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What are the real reasons gold has surged pass $5,000 per ounce? · The Financial Exchange Show

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Speaker 1: with Chuck Zada and Mike Armstrong.
1:11
Speaker 2: Chuck, Mike and Chucker with you here as the country
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Speaker 2: looks to dig out from a whole bunch of snow
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Speaker 2: and decent amount of ice that came through as well.
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Speaker 2: And I think that when we look at the economic
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Speaker 2: impact of this, Mike, it's going to be one that
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Speaker 2: you know, takes a little bit of time to understand
1:35
Speaker 2: exactly what we're seeing. But I think to this point,
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Speaker 2: the the big things that you know, I'm noticing just
1:44
Speaker 2: as I look at you know, snowfall totals through at
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Speaker 2: throughout I'm sorry the United States is some of the
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Speaker 2: more southern areas were spared by the fact that this
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Speaker 2: thing moved a little bit north, and so, you know,
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Speaker 2: not quite as as bad as it could have been
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Speaker 2: for you know, portions of the southeastern United States, but
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Speaker 2: certainly when you look at basically, you know, northern Arkansas,
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Speaker 2: through the Midwest and up into the New England region,
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Speaker 2: you're talking about significant snowfall mounts, and in the Carolinas
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Speaker 2: North Carolina, really you did end up with some ice
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Speaker 2: that caused some problems as well. But the fact that
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Speaker 2: this buy and large didn't get you know, the initial
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Speaker 2: projections of the ice and snow that could have affected
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Speaker 2: you know, Atlanta all the way through Charlotte and everything.
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Speaker 2: Things a little better on that front, but the estimates
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Speaker 2: that I've seen that because of just how broad this
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Speaker 2: storm was and the cold that got down into Texas
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Speaker 2: and places like that, the estimates are that this one
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Speaker 2: storm alone could take anywhere from half percent to one
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Speaker 2: percent off of GDP for the quarter.
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Speaker 3: As you look at the economic impacts here.
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Speaker 4: Yeah, last count we have three hundred thousand customers without
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Speaker 4: power in Tennessee, nine hundred thousand across the country. We
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Speaker 4: had twelve thousand, one hundred flights canceled Sunday. That is
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Speaker 4: the most since April, sorry, March thirtieth of twenty twenty,
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Speaker 4: right in the middle of COVID when twelve thousand, one
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Speaker 4: hundred and forty three flights were canceled.
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Speaker 5: So there is some economic impact.
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Speaker 4: Obviously, travel's been snarled, and a lot of people are
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Speaker 4: without power, and you know, I'm guessing we won't see
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Speaker 4: the full full ice effect and what exactly was taken
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Speaker 4: out in terms of infrastructure in some of those more
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Speaker 4: southern parts of the country for a few days here.
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Speaker 2: So again the country trying to dig out of here.
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Speaker 2: But I think overall the initial projections from the middle
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Speaker 2: of last week, fortunately the storm just you know, continued
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Speaker 2: to drift northward and you know, so you didn't end
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Speaker 2: up with as much in the southern part of the
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Speaker 2: country as you could have. And the big thing now
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Speaker 2: is just digging out and getting traveled back to normal.
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Speaker 3: The good thing from my.
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Speaker 2: Perspective looking at this is because it was so cold
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Speaker 2: in many of the areas where the snow was falling. Yes,
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Speaker 2: you ended up with high accumulation amounts, but ultimately it's
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Speaker 2: pretty light, fluffy snow that's easy to move, and so
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Speaker 2: it's not something that I think is going to snarl
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Speaker 2: things for the better part of the week. But you
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Speaker 2: still probably have a couple of days before you have
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Speaker 2: things back to normal. And then of course, you know,
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Speaker 2: you pop open the weather apps this morning and you see, hey,
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Speaker 2: there could be at least in the New England region,
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Speaker 2: you know, another you know, six to ten inches coming
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Speaker 2: in next weekend, and so you kind of say, okay,
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Speaker 2: we in one of these cycles where it's like every week,
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Speaker 2: like twenty fifteen, you're getting dumped on, you know, anywhere
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Speaker 2: from half a foot to a foot of snow, and
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Speaker 2: what kind of impacts does that cause?
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Speaker 6: Yeah, no melting by the way.
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Speaker 2: Yeah, it's not getting it's not getting above freezing in
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Speaker 2: the New England region until at least next Tuesday.
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Speaker 3: It looks like flamethrower. Flamethrower.
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Speaker 4: No, I think the neighbor might have one. Okay, one
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Speaker 4: of my neighbors got an electric snowblower. I was surprised
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Speaker 4: that that existed. That's a new piece of technology as
5:17
Speaker 4: far as I'm concerned. And I had one pipe freeze
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Speaker 4: that did not burst, So I feel like I'm coming
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Speaker 4: out ahead on that.
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Speaker 5: One hasn't burst yet. Now it thowed this morning.
5:27
Speaker 4: We had the space heaters running in the basement for
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Speaker 4: the last forty eight hours.
5:31
Speaker 5: Electricity bill is gonna be through the roof.
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Speaker 4: But the water started finally flowing through the through the
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Speaker 4: bathroom fascet this morning after It's good, not doing so
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Speaker 4: since Saturday morning at nine am.
