Latest / The Financial Exchange Show / Trump's tariffs put the Federal Reserve in a no-win situation

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Trump's tariffs put the Federal Reserve in a no-win situation · The Financial Exchange Show

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Speaker 1: donation today. This is the Financial Exchange with Chuck Zada,
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Speaker 1: and Mark VANDEBNI.
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Speaker 2: Kicking off hour two on the Financial Exchange is Chuck Mike, Chuck,
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Speaker 2: Mark and Tucker actually, and the Dow was off one
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Speaker 2: hundred and sixty seven points, the SMP is flat, and
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Speaker 2: the Nasdaq up one twenty six so mixed market that
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Speaker 2: has had a again fairly wide range of trading today.
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Speaker 2: Just to put like the last two days in perspective,
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Speaker 2: the S and P five hundred on Monday and Tuesday
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Speaker 2: of this week, on each of these days basically traded
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Speaker 2: within the same, like same width of range as the
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Speaker 2: market traded in from October through February. So the market
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Speaker 2: from October through February was basically in like a seven
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Speaker 2: to seven and a half percent range. On Monday we
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Speaker 2: traded in an eight and a half percent range, and
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Speaker 2: on Tuesday we traded in a seven and a half
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Speaker 2: percent range. So it's just something where no one in
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Speaker 2: the last couple days that any idea how to price there.
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Speaker 3: It's hard to get your mind around it because our
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Speaker 3: time scales never change. Is people, an hour is an hour,
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Speaker 3: But in the market, you could scale months of movements
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Speaker 3: and volatility into a very small period. It looks just
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Speaker 3: the same what I just said doesn't make a lot
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Speaker 3: of sense. But the upshot of it, it doesn't sound
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Speaker 3: I meant though, don't know yourself short. It actually made
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Speaker 3: no sense. Don't sell yourself short. What I meant was,
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Speaker 3: things can happen very unnaturally fast in markets that mimic
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Speaker 3: things that happen over much longer time scales. It's just
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Speaker 3: impossible to get your head around how volatile markets have
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Speaker 3: become in such a short period of time, because there
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Speaker 3: are very few parallels like in nature, other than when
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Speaker 3: like a volcano goes from just steaming a little bit
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Speaker 3: like it's done for hundreds of years to actually exploding
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Speaker 3: without any warning. Yes, it's a hard thing, is my
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Speaker 3: confusing at this point point to get your head around,
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Speaker 3: at least for me. As I've demonstrated.
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Speaker 2: Another mark that's been seeing quite a bit of volatility,
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Speaker 2: the US treasury market in the last few days. So first,
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Speaker 2: in the five I'm sorry seven days heading into April fourth,
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Speaker 2: the ten year US treasury went from four point four
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Speaker 2: down to three point eight eighty six. Subsequently, it went
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Speaker 2: back up to four point five percent overnight and currently
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Speaker 2: sits at four point thirty nine eight percent. So you've
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Speaker 2: had the ten year treasury bounce almost you know, at
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Speaker 2: this point where it stands, it's bounced about fifty five
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Speaker 2: basis points off its bottom uh and now is back
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Speaker 2: to where it was on February twenty fourth of this year.
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Speaker 4: What that means, no idea.
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Speaker 3: Yeah, they're great harbingers. Probably gaps like this.
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Speaker 2: Here's the thing that I'll say about crises in markets.
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Speaker 2: When everything gets really volatile, you don't really get great
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Speaker 2: signals from prices on things because you don't know what
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Speaker 2: is someone actually making a bit or an ask on
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Speaker 2: a certain price because they want to, and what is
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Speaker 2: someone making a certain bid or ask because they have to.
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Speaker 2: And what I mean by that is in normal markets,
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Speaker 2: generally people are bidding on securities because they want to,
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Speaker 2: or they're selling them because they want to. When you
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Speaker 2: get into markets with this scale of movement, you have
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Speaker 2: a lot of forced liquidations that happen. Margin calls, you know,
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Speaker 2: over leverage and hedge funds, things along those lines where
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Speaker 2: either a risk manager or in some cases your prime
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Speaker 2: broker comes to you and says, hey, you borrowed a
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Speaker 2: billion dollars and you're underwater.
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Speaker 4: Half of it.
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Speaker 2: You gotta liquidate the rest of that position because margin
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Speaker 2: call and so it's tough to interpret these moves and
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Speaker 2: definitively say a ton about them, just because in crises
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Speaker 2: that the phrase that I like to use is all
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Speaker 2: correlations go to one like on certain days, just everything
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Speaker 2: gets sold. And it's not because everything went bad the
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Speaker 2: exact same way. It's just people are pushing that liquidation
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Speaker 2: button a lot of times because they have to, sometimes
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Speaker 2: because they want to. And so I don't think that
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Speaker 2: you can judge a ton about how price movements are
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Speaker 2: working in these situations. It's just everyone is flying by
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Speaker 2: the seat of their pants, and sometimes they're being forced
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Speaker 2: into decisions by the earlier decisions they made to lever
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Speaker 2: up in the wrong way.
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Speaker 3: Yeah, the only really reliable relationship and finance that I
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Speaker 3: know of is that between volatility and itself and the
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Speaker 3: prior period. By that, I mean volatility when it becomes volatile,
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Speaker 3: like the one day movements in the S and P
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Speaker 3: when they go from an average of point one point
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Speaker 3: two percent on any given day to zero point five
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Speaker 3: to two or more percent. So those instances tend to
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Speaker 3: bunch up. Volatility tends to cluster, and it is persistent,
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Speaker 3: so it takes time to calm down. I can't tell
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Speaker 3: you what the resolution is going to be. I can
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Speaker 3: only tell you that volatility. Sometimes people sometimes put it
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Speaker 3: this way, volatility begets volatility. I can't think of a
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Speaker 3: les highalutant way of saying that, but it's accurate.
