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Why are big investors shifting away from US markets? · The Financial Exchange Show

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Speaker 1: making a donation today. This is the Financial Exchange with
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Speaker 1: Chuck Zada and Mike Armstrong.
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Speaker 2: Chuck, Mike and tucking with you and taking a look
1:13
Speaker 2: at US markets as we past the top of the hour,
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Speaker 2: the Dow Jones Industrial Average is up sixty nine points
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Speaker 2: right now. The S and P is up eleven. NASDAK
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Speaker 2: is up seventy one, So again some modest upward drift
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Speaker 2: continuing to be led by Tech. Which this is kind
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Speaker 2: of a reversal of what we saw from you know,
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Speaker 2: July through March of this year, where that nine month
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Speaker 2: period Tech was really struggling. Actually, if you take a
1:42
Speaker 2: look at the NASDAK compared to the S and P
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Speaker 2: five hundred NASDAK, you know, really weakened relative to the
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Speaker 2: S and P by about ten percent through early April.
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Speaker 2: And then since you know, the tariffs were rolled back
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Speaker 2: on April nine, you've pretty much seen like the Nasdaq
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Speaker 2: regain leadership since then and just be on an absolute
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Speaker 2: you know, charge ahead over the last four to six
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Speaker 2: weeks now, actually I guess over the last eight weeks here,
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Speaker 2: so that process is continuing as of today, tenure US
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Speaker 2: Treasury not changing too much. It is up two basis
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Speaker 2: points to four point three eight seven percent. Interestingly enough,
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Speaker 2: after jobless claims were released this morning. The tenuere was
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Speaker 2: down by about five basis points, so it is a
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Speaker 2: little bit of an intra day reversal here, but yields
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Speaker 2: only moving up very modestly on that front. Oil West
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Speaker 2: Texas Intermediate up eighty seven cents a barrel to sixty
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Speaker 2: three seventy two. And we've got gold down eight dollars
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Speaker 2: and ounce now to thirty three ninety one and twenty cents.
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Speaker 2: Gold was up about half percent earlier in the day
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Speaker 2: as well. We got a piece here from the Financial Times.
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Speaker 2: It's titled big investors shift away from US markets, and
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Speaker 2: I think this gets it to a couple different things.
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Speaker 2: I'll read a couple pieces from here because I think
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Speaker 2: it's instructive ast to what's going on. Big institutional investors
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Speaker 2: are shifting away from US markets as Donald Trump's trade
3:15
Speaker 2: wars in the country's escalating debt fuel fears about the
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Speaker 2: dominance of American assets in global portfolios. The US president's
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Speaker 2: are at a trade policy has shaking global markets in
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Speaker 2: recent months, sparking a sharp sell off in the US
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Speaker 2: dollar and leaving Wall Street stocks lagging far behind European
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Speaker 2: rivals this year. So couple different things to chew on
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Speaker 2: when it comes to this. The first is there are
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Speaker 2: two different institutional investors that I want to talk about here,
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Speaker 2: at least classifications US ones and international ones. Sure, a
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Speaker 2: US based investor is I'm going to have some of
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Speaker 2: this poll but not nearly as much as a foreign
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Speaker 2: investor to look to repatriate capital. And the reason is
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Speaker 2: twofold and really dovetails into one thing. If your local market,
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Speaker 2: let's pick, I don't know where, where do you want
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Speaker 2: to go? You want to go to?
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Speaker 3: Europe makes some sense. There's a fair bit of capital there.
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Speaker 2: Okay. So if you go over and take a look
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Speaker 2: at European markets and what they are doing this year,
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Speaker 2: actually they don't have no I do have Europe. So
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Speaker 2: Europe year to date, the MSCI Europe Index is up
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Speaker 2: nineteen point seven eight percent. The S and P five
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Speaker 2: hundred is up one point five.
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Speaker 3: To nine Okay, so there's been some gains there.
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Speaker 2: That's one piece. The other piece of this is the
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Speaker 2: fact that if you are a European investor investing in
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Speaker 2: the S and P five hundred, you also have to
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Speaker 2: take into a fact currency fluctuations. Sure, the euro has
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Speaker 2: appreciated about ten percent relative to the dollar over the
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Speaker 2: course of this year, meaning if you bought US investments,
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Speaker 2: you aren't lagging your European investments by eighteen percent, You're
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Speaker 2: lagging by almost twenty eight percent because you have to
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Speaker 2: adjust for currency or you had to pay up at
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Speaker 2: the beginning of the year for a whole bunch of
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Speaker 2: protection on your currency and hedge that currency potential move.
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Speaker 2: And whether or not you did that was, you know,
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Speaker 2: kind of a coin flip, Like I don't know if
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Speaker 2: European investors did that, because generally they don't in a
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Speaker 2: lot of cases.
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Speaker 3: I've got two other factors to add into this, and
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Speaker 3: maybe you're going to list them.
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Speaker 2: One.
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Speaker 3: All of these institutional investors have constituents that they answer to. Yes,
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Speaker 3: some of those constituents, more of them than last year,
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Speaker 3: are not happy about investments in the United States.
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Speaker 2: Correct.
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Speaker 3: I think that's just a fair general statement. How big
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Speaker 3: of effect is it having. What portion of the move
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Speaker 3: out of the US is because of that?
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Speaker 2: Nobody knows.
