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What are stablecoins and how do they work? · The Financial Exchange Show

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Speaker 1: with Chuck Zada, and Mike Armstrong, Chuck.
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Speaker 3: Mike and Ben with you here today and kicking things
1:16
Speaker 3: off on what is a light news day today, but
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Speaker 3: the last couple of days have had quite a bit
1:21
Speaker 3: that we didn't get a full chance to recap yesterday
1:24
Speaker 3: because of the Juneteenth holiday, and so Mike, I think
1:27
Speaker 3: we're gonna kick things off today talking about the FED
1:31
Speaker 3: because we had a FED meeting that concluded on Wednesday afternoon,
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Speaker 3: So we got FED policy, we got FED economic projections,
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Speaker 3: and we got Jay Powell in the purple tie once again.
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Speaker 2: Where would you like to start thing? Let's just start.
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Speaker 4: Right with the press conference and the series of decisions
1:47
Speaker 4: that I guess you know, staying steady is a decision,
1:50
Speaker 4: but the decisions that were made.
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Speaker 2: So they Federal Reserve.
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Speaker 4: On Wednesday after noon announced no change in their rate
1:58
Speaker 4: setting policy and spoke once again to the competing risks
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Speaker 4: of inflation and unemployment, and once again acknowledged that they
2:07
Speaker 4: could be faced with a with an event that challenges
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Speaker 4: both of those two mandates, the higher unemployment as well
2:16
Speaker 4: as higher prices at the same time, and they tackled
2:19
Speaker 4: how they would handle that sort of thing in the
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Speaker 4: off chance that it did occur, but you know, big
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Speaker 4: picture here, rates staying the same and acknowledging that, you know,
2:27
Speaker 4: maybe something to come for the second half of the
2:29
Speaker 4: year is kind of the hinting that they did in
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Speaker 4: my opinion.
2:32
Speaker 3: Yeah, and I think ultimately it's it's something where I've
2:37
Speaker 3: said this before. The more economic data we get, the
2:39
Speaker 3: more that I keep leading in this direction, which is, Hey,
2:42
Speaker 3: if you didn't have these tariffs and the uncertainty about
2:45
Speaker 3: inflation in place, I think the FED might have started
2:51
Speaker 3: cutting Wednesday, or at the very least would have a
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Speaker 3: very compelling case to start cutting at the July meeting.
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Speaker 4: Oh, you don't think it would have been earlier. I
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Speaker 4: think without really, without the threat of tariffs, I'm not
3:03
Speaker 4: sure that there would be. I feel as though there
3:06
Speaker 4: might have been some rate cuts already continuing at this stage.
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Speaker 2: I don't think so.
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Speaker 3: And I guess the reason why I say that is like,
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Speaker 3: let's look at where we were heading into this year.
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Speaker 3: There were no tariffs in place, and the FED had
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Speaker 3: done a fifty basis point cut in uh September September,
3:26
Speaker 3: and then twenty five BIPs at each of the next
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Speaker 3: couple and then in January paused before any any tariffs
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Speaker 3: were even known, right, So I guess I look at
3:37
Speaker 3: the inflation piece there and I say, okay, in January,
3:42
Speaker 3: or I guess, like, let's look at the December data,
3:44
Speaker 3: because that's really what we're coming off of. So December
3:47
Speaker 3: you had headline CPI at two eight nine, you had
3:52
Speaker 3: Core CPI at three two one, headline PCE at two
3:56
Speaker 3: six and core pc at two eight six.
3:59
Speaker 1: Ye.
4:00
Speaker 3: So you go out and let's say, okay, let's look
4:01
Speaker 3: at the February date and see, like if March would
4:04
Speaker 3: have been in play, headline CPI was still two eight two,
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Speaker 3: Core was still at three one four.
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Speaker 2: At that point, it's.
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Speaker 3: Not really convincing there the PCE headline still at two
4:15
Speaker 3: six five, Cores at two nine to two. So CORD
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Speaker 3: moved up into March. So they say, okay, like that
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Speaker 3: March meeting is off the table. May maybe they could
4:25
Speaker 3: because by April headline CPI two three eight, Core two
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Speaker 3: seven eight, okay, uh, Core PCE at two five two,
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Speaker 3: Headline at two one five.
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Speaker 2: Maybe they could have gone in May.
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Speaker 3: But even there, you're looking at it in May and
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Speaker 3: you sit there and you go, okay, Unemployments at four
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Speaker 3: to two. Would we have had some of this weakening
4:45
Speaker 3: under the surface as far as hiring indications and things
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Speaker 3: like that, I don't know. But if we're like playing
4:50
Speaker 3: the whole counterfactual game, I don't know if we would
4:54
Speaker 3: have necessarily had that, and so.
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Speaker 4: Prices would have been even lower had this, you know,
5:02
Speaker 4: non tariff world existed.
5:03
Speaker 2: So yeah, it is it is tough to guess.
5:06
Speaker 4: But I take your point that, uh, the FED was
5:09
Speaker 4: on a pause before the announcement of tariffs.
5:12
Speaker 2: Maybe they would have kicked things off.
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Speaker 4: At the last or this meeting in terms of rate
5:16
Speaker 4: cuts without those tariffs existing, but it's not as though
5:19
Speaker 4: we would have been a percentage point lower on rates
5:22
Speaker 4: should tariffs not exist at this stage.
5:24
Speaker 3: So I think that we're in a place where if
5:27
Speaker 3: you look at what the FED did, let's look at
5:29
Speaker 3: the Summary of Economic Projections, because this tells us what
5:31
Speaker 3: the Fed's thinking. They told us they expect GDP this
5:35
Speaker 3: year to come in at one four. In March, they
5:38
Speaker 3: thought it would come in at one seven. In December
5:40
Speaker 3: of last year, they thought it would be two to one.