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Speaker 2: And what came first the volatility or the yeah right,
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Speaker 2: you know, because it's like, okay, what is true though?
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Speaker 3: Like did sentiments sour first and then people acted on it?
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Speaker 3: Or did volatility random volatility spook people.
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Speaker 4: It's probably a little bit of both.
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Speaker 3: Yeah, I don't know which way they are, and I
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Speaker 3: don't know.
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Speaker 2: That it's entirely useful to try to figure it out
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Speaker 2: other than oh, sorry, we're here, like you got to
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Speaker 2: deal with it now.
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Speaker 3: You know it's true, We'll be nice. If policymakers new,
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Speaker 3: so they knew where to put the band aid or
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Speaker 3: what to say.
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Speaker 4: Is it nothing?
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Speaker 3: Is it just people spooking them scared by their own shadow,
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Speaker 3: or is there something fundamentally wrong? You don't really know,
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Speaker 3: okay until things work themselves out.
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Speaker 2: Yeah, one place that I think we are getting a
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Speaker 2: pretty clear signal right now. Oil prices continue to fall
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Speaker 2: West Text Intermediate now at fifty six twenty, down three
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Speaker 2: dollars and thirty eight cents a barrel, triple a national
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Speaker 2: average four gas price is starting to reflect this, now
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Speaker 2: down one point one CeNSE overnight to three twenty three
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Speaker 2: and five tenths of a cent. Gold rallying strongly today.
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Speaker 2: This is another one of those things. Gold the last
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Speaker 2: couple of days was getting pounded, even though you had
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Speaker 2: questions about uncertainty and inflation in the dollar, it's because
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Speaker 2: everyone's just liquidating what they can, even something like gold
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Speaker 2: that had held up well over the.
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Speaker 4: Previous few days.
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Speaker 2: Okay, if you're a hedge fund, who is you know
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Speaker 2: enforced liquidations, Great, sell some of your gold so that
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Speaker 2: you don't have to sell the stuff that's down, you know,
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Speaker 2: as badly. This can help you to cover some of
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Speaker 2: that stuff potentially. But gold up ninety one dollars and
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Speaker 2: ninety cents an ounce today to three thousand, eighty two
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Speaker 2: dollars on the nose. It is still off the all
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Speaker 2: time high that we had hit previously. I think we
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Speaker 2: got up to around thirty I want to say, like
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Speaker 2: thirty two hundred last week before the tariff announcement, but
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Speaker 2: making a run back up three percent today.
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Speaker 4: Talk a little bit about j.
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Speaker 2: Powell, because there's a piece of Wall Street Journal It's
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Speaker 2: titled Trump's tariffs put FED Chair Powe in a no
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Speaker 2: win situation. And I'm just not sure it's rare that
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Speaker 2: you will ever hear me say this, because I've generally
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Speaker 2: believed that, at least for the last seventeen years, the
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Speaker 2: most powerful person in the world has been the FED chair,
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Speaker 2: not the president.
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Speaker 4: From an economic perspective, at.
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Speaker 3: Least yep, I think there's no question about that.
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Speaker 2: Yeah, I don't think the FED has very much.
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Speaker 4: Here's what I'm getting at.
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Speaker 2: I guess whatever the FED does at the next few meetings,
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Speaker 2: I'm not sure it matters much to markets.
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Speaker 3: Yeah, I think since the eighty seven crash, and somebody
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Speaker 3: wrote a book not long after it. I think it
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Speaker 3: was called Secrets of the Temple, And yeah, you're already intrigued,
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Speaker 3: and tell me the upshot. The upshot was before this
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Speaker 3: gets weird. The FED is the most FED can bail
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Speaker 3: out markets. The FED can come to the rescue, and
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Speaker 3: from eighty seven until the COVID crisis, that was mostly
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Speaker 3: the case. They had a lot of room to do it.
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Speaker 3: They hadn't expanded their so called balance sheet by buying treasuries,
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Speaker 3: as they were forced to do over the last two crises. Now,
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Speaker 3: in the past seventeen or so years, interest rates, real
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Speaker 3: interest rates could get pushed well into negative territory. That
9:22
Speaker 3: gets a little technical, but it just means the FED
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Speaker 3: had more room then than it has today. So the
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Speaker 3: idea some of this so called dip buying or this
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Speaker 3: implicit belief that the Fed's going to say, I know
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Speaker 3: this is a slightly different topic than what you were
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Speaker 3: in the point of the article, but it's conditioned on
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Speaker 3: the FED. In every crisis since nineteen eighty seven, and
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Speaker 3: eighty seven was a crisis, there were commodity fund managers
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Speaker 3: who were insolvent. Green Span had to effectively step in
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Speaker 3: and backstop them. That set the precedent and established what
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Speaker 3: we now refer to as the green Span are just
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Speaker 3: now the FED put is that backstop available? Probably could
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Speaker 3: this if it snowballs into a crisis. Could the outcome
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Speaker 3: be different, more painful, more prolonged as a result, Yeah,
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Speaker 3: very possibly.
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Speaker 2: And the reason for that in terms of where the Fed.
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Speaker 2: You know why the Fed does or doesn't matter right now?
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Speaker 2: I think it's the the causes for previous crises. They've
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Speaker 2: been credit crises and things like that, and this is
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Speaker 2: not that.
