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Diesel Hits $6.50 as Global Supply Pressures Build · The Financial Exchange Show

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  Speaker 1: is The Financial Exchange with Chuck Zotta and Mike Armstrong.
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  Speaker 2: It's Chuck, Mike, and Tucker with you here. Hope you
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  Speaker 2: all had a great weekend. And this is one of
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  Speaker 2: those weeks where, if I'm being honest... Not much going
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  Speaker 2: on this week. It is as dead of an economic
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  Speaker 2: week as you will find. Mike, do you know what
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  Speaker 2: the biggest earnings report is this week? Micron.
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  Speaker 3: Wendy's.
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  Speaker 2: There's only one that matters. No, Costco.
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  Speaker 3: Oh.
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  Speaker 2: Costco reports on Thursday, which is, it's not nothing, but
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  Speaker 2: other than that, Mike, have you ever heard of Worthington Industries?
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  Speaker 3: No. Actually, I feel like I've heard the name, but
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  Speaker 3: does not rank in my top 490 companies to pay
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  Speaker 3: attention to. No.
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  Speaker 2: On Wednesday, we do have kind of, you know, a
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  Speaker 2: very class B to class C group of companies reporting
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  Speaker 2: paychecks reports. It's nice that they actually, like, give people
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  Speaker 2: the paychecks and everything, but it's a $ 34 billion company.
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  Speaker 2: General Mills, Big Cereal.
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  Speaker 3: What portion of paychecks customers do you think receive paychecks now?
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  Speaker 2: Like, physical paychecks?
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  Speaker 3: Physical paychecks, yeah.
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  Speaker 2: One.
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  Speaker 3: One percent? One customer. One customer.
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  Speaker 2: General Mills, big cereal reports on Wednesday against a $ 21
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  Speaker 2: billion company. And Cracker Barrel Country Store.
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  Speaker 3: I wonder how they're doing with their turnaround back to
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  Speaker 3: where they were.
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  Speaker 2: Yes, they're 360, if you will.
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  Speaker 4: Micron's next week, sorry.
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  Speaker 2: Yeah, Micron's the week after. No, again, I'm not making
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  Speaker 2: this up. It's kind of a dead week. Here are
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  Speaker 2: the big economic data points this week. There is an
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  Speaker 2: ADP weekly employment change data set on Tuesday. The EIA
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  Speaker 2: gives us oil inventory levels on Wednesday. Jobless claims on Thursday.
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  Speaker 2: Durable goods orders Friday.
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  Speaker 3: New home sales Thursday, which isn't going to really tell
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  Speaker 3: us much because there's no home sales. They're bad.
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  Speaker 2: There's not much this week. But what we lack in
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  Speaker 2: economic data and in earnings, we make up for with
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  Speaker 2: the absolute chaos that's going on in the world. I
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  Speaker 2: woke up on, I think it was Saturday morning. And
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  Speaker 2: did you happen to see the pictures out of Moscow?
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  Speaker 3: No, because I'm not. I don't do what you do, Chuck,
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  Speaker 3: which is check the price of diesel at 4 a.m.
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  Speaker 3: every morning. I do.
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  Speaker 2: And fortunately, the prices don't move over the weekend except for,
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  Speaker 2: you know, retail. But I'm telling you, like, the first
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  Speaker 2: thought that went through my head, did either of you
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  Speaker 2: guys happen to watch the, like, Lord of the Rings
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  Speaker 2: spinoff that Amazon did?
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  Speaker 3: No, God, no.
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  Speaker 2: It was very bad, the first season. I didn't even
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  Speaker 2: watch the second one just because it wasn't, worth my time,
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  Speaker 2: but I committed to watching the first one just because, uh, I,
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  Speaker 2: I had to, you know, see what was going on
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  Speaker 2: and I think I can spoil it now. It's been
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  Speaker 2: a few years and it was, it was bad.
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  Speaker 3: So the, the.
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  Speaker 2: End of it, I forget exactly like the chain of
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  Speaker 2: events that led to this, but basically the like calm, idyllic,
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  Speaker 2: like green scenery place, uh, that the story started in becomes, like,
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  Speaker 2: volcanic and there's lava everywhere and the sky's dark and
• 4:26
  Speaker 2: Mount Doom rises. And then just in case, like, you
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  Speaker 2: didn't get it, there's a big sign that flashes at
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  Speaker 2: the back end that says... it changes the name of
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  Speaker 2: like whatever it was to Mordor. And you're like, there's
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  Speaker 2: a sign. Yes. Like, like a Chiron that literally changed it.
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  Speaker 2: And it's like, well, thanks for beating me over the
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  Speaker 2: head with it. Like, I get it. And I was
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  Speaker 2: just struck by the scenes in Moscow where, again, it
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  Speaker 2: was like, again, like not that Moscow is this like calm,
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  Speaker 2: idyllic place or whatever. But you wake up and it
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  Speaker 2: literally looks like Mordor. It's just like there's fountains of
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  Speaker 2: flame and smoke everywhere. I guess a couple other refineries
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  Speaker 2: got hit over the weekend. And so this does mesh
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  Speaker 2: with the key story on Diesel that you mentioned because... Look,
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  Speaker 2: there are two things that are driving up the price
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  Speaker 2: of diesel. And one of them is the one that's
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  Speaker 2: been heavily covered this year, which is obviously what's going
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  Speaker 2: on in the Middle East. The other is something that
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  Speaker 2: we've touched on and we've mentioned it as part of
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  Speaker 2: what's been influencing... refined product prices, which is, hey, there's
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  Speaker 2: been a campaign from Ukraine over the last four to
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  Speaker 2: five months now in particular targeting basically any kind of
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  Speaker 2: Russian logistics and infrastructure. It has been everything from oil refineries.
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  Speaker 3: What's the name of their company that's their.
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  Speaker 2: Version of Amazon? Strawberries or blueberries?
