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Why did Trump kill the GOP spending bill? Was he right to kill it? · The Financial Exchange Show

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  Speaker 1: donation today. This is the Financial Exchange with Chuck Zada,
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  Speaker 1: and Mike Armstrong.
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  Speaker 2: Kicking things off today. Chuck, Mike and Tucker with you,
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  Speaker 2: and we got I gotta tell you, Mike, normally you
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  Speaker 2: get to December fifteenth and we kind of run out
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  Speaker 2: of material.
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  Speaker 3: Yeah, we shut down the year. You know, we talk
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  Speaker 3: about sweaters and holiday shopping.
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  Speaker 2: I'll be entirely honest. I was completely unprepared for this week.
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  Speaker 2: It's been a little bit naughty out there, and so
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  Speaker 2: we're gonna kick things off today with a little bit
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  Speaker 2: of government shutdown chatter because the government's gonna shut down.
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  Speaker 2: It's looking that way. And here's the thing. So two
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  Speaker 2: days ago Wednesday, seemed like we had a bill that
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  Speaker 2: was going to you know, fund the government for a
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  Speaker 2: few months, a continuing resolution. It had some other stuff
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  Speaker 2: that was attached to.
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  Speaker 3: It, as frequently happens, this stuff that everyone hates attached
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  Speaker 3: to it, special projects for individuals and individual states and participants.
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  Speaker 2: No, there really wasn't that much. I'm gonna be honest. Now, Okay,
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  Speaker 2: have you read the fifteen hundred pages. I didn't read
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  Speaker 2: the whole fifteen hundred pages. Part of that was because
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  Speaker 2: a thousand pages of it was reform to pharmacy benefit
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  Speaker 2: managers to try to save the government money. Okay, I
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  Speaker 2: didn't even attempt to read that, but that was stripped out.
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  Speaker 2: That's part of the reason why the bill went from
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  Speaker 2: fifteen hundred pages to like one hundred is that it
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  Speaker 2: stripped out that whole piece. So there was some stuff
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  Speaker 2: in it, but it was mostly like disaster relief. There
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  Speaker 2: was a thing on pediatric cancer research. Well, it was
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  Speaker 2: the big one for the Redskins. Sorry not the Redskins.
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  Speaker 2: The Washington Commander's Stadium something like that was in there.
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  Speaker 2: It was being they were gonna transfer ownership from the
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  Speaker 2: federal government to DC so that the federal government didn't
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  Speaker 2: have to deal with it anymore. But again it seems
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  Speaker 2: like go to like the federal government should not own
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  Speaker 2: a sports stadium. It's fine, like get rid of it,
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  Speaker 2: like move on, you know, like that's okay. In any case,
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  Speaker 2: the bill ends up getting scuttled, and largely because President
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  Speaker 2: elect Trump and Elon Musk came out and said like, no,
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  Speaker 2: we don't want this. And Elon was you know, basically
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  Speaker 2: direct messaging reps on Twitter being like, hey, you should
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  Speaker 2: vote against this because of reasons X, Y, and Z.
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  Speaker 2: It was a little bit stronger than that.
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  Speaker 3: Once it came from President Trump, which was vote against this,
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  Speaker 3: or we're gonna find somebody to run against you next year.
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  Speaker 2: It's been coming from Elon too, Like Elon said the
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  Speaker 2: same stuff, which again I just I really think we
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  Speaker 2: all need to wonder how much we want and the unelected,
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  Speaker 2: richest person in the world telling our Congress what to
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  Speaker 2: vote for.
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  Speaker 3: But I hope not to go too far down a
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  Speaker 3: rabbit hole here. But do you hear rand Paul calling
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  Speaker 3: him to be a life did a Speaker of the House?
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  Speaker 2: Finally, no, So I have no problem. Look, I'm not
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  Speaker 2: saying like whether or not I think Elon like should
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  Speaker 2: be in that role. But ultimately, if the House says, hey,
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  Speaker 2: this is who we want as speaker at least that's
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  Speaker 2: not an official role, that's fine. Like yeah, the title right,
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  Speaker 2: like they can do what they want and there's an
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  Speaker 2: official role. But I don't know in general, do I
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  Speaker 2: want Jeff Bezos or Mark Cuban or Elon Musk or
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  Speaker 2: Bill Gates like coming out and being like, hey, reps,
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  Speaker 2: you have to vote for this or I'm gonna find
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  Speaker 2: someone to run against you know, like that that's kind
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  Speaker 2: of bad for democracy.
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  Speaker 3: It is, but we need to explain why because in
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  Speaker 3: an unelected role, he has no obligation whatsoever to report
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  Speaker 3: or disclose anything.
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  Speaker 2: There are potentially huge conflicts of interest in all of this.
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  Speaker 2: Like it's it's a huge problem. And this is why
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  Speaker 2: when we talk about like money in politics, like this
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  Speaker 2: is kind of the crux of it. So like, this
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  Speaker 2: is not an elon thing. This is no like if
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  Speaker 2: if freaking.
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  Speaker 3: I don't know, so if the opposite, this would be
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  Speaker 3: if during the last four years Bill Gates was doing this,
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  Speaker 3: how would you feel about it?
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  Speaker 2: Correct, Like, I don't feel good. It's's pretty obvious. I
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  Speaker 2: don't know why. There's multiple reasons. One is like the corrosive,
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  Speaker 2: you know, overall influence of money on politics. It's like
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  Speaker 2: we can get into. The other is, look, just because
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  Speaker 2: you've made a bunch of money, whether Elon, Bill Gates,
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  Speaker 2: whoever the heck you are, Like, why does that make
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  Speaker 2: you an expert on what should be passed in a
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  Speaker 2: continuing resolution bill?
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  Speaker 3: In either case, it didn't pass. So let's uh, here
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  Speaker 3: we are.
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  Speaker 2: So here we are. And so yesterday I think it
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  Speaker 2: was probably three o'clock or so, maybe two thirty or
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  Speaker 2: three comes out, Hey, we think we have a bill
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  Speaker 2: that we're gonna pass. We're gonna vote on it later today.
