Latest / The Financial Exchange Show / If the US falters as the economic leader, who will fill the void?

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If the US falters as the economic leader, who will fill the void? · The Financial Exchange Show

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  Speaker 2: Chuck, Mike and Sucker with you today as we continue
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  Speaker 2: through a pretty busy week.
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  Speaker 3: Earnings continuing to come through.
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  Speaker 2: We've got a little bit of economic data that we're
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  Speaker 2: gonna touch on, but we're gonna kick things off with.
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  Speaker 2: But I gotta say, probably the most predictable result yesterday is, Hey,
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  Speaker 2: the Greenland situation turns out we're not going to war
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  Speaker 2: over Greenland. And you know, all the people that were
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  Speaker 2: hyping up all Europe's gonna sell all of their treasuries
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  Speaker 2: at the push of a button, and oh, like this
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  Speaker 2: is gonna be as we said for the last couple
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  Speaker 2: of days. Ultimately, we've seen this story play out several
• 1:53
  Speaker 2: times over the last year, in which the Trump administration
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  Speaker 2: comes out with you know, large initial demands and subsequently
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  Speaker 2: walks them back, maybe as part of a negotiating strategy,
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  Speaker 2: maybe as part of just trying to diffuse the situation, whatever, you.
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  Speaker 3: Know, you think on that. I think the important.
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  Speaker 2: Thing is the playbook that markets should believe right now
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  Speaker 2: is that we need to stop paying so much attention
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  Speaker 2: to what different parties are saying, whether it is the
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  Speaker 2: US government, whether it is European investors, whoever it might be,
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  Speaker 2: and start actually.
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  Speaker 3: Paying attention to what they do, and you can.
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  Speaker 2: Save yourself just a whole lot of adjecta in the
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  Speaker 2: process and instead just let the market do the worrying
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  Speaker 2: for you.
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  Speaker 4: Yeah, well, said Chuck.
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  Speaker 5: I think once again investors being taught a lesson on
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  Speaker 5: not taking the president's words literally. As we headed into
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  Speaker 5: this week, equities Tuesday sold off by more than two percent,
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  Speaker 5: depending on which index you are looking at the NASDAC
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  Speaker 5: I believe about two and a half percent rallied yesterday,
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  Speaker 5: making up some of those losses. Around half of those
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  Speaker 5: losses were made up in trading yesterday.
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  Speaker 4: Equity's moving up again today.
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  Speaker 5: I guess the positive news here would be that investors
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  Speaker 5: seemingly drew some lessons from April of twenty twenty five
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  Speaker 5: in terms of not getting you know, extremely spooked in
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  Speaker 5: the same way. The kind of point is, they still
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  Speaker 5: participated in a fairly big single day selloff on Tuesday,
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  Speaker 5: and those who did sell into it are probably not
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  Speaker 5: feeling so great this morning.
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  Speaker 3: Now.
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  Speaker 2: What I've said all along is, if you want to
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  Speaker 2: have realistic conversations, not the conversations about UHZ, is Europe
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  Speaker 2: gonna sell eight trillion dollars worth of US treasuries, Like, no,
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  Speaker 2: they're not, because they're not stupid. We can talk all
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  Speaker 2: we want about how Europe governs itself and how you know,
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  Speaker 2: European investment management may work in this and this, but
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  Speaker 2: they're not fun mentally stupid, Like that's that's just not
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  Speaker 2: what happens here, because you can't actually sell eight trillion
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  Speaker 2: dollars in treasuries for a large number of reasons that
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  Speaker 2: we've gone through before. But if you want to have
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  Speaker 2: the honest conversation about, hey, at some point, do European
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  Speaker 2: investors say, hey, rather than sending you know, the extra
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  Speaker 2: surplus that we're accumulating to invest in the US, do
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  Speaker 2: we start looking to move that into other places on
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  Speaker 2: the margins? And does that affect capital flows as a
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  Speaker 2: result of that? The answer is a resounding maybe, Like
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  Speaker 2: this is something that I think is worth watching over
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  Speaker 2: the next like five to ten years. And the reason
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  Speaker 2: why is Look, ultimately, when you talk about why Europe
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  Speaker 2: buys lots of US assets right now, be it US treasuries,
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  Speaker 2: be at US stocks, be at US real estate, the
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  Speaker 2: reason is that there is a in imbalance on the
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  Speaker 2: trade side of things, Europe sells more stuff into the
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  Speaker 2: US and the aggregate than the US sells to Europe,
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  Speaker 2: and so as a result, Europe ends up accumulating these
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  Speaker 2: dollars as a result of that. What they then choose
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  Speaker 2: to do with that, they could do any one of
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  Speaker 2: a number of different things, buy and large. For the
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  Speaker 2: most part, they say, yep, we're gonna you know, if
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  Speaker 2: we see something attractive we want to buy, great, we'll buy,
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  Speaker 2: you know, invest in shares of that business, or buy
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  Speaker 2: that piece of real estate or this and that. Or
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  Speaker 2: if not, hey, we'll just buy us treasuries and sit
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  Speaker 2: on it because we know these dollars are coming useful
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  Speaker 2: down the road unless you actually change the imbalance, which look,
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  Speaker 2: there's no sign that there's any real shift in the
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  Speaker 2: trade balance between the US and other countries in the aggregate.
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  Speaker 2: There's been some shifts on the margin between like which
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  Speaker 2: ones are picking up more of it, but ultimately the
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  Speaker 2: trade bounce between the US and Europe widened last year
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  Speaker 2: as the trade deficit between the US and China narrowed,
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  Speaker 2: which might also just be a sign that there's a
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  Speaker 2: bunch of transhit.
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  Speaker 3: It's from China going through Europe.