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  Speaker 3: Something like that, yeah. What is it? Very unexpected for
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  Speaker 3: a large Russian conglomerate, in my opinion.
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  Speaker 2: It's, what the heck is it called? Wildberries.
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  Speaker 3: Wildberries, yes.
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  Speaker 2: So here's what you have. Ukraine is basically targeting... Again,
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  Speaker 2: it's wild berries, warehouses. They're targeting oil refineries. They're targeting
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  Speaker 2: any kind of heavy equipment moving on roads, basically to
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  Speaker 2: try to paralyze the Russian economy the best they can.
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  Speaker 2: The side effect of that is that Russia is a
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  Speaker 2: huge exporter of refined products to the rest of the world,
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  Speaker 2: and Russia has now eliminated exports of diesel and gas
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  Speaker 2: because they just don't have enough domestically. They're actually importing
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  Speaker 2: diesel now because they can't produce enough. And so it's
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  Speaker 2: been mentioned a couple of times in the last couple
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  Speaker 2: of weeks, but now over the weekend, I'll quote here
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  Speaker 2: from the Financial Times. Donald Trump pressed his Ukrainian counterpart,
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  Speaker 2: Vladimir Zelensky, on a call Sunday to halt Kiev strikes
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  Speaker 2: on Russian refineries over concerns that the attacks are exacerbating
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  Speaker 2: a global diesel shortage and pushing up prices, according to
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  Speaker 2: people familiar with the call.
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  Speaker 3: The U.S.
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  Speaker 2: President's main message was about, quote, diesel, diesel, diesel, and
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  Speaker 2: urging Zelensky to order his military to cease their drone
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  Speaker 2: and missile attacks, a senior Ukrainian official who was on
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  Speaker 2: the call told the Financial Times. Not entirely surprising that
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  Speaker 2: the president would do this, given that his main concern
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  Speaker 2: at the moment is what is becoming very uncomfortable for
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  Speaker 2: a large portion of the American population, higher energy prices,
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  Speaker 2: particularly diesel ones, that seep into a much broader portion
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  Speaker 2: of the economy than just rising gas prices do.
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  Speaker 1: Yeah.
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  Speaker 3: And interestingly for Zelensky, might be willing to do this.
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  Speaker 3: The question, of course, is what am I going to
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  Speaker 3: get from America for attempting to see strikes on diesel infrastructure? Correct.
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  Speaker 2: And so I don't think that Zelensky has said in
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  Speaker 2: the last week or two, because this was brought up
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  Speaker 2: last week when the president put out a true social
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  Speaker 2: post that Russia and Ukraine had decided to stop attacking
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  Speaker 2: each other's energy infrastructure, which.
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  Speaker 3: Was immediately contradicted.
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  Speaker 2: Surprise, they haven't. But I think Zelensky said, look, we
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  Speaker 2: would consider doing this if Russia stopped as well. And
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  Speaker 2: then Russia said, okay, well, if we're going to do this,
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  Speaker 2: then we also need sanctions relief and this and that.
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  Speaker 2: And so it very quickly spiraled into, okay, this isn't happening.
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  Speaker 2: But if... If you're trying to look at the reasons
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  Speaker 2: why we've gotten to where we are domestically on energy
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  Speaker 2: prices right now, either one of these alone wouldn't have
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  Speaker 2: pushed us here.
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  Speaker 3: Sure.
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  Speaker 2: If you had Ukraine attacking Russian oil refineries, but everything
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  Speaker 2: is still flowing normally through the Strait of Hormuz and
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  Speaker 2: there's no conflict there, you see elevated prices. I have
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  Speaker 2: no doubt about that. But you have far more availability
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  Speaker 2: of crude oil just in order to put into refineries.
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  Speaker 2: And you have a bunch of refinery capacity in the
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  Speaker 2: Middle East that is operational and able to ramp up
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  Speaker 2: if needed coming out of the Strait of Hormuz. And
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  Speaker 2: China probably hasn't throttled back its refining capacity over the
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  Speaker 2: first half of the year as well. Likewise, if the
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  Speaker 2: conflict in Ukraine and Russia had wound down earlier this year,
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  Speaker 2: but you still had problems in the Middle East... Yes,
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  Speaker 2: you would still have elevated pricing, but Russia isn't importing
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  Speaker 2: diesel and instead is exporting. And so the net balance
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  Speaker 2: to the world looks different as well. It's the combination
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  Speaker 2: of these two that has gotten us to where we
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  Speaker 2: are today. So the obvious question then is, well, what
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  Speaker 2: comes next? And the answer is, anyone who thinks that
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  Speaker 2: they have any idea what refined product prices look like
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  Speaker 2: beyond two months out, I think is full of it.
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  Speaker 2: It's even gotten to the point where I think it
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  Speaker 2: was Morgan Stanley or JP Morgan, one of them published
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  Speaker 2: the piece last week that I had everyone talking that was, hey,
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  Speaker 2: we don't have a baseline view now. And I've kind
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  Speaker 2: of been like, well, guys, of course you don't. How
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  Speaker 2: could you? I've been saying this all year. Like, unless
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  Speaker 2: you know how the Strait of Hormuz and Ukraine-Russia are
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  Speaker 2: going to resolve and the timeline on which they resolve.
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  Speaker 2: Why is Goldman Sachs putting out pieces on March 1st about, well,
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  Speaker 2: we think Hormuz flows are going to be back to
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  Speaker 2: normal by mid-April?
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  Speaker 3: Yeah, not useful.
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  Speaker 2: Take that and just, what's that even worth? Obviously these
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  Speaker 2: things are not useful. So I don't know how either
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  Speaker 2: of these conflicts resolve, but they're not just going to
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  Speaker 2: stop because we're here now and things are expensive.
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  Speaker 3: Yeah, the other part of all of this, you talked
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  Speaker 3: about the supply side. I think it's worth talking about
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  Speaker 3: the demand side, which we have done before. But you
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  Speaker 3: look at the difference between gasoline and diesel right now, right?
