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Is it too late to save the US economy? · The Financial Exchange Show

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Speaker 1: Zada and Mike Armstrong.
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Speaker 2: We're two on the Financial Exchange, and we got markets
1:14
Speaker 2: settling off very, very modestly today. The Dow's off eighty points,
1:18
Speaker 2: the S and P is off five, the Nasdaq is
1:22
Speaker 2: off eighty nine. Just not too much going on, which
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Speaker 2: is totally fine after a nice roll. You don't need
1:29
Speaker 2: stocks to go up, you know, one or two percent
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Speaker 2: every day. That's not realistic and typically not healthy in
1:36
Speaker 2: markets if they do that forever as well, because they
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Speaker 2: can't do that forever, they get tired. Their little stock
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Speaker 2: legs just run out of energy and they go splat.
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Speaker 2: So it's nice just to have a day where you
1:46
Speaker 2: kind of take some take a little pause and calm
1:49
Speaker 2: down and everything. We've got the ten year treasury moving
1:54
Speaker 2: down six bases points to four point four to six percent,
1:58
Speaker 2: so reversing itself after you know, pretty substantial move up
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Speaker 2: over the last month or so. Remember the ten years
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Speaker 2: down around four to one at the start of April.
2:07
Speaker 2: It crossed four or five yesterday. So a little bit
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Speaker 2: of a relief here in yields moving up. That should
2:13
Speaker 2: help out the mortgage market a little bit, because yesterday,
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Speaker 2: according to Mortgage News Daily, we saw the average thirty
2:21
Speaker 2: year fixed rate mortgage move up to six point nine
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Speaker 2: to nine percent, so getting you know, right around that
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Speaker 2: seven percent mark. And again it's it's never great when
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Speaker 2: you're in the middle of the spring housing season and
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Speaker 2: rates are moving up as you are going through it. Oil,
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Speaker 2: we got West Texas Intermediate down a dollar eighty seven
2:38
Speaker 2: a barrel, this on hopes of some type of deal
2:42
Speaker 2: between the US and Iran that would end up bringing
2:45
Speaker 2: some Iranian oil back to the market. And we've got
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Speaker 2: gold today moving up nineteen dollars and sixty cents an
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Speaker 2: ounce to thirty two oh seven and ninety cents Mike.
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Speaker 2: This morning, J Powell had some common so I can't
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Speaker 2: remember what he was speaking at, but at eight forty
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Speaker 2: am he started speaking and everyone started paying attention to him,
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Speaker 2: because when you are the chair of the.
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Speaker 3: Federal Reserve, that's what happens.
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Speaker 2: Yeah, I mean, look, you're basically, when it comes to
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Speaker 2: the economy, probably the most powerful person in the world,
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Speaker 2: if not a close second. I mean, here, here's the thing,
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Speaker 2: like when you're the FED.
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Speaker 3: But it would be first in that scenario.
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Speaker 2: The only other person that I would consider is the President.
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Speaker 2: I mean, as We've seen what the President can do
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Speaker 2: can move markets pretty substantially in the last you know,
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Speaker 2: few months. Yep, Powell could do similar things. But you know,
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Speaker 2: it's again like I think it's basically between the two
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Speaker 2: of them, is to you know, who has the most
3:43
Speaker 2: juice when it comes to the economy. So a couple
3:46
Speaker 2: of things that Powell talked about in his speech. The
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Speaker 2: first is, and this is not really surprising, talks about, Look,
3:53
Speaker 2: we're gonna have, you know, potentially a series of supply shocks.
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Speaker 2: It's not going to allow us to really do a
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Speaker 2: whole lot as it relates to to managing the economy
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Speaker 2: because we're kind of going to be perpetually waiting to
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Speaker 2: see what happens as these supply shocks come up and subside,
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Speaker 2: and we don't know the path they're going to take,
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Speaker 2: and so given that uncertainty, we kind of have to
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Speaker 2: put anything on hold right now because we have to
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Speaker 2: see how these actually impact the economy.
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Speaker 3: The supply shocks term is a term from.
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Speaker 4: Those who studied the nineteen seventies period of inflation and
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Speaker 4: the oil embargo. All of those supply shocks are largely
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Speaker 4: accredited to the high inflation of the nineteen seventies and
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Speaker 4: early eighties, combined with Federal Reserve missteps along the way
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Speaker 4: when it came to addressing inflation.
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Speaker 3: I guess, is there anything how similar?
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Speaker 4: Can we put these in those same categories of what
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Speaker 4: we were seeing in the nineteen seventies, because I can
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Speaker 4: continue to hear that so hotly debated of hey, this
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Speaker 4: is very different than the nineteen seventies supply shocks, and
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Speaker 4: we shouldn't, you know, really be paying as much attention
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Speaker 4: to these supply shocks as the ones that we're back
5:00
Speaker 4: in the nineteen seventies. And of course they're different. They're
5:03
Speaker 4: not oil supply shocks. And even if we got an
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Speaker 4: oil supply shock, I don't think it would have the
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Speaker 4: same effect that it did in the nineteen seventies.
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Speaker 3: Sure, but I'm with J. Powell on this. I don't
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Speaker 3: think that they can be swept to the side and ignored.
5:15
Speaker 1: No.
