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Why is nobody talking about the tariffs on China? · The Financial Exchange Show

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Speaker 1: This is the Financial Exchange with Chuck Zada and Paul Lane.
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Speaker 2: Our two of the financial exchange kicking off here. It's Chuck,
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Speaker 2: Paul and Tucker with you, and we've got markets not
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Speaker 2: really doing much of anything, quite honestly. The Dow Jones
1:20
Speaker 2: Industrial Average, or the DIGIA as it's more commonly known,
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Speaker 2: is up forty two points right now. That's a point
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Speaker 2: one percent increase. The S and P five hundred, or
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Speaker 2: the S and P five hundred as it's more widely known,
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Speaker 2: is down seven points, so about an eighth of a percent.
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Speaker 2: No major movement there. Nasdac's off a tenth of a
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Speaker 2: percent as well, down eighteen points, so again pretty quiet
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Speaker 2: after you know, the last week or so of fireworks
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Speaker 2: that we've seen. Tenure US Treasury see a little bit
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Speaker 2: of a sell off, reversing its recent downward momentum. It's
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Speaker 2: up four point seven basis points to four point two
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Speaker 2: five seven percent, getting nothing huge there, and you know,
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Speaker 2: still in a pretty you know, solid short term down trend.
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Speaker 2: We got oil selling off bigly today. The price on
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Speaker 2: West Texas Intermediate is down two dollars and forty cents
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Speaker 2: a barrel to sixty five eighty six. So you got
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Speaker 2: oil prices moving down pretty steadily on the back of
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Speaker 2: OPEC plus output increases that were announced. Gold today is
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Speaker 2: up eight dollars and thirty cents an ounce to twenty nine,
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Speaker 2: twenty eight and ninety cents, and the triple A national
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Speaker 2: averageur gas prices up let's see eight tenths of a
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Speaker 2: cent to three ten and seven tenths right now. No
2:37
Speaker 2: major movement yet as a result of the tariffs that
2:40
Speaker 2: were implemented yesterday, but if they do end up sticking around,
2:44
Speaker 2: you'd expect to see that start filtering through in the
2:46
Speaker 2: next week or two, predominantly in the northeast, Midwest and
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Speaker 2: Great Lakes region, but you know, parts of the country
2:54
Speaker 2: might feel different impacts from others. Ultimately, if you do
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Speaker 2: have lower oil prices, it'll offset some of that, but
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Speaker 2: you still might see some higher prices at the pump
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Speaker 2: if those tariffs do end up sticking around. A reminder,
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Speaker 2: Howard Lutnik, the Secretary of Commerce, has said that they
3:12
Speaker 2: are anticipating a potential announcement this afternoon with regards to
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Speaker 2: a tariff compromise. Also this morning, Justin Trudeau, or at
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Speaker 2: least an official from the Canadian government, said that they
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Speaker 2: would not Canada would not remove its tariffs unless all
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Speaker 2: US tariffs on Canada that were just implemented yesterday were removed.
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Speaker 2: So we'll see where these negotiations go. But this is
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Speaker 2: the current state of play on this Speaking of tariffs,
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Speaker 2: also implemented yesterday was an additional ten percent jump in
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Speaker 2: tariffs on China. No one's really talking about this, which
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Speaker 2: is fascinating to me, and part of me is almost like,
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Speaker 2: is this kind of the plan to just raise tariffs
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Speaker 2: on China stealthily by giving everyone something else to look at,
4:03
Speaker 2: you know, the day that you're doing it, Because no
4:05
Speaker 2: one's talking about the fact that tariffs on all imports
4:07
Speaker 2: from China have just gone from zero to twenty percent
4:10
Speaker 2: in the past two months.
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Speaker 1: Now.
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Speaker 2: Granted, there was a small subset of goods that had
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Speaker 2: tariffs on it to begin with. I think it was
4:17
Speaker 2: maybe a third of Chinese exports had tariffs that were
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Speaker 2: implemented during the first Trump administration and have continued to
4:24
Speaker 2: this point. But this is a broader implementation that you've seen.
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Speaker 2: And the fascinating thing is, with all of the chattered
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Speaker 2: hubbub about Canada and Mexico, there's no one paying attention.
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Speaker 3: To this, right It is certainly less talked about in
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Speaker 3: terms of impact. You know, a couple of companies domestically
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Speaker 3: in the United States that have at least spoken about
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Speaker 3: the impact to its business has been the toymakers Hasbro
4:49
Speaker 3: and Mattela. Hasbro specifically, forty percent of its toys are
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Speaker 3: imported from China. So the longer that these are in place,
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Speaker 3: you're gonna see price increases on that side of things.
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Speaker 3: But I do you wonder, Chuck, if the reason that
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Speaker 3: this hasn't been emphasized as much as some of the
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Speaker 3: other impacts of tariffs from Canada Mexico is because Walmart
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Speaker 3: had talked about this. You know, this has been something
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Speaker 3: that's been ongoing for seven or eight years, just the
5:13
Speaker 3: scrutiny on China. Not because I'm not saying tariffs were
5:16
Speaker 3: in to this scale certainly seven or eight years ago,
5:19
Speaker 3: but Walmart has mentioned, Hey, we've been dealing with this
5:22
Speaker 3: tariff situation for seven or eight years, and we have
5:24
Speaker 3: contingency plans in place to route things through other areas
5:28
Speaker 3: of you know, Asia, whether it be Vietnam, Cambodia, or others.