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  Speaker 2: But that's neither here nor there, and so I think
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  Speaker 2: that ultimately, when you look at this, it's one where
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  Speaker 2: because the United States has higher levels of overall spending
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  Speaker 2: and lower saving relative to Europe, you can't simply resolve
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  Speaker 2: these things. And so the question becomes, Hey, of that
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  Speaker 2: surplus on trade that Europe ends up running, do they
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  Speaker 2: continue to throw capital back to the US where we run,
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  Speaker 2: you know, a capital account surplus relative to them, or
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  Speaker 2: do they say, no, we want to take some of
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  Speaker 2: that excess capital and throw it towards South America or
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  Speaker 2: back towards Asia, or even keep some.
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  Speaker 3: Of it internally.
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  Speaker 2: And you know, maybe well, you know up our you know,
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  Speaker 2: uh spending, you know, domestically, things like that. So there
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  Speaker 2: are a number of different ways that this can end
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  Speaker 2: up playing out. But my point on this is the
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  Speaker 2: interesting conversations are, hey, how might European investment firms or
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  Speaker 2: European countries look to adjust this investment at the margin
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  Speaker 2: over the next five to ten years. Not Hey, do
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  Speaker 2: you think Europe's gonna go sell all their treasuries?
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  Speaker 3: What are they gonna do? That's just not real.
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  Speaker 5: So I think a microcosm of this can be seen
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  Speaker 5: in our neighbors to the north. And this isn't so
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  Speaker 5: much a financial maneuver as a different type that we
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  Speaker 5: covered last week on the show. And as misguided as
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  Speaker 5: I think it is, and as displeased as I think
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  Speaker 5: the Canadian people will be with it, We've seen how
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  Speaker 5: Canada over the course of the last several months has
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  Speaker 5: been upset with the United States and its policy regarding trade,
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  Speaker 5: and in reaction to that, to some degree, turning to
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  Speaker 5: China as a different potential trade partner. Now again, I
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  Speaker 5: think that's misguided. I think it will very clearly backfire
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  Speaker 5: on them in a number of different ways. But I
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  Speaker 5: think that's part of the underlying threat here is who
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  Speaker 5: if the United's it's vacates in influence that it has
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  Speaker 5: held over the rest of the world, who fills that gap?
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  Speaker 5: And in the case of China, there are in case
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  Speaker 5: of the Canada, there are indications that China might be
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  Speaker 5: the one to play that role.
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  Speaker 2: Yes, And I think this also gets this does get
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  Speaker 2: at what I think is a very real criticism of
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  Speaker 2: Canada and Europe as it relates to China in that
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  Speaker 2: look the There's been a lot of chatter since President
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  Speaker 2: Trump's first term as to, hey, we need to get
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  Speaker 2: together like a coalition of you know, countries like Canada
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  Speaker 2: and France and Germany and.
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  Speaker 3: The rest of Europe.
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  Speaker 2: We need to get together, you know, a coalition of
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  Speaker 2: them to really stand up to China. And quite honestly,
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  Speaker 2: I am entirely unconvinced that countries like Canada or continents
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  Speaker 2: or groups of countries like the EU actually want to
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  Speaker 2: stand up to China. In some cases, quite honest I
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  Speaker 2: think it's because their governments are likely somewhat compromised by
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  Speaker 2: Chinese government influence. In other cases, I think they just
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  Speaker 2: may not realize what they are doing. And neither one
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  Speaker 2: of those situations is good. But I haven't seen any
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  Speaker 2: indication from either Canada or Europe or you know, emerging
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  Speaker 2: countries that they really see China as the threat that
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  Speaker 2: I believe they should perceive it to be. And so
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  Speaker 2: part of me looks at this and I'm like, guys,
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  Speaker 2: I'm not convinced that those are you know, actually allies
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  Speaker 2: in a real you know, economic competition against China. I
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  Speaker 2: just I don't see those facts in evidence. When you
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  Speaker 2: look at the behavior of the Canadian government for the
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  Speaker 2: last twenty years, or the German government for the last
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  Speaker 2: twenty maybe like occasionally you see like some signs of
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  Speaker 2: backbone there. But I just don't know that they viewed
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  Speaker 2: China as a threat the same way that I believe
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  Speaker 2: they should.
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  Speaker 5: Well, I also don't know that there's been any real
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  Speaker 5: concerted effort on the US's part to build that established
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  Speaker 5: anti Chinese influence wall.
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  Speaker 3: No, but why why does the US have to like
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  Speaker 3: do the whole thing, like, you.
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  Speaker 4: Know, chose to lead everything else? So I guess that's
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  Speaker 4: the You.
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  Speaker 2: Know, if you're the German government, you're just like, oh,
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  Speaker 2: we've got this great auto industry here, China, just come
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  Speaker 2: in and eat it.
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  Speaker 3: Like you shouldn't need like me to be.
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  Speaker 2: Sitting there being like, hey, guys, might not be a
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  Speaker 2: good idea, you know. So in any case, let's take
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  Speaker 2: a quick break here. When we come back. We got
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  Speaker 2: some economic data this morning. We got PCE inflation, we
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  Speaker 2: got jobless claims, we got all kinds of stuff to
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  Speaker 2: look at.
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  Speaker 3: Let's go through that when we return.
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• 11:45
  Speaker 2: A bunch of economic data out today. Unfortunately none of
• 11:48
  Speaker 2: it is current. We're still kind of working through the
• 11:52
  Speaker 2: shutdown backlog here at this point. So we got the
• 11:56
  Speaker 2: final update to Q three GDP, which was revised up
• 12:02
  Speaker 2: slightly from four point three percent to four point four
• 12:04
  Speaker 2: percent growth.
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  Speaker 3: We receive PCE and core PCE for both.
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  Speaker 2: October and November, which came in at point two percent
• 12:13
  Speaker 2: on each one, in line with expectations, so nothing crazy there.
