Latest / The Financial Exchange Show / Where is the inflation from tariffs?

Transcript

Where is the inflation from tariffs? · The Financial Exchange Show

0:00
Speaker 1: The Financial Exchange is produced by Money Matters Radio and
0:02
Speaker 1: is hosted by employees of the Armstrong Advisory Group, a
0:05
Speaker 1: registered investment advisor. All opinions expressed are solely those of
0:08
Speaker 1: the hosts. Do not reflect the opinions of Armstrong Advisory
0:11
Speaker 1: or anyone else. Investments can lose money. This program does
0:14
Speaker 1: not offer any specific financial or investment advice. Please consult
0:17
Speaker 1: your own financial, tax, and estate planning advisors before making
0:20
Speaker 1: any investment decisions. Armstrong Advisory and the advertisers heard on
0:23
Speaker 1: this program do not endorse each other or their services.
0:25
Speaker 1: Armstrong and Money Matters Radio do not compensate each other
0:28
Speaker 1: for referrals and are not affiliated. This is the Financial
0:34
Speaker 1: Exchange with Chuck Zada and Mike Armstrong, your exclusive look
0:38
Speaker 1: at business and financial news affecting your day, your city,
0:42
Speaker 1: your world. Stay informed and up to date about economic
0:46
Speaker 1: and market trends, plus breaking business news every day. The
0:50
Speaker 1: Financial Exchange is a proud partner of the Disabled American
0:53
Speaker 1: Veterans Department of Massachusetts. Help us support our great American
0:57
Speaker 1: heroes by visiting dav five k dot com Austin and
1:00
Speaker 1: making a donation today. This is the Financial Exchange with
1:05
Speaker 1: Chuck Zada and Mike Armstrong.
1:10
Speaker 2: Chuck, Mike and Tucker with you here.
1:12
Speaker 3: And we got markets selling off, not modestly, not.
1:17
Speaker 2: Extremely somewhere between those two.
1:21
Speaker 3: We got markets selling off, I guess, but that makes
1:24
Speaker 3: it telling. It's like big when you say market's selling off,
1:27
Speaker 3: like the the S and P's down.
1:29
Speaker 4: Three quarters, markets cratering would be big or markets. Yeah,
1:34
Speaker 4: I don't think market's selling off insinuates that they are
1:37
Speaker 4: having a big down day.
1:39
Speaker 2: Markets are falling.
1:44
Speaker 4: Generally less than one percent, extra mediumly. Yeah, Okay, I
1:49
Speaker 4: think that's how I would describe it.
1:51
Speaker 3: That was off five hundred and forty one points, about
1:53
Speaker 3: one to quarter percent. S Andp's off forty two points,
1:55
Speaker 3: about three quarters of a percent, NASDAK down one sixty six,
1:59
Speaker 3: about eight or nine tenths of a percent. We've got
2:03
Speaker 3: the tenyure treasury selling off as well. So this again
2:07
Speaker 3: kind of echoes of early twenty twenty two and in
2:11
Speaker 3: some respects where hey, you got stocks and bonds selling off,
2:16
Speaker 3: and you got oil moving up on you know, a
2:18
Speaker 3: geopolitical item like we've.
2:20
Speaker 2: Heard this story before.
2:21
Speaker 3: I'm sorry, not this exact one, but it's it's rhyming
2:24
Speaker 3: a little bit to me, and so the tenure treasury
2:27
Speaker 3: is back above four point four percent to four point
2:29
Speaker 3: four one four at the moment. Mortgages nationally yesterday fell
2:34
Speaker 3: four tents four hundreds of a percent to six point
2:37
Speaker 3: eight five percent. This is probably pushing back up to
2:39
Speaker 3: around sixty nine, so continuing to hover in that six
2:42
Speaker 3: eight to seven range that we've been in for quite
2:46
Speaker 3: some time now on the national average for.
2:48
Speaker 2: Thirty year mortgages.
2:50
Speaker 3: Oil now up five and a half percent on West
2:52
Speaker 3: Texas Intermediate to seventy one seventy eight. Expectations based on
2:57
Speaker 3: Patrick de Haan from gas Buddy, is that we we'll
3:00
Speaker 3: see the national average for gas prices rise anywhere from
3:03
Speaker 3: ten to twenty five cents, depending on how the next
3:06
Speaker 3: week or so goes in the Middle East and the
3:10
Speaker 3: potential impact on oil and gas markets. And we've got
3:14
Speaker 3: gold moving up as well, up forty six dollars and
3:18
Speaker 3: forty cents an ounce to thirty four forty eight and
3:21
Speaker 3: eighty cents. Obviously, the big thing triggering these moves the
3:26
Speaker 3: attack on Iran by Israel overnight. We are continuing to
3:30
Speaker 3: monitor the situation for you know, how it may impact
3:34
Speaker 3: markets and the economy. But the big one at this
3:36
Speaker 3: point is oil prices moving up is yet another cost
3:40
Speaker 3: that companies may have to deal with if this is
3:43
Speaker 3: any protracted engagement here. We don't know how long this
3:48
Speaker 3: may or may not last. We don't know, if you know,
3:51
Speaker 3: Israel has been so successful with their initial assault that
3:54
Speaker 3: Iran comes out and says, look, we you know, we
3:59
Speaker 3: have to end this, like we can't do this anymore.
4:02
Speaker 3: We don't know if there is a larger response that's
4:04
Speaker 3: planned by the Iranians, but we'll continue to watch things.
4:07
Speaker 3: But right now, that oil price jump is the big
4:10
Speaker 3: one that we're seeing as.
4:11
Speaker 2: A result of this.
4:13
Speaker 3: Anything else, Mike No, Okay, let's see let's kick this
4:18
Speaker 3: off this hour with talking a little bit about this
4:21
Speaker 3: piece of New York Times. Where's the inflation from tariffs?
4:24
Speaker 3: Just wait, economists say, and here's where we stand. Is
4:30
Speaker 3: the imposition of tariffs, the ten percent blanket tariff and
4:35
Speaker 3: higher ones on China has been in effect for about
4:39
Speaker 3: two months, and during the month of April, we saw,
4:42
Speaker 3: you know, a dramatically lower volume of shipping stuff, you know,
4:46
Speaker 3: shipping coming into the United States. And part of this
4:48
Speaker 3: is because there was a bunch of front running by
4:50
Speaker 3: companies to try to bring in inventory in February and March,
4:55
Speaker 3: trying to front run any potential tariffs that may be imposed.