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Speaker 3: So I wonder if maybe that's part of it. Obviously,
5:34
Speaker 3: there's small businesses out there that don't have the flexibility
5:37
Speaker 3: of some of these behemoths to pivot their supply chain,
5:40
Speaker 3: you know, on a dime and be able to circumvent
5:43
Speaker 3: these But I wonder if that plays a slight role
5:45
Speaker 3: into some of this. And it just doesn't seem like
5:48
Speaker 3: people are as averse of course to tariffs on China
5:51
Speaker 3: as well from a collective standpoint.
5:53
Speaker 2: No, And I think that this is one area where
5:58
Speaker 2: and again I know that I have one's got like
6:00
Speaker 2: their own views on this, but I've kind of been
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Speaker 2: of the opinion. Look like, I view China as a
6:06
Speaker 2: significant adversarial threat to the United States, and I think
6:11
Speaker 2: putting meaningful economic pressure on China in ways that that
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Speaker 2: you can and that are actually enforceable, you know, outside
6:19
Speaker 2: of you know, trying to construct agreements with China, because
6:21
Speaker 2: the Chinese government doesn't have a great history of holding
6:24
Speaker 2: up their end of the bargain. And so yeah, I think, hey,
6:27
Speaker 2: if you want to put a little bit of pressure
6:29
Speaker 2: on China through a ratcheting up of tariffs with the
6:33
Speaker 2: understanding that, yeah, it is going to create some issues
6:37
Speaker 2: as far as you know, raising those prices domestically, it
6:40
Speaker 2: certainly will. And the potential for the Chinese government to
6:43
Speaker 2: retaliate not so much against you know, US exports to
6:47
Speaker 2: China just because the dollar volume isn't as high, but
6:49
Speaker 2: potentially against US companies operating in China and things like that.
6:52
Speaker 3: You saw the Google story that we covered a couple
6:54
Speaker 3: of weeks ago.
6:55
Speaker 2: Yeah, expect more of that, investigations into US companies operating
6:59
Speaker 2: in China and stuff like that.
7:01
Speaker 1: Yeah.
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Speaker 2: I mean, look, I'm not saying it's going to be easy,
7:03
Speaker 2: but this is something that is, in my opinion, worthwhile.
7:09
Speaker 2: And look, what does my opinion count for. I don't know.
7:11
Speaker 2: I'm one person. I'm sitting here. We all have opinions,
7:13
Speaker 2: and I could tell you the famous phrase about opinions
7:16
Speaker 2: and how they smell, but you know, I'm not gonna
7:18
Speaker 2: do that right now. But ultimately, it's something where I
7:24
Speaker 2: think that there's some meat here in terms of this
7:28
Speaker 2: feels to me like a more concrete and consistent goal
7:32
Speaker 2: of this administration than implementing any kind of long like
7:37
Speaker 2: long standing tariffs on Canada and Mexico. I don't really
7:40
Speaker 2: get the sense that the Trump administration wants high tariffs
7:44
Speaker 2: on Canada and Mexico for any extended period of time.
7:47
Speaker 2: I do get the sense that they want them on China.
7:50
Speaker 3: Yeah, it had been rumored during the campaign trail that
7:53
Speaker 3: this the Chinese tariffs could get as high as perhaps
7:55
Speaker 3: sixty percent. It would just be the increments of ten Again,
7:58
Speaker 3: that's speculation.
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Speaker 2: There, wild sneakily got there over six months, Like paying.
8:03
Speaker 3: Attention to kind of the way it's trending. It's basically
8:05
Speaker 3: ten percent a month r so, so that's the potential.
8:09
Speaker 3: But I would agree with you that I hold the
8:12
Speaker 3: view that the idea of the tariffs on Mexico and Canada,
8:15
Speaker 3: because the free trade agreement, because the proximity that United
8:19
Speaker 3: States has to those two countries and the amount of
8:21
Speaker 3: imports there, that I at least hope from an economic
8:24
Speaker 3: perspective it's much shorter lived. And I get a little
8:27
Speaker 3: hesitant when I quote statistics says to what the counter
8:29
Speaker 3: your impact of those import tariffs could be, just because
8:34
Speaker 3: who knows if they're gonna be here tomorrow, let alone
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Speaker 3: six months from now.
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Speaker 2: Yes, it's tough to discuss the annual impact of Canada
8:41
Speaker 2: tariffs when this afternoon and then everything can come, it's
8:45
Speaker 2: just gonna look ridiculous, which which is why. I like,
8:47
Speaker 2: I'm at the point now where on the tariff side
8:50
Speaker 2: of things, I've kind of said, I'm not really going
8:52
Speaker 2: to get into the predictions until they're implemented or not. Like,
8:56
Speaker 2: we'll just we'll take it day by day. All anyone
9:00
Speaker 2: can do, isn't that isn't that right?
9:01
Speaker 3: But I always tell my wife. She gets annoyed with
9:03
Speaker 3: that phrasing, But yep, that's that's how you gotta do it.
9:06
Speaker 2: I just try to take it lifetime by lifetime, you know.
9:08
Speaker 2: That's that's all someone can.
9:10
Speaker 1: Do with you.
9:10
Speaker 3: A cat nine lives.
9:12
Speaker 2: As a matter of fact, I am let's take a
9:14
Speaker 2: quick break. Who is the Do you guys remember the
9:17
Speaker 2: lawyer back during the pandemic that turned himself into a
9:20
Speaker 2: cat on zoom and oh yeah, I had to decatify himself.