• 12:17
  Speaker 2: We also got personal income in spending, personal spending for
• 12:20
  Speaker 2: October was a bit stronger than anticipated for November. In
• 12:23
  Speaker 2: line income for November a little stronger income for October
• 12:27
  Speaker 2: a little weak or so washes out there. But again,
• 12:30
  Speaker 2: the big thing on this is this is all data
• 12:32
  Speaker 2: that is like I mean, look Q three, we're talking
• 12:36
  Speaker 2: three to six months stale at this point. It's not like,
• 12:39
  Speaker 2: you know, this is anything entirely new that we're gathering.
• 12:42
  Speaker 2: And that's why markets didn't really have any you know,
• 12:44
  Speaker 2: excitement on the release of any of this news here,
• 12:49
  Speaker 2: in my opinion, is because we're still working through the backlog.
• 12:54
  Speaker 3: We're getting close to being caught up.
• 12:56
  Speaker 2: I did see that December PPI is going to be
• 12:59
  Speaker 2: out next Friday, now, so that's good news that will
• 13:01
  Speaker 2: finally be caught up on PPI.
• 13:03
  Speaker 3: I'm assuming PC will be.
• 13:05
  Speaker 2: Caught up sometime in the first first part of February.
• 13:09
  Speaker 2: But overall the pieces that I gave, I don't think
• 13:13
  Speaker 2: there's anything too interesting there.
• 13:16
  Speaker 3: Your thoughts, Mike, Yeah.
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  Speaker 5: Look, I mean I think it's pretty clear that the
• 13:19
  Speaker 5: economy is growing at a fast pace in the third
• 13:22
  Speaker 5: quarter of last year and likely is continuing now. Important
• 13:26
  Speaker 5: to call out right when you when you talk about
• 13:27
  Speaker 5: measuring the growth in the economy.
• 13:30
  Speaker 4: You have the you know, the increases in things like spending.
• 13:34
  Speaker 5: You also have increased prices factoring into that GDP growth rate,
• 13:38
  Speaker 5: and so you do have I think the PC inflation
• 13:42
  Speaker 5: for you know, the quarter was something like three percent,
• 13:45
  Speaker 5: and so a big chunk of that GDP growth came
• 13:47
  Speaker 5: from expanding prices, which people are not terribly happy about.
• 13:50
  Speaker 5: Speaking of that, Jeff, was the PCE read for this
• 13:53
  Speaker 5: morning delayed?
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  Speaker 3: From what perspective?
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  Speaker 4: Wasn't it supposed to be the decemb PCE released this morning?
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  Speaker 3: Or is that?
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  Speaker 4: Is that not happening?
• 14:03
  Speaker 2: No, it's it's not. It's so the December one is
• 14:06
  Speaker 2: delayed still.
• 14:07
  Speaker 4: It's November that was released.
• 14:09
  Speaker 2: It was October November that we're released today. So we're
• 14:12
  Speaker 2: still working through the backlog on this. I am assuming
• 14:16
  Speaker 2: I haven't seen a Let me take a quick look.
• 14:22
  Speaker 2: Let's see PCE for December will not be out until
• 14:25
  Speaker 2: February twentieth, Like, just catch guys, what the heck? Like
• 14:30
  Speaker 2: you can't just be a month behind forever like tomorrow.
• 14:34
  Speaker 4: Just we're no overtime put in.
• 14:37
  Speaker 3: For the overtime.
• 14:38
  Speaker 2: I'm sorry, Like, we just can't keep looking at data
• 14:41
  Speaker 2: that's two months old, it's useless.
• 14:43
  Speaker 5: Can we just not look at it? Quite honestly, we'll
• 14:45
  Speaker 5: have CPI relatively on time. I think my answer is
• 14:50
  Speaker 5: that it doesn't matter which part. The fact that it's
• 14:53
  Speaker 5: gonna come out in February and tell us what the
• 14:55
  Speaker 5: what the inflation looked like in December is irrelevant to
• 14:59
  Speaker 5: anyone's every day life life unless it significantly diverges from CPI.
• 15:03
  Speaker 4: I don't think it's going to matter at all.
• 15:05
  Speaker 2: Now, this does get to this piece from the Financial
• 15:07
  Speaker 2: Times titled the Case for higher Inflation in twenty twenty six,
• 15:10
  Speaker 2: and I think it boils down, in my opinion, it
• 15:14
  Speaker 2: boils down to one thing, and that is the other
• 15:16
  Speaker 2: piece of data that we got this morning, which is
• 15:19
  Speaker 2: initial jobbles claims, which came in at a continued very
• 15:23
  Speaker 2: low level of two hundred thousand, and continuing jobbles claims
• 15:28
  Speaker 2: came in in a seasonally adjusted level of one point
• 15:31
  Speaker 2: eight four nine million, That is actually two percent below
• 15:35
  Speaker 2: last year's reading of one point eight eight eight million.
• 15:38
  Speaker 2: At the same time. Now it's one week, so you know,
• 15:40
  Speaker 2: caveats and everything, But what I will tell you is,
• 15:44
  Speaker 2: if you are seeing an improvement in the labor market
• 15:47
  Speaker 2: and initial claims and continuing claims of the place where
• 15:50
  Speaker 2: you tend to see at first, if you are seeing
• 15:54
  Speaker 2: something going on here that is a real meaningful improvement,
• 16:00
  Speaker 2: that is the case for higher inflation because the second
• 16:02
  Speaker 2: demand picks up. If you are cutting interest rates and
• 16:06
  Speaker 2: stimulating the economy with larger tax cuts and things like that,
• 16:10
  Speaker 2: and you've got a labor market that starts heating up,
• 16:13
  Speaker 2: that is the case for hotter inflation this year. And
• 16:17
  Speaker 2: the potential concern on that front because I again, it's
• 16:23
  Speaker 2: the idea that you know, hey, you're at four and
• 16:26
  Speaker 2: a half percent on the unemployment rate. Inflation is you know,
• 16:30
  Speaker 2: kind of still kicking in the mid twos. And this
• 16:34
  Speaker 2: is with a job market that's been weakening for the
• 16:36
  Speaker 2: last you know, three years now. And if you see
• 16:39
  Speaker 2: an upward inflection in the labor market and demand for
• 16:42
  Speaker 2: labor picks up, by the way, at the same time
• 16:45
  Speaker 2: that you're heading into a demographic headwind and reduced immigration, companies,
• 16:50
  Speaker 2: what do they say, then, Okay, we got to pay
• 16:52
  Speaker 2: more for that labor. What does that mean you got
• 16:53
  Speaker 2: to do to maintain margins? Hike the prices?