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Speaker 5: So we're happy.
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Speaker 2: I had a If you want to know what not
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Speaker 2: to do in that situation, I had a neighbor burned
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Speaker 2: their house down, burned their house down trying to thaw
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Speaker 2: a pipe with a wind thrower.
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Speaker 3: A hair dryer, full full circle.
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Speaker 2: They were trying to thaw pipe with a hair dryer
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Speaker 2: and accidentally the installation in the house off fire. Yehs right,
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Speaker 2: and that was just the whole thing. It was, you know,
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Speaker 2: an old construction and that was that was it. So
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Speaker 2: don't you do that if feeling for what not to do,
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Speaker 2: don't do that, Yeah, because it's worse than a frozen
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Speaker 2: pipe when your house burns down. Unfortunately, so hopefully we
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Speaker 2: don't see too much of.
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Speaker 4: That other economic impact. We did see natural gas top
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Speaker 4: six dollars. How do we price that?
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Speaker 3: Is it per million BTUs?
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Speaker 5: Per million BTUs?
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Speaker 4: That was the first time that's happened since twenty twenty two.
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Speaker 4: So clearly those heating bills and specifically the wholesale prices
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Speaker 4: for utility companies running all the electricity they need to
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Speaker 4: have spiked during all of this, and the cold weather
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Speaker 4: continuing through parts of the country may continue to see
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Speaker 4: that elevated.
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Speaker 2: So this again, I don't think there's anything too much
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Speaker 2: more to say about this. It's it's one where I
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Speaker 2: think you know, by and large, the precipitation amounts that
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Speaker 2: came through, we're pretty close at least if you were
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Speaker 2: in again kind of the Midwest and the northeast. The
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Speaker 2: South was largely spared by this thing drifting a little
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Speaker 2: bit further north, and so that makes it such that
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Speaker 2: the economic impacts not necessarily as big as they could
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Speaker 2: have been, but still some work to do in terms
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Speaker 2: of getting everyone dug out and you know, back to
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Speaker 2: back to functioning at this point here with what was
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Speaker 2: just this massive storm system that stretched across you know,
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Speaker 2: most of the country for the last couple of days here,
7:35
Speaker 2: This then gets us to what we have to look
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Speaker 2: forward to in the coming week. And I got to
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Speaker 2: tell you sneaky big week actually in terms of data
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Speaker 2: and earnings. This morning we got durable goods orders which
7:46
Speaker 2: came in a little bit better than anticipated. When you
7:49
Speaker 2: strip out transportation, you know, vehicles and airplanes and things
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Speaker 2: like that, basically right on the money for expectation. So
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Speaker 2: it was just you know, you had some big orders
7:58
Speaker 2: for I guess airplanes and cars.
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Speaker 3: That skewed them to the upside.
8:01
Speaker 2: We've got Casehiller home price data and FHFA home price
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Speaker 2: data coming out tomorrow at nine am Eastern on Wednesday.
8:09
Speaker 2: We've got a FED meeting, sneaky FED meeting, Like no
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Speaker 2: one's been talking about this really, probably just because expectations
8:15
Speaker 2: are that they're not going to do anything. But we
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Speaker 2: do have a FED meeting on Wednesday, and so that
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Speaker 2: always gets you know, a lot of eyeballs and a
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Speaker 2: lot of interest. Thursday, we're going to have weekly jobless claims,
8:28
Speaker 2: and then Friday, we're finally going to be caught up
8:30
Speaker 2: on Producer Price Index when the December PPI comes out.
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Speaker 2: So that is exciting to have that puppy in the
8:37
Speaker 2: queue prior to the end of the month earnings. First
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Speaker 2: real major week for earnings as well. Tomorrow we've got
8:45
Speaker 2: United Health, Raytheon, Texas Instruments, Boeing, Union Pacific, North Grummin Ups,
8:51
Speaker 2: General Motors, Kimberly, Clark, So you got some big names there. Wednesday,
8:55
Speaker 2: the real heavy hitters come out to play Microsoft Meta Tesla,
8:59
Speaker 2: and and you still have again, you know, other big names,
9:02
Speaker 2: uh in terms of AT and T, Progressive, ADP, General Dynamics, Starbucks,
9:07
Speaker 2: Waste Management. They're all reporting then as well. And then
9:11
Speaker 2: Thursday you've got Apple, Visa, MasterCard, Caterpillar, Blackstone, Southern Copper, Honeywell, Lockey, Martin, Comcast, Altria,
9:22
Speaker 2: and a whole bunch of other names. So you're right
9:25
Speaker 2: into the middle of kind of the two week peak
9:27
Speaker 2: of earning season now, and it's gonna be interesting to
9:31
Speaker 2: see what we get in particular from these tech companies,
9:33
Speaker 2: in my opinion, where a lot of them have kind
9:36
Speaker 2: of plateaued in the last four to six months, and
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Speaker 2: can this earning season be a springboard for them to
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Speaker 2: move higher or do we you know, continue this chop
9:46
Speaker 2: and and just not really see them get anywhere. Microsoft,
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Speaker 2: I think is gonna be a really interesting one to
9:51
Speaker 2: watch in my opinion, Mike. The last two earnings reports
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Speaker 2: for Microsoft both were very good and both saw the
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Speaker 2: stocks surge to round share. Afterwards, it hasn't touched those
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Speaker 2: prices aside from those two earnings days. It's slid in
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Speaker 2: the weeks and months after. And so the question that
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Speaker 2: I have is, look, do you see something similar in
10:11
Speaker 2: this uh in this one at this point, because Microsoft
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Speaker 2: has just been unable to really get its footing after
10:19
Speaker 2: earnings despite those earnings day pops.
