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Is China getting close to finding its own Nvidia? · The Financial Exchange Show

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1:03
Speaker 1: This is the Financial Exchange with Chuck Zada and Mike Armstrong.
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Speaker 2: Chuck, Mike and Tucker with you, and as we kick
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Speaker 2: off our Thursday show, we got a little bit of
1:15
Speaker 2: economic data to get to, including an updated GDP report
1:19
Speaker 2: and some jobless claims. But the top story for today
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Speaker 2: in Video reported earnings a little bit after the bell yesterday,
1:29
Speaker 2: and market doesn't love them. They're not, you know, really
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Speaker 2: freaking out. It's basically, I mean, in Video is down
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Speaker 2: about two percent, which in vidio terms is like not
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Speaker 2: really worth getting out of bed for.
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Speaker 3: No, but some disappointed people at the Nvidia earnings parties
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Speaker 3: last night. I would assume, now you know who the
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Speaker 3: most disappointed people are, Mike are the people that spend
1:52
Speaker 3: a bunch of money on option Trimium today shop and
1:55
Speaker 3: have gotten absolutely nowhere from it because the stocks just
1:59
Speaker 3: not move very much. So in terms of what in
2:02
Speaker 3: Video reported, their sales during the most recent quarter hit
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Speaker 3: forty six point seven billion dollars, basically in line with
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Speaker 3: analyst estimates.
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Speaker 2: So that's nice. It was a touch higher, but you know, again,
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Speaker 2: not anything like what they used to do, where they'd
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Speaker 2: be like, hey, we had like sixteen billion in revenue
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Speaker 2: and you guys thought we'd have ten yeah, it's it's
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Speaker 2: not that net income rose to twenty six point four
2:26
Speaker 2: billion dollars, a fifty nine percent growth rate compared to
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Speaker 2: the prior year, and their expectations for Q three revenue
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Speaker 2: are about fifty four billion dollars, which is a little
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Speaker 2: bit above expectations. So you look at Nvidian just kind
2:44
Speaker 2: of how it's traded since then, and we'll get into,
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Speaker 2: you know, more of the specifics on what this means,
2:48
Speaker 2: but pretty much right after the announcement, stock fell three
2:51
Speaker 2: or four percent. Over the course of the rest of
2:54
Speaker 2: the after hour session, kind of rallied back to being
2:56
Speaker 2: down to open this morning pre market down around to
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Speaker 2: rally back to flat, and now you know, is down
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Speaker 2: a couple percentage points. So overall, I think that the
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Speaker 2: takeaway on this is, look, when you have a company
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Speaker 2: that's priced for a huge amount of growth, delivering on
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Speaker 2: the growth that's expected as good, but it doesn't really
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Speaker 2: move the needle as far as driving that next leg up.
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Speaker 3: As a result of the news release yesterday, I don't
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Speaker 3: know if it's true or not, but the one piece
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Speaker 3: that every analyst and reporter out there is talking about
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Speaker 3: in terms of how they redeliver on that growth promise.
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Speaker 3: Is China any debate there?
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Speaker 2: Well, yes, okay, And I think I think here's the
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Speaker 2: thing is, it's pretty clear that China would prefer to
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Speaker 2: not have to buy in video chips.
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Speaker 3: I think that's pretty clear that well six to one
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Speaker 3: a half dozen the other Hijingping does not want these
3:56
Speaker 3: companies to buy Chinese made here's China in video mas.
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Speaker 2: That's the Chinese government, through Jijingping, does not want to
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Speaker 2: buy in video chips if they can avoid doing so.
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Speaker 2: The main reasons not because the chips are bad, but
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Speaker 2: simply because, quite honestly, I don't think they want the
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Speaker 2: United States to have a point of leverage over them
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Speaker 2: in any negotiations or dealings.
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Speaker 3: Agreed.
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Speaker 2: I think it's as simple as that. And so you know,
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Speaker 2: there's there's all this chatter about, you know, Jensen Huang
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Speaker 2: got asked a bunch of times, Hey, you know, what's
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Speaker 2: the deal with China? Are you gonna be able to
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Speaker 2: sell into them? What kind of revenue do you expect?
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Speaker 2: And you kind of tap danced around it in a
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Speaker 2: bunch of different ways. He said some interesting things, including
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Speaker 2: in video this morning saying, yeah, we're happy to give
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Speaker 2: the US government fifteen percent of revenue from all blackwell
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Speaker 2: sales if we can sell you know, the most recent
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Speaker 2: iteration of chips. But they also said yesterday in video, hey,
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Speaker 2: despite the you know agreement that was reached a couple
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Speaker 2: of weeks ago to give the US government fifteen percent revenue,
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Speaker 2: we're still working through it with counsel and with the
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Speaker 2: White House because there's no mechanism for us to do so,
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Speaker 2: and so we need to figure out how to actually
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Speaker 2: go about doing this.
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Speaker 3: Are we putting the cart ahead of the horse here,
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Speaker 3: given that China has no interest in buying them in
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Speaker 3: any of those age twenty chips.
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Speaker 2: Probably, but when has that ever stopped any enterprising young
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Speaker 2: CEO from saying, yeah, we we think we can do
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Speaker 2: this right and and so I think with Nvidiaya, the
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Speaker 2: China piece, maybe the short term is something that.
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Speaker 3: Matters, but ultimately it's a red.
5:36
Speaker 2: Herring in my opinion, because the long term growth of
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Speaker 2: Nvidia is going to depend on the data center spend
5:46
Speaker 2: by the mag seven companies more than anyone else, even
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Speaker 2: like you even talk about China and look and in
5:53
Speaker 2: Videy's getting you two hundred billion dollars in revenue this year. Okay,
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Speaker 2: even if you think in Nvidia is gonna selly chip
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Speaker 2: to China that they're buying right now, the estimates that
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Speaker 2: you're seeing are maybe another fifty billion over a multi
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Speaker 2: year period.