• 16:56
  Speaker 3: Baby?
• 16:57
  Speaker 2: They go up, and so that's the thing that creates inflation.
• 17:02
  Speaker 2: If you see a renewed acceleration in the labor market,
• 17:06
  Speaker 2: that's my concern. If it were to appear we may
• 17:10
  Speaker 2: be seeing the early stages of an improving labor market
• 17:13
  Speaker 2: based on the weekly jobless claims.
• 17:17
  Speaker 3: I think we need another four to six weeks to
• 17:18
  Speaker 3: see if that's actually what's.
• 17:20
  Speaker 2: Happening here or if this is just year end and
• 17:22
  Speaker 2: holiday noise and stuff like that.
• 17:24
  Speaker 5: Yeah, to your point, though, it's not the only data
• 17:26
  Speaker 5: point that might support it. Right, We thought that unemployment
• 17:30
  Speaker 5: rate had jumped to what was it, four point six
• 17:32
  Speaker 5: percent in November during that initial release, it got revised
• 17:36
  Speaker 5: down to four point five percent. The December release for
• 17:39
  Speaker 5: the unemployment rate came in at four point four percent.
• 17:42
  Speaker 5: So I think there are to your point, you wait
• 17:45
  Speaker 5: for a few additional data trends before you come to
• 17:48
  Speaker 5: any conclusion. But this fall we were getting a little
• 17:51
  Speaker 5: bit concerned about the unemployment rate. The Fed was clearly
• 17:54
  Speaker 5: concerned about the unemployment rate and what we were seeing there,
• 17:57
  Speaker 5: hence their rate cuts that they put through. We had
• 18:00
  Speaker 5: all these stories that you and I discounted from Challenger
• 18:02
  Speaker 5: Gray and Christmas about the layoff announcements, which we still
• 18:05
  Speaker 5: should continue to discount because apparently that didn't happen, but
• 18:09
  Speaker 5: they probably still happened, but they didn't really contribute to
• 18:12
  Speaker 5: a higher unemployment rate. The trend though, kind of broke
• 18:16
  Speaker 5: in November, and that was all amidst the government shut
• 18:19
  Speaker 5: down too, And so you just take a look at
• 18:21
  Speaker 5: this now and say, Okay, if we are heading to
• 18:24
  Speaker 5: a lower unemployment rate, yeah, the real possibility of that
• 18:28
  Speaker 5: inflation for those higher wages, the continued impact of tariffs,
• 18:32
  Speaker 5: and the potential for increase spending showing up from tax
• 18:37
  Speaker 5: returns or refunds rather that, yeah, that could spark something
• 18:42
  Speaker 5: that might not be very comfortable and could again cause
• 18:46
  Speaker 5: the FED to reverse course. Right as you have a
• 18:49
  Speaker 5: chairperson switching over with j Powell's term being up in
• 18:54
  Speaker 5: May April April May timeframe I don't remember which. Yeah,
• 18:58
  Speaker 5: it could shape up for a pretty in the spring, chuck.
• 19:01
  Speaker 2: So I still think we need to see what happens
• 19:04
  Speaker 2: with these claims through the month of February. I think
• 19:06
  Speaker 2: by the end of that I think we'll have a
• 19:07
  Speaker 2: better sense of Hey, is this, you know, a meaningful
• 19:10
  Speaker 2: inflection point or is this just noise from one or
• 19:14
  Speaker 2: two weeks, but potentially some green shoots happening in the
• 19:18
  Speaker 2: labor market and we'll monitor over the next couple weeks
• 19:21
  Speaker 2: to see if that is the real deal. Quick break
• 19:26
  Speaker 2: here when we come back, we're talking about j Powell.
• 19:29
  Speaker 2: We're talking about Proctor and Gamble as well.
• 19:41
  Speaker 1: Like us on Facebook and follow us on Twitter at
• 19:44
  Speaker 1: TFE show. Breaking business news is always first right here
• 19:48
  Speaker 1: on the Financial Exchange Radio Network. Time now for Wall
• 19:53
  Speaker 1: Street Watch a complete look at what's moving market so
• 19:56
  Speaker 1: far today right here on the Financial Exchange Radio Network.
• 20:00
  Speaker 6: The markets are building on yesterday's rebound driven by President
• 20:03
  Speaker 6: Trump's tariff threat pivot on European countries over Greenland. This morning,
• 20:07
  Speaker 6: investors are digesting delayed November core PCE data for the
• 20:11
  Speaker 6: latest gage home inflation and in addition to jobless claims
• 20:15
  Speaker 6: and revise GDP with no surprises. Right now, the Dow's
• 20:20
  Speaker 6: up seven tenths of a percent, or three hundred and
• 20:22
  Speaker 6: forty seven points, SMP five hundred up just over half
• 20:25
  Speaker 6: a percent higher thirty seven points. Nasdaq is up eight
• 20:30
  Speaker 6: tens of a percent to one hundred and eighty five points.