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Speaker 2: I mean, here's the thing is, if you have a
5:19
Speaker 2: world in which countries and companies are trying to remove
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Speaker 2: some of the integrations that they've previously had with each other,
5:29
Speaker 2: or at least manage them differently, you're going to have
5:33
Speaker 2: some bumps in that process. And you're also moving to
5:36
Speaker 2: a situation where you're no longer you're no longer selecting
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Speaker 2: the most economically advantageous choice for producing something. You're selecting
5:52
Speaker 2: one based on other criteria. Now there's other criteria, maybe valid,
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Speaker 2: they may be invalid. I'm not saying that this is
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Speaker 2: good or bad. There's some that you could say, Hey,
6:02
Speaker 2: it's if if someone wanted to argue, hey, we should
6:06
Speaker 2: produce all materials for the F thirty five fighter in
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Speaker 2: the United States because of national security concerns, I can
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Speaker 2: buy that as a convincing argument. Unfortunately, national security concerns
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Speaker 2: are not something that's valid when it comes to socks. True,
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Speaker 2: do we need to produce enough socks for all Americans
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Speaker 2: here in the United States?
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Speaker 5: Not really.
6:30
Speaker 2: If if, if worse comes to worse, go without socks,
6:33
Speaker 2: buy a slipper, you know, like flip flops, flip flops summer.
6:37
Speaker 2: You know, you'll figure it out. You can't really figure
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Speaker 2: it out with the F thirty five. But here's the
6:42
Speaker 2: thing about the F thirty five. It's a big multinational,
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Speaker 2: you know, manufacturing process. Because we also have you know,
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Speaker 2: allies who want them to be sold to them, And
6:51
Speaker 2: part of it is Hey, the manufacturer part of this
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Speaker 2: in you know, country X, Y and Z, and so
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Speaker 2: it's this whole joint venture, which is again another good
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Speaker 2: reason to to do something. Potentially, there are other things
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Speaker 2: that are like abject bad reasons for you know, wanting
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Speaker 2: to have something produced in a different way. If if
7:10
Speaker 2: if I woke up and let's say that I were,
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Speaker 2: you know, King of chuck Land, and I woke up
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Speaker 2: and said I would like to reclassify all two by
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Speaker 2: fours as four by eights in order to make buildings
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Speaker 2: more sturdy, anyone who builds houses would be like, hey, Chuck,
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Speaker 2: you don't even know what you're talking about accurate, and
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Speaker 2: b that's not necessary and it'll cost a whole lot
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Speaker 2: more without providing an additional benefit. So like, it's not
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Speaker 2: to say that any of this is good or bad.
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Speaker 2: It's just that it is. We are making decisions now
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Speaker 2: that are not because companies are trying to find the
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Speaker 2: cheapest or most efficient way to do something, but rather
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Speaker 2: for other reasons, some of which can be good, some
7:51
Speaker 2: of which can be bad. But ultimately it is probably
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Speaker 2: gonna drive some additional cost because it's reversing the low
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Speaker 2: cost push.
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Speaker 5: That companies have had for the last forty years.
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Speaker 4: If it sticks, and so that's I think a fair
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Speaker 4: category of a supply shock.
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Speaker 5: What do you mean if it sticks?
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Speaker 3: I think you could make a compelling argument that nine
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Speaker 3: months from now, nobody's talking about realigning supply chains, nobody's
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Speaker 3: talking about tariffs, and it's all been swept to the sideline.
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Speaker 5: Talk to me about the compelling case, compel me.
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Speaker 4: What we've seen over the last four weeks has been
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Speaker 4: a very clear path towards de escalation on trade. We
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Speaker 4: have word this morning that India is considering reducing all
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Speaker 4: tariffs to zero. European Union has done the same. It
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Speaker 4: seems unlikely to me that we get back to the
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Speaker 4: level of low tariffs that we saw on January fourth.
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Speaker 4: I heard it reported from the Journal or something this
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Speaker 4: morning that they put out an offer to eliminate all
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Speaker 4: tariffs on US made products coming into the US are coming.
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Speaker 3: Into the EU.
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Speaker 4: So could I make a case that nine months from
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Speaker 4: now tariffs are still higher than they were in January,
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Speaker 4: but are low enough that we are not talking about
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Speaker 4: our reshuffling of supply chains. Yeah, I think I could
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Speaker 4: make that case.
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Speaker 2: You do, Yeah, I'm just trying to unpack what that means.
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Speaker 2: If that's the world we're in there, I don't think
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Speaker 2: we can.
9:18
Speaker 3: Yeah, okay.
9:20
Speaker 2: The reason that I don't think we can they need
9:23
Speaker 2: the revenue. They need the revenue to pass the tax bill.
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Speaker 4: I think they need the revenue to pass the tax bill,
9:29
Speaker 4: but once pasted, I don't think they need the revenue anymore.
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Speaker 2: If they get rid of the revenue and pass the
9:33
Speaker 2: tax bill as it's currently like trending, Oh the.
9:36
Speaker 3: Depthsit will blow out.
9:37
Speaker 4: If that's somebody else's the ten years going to eight percent,
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Speaker 4: that's been always been somebody else's problem.
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Speaker 5: It won't be. It won't be.
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Speaker 4: Yeah, we're getting a bit technical here, like yeah, it
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Speaker 4: might be the president's problem at that exact time. But
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Speaker 4: that that's kind of went through my head this morning,
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Speaker 4: is what if we just need the tax revenue from
9:53
Speaker 4: tariffs to get the tax bill done, and then you
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Speaker 4: just say, well, yeah, never mind.
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Speaker 2: Then we're head to a very bad place. Actually, and
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Speaker 2: that place is one where either then you do have
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Speaker 2: perpetually high inflation or you got the ten year at
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Speaker 2: eight and what that means for the US economy.
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Speaker 3: Yeah, neither whichs are very good.
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Speaker 2: So this late leads us to the next piece, is
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Speaker 2: it too late to save the US economy? We got
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Speaker 2: to go to a commercial, but we'll fill you in
10:22
Speaker 2: on that when we come back, and we'll also actually
10:24
Speaker 2: know yes, we will do that, and we'll also do
10:27
Speaker 2: some trivia right after this.