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  Speaker 2: They vote on it later today, missus by sixty votes,
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  Speaker 2: not even close, not even close. And so we're here
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  Speaker 2: today and saying, Okay, you've basically got until midnight where
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  Speaker 2: you've got to figure out what to do in order
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  Speaker 2: to fund the government. Now, it's probably like from everything
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  Speaker 2: I'm reading, it doesn't appear that this is going to
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  Speaker 2: end up as a long shutdown, if there is one here,
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  Speaker 2: But it is something where, again in a very tight
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  Speaker 2: congress where the incoming you know that the new Republican majority,
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  Speaker 2: which is you know, differs in constituents from the ones
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  Speaker 2: that are currently there. It's it's a very tight and
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  Speaker 2: very narrow majority. It's gonna be two hundred and twenty Republicans.
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  Speaker 2: You can lose two votes and still pass something without
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  Speaker 2: Democrat support, of which you're probably not gonna get any
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  Speaker 2: So my read through on this is not, hey, like,
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  Speaker 2: what's gonna happen because of this? Because ultimately, from a
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  Speaker 2: from a pure economic standpoint, whether the government is shut
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  Speaker 2: down or not is not affecting the broad economy in
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  Speaker 2: any meaningful fashion. I'm not saying that, especially in the
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  Speaker 2: I'm not saying it's good because look, for you know,
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  Speaker 2: federal workers that are furloughed or not collecting pay, especially
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  Speaker 2: right around this time of year, kind of bad.
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  Speaker 3: Also talk about government waste, because remember, what you're doing
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  Speaker 3: when you're furloughing workers is you're saying, we are going
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  Speaker 3: to pay you eventually, but you don't have to some
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  Speaker 3: of you don't have to work. So pretty dumb if
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  Speaker 3: you're talking about government efficiency to tell let's say, you know,
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  Speaker 3: a thousand employees of the EPA to not go to work,
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  Speaker 3: but we will still pay you. That's what you do
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  Speaker 3: during a government shutdown, now, like you save the money,
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  Speaker 3: like they still end up getting paid, correct, you know,
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  Speaker 3: it's it's different from a private sector furlough where oh
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  Speaker 3: we're gonna put you on.
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  Speaker 2: The side for two weeks, you know, like it's it's different.
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  Speaker 2: So I think that I don't really care about this
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  Speaker 2: from the perspective of how it affects the US economy
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  Speaker 2: because it doesn't and it won't. It's a non factor.
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  Speaker 2: The lens that I'm looking at it through is, hey,
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  Speaker 2: you've got some major priorities that you want to pass
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  Speaker 2: next year border tax reform potentially like anything else, but
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  Speaker 2: like those are the two big ones that are being
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  Speaker 2: talked about in order to pass something it needs to pass.
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  Speaker 2: I know that sounds circular, but it is and it's
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  Speaker 2: important because you need to actually be able to get
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  Speaker 2: the votes. And the votes don't come from the ether.
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  Speaker 2: They come from actual people that have districts or states
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  Speaker 2: that they represent, and you need to convince them, hey,
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  Speaker 2: this is going to be good for your district and
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  Speaker 2: as such, you can run on this because it's something
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  Speaker 2: that will be you know, be reflective of good governance.
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  Speaker 3: So let's talk about some of those commentaries that we
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  Speaker 3: saw coming out of this that could indicate maybe you
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  Speaker 3: have a tougher time passing things in the future, like
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  Speaker 3: tax cuts, like major pieces of the Trump campaign. So
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  Speaker 3: it's fairly obvious to me why all Democrats voted against
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  Speaker 3: this continuing resolution because they got the rug pulled out
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  Speaker 3: from them at the last second by Johnson.
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  Speaker 2: They had to and then it was pulled out.
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  Speaker 3: So everyone voted against it because obviously on the Republican side,
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  Speaker 3: like you said, what was it, sixty members voted.
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  Speaker 2: Against the thirty Republicans. So the difference ended up being sixty.
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  Speaker 3: So one individual Republican from Texas, Chip Roy, who has
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  Speaker 3: been quoted all over this quote, I'm absolutely sickened by
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  Speaker 3: a party that campaigns on fiscal responsibility. By the way,
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  Speaker 3: I'm not sure that facts are in evidence there. I
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  Speaker 3: didn't see any campaign this year on fiscal responsibility and
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  Speaker 3: has the temerity to go forward to the American people
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  Speaker 3: and say, you think this is a fiscally responsible bill.
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  Speaker 3: I slightly misquoted that. Does that speak to somebody that
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  Speaker 3: is willing to tax cut taxes without corresponding spending decreases? Again,
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  Speaker 3: maybe because tax cuts are looked at differently, But if
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  Speaker 3: you're taking this person at their word, then a lot
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  Speaker 3: of the bills.
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  Speaker 2: That the Republicans want to bring to the House might
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  Speaker 2: not go through. And I don't think that there are
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  Speaker 2: you know, I don't think this is an opinion that
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  Speaker 2: is scarce among it. Like you look at the Freedom
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  Speaker 2: Caucus in the House and you say, okay, Like there
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  Speaker 2: are a lot of people that feel similarly to Chip
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  Speaker 2: Roy in terms of, hey, we want to try to
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  Speaker 2: get back to something that's more fiscally sustainable. And Mike,
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  Speaker 2: we've talked on this show quite a bit about Look,
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  Speaker 2: you don't want to be running six percent deficits in perpetuity,
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  Speaker 2: and of em oftentimes like you can't run six percent
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  Speaker 2: deficits in perpetuity because eventually the bond market punishes you
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  Speaker 2: for doing so. So from my perspective, the interesting thing
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  Speaker 2: about this is, hey, as you're trying to figure out
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  Speaker 2: policy on the federal side next year, what do you
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  Speaker 2: think you're going to get passed on this, you know,
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  Speaker 2: in terms of this Congress. And the piece to me
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  Speaker 2: that is interesting there is maybe we actually do start
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  Speaker 2: to see some kind of shift back to if if
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  Speaker 2: you have a narrow majority but want to pass legislation,
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  Speaker 2: it's that small rump within the majority party that has
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  Speaker 2: the power to demand concessions say yes, rump, got it.