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Speaker 3: So they're saying, hey, the economy is continuing to slow
5:44
Speaker 3: based on what we're seeing PCE inflation headline. In December
5:49
Speaker 3: they thought would be two five. In March they thought
5:52
Speaker 3: it would be two seven. Now they think it's going
5:53
Speaker 3: to be three for the full year. Core they thought
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Speaker 3: would go from two five to two eight to three one,
5:58
Speaker 3: so both those moving up a half percent. So pretty
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Speaker 3: much the what they're seeing in the trade off is, yeah,
6:04
Speaker 3: nominal GDP is going to remain about the same, but
6:06
Speaker 3: more of it's going to go towards inflation rather than growth.
6:09
Speaker 3: YEP fed funds rate, they have not changed their projections
6:13
Speaker 3: at all for this year. It's been at three to
6:15
Speaker 3: nine consistently, so basically saying, yeah, we might get one
6:17
Speaker 3: to two cuts by the end of the year. And
6:20
Speaker 3: the reason why the unemployment rate. The projection in December
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Speaker 3: was four to three, the projection in March was four
6:26
Speaker 3: to four, and the projection today's four or five. So
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Speaker 3: they're seeing.
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Speaker 2: Basically, what they're telling you is, yeah, growth is.
6:32
Speaker 3: Gonna slow a little bit more than we expect, inflation
6:35
Speaker 3: is gonna pick up a touch, and unemployment's gonna rise
6:38
Speaker 3: a little more than we expect. And if so, we
6:41
Speaker 3: feel comfortable cutting a couple times. And that's kind of
6:45
Speaker 3: where they are yep. So the question here is is
6:52
Speaker 3: that there's only one question out and it's what does
6:54
Speaker 3: the data show the next few months, because it's going
6:56
Speaker 3: to determine the entire ballgame, like this is it over
7:00
Speaker 3: the next few months, and then quite honestly, if you
7:03
Speaker 3: haven't seen tariff related inflation show up by September, it's
7:08
Speaker 3: not going to, right, it's not going to If you
7:13
Speaker 3: haven't seen layoffs in response to slower demand and trying
7:19
Speaker 3: to maintain margins taking place by September, not going to
7:24
Speaker 3: at least not in terms of like this cycle. Could
7:27
Speaker 3: there be something else that happens in you know, January
7:30
Speaker 3: February of next year, sure, like I buy that. But ultimately,
7:34
Speaker 3: if companies are really having to enter survival mode because
7:37
Speaker 3: of tariffs, a five to six month time horizon for
7:41
Speaker 3: it to do so, which is you know by September
7:43
Speaker 3: ish like that, that's kind of enough to see what happens.
7:46
Speaker 3: Like we've said this before, like you can't just extend
7:49
Speaker 3: the soft landing thesis out forever and be like, well
7:52
Speaker 3: they need to you know, unemployment can't run no, like
7:55
Speaker 3: it has to be within a certain period. If you're
7:57
Speaker 3: not seeing economic weakness from tariffs within six months, I
8:01
Speaker 3: don't think you're going to It could be something else,
8:05
Speaker 3: but it's not gonna be from tariffs, right, And so
8:08
Speaker 3: this this is the whole ballgame here is what does
8:12
Speaker 3: the next two to three months of data show and
8:15
Speaker 3: does labor continue to deteriorate? Is pretty much the big
8:21
Speaker 3: one that you know is already you know kind of
8:23
Speaker 3: that we're seeing in the data. But the one that
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Speaker 3: we are waiting to see that hasn't shown up yet
8:27
Speaker 3: is hey, when does teriff related inflation print? And does
8:32
Speaker 3: it print? Because to this point it hasn't at all. Right, So,
8:38
Speaker 3: in terms of what Powell said yesterday and again not
8:42
Speaker 3: yesterday and wednesday, I always just you know, take notes
8:44
Speaker 3: as he's going through. Uh just these are some quotes
8:47
Speaker 3: from him. It takes time for tariffs to work their
8:49
Speaker 3: way through the chain to the end consumer. We expect
8:51
Speaker 3: to see goods inflation continuing to increase over the course
8:54
Speaker 3: of the summer. We want to make sure that a
8:57
Speaker 3: one time inflation increase does not turn into inflation and
9:00
Speaker 3: inflation problem. This is why they're not cutting today, is
9:04
Speaker 3: not because they think that they're inherently wrong right now,
9:09
Speaker 3: but because if you start cutting and and juice demand,
9:13
Speaker 3: does that create inflation in other areas? That then makes
9:16
Speaker 3: it non transitory? Does it become sticky?
9:20
Speaker 4: You would also just I know they don't, they wouldn't
9:23
Speaker 4: say this out loud, but you look pretty foolish if
9:25
Speaker 4: you cut interest rates and then inflation shoots up two
9:28
Speaker 4: months later, even if it ends up being transitory correct
9:31
Speaker 4: other things.
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Speaker 3: I thought this was a great Someone asked him, like,
9:34
Speaker 3: what do you make sense of these projections? And he said,
9:38
Speaker 3: I would focus most on the near term projections. It's
9:41
Speaker 3: really hard to know where anyone thinks the economy is
9:43
Speaker 3: going to be longer term, basically saying we're not looking
9:47
Speaker 3: at like two to three years from now, don't pay
9:49
Speaker 3: attention to that, We're just trying to figure out what's
9:51
Speaker 3: happening in the next six months, which I thought was
9:54
Speaker 3: kind of an enlightening little piece there. I thought that
9:57
Speaker 3: was interesting.
9:57
Speaker 2: I'm not gonna have this job two years from now, anyway,
10:00
Speaker 2: who cares? That could be a kind of a test
10:02
Speaker 2: admission of that as well. I don't. I don't genuinely
10:06
Speaker 2: think that's what he's thinking. No, No, well he.