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Speaker 3: So then somebody explained to me, pull out your inner
6:12
Speaker 3: Dan ives the biggest Nvidia bowl that I can think of? Yeaheah.
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Speaker 3: What is the long term growth story?
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Speaker 1: Like?
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Speaker 3: I would assume more data centers forever? Right, But yeah,
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Speaker 3: I guess that's my point. I would assume that once
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Speaker 3: I don't know, once JP Morgan has built their latest
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Speaker 3: and greatest artificial intelligence internal system on the backs of
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Speaker 3: Microsoft's data centers or whoever is that they are using,
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Speaker 3: they will need to continue to update it every year,
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Speaker 3: just like they do every other piece of their technology.
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Speaker 3: But I would assume that they're not going to need
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Speaker 3: the same number of semiconductors that they needed to get
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Speaker 3: that thing up and running as they will to update
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Speaker 3: it every year. So where does this perpetual long term
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Speaker 3: growth come from? I don't know, that's the right answer.
6:58
Speaker 3: And this is the whole thing is like with the Internet,
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Speaker 3: once you laid off of the wire to create it,
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Speaker 3: the especially improvements were incremental well, you went from three
7:10
Speaker 3: G to four G and nothing changed, and so tell
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Speaker 3: me what goes. What's the huge difference once we go
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Speaker 3: from Blackwell to next generation semiconductor ten years out from now,
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Speaker 3: and I'm struggling to start seeing the picture.
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Speaker 2: This is the whole question, which is, look, you did
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Speaker 2: all the heavy lifting, like to compare to the Internet. Hey,
7:32
Speaker 2: the shift from dial up to fiber optic was a
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Speaker 2: huge shift. The shift from ten megabits per second to
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Speaker 2: thirty okay, like if you're running lots of devices in
7:49
Speaker 2: your house matters. The shift from thirty two. You know,
7:53
Speaker 2: everyone is arguing like, oh, like a gigabit is what
7:55
Speaker 2: you you don't need to I have like a fifty
7:58
Speaker 2: megabit connection, and it's just for you know, doing a
8:01
Speaker 2: lot of things that I need to, like anything. I
8:05
Speaker 2: can be watching TV in one room, my wife can
8:07
Speaker 2: be in another, I can be I can be freaking
8:10
Speaker 2: doing the show.
8:11
Speaker 4: You know.
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Speaker 2: If I'm you know, at home or whatever for a
8:13
Speaker 2: certain day, there's no huge problem there. So when when
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Speaker 2: it comes to this, the question is, look, we're already
8:20
Speaker 2: starting to see kind of a tailing off in terms
8:22
Speaker 2: of okay, the first iteration of models great it needed
8:28
Speaker 2: ex compute and it produced why result? Now you did
8:32
Speaker 2: X squared in terms of the compute you know, you
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Speaker 2: increased it by a factor of ten, and you know, okay,
8:39
Speaker 2: did it actually result in better performance?
8:41
Speaker 3: Yeah?
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Speaker 2: It did, but it was like thirty percent better performance
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Speaker 2: for ten x the compute power. I don't when you
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Speaker 2: did it again and you got only a ten percent
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Speaker 2: incremental improvement there. And I don't want any of what
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Speaker 2: to take this to mean that we're missing the boat
8:54
Speaker 2: on what artificial intelligence could mean.
8:56
Speaker 3: I am convinced that there are players out there. Remember
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Speaker 3: the MIT study from earlier this week that you know,
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Speaker 3: all these companies invested and only five percent of them
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Speaker 3: had seen any return on investment. That didn't surprise me. Like,
9:08
Speaker 3: we're very early stages at this point.
9:10
Speaker 2: I am sure sure most companies didn't have a good
9:12
Speaker 2: Internet strategy in nineteen ninety eighty either.
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Speaker 3: Yeah, I'm sure there are many companies out there with
9:17
Speaker 3: their own proprietary data sets that will build an artificial
9:19
Speaker 3: intelligence that will change something significantly for that company and
9:23
Speaker 3: perhaps the world. I'm less convinced that that means perpetual
9:30
Speaker 3: giant growth for a company like in video unless they
9:33
Speaker 3: have a different plan than modernizing their semiconductors. Because here's
9:40
Speaker 3: the thing.
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Speaker 2: Even if you get even if you get to a
9:43
Speaker 2: point where you've just got to, like, you know, replace
9:45
Speaker 2: these data centers in perpetuity instead of growing them, Okay,
9:49
Speaker 2: that's that's a replacement business. That's not a growth business anymore. Right,
9:53
Speaker 2: you know, you become Cisco replacing Routers, who still runs
9:56
Speaker 2: a really good business. But it's not what everyone thought
9:58
Speaker 2: they were going to be back in two thousand and
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Speaker 2: when you know, they were one of the most valuable
10:02
Speaker 2: companies on the planet. No one looks at Cisco now
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Speaker 2: and feels any kind of excitement, either positive or negative
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Speaker 2: about them. They just exist kind of like they make
10:13
Speaker 2: a boatload of money. By the way, like I'm not
10:15
Speaker 2: here to like pooh pooh Cisco. Like you take a
10:18
Speaker 2: look at the company as a whole.
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Speaker 3: The only negative thing we're saying about it is that
10:22
Speaker 3: it's not as stock price isn't its stock is not
10:25
Speaker 3: in Vidia.
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Speaker 2: It's it's just boring now, which is fine. I mean again,
10:29
Speaker 2: they make ten billion dollars a year in profit off
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Speaker 2: of sixty billion dollars a.