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Speaker 3: And you know, some governments overseas might be forcing them
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Speaker 3: to do this, some might just be suggesting it some
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Speaker 3: of their constituents. If you are a donor to university
6:08
Speaker 3: or the owner of an insurance company might be pushing
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Speaker 3: for this, but I think that's fair to say that
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Speaker 3: there is a general push in that direction. One more
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Speaker 3: piece on this. The big beautiful tax bill that's working
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Speaker 3: its way through Congress has a section and it called
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Speaker 3: Section eight ninety nine. It would impose a retaliatory tax
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Speaker 3: on persons who are residents of or otherwise have sufficient
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Speaker 3: nexus with foreign countries that, in the view of the
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Speaker 3: House unfairly targeted imposed discriminatory taxes on US payers doing
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Speaker 3: business abroad. So what they specifically identify here includes digital
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Speaker 3: services taxes widespread across the European Union, to very profit taxes,
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Speaker 3: and then any other tax that the Secretary describes as
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Speaker 3: discriminatory against the United States and US persons. This would
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Speaker 3: impose a tax of up to twenty percent over time,
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Speaker 3: starting at five percent. If you are an investor in
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Speaker 3: one of these countries, you might look at that and
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Speaker 3: you know, I don't think this is getting a massive
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Speaker 3: amount of pushback.
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Speaker 2: I've heard a little bit of pushback.
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Speaker 3: Here and there, but you might look at this and say, hey,
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Speaker 3: I'm going to have ultimately faced higher taxes. Threw no
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Speaker 3: fault of my own for investing in the US, why
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Speaker 3: not try and relocate capital ahead of time.
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Speaker 2: So in terms of what this means, and by the way,
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Speaker 2: the other thing that you have to be aware of
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Speaker 2: on this is for basically the last I don't know,
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Speaker 2: I'm just looking at the ten year chart here now
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Speaker 2: on this, but over the last ten years, the S
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Speaker 2: and P five turn one hundred and eighty five percent,
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Speaker 2: MSCI Emerging markets returned eighteen, MSCI Japan forty three percent,
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Speaker 2: MSCI Europe forty percent. So the other place that we
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Speaker 2: have to start from on this is that for the
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Speaker 2: last decade, if you were an international investor who did
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Speaker 2: not own US assets, you got killed relative to your
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Speaker 2: career peers who decide to do so. So there's been
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Speaker 2: a ton of international money that's flowed into US markets,
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Speaker 2: particularly in the last five years, in the last couple
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Speaker 2: towards MAG seven, AI plays and things like that, And
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Speaker 2: so this is something where you sit in you you
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Speaker 2: ask the question, what does it mean for these investors
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Speaker 2: to move away and how does it happen? And the
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Speaker 2: first thing that you need to know is that big
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Speaker 2: institutional money, it's it takes forever to do stuff. You
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Speaker 2: have an investment committee meeting one quarter that says we're gonna,
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Speaker 2: you know, look at this over the next quarter. Then
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Speaker 2: the following quarter comes, Okay, are we ready to do this? No,
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Speaker 2: let's get a consultant and to make sure that we should.
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Speaker 2: This is stuff that takes not weeks or months, but
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Speaker 2: oftentimes quarters or years for it to play out. Sure,
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Speaker 2: and so it's something where I doubt you've even started
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Speaker 2: to like scratch the surface of what this means as
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Speaker 2: far as the flows that tend to dominate big institutional investments.
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Speaker 2: You've likely seen some things on the surface that have
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Speaker 2: happened now, but the real money has yet to move
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Speaker 2: in any meaningful fashion, and we don't know when it will. Really,
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Speaker 2: we don't even know if it will, if it does,
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Speaker 2: how much will, and when it will. So it's something
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Speaker 2: that's going to play out over the next five to
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Speaker 2: ten years if it does.
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Speaker 3: But remember what foreign investment in the United States, what
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Speaker 3: form that takes, because we think of it as you know,
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Speaker 3: institutions buying US companies or buying real estate or those
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Speaker 3: types of investments. One of the biggest ones that everyone
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Speaker 3: and their mother is talking about writing now about and
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Speaker 3: concerned about right now is foreign buyers of US government debt. Yes,
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Speaker 3: And frankly, that's the one that matters for everybody listening
9:52
Speaker 3: to is can the United States continue to run big
9:55
Speaker 3: deficits and finance those with low interest rates because of
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Speaker 3: foreign buyers of the debt? And if any of these scenarios,
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Speaker 3: including that new tax that the United States is considering
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Speaker 3: putting on foreign entities, that tax US unfairly starts to
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Speaker 3: question that special status of US government bond issuance becomes
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Speaker 3: a real problem.
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Speaker 2: Take a quick break here. When we come back, we've
10:18
Speaker 2: got a little bit of trivia, and then we'll talk
10:21
Speaker 2: about a study on Americans retirement savings and what we
10:25
Speaker 2: are seeing from that.
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Speaker 2: Hi, let's do a.
11:10
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11:58
Speaker 2: PC in the Wall Street Journal talking about some data
12:01
Speaker 2: out of Fidelity that the average savings rate in four
12:05
Speaker 2: to one K plans managed by Fidelity rose to a
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Speaker 2: record high of fourteen point three percent of income in
12:11
Speaker 2: the first three months of this year. Just a bit
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Speaker 2: below the fifteen percent that they say. Financial advisors typically
12:17
Speaker 2: recommend a couple caveats on this. The first is this
12:21
Speaker 2: is only four plans that Fidelity manages.
