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Warsh Faces a Real Fed Test as Oil Risks Build · The Financial Exchange Show

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Speaker 2: Chuck, Mike and Tucker with the hears. We look to
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Speaker 2: finish out the week, and I'm gonna start with the
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Speaker 2: piece from New York Times is titled war and Tariffs
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Speaker 2: threaten a resilient US economy. Again, Let's unpack this a
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Speaker 2: bit in terms of these two items, because there are
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Speaker 2: two different items obviously, that's why they're mentioned as separate
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Speaker 2: items in the headline. Let's start first with the tariff piece.
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Speaker 2: What happened yesterday, as it relates to tariff's mint.
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Speaker 3: We had an announcement from the White House that they
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Speaker 3: were imposing tariffs per Section three to zero one of
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Speaker 3: the Trade Act of nineteen seventy four on around eighty
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Speaker 3: different countries between ten and twelve and a half percent
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Speaker 3: rates of tariff. Those tariff rates are not caps predetermined
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Speaker 3: by that section.
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Speaker 2: That they are using.
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Speaker 3: The White House chose those rates, and so these tariffs
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Speaker 3: replace a bunch of expiring tariffs and continue and try
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Speaker 3: and keep in place an average teriff rate of around
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Speaker 3: ten percent on those countries. I don't I don't know
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Speaker 3: how big of a change this is. I do, I do, Okay, good,
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Speaker 3: it's not a change. It's not a change. And the
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Speaker 3: important piece that I wanted to point out there is
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Speaker 3: this law would have, you know, the president and his
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Speaker 3: advisors could have chosen a twenty percent rate, They could
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Speaker 3: have chosen a fifty percent rate, They could have chosen
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Speaker 3: one hundred percent rate if they so chose.
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Speaker 2: This seems like a status quo move.
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Speaker 3: That they are hoping they can put in place without
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Speaker 3: much disruption. And while I am certain there will be
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Speaker 3: lawsuits on behalf of all sorts of companies that file suit,
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Speaker 3: you know, asking about the supply chain research that the
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Speaker 3: White House did to determine whether or not that you're
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Speaker 3: using avery and indentured servitude in the supply chains, it
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Speaker 3: seems like kind of a non issue.
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Speaker 2: Yeah, I mean, I think the piece that's interesting to me.
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Speaker 2: You're obviously gonna have legal challenges, of course. I think
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Speaker 2: the piece that's going to be interesting to me on
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Speaker 2: the legal challenge because again, like the previous ones, took
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Speaker 2: what was it like almost a year to work through.
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Speaker 2: Announced in April, and I think we got the resolution
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Speaker 2: in like December January, Yeah, sometime yeah, between December and February,
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Speaker 2: so it was like eight months or so, let's call
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Speaker 2: it eight to ten months was the process. During that time,
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Speaker 2: the tariffs were still allowed to be collected because the
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Speaker 2: US government alleged, Okay, there would be you know, irreparable
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Speaker 2: harm or you know, whatever it might be, and so
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Speaker 2: we're gonna be able to still collect them and then
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Speaker 2: refund them all correct. And so that's the interesting piece
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Speaker 2: to me is given that that first round of tariffs
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Speaker 2: when finally struck down by the Supreme Was it the
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Speaker 2: Supreme Court that struck down Okay, I can't even remember
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Speaker 2: like the full path that took.
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Speaker 3: Yeah, they didn't resolve how it was gonna be paid back,
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Speaker 3: but they ultimately struck it down.
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Speaker 2: Got it. Now that that precedent is set, I wonder
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Speaker 2: if any legal challenge that ends up pausing tariffs that
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Speaker 2: that you know, to this ends up basically like staying
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Speaker 2: the tariffs and so they're not in place until the
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Speaker 2: challenge is resolved. Given that there's a precedent set for
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Speaker 2: refunding tariffs that were found to be you know, unconstitutional,
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Speaker 2: fair question. That's that's the only interest that I have
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Speaker 2: on this are is this round of tariffs gonna change
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Speaker 2: anything for the US economy broadly speaking? No, right on
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Speaker 2: an individual level, depending on the company where you importantly.
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Speaker 2: Maybe I'm not saying it won't have any impact on anyone.
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Speaker 2: What I am saying is is it anything that rises
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Speaker 2: to the level of this is going to you know,
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Speaker 2: affect the US economy uh and threaten it as you know,
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Speaker 2: as being said in the title. Nope. Now if you
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Speaker 2: want something that is you know it does have the
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Speaker 2: potential to threaten the US economy. The continuation and potential
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Speaker 2: expansion of a war in the Middle East, Yeah, it's
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Speaker 2: got it. Okay. To this point, high energy prices have
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Speaker 2: not caused a meaningful downshift in the US economy. That
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Speaker 2: doesn't mean that if high energy prices either continue or
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Speaker 2: get worse, that they won't And that I think is
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Speaker 2: the important thing to note when we talk about this
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Speaker 2: is to this point, the stuff that's been driving the
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Speaker 2: US economy has been semiconductors, and what high energy costs
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Speaker 2: don't really threaten the semiconductor trade. There's other stuff that's
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Speaker 2: threatening that, but it's not like what's happening with gas
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Speaker 2: prices or diesel prices or heating oil prices doesn't impact
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Speaker 2: how many memory chips, micron cells, or how many GPUs
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Speaker 2: in vidia cells.
