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The hard data isn't showing signs of a slowing economy · The Financial Exchange Show

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  Speaker 1: and Mike Armstrong, Chuck.
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  Speaker 2: Mike Tucker with you here kicking off the last full
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  Speaker 2: week of March, and again, who knows what the next
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  Speaker 2: four or five days are going to entail, but thus
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  Speaker 2: far March kind of operating backwards to this point. I
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  Speaker 2: don't know that it came in like a lion. It
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  Speaker 2: came in like a bear, and right now kind of
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  Speaker 2: going out wondering, you know where the next leg is
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  Speaker 2: going to be. We do have a rally that's going
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  Speaker 2: on today, so you know, you're picking up some gains
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  Speaker 2: in markets, but obviously still questions as to hey, you've
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  Speaker 2: got potential tariffs being implemented eight sorry, nine days from now,
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  Speaker 2: and what do those look like? What is you know,
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  Speaker 2: the landscape going to be. And again, at least based
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  Speaker 2: on when this rally started, which was pretty much right
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  Speaker 2: as futures open up yesterday, shortly after a Wall Street
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  Speaker 2: journal piece indicating that tariffs are likely to be smaller
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  Speaker 2: than feared by many, you end up with a rally
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  Speaker 2: taking place based on the idea that, hey, you might
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  Speaker 2: not see as much in the way of tariffs as
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  Speaker 2: people initially thought, but we're still gonna have to see
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  Speaker 2: what that means and how it plays out here.
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  Speaker 3: So stocks up, yields up, oil up this morning.
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  Speaker 2: Yeah, you got everything moving up today to kick things
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  Speaker 2: off basically on the idea that hey holds up well.
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  Speaker 2: So there are a few different things going on here.
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  Speaker 2: The first is that the yields move is in the
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  Speaker 2: last twenty minutes or so largely fueled by a hotter
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  Speaker 2: than anticipated SMP global PMI reading, So there's a few
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  Speaker 2: sets of pmis that we get Purchasing manager intosees and
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  Speaker 2: SMP always does one towards the end of the month.
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  Speaker 2: That is a again global one. The one that we
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  Speaker 2: talk about at the beginning of the month is a
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  Speaker 2: US based one from the Institute of Supply Management the ISM.
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  Speaker 2: But Standard and Pores has their own Purchasing Managers Index
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  Speaker 2: that they put out as well, and it came in
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  Speaker 2: with a reading of fifty three to five compared to
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  Speaker 2: the previous of fifty one to six. Devil's in the
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  Speaker 2: details though the manufacturing component there dipped to forty nine
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  Speaker 2: eight from fifty two to seven, while the services one
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  Speaker 2: went from fifty one up to fifty four to three.
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  Speaker 2: So the reason that you have this move up in
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  Speaker 2: yields is twofold. The first is and when you again
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  Speaker 2: just read through the actual report, because Standard and Ports
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  Speaker 2: publishes it, it's it's not very long. It's five pages,
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  Speaker 2: So I recommend everyone actually like take a look through
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  Speaker 2: it because you get some nice quotes that I think
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  Speaker 2: helped to tell you what's going on here, and here
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  Speaker 2: are some things that I think are notable. Manufacturing output
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  Speaker 2: fell into a decline, contrasting sharply with gain seen in
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  Speaker 2: the first two months of the year. Factories reported fewer
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  Speaker 2: instances of output having been buoyed by the front running
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  Speaker 2: of tariffs and new orders. Growth came in close to stalling,
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  Speaker 2: and the goods pretty sectors, so it's telling you, okay,
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  Speaker 2: there's definitely some front running of tariffs and now manufacturers
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  Speaker 2: kind of moving into weight and CE mode is the
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  Speaker 2: case that you have there. Exports sales showed the smallest
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  Speaker 2: decline for nine months, thanks to rising orders from Canada,
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  Speaker 2: Germany and other EU countries, hinting at some further efforts
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  Speaker 2: to fulfill orders ahead of tariff implementation. So that's kind
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  Speaker 2: of like, okay, maybe you have some additional manufacturing weakness
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  Speaker 2: that prints here in the next month. There future sentiment
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  Speaker 2: although current output growth picked up the pace in March,
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  Speaker 2: again that overall reading, not manufacturing optimism about the coming
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  Speaker 2: year fell for a second successive month. The decline took
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  Speaker 2: confidence to its lowest since October twenty twenty two, barring
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  Speaker 2: the bottom scene last September when business was unsettled by
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  Speaker 2: uncertainty ahead of the presidential election. So another one of
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  Speaker 2: these things where hey, the sentiment is bad, the soft
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  Speaker 2: data is saying, yes, we're nervous about what might be coming.
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  Speaker 2: But to this point we've seen minimal disruption in the
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  Speaker 2: hard data that we get on a regular basis. And
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  Speaker 2: so the question that is looming out there is does
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  Speaker 2: the weak soft data turn into weak hard data at
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  Speaker 2: some point or do businesses just say, Okay, this is
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  Speaker 2: the landscape and we're gonna have to deal with it
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  Speaker 2: and we'll figure out how.
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  Speaker 3: To do it.
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  Speaker 4: And plenty of evidence from years and years worth of
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  Speaker 4: data that the soft data does lead the hard data
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  Speaker 4: by three to six months, but sure recently not at all.
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  Speaker 3: Recently.
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  Speaker 4: Go look at sentiment for the course the last three years,
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  Speaker 4: and it has led absolutely nothing convincing in terms of
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  Speaker 4: a weakening of hard data. When it comes to sales
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  Speaker 4: or consumer spending generally.
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  Speaker 2: Other things that you have in here and again wire
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  Speaker 2: yields up. Cost pressures intensified across the economy and march
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  Speaker 2: across both goods and services. Input costs increase at the
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  Speaker 2: sharpest rate for twenty three months, surging especially in manufacturing,
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  Speaker 2: where the rate of inflation hit a thirty one month high,
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  Speaker 2: but also picking up further pace to an eighteen month high.
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  Speaker 2: In the service sector, higher costs were first and foremost
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  Speaker 2: attributed to tariffs that increasing Increased staffing costs were also
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  Speaker 2: widely reported. So that kind of gives you the feed
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  Speaker 2: through too, Hey, what's happening on the yield side of things.