9:23
Speaker 2: He was out of Texas, right somewhere like Texas, Oklahoma.
9:26
Speaker 2: Something help, I'm a cat And it was just fantastic.
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9:56
Speaker 2: The two headed monster stalking the economy has a name, Jim.
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Speaker 2: Stagflation is actually the word that Nick Timmerouse uses in
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Speaker 2: the headline. He probably didn't write the headline. He's the journalist,
10:10
Speaker 2: not the headline writer. But his first sentence is a
10:13
Speaker 2: doozy stagflation has entered the chat. So here's if you're
10:20
Speaker 2: not familiar with the idea of stagflation, it's you take
10:23
Speaker 2: a male deer and sorry, I just this piece just
10:28
Speaker 2: cracks me up a little bit. Not because I have
10:30
Speaker 2: anything against Nick. I actually think he does a great
10:32
Speaker 2: job with his work. But stagflation is the idea of
10:37
Speaker 2: an economy that slows down well at the same time
10:42
Speaker 2: inflation goes up. And we had a stagflationary economy in
10:46
Speaker 2: the first half of twenty twenty two. It didn't last
10:50
Speaker 2: very long. It lasted about five months or so, but
10:53
Speaker 2: you had an economy that was effectively seeing nominal GDP
10:58
Speaker 2: growth slowing and real GDP as a result of rising inflation,
11:02
Speaker 2: and so it was a very very uncomfortable time. Now
11:05
Speaker 2: things don't have to be as dramatic as that to
11:07
Speaker 2: end up in you know, what you could consider to
11:09
Speaker 2: be stagflation. But I think that there is a pretty
11:14
Speaker 2: big leap to say that we're heading into a stagflationary
11:17
Speaker 2: period right now, just because normally, most of the time,
11:23
Speaker 2: when you see a significant slow down in the economy,
11:27
Speaker 2: it's usually caused by a drop in demand, at least
11:31
Speaker 2: in recent history, and drops in demand typically produced downward
11:35
Speaker 2: pricing pressure because companies try to unload their inventory any
11:38
Speaker 2: way they can. And so that's why generally the proof,
11:43
Speaker 2: you know, what, what you do in order to try
11:46
Speaker 2: to end inflation is almost induce a recession, because the
11:50
Speaker 2: recession ends the inflationary impulse as a result of the
11:54
Speaker 2: dropping demand and dropping sentiment when it comes to inflation.
11:58
Speaker 2: So the p here that Nick lays out is, hey,
12:02
Speaker 2: here's why this could be different. And I think that
12:04
Speaker 2: this is you know, a viable consideration, which is, yes,
12:08
Speaker 2: you have the US government talking about reducing federal spending,
12:12
Speaker 2: which in the short term reduces demand and potentially you know,
12:15
Speaker 2: some other demand reductions as a result of that. At
12:18
Speaker 2: the same time, you've got these teriff implementations that could
12:21
Speaker 2: reshape supply chains and drive some costs up, and so
12:25
Speaker 2: it does present the possibility for a stagflationary situation to develop.
12:32
Speaker 2: The timing on all of this and how it plays out,
12:34
Speaker 2: I think is going to matter in terms of what
12:36
Speaker 2: gets implemented first, how it gets implemented, the scale, the
12:39
Speaker 2: magnitude of all this, and how long it all lasts.
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Speaker 2: So I think that when we talk about stagflation, it's
12:46
Speaker 2: something that now, if you look at it, you can
12:49
Speaker 2: put it on your you know, bingo card and say, yeah,
12:52
Speaker 2: maybe there's a greater chance of this now than in
12:54
Speaker 2: most situations. But I almost always look at the idea
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Speaker 2: of stagflation is something that is an edge case and
13:03
Speaker 2: not something that I would put as a most likely probability,
13:07
Speaker 2: just because.
13:08
Speaker 3: So many things need to go wrong at once. Yes,
13:10
Speaker 3: and in like the right order for it to occur
13:12
Speaker 3: that way, Yeah, I mean there's historically the wrong order.
13:15
Speaker 3: There's historical precedent obviously with the seventies. You know, that's
13:18
Speaker 3: the one period of time where we have with the
13:19
Speaker 3: supply shock specific to the oil and energy markets. Those
13:23
Speaker 3: dynamics aren't the same today in terms of where we
13:26
Speaker 3: stand from an oil and energy perspective, but it's worth
13:30
Speaker 3: having a discussion on the subject. But I'm unwilling to
13:34
Speaker 3: venture too far down the road of making some sort
13:37
Speaker 3: of prognostication as to how this could impact the economy
13:42
Speaker 3: because of that point, it's just so many different things
13:44
Speaker 3: to have rising inflation, falling unemployment or sorry, rising unemployment,
13:50
Speaker 3: and falling demand and supply shocks at the same time.
13:53
Speaker 3: That cock to hell mix is really hard to get
13:57
Speaker 3: At the same point in time, there's factors out there
13:59
Speaker 3: that's worth talking about because of these tariffs that have
14:02
Speaker 3: been put into place, but what we've seen on a
14:04
Speaker 3: night to night, an hour an hour basis, it's too hard,
14:07
Speaker 3: it's too far to project this down the road because
14:09
Speaker 3: we don't even know how long this alleged supply shock
14:13
Speaker 3: on the tariff side of things will be present.