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Speaker 3: To put it plainly, this is not a consumer led
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Speaker 3: economy like it was for most of the last.
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Speaker 2: Two days decades. Consumer spending has been fine. It hasn't
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Speaker 2: been bad. It's consistently growing around five to four to
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Speaker 2: four to six percent year over year with three percent inflation,
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Speaker 2: which means it's growing like two percent in real terms,
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Speaker 2: which is fine. Like, it's it's not bad, it's not amazing,
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Speaker 2: it's it's fine. Could that be threatened if gas prices
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Speaker 2: move higher and and it you know, passes through to
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Speaker 2: other parts of the economy. Yeah, potentially you can make
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Speaker 2: that case there, And if prices go high enough and
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Speaker 2: there's enough demand destruction, it could absolutely, you know, cause
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Speaker 2: cause issues you know that are that are more broad.
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Speaker 2: But I'm also going to look at the data that
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Speaker 2: we've seen, and to be completely honest, the real threat
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Speaker 2: in my mind is not to the US economy, but
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Speaker 2: it's to the US stock market. And remember they're different, Yeah,
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Speaker 2: they're fundamentally different. And the risk, in my opinion, is
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Speaker 2: what happens to the bond market and its impact on
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Speaker 2: the stock market. That's like that that's the real risk,
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Speaker 2: in my opinion is if we do end up with,
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Speaker 2: you know, the worst case scenarios, which I don't know
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Speaker 2: if they're going to come to pass, Like I'm not
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Speaker 2: sitting here saying like they will. But if you do
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Speaker 2: end up with the worst case scenarios about what could
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Speaker 2: happen in the Middle East, which again we're kind of
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Speaker 2: flirting with them, we're getting closer to them, but they're
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Speaker 2: not happening now. If you do end up with those,
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Speaker 2: what happens to bonds? How high do they need to go?
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Speaker 2: And how much pain does that cause in the stock market?
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Speaker 2: And then because we do have this you know, closer
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Speaker 2: link now between asset prices and what goes on in
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Speaker 2: the US economy, does that derail consumer spending to the
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Speaker 2: point where you start to see some problems? Sure?
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Speaker 3: I mean, these companies are investing hundreds of billions of dollars,
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Speaker 3: and if they need to borrow money at higher rates,
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Speaker 3: or if investors need to take a more critical look
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Speaker 3: at that spending because those interest rates are that much higher,
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Speaker 3: and that could be a piece here.
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Speaker 2: I'll also, you know, if we're talking about worst.
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Speaker 3: Case scenarios, I don't think it's fair to ignore the
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Speaker 3: fact that we could be facing actual shortages of energy, right.
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Speaker 3: I know, we've talked about that of the last seven months.
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Speaker 2: We will No, no, no, I don't. I don't think
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Speaker 2: we will in the US either.
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Speaker 3: But let's remember that the AI supply chain is a
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Speaker 3: global one and a lot of this manufacturing and output
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Speaker 3: does come from Asian nations that do not largely produce energy.
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Speaker 3: And so I don't think we're going to get there either,
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Speaker 3: based on what China has been capable of doing over
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Speaker 3: the course of the last several months. But this, this
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Speaker 3: entire economy is not just a US centric one where
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Speaker 3: the only thing that matters is diesel and gasoline availability
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Speaker 3: here in the United States.
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Speaker 2: We've always been big on this show in terms of
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Speaker 2: like you got to keep an open mind on potential outcomes.
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Speaker 2: Last year in April, when we were you know, seeing
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Speaker 2: different kinds of you know, trade situations, we said, look,
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Speaker 2: you got to keep an open mind as to how
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Speaker 2: this can resolve and understand that things can change quickly,
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Speaker 2: and they did, like in a week. Likewise, with what's
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Speaker 2: going on in the Middle East right now, I think
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Speaker 2: you've got to keep an open mind as well. And
9:17
Speaker 2: an open mind doesn't mean like just in one direction.
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Speaker 2: It means, hey, the status quote could be maintained, there
9:23
Speaker 2: could be improvement, and there could be worsening, and yes,
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Speaker 2: you can you know, wait those different probabilities and if
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Speaker 2: you want to peg me down on like my personal
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Speaker 2: waiting right now, it's tough. Okay, Mike, here, here we go.
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Speaker 2: This is gonna be a tough one to walk through.
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Speaker 2: I have how I feel things will be in the
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Speaker 2: Middle East. A week from now, a month from now,
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Speaker 2: in three months from now, good luck, okay, a month
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Speaker 2: from now, I'm sorry. A week from now, I lean
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Speaker 2: modestly towards things will be better. The reason being when
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Speaker 2: we typically see you know, large threats coming via tweet
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Speaker 2: or true social from the president, that's usually about when
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Speaker 2: things start to pivot in the other direction. That's been
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Speaker 2: the trend over the last six months, which.
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Speaker 3: Just to put out there is kind of interesting that
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Speaker 3: gas oil prices are falling between two and a half
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Speaker 3: and three and quarter percent right now.
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Speaker 2: I think that's a different item and we can get
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Speaker 2: to that in a minute. Though. The if you look
10:26
Speaker 2: out a month from now, I think things are probably
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Speaker 2: about the same. If you look out three months from now,
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Speaker 2: I have no idea, and I'm not ashamed to admit
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Speaker 2: that because I have no clue, but like that that's
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Speaker 2: kind of where I think things are on oil prices today.