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  Speaker 2: And so if you do have a situation where look,
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  Speaker 2: the hard dat is not really showing the economy slowing
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  Speaker 2: to this point, but there are concerns, you know, pointing
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  Speaker 2: here as it relates to higher prices because of tariffs. Yeah,
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  Speaker 2: you end up in a situation where Okay, you can
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  Speaker 2: get stocks up and bonds down, and that's what you
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  Speaker 2: have for the day. That's not really a sustainable model
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  Speaker 2: for the long term.
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  Speaker 3: Generally.
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  Speaker 2: The phrase that I always like to come back to is, hey,
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  Speaker 2: did you know there's bonds in your stocks, because ultimately
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  Speaker 2: yields do influence risk taking and valuation. But you can
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  Speaker 2: have you know, times like this where there's absolutely no
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  Speaker 2: problem for you know, short periods of time with yield
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  Speaker 2: selling off and stocks being able to rally higher based
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  Speaker 2: on greater growth expectations.
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  Speaker 3: So that's what you have.
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  Speaker 2: Going on at the moment here. I mentioned briefly Wall
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  Speaker 2: Street Journal piece. It is titled White House Nariffs narrows
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  Speaker 2: April second Tariffs, and I gotta admit, and look, maybe
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  Speaker 2: this is just me. I've been. I've been of the
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  Speaker 2: belief that the Trump administration wants to impose significant tariffs,
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  Speaker 2: because they've said they want to impose significant tariffs, and
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  Speaker 2: a couple of times, like earlier this year, I kind
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  Speaker 2: of felt like I had egg on my face because
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  Speaker 2: you know, things came and went and okay, there's you know,
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  Speaker 2: it's just a negotiation in YadA YadA.
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  Speaker 3: But I guess.
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  Speaker 2: So I see this headline, I'm like, oh, like, tell
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  Speaker 2: me like what it means to narrow the April second tariffs,
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  Speaker 2: and the piece I don't actually think matches up with
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  Speaker 2: the headline as strongly as I was expecting it to.
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  Speaker 2: And I'm not saying I'm rooting for tariffs, but I
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  Speaker 2: guess I'm kind of expecting them, and so I'll give
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  Speaker 2: you what I have what this Wall Street Journal piece
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  Speaker 2: has here. President Trump has declared as April second deadline
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  Speaker 2: to be Liberation Day for the US, when he will
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  Speaker 2: put in place what is called reciprocal tariffs that seek
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  Speaker 2: to equalize US tariffs with the duties charged by trading partners,
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  Speaker 2: as well as tariffs on sectors like automobiles, pharmaceuticals, and semiconductors.
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  Speaker 2: He repeatedly said would be enacted on that day. Those
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  Speaker 2: sectors specific tariffs now, however, are not likely to be
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  Speaker 2: announced on April second, said an administration official. So it's basically, hey,
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  Speaker 2: we're still going to impose these reciprocal tariffs, just not
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  Speaker 2: sector specific ones on top of them, which I feel like,
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  Speaker 2: for some reason is being interpreted as well. I guess
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  Speaker 2: we don't have to worry about that, but I'm still
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  Speaker 2: looking at this going okay, but they're still imposing a
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  Speaker 2: bunch of tariffs, and are we just missing the point
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  Speaker 2: on this.
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  Speaker 4: I'm also waiting in this piece for the you know,
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  Speaker 4: According to an anonymous source at the White House, or
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  Speaker 4: where this is coming from, because I don't think the
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  Speaker 4: Wall Street Journal would make this type of thing up.
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  Speaker 4: But we also don't know where precisely it's coming from.
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  Speaker 4: And the part that makes me a bit nervous is
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  Speaker 4: several times we've seen this exact same story or some
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  Speaker 4: version of it printed, only for the White House to
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  Speaker 4: come out stuff like that day and say fake news.
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  Speaker 3: We're going forward with.
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  Speaker 4: All of this, and you know, this is just not
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  Speaker 4: fundamentally true. So the narrowing that seems to have occurred
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  Speaker 4: is the industrial sector bisector tariffs that were planned, which
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  Speaker 4: I don't at this stage. I'm having a tough time
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  Speaker 4: keeping track of them all. But those were always going
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  Speaker 4: to be quite complicated because you had to go and
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  Speaker 4: measure all of this stuff, and many many countries were
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  Speaker 4: just unsure of what that would look like. And so
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  Speaker 4: maybe those are not going into place on April second,
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  Speaker 4: but many others are.
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  Speaker 3: I don't know.
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  Speaker 4: This story seems to be the groundwork though, for oh
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  Speaker 4: and we're you know, going much lighter than was previously
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  Speaker 4: expected on April second.
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  Speaker 3: I just I just don't know.
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  Speaker 2: Well, and other things that I guess point me towards Hey,
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  Speaker 2: that's I don't know that this means what people think
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  Speaker 2: it means. Quote, the administration is now focusing on applying
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  Speaker 2: tariffs to around fifteen percent of nations with persistent trade
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  Speaker 2: imbalances with the United States. And so again I'm just
• 10:20
  Speaker 2: looking through the countries that have, first of all number
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  Speaker 2: of countries in the world, give or take, it's two hundred,
• 10:27
  Speaker 2: just to make the math easy, the thirty largest trading
• 10:31
  Speaker 2: partners that the US has, about twenty of them we
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  Speaker 2: have deficits with, so I think you can kind of
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  Speaker 2: figure this out pretty easily. They include China, who we
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  Speaker 2: have the largest trade deficit with, though not the largest
• 10:45
  Speaker 2: amount of imports, Mexico, Vietnam, Ireland, Germany, Taiwan, Japan, South Korea, Canada, India, Thailand, Italy, Switzerland, Malaysia, Indonesia, France, Israel,
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  Speaker 2: the Philippines, and Russia.
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  Speaker 4: And the other piece too, is it's very unclear how
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  Speaker 4: the US plans to treat the European Union versus individual
• 11:06
  Speaker 4: companies within countries within the EU, because elsewhere in the
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  Speaker 4: article they lump together the entire EU and their trade practices.