10:10
Speaker 3: May be thinking it, yeah, but I mean, look, j
10:13
Speaker 3: knows he's not gonna have this job a year from now,
10:15
Speaker 3: like his terms up in May.
10:17
Speaker 2: He's gonna be done whether or not. I don't think
10:20
Speaker 2: it's influencing his.
10:21
Speaker 3: Policy, no, no, no, but it's just yeah, he doesn't have
10:25
Speaker 3: senioritis quite yet. Other things that we have here. This
10:32
Speaker 3: is another one, just kind of along the same lines.
10:34
Speaker 3: We talked about a lot of different scenarios. Somewhere inflation
10:37
Speaker 3: may not be at the level we see it at,
10:39
Speaker 3: or we're hiring maybe weaker than expected. So basically saying, hey,
10:43
Speaker 3: we are considering scenarios where tariffs could act as a
10:46
Speaker 3: deflationary force because the economy weakens enough that those higher
10:50
Speaker 3: prices can't actually gain hold. I thought that was interesting
10:54
Speaker 3: to hear. Ye, and immediately after he said, look, no
10:57
Speaker 3: one holds any of these views with a ton of
10:59
Speaker 3: convict right now, So I thought that was kind of
11:03
Speaker 3: informative too. They're really just watching to see what happens.
11:09
Speaker 4: I find it interesting too that their base case scenario
11:12
Speaker 4: now is for growth to slow down at the same
11:16
Speaker 4: time that prices increase. It has been for a while,
11:19
Speaker 4: but you take a look at how their projections have
11:21
Speaker 4: changed recently on GDP.
11:23
Speaker 2: Oh.
11:23
Speaker 4: Yeah, we expect the overall economic growth to slow down
11:27
Speaker 4: at the same time that we generally anticipate prices going up.
11:31
Speaker 4: And that's I mean, that's a pretty bad scenario to have.
11:34
Speaker 4: It doesn't mean recession, though. We're still talking about ultimately
11:37
Speaker 4: growth in the economy, just a lot slower growth than
11:40
Speaker 4: we had experienced over the last few years. But you
11:43
Speaker 4: don't like to see that growth slow down accompanied by
11:46
Speaker 4: a rise in prices.
11:47
Speaker 2: Big thing.
11:48
Speaker 3: Fed's got a meeting on July thirtieth, and the next
11:50
Speaker 3: one after that September seventeenth. So here's what I will say.
11:54
Speaker 3: July thirtieth, we are going to have another set of
11:58
Speaker 3: employment data set of CPI, PPIPC, all that stuff's gonna
12:03
Speaker 3: be in there by then, and you know, basically another
12:06
Speaker 3: five six weeks of jobless claimed since since now, if
12:10
Speaker 3: things start to weaken meaningfully before then, FED can easily
12:13
Speaker 3: go fifty BIPs there, fifty BIPs since like they could
12:16
Speaker 3: basically do fifty to fifty to fifty for the rest
12:18
Speaker 3: of the year, and FED funds rate goes from four
12:20
Speaker 3: twenty five to four to fifty down to two twenty
12:23
Speaker 3: five to two fifty, So they got to and that's
12:24
Speaker 3: without any intermeting rate cuts or things like that. I mean,
12:28
Speaker 3: there's a lot of different stuff they can do.
12:30
Speaker 4: You've got to I would think, Chuck, that you have
12:32
Speaker 4: to spe printing unemployment approaching five percent to see two
12:37
Speaker 4: percent rate points of rate cuts by your end.
12:43
Speaker 3: Basically, I think the way that unemployment typically works is, Hey,
12:46
Speaker 3: once you hit a tipping point, it starts to rise quickly, right,
12:49
Speaker 3: And so like that's what it would be.
12:52
Speaker 2: We're not there yet.
12:52
Speaker 3: In the next again, couple months, we're gonna see if
12:55
Speaker 3: you see a shift in the labor market beyond what
12:59
Speaker 3: we've seen this point, and that's what would get the
13:02
Speaker 3: FED moving. So let's take a quick break here. We'll
13:06
Speaker 3: talk a little bit about Hey, FED funds rate held
13:09
Speaker 3: steady yesterday, But why are you seeing things like credit
13:13
Speaker 3: card rates and mortgage rates moving up even with the
13:15
Speaker 3: Fed not doing anything.
13:16
Speaker 2: We'll touch on that when we return.
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14:18
Speaker 2: Mike, we got a.
14:19
Speaker 3: Piece in CNBC. It's titled the Fed held interest rates steady,
14:25
Speaker 3: but some credit cards aprs keep going up. Here's why,
14:29
Speaker 3: and the answer is not entirely surprising.
14:33
Speaker 2: Here. It's look, if banks have.
14:37
Speaker 3: Concerns about higher default rates on credit cards, what they
14:43
Speaker 3: often end up doing is modifying terms of the the agreements.
14:49
Speaker 3: You know, after the fact they can change. You know
14:51
Speaker 3: what the the APR terms are. But also remember that
14:55
Speaker 3: if you are delinquent, oftentimes you end up having to
14:57
Speaker 3: pay higher interest rates on credit cards that you're taking
15:01
Speaker 3: out because banks want protection from you defaulting.
15:05
Speaker 4: Yeah, there's a few things going on here, right. There
15:07
Speaker 4: are some credit card issuers who are raising rates generally,
15:11
Speaker 4: But what we're the data that we're referring to here
15:13
Speaker 4: is largely that the average rate paid is going up,
15:16
Speaker 4: and that can be better explained by people's worsening credit scores.
15:20
Speaker 2: Sure, right, I mean you know, if you're applying for
15:21
Speaker 2: a new creditor.
