Latest / The Financial Exchange Show / Trump no longer has a penny for your thoughts

Transcript

Trump no longer has a penny for your thoughts · The Financial Exchange Show

0:00
Speaker 1: The Financial Exchange is produced by Money Matters Radio and
0:02
Speaker 1: is hosted by employees of the Armstrong Advisory Group, a
0:05
Speaker 1: registered investment advisor. All opinions expressed are solely those of
0:08
Speaker 1: the hosts. Do not reflect the opinions of Armstrong Advisory
0:11
Speaker 1: or anyone else. Investments can lose money. This program does
0:14
Speaker 1: not offer any specific financial or investment advice. Please consult
0:17
Speaker 1: your own financial, tax, and estate planning advisors before making
0:20
Speaker 1: any investment decisions. Armstrong Advisory and the advertisers heard on
0:23
Speaker 1: this program do not endorse each other or their services.
0:26
Speaker 1: Armstrong and Money Matters Radio do not compensate each other
0:28
Speaker 1: for referrals and are not affiliated. This is the Financial
0:34
Speaker 1: Exchange with Mike Armstrong and Mark Vandetti. Your exclusive look
0:39
Speaker 1: at business and financial news affecting your day, your city,
0:43
Speaker 1: your world. Stay informed and up to date about economic
0:47
Speaker 1: and market trends, plus breaking business news every day. The
0:51
Speaker 1: Financial Exchange is a proud partner of the Disabled American
0:54
Speaker 1: Veterans Department of Massachusetts. Help us support our great American
0:58
Speaker 1: heroes by visiting dav five K dot Boston and making
1:02
Speaker 1: a donation today. Face is the Financial Exchange with Mike
1:06
Speaker 1: Armstrong and Mark Vandetti.
1:11
Speaker 2: Good morning, Welcome back to the Financial Exchange. I'm trying
1:14
Speaker 2: to take it nice and easy for everyone who stayed
1:16
Speaker 2: up a little bit too late watching a really boring
1:18
Speaker 2: Super Bowl, may have had a couple too many bites
1:22
Speaker 2: to eat or beverages, and are just now waking up
1:26
Speaker 2: to tune in on Monday morning. We've got a jam
1:29
Speaker 2: packed show here on the Financial Exchange with new potential
1:32
Speaker 2: tariff announcements, and I'm sure Tucker will chime in on
1:36
Speaker 2: why the NFL is completely wrong to hold the Super
1:39
Speaker 2: Bowl on Sunday when they couldush push it back one
1:42
Speaker 2: week to a holiday. But welcome back to the Financial Exchange.
1:45
Speaker 2: Hope everyone had a nice Super Bowl Sunday. Maybe spend
1:48
Speaker 2: a little time with family. I spent most of my
1:51
Speaker 2: evening last night holding babies, which is, you know, always
1:54
Speaker 2: a good time. They were my family. I didn't just
1:56
Speaker 2: find some babies the baby family and spend some time
2:01
Speaker 2: holding babies, which is always a good way to spend
2:03
Speaker 2: the Super Bowl. We will dive into ads and some
2:07
Speaker 2: of that fun stuff later in the show, but the
2:09
Speaker 2: first news to dominate the economy this morning is going
2:13
Speaker 2: to be about tariffs again, So two weeks in a
2:16
Speaker 2: row where we get to talk about this, and this
2:18
Speaker 2: time not country specific so much as product specific, and
2:23
Speaker 2: tariff's also that we've become somewhat normalized and used to here,
2:28
Speaker 2: which is on steel and aluminium. Do you want to
2:33
Speaker 2: go the British spelling today steel and aluminum will be
2:37
Speaker 2: facing twenty five percent tariffs globally, it looks like with
2:41
Speaker 2: very few exceptions. And this is not something new. This
2:45
Speaker 2: is something that markets have dealt with, and we've used
2:47
Speaker 2: the term whistling past the graveyard a few times over
2:50
Speaker 2: the course of the last few weeks. But markets are
2:52
Speaker 2: certainly are whistling this morning. All three major US indices
2:57
Speaker 2: in strongly positive territory. But Mark, let's talk at a little
3:00
Speaker 2: bit before we get into why I think the Trump
3:03
Speaker 2: administration is pushing these and specifically pushing these on countries
3:06
Speaker 2: that are not China. Can we talk a little bit
3:09
Speaker 2: about the history of steel and aluminum tariffs, because to
3:12
Speaker 2: your point on a conversation we had prior to this show,
3:15
Speaker 2: this is nothing new. This is something that has been
3:18
Speaker 2: implemented many times. Many administrations have looked at steel and
3:22
Speaker 2: aluminum terraffs over the course of the last few decades.
3:24
Speaker 2: So can you give me a bit of a history
3:26
Speaker 2: lesson here in terms of where it's been used and
3:27
Speaker 2: how impactful they've been.
3:29
Speaker 3: Oh, the longer term history, I'm not all that familiar with.
3:32
Speaker 3: I can only tell you from memory and maybe a
3:35
Speaker 3: little bit of reading that most US presidents have put
3:38
Speaker 3: tariffs on steel or cars, some derivative product at one
3:43
Speaker 3: time or another. Steel Workers USW is a very influential union,
3:49
Speaker 3: and they're in Pennsylvania, of course, their headquarters are. They're
3:52
Speaker 3: in Pittsburgh, a very important swing state. It always has been,
3:57
Speaker 3: so they're not new in that sense. There were no
4:01
Speaker 3: stranger to them in terms of more recent history either.
4:05
Speaker 3: The first Trump administration imposed tariffs of about what they
4:08
Speaker 3: are allegedly toying with this time around in twenty eighteen,
4:13
Speaker 3: and they had textbook effects. By that, I mean they
4:17
Speaker 3: had the effects you would expect a tariff, which is
4:19
Speaker 3: just a tax on a foreign good on an import,
4:24
Speaker 3: had the effects that you would expect a tax on
4:26
Speaker 3: a foreign good to have. It helped domestic producers. So
4:31
Speaker 3: we saw domestic steel production go up briefly over the
4:36
Speaker 3: next several months in twenty eighteen. It then quickly retreated,
4:40
Speaker 3: but that could be due to broader economic circumstances I
4:43
Speaker 3: didn't control for those in the conversation we were having earlier.