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Speaker 4: Yeah, I was gonna say, of the four big ones
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Speaker 4: there that you mentioned, Tesla, Apple, Microsoft, and Meta. Microsoft
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Speaker 4: and Meta to me are the most interesting. They're the
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Speaker 4: most plugged into the massive spending increase on the AI
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Speaker 4: infrastructure move Tesla and Apple have interesting things to say,
10:37
Speaker 4: but again their core business is not investing in new
10:41
Speaker 4: AI development at this point, and those two really have
10:45
Speaker 4: a lot more to say about it. So if you
10:47
Speaker 4: are looking for hints as to how much longer this
10:51
Speaker 4: infrastructure playout can keep going, these gravy trains are the
10:54
Speaker 4: ones that are gonna tell you.
10:56
Speaker 2: Can we just talk a little bit more just about
10:57
Speaker 2: a couple of these meta just as an example, just
11:00
Speaker 2: because you mentioned them on January twenty seventh of last year,
11:03
Speaker 2: So one year ago they traded at six hundred and
11:05
Speaker 2: sixty one dollars to share. There at six sixty seven
11:07
Speaker 2: right now, basically flat for the last year. Microsoft, you
11:12
Speaker 2: take a look at where they were a year ago
11:15
Speaker 2: January twenty eighth, they were at four hundred and forty
11:18
Speaker 2: five bucks a share there at four sixty nine, so up,
11:20
Speaker 2: you know, four or five percent. But basically, again the
11:23
Speaker 2: path has been anything butt flat. But the stock is,
11:27
Speaker 2: you know, barely budged in the last year. The one
11:30
Speaker 2: that you can look at and say, hey, things have
11:32
Speaker 2: changed positively is Google now or Alphabet as they like
11:36
Speaker 2: to call themselves. They're at about a buck eighty nine.
11:38
Speaker 2: Last year, they're at three thirty one right now, right Amazon,
11:41
Speaker 2: you take a look at them, they're at two thirty
11:43
Speaker 2: eight today. January twenty seventh, they were two thirty five,
11:45
Speaker 2: so up one percent over the last year. Tesla was
11:50
Speaker 2: at four hundred and four hundred bucks. Last year there
11:53
Speaker 2: at four forty. But again, choppy move and ten percent
11:56
Speaker 2: is nothing to sneeze at, you know, it's nothing crazy.
11:59
Speaker 2: In Vidia has had you know, a significant movemup, but
12:01
Speaker 2: has plateaued now in the last six months since late July.
12:07
Speaker 2: So a lot of eyeballs on these names because the
12:10
Speaker 2: excitement from last year kind of tapering off of these names.
12:14
Speaker 2: Do we see you know, maybe another lag up or
12:16
Speaker 2: do we see these start to slip? Very interesting earning
12:19
Speaker 2: season in my opinion. Let's take a quick break when
12:24
Speaker 2: we come back, let's do a little bit of FED
12:28
Speaker 2: talk right after this.
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13:28
Speaker 3: Mike.
13:28
Speaker 2: We talked briefly in the first segment that we do
13:30
Speaker 2: have a FED meeting that I think is kind of
13:33
Speaker 2: snuck up on everyone this Wednesday. And we've also got
13:37
Speaker 2: this piece in Baron's here it's his Powell's term as
13:40
Speaker 2: FED chief and soon his words carry more weight than ever.
13:46
Speaker 2: Do we agree with that premise.
13:47
Speaker 3: Of this piece.
13:48
Speaker 5: I'm not sure about more weight than ever?
13:51
Speaker 4: But look, I think the reason this meeting itself has
13:53
Speaker 4: snuck up on people is because there's been far juicier
13:56
Speaker 4: Federal Reserve news than what they're going to do, which
13:58
Speaker 4: inter straight setting policy? Was it two Sundays ago. Now, yeah,
14:02
Speaker 4: two Sundays ago, now that Jay Powell released his two
14:05
Speaker 4: minute video calling out you know what we what I
14:12
Speaker 4: call it meddling with the Federal Reserve from the White
14:14
Speaker 4: House and calling the investigation into the construction little more
14:21
Speaker 4: than intimidation techniques. And so, yeah, you're right, nobody's really
14:26
Speaker 4: been focusing on that next meeting. I think when it
14:31
Speaker 4: comes to Wednesday's meeting, I don't think his words carry
14:33
Speaker 4: more weight than every because I don't think he has
14:35
Speaker 4: any interest in using his official Federal Reserve chair podium
14:43
Speaker 4: to talk about the intimidation from the White House. I
14:47
Speaker 4: don't think he wants to do that. That's why he
14:49
Speaker 4: released a video via Twitter. Otherwise he would have done so.