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11:04
Speaker 6: Time for trivia here on the Financial Exchange in As
11:06
Speaker 6: we discussed earlier this morning, Walmart released their quarterly earnings
11:11
Speaker 6: that showed strong sales, but more than that, price increases
11:15
Speaker 6: are coming. Walmart has been in business since nineteen sixty four,
11:19
Speaker 6: when it was founded by Sam and Bud Walton. So
11:23
Speaker 6: trivia question today, what state is Walmart headquartered in? Once again,
11:28
Speaker 6: what state is Walmart headquartered?
11:30
Speaker 3: In be the.
11:31
Speaker 6: Seventh person today to text us at six one seven
11:34
Speaker 6: three six two thirteen eighty five with the correct answer,
11:37
Speaker 6: and you'll win a Financial Exchange Show T shirt. Once again,
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Speaker 6: the seventh correct response to text us at six one
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Speaker 6: seven three six two thirteen eighty five will win that
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Speaker 6: dot com. I can actually tell you the city that
11:53
Speaker 6: they're headquartered in, don't.
11:56
Speaker 5: I won't, but I could. I know you could. I
11:59
Speaker 5: could just letting you know. Talker isn't too late.
12:04
Speaker 2: To save the US economy. That's the headline from the
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Speaker 2: piece in Bloomberg. So here's the thing. Before we answer
12:13
Speaker 2: the question of whether it's too late to save the
12:16
Speaker 2: US economy, we need to actually ask how much damage
12:20
Speaker 2: has been caused in the US economy and does it
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Speaker 2: need saving?
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Speaker 4: Yeah, that was my first question. Does the economy need
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Speaker 4: quote saving?
12:30
Speaker 2: I don't know, And anyone else professing that they know
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Speaker 2: exactly what the economy is going to do over the
12:34
Speaker 2: next six months is lying to you.
12:38
Speaker 5: And here's why.
12:40
Speaker 2: In a span of forty five days, we have seen
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Speaker 2: an absolutely ridiculous amount of volatility related to how much
12:52
Speaker 2: stuff may or may not cost to bring into the
12:54
Speaker 2: United States.
12:56
Speaker 3: Ridiculous is a good description.
12:57
Speaker 4: Yeah.
12:58
Speaker 2: I have no idea how this is affected what businesses
13:02
Speaker 2: are planning or we're planning undoing later this year, Nor.
13:05
Speaker 4: Do I know how consumers are thinking about their own
13:08
Speaker 4: personal financial situation today compared to February.
13:11
Speaker 2: First, what I can tell you. What I can tell
13:15
Speaker 2: you is and Mike, can I talk about this a
13:19
Speaker 2: good amounts. It's really rare to see US households change
13:26
Speaker 2: their spending in a material way before being forced to write.
13:33
Speaker 2: And it's not to say that people may not have
13:35
Speaker 2: like shifted their spending patterns the last couple months, but
13:38
Speaker 2: it was most likely. Hey, I was gonna buy a
13:40
Speaker 2: car in September. Okay, I'm buying the car in March instead,
13:44
Speaker 2: and then September auto sales are weak. Hey, you know what,
13:50
Speaker 2: I'm a little bit nervous that we're not going to
13:52
Speaker 2: be able to get all the cat food because it's
13:54
Speaker 2: made in China. Okay, let's buy six months worth of
13:58
Speaker 2: cat food right now. Things like that and that, like
14:02
Speaker 2: people may have pulled forward demand. I don't think in
14:05
Speaker 2: the aggregate we're seeing any information right now that points
14:09
Speaker 2: to a conclusive change in spending in either direction. You
14:12
Speaker 2: might have had some wobbles here and there to the
14:14
Speaker 2: upside or downside, depending on the category, but by and large,
14:20
Speaker 2: to quote you know, the late great Charlie Munger, we
14:24
Speaker 2: ain't seen it, he said that.
14:27
Speaker 5: No he didn't.
14:27
Speaker 2: I just like making up Charlie Munger quotes right now.
14:30
Speaker 2: Just it's kind of in a little monger thing, you know. Yeah,
14:35
Speaker 2: I don't know why.
14:36
Speaker 3: Yeah.
14:36
Speaker 4: So that really is a precursor to asking about rescuing
14:40
Speaker 4: or saving the state of the US economy. You have
14:43
Speaker 4: to prove out that it is in fact headed for
14:46
Speaker 4: a bad place, which, look, it does not take a
14:50
Speaker 4: genius to paint that picture. Certainly it could be that
14:54
Speaker 4: we are heading for a recession. The counterpoint to many
14:57
Speaker 4: of these things would be we are entering any sort
15:02
Speaker 4: of financial difficulty and an amazingly strong starting point. Unemployments
15:07
Speaker 4: at four point two percent, inflations under three, consumer household
15:12
Speaker 4: debt will totally not great. I mean, if home prices
15:17
Speaker 4: faill by twenty percent, how many people would be underwater
15:21
Speaker 4: on their mortgages. Well, it doesn't matter if they're not
15:22
Speaker 4: forced to sell them it also it doesn't matter. But
15:26
Speaker 4: I can't imagine there's been many points in time where
15:28
Speaker 4: that could happen and fewer Americans would be underwater on
15:31
Speaker 4: their mortgages. So I just go back to these scenarios,
15:35
Speaker 4: and I am, as you've heard us, quite concerned about
15:39
Speaker 4: where this all could go.
15:41
Speaker 3: But my biggest concerns.
