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The world's most important market is sending a warning signal · The Financial Exchange Show

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  Speaker 1: and Mark Vandetti.
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  Speaker 2: Welcome back to the second hour of the Financial Exchange.
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  Speaker 2: Paul Lane, Mark Vendetti, and Tucker Silva here with you
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  Speaker 2: as we take a look around at markets. As I mentioned,
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  Speaker 2: very little activity here. SMP up five points, Dow Jones
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  Speaker 2: off about forty points, NADAK off point two points, and
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  Speaker 2: the US Tenure Treasury is taking up a little bit
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  Speaker 2: as we await Federal Reserve meeting minutes on Wednesday. It's
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  Speaker 2: at the US Tenure Treasury four point five to one percent.
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  Speaker 2: Oil West Texas Intermediate trading at seventy one dollars and
• 1:43
  Speaker 2: forty cents a barrel, up close to one percent, and
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  Speaker 2: we've got Gold up about one and a half percent
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  Speaker 2: at two nine hundred and forty four dollars. In terms
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  Speaker 2: of any stocks that are making particular moves, we've got
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  Speaker 2: Maderna up eleven percent today, Walgreens up over ten percent,
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  Speaker 2: and you've got Medtronic down about seven point four percent.
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  Speaker 2: We kick off the second hour of our program talking
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  Speaker 2: about the world's most important important market, sending us a warning.
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  Speaker 2: We talk a lot about the stock market, of course,
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  Speaker 2: on a daily basis here in the Finished Exchange, but
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  Speaker 2: the bond market itself. Mark is sending a different bit
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  Speaker 2: of a warning signal. Tell us a little bit about
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  Speaker 2: what we're seeing from the bond market here.
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  Speaker 3: Well, I think most people know that longer term rates
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  Speaker 3: have gone up as the FED has lowered its short
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  Speaker 3: term interest rate target. So the Fed is trying to
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  Speaker 3: keep unemployment as low as possible consistent with stable inflation.
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  Speaker 3: Inflation is stable, but it's elevated. So despite that, in anticipation,
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  Speaker 3: I think you could say of a potential slowdown in
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  Speaker 3: economic activity, the Fed's been lowering rates. That doesn't mean
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  Speaker 3: is you've all experienced, though, that longer term rates are
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  Speaker 3: going to follow suit.
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  Speaker 4: Indeed, they usually don't.
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  Speaker 3: Sometimes in anticipation of faster economic activity, which can be
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  Speaker 3: get inflation, though you can get inflation without faster economic activity,
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  Speaker 3: but generally the two go together. In anticipation of that,
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  Speaker 3: longer term rates have gone up. They were at one
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  Speaker 3: point up nearly a percentage point. So while the Fed
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  Speaker 3: is lowering its short term rate target, which puts pressure
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  Speaker 3: on money market funds, bank savings accounts and stuff like that,
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  Speaker 3: while the Fed was lowering it short term rate target
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  Speaker 3: by a percentage point, longer term rates have gone up
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  Speaker 3: by a percentage point, and at the same time, because
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  Speaker 3: there are US treasuries. You mentioned the US treasury market
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  Speaker 3: for longer term bonds in particular being the most important
• 3:37
  Speaker 3: in the world, and that's not an understatement. Some US
• 3:40
  Speaker 3: treasuries are indexed for inflation. They're called treasure inflation protected securities.
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  Speaker 3: Using those, we can ascertain what markets think inflation will
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  Speaker 3: do over the term that you hold that bond for.
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  Speaker 3: And the long and the short of this is I'll
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  Speaker 3: just cut to the chase here because this is probably
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  Speaker 3: getting painful for you and me. Inflation expectations as measured
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  Speaker 3: by the difference between typical treasuries, conventional treasuries and inflation
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  Speaker 3: index treasuries, that's gone up too in the past few
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  Speaker 3: months since the FED started cutting, by nearly a half
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  Speaker 3: a percentage point, which is a lot, because it started
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  Speaker 3: at too Now it's at about two four and a
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  Speaker 3: half or so two point four to five ish, so
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  Speaker 3: it's not these are the facts. Long term rates have
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  Speaker 3: gone up despite the FED cutting short term rates, indeed
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  Speaker 3: probably because of it. They may also be concerned about
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  Speaker 3: higher deficits. When the government borrows more money, it crowds
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  Speaker 3: out if you like private sector demand for loanable funds,
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  Speaker 3: and the different way to think about it is for
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  Speaker 3: the government to get you to hold treasuries, the more
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  Speaker 3: it issues, it's got to compensate you more for the marginal,
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  Speaker 3: the tiny possibility that you may not get paid what
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  Speaker 3: you think you'll get paid, perhaps because of inflation, perhaps
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  Speaker 3: because of something worse.
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  Speaker 2: The US ten year treasury had peaked in mid January
• 5:00
  Speaker 2: here at around four point eight percent four point seven
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  Speaker 2: seven percent. If you look back in October of twenty three,
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  Speaker 2: we're in and around those levels, but much through the
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  Speaker 2: fall we were sitting at three point seven percent, So
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  Speaker 2: sort of alluding to what Mark was speaking about, where
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  Speaker 2: we saw a pretty significant uptick on the US ten
• 5:17
  Speaker 2: year treasury, And really important for listeners to keep in
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  Speaker 2: mind when we talk about rates, there's two different sides
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  Speaker 2: to the coin. There's the short term one and the
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  Speaker 2: fret of reserve, which has a lot of influence on
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  Speaker 2: where that rate goes. But the longer term one is
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  Speaker 2: up to market forces. So people who had optimism heading
• 5:33
  Speaker 2: into the year that the thirty year fixed mortgages would
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  Speaker 2: come under six percent or something like that, that is
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  Speaker 2: not what's gone on. Quite the opposite, in fact, where
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  Speaker 2: we're sitting at close to seven percent on thirty year
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  Speaker 2: fixed mortgages as a result of the fact that the
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  Speaker 2: US ten yere treasury, which is a bellweather or a
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  Speaker 2: benchmark for that thirty year fixed mortgage rate, has increased
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  Speaker 2: so significantly over the last couple months or so. So
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  Speaker 2: we'll continue to follow that as it goes forward. Another
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  Speaker 2: piece of news that had garnered a lot of headlines
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  Speaker 2: and a lot of attention in the beginning of January
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  Speaker 2: here was the Social Security Fairness Act. We had. This
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  Speaker 2: law was signed in i believe at the beginning of January,
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  Speaker 2: where it undid the impacts of the government pension offset
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  Speaker 2: as well as the windfall elimination provision, which were laws
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  Speaker 2: that were put in in the late seventies and early
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  Speaker 2: eighties to offset those people who collected dumiicipal pension from
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  Speaker 2: collecting full social security benefits. And now there's three point
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  Speaker 2: two million people who have been impacted by this decision.