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  Speaker 3: There's $ 2 difference per gallon right now. According to AAA,
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  Speaker 3: national average for regular unleaded gas, $ 4. 48. Diesel, $ 6. 51. Few
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  Speaker 3: things at work there. Yes, there are differences in who
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  Speaker 3: refines what and where it's refined and how easily you
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  Speaker 3: can refine it. But the real difference that I see
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  Speaker 3: there is demand curve. When prices get really high, people
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  Speaker 3: do slow down their driving, cease driving, or find ways
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  Speaker 3: to curb their demand for gasoline. It does not happen
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  Speaker 3: with diesel. There are very few opportunities to curb your
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  Speaker 3: demand for diesel. Really, the only one I can think
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  Speaker 3: of is Keeping the thermostat a little bit lower and
• 11:32
  Speaker 3: wearing an extra sweater around the house, which I'm sure
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  Speaker 3: people will be doing this winter, but that is not
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  Speaker 3: enough on the margins to drive price in any meaningful way.
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  Speaker 3: Whereas that is seemingly what's happening a bit with gasoline
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  Speaker 3: prices and Americans, fewer road trips and just fewer miles
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  Speaker 3: driven over the course of the summer.
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  Speaker 2: Let's take a quick break here. When we return, let's
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  Speaker 2: talk a little bit just about the real world impacts
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  Speaker 2: that we are seeing now with diesel at $ 6. 50 a
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  Speaker 2: gallon for the first time ever. How is it impacting businesses, consumers, households?
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  Speaker 2: We'll discuss next.
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• 13:03
  Speaker 2: So we've got diesel north of 650 for the first
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  Speaker 2: time in history. And the question is, okay, what are
• 13:13
  Speaker 2: the real impacts that we are now starting to see?
• 13:18
  Speaker 2: And the obvious ones to anyone in the Northeast, the
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  Speaker 2: price of diesel very closely tracks the price of home
• 13:27
  Speaker 2: heating oil. And when you look at the math on this,
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  Speaker 2: just as an example, Mike, home heating oil tank sizes. Generally,
• 13:39
  Speaker 2: I believe the most common size is right around 300 gallons.
• 13:43
  Speaker 2: I think that is normal. I've seen some as large
• 13:47
  Speaker 2: as 1,000, but I think like 300 to 500 is
• 13:51
  Speaker 2: tend to be kind of where most of them land.
• 13:53
  Speaker 2: I think it's like 275, 330, and 500 are the
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  Speaker 2: most common ones. So just as an example, if you
• 14:00
  Speaker 2: were to fill up a, let's call it a, let's
• 14:05
  Speaker 2: do a 330 gallon tank. And let's say that you were,
• 14:08
  Speaker 2: you know, just about empty. You had like 10% left.
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  Speaker 2: So let's say it's 300 gallons. And let's say you're
• 14:13
  Speaker 2: paying 250 more per gallon. It's an extra $ 750 each
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  Speaker 2: time you fill up that 330 gallon tank. If you're
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  Speaker 2: talking a 500-gallon tank, and again, 10% left still, so
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  Speaker 2: you've got 50 gallons left because, again, I don't know
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  Speaker 2: if I'm fortunate enough, but I'm hooked up to nat gas.
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  Speaker 3: That is fortunate, yes.
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  Speaker 2: I don't exactly understand how it works at this point,
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  Speaker 2: but my assumption is you don't want to let it
• 14:41
  Speaker 2: go to zero because then if you need heat, you
• 14:43
  Speaker 2: can't have heat. So let's say you need 450 gallons. At, again,
• 14:47
  Speaker 2: 250 more than last year, you're talking an extra $ 1, 125
• 14:50
  Speaker 2: that you've got to pay to fill up. Most people
• 14:54
  Speaker 2: that I talk to have to fill their tanks in
• 14:56
  Speaker 2: any given winter, anywhere from one to three times a winter,
• 14:58
  Speaker 2: depending on how bad it is. So you're talking, in
• 15:01
  Speaker 2: terms of extra additional cost, probably on average somewhere in
• 15:05
  Speaker 2: the ballpark of an extra couple thousand dollars this year
• 15:08
  Speaker 2: to provide heat for their homes.
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  Speaker 3: Which biggest impact, you know, in terms of portion of
• 15:14
  Speaker 3: the state goes to Maine.
• 15:15
  Speaker 2: Yeah, Maine, 50% of households use home heating oil.
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  Speaker 1: Yep.
• 15:19
  Speaker 3: But New Hampshire, Vermont, Rhode Island, parts of New York, Pennsylvania, Massachusetts, Connecticut,
• 15:25
  Speaker 3: and Alaska all, you know, have, I think each of
• 15:28
  Speaker 3: those states have a fifth or more of their homes
• 15:32
  Speaker 3: that are heating with heating oil.
• 15:34
  Speaker 2: Yes. And so, look, a lot of those households... They
• 15:39
  Speaker 2: can't afford an extra $ 2, 000 to $ 2, 500 in heating costs
• 15:44
  Speaker 2: this winter. It's going to have to be something where
• 15:47
  Speaker 2: local municipalities and the states are probably going to have
• 15:49
  Speaker 2: to come up with some kind of relief effort. Otherwise,
• 15:52
  Speaker 2: you're going to see households that can't heat themselves for
• 15:56
  Speaker 2: the entire winter or that end up trying to use
• 15:58
  Speaker 2: some kind of alternative fuel and end up. In a
• 16:01
  Speaker 2: bad situation where they burn the house down. So this
• 16:05
  Speaker 2: is something that is obviously very New England-centric. When you
• 16:09
  Speaker 2: branch out, again, any type of good in the country
• 16:13
  Speaker 2: is transported using vehicles that are powered by diesel.
• 16:17
  Speaker 3: Whether it's a train, whether it's an 18-wheeler, by and large,
• 16:21
  Speaker 3: we are moving this stuff around with diesel fuel.
