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Why is your gas bill so high right now? · The Financial Exchange Show

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Speaker 2: Good morning on a red Tuesday. If you're just joining
1:16
Speaker 2: US Dow, SMP, and NASDAK all in negative territory, with
1:19
Speaker 2: the Nazak leading the way off three hundred and seventy
1:22
Speaker 2: points are about one point nine percent in this early
1:25
Speaker 2: trading on a Tuesday, SMP down fifty seven points nine
1:28
Speaker 2: ten percent and the Dow still close to flat, only
1:31
Speaker 2: down about twenty five points at the moment. Big moves
1:35
Speaker 2: in treasury markets as well, with the US ten year
1:37
Speaker 2: treasury moving down about nine basis points to four point
1:41
Speaker 2: three percent. Oil prices off by a couple percent as well,
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Speaker 2: down to sixty nine dollars a barrel two and a
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Speaker 2: quarter percent off on the day. Does help us out
1:53
Speaker 2: at the gas pump a little bit. But again, if
1:55
Speaker 2: we're looking at a market sentiment shift, seems to be
1:58
Speaker 2: a sentiment towards concern. Learn about recession. You have recession
2:01
Speaker 2: less oil demand, less gas demand, problems for energy markets
2:06
Speaker 2: to play out there. There's also some you know, potential
2:10
Speaker 2: talk of you know, Russia, Ukraine, how that plays out
2:12
Speaker 2: a little bit. More friendliness to Russia from this administration.
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Speaker 2: What could that mean for global oil prices, so I
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Speaker 2: won't attribute it all to one thing. According to Triple A,
2:21
Speaker 2: the national average for a gallon of gas sitting at
2:23
Speaker 2: three dollars and fourteen cents at the moment, thirty year
2:29
Speaker 2: fixed rate mortgage now coming in at six point eight
2:32
Speaker 2: seven percent, and crypto markets, which have been really just
2:39
Speaker 2: attributing as like a leveraged tech holding for some time.
2:43
Speaker 2: Now Bitcoin dropping to a three month low below ninety
2:46
Speaker 2: thousand dollars in a clear risk off move for the
2:51
Speaker 2: market right now. We talked a bit about it in
2:53
Speaker 2: the first hour, but we did receive another sentiment survey
2:57
Speaker 2: this morning at ten am from the conference board, this
2:59
Speaker 2: time really echoing a lot of the same pessimism we
3:03
Speaker 2: saw last week on Friday. I believe it was from
3:06
Speaker 2: the University of Michigan Consumer Sentiment Survey, both of which
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Speaker 2: confirming a lot of concern on average from consumers about
3:14
Speaker 2: the future of the US economy, not so much from
3:17
Speaker 2: a pricing standpoint and inflation, although that was expressed in
3:20
Speaker 2: the consumer sentiment survey, but really on the overall economic
3:24
Speaker 2: outlook and growth. So for the moment, market's in a
3:28
Speaker 2: bit of a sell off mode. S and P five
3:30
Speaker 2: hundred off about three and a half a little bit
3:32
Speaker 2: more percent from their highs reached on the close on Wednesday.
3:36
Speaker 2: Anything else about markets to discuss mark that are catching
3:38
Speaker 2: your right, I can't think of anything.
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Speaker 3: You didn't cover. I was hoping you would forget at
3:43
Speaker 3: least one or two items, but.
3:45
Speaker 2: You were pretty ever today.
3:46
Speaker 3: Look and you hinted at this, you said this explicitly
3:49
Speaker 3: actually the last hour. Based on what we know today,
3:52
Speaker 3: which is just the soft survey stuff, the stuff where
3:54
Speaker 3: they ask people questions, and what the markets are doing,
3:57
Speaker 3: and based on the data we've gotten for what it
4:01
Speaker 3: is worth from those two indicators, which are not always reliable,
4:05
Speaker 3: but they're reasonably good forecasters of future hard data realizations
4:12
Speaker 3: of what's actually gonna happen with the economy. Things are
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Speaker 3: looking a little shaky, and then of course it becomes
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Speaker 3: self fulfilling. We know that stock market jumpiness begets more
4:22
Speaker 3: stock market jumpinesses. People start to think of reasons why
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Speaker 3: investors ought to be jumpy. Similarly, with sentiment, you hear
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Speaker 3: sentiments bad, you wonder if you're missing something. It becomes contagious.
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Speaker 3: The question is at what point of policy makers, if
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Speaker 3: indeed this snowballs to what point of policy makers have
4:39
Speaker 3: to step in to try to staunch the contagion. We're
4:42
Speaker 3: not anywhere near that point.
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Speaker 2: Yeah, we're off three and a half percent from all
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Speaker 2: time highs. Right, We're nowhere near that level. But this
4:48
Speaker 2: is an administration that talks a lot about the stock market,
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Speaker 2: talks a lot about interest rates, and they are going
4:52
Speaker 2: to be responding to this sort of thing.
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Speaker 3: I would think. So, So, how long before he loses?
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Speaker 3: Of course they'll blame the Fed. How long before that
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Speaker 3: they start to put this is a little bit rhetorical,
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Speaker 3: before they start to put pressure on the Fed to
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Speaker 3: quote do something. Yeah, I think it's gonna take very long, Mike.
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Speaker 3: You know that tweet may have already been issued the right.