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Speaker 3: Year in revenue.
10:34
Speaker 2: That's perfectly cromulent, like you can make a good living
10:37
Speaker 2: off ten billion dollars. I hear it's you know, it's
10:39
Speaker 2: it's perfectly fine, but it's not what people thought it
10:44
Speaker 2: was going to be back in the tech bubble, the
10:48
Speaker 2: highs of which Cisco is never surpassed by the way,
10:51
Speaker 2: it's never gotten back to eighty dollars a share where
10:53
Speaker 2: it traded back in you know, two thousands. So within VIDIA,
10:57
Speaker 2: two things can be true. They can run it a
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Speaker 2: darn good business, and they still have a lot of
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Speaker 2: growth in front of them. But we talked about the
11:06
Speaker 2: economics of this, and eventually you get to a point
11:08
Speaker 2: where the buyers of these chips have to figure out
11:11
Speaker 2: how do we make money off of them? And that's
11:14
Speaker 2: where the question is actually going to be. The other
11:16
Speaker 2: thing that's true, there's going to be a lot more
11:18
Speaker 2: money spent on AI, and a lot of companies are
11:20
Speaker 2: going to increase that spend dramatically in the next five
11:23
Speaker 2: to ten years, and it still might not be enough
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Speaker 2: to actually cover all of this data center construction cost.
11:28
Speaker 2: I mean, if you're talking about in the next five
11:30
Speaker 2: years spending two to four trillion dollars on data center construction,
11:38
Speaker 2: that's a lot of depreciation that you've got to cover
11:40
Speaker 2: the cost of. It's a lot of depreciation that you've
11:43
Speaker 2: got to cover the cost of. And this is before
11:46
Speaker 2: we even get to the big problem in the US,
11:48
Speaker 2: which is, hey, how do we turn the lights on
11:50
Speaker 2: in these things? Because we don't build power plants as
11:52
Speaker 2: quickly as data centers.
11:54
Speaker 3: Let's take a quick break.
11:55
Speaker 2: When we return, let's talk about some of the economic
11:59
Speaker 2: data that came out today.
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Speaker 3: Do you have anything else to add on nvidio. I
12:02
Speaker 3: think you'll probably be revisiting it during artificially.
12:08
Speaker 2: I'm sure we'll talk about them sometime in the future,
12:10
Speaker 2: so we'll do that, but right now, quick break, then
12:13
Speaker 2: economic data.
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13:14
Speaker 2: All right, so we got a whole bunch of economic
13:17
Speaker 2: data this morning. Let's start first with the new stuff
13:22
Speaker 2: that came out. Jobless claims. Initial jobbles claims dropped just
13:26
Speaker 2: a touch, going from a slightly revised two hundred and
13:29
Speaker 2: thirty four thousand in the prior week down to two
13:32
Speaker 2: hundred and twenty nine thousand, so that's always good news
13:34
Speaker 2: to see. The continuing claims numbers also showed a modest drop,
13:40
Speaker 2: going from one point nine to six one million to
13:42
Speaker 2: one point nine to five four million. We still are
13:47
Speaker 2: floating around like five to six percent year over year
13:51
Speaker 2: growth on continuing claims, which is not really ideal, but
13:55
Speaker 2: not to the point where you're really seeing signs of
13:58
Speaker 2: any shift in the labor market.
13:59
Speaker 3: So probably all still means that we're sitting with an
14:02
Speaker 3: unemployment right right around four point two percent, right maybe
14:05
Speaker 3: four three, maybe four to one, depending on where you
14:07
Speaker 3: get the reading. But a labor market that is, while stagnant,
14:13
Speaker 3: pretty well balanced and for throughout you know, the last
14:18
Speaker 3: thirty years of four point two percent unemployment rate, If
14:20
Speaker 3: that's where we land next Friday, when we get it
14:23
Speaker 3: exceedingly low, I'll make the case that on the whole.
14:27
Speaker 2: And again, I know there's you know, places that you
14:29
Speaker 2: can look where you're like, Okay, this has gotten worse,
14:31
Speaker 2: So this has gotten better. On the whole, the labor
14:33
Speaker 2: market hasn't changed in a year. We're pretty much right
14:37
Speaker 2: where we were hit like it's in September of last year.
14:41
Speaker 3: Just to give you feel a little different. It feels
14:43
Speaker 3: different to me.
14:44
Speaker 2: It does because the only thing that is meaningfully different
14:48
Speaker 2: is the pace of job growth. Yeah, but you can
14:50
Speaker 2: make a case that that's because of demographics and deportations. Yeah,
14:55
Speaker 2: and so like if you look at the labor market.
14:59
Speaker 3: I guess I guess that's my point though, is that's
15:01
Speaker 3: why it feels different is the the growth is exceedingly
15:04
Speaker 3: slow and it seems more challenging. I think it seems
15:09
Speaker 3: more challenging today to find a new job than it
15:11
Speaker 3: did a year ago. I'm not sure that's the case.
15:15
Speaker 2: I think I think there are just fewer people looking
15:17
Speaker 2: for jobs. Just some some big numbers to give you.
15:22
Speaker 2: A year ago, this is from the Jolts Report, the
15:26
Speaker 2: layoffs and discharge rate was one point two percent now it's.
15:30
Speaker 3: One mey one point two percent of the total work
15:32
Speaker 3: first was getting.
15:33
Speaker 2: Laid off in any given month. The highre's rate was
15:36
Speaker 2: three to five, now it's three three. So layoffs got
15:39
Speaker 2: a little bit worse, hires sir layoffs got a little better.
