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Has the Market Shifted from Inflation Fear to AI Fear? · The Financial Exchange Show

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  Speaker 1: and Mike Armstraw.
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  Speaker 2: All right, it's Chuck, Mike and Sucker with you here,
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  Speaker 2: and just say y'all listening, No, Mike's Mike is in
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  Speaker 2: danger of tipping over. So, uh if if you call
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  Speaker 2: me floppy Mike, Mike, if you're that's what we call
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  Speaker 2: him in the office, and uh, floppy Mic Mic, it's
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  Speaker 2: it's great. But in any case, this morning we got
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  Speaker 2: the latest inflation data, uh, the Consumer Price Index or
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  Speaker 2: the CPI if you will, that's what the people in
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  Speaker 2: the biz call it. And the CPI showed this, Uh,
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  Speaker 2: inflation for the month of January came in at point
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  Speaker 2: two percent month over month on headline, point three percent
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  Speaker 2: month over month on core. So twelve months for headline
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  Speaker 2: are now at two point four percent. Twelve month four
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  Speaker 2: core are at two point five percent. So I think
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  Speaker 2: that when we look at this, I know there's a
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  Speaker 2: two percent target on inflation, but as we've gone through
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  Speaker 2: the data previously.
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  Speaker 3: Nobody actually cares about it.
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  Speaker 2: Well, it's not that nobody cares, it's like you basically
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  Speaker 2: never actually get to two percent historically. So if you
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  Speaker 2: have a target that you can never reach, is it
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  Speaker 2: really a target or.
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  Speaker 3: Is it just a number. It's just there.
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  Speaker 2: Here's what we are seeing right now, and I'm kind
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  Speaker 2: of trying to reconcile this because I don't understand some
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  Speaker 2: of it. One of the things that pulled headline prices
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  Speaker 2: down was gas prices, according to CPI, following three point
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  Speaker 2: two percent. This despite the fact that gas prices have
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  Speaker 2: moved up over the last month and a half, so I.
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  Speaker 4: Hadn't really paid attention to that. So gas prices are
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  Speaker 4: up in the month of January, not a.
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  Speaker 2: Ton, but like, so gas price right now, we're two
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  Speaker 2: ninety four. I know we're in February right now, but
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  Speaker 2: the start of January we were around two eighty and
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  Speaker 2: as of about a week and a half ago we
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  Speaker 2: were at two ninety, So like a three percent upswing,
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  Speaker 2: and the CPI here is down, so expect some reversion there.
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  Speaker 2: It was probably just a sampling thing or timing right
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  Speaker 2: by right exactly January. I'm not describing like there's no
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  Speaker 2: ill intent here. It's just a sampling and timing thing
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  Speaker 2: in terms of when they must have done it.
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  Speaker 4: Remember too, that sampling in general in January might have
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  Speaker 4: just been screwed up based on the fact that one
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  Speaker 4: hundred and eighty million Americans were in the path of
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  Speaker 4: a pretty big snowstorm.
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  Speaker 2: Correct, So that's something I would expect to reverse here.
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  Speaker 2: Other things that I would expect to end up reversing here.
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  Speaker 2: You saw a one point eight percent decline in used
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  Speaker 2: cars and trucks. Some of that is real, but that's
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  Speaker 2: a huge magnitude. You're not going to see a one
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  Speaker 2: point eight percent decline in used vehicle prices every month,
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  Speaker 2: so don't expect to see that. Things that I will
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  Speaker 2: expect to see were continuing to get better prints on shelter,
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  Speaker 2: which came in at point two percent for the month,
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  Speaker 2: And I do think continued shelter disinflation is real, So
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  Speaker 2: I think that's going to be a nice little help
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  Speaker 2: for inflation going forward. But I continue to be of
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  Speaker 2: the opinion that in the next few months, you know,
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  Speaker 2: probably through the end of certainly through the end of
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  Speaker 2: Q one, and probably into early Q two. I just
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  Speaker 2: don't think inflation is the biggest potential problem facing the
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  Speaker 2: US economy. I think there are some things that we
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  Speaker 2: could talk about in terms of, hey, could it develop
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  Speaker 2: into a bigger issue by the second half of the year. Yes,
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  Speaker 2: if a certain set of things fall in a certain way.
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  Speaker 2: But I think this report, in my opinion, continues to
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  Speaker 2: reinforce that, hey, while inflation is still a little bit
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  Speaker 2: above that target, if you're printing two and a half percent,
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  Speaker 2: you can have a fantastic economy with two and a
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  Speaker 2: half percent inflation and this is not a problem today.
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  Speaker 4: Yeah, I'm trying to remember when did the Fed FED
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  Speaker 4: cut rates in twenty nineteen, right pre COVID normalized. It
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  Speaker 4: was that earlier.
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  Speaker 3: Hold please.
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  Speaker 2: The effect of federal funds rates, So in terms of
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  Speaker 2: what they did, you're talking twenty nineteen.
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  Speaker 4: Yeah, I'm time pre covid. I'm just I'm trying to
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  Speaker 4: think about the justification.
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  Speaker 2: Rate cuts there, And quite honestly, it was a case
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  Speaker 2: where there were some signs that we were going to
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  Speaker 2: be getting into a little bit of a gnarly labor
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  Speaker 2: market situation. Not like horrible, but there were some signs
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  Speaker 2: of weakness developing there.
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  Speaker 4: You know, I'm just looking at the context for this. Now.
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  Speaker 4: The big difference between twenty nineteen and now is that
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  Speaker 4: the CPI back at the end of twenty nineteen was
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  Speaker 4: running one seven, so like that's you know, abnormally low,
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  Speaker 4: and we were getting to this you know point in
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  Speaker 4: twenty eighteen, twenty nineteen where people were just saying, hey, look,
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  Speaker 4: you know, unemployment rate being this low might not just
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  Speaker 4: contribute to higher inflation right now.
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  Speaker 3: And yeah you did.
