
15:36
Speaker 3: For me, I was thinking about it reading the pieces.
15:38
Speaker 3: You know, I don't remember what was happening when it
15:40
Speaker 3: was at five thousand or six thousand, So why should ever,
15:43
Speaker 3: why should I care what's going on numerically at the
15:46
Speaker 3: seven thousand standpoint? Far more noteworthy are just changes in
15:50
Speaker 3: the economy rather than the numbers on the page.
15:52
Speaker 2: You tend to agree. PEPSI released earnings and has been
15:57
Speaker 2: this is one of those companies that has fallen into
16:00
Speaker 2: a I don't want to say it's a trap, but
16:03
Speaker 2: the same issues that every major company that is not
16:06
Speaker 2: operating an artificial intelligence is falling into, which is they
16:10
Speaker 2: really are struggling to get anyone's attention. There's stock today,
16:14
Speaker 2: at least after releasing earnings, was up in pre market.
16:18
Speaker 2: Let me see. Yeah, it's still up close to five
16:23
Speaker 2: percent on the news, but when we take a look
16:25
Speaker 2: at the course of the last year, it was up
16:28
Speaker 2: three percent prior to today's moves. Is now up eight
16:31
Speaker 2: percent over the course of the last twelve months. Remember
16:34
Speaker 2: the Pepsi. While they bear the name of the carbonated
16:38
Speaker 2: fun Beverage Sugary Beverage, they are a snack brandy. You've
16:42
Speaker 2: got the page up here, Paul Draft tell me about it.
16:45
Speaker 2: But what are some of the popular brands that are
16:49
Speaker 2: underneath Pepsi?
16:50
Speaker 3: The snacks one that we'll focus on because the drink
16:53
Speaker 3: side you could probably put surmises together, but Cheetos, Freedo's, Dorito's, Funions, Lays,
16:59
Speaker 3: Miss Vicky's, Chips, Son Chips, Ruffles.
17:02
Speaker 2: Miss Who, Miss Vickeys, Miss Vicki's.
17:04
Speaker 1: You see those? You see those?
17:06
Speaker 2: I think much places You're actually okay, say so?
17:10
Speaker 3: In any case, any of those your what's your favorite
17:12
Speaker 3: of the of the bunch mentioned very.
17:14
Speaker 4: Quickly here, gotta go sun Chips, right.
17:16
Speaker 3: I was gonna say that too, Tucker, huge sonships fan,
17:20
Speaker 3: and then probably Dorito's as the second.
17:25
Speaker 2: I think the taste you just have all those as Cheetos.
17:27
Speaker 2: They're also the most disgusting because there, if we're really
17:30
Speaker 2: going to now the best, what tastes the best, it's
17:32
Speaker 2: that garbage.
17:33
Speaker 4: The best late night chip out of that cat that
17:36
Speaker 4: group funions.
17:38
Speaker 3: Yeah, very late night, right, Tostitos, you can't forget them too.
17:44
Speaker 2: Yeah. I also will say that Pepsi, in my opinion,
17:47
Speaker 2: has pretty much dominated the Super Bowl ads scene for
17:50
Speaker 2: the last two decades. So until somebody else proves that
17:52
Speaker 2: they can beat them, then you know, I'm not buying it.
17:55
Speaker 2: But in any case, the struggle that Pepsi had has
17:57
Speaker 2: not been maintaining margins. They've been able to do so,
18:00
Speaker 2: their sales have been relatively okay. The real problem is
18:05
Speaker 2: that from an investor perspective, right, if you are a
18:08
Speaker 2: holder of this company stock, you've been getting paid your
18:11
Speaker 2: you know, dividend, which is not terrible, but you've just
18:15
Speaker 2: been sitting here waiting for something to happen, and the
18:18
Speaker 2: reality is that this is just a major brand that
18:22
Speaker 2: is also facing a little bit of backlash when it
18:25
Speaker 2: comes to inflation. And this is where they're going now
18:30
Speaker 2: as they are attempting to cut prices at store shelves,
18:33
Speaker 2: especially in the snack side of the business, because I
18:35
Speaker 2: think that's where they're getting some of the biggest backlash.
18:38
Speaker 2: It was, you know, initially theorized, hey, is this all
18:40
Speaker 2: because of the Wagovis of the world, the weight loss
18:44
Speaker 2: drugs that are out there and people shifting their consumer habits.