4:47
Speaker 3: Prices went up to it didn't do much for manufacturing
4:50
Speaker 3: specifically steel employment as a percentage of overall employment. And
4:56
Speaker 3: the point I tried to make earlier internally is that
4:58
Speaker 3: manufacturing employment and steel employment more specifically have been declining
5:03
Speaker 3: for decades no matter how you slice it, as the
5:06
Speaker 3: US economy has shifted toward producing more services than than
5:13
Speaker 3: concrete things than goods that you make, and there's nothing
5:17
Speaker 3: any president can can do about that. You asked it
5:20
Speaker 3: this right start. What is the purpose of these tariffs?
5:22
Speaker 3: Is it to raise revenue? Is it to protect jobs?
5:26
Speaker 3: Is it to exact? Is it to extract some concession
5:29
Speaker 3: by exacting leverage on another party? That's what I'm not
5:33
Speaker 3: clear about with respect to this White House. What exactly
5:36
Speaker 3: you're trying to do here now?
5:38
Speaker 2: To be clear, just in September of last year, the
5:40
Speaker 2: Biden administration increased tariffs on I don't know what many,
5:45
Speaker 2: but many Chinese steel and aluminum products die up to
5:48
Speaker 2: twenty so this did just happen last fall, and China
5:52
Speaker 2: is the main culprit that I think. Again, they not
5:57
Speaker 2: specific announcements here from the Trump administration in terms of
5:59
Speaker 2: what they're try kind to target, but I suspect that
6:01
Speaker 2: this is the main thing they are trying to target,
6:03
Speaker 2: because what has happened in China over the course of
6:07
Speaker 2: the last I guess two to three decades has been
6:10
Speaker 2: a massive build up of the country's steel and aluminum
6:14
Speaker 2: manufacturing capabilities. They have the most modern, most modern facilities
6:19
Speaker 2: they basically have. You know, the planned economy has pushed
6:23
Speaker 2: this stuff out, and for years they had massive domestic
6:27
Speaker 2: consumption needs. You were building these massive cities that didn't
6:31
Speaker 2: exist before, high speed rail, new high rise towers, all
6:34
Speaker 2: of these things that required massive amounts of raw inputs.
6:39
Speaker 2: What's happened over the course of the last five to
6:41
Speaker 2: ten years, mark is a dramatic slowdown in the Chinese economy,
6:44
Speaker 2: far less building. I think everyone at this point has
6:47
Speaker 2: seen the images of these ghost cities that were built
6:51
Speaker 2: without any real population to inhabit them. And so there
6:56
Speaker 2: have been many allegations now of China dumping steel, steel
7:00
Speaker 2: and aluminum onto markets, and the United States has not
7:03
Speaker 2: been the only country to slap terrace on them. Because
7:06
Speaker 2: of this, I think the overall story remains that even
7:11
Speaker 2: if you slap tariffs on China when it comes to
7:14
Speaker 2: steel and aluminum, if they are still dumping their product
7:17
Speaker 2: into the global market, you're still bringing down prices even
7:20
Speaker 2: with those tariffs that America is forcing on them. And
7:23
Speaker 2: so to me, this might just be an attempt to
7:27
Speaker 2: deal with some of that problem, which is, it doesn't
7:31
Speaker 2: matter if we slap the tariff on China alone if
7:34
Speaker 2: they are still exporting the steelil to Brazil, who is
7:37
Speaker 2: then in turn selling very cheap steel and aluminum to
7:41
Speaker 2: the United States. Even if manufactured there in Brazil, it's
7:44
Speaker 2: still bringing down the overall price situation. But to your point,
7:47
Speaker 2: I don't really know from these Trump orders if they
7:50
Speaker 2: are an attempt to protect the American steel industry, if
7:54
Speaker 2: they are an attempt to punish China further. It's relatively
7:59
Speaker 2: uncle lear to me at this stage. And also markets
8:02
Speaker 2: don't seem even the least.
8:03
Speaker 3: They're not phased. It's like they don't I don't personally
8:05
Speaker 3: believe it's gonna happen, and I could easily be proved wrong.
8:08
Speaker 3: What the heck, do I know, But it doesn't seem
8:10
Speaker 3: it seems so rash.
8:14
Speaker 2: It also seems to me that it would be far
8:15
Speaker 2: less impactful than slapping tariffs on just about everything imported
8:20
Speaker 2: from Canada and Mexicano.
8:21
Speaker 3: We where that that's subject to a third. These these
8:24
Speaker 3: deadlines that that the White House is imposing are dizzying.
8:27
Speaker 3: That the clock's running on that one too, mich.
8:28
Speaker 2: It is from last week, But that's merely My point
8:31
Speaker 2: is that one was delayed because I think of how
8:33
Speaker 2: severe the effect would be. I'm not sure how severe
8:35
Speaker 2: the effect of twenty five percent far.
8:37
Speaker 3: Less, far less broad in terms of detrimental overall economic impact.
8:43
Speaker 3: It could easily though, have an impact on inflation twenty
8:45
Speaker 3: five percent. I don't know. I should know off the
8:48
Speaker 3: top of my head, but I don't want uh. I
8:51
Speaker 3: don't have a good way to quantify the impact of steal,
8:54
Speaker 3: specifically in a lore stealing aluminum in this case on GDP,
8:57
Speaker 3: because they there. You'd have to account for second order
9:02
Speaker 3: and other effects. But no, certainly not as potentially damaging.
9:07
Speaker 2: It just raised it raises this additional question that we have,
9:11
Speaker 2: We've asked so many times. It's I'm no steel an
9:15
Speaker 2: aluminum manufacturing expert, but it's fairly clear to me that
9:20
Speaker 2: China's steal aluminum industry is fairly heavily subsidized by the
9:24
Speaker 2: Chinese government. Do you think that's a reasonable statement that
9:27
Speaker 2: most people could agree upon, Mark, I.
9:29
Speaker 3: Don't know, sure, let's go with it for purposes of this.