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Speaker 3: They are the largest four to one K provider out there,
12:27
Speaker 3: so it's not an insignificant portion, but yeah.
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Speaker 2: The second is that it is only for people who
12:32
Speaker 2: have chosen to participate in the plans, so it doesn't
12:36
Speaker 2: give any statistics about what percentage of Americans who have
12:40
Speaker 2: the ability to enroll in one of these plans are
12:42
Speaker 2: actually participating. So what this means, Look, if this were
12:45
Speaker 2: one hundred percent of you know, possible planned participants, then
12:48
Speaker 2: you could be like, yeah, like this, this is great.
12:51
Speaker 2: If and I don't know exactly where the data is,
12:55
Speaker 2: I'm guessing it's probably somewhere between like forty and sixty
12:58
Speaker 2: percent of people who have these plans offered or are
13:01
Speaker 2: actually contributing. That means that the net savings rate into
13:05
Speaker 2: four to one k's is down around like seven or
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Speaker 2: eight percent, not fourteen percent. But it also could mean
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Speaker 2: that those people who aren't contributing to the four to
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Speaker 2: one K might be saving somewhere else instead because of
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Speaker 2: whatever they're probably not in large numbers. But overall, look,
13:24
Speaker 2: it's good news that the people that are participating in
13:28
Speaker 2: Fidelity's four to one K plans are saving more. I
13:32
Speaker 2: think you can only view that as a good thing. Great,
13:35
Speaker 2: but it doesn't give us the complete picture, just because
13:37
Speaker 2: it doesn't tell us about the people who may not
13:40
Speaker 2: be contributing separately.
13:41
Speaker 3: Barons has a piece on three mistakes that they claim
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Speaker 3: investors are making, and these would be, you know, forget
13:49
Speaker 3: formidable mistakes, big mistakes if they are being made. The
13:52
Speaker 3: first one is doing too much, and this applies to
13:55
Speaker 3: whether it's a four to one K or any other
13:57
Speaker 3: type of investment account. Yeah, if you sell at the
14:00
Speaker 3: bottom and then buy it the high, you're not going
14:03
Speaker 3: to do very well for yourself. And the best and
14:06
Speaker 3: worst days in markets are oftentimes concentrated around the same
14:10
Speaker 3: time period because markets sell off and then oftentimes regain
14:12
Speaker 3: themselves quickly see April of twenty twenty five. So that's
14:16
Speaker 3: a bad mistake to make, losing sight of the big picture. Basically,
14:22
Speaker 3: stay organized when it comes to your four oh one k's,
14:24
Speaker 3: don't forget about them, don't lose them. And in oftentimes
14:28
Speaker 3: they point out the consolidating them so you can see
14:30
Speaker 3: them all in one place can be helpful. And then
14:32
Speaker 3: forgetting about fees, The tricky part about fees with four
14:35
Speaker 3: oh one k's is they are not really clear. It's
14:39
Speaker 3: one of the most complicated ways to measure fees that's
14:42
Speaker 3: out there. I'm just going to going to read I
14:44
Speaker 3: have right now a fee disclosure from an actual four
14:49
Speaker 3: oh one K right now, and I'm just going to
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Speaker 3: read how confusing this is.
14:52
Speaker 2: Quote.
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Speaker 3: These fees are charging arrears on a monthly basis to
14:55
Speaker 3: the plan deducted from plan participants accounts on a pro
14:58
Speaker 3: red a basis. The fee is based on the APPA
15:00
Speaker 3: daily balanced YadA, YadA, YadA. The fees are pro rated
15:02
Speaker 3: based on the number of days you had a great
15:05
Speaker 3: balance greater than zero. The plan sponsor may elect to
15:08
Speaker 3: pay some or all of these fees directly. It goes
15:11
Speaker 3: on to say that if the plan sponsor doesn't pay
15:13
Speaker 3: the fees, then they may allocate the fees pro rated
15:16
Speaker 3: to your account. So these are the fees. This is
15:19
Speaker 3: supposed to be a disclosure about what you the customer pay,
15:23
Speaker 3: but it actually doesn't tell you what you pay. And
15:25
Speaker 3: so four to one K is in particular when it
15:27
Speaker 3: comes to what you're being charged to use them and
15:32
Speaker 3: what services you're getting, and then what underlying fees there are.
15:36
Speaker 3: It's pretty darn complicated, which is disappointing because it is
15:39
Speaker 3: supposed to be the American way of saving for retirement,
15:42
Speaker 3: and it's just really it's not to say that every
15:45
Speaker 3: four to one.
15:46
Speaker 2: K has really high fees. Most don't.
15:48
Speaker 3: It's just to say that it's really tough to actually
15:50
Speaker 3: understand what you're being charged when it comes to your
15:53
Speaker 3: retirement plan if you have questions about your retirement. And
15:56
Speaker 3: by the way, none of these are what I would
15:59
Speaker 3: consider to be the most common mistake that I see
16:01
Speaker 3: in four O one k's. The most common one that
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Speaker 3: I see is not knowing how much to contribute and
16:07
Speaker 3: or contributing to the wrong type traditional versus wroth. I
16:10
Speaker 3: see that one all the time. There's just no thought
16:13
Speaker 3: put into how much should I put away and should
16:15
Speaker 3: I be putting into traditional versus wroth? What are these
16:18
Speaker 3: two and how do they benefit me? Four to one
16:21
Speaker 3: k's four H three b's. All of these different retirement
16:24
Speaker 3: plans out there are complicated. They are meant to be simple,
16:28
Speaker 3: they are not terribly simple. And if you have questions
16:32
Speaker 3: about yours, we'd like to talk to you and guide
16:35
Speaker 3: you in the right direction. Here at the Armstrong Advisory Group,
16:38
Speaker 3: the numbers eight hundred three nine three for zero zero one.