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Speaker 2: Likely not, and there will likely be mounting pressure. But
5:14
Speaker 2: it's not as though it's coming at a time when
5:16
Speaker 2: rates are moving up. Right. You do have markets responding
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Speaker 2: kind of logically here, which is stocks are selling off,
5:22
Speaker 2: bond yields coming down, people buying treasuries bringing yields lower,
5:25
Speaker 2: bringing down mortgage rates, which is kind of expressly what
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Speaker 2: Scott Bessett, the Treasury Secretary, and Donald Trump have wanted
5:32
Speaker 2: to see, which is lower mortgage rates, and they're getting
5:34
Speaker 2: it right now, but they're getting it in hand with
5:37
Speaker 2: lower stock prices as well, which nobody likes to see.
5:41
Speaker 2: Home Depot reported earnings this morning prior to the bell.
5:44
Speaker 2: Earnings per share came in a cent more than expected,
5:47
Speaker 2: three dollars and two cents per share versus three zero
5:50
Speaker 2: one expected revenue likewise right in line with expectations. Early
5:54
Speaker 2: market tradings shares were moving down a little bit, but
5:58
Speaker 2: have since recovered and are currently up about three and
6:00
Speaker 2: a half percent in early trading. Home Depot always interesting
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Speaker 2: to look at, not only because it's a massive retailer
6:07
Speaker 2: that everyone in this country has probably stepped into at
6:10
Speaker 2: some point or another, but they do service the contractor
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Speaker 2: universe pretty substantially, home builders and contractors massive portion of
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Speaker 2: their business, and this broke a bit of a trend
6:23
Speaker 2: for home Depot, so they did see their same store
6:26
Speaker 2: sales increase for the first time in eight quarters that
6:29
Speaker 2: had been on a previous pretty substantial downturn after obviously
6:34
Speaker 2: being one of the primary beneficiaries of the COVID lockdown,
6:37
Speaker 2: selling all sorts of fitness equipment and grills and everything
6:40
Speaker 2: that people could get their hands on. But for the
6:42
Speaker 2: last eight quarters, it's been a pretty rough story for
6:44
Speaker 2: Home Depot in response to these higher interest rates, and
6:47
Speaker 2: this was the first quarter that really broke that trend,
6:50
Speaker 2: albeit just a little bit. You saw the same store
6:52
Speaker 2: sales increase a tad. They also mentioned that they're anticipating
6:58
Speaker 2: same store comp sales to turn positive and fiscal year
7:02
Speaker 2: through January of twenty twenty six, but only slightly rising
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Speaker 2: about one percent is the expectation for the new year.
7:10
Speaker 2: Their chief financial officer, Richard McPhail mentioned in an interview
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Speaker 2: that they are seeing now customers actually getting used to
7:19
Speaker 2: the new raid environment and kind of considering it a
7:22
Speaker 2: new normal, and I would echo some of that. I
7:25
Speaker 2: do think that these rates are now finally setting in
7:28
Speaker 2: as the new normal. People are getting back to buying
7:30
Speaker 2: cars and financing them, financing mortgages, taking out home equity
7:34
Speaker 2: loans to some limited extent, But it does not solve
7:37
Speaker 2: the affordability problem. Mortgage rates being at six eight seven
7:41
Speaker 2: still represents a massive affordability problem for a large portion
7:45
Speaker 2: of potential home buyers. And I can't imagine home buildings
7:49
Speaker 2: suddenly ticking up in this type of environment.
7:53
Speaker 3: Some of The slowdown in sales that we're seeing at
7:55
Speaker 3: home depot and elsewhere, I think is just a return
7:57
Speaker 3: to the pre COVID trend line. Spending exploded during COVID.
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Speaker 3: We all know this. We were we were loaded up
8:05
Speaker 3: with stimulus. People were flush with cash and had nothing
8:08
Speaker 3: to Uh, we couldn't do stuff outside the house, so
8:11
Speaker 3: we all did little home improvement projects.
8:13
Speaker 2: I guess everybody bought a solo stove? How many people? Like?
8:18
Speaker 3: Mind me with that?
8:19
Speaker 2: Remember the smokeless aluminum drums that you burn wood outdoors
8:25
Speaker 2: and it's called a solo stove, And I remember Snoop
8:29
Speaker 2: said that he was going smokeless that day after announced
8:32
Speaker 2: that he's just becoming a sponsor of solo stove because
8:34
Speaker 2: they burned would without smoke. So, yeah, it was a
8:38
Speaker 2: whole thing, and thank you guys.
8:42
Speaker 3: That's that's that's terrific. No, we're back to the like
8:46
Speaker 3: with so many like, with so many things, so many series, spending,
8:52
Speaker 3: you name it. We're getting back to the old trend
8:54
Speaker 3: line and that's going to involve some I guess you
8:57
Speaker 3: could just call it pain because we went so far
9:02
Speaker 3: off track during the COVID period.
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Speaker 2: Yeah, it wasn't normal for Home Depot to be growing
9:06
Speaker 2: sales at five a year in economy that where the
9:12
Speaker 2: population is barely growing is kind of what you can expect.
9:16
Speaker 2: The company does plan to open twelve or did open
9:19
Speaker 2: twelve new stores in twenty twenty four, plans to open
9:22
Speaker 2: thirteen new locations in the coming year. So again, if
9:24
Speaker 2: we're talking about normal growth, kind of what we've been
9:27
Speaker 2: seeing is a trend of okay, low teen store openings,
9:31
Speaker 2: low single digit sales growth. And you know, should housing
9:35
Speaker 2: up tick up, then it'll be a great thing for
9:36
Speaker 2: Home Depot, But I don't think they're really anticipating it
9:39
Speaker 2: from what I'm seeing.