15:42
Speaker 2: Hires got a little worse. The quits rate was one
15:46
Speaker 2: point nine percent now it's two. It's not a meaningful
15:49
Speaker 2: statistical shift when we go and take a look at
15:54
Speaker 2: some of these employment ratios. This is, I think, kind
15:57
Speaker 2: of gets at some of the stuff we've seen. Labor
15:59
Speaker 2: force participate rate for prime age age twenty five to
16:01
Speaker 2: fifty four was eighty three nine a year ago. It's
16:04
Speaker 2: eighty three to four right now. It's a modest slow
16:07
Speaker 2: down there, but no huge shift. Uh. The employment to
16:09
Speaker 2: population ratio in that same demo eighty percent today versus
16:13
Speaker 2: eighty point six a year ago, again modest ship labor
16:17
Speaker 2: force participation rate broadly has gone from sixty two to
16:20
Speaker 2: seven down to sixty two to two over that time. Okay,
16:23
Speaker 2: it kind of messures with what we've been talking about
16:25
Speaker 2: the ratio of job openings to unemployed a year ago
16:32
Speaker 2: in August, because that's really what a year ago was
16:35
Speaker 2: for jolts one point eight percent.
16:39
Speaker 3: The ratio, yes, one.
16:41
Speaker 2: Point eight people who one point eight job openings per
16:45
Speaker 2: every person who is unemployed.
16:47
Speaker 3: Today it's one point oh six, the exact same. It's
16:50
Speaker 3: pretty much the exact same.
16:51
Speaker 2: The unemployment rate a year ago again, I got I
16:55
Speaker 2: got all kinds of these here. Unemployed rate a year
16:57
Speaker 2: ago four to two. Today the U six, the underemployment
17:02
Speaker 2: rate was seven nine, it's seven nine. About wages, wage
17:07
Speaker 2: growth right now, I'm glad you asked, Michael, we're talking
17:10
Speaker 2: about like wage growth, that's what you're.
17:12
Speaker 3: Looking for, looking for we're looking at in terms of
17:15
Speaker 3: wage growth, I guess year over year last year compared
17:18
Speaker 3: to now.
17:19
Speaker 2: So this is kind of a wiggly data series in
17:21
Speaker 2: that like month to month, you get some fluctuations in here,
17:24
Speaker 2: But when you look at it right now, just use
17:26
Speaker 2: the BLS data, just because it's what I have front
17:28
Speaker 2: and center right now, you're running at four point two
17:30
Speaker 2: percent year over year wage growth according to the BLS.
17:34
Speaker 2: I give you a few I mean, if you look
17:35
Speaker 2: at the Indeed Wage Indeed Wage tracker, you're at two
17:38
Speaker 2: to four, but right now you're at four point two percent.
17:41
Speaker 2: If you go back a year ago, you were at
17:43
Speaker 2: three six. So there's been a modest uptick in wage growth,
17:47
Speaker 2: which could be represented by Hey, the labor market is
17:50
Speaker 2: losing a lot of older people who are retiring and
17:53
Speaker 2: a lot of people who are not in the country
17:55
Speaker 2: legally who can't work anymore, and so as a result,
17:59
Speaker 2: wages may be showing something on in terms of growth.
18:04
Speaker 2: But the counter to that is, hey, the INDEED data
18:06
Speaker 2: is showing things in the opposite direction. So maybe there's
18:09
Speaker 2: just no real shift in wage growth and you're pretty
18:11
Speaker 2: much in the same spot you were a year ago.
18:14
Speaker 2: Either way, when you look at the labor market as
18:16
Speaker 2: a whole, it's tough to conclusively feel things are very
18:20
Speaker 2: different other than the rate of job growth is slowed,
18:23
Speaker 2: but that might just be because there are fewer people
18:25
Speaker 2: looking for jobs because of retirements and deportations. Other data
18:30
Speaker 2: that we got this morning, second quarter GDP revised up
18:33
Speaker 2: from three point one percent to three point three percent,
18:37
Speaker 2: so a little bit stronger than initially reported. Obviously, it
18:41
Speaker 2: doesn't affect you know what's going on today in the economy,
18:44
Speaker 2: but good to see stronger growth in Q two than
18:47
Speaker 2: we originally had there and pending home sales data also
18:52
Speaker 2: came in at ten am this morning that was a
18:55
Speaker 2: little bit weaker than expected, negative point four percent for
18:58
Speaker 2: the month versus expectations of minus point one two point two.
19:02
Speaker 2: We'll cover this later in the show with a piece
19:04
Speaker 2: from Connor Sen, who really shares my view on housing
19:07
Speaker 2: that this might be like a five to seven year
19:09
Speaker 2: slog to get through the issues that are plaguing housing,
19:13
Speaker 2: not in terms of there's probably not like any kind
19:16
Speaker 2: of catastrophic drop in prices nationwide, but just a slow
19:21
Speaker 2: slog to get back to affordability after it got so
19:24
Speaker 2: out of whack in the last several years.
19:26
Speaker 3: We all got to move to Florida.
19:27
Speaker 2: That'll help affordability. Quick break here when we return. It's
19:31
Speaker 2: Wall Street Watch.
19:41
Speaker 1: Like us on Facebook and follow us on Twitter at
19:44
Speaker 1: TFE show. Breaking business news is always first right here
19:48
Speaker 1: on the Financial Exchange Radio Network. Time now for Wall
19:53
Speaker 1: Street Watch. A complete look at what's moving market so
19:56
Speaker 1: far today right here on the Financial Exchange Network.