• 20:32
  Speaker 6: Russell two thousands, up over nine tenths of a percent,
• 20:35
  Speaker 6: and Your Treasure reeled up one basis point at four
• 20:38
  Speaker 6: point two six seven percent, and Crew to oiled down
• 20:42
  Speaker 6: almost two percent, trading a fifty nine dollars and fifty
• 20:45
  Speaker 6: two cents a barrel. Brock Ter and Gamble reported mixed
• 20:48
  Speaker 6: quarterly results ahead of the open this morning. With a
• 20:50
  Speaker 6: consumer goods company cut its annual earnings outlook, citing higher
• 20:54
  Speaker 6: restructuring charges. The company also noted it expects commodity costs
• 20:58
  Speaker 6: to ease a bit impacted its prior forecast for adjusted earnings.
• 21:02
  Speaker 6: That stock is up over two percent. Meanwhile, spicemaker McCormick
• 21:07
  Speaker 6: reported disappointing fourth quarter earnings, where its revenue mostly came
• 21:10
  Speaker 6: in line with estimate. Shares are tumbling six percent. Abbott
• 21:14
  Speaker 6: Labs reported quarterly sales that fell short of expectations, though
• 21:17
  Speaker 6: earnings per share slightly be forecast. Shares in the maker
• 21:21
  Speaker 6: of medical devices sinking seven percent. GE Aerospace shares are
• 21:26
  Speaker 6: off six percent, despite the aviation technology company reporting stronger
• 21:30
  Speaker 6: than expected adjusted earnings, boosted by rebounding air travel demand
• 21:34
  Speaker 6: as well as increased military spending. And after today's closing,
• 21:38
  Speaker 6: bell we'll see earnings from Intel Intuitive Surgical Capital one
• 21:42
  Speaker 6: in CSX. After its twelve percent surge yesterday ahead of
• 21:47
  Speaker 6: its earnings, Intel stock today is pulling back by one percent.
• 21:52
  Speaker 6: I'm Tucker Silvan. That is Wall Street Watch, and remember
• 21:55
  Speaker 6: you can watch the show live every day on our
• 21:58
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• 22:00
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• 22:15
  Speaker 2: Yesterday, in an interview with CMBC, President Trump was asked
• 22:21
  Speaker 2: a question in terms of hey, you know, how do
• 22:25
  Speaker 2: you think the rest of J. Powell's term as a
• 22:29
  Speaker 2: member of the Board of Governors would go if he
• 22:31
  Speaker 2: stayed on there after his term as FED chair ends.
• 22:37
  Speaker 2: Remember the appointment to the Board of Governors and the
• 22:39
  Speaker 2: appointment to fedchair are separate terms that do not have
• 22:44
  Speaker 2: their end dates. Coincide, Powell would have an additional three years,
• 22:49
  Speaker 2: I believe, on the Board of Governors if he chose
• 22:52
  Speaker 2: to stay on. Generally, when a chair is you know,
• 22:57
  Speaker 2: no longer chair, they tend to leave the board as well,
• 22:59
  Speaker 2: but power is indicated he has not yet made a
• 23:01
  Speaker 2: decision on that front. And so President Trump said, quote,
• 23:05
  Speaker 2: we'll see how it all works out, but if it happens,
• 23:08
  Speaker 2: his life won't be very very happy. I don't think so,
• 23:11
  Speaker 2: basically saying Jerome, I'd like to see you leave once
• 23:15
  Speaker 2: your term is up.
• 23:17
  Speaker 5: Correct, I'd say he's going a step further, And it's
• 23:22
  Speaker 5: a not so unveiled threat to say that your life
• 23:26
  Speaker 5: won't be very happy, because I'm not going to make
• 23:28
  Speaker 5: it very comfortable for you if you stay on here
• 23:31
  Speaker 5: as a dueling influence for the Federal Reserve. I mean,
• 23:35
  Speaker 5: I don't know how to put it other than you know,
• 23:38
  Speaker 5: it's effectively the President saying it's sure to be a
• 23:40
  Speaker 5: shame if something happened to your nice story here. The
• 23:46
  Speaker 5: comment is not surprising and just as a continued escalation
• 23:51
  Speaker 5: of between the White House, President Trump, and the Federal
• 23:54
  Speaker 5: Reserve and j. Powell specifically, and to be fair, I mean,
• 23:58
  Speaker 5: the reason that most Reserve officials do step down after that.
• 24:02
  Speaker 5: To be really clear here is it would be pretty
• 24:07
  Speaker 5: complicated to have two centers of influence on the voting
• 24:12
  Speaker 5: members of the Fed. You have the new FED chair
• 24:14
  Speaker 5: plus the one that ran the thing for what will
• 24:17
  Speaker 5: it have been eight years?
• 24:20
  Speaker 2: Which is why Tucker, if you want to put this
• 24:22
  Speaker 2: on the board SUA, My guess is that Powell steps
• 24:26
  Speaker 2: down when his term is chair as chair is done,
• 24:29
  Speaker 2: because as much as I think Powell wants to defend
• 24:33
  Speaker 2: the Fed's independence, I don't think he wants to do
• 24:37
  Speaker 2: it as a distraction to the overall mission of the FED,
• 24:41
  Speaker 2: which it could turn into if he were to stay
• 24:44
  Speaker 2: on on the Board of Governors after his term is up.
• 24:47
  Speaker 3: Yeah.
• 24:47
  Speaker 5: I don't think there's much evidence that him staying there
• 24:50
  Speaker 5: would be a furtherance of the Fed's independence.
• 24:56
  Speaker 2: I don't think he needs to write, you know, I
• 24:59
  Speaker 2: don't think there's a ton of distance between him and
• 25:03
  Speaker 2: you know, several other members of the Board of Governors
• 25:06
  Speaker 2: in terms of their view of FED independence.
• 25:08
  Speaker 3: Right, I don't think he needs to Yeah.
• 25:11
  Speaker 5: I frankly, I think if his goal after FED chair
• 25:16
  Speaker 5: is to play a role of supporting FED independence, he
• 25:19
  Speaker 5: can probably do a better job of that by staying
• 25:21
  Speaker 5: outside of the FED and criticizing every decision that they
• 25:24
  Speaker 5: make from an outside perspective.