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Speaker 2: The big thing, remember yesterday, we have to now be
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Speaker 2: concerned about two straits, not just one. We've got the
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Speaker 2: straight up horror moves and which is, you know, connecting
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Speaker 2: the Gulf of the Persian Gulf into the Indian Ocean
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Speaker 2: that goes around the top of the Arrabi Peninsula coming
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Speaker 2: through the bottom kind of the southwest corner of the
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Speaker 2: Arabian Peninsula is the bob El bob El Mandeb Strait,
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Speaker 2: which the houthis a couple of days ago said okay,
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Speaker 2: we're gonna, you know, restrict anything you know, Saudi in
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Speaker 2: nature and took out two tankers and then overnight you
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Speaker 2: saw traffic basically moving as normal. So the question and
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Speaker 2: why you have oil coming off a couple dollars. No
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Speaker 2: one really knows what the Houthies mean by Saudi related transits.
11:31
Speaker 2: It could be just Saudi owned vessels, which the first
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Speaker 2: two that were shot were. It could be anyone transporting
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Speaker 2: Saudi oil, but that doesn't seem to hold up given
11:40
Speaker 2: what's transited through recently. It could be anyone making a
11:43
Speaker 2: stop in Saudi Arabia. So we still don't quite know
11:47
Speaker 2: the rules of the road there, and we'll see how
11:49
Speaker 2: that develops in the next week or two. But the
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Speaker 2: initial fear after those two tankers were it was, Oh,
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Speaker 2: they're not gonna let anything through and it's gonna be
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Speaker 2: the same as the straight offore moves. It doesn't appear
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Speaker 2: to be the case as of this morning, and we'll
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Speaker 2: just have to see how it evolves. This can all
12:05
Speaker 2: change tomorrow. We we it's it's changed the show. It's yeah,
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Speaker 2: I mean, please, I I don't. I don't want which
12:12
Speaker 2: it has I know, I know, I bookpe, you posted,
12:17
Speaker 2: you know what I always you know, people like wish
12:19
Speaker 2: for different things. I just want to live in I
12:21
Speaker 2: want to live in precedented times, not unprecedented ones. I
12:25
Speaker 2: want to live in times with precedent. That would be
12:28
Speaker 2: be nice. Uh, let's take a quick break when we return. Uh,
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Speaker 2: let's talk about a little bit this FED meeting that's
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Speaker 2: coming up next Wednesday. We're five days out from Kevin
12:38
Speaker 2: Worsh's second FED meeting. Is gonna be a sophomore slump
12:42
Speaker 2: or uh, you know, is is he gonna well? I
12:45
Speaker 2: don't really know. If you know, we'll talk about that next.
12:51
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13:37
Speaker 2: We got a piece here in Bloomberg. It's titled the
13:45
Speaker 2: economists stick to FED rate cut call as markets price
13:49
Speaker 2: in hikes. So here's what we're seeing. If you take
13:51
Speaker 2: a look at the Chicago mercandil exchange is fedwatch tool.
13:57
Speaker 2: The FED watch tool is saying, hey, we're gonna like
14:00
Speaker 2: you see a hike at the September meeting, not dodgely
14:05
Speaker 2: next week, and maybe another one at the December meeting.
14:11
Speaker 2: Economists surveyed by Bloomberg have said we're not gonna see
14:15
Speaker 2: anything until Q three of twenty twenty seven, when the
14:18
Speaker 2: FED is going to cut.
14:21
Speaker 3: So I'm just gonna throw this out. There is a
14:24
Speaker 3: forecast on something that's not going to occur until third
14:28
Speaker 3: quarter of twenty twenty seven.
14:30
Speaker 2: Right now.
14:30
Speaker 3: When it comes to interest rates and inflation, useful, it's
14:34
Speaker 3: I mean, it's it's useful.
14:36
Speaker 2: Yeah, Like it's it's it's a data point is to
14:38
Speaker 2: what people think, and what people think matters to markets.
14:41
Speaker 2: Here's the point that I'll make, h my ultimately, when
14:45
Speaker 2: it comes to interest rates, over the last five years,
14:51
Speaker 2: generally everyone's been wrong, you know, like it's it's not
14:56
Speaker 2: like what the the CME you know, market is pricing in.
15:00
Speaker 2: It has been accurate. You can see back in twenty
15:02
Speaker 2: twenty two, it was pricing in like seventy five basis
15:04
Speaker 2: points of hikes for the full year and we got
15:06
Speaker 2: like four hundred and fifty. Yeah. So I think that
15:10
Speaker 2: you have to look at all of this and say, hey,
15:12
Speaker 2: this is what's being priced in now, and then understand
15:16
Speaker 2: how different actions potentially change what that means for the market. So,
15:20
Speaker 2: just as an example, like here's something that you need
15:22
Speaker 2: to understand about the meeting next week. Right now, there
15:29
Speaker 2: is a sixty four point two percent chance priced in
15:32
Speaker 2: that there is no hike. There's a thirty five point
15:36
Speaker 2: eight percent chance of a hike priced in pretty good huts.