15:42
Speaker 4: Are more about, Hey, does this do long lasting damage
15:46
Speaker 4: to the state of the dollar as a reserve currency?
15:49
Speaker 4: What does this do to you long lasting relationships that
15:53
Speaker 4: we frankly will not see play out over the course
15:56
Speaker 4: of the next six months.
15:57
Speaker 5: Let's even because again, like some of that stuff's like.
16:00
Speaker 2: Kind of nebulous, like we'll it change the dollars right
16:03
Speaker 2: currency status?
16:04
Speaker 3: Like who knows? That's too nebulous, men, And what will
16:07
Speaker 3: happen if it does?
16:08
Speaker 5: You're sitting there.
16:09
Speaker 2: With too much smoke around your head. Instead, I like
16:13
Speaker 2: to think of it in terms of like get get
16:14
Speaker 2: more micro than that. And this is the place where
16:16
Speaker 2: I don't think we know and we just need to
16:18
Speaker 2: see how it plays out for the next six months,
16:20
Speaker 2: which is why J. Powell used the term weight like
16:22
Speaker 2: four hundred times during his press conference a couple of
16:24
Speaker 2: weeks ago. If you are a business owner, whether your
16:30
Speaker 2: business has three employees or three hundred thousand, how are
16:34
Speaker 2: you assessing your ability to take risk right now? Because
16:38
Speaker 2: the fundamental thing that businesses do in order to expand,
16:41
Speaker 2: there's a reason why we use the term lever up.
16:44
Speaker 2: It's because they typically borrow money to do so. They
16:47
Speaker 2: don't just invest their own they use other people's money.
16:50
Speaker 2: Tail's old as.
16:51
Speaker 3: Time, yep.
16:52
Speaker 2: And so the question that's out there is for all
16:55
Speaker 2: the bean counters with their spreadsheets that went to MBA programs,
17:00
Speaker 2: who I talk about quite derisively quite often, what numbers
17:04
Speaker 2: are you plugging into those spreadsheets right now? And how
17:07
Speaker 2: do they inform how you're making decisions? And it might be, hey,
17:12
Speaker 2: we have, you know, three different sets of numbers that
17:15
Speaker 2: we're plugging in, and if two add of the three work,
17:18
Speaker 2: we go ahead with it. And if two out of
17:20
Speaker 2: the three don't, then we don't because you don't really know,
17:23
Speaker 2: like can anyone conclusively say they know what trade policy
17:27
Speaker 2: is gonna look like January one, twenty twenty six now.
17:30
Speaker 2: And so this is the piece that I think matters,
17:33
Speaker 2: which is what are we seeing in terms of companies
17:38
Speaker 2: and their willingness to spend money to make money?
17:42
Speaker 4: Right, this, like every other recession in American history, primarily
17:46
Speaker 4: will not be a consumer led recession if we get one.
17:49
Speaker 3: It's what our business is planning.
17:51
Speaker 4: What is going to happen there The last thing to
17:56
Speaker 4: show up, And I know we keep talking about and
17:58
Speaker 4: people keep looking at, but I think the very last
18:00
Speaker 4: thing to show up will be consumer spending dropping.
18:03
Speaker 2: I will say, there's also just again the one place
18:07
Speaker 2: where you're not seeing really any hesitation at least that
18:10
Speaker 2: has you know, been notable to this point. Anything related
18:14
Speaker 2: to AI is still moving, you know, at a pretty
18:16
Speaker 2: good clip. We had a little bit of concern about
18:18
Speaker 2: that after deep seek and some of the stuff about hey,
18:21
Speaker 2: is data center growth slowing? Given what we've seen this
18:23
Speaker 2: week about Hey, like, we're gonna just send a bunch
18:26
Speaker 2: of chips over to the Middle East and we'll see
18:27
Speaker 2: what happens. That fear appears to have dissipated in markets
18:31
Speaker 2: for the time being. We'll see if it comes back.
18:33
Speaker 5: I found this.
18:34
Speaker 2: This was pointed out by Luke Kwa, who writes for
18:38
Speaker 2: Sherwood News. Again, this is this is really interesting here.
18:42
Speaker 2: So the Cisco CEO, Remember Cisco is not you know
18:45
Speaker 2: what it used to be but they still they still
18:47
Speaker 2: see everything that's happening in tech. Quote, I think the
18:52
Speaker 2: AI transition is just so important that they're going to
18:56
Speaker 2: continue to spin until they just absolutely have to stop.
19:00
Speaker 2: And he pulled this quote. This is from a city CEO,
19:03
Speaker 2: Chuck Prince, back in two thousand and seven. It's a
19:06
Speaker 2: great pol because it is like, it's a quote that
19:09
Speaker 2: still sticks with me. When the music stops. In terms
19:11
Speaker 2: of liquidity, things will be complicated, but as long as
19:14
Speaker 2: the music is playing, you've got to get up and dance.
19:16
Speaker 5: We're still dancing.
19:18
Speaker 2: And his point wasn't that the AI thing is going
19:20
Speaker 2: to end the same way as the housing bubble.
19:23
Speaker 5: It's much more.
19:24
Speaker 2: Hey, when you have these booms going on, there's so
19:26
Speaker 2: much incentive drawn to executives to just have to participate,
19:29
Speaker 2: even if they know it's not going to work out.
19:32
Speaker 2: And that's what's going on right now. We don't know
19:34
Speaker 2: if it's going to work out or not. With AI,
19:36
Speaker 2: Quick Break, Trivia Answers.
19:37
Speaker 7: Next, bringing the latest financial news straight to your radio.