• 16:24
  Speaker 2: And when you look at how much do higher diesel
• 16:28
  Speaker 2: prices impact the final prices of goods, it varies based
• 16:35
  Speaker 2: on specifically what is being transported over what distances, in
• 16:41
  Speaker 2: what quantities. It's not something where you just say, well,
• 16:44
  Speaker 2: it's going to be defined, 10% of this gets passed through.
• 16:50
  Speaker 2: It depends. The first way that you get to, you know,
• 16:53
  Speaker 2: how to back into this is remember that fuel is
• 16:56
  Speaker 2: generally somewhere around 25 percent of any trucking company's costs.
• 17:01
  Speaker 2: The other portions that are big, you know, obviously like labor, maintenance,
• 17:05
  Speaker 2: like all that stuff. So when you look at this,
• 17:09
  Speaker 2: generally you're talking about trucking costs for every dollar that
• 17:13
  Speaker 2: is moving up. The standard that I've generally seen is
• 17:16
  Speaker 2: it's like a 6% to 7% increase in trucking costs.
• 17:21
  Speaker 2: So diesel prices in the last year are up around $ 3,
• 17:25
  Speaker 2: which means you're talking trucking costs probably up somewhere in
• 17:28
  Speaker 2: the ballpark of 20% to 25%, which is also kind
• 17:31
  Speaker 2: of what we're seeing and hearing generally. When you look
• 17:36
  Speaker 2: at what you are actually paying for for a finished good, remember,
• 17:41
  Speaker 2: transportation is part of the picture, but it's not the
• 17:44
  Speaker 2: biggest part by any means. It's usually kind of a
• 17:48
  Speaker 2: low to mid single digit percentage. And so when you
• 17:52
  Speaker 2: talk about, you know, the costs that get passed through here,
• 17:55
  Speaker 2: if diesel has risen by 70 percent as it has
• 17:59
  Speaker 2: in the last year, you're still probably only talking about
• 18:02
  Speaker 2: a few extra percentage points in terms of cost. The
• 18:06
  Speaker 2: problem is that this is coming from a baseline of
• 18:08
  Speaker 2: costs that have already been inflating over the past several years.
• 18:12
  Speaker 3: Yeah, the year-over-year price increase on CPI was 3.4. Cleveland
• 18:16
  Speaker 3: Fed has an estimate in there for 3.5 in September.
• 18:18
  Speaker 3: I don't know where exactly we get to, but there's
• 18:21
  Speaker 3: just There's no way that rate hikes or anything else
• 18:25
  Speaker 3: brings inflation down in an environment like this.
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  Speaker 2: The other problem is that the place that you typically
• 18:30
  Speaker 2: see a higher percentage of costs related to transport isn't food,
• 18:35
  Speaker 2: simply because they are bulky products. They're heavy. They're low
• 18:39
  Speaker 2: margin to begin with. So you don't have much margin
• 18:42
  Speaker 2: to absorb transportation changes.
• 18:44
  Speaker 3: It's also compounding. The farmers use the diesel to get
• 18:47
  Speaker 3: it out of the ground. Plus then you ship it
• 18:49
  Speaker 3: on diesel trucks.
• 18:50
  Speaker 2: Not only on diesel trucks, but oftentimes, depending on what
• 18:52
  Speaker 2: you're shipping, it's got to be shipped in a refrigerated truck,
• 18:54
  Speaker 2: which burns diesel as well. And so this is a
• 18:58
  Speaker 2: whole thing that adds up here. And so you're often
• 19:01
  Speaker 2: not talking like low single digits then. You're talking mid
• 19:05
  Speaker 2: to high single digits in terms of additional costs that
• 19:07
  Speaker 2: get passed through. So that's another big place that you
• 19:11
  Speaker 2: see it. I think that ultimately the heating side of things,
• 19:15
  Speaker 2: as well as food, is where most people are going
• 19:17
  Speaker 2: to feel this the most. The other places, okay, like
• 19:20
  Speaker 2: what does this do to, you know, prices for holiday shopping?
• 19:23
  Speaker 2: It's going to have, you know, a small marginal impact.
• 19:26
  Speaker 2: You still might notice it just because inflation's already been
• 19:30
  Speaker 2: elevated prior to this. Quick break here. We've got Wall
• 19:33
  Speaker 2: Street Watch next.
• 19:38
  Speaker 1: Like us on Facebook and follow us on Twitter at TFEShow.
• 19:43
  Speaker 1: Breaking business news is always first, right here on the
• 19:46
  Speaker 1: Financial Exchange Radio Network. Time now for Wall Street Watch.
• 19:52
  Speaker 1: Tracking the stocks, the data, and the headlines driving markets
• 19:55
  Speaker 1: so far today, right here on the Financial Exchange Radio Network.
• 20:01
  Speaker 4: Markets are staging a modest rally to begin the week
• 20:04
  Speaker 4: with a pullback in oil. Wall Street's also readying for
• 20:07
  Speaker 4: talks between the U.S. and China this week surrounding trade
• 20:10
  Speaker 4: and artificial intelligence. Right now, the Dow is up nearly
• 20:13
  Speaker 4: half a percent or 221 points. S & P 500
• 20:14
  Speaker 4: is up nearly 1% or 72 points higher.
• 20:15
  Speaker 3: NASDAQ up over 1.5%. Up 414 points.
• 20:16
  Speaker 4: Russell 2000 is up over half a percent. And your
• 20:19
  Speaker 4: Treasury yield down three basis points at 4.959%. Crude oil
• 20:21
  Speaker 4: down 3%. 4.5%, trading at $ 95 a barrel, while Brent
• 20:37
  Speaker 4: pulling back over 3%, trading.
• 20:39
  Speaker 3: At $ 100 a barrel.
• 20:40
  Speaker 4: According to Bloomberg, Paramount Skydance has reached a settlement with California.
• 20:45
  Speaker 4: Other states suing to block its proposed acquisition of Warner Bros.
• 20:50
  Speaker 3: Discovery.