15:41
Speaker 2: It was we haven't seen like a meeting beat this,
15:43
Speaker 2: you know, up in the air in a while. Yeah,
15:45
Speaker 2: it's it's you know, it's again. This is it's a
15:48
Speaker 2: new FED. They're not saying as much. We'll see if
15:50
Speaker 2: this becomes the norm or just you know, we got
15:52
Speaker 2: to get used to what they're saying or not saying.
15:56
Speaker 2: Here's the thing. If the Fed, I'm sorry, If the
16:00
Speaker 2: the Fed's not gonna cut at the next meeting, I'm
16:02
Speaker 2: sorry to everyone who's hoping for that, and it wouldn't
16:04
Speaker 2: They wouldn't do what you think it would. Anyways. If
16:07
Speaker 2: the FED does nothing at this meeting, what it means
16:12
Speaker 2: is that that thirty five point eight percent chance of
16:14
Speaker 2: a hike that's priced in now hasn't occurred. It is
16:17
Speaker 2: implicitly the FED creating easier monetary policy because the market
16:23
Speaker 2: right now is priced for the chance that they actually hike. Likewise,
16:28
Speaker 2: if the Fed hikes at that meeting, it is tighter
16:31
Speaker 2: policy than is currently priced in because there's a sixty
16:35
Speaker 2: four percent chance that they do nothing. So it's not
16:38
Speaker 2: like one of these meetings where hey, it's ninety nine
16:41
Speaker 2: percent chances that they're going to do this, and then
16:43
Speaker 2: when they do that, it doesn't affect markets. If the
16:45
Speaker 2: Fed doesn't hike next week, it is going to produce
16:49
Speaker 2: a loosening effect on markets. Which the interesting counterintuitive thing
16:54
Speaker 2: is if they don't hike next week, watch the long
16:56
Speaker 2: end of the yield curve, because I think it goes higher.
17:01
Speaker 2: The FIT doesn't hike next week, it's saying, yeah, we're
17:03
Speaker 2: we're going to be easier than the market is pricing
17:05
Speaker 2: in right now. The long end's got to reflect that, yeah,
17:09
Speaker 2: it'll be.
17:10
Speaker 3: So the way these meetings work, they put out their
17:13
Speaker 3: rate announcement at two pm, and then the press conference
17:16
Speaker 3: occurs at two thirty. It'll be interesting to actually watch
17:19
Speaker 3: the volatility in that half hour period or I guess
17:21
Speaker 3: that hour period from you know, interest right announcement to
17:25
Speaker 3: real meat on the bones of the press conference. If
17:31
Speaker 3: they don't hike, I do think Kevin worsh has to
17:33
Speaker 3: talk a lot more Like if his goal is to
17:36
Speaker 3: really shut up, then I feel like his best bet
17:38
Speaker 3: is to just raise rates and be able to not talk.
17:41
Speaker 3: If he doesn't, then he's gonna have to face a
17:43
Speaker 3: lot of questions about why not.
17:44
Speaker 2: I wouldn't be surprised if they hike, because because if
17:48
Speaker 2: they hike it, there's a couple. Here's the thing. A
17:51
Speaker 2: single hike is both incredibly meaningful and incredibly not.
17:56
Speaker 3: Well, it's incredibly meaningful and not incredibly impactful. As how
18:00
Speaker 3: I describe it, that's the right way to put it.
18:02
Speaker 3: It's if they hike next week, it's a signal to
18:05
Speaker 3: the market. Yo, dudes, New Boston town. My name's keV.
18:11
Speaker 3: This is how I manage monetary policy. Like it is,
18:13
Speaker 3: very much like I am going to back up my
18:16
Speaker 3: talk with action. Even though it's one hike, it's not
18:19
Speaker 3: impactful in that it's not going to actually change the
18:24
Speaker 3: course of inflation. It's not going to actually in and
18:28
Speaker 3: of itself change where you know, interest rates are. But
18:32
Speaker 3: the signal alone might be powerful enough that it says, hey,
18:37
Speaker 3: this guy's you know, not messing around on this, and
18:40
Speaker 3: that could actually bring the long end of the yield
18:43
Speaker 3: curve in because markets say, you know what, he's not
18:48
Speaker 3: just gonna let the economy run hot and you know,
18:50
Speaker 3: inflation be whatever he wants. He's gonna slow the economy
18:54
Speaker 3: if he needs to in order to reign in inflation,
18:56
Speaker 3: and that's what brings the long end in then if
18:59
Speaker 3: if it happens. So I think this is in my opinion,
19:04
Speaker 3: this is one of the most interesting FED meetings that
19:07
Speaker 3: we're heading into in a while because there is this
19:09
Speaker 3: uncertainty and because of what the resolution of the uncertainty
19:14
Speaker 3: can mean to markets in either direction, depending on how
19:18
Speaker 3: it resolves.
19:19
Speaker 2: So, you know, sometimes I poop poo FED meeting. I'm like, yeah,
19:22
Speaker 2: this one's not really that. This is kind of a
19:24
Speaker 2: cool one here, and I'm I'm pretty excited for it.
19:28
Speaker 2: Just five days out. It's like it's like we're heading
19:31
Speaker 2: to Christmas, but it's Christmas in July. Quick break here,
19:34
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Speaker 2: Marc gets closed out.