19:44
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19:48
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20:09
Speaker 6: Seeing that Walmart reported earnings this morning, we asked the
20:12
Speaker 6: trivia question what state is Walmart headquartered in? And that
20:16
Speaker 6: would be Arkansas. Gene from Sanford, Maine is our winner today,
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20:26
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20:29
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20:32
Speaker 2: Mike, we have a couple of pieces that we're gonna
20:34
Speaker 2: cover on India. Before we do that, though, there's a
20:41
Speaker 2: piece from the Hollywood Reporter that I just found.
20:45
Speaker 3: What I just I don't know that we've ever covered
20:48
Speaker 3: the Hollywood Reporter on this.
20:49
Speaker 2: No, No, it's it's it's about Netflix, and specifically it's
20:53
Speaker 2: talking about just what they're finding for like usership, usership, usership,
21:02
Speaker 2: usership ness.
21:03
Speaker 5: Right now, I'll quote here from them.
21:05
Speaker 2: Since last year's upfront, monthly monthly active users on an
21:09
Speaker 2: ad supported tier of Netflix jump from four since last
21:12
Speaker 2: that doesn't make sense.
21:15
Speaker 3: Yeah, it's the Holly What did you call it? What?
21:18
Speaker 5: The Hollywood Probably?
21:19
Speaker 2: Okay, since last year, monthly active users on an ad
21:23
Speaker 2: supported tier of Netflix jumped from forty million to ninety
21:26
Speaker 2: million globally, So there's ninety million people that are using
21:29
Speaker 2: one of the ads supported tiers on Netflix.
21:31
Speaker 5: Yep, that was on the stack.
21:32
Speaker 6: By the way, that's okay, what's that?
21:34
Speaker 5: This was in the stack? Oh I didn't get to
21:35
Speaker 5: the back of the stack, now I know that.
21:37
Speaker 3: Yeah, yeah, yeah, it's fine.
21:40
Speaker 2: Members on such plans spent an average of forty one
21:43
Speaker 2: hours a month viewing Netflix. So that's more than an
21:46
Speaker 2: hour day. It's like an hour and a half a
21:48
Speaker 2: day almost viewing Netflix. So here's this people, here's the
21:52
Speaker 2: piece that's really interesting to me.
21:53
Speaker 3: College dude bingers.
21:56
Speaker 2: Remember that the average on an average right now, Netflix
22:00
Speaker 2: is displaying about six minutes an hour of commercials on
22:05
Speaker 2: those tiers, So it's about four hours of commercials.
22:08
Speaker 5: Yeah.
22:09
Speaker 2: In order to avoid four hours of commercials, people are
22:14
Speaker 2: willing to pay like ten dollars less. I value my
22:19
Speaker 2: time enough that if I watch that much Netflix, it's
22:23
Speaker 2: gonna take more than two dollars and fifty cents an
22:25
Speaker 2: hour to get me to watch those commercials. Yeah again,
22:30
Speaker 2: but that's just me. Yeah, nobody's doing that math first
22:33
Speaker 2: and foremost, you're spending two days a year watching commercials
22:36
Speaker 2: that you could otherwise avoid.
22:38
Speaker 6: No different than cable if you think about it.
22:41
Speaker 2: I guess this is the thing. But my time is
22:44
Speaker 2: worth more than two dollars and fifty cents.
22:46
Speaker 4: There is never a choice with cable, you're right, Tucker,
22:48
Speaker 4: But there is never a choice. And it's not cable
22:51
Speaker 4: HBO that that's where they're making a choice. Oh, speaking
22:54
Speaker 4: of which, did you see Oh you covered it will Yeah,
22:59
Speaker 4: we cover that. Okay, we covered it.
23:02
Speaker 2: But yeah, forty one hours a month watching Netflix has
23:05
Speaker 2: to be college kids in like twenty three year old.
23:07
Speaker 6: Ye, or they just leave it on and it's a
23:09
Speaker 6: fish tang.
23:10
Speaker 2: Well, so this is the other thing is that Netflix
23:12
Speaker 2: has done a bunch of studies that people just kind
23:14
Speaker 2: of leave it on like they used to with like
23:15
Speaker 2: Law and Order SVU. And this is why so many
23:18
Speaker 2: of the new like produced by Netflix movies are just
23:20
Speaker 2: so vapid and stupid.
23:22
Speaker 5: Is they're just like, hey.
23:24
Speaker 2: It's background noise, and so we're gonna have the characters
23:26
Speaker 2: tell you what's happening because you're not watching, and that's
23:29
Speaker 2: why you have conversations and all these made for Netflix
23:31
Speaker 2: movies that are like, what did you do yesterday? I
23:34
Speaker 2: saw my friend and they were very upset with me.
23:37
Speaker 2: I can understand why they were upset. You you betrayed
23:41
Speaker 2: them horribly.
23:42
Speaker 3: At soap opera.
23:43
Speaker 2: No, it's like an audiobook on TV. Yeah, that's worse,
23:47
Speaker 2: but a bad audiobook on TV.
23:49
Speaker 5: So there's that.
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24:47
Speaker 5: Peace from Bloomberg.
24:49
Speaker 2: It's been reported a couple other places that India has
24:51
Speaker 2: made an offer to drop tariffs on US goods. And
24:56
Speaker 2: this according to a statement from President Trump saying, quote,
25:00
Speaker 2: they offered us a deal where basically they're willing to
25:02
Speaker 2: literally charge us no tariff. We don't have any additional
25:05
Speaker 2: details on this, but obviously, look, tariffs are you know,
25:10
Speaker 2: tariff's on US goods being exported are one of the
25:12
Speaker 2: things that the Trump administration has talked about wanting to reduce,
25:16
Speaker 2: along with you know, non tariff barriers.