4:59
Speaker 3: So one of the logical explanations is, hey, we've been
5:03
Speaker 3: working through that pre tariff inventory and companies are going
5:05
Speaker 3: to start raising prices soon, and then it'll show up
5:08
Speaker 3: in the summer inflation data. This kind of messages with
5:10
Speaker 3: what companies like Walmart have told us. What else is
5:13
Speaker 3: outlined in here, Mike.
5:14
Speaker 4: Well in the article they talked about you know, it
5:17
Speaker 4: takes a while for this stuff to feed through. Companies
5:19
Speaker 4: could just be eating some of it. I want to
5:22
Speaker 4: make the point that we made very early on here, Chuck,
5:26
Speaker 4: businesses don't have the pricing power that they did in
5:28
Speaker 4: twenty twenty one and twenty twenty two. If they go
5:31
Speaker 4: and raise prices on consumers, consumers seem like right now,
5:35
Speaker 4: they're just going to buy less of that stuff. And
5:38
Speaker 4: so in twenty twenty one, had you had this type
5:41
Speaker 4: of news that yeah, terris are going into effect, I
5:44
Speaker 4: think a lot of CEOs would be out there bumping
5:47
Speaker 4: up prices even if they didn't have to, because they
5:50
Speaker 4: had already stockpiled supplies and had plenty on hand, and
5:54
Speaker 4: you know, speaking to it during their earnings calls that yeah,
5:56
Speaker 4: you know, we did see prices that we were able
5:59
Speaker 4: to pass to consumers. You are not hearing that on
6:02
Speaker 4: conference calls. You are much more hearing the pushback from
6:05
Speaker 4: CEO of saying, hey, if this, if this gets fully implemented,
6:07
Speaker 4: it is a real problem for our business. And we
6:09
Speaker 4: don't think we can pass this through to consumers as
6:12
Speaker 4: much as we would hope here and there. You know,
6:14
Speaker 4: you have Walmart who mentioned they plan to pass things through.
6:16
Speaker 4: You have Amazon who did so and then took a
6:19
Speaker 4: step back. But yeah, the answer to me as to
6:23
Speaker 4: why we're not seeing it, yeah, in part because companies
6:26
Speaker 4: have some stock that they didn't have to pay tariffs on,
6:29
Speaker 4: in part because the tariffs are a lot less significant
6:31
Speaker 4: than was previously expected. And also in part because the
6:34
Speaker 4: pricing power is just not there at the moment, given
6:37
Speaker 4: the weakness to the consumer, or at least perceived weakness
6:40
Speaker 4: of the consumer.
6:41
Speaker 3: And so here's the thing like that, at some point,
6:46
Speaker 3: assuming that these you know, stay in place, they are
6:49
Speaker 3: going to show up in the data somewhere. Think it's
6:54
Speaker 3: you can't just have like the immaculate imposition of tariffs,
6:57
Speaker 3: where hey, there's a ten percent blanket teara funnel imports
7:00
Speaker 3: into the US and it just doesn't show up anywhere, Right,
7:03
Speaker 3: It's going to show up somewhere.
7:05
Speaker 2: What are the possibilities for where it could show up?
7:08
Speaker 4: Yeah, I mean consumers, consumer prices go up, You could
7:13
Speaker 4: see shrinking profit margins of domestic companies who pay these tariffs.
7:18
Speaker 2: Those are to name a few.
7:19
Speaker 4: I mean, hypothetically, do you have producers overseas who absorb
7:23
Speaker 4: some of this by lowering prices and they absorb some
7:26
Speaker 4: of the price shock possibly?
7:28
Speaker 2: Yes, yes, possibly, and most.
7:31
Speaker 3: Likely it's a combination of all these things. You know,
7:33
Speaker 3: It's okay. Some of it's gonna get passed along to
7:36
Speaker 3: end buyers. Some of it's gonna get absorbed by US
7:40
Speaker 3: companies selling this stuff. Some of it's going to be
7:43
Speaker 3: absorbed by companies making the stuff overseas. Some of it
7:47
Speaker 3: might be absorbed by shippers that, you know, figure out
7:49
Speaker 3: how to you know, be the bridge between you know, hey,
7:52
Speaker 3: i'd rather have the boat, you know, eighty nine percent
7:55
Speaker 3: full than eighty seven percent full.
7:56
Speaker 2: So sure we can take you a little bit cheaper
7:58
Speaker 2: than we thought we would.
8:00
Speaker 3: It all adds up in these different areas, but it's
8:03
Speaker 3: not going to just never show up anywhere another place
8:06
Speaker 3: that you could see it. What about lower demand overall?
8:10
Speaker 3: If companies try to maintain margins, which is what they
8:12
Speaker 3: often try to do, one of the places that they
8:15
Speaker 3: go for that is they say, look, we got to
8:17
Speaker 3: cut headcount, and when you cut headcount, you eventually end
8:19
Speaker 3: up cutting you know, aggregate demand in the United States,
8:23
Speaker 3: And so is that something that we see as well potentially? So,
8:28
Speaker 3: I think to this point it's safe to say that
8:32
Speaker 3: the inflation data hasn't shown anything very meaningful. It's been
8:37
Speaker 3: basically nothing of note there. The labor market on the
8:40
Speaker 3: surface hasn't seen any problems, but there are some cracks
8:43
Speaker 3: appearing underneath. I don't know if it's related to the
8:46
Speaker 3: tariff pricing so much as the tariff uncertainty, and as
8:52
Speaker 3: far as profit margins, well, we haven't gotten you know,
8:55
Speaker 3: new corporate earnings and projections for them yet, so it's
8:57
Speaker 3: it's kind of you know, Okay, we'll see what happens there.
9:01
Speaker 3: But I think overall, the second half of this year
9:06
Speaker 3: is when you are going to see some of this
9:08
Speaker 3: show up. And the open question is is the impact
9:11
Speaker 3: large enough to derail the US economy or is it
9:15
Speaker 3: a small detour either way? And this is like every
9:19
Speaker 3: economist saying this, and this is me, you know, saying
9:21
Speaker 3: this as well. You're going to have a slower economy
9:24
Speaker 3: in the second half of the year than the first half.