• 25:26
  Speaker 4: As the previous chair's talk a little bit, not that
• 25:29
  Speaker 4: he will do that, but if he wanted to.
• 25:31
  Speaker 2: Yeah, let's talk a little bit about Procter and gamblerings.
• 25:33
  Speaker 2: I know Tucker mentioned them during Wall Street Watch, and
• 25:37
  Speaker 2: basically Procter and Gamble stock up two and a half
• 25:39
  Speaker 2: percent even though you know, revenue was a little bit disappointing.
• 25:45
  Speaker 2: And you know, when we talk about disappointing revenue, and look,
• 25:49
  Speaker 2: this is a company that's always evolving. They've bought and
• 25:51
  Speaker 2: sold companies over you know, the last you know, however
• 25:53
  Speaker 2: many years. But Mike, is it a general thought that
• 25:57
  Speaker 2: when running a business, one would prefer revenue to go
• 26:02
  Speaker 2: up rather than down.
• 26:03
  Speaker 4: That's what I understand.
• 26:04
  Speaker 3: Yeah, okay, glad we're at this point.
• 26:06
  Speaker 2: Then, back in Q three of two thousand and eight,
• 26:10
  Speaker 2: just before the financial crisis, Procter and Gamble had revenue
• 26:14
  Speaker 2: of eighty five billion dollars for the prior twelve months.
• 26:18
  Speaker 2: Today they have revenue of eighty five billion dollars for
• 26:22
  Speaker 2: the prior twelve months. Not great, Bob, Eighteen years a
• 26:26
  Speaker 2: whole bunch of inflation later, and their sales are still
• 26:30
  Speaker 2: the same, which to me says, okay, like there's you know,
• 26:34
  Speaker 2: kind of you know something not great going on here.
• 26:38
  Speaker 2: Now when we take a look at the net income
• 26:40
  Speaker 2: piece in this case, net income over the same time
• 26:45
  Speaker 2: has gone from about twelve billion dollars up to almost
• 26:48
  Speaker 2: seventeen so about a twenty five twenty six percent gain.
• 26:51
  Speaker 2: But again that's over like an eighteen year period. It's like, Okay,
• 26:54
  Speaker 2: your earnings are going up one percent per year over
• 26:58
  Speaker 2: that time period. That's you know, pretty slow. The fascinating thing.
• 27:05
  Speaker 2: And this again is something that I just have to
• 27:08
  Speaker 2: figure out how to untangle here. Procter and Gamble's price
• 27:14
  Speaker 2: in September of two thousand and eight, just before the
• 27:17
  Speaker 2: financial crisis, was about seventy bucks a share. Today it's
• 27:22
  Speaker 2: about one hundred and fifty. Mike, How does a company
• 27:25
  Speaker 2: like just just explain this to me. How does a
• 27:28
  Speaker 2: company with flat sales over that time revenue moving up
• 27:35
  Speaker 2: one percent a year still see a stock price more
• 27:40
  Speaker 2: than double during that time period?
• 27:44
  Speaker 4: Yeah, Jack, I mean, plain and simple.
• 27:46
  Speaker 5: It seems to be a factor of investor confidence in
• 27:51
  Speaker 5: US companies and willing to pay higher prices for them.
• 27:53
  Speaker 5: Because there's nothing terribly impressive about what Procter and Gamble
• 27:57
  Speaker 5: has been able to do over that course. Of time,
• 27:59
  Speaker 5: and frankly, I think they face a lot of the
• 28:02
  Speaker 5: same challenges that they have for the last like, I
• 28:05
  Speaker 5: don't think they've solved any of their major problems. The
• 28:07
  Speaker 5: major problem that I see for Procter and Gamble is
• 28:10
  Speaker 5: that they have faced increasing competition from different online vendors,
• 28:16
  Speaker 5: as well as people shying away from it and being
• 28:20
  Speaker 5: more comfortable getting away from big name brand items. And
• 28:25
  Speaker 5: there's just been more competition in that space from grocery
• 28:28
  Speaker 5: stores that have ruled out their own branded items and
• 28:32
  Speaker 5: online sales where Procter and Gamble shelf space does not
• 28:35
  Speaker 5: play as important as a role as it did thirty
• 28:39
  Speaker 5: years ago when you went to the grocery store. And
• 28:41
  Speaker 5: so seems to me that's my only answer. I don't
• 28:45
  Speaker 5: think they've become more strategically important or certainly, as you
• 28:48
  Speaker 5: just outlined, much more profitable over the last fifteen years
• 28:51
  Speaker 5: or twenty closer to twenty.
• 28:53
  Speaker 3: Yeah, let's take a quick break here.
• 28:55
  Speaker 2: When we return, we'll talk a little bit about what's
• 28:58
  Speaker 2: going on with energy prices, not so much at the
• 29:01
  Speaker 2: pump up more net gas prices, utility bills, things like that.
• 29:04
  Speaker 2: We got some deep cold that's gonna be coming through.
• 29:07
  Speaker 2: How's that going to affect things? And then a little
• 29:09
  Speaker 2: bit of chatter about the private credit market. We haven't
• 29:12
  Speaker 2: talked much about it recently, but we will after this.
• 29:19
  Speaker 1: There's only one show that follows Wall Street's continued volatility.
• 29:23
  Speaker 1: Keep it here all morning long on the Financial Exchange
• 29:26
  Speaker 1: Radio Network. This is your home for the most comprehensive
• 29:30
  Speaker 1: coverage of the economy and the trends on Wall Street.
• 29:33
  Speaker 1: This He's the Financial Exchange Radio Network.