20:00
Speaker 4: The fall of the week in mixed territory is Wall
20:02
Speaker 4: Straight awaits more developments out of the Middle East, with
20:04
Speaker 4: oil seeing some reliefs today. Treasury yields also being closely watched,
20:08
Speaker 4: with a FED meeting on tap next week. Right now,
20:11
Speaker 4: the Dow is up about two tenths of one percent,
20:14
Speaker 4: or eighty seven points higherr SMP five hundred is up
20:16
Speaker 4: only one point now two points. Nasdaq is down two
20:21
Speaker 4: thirds of a percent to one hundred and fifty seven points,
20:23
Speaker 4: or else two thousands, down about two tenths of a percent.
20:26
Speaker 4: Ten Your treasureeled down three basis points at four point
20:29
Speaker 4: six six percent, and oiled down over two and a
20:32
Speaker 4: half percent, trading at eighty nine dollars a barrel. Intel
20:36
Speaker 4: reported stronger than expected second quarter results were recorded its
20:39
Speaker 4: fastest revenue growth rate for any quarter since twenty eleven.
20:43
Speaker 4: Intel also offered optimistic guidance. However, after jumping in off
20:47
Speaker 4: hours trading, the stock is now down by two percent. Meanwhile,
20:50
Speaker 4: American Express reported a revenue miss in the previous quarter,
20:54
Speaker 4: while its earnings came in above estimates, that stock down
20:57
Speaker 4: by six percent. Elsewhere, Oracle shares down two percent after
21:01
Speaker 4: the software company inc to ten year agreement with the
21:03
Speaker 4: Pentagon worth almost seven billion dollars. Boston Beer up two
21:07
Speaker 4: percent after its second quarter revenue narrowly beat expectations, and
21:11
Speaker 4: Verizon up nearly three percent after it posted a mixed
21:15
Speaker 4: earnings report for the previous quarter. It's full year guidance did, however,
21:19
Speaker 4: come in above expectations. I'm Tucker Silva and that is
21:24
Speaker 4: Wall Street Watch, Mike.
21:26
Speaker 2: We got this piece from market Watch. It's titled why
21:30
Speaker 2: fixing the housing crisis for under forties could trigger ten
21:34
Speaker 2: percent yields?
21:36
Speaker 3: So meaning old on which you know, again we kind
21:40
Speaker 3: of talking this O pick terms treasury yields. Ten year
21:42
Speaker 3: treasure yields at ten percent probably means thirty year mortgage
21:46
Speaker 3: rates at twelve fifteen percent.
21:50
Speaker 2: Something like that, somewhere between twelve and thirteen most likely. Yeah, okay, so, uh,
21:55
Speaker 2: let's first go to the let's go to part one
21:58
Speaker 2: of this. Uh, you never say never, but like I'm
22:04
Speaker 2: ninety nine point nine nine percent certain that the US
22:10
Speaker 2: economy and government can't survive ten percent treasury yields. Yeah,
22:19
Speaker 2: and by like the US government can't survive, I don't
22:21
Speaker 2: mean that. Like, what I mean by that is the
22:25
Speaker 2: US government can't afford to pay ten percent treasury yields.
22:29
Speaker 2: Like the math just doesn't work. The whole thing breaks down. Uh,
22:36
Speaker 2: why does this this piece say that we need ten
22:41
Speaker 2: percent treasury yields in order to fix the housing crisis?
22:45
Speaker 2: And one other thing at one point, Sorry, I when
22:52
Speaker 2: does the housing crisis end? Like? I feel like we've
22:55
Speaker 2: just been in a housing crisis for like twenty years now,
22:59
Speaker 2: and if you just call it always a crisis, it's
23:03
Speaker 2: not one, right, Like when isn't just a house?
23:06
Speaker 3: As I pointed out, you know, more recently, I know
23:11
Speaker 3: that we need to take into a you know, taken
23:13
Speaker 3: to factor combination of different issues between incomes, home prices,
23:19
Speaker 3: mortgage rates. But I pointed out on the show earlier
23:22
Speaker 3: this week that compared to a decade ago, the price
23:27
Speaker 3: of a house compared to median incomes actually got a
23:29
Speaker 3: bit cheaper, and we've been pretty flat lined now Again,
23:33
Speaker 3: mortgage rates being this high counteracts all of that effect.
23:36
Speaker 3: But I am with you that when we call it
23:39
Speaker 3: a crisis constantly, that's problematic. So for some reason, the
23:44
Speaker 3: author here their solution to fixing the housing crisis.
23:48
Speaker 2: To be fair, it's not the author. This was the
23:51
Speaker 2: interview with the author of the paper by someone by
23:55
Speaker 2: the name of Russell Clark, who I've never heard of.
23:58
Speaker 2: Apparently he runs a hedge fund over in the UK. Yep.
24:01
Speaker 2: Maybe he's good at maybe he's not. I haven't actually
24:03
Speaker 2: looked at anything that he's done.
24:05
Speaker 3: So the argument for ten percent rates is not a
24:10
Speaker 3: way of bringing down housing costs. In fact, it's a
24:14
Speaker 3: result of the solution which he says, Hey, to make
24:17
Speaker 3: housing affordable, we just need to dramatically increase incomes to
24:24
Speaker 3: the tune of seven percent a year for the next decade,
24:27
Speaker 3: effectively doubling incomes over the next ten years.