9:27
Speaker 2: Seems likely, seems inevitable. Is that slow down?
9:32
Speaker 3: Hey we go from you know, two and a half
9:33
Speaker 3: percent GDP down to one or one and a half
9:37
Speaker 3: and then rebound from there and it's not a huge deal. Possible,
9:40
Speaker 3: Absolutely possible, or is it. Hey, we're heading from you know,
9:45
Speaker 3: two percent.
9:46
Speaker 2: GDP and uh, this isn't great.
9:48
Speaker 3: And yeah GDP's going negative and there's some job us
9:51
Speaker 3: and we got, you know, some kind of recession that materializes.
9:54
Speaker 2: Also possible.
9:55
Speaker 3: I I don't try to say that I have the
9:59
Speaker 3: crystal ball that can tell you exactly what's gonna happen,
10:02
Speaker 3: but acknowledge the possibilities of where things can go, and
10:04
Speaker 3: also acknowledge that these can evolve as the tariff picture evolves.
10:09
Speaker 3: Convince it you could. You could put someone in front
10:13
Speaker 3: of me. It says, Chuck, tariffs are gonna be higher
10:15
Speaker 3: on January first because of Buppah bah bah Bah.
10:18
Speaker 2: I could buy that.
10:20
Speaker 3: You could tell me have put someone else that says
10:22
Speaker 3: Chuck Tariff's could be lowered by January first because of
10:25
Speaker 3: you know, dah da.
10:25
Speaker 2: Da da dah. I could buy that too.
10:28
Speaker 3: There are plenty of reasons on each side why the
10:30
Speaker 3: situation could evolve to be either better or worse. And
10:34
Speaker 3: we're just gonna have to see where we go. I
10:36
Speaker 3: know that's not satisfactory. Where we always need to have
10:39
Speaker 3: the answer, man, but we don't have the answer right now.
10:44
Speaker 2: We're just gonna have to see. Just take a quick break.
10:47
Speaker 3: When we come back, we'll do a little bit of trivia,
10:53
Speaker 3: and then we're gonna talk a little bit about the
10:55
Speaker 3: housing market and how it relates to inflation as well.
11:00
Speaker 1: The Financial Exchange has done national Hear the show daily
11:03
Speaker 1: on Sirius XM's business radio channel one thirty two. Keep
11:07
Speaker 1: it here for the latest business and financial news, what's
11:10
Speaker 1: happening on Wall Street, and the President's economic agenda. The
11:13
Speaker 1: Financial Exchange is Life on Serious XM's business radio channel
11:17
Speaker 1: one thirty two. Face is the Financial Exchange Radio Network.
11:22
Speaker 1: Find daily interviews and full shows of the Financial Exchange
11:25
Speaker 1: on our YouTube page. Subscribe to our page and get
11:28
Speaker 1: caught up on anything and everything you might have missed.
11:31
Speaker 1: This is the Financial Exchange Radio Network.
11:36
Speaker 5: This segment of The Financial Exchange is brought to you
11:38
Speaker 5: part by the US Virgin Islands Department of Tourism. The
11:42
Speaker 5: West Virgin Islands are Saint Croix, Saint Thomas, and Saint
11:45
Speaker 5: John and are consistently voted one of the top Caribbean
11:48
Speaker 5: udication destinations. Enjoy world class cuisine, Pristine Beach's rich history,
11:53
Speaker 5: and a vibrant nightlife. Book your trip now to visit
11:56
Speaker 5: America's Caribbean paradise the United States Virgin Islands. For reservations
12:01
Speaker 5: and more information, go to visit USVII dot com. That's
12:05
Speaker 5: visit USVII dot com. Time for trivia here in the
12:09
Speaker 5: Financial Exchange, and today is Chris evans forty fourth birthday.
12:13
Speaker 5: Evans is best known for his portrayal of Captain America
12:17
Speaker 5: in the Marvel Films. Marvel Films, Evans grew up in
12:21
Speaker 5: Massachusetts and even went to high school with actor Jeremy Strong.
12:25
Speaker 5: So trivia question today, which Massachusetts town did Chris Evans
12:30
Speaker 5: grow up in? Once again, which Massachusetts town did Chris
12:34
Speaker 5: Evans grow up in?
12:36
Speaker 2: Uh?
12:36
Speaker 5: Be the fourth person today to text us at six
12:40
Speaker 5: one seven three six two thirteen eighty five with the
12:42
Speaker 5: correct answer, and you win a Financial Exchange Show T shirt.
12:46
Speaker 2: Once again.
12:47
Speaker 5: The fourth correct response to Texas to the number six
12:50
Speaker 5: one seven three six two thirteen eighty five will win
12:53
Speaker 5: that T shirt. See complete contest rules at Financial Exchange
12:57
Speaker 5: Show dot com.
12:58
Speaker 3: Peace in Bloomberg Pit mean by Connor Son the South
13:01
Speaker 3: is beating inflation but not housing.
13:04
Speaker 2: Can we just talk about that title for a few
13:06
Speaker 2: minutes here? The title? I know Connor didn't right.
13:10
Speaker 4: But like I understand fundamentally how you beat inflation?
13:14
Speaker 2: Like, how do you how do you beat housing? I
13:17
Speaker 2: don't know? Uh, yeah, I don't. I don't know what
13:21
Speaker 2: that scream at it.
13:22
Speaker 4: I don't know what that means beating housing. I mean
13:24
Speaker 4: I would argue that if you pulled Americans and asked, like,
13:28
Speaker 4: what's the biggest issue surrounding housing, I would think it's
13:33
Speaker 4: housing affordability, to which case flor you know, the South
13:36
Speaker 4: is beating that too, So I'm confused by the time
13:39
Speaker 4: in some respects.
13:41
Speaker 3: Yeah, you know, when you would like, what's happened to
13:43
Speaker 3: insurance premiums down there. It's not sagy. So here's what
13:48
Speaker 3: Connor's saying. He's saying, Look, the reason why the CPI
13:53
Speaker 3: is showing what it's showing right now is because shelter
13:56
Speaker 3: cost is still a big chunk of the gains. And
14:01
Speaker 3: in particular, if you look at what's going on with
14:04
Speaker 3: home prices in the South, they are a huge drag
14:10
Speaker 3: on inflation in that region because home prices have been
14:14
Speaker 3: falling in many parts of the South, and that's creating
14:17
Speaker 3: less economic activity in the South and putting the South
14:20
Speaker 3: in kind of a dangerous spot when it comes to recession.