14:15
Speaker 2: No, And and look, if you see a significant slowdown
14:18
Speaker 2: as a result of tariffs, one of the things that
14:21
Speaker 2: you typically see associated with that is a drop in
14:23
Speaker 2: oil prices because there's a big drop in demand for
14:27
Speaker 2: energy products. And so it's like it's kind of hard
14:29
Speaker 2: to have inflation at any meaningful level if energy prices
14:34
Speaker 2: are falling, because that filters into so many other parts
14:37
Speaker 2: of the US economy. It's not just that one line
14:40
Speaker 2: item on the CPI. It's hey, that factors into food
14:44
Speaker 2: prices because of the cost of transporting you know food
14:46
Speaker 2: and things like that. It factors into you know, housing
14:51
Speaker 2: cost because of the cost of you know, producing and
14:53
Speaker 2: transporting the materials and stuff like that. So I think
14:57
Speaker 2: that yeah, we can, we can hold stack inflation out
15:00
Speaker 2: there and say, hey, let's let's pay attention because if
15:03
Speaker 2: things go really wrong, that's where you could end up.
15:07
Speaker 2: But I'm just not I'm not there right now to
15:11
Speaker 2: be able to say, yeah, this is where things are
15:15
Speaker 2: are going. I keep it as a possibility, but that's
15:19
Speaker 2: that's that's all it is. Likewise, we also have this
15:23
Speaker 2: piece from another piece from muhammadel Arian, who was the
15:29
Speaker 2: he used to run the UH. He was the CEO
15:31
Speaker 2: at PIMCO, who was the largest bond mutual fund operator
15:35
Speaker 2: in the world, at least they were at the time
15:37
Speaker 2: he was there. I don't know if they are any
15:40
Speaker 2: more given the changes in that landscape. But he he's
15:45
Speaker 2: a smart dude, like Mohammad, knows his stuff, and he's
15:49
Speaker 2: got a piece today in Bloomberg Opinion titled the US
15:52
Speaker 2: recession odds are becoming unsettlingly high, and it talks about
15:55
Speaker 2: some of the economic indicators that are, you know, potentially
15:58
Speaker 2: indicating a slow down. Treasury bond yields falling as a
16:02
Speaker 2: result of you know, some slow and growth in the
16:04
Speaker 2: last month or so, oil price is slipping, something else
16:07
Speaker 2: that you typically see. And so he notes, Look, there's
16:12
Speaker 2: a I'll quote from him, while still relatively low, my
16:16
Speaker 2: probability of a recession is increased from ten percent at
16:18
Speaker 2: the beginning of the year to twenty five to thirty
16:20
Speaker 2: percent today. Well, unless you're like a trader, I don't
16:26
Speaker 2: know that that tells you anything, Like, I don't know
16:27
Speaker 2: if that does anything for you, you know, like, what
16:32
Speaker 2: what do you do with that? If if you're someone,
16:35
Speaker 2: how do you plan for a twenty five percent chance
16:37
Speaker 2: of recession versus a ten percent? And also how do
16:42
Speaker 2: you know that you're right? Because it wasn't him, but
16:44
Speaker 2: I think it was the Bloomberg. It was like a
16:48
Speaker 2: board that they had back at the end of twenty
16:49
Speaker 2: twenty two said that there was one hundred percent chance
16:51
Speaker 2: of recession in the next twelve months and it never happened, Right,
16:55
Speaker 2: So I look at everyone loves to try to predict
17:00
Speaker 2: sessions because it makes them sound smart, But ultimately, I
17:04
Speaker 2: think that you get more value out of it for
17:06
Speaker 2: your own life, as you know, an individual trying to
17:09
Speaker 2: make economic decisions, or as an investor trying to make
17:11
Speaker 2: economic trying to make portfolio decisions, by just taking it
17:15
Speaker 2: as it comes, like, you're gonna react to whatever data
17:18
Speaker 2: is there. If we have a recession, I'm sure you'll
17:22
Speaker 2: hear about it on our show. Maybe I'm sure we'll
17:25
Speaker 2: cover it for at least an hour or so. I
17:28
Speaker 2: promise you we will. But economists have been predicting imminent
17:34
Speaker 2: recession for the last two and a half years now, and.
17:37
Speaker 3: Any predictions when it comes to the Marketer recessions, it's
17:39
Speaker 3: hard to put a tremendous amount of weight in them
17:41
Speaker 3: because of how difficult it is to get accurate. It's
17:44
Speaker 3: almost impossible to get accurate consistently.
17:46
Speaker 2: And not all recessions are the same. Yeah, you can
17:48
Speaker 2: have a small recession that wacks the market twenty twenty, Bigley.
17:51
Speaker 2: You could have a huge recession that doesn't do much
17:53
Speaker 2: to the market at all, And so I just the
17:57
Speaker 2: focus on recession or not as we've been saying for
17:59
Speaker 2: a few years it's kind of overblown.
18:05
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18:26
Speaker 2: Peace in the bloomy Berg in video, chart watchers brace
18:30
Speaker 2: for more pain with dip buyers at Bay. I don't know,
18:35
Speaker 2: I mean yeah, in video, stock hasn't been good lately,
18:38
Speaker 2: hasn't been good for a while. Actually, let's be completely honest.