20:00
Speaker 4: Markets mostly quiet again today in a mixed territory as
20:05
Speaker 4: traders react to mag seven earnings from chip maker and
20:07
Speaker 4: AI Giant in video, in addition to fresh economic data
20:11
Speaker 4: points including jobless claims and a new revision two second
20:15
Speaker 4: quarter GDP. Right now, the Dow is off by two
20:19
Speaker 4: tenths of one percent or eighty eight points lower s
20:21
Speaker 4: and P five hundred is down merely two points. Nasdaq
20:26
Speaker 4: is up a tenth of a percent or twenty four
20:28
Speaker 4: points higher, Rusted two thousands up a tenth of a percent,
20:31
Speaker 4: ten year Treasureial flat at four point two to three percent,
20:34
Speaker 4: and crude oil retreating one percent. Today Training at sixty
20:38
Speaker 4: three dollars and fifty one cents a barrel. While on
20:41
Speaker 4: Video saw its quarterly sales reach new record highs, the
20:44
Speaker 4: company's underwhelming outlook has increased worries about future demand, and
20:49
Speaker 4: Video shares are currently down by two percent. Sticking with
20:53
Speaker 4: the tech spase, where HP shares are climbing three percent
20:56
Speaker 4: after it beat revenue forecast, driven by growing demand and
21:00
Speaker 4: for AI enabled personal computers. Meanwhile, Cloud software and AI
21:04
Speaker 4: platform company Snowflake also beat revenue expectations, sending that stock
21:09
Speaker 4: jumping eighteen percent. Elsewhere, shares in Dollar General down modestly
21:14
Speaker 4: after the discount retailer beat earnings and revenue estimates for
21:17
Speaker 4: the previous quarter. The company also hiked its full year
21:20
Speaker 4: earnings in revenue growth guidance. Another discount retailer in five
21:25
Speaker 4: below also beat earnings and revenue forecasts, where its third
21:28
Speaker 4: quarter outlook also impressed. Shares in five below a rising
21:32
Speaker 4: by three percent. Dick Sporting Goods beat expectations in the
21:36
Speaker 4: second quarter and upped its full year outlook. However, shares
21:40
Speaker 4: are down by four percent at the moment, and CrowdStrike
21:43
Speaker 4: shares are up two percent, despite the cybersecurity provider swinging
21:47
Speaker 4: to a loss in giving revenue guidance for the current
21:49
Speaker 4: quarter that fell below forecasts. I'm Tucker Silvan.
21:53
Speaker 1: That is wall Stree, watch Mike.
21:56
Speaker 2: Just one final word on in video. This is not
21:59
Speaker 2: my own math. This is from bespoken Vest today. Do
22:04
Speaker 2: you know that within video being a four point four
22:06
Speaker 2: trillion dollar company now that is equivalent to six Walmarts, Yes,
22:12
Speaker 2: eleven Costcos, twenty one, Disney's thirty eight Nikes forty five,
22:20
Speaker 2: Starbucks is Starbucks', Starbucks's yea seventy eight, Chipotle's ninety four, Fords,
22:30
Speaker 2: one hundred and two Targets, one hundred and three Ebays
22:35
Speaker 2: two hundred and forty four, Dick Sporting Goods nine hundred
22:39
Speaker 2: and eighty four Shake Shacks two thousand and ninety under armours.
22:46
Speaker 2: Just to give you the scale of what we're talking
22:48
Speaker 2: about here at the four point four trillion dollar company,
22:51
Speaker 2: let's talk about this piece from the Wall Street Journal.
22:53
Speaker 2: It's titled why the market doesn't care much about Trump
22:56
Speaker 2: firing the Fed's cook. It's pretty simple in my book.
23:00
Speaker 2: The first is they didn't fire the chef. No, they
23:04
Speaker 2: didn't the different cook. They fired the cook, not the chef.
23:08
Speaker 2: The first is very simple. It is really unclear legally
23:12
Speaker 2: if the president is able to do this. And markets
23:15
Speaker 2: have gotten in a whole bunch of trouble this year.
23:18
Speaker 2: Not markets, Investors have gotten in a whole bunch of
23:20
Speaker 2: trouble this year by reacting to headlines instead of the
23:23
Speaker 2: ultimate resolution. And so I think markets have really learned
23:27
Speaker 2: in the last six months. Don't pay attention to the headline,
23:31
Speaker 2: pay attention to the eventual resolution. This by all accounts,
23:36
Speaker 2: could take several months to play out and finally get
23:39
Speaker 2: through the Supreme Court, who has already said you can't
23:43
Speaker 2: touch anyone at the FED. And so I think, hey,
23:46
Speaker 2: markets are looking at this and saying there's a decent
23:49
Speaker 2: chance this doesn't end up happening. The second piece is, ultimately,
23:53
Speaker 2: if you were concerned about FED independence before this, you're
23:56
Speaker 2: still concerned today. I don't know how many new people
23:59
Speaker 2: got to into the camp of hey, I'm now concerned
24:02
Speaker 2: about this because you went and tried to fire Lisa.
24:05
Speaker 3: Cook, Right. I think, Look, most every serious investor and
24:10
Speaker 3: economist out there believes that FED independence is very important.
24:15
Speaker 3: I think that's fair to say. Even if you were
24:18
Speaker 3: to pin down members of the Trump administration, they probably
24:22
Speaker 3: can't say it with the pressure of the president, but
24:24
Speaker 3: I do genuinely think most of them would admit that, yes,
24:27
Speaker 3: FED independence is crucially important. The conclusion that I come
24:32
Speaker 3: to is that the attempted firing of Cook hasn't made
24:38
Speaker 3: those same people feel any more convinced that they FED
24:41
Speaker 3: is no longer going to be independent. It hasn't moved
24:44
Speaker 3: the needle for them.
