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Trump is laying the groundwork to blame Powell for any downturn · The Financial Exchange Show

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Speaker 1: and Mark Fandetti.
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Speaker 2: Welcome to this Tuesday edition of the Financial Exchange. Paul Lane,
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Speaker 2: Mark Fandetti, and Ben Kitchen here with you, and we
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Speaker 2: continue to see up and down action on Wall Street.
1:19
Speaker 2: We saw sell offs of more than two percent across
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Speaker 2: the major induses during yesterday's trading, but today they are
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Speaker 2: bouncing back in the other direction, with all the major
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Speaker 2: industries Dow Jones, S and P five hundred and the
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Speaker 2: Nasdaq up over one and a half percent. There is
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Speaker 2: no real significant news unless I have missed something and
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Speaker 2: been asleep of the switch mark that indicates as to
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Speaker 2: why we're seeing a bit of a bump today. Obviously,
1:45
Speaker 2: the volatility that we've seen this month has been quite
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Speaker 2: tremendous and sort of out of the norms that we
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Speaker 2: saw back in late fall and early this year. But ultimately,
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Speaker 2: regardless of the action that we've seen over to or
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Speaker 2: the last couple of weeks, it is going to be
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Speaker 2: on track for one of the worst aprils that we've
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Speaker 2: seen if we're looking at the DAO specifically since nineteen
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Speaker 2: thirty two, and this stems from just a lot of
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Speaker 2: uncertainty economically in the United States at the moment.
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Speaker 3: Yeah, it's not even You're right, it is uncertainty, but
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Speaker 3: it's we know exactly what to pin it on. The
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Speaker 3: White House wants to fundamentally change some of our institutions.
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Speaker 3: You can agree or disagree. That's almost a political question.
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Speaker 3: Do you want an independent FED?
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Speaker 2: Do you not?
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Speaker 3: I don't think I certainly wouldn't understand what the heck
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Speaker 3: was going on if I wasn't a long time student
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Speaker 3: of the FED monetary policy generally, so I'm not sure
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Speaker 3: how anybody could have the foggiest how to interpret this.
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Speaker 3: It'd be like telling me whether or not the FDA
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Speaker 3: should approve a drug or something. So I'm sort of
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Speaker 3: impressed that most people seem to understand, at least if
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Speaker 3: the market's reaction is any guide, that an independent FED
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Speaker 3: is important because you don't want to put control of
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Speaker 3: the money supply in the hands of anyone politician. And
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Speaker 3: that's ultimately The FED has some regulatory responsibilities too, But
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Speaker 3: what's the issue here is who should control the supply
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Speaker 3: of money. We think about the fedest setting interest rates,
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Speaker 3: but that's only indirectly what they do. They target a
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Speaker 3: short term interest rate by controlling the supply of money
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Speaker 3: when they want a lower interest rates, They increase the
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Speaker 3: supply of money, and they use that to buy securities
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Speaker 3: like treasuries that banks have on their balance sheet. That
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Speaker 3: allows banks to loan the money that they're buying those
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Speaker 3: securities with. That's effectively how monetary policy, which is what
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Speaker 3: the FED does, is called. That's how it works. And
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Speaker 3: Congress has the power to create money under the Constitution,
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Speaker 3: they gave that to the FED. So now there's this
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Speaker 3: sort of power struggle which really should be between the
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Speaker 3: President and Congress, but it's being framed as between the
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Speaker 3: President and the Fed. And I'll say again, I'm impressed
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Speaker 3: that that market participants seem to understand that monetary policy
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Speaker 3: should be kept independent of the will of any one politician,
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Speaker 3: not independent from oversight. Maybe the Fed's a little bit
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Speaker 3: too independent in some ways. I tend to agree with
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Speaker 3: those arguments, but clearly markets understand that if it got
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Speaker 3: into the hands of any one politician, anybody, they would
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Speaker 3: be tempted, overwhelmingly tempted to print money without warrying about
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Speaker 3: the long term inflation consequences.
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Speaker 2: Yeah, that's the problem with four year terms in a sense,
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Speaker 2: is that the president in office is always going to
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Speaker 2: be very motivated to achieve any of their objectives for
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Speaker 2: short term gain and not worrying about the longer term
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Speaker 2: ramifications of actions like printing money throwing the US into
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Speaker 2: a talesman. And we find ourselves at a point, and
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Speaker 2: this is not news, that we are heavily extended on
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Speaker 2: the debt front and a place where already we've sort
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Speaker 2: of taken advantage of that power to print money over
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Speaker 2: an extended period of time. And the reason that we
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Speaker 2: were able to do it it is because of the
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Speaker 2: stability and safety that the US market economic market has
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Speaker 2: typically found itself in. But those fears have been shaken about.
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Speaker 3: Okay, so that's the issue. Yeah, So what you're bringing
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Speaker 3: up is foreign ownership of things like treasuries and the
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Speaker 3: dollar generally. Yeah, it's definitely connected. You wouldn't want to
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Speaker 3: own treasuries if you thought the interest payments were going
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Speaker 3: to be made with money conjured up out of thin air.
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Speaker 3: They're going in real terms, you're going to lose purchasing power.
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Speaker 3: This is true of domestic investors too. So that's a
5:37
Speaker 3: slightly different but equally important angle. And there are many
5:42
Speaker 3: such angles, which is why the volatility that we are
5:46
Speaker 3: witnessing is is permeating many different markets currents. We've heard
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Speaker 3: You've heard about the dollar weakening, which might be due
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Speaker 3: to the effects that you were talking about, Paul. We've
5:56
Speaker 3: heard about treasury yields rising related to the dollar weakening
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Speaker 3: of core and related perhaps to lack of confidence in
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Speaker 3: in in the US maintaining the purchasing power of the dollar.