9:31
Speaker 2: Yeah. And so what you are seeing is China facing many,
9:35
Speaker 2: many allegations globally of dumping steel and aluminum onto the markets,
9:39
Speaker 2: putting domestic manufacturers out of business across the globe. And
9:43
Speaker 2: the question is how do you react to all of that.
9:47
Speaker 2: And we've talked about this with semiconductors, We've talked about
9:50
Speaker 2: this with televisions, We've talked about this with cars, and
9:54
Speaker 2: it's this complete running question of Okay, it's what we
9:59
Speaker 2: domess in the United States in a free trade, capitalist society,
10:03
Speaker 2: would deem to be cheating the system a little bit,
10:08
Speaker 2: But should we care? Is manufacturing steel so strategically important
10:15
Speaker 2: to the United States that we need to slap terrace
10:19
Speaker 2: on it to protect that industry because they are cheating
10:21
Speaker 2: and we don't want that stuff coming in. And also,
10:24
Speaker 2: where do we draw the line? Are televisions strategically important
10:29
Speaker 2: that we need to prevent China from manufacturing them on
10:32
Speaker 2: a subsidized basis. If we think that they are using
10:36
Speaker 2: slave labor in Western China to manufacture cotton based products,
10:40
Speaker 2: should we be preventing any of those from coming in
10:43
Speaker 2: here because it's strategically important to the United States that
10:46
Speaker 2: we have a cotton industry. Or do we just say, hey,
10:51
Speaker 2: if the Chinese government's willing to subsidize the price of
10:53
Speaker 2: steel and aluminum, we can manufacture finished goods at a
10:57
Speaker 2: much lower price, and so I don't care if we
10:59
Speaker 2: do it here. Still in aluminum is a little bit
11:01
Speaker 2: different to cotton than cotton. To me, if you if
11:04
Speaker 2: you're in an all out war, I think you do
11:05
Speaker 2: want to have steel and aluminum capabilities domestically. But these
11:09
Speaker 2: are the strategic questions that I don't think we're really
11:12
Speaker 2: asking ourselves. We're just saying, well, that's unfair blame.
11:16
Speaker 3: This is the level of dialogue here has been disappointing
11:20
Speaker 3: that they it's been stupid. Who do you blame for that?
11:23
Speaker 3: Is it the media for not asking good questions of
11:25
Speaker 3: the White House? Is it our lack of seeming, a
11:31
Speaker 3: lack of ability to pay attention to any one thing
11:33
Speaker 3: for more than a few seconds.
11:35
Speaker 2: Yeah, I don't. I don't know, because frankly, both the
11:39
Speaker 2: left and the right have had the same attitude towards this.
11:42
Speaker 2: They're cheating, slap tarls protection. It's been a general drift
11:48
Speaker 2: towards one direction, and we just haven't had a strategic question,
11:53
Speaker 2: you know, a strategic analysis and questioning of why do
11:57
Speaker 2: we care if China wants to subsidize the manufacturturing of
12:00
Speaker 2: X y Z good And where do we draw the
12:03
Speaker 2: line between a good of strategic national importance like semiconductors
12:08
Speaker 2: and like defense equipment, And where do we say I
12:12
Speaker 2: just don't care if my button down shirt gets subsidized
12:16
Speaker 2: by the Chinese government. It's rather disappointing that we don't
12:21
Speaker 2: have that discussion, but it is pretty fundamental and comes
12:24
Speaker 2: to why we're a little bit confused about these tariffs today.
12:27
Speaker 2: I would like a clear statement made, like, yeah, this
12:29
Speaker 2: is strategic national defense importance and therefore we're slapping these
12:32
Speaker 2: tariffs across the board. Let's take a quick break. When
12:35
Speaker 2: we come back, I want to talk a little bit
12:36
Speaker 2: about how China over the last few years has usually
12:40
Speaker 2: responded to this sort of thing. And again, while these
12:43
Speaker 2: tariffs aren't specifically levied on China, they seem to be
12:49
Speaker 2: a push on China quite a bit. Here, let's take
12:51
Speaker 2: a quick break, and I want to talk about likely
12:53
Speaker 2: repercussions for other industries from China.
12:55
Speaker 1: After this business and financial news affecting the markets and
13:00
Speaker 1: your wallet, We've done it all strength from Wall Street
13:03
Speaker 1: right here on the Financial Exchange Radio Network Wall Street.
13:08
Speaker 1: Watch a full update on the market's performance today weekdays
13:11
Speaker 1: at ten thirty only here on the Financial Exchange Radio Network.
13:17
Speaker 4: The Financial Exchange is a proud partner of the Disabled
13:20
Speaker 4: American Veterans Department of Massachusetts. By making a donation, you
13:24
Speaker 4: can support the Veteran Advancement Program, which offers permanent and
13:28
Speaker 4: transitional affordable housing to veterans and their dependents. The DAV
13:32
Speaker 4: of Massachusetts is the only DAV department in the country
13:36
Speaker 4: to lead a veterans housing initiative for single vets and
13:39
Speaker 4: those with families. Visit DAV FIVEK dot Boston to make
13:44
Speaker 4: a donation today and make note for this year's five
13:47
Speaker 4: K to be held on Saturday, November eighth. That's DAV
13:50
Speaker 4: five K dot Boston.
13:52
Speaker 2: So we were talking a little bit about market's whistling
13:55
Speaker 2: past the graveyard. Here's what I mean. The NASDAC this
13:57
Speaker 2: morning's up two hundred twenty nine points. Tech Heavycom Index
14:00
Speaker 2: up nearly one point two percent. And historically in trade wars,
14:06
Speaker 2: China has a very different way of dealing with them
14:10
Speaker 2: than the United States does, and I think it's largely
14:12
Speaker 2: because they don't have an executive branch a legislative branch.
14:16
Speaker 2: They have she and president. She just decides what is
14:21
Speaker 2: going to be and they are able to respond in
14:23
Speaker 2: different ways than we would here in the United States.
14:26
Speaker 2: For instance, if China decided to slap tariffs on American
14:29
Speaker 2: made goods, Donald Trump could reciprocate with tariffs of his own.