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  Speaker 4: You did see the FED cutting an environment where unemployment
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  Speaker 4: was at three point six percent. But I think that
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  Speaker 4: if you are Kevin Worrish, you're going to use that
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  Speaker 4: same logic from back then to say, yeah, you know what,
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  Speaker 4: unemployment is four point three percent, which seems healthy, but
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  Speaker 4: you know, inflation is not really showing signs of sparking
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  Speaker 4: in spite of that lower unemployment. So that's what we're
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  Speaker 4: going to be doing the inflation read Ultimately, I think
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  Speaker 4: what we've focused on the last several readings, if you
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  Speaker 4: get a reversal in energy prices, we could be in
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  Speaker 4: pretty rough waters because the core prices are still running
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  Speaker 4: in that slightly uncomfortable zone that you know, should something
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  Speaker 4: reverse on energy, you could have something ugly.
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  Speaker 2: Yeah, we're still waiting to see what we get from
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  Speaker 2: the Cleveland Fed on median CPI and TRIM mean those
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  Speaker 2: measures both still running around three percent year over years,
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  Speaker 2: So it does tell you like things are hotter than
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  Speaker 2: you'd like to see in a perfect world. And remember
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  Speaker 2: when we're talking about inflation, there are a few different
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  Speaker 2: things that get kind of confused when people talk about inflation.
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  Speaker 2: What we're talking about here is the rate of inflation,
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  Speaker 2: how quickly are price is going up. And what we're
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  Speaker 2: telling you today is that the rate that prices are
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  Speaker 2: going up is generally within at least the realm of
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  Speaker 2: what would be acceptable. If you saw two and a
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  Speaker 2: half percent year over your inflation for the next decade,
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  Speaker 2: you could look back and say that was fine, Like
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  Speaker 2: you would not have any problem there. We are not
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  Speaker 2: talking about the price level, which is prices have risen
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  Speaker 2: by x amount in this case a large amount over
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  Speaker 2: the last five years, and those are not going down because.
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  Speaker 3: That's just not how it works. Quite honestly. I know
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  Speaker 3: everyone's like, oh, I wish we could have deflation. No,
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  Speaker 3: you don't.
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  Speaker 2: Deflation sucks because it generally happens when demand is really bad.
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  Speaker 2: And think about this from this perspective. Let's say that
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  Speaker 2: you're in a deflationary environment. My name is Chuck, and
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  Speaker 2: I'm in a deflationary environment. Do I go out and
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  Speaker 2: buy a car today?
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  Speaker 3: No?
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  Speaker 2: No, I wait, because it's going to be cheaper next year,
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  Speaker 2: which means demand gets sucked out even more, which means
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  Speaker 2: businesses die. You want disinflation, not deflation. Seventy five years
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  Speaker 2: worth of data. Let me show you the points of
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  Speaker 2: year of a year deflation. August August of nine was
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  Speaker 2: one of them.
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  Speaker 4: Not a great period if time, Uh nope, didn't get there.
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  Speaker 4: Let's see October of fifty.
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  Speaker 3: Four really bad as well.
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  Speaker 2: The feder just like jammed rates higher to stop like
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  Speaker 2: twenty percent annualized inflation September of forty nine also not
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  Speaker 2: a great economy.
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  Speaker 4: Yeah, so again, we barely have context for what the
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  Speaker 4: economy was like in the forties and fifties. Few people
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  Speaker 4: living today truly understand what the economy is like back then. Yes,
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  Speaker 4: so you the only time in modern history what's happened
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  Speaker 4: was post Great Financial Crisis, when unemployment was absurdly high
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  Speaker 4: and nobody could afford to buy anything.
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  Speaker 3: Yes.
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  Speaker 2: Uh so you can make a case that, yes, like
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  Speaker 2: if inflation runs two and a half percent for the
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  Speaker 2: next you know, ten years, you're completely fine.
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  Speaker 3: The question is, hey, what could this run that?
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  Speaker 2: And for this we're gonna go back to the job
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  Speaker 2: support that came out two days ago. We don't need
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  Speaker 2: to fire up the time machine for it, because I
• 9:08
  Speaker 2: saw you getting the flex capacitor ready. But we don't
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  Speaker 2: need to Tucker. Plutonium is through the roof these days.
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  Speaker 2: We can't afford to run the time machine for a
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  Speaker 2: couple days.
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  Speaker 3: Okay. So here's the thing.
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  Speaker 2: Every jobs report, we get a data point that is
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  Speaker 2: called weekly change changing weekly payrolls. And in two of
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  Speaker 2: the last three now it's come in at point seven
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  Speaker 2: percent month over month. The one in between did see
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  Speaker 2: a modest decline, but it's still over the last three months,
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  Speaker 2: weekly payroll growth or not payroll growth, weekly wage growth
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  Speaker 2: is running at a six percent annualized rate, which is Tucker.
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  Speaker 3: In this case, you can fire up the bongos if
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  Speaker 3: you will. No, no bongos, bongos out bongos.
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  Speaker 2: Give me the steel drum. Steal drums. I need to
• 9:58
  Speaker 2: steal drums. How we waste our plutonium. That's what the
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  Speaker 2: wage growth is goes. And so here's the potential problem.
• 10:07
  Speaker 2: Mike pretends to own a restaurant, and in this scenario,
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  Speaker 2: Mike's margins are like two percent. One of his servers
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  Speaker 2: leaves and in order to hire a new one, because
• 10:18
  Speaker 2: the supply of labor is so tight, he's got to
• 10:21
  Speaker 2: pay through the roof. His labor cost goes up, and
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  Speaker 2: in doing so, it puts pressure on his very meager margins,
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  Speaker 2: and so Mike has to raise prices in order to
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  Speaker 2: stay in business. That is the potential path to inflation
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  Speaker 2: getting a little bit gnarly in the second half of
• 10:35
  Speaker 2: the years. If the labor market is indeed inflecting up
• 10:38
  Speaker 2: and starting to strengthen, labor supply right now, you can
• 10:42
  Speaker 2: make a case is declining two reasons. Number one, raise
• 10:46
  Speaker 2: your hand for your baby boomer, not two if you're driving.