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  Speaker 2: Getting a little bit more information that it may take
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  Speaker 2: a little bit longer to unwind all of these payment issues.
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  Speaker 2: Where there was some optimism that there would be a
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  Speaker 2: payment relatively early in the year retroactively for twenty twenty
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  Speaker 2: four for those participants that were impacted by that legislation. Now,
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  Speaker 2: the Social Security Administration on their website has mentioned that
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  Speaker 2: it could take more than a year to sort out
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  Speaker 2: both the retroactive payment as well as the new monthly
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  Speaker 2: payments that Social Security recipients will receive who were previously
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  Speaker 2: impacted by these two pieces of leglation in the Massachusets area.
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  Speaker 2: The reason in the New England area in general, the
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  Speaker 2: reason I cover this story is because we have a
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  Speaker 2: lot of people in this area that are impacted by
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  Speaker 2: this piece of legislation here, so it's worth falling just
• 7:24
  Speaker 2: because there's a lot of listeners who are impacted to it.
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  Speaker 2: So no payments just yet. Continue to wait.
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  Speaker 4: There, Paul.
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  Speaker 3: I'm watching Bloomberg right now, which we have on here
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  Speaker 3: in the studio, and the third or fourth commercial in
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  Speaker 3: a row I've lost count is for something crypto related.
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  Speaker 3: The world has really changed in the past few years.
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  Speaker 3: I know I'm stating the obvious here, but it went
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  Speaker 3: from a shunned I won't call it an asset class
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  Speaker 3: because unlike say stocks or real estate or infrastructure, it
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  Speaker 3: doesn't within crypto, the different units of account. The different
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  Speaker 3: currencies don't have the types of characteristics that say constituents
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  Speaker 3: of other asset classes do. But whatever the heck you
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  Speaker 3: want to call it, there's been a real change in thinking,
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  Speaker 3: perhaps because the new regime is embracing it. It's become mainstream,
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  Speaker 3: and I think about all the time people are spending
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  Speaker 3: researching it, pursuing it, running ads for it. This is
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  Speaker 3: not a generative asset class. Gold is not either, but
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  Speaker 3: gold has a pretty good historical track record as a
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  Speaker 3: safe haven. And I just wonder how this all turns
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  Speaker 3: out in five years, ten years, Will this be the
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  Speaker 3: biggest folly so far of this century? That would be
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  Speaker 3: saying something? Or does blockchain and crypto those are two
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  Speaker 3: those aren't necessarily the same things? Do they somehow serve
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  Speaker 3: a need that to this point, despite having been in
• 8:49
  Speaker 3: existence for about fifteen years a little more than that,
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  Speaker 3: closing in on twenty, they haven't been able to serve.
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  Speaker 2: We saw billion of inflows into ETF's related to cryptocurrencies,
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  Speaker 2: I believe in the month of January I was reading
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  Speaker 2: earlier today. So there's continues to be a tremendous amount
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  Speaker 2: enthusiasm around it.
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  Speaker 4: But and that's just etf inflows.
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  Speaker 2: I think.
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  Speaker 4: I'm just I'm wondering what are the.
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  Speaker 3: Economic consequences of what is essentially Uh, there's a gambling
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  Speaker 3: element to all investing, but this is pure gambling. This
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  Speaker 3: is pure speculation. Again, there's a speculative element to any
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  Speaker 3: assets return or price, but there's nothing else here. This
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  Speaker 3: is capital that could be going elsewhere, could be going
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  Speaker 3: to fund research that will result in earnings and follow
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  Speaker 3: on discoveries. Said differently, is just this is money sloshing
• 9:44
  Speaker 3: around towards no productive, regenerative and I don't think it
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  Speaker 3: can be good. I'm just amusing a.
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  Speaker 4: Little bit here. There's no point. This is retarded.
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  Speaker 2: No, No, it's hard. In my position, I don't really
• 9:56
  Speaker 2: want to take one a stance one way or another
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  Speaker 2: other than the fact that I can say candily, I've
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  Speaker 2: read a lot of information on it, and I just
• 10:04
  Speaker 2: something that I really don't understand the value proposition behind it.
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  Speaker 2: So that's that's my two cents on it. But everyone
• 10:11
  Speaker 2: needs to do their own research out there. But I
• 10:14
  Speaker 2: do look at companies like super micro Computer Systems, which
• 10:18
  Speaker 2: is up you know another super micro computer which is
• 10:20
  Speaker 2: up another fourteen percent to day, which is basically just
• 10:23
  Speaker 2: a leverage play on bitcoin. They're just buying a bunch
• 10:26
  Speaker 2: of bitcoins and issuing.
• 10:27
  Speaker 4: What do you mean a leverage play on bitcoin?
• 10:28
  Speaker 2: There?
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  Speaker 4: You say that, you mean they're issuing borrowing.