14:52
Speaker 4: And so I don't think that this Wednesday is the
14:55
Speaker 4: most important FED meeting. I don't think his words on
14:59
Speaker 4: Wednesday carry more than ever. I do think that, you know,
15:03
Speaker 4: it's going to be a distraction though at this meeting,
15:05
Speaker 4: instead of asking questions about their views on the state
15:10
Speaker 4: of unemployment and inflation and where interest rates should be,
15:14
Speaker 4: where the natural rate might be, j Powell is likely
15:17
Speaker 4: to face a lot of questions from reporters about his
15:20
Speaker 4: video that he posted about his view on the investigation
15:26
Speaker 4: into his role in those construction projects. And therefore it's
15:32
Speaker 4: going to be a pretty messy meeting, would be my guess,
15:34
Speaker 4: or a messy press conference anyway. I don't think the
15:36
Speaker 4: meeting itself will be messy.
15:37
Speaker 2: Yeah, I don't get the sense that he wants to
15:40
Speaker 2: speak off the cuff with regards to anything related to
15:46
Speaker 2: you know, his video, And so the thing is, as
15:50
Speaker 2: you mentioned, like, I think he's going to get a
15:51
Speaker 2: lot of questions about it. And I think this also
15:54
Speaker 2: is partly just because we're still trying just to figure
15:57
Speaker 2: out where the labor market is right now. We talked
16:01
Speaker 2: last week that there are some signs that maybe the
16:04
Speaker 2: labor market is starting to thaw in the weekly jobless
16:08
Speaker 2: claims numbers, but that's just one area. You have other
16:11
Speaker 2: areas where you look at and you're like, now, like
16:13
Speaker 2: this still doesn't really look very good, but they're not
16:15
Speaker 2: as up to date and as high frequency in terms
16:20
Speaker 2: of when we get readings and how timely they are.
16:22
Speaker 2: So I think we're trying to get a sense of
16:24
Speaker 2: where this labor market is.
16:27
Speaker 3: And the.
16:30
Speaker 2: Big thing is, until you have a sense of whether
16:32
Speaker 2: or not there's a turn happening, it's kind of hard
16:35
Speaker 2: to want to do anything from a policy perspective, which
16:37
Speaker 2: is why, by and large, if you look at what's
16:40
Speaker 2: being priced in this year right now in terms of
16:45
Speaker 2: FED action, there's not really much here. There's the potential
16:50
Speaker 2: for a rate cut being priced in in the June
16:53
Speaker 2: meeting and potentially one more being priced in in the
16:57
Speaker 2: December meeting.
16:58
Speaker 3: That's it.
17:00
Speaker 2: There's nothing being priced as far as any probability of hikes.
17:04
Speaker 2: The most likely outcome at the next three meetings through
17:07
Speaker 2: end of April is no change in rates, and the
17:13
Speaker 2: furthest that you get with you know, at least a
17:15
Speaker 2: twenty percent chance of rate cuts is maybe you know,
17:21
Speaker 2: to three rate cuts this year, and I think, look,
17:27
Speaker 2: you can make a case that that's reasonable.
17:29
Speaker 3: Especially.
17:31
Speaker 2: Here's the other piece that I think we need to
17:32
Speaker 2: pay some attention to. Something we haven't really talked about
17:36
Speaker 2: a ton this year is the overall dollar index, where
17:40
Speaker 2: you know, the dollar's fallen about three percent this year now,
17:44
Speaker 2: and in a world in which you know, hey, commodity
17:48
Speaker 2: prices are already screaming, this is going to affect the
17:51
Speaker 2: prices of imports and things along those lines. Does that
17:55
Speaker 2: potentially firm inflation up a little bit and become cause
17:59
Speaker 2: for concern?
17:59
Speaker 3: Right?
17:59
Speaker 2: Is the labor markets turning? That's a potential story that
18:03
Speaker 2: you want to watch. It's not there yet. I don't
18:06
Speaker 2: think you're there on that side yet, just because I'm
18:08
Speaker 2: not sure the labor market is turning. It may be,
18:11
Speaker 2: but we're just in the early innings on it. But
18:14
Speaker 2: this is another thing that you have to watch as
18:16
Speaker 2: far as how the Fed may react, even before you
18:19
Speaker 2: get to the fact that you're gonna have a new
18:20
Speaker 2: chair in place four months from now.
18:22
Speaker 5: Yeah.
18:22
Speaker 4: Again, I think the interesting things to watch about the
18:25
Speaker 4: Federal Reserve, surprisingly are not what its actions or even
18:28
Speaker 4: statements are around inflation, labor marketed interest rates. We just
18:33
Speaker 4: we're gonna have to wait a little bit before any
18:34
Speaker 4: of that becomes interesting. The more interesting stuff to be
18:37
Speaker 4: answered right now is how is J. Powell thinking about
18:41
Speaker 4: the end of his term as chair? Is there any
18:44
Speaker 4: chance he's consider staying on? We still don't do we
18:48
Speaker 4: have an official pick from the White House in terms
18:50
Speaker 4: of his replacement, and will the Senate be willing to
18:53
Speaker 4: confirm anything. So there are some pretty interesting things going
18:56
Speaker 4: on within the Federal Reserve and the pressure campaign from
18:59
Speaker 4: the House, but none of them are likely to influence
19:03
Speaker 4: what happens with interest rates prior to probably June of
19:07
Speaker 4: this Year's.