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  Speaker 2: You've heard the term rump like rump politics? I'm not
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  Speaker 2: sure I have, but you're gone. In any case, it's
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  Speaker 2: something where you have this you know, small group that
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  Speaker 2: has the potential to demand it. The question and and
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  Speaker 2: the and the issue that you face with the Republican
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  Speaker 2: majority is there's kind of two of these different groups.
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  Speaker 2: The first is your your freedom Caucus Republicans, who are
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  Speaker 2: you know, kind of like they're the ones who evolved
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  Speaker 2: from the Tea Party. Basically, we want to be fiscally responsible.
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  Speaker 2: This is what we want to do. The other side
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  Speaker 2: that you have is, you know, I'll characterize them as
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  Speaker 2: like coastal you know, Republicans in swing of your districts.
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  Speaker 2: You know someone in you know, New York Westchester County
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  Speaker 2: or something I haven't looked at like the exact map,
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  Speaker 2: but you have, you know a handful of New York
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  Speaker 2: Republicans that are gonna want the salt cap repealed for
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  Speaker 2: taxes so that you can have larger deductions of state
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  Speaker 2: and local taxes. That goes kind of directly against sure
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  Speaker 2: being fiscally responsible, Like that's no, we want more you know,
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  Speaker 2: spending to help our districts out. And so this is
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  Speaker 2: the thing that I'm trying to figure out, is from
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  Speaker 2: a policy perspective, what are you gonna end up with?
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  Speaker 2: Because I find it hard to believe you're gonna get
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  Speaker 2: nothing done. But it's more what does the eventual policy
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  Speaker 2: look like? And then how does that end up affecting
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  Speaker 2: the economy. So I'm trying to figure out what the
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  Speaker 2: equilibrium is that we get to from a policy perspective
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  Speaker 2: here because what I can here's why I think it's
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  Speaker 2: unlikely to get nothing done. If you've got a Republican House,
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  Speaker 2: republican Senate, Republican president, you can't go back to your
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  Speaker 2: voters two years from now and say we pass nothing.
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  Speaker 2: You know you're not gonna get that. So you're gonna
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  Speaker 2: get something. But what is it is what I'm trying
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  Speaker 2: to figure out now, and that's where all the meat
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  Speaker 2: is in my opinion. Let's take a quick break here
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  Speaker 2: when we come back. We talked about the debt seialing
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  Speaker 2: yesterday's let's move on to inflation. Let's talk inflation after this,
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  Speaker 2: and we'll talk PCE when we return.
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  Speaker 1: Well, stream watch a full update on the markets performance
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• 14:07
  Speaker 2: Some good news today with the pe inflation data. Looks
• 14:12
  Speaker 2: like we came in at point one percent on both
• 14:14
  Speaker 2: headline and core. And these weren't just you know, rounding things.
• 14:17
  Speaker 2: You were basically, you know, pretty close to dead on
• 14:19
  Speaker 2: as far as a real point one percent. Expectations were
• 14:23
  Speaker 2: for point two percent on both of these, and so
• 14:27
  Speaker 2: overall pretty good numbers there. You also had personal incomes
• 14:30
  Speaker 2: and spending come in a tenth of a percent under
• 14:33
  Speaker 2: expectations on both of those, which is something that helps
• 14:36
  Speaker 2: to take a little bit of potential pressure off future inflation.
• 14:39
  Speaker 2: So overall, today, for the first time in about a
• 14:42
  Speaker 2: week and a half, you got the bond market seeing
• 14:44
  Speaker 2: some money flowing into it and yields coming down a
• 14:46
  Speaker 2: little bit instead of moving up. Yeah, and ahead of
• 14:50
  Speaker 2: this report which was eight thirty eight thirty eight thirty am.
• 14:53
  Speaker 2: You did have futures off close to one percent depending
• 14:56
  Speaker 2: on which index you were looking at they are. I
• 14:58
  Speaker 2: woke up and was like, oh, this should be fun.
• 15:00
  Speaker 3: Yeah, So you know, I had you had a miss
• 15:01
  Speaker 3: on this, it could have been pretty ugly in one
• 15:03
  Speaker 3: of markets.
• 15:04
  Speaker 2: If you had a miss, it would have been a
• 15:05
  Speaker 2: repeat of Wednesday, it might have been yeah. Yeah.
• 15:08
  Speaker 3: And it's not to say we won't still get something
• 15:10
  Speaker 3: to that effect this afternoon. It's only ten twenty four am,
• 15:15
  Speaker 3: so give it time. But at the moment, market's reacting
• 15:18
  Speaker 3: relatively positive to this, and quite honestly, you know, we
• 15:23
  Speaker 3: had sort of seen this coming with the CPI and
• 15:25
  Speaker 3: PPI reads if you recall Chuck earlier this month, where
• 15:29
  Speaker 3: you know, looking at the data wasn't received terribly well,
• 15:31
  Speaker 3: but when you looked into the details, a lot of
• 15:34
  Speaker 3: the stuff that feeds into PCEE was showing, Hey, this
• 15:37
  Speaker 3: actually should be fine.
• 15:38
  Speaker 2: Yeah. I felt pretty good heading into this one. I
• 15:40
  Speaker 2: will say also, I wanted to circle back to something
• 15:43
  Speaker 2: from yesterday that we didn't get a chance to cover.