25:17
Speaker 5: And this, and that.
25:19
Speaker 2: There's been a ton of reporting that a US India
25:21
Speaker 2: deal you know, could be on the horizon here. And
25:24
Speaker 2: so I think obviously the you know, skirmishes with Pakistan
25:28
Speaker 2: in the last week, you know, put a bit of
25:30
Speaker 2: a hold on that. But I think we'll have to see,
25:34
Speaker 2: you know, kind of where things go. Because a few
25:37
Speaker 2: days earlier this week, the Indian government had threatened to
25:41
Speaker 2: impose retaliatory tariffs in response to the steel and aluminum
25:45
Speaker 2: tariffs that are still in place. And so again this
25:48
Speaker 2: is all kind of going back and forth after what's
25:50
Speaker 2: gone on with China in the last month.
25:52
Speaker 5: I don't think we need.
25:53
Speaker 2: To rehash like every publicly held negotiating point, no other
25:58
Speaker 2: than to say the sides are talking, we'll see where
26:01
Speaker 2: things get to. But this is one of the ones
26:03
Speaker 2: that you would expect the Trump administration to get across
26:05
Speaker 2: the finish line, given the size of the Indian economy,
26:08
Speaker 2: the importance the Trump administration wants to put on it,
26:11
Speaker 2: and you know, being able to act as a counterbalance
26:13
Speaker 2: to China.
26:14
Speaker 4: Here's what I have a tough time getting over the
26:16
Speaker 4: hump on. It applies to India, it applies to the
26:19
Speaker 4: European Union as well. We've talked at length about how
26:22
Speaker 4: that ten percent baseline tariff seems to be a floor, right.
26:27
Speaker 2: If that's the best deal that you can negotiate, which
26:30
Speaker 2: based on the UK deal, seems to be.
26:32
Speaker 4: So if you are the European Union, don't you still
26:37
Speaker 4: retaliate if the floor is ten percent and you negotiate
26:42
Speaker 4: the very best deal you can get with the United
26:44
Speaker 4: States of America, and that means that all of the
26:47
Speaker 4: imports from the European Unions still face ten percent, other
26:49
Speaker 4: than some special carve outs on things that we.
26:51
Speaker 3: Maybe I think you still retaliate.
26:54
Speaker 4: Maybe I think if India is in that same position
26:57
Speaker 4: that hey, if we can't get this baseline down to zero,
27:00
Speaker 4: why are we going to offer zero percent tariff for
27:03
Speaker 4: products coming into our country? And that's and then how
27:07
Speaker 4: does the United States respond to all of that? How
27:08
Speaker 4: does present trap respond to that? Because that is by
27:10
Speaker 4: definition retaliatory. Those are big roadblocks that I don't have
27:14
Speaker 4: an answer to. India I'm not sure about. But the
27:16
Speaker 4: European Union, I'm fairly certain they're not going to go
27:19
Speaker 4: to zero if we stick a ten again.
27:24
Speaker 2: Maybe there's some way that there's part of this. There
27:28
Speaker 2: may be more to give for India than the UK.
27:32
Speaker 2: I mean, look, let's be on just given the relative
27:34
Speaker 2: size of the UK and what they have to offer
27:36
Speaker 2: in terms of like natural resources and like stuff that
27:40
Speaker 2: the US like might not be able to produce itself
27:42
Speaker 2: or chooses not to produce itself. Right, the UK is
27:46
Speaker 2: a heavily service based economy. What can they what can
27:50
Speaker 2: they give you. You know that that's going to be a
27:53
Speaker 2: big enough concession. Maybe India has something more that they
27:56
Speaker 2: can give. I guess that's the only thought that I
27:58
Speaker 2: would have. There also mentioned in here, and it's also
28:02
Speaker 2: a separate piece on Bloomberg as well. The President asked
28:05
Speaker 2: Apple to stop moving iPhone production to India. The quote
28:08
Speaker 2: here from President Trump had a little problem with Tim
28:11
Speaker 2: Cook yesterday. He is building all over India. I don't
28:14
Speaker 2: want you building in India. And as a result, he
28:16
Speaker 2: says that Apple will be upping their production in the
28:18
Speaker 2: United States. So, look, here's the deal. Whether you think
28:23
Speaker 2: this specific thing is good or bad, do we want like? Again,
28:29
Speaker 2: I always like to think of this in terms of like,
28:31
Speaker 2: think of the person who you think is like least
28:33
Speaker 2: qualified to be president it's probably me, And then ask yourself,
28:38
Speaker 2: would you want that person, whether it's Chuck, whether it's Mike,
28:43
Speaker 2: whether it's Bernie Sanders, President Trump, whoever it might be,
28:47
Speaker 2: the person who you think is least qualified to run
28:49
Speaker 2: the economy. Do you want them to be telling companies
28:52
Speaker 2: where to produce their goods?
28:54
Speaker 3: Yeah?
28:55
Speaker 5: I don't.
28:56
Speaker 2: And that's the problem is. Look, you might totally agree
29:00
Speaker 2: that Tim Cook should have Apple building more iPhones here.
29:03
Speaker 2: But what if the next president is you know, I
29:07
Speaker 2: don't know, Hank Hankerson who comes in, is like, hey, Tim,
29:12
Speaker 2: you better move all that production to Fiji, otherwise I'm
29:16
Speaker 2: gonna tax you out the wazoo.
29:19
Speaker 5: Like that's not what I want. Like, that's not a stable.