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  Speaker 3: Just one.
• 10:49
  Speaker 2: If you're a baby boomer, how many of your friends
• 10:51
  Speaker 2: are either retired, retiring, or going to retire in the
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  Speaker 2: very near future most of them? And if you are
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  Speaker 2: agen zer, raise your hand. There's not enough of you
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  Speaker 2: to replace all of the boomers that are retiring. And
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  Speaker 2: coupled with the fact that we have immigration now either
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  Speaker 2: somewhere around zero or net negative at this point, there
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  Speaker 2: is no labor supply to fill that gap. And so
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  Speaker 2: the potential issue that you run into is you might
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  Speaker 2: see very modest job gains, but wages have to go
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  Speaker 2: through the roof to fill them because there just aren't
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  Speaker 2: enough people to fill those jobs.
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  Speaker 4: Actually, yeah, the Titaness piece was echoed elsewhere, right, that
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  Speaker 4: wage growth is one of them. The unemployment rate sank
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  Speaker 4: to four point three percent.
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  Speaker 2: So I don't think that CPI that inflation is something
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  Speaker 2: that we need to worry about right now. But let's
• 11:43
  Speaker 2: watch this data closely over the next three to six
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  Speaker 2: months because it could be something that matters in the
• 11:48
  Speaker 2: second half of the year.
• 11:50
  Speaker 3: Quick break.
• 11:51
  Speaker 2: When we come back, we're talking about why AI is
• 11:54
  Speaker 2: scaring the heck out of everyone.
• 11:56
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  Speaker 2: All right, we got a piece here in the Wall
• 12:48
  Speaker 2: Street Journal. It's titled Worries about AI disruption's fuel stock slide.
• 12:53
  Speaker 2: And to bring this together, we've got this piece in Bloomberg.
• 12:57
  Speaker 2: Former karaoke company drags Logist into the AI scare trade.
• 13:01
  Speaker 2: So here's what happened yesterday. There's a company by the
• 13:05
  Speaker 2: name of Algorithm.
• 13:06
  Speaker 3: Holdings used to be the Singing Machine Company, and they
• 13:10
  Speaker 3: made karaoke machines. They earlier this week rolled out.
• 13:16
  Speaker 2: Or announced I don't even know if rolled out is
• 13:17
  Speaker 2: the right word, but they announced that they had put
• 13:21
  Speaker 2: together an AI app that held quot here the chief
• 13:26
  Speaker 2: executive officer of the karaoke turned AI company, The chief
• 13:31
  Speaker 2: executive officer of the karaoke turned AI company, yep, the
• 13:35
  Speaker 2: chief executive officer of the karaoke turned AI company, was
• 13:39
  Speaker 2: among those left shocked by the market action, which began
• 13:43
  Speaker 2: after the company said its semiicab platform was helping customers
• 13:48
  Speaker 2: scale freight volumes by three hundred to four hundred percent
• 13:51
  Speaker 2: without a corresponding increase in operational headcounts.
• 13:55
  Speaker 4: Okay, so seems kind of silly on the surface. It
• 13:59
  Speaker 4: is silly on the surface. This is a pen You
• 14:01
  Speaker 4: also don't know if it's real true like, So here's
• 14:06
  Speaker 4: what I think is silly. The algorithm Holding's penny stock,
• 14:11
  Speaker 4: which was trading around eighty cents per share prior to
• 14:15
  Speaker 4: this announcement, shot up to like a buck twenty five
• 14:18
  Speaker 4: a share, which I know that's tiny pennies, but percentage
• 14:22
  Speaker 4: wise massive. I think there is very little evidence that
• 14:27
  Speaker 4: this company is going to be able to deliver on
• 14:29
  Speaker 4: much of anything, So I think that part is a
• 14:31
  Speaker 4: little bit wonky. The idea of major trucking companies and
• 14:37
  Speaker 4: logistics companies getting hit by ten to fifteen percent, I'm
• 14:43
  Speaker 4: not sure is quite as silly as the stock price
• 14:46
  Speaker 4: of the penny stock going up. Here's where I land,
• 14:50
  Speaker 4: which is the exact place I land with software companies.
• 14:54
  Speaker 3: Might it be overstated, yes, But will.
• 14:59
  Speaker 4: H Raw Robinson Worldwide or land Star or you know
• 15:03
  Speaker 4: any of these giant trucking logistics companies whose main compelling
• 15:09
  Speaker 4: case is, hey, we help you get your stuff from
• 15:12
  Speaker 4: point A to point B. We have the network of shippers,
• 15:16
  Speaker 4: and we will be able to logistically find the best
• 15:19
  Speaker 4: and cheapest way to get you from point A to
• 15:20
  Speaker 4: point B. I am certain that they are investing in
• 15:23
  Speaker 4: the same type of modeling software that this company just
• 15:26
  Speaker 4: claims to.
• 15:26
  Speaker 3: Have ruled out.
• 15:28
  Speaker 4: But they will face increased competition from a bunch of
• 15:31
  Speaker 4: new companies, and so there is a new inherent risk
• 15:34
  Speaker 4: that should have been thought of before, but was thought
• 15:37
  Speaker 4: of just yesterday when it came to these companies.
• 15:42
  Speaker 3: Here's where I struggle with this one.
• 15:44
  Speaker 2: Okay, see it's Robinson, just as the example, because it's
• 15:48
  Speaker 2: discussed in this piece. Their operating margins are four point
• 15:52
  Speaker 2: nine to one percent. There's not a lot of fat
• 15:55
  Speaker 2: on that bone. It's a pretty skinny bone. And if
• 15:59
  Speaker 2: you look at this, especially given like given the very
• 16:03
  Speaker 2: limited amount that I know about trucking and logistics, it's
• 16:07
  Speaker 2: enough to make me dangerous, Especially if you put me
• 16:10
  Speaker 2: behind the wheel of one of those trucks.