18:48
Speaker 2: I'm still not sure the evidence is fully in there,
18:50
Speaker 2: but I think between that plus the you know, consumers
18:55
Speaker 2: that are just frustrated with inflation, they have not seen
18:58
Speaker 2: their sales really show up where they want to be,
19:00
Speaker 2: and so they are talking about cutting prices a little bit,
19:02
Speaker 2: which again you need to see that really influence volumes
19:06
Speaker 2: because otherwise you're just shrinking profit margin any way you
19:11
Speaker 2: cut that deal. So we will see.
19:12
Speaker 3: Yeah, this comes off the heels of them striking in
19:14
Speaker 3: agreement with the activist investor Elliott Investment Management course, so
19:17
Speaker 3: I think that there was some pressure placed by them
19:20
Speaker 3: to make those cuts. Rare that you see a brand
19:23
Speaker 3: really saying that it's time to cut the prices a
19:25
Speaker 3: little bit.
19:25
Speaker 2: Here, let's take a quick break. When we come back,
19:28
Speaker 2: Wall Street watches next.
19:40
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19:48
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19:53
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19:56
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20:01
Speaker 4: No markets are mixed territory, as Wall Street continued to
20:03
Speaker 4: see volatility in gold and silver. We also have a
20:06
Speaker 4: partial government shutdown, resulting in the BLS postponing the January
20:10
Speaker 4: jobs report that was expected on Friday. Traders are also
20:13
Speaker 4: sifting through a new flurry of earnings with mixed results.
20:17
Speaker 4: At the moment, the Dow is up over a tenth
20:19
Speaker 4: of a percent or seventy two points higher, SMP five
20:22
Speaker 4: hundred down about half a percent or thirty eight points lower,
20:26
Speaker 4: Nasdaq selling off one point two percent or two hundred
20:28
Speaker 4: and eighty two points. Russell two thousand is up a
20:31
Speaker 4: third of a percent. Tenure treasure Field mostly flat, trading
20:34
Speaker 4: at four point two eighty five percent, and crew to
20:37
Speaker 4: Oil up one percent higher today trading at sixty two
20:40
Speaker 4: dollars and eighty cents a barrel. Breaking news from Disney
20:43
Speaker 4: this morning, where the entertainment giant officially named Josh Deamero
20:47
Speaker 4: as its new CEO, succeeding Bob Iger. Amero was in
20:50
Speaker 4: charge of Disney's theme parks and cruise ships, which has
20:54
Speaker 4: become one of the company's biggest source of profits. Disney
20:57
Speaker 4: shares down about one and a half percent. Meanwhile, i'll
21:00
Speaker 4: Pallinteer stock jumping five percent after the AI software company
21:04
Speaker 4: beat fourth quarter earnings and revenue forecast, driven by rising
21:07
Speaker 4: spending on AI tools from governments and businesses elsewhere. Advisor
21:12
Speaker 4: or Peiser reported lower quarterly sales and swung to a
21:16
Speaker 4: loss as demand for its COVID nineteen vaccine and anti
21:19
Speaker 4: viral drug continue to decline. Chairs in the drug maker
21:22
Speaker 4: down by three percent. Pepsi logged a higher quarterly profit
21:26
Speaker 4: and revenue, where the food and beverage maker said it
21:28
Speaker 4: aims to spur sales in the coming year. The company
21:31
Speaker 4: also announced it plans to cut prices for Dorito's and
21:33
Speaker 4: other snacks by up to fifteen percent. Pepsi stock gaining
21:37
Speaker 4: nearly five percent. Digital payments company PayPal set earnings will
21:42
Speaker 4: likely decline this year after growth in its key branded
21:45
Speaker 4: checkout product sputtered PayPal sinking seventeen percent today and with
21:50
Speaker 4: today's gains of nearly two percent, Walmart has officially crossed
21:54
Speaker 4: the one trillion dollar market cap threshold on Tucker Silvan,
21:59
Speaker 4: that is Walstreet Watch.
22:01
Speaker 2: After Europe and the India signed a free trade deal.
22:06
Speaker 2: That didn't they call it like the mother of all deals?
22:08
Speaker 1: Yes that was who?
22:10
Speaker 3: Did I think?
22:11
Speaker 1: That was?
22:11
Speaker 3: The German prim Minige?
22:14
Speaker 1: Yeah, yeah, yeah.
22:15
Speaker 2: So they signed that deal a couple of weeks ago,
22:17
Speaker 2: and the United States has now signed a trade deal
22:21
Speaker 2: allegedly with India as well. Details at this point are scant.