14:23
Speaker 3: I know, we don't think of recessions as being regional,
14:25
Speaker 3: and we probably shouldn't, but he's basically saying economic activity
14:28
Speaker 3: in the South is really at risk, and if it
14:32
Speaker 3: weren't for housing activity in other parts of the country,
14:35
Speaker 3: the FED would probably be cutting rates already.
14:37
Speaker 4: We talked about this on the show a couple of
14:39
Speaker 4: weeks ago, but DC, Texas, Colorado, Florida, Tennessee, Arizona, Utah,
14:44
Speaker 4: Washington State, Idaho, and Hawaii all have inventory levels in
14:48
Speaker 4: their states that are higher than what they were seeing
14:51
Speaker 4: in terms of inventory back in twenty nineteen. Those are
14:54
Speaker 4: the states that are really feeling some of this. Mostly
14:56
Speaker 4: you're talking about Southern states here.
14:59
Speaker 3: So again this kind of gets at the view, which is, yeah,
15:02
Speaker 3: there's some kind of gnarly stuff happening that if it
15:05
Speaker 3: weren't for the potential for tariffs to pass through, a
15:09
Speaker 3: bunch of inflation over you know, the.
15:11
Speaker 2: Rest of the year.
15:13
Speaker 3: I think there's a really credible case for the Fed
15:16
Speaker 3: to be cutting right now. And this is somewhere that
15:19
Speaker 3: I've kind of evolved to over the last you know,
15:20
Speaker 3: two or three weeks as we've gotten more data. The
15:23
Speaker 3: labor market stuff is legitimately concerning at this point as
15:27
Speaker 3: far as it's potential to worsen. But how do you
15:32
Speaker 3: reconcile all of this, you know, together, I think is
15:36
Speaker 3: the big question. And the last thing the FED wants
15:40
Speaker 3: to do is say, all right, you know what we're
15:44
Speaker 3: gonna do, you know, a couple of cuts and as
15:48
Speaker 3: part of that, then okay, you see economic activity maybe
15:52
Speaker 3: picked back up a little bit right as you're heading
15:54
Speaker 3: into this wave of tariff inflation, and now you got
15:58
Speaker 3: unemployment that shows a little bit more stability in the fours,
16:01
Speaker 3: but inflation starts heading you know, back towards the fores
16:04
Speaker 3: as well, and you're like, oh, gee, do we need
16:05
Speaker 3: to hike now?
16:06
Speaker 4: For those that didn't live through and study economics during
16:09
Speaker 4: the early seventies, which would be everyone currently in this room,
16:13
Speaker 4: can we explain why, like, why doesn't the FED want
16:16
Speaker 4: to have to deal with that of cutting and then
16:18
Speaker 4: having hike rates again. What's the problem with you know,
16:23
Speaker 4: lowering rates because the economy seems to be weakening with
16:27
Speaker 4: the knowledge that you might have to reverse course and
16:29
Speaker 4: go in the other direction in a few months.
16:31
Speaker 3: Well, I mean, it kills the credibility of the move
16:33
Speaker 3: and then it effectively dampens you know what that move
16:36
Speaker 3: means in the future. But beyond that, look, inflation is
16:40
Speaker 3: something where when it shows up historically, it's tended to
16:44
Speaker 3: be sticky and big.
16:46
Speaker 2: Exception in twenty twenty two. Yeah, and even there it.
16:50
Speaker 3: Was stickier longer than the FED wanted. Yeap, you know,
16:52
Speaker 3: I mean we got you remember the whole fight about
16:54
Speaker 3: it is it transitory or not?
16:56
Speaker 2: You know, like, you know, we we.
16:58
Speaker 4: Have there's less trans story than they were hoping for. Right,
17:03
Speaker 4: It's where we coin the term intermediatory. Yeah, correct, And
17:06
Speaker 4: that's how we continue to describe inflation. In the twenty twenties,
17:09
Speaker 4: it was intermediatory. So I think that ultimately it's.
17:14
Speaker 3: That plus the fact that, look, there's a reason why
17:20
Speaker 3: governments around the world hate inflation, and it's not because
17:24
Speaker 3: it's inherently bad for like their bottom line or the
17:27
Speaker 3: bottom lines of companies. It's because people hate it and
17:31
Speaker 3: it causes social upheaval. Now you can say high unemployment
17:36
Speaker 3: does too, and that's true to a certain extent.
17:40
Speaker 4: But inflation affects everyone. Unemployment in their worst case scenarios,
17:44
Speaker 4: maybe affects one in ten of the voting public.
17:48
Speaker 2: Yeah, it's it's less than that.
17:50
Speaker 4: Actually, I mean, thinking through that for a moment here,
17:52
Speaker 4: given the number of retirees, if we saw even seven
17:55
Speaker 4: percent inflation unemployment right now, that fact affects a very
18:00
Speaker 4: small number of actual voting Americans.
18:02
Speaker 3: It doesn't mean psychologically it still has an impact, because
18:05
Speaker 3: you know, everyone's looking over their shoulder wondering, am I
18:07
Speaker 3: gonna be the next one laid off?
18:09
Speaker 2: Yep.
18:09
Speaker 3: But as long as you're getting that paycheck, you still say, okay,
18:12
Speaker 3: like I still have my you know, my my paycheck. Here,
18:15
Speaker 3: the inflation side it's it's everyone feels it, and it
18:20
Speaker 3: just Economists have looked at this for a while and
18:24
Speaker 3: they can't come up with any reason why inflation is
18:26
Speaker 3: inherently bad other than people hate it. And the reason
18:30
Speaker 3: why it's very simple. Hey, I bought that same container
18:34
Speaker 3: of milk last week and it was twenty cents cheaper.
18:38
Speaker 2: Did it get bigger?
18:39
Speaker 1: No?
18:40
Speaker 2: Are the cows better?
18:41
Speaker 3: No?
18:42
Speaker 2: Does it taste better? No? Then why am I paying
18:44
Speaker 2: more for it?
18:45
Speaker 4: Yeah?
18:45
Speaker 3: It's just it just it just it nags at you,
18:49
Speaker 3: it burns you like that. So that that's I think.