24:44
Speaker 2: No, It's okay, like we already knew that you wanted
24:48
Speaker 2: to do this, Like you've talked about this for the
24:50
Speaker 2: last couple of weeks. Now you went and tried to
24:52
Speaker 2: and we're going to see how it all plays out,
24:54
Speaker 2: and we'll no more over the next few months. But
24:57
Speaker 2: I would imagine sometime today or tomorrow Cook has already
25:00
Speaker 2: fired filed a lawsuit looking for a stay or you know,
25:06
Speaker 2: temporary restraining order on the action here, and so I
25:09
Speaker 2: would imagine that that'll be in place pretty shortly, and
25:12
Speaker 2: the FED is pretty much said, yeah, like she's still
25:15
Speaker 2: you know, on the board at the moment. Well buy
25:17
Speaker 2: by anything that any judge says, but ultimately, like this
25:20
Speaker 2: is where we are.
25:21
Speaker 3: So I don't think we've we felt pretty close to j.
25:23
Speaker 3: Powell himself being fired earlier this year, right we.
25:26
Speaker 2: Were there in I think it was early August or
25:28
Speaker 2: late July, somewhere in that ballpark.
25:30
Speaker 3: I can't remember exactly where it was. So one more
25:35
Speaker 3: point that I just want to make on this. I
25:37
Speaker 3: made it on Tuesday. But none of this is to
25:40
Speaker 3: minimize the accusations against Cook. Like, while a mortgage application
25:46
Speaker 3: seems like a relatively small thing, anyone at the Federal
25:50
Speaker 3: Reserve should be held to an extremely high standard, and
25:53
Speaker 3: if she did, in fact falsify a mortgage application, she
25:55
Speaker 3: should be fired. That would at least be my take,
25:59
Speaker 3: And I feel the same way about a congress person,
26:01
Speaker 3: a member of just about any government administration. That doesn't
26:05
Speaker 3: diminish the fact that clearly the White House wants more
26:08
Speaker 3: control over the FED. And so both of those things
26:10
Speaker 3: can be true at the same time.
26:12
Speaker 2: Yes, she can have listed multiple residences as her primary residence,
26:18
Speaker 2: which just is an unseemly look for someone at the
26:21
Speaker 2: FED to do. Quite honestly, in my book, it doesn't
26:24
Speaker 2: rise to the level of what Rosingrin and Kaplan were
26:26
Speaker 2: doing where they were, you know, trading potentially based on
26:30
Speaker 2: FED activity. Yep, Like that's something that represents more of
26:33
Speaker 2: a conflict of interest. This is just, hey, you're trying
26:36
Speaker 2: to help yourself out financially, which is unseemly and should
26:39
Speaker 2: be prosecuted as needed based on whatever it is. But
26:44
Speaker 2: is that something in my book that rises to the
26:46
Speaker 2: letter to the level of you can't do your job
26:49
Speaker 2: because of it. I just don't know about that.
26:54
Speaker 3: I don't think it puts her in a conflicted place
26:56
Speaker 3: where she can't do the job. I just think that
26:58
Speaker 3: you're held to you should be held to such a
26:59
Speaker 3: high stand there where you can make a case that's
27:02
Speaker 3: resigned because it's just too much of a distraction. If
27:04
Speaker 3: it were true, it should be designed because let's be honest,
27:06
Speaker 3: if a junior member of her staff had done it, yeah,
27:10
Speaker 3: they'd be fired.
27:11
Speaker 2: It's it's just too much of a distraction, and you
27:13
Speaker 2: know you shouldn't be there. Then that's different from is
27:15
Speaker 2: there you know, the right to fire the person it is, yeah,
27:18
Speaker 2: which is obviously where we are. So let's take no,
27:21
Speaker 2: let's not take a quick break. Let's talk about this
27:23
Speaker 2: next story here right now. Mexico raising tariffs on imports
27:27
Speaker 2: from China after a push from the United States. This,
27:32
Speaker 2: in my opinion, has been a major goal of the
27:33
Speaker 2: Trump administration all along, which is to get countries to
27:37
Speaker 2: build somewhat of a barrier around China in terms of
27:40
Speaker 2: you know, not being able to just export cheap goods
27:43
Speaker 2: somewhere else, to try to do an end run around
27:45
Speaker 2: the United States.
27:47
Speaker 3: And by the way, if they were successful in this
27:49
Speaker 3: in other countries, I would be ecstatic about the results.
27:53
Speaker 3: We've talked about this sometimes since Trump administration. One point. Oh,
27:57
Speaker 3: if this can be an end goal of all the
28:00
Speaker 3: tariffs are saying, Hey, we are building consensus among major
28:04
Speaker 3: US allies and trading partners that we should attack China
28:09
Speaker 3: in this way by walling off some of their goods
28:13
Speaker 3: into our country. I think that that would be the
28:16
Speaker 3: best potential outcome of tariffs.
28:18
Speaker 2: And look, i think since the beginning of the year
28:20
Speaker 2: I've kind of been in the same camp here that
28:23
Speaker 2: the President and the President Trump and President Scheinbaum seem
28:29
Speaker 2: to get along pretty darn well. Like they understand how
28:32
Speaker 2: each other communicates, they understand what each other trying to do.
28:35
Speaker 2: It seems like they have a pretty good working relationship actually,
28:39
Speaker 2: And so this is not entirely surprising to me, just
28:42
Speaker 2: because it's a.
28:44
Speaker 3: Little bit surprising me because of those links though. I mean,
28:47
Speaker 3: China has been investing a lot in Mexico. They have
28:49
Speaker 3: been investing in car manufacturing in Mexico, And maybe that's
28:52
Speaker 3: the answer is, Hey, you know, the terriffs won't be
28:54
Speaker 3: all that impactful because we are going to end up
28:57
Speaker 3: constructing some Chinese made evs in Mexico. But the linkage
29:02
Speaker 3: is there. While not as significant as those between the
29:06
Speaker 3: United States and China. They do feel pretty significant in
29:10
Speaker 3: terms of Chinese investment in Mexico over the course of
29:12
Speaker 3: the last few years.