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Speaker 3: Yeah, in the seventies it was oil. In ninety it
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Speaker 3: was consumption slash, invasion of Iraq, invasion by Iraq, and
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Speaker 3: then US in the Gulf. Yeah, so everyone has a
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Speaker 3: slightly different cause, but by and large in the post
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Speaker 3: war period wherecessions were caused by the FED to cool
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Speaker 3: the economy, there are some big exceptions. This is just
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Speaker 3: another example of a different of a different animal that
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Speaker 3: the FED is faced with having to tain.
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Speaker 2: Let's take a quick break here. When we come back,
10:44
Speaker 2: we'll do a little bit of trivia. Also a little
10:46
Speaker 2: bit more detail on what Delta is talking about as
10:48
Speaker 2: far as their earnings and what they expect from air
10:50
Speaker 2: travel going into the rest of the year.
10:53
Speaker 1: There's only one show that follows Wall Street's continued volatility.
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Speaker 2: Let's talk a little bit about airlines. We noted in
12:49
Speaker 2: the first hour Delta has pulled its full year guidance
12:54
Speaker 2: and basically like started to see some degradation in their
12:57
Speaker 2: business over the last couple of months in February and March. Obviously,
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Speaker 2: we don't have any information on what bookings look like
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Speaker 2: since the tariff announcements a week ago, but the fact
13:09
Speaker 2: that they're pulling their guidance suggests, hey, they're not really
13:12
Speaker 2: sure where it's going to go either. Things that they
13:15
Speaker 2: are indicating they did say during their call this morning, they're,
13:20
Speaker 2: you know, midsummer transatlantic bookings are basically in line with
13:23
Speaker 2: where they thought they would be. Soo's Tho's kind of
13:25
Speaker 2: long term trips that people have planned aren't really being
13:29
Speaker 2: deviated from where they are seeing a significant shift. Is
13:34
Speaker 2: that that close window booking, you know, anything that's four
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Speaker 2: to six weeks out, they're seeing a huge drop off
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Speaker 2: now what huge means. I don't know if that is
13:43
Speaker 2: five percent, ten percent, twenty percent, but they're seeing a
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Speaker 2: big drop off in those short term bookings that typically
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Speaker 2: fill you know, the remaining seats on planes, and so
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Speaker 2: they have guided that, at least based on what they're
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Speaker 2: seeing right now, they're going to be trying to reduce
14:01
Speaker 2: capacity by year end by three to four percent relative
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Speaker 2: to what they thought they would have previously. So we'll
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Speaker 2: have to see how this continues to evolve because it's
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Speaker 2: still pretty early. But that's again, a three to four
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Speaker 2: percent down shift in seat capacity. Is you know, something
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Speaker 2: that's meaningful given you know how airlines actually make their money.
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Speaker 3: Your thoughts smart, I mean, this is systemic. I would
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Speaker 3: expect every publicly traded company that's forced to issue guidance
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Speaker 3: will be pulling back previous guidance.
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Speaker 2: This is not everyone, because this very morning, Walmart came
14:38
Speaker 2: out and said, yeah, we're reaffirming.
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Speaker 3: Like I said, there are some large companies that are
14:42
Speaker 3: standing fast.
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Speaker 2: And which is kind of wild to me, especially because
14:46
Speaker 2: you think about where a lot of Walmart products come from.
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Speaker 3: That doesn't seem plausible.
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Speaker 4: It rhymes with.
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Speaker 2: Rhina land at Kamanchak, China. Anyways, Okay, it's fine. So
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Speaker 2: that one I did find interesting that Walmart came out
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Speaker 2: and and said, yeah, we still think we are going
15:07
Speaker 2: to see net sales up three to four percent this year,
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Speaker 2: and we are going to be able to keep prices low.
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Speaker 2: This also, by the way, interesting to me, came across
15:19
Speaker 2: a Bloomberg Chiron maybe about an hour or so ago.
15:22
Speaker 2: Amazon pausing a number of inventory shipments from China. Obviously,
15:27
Speaker 2: they are, along with Walmart, one of the two biggest
15:30
Speaker 2: retailers in the world, and so when you have one
15:34
Speaker 2: of them at least I don't know if it was
15:36
Speaker 2: an announcement or if it was just you know, kind
15:38
Speaker 2: of sussed out by you know, an investigative reporters who
15:42
Speaker 2: you know, found out what was going on. But if
15:44
Speaker 2: Amazon is pausing some shipments from China, is is Walmart
15:48
Speaker 2: doing the same thing in order to potentially be able
15:50
Speaker 2: to wait until you know, tariffs are announced to be
15:53
Speaker 2: lower after some negotiations or something. It's these are the
15:56
Speaker 2: things that you try to figure out and see how
15:58
Speaker 2: companies are respond in real time to what's going on.
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Speaker 3: From a tariff perspective, it's tough there's short term pain
16:05
Speaker 3: and there's potential longer term pain. The short term pain
16:08
Speaker 3: is something we could probably look through and maybe the
16:10
Speaker 3: FED can as well. The longer term pain comes from
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Speaker 3: the uncertainty that this on again, off again policy, and
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Speaker 3: this escalation policy without rules, without bounds, the uncertainty that
16:21
Speaker 3: it fosters.
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Speaker 2: So I think it's again, we still don't know what.
16:28
Speaker 2: We still don't know what the final form of all
16:30
Speaker 2: of this is going to take. A week ago, the
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Speaker 2: China tariffs were going to be fifty four percent total.
16:38
Speaker 2: I think it was fifty four because it was the
16:39
Speaker 2: thirty four on top of the twenty. Now we're at
16:42
Speaker 2: one hundred and four. So I could see a conceivable
16:45
Speaker 2: path where you keep levying additional tariffs on if China escalates.