• 20:50
  Speaker 4: Paramount jumping 6%, while Warner shares are up 9%. Meanwhile,
• 20:55
  Speaker 4: shares in Rare Earth Minerals Development Company Critical Metals surging 36%.
• 21:01
  Speaker 4: After President Trump announced a security agreement over Greenland that
• 21:04
  Speaker 4: relieves pressure from U.S. maneuvering to control the Danish territory,
• 21:07
  Speaker 4: Critical Metals has a project in Greenland. And Accenture's stock
• 21:12
  Speaker 4: is climbing 3% after the professional services company said it
• 21:15
  Speaker 4: would partner with Anthropic and evaluate the AI company's models.
• 21:19
  Speaker 4: Both companies would also invest at least $ 1 billion for
• 21:23
  Speaker 4: building capacity in that area. I'm Tucker Silva and that
• 21:28
  Speaker 4: is Wall Street Watch.
• 21:31
  Speaker 2: Can we talk about this Paramount piece that Tucker mentioned there?
• 21:37
  Speaker 2: This is the biggest load of bull-loney I have ever seen.
• 21:43
  Speaker 2: Have you seen what's actually been negotiated here?
• 21:46
  Speaker 3: I remember staying in California and just a whole bunch
• 21:51
  Speaker 3: of bribes to states.
• 21:52
  Speaker 4: Yeah, Wall Street Journal had the initial report over the weekend.
• 21:55
  Speaker 2: I'm going to quote here from Bloomberg.
• 21:57
  Speaker 3: What?
• 21:59
  Speaker 2: The terms are said to include a financial penalty if
• 22:03
  Speaker 2: the company fails to make good on a promise to
• 22:06
  Speaker 2: distribute 30 films per year in theaters. Discussions included Paramount
• 22:11
  Speaker 2: having to pay $ 30 million for each film that falls
• 22:14
  Speaker 2: short of that goal, Bloomberg reported.
• 22:16
  Speaker 3: To whom?
• 22:18
  Speaker 2: Forget about the to whom, Michael. We are now engaging
• 22:23
  Speaker 2: in a socialist... Like we're literally saying this is how
• 22:29
  Speaker 2: many movies you need to make each year. Like, there
• 22:34
  Speaker 2: is nothing more ridiculous than that. This is to agree with,
• 22:37
  Speaker 2: I mean, this is a settlement with the states, right?
• 22:39
  Speaker 3: The federal government's not suing this for this.
• 22:41
  Speaker 2: This, by and large, is California saying, look, we don't
• 22:44
  Speaker 2: want to have, like, all of these film jobs get
• 22:47
  Speaker 2: shuttered in California. Okay, like, I understand the general sentiment.
• 22:51
  Speaker 2: The idea that there is a right number of films
• 22:54
  Speaker 2: that Paramount has to produce and that that number has
• 22:57
  Speaker 2: to be 30 per year is ludicrous. This is absolutely insane.
• 23:05
  Speaker 2: You're prescribing a number of movies that have to be
• 23:08
  Speaker 2: filmed each year?
• 23:09
  Speaker 3: Yeah, that's right. What's next?
• 23:11
  Speaker 2: Okay, so you need to have 42 different news articles
• 23:17
  Speaker 2: published each day in order to make... Are we really
• 23:21
  Speaker 2: serious about this? And the answer is yes, unfortunately. But
• 23:27
  Speaker 2: this is just... We've talked at length about... You've cited
• 23:31
  Speaker 2: the thing for the last little while where there was
• 23:33
  Speaker 2: some poll where over half of respondents, regardless of political party,
• 23:37
  Speaker 2: think that price controls are good. This is the logical
• 23:41
  Speaker 2: extension of it. It's, well, we can't lose jobs because of...
• 23:46
  Speaker 2: What if there aren't 30 good movies to make? What
• 23:49
  Speaker 2: if I just get Bill and Ted's Mediocre Adventure 6?
• 23:53
  Speaker 2: Featuring Bionu Beavs.
• 23:58
  Speaker 3: This is one of those ones, too, where it's not
• 24:01
  Speaker 3: that I think we should just accept the merger of
• 24:04
  Speaker 3: these two companies. No. But the solution is so garbage. Right. Like,
• 24:08
  Speaker 3: just break up the company.
• 24:09
  Speaker 1: Right.
• 24:10
  Speaker 2: If you really think there's a problem with these companies merging,
• 24:14
  Speaker 2: the answer isn't make them make more movies together.
• 24:17
  Speaker 3: Right.
• 24:20
  Speaker 2: Like, I'm sorry. Also, there's... I feel like I don't
• 24:24
  Speaker 2: have a place in this world that understands me anymore.
• 24:29
  Speaker 3: I'm really, really curious as to what the mechanism is
• 24:34
  Speaker 3: by which this is enforced. Because obviously, if it were
• 24:37
  Speaker 3: the federal government trying to enforce that a company needs
• 24:40
  Speaker 3: to make a certain number of movies, I would think
• 24:43
  Speaker 3: that a judge would throw that out pretty quickly. Given
• 24:45
  Speaker 3: that it's the states, I'm not sure that the same
• 24:48
  Speaker 3: standard would apply here. But, yeah, I have no idea
• 24:56
  Speaker 3: how this all culminates, other than the company's not going
• 24:59
  Speaker 3: to follow through at some point, and the enforcement mechanism
• 25:02
  Speaker 3: is just going to be hilarious.
• 25:03
  Speaker 2: Well, look, there are, just as an example of how
• 25:07
  Speaker 2: this can end up going really badly, y'all ever heard
• 25:12
  Speaker 2: of the idea of a spite album?
• 25:14
  Speaker 3: Yeah.
• 25:14
  Speaker 2: Yeah. It's you're a band who's under contract with a
• 25:18
  Speaker 2: label and you've got to produce X number of albums
• 25:21
  Speaker 2: because that's what your contract says. And so you end
• 25:25
  Speaker 2: up just putting out like a load of crap in
• 25:28
  Speaker 2: order to get out of it. Just because you're like,
• 25:30
  Speaker 2: I got to get out of this deal with this label.