• 29:45
  Speaker 2: Massachusetts Governor More Healy said today that the state of
• 29:50
  Speaker 2: Massachusetts will cover one hundred and eighty million dollars in
• 29:54
  Speaker 2: Massachusetts residents electricity costs over the next two months, saying
• 29:58
  Speaker 2: that this will help to cut people's monthly electric bills
• 30:02
  Speaker 2: by about fifteen percent. This is expected to be announced
• 30:09
  Speaker 2: later today in a prime time speech, and that the
• 30:13
  Speaker 2: rate reductions would apply to customers of the five major
• 30:16
  Speaker 2: utilities that operate in the state, including ever Source and
• 30:19
  Speaker 2: National Grid, which are the two biggest ones for the
• 30:22
  Speaker 2: months of February and March. So here's the thing. This
• 30:29
  Speaker 2: is a band aid and until all of New England
• 30:34
  Speaker 2: gets serious about actually doing what is necessary to get
• 30:40
  Speaker 2: the fuel needed to supply electricity into the New England
• 30:45
  Speaker 2: region at a cheaper cost than putting it on a
• 30:50
  Speaker 2: giant ship, freezing it and shipping it all around you know,
• 30:54
  Speaker 2: the country. We're going to continue to have the highest
• 30:58
  Speaker 2: utility rates in the country, and this is money that
• 31:01
  Speaker 2: would be better off spent addressing the root cause of
• 31:04
  Speaker 2: the problem instead of slapping a band aid on it.
• 31:08
  Speaker 5: We were talking about electricity prices just the other week,
• 31:12
  Speaker 5: and my conclusion on it was we were going to
• 31:14
  Speaker 5: see some well thought through policy and some particularly bad,
• 31:19
  Speaker 5: stupid policy. Now this isn't particularly harmful. The Massachusetts state
• 31:24
  Speaker 5: budget can likely afford one hundred and eighty million dollars.
• 31:27
  Speaker 5: They've collected billions in you know, the millionaire's tax that
• 31:30
  Speaker 5: they put in.
• 31:31
  Speaker 3: It brought in a lot more than they expected.
• 31:33
  Speaker 5: But to your point, Chuck, when you subsidize things, it
• 31:38
  Speaker 5: does not help with the actual price. Go take a
• 31:43
  Speaker 5: look at college education, Go take a look at any
• 31:48
  Speaker 5: number of different things that we that we subsidize. Houser
• 31:52
  Speaker 5: don't underwrite housing is another one.
• 31:55
  Speaker 4: The price for that good will go up.
• 31:58
  Speaker 5: And by the way, if people have less of an
• 32:00
  Speaker 5: incentive to control their consumption of electricity, because it's getting
• 32:04
  Speaker 5: subsidized by their government, then they're going to use more electricity,
• 32:07
  Speaker 5: driving prices higher. Create policy that brings down prices over
• 32:13
  Speaker 5: the long term, which, by the way, might mean that
• 32:16
  Speaker 5: we are all facing higher electricity prices in the short term,
• 32:19
  Speaker 5: which may finally incentivize us to say, oh, maybe those
• 32:23
  Speaker 5: pipelines coming into New England wouldn't be the worst idea
• 32:25
  Speaker 5: in the world, because.
• 32:27
  Speaker 4: I cannot keep affording to pay by.
• 32:29
  Speaker 5: Electricity costs throughout the course of the summer or in
• 32:32
  Speaker 5: this case the winter. Maybe that hydro from Quebec that
• 32:36
  Speaker 5: would require some trees to get cut down in I'm
• 32:40
  Speaker 5: gonna yell that by our New Hampshire listeners that would
• 32:43
  Speaker 5: acquire a giant and obnoxious set of power lines going
• 32:48
  Speaker 5: through Maine, New Hampshire, Barts of Vermont and Massachusetts. Maybe
• 32:51
  Speaker 5: it's worthwhile given how much I have to pay for electricity.
• 32:55
  Speaker 5: This is, to your point, a band aid, But it's
• 32:57
  Speaker 5: worse than a band aid because it does nothing. It
• 33:00
  Speaker 5: incentivizes the wrong behavior.
• 33:03
  Speaker 2: It's I understand that none of us want electric you know,
• 33:08
  Speaker 2: utility stuff in our backyard. I'm the exception that if you,
• 33:12
  Speaker 2: if you told me I could have a small nuclear
• 33:14
  Speaker 2: reactor in my basement. Sign me up, because if it
• 33:18
  Speaker 2: goes badly, I ain't gonna know. In any case, none
• 33:22
  Speaker 2: of us want this in our backyard. I get that.
• 33:25
  Speaker 2: The problem is if none of us actually like allow
• 33:28
  Speaker 2: us to put this in our backyard, it just keeps
• 33:30
  Speaker 2: ending up in our mailbox every month. That bill just
• 33:34
  Speaker 2: keeps coming even it like and and this is the
• 33:38
  Speaker 2: problem here. There's no perfect solution. There's going to be
• 33:41
  Speaker 2: a bunch of solutions that require a lot of us
• 33:44
  Speaker 2: probably not getting everything that we want.
• 33:47
  Speaker 3: But if we just continue to be like.
• 33:49
  Speaker 2: Hey, I don't want those power lines, or I don't
• 33:52
  Speaker 2: want that nat gas pipeline, or I don't want you
• 33:55
  Speaker 2: know that that power plant, eventually it just turns into Okay.
• 34:00
  Speaker 2: The only way to resolve the supply demand imbalance is
• 34:03
  Speaker 2: for your price to go up and continue to see
• 34:06
  Speaker 2: the highest costs of electricity in the United States.
• 34:10
  Speaker 5: And by the way, while we might be particularly stupid
• 34:12
  Speaker 5: about this in New England, we are not the only
• 34:14
  Speaker 5: ones across the country facing high electricity costs.
• 34:17
  Speaker 4: And I'm certain.
• 34:18
  Speaker 2: It's just everyone else has a lot more land, so
• 34:20
  Speaker 2: it's not in everyone's backyard.