16:49
Speaker 4: I could see a.
16:49
Speaker 2: Path where okay, like let's both take some de escalatory
16:52
Speaker 2: steps and those step down a little bit. But we
16:57
Speaker 2: don't even know how this is going to evolve over
16:58
Speaker 2: the next couple weeks or so, and neither do you
17:02
Speaker 2: know companies right now, and so if you're not sure
17:05
Speaker 2: what to do and you don't have to do anything,
17:08
Speaker 2: pausing shipments, pause, like just taking a step back is
17:11
Speaker 2: the logical thing for companies to do in a lot
17:14
Speaker 2: of these cases. And we've seen this not just with
17:17
Speaker 2: retailers like Walmart, but we talked about automakers that are
17:20
Speaker 2: importing vehicles. Audi has paused new shipments into the US.
17:24
Speaker 2: Land Rover has Porsche ha and Porscha's part of Folkswagen
17:27
Speaker 2: and Audi. But this is the stuff that you are
17:30
Speaker 2: seeing because I think part of the view is, hey,
17:33
Speaker 2: if there's negotiation that's ongoing, and tariff rates are X today,
17:38
Speaker 2: if there's a chance they could be X minus ten
17:41
Speaker 2: a week or two from now, why wouldn't we wait
17:43
Speaker 2: until then to see if we can import these then?
17:45
Speaker 2: And if we do need to get the inventory to dealers, okay, great,
17:50
Speaker 2: we'll move the inventory when we have to, but let's
17:52
Speaker 2: delay it as long as possible so that we don't
17:55
Speaker 2: have to pay what are potentially the highest tariff rates
17:58
Speaker 2: during this cycle, because we don't they there is a
18:01
Speaker 2: path where some of these could be negotiated down.
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Speaker 4: We just don't know right now.
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Speaker 3: I guess there is, if that's the objective. I thought
18:06
Speaker 3: the objective or part of it was to relocate manufacturing
18:10
Speaker 3: jobs here. If so, you need to leave the tariffs
18:11
Speaker 3: in place and let that happen. Go ahead, we can,
18:15
Speaker 3: let's make make it a dialogue.
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Speaker 2: Go the one counterpoint on this. And this is where
18:19
Speaker 2: I think bessent is kind of interesting in this role.
18:24
Speaker 2: Bessentt is pretty well versed on the currency side of things,
18:27
Speaker 2: and I don't know if you saw the announcement that
18:29
Speaker 2: he's going to be heading to Japan to go through
18:31
Speaker 2: the negotiations with Japan. It's pretty rare that a Treasury
18:35
Speaker 2: secretary is conducting trade negotiations, which makes me think there's
18:38
Speaker 2: a pretty big currency component to these pieces. So part
18:42
Speaker 2: of the resolution might not necessarily be, hey, let's resolve
18:47
Speaker 2: this through using tariffs in order to bring manufacturing back,
18:52
Speaker 2: but let's try to resolve it using currency to do so.
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Speaker 3: The s total of the current account deficit are so
18:58
Speaker 3: called trade deficit is a re alt of the difference
19:00
Speaker 3: between savings and what we take in an investment. This
19:03
Speaker 3: gets a little convoluted, but we don't have a trade
19:04
Speaker 3: deficit because everybody's cheating us. We have a trade deficit
19:07
Speaker 3: because we are an attractive investment venue that requires dollars.
19:10
Speaker 3: Those dollars come from US sending them abroad to buy imports,
19:14
Speaker 3: and there is a currency mechanism obviously, But okay, that's
19:17
Speaker 3: fixing the bilateral country to country deficit with Japan. That's
19:20
Speaker 3: one thing. But unless you fix the root cause, and
19:22
Speaker 3: I'm not even suggesting it needs to be fixed, by
19:24
Speaker 3: the way, it's just gonna go elsewhere to.
19:27
Speaker 4: Take a quick break. When we come back, We've got
19:29
Speaker 4: the trivia answer after this.
19:41
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20:00
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20:11
Speaker 5: Trivia question today was what is the second most profitable
20:15
Speaker 5: Broadway musical of all time?
20:18
Speaker 4: That would be Wicked.
20:19
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20:23
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20:26
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20:30
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20:34
Speaker 2: Mark, do you want to talk about McMansions or cars?
20:40
Speaker 3: Or I thought the house story? Was I thought the
20:43
Speaker 3: house story? Yeah, they're sort of related.
20:45
Speaker 4: Do you want to talk about really big cars?
20:47
Speaker 3: These stories aren't related. You can't put them in the
20:49
Speaker 3: smaller house garages we're going.
20:52
Speaker 4: When do you want to start on the house one.
20:53
Speaker 3: Let's do the housing one. I thought that was kind
20:54
Speaker 3: of interesting.
20:54
Speaker 4: What do you got for me on it? Talk about
20:56
Speaker 4: what we saw here?
20:57
Speaker 3: Homes are getting smaller? Is the upshot and the reasons
21:01
Speaker 3: decades of direct Yeah, we all know this. In the nineties,
21:04
Speaker 3: we all saw these ornate, very large houses going up
21:08
Speaker 3: in subdivisions all over the country. They were demeaningly I
21:11
Speaker 3: think called mcmanson, though now it's become sort of an
21:13
Speaker 3: acceptable term, and the reason was simple. Materials were relatively cheap,
21:18
Speaker 3: rates were low. This went on until the housing crisis,
21:21
Speaker 3: and it goes on even today. We all know they're
21:23
Speaker 3: tearing down older homes on postage stamp sized lots and
21:26
Speaker 3: offense to anybody who's got a small lot, and most
21:28
Speaker 3: of us prefer a small lot and putting up homes
21:30
Speaker 3: that are just as big as possible, filling as much
21:32
Speaker 3: of this square footage on the lot as possible with house.