9:40
Speaker 3: The problem with their share value and the share value
9:42
Speaker 3: of many companies, is that they started to price in
9:44
Speaker 3: that abnormally high rate of growth. Sure by that, I
9:46
Speaker 3: mean expect it to persist, when, as you said, that
9:49
Speaker 3: wasn't realistic.
9:51
Speaker 2: Let's take a quick break. We will see by the
9:53
Speaker 2: way earnings from Low's the main competitor there to Home
9:56
Speaker 2: Depot tomorrow and then also the biggest earnings of the
10:00
Speaker 2: week coming from Nvidia after the bell tomorrow evening quick break.
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10:30
Speaker 2: Boston Globe Today has a really solid explanation of why
10:33
Speaker 2: everyone's gas bill went through the roof, and I thought
10:35
Speaker 2: it'd be worth mentioning for those listeners that live in Masters,
10:38
Speaker 2: But frankly, other states are seeing a lot of the
10:41
Speaker 2: same thing, and I think it has a lot of
10:42
Speaker 2: people scratching their heads a little bit. Not me, because,
10:47
Speaker 2: like I still live in the nineteen sixties. A giant
10:49
Speaker 2: truck pulls up to my house every few weeks and
10:51
Speaker 2: fills my house with home heating oil, which is it
10:54
Speaker 2: makes me so frustrated that I cannot get natural gas
10:57
Speaker 2: where I live. They don't have pipe often to my deliveries,
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Speaker 2: probably pretty frequently. I don't know. I don't burn through
11:04
Speaker 2: five hundred gallons every few weeks, so I guess it's
11:07
Speaker 2: probably more more distant than that, But it seems that
11:11
Speaker 2: is that frequent because of how big my bills are.
11:13
Speaker 2: But nonetheless, if you're taking a look at your gas
11:16
Speaker 2: breakdown and wondering what exactly has been going on here,
11:20
Speaker 2: national grid at least breaks your bill off of three
11:24
Speaker 2: different factors, and it's a source of confusion in terms
11:29
Speaker 2: of where this goes. There's three different billing factors that
11:32
Speaker 2: all get multiplied by your consumption. There's gas delivery, gas supply,
11:37
Speaker 2: and then something called the distribution adjustment. So gas delivery
11:41
Speaker 2: pretty simple. You know you're paying to use the pipes
11:44
Speaker 2: and all the infrastructure that these companies need to get
11:47
Speaker 2: the gas to your boiler. It also covers personnel, overhead
11:50
Speaker 2: profit and that factor was up a little bit, but
11:54
Speaker 2: only about two point eight percent compared to last year,
11:58
Speaker 2: so that number pretty much up with inflation as you
12:01
Speaker 2: might anticipate. Supply factor came in a little bit higher.
12:06
Speaker 2: That's the amount of gas that you actually burned. That
12:08
Speaker 2: supply factor came into point eight five, which is four
12:11
Speaker 2: point two percent higher than last winter. Bigger increase, but
12:15
Speaker 2: not all that substantially. And then finally, this distribution adjustment.
12:19
Speaker 2: That distribution adjustment is ten times higher than inflation. Came
12:24
Speaker 2: in at forty one percent higher than last winter. Where
12:27
Speaker 2: does that all go. Well, that specifically, according to National
12:31
Speaker 2: Grid themselves, includes customers contribution to local energy and environmental programs.
12:37
Speaker 2: Have you heard of mass save? Probably we all have.
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Speaker 2: This is where that portion is going. And so when
12:43
Speaker 2: you take a look at your bill and figure out,
12:45
Speaker 2: you know where this stuff is going. A lot of
12:48
Speaker 2: it is actually going to that one single source of
12:52
Speaker 2: the mass Save program, which is getting a twenty five
12:54
Speaker 2: percent budget increase this year. And so it's not net
12:58
Speaker 2: gas prices going through the roof. It's not these companies
13:01
Speaker 2: getting greedy and saying we're taking a much larger profit.
13:04
Speaker 2: It is legislators deciding, hey, we want to fund this
13:08
Speaker 2: program to offer people rebates to increase their efficiency or whatever.
13:13
Speaker 2: The mass Safe program does. I know, I know there's
13:15
Speaker 2: a lot of different features where you can get new
13:16
Speaker 2: insulation and all sorts of stuff to make your home
13:19
Speaker 2: more efficient.
13:19
Speaker 3: Pay for my thermostats every time I break.
13:21
Speaker 2: Away, there you go, and so you are taking advantage
13:24
Speaker 2: of the system there. But that's where a lot of
13:26
Speaker 2: this you get three going, and I I didn't really
13:30
Speaker 2: know that. I didn't know that either.
13:31
Speaker 3: This is actually reporting as you say, so some of
13:34
Speaker 3: the time, some of it was just bad timing, Mic right.
13:37
Speaker 3: Decisions were made at a different under a different set
13:40
Speaker 3: of pricing circumstances. And I guess that once you put
13:44
Speaker 3: that in motion, you can't you can't delay or reverse it. Yeah,
13:47
Speaker 3: and that would be a nice time.