• 25:33
  Speaker 1: Yeah.
• 25:34
  Speaker 2: You're going to have spite movies from Paramount. It's like,
• 25:37
  Speaker 2: what qualifies as a movie? Like, do you have to
• 25:41
  Speaker 2: spend a certain amount on it? Do you have to
• 25:44
  Speaker 2: use certain assets?
• 25:44
  Speaker 3: The funniest thing that could happen here, and I'm sure
• 25:47
  Speaker 3: that there's something written into this agreement with the states
• 25:49
  Speaker 3: to prevent this, but the funniest thing that could happen
• 25:52
  Speaker 3: would be Paramount putting together a dozen AI-generated garbage slop
• 25:57
  Speaker 3: movies a year to satisfy this standard using none of
• 26:00
  Speaker 3: the California resources.
• 26:01
  Speaker 2: They won't do that because then none of the union
• 26:04
  Speaker 2: people will work with them in the future. You need
• 26:07
  Speaker 2: those people in order to actually produce other movies.
• 26:10
  Speaker 1: Yeah.
• 26:11
  Speaker 3: But it would be funny, though.
• 26:13
  Speaker 2: Like, I just I don't understand. I don't understand the
• 26:20
  Speaker 2: logic where you're like, oh, these two companies shouldn't be merging.
• 26:24
  Speaker 2: And the answer is, well, we now have to have
• 26:26
  Speaker 2: them make a certain number of their product in order
• 26:29
  Speaker 2: to be able to merge.
• 26:30
  Speaker 3: Chuck, just quite honestly, I think this is perfectly in
• 26:34
  Speaker 3: line with the zeitgeist today, which is that free market
• 26:38
  Speaker 3: capitalism isn't working.
• 26:41
  Speaker 2: It's just, I don't know what to do with any
• 26:45
  Speaker 2: of this.
• 26:46
  Speaker 3: It's all very not good. It's a zeitgeist that I
• 26:48
  Speaker 3: disagree with, by the way. But that is clearly the drive,
• 26:51
  Speaker 3: whether you're looking at rent control popularity.
• 26:55
  Speaker 2: There's no right price of gas. There's no right number
• 26:58
  Speaker 2: of Paramount movies. There's no right price of groceries. Like,
• 27:02
  Speaker 2: if you're going to break markets like this, then you
• 27:06
  Speaker 2: don't get to be pissed when they're not working.
• 27:08
  Speaker 1: Yeah.
• 27:10
  Speaker 2: Like, I'm sorry. That's the deal. You can't have it
• 27:13
  Speaker 2: both ways.
• 27:14
  Speaker 3: Yeah.
• 27:15
  Speaker 2: I will have it one way, which is, hey, there's
• 27:17
  Speaker 2: times in markets where the price of diesel goes to $ 6. 50,
• 27:22
  Speaker 2: and you just got to figure it out as painful
• 27:25
  Speaker 2: as that may be. Because there's other times, like 2015,
• 27:28
  Speaker 2: where a bunch of oil producers go bankrupt because the
• 27:31
  Speaker 2: price went too far down. And, hey, you took on
• 27:34
  Speaker 2: the risk, and now you're feeling the pain. But if
• 27:38
  Speaker 2: we're just going to be like, hey, farm over there.
• 27:41
  Speaker 2: You've got to sell 42 bananas and farm over there.
• 27:44
  Speaker 2: You got to produce 10. Well, man, when people stop
• 27:49
  Speaker 2: eating bananas, you don't get to be like, oh, who
• 27:51
  Speaker 2: broke this?
• 27:52
  Speaker 3: Well, the hilarious thing is we know how that goes.
• 27:55
  Speaker 3: Plenty of nations have done this. Yes, we do. We
• 27:57
  Speaker 3: know exactly how this goes. It really.
• 28:00
  Speaker 2: Oh, my goodness. I just.
• 28:06
  Speaker 2: I just don't know what to say sometimes. So with
• 28:09
  Speaker 2: that in mind, we'll take a break so that someone
• 28:11
  Speaker 2: else can say something. And when we come back, we're
• 28:13
  Speaker 2: going to talk U.S. and China next.
• 28:15
  Speaker 1: This is your home for the most comprehensive coverage of
• 28:18
  Speaker 1: the economy and the trends on Wall Street. This is
• 28:21
  Speaker 1: the Financial Exchange Radio Network. Subscribe now to our YouTube
• 28:26
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• 28:29
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• 28:32
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• 28:34
  Speaker 1: Financial Exchange.
• 28:46
  Speaker 2: So we've got a summit happening this week between President
• 28:50
  Speaker 2: Trump and President Xi of China. And over the weekend,
• 28:55
  Speaker 2: Treasury Secretary Scott Besant met with Haley Fang, his counterpart
• 29:00
  Speaker 2: in China, and basically said that they had, quote, very
• 29:05
  Speaker 2: successful discussions that were, quote, candid, in-depth, and constructive. I
• 29:11
  Speaker 2: don't think anyone has expectations of anything meaningful happening this week.
• 29:17
  Speaker 3: Fair? Yes, I... Can't imagine.
• 29:21
  Speaker 2: Similar to what we said, I think there was, what
• 29:22
  Speaker 2: was it, back in, was it April or May? I
• 29:24
  Speaker 2: think it was in April they were supposed to get
• 29:26
  Speaker 2: together and got pushed back to May after the outbreak
• 29:29
  Speaker 2: of the war in the Middle East. We said at
• 29:32
  Speaker 2: the time we didn't expect anything big to come out
• 29:34
  Speaker 2: of that either, and nothing really did. uh it's fine
• 29:37
  Speaker 2: that they're talking but they're going to talk a little
• 29:39
  Speaker 2: bit about ai and based on what we've heard publicly
• 29:42
  Speaker 2: it doesn't sound like anything's going to go towards any
• 29:45
  Speaker 2: kind of conclusive agreement or you know thoughts on uh
• 29:49
  Speaker 2: what's happening with ai it's probably good for the broader
• 29:53
  Speaker 2: world economy that the two sides are talking cordially yeah It's.