16:43
Speaker 3: We do this all the time. We do it day
16:45
Speaker 3: in and day out, helping our clients understand when they're
16:48
Speaker 3: saving that next dollar where it should go, and then
16:50
Speaker 3: eventually when they're pulling out that next dollar where it
16:52
Speaker 3: should come from. The number, once again for the Armstrong
16:55
Speaker 3: Advisory Group is eight hundred three nine three for zero
17:00
Speaker 3: zero one.
17:01
Speaker 1: The proceeding was paid for by Armstrong Advisory Group, a
17:04
Speaker 1: registered investment advisor. Nothing in the ad or in any
17:06
Speaker 1: Armstrong guide a specific financial, legal, or tax advice. Consult
17:09
Speaker 1: your own financial, tax into state planning advisors before making
17:12
Speaker 1: any investment decisions. Armstrong may contact you to offer investment
17:15
Speaker 1: advisory services.
17:17
Speaker 2: We got another ship story, Mike. You know what's the
17:20
Speaker 2: worst emergency you can have on a boat? Fire is
17:24
Speaker 2: undoubtedly Now it's a little bit better now that we
17:26
Speaker 2: don't build ships out of timber. Yes, that used to
17:29
Speaker 2: be a really big problem from what I understand talking
17:31
Speaker 2: to my pirate friends. But even when it's not made
17:35
Speaker 2: of fire, when you happen to be transporting dozens or
17:38
Speaker 2: hundreds of electric vehicles with those really flammable batteries, when
17:41
Speaker 2: you have a fire on board, it's not good. Not
17:44
Speaker 2: a great situation. So you had this ship that was
17:49
Speaker 2: heading from China to Mexico, the Morning Midas, which is
17:54
Speaker 2: flagged out of Liberia. Obviously, I bet it makes one
17:57
Speaker 2: stop there a year. However, many a required in order
18:00
Speaker 2: to make flagship out of Liberia. Yep. But it was
18:03
Speaker 2: heading from China to Mexico with about three thousand cars,
18:06
Speaker 2: including eight hundred EV's on board.
18:09
Speaker 3: You've ever seen an EV car fire on the side
18:11
Speaker 3: of the road, you know what happens when that happens.
18:14
Speaker 2: And apparently the smoke was originally seen emanating from the
18:18
Speaker 2: deck carrying evs. According to a spokesman from the companys,
18:22
Speaker 2: they did successfully evacuate all twenty two crew members from
18:27
Speaker 2: the vessel, but the ship is still just basically floating
18:32
Speaker 2: out off the coast of Alaska, about three hundred miles
18:35
Speaker 2: southwest of Alaska's Aidak Island, and it's just hanging out
18:40
Speaker 2: there right now. I think combination like, Okay, we need
18:44
Speaker 2: to wait for the fire to go out. Because it's
18:46
Speaker 2: you know, you can't put a fire that big out
18:48
Speaker 2: at sea, like you just don't have you know, ships
18:50
Speaker 2: that are capable of doing so. But also you kind
18:54
Speaker 2: of look at this and you're like, well, we'd probably
18:56
Speaker 2: prefer that this thing doesn't sink if you're the company,
19:00
Speaker 2: But what do you really do in this case? There's
19:02
Speaker 2: not too much that you can do. So it is
19:05
Speaker 2: for the insurance company.
19:06
Speaker 3: Three thousand Chinese made cars, you know, total profit, total dollars,
19:10
Speaker 3: total value of eight dollars.
19:11
Speaker 2: They should be all right, yeah, you just write it off.
19:14
Speaker 2: It's fine. It's it's not a big deal really, but yeah,
19:17
Speaker 2: it does appear that is it Alliance? Who is the insurer?
19:24
Speaker 2: I don't know on this they're mentioned in here. I
19:25
Speaker 2: don't know that it's said that they were actually the
19:28
Speaker 2: insurer for the ship. But we'll see quick break here,
19:31
Speaker 2: we got the trivia answer. Next.
19:40
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Speaker 4: Now in positive territory with some trade optimism after President
20:04
Speaker 4: Trump confirmed he held a phone call the Chinese president
20:06
Speaker 4: g this morning and that trade officials from both countries
20:10
Speaker 4: will be meeting soon at a two b determined location.
20:15
Speaker 4: Right now, the Dow is up by a third of
20:16
Speaker 4: a percent, SMP five hundred is up by four tenths
20:19
Speaker 4: of a percent, and the Nasdaq up by seven tenths
20:22
Speaker 4: of a percent or one hundred and thirty five points.
20:25
Speaker 4: Rustered two thousand is up by a quarter of a percent.