29:13
Speaker 2: They do. I still think, like if you looked at
29:17
Speaker 2: if you look at Mexico's largest trading partners and just say, okay, like,
29:22
Speaker 2: you know, how does this actually stack up as far
29:24
Speaker 2: as you know, who's the biggest out there? Mexico's largest
29:29
Speaker 2: trading partner by far as the United States. Eighty percent
29:31
Speaker 2: of their exports go to the US, of course, and
29:34
Speaker 2: so it kind of gets back to what we've talked
29:36
Speaker 2: about in a number of cases, which is where's your
29:38
Speaker 2: bread buttered? And in this case, it's buttered in the
29:41
Speaker 2: United States. You know, so we got great butter.
29:45
Speaker 1: Yeah.
29:46
Speaker 3: I do feel as though many other countries would be
29:51
Speaker 3: probably if it were laid out in this way. And
29:53
Speaker 3: I don't think the Trump administration is willing to. But
29:55
Speaker 3: if it were laid out in this way of hey,
29:56
Speaker 3: we'll give you free trade or close to it, if
29:58
Speaker 3: you are willing to put these barriers upon China, I
30:02
Speaker 3: think many countries would say yes, not all of them,
30:05
Speaker 3: but I think many would.
30:06
Speaker 2: If you talk about the ones that matter, it's the EU,
30:11
Speaker 2: It's the EU would not okay, like let's EU and yeah,
30:15
Speaker 2: I agree, the EU is kind of politically captive to
30:21
Speaker 2: China in a number of respects when it comes to
30:23
Speaker 2: their economy. I don't think. I don't think that the
30:27
Speaker 2: EU is an objective, neutral third party when it comes
30:32
Speaker 2: to China.
30:32
Speaker 3: So what are the other ones that would matter other
30:34
Speaker 3: than the EU?
30:35
Speaker 2: So it's the the EU, Mexico, Canada, Japan, South Korea, Taiwan, Vietnam,
30:43
Speaker 2: UK and India, like those are the top ten trading partners.
30:46
Speaker 2: Of those, I think you could get Mexico is on board. Yeah,
30:50
Speaker 2: I think you're going to struggle with Canada.
30:52
Speaker 3: I think so.
30:54
Speaker 2: The Canadian government has had like a whole bunch of
30:58
Speaker 2: problems untangling itself from some political items related to China,
31:03
Speaker 2: in my opinion, and I don't know that they would
31:06
Speaker 2: be as resolute as you'd want them to be. So
31:08
Speaker 2: I think there's some questions there. The EU, obviously, I think,
31:11
Speaker 2: would be kind of a mess.
31:13
Speaker 3: Japan.
31:13
Speaker 2: I think if you had the right deal there, I
31:15
Speaker 2: think they would do it in a heartbeat. There's no
31:17
Speaker 2: love loss between Japan and China.
31:18
Speaker 1: True.
31:19
Speaker 2: South Korea, South Korea, same boat, Taiwan, same boat, but
31:25
Speaker 2: I think you would have to have some kind of
31:26
Speaker 2: defense commitment going there, and that I think could be
31:29
Speaker 2: you know, problematic obviously in terms of war. Yes, you know,
31:34
Speaker 2: like would there be like a firm commitment to defend
31:36
Speaker 2: Taiwan in the event that China attacked it? Right the
31:39
Speaker 2: UK coin flip, I think you could probably get them
31:43
Speaker 2: on board. But I like, again, we had, you know,
31:46
Speaker 2: this deal earlier this year that didn't spell things out
31:50
Speaker 2: quite as strongly as you would have liked to see.
31:52
Speaker 2: On China India, I genuinely have no idea. India is
31:55
Speaker 2: a wild card right now. Yeah, Like the first six
31:58
Speaker 2: months of the year, it seemed like we were like
32:00
Speaker 2: all gung ho on deepening US India relations and building
32:04
Speaker 2: that up. Is like, hey, here's how we can you know,
32:06
Speaker 2: counterbalance China in the region. Then we threw that chuck
32:08
Speaker 2: in tur I don't know what happened. It just seems
32:11
Speaker 2: like the last eight weeks something went wrong and I
32:15
Speaker 2: still can't figure.
32:16
Speaker 3: Out what it is.
32:16
Speaker 2: Yeah, let's take a quick break here. When we come back,
32:20
Speaker 2: let's talk about power bills. They're going up.
32:25
Speaker 1: Text US six one, seven, three, six, two, thirteen eighty
32:28
Speaker 1: five with your comments and questions about today's show, and
32:31
Speaker 1: let us know what you think about the stories we
32:33
Speaker 1: are covering. This is the Financial Exchange Radio Network, breaking
32:39
Speaker 1: business and financial news first throughout the day, only here
32:42
Speaker 1: on the Financial Exchange Radio Network.
32:54
Speaker 3: Mike KRUSTA blame for your higher power bill? I don't know.
32:57
Speaker 3: But if you ask Democrats, it's Republicans. And if you
32:59
Speaker 3: have to score Republicans, it's going to be Democrats, especially
33:02
Speaker 3: next year leading up to elections.
33:03
Speaker 2: Well, let's not ask either of them that, yeah, because
33:06
Speaker 2: I don't think that's a particularly useful I.