• 10:31
  Speaker 2: To buy it exactly exactly, and good grief, that is
• 10:37
  Speaker 2: a scary proposition for something that's four times more volatile
• 10:40
  Speaker 2: I'm speaking of Bitcoin than the S and P five
• 10:42
  Speaker 2: hundred in general. Just how that plays out over time
• 10:46
  Speaker 2: is interesting. When the market cap of this super micro
• 10:50
  Speaker 2: Computer Inc. Has now soared to thirty two billion dollars,
• 10:55
  Speaker 2: so it's larger than the size of target or capital one,
• 10:59
  Speaker 2: all of those that have very defined businesses that you
• 11:01
  Speaker 2: can point to in earning's growth and retail footprints. And
• 11:06
  Speaker 2: then you have just something that holds. I think it's
• 11:09
  Speaker 2: four one hundred million bitcoiner I might have the number one.
• 11:12
  Speaker 4: What else did they do? Forgive my ignorance, But.
• 11:14
  Speaker 2: They were previously a software company, an IT solution provider,
• 11:18
  Speaker 2: but really their main focus has been in this space
• 11:21
  Speaker 2: is in recently.
• 11:22
  Speaker 5: Isn't a MicroStrategy in that camp as well? In terms
• 11:24
  Speaker 5: of a built type of example.
• 11:27
  Speaker 2: I believe, Oh, I believes so, I believe so.
• 11:32
  Speaker 5: No I just recalled that seeing a surge like it's
• 11:36
  Speaker 5: up a nearly one hundred and fifty percent in the
• 11:37
  Speaker 5: past six months.
• 11:39
  Speaker 4: I don't know if it's like.
• 11:40
  Speaker 3: And the reason this is dangerous is the same reason
• 11:42
  Speaker 3: they warn you about extracting equity from your brokerage account
• 11:46
  Speaker 3: using stocks as collateral, for example, because when they fall,
• 11:50
  Speaker 3: you're you're under collateralized and you have to come up
• 11:53
  Speaker 3: with money or your house. But another analogy is your
• 11:55
  Speaker 3: house being underwater and having to sell or something like that.
• 11:58
  Speaker 2: Absolutely, yeah, I'm sorry.
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  Speaker 3: I didn't know companies were pursuing this as a business strategy.
• 12:03
  Speaker 2: Yeah, I apologize. Tucker has me on the right train
• 12:05
  Speaker 2: of thought. It's micro strategies that is the one that
• 12:07
  Speaker 2: is leveraging to purchase bitcoins in super microcomputer where a
• 12:13
  Speaker 2: little bit different business model, a software platform. So micro
• 12:17
  Speaker 2: strategy is the one that to focus on there. Thanks
• 12:19
  Speaker 2: for the micro you have the micropart right. You know,
• 12:22
  Speaker 2: it's hard to keep all these names together here, but
• 12:26
  Speaker 2: it's an interesting market. A lot of speculation going on
• 12:28
  Speaker 2: there anyone's guests as to how it plays out.
• 12:31
  Speaker 4: But you're right, lost a question of time, stupid bad. Yeah,
• 12:35
  Speaker 4: we're going to.
• 12:36
  Speaker 2: Take a quick break here on the Financial Exchange. When
• 12:38
  Speaker 2: we come back, we're you're talking a little bit about
• 12:41
  Speaker 2: no relief for high use car prices as well as
• 12:45
  Speaker 2: lower taxes that Republicans want. Can they get those through?
• 12:49
  Speaker 2: Right after this break, we'll be covering those two subjects.
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  Speaker 2: There is no relief coming for high used car prices.
• 14:26
  Speaker 2: We've seen a continued increase and lessening supply in the
• 14:30
  Speaker 2: used car market, where in the month of from December
• 14:34
  Speaker 2: to January, a two point two percent increase on used
• 14:37
  Speaker 2: car and truck prices while new car prices were flat,
• 14:40
  Speaker 2: and it was a pretty significant contributor to the inflation
• 14:45
  Speaker 2: report that we saw run at three percent for the
• 14:48
  Speaker 2: month of January. Really, the issue stems back to the
• 14:51
  Speaker 2: pandemic a couple different factors in place. One of them
• 14:54
  Speaker 2: the major sort of focus during the pandemic, during the
• 14:58
  Speaker 2: supply chain snarl ups was a more focus on selling
• 15:02
  Speaker 2: vehicles outright new which were more profitable, and less of
• 15:06
  Speaker 2: a focus on leasing. The three year lease deals were
• 15:10
  Speaker 2: down significantly during that period of time. Those are now
• 15:14
  Speaker 2: sort of coming due over the course of the next
• 15:16
  Speaker 2: the last year or so that would create some of
• 15:19
  Speaker 2: the used car supplies, but we're seeing a twenty three
• 15:21
  Speaker 2: percent drop on those leaseback deals that are coming available
• 15:25
  Speaker 2: from an inventory perspective that they don't anticipate will bounce
• 15:27
  Speaker 2: back until twenty twenty seven. So you just there's a
• 15:31
  Speaker 2: smaller pool of lease cars that's leading to less inventory
• 15:34
  Speaker 2: in the used car market and keeping the prices more elevated.
• 15:38
  Speaker 2: Plus you also have consumers that are looking to turn
• 15:41
  Speaker 2: to the used car market because new car prices are
• 15:44
  Speaker 2: so dang expensive, where you have the average price of
• 15:47
  Speaker 2: a new car up at forty eight, six hundred and
• 15:50
  Speaker 2: forty one dollars as of recent reports from Cox Automotive,
• 15:53
  Speaker 2: So it doesn't seem like you're gonna get any more
• 15:56
  Speaker 2: deals on the used car front anytime soon. Mark here.
• 15:59
  Speaker 3: Yeah, the used car market has really been in turmoil
• 16:02
  Speaker 3: relative to its pretty stable price history since COVID. There
• 16:07
  Speaker 3: was a time we all remember this in twenty twenty one,
• 16:10
  Speaker 3: when the year over year change went from immediately before
• 16:14
  Speaker 3: COVID it was somewhere between plus and minus two percent.