24:30
Speaker 2: Tucker, can I get the car crash sound effect? Yeah, yeah, yep,
24:37
Speaker 2: And that's where it jumps the shark, Like that is
24:42
Speaker 2: completely ridiculously insane, to the point of being just not possible. Again.
24:52
Speaker 3: Quote, if you want to get housing back to some
24:55
Speaker 3: more reasonable levels, you need to have wages rising at
24:58
Speaker 3: about seven percent a year. He doesn't define why you
25:02
Speaker 3: would need to see wages double over the next decade
25:05
Speaker 3: to bring housing to.
25:06
Speaker 2: A more affordable level.
25:07
Speaker 3: Like that would make housing probably the cheapest that we've
25:11
Speaker 3: seen since the nineteen seventies in the United States. And Michael,
25:15
Speaker 3: there's no mechanism for that.
25:17
Speaker 2: There's there's no mechanism for that. Furthermore, like when you
25:21
Speaker 2: look at the data. Actually, and I'll just use the
25:25
Speaker 2: fed's wage growth tracker just because they they have the
25:29
Speaker 2: data and it exists. So here's here's the deal. Like,
25:33
Speaker 2: wage growth doesn't just rise because we tell it too.
25:37
Speaker 2: We're not just like it's not like you throw like
25:39
Speaker 2: yeast into you know, a bunch of flower and stuff
25:42
Speaker 2: and it's like, oh it's rising. Like, no, wage growth
25:45
Speaker 2: rises because you have companies competing for talent and they
25:50
Speaker 2: have to pay more, and not because of higher minimum
25:53
Speaker 2: wage laws. But no, like this, look look at twenty
25:55
Speaker 2: twenty two, just as the example, the FEDS fed Atlanta
25:58
Speaker 2: Fed's wage growth tracker reach six point seven percent wage
26:02
Speaker 2: growth in July of twenty twenty two. Okay, the reason
26:06
Speaker 2: that it did that was because everyone was competing for labor.
26:09
Speaker 2: A bunch of people had gotten like laid off the
26:11
Speaker 2: year before, and everyone was like, oh no, we got
26:13
Speaker 2: to bring everyone back and more. And so it was
26:15
Speaker 2: it was insane. It was crazy. We like, it's just
26:20
Speaker 2: it was nuts. So here's the thing. When you get
26:23
Speaker 2: wages rising seven percent a year, this Clark dude, who
26:28
Speaker 2: I'm I'm calling dude, even though he's probably way more
26:31
Speaker 2: accomplished than me, is probably like way better his job.
26:34
Speaker 2: Like I'm calling him a dude because his point makes
26:38
Speaker 2: no sense here, and that drops your title from hedge
26:41
Speaker 2: fund manager to dude. And so basically what he's saying is, Yeah,
26:47
Speaker 2: we want to get wages rising at seven percent a year,
26:50
Speaker 2: but then you have to have the housing market be flat,
26:52
Speaker 2: so you need high interest rates to keep housing prices
26:55
Speaker 2: from rising. Well, if you raise interest rates that much,
26:59
Speaker 2: it slows the accomo to me dramatically, which means ways
27:02
Speaker 2: just going to grow at seven percent. Like the I
27:05
Speaker 2: don't know how you get these things coexisting, Chuck.
27:09
Speaker 3: If I were made king for a day, like, let's
27:11
Speaker 3: just you know, we like playing this hypothetical every once
27:14
Speaker 3: in a while. Yeah, yeah, and what would you do
27:16
Speaker 3: I had and I was given the mandate, Hey, you
27:19
Speaker 3: need to make housing more affordable by doing one of
27:22
Speaker 3: these two things, either stringing that either bringing down the
27:25
Speaker 3: house cost of housing or bringing up incomes. I'll take
27:29
Speaker 3: bringing down the cost of housing and putting in rules
27:32
Speaker 3: to do that any day of the week over trying
27:35
Speaker 3: to sort through how I'm going to shape the economy
27:38
Speaker 3: in a way that's going to consistently bring up wages
27:40
Speaker 3: of the next decade.
27:40
Speaker 2: Like, if I'm king for.
27:41
Speaker 3: The day, then you know, forget about all of your
27:44
Speaker 3: zoning regulations and all these things I'm going to create.
27:47
Speaker 3: There's a pretty good formula for how you could go
27:49
Speaker 3: about making housing more affordable. The problems you would piss
27:52
Speaker 3: everybody off. But if you're king for the day, then
27:53
Speaker 3: it doesn't matter. The conditions that you would need to
27:57
Speaker 3: create in order to consistently bring up in comes is
28:01
Speaker 3: just way more complicated.
28:02
Speaker 2: Well, Mike, it ignores the laws of supply and demand. Okay,
28:08
Speaker 2: it's hey, like, let's bring up incomes. Okay, but are
28:13
Speaker 2: we gonna do anything to supply No? Well, what do
28:17
Speaker 2: you think is gonna happen? Well, that's why we need
28:18
Speaker 2: to raise interest rates that much? Well, then how are
28:20
Speaker 2: you gonna get incomes up? But like, the whole thing
28:22
Speaker 2: breaks down because it's not logically coherent. So yes, I
28:28
Speaker 2: come back to, hey, if we're actually serious about getting
28:31
Speaker 2: the cost of housing down, you build more housing. How
28:34
Speaker 2: do we know this works? The places that have done
28:36
Speaker 2: this Austin, Texas, Minneapolis, Minnesota. Look at what has happened
28:41
Speaker 2: to their rental costs, and you see it, it's like, oh, like,
28:46
Speaker 2: this is how housing actually gets cheaper, not just rentals.