18:53
Speaker 3: The big thing is the FED and other central banks.
18:57
Speaker 3: They do not want a repeat of inflation. The counter
19:00
Speaker 3: to this is, I'm a big believer no matter who
19:04
Speaker 3: it is, pay attention to what they do, not what
19:05
Speaker 3: they say. And when you look at what the Fed
19:09
Speaker 3: under J. Powell has done, they've always taken the first
19:13
Speaker 3: opportunity to be dublished that they can.
19:15
Speaker 2: Yep.
19:16
Speaker 3: So yeah, they might talk a hawkish game here. If
19:21
Speaker 3: push comes to shove, they probably move to stem the
19:25
Speaker 3: bleeding on the labor market before they do anything with
19:30
Speaker 3: higher rates because of inflation. Quick break here we've got
19:33
Speaker 3: the trivia answer.
19:34
Speaker 1: Next bringing the latest financial news straight to your radio.
19:44
Speaker 1: Every day. It's the Financial Exchange on the Financial Exchange
19:48
Speaker 1: Radio Network. Time now for Wall Street Watch a complete
19:53
Speaker 1: look at what's moving market so far today right here
19:57
Speaker 1: on the Financial Exchange Radio Network.
20:00
Speaker 5: Are in sell off mode, but not as bad as
20:02
Speaker 5: about an hour ago, following Israel strikes against Iran overnight,
20:06
Speaker 5: sending oil, gold, and geopolitical uncertainty higher. Right now, the
20:11
Speaker 5: Dow is off by just over one percent, or four
20:13
Speaker 5: hundred and forty three points. S and P five hundred
20:16
Speaker 5: is down by only half a percent now or thirty points,
20:19
Speaker 5: and the Nasdaq is down by six tenths of one
20:22
Speaker 5: percent or one hundred and twenty four points. RUSS two
20:24
Speaker 5: thousand is down just over one percent, or twenty three
20:27
Speaker 5: points lower. Tenyure Treasure reeled up seven basis points now
20:31
Speaker 5: at four point four to two percent. In crude oil
20:35
Speaker 5: now up six point two percent higher, trading just above
20:39
Speaker 5: seventy two dollars a barrel, with oil prices spiking due
20:42
Speaker 5: to concerns over the supply outlook. Chevron and Conco Phillips
20:46
Speaker 5: Oxidel Petroleum are up anywhere between one and three percent.
20:50
Speaker 5: Defense stocks like Lockheed Martin and RTX are up by
20:53
Speaker 5: about three percent on the day. Several airline stocks also
20:58
Speaker 5: seeing losses on the prospect of higher fuel costs and
21:01
Speaker 5: slower demand due to the rising tensions in the Middle East.
21:04
Speaker 5: United Airlines and Delta now down just over two percent.
21:08
Speaker 5: Cruise lines including Carnival and Royal Caribbean or off anywhere
21:12
Speaker 5: between two and four percent due to heightened risk deterring
21:15
Speaker 5: vacationers and increasing oil prices outside of the Middle East news.
21:20
Speaker 5: Adobe posted stronger than expected second quarter earnings in revenue
21:24
Speaker 5: and also raised its annual outlook. However, analysts say generative
21:28
Speaker 5: AI could take away from Adobe's business if it doesn't
21:32
Speaker 5: move to keep up. That stock is sinking by five percent.
21:35
Speaker 5: According to the Wall Street Journal, Walmart and Amazon have
21:38
Speaker 5: recently explored whether to issue their own stable coins in
21:41
Speaker 5: the US, and furniture retailer RH jumping eleven percent after
21:47
Speaker 5: it swung to a quarterly profit despite tariff uncertainty and
21:51
Speaker 5: a shaky housing market. I'm Tucker Silva and that is
21:55
Speaker 5: Wall Street Watch and the trivia question we asked in
21:58
Speaker 5: the previous segment was what Massachusetts town did Chris Evans
22:02
Speaker 5: grow up in? It'll be Sudbury who was our winner today?
22:07
Speaker 5: It was from Oakham, Massachusetts. I know that I deleted
22:12
Speaker 5: the email.
22:12
Speaker 2: James, excuse me.
22:13
Speaker 5: James from Oakham, Massachusetts won that Financial Exchange Show teachhert
22:17
Speaker 5: congrats there, and we play trivia every day here on
22:20
Speaker 5: the Financial Exchange See complete contest rules at Financial Exchange
22:24
Speaker 5: Show dot com.
22:26
Speaker 3: Mike, can we go back and just talk about you
22:28
Speaker 3: Michigan for a second, just because I was digging into
22:30
Speaker 3: some of the data a little bit more sure, and
22:33
Speaker 3: this is why I'm just not sure what the predictive
22:35
Speaker 3: value is for this at this point. So by June
22:39
Speaker 3: of twenty twenty six, one year forward, inflations of expectations,
22:43
Speaker 3: where do you think they stand? For self identified Democrats
22:48
Speaker 3: that responded to this, let's see the.
22:51
Speaker 4: Average was, let's call it six and a half percent, ten,
22:54
Speaker 4: ten percent?
22:56
Speaker 3: Where do you think it stands for self identified Republicans
22:59
Speaker 3: one one and a half. Okay, it's probably not gonna
23:03
Speaker 3: be either of those, right, you know?
23:06
Speaker 2: And where exactly is it going to be?
23:08
Speaker 3: I don't know, depending on you know, exactly how things go,
23:10
Speaker 3: probably somewhere between. If look if this israel around thing,
23:15
Speaker 3: is you know, over quickly and not you know, a
23:17
Speaker 3: lingering thing, and tariffs you know, slow the US economy actually,
23:21
Speaker 3: and you end up with, you know, some kind of recession.
23:23
Speaker 3: You can make a case that a year from now
23:25
Speaker 3: inflation could be close to two percent.
23:27
Speaker 2: Than anything else.
23:28
Speaker 3: Not for the right reasons, but like you could make
23:31
Speaker 3: that case if they go badly and maybe if tariffs
23:35
Speaker 3: keep going up and YadA YadA, and this thing in
23:37
Speaker 3: the Middle East you know, continues on, you could have
23:40
Speaker 3: me convince that inflation's close to like six or seven
23:42
Speaker 3: percent a year from now, the midpoint of that, like, okay,
23:46
Speaker 3: probably like somewhere between three and five checked.