• 16:18
  Speaker 3: I'd call that stable. If you look at the series
• 16:22
  Speaker 3: over its duration, there's about that amount of volatility with
• 16:27
  Speaker 3: the exception of immediately before during excuse me, or immediately
• 16:30
  Speaker 3: after recessions, but during COVID you had again. We all
• 16:33
  Speaker 3: know this price is going up forty in the thirties
• 16:36
  Speaker 3: to the forty percent year over year. They plummeted in
• 16:41
  Speaker 3: starting in February when the overall price level started to
• 16:44
  Speaker 3: moderate and the change in the overall price level inflation
• 16:47
  Speaker 3: started to moderate. But they've been ticking up again. It
• 16:50
  Speaker 3: just hasn't the behavior of used car inflation for what
• 16:53
  Speaker 3: it is worth, and I don't think I'm telling anybody
• 16:55
  Speaker 3: anything you don't already know here has not been normal
• 16:58
  Speaker 3: since COVID, like that continues to echo through the process.
• 17:03
  Speaker 3: And one's best guess if you're just a generalist like
• 17:06
  Speaker 3: I am, is expect more volatility on both sides of
• 17:11
  Speaker 3: the number line positive and negative and use car prices.
• 17:15
  Speaker 4: I know that's not very helpful.
• 17:16
  Speaker 2: Dealers had a sixty three day supply of new cars
• 17:19
  Speaker 2: on their lots or in transit to stores at the
• 17:21
  Speaker 2: end of January. That was up from twenty six days
• 17:24
  Speaker 2: at the same time in twenty twenty two. But meanwhile,
• 17:27
  Speaker 2: when you look at the used car supply over the
• 17:29
  Speaker 2: exact same period from twenty twenty two to where we
• 17:32
  Speaker 2: are today. It's forty eight days down from fifty seven
• 17:36
  Speaker 2: days in terms of the inventory that's available on the
• 17:40
  Speaker 2: used car supply, so continues to be just not a
• 17:43
  Speaker 2: lot of inventory for used cars out there, and a
• 17:47
  Speaker 2: lot more on the new car side of things. And
• 17:49
  Speaker 2: I ran through the same thing myself personally looking to
• 17:51
  Speaker 2: buy vehicles where the price differential between you and used
• 17:55
  Speaker 2: the gap wasn't as wide as I anticipated, so I
• 17:58
  Speaker 2: ended up skewing towards purchasing you. What's really hard about also,
• 18:02
  Speaker 2: what you're dealing with getting a car loan, is that
• 18:04
  Speaker 2: the interest rate is, you know, twice as high as
• 18:07
  Speaker 2: what it would have been back in twenty one or
• 18:10
  Speaker 2: twenty when you were you were doing that previously. So
• 18:13
  Speaker 2: it will be interesting if we could get any sort
• 18:16
  Speaker 2: of jolt there on the supply side on the used cars,
• 18:20
  Speaker 2: but it doesn't really look like there's gonna be any
• 18:22
  Speaker 2: relief anytime soon there, And who knows what impact any
• 18:27
  Speaker 2: tariffs would have on on supply. I don't think that
• 18:30
  Speaker 2: would necessarily do anything on the.
• 18:31
  Speaker 4: You'd raise use car. It'll or it could because because
• 18:35
  Speaker 4: it will.
• 18:35
  Speaker 3: Increase demand, right used alternatives, it should push all LSEQL
• 18:39
  Speaker 3: very much, all LSEQL, it should push their price up. Now,
• 18:42
  Speaker 3: imagine if inflation's ticking up and those long term interest
• 18:44
  Speaker 3: rates are ticking up. These are the types of things
• 18:46
  Speaker 3: that Fed thinks about obviously, and politicians too. I suppose
• 18:49
  Speaker 3: you again, expect to continue This isn't a deep insite,
• 18:53
  Speaker 3: but expect continued volatility. And it doesn't look like volatility,
• 18:57
  Speaker 3: excuse me. And it doesn't look like those looking for
• 18:58
  Speaker 3: more affordability you're going to have their wishes fulfilled anytime soon.
• 19:03
  Speaker 2: Taking a look at the markets, we're in again a
• 19:06
  Speaker 2: pretty muted day of trading activity. As we come off
• 19:09
  Speaker 2: the market, we're being closed yesterday dal Jones off about
• 19:13
  Speaker 2: eighty five points, the S and P five hundred and
• 19:15
  Speaker 2: up five points in the Nasdaq up five points as well.
• 19:18
  Speaker 2: We're going to head into the break here, but when
• 19:20
  Speaker 2: we come back from break, we're gonna be talking about
• 19:23
  Speaker 2: Republicans wanting lower taxes and choosing what to cut as
• 19:27
  Speaker 2: a result of that. And then also we're gonna have
• 19:29
  Speaker 2: our trivia answer right after this break.
• 19:40
  Speaker 1: Bringing the latest financial news straight to your radio. Every day,
• 19:45
  Speaker 1: it's the Financial Exchange on the Financial Exchange Radio Network.
• 19:50
  Speaker 1: The latest news on inflation, the FED, the economy, and
• 19:54
  Speaker 1: how the markets are reacting every morning right here on
• 19:57
  Speaker 1: the Financial Exchange Radio Network.
• 20:06
  Speaker 5: All Right, trivia question today was who was the youngest
• 20:10
  Speaker 5: host in Saturday Night Live history? Wasn't Macaulay Culkin. It
• 20:15
  Speaker 5: was Drew Barrymore, who was seven years old when she
• 20:19
  Speaker 5: hosted the show in nineteen eighty two. Winner today of
• 20:24
  Speaker 5: the Financial Exchange Show Teacher was Keith from steep Falls, Maine.
• 20:29
  Speaker 5: Congrats to Keith, and we played trivia every day here
• 20:32
  Speaker 5: on the Financial Exchange See complete contest rules at Financial
• 20:36
  Speaker 5: Exchange Show dot com.