29:25
Speaker 2: Environment for business, which in turn makes it not a
29:28
Speaker 2: stable environment for other human beings because we ultimately most
29:34
Speaker 2: of us need to be employed by businesses we do
29:38
Speaker 2: and so like that. That's my issue on this is
29:42
Speaker 2: not like with the specifics of any particular thing, but hey,
29:46
Speaker 2: imagine the person that you think is least qualified having like.
29:49
Speaker 3: This degree of power, this degree of power.
29:52
Speaker 5: I don't want that. That's all I know. Let's take
29:56
Speaker 5: a quick break.
29:56
Speaker 2: When we come back, we're gonna be joined by Ted
29:58
Speaker 2: Rossman from Bank Rate talking about not their survey, but
30:02
Speaker 2: the New York Feds Q one Household Debt and Credit report.
30:06
Speaker 5: Right after this.
30:08
Speaker 1: This is your home for the most comprehensive coverage of
30:11
Speaker 1: the economy and the trends on Wall Street. This is
30:14
Speaker 1: the Financial Exchange Radio Network. The Financial Exchange streams live
30:19
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30:22
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31:07
Speaker 4: Joining us now is Ted Rossman from Bank Ra talking
31:09
Speaker 4: to us about the New York Feds quarterly report on
31:12
Speaker 4: household debt. Ted, thanks for joining us, appreciated my pleasure.
31:15
Speaker 8: Good to be here.
31:16
Speaker 3: So in the first quarter of the year, it looks
31:18
Speaker 3: like Americans followed the age old trend of paying off
31:21
Speaker 3: those end of year presence debt that they incurred. But
31:26
Speaker 3: what is the status of American balance sheets at the moment?
31:29
Speaker 3: According to the New York Fed.
31:31
Speaker 9: Total consumer dead is at a record eighteen trillion dollars.
31:35
Speaker 9: Credit Card debt was down a little bit in the
31:37
Speaker 9: first quarter. That typically happens in Q one. People get
31:41
Speaker 9: these New Year's resolutions to payoff debt, spend less, save more,
31:47
Speaker 9: people use tax refund money to pay off dead in
31:50
Speaker 9: the first quarter.
31:51
Speaker 8: The New York Fed has been.
31:52
Speaker 9: Doing this particular data study since two thousand and three,
31:55
Speaker 9: and every single time, except for one year that it
31:58
Speaker 9: was flat. Every other time balances fell. Credit card balances
32:01
Speaker 9: fell from Q four to Q one.
32:03
Speaker 8: So we kept the street going.
32:04
Speaker 9: This year, credit card balances were down two point four
32:07
Speaker 9: percent quarter over quarter. That could be short lived relief, though,
32:11
Speaker 9: because balances usually grow in the second, third, and fourth quarters.
32:15
Speaker 9: And like we said, Americans have a lot of other
32:18
Speaker 9: debt too. Mortgage, home equity, and student loan balances.
32:23
Speaker 8: All grew in the first quarter.
32:25
Speaker 9: Credit cards and auto loans were down a little bit,
32:27
Speaker 9: but that might be a brief pause.
32:29
Speaker 4: Now, Ted, can you talk to me a little bit
32:30
Speaker 4: about those balances, because look, we always expect credit card
32:33
Speaker 4: balances and other types of balances to go up. Inflation
32:36
Speaker 4: goes up, home prices go up, and so naturally mortgages,
32:40
Speaker 4: car loans. All of these things increase over time, but
32:43
Speaker 4: it's appearing to me now that credit cards in particular
32:47
Speaker 4: are running away, even compared to where inflation has been
32:50
Speaker 4: over the last few years.
32:52
Speaker 8: It's one of these all news is local kind of things.
32:54
Speaker 9: And I don't mean geographically, I mean more at the
32:57
Speaker 9: household level. Roughly half of credit card holders and fall
33:00
Speaker 9: every month and avoid interest and benefit from rewards, and
33:04
Speaker 9: then the other half carry expensive debt. The average credit
33:07
Speaker 9: card rate is twenty point one to two percent. That's
33:09
Speaker 9: close to a record high. There is just such a
33:12
Speaker 9: stark gap there between those who pay in full and
33:15
Speaker 9: those who don't. When we see these aggregate statistics like
33:19
Speaker 9: the one point one eight trillion dollars in credit card
33:22
Speaker 9: debt that Americans have, that reflects balances at a moment
33:26
Speaker 9: in time. It's what people owe on their statement. Half
33:29
Speaker 9: of those people pay in full every month. So it
33:32
Speaker 9: would actually be better if these data sources would go
33:35
Speaker 9: a little deeper as far as what's true debt and
33:38
Speaker 9: what's not. Because you're right, I mean, in some cases
33:41
Speaker 9: this is a proxy for economic activity. People are spending,
33:44
Speaker 9: they're using less cash, they're using more cards. The population's growing,
33:49
Speaker 9: we really need to think about the household impacts of
33:53
Speaker 9: are you in the half that's paying it off right
33:54
Speaker 9: away or are you in the half that's trapped in
33:57
Speaker 9: this expensive debt cycle.
33:59
Speaker 4: We always see some degree of delinquencies when it comes
34:01
Speaker 4: to credit cards, and those get worse during recession.
34:04
Speaker 3: Obviously.
34:05
Speaker 4: I want to talk about another area of the market, though,
34:07
Speaker 4: which is student loan debt. According to the numbers that
34:11
Speaker 4: I'm seeing, total student loan debt in the United States
34:13
Speaker 4: is about one point seven seven trillion dollars, which you know,
34:18
Speaker 4: is considerably smaller than say the mortgage market, for example,
34:21
Speaker 4: But the delinquencies and there are ticking up. What can
34:23
Speaker 4: you tell us definitively about the market for student loans
34:27
Speaker 4: and what people are facing right now?