22:25
Speaker 2: What we've heard so far is that the US will
22:27
Speaker 2: cut its levee on Indian goods from eight to eighteen
22:31
Speaker 2: percent from the current twenty five percent, which is lower
22:33
Speaker 2: than most Asian peers. An additional twenty five percent punitive
22:37
Speaker 2: duty that was tied previously to the purchase of Russian
22:40
Speaker 2: oil that was tossed out as India has allegedly committed
22:43
Speaker 2: to not buying in Russian oil going forward. Modia allegedly
22:48
Speaker 2: agreed to buy five hundred billion dollars worth of US
22:51
Speaker 2: goods and cut its tariffs to zero. That piece seems
22:54
Speaker 2: very unlikely to me if it's going to be across
22:57
Speaker 2: the board, because we've talked at length about big, big
23:00
Speaker 2: industries in India being very heavily protected, and so to
23:05
Speaker 2: zero seems unlikely. We've seen no confirmation from the Indian
23:09
Speaker 2: government on the details of this deal that has been
23:12
Speaker 2: announced and allegedly signed according to some reports. But look,
23:17
Speaker 2: I would take this as a step in the right direction.
23:20
Speaker 2: I want to have a bilateral trade agreement with the
23:24
Speaker 2: world's most populated country at this stage, and speaking of
23:27
Speaker 2: that population, I just I want to point it out
23:30
Speaker 2: because we continue to think about China as this big
23:34
Speaker 2: threat and they remain such, but that country, to me
23:40
Speaker 2: more and more seems like yesterday's story. When you go
23:43
Speaker 2: take a look at future population projections for the world,
23:48
Speaker 2: you know, obviously Europe is in this slow decline. I'm
23:51
Speaker 2: looking at a chart right now from a visual capitalist
23:53
Speaker 2: that charts out India, China, Europe, United States in terms
23:57
Speaker 2: of population growth estimated through twenty one hund United States
24:01
Speaker 2: is on this very slow upward slope. We still have
24:05
Speaker 2: a positive replacement ratio on the birth rate and so
24:08
Speaker 2: slow increase, Europe slow decline. India looks like its population
24:14
Speaker 2: growth will peak out sometime around twenty sixty five is projected,
24:19
Speaker 2: before slowly declining after that. Through twenty one hundred, China
24:23
Speaker 2: has peaked every indication that I have seen in terms
24:26
Speaker 2: of China's population, which was surpassed by India I think
24:30
Speaker 2: just last year. If my numbers are correct, China is
24:35
Speaker 2: in a very rapid downward slope right now. When you
24:39
Speaker 2: take a look at their population growth rates, and we're
24:42
Speaker 2: talking about, you know, a population of one point four
24:45
Speaker 2: billion people right now potentially being cut in half over
24:49
Speaker 2: the course of the next century. That doesn't make them irrelevant,
24:54
Speaker 2: that does not make them a non world power. Obviously
24:58
Speaker 2: there's you know, technology and everything else that is changing.
25:00
Speaker 2: But in terms of economic activity, in terms of them
25:06
Speaker 2: being the manufacturing hub of the world, this really calls
25:10
Speaker 2: all of that into question, and so I like that
25:14
Speaker 2: more focus is turning towards India at this stage. I'll
25:16
Speaker 2: let you talk now, Paul.
25:17
Speaker 3: Sorry, no, I just I think there's a big disconnect
25:21
Speaker 3: between population and execution of economic endeavors. So you have
25:26
Speaker 3: to at least acknowledge that while they may be similar
25:30
Speaker 3: in size of population, the structure of the government, and
25:36
Speaker 3: just the way the economies are laid out in the
25:38
Speaker 3: two countries vastly different. And you have a Chinese economy that,
25:42
Speaker 3: as much as there are issues and policies that I
25:46
Speaker 3: would contend with and have issues with, you cannot deny
25:50
Speaker 3: that from a manufacturing standpoint, they.
25:52
Speaker 2: Are They are the world's manufacturer.