28:48
Speaker 2: When you build more rentals, by the way, it means
28:51
Speaker 2: that people who might have previously chosen to buy, they
28:54
Speaker 2: decide to rent because it's cheaper, which then makes buying
28:57
Speaker 2: a house cheaper as well because there's less demand there.
29:00
Speaker 2: So and there are there again to be clear here,
29:03
Speaker 2: there are trade offs.
29:04
Speaker 3: Guess what if you build more housing and make housing
29:05
Speaker 3: more affordable, There's gonna be more traffic, there's going to
29:08
Speaker 3: be less green space, there's going to be all of
29:09
Speaker 3: these things. And yes, you can build a in a
29:12
Speaker 3: thoughtful way. But I just get so sick of this debate.
29:16
Speaker 3: I see it in my town social media chats all
29:18
Speaker 3: the time like oh, heaven forbid, they're building a thirty
29:22
Speaker 3: unit apartment complex.
29:24
Speaker 2: We're never gonna be able to drive through town.
29:26
Speaker 3: And like, yeah, sorry, you live in one of the
29:29
Speaker 3: most expensive areas in the country, close to one of
29:33
Speaker 3: the biggest cities in the country that happens to support
29:37
Speaker 3: some of the highest wages. So yeah, there are these
29:40
Speaker 3: trade offs, and I don't know what to tell you.
29:44
Speaker 2: One kids just done with this one cannot simultaneously complain
29:48
Speaker 2: about housing affordability but not allow more housing to be built.
29:52
Speaker 2: It is logically inconsistent and kind of just like not
29:57
Speaker 2: a nice move. It's a you can't have your cake
30:01
Speaker 2: and eat it too. What did the guy at the
30:02
Speaker 2: town hall say?
30:04
Speaker 4: Uh oh, marblehead. It was something like he was like,
30:08
Speaker 4: maybe we could stop being a bunch of pricks.
30:12
Speaker 2: That was It.
30:15
Speaker 3: Was very much the like, no, he didn't even better
30:17
Speaker 3: because he asked, so are we kind of just being.
30:20
Speaker 2: A bunch of precks. It was very much the mean,
30:22
Speaker 2: well done. Wait a minute, are we the baddies? Is
30:26
Speaker 2: that us? The answer is yes, like we are, Like
30:31
Speaker 2: you can't simultaneous collective we suck. Yes, we can't complain
30:35
Speaker 2: about our property taxes, and then say but you can't
30:39
Speaker 2: build that, Like no, you get to pick one. If
30:42
Speaker 2: you want to complain about your property taxes, fine, like
30:47
Speaker 2: like you you can do that, but you can't say
30:51
Speaker 2: don't build that. If you want to say don't build that,
30:55
Speaker 2: then you can't complain about your property taxes. You get
30:59
Speaker 2: to choose one. If you choose both, then yes, you
31:03
Speaker 2: are the batty. Let's take a quick break when we return.
31:07
Speaker 2: Let's see AI it's still here and we're gonna talk
31:11
Speaker 2: about it.
31:12
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31:42
Speaker 2: Mike Intel reported earnings after the bell yesterday, and everyone's
31:45
Speaker 2: obviously interested in what's going on with semiconductor stocks. The
31:48
Speaker 2: earnings were fantastic, basically double what the market was expecting.
31:54
Speaker 2: Sales came in like five to ten percent above for
31:57
Speaker 2: the next quarter. So the stock initially popped, i think
31:59
Speaker 2: twelve percent after hours. Today it ended up opening basically
32:04
Speaker 2: flat and now is trading off about four and a
32:07
Speaker 2: half percent today. The semiconductor sector is a whole down
32:10
Speaker 2: four percent today, and so it's kind of continuing this
32:14
Speaker 2: theme of hey, like Semi's you know, peaked about a
32:18
Speaker 2: month and a half ago, and I've just been seeing
32:20
Speaker 2: these huge daily swings now and are just kind of
32:24
Speaker 2: trading like poop, even when the like the overall earnings
32:28
Speaker 2: are pretty good.
32:29
Speaker 3: Yeah, I mean like, these were really phenomenal earnings, And
32:34
Speaker 3: I think again, when you have phenomenal earnings paired with
32:38
Speaker 3: market sell or company sell offs is an interesting thing
32:42
Speaker 3: to monitor. Obviously, there's some big execution questions with Intel.
32:46
Speaker 3: They have failed to execute on most anything for the
32:48
Speaker 3: last decade or so. And can they turn this moment
32:52
Speaker 3: into something lasting is the major question that everybody has.
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34:09
Speaker 2: Mike, you got a fascinating piece in the Boston Globe.
34:11
Speaker 2: It's titled why Facebook Marketplace is the new hotspot for
34:14
Speaker 2: home cooked food. Quote, you can't get that quality at restaurants.