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Speaker 3: It gets it gets complicated, is my point.
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Speaker 2: Yeah, The US Dollar Index now sits at its lowest
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Speaker 2: level in the last three years in terms of the
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Speaker 2: S and P five hundred mark. I've been out for
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Speaker 2: a couple of days. Are we sitting at what was
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Speaker 2: it six or seven percent down year to date on
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Speaker 2: the SMP.
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Speaker 3: It's twelve at this point, isn't it? After yesterday?
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Speaker 2: Three?
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Speaker 3: Twelve point one year to date? I'm rounding up a
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Speaker 3: little bit month to date. You're right, month to date,
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Speaker 3: we're down about eight several percentage points month to date.
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Speaker 2: As you've talked about the beginning one and a half
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Speaker 2: and then potentially it's hard to keep it's hard to
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Speaker 2: keep track at this point because the moves have been
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Speaker 2: so large.
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Speaker 3: As you pointed out.
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Speaker 2: This is the would be the worst S and P
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Speaker 2: five hundred performance since inauguration day for any president, since
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Speaker 2: the data that we had going back to nineteen twenty eight,
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Speaker 2: and some of the other areas of the market that
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Speaker 2: have been impacted and been moving significantly. Gold has really
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Speaker 2: risen dramatically over the course of the last several months
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Speaker 2: or so. It had top thirty five hundred dollars an ounce.
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Speaker 2: Now today it sits at just shy of thirty five hundred,
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Speaker 2: but still up close to about zero point six percent
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Speaker 2: on today's trading.
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Speaker 3: So, and another way to think about that is the
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Speaker 3: dollar is weakening relative to gold. Gold is a currency
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Speaker 3: of sorts. It is a store value of sorts for
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Speaker 3: historical reasons, it maintains that characteristic if you like. So
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Speaker 3: when gold goes up, it takes more dollars to purchase,
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Speaker 3: say an ounce of gold. That's just a different way
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Speaker 3: of saying the dollar is weakening relative to gold, just
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Speaker 3: like when we say the exchange rate goes down. I
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Speaker 3: think when most people hear that, they think that means
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Speaker 3: the dollar is somehow weakening, which just means it takes
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Speaker 3: more dollars to buy a Japanese yen or a euro
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Speaker 3: or a Great Britain pound or whatever.
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Speaker 2: The biggest story that we've covered over the last couple
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Speaker 2: of days or so, is is President Trump going after
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Speaker 2: Frederick chairman Jerome Powell. And Mark alluded to it in
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Speaker 2: some of his comments, and it does seem like here.
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Speaker 2: There's a piece in the Wall Street Journal titled Trump
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Speaker 2: is laying the groundwork to blame Powell for any downturn,
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Speaker 2: and that shares our echos sentiments that sort of rattle
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Speaker 2: around in my head when I saw the initial news
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Speaker 2: come out that President Trump had posted on his true
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Speaker 2: social on Monday that there is virtually no inflation, calling
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Speaker 2: Jerome Powell mister toolate and a major loser for not
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Speaker 2: reducing interest rates immediately. And let's just tackle this from
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Speaker 2: the economic perspective piece here, where you have tariffs looming
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Speaker 2: out there this summer already in place, but you know
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Speaker 2: even more significant ones looming which would create inflationary pressure.
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Speaker 2: So to counter the point that there's virtually no inflation, yes,
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Speaker 2: inflation has come down from the highs that it was
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Speaker 2: at in twenty twenty two. However, there are things on
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Speaker 2: the economic horizon that could make inflation much more substant
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Speaker 2: than we've seen, which leads to the fact that's why
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Speaker 2: the Federal Reserve.
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Speaker 3: Look, I'm glad the President's bringing this up because it
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Speaker 3: allows us to think about what monetary policy is, what
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Speaker 3: the FED is for, why it's independent in the first place.
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Speaker 3: So he says there's no inflation, Well, that's obvious, that's
9:16
Speaker 3: actually there was no inflation last month. So in a
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Speaker 3: way that's true. We know the consumer price index went
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Speaker 3: down minus point one tenth of a percent month over
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Speaker 3: a month. That's likely to be fleeting. But in a
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Speaker 3: very narrow way, what the President said is actually right.
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Speaker 3: There was disinflation. There was deflation technically last month. Now
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Speaker 3: your point is, yeah, but we know that's not representative
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Speaker 3: of the real picture. What's the trend in inflation, what's
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Speaker 3: underlying inflation. That's why we have core, which strips out
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Speaker 3: food and energy. There are other measures like the median
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Speaker 3: that we talk about a lot, that filter out big
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Speaker 3: price increases or decreases, no matter what sector they originate from,
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Speaker 3: that better gets at the trend in inflation. So the President,
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Speaker 3: in a very strict sense, was actually right, and I
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Speaker 3: think it's good that the issues at least being raised.
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Speaker 2: Now.
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Speaker 3: I don't agree with compromising the Fed's independence. I think
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Speaker 3: that would probably be devastating. Every researcher who's ever looked
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Speaker 3: at any country and its degree of central bank which
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Speaker 3: is what the FED is, its degree of central bank independence,
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Speaker 3: has concluded that the degree of independence is positively related
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Speaker 3: to the degree to which inflation is under control. Everybody
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Speaker 3: who's ever looked at it in any time in any
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Speaker 3: country has concluded that. So the president's wrong in that sense.