25:54
Speaker 3: They are absolutely excellent, and they've been able to do
25:57
Speaker 3: it in a lot of different areas. There's a terminous
25:59
Speaker 3: amount of investment their electrical gride capacity compared to the
26:03
Speaker 3: US dwarfs US, there's a lot of advantages that they
26:06
Speaker 3: have tech, they're right in the ballpark two that India
26:10
Speaker 3: falls very vastly short in. And so just because they're growing,
26:15
Speaker 3: it's noteworthy and they've been sort of the trendy pick
26:17
Speaker 3: for the next twenty five or thirty years to take
26:20
Speaker 3: over potentially that manufacturing role. But it's worth noting that
26:23
Speaker 3: as much as there's ben trementous population growth with it
26:26
Speaker 3: needs to come execution. And perhaps the reason where I
26:29
Speaker 3: view this more as a positive indicator for India than
26:32
Speaker 3: the United States, just given that the amount of exports
26:35
Speaker 3: from India to the US. It's relatively small from a
26:38
Speaker 3: percentage perspective, that they're on reasonable footing and sound footing
26:43
Speaker 3: with both the EU and the US. To me, is
26:46
Speaker 3: much more of a victory for the Indian government rather
26:51
Speaker 3: than the US. This is sort of the foundation that
26:54
Speaker 3: they need to build and that they need to kind
26:56
Speaker 3: of continue to execute on the manufacturing. There's just from
27:00
Speaker 3: what I've read, there's a lot of fractures within their
27:02
Speaker 3: society in terms of how they want to approach sort
27:06
Speaker 3: of this transition to become the next manufacturing power.
27:09
Speaker 2: I think back to the population story for just a moment.
27:12
Speaker 2: What I would say about it is a growing population
27:15
Speaker 2: in no way guarantees a strong economy. I'm with you there,
27:18
Speaker 2: and you still need to execute, but you can pave
27:20
Speaker 2: over a lot of mistakes by throwing people at the problem.
27:24
Speaker 2: I think that's kind of the way I look at
27:26
Speaker 2: this is in India's case, you can make a lot
27:29
Speaker 2: of mistakes and still see a growing economy because the
27:31
Speaker 2: demand from your population is going to grow tremendously still
27:35
Speaker 2: over the course of the next quarter century. In China's case,
27:39
Speaker 2: can you still have a strong economy with a dramatically
27:41
Speaker 2: shrinking population. Yes, do you need to execute perfectly on
27:47
Speaker 2: every strategy, on every social policy, on every government program
27:52
Speaker 2: that is going to be collecting revenue from fewer individuals
27:55
Speaker 2: and have fewer individuals to execute on your reputation as
27:59
Speaker 2: the world's manufacturer. Sure? Also yes, so I'm with you.
28:04
Speaker 2: Demographics does not solely define the outcome of a country.
28:08
Speaker 2: If it did, many countries in Africa would be booming.
28:12
Speaker 2: But boy, is it tough to have a booming economy
28:16
Speaker 2: when your population is forecasted to be cut in half
28:20
Speaker 2: over the next seventy years.
28:22
Speaker 1: Oh we looking?
28:24
Speaker 2: Uh. The United States is in this weird demographic position
28:28
Speaker 2: where while our birth rate has dramatically slowed, it has
28:32
Speaker 2: not entered shrinking mode like Europe. Okay, And so I
28:37
Speaker 2: think what could reverse that? Obviously, if we continue to
28:39
Speaker 2: have in immigration policy that is extremely restrictive like we
28:43
Speaker 2: have now seen for the last year, if we were
28:46
Speaker 2: to continue that for a few decades, then we would
28:48
Speaker 2: probably be in a similar position to Europe if we
28:52
Speaker 2: ultimately reach some compromise on immigration, which seems likely to me. Sure,
28:56
Speaker 2: more and more people are talking about that. You got
28:59
Speaker 2: close through years ago, and I think you might get
29:02
Speaker 2: close again during the second half of the Trump administration.
29:05
Speaker 2: If you get there, then you know the projections are
29:07
Speaker 2: still for the United States to slowly grow through twenty
29:10
Speaker 2: one hundred, but very slowly.
29:11
Speaker 1: Got it.
29:12
Speaker 2: Let's take a quick break. When we come back, we're
29:15
Speaker 2: talking about manufacturers. We got a reading on manufacturing yesterday
29:19
Speaker 2: from the Ism. We'll talk about that next. On the
29:21
Speaker 2: Financial Exchange.
29:22
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29:58
Speaker 2: Wall Street Journal piece today US MANUFA facturing is in
30:00
Speaker 2: retreat and Trump's tariffs aren't helping. I guess my answer
30:05
Speaker 2: would be yet, I don't really know that you can
30:07
Speaker 2: measure the impact of manufacturing employment with less than one
30:14
Speaker 2: year of tariff implementation, and furthermore, with a year of
30:19
Speaker 2: tariff implementation that's been defined by volatile policy. I just
30:27
Speaker 2: think through the number of iterations of tariff announcements that
30:30
Speaker 2: we've been through since April of twenty twenty five, and
30:33
Speaker 2: they have been nothing but volatile. So I think most
30:37
Speaker 2: manufacturers out there are assuming, and most importers are assuming
30:40
Speaker 2: that the cost of importing goods from overseas is going
30:42
Speaker 2: to remain higher than it was prior to the Trump administration.