34:29
Speaker 9: Student loan delinquencies are a problem. This is sort of
34:32
Speaker 9: a car crash that's been brewing in slow motion. Because
34:35
Speaker 9: remember there was that long payment pause during the pandemic,
34:38
Speaker 9: and then there was the one year on ramp. Even
34:41
Speaker 9: once payments were supposed to resume, there was kind of
34:43
Speaker 9: this wink and a nod about like, oh, we won't
34:45
Speaker 9: really report you as late for another year. Well that
34:48
Speaker 9: expired last fall, it's ninety days after that where you're
34:52
Speaker 9: considered seriously delinquent. It's two hundred and seventy days until
34:56
Speaker 9: you're considered in default. So really we're just kind of
34:59
Speaker 9: in the early stages now of something that's been brewing
35:02
Speaker 9: for five years. Just this month, the government started collections
35:06
Speaker 9: activity on student loans for the first time since the pandemic.
35:10
Speaker 9: July first is right around the date when a lot
35:13
Speaker 9: of these initial defaults are going to kick in.
35:15
Speaker 8: It's believed that about one.
35:17
Speaker 9: In four student loan borrowers are behind on their payments.
35:21
Speaker 9: And this is really a significant issue for the broader
35:24
Speaker 9: economy too, because there's a spillover effect, Like if you're
35:27
Speaker 9: struggling with student loans, you might also be struggling with
35:30
Speaker 9: something like credit card debt, so it is related.
35:34
Speaker 4: Ted Maybe you know this, maybe you don't, and sorry
35:37
Speaker 4: for just posing to you quickly, but do collections on
35:40
Speaker 4: student loans differ significantly from the way it works for
35:43
Speaker 4: say a delinquent credit card, given that it's the government?
35:46
Speaker 9: Notable there is that student loans are really hard to
35:49
Speaker 9: discharge in bankruptcy. I mean, not that we necessarily want
35:53
Speaker 9: to be in bankruptcy. But you know, something like credit
35:55
Speaker 9: card debt is generally pretty easy to get wiped away.
35:58
Speaker 9: Of course, there are still consent sequences. You have credit
36:01
Speaker 9: score damage, you can be sued for non payment. But
36:05
Speaker 9: Uncle Sam doesn't let people off the hook for student loans.
36:09
Speaker 9: They can seize some or all of your tax refund
36:12
Speaker 9: social Security money.
36:14
Speaker 8: They can garnish your wages.
36:15
Speaker 9: I mean, these are some of the consequences that are
36:17
Speaker 9: going to start to kick in for people this summer.
36:20
Speaker 9: So anybody struggling with student loans really needs to make
36:23
Speaker 9: this a priority. Speak up, contact your servicer, maybe work
36:27
Speaker 9: with a reputable nonprofit like Money Management International. You can't
36:31
Speaker 9: hide from federal student loan debt.
36:34
Speaker 4: Ted Rossman from bank Rade joining us today talk about
36:36
Speaker 4: the first quarter New York Fed household debt and credit report.
36:40
Speaker 4: Ted as always appreciated. Thank you, We'll talk to you soon.
36:43
Speaker 8: Sounds good. Thanks.
36:45
Speaker 5: What else do we want to cover?
36:48
Speaker 3: That's your call, Chuck, it's my call. Yep.
36:51
Speaker 2: Barista strikeover dress coded Starbucks, Yep. Not enough flair.
36:56
Speaker 4: Not enough flair would be my takeaway. They are acquiring
36:58
Speaker 4: everyone to wear an all black long sleeve shirt. It
37:04
Speaker 4: seems like I don't even know if it's long sleep,
37:05
Speaker 4: but all all solid black tops underneath their green what
37:10
Speaker 4: is that a smock?
37:12
Speaker 8: Apron?
37:12
Speaker 3: Apron? Yeah, smock, it's clearly an apron. I forgot the
37:17
Speaker 3: word for apron.
37:18
Speaker 5: Can you give me to Starbucks to do some painting?
37:23
Speaker 3: And people are walking off the job for that? I
37:29
Speaker 3: don't know. It seems seems unnecessary to I.
37:32
Speaker 6: Mean, like people at a workers at Chipole are like
37:34
Speaker 6: where the chippole polo and black pants, like they don't
37:38
Speaker 6: have problems.
37:39
Speaker 2: So like issue here is that the place where they're
37:42
Speaker 2: doing this is that they are unionized shops. Yeah, and
37:45
Speaker 2: so even stuff like this gets collectively no. So Tucky,
37:48
Speaker 2: here's the thing. I know you shrugged at me, But
37:50
Speaker 2: here's the thing.
37:51
Speaker 5: I shrugged pretty hard.
37:53
Speaker 2: It was the fu shrug that you gave me. So
37:56
Speaker 2: here's the thing. If you are in a union, you
37:59
Speaker 2: can't give an inch because they you give a mile.
38:00
Speaker 3: Ye that's fair.
38:01
Speaker 2: Like, if you're gonna let management roll you on this,
38:03
Speaker 2: then you're gonna get rolled on everything.
38:05
Speaker 5: So while I may think, hey, you should be.
38:07
Speaker 2: Able to wear whatever you want, and you know, or
38:10
Speaker 2: if the boss says do this, if it's collectively bargained.
38:13
Speaker 2: You kind of got to stand up otherwise you don't
38:16
Speaker 2: really have anything collectively bargained.
38:18
Speaker 5: Let's take a quick break.
38:19
Speaker 2: Tomorrow we will collectively bargain for our entire two hours show,
38:24
Speaker 2: and we'll wrap up the word looking forward to it.
38:25
Speaker 5: Can't wait.