• 16:11
  Speaker 3: Yeah, you wouldn't be able to get into first gear.
• 16:13
  Speaker 3: I wouldn't be able to see over the hood singing karaoke.
• 16:16
  Speaker 2: You know, I'd be like, Okay, where's the booster, Jimmy,
• 16:18
  Speaker 2: can you pop me up?
• 16:19
  Speaker 3: A little business. Hi's the sea cos.
• 16:21
  Speaker 4: It'd be exactly like the scene in Supertroopers where neither
• 16:23
  Speaker 4: of us can.
• 16:24
  Speaker 3: Get the truck in difference.
• 16:25
  Speaker 2: Yes, no, we'd have no chance. So the margins are
• 16:28
  Speaker 2: five percent, and the reasons why the margins are low.
• 16:31
  Speaker 2: In the trucking business, it's already a commoditized business. There
• 16:36
  Speaker 2: are already marketplaces online that you can go to that
• 16:39
  Speaker 2: will help to match you up with available trucks in
• 16:42
  Speaker 2: order to ship what you want. In fact, h Robinson
• 16:46
  Speaker 2: runs one of those. I'm just not sure that you
• 16:49
  Speaker 2: can actually get there without ch Robinson figuring out how
• 16:54
  Speaker 2: to get there at the exact same time, which.
• 16:57
  Speaker 4: Might bring prices down.
• 16:59
  Speaker 2: For prices may come down, but they still probably end
• 17:02
  Speaker 2: up winning. Maybe yeah, Because this is one case where
• 17:06
  Speaker 2: like the network matters. It's it's not like if you're
• 17:10
  Speaker 2: selling someone photo editing software, there's no network effect to that.
• 17:17
  Speaker 2: You just go, Okay, what'sever cheapest and does the coolest
• 17:19
  Speaker 2: stuff this? There's a network that has to be present,
• 17:23
  Speaker 2: and so given that, it's kind of like okay, if
• 17:30
  Speaker 2: if you know you were starting a competing you know,
• 17:32
  Speaker 2: sports league, you need the best players. It doesn't matter
• 17:35
  Speaker 2: how low your cost is. Like, if you got a
• 17:38
  Speaker 2: bunch of you know, AI players, they would have to
• 17:41
  Speaker 2: be doing things that the real humans can't do.
• 17:44
  Speaker 4: This one does not seem as logical to me as say,
• 17:48
  Speaker 4: wealth management businesses or software companies.
• 17:51
  Speaker 3: I'm I'm with you there.
• 17:53
  Speaker 4: Do you remember a few years ago Uber ruled out
• 17:55
  Speaker 4: shipping logistics. Yes, it had no impact, So, like you know,
• 17:59
  Speaker 4: first and foremot I don't think any of those existing
• 18:01
  Speaker 4: logistics companies. They might have been investors, might have been
• 18:04
  Speaker 4: spooked initially, but I don't think it had any substantial impact.
• 18:08
  Speaker 4: I think the point about AI is that there will
• 18:11
  Speaker 4: be ten to fifteen new ubers attempting to do this
• 18:15
  Speaker 4: in the logistics space, and what's the risk that one
• 18:17
  Speaker 4: of them actually does it a lot better?
• 18:19
  Speaker 3: Which is fair?
• 18:20
  Speaker 4: Now, maybe that doesn't justify a fifteen percent self off,
• 18:23
  Speaker 4: I'm not sure, but what we are clearly experiencing right
• 18:26
  Speaker 4: now is investors going industry by industry, not with any
• 18:31
  Speaker 4: sort of checklist, just how can this be disrupted?
• 18:33
  Speaker 3: How can this be disrupted?
• 18:34
  Speaker 4: Right and just by the tiny announcements of previously unknown companies.
• 18:40
  Speaker 4: They're shooting first and asking questions later. Yeah, I don't
• 18:45
  Speaker 4: know that we've reached peak silly on this though.
• 18:50
  Speaker 2: It's hard to know when you get there, but it's
• 18:53
  Speaker 2: always painfully obvious in hindsight. I mean, Long Island Iced
• 18:58
  Speaker 2: Tea changing its name to Long Island Blockchain, and it
• 19:00
  Speaker 2: was like, that's the moment right there. This a karaoke
• 19:04
  Speaker 2: company rolling out logistics software. It's a hard maybe, it's
• 19:08
  Speaker 2: a hard maybe.
• 19:09
  Speaker 3: Yeah. So I think that this is going to continue.
• 19:12
  Speaker 2: And by the way, just because I might poopoo a
• 19:15
  Speaker 2: specific example, this stuff's gonna come for everyone, and I
• 19:19
  Speaker 2: think faster than people think, which is what's starting to
• 19:21
  Speaker 2: get priced in quick break here, Wall Street Watch is next.
• 19:30
  Speaker 1: Like us on Facebook and follow us on Twitter at
• 19:32
  Speaker 1: TFE show. Breaking business news is always first right here
• 19:37
  Speaker 1: on the Financial Exchange Radio Network. Time now for Wall
• 19:42
  Speaker 1: Street Watch. A complete look at what's moving markets so
• 19:45
  Speaker 1: far today right here on the Financial Exchange Radio Network.
• 19:49
  Speaker 5: Following a busy week, market to modestly higher as Wallstree
• 19:52
  Speaker 5: reacts to the Consumer Price Index this morning, where consumer
• 19:55
  Speaker 5: prices row zero point two percent in January, softer than
• 19:58
  Speaker 5: forecasts of zero point three percent. Traders are also continuing
• 20:02
  Speaker 5: to weigh concerns around AI disruption, impacting various sectors, including
• 20:06
  Speaker 5: real estate, trucking, and software.
• 20:09
  Speaker 3: Right now, the Dow is.