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  Speaker 2: So I guess where I'm going with this is, Look,
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  Speaker 2: if you're trying to figure out where it's going to be.
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  Speaker 2: It's probably on you know, most of that list of
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  Speaker 2: twenty countries that I outlined. There's a few others that
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  Speaker 2: we have trade surpluses with that also might end up
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  Speaker 2: wrapped up in this by virtue of you know, being
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  Speaker 2: in the EU.
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  Speaker 3: So Spain we.
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  Speaker 2: Actually run a small surplus with Belgium, same thing the
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  Speaker 2: Netherlands we run a rather large surplus with. I don't
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  Speaker 2: know exactly why that's the case. What for some reason,
• 11:44
  Speaker 2: I guess we send a lot of stuff to the Dutch.
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  Speaker 3: Don't I don't know what something for ASML.
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  Speaker 2: We send ninety billion dollars of stuff there and get
• 11:53
  Speaker 2: thirty four billion back. I don't know, but that's just
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  Speaker 2: what the data I'm looking at shows. So maybe you
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  Speaker 2: get some of those wrapped up in there.
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  Speaker 3: I don't really know.
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  Speaker 2: But ultimately, look out of the two hundred countries in
• 12:05
  Speaker 2: the world, sure are you know, our imports might be
• 12:08
  Speaker 2: big for you know, the Maldives, But like you're not
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  Speaker 2: gonna tear iff the Malieves because we don't import anything
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  Speaker 2: from there, Like there's no point, it has no effect,
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  Speaker 2: So you're gonna do it on the things that matter,
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  Speaker 2: and so I guess where I stand on this is okay,
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  Speaker 2: Like this still sounds like they're going through with something
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  Speaker 2: pretty meaningful. But is this just me looking at it saying, hey,
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  Speaker 2: they've been telling us this for a while. And then
• 12:36
  Speaker 2: I get back to the whole like, Okay, pay attention
• 12:38
  Speaker 2: to what people do, not what people say. And then
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  Speaker 2: I'm like, well, I don't know what to do with that,
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  Speaker 2: because we've seen tariffs imposed in the morning and withdrawn
• 12:44
  Speaker 2: by the next morning.
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  Speaker 3: So I don't know.
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  Speaker 2: I'm trying to I'm trying to get my head around
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  Speaker 2: what this means here, and I don't quite know yet.
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  Speaker 2: And so I think where I land is just, Hey,
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  Speaker 2: we're gonna have to wait and see what happens next
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  Speaker 2: one day. It's nine days away, and we're going to
• 13:02
  Speaker 2: know at that point in time exactly what's going on.
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  Speaker 4: Investers in the meantime seemingly very willing to jump into
• 13:11
  Speaker 4: the stocks on even the rumor of a waiver of
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  Speaker 4: some of these trade rules. And so here's another thing
• 13:19
  Speaker 4: that I keep going back to, nobody actually knows where
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  Speaker 4: this is going to go, and to this point that
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  Speaker 4: there could be damage caused by the lack of confidence
• 13:29
  Speaker 4: for businesses and the back and forth on these tariffs.
• 13:32
  Speaker 4: But to this point, any of the damage to markets,
• 13:34
  Speaker 4: for instance, that has been caused as a result of this,
• 13:39
  Speaker 4: none of it is so severe that it can't be
• 13:42
  Speaker 4: waved away with the stroke of a pen. And so
• 13:45
  Speaker 4: that's where I that's where I land is. To this point,
• 13:48
  Speaker 4: anything that's been done in terms of damage could be
• 13:50
  Speaker 4: changed tomorrow with the stroke of a pen, and you
• 13:52
  Speaker 4: just kind of have to wait and see.
• 13:54
  Speaker 3: To take a quick break here.
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  Speaker 2: When we come back, we'll talk about what it means
• 13:57
  Speaker 2: for that Q two economic outlook. What does the second
• 13:59
  Speaker 2: QUES look like. We'll discuss that when we return.
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  Speaker 3: Peace and Bloomberg.
• 15:06
  Speaker 2: Opinion from Connor Sentence Ty. The economic data is as
• 15:10
  Speaker 2: cloudy as the outlook, And basically what it's talking about
• 15:12
  Speaker 2: is not that there's like all this bad that's gonna
• 15:16
  Speaker 2: all of a sudden show up, but much more, Hey,
• 15:18
  Speaker 2: we're not really sure how any of this that is
• 15:21
  Speaker 2: playing out from a trade perspective is going to end
• 15:25
  Speaker 2: up impacting the overall economy, and it's gonna depend on
• 15:29
  Speaker 2: the magnitude, the duration, the implementation and all these things.
• 15:33
  Speaker 2: But this is also talking about Look, you've had some
• 15:36
  Speaker 2: you know, places where there's been weakening of economic data
• 15:39
  Speaker 2: in the last month or two, most notably in retail sales,
• 15:42
  Speaker 2: where we've had a couple months that have been bad,
• 15:45
  Speaker 2: I think is fair to say, but this piece points out, Look,
• 15:49
  Speaker 2: you've had all kinds of weather issues that aren't really
• 15:53
  Speaker 2: normal for different regions. Whether you're talking about like the
• 15:55
  Speaker 2: deep freeze in Texas, the winter wildfires out in California
• 15:59
  Speaker 2: that ran through Los Angeles, you also have had I
• 16:03
  Speaker 2: don't know about any of you, but for my family,
• 16:07
  Speaker 2: there's just been like one sickness after another this winter,
• 16:10
  Speaker 2: and a bunch of flu anything from yeah, different you know,
• 16:14
  Speaker 2: head colds and flu in this and that all the
• 16:16
  Speaker 2: way through you know, neurovirus and hey, you know, we
• 16:19
  Speaker 2: all know how much fun that can be when it
• 16:20
  Speaker 2: goes through a house. So I think that trying to
• 16:23
  Speaker 2: figure out, hey, how much of this is, you know,
• 16:26
  Speaker 2: related to what's going on from a policy perspective, and
• 16:29
  Speaker 2: how much of it is just other things that are,
• 16:31
  Speaker 2: you know, happening in the economy otherwise it's hard to
• 16:35
  Speaker 2: do anyways. And that's before you get to the fact
• 16:38
  Speaker 2: that we have, you know, some bigger differences newly implemented
• 16:41
  Speaker 2: policy from the prior baseline than we usually have. And
• 16:45
  Speaker 2: so I think that if you're going into the second
• 16:48
  Speaker 2: quarter being like, look, I could see a path where
• 16:51
  Speaker 2: we skate by and there's no problem at all, and
• 16:54
  Speaker 2: I could see a path where we start edging towards recession.