• 20:38
  Speaker 2: Did you either you guys watch the fiftieth anniversary special?
• 20:41
  Speaker 5: So I watched the last hour of it? Yea, because
• 20:45
  Speaker 5: my oldest who's six, is obsessed with Daytona five hundred,
• 20:49
  Speaker 5: so that was delayed because of weather. So we had
• 20:53
  Speaker 5: to watch the Daytona five hundred until it concluded around
• 20:56
  Speaker 5: nine thirty. So I missed the first two hours.
• 20:59
  Speaker 2: But I caught the best hour of it. I got
• 21:01
  Speaker 2: a how was it?
• 21:01
  Speaker 4: Watch?
• 21:04
  Speaker 1: Well?
• 21:05
  Speaker 2: How was that? Either?
• 21:07
  Speaker 5: Daytona five hundred was fine? I don't know whatever, it's fine?
• 21:12
  Speaker 5: Kid was excited, and then the Sin Night Live thing.
• 21:15
  Speaker 5: I've heard mixed things on, but from what I saw
• 21:18
  Speaker 5: of it, it was good. I mean it was literally
• 21:20
  Speaker 5: like one of the most important gatherings of talent and
• 21:25
  Speaker 5: cable history. Really, when you think about it, it was
• 21:27
  Speaker 5: just cool to see the different generations of SNL mix
• 21:31
  Speaker 5: in together, like Tracy Morgan and Eddie Murphy were in
• 21:34
  Speaker 5: a sketch together, or Keenan Thompson and Eddie Murphy were
• 21:37
  Speaker 5: doing a sketch together, and then Will Ferrell comes in school.
• 21:41
  Speaker 5: But again, I gotta watch the first two hours of it.
• 21:43
  Speaker 2: Though Republicans want lower taxes, the hard part is choosing
• 21:47
  Speaker 2: what to cut. So much has been talked about in
• 21:50
  Speaker 2: terms of what we're going to see from a tax
• 21:53
  Speaker 2: cut perspective. The problem being that the House Republicans are
• 21:58
  Speaker 2: preparing to adopt a plan that puts a four and
• 22:01
  Speaker 2: a half trillion dollar limit on the size of tax cuts,
• 22:04
  Speaker 2: and so to fill everyone a four and a half
• 22:07
  Speaker 2: trillion dollar limit on the size of a tax cut
• 22:11
  Speaker 2: would really confine the Republicans to a very narrow amount
• 22:15
  Speaker 2: of measures that would be radically different from where we
• 22:18
  Speaker 2: sit today. In twenty seventeen, the taxing jobs cut was instituted,
• 22:22
  Speaker 2: which has set forth the lower brackets that we've all
• 22:26
  Speaker 2: been operating in over the course of the last eight
• 22:28
  Speaker 2: years or so. Just to reinstitute that over the course
• 22:32
  Speaker 2: of the next ten years those brackets would cost four
• 22:34
  Speaker 2: trillion dollars, so very quickly, the four and a half
• 22:37
  Speaker 2: trillion is being occupied just to keep tax brackets the
• 22:41
  Speaker 2: same that they are today. There's been some other provisions
• 22:44
  Speaker 2: that have been mentioned, such as deducting more interest on
• 22:47
  Speaker 2: debt that companies are accruing and paying. That would cost
• 22:51
  Speaker 2: about fifty billion. And then they're also looking the House
• 22:53
  Speaker 2: Republicans to revive something that had died out in twenty seventeen,
• 22:57
  Speaker 2: where businesses could get a tax break for research and development.
• 23:01
  Speaker 2: It just doesn't leave a lot of areas, yeah, that
• 23:04
  Speaker 2: have been mentioned as part of the campaign trail, such
• 23:07
  Speaker 2: as no taxes on social Security and no taxes on
• 23:11
  Speaker 2: overtime or tips. It doesn't leave a lot of room
• 23:14
  Speaker 2: for that. If you want to get the brass tax
• 23:17
  Speaker 2: or the most integral part of the tax cuts from
• 23:20
  Speaker 2: twenty seventeen, reinstitute for another ten years.
• 23:23
  Speaker 4: Here, yeah, I think we have to.
• 23:24
  Speaker 3: And by the way, the fiscal accounting rules make the
• 23:26
  Speaker 3: language around this discussion so confusing. When they say four
• 23:29
  Speaker 3: point five trillion, they mean one tenth of that a year,
• 23:33
  Speaker 3: so it's not at once it's a roughly a half
• 23:36
  Speaker 3: of trillion dollars a year, But for some reason they
• 23:39
  Speaker 3: give you the cumulative number. That also allows them to
• 23:43
  Speaker 3: sort of play games with the cost of things. They
• 23:45
  Speaker 3: can assume, well, it's really expensive today, but there's going
• 23:49
  Speaker 3: to be more economic growth on the back end, and
• 23:54
  Speaker 3: therefore the total cost over ten years will be less.
• 23:58
  Speaker 3: So it all gets very confused. Seeing some of that
• 24:00
  Speaker 3: I think is deliberate. I think it's probably safe to say,
• 24:04
  Speaker 3: since we can speculate, we're just having fun here.
• 24:06
  Speaker 4: Not really my area.
• 24:08
  Speaker 3: But they'll probably extend the current tax cuts because they're
• 24:13
  Speaker 3: so adamantly opposed to tax increases, even though now is
• 24:16
  Speaker 3: precisely the time to increase taxes. Get a hold on
• 24:20
  Speaker 3: the deficit. That might actually help bring longer term interest
• 24:22
  Speaker 3: rates down. We saw that in the nineteen nineties. George
• 24:25
  Speaker 3: hw and then Bill Clinton did it under far less
• 24:31
  Speaker 3: favorable economic circumstances than we would be doing it today.
• 24:34
  Speaker 3: Economy is running probably too hot today.
• 24:36
  Speaker 4: We could use little.