15:22
Speaker 4: Yeah, if you're applying for a new credit card and
15:25
Speaker 4: you have now a terrible credit score because your student
15:27
Speaker 4: loan payments resumed and you didn't make payments, then you're
15:30
Speaker 4: going to be facing a higher score on that new
15:32
Speaker 4: card compared to somebody with excellence credit. And we've generally
15:35
Speaker 4: seen a deterioration and credit over the last couple of
15:38
Speaker 4: years here, And so I don't know how much of
15:41
Speaker 4: this is funny business on behalf of the banks, right, Yes,
15:45
Speaker 4: you do.
15:45
Speaker 2: Banks. How would you define funny business.
15:47
Speaker 4: Issuing a credit card at a certain rate and then
15:50
Speaker 4: raising the rate subsequently after the fact without the FED
15:52
Speaker 4: moving rates. I mean, I know they can, but it's
15:55
Speaker 4: a little bit funny business. Yeah, it's a little I mean,
16:00
Speaker 4: it's not that they're not telling them.
16:02
Speaker 2: Let's be completely honest.
16:04
Speaker 3: When if you're someone who doesn't carry a balance on
16:08
Speaker 3: a card, typically do you even look at the APR
16:11
Speaker 3: when you're signing up for it?
16:12
Speaker 4: I do not, No, No, I'm looking purely at the
16:16
Speaker 4: benefits to me when I sent up for a credit card.
16:17
Speaker 3: If you're someone who does carry a balance, your options
16:21
Speaker 3: for switching cards are often limited. Yeah, And the only
16:24
Speaker 3: thing that you're looking for is is there something where
16:26
Speaker 3: there's like a balance transfer offer where it gets zero
16:29
Speaker 3: percent for six months or something like that.
16:33
Speaker 2: So I guess, look this.
16:36
Speaker 3: Obviously, the FED does not control credit card interest rates,
16:39
Speaker 3: and these can move. The other pieces they don't control.
16:41
Speaker 3: That still remains hot these days mortgage rates, which as
16:45
Speaker 3: of yesterday, according to Mortgage News Daily, the national average
16:49
Speaker 3: for thirty or fixed rate mortgage still stood at six
16:52
Speaker 3: point eighty seven. We've been in a really tight range
16:55
Speaker 3: for pretty much the last two months. So if you
17:01
Speaker 3: go back to April seventh, so kind of right after
17:05
Speaker 3: Liberation Day and right after we got past that initial
17:08
Speaker 3: drop in bond yields, on April seventh, we were at
17:12
Speaker 3: six eighty two. The lowest we got since then was
17:16
Speaker 3: six' eight one On april twenty, eighth and the highest
17:20
Speaker 3: was seven oh. Seven so we've been in a really
17:22
Speaker 3: tight quarter percent range for the last two Months and
17:25
Speaker 3: what we are seeing from housing right now is, that
17:28
Speaker 3: based on the inventory builds that are out there and
17:31
Speaker 3: what we're starting to see in, pricing those rates are
17:34
Speaker 3: too high to hold pricing where it. Is, yes you,
17:38
Speaker 3: know you're you're getting to the point now where home
17:41
Speaker 3: prices are sliding in not a majority of the country
17:45
Speaker 3: by geographic, breakdown not even a, majority not even a
17:51
Speaker 3: majority of the country by population, breakdown but prices are
17:56
Speaker 3: sliding in a majority of the country based on the
17:59
Speaker 3: number of how deals that are closed in those different.
18:02
Speaker 3: Areas WHAT i mean by That New york has a huge, population, Correct,
18:06
Speaker 3: michael they do big. Population is there a lot of
18:09
Speaker 3: housing activity In New york in general relative To florida
18:13
Speaker 3: as an, Example, no.
18:14
Speaker 2: Not at the. Moment there is just no, building just
18:16
Speaker 2: like the rest of The.
18:17
Speaker 3: Northeast and so if you wait this based on transaction
18:21
Speaker 3: volume and not on, population what you are seeing is
18:24
Speaker 3: that the majority of the country right now is in
18:27
Speaker 3: part you, know is in the majority of housing stock
18:30
Speaker 3: is in areas that have falling, prices and that's going
18:33
Speaker 3: to expand as this year goes. On are shows based
18:37
Speaker 3: out of the northeast In New, england this is one
18:39
Speaker 3: of the only areas where that is not the. Case
18:42
Speaker 3: Right inventories are still anywhere from like thirty to seventy
18:46
Speaker 3: percent of pre pandemic, levels whereas if you look At
18:49
Speaker 3: florida And, texas you're now running one hundred and thirty
18:51
Speaker 3: to one hundred and forty percent of pre pandemic, inventories
18:55
Speaker 3: and a lot of other parts of the country are
18:56
Speaker 3: heading in that direction as you continue to see more
18:59
Speaker 3: listings but people not being able to close on those.
19:03
Speaker 3: Deals SO i think from a mortgage, perspective mortgage rates
19:09
Speaker 3: obviously THE fed doesn't control. Them even if the feed starts,
19:12
Speaker 3: cutting it doesn't necessarily pass through directly into mortgage. Rates
19:17
Speaker 3: SO i think this is something that is going to
19:20
Speaker 3: become a bigger and bigger story as we go.
19:25
Speaker 2: Forward.
19:25
Speaker 3: Here let's take a quick. Break when we come. Back
19:29
Speaker 3: we Got Wall Street Watch.
19:40
Speaker 1: Like us On facebook and follow us On twitter AT tfe.
19:44
Speaker 1: Show breaking business news is always first right here on
19:48
Speaker 1: The Financial Exchange Radio. Network time now For Wall. Street
19:53
Speaker 1: watch a complete look at what's moving markets so far
19:56
Speaker 1: today right here on The Financial Exchange Radio.