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Speaker 3: But he's right. We've had some deflation very recently. Can
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Speaker 3: we count on that continuing? Probably not. Should the Fed,
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Speaker 3: in a knee jerk fashion, lower rates in response to
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Speaker 3: one month's deflation? Probably not. But I think it's it's
10:43
Speaker 3: not illegitimate to have the discussion. Too many people when
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Speaker 3: the president comes up, they have a knee jerk, and
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Speaker 3: I sometimes do it too, because he's so provocative. But
10:52
Speaker 3: it's good to step back and think about what is
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Speaker 3: the point there, what's the counterpoint? Let's talk through this rationally. No,
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Speaker 3: he's wrong in this case, but it is good to
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Speaker 3: think about the direction of which inflation might be heading
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Speaker 3: in what the appropriate response of the FED should be.
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Speaker 3: There are so there are almost two issues. You can
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Speaker 3: make a case that the Fed should be easy. I
11:11
Speaker 3: don't agree with it. I don't think. I think the
11:13
Speaker 3: bulk of the evidence is on the other side of
11:14
Speaker 3: that argument right now.
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Speaker 2: Well, would the case to easing be that we've made
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Speaker 2: so much progress on the inflationaorty front?
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Speaker 3: I think. Look, a FED policy maker has has to
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Speaker 3: weigh two things, output and the degree to which it's
11:26
Speaker 3: above or below trend, and inflation and the degree to
11:29
Speaker 3: which it's belova above or below the Fed's target. This
11:33
Speaker 3: is a common construct for central bank policy makers.
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Speaker 2: Employment.
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Speaker 3: Kind of that employment is in the output gape. So
11:40
Speaker 3: there are two terms, if you like, in the Feds.
11:43
Speaker 3: I'm going to put this in quotes. Function. We all
11:46
Speaker 3: have a welfare function. Yours is am I taking care
11:50
Speaker 3: of the kids? Am I doing what I need to?
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Speaker 3: The Fed's welfare function is output. One eye is on output.
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Speaker 3: The other eye, so to speak, is on inflation. The
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Speaker 3: argument for lowering the FED funds rate target right now
12:04
Speaker 3: is that the output gap has narrowed a lot. We
12:06
Speaker 3: went from maybe overheating a little bit last couple of years,
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Speaker 3: or to perhaps undershooting right now. A lot of forecasters
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Speaker 3: are calling for very slow growth in the next say,
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Speaker 3: six months. They might be wrong of course, if you
12:18
Speaker 3: put more weight on that outcome, you ignore that inflation
12:22
Speaker 3: might still be a little elevated, and you cut preemptively.
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Speaker 3: As the President I think said, I don't agree with
12:28
Speaker 3: his interpretation of the evidence, but it's not like he's
12:31
Speaker 3: not making a valid point if the next the problem
12:34
Speaker 3: is is that he's impinging on FED independence when he
12:37
Speaker 3: calls Powell a loser and says he can't wait till
12:40
Speaker 3: he gets terminated. That's where he goes too far right right,
12:43
Speaker 3: and that's why markets sort of freaked out yesterday. But
12:45
Speaker 3: he makes there is a legitimate point underneath all the
12:48
Speaker 3: bluster there.
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Speaker 2: There's certainly a lot to get to with this topic,
12:53
Speaker 2: so we'll touch on that a little bit more here.
12:55
Speaker 2: We're going to take a break right here. We'll touch
12:57
Speaker 2: a little bit more on Jerome Powell, the FED chairman,
12:59
Speaker 2: and President Trump, then the ongoing wars back and forth,
13:02
Speaker 2: a mostly from Trump's side of things, and we'll also
13:04
Speaker 2: be talking about some guys get hit in the face
13:07
Speaker 2: today thing, and then we'll also talk about the Justice Department,
13:10
Speaker 2: which has a big case with Google coming up. That's
13:12
Speaker 2: right after this break here.
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14:05
Speaker 2: Before the break, we were discussing President Front's recent comments
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Speaker 2: regarding FED Chairman Jerome Powell and his lack of action
14:14
Speaker 2: in taking proactive measures to cut interest rates, and the
14:19
Speaker 2: things that we were discussing that loom out there as
14:22
Speaker 2: concerns for the Federal Reserve is certainly the impact of
14:25
Speaker 2: tariffs on the inflationary front, as well as trying to
14:29
Speaker 2: just monitor the US economic growth and what impact it
14:32
Speaker 2: could have on the labor market here, anything else mark
14:37
Speaker 2: that you want to touch upon, just on the independence
14:40
Speaker 2: of the FED and sort of where where we go
14:43
Speaker 2: from here. I mean, certainly these messages to me, I
14:47
Speaker 2: do think it is worth reitering that clearly a bit
14:50
Speaker 2: of laying the ground for the FED to be the
14:53
Speaker 2: scapegoat with these types of messages leading into some of
14:56
Speaker 2: the economic policies that could be coming down the road.
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Speaker 3: It could be I don't I think that's gonna work.
15:01
Speaker 3: People know the economy was strong a few months ago.
15:04
Speaker 3: They know forecasts deteriorated in response to tariffs. At the time,
15:10
Speaker 3: the proponents of tariffs were saying they might cause economic pain.
15:13
Speaker 3: They were very candid about it. They probably should have
15:16
Speaker 3: stuck to that line rather than now scrambling to find
15:20
Speaker 3: another party to blame for things somewhat coming apart it.