21:35
Speaker 3: That trend is changing. Materials have gotten more expensive, property taxes, insurance,
21:38
Speaker 3: pricing people out of the housing market naturally, materials prices,
21:43
Speaker 3: I mean, you name it, naturally. The solution is go smaller.
21:46
Speaker 3: One component of this is zoning. Can we build houses
21:50
Speaker 3: on smaller lots? My town I think has a one
21:53
Speaker 3: or two acre. Oh, I think it's a one acre
21:54
Speaker 3: these days used to be too at one time, I
21:56
Speaker 3: think minimum. So we've got to get zoning to change that.
21:59
Speaker 3: Coupled with market forces will help gradually fix the supply
22:04
Speaker 3: problem if if there is one. So for that matter,
22:06
Speaker 3: will is slowing economy. That's the upshot as I read.
22:08
Speaker 2: It, Chuck, when when looking at this again, those there's
22:12
Speaker 2: issues that you mentioned, you know, rising property taxes, rising
22:16
Speaker 2: insurance costs. Those are long term structural iss issues too.
22:21
Speaker 2: So it's not something where you can just say, okay,
22:24
Speaker 2: like that's a temporary, you know, transitory thing and then
22:27
Speaker 2: things are going to push back to what they were.
22:29
Speaker 2: It's looking much more like, hey, we you know, those
22:33
Speaker 2: are going to be costs that are rising over the
22:37
Speaker 2: next decade, and that's not going You can't put that
22:40
Speaker 2: genie back in the bottle. Is kind of what I'm
22:42
Speaker 2: trying to say. On the car side of things, Uh,
22:46
Speaker 2: what we are seeing is and this is kind of
22:50
Speaker 2: wild in terms of some of the stuff here. So
22:53
Speaker 2: when we talk about cars, really imported cars. So we've
22:58
Speaker 2: had a number of different companies that have come out
23:00
Speaker 2: and said, hey, we are going to pause imports of
23:05
Speaker 2: these vehicles. Not they haven't said exactly why it's It
23:10
Speaker 2: could be because they're waiting to see if these tariffs come down.
23:12
Speaker 2: It could be just because they don't know if they
23:14
Speaker 2: can sell them at these prices, and they might not
23:16
Speaker 2: want to import them and instead could try to reroute
23:18
Speaker 2: them to other markets. There's different ways that companies can
23:22
Speaker 2: approach this, but you're largely seeing it with high priced
23:26
Speaker 2: imported vehicles from Europe. That's the biggest place where this
23:30
Speaker 2: is happening right now. A lot of other manufacturers have said,
23:34
Speaker 2: you know, we're gonna continue to send these over, but
23:37
Speaker 2: the high priced imports, your Audias, your land Rovers, they're saying, yeah,
23:43
Speaker 2: we're gonna pause these shipments for now. And a couple
23:47
Speaker 2: different pieces on this and this is just wild thinking
23:52
Speaker 2: about it. In order, automakers don't make a whole lot
23:56
Speaker 2: of money per car. They might make a lot when
23:59
Speaker 2: it comes when it comes to like the total dollars
24:02
Speaker 2: that they make, but the margins are slim. It's just, Hey,
24:05
Speaker 2: if you've got a five percent margin on a tomato,
24:09
Speaker 2: you say you're making five cents a tomato. If you've
24:12
Speaker 2: got a five percent margin on one hundred thousand dollars Portia,
24:16
Speaker 2: you're making five thousand dollars a car. The fact remains
24:18
Speaker 2: that you have very narrow margins with a little room
24:21
Speaker 2: for error. It just it seems bigger on the car,
24:25
Speaker 2: but it's the same as the tomato. It's just Okay,
24:27
Speaker 2: you only sold one Porsche. You have to sell, you know,
24:29
Speaker 2: one hundred thousand tomatoes to get to that point.
24:32
Speaker 3: Hey, nice car, how many tomatoes are that set you back?
24:34
Speaker 4: Well, yeah, we got a little bit of a pepper
24:36
Speaker 4: short right Now. Here's the thing about the pepper shortage.
24:39
Speaker 2: When you don't have enough peppers, you got to figure
24:40
Speaker 2: out how you're gonna pay more for peppers. And if
24:42
Speaker 2: there's not enough peppers, the pepper price keeps going up
24:44
Speaker 2: and then you're gonna have to pay more. Anyways, where
24:49
Speaker 2: was I going with this?
24:50
Speaker 1: Cars?
24:51
Speaker 4: Cars, got it?
24:51
Speaker 3: Pizza?
24:52
Speaker 1: I think.
24:53
Speaker 2: So here's the other piece of this. Insurance companies are
24:59
Speaker 2: a driving force for vehicles just as they are for
25:03
Speaker 2: homes in terms of what you can actually afford. And
25:07
Speaker 2: in speaking with a couple people in the insurance business
25:10
Speaker 2: in the last couple of days, insurance carriers are already
25:14
Speaker 2: updating their insurance pricing for new vehicles coming from foreign jurisdictions.
25:21
Speaker 2: And to give you a sense of the size of
25:24
Speaker 2: the updates that they are making on these rates, not
25:28
Speaker 2: talking ten percent, not talking twenty percent, not talking thirty percent,
25:34
Speaker 2: but fifty two, one hundred percent. And the reason why
25:38
Speaker 2: is because, ultimately, if you are an insurance company, there's
25:41
Speaker 2: one thing that keeps you up at night. It's not
25:43
Speaker 2: that there's some damage to the bumper and you have
25:45
Speaker 2: to pay out, you know, a two thousand dollars claim.