19:59
Speaker 5: Network, well markets are mixed right now at about ten thirty,
20:04
Speaker 5: Four The Dow jones is up seventy eight, points or
20:07
Speaker 5: two tenths of a. Percent THE s AND p five
20:09
Speaker 5: hundreds up just three points or point zero five. Percent
20:13
Speaker 5: The nasdaq is down twenty one. Points right, now take
20:17
Speaker 5: a look at some individual companies. Here CarMax shares are
20:20
Speaker 5: up four percent After carmacks reported first quarter.
20:23
Speaker 2: Results that exceeded.
20:24
Speaker 5: Expectations earnings of a dollar thirty eight per share on
20:28
Speaker 5: revenue of seven point five to five billion exceeded consensus
20:32
Speaker 5: of a dollar sixteen in earnings per share and revenue
20:34
Speaker 5: of seven point five two. Billion Darden restaurants shares are
20:38
Speaker 5: up two percent after the olive garden's parents' fourth quarter
20:41
Speaker 5: earnings beat on both the top and bottom. Line adjusted
20:45
Speaker 5: earnings were two dollars and ninety eight cents a, share
20:47
Speaker 5: topping expectations by one. Cent revenue was three point twenty seven,
20:52
Speaker 5: billion while the three point twenty six billion was. Expected
20:56
Speaker 5: darden also authorized a new one billion dollar share repurchase,
21:00
Speaker 5: program and, finally shares Of circle are up over fourteen
21:04
Speaker 5: percent today as investors cheered The senate approval of its
21:08
Speaker 5: proposed stable coin legislat, legislation The Genius. Act the stock
21:13
Speaker 5: was up fourteen percent in pre market trading after the
21:16
Speaker 5: bill passed The senate On. Tuesday On, wednesday it rose
21:19
Speaker 5: thirty three. PERCENT i Am Ben kitchen and that was
21:22
Speaker 5: A Wall street, Watch.
21:24
Speaker 3: Mike can we just talk a little bit about that
21:27
Speaker 3: whole stable coin thing that's going on right?
21:30
Speaker 2: Now, yeah let's, uh let's jump. IN i want to.
21:33
Speaker 3: Touch on this just BECAUSE i think this is going
21:36
Speaker 3: to be a big, story for better or for worse
21:39
Speaker 3: over the next couple of. Years so if you're not
21:41
Speaker 3: familiar with the idea of what a stable coin, is
21:44
Speaker 3: first of, all you're not.
21:45
Speaker 2: Alone but the.
21:46
Speaker 3: Basic premise is think of it in terms of it's
21:49
Speaker 3: the crypto equivalent or the crypto attempt to create a
21:55
Speaker 3: money market. Fund is that a fair way of describing.
21:59
Speaker 4: It, Mike, yeah EXCEPT i think of a money market
22:03
Speaker 4: fund primarily as a savings, vehicle whereas a a stable.
22:08
Speaker 4: COIN i feel as though that's also being pushed as
22:11
Speaker 4: a transaction. Tool Where as a money market money market
22:15
Speaker 4: per primarily a savings. Tool you don't use it with
22:18
Speaker 4: your debit card or your core like.
22:20
Speaker 3: That, Sure so basically the premise is it's a cryptocurrency
22:24
Speaker 3: that attempts to hold a fixed value per. Token in many,
22:30
Speaker 3: cases that fixed value to attempts to hold is one
22:32
Speaker 3: dollar per, token just like a money market fund attempts
22:36
Speaker 3: to hold a price of one dollar per. Share as
22:40
Speaker 3: we saw back in two thousand and, eight money market
22:42
Speaker 3: funds can have situations where the underlying collateral comes into
22:45
Speaker 3: question and they do not hold that.
22:47
Speaker 2: Value it's what's known as breaking the.
22:49
Speaker 3: Buck and so you, know that was a hard lesson
22:52
Speaker 3: for a lot of people to learn, That, hey money
22:53
Speaker 3: markets are not you know the same as actual. Cash,
22:58
Speaker 3: likewise stable coins aren't necessar. Early but the premise on
23:01
Speaker 3: this is that stable, coins because they transact in uh
23:06
Speaker 3: or you, know on a, blockchain in some cases you
23:08
Speaker 3: can have you, know faster transmission than.
23:10
Speaker 2: You do in other.
23:11
Speaker 3: Situation, situations you, know being able to process transactions instantly
23:16
Speaker 3: are pretty close to it instead of waiting for settlement
23:18
Speaker 3: over a period of a day or. Two you, know
23:21
Speaker 3: cross national transactions can, Happen YadA, YadA and that's kind
23:25
Speaker 3: of the the feeling on. It the hype is starting
23:29
Speaker 3: to get a little bit. Nuts and WHAT i mean
23:32
Speaker 3: by this is the the company that went public about
23:35
Speaker 3: a week and a half ago by the name Of.
23:37
Speaker 3: Circle their whole thing is that they run a stable
23:40
Speaker 3: coin right, now and basically what it is, is, look they,
23:43
Speaker 3: have you, know these stable coins that are backed by different,
23:46
Speaker 3: reserves and they make money based on collecting interest off
23:50
Speaker 3: of what they hold versus not paying any of it
23:52
Speaker 3: out to their. Users it's it's not all that different
23:56
Speaker 3: from how traditional banks make.
23:57
Speaker 4: Money and we all value, banks you know, what forty,
24:01
Speaker 4: times you, know fifty. Times the point THAT i think
24:04
Speaker 4: you're gonna get to on some of this is there's
24:06
Speaker 4: some pretty wild valuations for something that operates a lot
24:09
Speaker 4: like a, bank not even.