15:25
Speaker 3: The seems relative again to the position we found ourselves
15:27
Speaker 3: at the beginning of the year, I'll see again. I
15:29
Speaker 3: think a conversation about FED independence is good. It's healthy
15:34
Speaker 3: because we take it for granted and because it's not
15:38
Speaker 3: something we've had to talk about in the past thirty years,
15:41
Speaker 3: it's been taken as kind of revealed truth that it
15:44
Speaker 3: was a good thing to the point where we got
15:46
Speaker 3: this great inheritance of stable inflation until COVID, but that
15:50
Speaker 3: has since subsided. I don't like the way Powell handled it,
15:53
Speaker 3: but the blame was not entirely with him, certainly not
15:55
Speaker 3: for the surge and inflation. Arguably he didn't tamp it
15:59
Speaker 3: down quickly enough, but there are plenty of accomplished scholars
16:03
Speaker 3: who don't think he could have done anything different, who
16:05
Speaker 3: should have or could have, for that matter, done anything differently.
16:09
Speaker 3: So I think the conversation is healthy. Raising the prospect
16:14
Speaker 3: of depriving the FED of independence for reasons we discussed
16:16
Speaker 3: in the last segment is not healthy as evidence by
16:19
Speaker 3: market reaction, and that's really all you can say at
16:22
Speaker 3: this point. Maybe the president drops it. He dropped it
16:25
Speaker 3: in twenty eighteen and twenty. I mean this was a
16:28
Speaker 3: common feature of his first term, brow beating the he
16:31
Speaker 3: replaced the FED chair. We forget this, but Paul's's guy.
16:35
Speaker 2: He took Jenny ironic part.
16:37
Speaker 3: Most presidents have reappointed FED chairs unless they were utterly
16:41
Speaker 3: incompetent or unsuited for the role. It's hard to think
16:44
Speaker 3: of one in recent history that didn't get reappointed for
16:48
Speaker 3: solely political reasons. In fact, I can't think of one.
16:51
Speaker 3: Reagan inherited Vulgar, reappointed him, then he didn't, but that
16:55
Speaker 3: was okay. Vulgar served two terms. There was no love loss,
16:58
Speaker 3: I don't think between him and the Reagan administration. But anyway,
17:02
Speaker 3: Clinton reappointed green Span Obama jumping ahead a little bit.
17:07
Speaker 3: Obama reappointed Bernanky. It's just something that you typically do.
17:10
Speaker 3: Trump fired effectively Janet Yelling unclear why Powell's his guy,
17:16
Speaker 3: and almost immediately soured on Powell. He is who he
17:21
Speaker 3: The president is who he is, and this is why
17:23
Speaker 3: many of his supporters like him. He is mercurial and
17:25
Speaker 3: keeps other people on their toes. Some people like that,
17:29
Speaker 3: markets generally don't, and people making long term investments generally don't.
17:33
Speaker 3: So hopefully this all just kind of goes away. Sure,
17:36
Speaker 3: I don't know if that's a realistic prospect. Probably just
17:39
Speaker 3: wishful thinking.
17:40
Speaker 2: We'll continue to follow it. The Justice Apartment urges tough
17:43
Speaker 2: action to break Google's search dominance, so the anti trust
17:48
Speaker 2: case headlines have really been heating up over the course
17:50
Speaker 2: of the last couple of weeks specific to Google, we
17:53
Speaker 2: had a federal judge last Thursday ruled that Google created
17:58
Speaker 2: a monopoly that allowed it to control parts of the
18:02
Speaker 2: online advertising industry. Google has about ninety percent of the
18:07
Speaker 2: global search market, so in terms of its percentage of
18:11
Speaker 2: market share, it is right up there from a monopoly perspective.
18:15
Speaker 2: But the tricky thing we'll be here is that that
18:17
Speaker 2: federal judge ruling is the second one that we've seen
18:21
Speaker 2: in the last eight months that have indicated some sort
18:24
Speaker 2: of correlation or credence to the idea that Google created
18:29
Speaker 2: a monopoly. The Justice Department is different. These other cases
18:34
Speaker 2: that I'm alluding to here by federal judges don't have
18:36
Speaker 2: a direct impact on the case that we're about to
18:38
Speaker 2: hear with the Justice Department. But some of the measures
18:41
Speaker 2: that have been mentioned as part of this Justice Department
18:44
Speaker 2: case is forcing the sale of some of the company's
18:48
Speaker 2: advertising products for Google, forcing the sell off of its
18:52
Speaker 2: Google Chrome browsing business, and not allowing Google to be
18:56
Speaker 2: the default search engine on your smartphone. So for any
19:00
Speaker 2: phone user out there, if you are to search something
19:02
Speaker 2: in the Safari browser in your iPhone, Google is the
19:06
Speaker 2: default search engine that you'll get. If you say pizza
19:08
Speaker 2: joints in Portland, Maine or Cape cod you are going
19:12
Speaker 2: to get Google search results. And Google pays twenty billion
19:15
Speaker 2: dollars a year for that privilege of being the default
19:18
Speaker 2: search browser on Apple Safari. A lot of people execute
19:22
Speaker 2: many Google searches on their phone, so being that default
19:25
Speaker 2: browser is really important.
19:26
Speaker 1: There.
19:27
Speaker 2: We're gonna take a quick break here on the Financial Exchange.
19:29
Speaker 2: When we come back, we're gonna cover Wall Street Watching
19:31
Speaker 2: a little bit more on anti trust and some free
19:33
Speaker 2: trade zone talk. That's right after this break.
19:41
Speaker 1: Like us on Facebook and follow us on Twitter at
19:44
Speaker 1: TFE show. Breaking business news is always first right here
19:49
Speaker 1: on the Financial Exchange Radio Network. Time now for Wall
19:54
Speaker 1: Street Watch a complete look at what's moving market so
19:57
Speaker 1: far today right here on the Financial Exchange Change Radio Network.
20:02
Speaker 4: All right, markets are largely in the green. Right now.