• 16:57
  Speaker 2: I think those are both possibilities, and we have to
• 16:59
  Speaker 2: remain open to them because we don't know exactly how
• 17:02
  Speaker 2: all of this is going to resolve.
• 17:03
  Speaker 4: Quote here from Connor's piece, much of the first quarter's
• 17:06
  Speaker 4: weakness as a one off, and the economy should do
• 17:08
  Speaker 4: substantially better in the subsequent three months. And then he
• 17:12
  Speaker 4: lays out the exact arguments you just made. Weather patterns,
• 17:14
  Speaker 4: fires in California, a pretty bad flu season, et cetera,
• 17:20
  Speaker 4: affecting all sorts of different spending and economic figures. I
• 17:24
  Speaker 4: wouldn't expect those same things to affect sentiment as much
• 17:28
  Speaker 4: as they have, right, Like the weather being gloomy doesn't
• 17:31
  Speaker 4: typically correspond to a massive drop in consumer sentiment. And
• 17:35
  Speaker 4: that would be the one area that I look at
• 17:36
  Speaker 4: a little bit differently than what Connor saying, Like, could
• 17:38
  Speaker 4: I see consumer spending jump back in the other direction? Yes,
• 17:42
  Speaker 4: you know, auto sales, all sorts of stuff jump in
• 17:45
  Speaker 4: the other direction. Even industrial production to some degree maybe
• 17:48
  Speaker 4: pick up depending on where tariff's go. Totally absolutely what
• 17:52
  Speaker 4: does that do to shift the sentiment picture? I think largely,
• 17:56
  Speaker 4: in my opinion, depends on what's coming out of the
• 17:57
  Speaker 4: White House, and so I struggle with that. One piece
• 18:01
  Speaker 4: of it is, yes, I'm perfectly willing to blame bad
• 18:04
  Speaker 4: sales and disappointing earnings on one off events, whether flud
• 18:12
  Speaker 4: et cetera. I'm not really willing to blame the massive
• 18:17
  Speaker 4: drop in Michigan consumer sentiment on weather and wildfires and.
• 18:21
  Speaker 2: Ultimately where he lands is. Look, unless you see the
• 18:24
  Speaker 2: labor market weaken substantially, it's tough to see a major
• 18:29
  Speaker 2: problem developing in the US economy. And the reason why
• 18:33
  Speaker 2: is we are still a consumption based economy. Most of
• 18:36
  Speaker 2: our GDP, nearly seventy percent of it comes from people
• 18:38
  Speaker 2: buying stuff and the way that they can buy stuff.
• 18:41
  Speaker 2: There's typically the vast majority of consumer spending is one
• 18:45
  Speaker 2: of two things, wages or people pulling money from their portfolios.
• 18:50
  Speaker 2: Everything else is kind of side stuff that plays in
• 18:54
  Speaker 2: based on how, you know, wealth inequality and income inequality
• 18:57
  Speaker 2: is skewed. I know, people say, well, what about you know,
• 18:59
  Speaker 2: so security benefits and things like that. That is, you know,
• 19:02
  Speaker 2: the third largest component there of consumer spending, it's still
• 19:06
  Speaker 2: smaller than the other ones just because of the magnitude
• 19:08
  Speaker 2: and where you get to. So I think that overall,
• 19:12
  Speaker 2: when you look at it, if you don't see a
• 19:16
  Speaker 2: deterioration in the labor market, that's probably how you end
• 19:20
  Speaker 2: up skating through here. I'm not saying that it becomes,
• 19:22
  Speaker 2: you know, greater, like you know, the best economy ever tomorrow.
• 19:25
  Speaker 2: But you got to walk before you can run, is
• 19:28
  Speaker 2: kind of where I'm.
• 19:28
  Speaker 1: Going with it.
• 19:29
  Speaker 3: Let's take a quick break. When we come back. We
• 19:32
  Speaker 3: got Wall Street Watch after this.
• 19:39
  Speaker 1: Like us on Facebook and follow us on Twitter. Act
• 19:42
  Speaker 1: TFE show. Breaking business news is always first right here
• 19:46
  Speaker 1: on the Financial Exchange Radio Network. Time now for Wall
• 19:52
  Speaker 1: Street Watch a complete look at what's moving markets so
• 19:55
  Speaker 1: far today right here on the Financial Exchange Radio Network.
• 20:02
  Speaker 6: Well, markets are beginning of the week on a positive
• 20:04
  Speaker 6: note following reports that President Trump's tarrifs are expected to
• 20:07
  Speaker 6: be more targeted and that deadline is coming up on
• 20:11
  Speaker 6: April second. As we all know, right now, the Dow
• 20:14
  Speaker 6: is up one and a quarter percent, or five hundred
• 20:17
  Speaker 6: and six points. SMP five hundred is up nearly one
• 20:21
  Speaker 6: and a half percent or eighty three points and the
• 20:24
  Speaker 6: NASDAC up nearly two percent higher or three hundred and
• 20:28
  Speaker 6: thirty eight points. Russell two thousand also up nearly two
• 20:31
  Speaker 6: percent as well, so everything with a strong rally so
• 20:35
  Speaker 6: far today. Ten You're Treasure reeled up by seven basis
• 20:38
  Speaker 6: points at four point three two percent, and crude oil
• 20:41
  Speaker 6: up about three quarters of a percent, treating just below
• 20:44
  Speaker 6: sixty nine dollars a barrel after notching it's ninth straight
• 20:47
  Speaker 6: week of losses. Tesla up by ten percent so far
• 20:51
  Speaker 6: today after Elon musk urged employees not to sell shares
• 20:55
  Speaker 6: at a meeting broadcast on his social media platform X
• 20:58
  Speaker 6: over the weekend. Meanwhile, DNA testing company twenty three and
• 21:02
  Speaker 6: meters filed for Chapter eleven bankruptcy to help sell itself.