13:48
Speaker 2: To And there's been a lot written about how, you know,
13:51
Speaker 2: how this was really rapid. It all came during the winter,
13:53
Speaker 2: and those bills are way higher, and so the companies
13:56
Speaker 2: have put off some of these increases and lowered them
14:00
Speaker 2: in certain areas, but it's all been under the assumption
14:02
Speaker 2: that they're going to be able to bump up those
14:04
Speaker 2: prices higher in the summer when people are using less
14:07
Speaker 2: NOTT gas and therefore don't care as much. It's not,
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Speaker 2: like I said, it's not these companies being greedy. It's
14:12
Speaker 2: the contributions to mass save that are actually driving these
14:16
Speaker 2: gas prices through the roof when it comes to your
14:19
Speaker 2: home heating gas. To do its job right, the FED
14:23
Speaker 2: must see what's wrong. This is a piece from Bill Dudley,
14:26
Speaker 2: a former FED chair person, not not chare Fed Reserve
14:30
Speaker 2: Bank president. I'm interested in your view on this stuff, Mark,
14:35
Speaker 2: I mean he lays out a number of comments where
14:37
Speaker 2: they just had the wrong framework going into COVID, and
14:41
Speaker 2: that framework needs to be adjusted. But let's start with
14:43
Speaker 2: what that framework was, because it was seemingly one of, hey,
14:46
Speaker 2: this economy has so much capacity that we really don't
14:50
Speaker 2: need to be all that worried about inflation and less
14:53
Speaker 2: things truly start to overheat. And so what we saw
14:57
Speaker 2: in the early twenty twenties was, you know, thing like
15:00
Speaker 2: the average inflation rate, the average rate where they said, hey,
15:04
Speaker 2: you know, we're not going to immediately move rates because
15:07
Speaker 2: we think we can use these longer term norms when
15:10
Speaker 2: it comes to inflation and things like that to achieve
15:12
Speaker 2: our two percent target. And a lot of people would
15:15
Speaker 2: say they kind of missed the boat when it came
15:17
Speaker 2: to early twenty twenties and their response to the COVID
15:20
Speaker 2: level of inflation that we saw. Does Bill have a
15:22
Speaker 2: point with all this?
15:23
Speaker 3: Well, sure, I think that's pretty self evident. They blew it,
15:27
Speaker 3: and many of us did, both in overestimating in some
15:31
Speaker 3: cases how transitory the COVID supply and demand shocks were
15:36
Speaker 3: going to be, and also in overestimating, to be fair,
15:40
Speaker 3: how much economic pain would be required to get inflation
15:43
Speaker 3: back down. I certainly didn't realize to what extent supply
15:46
Speaker 3: chain disruptions had contributed to the spike in conventionally measured inflation.
15:51
Speaker 3: One reason why the FED decided to switch to an
15:53
Speaker 3: average long term rate of inflation is that the number
15:57
Speaker 3: we get from month to month is influenced big relative
16:02
Speaker 3: price changes food, energy, insurance, premiums up or down. So
16:07
Speaker 3: one way to filter those out is just to take
16:10
Speaker 3: a moving average or just a long term average. Another
16:13
Speaker 3: way is to use core, which is X food, which
16:17
Speaker 3: one way of one definition of which is X food
16:19
Speaker 3: and energy. I like or dare I say we like? Here?
16:22
Speaker 3: Measures that trim the outliers median and trim mean, the
16:26
Speaker 3: FED could have used those instead of average inflation targeting.
16:29
Speaker 3: The average inflation targeting is probably what did the FED
16:32
Speaker 3: in that and the strong belief that the shocks that
16:39
Speaker 3: pushed up headline inflation early on in the COVID era
16:42
Speaker 3: would reverse quickly, not just subside, but would reverse and
16:46
Speaker 3: pull inflation back down. How much of that was structural,
16:49
Speaker 3: How much of that is built into their policy document,
16:52
Speaker 3: which is what Dudley is referring to. How much of
16:55
Speaker 3: it was just bad judgment and would have in retrospect
16:57
Speaker 3: bad judgment and would have happened under any policy framework. Mike,
17:01
Speaker 3: I honestly don't know.
17:02
Speaker 2: Yeah, and I don't think any of us really know
17:04
Speaker 2: to what degree the FED has accepted could we were not?
17:07
Speaker 2: And to what degree they've accepted that narrative though, and
17:10
Speaker 2: that's accepted the narrave that that I, hey, we got
17:14
Speaker 2: it wrong.
17:14
Speaker 3: Oh, I think they maybe they can't admit it publicly.
17:17
Speaker 2: But that's the big question to me, because let's for
17:21
Speaker 2: a moment just say that we do see a spark
17:24
Speaker 2: of another set of inflation here, which I don't think
17:26
Speaker 2: is a sure thing. And suppose tariffs push prices up, right,
17:30
Speaker 2: what is the framework?
17:31
Speaker 3: Should we look through those? The Fed's asking, there's going
17:33
Speaker 3: to be a one time thing, these tariffs, unless we
17:36
Speaker 3: we do it fitfully, it's going to be a one
17:38
Speaker 3: time in position. Should should they look through them? And
17:41
Speaker 3: here beforehand? I honestly don't know the end. I tend
17:44
Speaker 3: to think they shouldn't because of the lessons of COVID,
17:47
Speaker 3: But you also don't want to overreact based on having
17:49
Speaker 3: got and burned during that episode. It depends on expectations
17:53
Speaker 3: Luckily we get monthly data on that.
17:55
Speaker 2: Yeah, so I think Dudley lays out a number of
17:58
Speaker 2: reasonable arguments. I don't think we will actually know until
18:01
Speaker 2: we get another burst of inflation as to whether or
18:03
Speaker 2: not the Fed truly learned any lessons from the early
18:06
Speaker 2: twenty twenties. And hopefully we don't get the inflation to
18:09
Speaker 2: have to test that theory. I think that would be
18:11
Speaker 2: my key takeaway.