20:28
Speaker 4: Ten year treasureyil now up two basis points, now at
20:31
Speaker 4: four point thretey nine percent, and crude oil up one
20:33
Speaker 4: percent higher, trading at sixty three dollars forty eight cents
20:37
Speaker 4: a barrel. Procter and Gamble said it will cut seven
20:40
Speaker 4: thousand jobs, or about fifteen percent of its non manufacturing
20:43
Speaker 4: workforce over the next two years, that stock retreating by
20:47
Speaker 4: one percent. More news on the consumer goods front after
20:50
Speaker 4: Kimberlee Clark agreed to a three billion dollars deal to
20:54
Speaker 4: sell its Kleenex and tissue businesses outside of North America
20:58
Speaker 4: as it aims to focus on profitable areas. Kimberlee Clark
21:02
Speaker 4: shares are almost two percent lower elsewhere. Discount retailer five
21:06
Speaker 4: below posted stronger than expected first quarter results. That stock
21:10
Speaker 4: is jumping by six percent. Shares a Brown Forman down
21:14
Speaker 4: by more than eighteen percent after the bourbon maker and
21:18
Speaker 4: parent company of Jack Daniels saw its latest quarterly results
21:21
Speaker 4: miss expectations. Mango dB surging by over fifteen percent after
21:26
Speaker 4: beating earnings and revenue expectations. The software company also raised
21:30
Speaker 4: its annual guidance, and tomorrow morning we'll see the May
21:34
Speaker 4: jobs report posted at A thirty I'm Tucker Silvans Wall
21:38
Speaker 4: Street Watch. And in the previous segment, we asked the
21:40
Speaker 4: trivia question what state was Hooter's chain launched in? That
21:45
Speaker 4: would be Florida, where a first Hooters restaurant was open
21:48
Speaker 4: in nineteen eighty three in Clearwater, Florida. Winter was Beth
21:52
Speaker 4: from Sturbridge, mass Taking on a Financial Exchange Show t shirt.
21:56
Speaker 4: Congrats to Beth, and we play trivia every day here
21:59
Speaker 4: on the Financial Exchange See complete contest rules at Financial
22:02
Speaker 4: Exchange Show dot com.
22:03
Speaker 3: There really couldn't have been any other answer to that
22:05
Speaker 3: trivia question, like, of.
22:08
Speaker 4: Course it's a couple of Texas guess guesses, but yeah,
22:12
Speaker 4: it's one of the two.
22:13
Speaker 2: Yeah, not much room for you know, not much wiggle
22:16
Speaker 2: room there. Yeah, utah, Yes, perfect piece from the BBC.
22:28
Speaker 2: It's titled how airlines have turned baggage fees into billions
22:32
Speaker 2: And the answer is they keep raising them and we
22:34
Speaker 2: keep paying them.
22:35
Speaker 3: Yeah, it is a big profit line item for them
22:38
Speaker 3: these days.
22:39
Speaker 2: Honestly, I know that.
22:44
Speaker 3: Here's where it's frustrating is when you don't pay attention,
22:47
Speaker 3: it just starts adding on. But I gotta say, I
22:51
Speaker 3: kind of prefer the customization route that you have today
22:55
Speaker 3: when I go and book a flight. I know it's
22:58
Speaker 3: not ten years ago where I'm getting surprised by a
23:01
Speaker 3: forty dollars baggage fee when I go to book a
23:03
Speaker 3: flight today. No, I know that I'm going to be
23:05
Speaker 3: able to customize things to the point where if I
23:07
Speaker 3: want to, as the kids say, raw dog the flight
23:10
Speaker 3: and you know, not choose a seat, not bring anything
23:13
Speaker 3: on with me, then I can pay bare minimum for
23:17
Speaker 3: flying on this plane across the country. And if I
23:20
Speaker 3: want to instead have all the bells and whistles, then
23:24
Speaker 3: I can buy a package that will allow me to
23:26
Speaker 3: do so. But I prefer that too, just saying okay,
23:30
Speaker 3: every ticket costs the same amount, and I get this standard.
23:33
Speaker 3: I get this standard thing because you can actually work
23:36
Speaker 3: the system a little bit with these new rules. What
23:39
Speaker 3: I don't like is that there's very little competition, and
23:41
Speaker 3: so all the airlines now resemble each other, even Southwest,
23:46
Speaker 3: which traditionally played a different role in the industry.
23:49
Speaker 2: So I think, look, here's the general rule of thumb.
23:54
Speaker 2: If I'm not flying with kids, I will never check
23:57
Speaker 2: a bag. Just no reason to. There's just no reason to.
24:05
Speaker 2: You know. It's like I just I can't see a
24:08
Speaker 2: reason why I would check a bag other than hey
24:11
Speaker 2: had to pack a bunch of stuff for the kids. Yep.
24:14
Speaker 2: I guess you could make the case like, yeah, if
24:16
Speaker 2: you have like specialized like sports equipment, if you're going
24:19
Speaker 2: on like a skier golf vacation, okay you have to then,
24:23
Speaker 2: But also got to be honest to having kids. It's
24:24
Speaker 2: been a little while since I've done one of those.
24:26
Speaker 3: What I don't love are some of the external externalities
24:29
Speaker 3: here of you know, Okay, every single flight that I
24:32
Speaker 3: go on now, they run out of overhead bin space
24:35
Speaker 3: because nobody wants to pay the checked bag.
24:37
Speaker 2: We need forty eight people to gate check bags. Well,
24:40
Speaker 2: that's half the plane.
24:41
Speaker 3: What do you mean, which is kind of why I
24:44
Speaker 3: find it interesting that some other airlines like Spirit now
24:46
Speaker 3: charge for your carry on or your checked bag because
24:50
Speaker 3: they realize that, Yeah, it's actually cheaper for us to
24:52
Speaker 3: probably load all these things into the checked bag space
24:55
Speaker 3: and deliver them all that wants via a giant baggage
24:58
Speaker 3: cart rather than delaying boarding by having.