24:10
Speaker 3: Wild valuations in something that operates like a, bank something
24:13
Speaker 3: that operates like a bank without many barriers to, Entry,
24:16
Speaker 3: like it's not that hard to go out and do,
24:18
Speaker 3: This and so what makes any one of, these you know,
24:21
Speaker 3: unique especially if we've, heard you, know now the rumors that,
24:25
Speaker 3: hey you, know big retailers will want to get into
24:28
Speaker 3: launching their own stable coins and this and that and
24:30
Speaker 3: by the, way some of this also starts to get
24:33
Speaker 3: towards pretty dangerous, places which is why like basically private
24:37
Speaker 3: currencies haven't really existed in The United states for the last,
24:40
Speaker 3: four you, know one hundred and fifty hundred and forty,
24:42
Speaker 3: years is because they could, be if utilized, improperly a
24:47
Speaker 3: hugely destabilizing force that led to some tremendously awful swings
24:52
Speaker 3: in the state of the economy because of how they
24:55
Speaker 3: were handled back in you, know the late eighteen.
24:57
Speaker 4: Hundreds but which is probably Why congress is going to
25:00
Speaker 4: set up regulations that require these stable COINS i would
25:05
Speaker 4: think to have collateral behind, them that is similar to
25:09
Speaker 4: the regulations that govern other types of things that are
25:11
Speaker 4: looked at as a.
25:12
Speaker 3: Currency, YEAH i don't know enough about the specifics of
25:15
Speaker 3: The Genius act to be able to say exactly what's in.
25:17
Speaker 3: It from that, Perspective, well we'll have to, see because
25:22
Speaker 3: otherwise it's gonna be the Wild. West it's going to be.
25:24
Speaker 3: Dangerous but here's WHAT i can tell you About circle
25:26
Speaker 3: just as an, example they ipo'ed at thirty one dollars a.
25:29
Speaker 2: Share they're now at two hundred and twenty. Six, Okay
25:34
Speaker 2: this is not healthy for.
25:36
Speaker 3: Markets And i'm not saying this to poo poo anyone
25:38
Speaker 3: who might have made you, know a, huge you know
25:40
Speaker 3: win on this over the last couple of. Weeks but
25:43
Speaker 3: any time you have companies that are in a completely
25:46
Speaker 3: new industry that no one really knows a ton about
25:49
Speaker 3: that go up seven x in the span of like
25:51
Speaker 3: their first two weeks of, trading that's typically not bullish
25:56
Speaker 3: for overall stock market conditions shortly, after just because this
25:59
Speaker 3: is like when the fever, breaks it's it's not usually.
26:05
Speaker 3: Great we've seen this a few times with new, IPOs
26:09
Speaker 3: and it's not to say that this won't be a successful.
26:11
Speaker 3: COMPANY i have no idea what they're going to do
26:14
Speaker 3: the next, five, ten twenty, years BUT i think about
26:17
Speaker 3: the hype train on a number of you know IPOs
26:19
Speaker 3: in recent history that have gone in similar, fashion and,
26:24
Speaker 3: they you, know a number of them fell on you,
26:25
Speaker 3: know tough times over the subsequent year or, two not
26:28
Speaker 3: for the, company but just for the stock, price because
26:31
Speaker 3: so much of it was just based on there's low
26:33
Speaker 3: float out there and everyone's trading the, thing and everyone's
26:36
Speaker 3: trying to make a bunch of. Money and then once
26:38
Speaker 3: the hype. Fades, okay now where are the flows to
26:41
Speaker 3: support those prices.
26:42
Speaker 4: Checked one of the THREATS i think to THE us
26:45
Speaker 4: dollar from crypto in general has been the idea, that,
26:49
Speaker 4: hey what if trade were conducted in different cryptocurrencies and
26:54
Speaker 4: it did not require as many companies and countries to
26:58
Speaker 4: hold dollars?
26:59
Speaker 2: Anymore?
27:00
Speaker 4: Right is that fair to say that that was a
27:02
Speaker 4: stated threat of the crypto industry?
27:06
Speaker 2: Potentially?
27:07
Speaker 4: YEAH i, mean you, know one of THE i guess
27:10
Speaker 4: if the interest is now moving to these stable coins
27:13
Speaker 4: that are pegged to THE us, dollar that presumably the
27:17
Speaker 4: companies backing them, would at least if they were going
27:21
Speaker 4: to try and actually do this, successfully want to hold
27:24
Speaker 4: different forms of dollar denominated. Assets does this help mitigate
27:28
Speaker 4: that potential? Risk is that Why congress is pushing The
27:32
Speaker 4: Genius act and you, know pushing why stable.
27:35
Speaker 3: Why congress is saying that they're pushing. It But i'll be,
27:38
Speaker 3: HONEST i think that that is a bunch of bull.
27:42
Speaker 2: Loaney. Yeah and the reason.
27:44
Speaker 3: Why, Is, look if you want something that is pegged
27:48
Speaker 3: to the dollar to begin, with aren't you transacting in dollars?
27:51
Speaker 2: Anyways?