18:41
Speaker 2: So fascinating thing with in video right now. I'm looking
18:45
Speaker 2: at it as of live this very moment. It's trading
18:49
Speaker 2: just below one hundred and fifteen bucks a share. The
18:52
Speaker 2: first time that it crossed this threshold, and that was
18:55
Speaker 2: at actually like this exact level was May twenty eighth
18:59
Speaker 2: of last year. It's been almost ten months, and the
19:01
Speaker 2: stock hasn't moved, well, it's moved, It went up and
19:04
Speaker 2: then down. And so you look at this and I
19:09
Speaker 2: think the reasons are pretty straightforward. It still is and
19:12
Speaker 2: this is exactly what we talked about for all of
19:15
Speaker 2: last year. Also, by the way, which is it's a
19:18
Speaker 2: fantastic company. It prints money hand over fist, but the
19:25
Speaker 2: growth rate is slowing, and if you want to maintain
19:28
Speaker 2: the ability to grow your stock, you know, two hundred
19:30
Speaker 2: three hundred four hundred percent each year, it can't just
19:33
Speaker 2: happen in a vacuum like that's just you know, it's
19:37
Speaker 2: it's not real, like it doesn't work like that. And
19:40
Speaker 2: so this is one of those consolidations that it could
19:44
Speaker 2: get worse like that. There's a case to be made
19:46
Speaker 2: that it could get a lot worse there. It might
19:49
Speaker 2: just level out here and hang out here for a
19:50
Speaker 2: few years. Like you, you don't know exactly what it's
19:53
Speaker 2: going to do, because there are so many factors that
19:55
Speaker 2: could influence how, you know, this particular business and industry evolve.
19:59
Speaker 2: But this is the danger with buying very highly priced stocks.
20:03
Speaker 2: It's not necessarily that they fall Apartment Shure. If you
20:06
Speaker 2: bought at the peak at like one fifty three and
20:08
Speaker 2: now you're down twenty five percent, you're kind of like, yeah,
20:11
Speaker 2: that doesn't feel very good, But hey, you could also
20:13
Speaker 2: buy it and maybe just doesn't go anywhere for like
20:15
Speaker 2: two or three years, or maybe doesn't go anywhere for
20:19
Speaker 2: a decade like Microsoft stock back in the two thousands.
20:22
Speaker 2: You know, like you just don't know. It's not that
20:25
Speaker 2: in video is going to go out of business because
20:28
Speaker 2: at least at the moment. Again, you never know what
20:29
Speaker 2: the future holds. Like all the caveats, they're too good
20:33
Speaker 2: of a company right now to go out of business
20:34
Speaker 2: anytime in the near future. But do they have to
20:37
Speaker 2: go up, well, no, like stocks don't just go up.
20:40
Speaker 1: No.
20:40
Speaker 3: This to me, this is healthy behavior from a video's perspective.
20:44
Speaker 3: They were growing at a revenue rate of almost doubling
20:48
Speaker 3: every single year. I think I had done out their
20:51
Speaker 3: yearly revenues for physical years where they were sitting at
20:55
Speaker 3: twenty seven billion for twenty one and twenty two, and
20:58
Speaker 3: for twenty three twenty four, you saw it grow from
21:01
Speaker 3: maybe thirty to sixty and now they're running at an
21:04
Speaker 3: annualized rate of one hundred and forty billion. Again, all
21:06
Speaker 3: those are rough numbers, but you can see the doubling
21:09
Speaker 3: effect that you saw from a revenue perspective. It's very
21:12
Speaker 3: almost impossible to duplicate that every single year. And I
21:15
Speaker 3: brought this up on the show previously. Think about any
21:17
Speaker 3: business owner out there Doubling your revenue in a given
21:20
Speaker 3: year is a tremendous accomplishment and really hard to go
21:23
Speaker 3: out and do again in the next year. So what
21:25
Speaker 3: you see from evaluation perspective is the stock had been
21:28
Speaker 3: up upwards of I think we had said six or
21:31
Speaker 3: seven hundred percent over a course of a couple of years.
21:33
Speaker 3: It has leveled off too.
21:34
Speaker 2: It was trading like forty eight times forward earning.
21:37
Speaker 3: That's what I was just going to get to is
21:38
Speaker 3: now we're sitting at a spot, no, no worries. Now
21:40
Speaker 3: we're sitting at a spot of twenty five times forward earnings,
21:43
Speaker 3: and I know on a price to earnings basis it
21:45
Speaker 3: was ninety five at one point, so it's grown into
21:48
Speaker 3: its valuation. I look at the business. I'm not even
21:51
Speaker 3: going to comment on the technical stuff because I don't
21:53
Speaker 3: really get into that world. To me, it's if you're
21:56
Speaker 3: investing in VideA, do you believe in its business going forward?
21:58
Speaker 3: There are certainly hurdle out there. There's a tremendous amount
22:01
Speaker 3: of competition. We've talked about that they have high margins
22:04
Speaker 3: which are being chased. But the bottom line is for
22:07
Speaker 3: the development of the AI infrastructure, it is something that
22:11
Speaker 3: is a critical part in the supply chain in its
22:15
Speaker 3: design of chips and servers and things like that, until
22:19
Speaker 3: that dominant market share is eroded where I think they
22:22
Speaker 3: have two thirds or more of the market share. Until
22:25
Speaker 3: that's a road. It's a great com you know, it
22:27
Speaker 3: has great revenue and great fundamentals to it, but it
22:30
Speaker 3: may you know, flatline for a little bit.