25:01
Speaker 2: The carry ons. You know what the next frontier is
25:03
Speaker 2: on this? No?
25:07
Speaker 3: Please, what is the next charge going to be on airline? No?
25:09
Speaker 2: No, not for what they're going to charge. But the
25:11
Speaker 2: way to solve this is just wearing all of the
25:14
Speaker 2: outfits instead of packing. Oh come on, people do that already, right,
25:17
Speaker 2: you know it's like, oh, why do you have eighteen
25:20
Speaker 2: layers on? Who cares? Turned out of the ac I am.
25:24
Speaker 3: I am one hundred percent certain that my brother has
25:28
Speaker 3: done that at some point or another.
25:30
Speaker 2: So yeah, there's that. Let's see, do we want to
25:36
Speaker 2: talk about Florida's property market or Tesla. Let's go to Tesla. Yeah,
25:41
Speaker 2: it's been a little while since we've chatted about them.
25:43
Speaker 2: They've got so a week from today, they've got their
25:46
Speaker 2: autonomous thing in Austin.
25:49
Speaker 3: Yeah, they've really set a firm date for this, I
25:50
Speaker 3: don't know how they would back out from it. So
25:53
Speaker 3: the claim is that they are going to be launching
25:55
Speaker 3: their autonomous robotaxis in the city of Austin only I
25:58
Speaker 3: think ten of them, and so you know, slow roll
26:02
Speaker 3: out obviously, but this is you know, a pretty big
26:06
Speaker 3: date for them on a promise that's been what like
26:08
Speaker 3: fifteen years in the making.
26:10
Speaker 2: Yeah, and here here's the thing with Tesla. They have
26:14
Speaker 2: some very real problems related to their core business that
26:18
Speaker 2: make some of these supplemental things pretty darn important. If
26:23
Speaker 2: they want to navigate the next twelve to eighteen months
26:26
Speaker 2: and just justify their share price, they have potentially bigger
26:30
Speaker 2: problems than justifying their share price if they continue to
26:33
Speaker 2: see the issues that they're seeing. So shipments from Tesla's
26:36
Speaker 2: shang High factory fell fifteen percent in May. Their European
26:40
Speaker 2: sales are off about fifty percent overall when you include
26:43
Speaker 2: the Americas you're talking you know, somewhere in the ballpark
26:47
Speaker 2: of like a twenty to thirty percent annual decline that
26:51
Speaker 2: they're seeing in sales. There is not a single automaker
26:54
Speaker 2: in the world that is positioned to be able to
26:56
Speaker 2: deal with that because of how auto factories have to operate,
27:01
Speaker 2: which is pretty much you turn the thing on and
27:03
Speaker 2: you crank your cars out as fast as you can,
27:06
Speaker 2: and that's how you get your margins of five percent.
27:10
Speaker 2: Otherwise bye bye, like you're not there for any longer.
27:15
Speaker 2: So I think these supplemental businesses and these these supplemental
27:20
Speaker 2: ideas of hey, can we get these autonomous vehicles to work?
27:25
Speaker 2: I think there is a very real business need for
27:30
Speaker 2: them at Tesla, similar you know, the robotic stuff that
27:34
Speaker 2: they're working on as well, because otherwise they have some
27:39
Speaker 2: real issues, you know, twelve to eighteen months out when
27:43
Speaker 2: it comes to what the financials of the company look like.
27:46
Speaker 2: If this were to continue on the sales side of things,
27:49
Speaker 2: and the China piece, quite honestly, could get work, could
27:53
Speaker 2: get worse because Tesla's kind of getting worked there by
27:57
Speaker 2: these native Chinese manufacturers that have pretty much copied what
28:01
Speaker 2: Tesla did, yep, and they're selling at cheaper prices, and
28:06
Speaker 2: Tesla's option is either hey, sell it a loss or
28:09
Speaker 2: don't make the sale at all.
28:11
Speaker 3: Yeah, And if you combine that with backlash over the
28:14
Speaker 3: CEO's politics, which is not just you know, I know
28:18
Speaker 3: we phrase everything in a domestic focused way. It's arguably
28:22
Speaker 3: bigger across parts of Europe where the backlash against Elon
28:25
Speaker 3: Musk has been pretty strong. And so those two factors,
28:28
Speaker 3: you know, new competition from China, which you know exists
28:31
Speaker 3: everywhere else in the world other than the United States,
28:33
Speaker 3: plus backlash against the CEO. I tend to doubt that
28:37
Speaker 3: the CEO backlash is a story that has legs, but
28:42
Speaker 3: it doesn't really matter. You know, if it's not a
28:45
Speaker 3: problem five years from now, you still got to make
28:46
Speaker 3: it five years for it to solve itself.
28:50
Speaker 2: True on that topic, the last few days, we've started
28:55
Speaker 2: to see Musk putting up a series of objections to
29:03
Speaker 2: the reconciliation bill making its way through Congress right now.
29:07
Speaker 2: Light way of saying it, Yeah, I mean I'm always
29:10
Speaker 2: you know, ye, I don't even know what the word is.
29:13
Speaker 2: I'm trying to eat. I'm always nice, No, no, definitely
29:20
Speaker 2: not that I'm always now and I'm not always fair.