27:52
Speaker 3: Right if you want something that doesn't have you, know
27:56
Speaker 3: any kind of you, know, know your client or anti
27:59
Speaker 3: money law during stuff attached to. It that's where you
28:02
Speaker 3: go looking for other stuff that you can circumvent the system, with,
28:06
Speaker 3: right you know when you talk about you, know financing
28:08
Speaker 3: illicit trade and you know all you, know all the
28:11
Speaker 3: stuff that is you, know the nasty underbelly of you,
28:14
Speaker 3: know the the world economic. System this, LIKE i keep
28:20
Speaker 3: seeing all these things about, well this is going to open,
28:23
Speaker 3: up you, know a huge new market for you, know
28:25
Speaker 3: people to you, know basically BUY us treasuries because what's
28:29
Speaker 3: backing these stable coins are very often like short TERM us,
28:32
Speaker 3: treasuries to WHICH i, say, Well i'm not really sure
28:36
Speaker 3: that it, is because those people that want something that
28:38
Speaker 3: is back to BUY us treasuries, anyways are already seeking
28:41
Speaker 3: out dollars where they. Can this is just changing the
28:45
Speaker 3: location of where they're buying these. Dollars, like let let's
28:48
Speaker 3: say that you live In, Argentina, mike AND i have
28:50
Speaker 3: a good friend who Is. Argentinian, yes and Again i've
28:54
Speaker 3: known the guy for twenty five, years and it's basically, like,
28:57
Speaker 3: oh like they are like everyone In argentina knows that
29:01
Speaker 3: The argentinian economy and the currency have been a joke,
29:05
Speaker 3: historically and so there obviously is always a very high
29:08
Speaker 3: demand for, dollars which turns out that dollars end up
29:11
Speaker 3: being priced a certain.
29:12
Speaker 2: Way if all that.
29:14
Speaker 3: Happens is instead of going out and trying to buy
29:16
Speaker 3: physical dollars or dollars at banks that are you, know
29:19
Speaker 3: available through FOUR x windows and things like, that if
29:21
Speaker 3: they just go and start buying them through stable, coins
29:25
Speaker 3: it's not actually adding to the demand four. Dollars it's
29:29
Speaker 3: just shifting around where they're trying to do that from,
29:32
Speaker 3: Right and that's kind of WHERE i come to on,
29:36
Speaker 3: this which, Is, NO i don't think that stable coins
29:38
Speaker 3: are gonna unlock trillions of dollars in demand for you,
29:42
Speaker 3: KNOW us treasuries and, this and. That they're just gonna
29:45
Speaker 3: pull it from one place and it'll go down there
29:47
Speaker 3: and it'll go up, here and it'll be net net
29:49
Speaker 3: probably about the. SAME i don't really see it as
29:54
Speaker 3: hugely impactful in terms of demand for. TREASURIES i do
29:59
Speaker 3: see it being something where, hey could it could it
30:03
Speaker 3: be something that starts to you, know change how we
30:05
Speaker 3: process payments and maybe speed things.
30:07
Speaker 2: Up, YEAH i could.
30:08
Speaker 4: Do it could disrupt some major players out there in
30:11
Speaker 4: the banking industry that exist, today so, hypothetically, yeah so.
30:15
Speaker 2: We'll kind of see where things.
30:16
Speaker 3: Go BUT i just find, this this is something that's
30:20
Speaker 3: kind of interesting to me just because it we've been
30:24
Speaker 3: talking about crypto for What mike like ten years. Legitimately now, yeah,
30:28
Speaker 3: YEAH i, mean AND i KEEP i keep, Saying, look
30:30
Speaker 3: the idea of crypto is, interesting but show me the
30:32
Speaker 3: use cases for the average. Person this is the first
30:36
Speaker 3: time there's even like some kind of, viable halfway viable
30:39
Speaker 3: use case for the average.
30:40
Speaker 2: Person, yeap other than, speculation, right every everything else is just.
30:45
Speaker 3: Speculation, which, look it's fine if you just want to
30:47
Speaker 3: be another you, know number in The Wall street, casino that's.
30:49
Speaker 2: Cool like.
30:51
Speaker 3: My whole, LIFE i work in The Wall street. Casino
30:53
Speaker 3: so Like i'm not poo pooing anyone who decides to
30:56
Speaker 3: make it. That but the promise of crypto was for something.
30:58
Speaker 3: More and if all it's to be is number go,
31:01
Speaker 3: up number go, down, Okay like that's, Fine but eventually
31:03
Speaker 3: you got to prove some use. Cases and maybe stable
31:06
Speaker 3: coins are a use, case but it's also kind of
31:09
Speaker 3: the most boring use.
31:10
Speaker 2: Case that you could have come up. With for.
31:11
Speaker 3: Crypto, right here's The walmart stable. Coin, yes, great let's
31:16
Speaker 3: take a quick. Break when we come, back we'll talk
31:19
Speaker 3: a little bit about tariffs and how they're Affecting china's
31:22
Speaker 3: small parcel.
31:23
Speaker 1: Exporters this is your home for the most comprehensive coverage
31:28
Speaker 1: of the economy and the trends On Wall. Street this
31:31
Speaker 1: is The Financial Exchange Radio. Network find daily interviews and
31:36
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31:42
Speaker 1: and everything you might have. Missed this is The Financial
31:45
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31:46
Speaker 3: Network, mike we got a piece here from The. Bluemenberg
32:01
Speaker 3: it's TITLED us tariff. Spike It's china's small parcels squeezing.
32:05
Speaker 3: Exporters and basically what you're seeing is that a lot
32:11
Speaker 3: of the uh kind of upstarts in the really freaking
32:17
Speaker 3: cheap shipping business is that the technical.
32:20
Speaker 2: Term really cheap goods.
32:23
Speaker 3: Consumer goods could in no way be profitable.
32:27
Speaker 2: Businesses industry.
32:30
Speaker 3: Companies Like shine And tamu that sell a bunch of
32:33
Speaker 3: stuff made In china for prices that are insanely. Low
32:37
Speaker 3: we're able to do so because of combination of two.
32:41
Speaker 3: Things the first is, generally you, know low tariffs on
32:44
Speaker 3: the imports of Most chinese, goods but beyond that a
32:47
Speaker 3: deminimous exception that allowed for the import of goods priced
32:51
Speaker 3: below a certain price point to not have any tariffs.
32:54
Speaker 2: Applied, anyways the.