• 21:06
  Speaker 6: CEO and co founder and which whiskey I think also resigned. Elsewhere,
• 21:13
  Speaker 6: Boeing is adding to its recent gains after President Trump
• 21:16
  Speaker 6: awarded the aircraft maker contract to build the new F
• 21:20
  Speaker 6: forty seven fighter jet, beating out Lockheed Martin. Boeing was
• 21:24
  Speaker 6: also upgraded to a buyer rating by Malia's Research on
• 21:27
  Speaker 6: the news. Boeing up by three percent, while Lockheed Martin
• 21:31
  Speaker 6: stock is down by two PERCENTERMA and German Pharma in
• 21:36
  Speaker 6: Agricultural company Buyer suffered a fresh legal defeat over its
• 21:40
  Speaker 6: roundup weed killer when a Georgia judge ordered it to
• 21:44
  Speaker 6: pay two point one billion dollars. FedEx upgraded by Jeffries
• 21:48
  Speaker 6: to buy from hold saying investors are ignoring the cost
• 21:51
  Speaker 6: cutting efforts by the shipping giant that will continue to
• 21:54
  Speaker 6: drive earnings growth regardless of the macro economic challenges. FedEx
• 21:58
  Speaker 6: shares up by five percent, and after today's closing bell,
• 22:02
  Speaker 6: we'll see earnings from KB home. I'm Tucker Silvan.
• 22:07
  Speaker 1: That's Wall Street Watch.
• 22:08
  Speaker 2: All right, Mike, we're coming up on our favorite topic
• 22:11
  Speaker 2: to discuss, which is the debt ceiling. We're not going
• 22:15
  Speaker 2: to talk much about it today because according to the
• 22:17
  Speaker 2: Bipartisan Policy Center, the United States could run out of cash,
• 22:22
  Speaker 2: effectively coming up against the debt ceiling by mid July
• 22:25
  Speaker 2: or potentially the beginning of October. They don't really know
• 22:29
  Speaker 2: because they don't know what tax receipts are going to be.
• 22:30
  Speaker 2: They don't know what outlays, so they you know, project
• 22:33
  Speaker 2: it in YadA YadA.
• 22:34
  Speaker 3: National debts now approaching thirty seven trillion dollars.
• 22:36
  Speaker 2: Which is fun, and so look, it's it's gonna be
• 22:40
  Speaker 2: something that comes up sometime this summer or early fall.
• 22:44
  Speaker 3: Is kind of the range that you're in.
• 22:47
  Speaker 2: It always ends up being resolved because no one actually
• 22:50
  Speaker 2: wants the United States to default on its debt. So
• 22:52
  Speaker 2: even though everyone likes to run around screaming like you know,
• 22:56
  Speaker 2: something's actually going on here, we always take the stance
• 23:00
  Speaker 2: on our show that hey, stop worrying about this and
• 23:03
  Speaker 2: stop thinking about it, because it doesn't matter.
• 23:06
  Speaker 4: Yeah, unless you have a president say we're going to
• 23:08
  Speaker 4: intentionally default on our debt, or Congress which would be crazy,
• 23:13
  Speaker 4: which would be wild, then I'm not going to take
• 23:15
  Speaker 4: this seriously. Scott Bessen wrote recently, I respectfully urge Congress
• 23:20
  Speaker 4: to act promptly to protect the full faith and credit
• 23:22
  Speaker 4: of the United States, which are pretty much the exact
• 23:24
  Speaker 4: same words you hear from every single Treasury secretary whenever
• 23:28
  Speaker 4: this comes up. So I too have confidence that it
• 23:31
  Speaker 4: will get resolved because it is dumbest way to manage
• 23:36
  Speaker 4: a budget.
• 23:37
  Speaker 3: Ever.
• 23:38
  Speaker 4: Hey, we're going to prove a bunch of spending and
• 23:39
  Speaker 4: then we're going to here's what a cap that exists.
• 23:42
  Speaker 4: After that, here's what it is.
• 23:43
  Speaker 2: Let's say that you took out a mortgage MIC and
• 23:46
  Speaker 2: the bank lent you the money yes, because they said, hey,
• 23:49
  Speaker 2: we trust that you're going to be able to pay
• 23:52
  Speaker 2: this back, And then about halfway through the mortgage, you're like,
• 23:56
  Speaker 2: you know what, I'm coming up on my spending lim
• 24:00
  Speaker 2: for the year. I don't think I can pay this
• 24:03
  Speaker 2: back right now. I'm gonna get to it later. Not
• 24:05
  Speaker 2: that you're out of money, but just no, I'm up
• 24:08
  Speaker 2: against my my my actual like limit of what I
• 24:11
  Speaker 2: can spend.
• 24:12
  Speaker 4: This is what my my husband and I decided we're
• 24:14
  Speaker 4: comfortable spending. So we we we cap that because we
• 24:17
  Speaker 4: spent a little bit too much money on the pool
• 24:19
  Speaker 4: this year.
• 24:19
  Speaker 3: So mortgage is gonna have to take a wait and
• 24:21
  Speaker 3: see approach.
• 24:22
  Speaker 2: It's like, no, well you've you've already authorized it and everything,
• 24:25
  Speaker 2: so you kind of have to pay it.
• 24:26
  Speaker 3: That's basically what this This is correct.
• 24:29
  Speaker 2: If you want to have a conversation about, hey, should
• 24:31
  Speaker 2: we have, you know, taken out such a big mortgage,
• 24:33
  Speaker 2: or should we downsize the house, those are realistic conversations
• 24:37
  Speaker 2: to have. You don't just stop paying the mortgage halfway through,
• 24:41
  Speaker 2: because then no one will ever lend.
• 24:42
  Speaker 3: To you ever again, Yes, it's kind of how I
• 24:46
  Speaker 3: tend to look at it. Uh, let's see, Uh, do
• 24:49
  Speaker 3: you want.