14:33
Speaker 2: He probably couldn't ban certain companies from buying real estate
14:41
Speaker 2: in the United States. He probably couldn't ban a company
14:45
Speaker 2: from advertising in the United States because we have things
14:47
Speaker 2: called free speech laws, and so it's.
14:50
Speaker 3: A different would try.
14:52
Speaker 2: He might try, but he would probably be unsuccessful without
14:56
Speaker 2: an Act of Congress. And we see that difference lining up,
15:00
Speaker 2: and we finally did get an Act of Congress to
15:02
Speaker 2: act a little bit more like China does here with
15:04
Speaker 2: the TikTok band, which is now again being looked at
15:08
Speaker 2: a little bit differently, but neither here nor there. Historically,
15:11
Speaker 2: China has reciprocated with tariffs of their own, but oftentimes
15:16
Speaker 2: different types of policies, such as banning companies from doing business.
15:22
Speaker 2: We remember a few years ago. Do you recall the
15:24
Speaker 2: story a few years ago of there are basically brick
15:29
Speaker 2: and mortar retail stores of fashion companies that just disappeared
15:34
Speaker 2: overnight in China. And what they did there was they
15:37
Speaker 2: didn't immediately close down the stores, but they just went
15:39
Speaker 2: to the largest tech companies and said, you will not
15:43
Speaker 2: allow people to find these stores in your app like
15:47
Speaker 2: on Google Maps. Just immediately make those things disappear. And
15:50
Speaker 2: so they have a different set of tools that are
15:52
Speaker 2: at play here, and I do wonder if they bring
15:55
Speaker 2: those tools out specifically around trying to her tech company.
16:00
Speaker 2: Now there's a number of them that won't really matter
16:02
Speaker 2: for Microsoft, Google, Facebook don't really have any Chinese exposure
16:06
Speaker 2: to begin with. Apple to me is the big behemoth here.
16:11
Speaker 3: Everything's on the table because they know this white house
16:14
Speaker 3: is transactional. And I don't mean that pejoratively. I just
16:17
Speaker 3: mean they're looking for something. Every instance, virtually every instance
16:23
Speaker 3: of threatened tariffs in the first Trump administration and most
16:28
Speaker 3: recently has been a threat has been brinkmanship. If you
16:35
Speaker 3: could look back to the news reports about tariff threats
16:38
Speaker 3: in twenty eighteen twenty nineteen, they followed the same script.
16:42
Speaker 3: Tariffs will be imposed onto a very dramatic social media posts.
16:46
Speaker 3: They will be imposed on mid midnight on the first
16:48
Speaker 3: of the next month, at three o'clock the afternoon before
16:51
Speaker 3: I'm having phone calls with foreign leaders. It's reality TV Mike,
16:55
Speaker 3: and they know this. They know ultimately he's just looking
16:58
Speaker 3: for bargaining, looking for some bargaining advantage. And then if
17:02
Speaker 3: they meet him, not even necessarily halfway, if they offer
17:05
Speaker 3: some concession, it might be empty sufficient though to give
17:08
Speaker 3: him the sufficient to allow him to spin it as
17:11
Speaker 3: a victory. He'll fold, just like he did last week.
17:14
Speaker 3: So I expect over the next four years, rolling tariff
17:17
Speaker 3: crises followed by last minute made for reality TV resolutions
17:22
Speaker 3: without any material damage I hope to the economy. And
17:25
Speaker 3: it would seem that stock and bond market investors are
17:29
Speaker 3: familiar enough with the script to draw the same conclusion.
17:32
Speaker 2: Yeah, like I said, they seem to be they sniffed
17:35
Speaker 2: out the Canada Mexico situation. I think markets where those
17:39
Speaker 2: tarifts very serious, you know, likely could have been down
17:41
Speaker 2: significantly more than they were prior to the announcement of suspension.
17:45
Speaker 2: Today markets moving up in spite of new tariffs on
17:49
Speaker 2: US sorry on foreign made steel and aluminum. In terms
17:53
Speaker 2: of Beijing actions, already, Beijing's already said that they are
17:56
Speaker 2: investigating in Vidia and Google over alleged antitrust issues. Again,
18:01
Speaker 2: I don't think it really matters that they're investigating Google
18:04
Speaker 2: because Google doesn't have any real business in China, But
18:07
Speaker 2: that will be The question to me is if this
18:09
Speaker 2: does escalate. I'm less concerned about the tariff on American
18:13
Speaker 2: made goods making their way into China. I am more
18:15
Speaker 2: concerned about manufacturing companies that do business in China. But frankly,
18:21
Speaker 2: as we've talked about time and time again, any action
18:24
Speaker 2: that China wants to take to retaliate is likely to
18:27
Speaker 2: harm China more than it harms the United States, and
18:29
Speaker 2: so for a number of reasons, I'm not sure how
18:31
Speaker 2: serious that will get.
18:33
Speaker 3: Yeah, I don't think either party. Well I shouldn't say
18:35
Speaker 3: that because during the campaign Donald Trump talked about using
18:38
Speaker 3: tariffs to raise revenue and to bring jobs back. This
18:41
Speaker 3: takes us back to our earlier conversation about what is
18:45
Speaker 3: the objective here. We should be mad that he's not imposed.
18:48
Speaker 3: Those who think tariffs will bring manufacturing jobs back or
18:51
Speaker 3: be an alternative source of revenue, say to replace the
18:54
Speaker 3: income tax, as he talked about a lot during the campaign,
18:56
Speaker 3: should be upset that he's not following through. Weren't you serious?
19:00
Speaker 3: I thought tariffs were this miracle elixir. They were going
19:03
Speaker 3: to replace the income tax. They were going to restore
19:05
Speaker 3: Amaraga to its eighteen nineties greatness. What is the purpose?
19:11
Speaker 3: And if the purpose is laudable, why aren't you following through?
19:15
Speaker 3: This is where I get sort of stuck and why
19:17
Speaker 3: I don't take it that seriously.