22:33
Speaker 2: Here can we talk about Paul. When you think about
22:36
Speaker 2: publicly traded companies that are the face of AI, can
22:41
Speaker 2: you name like three or four for me? In videos?
22:44
Speaker 3: One Palenteer gets grouped in there as well. Microsoft with
22:50
Speaker 3: its ties to Open AI is a third, though from
22:53
Speaker 3: a profitability standpoint it's a speck on the balance sheet,
22:57
Speaker 3: and Meta would be another, and then probably Amazon fifth
23:03
Speaker 3: with anthropic No sorry, Google ahead of Meta because of
23:06
Speaker 3: the Gemini aipiece. But from a revenue perspective, if you
23:10
Speaker 3: looked at all those companies, you'd be like, Paul, this
23:12
Speaker 3: doesn't even show up anywhere.
23:13
Speaker 2: It's more headline based. So I got something fascinating. So
23:16
Speaker 2: Palantiner obviously is trading just nuttly. It's still one hundred
23:19
Speaker 2: and fifty two times forward earnings, which is down from
23:22
Speaker 2: a couple weeks ago when it was two hundred and
23:23
Speaker 2: twenty five times forward earnings. But let's strip that out
23:27
Speaker 2: just because that's kind of a weirdo in video right now,
23:31
Speaker 2: trading twenty five times forward earnings, Microsoft twenty nine x, Google,
23:36
Speaker 2: Alphabet eighteen x, Meta twenty five x. So they're all
23:40
Speaker 2: like eighteen to thirty x.
23:42
Speaker 1: Right.
23:44
Speaker 2: Here's something and this has been the case for the
23:46
Speaker 2: last couple weeks. Now, this is just kind of wild
23:49
Speaker 2: to me. Walmart. Walmart the company that sells predominantly groceries,
23:57
Speaker 2: Like the majority of Walmart's sales are groceries, and then
24:03
Speaker 2: they also sell you know, probably a lot of T
24:05
Speaker 2: shirts and sweatshirts and apparel and DVDs.
24:08
Speaker 3: I mean they have like one hundred thousand skews or something,
24:11
Speaker 3: so like.
24:12
Speaker 2: They sell very few things, but they're like Walmart, Like
24:16
Speaker 2: it's boring old Walmart. The sales grow like three to
24:19
Speaker 2: four percent a year, Like it's it's boring. It's trading
24:22
Speaker 2: thirty six times forward earnings. Thirty six times forward earnings
24:30
Speaker 2: for Walmart. Now what I think you can say, So
24:34
Speaker 2: here's something interesting, and this is this is not my
24:36
Speaker 2: original idea, but It's something that's been marinating in my
24:39
Speaker 2: head just the last six months or so. Is there
24:44
Speaker 2: are two ways that multiples develop on stocks. In my opinion,
24:47
Speaker 2: the first is through like that high multiples developed. The
24:51
Speaker 2: first is through rapid growth. Okay, great, You're obviously willing
24:55
Speaker 2: to pay more for a company that's growing rapidly, but
24:59
Speaker 2: you're also willing to pay more for a company that's
25:01
Speaker 2: growing consistently. Because if a company doesn't have the threat
25:05
Speaker 2: of the bottom falling out, then you say, fine, like
25:09
Speaker 2: I'm not as nervous about buying it this valuation because
25:13
Speaker 2: the bottom's not going to fall out of it. And
25:16
Speaker 2: so Walmart, like you even go back to you know,
25:19
Speaker 2: a couple of years ago, like mid twenty twenty three,
25:22
Speaker 2: early twenty three, like this is after recession scares in
25:25
Speaker 2: the US and stuff, or even during them, and Walmart
25:28
Speaker 2: was trading twenty two times forward earnings and so like
25:32
Speaker 2: It's it's kind of interesting to me because we always
25:34
Speaker 2: talk about earnings multiples and more like well, you know,
25:38
Speaker 2: like can you grow into those earnings and this and that,
25:41
Speaker 2: But part of the can you grow into it is
25:43
Speaker 2: your likelihood of hitting those earnings. And a company like
25:46
Speaker 2: Walmart might not grow earnings that quickly, but maybe it's
25:50
Speaker 2: got a higher likelihood of hitting those earnings that earnings
25:53
Speaker 2: growth than other companies. And it still doesn't mean that
25:56
Speaker 2: it's like cheap, Like you could still point to Walmart
25:57
Speaker 2: now and be like, yeah, thirty six x four. You know,
26:00
Speaker 2: a company like that probably feels a little roasty, you know.
26:04
Speaker 2: But I do think that there's an interesting thing in
26:06
Speaker 2: terms of not just earning's growth, but earnings consistency I
26:10
Speaker 2: think matters when incorporating that into valuation as well.
26:12
Speaker 3: And the optimism for the future, I mean that is
26:15
Speaker 3: the totally the Tesla's story, which we'll cover, and in
26:19
Speaker 3: Walmart two, there's a lot of optimism regarding the e
26:22
Speaker 3: commerce growth that they've shown over the last eight to
26:24
Speaker 3: ten quarters. It's been pretty steady.
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27:28
Speaker 1: Let's talk a.
27:29
Speaker 2: Little bit about Tesla. We got a piece of New
27:31
Speaker 2: York Times Tesla sales in Germany. We got the data
27:36
Speaker 2: yesterday and they fell by seventy six percent year over year.