19:09
Speaker 2: Take a quick break here. When we return, we'll do
19:14
Speaker 2: a little bit of Wall Street Watch, and then we'll
19:17
Speaker 2: talk a little bit more about, Hey, what are the
19:20
Speaker 2: risks of having interest rates lower than the economy dictates
19:26
Speaker 2: they should be.
19:27
Speaker 3: We'll discuss that when we return.
19:40
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20:00
Speaker 6: It's beginning the week in positive territory as Wall Street
20:02
Speaker 6: assesses the economic impact from sunday significant winter storm. Traders
20:08
Speaker 6: are also writing for a FED meeting with the decision
20:10
Speaker 6: on interest rates Wednesday afternoon. In addition to big tech
20:15
Speaker 6: earnings from Microsoft, Meta, Tesla.
20:17
Speaker 3: And Apple.
20:18
Speaker 6: Right now, the Dow is up four tenths of one percent,
20:21
Speaker 6: or one hundred and ninety three points high. R SMP
20:24
Speaker 6: five hundred, up over half a percent or thirty seven
20:27
Speaker 6: points higher. Nasdaq also up over half a percent, or
20:30
Speaker 6: one hundred and twenty eight points. Russell two thousand is
20:33
Speaker 6: up about a quarter percent ten Your Treasure reeled down
20:35
Speaker 6: three basis points today at four point two zero three percent,
20:39
Speaker 6: and crude oil down about half a percent, trading at
20:42
Speaker 6: sixty dollars in eighty cents a barrel. Some breaking news
20:45
Speaker 6: from video this morning after the AI and chip Giant
20:48
Speaker 6: announced it is investing in additional two billion dollars into
20:52
Speaker 6: AI data center company core Weave. The company said that
20:55
Speaker 6: they would build new AI factories on in Video's computing
20:59
Speaker 6: platform technology operated by core Weave, and Video shares are
21:03
Speaker 6: down modestly, while core Weavestock is jumping nearly thirteen percent. Meanwhile,
21:08
Speaker 6: shares an USA Rare Earth rallying ten percent after the
21:12
Speaker 6: critical mineral startup announced that the Department of Commerce will
21:16
Speaker 6: take an equity stake as part of a funding deal. Elsewhere,
21:19
Speaker 6: shares in gold miner Numont are climbing nearly three percent
21:23
Speaker 6: higher as gold prices have climbed above five thousand dollars
21:26
Speaker 6: for the first time, and tomorrow morning we'll see more
21:30
Speaker 6: fourth quarter earnings from the likes of United Health RTX,
21:33
Speaker 6: boeing ups Union Pacific and Northrop Grumming as well as
21:38
Speaker 6: General Motors again, all due out tomorrow morning. I'm Tucker Silvan.
21:43
Speaker 6: That is Wall Street Watch. And remember the Financial Exchange
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21:50
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21:53
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22:02
Speaker 2: Mike, can we talk a little bit about gold, just
22:04
Speaker 2: since Tucker mentioned it and we had an item in
22:06
Speaker 2: our stack, we can. I feel like it's it's it's
22:10
Speaker 2: worth love gold. I knew it was was coming there.
22:16
Speaker 2: Uh So, in any case, you do have gold over
22:19
Speaker 2: five thousand dollars in ounce.
22:21
Speaker 1: Uh.
22:21
Speaker 2: It is important to note that gold is not just
22:26
Speaker 2: priced in dollars. You can, you know, get the price
22:28
Speaker 2: of gold in just about any major currency. And the
22:33
Speaker 2: big thing that we are seeing here is that this
22:39
Speaker 2: is happening across the board, uh throughout major world currencies,
22:45
Speaker 2: whether you are looking at the dollar, the euro, the pound,
22:50
Speaker 2: the yen, the Swiss franc, the Chinese you want, like,
22:54
Speaker 2: you go through your major world currencies, and what you
22:58
Speaker 2: find is that not at the exact same rate, the
23:01
Speaker 2: price of gold is going up relative to them.
23:05
Speaker 3: And so there's this piece.
23:06
Speaker 2: Of the Wall Street Journal, you know, the five reasons
23:07
Speaker 2: that gold price is served above five thousand dollars an ounce,
23:11
Speaker 2: And you know, it's this idea of here are the
23:15
Speaker 2: ones that they give you, the debasement trade. So the
23:18
Speaker 2: idea that the strength of the US dollar may weaken
23:21
Speaker 2: lower interest rates, which you know, again typically lower real
23:25
Speaker 2: rates relative to inflation, tend to spur runs in gold
23:29
Speaker 2: and other precious metals.
23:31
Speaker 4: Think about it as opportunity costs. Right, gold doesn't pay
23:33
Speaker 4: you a dividend. If you're not getting paid a dividend
23:35
Speaker 4: or interest on your CD anyway, you might consider that
23:38
Speaker 4: a more reasonable trade off compared to when you were
23:40
Speaker 4: getting five percent on a CD.
23:42
Speaker 2: Central bank buying expensive stocks and momentum. So let's break
23:48
Speaker 2: this down in the context of you know, what we
23:52
Speaker 2: are seeing in these areas, because I think a couple
23:55
Speaker 2: of these could be true, a couple of them are not.