• 24:37
  Speaker 3: I hate taxes as much as anybody. My favorite tax
• 24:40
  Speaker 3: would be a consumption Just for the record, I don't
• 24:42
  Speaker 3: like the income tax. I'd love it to be a
• 24:43
  Speaker 3: consumption tax. But we don't live in that world, so
• 24:46
  Speaker 3: I'm not. I'm a hardly pro tax But even I
• 24:48
  Speaker 3: acknowledge that the deficit is wildly out of control?
• 24:51
  Speaker 2: Amen, right right?
• 24:52
  Speaker 4: Who who couldn't Who couldn't Who couldn't admit that?
• 24:54
  Speaker 2: Well?
• 24:54
  Speaker 3: The White House doesn't like to talk about it, and
• 24:56
  Speaker 3: the last White House didn't like to talk about it.
• 24:57
  Speaker 3: But it is the responsible thing to do right now,
• 25:00
  Speaker 3: to raise, not lower taxes right to close some of
• 25:03
  Speaker 3: the gap. We had politicians with courage and connection.
• 25:05
  Speaker 2: You wouldn't have to vote in anything to do it now.
• 25:08
  Speaker 2: It's because that's the way the law was written. They
• 25:10
  Speaker 2: would revert back to what they were previously.
• 25:12
  Speaker 3: And if the nineties are any guide, and they are
• 25:16
  Speaker 3: an imperfect guide, because no two periods are alike, you
• 25:18
  Speaker 3: might actually see longer interest rates come down if the
• 25:20
  Speaker 3: markets thought the government was regaining some sense of fiscal responsibility.
• 25:25
  Speaker 3: There is zero chance of that happening given the complexion
• 25:28
  Speaker 3: as I read it, for what my two cents is
• 25:31
  Speaker 3: worth of Congress in the White House, who I'm convinced
• 25:33
  Speaker 3: doesn't actually care about this issue. The last one did neither.
• 25:35
  Speaker 3: They're very willing to pass this along to the next
• 25:38
  Speaker 3: generation and sort of hope for the best. So it
• 25:41
  Speaker 3: looks like we're going to get an extension of the
• 25:43
  Speaker 3: current cuts and probably a couple campaign promises filled the deficit.
• 25:47
  Speaker 3: Just keep this in mind for those of you keeping scoring.
• 25:49
  Speaker 3: I submit that only five out of one hundred people listening,
• 25:53
  Speaker 3: five percent.
• 25:54
  Speaker 4: Care about the debt and deficit.
• 25:56
  Speaker 3: The rest we just say we do because it's sort
• 25:58
  Speaker 3: of the polite thing to say, and you don't want
• 25:59
  Speaker 3: to sound reckless. But nobody actually cares about the deficit
• 26:03
  Speaker 3: until and the cumulative deficit being the debt, until it
• 26:07
  Speaker 3: comes home to roost and interest rates go way up,
• 26:09
  Speaker 3: which thankfully we haven't experienced for a long time in
• 26:11
  Speaker 3: this country. But my guess is the deficit, which is
• 26:14
  Speaker 3: about two trillion dollars over the last fiscal year, about
• 26:17
  Speaker 3: six percent of the economy's output of goods and services
• 26:20
  Speaker 3: so called GDP, my guess is it'll be higher next year,
• 26:23
  Speaker 3: and higher still the year after that, and then four
• 26:26
  Speaker 3: years will have run up another six to eight trillion
• 26:28
  Speaker 3: at least in new debt on the current trajectory, the
• 26:31
  Speaker 3: idea that you can.
• 26:32
  Speaker 4: Grow your way out of it is always questionable.
• 26:35
  Speaker 3: It just never happened, particularly when you're starting from a
• 26:38
  Speaker 3: high growth rate as we are today. So the White
• 26:41
  Speaker 3: Houses and the Treasury secretaries protests that oh, this will
• 26:44
  Speaker 3: partially pay for itself are blowney and should be dismissed
• 26:47
  Speaker 3: out of hand because it's never happened, especially again when
• 26:50
  Speaker 3: you're starting from an economy growing like gangbusters. But if
• 26:53
  Speaker 3: we don't have as much debt as we accumulated over
• 26:56
  Speaker 3: the last four years, accumulate over the next four and
• 26:58
  Speaker 3: if we don't have successive higher deficits, given the tone
• 27:03
  Speaker 3: of the discussions today, I would be well pleasantly surprised,
• 27:06
  Speaker 3: but absolutely shocked.
• 27:07
  Speaker 4: I don't know about you.
• 27:08
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• 28:21
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• 28:30
  Speaker 2: Restaurants are warning of a week first quarter. A lot
• 28:34
  Speaker 2: of restaurants out there have been making a huge focus
• 28:36
  Speaker 2: on the fast food a side of things to deliver
• 28:39
  Speaker 2: value offerings to bring back in diners. If you look
• 28:42
  Speaker 2: at restaurant brands, which is behind Burking and Popeyes, they
• 28:47
  Speaker 2: saw their sales improve in the fourth quarter as they
• 28:50
  Speaker 2: brought some of those value offerings back, and even McDonald's
• 28:53
  Speaker 2: saw domestic traffic grew as well during that period of time.
• 28:57
  Speaker 2: But in January, they've seen some week in growth. Fast
• 29:00
  Speaker 2: food net sales rows about three point four percent in
• 29:04
  Speaker 2: January compared to the period a year ago, and that
• 29:07
  Speaker 2: was down from the growth that they saw in December,
• 29:09
  Speaker 2: which was a five percent spike. They do seem to say,
• 29:14
  Speaker 2: whether you talk to or listen to the CEO of
• 29:17
  Speaker 2: Chipotle or restaurant brands or others, that the second half
• 29:20
  Speaker 2: of the year is going to propel more restaurant growth.