23:49
Speaker 4: It is wild to see just how dramatically people's political
23:54
Speaker 4: views are beginning to and begin to more severely and
23:59
Speaker 4: continuing to affect their financial thinking, because like this is
24:04
Speaker 4: one thing, right, and you could I don't know whether
24:07
Speaker 4: this is genuinely Democrats thinking that inflation is going to
24:10
Speaker 4: be ten percent, or intentionally trying to make a survey
24:13
Speaker 4: result look bad for the president or something else. I
24:18
Speaker 4: don't fully understand the psychology behind it, but I could see.
24:21
Speaker 3: How you get there if you know, like, if you
24:24
Speaker 3: think it through. Just from this perspective. You say, Okay,
24:28
Speaker 3: if I'm someone who is not a fan of this
24:31
Speaker 3: administration and I just saw ten percent tariff slapped on
24:34
Speaker 3: every country, sure I think prices are gonna go up
24:36
Speaker 3: by ten percent. Yeah, Like it's a very linear way
24:40
Speaker 3: of thinking. There's gonna be a ten percent tariff, prices
24:42
Speaker 3: will go up by ten percent. Yeah, it's wrong, but
24:45
Speaker 3: it's wrong. But like I can see how you get there.
24:49
Speaker 3: I can also like see the case where you're like, Okay,
24:53
Speaker 3: maybe it won't be that bad because the inflation so
24:55
Speaker 3: far this year hasn't been that bad. I could see
24:59
Speaker 3: that case being made extrapolating either of those for a
25:04
Speaker 3: full year and not taking into account like the full
25:06
Speaker 3: picture problematic.
25:09
Speaker 4: And the question that I have, which is a pretty
25:12
Speaker 4: important one, is if you think this, are you following
25:15
Speaker 4: through on it with your actions?
25:16
Speaker 2: And the answer basically that we've seen is no, Well.
25:19
Speaker 4: Yeah, I think you're right, but I don't know. I've
25:22
Speaker 4: got firsthand experience of people following through their political fears
25:25
Speaker 4: with actions. Maybe not on purchases, but how many times
25:28
Speaker 4: have you seen somebody say I hate this president, I'm
25:30
Speaker 4: terrified sell my stocks.
25:33
Speaker 3: Yes, I've seen it. With every president since I've been
25:36
Speaker 3: working in this business. I've seen it with Obama Trump one,
25:40
Speaker 3: Biden Trump two.
25:41
Speaker 4: How about I'm really worried about about this Congress and
25:46
Speaker 4: what they're going to do. I'm taking my social Security now,
25:49
Speaker 4: not waiting. I have a tougher time exactly dragging that
25:52
Speaker 4: out in terms of what's your political view on that.
25:55
Speaker 4: But I keep seeing this stuff influence people's decision making
26:00
Speaker 4: process when it comes to their financial future, and goes
26:04
Speaker 4: back to our age old adage, right, Emotional decision making
26:09
Speaker 4: is by definition bad decision making when it comes to
26:13
Speaker 4: these When it comes to these all critical pieces here,
26:16
Speaker 4: and emotional.
26:17
Speaker 3: Decision making is always bad decision making. It doesn't even
26:19
Speaker 3: have to be about your finances. Emotional decisions usually don't
26:24
Speaker 3: work out well fair And this isn't just anecdote. By
26:28
Speaker 3: the way, there's a piece from NPR right here that's
26:31
Speaker 3: talking about social security claims, which is one of the
26:33
Speaker 3: things that you mentioned. I'll quote social security retirement claims
26:38
Speaker 3: tend to follow a seasonal pattern each year, and they
26:40
Speaker 3: increase over time with the aging of the population, says
26:42
Speaker 3: Jack small Agan, a senior policy fellow at the Urban
26:45
Speaker 3: Institute this spring. Something different happens. Between January and May,
26:50
Speaker 3: the number of claims was nearly eighteen percent higher than
26:54
Speaker 3: during the same period last year, eighteen percent higher.
26:59
Speaker 4: So one thing, you can strip a bunch of this
27:01
Speaker 4: out because of the Social Security Fairness Act. So I'm
27:04
Speaker 4: willing to do that. There are a number of Americans,
27:06
Speaker 4: probably one hundreds of thousands of them, maybe tens of
27:09
Speaker 4: thousands of them, I'm not sure, who couldn't file for
27:11
Speaker 4: Social Security previously and suddenly became eligible in January. So
27:15
Speaker 4: that does count for a little bit of this, But
27:18
Speaker 4: I'd be willing to bet there's a whole lot of
27:20
Speaker 4: others who said, Nope, terrified, worry about Social Security getting killed.
27:23
Speaker 2: Don't know what Republicans are going to do.
27:25
Speaker 4: I'm taking my Social Security now, and that could be detrimental.
27:29
Speaker 4: I mean when I think through people's financial plans, Yeah,
27:33
Speaker 4: there's some of them who are at risk of, you know,
27:35
Speaker 4: a big market collapse taking them out. But far more
27:39
Speaker 4: often what I see is, yeah, if you live like
27:42
Speaker 4: a long life, if you lived to ninety five years old,
27:44
Speaker 4: inflation could eat you alive. What's one of the best
27:47
Speaker 4: inflation hedges you as an individual have it's your social
27:50
Speaker 4: security benefit. It's the only one that's hedged to inflation.
27:53
Speaker 4: If it's bigger to start with, it's going to help
27:56
Speaker 4: you more against that inflation hedge. And so I don't
28:00
Speaker 4: I don't know you personally if you're listening to the
28:02
Speaker 4: program right now. But my point is, these decisions keep
28:05
Speaker 4: getting made by people in a vacuum, and it's a mistake.
28:09
Speaker 2: People.
28:09
Speaker 4: It is a mistake to make these decisions in a
28:12
Speaker 4: vacuum and with emotion as the main driver for it.
28:15
Speaker 4: And if you are approaching these decisions, don't let those
28:18
Speaker 4: emotions get in the way of logical decision making processes.