23:58
Speaker 2: And I think there's some stuff that the Wall Street
23:59
Speaker 2: Journal out of the list, in my opinion, good. The
24:03
Speaker 2: debasement trade is the one that just about everyone is
24:05
Speaker 2: talking about. Oh, you know, like deficits keep going up
24:08
Speaker 2: and so you know, the hedge against deficits going up
24:11
Speaker 2: and your currency being worthless is to go and buy
24:14
Speaker 2: precious metals. I think there's a reasonable case that that
24:17
Speaker 2: is part of what's going on here.
24:19
Speaker 5: And by the way, not a US only problem.
24:21
Speaker 4: We're talking about here, right, we have China with massive deficits,
24:24
Speaker 4: we have Japan with deficits. We have pretty much every
24:26
Speaker 4: developed and developing nation running very large deficits and have
24:30
Speaker 4: been for the last six years. And okay, I can
24:35
Speaker 4: connect those dots correct.
24:37
Speaker 2: So again, like overall, if you look at it again,
24:40
Speaker 2: you go across any major currency and you're seeing the
24:44
Speaker 2: exact same thing here. So that's happening. Let's talk a
24:49
Speaker 2: little bit about the second item, lower interest rates. So
24:53
Speaker 2: the idea here is not just lower interest rates nominally.
24:56
Speaker 2: It's not just the FED cutting interest rates from you know,
25:00
Speaker 2: five percent down to you know three point to three
25:03
Speaker 2: point seventy five or five and a quarter down to
25:04
Speaker 2: three seven five. It's the idea that, hey, real interest
25:08
Speaker 2: rates net of inflation have gone from again called around
25:14
Speaker 2: two percent to around one percent. And that's the piece
25:17
Speaker 2: that really, you know, matters, is what's happening with real
25:21
Speaker 2: interest rates. That's what typically gold and other metals are
25:25
Speaker 2: typically more sensitive to as opposed to nominal interest rates.
25:29
Speaker 4: I guess my question though, is are we seeing that globally?
25:32
Speaker 4: That effect globally, because this is a global phenomena we're
25:36
Speaker 4: seeing with gold, not just US buyers forcing at up parts.
25:39
Speaker 2: You're you're seeing you you are, I mean, like you
25:41
Speaker 2: look at like Japan right now, inflation's moving up in
25:43
Speaker 2: the Japanese Central Bank is not moving rates up at
25:48
Speaker 2: as rapid a rise as you know, inflation is moving
25:51
Speaker 2: and so you you've got that happening there. Central bank buying.
25:54
Speaker 2: This one is one that I'm gonna pooh pooh quite honestly.
25:58
Speaker 2: Chart from the Wall Street Journal that they pull from
25:59
Speaker 2: the World World Gold Council. Basically, central banks around the
26:04
Speaker 2: world have been net buyers of gold since twenty eleven.
26:08
Speaker 2: They have ramped up their pace in twenty two, twenty three,
26:12
Speaker 2: and twenty four, But the move that we're seeing is
26:17
Speaker 2: in twenty five and twenty six, where we don't have
26:19
Speaker 2: full year data yet, and it's not like we saw
26:22
Speaker 2: gold go hog wild in the twenty two to twenty
26:25
Speaker 2: four period, right you know, So I kind of poopoo
26:29
Speaker 2: the central bank buying one, just because central banks have
26:33
Speaker 2: been net buyers of gold for fifteen years now, and
26:36
Speaker 2: gold did not go wild during the twenty tens. So
26:38
Speaker 2: I kind of poopoo that one. Expensive stocks I'll quote here,
26:45
Speaker 2: I won't quote. It's basically saying, hey, stocks have gotten expensive,
26:48
Speaker 2: so you know, people are rotating into precious metals. They've
26:51
Speaker 2: been expensive, four guys. I've never seen that ever, right
26:54
Speaker 2: like that, that's just not a phenomenon.
26:57
Speaker 3: That you see.
26:58
Speaker 2: And by the way, European stocks are not expensive. So
27:02
Speaker 2: if this were the case, it wouldn't be happening in Europe,
27:04
Speaker 2: it wouldn't be happening in em you know, merging markets.
27:08
Speaker 2: But it's happening in those currencies too. So I'm not
27:10
Speaker 2: buying the expensive stocks piece momentum. I do kind of buy,
27:14
Speaker 2: but I want to add one piece to this, which
27:18
Speaker 2: is retail speculative mania. Sure, because what you made me, Yes,
27:24
Speaker 2: what you are absolutely seeing here, and this is confirmed
27:26
Speaker 2: if you look at the data in terms of like
27:28
Speaker 2: what's being talked about most on Reddit, you know stock
27:32
Speaker 2: forms right now, it's silver and gold that like that
27:36
Speaker 2: it is you can make a case that from a
27:40
Speaker 2: meme perspective, Silver is currently occupying the space formerly occupied
27:46
Speaker 2: by bitcoin, and so that is the issue, not the issue.