• 15:46
  Speaker 2: Just again, it's been crazy week, crazy week. The previous
• 15:51
  Speaker 2: two weeks of weekly jobbles claims had a little bit
• 15:54
  Speaker 2: of an uptick that was going on, and we had
• 15:56
  Speaker 2: said last week, but last week. Look, I'm not sure
• 15:59
  Speaker 2: if this is something that there's this like residual seasonality
• 16:01
  Speaker 2: because Thanksgiving was a week late and so things are
• 16:04
  Speaker 2: showing up weird, or if there's a real move up
• 16:06
  Speaker 2: that's happening here. But we got weekly job as claims yesterday.
• 16:10
  Speaker 2: They decreased from two hundred and forty two thousand down
• 16:13
  Speaker 2: to two hundred and twenty thousand. So again it's probably
• 16:17
  Speaker 2: too too soon to sound like the all clear on this, sure,
• 16:20
  Speaker 2: but it is looking more like that two week rise
• 16:23
  Speaker 2: in weekly unemployment claims was an outlier and that there
• 16:28
  Speaker 2: isn't anything meaningful that's you know, necessarily shifting there at
• 16:32
  Speaker 2: this point. So I think from my perspective that was
• 16:35
  Speaker 2: something that was reassuring. The ensured unemployment rate also ticked
• 16:40
  Speaker 2: back down from one point three to one point two percent,
• 16:43
  Speaker 2: so that is again another thing that you look at
• 16:45
  Speaker 2: and you say, okay, this is good, Like that's what
• 16:47
  Speaker 2: you want to be seeing there. So I thought this
• 16:50
  Speaker 2: was a promising sign. So the data, as far as
• 16:55
  Speaker 2: you know, some of the concerns that we have. Hey,
• 16:58
  Speaker 2: is unemployment rising and is that is recession concern? Or hey,
• 17:01
  Speaker 2: is the recent inflation readings that we've got are those
• 17:04
  Speaker 2: of concern? The last couple of days have been good
• 17:07
  Speaker 2: in terms of potentially resolving those I'd say.
• 17:10
  Speaker 3: I mean, frankly, the last two days very small data
• 17:13
  Speaker 3: points here, but they both pointed in the good direction
• 17:18
  Speaker 3: they have, which.
• 17:19
  Speaker 2: Is good to see.
• 17:19
  Speaker 3: Let's let's put this week in context, if you will, Chuck,
• 17:23
  Speaker 3: because I think most people saw what happened Wednesday, But
• 17:27
  Speaker 3: let's put everything in context in case somebody's just waking
• 17:30
  Speaker 3: up from the coma this week and you know, tuning
• 17:32
  Speaker 3: into what's been going on. You had a market sell
• 17:35
  Speaker 3: off that began at two thirty PM on Wednesday in
• 17:38
  Speaker 3: reaction to Jerome Powell's commentary about the economy. It wasn't
• 17:42
  Speaker 3: his actions, it was his words, and you can tell
• 17:45
  Speaker 3: based purely on the timing. They announced their proclamation on
• 17:49
  Speaker 3: interest rates at two PM. A little bit of weakness then,
• 17:51
  Speaker 3: but not a ton like half a percent maybe to
• 17:54
  Speaker 3: the downside. Then Jay Powell started talking and markets sold
• 17:56
  Speaker 3: off by a full three percent of the S and
• 17:57
  Speaker 3: P five hundred, so what did it in context for us?
• 18:01
  Speaker 2: Here?
• 18:02
  Speaker 3: What he had to say is that the US economy
• 18:06
  Speaker 3: seems stronger than they were anticipating, and therefore rates are higher.
• 18:12
  Speaker 3: Like I can't think of a better bad news story. Yes,
• 18:18
  Speaker 3: the counter to it is this week of data. I'm
• 18:20
  Speaker 3: gonna go through and I have the whole week laid
• 18:22
  Speaker 3: out here for you. And again this is I'm talking
• 18:26
  Speaker 3: even kind of inside baseball reports, but ones that still matter.
• 18:29
  Speaker 2: Sure. New York Empire State Manufacturing Index previous one came
• 18:33
  Speaker 2: in at a reading of thirty one. Consensus was for
• 18:35
  Speaker 2: a reading of twelve. It came in at point two,
• 18:38
  Speaker 2: weaker than expected. Retail sales headline beat at point seven
• 18:42
  Speaker 2: percent versus point five expected, but that was because auto
• 18:45
  Speaker 2: sales went up two point eight percent for the month.
• 18:47
  Speaker 2: Mic or auto sale is gonna rise thirty six percent
• 18:49
  Speaker 2: next year, depends when those tariffs go in, but no, unlikely,
• 18:53
  Speaker 2: probably not a lot of people were trying to front
• 18:55
  Speaker 2: run tariffs and buying up autos this month. The core
• 18:58
  Speaker 2: number excluding autos up point two versus expectations of point four.
• 19:02
  Speaker 2: I grade that as a miss. Industrial production expected to
• 19:05
  Speaker 2: see a point three percent rise, came in with a
• 19:07
  Speaker 2: point one percent contraction. The NHB Housing Market Index, expected
• 19:11
  Speaker 2: to see a reading of forty seven, came in at
• 19:13
  Speaker 2: forty six. Building permits did beat to the upside, came
• 19:17
  Speaker 2: in at one point five million versus one point four
• 19:19
  Speaker 2: to three expected, but housing starts came in at one
• 19:23
  Speaker 2: point two to eighty nine million versus one point three
• 19:26
  Speaker 2: to four million expected, also a contraction. This week has
• 19:30
  Speaker 2: actually been about slowing data rather than an expansion. Quick
• 19:33
  Speaker 2: Break Wall Street watches Next.
• 19:41
  Speaker 1: Like us on Facebook and follow us on Twitter at
• 19:44
  Speaker 1: TFE show. Breaking business news is always first right here
• 19:48
  Speaker 1: on the Financial Exchange Radio Network. Time now for Wall Street.
• 19:54
  Speaker 1: Watch a complete look at what's moving market so far
• 19:57
  Speaker 1: today right here on the Financial Exchange Radio Network.