20:05
Speaker 4: The Dow Jones is up just under seven hundred points,
20:08
Speaker 4: s and P five hundreds up over eighty seven points
20:11
Speaker 4: or one point seven percent, and then the Nasdaq is
20:13
Speaker 4: up over three hundred points or one point nine one percent.
20:18
Speaker 4: Ge Aerospace stock has moved up over four percent after
20:22
Speaker 4: ge Aerospace reported adjusted earnings of a dollar forty nine
20:25
Speaker 4: per share, topping the dollar twenty seven per share. Anticipated revenue, however,
20:30
Speaker 4: came in just shy of expectations. Hertz Global Hurts Global
20:35
Speaker 4: Holding shares are up over eleven percent after the rental
20:38
Speaker 4: car company rallied one hundred and twelve percent last week
20:41
Speaker 4: on Bill Ackman's big investment in the company. Pershing Square
20:45
Speaker 4: has taken a nineteen point eight percent stake in Hurts
20:48
Speaker 4: with outright share ownership and total return swap. The stock
20:52
Speaker 4: had fallen over five percent yesterday. Three M shares are
20:56
Speaker 4: up over seven and a half percent after first quarter
20:58
Speaker 4: results beat expectation on an adjusted basis. Three M earned
21:02
Speaker 4: a dollar eighty eight per share on five point seventy
21:05
Speaker 4: eight billion of revenue. Analysts had penciled in a dollar
21:08
Speaker 4: seventy seven per share and five point seven to six
21:11
Speaker 4: billion of revenue. Amazon shares are up just under three
21:14
Speaker 4: percent after even though Amazon had delayed some commitments around
21:18
Speaker 4: new data center leases, particularly international ones. Verizon shares are
21:23
Speaker 4: down over one percent after Verizon said it lost more
21:26
Speaker 4: postpaid net phone subscribers during the last quarter than we're expected.
21:30
Speaker 4: The company still beat forecasts for first quarter earnings in
21:33
Speaker 4: revenue and said it remains confident in achieving its year
21:36
Speaker 4: end goals. Lockheed Martin shares are down over two percent,
21:40
Speaker 4: even after Lockheed posted a strong first quarter profit and
21:43
Speaker 4: reaffirmed its forecast for the year, driven by resilient demand
21:47
Speaker 4: for its missile systems and fighter jets. I am ben
21:51
Speaker 4: Kitchen and that was Wall Street Watch.
21:53
Speaker 2: Touching a little bit more on the antitrust case that
21:57
Speaker 2: we see here tied to Google. The Justice Department is
22:00
Speaker 2: set to hear arguments over the course of the next
22:03
Speaker 2: couple weeks here as to whether or not Google should
22:07
Speaker 2: break up some of its global advertising business, claiming that
22:12
Speaker 2: they have a monopoly on the search market. As I
22:14
Speaker 2: was mentioning before the break, ninety percent of the global
22:16
Speaker 2: search market is through Google, and they pay a significant
22:19
Speaker 2: sum to Apple to be the default search engine on
22:23
Speaker 2: its browser. Some of the measures that have been mentioned
22:27
Speaker 2: are the idea of selling off Google Chrome, as well
22:30
Speaker 2: as divesting of some of the companies advertising products. And
22:35
Speaker 2: it seems to be a different day for anti trust market.
22:41
Speaker 2: It's always been very challenging for in the United States
22:44
Speaker 2: any company to get any sort of real charges levied
22:50
Speaker 2: against them on the anti trust front, but certainly back
22:53
Speaker 2: in the nineteen nineties it really did some harm to
22:57
Speaker 2: Microsoft's business, though it did not have to break up.
23:00
Speaker 2: There were a lot of time and effort and energy
23:03
Speaker 2: spent trying to battle the Anti Trust Department. So it'll
23:06
Speaker 2: be interesting to see what happens here on Google's front, yeah.
23:10
Speaker 3: And what precedent that sets for other tech giants. These
23:13
Speaker 3: companies are so much bigger in today's dollars than companies
23:17
Speaker 3: that we associate with monopoly practices and past eras at Amazon, Apple, Google.
23:23
Speaker 3: They're all worth between two one and two trillion dollars
23:27
Speaker 3: standard oil. Somebody wrote recently Rockefeller's oil monopoly monopoly in
23:32
Speaker 3: illegal sense that was busted up thirty three billion, so
23:38
Speaker 3: a fraction literally of the market value in today's dollars
23:43
Speaker 3: of today's tech giants. The argument for breaking them up
23:46
Speaker 3: is that it's killing innovation. They buy competitors. I know,
23:50
Speaker 3: Chuck can you and Mike Armstrong talk about this all
23:53
Speaker 3: the time, so I'm probably starting at two elementary level here,
23:56
Speaker 3: but they can snuff potential competitors out in the cradle.
24:00
Speaker 3: I know that's a horrible analogy, but that's effectively what
24:02
Speaker 3: they do, and they put this in an Zuckerberg puts
24:04
Speaker 3: this kind of stuff in emails. We got to buy them,
24:07
Speaker 3: they could compete with us. It's basically what he said.
24:10
Speaker 3: So it's no secret, So it's probably better. Is reluctant
24:15
Speaker 3: as a free market fanatic like me is to interfere.
24:19
Speaker 3: If a company gets really big, God bless them. More
24:21
Speaker 3: power to him. Fact is, they often use that power
24:25
Speaker 3: for ends that are economically, in an overall welfare sense, detrimental.
24:30
Speaker 3: So when something gets too big, you just got to
24:31
Speaker 3: break it up and shareholders could benefit. You get stock
24:35
Speaker 3: and on a pro rate a basis as I understand it,
24:37
Speaker 3: in the newly created companies, and they'll probably not guaranteed,
24:41
Speaker 3: but probably grow faster because they've got more freedom to innovate.