27:51
Speaker 2: But I think one of the major things here is
27:54
Speaker 2: you've got very small markets. I mean, these are not
27:56
Speaker 2: you know, big markets that get like massive amounts of
27:59
Speaker 2: trading act normally, and just to like put this in perspective,
28:04
Speaker 2: if you wanted to look at the big you know
28:09
Speaker 2: silver ETFs that are out there right now, for the
28:12
Speaker 2: last thirty days, the big one that's out there, which
28:14
Speaker 2: is the Iher Silver Trust, is seeing an average of
28:18
Speaker 2: ninety five million shares a day traded. Okay, if you
28:24
Speaker 2: go back and look at the last five years, it
28:27
Speaker 2: typically averaged ten to twenty million shares per day traded,
28:31
Speaker 2: so it's seen anywhere from five to ten times the
28:34
Speaker 2: normal amount of trading taking place in it. It's retail
28:38
Speaker 2: mania that is a huge driving force in this. I'm
28:42
Speaker 2: not saying that's good or bad. I don't really know,
28:45
Speaker 2: but that is a major major piece of this.
28:48
Speaker 3: Uh. And it's the fact that these are.
28:50
Speaker 2: Normally pretty small, not ill liquid markets, but just not
28:54
Speaker 2: ones that get a ton of participation, and now they're
28:57
Speaker 2: just seeing interest through the roof and that is a
29:01
Speaker 2: huge driver of what we're seeing in precious metals markets, gold, silver, platinum.
29:07
Speaker 3: You know, you can go down.
29:08
Speaker 2: The list even ones that you know, silver's got, industrial uses,
29:11
Speaker 2: palladiums another one. But this is absolutely a key driver
29:17
Speaker 2: as well here. And the other thing that I think
29:18
Speaker 2: is being left off in some of these areas, you
29:22
Speaker 2: do have concerns for geopolitical reasons about where the production
29:27
Speaker 2: levels might change in the next six to twelve months. Sure,
29:29
Speaker 2: and I think that's something that's afoot as well. And
29:32
Speaker 2: you know, something that's not just happening in metals markets,
29:35
Speaker 2: it's happening across lots of different commodity markets and is
29:39
Speaker 2: a key theme that's out there as well.
29:41
Speaker 4: By the way, attributing some portion of the price movement
29:44
Speaker 4: to these different effects is of course impossible, right.
29:47
Speaker 3: I don't know how much.
29:48
Speaker 4: The one thing that's interesting to me though, the only
29:51
Speaker 4: one that I look at on this list as a
29:53
Speaker 4: possible rapid change to Like you look at the debate
30:00
Speaker 4: basement story, or you look at the lower interest rates
30:03
Speaker 4: story or central bank buying, like all of those are
30:05
Speaker 4: unlikely to change on a dime. The only one I
30:07
Speaker 4: can look at to say, Oh, that can change pretty quickly.
30:11
Speaker 4: Is the momentum story, where you know, retail investors are
30:14
Speaker 4: fickle and their attention can be drawn elsewhere very quickly.
30:18
Speaker 4: So all the other facts don't seem like they would
30:21
Speaker 4: change overnight.
30:22
Speaker 3: Let's take a quick break.
30:23
Speaker 2: When we return, let's talk about potential new tariffs on
30:29
Speaker 2: Canada and whether we should spend more than three minutes
30:32
Speaker 2: talking about them.
30:34
Speaker 1: There's only one show that follows Wall Street's continued volatility,
30:38
Speaker 1: Keep it here all morning long on the Financial Exchange
30:42
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30:45
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30:49
Speaker 1: He's the Financial Exchange Radio Network.
30:59
Speaker 3: All right, So, uh, peace of the Wall Street Journal Late?
31:04
Speaker 3: I think this was late Friday. No, this was Saturday.
31:07
Speaker 2: President Trump threatening Canada with one hundred percent tariffs on
31:11
Speaker 2: all Canadian goods and products coming into the US if
31:14
Speaker 2: Canada makes a deal with China.
31:17
Speaker 3: Should we care about this or is this nothing?
31:21
Speaker 4: Look a same story as the Greenland situation, Yes, and
31:25
Speaker 4: far less impactful. So from what perspective, we were threatening
31:31
Speaker 4: tariffs on all of the European Union, which is a
31:33
Speaker 4: far larger dollar trade partner than Canada.
31:37
Speaker 3: Is is it that much bigger? I can't even remember at.
31:39
Speaker 5: This point, I believe, so.
31:43
Speaker 4: I'll pull some stats up during the break, But I
31:46
Speaker 4: believe that the European Union is a bigger trading partner
31:49
Speaker 4: between goods and services than anybody out there, including China.
31:52
Speaker 4: So I think that they probably it is.
31:55
Speaker 3: Yeah, you're right.
31:55
Speaker 2: Still, we import about two hundred billion dollars more from
32:00
Speaker 2: the EU than from Canada. Canada still is the if
32:03
Speaker 2: you're talking in terms of single countries, it is the
32:06
Speaker 2: third largest import partner, but fourth if you include the.
32:09
Speaker 3: EU as a whole.
32:10
Speaker 4: So not saying this isn't impactful, but we've seen this stuff.
32:17
Speaker 4: How it typically plays out, and how it typically plays
32:19
Speaker 4: out is big headline making threats yep, followed by some
32:25
Speaker 4: form of negotiation.
32:27
Speaker 3: So we'll watch, we'll see if anything develops.