• 20:10
  Speaker 5: Up about three tenths one percent or one hundred and
• 20:13
  Speaker 5: thirty eight points, SMP five hundred, up four tenths of
• 20:16
  Speaker 5: a percent, Nasdaq also up about four tenths of one
• 20:19
  Speaker 5: percent or eighty seven points higher. Russell two thousand and
• 20:23
  Speaker 5: up almost one percent. Tenure treasure reeled is down three
• 20:26
  Speaker 5: basis points at four point zero six nine percent, and
• 20:30
  Speaker 5: crude oil retreating about a quarter percent. Today, Training at
• 20:33
  Speaker 5: sixty two dollars and sixty nine cents a barrel. Applied
• 20:36
  Speaker 5: Materials rallying ten percent after the maker of semiconductor equipment
• 20:40
  Speaker 5: posted stronger than expected quarterly results, lifted by soaring demand
• 20:45
  Speaker 5: for AI computing. Meanwhile, cryptocurrency exchange coinbase swung to a
• 20:49
  Speaker 5: loss in the previous quarter, driven by a selloff in
• 20:52
  Speaker 5: digital currencies. However, Coinbase shares are rebounding about fifteen percent today. Elsewhere,
• 20:58
  Speaker 5: online sports betting operator Draftking saw its revenue jump forty
• 21:02
  Speaker 5: three percent. However, its annual sales outlook disappointed, sending shares
• 21:07
  Speaker 5: tumbling twelve percent. Rivian Automotive is jumping twenty percent after
• 21:12
  Speaker 5: the electric truck maker said it sees twenty twenty six
• 21:15
  Speaker 5: vehicle deliveries ranging from sixty two thousand to sixty seven
• 21:19
  Speaker 5: thousand units, which would be roughly fifty percent higher compared
• 21:23
  Speaker 5: to twenty twenty five. AIRBNBA reported better than expected quarterly results,
• 21:28
  Speaker 5: although investment in new business drove up expenses. Airbnb stock
• 21:33
  Speaker 5: is up about five percent. An online travel agency Expedia
• 21:37
  Speaker 5: posted solid quarterly results. However, the company identified emerging AI
• 21:42
  Speaker 5: powered platforms as a potential risk. Expedio stock is down
• 21:46
  Speaker 5: about five percent. I'm Tucker Silva and that is Wall Street.
• 21:49
  Speaker 3: Watch forget this?
• 21:51
  Speaker 4: What Who is the investor that was surprised by that?
• 21:54
  Speaker 3: Wait?
• 21:55
  Speaker 4: You see emerging AI technologies as a risk to your
• 21:57
  Speaker 4: business after your stock sold off by fifteen percent the
• 21:59
  Speaker 4: week before because of.
• 22:00
  Speaker 2: That, Tucker was surprised at forget the cell America trade.
• 22:07
  Speaker 2: Here comes Hedge America. What are we doing now, Michael?
• 22:12
  Speaker 3: What are we just?
• 22:12
  Speaker 1: Like?
• 22:13
  Speaker 3: What does that mean? What is the point of all
• 22:16
  Speaker 3: of this? Yeah?
• 22:20
  Speaker 4: I don't really have a great answer here. We haven't seen, uh,
• 22:24
  Speaker 4: have you seen tremendous evidence of either a sell America
• 22:26
  Speaker 4: or hedge America trade, I think mendous.
• 22:31
  Speaker 2: There's occasional things around the margins, which I think is
• 22:33
  Speaker 2: how it is because remember when we talk about allocations
• 22:39
  Speaker 2: that come from Europe, the Middle East, Asia, where they say, hey,
• 22:45
  Speaker 2: we want to buy American assets, generally, the vast majority
• 22:50
  Speaker 2: of those allocations are coming from large institutional investors. And
• 22:55
  Speaker 2: let me tell you something about how large institutional investors operate.
• 23:01
  Speaker 2: They like I'll give you an example. The investors that
• 23:14
  Speaker 2: were nervous about you know, American assets last April are
• 23:19
  Speaker 2: sitting down in their investment meetings today being like, hey, guys,
• 23:23
  Speaker 2: what should we do about this? That like that is
• 23:26
  Speaker 2: where they are. These things take not weeks to unfold.
• 23:30
  Speaker 2: It's not like retail traders sitting there being like, Jimmy,
• 23:33
  Speaker 2: do you think we should sell America in order to
• 23:36
  Speaker 2: get buy in from all of your institutional like pieces
• 23:39
  Speaker 2: within a large investment firm. It takes months, quarters, and
• 23:44
  Speaker 2: usually years for that to happen. So I just look,
• 23:50
  Speaker 2: it's not to say that you don't have you know,
• 23:53
  Speaker 2: higher cadence, higher frequency traders.
• 23:55
  Speaker 3: That are you know, playing in these waters.
• 23:57
  Speaker 2: They are, But I I just am not buying that
• 24:03
  Speaker 2: we've seen anything, aside from a few sporadic things here
• 24:07
  Speaker 2: and there that indicate this is real. Now, the interesting
• 24:10
  Speaker 2: piece is that because American markets have gotten so large,
• 24:15
  Speaker 2: especially relative to their worldwide counterparts, all it takes is
• 24:19
  Speaker 2: a small fraction of change at the margins to drive
• 24:23
  Speaker 2: worldwide markets higher than American ones if you're changing marginal flows, which,
• 24:29
  Speaker 2: by the way, helps to explain why international stocks absolutely
• 24:34
  Speaker 2: knocked the pants off of American stocks last year, even
• 24:38
  Speaker 2: in a compellingly good market for.
• 24:40
  Speaker 3: US doox right.