18:12
Speaker 3: But there will be supply shocks though, both favorable and unfavorable.
18:16
Speaker 3: We do need to come to grips with how to
18:18
Speaker 3: deal with noise, so to speak, in the inflation data,
18:21
Speaker 3: how to do that more effectively.
18:23
Speaker 2: Let's take a quick break. When we come back, we
18:25
Speaker 2: will have the trivia winner coming up, and then I
18:27
Speaker 2: want to talk a little bit about the Trump tax
18:29
Speaker 2: proposals that are getting battled over in Congress and what
18:32
Speaker 2: it might mean for local New Englanders.
18:34
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19:07
Speaker 2: Lawmakers in d C continue to really fight over the
19:12
Speaker 2: new tax laws that the Trump administration wants to put
19:15
Speaker 2: into place, and certainly a continuation of the twenty seventeen
19:20
Speaker 2: tax rules are a priority. But obviously, the Trump campaign
19:24
Speaker 2: rallied a lot on a number of different tax breaks,
19:26
Speaker 2: whether it be for individual payers in high tax states
19:31
Speaker 2: through the salt cap, whether it be tipped workers, what
19:37
Speaker 2: else we have, overtime workers, social Security recipients. There were
19:42
Speaker 2: a lot of constituencies to play to during the campaign,
19:46
Speaker 2: and they're all taking competing priorities in Congress. But there's
19:51
Speaker 2: a piece in Bloomberg today specifically about a little loophole
19:55
Speaker 2: that was created after the Trump tax cuts went into place,
19:58
Speaker 2: and it's a little bit complicated, but I think worth explaining.
20:01
Speaker 2: So as part of the Trump task cuts, one of
20:03
Speaker 2: the ways they were able to afford a lot of
20:06
Speaker 2: the big cuts was to say, Okay, you can no
20:08
Speaker 2: longer deduct all of the state and local taxes that
20:13
Speaker 2: individual payers pay. So here in Massachusetts or in even
20:18
Speaker 2: higher tax states like New York and California. Let's say
20:21
Speaker 2: you're a high income earner and you pay one hundred
20:24
Speaker 2: thousand dollars in state income taxes. You used to be
20:26
Speaker 2: able to deduct all of that against your federal tax
20:30
Speaker 2: return and receive a nice little deduction that was cap
20:33
Speaker 2: at ten thousand dollars. What states did, which was quite
20:37
Speaker 2: honestly just accounting genius, was say, Okay, what we're going
20:42
Speaker 2: to do here is create a loophole specifically for business
20:45
Speaker 2: owners in our state because we don't want them all
20:47
Speaker 2: leaving the state was I think a lot of the concern,
20:50
Speaker 2: and so what they did in states like Connecticut was
20:52
Speaker 2: the first to do it, but New York, Massachusetts many
20:55
Speaker 2: other states followed suit, was say, we are going to
20:58
Speaker 2: allow certain businesses to pay their state income taxes for
21:04
Speaker 2: the owners of those companies at the corporate level on
21:08
Speaker 2: behalf of the owners. So what that practically meant was, hey,
21:12
Speaker 2: you know you, Heck Armstrong Advisory Group can go and
21:15
Speaker 2: pay the presumed income tax that your shareholders will owe
21:19
Speaker 2: the state on behalf of your shareholders, and we will
21:22
Speaker 2: treat that as a credit to the taxes that they
21:24
Speaker 2: would have otherwise owed. And because the company is paying it,
21:28
Speaker 2: it comes as basically a reduction in profit at the
21:31
Speaker 2: corporate level, which then allows them to reduce it off
21:33
Speaker 2: of their federal income tax. Nonetheless, this is obviously anger
21:37
Speaker 2: some people who wrote the law and didn't want to
21:39
Speaker 2: see this type of thing happen, But it is also
21:42
Speaker 2: you know ingratiated number of really wealthy business owners to
21:45
Speaker 2: their state legislators who made sure that this type of
21:48
Speaker 2: rule went into place. Now it's obviously all on the
21:51
Speaker 2: table again. Lawmakers are talking about doing away with these loopholes,
21:55
Speaker 2: making them illegal, making it so that they cannot go
21:58
Speaker 2: into place. They did pass muster at the federal court level,
22:02
Speaker 2: and courts refuse to slap them down. But now the
22:06
Speaker 2: question is, okay, do you let this type of thing continue.
22:10
Speaker 2: Do you just do away with the salt cap in
22:14
Speaker 2: the first place, like the Trump campaign pledged to do
22:17
Speaker 2: while campaigning in New York, for example, or do you
22:20
Speaker 2: come up with some negotiation. Right now, the cap is
22:23
Speaker 2: ten thousand dollars, so if you think about it, right,
22:25
Speaker 2: you're paying property taxes, income taxes. If it exceeds ten
22:29
Speaker 2: thousand dollars, maybe you paid fifty thousand in total. You
22:31
Speaker 2: only get to take ten thousand off the top, unless
22:34
Speaker 2: you are a business owner. Maybe they increase that to
22:37
Speaker 2: thirty and that's kind of negotiating tactic. But all of
22:40
Speaker 2: these things cost serious money, and I genuinely, genuinely don't
22:45
Speaker 2: know where the priority is. Obviously keeping the corporate tax
22:48
Speaker 2: rate where it is. I think keeping the federal income
22:51
Speaker 2: tax rates where they are as a priority. But what's
22:54
Speaker 2: more important increasing the salt cap or not taxing Social Security?