33:09
Speaker 3: Think the basic I think the basic foundations of economics
33:13
Speaker 3: are to blame for higher power bills because, as we
33:16
Speaker 3: have talked about, you have been pretty dramatically increasing demand
33:20
Speaker 3: for electricity over the course of the last couple of years,
33:24
Speaker 3: but yeah, several years, but last couple especially, and we
33:30
Speaker 3: the correct answer is all of us are to blame. Yeah, Okay,
33:33
Speaker 3: we make it.
33:34
Speaker 2: Way too hard to build new power sources in the
33:38
Speaker 2: United States right now. And this is across the board now,
33:40
Speaker 2: like we are all to blame on this. This is
33:44
Speaker 2: this is whether you are talking about residents of Connecticut
33:46
Speaker 2: and Massachusetts who say no sorry, we don't want any
33:50
Speaker 2: gnatgas pipelines running through and so instead we have to
33:54
Speaker 2: ferry in a bunch of l andng to Boston Harbor
33:56
Speaker 2: in order to power you know, the region.
34:00
Speaker 3: Residentsive New Hampshire consistently vote down in the Northern past
34:05
Speaker 3: idea that got voted down.
34:07
Speaker 2: This is if you're talking about people on both sides
34:10
Speaker 2: of the political spectrum who say, no, we don't want
34:13
Speaker 2: nuclear power, it's too dangerous. This is, you know, talking
34:17
Speaker 2: about people who say, hey, we don't want any you know,
34:19
Speaker 2: oil pipelines being built. You can go down the list.
34:22
Speaker 2: This is people who say, no, I can't have offshore
34:24
Speaker 2: wind because it looks ugly when I look out my
34:28
Speaker 2: multi million dollar view on the islands like ooh, Like,
34:32
Speaker 2: how am I ever gonna be able to deal with
34:34
Speaker 2: something that spins? So we we all have like our
34:38
Speaker 2: our things and look, quite honestly, if someone had a
34:41
Speaker 2: nuclear power plant that fit in my basement and said, hey,
34:45
Speaker 2: I'll give you a million dollars if you put this
34:47
Speaker 2: thing in your basement, fine, I'll do it, because honestly,
34:50
Speaker 2: if it blows up, I'm dead anyways, I won't know.
34:53
Speaker 2: So what's the big deal. But in any case, we're
34:56
Speaker 2: all to blame on this, and we need to find
35:00
Speaker 2: and easier ways to allow for the creation of new
35:04
Speaker 2: power construction because otherwise there's no way out of this.
35:10
Speaker 3: It's game. It's the same thing for housing folks. If
35:13
Speaker 3: you want cheaper housing, then build more houses. If you
35:16
Speaker 3: want cheaper power, then build more power plants.
35:19
Speaker 2: And by the way, you probably need all kinds of them.
35:21
Speaker 2: You need nukes, you need solar power, you need nat gas,
35:25
Speaker 2: you need wind, you probably even need some coal. I
35:27
Speaker 2: know coal's been on the down, you know, going downhill
35:29
Speaker 2: for a while. But look, you can make all of
35:31
Speaker 2: these work cohesively in some kind of unit. But if
35:35
Speaker 2: you just say no, I can't have that near me,
35:38
Speaker 2: well then look we might as well just give up
35:40
Speaker 2: and pay fifteen hundred dollars a month for electricity.
35:44
Speaker 3: Yeah. Sorry, I'm having a bit of a moment.
35:49
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36:42
Speaker 4: is almost September first, and in the city of Boston.
36:45
Speaker 4: That means all of the out of towners bring the
36:47
Speaker 4: big U hauls in to get ready for college and
36:50
Speaker 4: move into their new apartments and stuff like that. And
36:53
Speaker 4: that also means that as they go down Stoo Drive,
36:55
Speaker 4: they get stuck under the low bridges, a process known
36:57
Speaker 4: as storrowing that happens quite frequently despite a whole bunch
37:01
Speaker 4: of signs telling people not to drive trucks on the road.
37:05
Speaker 3: Yeah, for those of you not from the Boston area,
37:08
Speaker 3: you may not be familiar with this, but there's a
37:10
Speaker 3: road called Sturo Drive and every year several trucks get.
37:15
Speaker 2: Not several, they've had thirty six of them so far
37:18
Speaker 2: this so far this year.
37:19
Speaker 3: Thirty six. That's one a week. It's such a phenomenon
37:23
Speaker 3: that a very popular brewery in the Boston area called
37:26
Speaker 3: Trillium named one of their beers after being stowed, and
37:30
Speaker 3: then subsequently one of their own drivers of their trucks
37:33
Speaker 3: got stir rowed on Stero Drive and ruined one of
37:37
Speaker 3: the one of their cargo trucks.
37:38
Speaker 2: Yeah, the beer was ruined. So ultimately, I think this
37:44
Speaker 2: is one that has a very easy solution, which is
37:48
Speaker 2: don't drive your truck where it says, don't drive your truck.
37:51
Speaker 2: I know people will be like, well, why don't they
37:52
Speaker 2: make the bridges higher. Sorry, that's kind of expensive to
37:55
Speaker 2: do at this point. Just don't drive your truck where
37:57
Speaker 2: you're not supposed to drive it.
37:59
Speaker 3: Plus, and then we wouldn't have the funny story to
38:01
Speaker 3: cover about somebody driving their U haul on stoh driving
38:04
Speaker 3: and getting total The.
38:05
Speaker 2: Bridges are obviously structurally sound based on the fact that
38:08
Speaker 2: they keep destroying trucks, but are still able to be used,
38:12
Speaker 2: so it's not like these things need to be replaced.
38:14
Speaker 2: Right now, they're wrecking trucks left and right. Let's take
38:19
Speaker 2: a quick break here. We got hour two coming up
38:21
Speaker 2: in a little bit