• 24:41
  Speaker 2: And by the way, this phenomenon is continuing. When you
• 24:46
  Speaker 2: take a look this year, Yeah, the S and P
• 24:49
  Speaker 2: five hundred, let's just say that it's flat, just because
• 24:52
  Speaker 2: again it's moving like half a percent every five minutes
• 24:55
  Speaker 2: right now. The S ANDP is flat year to date,
• 25:00
  Speaker 2: the MSCI Emerging Markets Index is up almost twelve percent,
• 25:04
  Speaker 2: the IFA's up eight. And then if you look at
• 25:06
  Speaker 2: like narrow Warriors, Japan's up seventeen, Europe's up five. International
• 25:11
  Speaker 2: markets are trouncing US markets again. Yeah, and so if
• 25:14
  Speaker 2: you were an investor who looked at you know, the
• 25:16
  Speaker 2: twenty tens in the early twenty twenties and was like, gee,
• 25:18
  Speaker 2: why would I ever want to invest in international markets.
• 25:21
  Speaker 2: The answer is, well, because they're not always going to underperform.
• 25:25
  Speaker 4: I was speaking with somebody just yesterday, actually who first
• 25:29
  Speaker 4: person I met who reads thoroughly the prospectuses that they get.
• 25:33
  Speaker 4: And but he didn't. He wasn't looking at them in detail.
• 25:36
  Speaker 4: He was really looking at Okay, let me look at
• 25:38
  Speaker 4: all these and tell me what the ten year return
• 25:40
  Speaker 4: on them is. And he brought up some of these
• 25:42
  Speaker 4: specifically country, you know, investments that represent holdings in Japan
• 25:48
  Speaker 4: or Brazil, and how abysmal the ten year return is.
• 25:51
  Speaker 3: Yeah.
• 25:51
  Speaker 4: And then you know, we open it together and you
• 25:53
  Speaker 4: look at, Okay, now look at the calendar year return
• 25:55
  Speaker 4: for the last twelve months. Yeah, and he kind of
• 25:58
  Speaker 4: floored like that, oh wow, oh yeah, up thirty percent
• 26:01
  Speaker 4: a year millikers, but down two percent a year for
• 26:04
  Speaker 4: the last decade. And then that has been the experience
• 26:07
  Speaker 4: of many many foreign investments as of late. Is huge
• 26:12
  Speaker 4: upside recently terrible performance over a decade and a half.
• 26:16
  Speaker 2: President Trump plans to roll back tariffs on metal and
• 26:19
  Speaker 2: aluminum goods. This is report from the Financial Times. I'll
• 26:23
  Speaker 2: quote here. Donald Trump is planning to scale back some
• 26:25
  Speaker 2: tariffs on steel and aluminum goods as he battles an
• 26:28
  Speaker 2: affordability crisis that has sapped approval ratings ahead of midterm elections.
• 26:32
  Speaker 2: The US President hit steel in aluminum tariffs imports with
• 26:35
  Speaker 2: tariffs of up to fifty percent last summer, and has
• 26:37
  Speaker 2: expanded the taxes to a range of goods made from
• 26:39
  Speaker 2: those medals, including washing machines and ovens. But the administration
• 26:44
  Speaker 2: is now reviewing a list of products affected by the
• 26:46
  Speaker 2: levies and plans to exempt some items, halt the expansion
• 26:49
  Speaker 2: of the lists, and instead launch more targeted national security
• 26:52
  Speaker 2: probes into specific goods. According to three people familiar with the.
• 26:56
  Speaker 4: Matter, one European business leader, who declined to be named
• 26:59
  Speaker 4: for the story set they knew of a company who
• 27:01
  Speaker 4: had sent four identical containers of machinery to the United
• 27:04
  Speaker 4: States and must charged different rates for each one of tariffs.
• 27:07
  Speaker 4: Here's the answer. This stuff is confusing. Yeah, it's leading
• 27:10
  Speaker 4: to higher prices for consumers in some cases too. But
• 27:13
  Speaker 4: it does not appear that there is a real coherent
• 27:17
  Speaker 4: formula that is used to apply to some of these things,
• 27:20
  Speaker 4: and trade officials themselves, Commerce department officials are just kind
• 27:24
  Speaker 4: of scratching their head on how do we actually implement
• 27:27
  Speaker 4: to this stuff. And that's a perfect example of why
• 27:29
  Speaker 4: it's so complicated is you're trying to figure out what
• 27:32
  Speaker 4: is the content portion of the finished product that comes
• 27:36
  Speaker 4: from stealing aluminum.
• 27:37
  Speaker 3: Guess what, that's pretty tricky.
• 27:39
  Speaker 2: Yeah, and again, we don't have any specifics or anything
• 27:42
  Speaker 2: on timing or you know exactly how this will apply,
• 27:45
  Speaker 2: but we'll keep you updated and let's know you know
• 27:48
  Speaker 2: how it evolves.
• 27:48
  Speaker 3: Here, let's take a quick break.
• 27:50
  Speaker 2: When we return, we'll talk about Americans with higher incomes.
• 27:55
  Speaker 3: They are starting to show.
• 27:56
  Speaker 2: Some signs that they might be falling behind on loan payments,
• 28:01
  Speaker 2: and that would represent a distinct change from the last
• 28:04
  Speaker 2: couple of years. We'll discuss that in its potential impacts
• 28:08
  Speaker 2: after this.
• 28:09
  Speaker 1: If you missed any of today's show, catch up whenever
• 28:11
  Speaker 1: you want on our YouTube page. Find daily show segments
• 28:14
  Speaker 1: and full shows. Just go to YouTube dot com and
• 28:17
  Speaker 1: search for the Financial Exchange. This is your home for
• 28:20
  Speaker 1: breaking business and financial news. This is the Financial Exchange
• 28:24
  Speaker 1: Radio network.
• 28:35
  Speaker 2: Piece in the Wall Street Journal for the Americans with
• 28:37
  Speaker 2: higher incomes are starting to fall behind on payments.