22:59
Speaker 2: Increasing the salt cap or reducing taxes on overtime or tips?
23:06
Speaker 2: I don't know, if you have a sense, I certainly
23:07
Speaker 2: have no idea what Congress is most interested in in
23:11
Speaker 2: terms of cutting taxes further. Nope, no clue. I don't either,
23:16
Speaker 2: And I think it'll start, Yeah, I think it'll start
23:19
Speaker 2: to become clear of the course of the next few
23:21
Speaker 2: weeks who the winners are and who the losers are
23:24
Speaker 2: of the next tax code changes that we see go
23:26
Speaker 2: into place here.
23:27
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Speaker 1: The proceeding was paid for and the views expressed are
24:37
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24:47
Speaker 2: Egg Prices remain just the story that keeps on giving
24:50
Speaker 2: this year. We reported earlier this month, on February first,
24:53
Speaker 2: that thieves in Pennsylvania stole about one hundred thousand eggs
24:56
Speaker 2: from a distribution trailer in Greencastle, Pennsylvania, making off with
25:01
Speaker 2: the forty thousand dollars worth of eggs in the Great
25:04
Speaker 2: Egg Heist of twenty twenty five. There's also been reported
25:08
Speaker 2: issues at the border of a growing black market for eggs.
25:12
Speaker 2: US Customs and Border Protection agents are finding evidence of
25:15
Speaker 2: a rising black market in eggs. Confiscation of eggs at
25:18
Speaker 2: ports of entry has increased twenty nine percent. The Trump
25:22
Speaker 2: administration has been trying to figure out solutions to the problem.
25:26
Speaker 2: They've had conversations with Turkey in terms of importing some
25:29
Speaker 2: eggs there, but that's not going to be a long
25:31
Speaker 2: term solution either. And there's even conversation about requiring farmers
25:38
Speaker 2: to vaccinate their flocks against the disease that is just
25:43
Speaker 2: kind of ripping through the American egg flock right now.
25:47
Speaker 2: And again that would be interesting because you have some
25:51
Speaker 2: people in the administration that are not very pro vaccine
25:53
Speaker 2: at the moment.
25:54
Speaker 3: So I have oh, he'll be ushered out of the room.
25:56
Speaker 3: They'll find something for him to do. This is a
26:00
Speaker 3: potential problem for influence. It's a big open sore. They
26:04
Speaker 3: campaigned on the issue and the issue has resurfaced, it's
26:09
Speaker 3: relatively recent, so they own it. Supply this is just
26:13
Speaker 3: another form of supply shock. It could be food, it
26:15
Speaker 3: could be energy. It's always something, is the general motto.
26:19
Speaker 2: And I think we can say that it might have
26:20
Speaker 2: been foolish for the Trump administration to campaign on the
26:23
Speaker 2: idea that they'd be able to bring down grocery prices.
26:26
Speaker 2: But no president controls grocery prices. It wasn't Biden's fault
26:30
Speaker 2: the grocery prices went up. It won't be by Trump's
26:32
Speaker 2: fault if they continue, but he'll own it. It just
26:34
Speaker 2: doesn't last government.
26:36
Speaker 3: Did Biden also inherited rising inflation? The stimulus started under
26:40
Speaker 3: the Trump administration. I'm not saying I have a better
26:43
Speaker 3: ideas as to how we could have pulled out of
26:46
Speaker 3: the COVID tail spin. You inherit problems. That's the nature
26:49
Speaker 3: of the job. Indeed, that's why you won because there
26:52
Speaker 3: were problems to be inherited. If there weren't, you would
26:54
Speaker 3: not have won. So it always seems strange to me
26:57
Speaker 3: that someone who recently won a non incumbent is complaining
27:00
Speaker 3: about the problems they inherited. That's why you're there. Jack
27:04
Speaker 3: that said.
27:05
Speaker 2: There's that's always I mean, that's always the case, right,
27:08
Speaker 2: That's why you're there. Yes, that's you beat an incumbent.
27:12
Speaker 3: You won because there were problems to then complain about
27:15
Speaker 3: those problems. Well, it's normal, I guess. Although, well, anyway,
27:21
Speaker 3: so there's nothing he could do about egg prices in
27:23
Speaker 3: the short term, but the FED does have to take
27:26
Speaker 3: them into account, and so should those making fiscal policy.
27:28
Speaker 3: They feed into the inflation directly into headline inflation.
27:32
Speaker 2: Yeah, I think the egg prices accounted for something like
27:35
Speaker 2: half of the overall food at home increased that you
27:38
Speaker 2: saw in the month of January when we last lofted
27:41
Speaker 2: CPI was that it's not something you can readily ignore
27:44
Speaker 2: because it is a staple that just goes into everything
27:48
Speaker 2: that we consume.
27:49
Speaker 3: This was part of the challenge of the seventies, in
27:51
Speaker 3: addition to the FED keeping policy too easy because they
27:54
Speaker 3: overestimated how fast the economy could grow, so they got
27:57
Speaker 3: that wrong. But there was a succession of food energy
28:01
Speaker 3: food energy. I'm going a little bit out of order,
28:04
Speaker 3: but there were a succession of shocks that we're hitting
28:06
Speaker 3: the economy throughout the seventies that blinded the FED in
28:09
Speaker 3: its other eye.
28:11
Speaker 2: I think we should all just get comfortable with eating
28:13
Speaker 2: ostrich eggs. I don't know who grows ostriches.
28:16
Speaker 3: How much cholesterol you thinks in one ostrich there if
28:19
Speaker 3: a typical egg has like two hundred and fifty.