24:44
Speaker 2: The challenging thing has always been for the Justice Department
24:47
Speaker 2: is to prove harm to US consumers, certainly businesses. On
24:51
Speaker 2: the innovation side, I think it's easy to make those arguments,
24:54
Speaker 2: but on the consumer side of things, it can be
24:57
Speaker 2: a little bit more difficult to make that justify cation.
25:00
Speaker 2: In general, it seems as if all companies are trying
25:03
Speaker 2: to get a sense for what the mergers and acquisition
25:06
Speaker 2: markets is going to look like under Trump's administration. There
25:11
Speaker 2: was a lot of optimism when he was elected that
25:14
Speaker 2: there would be a huge push for deregulation and perhaps
25:16
Speaker 2: this would open up the floodgates in terms of activity
25:20
Speaker 2: on the financial industry and the merger side of things.
25:22
Speaker 2: Though we did see some pretty big mergers over the
25:24
Speaker 2: course of the last couple months or so, the deal
25:27
Speaker 2: activity is not nearly what we've seen in the past.
25:31
Speaker 2: The notable ones, of course, were Capital One and Discover.
25:34
Speaker 2: That was a significant merger that may have seen more
25:36
Speaker 2: scrutiny under the Biden administration. That was a thirty five
25:40
Speaker 2: billion dollar acquisition that just received approval within the last
25:44
Speaker 2: week or so. And then it will be interesting to
25:45
Speaker 2: see Google not only are they battling this ant trust case,
25:49
Speaker 2: but also they have gone out and acquired a cybersecurity startup,
25:53
Speaker 2: wiz for thirty two billion dollars. How that gets through
25:55
Speaker 2: from an approval perspective will be something to track as well.
25:58
Speaker 3: Yeah, the standard here's interesting because it's not really consumer
26:01
Speaker 3: welfare anymore. You would think that you'd have to document
26:04
Speaker 3: in a sort of concrete way harm to look, you
26:06
Speaker 3: bought this company and then prices went up. Right, the
26:08
Speaker 3: degree to which prices went up as a pretty concrete,
26:11
Speaker 3: black and white measure of how worse off people were.
26:15
Speaker 3: That's not really the standard that they applied here though,
26:18
Speaker 3: this is not my area, but a quick Google search
26:21
Speaker 3: reveals the maybe there, Oh yeah, it's my first Where
26:27
Speaker 3: else do you go? Do you go anywhere else? When
26:29
Speaker 3: you want a quick fact?
26:29
Speaker 2: What do you what? Do you know? What I was
26:31
Speaker 2: going to say is that they are facing competition from
26:33
Speaker 2: chat TBT. I really feel like these large language models
26:36
Speaker 2: out there are going to make inroads.
26:38
Speaker 3: Let me ask you a question. When you ask chat
26:41
Speaker 3: GBT a question, does it give you a source for
26:43
Speaker 3: its answer or does.
26:43
Speaker 2: It just give you the answer?
26:44
Speaker 1: It does.
26:45
Speaker 2: It does give a list of sources a little comparable
26:48
Speaker 2: to the yes.
26:49
Speaker 3: To the results you get from Google, but it's it's
26:51
Speaker 3: more texts.
26:52
Speaker 2: It's more text that's provided and less of the the sourcingrying.
26:57
Speaker 3: To drive you to somebody's website from money exactly, which
27:00
Speaker 3: is Google's bread and butter.
27:02
Speaker 2: Yeah, okay, And the clarity of the answer.
27:05
Speaker 1: You know.
27:05
Speaker 2: I was having this discussion with family recently where the
27:09
Speaker 2: amount of information and the way it's delivered is much
27:13
Speaker 2: more clear and thoughtfully articulated as opposed to what Google
27:16
Speaker 2: Search has become, and I was reluctant to admit this.
27:19
Speaker 2: Chuck was the one who really pushed this hard that
27:22
Speaker 2: Google Search has worsened significantly over the last decade. So
27:25
Speaker 2: I couldn't wrap my mind around that, because you think
27:27
Speaker 2: the more searches that they have, just the more powerful
27:29
Speaker 2: the engine becomes supposed to work. But ultimately, to your point,
27:33
Speaker 2: it seems the focus is much more driving traffic to
27:36
Speaker 2: a specific area, and the idea of Chuck had posed
27:39
Speaker 2: this out googling what is the cost of an avocado
27:42
Speaker 2: would more likely to merit you places to go purchase avocas,
27:46
Speaker 2: rather than just answering your question of what is the
27:48
Speaker 2: average cost of an avocado, for example, Whereas on chat GPT,
27:53
Speaker 2: probably because it's in its infancy and they just want
27:55
Speaker 2: to get mass adoption, there is none of that is
27:58
Speaker 2: much more thoroughness of interest answers.
28:01
Speaker 3: So the hope and breaking them up is is that
28:03
Speaker 3: we get better results from small or more innovative company.
28:07
Speaker 3: It my guess is we're going to converge on the
28:09
Speaker 3: same to the same place where we are today. Given
28:12
Speaker 3: the economics, the attractive economics from directing people to prefer
28:16
Speaker 3: sure websites. Well, this isn't my air. I'm not even
28:20
Speaker 3: gonna speculate. All I can conclude from all this is
28:22
Speaker 3: if a company gets too big, and maybe this is
28:23
Speaker 3: a good rule, we're just going to break it up.