• 28:43
  Speaker 4: The stat here that I found the most interesting that
• 28:46
  Speaker 4: we can go through others too, But the average client
• 28:49
  Speaker 4: seeping seeking help from credit counseling agencies. So if you've
• 28:53
  Speaker 4: never been to a national Foundation for credit counseling produce
• 28:56
  Speaker 4: this data. Typically the step that you take before declaring
• 29:00
  Speaker 4: bankruptcy and is oftentimes required or strongly recommended as part
• 29:06
  Speaker 4: of that process. But the average client seeking help from
• 29:10
  Speaker 4: those agencies, according to this national foundation, currently makes about
• 29:14
  Speaker 4: seventy thousand dollars a year. Their unsecured debt levels are
• 29:17
  Speaker 4: now approaching thirty five thousand, about half of their income.
• 29:21
  Speaker 4: Sounds like a lot to me. They also let you
• 29:24
  Speaker 4: know that before the pandemic, typical client enrolled in counseling
• 29:27
  Speaker 4: made about forty grand a year and carried ten grand
• 29:30
  Speaker 4: in secured debt. So it is a market increase according
• 29:34
  Speaker 4: to this one statistic about credit counseling and debt loads.
• 29:40
  Speaker 2: And look, it's something where we've got, you know, some
• 29:46
  Speaker 2: data that's out there about rising delinquencies in different parts
• 29:49
  Speaker 2: of the credit market. This is still again the high
• 29:54
  Speaker 2: quality day that we get from places like the FED
• 29:57
  Speaker 2: is not indicating a broad deterioration that's continued through last year.
• 30:02
  Speaker 2: Like credit card delinquency rates have plateaued in the last
• 30:06
  Speaker 2: twelve months, saying, with auto loan delinquency rates.
• 30:09
  Speaker 4: Here's what I think you saw substantial increase on. So
• 30:13
  Speaker 4: the FED puts together this chart of what I'm looking
• 30:16
  Speaker 4: at is one hundred and twenty plus days late for
• 30:19
  Speaker 4: total household debt delinquency, and that would include mortgages, car payments,
• 30:24
  Speaker 4: student loans, credit cards, et cetera. That saw a big
• 30:27
  Speaker 4: jump right around third fourth quarter of last of twenty
• 30:32
  Speaker 4: twenty four.
• 30:32
  Speaker 3: Which is when student loans kicked back in.
• 30:34
  Speaker 4: Student loans kicked back in. So I think what we
• 30:37
  Speaker 4: saw here is that delinquencies were already there. They weren't
• 30:40
  Speaker 4: being reported, they weren't required to be paid for the
• 30:44
  Speaker 4: majority of the time during COVID, and now we have
• 30:46
  Speaker 4: shot up to levels. What is concerning is that these
• 30:49
  Speaker 4: levels are levels that we haven't seen since like the
• 30:51
  Speaker 4: twenty fifteen time frame.
• 30:53
  Speaker 3: Yep.
• 30:53
  Speaker 4: And so I don't like that, But I think this
• 30:56
  Speaker 4: is primarily a student loan problem, not some indication about
• 31:01
  Speaker 4: something new like car loans or credit card loans being
• 31:05
  Speaker 4: way in default. And by the way, that doesn't matter.
• 31:09
  Speaker 4: It still means that a bunch of people aren't going
• 31:11
  Speaker 4: to be able to spend money, especially because student loans
• 31:13
  Speaker 4: can't be discharged.
• 31:14
  Speaker 3: It's worth monitoring.
• 31:17
  Speaker 2: And if we see deteriorations start to pick back up
• 31:19
  Speaker 2: again in credit card or auto like we can we
• 31:21
  Speaker 2: can do something with it.
• 31:23
  Speaker 4: Logically that would make sense, right if you're defaulting on
• 31:25
  Speaker 4: your student loans, the next step would probably be defaulting
• 31:27
  Speaker 4: on your credit cards or auto loans.
• 31:29
  Speaker 2: But none of the banks have like said, anything's going
• 31:32
  Speaker 2: on there. They have not, you know, none of them. Yes,
• 31:35
  Speaker 2: you get like sporadic ones where it's like you know,
• 31:37
  Speaker 2: Discover might say, oh, we've seen you know, deterioration here,
• 31:40
  Speaker 2: or JP Morgan might see, yeah, there's been a small
• 31:42
  Speaker 2: one here. But in the aggregate you put it all together,
• 31:46
  Speaker 2: none of them are flashing red you know, warning signs
• 31:48
  Speaker 2: right now. And so that's I think where we stand today.
• 31:52
  Speaker 5: Stay planning is about more than just deciding who inherits what.
• 31:57
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• 32:00
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• 32:57
  Speaker 1: The proceeding was paid for and the views expressed are
• 32:59
  Speaker 1: solely those of Kush and Dolan. Cushing and Dolan and
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  Speaker 1: or Armstrong Advisory may contact you offering legal or investment services.
• 33:04
  Speaker 1: Cushing and Armstrong did not endorse each other and are
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• 33:08
  Speaker 2: Jamie Diamond must lower credit card interest rates, Navarro says.
• 33:12
  Speaker 2: In an interview with Bloomberg Radio yesterday, White House Trade
• 33:17
  Speaker 2: advisor Peter Navarro said, quote, James Diamond, lower your frigging
• 33:20
  Speaker 2: credit card interest rates. You are a criminal the way
• 33:23
  Speaker 2: you charge the American people at twenty two, twenty five
• 33:26
  Speaker 2: and thirty percent, and the President wants you to lower that, Jamie.
• 33:29
  Speaker 2: Until you do that, please refrain from commenting on other
• 33:31
  Speaker 2: public policies.
• 33:33
  Speaker 3: So, look, here's the deal.
• 33:34
  Speaker 2: When when California comes out, No I can't, I can.
• 33:39
  Speaker 3: Here's the deal.
• 33:41
  Speaker 2: When California comes out and says, hey, we're going to
• 33:45
  Speaker 2: have a separate minimum wage for fast food workers, we
• 33:50
  Speaker 2: call that out and we say, guys, this is an
• 33:53
  Speaker 2: awful lot of intrusion into you know, the business environment
• 33:57
  Speaker 2: and competitive markets, and you're gonna distort the labor market
• 34:02
  Speaker 2: and you're generally gonna have some pretty bad outcomes as
• 34:05
  Speaker 2: a result of that, and.