29:25
Speaker 2: I always try to be impartial when you know, talking now,
29:29
Speaker 2: not even that there we go. In any case, you've
29:32
Speaker 2: got a disagreement that is now out there in public
29:35
Speaker 2: between Elon and President Trump in a way that we
29:39
Speaker 2: haven't really seen in probably the last year and a
29:40
Speaker 2: half or so, and I think that it potentially represents Again,
29:46
Speaker 2: We'll have to see exactly where this goes, because who
29:49
Speaker 2: knows the exact reasons for Musk kind of distancing himself
29:54
Speaker 2: on this issue now, But one of the major reasons
29:58
Speaker 2: for Tesla's surge in the late fall and early winter was, Hey,
30:03
Speaker 2: he'd aligned himself with President Trump. Trump won the presidency,
30:06
Speaker 2: and the stock more than doubled in a couple months afterwards.
30:11
Speaker 2: If you are going against the sitting president from a
30:14
Speaker 2: policy perspective, investors may start to wonder how wide are
30:18
Speaker 2: those differences and does this put you in a bad
30:21
Speaker 2: position going forward for the state to potentially, you know,
30:25
Speaker 2: take a closer look at Tesla for any particular reason. Yeah.
30:27
Speaker 3: The other question I have when it comes to this
30:29
Speaker 3: tax bill is does Elon Musk put his money where
30:31
Speaker 3: his mouth is.
30:32
Speaker 2: He's been to this point just writing tweets.
30:34
Speaker 3: If he starts saying I will support the campaigns of
30:36
Speaker 3: people that vote against this bill, it.
30:39
Speaker 2: Had a pretty big impact. He's been saying that has
30:41
Speaker 2: He's basically saying, you know, in twenty twenty six. I'm
30:45
Speaker 2: going to primary people, so we'll we'll see it does.
30:50
Speaker 2: But this is another potential risk for tesla is. Continued
30:55
Speaker 2: operations in the political sphere for any company pose a
30:59
Speaker 2: risk depending on how political winds may change in things
31:02
Speaker 2: like that. Let just take a quick break. When we
31:04
Speaker 2: come back, We've got Ted Rossman from Bank Rate joining
31:07
Speaker 2: us talking about tipping. Right after this, The.
31:10
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32:14
Speaker 3: Joining US now is Ted Rossman from Bank Great talking
32:17
Speaker 3: to us about their latest tipping survey. Ted thanks for
32:20
Speaker 3: coming on, appreciate.
32:20
Speaker 5: It, good to be here.
32:22
Speaker 2: Thank you, Ted.
32:23
Speaker 3: I have to say it, I am falling into the
32:25
Speaker 3: camp of tipping frustration and confusion where I always tip
32:31
Speaker 3: in some locations for service restaurants being the primary one,
32:35
Speaker 3: and I have no idea what I'm supposed to be
32:37
Speaker 3: doing elsewhere. And it is, like I said, frustrating and confusion.
32:42
Speaker 3: Am I in good company on this one?
32:44
Speaker 5: You are in good company?
32:45
Speaker 2: Yeah?
32:45
Speaker 5: A lot of people are frustrated by tipping. Sixty three
32:47
Speaker 5: percent of Americans have a negative view towards the practice.
32:51
Speaker 5: That's up four percentage points from last year. The most
32:54
Speaker 5: common negative views are businesses should pay their staff better
32:59
Speaker 5: rather than relying so much much on tips. Tipping culture
33:02
Speaker 5: has gotten out of control, forty one percent said each
33:04
Speaker 5: of those two things, by the way, and thirty eight
33:07
Speaker 5: percent are annoyed by the pre entered tip screens that
33:09
Speaker 5: we see at coffee shops and food trucks and elsewhere.
33:13
Speaker 3: So I'm going to give you one of my real
33:15
Speaker 3: life frustrations. I was at Boston's Fenway Park last summer
33:18
Speaker 3: and they have one of those walk through the cooler section,
33:22
Speaker 3: pick out your own beer, and then bring the beer
33:25
Speaker 3: to the self checkout kiosks where it scans the beers
33:28
Speaker 3: for you, and then somebody is required in Massachusetts to
33:31
Speaker 3: open those for you, and you pay with your own
33:34
Speaker 3: credit card, check out yourself, and then there's a tip screen,
33:36
Speaker 3: and I'm left asking myself, who am I tipping? Are
33:39
Speaker 3: they actually getting the money? And why am I doing so?
33:42
Speaker 3: But what I've heard from people in the restaurant industry, however,
33:46
Speaker 3: which is a backlash I don't like, is they're seeing
33:50
Speaker 3: tips come down even at full service restaurants, perhaps in
33:53
Speaker 3: backlash to some of this tipping frustration. Is that is
33:56
Speaker 3: that bearing out in any of your surveys, or are
33:58
Speaker 3: we holding pretty strong in terms of tips at full
34:01
Speaker 3: service restaurants?
34:02
Speaker 2: I would agree with all that.
34:03
Speaker 5: The Fenway Park example reminds me of something I encountered
34:06
Speaker 5: at Newark Airport where I picked up a water and
34:08
Speaker 5: a sandwich out of a fridge and scanned it myself
34:11
Speaker 5: and went to check out, and the self checkout machine
34:14
Speaker 5: wanted a tip. I mean, that's the kind of crazy
34:16
Speaker 5: thing that's going on, and yeah, it is giving tipping
34:19
Speaker 5: a bad name in general. I'm surprised how little people
34:22
Speaker 5: are tipping at sit down restaurants that, by contrast, is
34:26
Speaker 5: a place where we should be tipping. And I think
34:28
Speaker 5: a lot of people are not separating some of the
34:30
Speaker 5: general annoyance with tipping versus where it's truly expected. It's
34:34
Speaker 5: part of the social contract at a restaurant, and yet
34:37
Speaker 5: only seventy percent of diners are always tipping at a restaurant.