19:19
Speaker 2: Let's take a quick break. When we come back, We're
19:21
Speaker 2: gonna have Wall Street Watch. After that, I want to
19:23
Speaker 2: talk a little bit about inflation. We've got a little
19:25
Speaker 2: bit of time between the next FED meeting, but talk
19:28
Speaker 2: on housing and inflation when we come back.
19:40
Speaker 1: Like us on Facebook and follow us on Twitter at
19:43
Speaker 1: TFE show. Breaking business news is always first right here
19:47
Speaker 1: on the Financial Exchange Radio Network. Time Now for Wall
19:52
Speaker 1: Stream watch a complete look at what's moving market so
19:55
Speaker 1: far today right here on the Financial Exchange Radio Network.
20:00
Speaker 4: Well, markets are in positive territory, despite the fact we
20:04
Speaker 4: have more news on the terror front, where President Trump
20:07
Speaker 4: said he's planning to announce a blanket twenty five percent
20:10
Speaker 4: tariff on all steel and aluminum imports today. Right now,
20:16
Speaker 4: the Dow is up by four tenths of a percent
20:18
Speaker 4: or one hundred and seventy six points, SMP five hundred
20:21
Speaker 4: up by seven tenths of a percent of forty two points,
20:25
Speaker 4: and then NAADAC is up one in a quarter percent
20:28
Speaker 4: or two hundred and thirty eight points, RUSTED two thousand,
20:31
Speaker 4: edging three points higher so far today, ten year treasure
20:34
Speaker 4: wheeled down by two basis points at four point four
20:37
Speaker 4: to six percent, and crude oil up about one percent higher,
20:41
Speaker 4: trading at seventy one dollars in seventy cents a barrel.
20:45
Speaker 4: Several American steel and aluminum producers are seeing gains onto
20:50
Speaker 4: on the day following President Trump's remarks. US Steel, Cleveland Cliffs,
20:56
Speaker 4: New Core Steel, Dynamics, and Alcoa shares are all impositive
21:00
Speaker 4: territory seeing gains. Meanwhile, the Wall Street journals reporting that
21:03
Speaker 4: Elliott Management has taken a stake in British oil giant BP,
21:08
Speaker 4: where the firm will push for changes to improve BP's performance.
21:12
Speaker 4: That stock is jumping by six percent elsewhere. McDonald's posted
21:17
Speaker 4: mixed fourth quarter results this morning, where it's adjusted earnings
21:20
Speaker 4: met expectations, However, revenue fell just short of forecasts. The
21:25
Speaker 4: fast food giant same store sales growth of zero point
21:28
Speaker 4: four percent also top the one percent decline analysts had anticipated.
21:33
Speaker 4: McDonald's shares are up by four percent, and after today's
21:37
Speaker 4: closing bell, Vertex Pharmaceuticals will report Tomorrow morning. We'll see
21:42
Speaker 4: earnings from Coca Cola, SMP Global, and Shopify. I'm Tucker Silvan.
21:47
Speaker 4: That's Wall Street watch Jrum.
21:49
Speaker 2: Powell heads to the Hill and we'll be testifying in
21:53
Speaker 2: front of both houses over the next few days. Next
21:56
Speaker 2: meeting for the Federal Reserve doesn't come until March. A
22:00
Speaker 2: little bit of an open period of time here for
22:03
Speaker 2: more FED speeches than we could possibly need. Next Fed
22:06
Speaker 2: meeting day will be March nineteenth, and there is right
22:10
Speaker 2: now at least over a ninety percent chance that they
22:12
Speaker 2: do nothing at that meeting in terms of moving rates
22:15
Speaker 2: around what sort of questions is J Powell like that
22:18
Speaker 2: to face at that meeting? Will any of them be
22:20
Speaker 2: useful or is it all just going to be political
22:23
Speaker 2: grant standing Again.
22:24
Speaker 3: A lot of it is that has got to be
22:26
Speaker 3: able to run an advertisement testimony. Sure, it's a little
22:30
Speaker 3: hard to badger the FED right now because they have
22:35
Speaker 3: presided over I won't say engineered. I think they've gotten lucky,
22:39
Speaker 3: and that's okay. They handled the luck the right way.
22:41
Speaker 2: Luck is good.
22:41
Speaker 3: They've presided over a big fall in headline inflation from
22:46
Speaker 3: roughly nine percent in mid twenty twenty two at the
22:49
Speaker 3: height of supply disruptions and energy market disruptions COVID and
22:54
Speaker 3: Russia invading Ukraine respectively. Inflation is now back down into
22:59
Speaker 3: probably the high twos, may be low threes, which might
23:02
Speaker 3: not be at their goal of two point zero, but
23:06
Speaker 3: is what most people will consider to be low and stable.
23:09
Speaker 3: So the FED could rightly declare mission accomplished. Here, we've
23:12
Speaker 3: got unemployment at four percent GDP, the nation's output of
23:16
Speaker 3: goods and services growing it about or having grown I
23:20
Speaker 3: should say, we don't know where the current quarter is
23:21
Speaker 3: going to come in, but having grown it about three percent,
23:23
Speaker 3: rounding up by just a tenth last year, and inflation
23:26
Speaker 3: back in the two s two is very low threes.
23:30
Speaker 3: That is an excellent trifecta like of economic results. And
23:33
Speaker 3: if you're keeping score over time, remember those three numbers.
23:38
Speaker 3: Four percent unemployment, three percent GDP growth, and three ish
23:41
Speaker 3: percent inflation. That's where we are today. The FED could,
23:46
Speaker 3: with a little bit of exaggeration, take credit for that.
23:48
Speaker 3: Their mandate, after all, is to ensure stable prices. They
23:52
Speaker 3: control the supply of money, which influences interest rates and
23:55
Speaker 3: in turn prices. Not quite in turn, but you know
23:57
Speaker 3: what I mean. And at the same time maximum employment,
24:01
Speaker 3: and by today's snapshot, Mike, they seem to have achieved
24:04
Speaker 3: that goal. I don't know why you'd want to mess
24:06
Speaker 3: with FED independence, but it seems like we're gonna We're
24:09
Speaker 3: gonna break that for the fun of it too. In
24:11
Speaker 3: the coming choice, Mike, I will be I will bet you.