34:18
Speaker 2: And basically what's going on is a bunch of people
34:20
Speaker 2: are making food in home kitchens and selling it on
34:24
Speaker 2: Facebook Marketplace. Now I poked around again. Every state has
34:28
Speaker 2: different you know, laws as it relates to you know,
34:31
Speaker 2: is this allowed, what qualifies you to do this, what
34:33
Speaker 2: do you have to do? What makes this different from
34:36
Speaker 2: a restaurant. This came from the Boston Globe, So in Massachusetts,
34:39
Speaker 2: just as an example, you can set up what's called
34:43
Speaker 2: a residential kitchen. They established this law back in two
34:47
Speaker 2: thousand actually, so it's been on the books for like
34:49
Speaker 2: almost closing it on thirty years now. And basically you
34:55
Speaker 2: are allowed to sell under that definition non potentially hazardous
35:00
Speaker 2: and shelf stable foods jams, jellies, butters, stuff like that.
35:06
Speaker 2: Cakes and cupcakes and breads are fine. But again, like
35:11
Speaker 2: it's you know, kind of spelled out what you can
35:13
Speaker 2: and can't do.
35:15
Speaker 3: It does not look like the guy in the picture
35:17
Speaker 3: is preparing any of those types of things.
35:18
Speaker 2: No, they're talking about people like preparing like soups and
35:21
Speaker 2: stews and things like that. And I'm of two minds
35:25
Speaker 2: on this. On one hand, I'm like, you know what,
35:28
Speaker 2: it's it's nice that like someone's able to like you know,
35:31
Speaker 2: not have to go through a bunch of red tape
35:33
Speaker 2: in order to you know, do this. On the other hand,
35:36
Speaker 2: like there's a reason why we have health inspectors and
35:38
Speaker 2: stuff like that because you don't know exactly like what
35:42
Speaker 2: the kitchen your food is being made and looks like,
35:45
Speaker 2: and potentially can be very hazardous to public health depending
35:48
Speaker 2: on where it's being made.
35:50
Speaker 3: Actually, yeah, I mean see the massive let us issues. Yeah,
35:57
Speaker 3: we are facing in this country right now. And then
35:59
Speaker 3: just I mean that's happening with food inspections at one
36:03
Speaker 3: of the largest food suppliers in the world, and I
36:08
Speaker 3: don't know who would buy food on Facebook marketplaces. This
36:11
Speaker 3: terrifies men. I end up getting from like our nineties
36:16
Speaker 3: upbringing of not taking candy from strangers. And you know,
36:22
Speaker 3: I very much get to you know what, maybe we
36:25
Speaker 3: need to make it cheaper and easier to get through
36:28
Speaker 3: the regulatory hurdles for selling food, but we should probably
36:31
Speaker 3: have them, but they still need to exist because like
36:36
Speaker 3: again it's I always like the phrase, you know, like
36:39
Speaker 3: don't take down a fence until you know why it
36:40
Speaker 3: was put up. And sometimes I think we forget about
36:44
Speaker 3: like what led us to put these in place, and
36:46
Speaker 3: it's like, oh yeah, when you like cook food with
36:49
Speaker 3: like mouse droppings in there, you can end up with
36:51
Speaker 3: like roadent borne illnesses that make you sick or Hey,
36:54
Speaker 3: if your kitchen happens to be like right next to
36:58
Speaker 3: you know, a pig that's rolling in mud, Yeah, that
37:01
Speaker 3: can present you know, some bacterial problems and things like that,
37:05
Speaker 3: and you just don't know what the kitchen looks like
37:08
Speaker 3: if you're buying the stuff off Facebook Marketplace, you just
37:11
Speaker 3: don't And I mean there's some form of recourse. If
37:14
Speaker 3: a restaurant gets you sick, good luck finding the person
37:18
Speaker 3: on Facebook marketplace again. If they ever get you sick, well.
37:21
Speaker 2: I'm sure you can find them. Like, why wouldn't you
37:23
Speaker 2: be able to find them?
37:25
Speaker 3: If I find out that I get a bunch of
37:27
Speaker 3: people sick, I'm closing my Facebook account and.
37:29
Speaker 2: You still know who you bought from the house, You
37:32
Speaker 2: know the person.
37:33
Speaker 3: All these people are saying, Yeah, I meet up in
37:35
Speaker 3: a parking lot in a public space and nobody has
37:37
Speaker 3: my address for them.
37:38
Speaker 2: Well, don't you have to use your real name on
37:40
Speaker 2: Facebook marketplace? No, you don't know. You can just sell
37:44
Speaker 2: us like Jimmy. Correct. Yeah, this has all sorts of problems, guys,
37:50
Speaker 2: don't do this. Yeah, shut it down. You had to
37:53
Speaker 2: use a real name on Facebook. No, No, I haven't
37:55
Speaker 2: been on Facebook in five years now. No, Yeah, this
37:59
Speaker 2: is not good. Don't do this. Yeah. So I bought
38:02
Speaker 2: a seafood chowder from a guy called the LOPSTERA dude, right, Like,
38:06
Speaker 2: that's kind of what it feels like. Next thing, I know,
38:08
Speaker 2: I'm all clammy. See what I did there. I've had
38:15
Speaker 2: some bad seafood chowder in my day, I gotta tell you.
38:17
Speaker 2: Let's take a quick break. Our two is coming up
38:19
Speaker 2: in a bit