25:48
Speaker 4: It's fine.
25:49
Speaker 2: It's that someone's Porsche Cayenne is totaled and you've got
25:53
Speaker 2: to replace it with a new one. And if you
25:57
Speaker 2: don't know what the price of that vehicle is going
25:59
Speaker 2: to be one, two, three, four, five years from now
26:02
Speaker 2: when that may happen, you do the only thing that
26:05
Speaker 2: you can and you say, we're going to price this
26:07
Speaker 2: prohibitively high because there's no other way that we can
26:11
Speaker 2: cover it. And that is going to be something that
26:15
Speaker 2: I think wakes people up because there's no way to
26:19
Speaker 2: get around that.
26:21
Speaker 3: It's interesting you're seeing surveys suggest that people are starting
26:26
Speaker 3: to develop an appreciation for free trade again. So it's
26:29
Speaker 3: too bad we have to live through this and it
26:31
Speaker 3: could just pass and things would content.
26:34
Speaker 4: There's a pendulum that swings.
26:35
Speaker 3: Yeah, I know, I know, but this is well, it's
26:36
Speaker 3: the most it's swung in my life. I've seen anti
26:38
Speaker 3: free trade sentiment before the NAFTA debate was pretty gnarly.
26:42
Speaker 3: This is like nothing I've ever seen before because we're
26:44
Speaker 3: actually I.
26:45
Speaker 2: Mean, the China WTO stuff turned out to be accurate,
26:48
Speaker 2: like letting China into the WTO was you know, not
26:51
Speaker 2: exactly great.
26:54
Speaker 3: Well because we run out well okay, yeah, I was
26:57
Speaker 3: gonna cover that later. Now this there's some there's some
26:59
Speaker 3: teachable alments to come out of all of this. A
27:02
Speaker 3: policy uncertainty, whether it's tariff's taxes or gez any aspect
27:07
Speaker 3: of the regime, the legal and economic regime. I don't
27:09
Speaker 3: mean people. I just mean the set of laws that
27:11
Speaker 3: we all live under. When you subject that administration, when
27:15
Speaker 3: you know, I don't even I don't even mean the
27:17
Speaker 3: administration this time, I mean literally the regime, the state
27:20
Speaker 3: of everything. It's way bigger than just who's in power.
27:22
Speaker 4: We can use the state.
27:24
Speaker 3: It's bigger than polities. Not the right word. State isn't
27:27
Speaker 3: quite the right word. I think regime sort of the
27:29
Speaker 3: capital s though, but that to me means the agent
27:32
Speaker 3: exers the the entity exercising power. Anyway, the set of
27:36
Speaker 3: norms is maybe a better way to put it, legal regulatory,
27:40
Speaker 3: the norms under which we operate. When those are subject
27:43
Speaker 3: to big shocks, not just big changes, but uncertainty as
27:46
Speaker 3: to what they're going to be and when they're going
27:47
Speaker 3: to be implemented, it it hurts real economic activity. Stocks
27:51
Speaker 3: are telegraphing that, not so much today but over the
27:53
Speaker 3: past few days, during which the sell off has been
27:56
Speaker 3: epic in historical terms, and it's it's a good economics lesson,
28:00
Speaker 3: and unfortunately it's in real time and in real life.
28:02
Speaker 2: Folks, if you've got questions about you know, what's going
28:05
Speaker 2: on in markets, and specifically you know with regards to
28:08
Speaker 2: your personal situation. Big thing. Markets do go up and down.
28:14
Speaker 2: This is normal, even though we are seeing, you know,
28:16
Speaker 2: some historic numbers. This is stuff that does happen in
28:20
Speaker 2: markets from time to time. It's okay to be nervous,
28:24
Speaker 2: but it's also important not to panic and rush to
28:29
Speaker 2: judgment on what you need to do, because making emotional
28:32
Speaker 2: decisions around these times can compound the problem for you potentially.
28:38
Speaker 2: So the Armstrong Advisory Group has offices all throughout the
28:41
Speaker 2: New England region and if you just want a second opinion,
28:45
Speaker 2: not that you're doing anything wrong, but just hey, take
28:48
Speaker 2: a look at this and let me know if there's
28:50
Speaker 2: anything I should be looking at or paying attention to.
28:53
Speaker 2: You can call eight hundred three nine three four zero
28:57
Speaker 2: zero one to set up a time to speak with
28:59
Speaker 2: someone from our team. Again, you don't need to be
29:03
Speaker 2: panicking right now. You don't need to be, you know,
29:06
Speaker 2: trying to make big, you know, sudden adjustments or things
29:10
Speaker 2: like that. But if you are finding, hey, I'm nervous
29:13
Speaker 2: and I'm having trouble sleeping and I'm wondering if I
29:15
Speaker 2: should be doing something different, get a second opinion.
29:19
Speaker 4: That's that's all. It is, just so that you.
29:21
Speaker 2: Can have a little bit of comfort where even if
29:22
Speaker 2: it's hey, I'm in good shape and I don't need
29:25
Speaker 2: to do anything, I'm fine. Well, hey, that's a good
29:27
Speaker 2: outcome to know again called eight hundred three nine three
29:31
Speaker 2: four zero zero one. You can set up a free
29:34
Speaker 2: consultation with someone from the Armstrong team. Eight hundred three
29:38
Speaker 2: nine three four zero zero one. Take some time to
29:41
Speaker 2: give yourself just a little bit of peace of mind,
29:42
Speaker 2: even if you don't have to actually make any changes,
29:45
Speaker 2: even if you are okay, just get someone else looking
29:48
Speaker 2: at it. Eight hundred three nine three four zero zero one.