32:56
Speaker 4: Way this stuff, worked you, Know, amazon is all about
32:59
Speaker 4: get me goods. FAST i can generally find the same
33:03
Speaker 4: goods at A walmart at a similar, price or at
33:06
Speaker 4: A cvs at a generally similar, price BUT i can
33:10
Speaker 4: order it On amazon and it'll be in my. House
33:12
Speaker 4: in some cases that afternoon Shennon timo with the exact.
33:16
Speaker 4: Opposite it's get me something that does not have a
33:19
Speaker 4: name brand at thirty percent of the price THAT i
33:22
Speaker 4: would see At Dick's Sporting, goods for. Example both items
33:27
Speaker 4: might still be manufactured In, china but this one is
33:29
Speaker 4: going to be insanely cheap and not take and not
33:32
Speaker 4: contain the name.
33:32
Speaker 3: Brand and pretty much the whole business model was just
33:37
Speaker 3: getting people who were upset with prices everywhere else to
33:41
Speaker 3: buy this stuff and be comfortable waiting for. It and
33:44
Speaker 3: it ships directly From, china so it's not held in
33:47
Speaker 3: A us, warehouse comes directly From. China basically get shipped
33:50
Speaker 3: right to you and correct me If i'm, Wrong, Mike but,
33:53
Speaker 3: like the return options are generally pretty not good or non,
33:56
Speaker 3: existent never.
33:57
Speaker 2: TRIED i assume you are correct about.
33:59
Speaker 3: THAT i have even gone to the websites quite, honestly
34:01
Speaker 3: just BECAUSE i don't want them to track. ME i
34:03
Speaker 3: was thinking about it in the run up to this,
34:04
Speaker 3: piece And i'm, like, NO i don't want them to
34:07
Speaker 3: know THAT i, exist at least in the form of
34:09
Speaker 3: someone who might buy stuff. Eventually but with the shift
34:14
Speaker 3: in tariff policy this, year a couple things have. Happened
34:17
Speaker 3: tariffs On chinese goods have, increased and the deminimus exception
34:20
Speaker 3: is gone as, well and so those parcels now face
34:23
Speaker 3: tariffs as high as fifty four. Percent and so you've
34:26
Speaker 3: had these companies raise, prices and so obviously when you
34:30
Speaker 3: raise prices, meaningfully sales tend to drop. Meaningfully and that's
34:33
Speaker 3: kind of what we've seen.
34:34
Speaker 4: Here, yeah forty percent plunge from the same month last
34:38
Speaker 4: year in sales for companies like. Schen the value of
34:42
Speaker 4: small parcels sent From china to usfl by over a
34:45
Speaker 4: billion dollars In, may and that's a forty percent.
34:47
Speaker 2: Drop so this is not.
34:48
Speaker 4: SHOCKING i think when you have the combination of the
34:51
Speaker 4: insert of tariffs plus just the attention that's been put
34:54
Speaker 4: on these types of, companies and you're kind of unsurprised
34:57
Speaker 4: by the.
34:57
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Speaker 3: Com, mike do you want to talk more About Israel?
36:01
Speaker 3: Iran or do you want to talk About Masios son's
36:05
Speaker 3: most recent artificial intelligence.
36:07
Speaker 4: Pitch, Ah the first is gonna be. Sad the ladders
36:12
Speaker 4: canna be more. Entertaining let's go With.
36:13
Speaker 2: Son let's Go. Son we can Cover Israel. Iran you
36:16
Speaker 2: know there's gonna be plenty to cover.
36:19
Speaker 3: There So Masioshu, son who Runs SoftBank group and generally
36:26
Speaker 3: has some of the most unintentionally comedic PowerPoint slides in,
36:32
Speaker 3: history like literally using things like unicorns and, rainbows is
36:38
Speaker 3: talking about trying to build a trillion dollar US ai hub,
36:47
Speaker 3: somewhere Probably. Arizona and what's interesting about, This, yeah so
36:53
Speaker 3: Probably arizona is what he's talking, about which it always
36:57
Speaker 3: FIND i always find interesting that they're trying to build
36:59
Speaker 3: semiconductor for In, arizona because you need a ton of
37:03
Speaker 3: water in order to make. Semiconductors but it's neither here nor.
37:06
Speaker 3: There but here's the thing about About. Sun, historically his
37:12
Speaker 3: his two, things his dreams have kind of outpaced his
37:17
Speaker 3: reach and ability to actually execute, them and his entrance
37:20
Speaker 3: into a number of areas has often marked kind of
37:23
Speaker 3: the top the. Peak SO i find it interesting that
37:27
Speaker 3: he's talking, about you, know, oh we're gonna try to
37:29
Speaker 3: do with this trillion dollar you, know semiconductor investment. Hub
37:33
Speaker 3: and WHEN i start seeing, THAT i start finally thinking to, Myself,
37:38
Speaker 3: man are we are we kind of at the peak
37:40
Speaker 3: of the hype?
37:40
Speaker 2: Cycle and is it starting to?
37:41
Speaker 4: Cress it's so unspecific. Too that's what he does production
37:47
Speaker 4: lines FOR ai powered industrial. Robots so here WHAT i
37:53
Speaker 4: will say, say we don't need a eye powered industrial.
37:56
Speaker 4: ROBOTS i just that's a broad, category my, Friend.
38:00
Speaker 3: AND i gotta tell you so this is a huge
38:01
Speaker 3: throwaway line for the end of an hour of a.
38:04
Speaker 3: Show but, man the MORE i, read the MORE i
38:09
Speaker 3: think that THE ai powered industrial robots are coming way
38:13
Speaker 3: sooner than any of us.
38:14
Speaker 2: Think And I'm
38:16
Speaker 3: I'm i've been really skeptical SINCE i got burnt on
38:19
Speaker 3: self driving, cars but This i'm seeing something, here quick,
38:23
Speaker 3: break we got more coming up in just a bit