27:40
Speaker 2: This despite German ev sales overall being up thirty one percent,
27:45
Speaker 2: and so there's a real problem with Tesla demand right now,
27:50
Speaker 2: it seems, and it's unclear how badly this is going
27:57
Speaker 2: to impact the company's stock from here. But when you're
28:01
Speaker 2: talking about declines of that magnitude for a car company
28:05
Speaker 2: with all of the capital expenditures that you have, it
28:09
Speaker 2: becomes very challenging to operate in that environment without making
28:16
Speaker 2: significant cuts in order to survive. We don't. We're not
28:21
Speaker 2: going to have an earnings report for another month and
28:24
Speaker 2: a half or so, so we've got, you know, a
28:26
Speaker 2: little ways to go another six to eight weeks before
28:28
Speaker 2: we are going to see how Q one ends up
28:31
Speaker 2: for them. But it's not just in Germany. Across most
28:34
Speaker 2: of Europe. The data that we've seen thus far, as
28:37
Speaker 2: you know, declines of forty to sixty percent in a
28:40
Speaker 2: lot of cases. The data from China for January was
28:44
Speaker 2: down I think around thirty five percent. I don't know
28:46
Speaker 2: that I've seen any data out of the US in
28:48
Speaker 2: terms of their sales.
28:50
Speaker 3: I haven't stumbled across it.
28:51
Speaker 2: I don't know that I've seen any, but I mean we've.
28:54
Speaker 3: Read anecdotally that you know, obviously a lot of their
28:57
Speaker 3: contingency from a purchase standpoint is is California and I
29:01
Speaker 3: do believe that there's been declines thereby, I just don't
29:04
Speaker 3: have the numbers in front of me.
29:05
Speaker 2: So we'll have to see where this goes. But Tesla
29:08
Speaker 2: at this point has now reversed all of its post
29:11
Speaker 2: election bump. Prior to the election on November fifth, uh,
29:17
Speaker 2: it traded up to two hundred and fifty five dollars
29:19
Speaker 2: a share. It's now at two sixty one it got
29:22
Speaker 2: to yesterday, so maybe not all of it. It's like
29:24
Speaker 2: three percent above. But this is a stock that had
29:27
Speaker 2: almost doubled and now is given back almost fifty percent
29:30
Speaker 2: of its value. So we'll have to see where this goes.
29:32
Speaker 2: But it does appear that Tesla has a real demand
29:35
Speaker 2: problem on its hands, and we'll have to see how
29:38
Speaker 2: badly that's impacting the fundamentals of the business in the
29:41
Speaker 2: next quarterly report. Let's take a quick break. When we
29:44
Speaker 2: come back, stack route, let text.
29:48
Speaker 1: Does six one seven TRN six two one three eight
29:51
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29:54
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30:02
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30:05
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30:25
Speaker 2: Paul, what do you got for me for the Roulette
30:27
Speaker 2: of the Stack?
30:28
Speaker 3: Concert ticket prices they're soaring and they're busting gen Z's
30:33
Speaker 3: budgets A personally icdot here. My wife and I are
30:37
Speaker 3: big country music fans, and there was an announcement that
30:39
Speaker 3: Morgan Wallen's coming to Jillette this summer.
30:44
Speaker 2: It's a huge ven venue.
30:45
Speaker 3: Yeah, you know, typically Kenny Chesney is an annual fixture
30:50
Speaker 3: at Jelette, And so immediately I went to go look
30:53
Speaker 3: at what the ticket prices would look like because I
30:56
Speaker 3: thought that would be a fun night out for my
30:57
Speaker 3: wife and I get a babysitter for the kids. And
31:00
Speaker 3: goodness were they high. I believe the least amount you
31:05
Speaker 3: could spend we're talking three hundred sections was close to
31:07
Speaker 3: one thousand bucks eights the cheapest. Yeah, that was the
31:10
Speaker 3: cheapest out there. Make sure to double check me on that,
31:14
Speaker 3: Tucker can pull my quote me on that phrase on there.
31:18
Speaker 3: But it was just so exorbitant, Chuck that immediately what
31:23
Speaker 3: we you know, we turned to each other like we
31:26
Speaker 3: could fly down to Florida or something.
31:28
Speaker 2: I don't think you're looking at the right thing is it?
31:30
Speaker 1: Is it?
31:31
Speaker 2: I got one hundred and sixty dollars.
31:32
Speaker 3: Wow, my wife screwing me. Oh my gosh, what.
31:36
Speaker 2: Is she talking about? I got, I got. You can
31:37
Speaker 2: be down on ground level for five hundred. I'm not
31:40
Speaker 2: saying you should spend five hundred, but.
31:42
Speaker 3: Oh my goodness, you's screwing me here, all right, I
31:45
Speaker 3: got someone to talk about.
31:46
Speaker 2: I'm like a thousand dollars Taylor.
31:49
Speaker 3: I was like, we should do it. That's you know,
31:51
Speaker 3: it's a great concert to see. Regardless of my personal anto,
31:54
Speaker 3: which now has blown up in play. I'm glad you
31:55
Speaker 3: checked me on it because now I'm going to tell
31:56
Speaker 3: her we should look to buy these tickets because this
31:58
Speaker 3: is a little bit more reasonable. But the point means
32:00
Speaker 3: from a data perspective, it was inflation adjusted. The average
32:04
Speaker 3: for a concert was fifty two dollars back in nineteen
32:07
Speaker 3: ninety six, again adjusted for inflation. To see the top
32:11
Speaker 3: hundred tours out in the country. As of twenty twenty four,
32:14
Speaker 3: that average ticket cost is one hundred and thirty five bucks,
32:16
Speaker 3: so three times more inflation adjusted for a ticket out
32:20
Speaker 3: of concert. There's examples on here where this one particular
32:23
Speaker 3: individual went to seven Taylor Swift concerts through the United
32:27
Speaker 3: States and Canada.