• 29:58
  Speaker 3: Given that there's a new potentially humanity ending technology out there. Yeah.
• 30:03
  Speaker 2: It's unclear that there's been any real progress made on
• 30:06
  Speaker 2: any of the key issues that have been, you know,
• 30:11
  Speaker 2: driving tensions between the two countries for the last 10
• 30:14
  Speaker 2: to 15 years.
• 30:15
  Speaker 1: Agreed.
• 30:17
  Speaker 3: There's these a couple of pieces out here with automakers
• 30:20
  Speaker 3: urging Trump not to allow Chinese cars into the U.S.
• 30:23
  Speaker 3: leading up to this summit. Yeah. some very obvious reasons.
• 30:29
  Speaker 3: I don't want Chinese-made vehicles in the U.S. market, but
• 30:32
  Speaker 3: I also don't want Chinese-made routers or TikTok or all
• 30:36
  Speaker 3: this other stuff that's already in this market. So I
• 30:40
  Speaker 3: think that cat's a little bit out of the bag.
• 30:41
  Speaker 3: I just openly wonder if there were to be some
• 30:45
  Speaker 3: big encompassing deal, which is not my expectation for this summit, But,
• 30:49
  Speaker 3: you know, hey, there was a deal reached on artificial
• 30:52
  Speaker 3: intelligence and coordinating things and, you know, rare earth materials.
• 30:57
  Speaker 3: Some big, you know, gargantuan deal that gets negotiated here, which, again,
• 31:01
  Speaker 3: I think maybe a 2% chance that happens. But if
• 31:04
  Speaker 3: there were, I can kind of envision the U.S. auto
• 31:08
  Speaker 3: industry being the sacrificial lamb there.
• 31:12
  Speaker 2: Why?
• 31:13
  Speaker 1: Why?
• 31:15
  Speaker 3: It does not seem as though the president is very
• 31:18
  Speaker 3: focused on protecting the U S auto industry.
• 31:22
  Speaker 2: You don't think so?
• 31:23
  Speaker 3: I don't think so. No, I think that a lot
• 31:25
  Speaker 3: of the policy that's been enacted has been very much
• 31:28
  Speaker 3: at the, at the sacrifice of the U S auto
• 31:33
  Speaker 3: industry and at the protest of the U S auto industry,
• 31:35
  Speaker 3: specifically the trade stuff with Canada and Mexico that has
• 31:39
  Speaker 3: been pretty detrimental to the U S auto industry. And
• 31:41
  Speaker 3: so I just openly wonder like, hey, if the president
• 31:45
  Speaker 3: had to allow Chinese-made vehicles into the U.S. in order
• 31:48
  Speaker 3: to sign a really compelling deal on AI, rare earths, etc.,
• 31:55
  Speaker 3: would he? Again, I think all of that is unlikely
• 31:59
  Speaker 3: to happen in the first place, so it's kind of
• 32:01
  Speaker 3: a moot point. But I just don't know how... President
• 32:05
  Speaker 3: Trump views that industry, and if he views it as
• 32:08
  Speaker 3: critically important, as they view themselves.
• 32:09
  Speaker 2: I think he thinks it's important. I think he just
• 32:11
  Speaker 2: has a difference of opinion on how it should progress
• 32:17
  Speaker 2: from here. So I can't see them being the sacrificial lamb.
• 32:26
  Speaker 2: I'm trying to think of what U.S. industry would be,
• 32:29
  Speaker 2: and that's an interesting one just to ponder in the
• 32:32
  Speaker 2: back of my head. I'll do that for a little
• 32:34
  Speaker 2: bit now.
• 32:35
  Speaker 4: Leaving your IRA to your children may sound like the
• 32:38
  Speaker 4: obvious choice, but how they receive that money could have
• 32:42
  Speaker 4: important tax consequences. Cushing and Dolan has a new guide
• 32:46
  Speaker 4: called Why Name Your Estate an IRA Beneficiary. Under current rules,
• 32:50
  Speaker 4: most adult children who inherit an IRA must withdraw the
• 32:53
  Speaker 4: money within 10 years. That can mean taking retirement distributions
• 32:58
  Speaker 4: while they're still working and earning income, potentially creating a
• 33:01
  Speaker 4: larger tax bill. That's one reason why your IRA beneficiary
• 33:06
  Speaker 4: should be part of your overall estate plan, who receives
• 33:10
  Speaker 4: the account, how they receive it, and the tax consequences
• 33:13
  Speaker 4: that may follow all deserve careful consideration. Get Cushing and
• 33:18
  Speaker 4: Dolan's new guide called Why Name Your Estate an IRA
• 33:21
  Speaker 4: Beneficiary by calling 866-848-5699.
• 33:22
  Speaker 3: That's 866-848-5699.
• 33:23
  Speaker 4: Or you can request the guide from their website, LegalExchangeShow.com.
• 33:36
  Speaker 1: The proceeding was paid for and the views expressed are
• 33:38
  Speaker 1: solely those of Cushing and Dolan. Cushing and Dolan and
• 33:40
  Speaker 1: or Armstrong Advisory may contact you offering legal or investment services.
• 33:43
  Speaker 1: Cushing and Armstrong do not endorse each other and are
• 33:45
  Speaker 1: not affiliated.
• 33:46
  Speaker 2: I want to hop forward to this piece from the
• 33:50
  Speaker 2: New York Times. It's titled, How DraftKings Uses AI to
• 33:53
  Speaker 2: Target the Gamblers Likeliest to Lose.
• 33:56
  Speaker 3: Yeah, this one hurt.