• 34:06
  Speaker 3: This is a bad idea.
• 34:09
  Speaker 2: So when Peter Navarro says, hey, like we're gonna set
• 34:13
  Speaker 2: credit card interest rates, you know, from the top, likewise
• 34:17
  Speaker 2: we can say that's a pretty bad idea, Okay, Like
• 34:20
  Speaker 2: if we really want to have the federal government setting
• 34:23
  Speaker 2: pricing for everyone, then we can just call it a
• 34:28
  Speaker 2: day and like.
• 34:29
  Speaker 3: Not have like an economy anymore, Okay.
• 34:33
  Speaker 2: And I'm sorry if we're gonna get to the point
• 34:36
  Speaker 2: where it's just like, hey, the governor of each state
• 34:40
  Speaker 2: sets their prices and then the federal government can set
• 34:43
  Speaker 2: then we can just call it a day. Okay, like
• 34:48
  Speaker 2: that's it. But otherwise I think that generally, Look, if
• 34:53
  Speaker 2: you if anyone listening wants to start a credit card
• 34:57
  Speaker 2: company that charges ten percent interest, you can. That is
• 35:00
  Speaker 2: the beauty of the free market. Like, if you think
• 35:02
  Speaker 2: that you can run a credit card company charging ten
• 35:05
  Speaker 2: percent interest, there's nothing stopping you. Right now, you can
• 35:09
  Speaker 2: go and open up a bank and then start lending
• 35:13
  Speaker 2: money to you know, ink some agreements with Visa and
• 35:15
  Speaker 2: start lending money on credit cards.
• 35:18
  Speaker 3: There's nothing to stop anyone from doing this. Correct.
• 35:22
  Speaker 4: Well, no, the thing that's stopping anyone from doing this
• 35:24
  Speaker 4: is losing money.
• 35:25
  Speaker 2: Terrible business. It's losing money is what's stopping people from
• 35:28
  Speaker 2: doing it.
• 35:30
  Speaker 4: So furthermore, you're a government official and you're telling a
• 35:34
  Speaker 4: member of the private sector to shut their mouth. Basically, like,
• 35:38
  Speaker 4: give me a break. I don't like everything that Jamie
• 35:41
  Speaker 4: Diamond says. We critique it like every other week.
• 35:43
  Speaker 2: We often talk about how he's like the worst economic
• 35:45
  Speaker 2: forecaster in the country.
• 35:47
  Speaker 4: And that's fine, but as a government official, will say, Jamie,
• 35:50
  Speaker 4: until you do that, please refrain from commenting on other
• 35:52
  Speaker 4: public policies. Does nobody else have an issue with that?
• 35:57
  Speaker 4: It seems pretty problematic.
• 35:58
  Speaker 3: It's not great. I know it's part for the courus,
• 36:01
  Speaker 3: but like, give me a break. I agree with you.
• 36:03
  Speaker 4: Jamie Diamond has a bunch of bad ideas. He uh
• 36:07
  Speaker 4: oftentimes calls for disaster in the economy when it's just
• 36:11
  Speaker 4: plainly not there, and I think he deserves some criticism
• 36:14
  Speaker 4: for that. But we've already gone through why this credit
• 36:18
  Speaker 4: card policy is a pretty bad idea, and then for
• 36:21
  Speaker 4: a member of the administration to tell a private citizen
• 36:24
  Speaker 4: to not publicly comment on things I don't like and look.
• 36:29
  Speaker 3: Good, price caps don't work.
• 36:32
  Speaker 2: Okay, if if you're listening and you're being like, hey, like,
• 36:35
  Speaker 2: I think the ten percent credit card thing is great.
• 36:38
  Speaker 3: How would you feel about rent control?
• 36:41
  Speaker 4: How about grocery prices capped like was being discussed uring
• 36:45
  Speaker 4: the last presidential campaign.
• 36:46
  Speaker 2: If we're just gonna cap all prices, then we can
• 36:50
  Speaker 2: call it a day and just.
• 36:51
  Speaker 3: Not have a market economy.
• 36:53
  Speaker 4: Yeah, but let's explain what that means. Like, plenty of
• 36:56
  Speaker 4: countries do.
• 36:57
  Speaker 3: This, Yes, they they're generally failed state.
• 37:00
  Speaker 4: Yeah, Communist Russia Rightviet Union did that, you know, Look,
• 37:04
  Speaker 4: go take a look at Turkey, have a look at
• 37:06
  Speaker 4: Argentina from time to time.
• 37:08
  Speaker 2: If you like the idea of price controls, there are
• 37:11
  Speaker 2: places that you can go to see just how that
• 37:13
  Speaker 2: works out.
• 37:14
  Speaker 4: Just because it's an industry that everybody hates, which is
• 37:17
  Speaker 4: credit cards and banking specifically, and plenty of reasons to
• 37:20
  Speaker 4: hate it, plenty of reasons to not want these companies to.
• 37:24
  Speaker 3: Get bailouts all that stuff.
• 37:25
  Speaker 4: But if we're talking about price caps, there is only
• 37:28
  Speaker 4: one logical place that that goes, which is shortages.
• 37:32
  Speaker 3: Lower supply.
• 37:33
  Speaker 2: If you're going to cap the price of something, people
• 37:35
  Speaker 2: just stop providing it.
• 37:37
  Speaker 3: And then, if you know.
• 37:37
  Speaker 4: Why the administration is obsessed with this idea, it's such
• 37:40
  Speaker 4: a compellingly bad idea to take a.
• 37:42
  Speaker 3: Quick break here.
• 37:43
  Speaker 2: When we come back, we've got our two coming up
• 37:46
  Speaker 2: in just a little bit,