28:24
Speaker 4: If you want to have some help on that logical
28:27
Speaker 4: decision making process and have somebody take a step back
28:29
Speaker 4: and look at that big picture, call us at the
28:32
Speaker 4: Armstrong Advisory Group the numbers eight hundred three nine three
28:35
Speaker 4: four zero zero one will sit down with you evaluate
28:39
Speaker 4: your personal situation to help you assess what is the
28:42
Speaker 4: right decision for my portfolio, for my social security, for
28:44
Speaker 4: my pension. Eight hundred three to nine three four zero
28:47
Speaker 4: zero one.
28:48
Speaker 1: The proceeding was paid for by Armstrong Advisory Group, a
28:51
Speaker 1: registered investment advisor. Nothing in the ad or in any
28:53
Speaker 1: Armstrong guide a specific financial, legal or tax advice. Consult
28:57
Speaker 1: your own financial tax into state planning advisors before making
28:59
Speaker 1: any investment decisions. Armstrong make contact you to offer investment
29:02
Speaker 1: advisory services.
29:05
Speaker 3: Mike, do you want to talk about apartment prices or
29:08
Speaker 3: electricity prices?
29:09
Speaker 2: Now?
29:10
Speaker 4: I want to talk electricity prices if you don't mind.
29:12
Speaker 3: Electricity prices in apartments or everywhere everywhere? Okay, So piece
29:16
Speaker 3: in the Wall Street Journal. Your electric bill is rising
29:18
Speaker 3: faster than inflation. Here's why, why.
29:22
Speaker 4: Not gas prices? They allude to a few different things.
29:27
Speaker 4: They try and make the connection to artificial intelligence, and
29:31
Speaker 4: I think that there is something that is ultimately going
29:34
Speaker 4: to be there that we are seeing dramatic increasing demand
29:38
Speaker 4: on the electric grid for the use of these giant
29:42
Speaker 4: data centers that run twenty four hours a day and
29:46
Speaker 4: need a giant amount of electricity and cooling in order
29:50
Speaker 4: to work. I don't really see the actual numbers connection here.
29:56
Speaker 4: Nobody in any of these articles yet is pointing to
29:59
Speaker 4: and that has resulted in this much additional demand on
30:02
Speaker 4: the grid, and therefore NAT gas price is going through
30:05
Speaker 4: the roof. But NAT gas prices have increased and you know,
30:10
Speaker 4: you do have to just kind of wonder does this
30:13
Speaker 4: get to a crescendo where we start seeing energy prices
30:16
Speaker 4: increase dramatically at some point in time or is it
30:20
Speaker 4: just this slow and steady rise over time because of
30:23
Speaker 4: these new entrants onto the grid.
30:25
Speaker 2: Yeah.
30:26
Speaker 3: I I don't know how to incorporate all of like the.
30:34
Speaker 2: I don't know how to.
30:35
Speaker 3: Incorporate like the projections for additional demand because of AI,
30:41
Speaker 3: just because I don't know how it dovetails with regulated
30:44
Speaker 3: utility prices. Yeah, it's it's not like it's not like
30:49
Speaker 3: in most of the country, you just wake up as
30:52
Speaker 3: a utility and you're like, hey, we got a new
30:55
Speaker 3: data center that wants to come on board. We got
30:57
Speaker 3: to raise prices in order to cut demand, and or
31:00
Speaker 3: we got to kick a bunch of people off. Like
31:02
Speaker 3: that's not really how it works.
31:03
Speaker 4: No, But they are also price takers, right, and so
31:06
Speaker 4: if all of that additional demand is causing more buyers
31:10
Speaker 4: of gnatgas to run these facilities, then yeah, they're going
31:16
Speaker 4: to realize that in their p and L and need
31:19
Speaker 4: to drive that price higher. So it's it's both impossible
31:23
Speaker 4: for me to see a scenario where a bunch of
31:26
Speaker 4: new demand comes onto the grid and prices don't go up.
31:29
Speaker 4: It's also really unclear to me how it gets navigated,
31:33
Speaker 4: how the regulators deal with it, and how much prices
31:36
Speaker 4: go up and under what time scenario.
31:38
Speaker 3: Here's the other piece to watch on this is the
31:42
Speaker 3: mix between how much oil gets produced domestically in the
31:45
Speaker 3: US and how much of it's overseas. And you say, chuck,
31:47
Speaker 3: why does oil matter for this? The reason why is
31:51
Speaker 3: that the vast majority of US oil produced right now
31:54
Speaker 3: is from shale deposits through fracking, and one of the
31:57
Speaker 3: major byproducts of fracking is a whole bunch of gnat
32:01
Speaker 3: gas that we produce. It's why the US is the
32:03
Speaker 3: largest producer of gnat gas in the world. Like you
32:08
Speaker 3: look at it, and it's it's just not particularly close.
32:12
Speaker 3: Like Russia is a distant second, like thirty percent behind us,
32:17
Speaker 3: and then Iran is an even more distant third, like
32:20
Speaker 3: sixty percent behind us. So the US is a huge
32:24
Speaker 3: producer of gnat gas because we frack most of our oil,
32:27
Speaker 3: and so you get all this gnat gas that gets
32:29
Speaker 3: spun off as a result of it. If you have
32:33
Speaker 3: lower oil prices, which is good for US as drivers
32:38
Speaker 3: here in the Northeast where we are based. The downside
32:42
Speaker 3: to that is lower oil prices means fewer rigs in
32:46
Speaker 3: the ground in the United States because US companies don't
32:49
Speaker 3: want to take the risk. And by the way, this
32:51
Speaker 3: is borne out by what we have seen as far
32:53
Speaker 3: as rig counts in the US that have now begun
32:56
Speaker 3: to roll over this year with lower prices. This year,
33:00
Speaker 3: the rig count at the start of the year was
33:02
Speaker 3: about five hundred and eighty nine rigs. It's down to
33:06
Speaker 3: five p fifty nine. Now you might say, look, it's
33:09
Speaker 3: the kind of you know, thirty rigs.
33:10
Speaker 2: What is that?
33:10
Speaker 3: Well, it's you know, six percent of active rigs in
33:13
Speaker 3: the US or now you know, offline, and it's trending down.
33:17
Speaker 3: If you're going to produce less oil domestically because oil
33:22
Speaker 3: prices are low, it may have the impact of pushing
33:25
Speaker 3: up net gas prices because you don't get as much
33:27
Speaker 3: of it. And so this is somewhere where you end
33:30
Speaker 3: up getting hit potentially. Yeah, let's take a quick break.