• 20:02
  Speaker 4: The markets are doing pretty well in positive territory as
• 20:06
  Speaker 4: Wall Street monitors the drama out of Washington regarding a
• 20:09
  Speaker 4: potential government shutdown. Traders are also digesting the core PC
• 20:14
  Speaker 4: index posted this morning, a key measure of inflation for
• 20:17
  Speaker 4: the Fed, which came in slightly lower than estimates. At
• 20:20
  Speaker 4: the moment, the Dow is up by three hundred and
• 20:23
  Speaker 4: sixty five points, nearly nine tenths of a percent. SMP
• 20:27
  Speaker 4: five hundred is up by seven tenths of a percent
• 20:30
  Speaker 4: or forty one points, and the Nasdaq is up by
• 20:33
  Speaker 4: six tenths of a percent or one hundred and thirteen points.
• 20:37
  Speaker 4: Rusted thousand is up nearly half a percent or ten points,
• 20:40
  Speaker 4: Tenure Treasure Reel pulling back five basis points, now at
• 20:43
  Speaker 4: four point five to one percent, and Crude oiled down
• 20:46
  Speaker 4: by two thirds of a percent, trading just below sixty
• 20:50
  Speaker 4: nine dollars a barrel. Shares of Novo Nordisk plunging twenty
• 20:53
  Speaker 4: percent after the pharmaceutical giant reported results in a late
• 20:57
  Speaker 4: stage trial for its experimental weight loss strug that missed expectations.
• 21:03
  Speaker 4: The company said its new drug candidate help patients reduce
• 21:06
  Speaker 4: their weight by twenty two point seven percent, below the
• 21:09
  Speaker 4: twenty five percent it had previously forecasted. Meanwhile, FedEx announced
• 21:14
  Speaker 4: the spin off of its freight business in addition to
• 21:17
  Speaker 4: posting mixed quarterly earnings and revenue. FedEx shares are jumping
• 21:24
  Speaker 4: standby Oh now, excuse me, they are flat today.
• 21:27
  Speaker 2: Excuse me. FedEx shares are flat.
• 21:30
  Speaker 4: Nike also posted quarterly earnings, revealing a decline in revenue
• 21:33
  Speaker 4: and earnings a year over year of the company's CEO
• 21:36
  Speaker 4: also said that its turnaround plan could take longer than expected.
• 21:41
  Speaker 4: Nike shares down nearly one percent, Starbucks down by about
• 21:45
  Speaker 4: a half a percent after Barista's in Los Angeles, Chicago,
• 21:48
  Speaker 4: and Seattle said they were ready to strike today demanding
• 21:52
  Speaker 4: better wages and schedules, and Warren Buffett's Berkshire Hathway disclosed
• 21:56
  Speaker 4: it purchased more shares of Occidental Petroleum, Serious, XAM and
• 22:01
  Speaker 4: VeriSign Oxy shares up by four percent, Serious shares up
• 22:05
  Speaker 4: by eight percent, and Verisigne shares are up by three percent.
• 22:09
  Speaker 4: I'm Tucker Silvan, That's Wall Street.
• 22:11
  Speaker 2: Watch Mike's story in the Wall Street Journal. We touched
• 22:14
  Speaker 2: on this a little bit yesterday titled the Fed cut
• 22:16
  Speaker 2: rates and mortgage costs went up. And the reason why
• 22:19
  Speaker 2: is kind of what j Powell has been talking about,
• 22:22
  Speaker 2: which is, look, we're pausing our rate cuts, not even pausing,
• 22:27
  Speaker 2: but we're potentially slowing the pace of those cuts because
• 22:30
  Speaker 2: we've seen unexpected strength in the economy. Unexpected strength means
• 22:34
  Speaker 2: that rates can generally remain higher in order to, you know,
• 22:39
  Speaker 2: without causing negative impact, and so long term rates moved
• 22:43
  Speaker 2: up as a result, and mortgage rates are typically based
• 22:46
  Speaker 2: off those long term treasury Did you see where they
• 22:48
  Speaker 2: are right now? The last time I saw was seven
• 22:49
  Speaker 2: to one to three? Is that where we are? Yeah?
• 22:51
  Speaker 3: Seven point one four percent according to Mortgage News Daily
• 22:54
  Speaker 3: average thirty year fixed rate mortgage now sitting at seven
• 22:57
  Speaker 3: to one four. If you happen to live in the
• 22:59
  Speaker 3: Newing area, you're probably looking at a jumbo mortgage, in
• 23:02
  Speaker 3: which case you're up at seven point three percent on
• 23:05
  Speaker 3: that average.
• 23:07
  Speaker 2: What is this? So I was asked this question, the
• 23:09
  Speaker 2: spring housing season's done if it stays like this for
• 23:11
  Speaker 2: another night. That's what Polino asked me, and that was
• 23:14
  Speaker 2: my answer, is it looks exactly like it did in
• 23:17
  Speaker 2: twenty twenty four if you have mortgage rates where they
• 23:20
  Speaker 2: are now, and again based on the commentary yesterday as
• 23:24
  Speaker 2: well as what we're seeing, the only thing in my
• 23:26
  Speaker 2: mind that gets you to lower mortgage rates by the
• 23:28
  Speaker 2: spring housing season is a full on recession. But there's
• 23:32
  Speaker 2: one other thing I think I need to say. I
• 23:34
  Speaker 2: don't know if I've said this before, but I think
• 23:37
  Speaker 2: we need to say it. You're not getting rates back
• 23:40
  Speaker 2: in the twos and threes. Yeah, that's an important distinction.
• 23:44
  Speaker 2: That's not if if you think you're gonna get rates there.
• 23:47
  Speaker 2: I'll even say fours. I mortgage rates in the fours
• 23:54
  Speaker 2: are as unlikely as you can get without it being
• 23:57
  Speaker 2: impossible in my mind, because mortgage rates in the fours,
• 24:01
  Speaker 2: you've got to get the tenure down to two and
• 24:03
  Speaker 2: a half. The only way the ten years getting to
• 24:05
  Speaker 2: two and a half is if you have like financial armagedinon.