• 24:49
  Speaker 2: To talk social security or energy costs?
• 24:52
  Speaker 4: Let's go to Social Security because it is top of mind.
• 24:58
  Speaker 4: So social Security the administration itself, I don't know about you, chuckl.
• 25:03
  Speaker 4: We deal with a lot of folks who deal directly
• 25:06
  Speaker 4: with the Social Security administration. Yea, And generally speaking, if
• 25:09
  Speaker 4: I'm being quite honest, yeah, there's some complaints here and
• 25:11
  Speaker 4: there about wait times and sitting on hold, But by
• 25:14
  Speaker 4: and large, I feel like people get.
• 25:15
  Speaker 3: Answers to their questions.
• 25:16
  Speaker 4: They're able to deal with the online tools. And it's
• 25:19
  Speaker 4: only when they're dealing with something especially complicated, like getting
• 25:22
  Speaker 4: an answer about you know, an ex spouse or a
• 25:26
  Speaker 4: widow's benefit, that it starts to get complicated. But for
• 25:29
  Speaker 4: the day to day things like get my deposits in
• 25:32
  Speaker 4: the right bank account with the correct tax withholdings, most
• 25:35
  Speaker 4: people have a fairly good experience when it comes to
• 25:37
  Speaker 4: Social Security administration.
• 25:38
  Speaker 3: You think that's fair.
• 25:39
  Speaker 2: Yeah, Generally, people say they're knowledgeable, they're helpful, They you know,
• 25:44
  Speaker 2: allow me to you know, get through the business I
• 25:46
  Speaker 2: have to do with them.
• 25:47
  Speaker 3: Pretty quickly.
• 25:48
  Speaker 4: So there are cuts being made to Social Security, a
• 25:51
  Speaker 4: lot of questions about and I think.
• 25:54
  Speaker 3: Not to the payments, right, but to the staffing, to.
• 25:56
  Speaker 4: The staffing at Social Security. And so that's being paired
• 25:59
  Speaker 4: with some policy chaines, one of which is for a
• 26:01
  Speaker 4: number of transactions that you used to be able to
• 26:03
  Speaker 4: do via a phone call that can no longer be
• 26:06
  Speaker 4: done via phone call. It either needs to be done
• 26:08
  Speaker 4: through the online tool or you make an appointment at
• 26:11
  Speaker 4: the Social Security Administration office and go in there and
• 26:14
  Speaker 4: deal with it in person. So, for example, you used
• 26:16
  Speaker 4: to be able to change your bank account information over
• 26:19
  Speaker 4: the phone. Probably a stupid idea in the first place,
• 26:22
  Speaker 4: for you to be able to change your bank account
• 26:23
  Speaker 4: information and over the phone, because why if I were
• 26:29
  Speaker 4: those people, I would want some verification of the routing
• 26:31
  Speaker 4: number and account of details at the Social Security Administration.
• 26:34
  Speaker 4: It seems like it's ripe for abuse.
• 26:37
  Speaker 2: Do we get the sense there's been a ton of
• 26:39
  Speaker 2: abuse with Social Security payments going to like someone claiming
• 26:43
  Speaker 2: your benefit and going to the wrong place a ton No,
• 26:46
  Speaker 2: Like doesn't really seem like it, No, But again, like
• 26:50
  Speaker 2: I can see why it would make sense to make
• 26:52
  Speaker 2: those types of changes.
• 26:53
  Speaker 4: What you're likely to see here is if you are
• 26:55
  Speaker 4: facing one of those complicated issues, it's probably gonna just
• 26:58
  Speaker 4: take a lot longer to get it resolved.
• 27:00
  Speaker 3: And I think that's.
• 27:02
  Speaker 4: Problematic in part because soci security is one of the
• 27:04
  Speaker 4: most popular programs out there and people really care about it.
• 27:08
  Speaker 4: And then you have rather silly things being said like
• 27:11
  Speaker 4: Commerce Secretary Howard Lutnik, who over the I think over
• 27:13
  Speaker 4: the weekend saying that only fraudsters would complain about missing
• 27:17
  Speaker 4: a monthly Social Security check and that most people wouldn't
• 27:19
  Speaker 4: mind if the government simply skip the payment.
• 27:22
  Speaker 3: I think most people in Social Security would mind.
• 27:24
  Speaker 4: Yeah, that seems like a mischaracterization of the situation. So
• 27:28
  Speaker 4: some misreading there, and I think that's getting h got
• 27:31
  Speaker 4: a lot of good playtime. But I'm not terribly concerned
• 27:34
  Speaker 4: about Social Security recipients eventually being paid what they are owed.
• 27:38
  Speaker 2: Now, Look, the big thing, Look that we've said this
• 27:41
  Speaker 2: over and over. If you're if you want to be
• 27:44
  Speaker 2: serious about reigning in the deficit, it's not through the
• 27:46
  Speaker 2: Social Security staffing. No, it's you. You have to tag
• 27:50
  Speaker 2: there's four places that you can tackle. Number one actually
• 27:55
  Speaker 2: shoring up social security either through some combination of claims,
• 28:00
  Speaker 2: you know, people claiming later in life, changing the benefit formula,
• 28:04
  Speaker 2: raising taxes, like it's one of those few items that
• 28:06
  Speaker 2: you have to do on it. Medicare is place number two,
• 28:09
  Speaker 2: quite honestly to mess have no idea how you're gonna
• 28:12
  Speaker 2: fix it. Number three D D and number four of
• 28:14
  Speaker 2: the interest on the already outstanding deficit if you're.
• 28:17
  Speaker 3: Not medicaid's a part of this too.
• 28:19
  Speaker 2: I think, yeah, Medicare and Medicaid just put health care
• 28:21
  Speaker 2: spending in the bucket share. But ultimately, if you're not
• 28:24
  Speaker 2: actually going to deal with those four areas and probably
• 28:28
  Speaker 2: deal with them like fairly evenly, because you otherwise you
• 28:33
  Speaker 2: have to have pretty significant cuts to one of them,
• 28:36
  Speaker 2: It's something where you look at it you go, okay,
• 28:39
  Speaker 2: like it's fine that like you're trying to do it
• 28:42
  Speaker 2: this way, but it's not really gonna work. You know,
• 28:44
  Speaker 2: we've talked about what staffing costs are with the federal government.