29:52
Speaker 1: The proceeding was paid for by Armstrong Advisory Group, a
29:55
Speaker 1: registered investment advisor. Nothing in the ad or in any
29:57
Speaker 1: Armstrong guide a specific financial, legal, or tax advice. Consult
30:00
Speaker 1: your own financial, tax into state planning advisors before making
30:03
Speaker 1: any investment decisions. Armstrong may contact you to offer investment
30:06
Speaker 1: advisory services.
30:08
Speaker 4: Let's see, do.
30:09
Speaker 2: We want to talk about artificial intelligence? Because I did
30:12
Speaker 2: see a story. I know there's a story in the
30:14
Speaker 2: stack here, but I don't know if you saw. But
30:16
Speaker 2: Microsoft yesterday announced that.
30:18
Speaker 4: They were.
30:20
Speaker 2: Basically canceling a data center that they had planned to
30:24
Speaker 2: build in Ohio. It's a billion dollar plant, not planted,
30:28
Speaker 2: but billion dollar data center that they were going to
30:30
Speaker 2: be building. And I have no idea if this is
30:33
Speaker 2: teriff related or not. My point was rather going to be, Hey,
30:36
Speaker 2: even before this, you had some you know, rumors the
30:39
Speaker 2: last couple of weeks that Microsoft was pulling back on
30:42
Speaker 2: data center projects. Now you're getting some more confirmation on
30:44
Speaker 2: it here in the United States, and I think that
30:49
Speaker 2: even if all of the tariff stuff goes by the wayside,
30:53
Speaker 2: you still have questions as to, hey, what is going
30:56
Speaker 2: to be that dominant leadership portion of the market, because
30:59
Speaker 2: it's U seems like that AI trade even before this
31:03
Speaker 2: was faltering a little bit and running out of some
31:05
Speaker 2: steam there.
31:06
Speaker 3: Yeah, we had the same The same questions were raised
31:09
Speaker 3: in two thousand when investments slowed. Was it because of
31:13
Speaker 3: the market sagging or was it because there was overinvestment
31:17
Speaker 3: and it was a good time to retrench a bit
31:21
Speaker 3: of a chicken egg dilemma in terms of resolving the
31:25
Speaker 3: first the approximate cause there. So, Yeah, I don't know,
31:31
Speaker 3: I don't know what to I don't know what to
31:32
Speaker 3: make of. It doesn't seem like it's something they decided
31:34
Speaker 3: to do, probably in the last three to five days,
31:36
Speaker 3: but might have been a good time to make the
31:38
Speaker 3: announcement as people were preoccupied.
31:41
Speaker 4: It's take a quick break here. When we come back,
31:44
Speaker 4: we'll do a little bit of stack root.
31:46
Speaker 1: Let's the Financial Exchange streams live on YouTube. Like our
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31:53
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32:21
Speaker 4: Mark, what do you have for me for stack Roulettes.
32:25
Speaker 3: The crisis in eggs is over. Supply has loosened up.
32:29
Speaker 3: But the inquiry, the finger the inquiries, the finger pointing
32:33
Speaker 3: has just started. I guess cal Maine is the largest
32:36
Speaker 3: I think are among them egg suppliers in the country.
32:40
Speaker 3: They're the subject of a price fixing inquiry. They reported
32:45
Speaker 3: net income last quarter which was like three and a
32:48
Speaker 3: half times the previous quarter. And the tone of this
32:52
Speaker 3: article in the Financial Times, it's not really a tone.
32:54
Speaker 3: It's fairly objective, but one could reasonably draw the inference
32:57
Speaker 3: at that is somehow evidence that they did something sort
33:00
Speaker 3: of sordid and underhanded and illegal, inch just bad. I
33:04
Speaker 3: think the price mechanism, probably we talked about prices being
33:07
Speaker 3: signals and how tariffs mess with them and they make
33:10
Speaker 3: it difficult to plan. They stoke uncertainty that makes stocks
33:13
Speaker 3: folidle and reduces economic growth for how long we don't know.
33:16
Speaker 3: The price mechanism seems to have worked here. These prices
33:19
Speaker 3: seem these profits seem obscene Calmaine's profits as they're reported anyway,
33:24
Speaker 3: but they will draw more supply in. They will induce
33:27
Speaker 3: Calmaine and others to expand supply. The best antidote is off.
33:33
Speaker 3: It's often said to high prices is high prices. It
33:37
Speaker 3: induces people to enter the market. And as far as
33:40
Speaker 3: I know, there are no restrictions on buying chickens and
33:43
Speaker 3: getting them to lay eggs.
33:44
Speaker 2: I think two things can be true at the same time,
33:47
Speaker 2: in that I've seen enough smoke when it comes to
33:53
Speaker 2: anti trust investigations about price fixing with big food to
33:57
Speaker 2: know there's probably something there. But it's also not the
34:02
Speaker 2: reason that egg prices went up like eight hundred percent,
34:06
Speaker 2: right it. It may have contributed a portion of that,
34:09
Speaker 2: but it's not the reason. It's not the main driver.
34:13
Speaker 3: No, you're right, they're responding to they're being opportunistic.
34:16
Speaker 2: Two things can be true at the same time. Opportunity, Like,
34:18
Speaker 2: I don't have a warm spot in my heart. Like
34:21
Speaker 2: we've seen what was the Tucker. There was like a
34:24
Speaker 2: tuna fixing scandal or something a couple of years back
34:27
Speaker 2: with Big Tuna. There's a tuna price fixing.