30:47
Speaker 2: But as a business I can also see why you
30:50
Speaker 2: would make absolutely zero changes to your manufacturing structure based
30:55
Speaker 2: on the tariffs that have been implemented so far, because
30:58
Speaker 2: by the way it's been going, they could be way
31:00
Speaker 2: or shot down or changed any point in the next
31:04
Speaker 2: few months or years. There are other points too, right,
31:07
Speaker 2: I mean, a lot of manufacturing that happens in the
31:11
Speaker 2: United States only does happen because you can easily ship
31:14
Speaker 2: things between Mexico and Canada, and now all that has
31:17
Speaker 2: been called into question, and so some manufacturers have said, Okay, well,
31:21
Speaker 2: while I may have previously done this in the United States,
31:24
Speaker 2: given the reciprocation from other countries and the cost of
31:27
Speaker 2: moving this between borders, it's actually cheaper for me to
31:30
Speaker 2: just manufacture that overseas. I think that's the minority case.
31:32
Speaker 2: I think overall, if you have higher trade barriers, more
31:35
Speaker 2: stuff ultimately will be manufactured in the United States. But
31:40
Speaker 2: I don't think we're going to see any effects of
31:42
Speaker 2: that A until the Supreme Court case is adjudicated, and
31:46
Speaker 2: B until you have several years of this under your belt,
31:49
Speaker 2: because again, if you are forward or if you are
31:53
Speaker 2: a furniture maker, you have no idea what tariffs are
31:57
Speaker 2: going to look like twelve months from now.
31:59
Speaker 3: Yeah, you can't make decisions. And when you're looking about
32:02
Speaker 3: allocating capital, usually those are done on a two to
32:05
Speaker 3: three year, four year timeframe, and so it's too early
32:08
Speaker 3: to kind of grade this out yet. And then also
32:10
Speaker 3: you have the looming piece of just a lot of
32:12
Speaker 3: businesses out there are trying to optimize their productivity, and
32:16
Speaker 3: so there's a lot of investment in automation, robotics, machine learning, officialelies,
32:21
Speaker 3: all those buzzwords to try and perhaps keep headcount at
32:24
Speaker 3: a reasonable level. So you're kind of fighting that counterforce too.
32:27
Speaker 2: I guess the question is will you ever have enough
32:29
Speaker 2: stability and policy to make this a thing or is
32:31
Speaker 2: it going to be Oh, this is a Trump administration
32:34
Speaker 2: policy that, by the way, was executed via executive order,
32:38
Speaker 2: and therefore next president's going to come in and walk
32:40
Speaker 2: it all back.
32:40
Speaker 3: It's really hard to reshape a trend that's been going
32:43
Speaker 3: on for twenty or thirty years in terms of the
32:45
Speaker 3: decline in manufacturing jobs in the United States, and to
32:48
Speaker 3: go up against just really deep ties to some of
32:51
Speaker 3: these Asian countries from a manufacturing standpoint. But it is
32:56
Speaker 3: too early, i think, to rule a great on it yet.
32:59
Speaker 3: It's just it's it's a tough challenge.
33:01
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34:02
Speaker 1: The proceeding was paid for and the views expressed are
34:04
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34:07
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34:13
Speaker 2: Tucker, we have a silly housing story and a serious
34:15
Speaker 2: housing story. You're the boss. What do you want to
34:17
Speaker 2: cover first?
34:18
Speaker 3: Uh?
34:19
Speaker 1: Just do the first one?
34:22
Speaker 2: So silly? Sure, okay, housing affordability. Sorry, housing market is
34:28
Speaker 2: swinging towards buyers, and housing affordability is and just hurting buyers.
34:32
Speaker 2: So the piece here that is absolute silliness is from CNBC.