28:25
Speaker 3: If you've got a ninety percent that seems to be
28:28
Speaker 3: the overriding imperative here when something gets too big ninety
28:33
Speaker 3: percent or I don't know if ninety percent is the threshold,
28:34
Speaker 3: maybe it is quantifiable, maybe it isn't. We're going to
28:37
Speaker 3: break it up. Bigness is unhealthy. It's stifles competition. I'm
28:40
Speaker 3: looking at the Justice Department's complaint, which the judge echoed
28:43
Speaker 3: in their decision. I don't know whether it was the
28:44
Speaker 3: browser or digital advertising of finding of a monopoly decision,
28:48
Speaker 3: but the alleged harm was it hurts publishing consumers. I
28:52
Speaker 3: guess this is in the case of search, hurts the
28:54
Speaker 3: competitive process, et cetera, et cetera. All very vague.
28:57
Speaker 2: Can we even come up with the three of us
28:59
Speaker 2: more than two other search engines besides Google? There's just
29:03
Speaker 2: the number one.
29:04
Speaker 4: YouTube is actually the number two, and people seve that
29:07
Speaker 4: out of the equation, it's overwhelmingly number two. But I
29:09
Speaker 4: actually have a list of the top ten search engines
29:11
Speaker 4: in the world.
29:12
Speaker 2: All right, I'll try and see if I can get
29:13
Speaker 2: a couple duc duck go. Does that crack the top ten?
29:16
Speaker 2: Number six, bing number two? Then it's going to be
29:21
Speaker 2: international ones that I'm not as familiar with. So I'm
29:23
Speaker 2: gonna bow out here and mark unless you can throw
29:25
Speaker 2: any of the top ten together.
29:27
Speaker 4: Well, we've got yandex dot. Are you of a Russian
29:30
Speaker 4: search engine? It's not going to come up with that one.
29:32
Speaker 4: That's number three by do out of China. Oh sure,
29:35
Speaker 4: number five Yaver out of South Korea, number seven, AOL.
29:39
Speaker 2: Hey, hey, look at you.
29:40
Speaker 4: AOL number eight, quant from France at number nine, and
29:43
Speaker 4: Ecosia from Germany at number ten.
29:45
Speaker 2: Gotcha. That rounds out the top ten. But still, as
29:49
Speaker 2: we were mentioning, Google taking ninety percent of the global
29:53
Speaker 2: market share. So while there may be a top ten list,
29:56
Speaker 2: Google is a behemoth there. So it'll be interesting to
29:59
Speaker 2: see what we get out of all these court cases,
30:02
Speaker 2: and specifically the Justice Department here as we fall it,
30:05
Speaker 2: I mean, this will take a long time to sort out.
30:08
Speaker 2: We're going to take a quick break here on the
30:10
Speaker 2: Financial Exchange, but when we come back, we're going to
30:12
Speaker 2: be talking a little bit more about Tariff's as well
30:15
Speaker 2: as vance's call for closer US India ties as trade
30:20
Speaker 2: talks are progressing. That's right after this break here on
30:22
Speaker 2: the Financial Exchange.
30:24
Speaker 1: Tariff's fears continue to grip markets. Get the latest straight
30:28
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30:33
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30:45
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30:59
Speaker 2: Coming back from break here, we've still got markets rallying
31:02
Speaker 2: quite a bit today. The Dow jones up over seven
31:04
Speaker 2: hundred points, the S and P five Hunter is up
31:06
Speaker 2: almost close to two percent, and the Nasdaq is up
31:09
Speaker 2: a little over two percent today as Wall Street looks
31:13
Speaker 2: to rebound from what was a rough Monday where major
31:16
Speaker 2: indices were off over two percent. We shift our gears
31:19
Speaker 2: back to discussing just a piece out of the Wall
31:22
Speaker 2: Street journal that kind of gauges the impact of some
31:26
Speaker 2: individual companies out there of these recent one hundred and
31:30
Speaker 2: forty five percent tariffs on Chinese goods. In this piece,
31:34
Speaker 2: they discuss a truck full of fake eyelashes that came
31:38
Speaker 2: to a screeching halt in Mexico. I'm disappointed I won't
31:41
Speaker 2: be able to get my eyelashes from this company in time,
31:44
Speaker 2: as they've been shelved here. But they all sorts of
31:49
Speaker 2: various knickknack goods like this have have been put on
31:53
Speaker 2: pause for the time being, just trying to await further
31:58
Speaker 2: clarification on what trade policies are going to look like
32:02
Speaker 2: going forward. So in this instance of the fake eyelashes,
32:05
Speaker 2: they have been halted and sort of stored in Mexico,
32:09
Speaker 2: just shy of the US border. They had been imported
32:12
Speaker 2: from China, which is a specialist in a particular area
32:16
Speaker 2: to make these fake elishes. And the same applies for
32:19
Speaker 2: some other businesses out there, both in the children's toy
32:21
Speaker 2: sector and others that really are just solely either based
32:28
Speaker 2: in China or even if you wanted to manufacture the
32:32
Speaker 2: goods here, many of the products come from China.
32:36
Speaker 3: Yeah, everything's topsy turvy right now. There are lots of examples,
32:41
Speaker 3: not all of them are as colorful or disturbing. If
32:44
Speaker 3: you think about a cargo container full of allegedly fake
32:49
Speaker 3: eyelash as they mean, it's China.
32:50
Speaker 1: So they.
32:53
Speaker 3: Just to claric could be plucked off political dissidence in China.
32:56
Speaker 3: We don't know where they came from, I guess, But anyway,
32:58
Speaker 3: lots of anecdotes like this. I guess this isn't an anecdote.