34:36
Speaker 4: Yeah here it was.
34:37
Speaker 2: It was, Oh yeah back in twenty seventeen. In twenty
34:40
Speaker 2: two last year, can tuna giants settle price fixing claims
34:43
Speaker 2: for over two hundred and sixteen million dollars. So, like,
34:46
Speaker 2: I've seen enough of these to know that when it
34:48
Speaker 2: comes to big food, you do have some of that
34:52
Speaker 2: that goes on, but they're usually much more discrete about
34:55
Speaker 2: it than just raising the price by four hundred percent.
34:57
Speaker 1: In a month.
34:58
Speaker 3: Well, I don't think of them as being that sophistic either,
35:00
Speaker 3: forgive me, but it's probably very straightforward opper, far more
35:04
Speaker 3: successful than I've been. I'm not diminishing what they do,
35:06
Speaker 3: but I don't think they sit around there's this cigar
35:08
Speaker 3: smoking cabal, you know, sitting around looking to you.
35:13
Speaker 4: Don't think they smoked cigars. It's just a regular cabal.
35:18
Speaker 4: They're vegan. I'm picking up what you.
35:19
Speaker 3: Put vegan cabal of speed walkers.
35:22
Speaker 2: I want to talk a little bit about. Uh, either
35:26
Speaker 2: of you happen to be uh F one fans Formula one?
35:29
Speaker 4: No, I'm a NASCAR guy though.
35:31
Speaker 2: Oh yeah that's fun too. Uh okay, well no, Tucker,
35:34
Speaker 2: this this will play in as well then all right?
35:36
Speaker 2: Uh the the HAS team, who has They've got a
35:39
Speaker 2: NASCAR team? I think they still have a NASCAR team.
35:41
Speaker 4: Right first, I'm hearing of it.
35:43
Speaker 2: What is has h As used to be paired up
35:46
Speaker 2: with Tony Stewart back in the day they got an
35:49
Speaker 2: F one team. I think they still have a NASCAR
35:50
Speaker 2: Stewarts Okay, yeah, so they maybe that they're Stewart Haas
35:54
Speaker 2: now I can't remember, but so they are. What Has
35:58
Speaker 2: actually is they are a major machine tool company that
36:01
Speaker 2: also happens to have racing teams just because the owners
36:04
Speaker 2: love racing.
36:05
Speaker 4: It's how a lot of the stuff gets.
36:06
Speaker 2: Like when you have enough money, you just you either
36:09
Speaker 2: race sailboats or cars, and that's just how it is.
36:12
Speaker 2: So they put out a statement yesterday regarding tariffs, and
36:17
Speaker 2: I just want to quote what they're seeing. Hous Automation
36:20
Speaker 2: is in the process of studying the full impact of
36:22
Speaker 2: tariffs on our operations. In recent days, we've seen a
36:24
Speaker 2: dramatic decrease in demand for our machine tools from both
36:27
Speaker 2: domestic and foreign customers. Out of caution, we have reduced
36:30
Speaker 2: production and eliminated overtime at our sole manufacturing plant in
36:34
Speaker 2: oxn Nerd, California, where we employ seventeen hundred workers and
36:37
Speaker 2: have been in operation since nineteen eighty three. We've also
36:40
Speaker 2: halted hiring and put new employment requisitions on hold. This
36:43
Speaker 2: is what I'm talking about when I'm talking about like
36:46
Speaker 2: the short term impacts of this is if you are
36:49
Speaker 2: a company that, again machine tool manufacturers, the margins are
36:53
Speaker 2: not wide like these are not companies that have a
36:56
Speaker 2: ton of margin. They just have a decent enough volume
36:59
Speaker 2: in the margins are enough that they do make a
37:01
Speaker 2: lot of money. But on a per unit basis, the
37:04
Speaker 2: way factories work, you got to run them full tilt
37:06
Speaker 2: or you don't run them at all. There's there's no
37:08
Speaker 2: real middle ground there. And so this is what you
37:11
Speaker 2: are going to be seeing from more and more businesses,
37:14
Speaker 2: which is, hey, if we don't know what our cost
37:17
Speaker 2: of good sould is going to be, because has has
37:20
Speaker 2: to import you know, some of the raw materials and
37:22
Speaker 2: even partly partly finished materials from places like South Korea
37:26
Speaker 2: and Japan and places like that. If you don't know
37:29
Speaker 2: what your cost of good sould is going to be,
37:32
Speaker 2: and your end buyers are saying, hey, we don't know
37:34
Speaker 2: if we need this right now, then this is kind
37:36
Speaker 2: of that pause that you have. And this is why
37:38
Speaker 2: I say, look, you've got a couple of weeks to
37:40
Speaker 2: maybe be able to say, Okay, we've got negotiations done
37:42
Speaker 2: with X, Y and Z, and here's the lay of
37:44
Speaker 2: the land, and now we can move forward. Because you
37:47
Speaker 2: go more than a couple of weeks like this and
37:49
Speaker 2: you start seeing the real impact on the economy pretty quickly.
37:52
Speaker 2: And so this is the stuff that is going to
37:56
Speaker 2: de spiral if if you don't get positive resolutions on this,
38:00
Speaker 2: you know, within the next couple.
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Speaker 4: Of weeks we are done for the day.
38:05
Speaker 2: We're gonna take a quick break for the rest of
38:07
Speaker 2: the day now, and tomorrow we're back at it. We've
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Speaker 2: got a little bit of economic data tomorrow. We do
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Speaker 2: have weekly jobless claims, and we got CPI from March
38:15
Speaker 2: as well some inflation data. So all that and more
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Speaker 2: coming up tomorrow.