33:34
Speaker 3: When we come back, it's time for stack roulette.
33:36
Speaker 1: The financial exchange is now available across the country and
33:40
Speaker 1: around the world on serious XM's business Radio Channel one
33:43
Speaker 1: thirty two. Stay informed about Wall Street trends, economic policy,
33:47
Speaker 1: and breaking business news. Every day. The Financial Exchange is
33:50
Speaker 1: live on Serious XM's Business Radio Channel one thirty two.
33:54
Speaker 1: This is the Financial Exchange Radio Network. The Financial Exchange
33:59
Speaker 1: Show podcast every day on Apple, Spotify and iHeartRadio. Het
34:03
Speaker 1: that subscribe button, then leave us a five star review.
34:06
Speaker 1: You're listening to the Financial Exchange Radio Network. Ladies and
34:11
Speaker 1: gentlemen the weekend.
34:17
Speaker 2: All right, Mike, what do you got for me for
34:19
Speaker 2: stack roulette?
34:20
Speaker 4: Walmart and Amazon exploring issuing their own stable coins, according
34:24
Speaker 4: to the Wall Street Journal, And I feel like we
34:28
Speaker 4: need to spend a minute on just what the heck
34:30
Speaker 4: this means, because in addition to this happening, there's other
34:34
Speaker 4: obviously daily crypto news out there, including some publicly traded
34:38
Speaker 4: companies adding things like bitcoin to their treasury reserves, which
34:44
Speaker 4: is a completely different type of situation that affects the
34:47
Speaker 4: stock price differently. But I'm having a tough time figuring
34:50
Speaker 4: out in the case of Walmart and Amazon, is this
34:53
Speaker 4: an announcement that they actually see making sense for them,
34:58
Speaker 4: or is an announcement to try and drive this price
35:00
Speaker 4: higher like we're seeing with the Treasury announcements here and
35:03
Speaker 4: there both.
35:04
Speaker 2: Yeah.
35:05
Speaker 3: So here here's the If you're not familiar with the
35:07
Speaker 3: concept of a stable coin, the idea is that it
35:11
Speaker 3: tries to have a stable fixed value, in most cases
35:14
Speaker 3: a dollar, and allows for faster processing than using conventional
35:19
Speaker 3: networks and still gives you, you know, the whole distributed
35:23
Speaker 3: ledger thing and YadA YadA that crypto people like, what
35:29
Speaker 3: I'm trying to wrap my head around is how Walmart,
35:33
Speaker 3: let's use Walmart. How do they get to the point
35:36
Speaker 3: where people are using this? And what I mean by
35:39
Speaker 3: this is the benefit to Walmart if they can get
35:42
Speaker 3: people to use stable coins, like a Walmart stable coin,
35:45
Speaker 3: you know'll call it wall coin.
35:47
Speaker 4: It's huge. You don't pay Visa anything, right, you don't
35:49
Speaker 4: have to pay two to three percent transaction fees, and
35:51
Speaker 4: so you're like, great, Like we get to save all
35:54
Speaker 4: that money. But why would I do it as a consumer?
35:57
Speaker 3: So me, as a human being, I look at it
36:00
Speaker 3: and I say, hey, when I pay on my Visa card,
36:04
Speaker 3: I get a bunch of cash back or points that
36:07
Speaker 3: I can use for stuff. Why am I going to
36:09
Speaker 3: use your wallcoin? What's what's the point of that? And
36:12
Speaker 3: Walmart's gonna come back and say, well, if you use that,
36:15
Speaker 3: we're gonna give you two percent off. And I kind
36:17
Speaker 3: of look at it and I go, I'm already getting
36:20
Speaker 3: cash back from my credit card. You're gonna give me
36:22
Speaker 3: two percent off, which means you're eating into your margins.
36:25
Speaker 2: What's the net benefit to anyone? Nothing?
36:29
Speaker 4: Is it also just a fancy way of storing your
36:32
Speaker 4: money on a Walmart gift card?
36:35
Speaker 2: Uh?
36:35
Speaker 4: Yes, right, I mean, like, I know are stable coins.
36:38
Speaker 4: I know we're talking to all this stuff, but like,
36:41
Speaker 4: let's talk about what this is. It's a gift card
36:44
Speaker 4: held on a digital currency.
36:46
Speaker 3: Which, to be fair, there are companies Starbucks, uh excuse me,
36:53
Speaker 3: that have yeah, thank you, It happens every now and
36:55
Speaker 3: then that have basically like they have the line items
37:00
Speaker 3: that they have on their quarterly reports because they have
37:04
Speaker 3: so much in accumulated you know, potentially deferred liabilities that
37:08
Speaker 3: they have just sitting there, but they can't invest the
37:11
Speaker 3: money during the time, and so it's kind of like, Okay,
37:13
Speaker 3: do you just have like all this money loaded onto
37:15
Speaker 3: Walmart cards then?
37:17
Speaker 2: And Walmart, yes, they have.
37:19
Speaker 3: This deferred liability, but they can do something with it
37:22
Speaker 3: to maybe earn some cash in the interim. Maybe, But
37:26
Speaker 3: now we're just talking about financial engineering as opposed to
37:28
Speaker 3: building a better company.
37:29
Speaker 4: It's the American way, Chuck, It is, it.
37:32
Speaker 2: Is until it's not.
37:34
Speaker 3: See General Electric in the nineteen nineties and two thousands. True,
37:39
Speaker 3: Let's see what do I want to talk about? So
37:41
Speaker 3: we did stable coins, Barbie's partnering with open ai.
37:47
Speaker 2: No, just no, what are we really doing here? Just no?
37:53
Speaker 3: Mattel and open Ai said they had formed a strategic
37:55
Speaker 3: collaboration to bring the magic of AI to age appropriate
37:59
Speaker 3: plays experiences.
38:01
Speaker 4: Mattel, you are so desperate right now.
38:05
Speaker 3: Yeah, I'm gonna go with a hard no here on
38:07
Speaker 3: this one. But I can see we're heading to some
38:12
Speaker 3: really dystopian places in the not so distant future. Markets
38:16
Speaker 3: remain broadly negative, but off their lows. We're done for
38:20
Speaker 3: the day, done for the week. Have a great weekend,
38:22
Speaker 3: have a great Father's Day. We'll see you Monday.