• 28:48
  Speaker 2: It's it's not most of the cost. It's a very
• 28:51
  Speaker 2: small piece of the puzzle. If you don't actually want
• 28:55
  Speaker 2: to deal with the entitlement situation, DoD or the interest expense.
• 29:00
  Speaker 4: It's not the people servicing Social Security and Medicare and Medicaid.
• 29:03
  Speaker 4: They don't cost much the program. I mean, let's face it,
• 29:06
  Speaker 4: like five out of eight people in nursing homes are
• 29:10
  Speaker 4: on Medicaid. It's costing taxpayers. What's the Medicaid reimbursement rate
• 29:16
  Speaker 4: these days? I don't even know, six eight thousand dollars
• 29:19
  Speaker 4: a month. Like these are the types of things you
• 29:21
  Speaker 4: would have to about talk about changing, and nobody's really
• 29:24
  Speaker 4: proposing a great solution to that.
• 29:26
  Speaker 2: I mean, look, federal worker salaries, they're about five percent
• 29:29
  Speaker 2: of government spending. Even if you fired every one in
• 29:32
  Speaker 2: the federal government, you're still running a two percent deficit
• 29:34
  Speaker 2: for the entire year, and you don't have anyone to
• 29:36
  Speaker 2: run the federal government a bit of a problem, Like
• 29:39
  Speaker 2: ninety five percent of the spending is not salaries. So
• 29:43
  Speaker 2: that's you got to deal with the other stuff. That said,
• 29:46
  Speaker 2: approach all this stuff logically.
• 29:47
  Speaker 4: Don't let changes to staffing at Social Security make you
• 29:52
  Speaker 4: change your mind about how you use the government benefit.
• 29:55
  Speaker 4: I think there's one takeaway because I've had those types
• 29:56
  Speaker 4: of questions too, like I don't want to deal with
• 29:59
  Speaker 4: the headache and a bad service, Like I'm just gonna
• 30:01
  Speaker 4: start pulling so Security early.
• 30:03
  Speaker 2: And I guess that that's making a permanent solution to
• 30:08
  Speaker 2: a temporary problem. Because you can only claim Social Security once.
• 30:11
  Speaker 2: You can't go back and do the thing that you
• 30:13
  Speaker 2: remember that used to allow you to.
• 30:14
  Speaker 3: If you paid back.
• 30:15
  Speaker 4: All of what you took, you can change them up
• 30:17
  Speaker 4: to a higher benefit. Yeah, you could change your mind.
• 30:20
  Speaker 2: Isn't that wild that they allowed you to do that
• 30:22
  Speaker 2: with no interest owed on it?
• 30:24
  Speaker 3: Yeah?
• 30:24
  Speaker 4: How many hedge fund people were just like claiming early,
• 30:27
  Speaker 4: putting it all on the equity markets, doubling their money
• 30:30
  Speaker 4: and up paying it all back and taking it later.
• 30:31
  Speaker 3: And isn't that wild that you were allowed to do that? Yeah?
• 30:36
  Speaker 3: I wonder if you had to pay interest. I don't
• 30:38
  Speaker 3: think you did. It doesn't matter, it's illegal. You can't
• 30:41
  Speaker 3: do it anyways.
• 30:42
  Speaker 2: So yeah, but I mean they used to let you
• 30:44
  Speaker 2: do all kinds of cool stuff like that.
• 30:45
  Speaker 3: They did not anymore.
• 30:49
  Speaker 4: Again, which is good because it was bankrupting the system.
• 30:52
  Speaker 4: It was making the system less efficient than it already.
• 30:55
  Speaker 6: Right.
• 30:55
  Speaker 2: So basically, if if you were wealthy enough that you
• 30:58
  Speaker 2: could take Social Security, bank it and then pay it
• 31:02
  Speaker 2: all back later in order to get a higher benefit.
• 31:05
  Speaker 2: That's not exactly how the system was designed to be used.
• 31:09
  Speaker 3: Correct. Let's take a quick break.
• 31:11
  Speaker 2: When we come back, we're going to talk a little
• 31:13
  Speaker 2: bit about energy costs in the New England region.
• 31:18
  Speaker 1: The Financial Exchange streams live on YouTube. Like our page
• 31:22
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• 31:24
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• 31:29
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• 31:32
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• 31:36
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• 31:39
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• 31:51
  Speaker 2: Peace in the Boston Global RUTI today. Just how much
• 31:55
  Speaker 2: highre our energy costs in Boston. Here's what the data shows.
• 31:58
  Speaker 2: What does it show, Michael.
• 32:00
  Speaker 3: Well, it depends what you want to look at.
• 32:02
  Speaker 4: But in electricity prices on average in the Boston area,
• 32:07
  Speaker 4: we're about seventy three percent higher than the national average.
• 32:10
  Speaker 4: So Boston Metro area was thirty one cents per kilowat no.
• 32:14
  Speaker 3: This is this is what the lower school. It's like
• 32:17
  Speaker 3: hires not better.
• 32:18
  Speaker 4: So the average electricity process price Boston Metro thirty one
• 32:22
  Speaker 4: cents per kilowat hour compared to about eighteen cents on
• 32:26
  Speaker 4: a national basis.
• 32:27
  Speaker 3: Nott Gas prices. We're better off here. Don't worry.
• 32:30
  Speaker 4: We're only sixty five percent more expensive than is national average.
• 32:34
  Speaker 4: We're fine on gas prices. Gasoline prices in the Boston
• 32:37
  Speaker 4: metro area are about in line with the national average.
• 32:40
  Speaker 4: But everything else stinks. And you can mainly blame this
• 32:46
  Speaker 4: on two things. One is any sort of lack of
• 32:50
  Speaker 4: sensible infrastructure in terms of pipelines for energy coming into
• 32:54
  Speaker 4: the Northeast, and two would be aging infrastructure on the
• 32:58
  Speaker 4: not so much. I mean, I'm sure that's on the
• 33:00
  Speaker 4: home side as well, but we're talking about the generation
• 33:03
  Speaker 4: and transmission side of things. So we have a bunch
• 33:06
  Speaker 4: of really old, inefficient infrastructure that gets upgraded very slowly,
• 33:10
  Speaker 4: and therefore a lot of this ends up being some
• 33:13
  Speaker 4: of the delivery charges, which end up costing a lot
• 33:15
  Speaker 4: rather than the actual price of the electricity.