28:20
Speaker 2: Milligrams, load me up, Load me up. Tucker is going
28:24
Speaker 2: to look up how much cholesterol is in an ostrich egg.
28:27
Speaker 2: But we're going to take a quick break, and when
28:29
Speaker 2: we come back, we're gonna have stack roulette. But we're
28:31
Speaker 2: also going to find out fifty two.
28:33
Speaker 5: Hundred uh milligrams.
28:36
Speaker 2: Hope that's a lot. Let's take quick breaks? Is next?
28:43
Speaker 1: Miss any of the show. The Financial Exchange Show podcast
28:47
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28:51
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29:02
Speaker 1: date on breaking business news all morning. Loan Base is
29:05
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29:11
Speaker 5: The Financial Exchange is proud of our partnership with the
29:14
Speaker 5: Disabled American Veterans Department in Massachusetts. This year's five K.
29:19
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29:22
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Speaker 5: registration information in the coming weeks. But in the meantime,
29:29
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29:48
Speaker 2: Well, I know none of you asked. I'm going to
29:50
Speaker 2: tell anyway. According to Food Republic, both ostrich eggs and
29:56
Speaker 2: egg eggs chicken eggs contain one hundred and fifty four
29:59
Speaker 2: calorie per serving. Ostro jaggs have more protein though, coming
30:03
Speaker 2: at thirteen point three grams compared to eleven less fat,
30:06
Speaker 2: less sodium as well, but slightly more carbs and cholesterol.
30:10
Speaker 2: So if you.
30:10
Speaker 3: Lately, excuse me, slightly more per per server, even.
30:14
Speaker 2: Per one hundred grands, per one hundred grams, yes, how many?
30:18
Speaker 2: I don't have the broad data for you. There markets
30:21
Speaker 2: more protein, more protein, more cholesterol.
30:23
Speaker 3: You're gonna look bolter, will look really good in your casket.
30:26
Speaker 2: Correct, yes, okay, yeah, what do you have for us
30:30
Speaker 2: for stacker?
30:30
Speaker 3: Let Jamie Diamond has become very opinionate. What is the
30:34
Speaker 3: consensus opinion of Jamie Diamond here in the Financial Exchange MIC.
30:38
Speaker 2: I don't know that we have one.
30:39
Speaker 3: Uh is he viewed it's sort of capable as sort
30:43
Speaker 3: of a time server.
30:45
Speaker 2: Yeah, time server, a capable CEO who has led the
30:51
Speaker 2: company over a period of time where it has probably
30:54
Speaker 2: made them more successful than any other large US bank
30:56
Speaker 2: out So, whether it's entirely to credit for that or not,
31:00
Speaker 2: they have pretty famously avoided major disaster over the course
31:04
Speaker 2: the last fiftell we've.
31:05
Speaker 3: Learned so much about him in the past few weeks.
31:06
Speaker 3: He's got very what someone used to call me, because
31:10
Speaker 3: I'm sort of conservative, reactionary views. We've learned a couple
31:14
Speaker 3: of weeks ago he was laying into work from home
31:17
Speaker 3: and DEI calling it all I'm paraphrasing here, but I'm
31:20
Speaker 3: not really exaggerating. I don't think I'm exaggerating. Oll called
31:22
Speaker 3: it all baloney and a waste of time. This morning,
31:26
Speaker 3: he's reported in Bloomberg as saying that, Wellie al Musk
31:30
Speaker 3: is actually doing a lot of good. There's a lot
31:31
Speaker 3: of waste and here I'm toning it down. There's a
31:33
Speaker 3: lot of waste, fraud, and abuse. It needs to be done.
31:36
Speaker 3: It's not just about the deficit. YadA, YadA, YadA. While
31:39
Speaker 3: I agree with many of these things, he suddenly found
31:41
Speaker 3: religion on causes that seemed to be politically popular at
31:47
Speaker 3: this time, very opportunistic and strikes me as slimy with respect,
31:52
Speaker 3: Can I ask you, can I go back to DEI
31:54
Speaker 3: for a second. If you're a CEO, you spent tens
31:57
Speaker 3: of millions on salaries and initiatives, et cetera, because you
32:00
Speaker 3: thought DEI policies policies that encourage the hiring of traditionally
32:04
Speaker 3: underrepresentative groups in your workforce, and there are other manifestations
32:08
Speaker 3: of it. You thought these would help your share price.
32:10
Speaker 3: Presumably you thought they would help earn it. Yes, Why
32:12
Speaker 3: do you suddenly not think that all of these CEOs
32:14
Speaker 3: are now railing against it, saying that it perhaps was
32:18
Speaker 3: a mistake. They were they bad CEOs then and good
32:21
Speaker 3: CEOs now. What data has changed their minds? Or are
32:23
Speaker 3: they just licking their finger, putting it into the wind
32:26
Speaker 3: and telling the new regime what it wants to hear.
32:28
Speaker 2: It's the latter, But I don't think it's just about
32:30
Speaker 2: the regime and I think this would if I'm to
32:33
Speaker 2: summarize my views on DEI kind of from the very beginning,
32:38
Speaker 2: it was a means by which privately run companies could
32:43
Speaker 2: attract new investors. I think very simply, many many companies
32:48
Speaker 2: went out there and said, Okay, this is clearly something
32:50
Speaker 2: that's being demanded. Go look at the Harvard Endowment Fund.