34:37
Speaker 2: They are saying that more homeowners are falling behind on
34:40
Speaker 2: their mortgages, which, while technically true, is useless information. They
34:45
Speaker 2: point out that mortgages that are more than ninety days
34:47
Speaker 2: past do rose in December to about point two percent
34:50
Speaker 2: from just under point one seven percent. They then go
34:53
Speaker 2: on to not explain any context for what that really means,
34:57
Speaker 2: because point two percent seems like a pretty small number
35:00
Speaker 2: to me at least. So what I did separately is
35:03
Speaker 2: I went to my holy grail of data, which is
35:05
Speaker 2: the Saint Louis Federal Reserve, and they track delinquency rates
35:09
Speaker 2: on single family residential mortgages booked in domestic offices for
35:12
Speaker 2: all commercial banks, which to me is a little bit
35:14
Speaker 2: of a better read. It's a little bit delayed the
35:16
Speaker 2: data that they get. The latest read that we have
35:18
Speaker 2: on this is the third quarter of twenty twenty five.
35:21
Speaker 2: But in the third quarter of twenty twenty five, according
35:24
Speaker 2: to the Saint Louis FED, the delinquency rate on these
35:27
Speaker 2: primary mortgages was one point seven to eight percent. So
35:31
Speaker 2: next the logical question is, well, how bad has it
35:33
Speaker 2: ever gotten? The answer would be Q one of twenty
35:37
Speaker 2: ten when it hit eleven and a half percent, So
35:41
Speaker 2: how do we compare to Then, well, we're in pretty
35:43
Speaker 2: good shape. Next question I would have anytime in the
35:46
Speaker 2: last twenty years, have we ever been lower than where
35:50
Speaker 2: we are right now? And the answer is in Q
35:56
Speaker 2: three of two thousand and six we were at one
35:58
Speaker 2: point seven four percent, So almost exactly twenty years ago,
36:02
Speaker 2: we were very slightly below the delinquency rate than that
36:06
Speaker 2: we are now, but this is the first time that
36:08
Speaker 2: we've been at one point seven eight percent since post GFC.
36:14
Speaker 2: We never got lower than this post COVID. We never
36:18
Speaker 2: really approached this anytime other than the mid two thousands.
36:22
Speaker 2: This is an incredibly healthy for homeowners mortgage market right now.
36:27
Speaker 2: Do not let any piece outswair about the increase in
36:30
Speaker 2: delinquencies tell you anything else, because the delinquency rate is
36:34
Speaker 2: obscenely low at this point and is as low as
36:36
Speaker 2: we have seen in any time other than that post
36:41
Speaker 2: or that PREGFC time period where the money was just
36:44
Speaker 2: flowing in home prices were skyrocketing upwards. So I do
36:48
Speaker 2: not believe we have a mortgage delinquency problem. I do
36:50
Speaker 2: not expect there to be any foreclosed homes for sale
36:54
Speaker 2: in my area anytime soon. The more serious piece is
36:57
Speaker 2: that the housing market does seem to be swinging more
36:59
Speaker 2: to buyers, at least in some parts of the country,
37:01
Speaker 2: and I think that part has some actual evidence to
37:05
Speaker 2: support it. So what are we seeing, Paul, in terms
37:08
Speaker 2: of home buyers and their options out there for purchasing
37:12
Speaker 2: homes right now?
37:13
Speaker 3: Right now, we're going back too closer to what we
37:16
Speaker 3: saw in twenty nineteen, which was the ability to actually
37:19
Speaker 3: get a discount off of what the listing price is
37:22
Speaker 3: on a home. Many of us will remember during twenty
37:24
Speaker 3: twenty one, twenty twenty two, and twenty twenty those years
37:28
Speaker 3: it was often sparked by bidding wars all sorts of
37:31
Speaker 3: crazy activity in terms of being able to lock a
37:33
Speaker 3: home down. But over the course of the last year,
37:36
Speaker 3: sixty two percent of buyers were able to purchase a
37:38
Speaker 3: home below the original listing price. That was the highest
37:42
Speaker 3: proportion since twenty nineteen, according to redfin. And what we're
37:46
Speaker 3: seeing is in the metro areas of West Palm Beach
37:51
Speaker 3: Fort Lauderdal in Miami, at least eighty five percent of
37:55
Speaker 3: buyers in twenty twenty five paid under the original listing price,
37:58
Speaker 3: according to redfin. As Mike was coughingly alluding to, yeah,
38:03
Speaker 3: that was definitely a big part of that sixty two percent.
38:06
Speaker 2: The housing market is slowly thawing in some parts of
38:09
Speaker 2: the country more than others. Quick Break a lot more
38:11
Speaker 2: to cover in the second hour the financial exchange. We
38:13
Speaker 2: will be right back