34:41
Speaker 5: It's shockingly low. For gen Z It's forty three percent
34:44
Speaker 5: of gen z Ers always tip at a sit down restaurant,
34:47
Speaker 5: and then it just goes down from there. I mean,
34:48
Speaker 5: only about half are tipping their hairstylist and barber. It's
34:52
Speaker 5: only one in four gen z Ers. It's only about
34:55
Speaker 5: half who tip for food delivery, little less than that
34:57
Speaker 5: for taxis and ride shares. This has generally declined in
35:02
Speaker 5: recent years. It stabilized a bid over the past year.
35:05
Speaker 5: The theory being that inflation's not quite as bad, but
35:09
Speaker 5: people are not tipping as well as they were, say,
35:12
Speaker 5: four years ago, when there was actually a brief ground
35:15
Speaker 5: swell of appreciation for the service industry during the pandemic.
35:20
Speaker 3: In terms of all of that backlash and frustration, I
35:24
Speaker 3: still don't feel as though I've seen any restaurant or
35:27
Speaker 3: other business owners make a big point of saying, Hey,
35:29
Speaker 3: we're doing away with tipping and we're going to build
35:32
Speaker 3: it into your bill and have a different format. To me,
35:35
Speaker 3: it seems like, in spite of any of those frustrations,
35:39
Speaker 3: the format isn't changing. The business owners are still asking
35:42
Speaker 3: for the tips, they're putting the screens out there, and
35:45
Speaker 3: they're putting their employees in the position of needing to
35:47
Speaker 3: make the tips in order to make their wages. Are
35:49
Speaker 3: you seeing anything that I'm not in terms of those changes.
35:53
Speaker 5: Danny Meyer is an example of a famous restauranteur who
35:56
Speaker 5: tried to do away with tipping, and he pointed out
35:58
Speaker 5: that tipping can be unfair between the front of the
36:01
Speaker 5: house and the back of the house. It can be racist,
36:03
Speaker 5: it can be sexist at times. He tried to do
36:06
Speaker 5: away with tipping and raise prices by about twenty percent,
36:09
Speaker 5: and it flopped. I think it was well intentioned, but
36:12
Speaker 5: diners couldn't see past the higher prices. Even a lot
36:15
Speaker 5: of staff thought, hey, I could make more at the
36:17
Speaker 5: restaurant down the street potentially, so they later did away
36:20
Speaker 5: with the policy. Attempts to do away with tipping have
36:23
Speaker 5: been pretty few and far between. Tipping is actually a
36:26
Speaker 5: great deal for the employer because it's a way to
36:29
Speaker 5: funnel more money to their workers without having to foot
36:32
Speaker 5: the bill. And that's part of why we've seen it
36:34
Speaker 5: catch on even at less conventional places. That's why they
36:38
Speaker 5: hit you over the head with it now at the
36:40
Speaker 5: coffee shop and sandwich shops and other counter service kind
36:44
Speaker 5: of places. I think we're going to see more of
36:46
Speaker 5: it in the future for cost reasons, but also technology
36:50
Speaker 5: is making it easier than ever to embed these prompts well.
36:53
Speaker 3: And if the tax on tips rules changes go into place,
36:56
Speaker 3: then certainly we will see that prolifer rate even for there.
37:00
Speaker 3: Ted Rossman from Bankreat join us to talk about their
37:03
Speaker 3: latest tipping survey. Thanks Ted for coming on appreciate, We'll
37:06
Speaker 3: talk to again soon.
37:07
Speaker 2: Sounds good, Thank you.
37:09
Speaker 3: Would you guys like to know the best and worst
37:12
Speaker 3: states for tipping highest and lowest tip percentages at full
37:15
Speaker 3: service restaurants by state, according to Toast.
37:17
Speaker 2: Can I guess sure? I'm gonna guess the best ones first? Okay.
37:23
Speaker 2: Mississippi Nope. Not in the top five, Tennessee nope, Georgia nope,
37:29
Speaker 2: Oregon nope, Rhode Island no.
37:32
Speaker 3: Missouri number one, Delaware, West Virginia, Indiana, New Hampshire, and Kentucky.
37:37
Speaker 3: This is according to data from Toast. Worst California followed
37:43
Speaker 3: by Washington, Nevada, Florida, and Louisiana.
37:47
Speaker 2: Interesting. I would have guessed Louisiana would have been higher,
37:51
Speaker 2: just because I figure Bourbon Street you got a bunch
37:54
Speaker 2: of people that have had won too many Yeah, they're
37:56
Speaker 2: not really paying close attention now which they're tipping. Okay,
37:58
Speaker 2: this seems fine.
38:00
Speaker 3: California again, everything's crazy expensive.
38:03
Speaker 2: Yeah, that would make sense. Yeah, that makes sense. Interesting.
38:07
Speaker 2: As we head towards the top of the hour, stocks
38:08
Speaker 2: remain in positive territory. The DAWs up one twenty five,
38:11
Speaker 2: s and P up twenty five, and Nasdaq up one
38:14
Speaker 2: thirty eight done for the day. Tomorrow Jobs Friday will
38:17
Speaker 2: tell you all about it then