32:27
Speaker 2: What did you take out a mortgage?
32:30
Speaker 3: Eighty four hundred bucks she spent on tickets, merchandise and travel.
32:33
Speaker 3: The reason I thought Morgan Wallam was close to one
32:36
Speaker 3: thousands because these Tailor Swift tickets were in and around
32:39
Speaker 3: that ballpark. He's obviously not as popular, but is still
32:42
Speaker 3: quite popular. So the bottom line is ever since it
32:45
Speaker 3: seems like the Live Nation merger where the amount of
32:49
Speaker 3: competition in the space, which I think that's still being
32:52
Speaker 3: regularly through the antitrust.
32:53
Speaker 2: They're still trying to wind through that. Yeah, there's still
32:56
Speaker 2: a consent decree that they're under end. I know that
32:59
Speaker 2: the FTC had reopened an investigation into them because they
33:03
Speaker 2: thought they may have been violating the consent decrease. So
33:06
Speaker 2: we'll see what happens on it. But yeah, it's content
33:09
Speaker 2: prices have gotten nuts. I do agree. And it's not
33:13
Speaker 2: just like they make the case on this that, oh,
33:15
Speaker 2: like Beyonce tickets are expensible. Yeah, of course if you're
33:17
Speaker 2: gonna see one of like the three most popular artists
33:19
Speaker 2: on the planet, right, they're always nuts, Like that's always
33:22
Speaker 2: been the case. But even for you know, again kind
33:27
Speaker 2: of that that tier down like the top one hundred
33:30
Speaker 2: tours of the year. You look at it and you're like, man,
33:34
Speaker 2: there's really something that is happening there.
33:39
Speaker 1: Now.
33:39
Speaker 2: Part of this is I think you can also attribute
33:42
Speaker 2: to trying to think of the best way to phrase this.
33:48
Speaker 2: There is something to be said for venue size being
33:50
Speaker 2: the problem and try and like being able to play
33:52
Speaker 2: in the right venue because you go back to nineteen
33:56
Speaker 2: ninety six and the US population was thirty percent small,
34:00
Speaker 2: so you had fewer people competing for the same number
34:03
Speaker 2: of tickets. Like the TD Garden in ninety six, is
34:06
Speaker 2: it just opened. It's the same size today, and so
34:10
Speaker 2: like the Boston metro area has more people in Boston
34:14
Speaker 2: and of itself, No, but the Boston metro area has
34:17
Speaker 2: more people in it New England as a whole, because
34:19
Speaker 2: you know, people drive down from New Hampshire and up
34:21
Speaker 2: from Rhode Island and stuff like that. There are more
34:24
Speaker 2: people competing for those eighteen thousand seats, and so part
34:28
Speaker 2: of it is supply and demand. Now, this also does
34:31
Speaker 2: get at there's sometimes like where I see someone who's
34:34
Speaker 2: playing the Garden and I'm like, how is that person
34:37
Speaker 2: playing the Garden? Like not just once, but like on
34:40
Speaker 2: how are they playing the Garden back to back nights?
34:42
Speaker 2: Who are the forty thousand people that want to see
34:45
Speaker 2: that person? But they filled? And part of that is
34:48
Speaker 2: just there's more people. So what might have previously been
34:51
Speaker 2: one night at the Garden or like three nights at
34:55
Speaker 2: I don't know what's like at you know whatever, like
34:59
Speaker 2: Great Woods or something infinity. Okay, now they move from
35:03
Speaker 2: doing three nights there to a night at the Garden,
35:05
Speaker 2: and you know that works, So I don't know there's
35:09
Speaker 2: something that's broken. The other thing that just as someone
35:11
Speaker 2: who like does love going to concerts, the downfall of
35:15
Speaker 2: these small venues in every city is a real problem.
35:20
Speaker 2: I think of the places that I used to hang
35:22
Speaker 2: out at when I'm twenty, and this is not like
35:24
Speaker 2: oh woe is me? Like when I was younger, everything
35:26
Speaker 2: was better, But you lose the access to those up
35:29
Speaker 2: and coming bands and performances that you would see in
35:32
Speaker 2: fifty one hundred person venues that just don't exist anymore
35:35
Speaker 2: because the economics don't make sense for them in today's world.
35:37
Speaker 3: Sure what I mean, We've still got locally, there's MDM
35:42
Speaker 3: Music Hall. Is that did that take over for House
35:45
Speaker 3: of Blues or those that's a separate Okay, so House
35:48
Speaker 3: of Blues is kind of another one too, But but
35:50
Speaker 3: I know what you mean. The Foxborough is a tough,
35:53
Speaker 3: tough slut.
35:53
Speaker 2: No, I think of all like t t the Bears.
35:56
Speaker 2: You know that's gone now, Johnny D's is gone, Our
36:00
Speaker 2: Woods is gone, at Woods has gone. I think. So
36:02
Speaker 2: it's like you got a lot that are that are gone.
36:04
Speaker 2: Quick break for the entire rest of the day. We'll
36:06
Speaker 2: see you back here tomorrow. On the Financial Exchange