• 24:12
  Speaker 3: Now, let me let me ask you, though, Chuck, I
• 24:14
  Speaker 3: mean for the average person listening out there, who's saying
• 24:17
  Speaker 3: you're crazy, Because, Chuck, we saw rates in the fours
• 24:20
  Speaker 3: from you know, two thousand and nine straight through twenty twenty,
• 24:24
  Speaker 3: why won't we ever get back there?
• 24:26
  Speaker 2: I'm not saying ever, like this is not the rest
• 24:29
  Speaker 2: of my life. Sure, this is ten years. It's gonna
• 24:33
  Speaker 2: be a tough put in, and certainly not next year.
• 24:36
  Speaker 2: Really the next couple of years, there's no chance you
• 24:40
  Speaker 2: get there unless you have financial arm again. And the
• 24:42
  Speaker 2: reason why, here's why mortgages were so low for so long,
• 24:47
  Speaker 2: is we went through financial arm again. Yeah, in two
• 24:50
  Speaker 2: thousand and eight. I know, like it's sixteen years ago now,
• 24:53
  Speaker 2: and so our memory of it is a little bit faded.
• 24:56
  Speaker 2: But It's hard to overstate just how close we came
• 25:02
  Speaker 2: to the financial system as a whole disappearing, and the
• 25:05
  Speaker 2: recovery from that was so slow and took so long,
• 25:08
  Speaker 2: not just in the US but overseas as well, and
• 25:11
  Speaker 2: growth was so low that no matter what the FED
• 25:16
  Speaker 2: or other central banks tried to do in order to
• 25:19
  Speaker 2: stimulate growth, which was namely lowering interest rates, they couldn't
• 25:24
  Speaker 2: get it to happen. Yeah, I mean, I'll fer them.
• 25:27
  Speaker 2: I point out, like Mortage News Daily only has this
• 25:29
  Speaker 2: data going back to nineteen eighty, but the four percent
• 25:33
  Speaker 2: mortgage rate was an apparition.
• 25:35
  Speaker 3: It only occurred. Ever during that period of time. You
• 25:38
  Speaker 3: never had rates below five percent in any of the
• 25:41
  Speaker 3: previous recessions prior to.
• 25:42
  Speaker 2: Eight And if you believe that rates are normalizing now
• 25:47
  Speaker 2: to hey, like if if we're going to see we
• 25:50
  Speaker 2: talk about this idea of the neutral rate, which is
• 25:52
  Speaker 2: the rate that the FED needs to hold rate interest
• 25:55
  Speaker 2: rates at in order to not be stimulative nor restrictive
• 25:59
  Speaker 2: to the economy. Historically, the estimates of the neutral rate
• 26:03
  Speaker 2: were closer to two percent than the one percent they're
• 26:05
  Speaker 2: at today. And so if that's the case, then the
• 26:07
  Speaker 2: long end of the curve in the long run probably
• 26:10
  Speaker 2: needs to move from the fours closer to the fives
• 26:15
  Speaker 2: like that. That's where you may need to get to eventually,
• 26:18
  Speaker 2: because you probably need a spread like normally the spread
• 26:21
  Speaker 2: between the ten year treasury if you look at the
• 26:24
  Speaker 2: long term trends on this and the spread between the
• 26:28
  Speaker 2: ten year treasury and the two year just as an example,
• 26:31
  Speaker 2: if you look at where that normally sits for most
• 26:35
  Speaker 2: of the time other than recessions, dating back to I'm
• 26:38
  Speaker 2: looking back at this through let me see how far
• 26:41
  Speaker 2: back the data I have goes. This goes back to
• 26:44
  Speaker 2: nineteen seventy seventy six, so almost fifty years of data.
• 26:49
  Speaker 2: And if you look at the average spread during that time,
• 26:53
  Speaker 2: even including recessions, it's one percent. That's spread right now
• 26:58
  Speaker 2: is a quarter percent, and if you take out the
• 27:01
  Speaker 2: recessions like in non recessionary periods, it's close to one
• 27:04
  Speaker 2: and a half to two percent. So my view on this,
• 27:07
  Speaker 2: I guess is, hey, even in a normal economy, the
• 27:12
  Speaker 2: expectations probably need to be for rates between six and
• 27:17
  Speaker 2: eight percent, and fives in below are the they're the recession,
• 27:23
  Speaker 2: they're the exception to the noise, and I think we
• 27:25
  Speaker 2: might get there in recessions like to play Devil's advocate
• 27:27
  Speaker 2: for a moment, which is not entirely but in the
• 27:30
  Speaker 2: event of a recession. One thing I feel fairly confident
• 27:33
  Speaker 2: about today is that the Federal Reserve and Congress does
• 27:37
  Speaker 2: not feel constrained by Congress might. Congress might, but I
• 27:43
  Speaker 2: guess the Federal Reserve and their willingness to use other
• 27:47
  Speaker 2: methods to bring long term rates down in the event
• 27:49
  Speaker 2: of a recession. Go look at twenty twenty as an
• 27:52
  Speaker 2: example in terms of what they are willing to do
• 27:54
  Speaker 2: where those extraordinary circumstances, Yes, will the Feds say, no,
• 27:59
  Speaker 2: We're not going to touch you know, buying you know,
• 28:02
  Speaker 2: government bonds and mortgage securities in the event of another recession. No,
• 28:06
  Speaker 2: My guess would be they'll probably use similar tools.
• 28:08
  Speaker 3: I don't know that gets you down to four or
• 28:09
  Speaker 3: three or two percent mortgage rates ever again, but in
• 28:13
  Speaker 3: the event of recession, I can still see a path
• 28:15
  Speaker 3: to briefly getting lower mortgage rates. But for what we
• 28:19
  Speaker 3: saw in the twenty tens decade that was a result
• 28:21
  Speaker 3: of hopefully a once in a lifetime recession, I.