24:16
Speaker 3: I know you have everything a man could want, but
24:19
Speaker 3: I will make a gentleman's bet with you. I could
24:22
Speaker 3: never coax you with any material, I know this, but
24:24
Speaker 3: I'll make a gentleman's bet with you. Within the next
24:27
Speaker 3: year or so, there's a crisis of fed independence at
24:29
Speaker 3: this country.
24:30
Speaker 2: Really.
24:30
Speaker 3: Oh, I'm after the events of the past few weeks,
24:33
Speaker 3: and I'm not convinced they'd be on the wrong side
24:35
Speaker 3: of it legally, the administration if they pushed for more influence.
24:38
Speaker 3: By the way, it's been a settled question for you know,
24:40
Speaker 3: fifty plus years. Why would you want to mess with that?
24:43
Speaker 3: But they're tinkerers, See I don't.
24:46
Speaker 2: I think we just get the same things we've seen
24:49
Speaker 2: in decades past, but louder and more public. And I
24:53
Speaker 2: don't think we see anything.
24:54
Speaker 3: You don't think if the economy gets into a gym.
24:56
Speaker 2: I think we see anything.
24:57
Speaker 1: No.
24:57
Speaker 2: I think that's ultimately it comes down to bluster and
25:02
Speaker 2: loud talk, but no real push on it.
25:04
Speaker 3: I think Trump means he is he is for realness.
25:07
Speaker 3: Over the weekend he replaced the entire Kennedy Center leadership
25:10
Speaker 3: because he wanted, you know, more operas or something.
25:13
Speaker 2: I think the fact I don't. We'll say, okay, we'll say,
25:17
Speaker 2: gentlemen's bet I like.
25:18
Speaker 3: But anyway back to where we back back to the
25:20
Speaker 3: state of the Union, Yes, and what we can.
25:23
Speaker 2: So the state of inflation has in the state of
25:26
Speaker 2: the economy based on those three things, have been pretty good.
25:29
Speaker 2: Like we talked about on Friday of last week, the
25:32
Speaker 2: problem for the FED is that expectations are One of
25:34
Speaker 2: the problems for the FED is that expectations around inflation
25:37
Speaker 2: at the FED and within the general public are on
25:40
Speaker 2: the rise. We saw what was it, a full percentage
25:43
Speaker 2: point growth in a single month on what consumers on
25:48
Speaker 2: average think inflation will be over the next year. That's
25:51
Speaker 2: a big jump to see. This is according to the
25:54
Speaker 2: University of Michigan. Consumer sentiments serve the dew every month
25:57
Speaker 2: and on average when you talk to consumers. Again, this
25:59
Speaker 2: was in January, before we knew that the tariffs on
26:02
Speaker 2: Mexico and Canada were going to be waived and all
26:04
Speaker 2: of that stuff. But at that point in time, expectations
26:07
Speaker 2: were growing for more inflation. I'm going to do something
26:11
Speaker 2: that we always warn people not to do on this program,
26:14
Speaker 2: which is cherry pick data for a moment here, and
26:16
Speaker 2: I'm gonna start with the prerequisite of you shouldn't do
26:19
Speaker 2: this because it doesn't mean anything, but wouldn't it be fascinating? So,
26:24
Speaker 2: according to the Saint Louis Federal Reserve, the shelter cost
26:28
Speaker 2: for the United States. This is according to the CPI
26:32
Speaker 2: report that we that we look at regularly. It peaked
26:36
Speaker 2: for this cycle back in March of twenty twenty three.
26:39
Speaker 2: At that point in time, year over year inflation on
26:41
Speaker 2: shelter costs was over eight percent. We've now been in
26:45
Speaker 2: this steadily declining area, whereas of December of twenty four
26:49
Speaker 2: it hit about four point six percent. And if I
26:52
Speaker 2: take a look back at the twenty ten decade, just
26:54
Speaker 2: to ground everybody, it was running, you know, in the
26:58
Speaker 2: early twenty tens, when all the housing market was still
27:01
Speaker 2: falling apart, it was in the ones. In the late
27:03
Speaker 2: twenty tens it got as high as three and a half.
27:05
Speaker 2: So we've been steadily declining back towards trend. I bring
27:09
Speaker 2: this up only because shelter is such a massive component
27:13
Speaker 2: of CPI. Wouldn't it just be wild if we saw
27:16
Speaker 2: this return to the pre pandemic norm and be the thing.
27:19
Speaker 3: And it's okay to just look at one component, by
27:21
Speaker 3: the way, because the stickier the prices that are less
27:25
Speaker 3: flexible are the ones that cause recession or a natural boom.
27:29
Speaker 3: So it's okay to look at less flexible prices like
27:31
Speaker 3: you're doing. And so I just do forecast I just
27:34
Speaker 3: do wonder.
27:34
Speaker 2: I don't feel comfortable forecasting that this will come down
27:37
Speaker 2: to pre pandemic norms of let's call it three percent,
27:40
Speaker 2: but if it did, it would probably be enough to
27:42
Speaker 2: drag a large component of inflation down and potentially the
27:46
Speaker 2: entire number down into a more comfortable area. And it
27:48
Speaker 2: follows along the CNBC story that talks about kind of
27:53
Speaker 2: being a renter's market at the moment, at least in
27:55
Speaker 2: some areas of the country. As of December, the median
27:59
Speaker 2: APT asking rent price in the United States was one thousand,
28:03
Speaker 2: six hundred and ninety five dollars, which sounds like a
28:05
Speaker 2: lot to me, but that is down half a percent
28:08
Speaker 2: from November, and it's down a full one point one
28:11
Speaker 2: percent from a year before, three point seven percent from
28:15
Speaker 2: the peaks back in July of twenty twenty two. And
28:18
Speaker 2: so what you're seeing here is finally in a lot
28:21
Speaker 2: of markets that are not Massachusetts, Rhode Island, for Monts,
28:25
Speaker 2: New Hampshire, Maine, Connecticut, but in a lot of markets
28:28
Speaker 2: across the country, the massive boom and building that you
28:30
Speaker 2: saw over the course of the last five ten years
28:33
Speaker 2: finally came online in twenty twenty four and twenty twenty five,
28:37
Speaker 2: and so rent in Houston and Austin and parts of
28:41
Speaker 2: Florida has been coming down pretty substantially, And I just
28:46
Speaker 2: I bring it up to openly wonder if you will
28:48
Speaker 2: see this drag on inflation over the course of the.