• 33:57
  Speaker 2: And basically, it's a pretty long piece, and it goes
• 34:04
  Speaker 2: through talking about how DraftKings tries to do what any
• 34:10
  Speaker 2: sports book would ideally try to do, which is take
• 34:13
  Speaker 2: fewer bets from people that are good at gambling and
• 34:15
  Speaker 2: take more from people who are bad at it.
• 34:17
  Speaker 1: Yeah.
• 34:18
  Speaker 3: Same goes for casinos and anybody else, right? Casinos walk
• 34:21
  Speaker 3: you out the door if you are too successful at
• 34:25
  Speaker 3: gambling or if they suspect you've being capable of counting cards, etc.
• 34:30
  Speaker 3: The piece itself comes from interviews of previous DraftKings engineers
• 34:35
  Speaker 3: who apparently worked on this project to use data on
• 34:38
  Speaker 3: their people to identify these are the ones that are
• 34:41
  Speaker 3: most likely to lose money and gamble more based on
• 34:45
  Speaker 3: advertising and promotions that we do that target them.
• 34:48
  Speaker 2: And look, I got to say, again, I'm not against
• 34:51
  Speaker 2: sports gambling. I've done it. If you ever go to
• 34:56
  Speaker 2: any casino anywhere, there's a chance you may have seen
• 34:58
  Speaker 2: me because I go to them occasionally. Not like a ton,
• 35:01
  Speaker 2: but I don't know, a few times a year because
• 35:03
  Speaker 2: I think it's fun. It's like a nice diversion and
• 35:05
  Speaker 2: I don't have a problem with it. What I have
• 35:08
  Speaker 2: a problem with is this and specifically the ability to
• 35:13
  Speaker 2: gamble so easily on phones. It's a problem that I
• 35:17
  Speaker 2: think when we look back on it 10 to 15
• 35:19
  Speaker 2: years from now, we're going to look at mobile gambling
• 35:24
  Speaker 2: as basically the equivalent of the opioid crisis in terms
• 35:27
  Speaker 2: of how I think it can ruin lives. I think
• 35:29
  Speaker 2: that you are absolutely going to have people... that end
• 35:32
  Speaker 2: up in such despair that they end up turning to
• 35:35
  Speaker 2: drugs and things like that in order to try to
• 35:38
  Speaker 2: get out of it. I think that if you talk
• 35:40
  Speaker 2: to any male below the age of 30, they will
• 35:45
  Speaker 2: tell you that them or a large number of their
• 35:47
  Speaker 2: friends have some type of gambling debt that they are
• 35:51
  Speaker 2: currently trying to figure out how to pay off. And
• 35:55
  Speaker 2: I think that the stories that we hear about this
• 35:59
  Speaker 2: are just absolutely wild. And this is before you even
• 36:02
  Speaker 2: get to. You scroll through social media now, and you've
• 36:05
  Speaker 2: got freaking LeBron James and Kevin Durant in advertisements for
• 36:13
  Speaker 2: either sports gambling companies or prediction market companies that allow
• 36:17
  Speaker 2: you to gamble on sports. while they are still playing,
• 36:21
  Speaker 2: and somehow we're just cool with this, and we're just like, yeah,
• 36:25
  Speaker 2: this is good for the fabric of society.
• 36:28
  Speaker 3: The other dark piece of this, and why reporting on
• 36:32
  Speaker 3: it is challenging and getting any of this stuff on it,
• 36:35
  Speaker 3: I see the same effect here as I see with
• 36:40
  Speaker 3: fraud and scams, right? People don't want to talk about it. No. So,
• 36:45
  Speaker 3: you know, you... financial scams, one of the most underreported
• 36:49
  Speaker 3: crimes that are out there because people are embarrassed. Sometimes
• 36:51
  Speaker 3: it's a romance scam. They don't want to tell their
• 36:54
  Speaker 3: family members that they are thoroughly ashamed of it. I
• 36:57
  Speaker 3: see the same effect in people that lose money on
• 37:00
  Speaker 3: sports gambling. Yes. And so, you know, getting people to
• 37:03
  Speaker 3: talk about it, getting people to, you know, pressure companies
• 37:09
  Speaker 3: in another way to change their behavior, I think is
• 37:11
  Speaker 3: going to be exceptionally challenging because nobody really wants to
• 37:15
  Speaker 3: talk about the issue publicly because you know what telling
• 37:19
  Speaker 3: your loved ones that you lost three thousand dollars gambling
• 37:21
  Speaker 3: on sports on your phone is objectively kind of embarrassing.
• 37:26
  Speaker 2: I was just an observation just on everything it really
• 37:33
  Speaker 2: feels like we're starting to kind of barbell society into
• 37:36
  Speaker 2: you guys ever uh Follow any of, like, Brian Johnson's posts.
• 37:39
  Speaker 2: He's the guy in.
• 37:40
  Speaker 3: What letter shape is the barbell that we're making here?
• 37:43
  Speaker 2: Brian Johnson's the guy who's trying to live to be 200,
• 37:45
  Speaker 2: and he takes, like, 400 different checks. He's like, he's like,
• 37:49
  Speaker 2: I accidentally ate a peanut yesterday, and my sleep was
• 37:52
  Speaker 2: affected for three weeks. Like... You either have people who
• 37:55
  Speaker 2: are just not living at all, or they're just so
• 37:59
  Speaker 2: far off the deep end.
• 38:00
  Speaker 3: Off the YOLO.
• 38:02
  Speaker 2: Just YOLOing too much. It's like, whatever happened to everything
• 38:06
  Speaker 2: in moderation, man? I know I feel like a dinosaur
• 38:10
  Speaker 2: when I say that, but it's okay to do some
• 38:13
  Speaker 2: bad things sometimes. It's okay to do some good things.
• 38:15
  Speaker 2: Just don't do too many of any. Except do more
• 38:17
  Speaker 2: good things if you can, I guess. Let's take a
• 38:21
  Speaker 2: quick break. The word of Chuck. We'll have more after this.