32:29
Speaker 2: But again, even if you look just as recently as
32:32
Speaker 2: last week, the conventional wisdom on this now is Okay,
32:36
Speaker 2: this is the initial position, and it's unlikely that this
32:40
Speaker 2: actually ends up being implemented, And the market reaction today,
32:43
Speaker 2: I think is telling you that story as well.
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34:03
Speaker 3: Piece in the New York Times.
34:04
Speaker 2: Low interest rates sound great, but a Trump FED could
34:06
Speaker 2: cause a painful sugar high discuss Michael.
34:11
Speaker 5: Well, Okay, trump fed.
34:13
Speaker 4: The argument that's being made by the New York Times
34:15
Speaker 4: is that the President, through his appointment or future appointments,
34:19
Speaker 4: will have the ability to influence the Fed to bring
34:23
Speaker 4: interest rates lower, so.
34:26
Speaker 2: Lower than they otherwise would have been brought by by
34:29
Speaker 2: an independent FED.
34:30
Speaker 5: So that is the argument that's being laid out.
34:32
Speaker 4: We've talked about the independence of the FED, how important
34:35
Speaker 4: it is, and whether or not we find it likely
34:37
Speaker 4: that over the course of the next three years that
34:40
Speaker 4: influence is exerted successfully. But the very obvious answer for
34:45
Speaker 4: you is that you risk much higher inflation. We don't
34:49
Speaker 4: need to go back too far to see this right
34:51
Speaker 4: the Fed. For all the talk that we have given
34:56
Speaker 4: the FED over the course of the last few years,
34:58
Speaker 4: we are pretty clear back in twenty twenty to what
35:00
Speaker 4: they were doing seemed wrong for the moment in time,
35:03
Speaker 4: lo and behold it was. They kept interest rates far
35:05
Speaker 4: lower than they should have been for far too long,
35:07
Speaker 4: and we're a major contributing factor to the awful inflation
35:12
Speaker 4: that we all experienced in twenty twenty two.
35:14
Speaker 2: Counterpoint, twenty tens FED cuts interest rates basically to zero
35:20
Speaker 2: and then goes through a whole bunch of quantitative easing.
35:23
Speaker 2: Everyone in their grandmother is out there saying this is
35:26
Speaker 2: gonna cause inflation. It's gonna and it didn't during that decade.
35:31
Speaker 2: And I think that this also then speaks to the
35:33
Speaker 2: idea of two things. The first is we still have
35:38
Speaker 2: an imperfect understanding of exactly how inflation manifests and sustains itself.
35:44
Speaker 3: But the other piece that I think goes with.
35:46
Speaker 2: This is even with that imperfect understanding, it's still is
35:49
Speaker 2: important to consider the overall context of what's going on
35:53
Speaker 2: in the broader economy, because the key difference is between
35:57
Speaker 2: the twenty tens and twenty twenties and why we saw
36:00
Speaker 2: inflation versus not Number one. The twenty twenties you had
36:04
Speaker 2: significant supply disruptions because of the pandemic. Yep number two,
36:09
Speaker 2: you had absolutely massive, to the point of like an
36:13
Speaker 2: order of magnitude greater infusions of cash into the US
36:17
Speaker 2: economy than in the early twenty ten period. The big
36:20
Speaker 2: thing in the early twenty tens was you remember the
36:22
Speaker 2: American Recovery and Reinvestment Act, the big infrastructure bill. It
36:26
Speaker 2: was like six hundred billion dollars in change. We had
36:29
Speaker 2: like almost six trillion dollars of stimulus that got pumped
36:34
Speaker 2: into the US economy in a couple of year period.
36:37
Speaker 2: And this is before you even get to what was
36:38
Speaker 2: going on worldwide. So just fundamentally different environments that I
36:45
Speaker 2: think ultimately do lower interest rates you know, potentially raise
36:50
Speaker 2: the risk of inflation returning, yes, but the context of
36:56
Speaker 2: what's going on in the economy also matters in that. Hey,
37:01
Speaker 2: if you have a really tight economy with unemployment you
37:06
Speaker 2: know still not you know, unemployment coming back down later
37:09
Speaker 2: this year, and you know, demand for labor picking up,
37:11
Speaker 2: and you're cutting interest rates into that, it's probably a
37:14
Speaker 2: risky move, but it's also not something that inherently guarantees
37:20
Speaker 2: that you get this massive jump in inflation, because we
37:24
Speaker 2: just don't know the context of you know, is supply
37:26
Speaker 2: increasing alongside of that demand and keeping things in balance.
37:31
Speaker 2: You know, how what what is the actual source of
37:35
Speaker 2: that demand and where is it coming from like these
37:37
Speaker 2: are things that are going to matter as well. So
37:40
Speaker 2: I do think we've again talked about the risks of
37:43
Speaker 2: a non independent FED for you know, any executive branch
37:47
Speaker 2: to be controlling. In this case, it's going to depend on, Hey,
37:51
Speaker 2: where's the labor market moving and what are we seeing
37:54
Speaker 2: on that front That could potentially, you know, cause some
37:57
Speaker 2: some issues, uh with in FLA if the FED were
38:02
Speaker 2: to embark on a policy that is more dubbish than
38:06
Speaker 2: it otherwise normally would be.
38:08
Speaker 3: Let's take a quick break here.
38:09
Speaker 2: When we come back, we've got our two coming up
38:13
Speaker 2: in just a little bit.