28:51
Speaker 3: Next well seql it should. Again, it's the more flexible,
28:54
Speaker 3: it's the less flexible excuse me, prices that cause a
28:56
Speaker 3: problem from monetary policymakers. The less flexible prices are, the
29:01
Speaker 3: more the brunt of any say, disinflation has to be
29:05
Speaker 3: borne by demand, right, the more severe a recession associated
29:10
Speaker 3: with this inflation might be. If that sounds technical, it
29:14
Speaker 3: is kind of technical. I don't think I'm doing a
29:16
Speaker 3: very good job summarizing it, but suffice to say this
29:19
Speaker 3: is a positive development. I also for getting inflation down further.
29:22
Speaker 2: While I'm encouraged to see this is data according to
29:24
Speaker 2: reelt dot com, by the way, so different than what
29:27
Speaker 2: the CPI looks at in terms of rental costs and
29:29
Speaker 2: shelter costs. But I also don't think it's something that's
29:32
Speaker 2: likely to continue for years on end, because that construction
29:34
Speaker 2: boom that we saw in multi family housing in parts
29:37
Speaker 2: of the country has largely dried up. Now it is
29:41
Speaker 2: not continuing at that breakneck pace, largely because the builders
29:45
Speaker 2: are seeing the exact same thing that we are, which
29:47
Speaker 2: is the demand is not there to support the current prices.
29:50
Speaker 2: Let's take a quick break. When we come back, we'll
29:53
Speaker 2: talk a bit more about the Magnificent Seven. One of
29:56
Speaker 2: their key areas of growth has been cloud a little
30:00
Speaker 2: bit of question about that growth going forward. Quick break,
30:03
Speaker 2: we'll be cover that next here on the Financial Exchange.
30:06
Speaker 1: Miss any of the show catch up at your convenience
30:08
Speaker 1: by visiting Financial Exchange Show dot com and clicking the
30:11
Speaker 1: on demand icon, where you'll find all of our interviews
30:14
Speaker 1: in full showers. This is your home for the latest
30:17
Speaker 1: business and financial news in New England and around the country.
30:21
Speaker 1: This is the Financial Exchange Radio Network. Text us at
30:26
Speaker 1: six one seven three six two one three eighty five
30:28
Speaker 1: with your comments and questions about today's show and let
30:31
Speaker 1: us know what you think about the stories we are covering.
30:33
Speaker 1: This is the Financial Exchange Radio Network.
30:55
Speaker 2: The Magnificent seven, magnicifantnificent illowed you I was watching the
31:03
Speaker 2: Super Bowl. Two folks, the Magnificent seven, Amazon, Microsoft, Alphabet,
31:10
Speaker 2: in Vidia, Tesla, Who am I missing Microsoft, No, I
31:16
Speaker 2: listed them. There's seven of them. Just take my word
31:19
Speaker 2: for it. A large portion of their growth over the
31:22
Speaker 2: course of the last decade has been through the cloud,
31:25
Speaker 2: and I think nobody epitomizes this better than probably Amazon,
31:29
Speaker 2: because it was kind of just a convenient accident for them.
31:34
Speaker 2: What they found was, Hey, in order to sell all
31:36
Speaker 2: this stuff online, we need a ton of computing power.
31:42
Speaker 2: And it's not because every single day we have people
31:44
Speaker 2: looking for stuff online on our website. It just happens
31:47
Speaker 2: to be that when we do Prime Day deals or
31:50
Speaker 2: around the Christmas holiday shopping season, the amount of interest
31:55
Speaker 2: in our site expands to a point where we have
31:57
Speaker 2: to have access capacity for the rest of the year.
31:59
Speaker 2: And this, well, what the heck do we do with
32:01
Speaker 2: all this excess capacity? And they came up with a
32:03
Speaker 2: pretty cool business idea, which is, oh, well, companies will
32:06
Speaker 2: pay us for this capacity to store their servers on
32:10
Speaker 2: our cloud computing. They will store their files on there.
32:14
Speaker 2: And because it's a you know, generally speaking, these businesses
32:17
Speaker 2: are a little bit more predictable in terms of their
32:19
Speaker 2: volume and needs of that service, we can make a
32:22
Speaker 2: pretty penny and it's kind of all profit margin to us,
32:24
Speaker 2: or a large portion of it is profit to us,
32:27
Speaker 2: because again we had to build this stuff out anyway
32:29
Speaker 2: in order to support our own business, and now we
32:32
Speaker 2: can just sell it off at a pretty high margin.
32:34
Speaker 2: And so Microsoft's Google have been doing this as well,
32:37
Speaker 2: and for similar reasons. Microsoft needs that excess capacity, but
32:41
Speaker 2: in many cases these other companies had to expand it
32:44
Speaker 2: in order to compete with Amazon's business in some different
32:47
Speaker 2: ways shapes or forms, and all of them have been
32:49
Speaker 2: rewarded tremendously in their stock prices for this intensely profitable
32:55
Speaker 2: business unit of storing data. And so you know, the
32:59
Speaker 2: exact sample would be heck, I'll talk about our office alone.
33:03
Speaker 2: For years, we had a physical server that would sit
33:07
Speaker 2: in a closet here and a backup version of it
33:10
Speaker 2: that would sit in another office in case this place
33:12
Speaker 2: burned to the ground and the thing was lost forever,
33:15
Speaker 2: and it would store all of our physical files on
33:17
Speaker 2: everything that we do here. And that no longer exists.
33:21
Speaker 2: That physical server, that needed to be maintained upgraded every
33:24
Speaker 2: few years, is now held in the cloud with a
33:27
Speaker 2: cloud provider I don't need to name which one of them.