• 28:25
  Speaker 2: Don't know if you see twos threes or fours. Twos
• 28:28
  Speaker 2: and threes again absent financial absent a great financial crisis
• 28:34
  Speaker 2: style recession. I don't know how you get to twos
• 28:37
  Speaker 2: and threes. Fours I still see as like a tough putt,
• 28:43
  Speaker 2: because things have to get awfully bad there. Yeah, it's
• 28:47
  Speaker 2: not to say that they can't. Like, sure, maybe maybe
• 28:49
  Speaker 2: you get to the fours like a couple of times,
• 28:51
  Speaker 2: you know, every you know, a couple of decades or
• 28:53
  Speaker 2: something like that, But even there, it's I don't know
• 28:56
  Speaker 2: how much time you spend there. The counter to this,
• 29:00
  Speaker 2: and if you're like, hey, Chuck Lake, you're you're wrong
• 29:02
  Speaker 2: on this, the potential counter that that you could see is, hey,
• 29:06
  Speaker 2: we're still unwinding from all of the weird stuff that
• 29:10
  Speaker 2: happened since COVID nineteen hit. And because of that, once
• 29:17
  Speaker 2: we get through that, maybe you end up back in
• 29:19
  Speaker 2: that slow growth trajectory that the twenty ten's looked like.
• 29:23
  Speaker 2: And maybe that is the norm because the demographics are
• 29:26
  Speaker 2: pretty bad in the US. They're not as bad as China,
• 29:28
  Speaker 2: they're not as bad as Europe, but they're not great.
• 29:31
  Speaker 2: And it's tough to have strong growth with bad demographics. YEP,
• 29:34
  Speaker 2: so that that that's see China, and look at where
• 29:38
  Speaker 2: the China's ten your treasury is right now, have you
• 29:39
  Speaker 2: looked now, it's under two percent. But they're also kind
• 29:43
  Speaker 2: of going through a recession and refusing to stimulate and
• 29:45
  Speaker 2: doing refusing to stimulate the real economy. So there's there's
• 29:49
  Speaker 2: some stuff going on there as well. Let's take a
• 29:52
  Speaker 2: quick break here when we come back, Let's see Nekean, FedEx, Nike,
• 30:00
  Speaker 2: and FedEx when we return.
• 30:02
  Speaker 1: The Financial Exchange streams live on YouTube. Like our page
• 30:06
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• 30:09
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• 30:14
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• 30:16
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• 30:19
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• 30:22
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• 30:25
  Speaker 1: business and financial news. This is the Financial Exchange Radio Network.
• 30:40
  Speaker 2: Talk a little bit about Nike. They reported earnings yesterday.
• 30:44
  Speaker 2: This stalks down about two percent and profit continues to decline,
• 30:49
  Speaker 2: revenue continues to decline, so they've they've got some issues.
• 30:51
  Speaker 2: We talked about this a little bit yesterday before the
• 30:55
  Speaker 2: earnings report, previewing it a little bit and they they're
• 31:00
  Speaker 2: trying to figure out how to stem the tide here.
• 31:04
  Speaker 2: I'm again CEOs always talk very generally because that's what
• 31:08
  Speaker 2: they do. Is there anything here that you find interesting
• 31:12
  Speaker 2: about what they're doing?
• 31:13
  Speaker 1: No?
• 31:13
  Speaker 2: Quite, honestly, it's he says, I'll quote like, here's the
• 31:18
  Speaker 2: part that's bothersome to me. What I've seen is traffic
• 31:21
  Speaker 2: and Nike Direct digital physical has softened because we lack
• 31:24
  Speaker 2: newness and product and we're not delivering inspiring stories, inspiring stories.
• 31:31
  Speaker 2: So I think what he's trying to say in doing
• 31:35
  Speaker 2: that is people used to buy Nike shoes because they
• 31:38
  Speaker 2: wanted to be like Mike Armstrong and Michael Jordan. That's right, sorry,
• 31:44
  Speaker 2: I who is is there a transformative figure out there today?
• 31:52
  Speaker 2: Let me ask this to both of you, just in general.
• 31:55
  Speaker 2: Is there a transformative figure out there today that people
• 31:59
  Speaker 2: will got the same way as a Michael Jordan, a
• 32:04
  Speaker 2: Lebron James, A Tiger Woods, a Leo Messi, a Tom
• 32:08
  Speaker 2: Brady Because I look at the last like twenty five
• 32:13
  Speaker 2: thirty years and and those are the names that come
• 32:16
  Speaker 2: to mind, not just in the US but globally. I mean,
• 32:18
  Speaker 2: Christiano Ronaldo, you can throw in there also for soccer.
• 32:20
  Speaker 2: But yeah, don't think Mahomes occupies no space, No, not
• 32:24
  Speaker 2: a that realm No. No, I think Mahomes occupies the
• 32:28
  Speaker 2: space of you know, best like quarterback in the NFL.
• 32:33
  Speaker 2: But even there, like I don't know that he has
• 32:35
  Speaker 2: the rarefied air of you know, being able to command
• 32:39
  Speaker 2: the cachet that Brady did at the time. I mean,
• 32:43
  Speaker 2: has Mahomes ever, you know, posed shirtless with a goat.
• 32:49
  Speaker 3: Then it's Kelsey because the Taylor Swift die in. But like, yeah,
• 32:54
  Speaker 3: you're right.
• 32:54
  Speaker 2: Who is the athlete today that is that that global
• 32:58
  Speaker 2: figure everyone knows think about like your best NBA players.
• 33:02
  Speaker 2: It's not like Novak uh uh not not Djokovic, No,
• 33:07
  Speaker 2: that's the wrong name. It's this guy thinking jok.
• 33:11
  Speaker 1: I always get that wrong.
• 33:12
  Speaker 2: Nicola, Nicola, whatever's for? Like, it's not him, it's not
• 33:16
  Speaker 2: Anthony Edwards, it's not Jason Tatum. Like they're not getting
• 33:19
  Speaker 2: to that status. No one in the NHL qualifies because
• 33:22
  Speaker 2: it's it's too much of a niche sport. Baseball is dying.