• 34:22
  Speaker 5: You know, I am quite certain we will see more
• 34:25
  Speaker 5: of this dumb policy coming from other parts of the
• 34:27
  Speaker 5: country as they try to deal with.
• 34:30
  Speaker 4: Rising costs that people don't like.
• 34:33
  Speaker 6: If you've been dreaming about a getaway that feels far
• 34:36
  Speaker 6: away but easy to get to, it's time to think
• 34:39
  Speaker 6: about the US Virgin Islands America's Caribbean. This is a
• 34:42
  Speaker 6: place where you can fall naturally in rhythm with the
• 34:44
  Speaker 6: heartbeat of the islands, enjoy crystal clear water and powder
• 34:47
  Speaker 6: soft beaches, world class dining in unforgettable sunsets. And here's
• 34:51
  Speaker 6: the best part. Travel from New England is easy. The
• 34:54
  Speaker 6: US Virgin Islands are part of the United States, which
• 34:57
  Speaker 6: means no passport is required and there's no money to exchange.
• 35:01
  Speaker 6: Just pack your bags and go. Spend your days snorkeling, sailing, hiking,
• 35:05
  Speaker 6: or simply relaxing by the water, and your evenings enjoying
• 35:09
  Speaker 6: local cuisine, live music in warm island breezes. Explore Saint Thomas,
• 35:14
  Speaker 6: Saint John and Saint Croix. Three distinct islands, each with
• 35:18
  Speaker 6: its own vibe, its own flavor, and its own way
• 35:21
  Speaker 6: of helping you unplug and reset. Start planning your Caribbean
• 35:26
  Speaker 6: escape Today at visit USVII dot com. Discover why the
• 35:30
  Speaker 6: US Virgin Islands are America's Caribbean paradise. For more information
• 35:34
  Speaker 6: and to book your trip, head to visit USVII dot com.
• 35:39
  Speaker 6: That's visit USVII dot com, Mike.
• 35:43
  Speaker 2: While we're talking about electricity and utility prices, this cold
• 35:48
  Speaker 2: snap and storm that's gonna come through about I don't know,
• 35:53
  Speaker 2: forty percent of the continental United States over the next
• 35:56
  Speaker 2: few days, starting Friday and going through Monday.
• 35:59
  Speaker 3: Has the potential Greek havoc.
• 36:00
  Speaker 2: It doesn't look like it's going to be as bad
• 36:03
  Speaker 2: as it could have been in that the actual storm
• 36:06
  Speaker 2: track has moved north, So Atlanta is no longer appearing
• 36:10
  Speaker 2: like it's going to get two inches of ice.
• 36:12
  Speaker 5: Oh thank god, which is good any cold weather happens
• 36:16
  Speaker 5: in Georgia, like dozens of people.
• 36:18
  Speaker 3: Die, which which is good.
• 36:19
  Speaker 2: And Texas no longer appears like it's gonna be getting
• 36:22
  Speaker 2: quite the same amount of ice, but it still could
• 36:24
  Speaker 2: get a little dodgy in the power grid down there.
• 36:27
  Speaker 2: But the entire like basically Oklahoma through main region, like
• 36:35
  Speaker 2: draw a straight line there, is going to get dumped
• 36:38
  Speaker 2: on to the point where like, just as an example,
• 36:41
  Speaker 2: I was looking at this just because one of my
• 36:43
  Speaker 2: my buddies had pointed me in this direction, and Mike,
• 36:48
  Speaker 2: you know, Greensboro, North Carolina, I do. Greensboro, North Carolina
• 36:53
  Speaker 2: is not exactly known for like winter weather. As of yesterday,
• 36:57
  Speaker 2: they were still predicted to get like fourteen inches of snow.
• 36:59
  Speaker 2: Now it's only going to be two and then some
• 37:01
  Speaker 2: ice on top of it, which again not great, but
• 37:04
  Speaker 2: like this is the kind of stuff that's coming. You're
• 37:07
  Speaker 2: going to basically throughout the entire Midwest and up through
• 37:09
  Speaker 2: the Northeast probably get anywhere from like twelve to twenty four.
• 37:12
  Speaker 3: Inches of snow.
• 37:14
  Speaker 2: And the interesting thing then is what this does economically
• 37:19
  Speaker 2: to the US for the you know, basically the whole
• 37:22
  Speaker 2: last week of January. Because while in the Northeast, look
• 37:27
  Speaker 2: you get you know, twelve to eighteen inches, it still
• 37:29
  Speaker 2: might take you a day or two to dig out.
• 37:31
  Speaker 3: If you're getting this in.
• 37:32
  Speaker 2: Kentucky and Missouri and Arkansas, they don't have plows in
• 37:39
  Speaker 2: those areas.
• 37:40
  Speaker 4: Just shut it down, Like.
• 37:42
  Speaker 2: You might be talking about a week where there's just
• 37:45
  Speaker 2: minimal economic activity because you can't get out of your house.
• 37:49
  Speaker 2: And I think This is something that we do need
• 37:51
  Speaker 2: to keep in mind when we start getting January economic
• 37:54
  Speaker 2: data coming in retail sales and things like that, we
• 37:57
  Speaker 2: do need to pay attention to this. It won't affect
• 37:59
  Speaker 2: things the jobs report, just because that's collected earlier in
• 38:02
  Speaker 2: the month, but just something to keep in mind as we, uh,
• 38:07
  Speaker 2: we go through the next.
• 38:09
  Speaker 3: Couple of weeks. Here, it's gonna be chilly.
• 38:11
  Speaker 4: That's that gas prices up.
• 38:14
  Speaker 2: Oh good, and that's on top of the seventy percent
• 38:15
  Speaker 2: they were already up in the last week. Quick break here,
• 38:18
  Speaker 2: let's uh, we got our two coming up in a bit.