33:30
Speaker 2: And we instead of having to deal with that physical server,
33:33
Speaker 2: deal with it, you know, over the internet server that
33:37
Speaker 2: is stored somewhere. I don't even know exactly where it
33:40
Speaker 2: is stored. Quite frankly, that is our tech teams problem.
33:45
Speaker 2: Massive business unit, massive growth good for the businesses because
33:48
Speaker 2: it's cheaper generally than keeping and maintaining your own server,
33:51
Speaker 2: good for the companies who are selling the data, and
33:53
Speaker 2: was growing incredibly rapidly as basically what would happen as
33:58
Speaker 2: a company like our server would go belly up or
34:02
Speaker 2: you know, finally hit a breaking point and you would say, okay,
34:04
Speaker 2: do you want to replace this thing for thirty thousand
34:07
Speaker 2: dollars or do you want to store all your stuff
34:09
Speaker 2: on the cloud for fifteen And it was a pretty
34:12
Speaker 2: clear answer in terms of what to do from both
34:14
Speaker 2: a cybersecurity and data access standpoint. The problem is that
34:20
Speaker 2: most of these companies have done it already. There aren't
34:23
Speaker 2: a whole lot of companies like ours left sitting there
34:25
Speaker 2: saying we have this physical server sitting in our closet
34:28
Speaker 2: that we need to migrate to the cloud. Even you know,
34:32
Speaker 2: across the globe, that's not really the case anymore. And
34:35
Speaker 2: so this massive area of growth has been slowing down.
34:39
Speaker 2: The unanswerable question is will that cloud computing need continue
34:46
Speaker 2: to expand exponentially because of the needs for artificial intelligence
34:52
Speaker 2: or have some of those things been overstated? And I
34:55
Speaker 2: don't know. That's a trillion dollar question that I don't
34:58
Speaker 2: have the answer to. But if FIT doesn't materialize, either
35:01
Speaker 2: because AI is overhyped, because the cloud computing has been overstated,
35:06
Speaker 2: or some reason that I'm not thinking about, then these
35:09
Speaker 2: seven companies whose growth was predicated on the years and
35:13
Speaker 2: years of massive profit growth from this area some questions
35:17
Speaker 2: being raised about what their financial future.
35:18
Speaker 3: I guess some One analogy is the fiber optic cable
35:21
Speaker 3: boom of the late nineties. We all remember they were
35:25
Speaker 3: laying it everywhere, sure, and there's we all may know
35:29
Speaker 3: now that there remains a lot of it still underground
35:32
Speaker 3: that just isn't being used. So much was produced, so
35:36
Speaker 3: much capacity was installed. If AI doesn't pan out, if
35:40
Speaker 3: it doesn't become essential to everything businesses that use cloud
35:45
Speaker 3: storage services do, then you're going to have a lot
35:48
Speaker 3: of capacity like the fiber optic overhang that's taken so
35:52
Speaker 3: far twenty five years to work off, and we're still working.
35:56
Speaker 2: On it again. Fantastic companies, still very profitable companies, just
35:59
Speaker 2: fantastically profitable companies that can't grow as fast. If this
36:03
Speaker 2: doesn't pan out the way that we thought it might.
36:06
Speaker 4: The calendar is turned and the cold is here to stay.
36:09
Speaker 4: So now's the perfect time to plan that getaway to
36:12
Speaker 4: the US Virgin Islands. Act now and take advantage of
36:14
Speaker 4: a special promotion to Saint Croix. Experience a vibe like
36:18
Speaker 4: no other, and receive a two hundred and fifty dollars
36:21
Speaker 4: per person airfare credit and a free hotel night when
36:24
Speaker 4: you book a five night minimum stay with any participating
36:28
Speaker 4: hotel before June thirtieth. San Croi is known for its
36:31
Speaker 4: incredible history and spectacular architecture, along with world class cuisine,
36:36
Speaker 4: incredible golf courses, and a wide variety of water sports.
36:40
Speaker 4: From the moment you arrive, you'll fall naturally in rhythm
36:43
Speaker 4: with the heartbeat of the islands. There's no money to exchange,
36:47
Speaker 4: and travel from New England could not be easier. America's
36:51
Speaker 4: Caribbean paradise is waiting for you. Experience a vibe like
36:54
Speaker 4: no other on the island of Saint Croix. Go to
36:57
Speaker 4: visit USVII dot com and use the code Vibe twenty
37:01
Speaker 4: twenty five for more information and book your trip today.
37:04
Speaker 4: That's visit USVI dot com and code Vibe twenty twenty five.
37:09
Speaker 2: It would be easy to criticize this next story as unimportant,
37:14
Speaker 2: but I actually am a really big fan of this.
37:17
Speaker 2: Trump is telling the United States Treasury to stop minting pennies.
37:21
Speaker 2: I have no clue whatsoever if he has the authority
37:24
Speaker 2: to do so, but I hope you do. This is
37:26
Speaker 2: a silly waste of money. It is not going to
37:28
Speaker 2: change the budget or deficit or problems that we have
37:31
Speaker 2: at all. But it costs about twice as much for
37:33
Speaker 2: the Treasury to meant to mint a penny as it
37:36
Speaker 2: does compared to the value of the penny itself. And
37:40
Speaker 2: I think we can all round the nearest five.
37:43
Speaker 3: Yeah, he's probably never used a penny in his life.
37:45
Speaker 2: Probably not.
37:46
Speaker 3: He doesn't even see he's wondering, He's like, what's what's
37:48
Speaker 3: a penny?
37:49
Speaker 2: Uh. There's going to be a bunch of complaints about this,
37:53
Speaker 2: But like things that I think are completely unimportant, somebody's
37:56
Speaker 2: saying that we're gonna face higher inflation because retailers are
37:59
Speaker 2: going to found up to the nearest five cents. No,
38:03
Speaker 2: that is not going to create inflation. Most transactions are
38:07
Speaker 2: still paid via credit card, in which case you can
38:09
Speaker 2: charge me exactly seventy three cents.
38:10
Speaker 3: Would be interesting if that happen.
38:12
Speaker 2: Though quick break. A lot more to cover in the
38:13
Speaker 2: second hour of the Financial Exchange, including it social Security
38:17
Speaker 2: talk next.