• 33:25
  Speaker 2: It's not anyone in baseball. Maybe Otani, but even there,
• 33:28
  Speaker 2: it's kind of like, I don't know if you asked. No,
• 33:31
  Speaker 2: here's the thing. If you asked a bunch of non
• 33:33
  Speaker 2: sports fans, do you know Michael Jordan, Yes, do you
• 33:36
  Speaker 2: know Lebron James, Yes? Do you know Tom Brady? Yes.
• 33:39
  Speaker 2: You can't ask them that about Shoe a Otani. You
• 33:41
  Speaker 2: can't ask them that about Nicola Jokic. And is that
• 33:46
  Speaker 2: just the case today across sports?
• 33:47
  Speaker 3: Like, because I think you could have said the same
• 33:49
  Speaker 3: thing about Wayne Gretzky in the nineties, right, big non
• 33:52
  Speaker 3: hockey fans would have known who Wayne Gretzky is. And
• 33:54
  Speaker 3: I exactly know that anyone occupies that space nationally today
• 33:58
  Speaker 3: in the NHL.
• 33:58
  Speaker 2: The question the NBA, the question is why. And this
• 34:01
  Speaker 2: is one that might be problematic for Nike. Is it
• 34:04
  Speaker 2: because Hey, the media environment is fracturing and so there
• 34:07
  Speaker 2: isn't the singular focus of everyone on these people the
• 34:10
  Speaker 2: same way there used to be. Like, is it fair
• 34:12
  Speaker 2: to ask will there never be another Lebron James or
• 34:16
  Speaker 2: another Tiger Woods? Because they're just not there. I mean
• 34:20
  Speaker 2: even in golf, Scotty Scheffler is doing things that Tiger
• 34:24
  Speaker 2: Woods used to do. Yeah, he's got the personality of
• 34:27
  Speaker 2: a moth. A moth just drawn to blue light. Just
• 34:34
  Speaker 2: absolutely zero Peru I find out. You mean he really
• 34:37
  Speaker 2: likes shiny things and brings them close to him by
• 34:39
  Speaker 2: winning so much. Yes he does. But is anyone like
• 34:42
  Speaker 2: lining up to be like, oh, Scotty Scheffler, is this
• 34:45
  Speaker 2: world ambassador for golf? No, Like it's it's not there.
• 34:48
  Speaker 3: I mean, with the demise of Sports Center in is
• 34:51
  Speaker 3: there just less interest in sports today? I know that
• 34:53
  Speaker 3: ratings are through the roof on all these things, but
• 34:56
  Speaker 3: do people just follow it differently due to things like sports, gambling,
• 34:59
  Speaker 3: fantasy and all these things where there is no none
• 35:04
  Speaker 3: of that same dedication. Plus there's all sorts of new
• 35:06
  Speaker 3: stuff that is gaining tractions, such as gaming, such as podcasting.
• 35:10
  Speaker 2: There's just new forms of someone says Connor McGregor. But
• 35:15
  Speaker 2: no again, like he's big, but I think he's better
• 35:18
  Speaker 2: than better than any hockey player in history. But no,
• 35:22
  Speaker 2: David Mma, guy got it? McGregor. Yeah, that makes more sense,
• 35:27
  Speaker 2: not Connor McDavid. There's only one sport in MIC's world. Yeah,
• 35:30
  Speaker 2: it's only hockey. Folks want to talk to you about
• 35:34
  Speaker 2: setting New Year's resolutions, and for a lot of folks
• 35:39
  Speaker 2: it's about getting their finances under control. I think when
• 35:41
  Speaker 2: I look at these lists, it's always like, lose fifteen
• 35:44
  Speaker 2: pounds and then get a handle on my personal finances.
• 35:47
  Speaker 3: Those always occupy the top two. I don't know how
• 35:50
  Speaker 3: to help you out with number one. I'll be honest.
• 35:52
  Speaker 3: I share my own issues with weight gain and those
• 35:55
  Speaker 3: types of problems, especially this time of year. But in
• 35:59
  Speaker 3: terms of getting your finances in order, I have seen
• 36:03
  Speaker 3: this play a crucial crucial role in people stress levels,
• 36:08
  Speaker 3: in their ability to just tackle life better once they
• 36:12
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• 37:15
  Speaker 2: FedEx making the decision to spin off their freight unit,
• 37:19
  Speaker 2: uh and the downside of it, according to this piece
• 37:22
  Speaker 2: from Bloomberg opinion, is that the parcel business will stay
• 37:26
  Speaker 2: very low margin and very capital intensive. I think this
• 37:29
  Speaker 2: is by design for FedEx.
• 37:31
  Speaker 3: Sure they have a very valuable business and a very
• 37:34
  Speaker 3: low margin business, and they want to help out.
• 37:37
  Speaker 2: Well you got I think they want someone to buy
• 37:39
  Speaker 2: the low margin business, and that's someone rhymes with Stallmart.
• 37:44
  Speaker 2: Oh why Walmart? Well, they're not doing doesn't deliver? Amazon doesn't.
• 37:51
  Speaker 2: Amazon doesn't need this. Amazon already has an internal like
• 37:55
  Speaker 2: Soup to knuts whatever, Like, why would Amazon need to
• 37:57
  Speaker 2: buy a parcel deliver service when they already run one?
• 38:00
  Speaker 2: Walmart on the other hand, does not have one. Oh
• 38:03
  Speaker 2: that's interesting that. That's where my mind went is they're
• 38:08
  Speaker 2: looking for the Waltons to pick up the phone and say, hey,
• 38:12
  Speaker 2: give me some of that, or however you put a
• 38:15
  Speaker 2: deal together, and it's like that's all. I think. It's
• 38:17
  Speaker 2: like that quick break here, Hour two including Festivus coming
• 38:21
  Speaker 2: up next