• 33:18
  Speaker 2: If you look at the numbers, the delivery charges throughout
• 33:21
  Speaker 2: the New England region are often pretty close to what
• 33:24
  Speaker 2: the national average is for electricity as a whole. So
• 33:27
  Speaker 2: it's not just expensive fuel, it's expensive transmission.
• 33:33
  Speaker 4: And this is not unique to Boston, by the way,
• 33:35
  Speaker 4: this is just the area area. I'm sure Boston is
• 33:38
  Speaker 4: worse but yeah, it's the entire New England area is
• 33:41
  Speaker 4: susceptible to this and makes it. Yeah, that cost a
• 33:46
  Speaker 4: living calculation does not get helped by this piece here.
• 33:50
  Speaker 2: Yeah, if you like go and actually look through what
• 33:55
  Speaker 2: the the rates are. Basically, you know, state by state
• 34:00
  Speaker 2: publishes this by the way, the Energy Information Administration.
• 34:03
  Speaker 3: If you go through, so the New England.
• 34:05
  Speaker 2: Region averages twenty eight cents per kill a WAT hour
• 34:10
  Speaker 2: for the month of December. They do this monthly, so
• 34:13
  Speaker 2: you get like all kinds of data, the highest is
• 34:17
  Speaker 2: Massachusetts at that thirty one cents. Everyone else is basically
• 34:21
  Speaker 2: like hanging out in the twenty five to twenty eight range,
• 34:23
  Speaker 2: except for Vermont, which comes intot twenty two.
• 34:25
  Speaker 3: So Vermont's the cheapest there. But again you look at.
• 34:29
  Speaker 2: The national average and for December at least, it was
• 34:33
  Speaker 2: sixteen and a quarter sixteen point two six cents per
• 34:37
  Speaker 2: kill white hour, So Massachusetts for December was actually almost
• 34:40
  Speaker 2: twice the average. And you get some states where you're like, man,
• 34:43
  Speaker 2: this is like really cheap. When you start seeing you know,
• 34:47
  Speaker 2: the ones that are lowest. You're talking Nebraska, it's ten
• 34:50
  Speaker 2: cents per kill a WAT hour, so a third of
• 34:52
  Speaker 2: the cost. Same with North Dakota, same with you know, Louisiana,
• 34:57
  Speaker 2: Arkansas eleven cents, Hose eleven cents, Montana is even the
• 35:03
  Speaker 2: other places that you would consider to be expensive. California
• 35:07
  Speaker 2: thirty cents of kill a white hour, still cheaper than Massachusetts,
• 35:10
  Speaker 2: Hawaii forty two cents of kill a white hour, only
• 35:13
  Speaker 2: about thirty percent more than Massachusetts. Everyone else is basically
• 35:18
  Speaker 2: like you look at the rest of the United States.
• 35:20
  Speaker 2: Aside from New York, everyone else is pretty much clustered
• 35:24
  Speaker 2: in like the twelve to eighteen cents range. Fun So
• 35:28
  Speaker 2: there's that, and on the deliveries on the production side, unfortunately,
• 35:33
  Speaker 2: it's because we decide to ship our net gas on big,
• 35:37
  Speaker 2: really cold barges through Boston Harbor like we're in Europe
• 35:40
  Speaker 2: because the pipeline, because we don't have enough pipeline capacity.
• 35:42
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• 35:46
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• 36:01
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• 36:05
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• 36:06
  Speaker 6: Its incredible history and spectacular architecture, along with world class cuisine,
• 36:11
  Speaker 6: incredible golf courses, and a wide variety of watersports. From
• 36:15
  Speaker 6: the moment you arrive, you'll fall naturally in rhythm with
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• 36:34
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• 36:38
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• 36:44
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• 36:49
  Speaker 2: Mike, do you know when glass windows became popular in homes? Now,
• 36:54
  Speaker 2: it's only in the last five hundred years or so
• 36:56
  Speaker 2: that this became a thing, and really only in the
• 36:58
  Speaker 2: last three hundred that it became like really a thing,
• 37:01
  Speaker 2: just because it was so hard to make glass for
• 37:03
  Speaker 2: the longest time, but we've gotten to the point now
• 37:06
  Speaker 2: where some of the new developments that we're seeing are
• 37:11
  Speaker 2: quite honestly, absolutely remarkable, where you have new windows that
• 37:16
  Speaker 2: have been developed basically through a combination of like public
• 37:20
  Speaker 2: private development that has gotten us to the point where
• 37:24
  Speaker 2: you now have these triple and four pane windows that
• 37:27
  Speaker 2: actually can insulate better than the walls around them, only
• 37:31
  Speaker 2: cost twenty percent more than standard windows, and are strong
• 37:35
  Speaker 2: enough that they can stop cannonballs from going through if
• 37:38
  Speaker 2: you happen to be attacked by pirates.
• 37:40
  Speaker 4: That was the last part, is what I was most
• 37:42
  Speaker 4: concerned about. I live along a river, and I'm always
• 37:45
  Speaker 4: concerned about those canoes maybe carrying a cannon in there.
• 37:48
  Speaker 2: You always have to wonder about those things. Yeah, and
• 37:50
  Speaker 2: so I do find this pretty remarkable in terms of
• 37:53
  Speaker 2: the potential for energy savings, especially here in the Northeast
• 37:57
  Speaker 2: where look, it's not gonna happen all at once, but
• 37:59
  Speaker 2: as these are barely for sale for sale anyway, this
• 38:02
  Speaker 2: will be in the next five ten years as homes
• 38:04
  Speaker 2: are retrofitted with them during you know, renovations and things.
• 38:07
  Speaker 3: But the potential for significant energy
• 38:10
  Speaker 2: Savings as these become more readily available quick break here,
• 38:14
  Speaker 2: Hour two coming up in just a bit