• 29:22
  Speaker 2: But there's been weather related events clothed climate in the
• 29:27
  Speaker 2: Northeast in other areas of the country that have slowed
• 29:29
  Speaker 2: down the influx of traffic on some of those fast
• 29:31
  Speaker 2: food restaurants, as well as the impact of the wildfires
• 29:35
  Speaker 2: hurting sales in California quite significantly. But you did have
• 29:39
  Speaker 2: companies like Chipotle being hurt by those wildfires as well
• 29:44
  Speaker 2: as others out there. So it'll be interesting to see
• 29:46
  Speaker 2: that plus some of the potential teariff impact that fast
• 29:50
  Speaker 2: food companies have to deal with here heading forward, But
• 29:53
  Speaker 2: they aren't anticipating that perhaps the second half of the
• 29:55
  Speaker 2: year will look a little bit stronger.
• 29:57
  Speaker 4: The overall spending is held up.
• 29:58
  Speaker 3: Growth, as we've been talking about for the past two hours,
• 30:01
  Speaker 3: is solid overall economic growth that can't happen for the
• 30:05
  Speaker 3: most part without consumer spending being strong. We saw retail
• 30:08
  Speaker 3: sales drop, and that includes food and related trades. I
• 30:12
  Speaker 3: think the headline number that gets reported we saw that drop,
• 30:16
  Speaker 3: but it's a pretty volatile.
• 30:20
  Speaker 4: Statistic, so I don't know, Paul, I don't.
• 30:23
  Speaker 3: We report a lot of the anecdotal stuff, a lot
• 30:25
  Speaker 3: of the one offs, like retail sales last week, like
• 30:28
  Speaker 3: this today.
• 30:29
  Speaker 4: But until I see a.
• 30:31
  Speaker 3: Meaningful retreat from the healthy, almost break the neck levels
• 30:37
  Speaker 3: of year over year spending growth that we've had over
• 30:39
  Speaker 3: the past few years, I'm not going to be convinced.
• 30:41
  Speaker 2: I'm not downing the consumer just yet.
• 30:43
  Speaker 4: Yeah, that's sort of what, thank you.
• 30:45
  Speaker 2: I'm not trying to say we're going to take a
• 30:46
  Speaker 2: quick break here on the finished exchange. When we come back,
• 30:49
  Speaker 2: we're going to be doing a little bit of stack
• 30:51
  Speaker 2: Roulette that's right after this break.
• 30:53
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• 30:56
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• 31:00
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• 32:21
  Speaker 2: All right, time for a little bit of stack roulette.
• 32:23
  Speaker 2: I will kick us off here discussing alcohol companies. We
• 32:28
  Speaker 2: just came off of dry January, where there is this
• 32:31
  Speaker 2: seasonal trend after the holidays for people to cut back
• 32:34
  Speaker 2: an alcohol consumption. But if you study the performance, regardless
• 32:38
  Speaker 2: of dry January of a lot of the major alcohol
• 32:41
  Speaker 2: brands out there, the stocks have taken on the chin
• 32:44
  Speaker 2: quite significantly. Diagio, which is the maker of Johnny Walker
• 32:47
  Speaker 2: Scotch whiskey, is down thirty six percent over the last
• 32:50
  Speaker 2: two years. Brown Foreman, which has Jack Daniels Tennessee whiskey,
• 32:54
  Speaker 2: has lost more than fifty percent. And even Constellation brands
• 32:58
  Speaker 2: which had been holding up okay It Corona and MODELO Beers,
• 33:03
  Speaker 2: they saw sales flatten out over their last quarter and
• 33:06
  Speaker 2: the stock plummeted seventeen percent in one day. And it's
• 33:09
  Speaker 2: interesting this piece that they put together mark in particular
• 33:13
  Speaker 2: the some of the tidbits as to why alcohol consumption
• 33:17
  Speaker 2: and sales may be falling. It's just seems to be
• 33:20
  Speaker 2: that the younger generation isn't consuming as much alcohol as
• 33:24
  Speaker 2: some of their predecessors. And what I found interesting was
• 33:27
  Speaker 2: bars in college towns like Ohio State as well as
• 33:32
  Speaker 2: Notre Dame mentioning that even though both those schools went
• 33:35
  Speaker 2: on a tremendous run in the college football playoff which
• 33:38
  Speaker 2: kept the bars busier because of the football games, they
• 33:41
  Speaker 2: weren't seeing patrons stay as late and not seeing the
• 33:45
  Speaker 2: same sort of alcohol consumption there. And it's just a
• 33:48
  Speaker 2: very fragmented market in general. Also, cannabis use has been
• 33:52
  Speaker 2: another sort of theory that's been mentioned around, but it
• 33:55
  Speaker 2: just seems like a very hard business to operate in
• 33:58
  Speaker 2: than it previously did, being kind of a staples business.
• 34:02
  Speaker 3: Yeah, you know, I'm looking at the Federal Reserve Economic
• 34:05
  Speaker 3: Databases series on beer, wine, distill distill beverage sales and
• 34:12
  Speaker 3: there is a break. And I was originally in a
• 34:14
  Speaker 3: poop poet and say, well, it's probably a vo little
• 34:16
  Speaker 3: thing in trends. Will this probably isn't a trend shift,
• 34:19
  Speaker 3: but you know, looking at it, it did kind of turn.
• 34:21
  Speaker 4: Over early in the COVID post COVID, yeah, yeah, for the.
• 34:25
  Speaker 3: First time in the history of this series, which isn't
• 34:27
  Speaker 3: that long. It only goes back about thirty five years,
• 34:29
  Speaker 3: but it does appear to.
• 34:30
  Speaker 4: Have turned over. For what that's worth. What's going on.
• 34:33
  Speaker 3: Are people finding religion or something, or is it just
• 34:34
  Speaker 3: too expensive? Some of that is you your better, I
• 34:37
  Speaker 3: don't go out.