32:53
Speaker 2: They're not going to purchase our shares unless we take
32:55
Speaker 2: these initiatives to slap a DEI label on what it
32:59
Speaker 2: is that we are doing. And I think many many
33:01
Speaker 2: cases of this, we're pretty disingenuous of just saying, Okay,
33:04
Speaker 2: we can do this low hanging fruit stuff that we're
33:07
Speaker 2: probably going to do anyway, slap a DEI label on it,
33:10
Speaker 2: and our shares will get picked up by this new
33:13
Speaker 2: fund that is focused on diversity, equity and inclusion, or
33:17
Speaker 2: going green or any number of different things. I don't
33:19
Speaker 2: put these in different camps. I think they were always
33:22
Speaker 2: about profit and stock price growth. And now that the
33:26
Speaker 2: overall opinion and narrative on this has shifted pretty substantially,
33:31
Speaker 2: I don't think this is just a Donald Trump and
33:34
Speaker 2: White House story, although I'm sure that's influencing it. But
33:37
Speaker 2: there are a lot of shareholders who are out there
33:39
Speaker 2: right now saying, if you continue these policies, we will
33:42
Speaker 2: dump you.
33:42
Speaker 3: Sure, if Harris had won, they'd be tacking this way.
33:46
Speaker 2: Not so publicly, No, no, not so publicly. But I
33:49
Speaker 2: think that to curry favor with the fact that Harris
33:52
Speaker 2: didn't win speaks to the okay that yeah, this is
33:56
Speaker 2: this is where the it's kind of showing. Yeah. I
34:01
Speaker 2: think from the people asked about this from the very beginning,
34:04
Speaker 2: my answer was always, look, these companies don't actually believe this. Right.
34:07
Speaker 2: They're doing d or they're doing green because it's what
34:12
Speaker 2: they think investors want at the moment. It's not actually
34:15
Speaker 2: costing them anything. They're not making any long term shifts
34:18
Speaker 2: in their policies. They are simply checking a box. It
34:21
Speaker 2: was very superficial, and so this moved to the other direction.
34:26
Speaker 2: I'm not sure it actually is. I think it's just
34:27
Speaker 2: kind of a return to where they were over the
34:30
Speaker 2: course of the last decade and doing away with some
34:32
Speaker 2: of the big kind of public announcements that they were
34:35
Speaker 2: making on these initiatives.
34:37
Speaker 3: It's a good point, doesn't cost them a lot. You're right,
34:39
Speaker 3: it's mostly hot air.
34:40
Speaker 2: Either way, It's not universal, right, There are some companies
34:42
Speaker 2: who were genuine about it, are sticking to their guns
34:45
Speaker 2: on it and are are pushing forward with these because
34:47
Speaker 2: they believe that they are truly transformative to their business
34:51
Speaker 2: and attracting customers, and they are truly genuinely moving forward
34:55
Speaker 2: with it.
34:55
Speaker 3: Why would you want to alienate any I'm sorry, interrupted,
34:57
Speaker 3: you got it.
34:58
Speaker 2: No, you're fine, And.
34:59
Speaker 3: I think you've already said you've already sort of hinted
35:01
Speaker 3: at this. Why alienate any group of potential customers? If
35:04
Speaker 3: target and I don't want I know this is a
35:06
Speaker 3: hot button, but if they want to advertise to a
35:08
Speaker 3: particular market segment, it's a market segment, probably one with
35:11
Speaker 3: a lot of money. Wouldn't it be smart to diversify
35:15
Speaker 3: your customer base a little bit by doing that?
35:17
Speaker 2: Yeah? So, in any case, I think that probably ninety
35:20
Speaker 2: percent of companies out there, the stuff that they did
35:22
Speaker 2: on this front was superficial and not terribly meaningful, and
35:26
Speaker 2: was there to attract new investors that wouldn't have otherwise
35:29
Speaker 2: purchased their shares or gone to their bank or bought
35:33
Speaker 2: their chapstick. I don't know. And now that sentiment has
35:37
Speaker 2: shifted on that they are sometimes quietly and sometimes very
35:40
Speaker 2: publicly pooh pooing what they previously did. So it all
35:44
Speaker 2: seems to me very superficial in both directions. And yeah,
35:49
Speaker 2: a lot of it is I think CEO is sticking
35:50
Speaker 2: their finger out and saying, which way is the wind blowing.
35:53
Speaker 2: I'm going to react to that, And I don't think that.
35:56
Speaker 2: I don't know that that necessarily diminishes Jamie Diamond and performances.
36:01
Speaker 3: He's overdoing it, Mike. He's overcompensating, he's over correcting.
36:04
Speaker 2: But that's kind of what he does. He comes out
36:06
Speaker 2: there every thirty days and says that it's a normouscession
36:08
Speaker 2: is coming. Watch out, the hurricane is blowing, and you know,
36:12
Speaker 2: that's kind of what he does. For some reason, markets
36:16
Speaker 2: remain open and are off their lows for the day
36:19
Speaker 2: so far, Dow off fifty one points, a little bit
36:21
Speaker 2: more than a tenth of a percent, s and P
36:23
Speaker 2: off forty seven points, eight tenths of percent, and the
36:26
Speaker 2: NASDAK off two hundred and eighty eight points or one
36:28
Speaker 2: and a half percentage points. We'll have a full market
36:31
Speaker 2: recap for you tomorrow and then close the bell tomorrow.
36:34
Speaker 2: We have in video rings which do have the possibility
36:36
Speaker 2: of moving markets as well. Talk to you tomorrow, folks.
36:39
Speaker 2: Have a great rest of your day.