33:01
Speaker 3: There's well it is and it isn't. It's just an
33:04
Speaker 3: example of the uncertainty that the on again, off again
33:08
Speaker 3: tariff policy is reaking. It's not tariffs per se that
33:12
Speaker 3: are although I don't like them. That there are first
33:14
Speaker 3: best solutions, and there's a tariffs are like a third
33:16
Speaker 3: best solution. They're not the best way to bring manufacturing
33:19
Speaker 3: back if that's your goal or whatever. If your goal
33:22
Speaker 3: is to plug the deficit, there are better ways to
33:24
Speaker 3: do it. That aside, there are also better ways to
33:28
Speaker 3: implement tariffs, which is announce them and stick with them
33:30
Speaker 3: and stop the on again, off again changing by the
33:34
Speaker 3: day or by the weak rhythm we've seen so far.
33:37
Speaker 3: Nobody knows what to rely on.
33:40
Speaker 2: Right now and when you're at I mean, one hundred
33:42
Speaker 2: and forty five percent is almost effectively an embargo, just
33:46
Speaker 2: with how financially detrimental me to businesses out there where
33:50
Speaker 2: you know these For this company here, it's going to
33:53
Speaker 2: be more than the cost of the goods on the
33:56
Speaker 2: cargo itself to pay that type of tariff. So certainly
34:00
Speaker 2: will continue to monitor a lot of businesses out there
34:02
Speaker 2: impacted by those tariffs.
34:05
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35:01
Speaker 1: The proceeding was paid for and the views expressed are
35:03
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35:05
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35:11
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35:12
Speaker 2: President Trump hosted CEOs of Walmart, Target, and Home Depot
35:17
Speaker 2: for a tariff meeting. I believe that was held yesterday.
35:21
Speaker 2: There was it seemed to be positive sentiment from discussions,
35:25
Speaker 2: but really nothing concrete here that was taken away from
35:29
Speaker 2: any of the meetings. Obviously, these companies out there, Walmart,
35:34
Speaker 2: for example, imports about one third of its import sorry,
35:40
Speaker 2: one third of its imports come from around the globe,
35:43
Speaker 2: China and Mexico being some of the most significant suppliers
35:46
Speaker 2: out there. Target for example, certainly has a lot of
35:51
Speaker 2: impact here on the import front. So some major CEOs
35:55
Speaker 2: trying to get to see the table discuss some of
35:57
Speaker 2: these terraffts, but nothing here that was, you know, significant
36:00
Speaker 2: takeaway from this meeting here.
36:03
Speaker 3: Yeah, this is an example of one of the sad
36:05
Speaker 3: side effects of the way tariff policy is being conducted
36:08
Speaker 3: right now. Economists refer to this type of behavior is
36:11
Speaker 3: rent seeking, and that sounds like a fancy term, but
36:13
Speaker 3: it just means we all start to do things not
36:15
Speaker 3: to grow our own wealth and grow the economy, but
36:18
Speaker 3: just protect what we've got. Rent seeking. It's called that,
36:21
Speaker 3: I think because rents are typically viewed as non earned
36:26
Speaker 3: income and somehow less noble than somebody rolling up their
36:29
Speaker 3: sleeves and going to work. Oh, you're just a rent seeker.
36:32
Speaker 3: You're a capitalist sitting around earning your interest. Those aren't
36:35
Speaker 3: entirely the same things, but that's what rent seeking means.
36:38
Speaker 3: And I use this as kind of a teachable moment,
36:40
Speaker 3: not that I'm qualified to teach anybody this stuff. I'm
36:42
Speaker 3: kind of reteaching myself this stuff too. This is an
36:45
Speaker 3: example of how things get directed redirected. Resources get redirected,
36:49
Speaker 3: and these CEO's time is presumably a valuable resource given
36:52
Speaker 3: what they get paid, get redirected in toward inefficient things
36:57
Speaker 3: like having to suck up to the president, which is
36:59
Speaker 3: what they're doing. They're going there to suck up and
37:01
Speaker 3: begging for exceptions. Yep, that's not helpful to long term
37:05
Speaker 3: growth and probably not helpful to short term economics. Not innovative,
37:08
Speaker 3: Yeah sure, yeah right, it's just it's a waste their time.
37:12
Speaker 3: The politician likes it, of course, because they feel important.
37:14
Speaker 3: Look who's coming to bend the knee and expression you
37:17
Speaker 3: hear a lot now, which you probably shouldn't in a
37:19
Speaker 3: free country, but we're hearing it a lot now. And
37:21
Speaker 3: again it's just from an economic solely from an economic
37:24
Speaker 3: point of view, forgetting about the political angle. It's sad
37:27
Speaker 3: because we're it's because it's going to be a drag
37:29
Speaker 3: on long term growth if we don't clean up our act.
37:32
Speaker 2: Here, taking a look around at markets, the major industries
37:36
Speaker 2: are rallying quite a bit today. We've got the Dow
37:39
Speaker 2: Jones up over seven hundred points or one point nine
37:42
Speaker 2: two percent, The S and P five hundred also up
37:44
Speaker 2: close to one hundred points or about two percent, and
37:47
Speaker 2: the Nasdaq is up over two percent through early training here.
37:51
Speaker 2: The Russell two thousand also is up close to about
37:54
Speaker 2: one and a half percent. Taking a look at the
37:56
Speaker 2: US ten year Treasury, it still sits in and around
38:00
Speaker 2: zero point four percent, not really moving significantly today, and
38:03
Speaker 2: oil is up about one and a half percent, with
38:07
Speaker 2: its sitting around sixty four dollars a barrel. That's all
38:10
Speaker 2: the time that we have for the first hour of
38:11
Speaker 2: the Financial Exchange, but we've got a jam packed second hour,
38:15
Speaker 2: including a preview of Tesla's earnings and much much more
38:19
Speaker 2: that's right after this break here on the Financial Exchange.
38:21
Speaker 2: Stick with US