• 34:39
  Speaker 2: I used to go out and not anymore. But some
• 34:42
  Speaker 2: of it is the health actors. Don't pin this on
• 34:44
  Speaker 2: the uh yeah, but there was a lot of news
• 34:47
  Speaker 2: that came up with a certain general's recent warning warning
• 34:50
  Speaker 2: on an alcohol that this was similar to the tobacco
• 34:55
  Speaker 2: industry challenges. It's it's too soon for that, that's not
• 34:57
  Speaker 2: the issue. This is a longer trend that dates you know,
• 35:00
  Speaker 2: post COVID. But I do think it's a very fragmented market.
• 35:04
  Speaker 2: The feedback seems to say that people in their twenties
• 35:07
  Speaker 2: are not consuming as much alcohol as their peers, their
• 35:11
  Speaker 2: predecessors did, like Tucker and myself back maybe in our
• 35:14
  Speaker 2: college days, or it just doesn't seem like there is
• 35:19
  Speaker 2: that same amount of conception there it's just really hard.
• 35:21
  Speaker 2: The one thing I know for certain is that if
• 35:23
  Speaker 2: you're a beer maker, for example, the amount of competition
• 35:27
  Speaker 2: that's in that space. Like I went to a restaurant
• 35:29
  Speaker 2: with my family last night. There are so many different
• 35:32
  Speaker 2: craft options out there. Where my dad comes from the
• 35:34
  Speaker 2: school of he just drinks Budwiser. Yeah, Budweiser, bud Light,
• 35:38
  Speaker 2: like that was the options, and it is so much
• 35:42
  Speaker 2: more fragmented today where Tucker and I probably both have
• 35:45
  Speaker 2: individually different different uh you know, picks for IPAs out there.
• 35:50
  Speaker 2: Maybe there's overlap, but there's a good chance that there
• 35:52
  Speaker 2: is some difference where it would have been the standard
• 35:54
  Speaker 2: of everyone in my dad's friends just would drink bud
• 35:57
  Speaker 2: you know. Yeah.
• 35:58
  Speaker 5: I mean there's so many varieties now and I fall
• 36:01
  Speaker 5: in that camp of, you know, leaning towards a craft
• 36:03
  Speaker 5: beer or whatever, as obnoxious as it's gotten, but still
• 36:07
  Speaker 5: and then the other thing in terms of like there
• 36:10
  Speaker 5: was definitely a shift in behavior with the lockdown the
• 36:13
  Speaker 5: pandemic in terms of going out. I feel like less
• 36:16
  Speaker 5: and less people at least in my social circle will
• 36:18
  Speaker 5: like stay out later at bars or whatever, or like
• 36:22
  Speaker 5: want to go out into Boston for a night out
• 36:25
  Speaker 5: or something like everybody's more content and just hanging out
• 36:28
  Speaker 5: at home, whether that's just hanging out and watching a
• 36:30
  Speaker 5: movie or catching up with your later show. Like people
• 36:33
  Speaker 5: are more comfortable just hanging in now.
• 36:35
  Speaker 2: I just don't know if that you'll let us getting old,
• 36:37
  Speaker 2: which we are probably that, yeah, yeah, but I don't know.
• 36:42
  Speaker 5: Do you see a bunch of youngsters going out getting
• 36:44
  Speaker 5: crazy like they did back when we were younger. It
• 36:47
  Speaker 5: feels like that's kind of ticked lower. Maybe it's just me.
• 36:51
  Speaker 1: I don't know.
• 36:51
  Speaker 2: I bought into what the The best feedback you could
• 36:54
  Speaker 2: have here is bars in these college towns nothing has
• 36:57
  Speaker 2: changed for them since since COVID, where they have the
• 37:00
  Speaker 2: same demographic of students we've gotten older, that has changed,
• 37:03
  Speaker 2: but you have the same demographic of eighteen to twenty
• 37:06
  Speaker 2: two year olds not going on as much. So I
• 37:08
  Speaker 2: think you may be right. Granted, small sample size, just
• 37:11
  Speaker 2: two bars in college campuses, but that seems like that
• 37:14
  Speaker 2: may be the case. Mark, What do you got for us?
• 37:17
  Speaker 4: Kind of breaking news?
• 37:18
  Speaker 3: This comes from WCVB dot com, though it's I don't
• 37:21
  Speaker 3: think they broke it. It's reported elsewhere, but that's where
• 37:23
  Speaker 3: I'm reading it from herb Chambers and institution over sixty
• 37:29
  Speaker 3: well sixty dealerships, thirty five brands.
• 37:31
  Speaker 4: We all know the name. They've been around since nineteen
• 37:34
  Speaker 4: eighty five.
• 37:34
  Speaker 3: They've they're being bought by a group, Aspbury Group of Georgia,
• 37:41
  Speaker 3: I believe Sorry, I'm just sort of scanning this as
• 37:44
  Speaker 3: we get into it. For one point three billion, half
• 37:46
  Speaker 3: of which is for his real estate, roughly half of
• 37:49
  Speaker 3: which six hundred billion I'm rounding up a little. It's
• 37:51
  Speaker 3: for his real estate and the rest is so called goodwill.
• 37:54
  Speaker 3: So does that mean they keep the name or is
• 37:56
  Speaker 3: that just another way of characterizing all the other stuff,
• 37:58
  Speaker 3: including the franchise's.
• 38:00
  Speaker 2: Say, how many dealerships? Though, because Georgie one operates, do
• 38:04
  Speaker 2: they have a big presence operates?
• 38:06
  Speaker 3: They operate well. Aspbury Automotive Group is the formal name.
• 38:09
  Speaker 3: They operate one hundred and fifty two dealerships, thirty one
• 38:13
  Speaker 3: brands in the in the in the South, in Georgia specifically,
• 38:16
  Speaker 3: as we're there.
• 38:17
  Speaker 2: That's all the time that we have today for this
• 38:19
  Speaker 2: episode of the Financial Exchange, but we'll we wripe out
• 38:21
  Speaker 2: at it tomorrow morning at ten am. Thanks so much
• 38:23
  Speaker 2: for joining us