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Why is the bull market revving back up? · The Financial Exchange Show

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Speaker 2: Chuck, Mike and Tucker kicking things off on Veterans Day.
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Here to those of you who joined us over the
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weekend at the dav five K in Boston, good time,
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fantastic time. Appreciate you all joining us. Just a great
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event that gets put on there. Yours truly ended up
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finishing twenty sixth out of about fifteen hundred runners. So
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ill doing a little bit of math. That puts me
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in the ninety eighth percentile, and that feels pretty darn good.
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If I got a gloat for myself a little bit here,
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I'm sorry, but I'm not sorry.
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Speaker 3: Do you want to announce mine so that we can
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you know? Yeah, where'd you finish the bottom twenty fifth
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percent tile or whatever it might have been.
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Speaker 2: I don't think you finished that badly. I haven't looked
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for you quite honestly. Wow, it's not too far down
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the list. You finished in one hundred and eleventh, so
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it's not bad.
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Speaker 3: I only beat you by eighty five spots top ten percentile, right, yeah,
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I beat you.
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Speaker 2: By eighty five spots. It's fine, it's no big deal.
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Speaker 3: None of us was unable to walk the next day though,
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and nearly nearly fell over from cramps right afterwards.
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Speaker 4: That was not Chuck, that was me.
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Speaker 2: No, But in any case, appreciate everyone joining us. Really
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look as much fun as it is to you know,
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actually run the race. The ultimate thing is making sure
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that we are supporting our veterans, and that's what really
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matters more than anything else. So please, again, I thank you,
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thank everyone who joined us there anyone who helped support
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the event and who supported the dav radiothon on Friday.
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Speaker 4: And I just you know, final piece on that.
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Speaker 3: I would just ask, Yeah, if you missed the show
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on Friday, or if you're not familiar with the work
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that the dav does, all I ask is that you
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familiarize yourself with it.
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Speaker 4: Yeah. Yeah, I'd love for you to make a donation.
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Speaker 3: I'd love for you to support them in some way,
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shape or form, but at the very least, if we
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can ask you to do one thing, it's familiarize yourself
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with the work that they do nationwide, because it is
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fantastic work. And even if you can't afford to donate
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can at least familiarize yourself with the work and you know,
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be an advocate and speak about the work that they
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do and.
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Speaker 2: Looking at the different divisions, I actually did win the
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men's thirty five plus division, so it feels fantastic too,
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if I may say so myself. Let's talk a little
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bit about the economic data that we are going to
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be getting this week. I know there's a ton of
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speculation surrounding what you know, President Trump will do in
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his second term in office. Quite honestly, I'm going to
3:41
try to limit that because it seems like we can speculate,
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like every day forever about what's going to happen. And
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I think it's important to talk about things that are
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being concretely discussed by the incoming administration. But we can't
3:53
just spend two hours being like, well, what if they
3:56
do this? What if they like that?
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Speaker 3: We kind of did that for a few shows, and
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it's yeah, you can't do it forever.
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Speaker 2: We can't do it forever. Like ultimately, we have to
4:03
talk about what's actually going on, and once they get
4:07
in place, then we'll be able to talk about what
4:08
they're doing. So it's not that we don't think there
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could be some big changes coming up. It's just that
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it's still very unclear what those exact changes will be,
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and as we get more information, we'll talk about them.
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But there is an economy that's actually happening right now,
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if that's the right term. And so a couple pieces
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of economic data that we are going to be getting
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this week. The first is going to be inflation data
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on Wednesday. CPI comes out eight thirty am Wednesday. Expectations
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right now, core inflation expected to print point three percent
4:39
for the month headline point two. This would keep the
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core inflation unchanged at three point three percent annually. It
4:48
would represent a slight bump up on the headline inflation
4:52
number from two point four percent annually to two point
4:54
six because last October printed a big fat zero for inflation.
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So we've got that coming out on Wednesday. Thursday, Producer
5:03
Price Index PPI comes out, so we'll have that at
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eight thirty along with initial job as claims and continuing claims.
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And then on Friday we get retail sales data. So
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those are, you know, kind of the big pieces that
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we have to hit this week. Mike, if you're looking
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at these different reports, Which one of these is most
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important to you? If you had to pick one, well.
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Speaker 3: I guess I would go with retail sales, even though
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it's a very volatile read and you know it doesn't
5:28
necessary necessarily give you anything and any one read of it.
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But we have a pretty good idea of what CPI
5:34
is going to look like. I think I don't think
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it's going to surprise much of anyone. I think it's
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a more important data point than retail sales. But because
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we're not seeing prices move, I'm pretty sure I know
5:44
where it's going to come in, whereas retail sales is
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interesting to me, and I'll be interested on the trend
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line on that over the next couple of months as well,
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to see where is sentiment shifting. You know, we see
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so much of sentiment built up in people's political views.
5:59
Do you people getting out there and spending ahead of
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the holiday season in a way that they otherwise wouldn't have.
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Speaker 4: That that's going to be compelling to me as we
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head into next week.
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Speaker 2: And I think what is going to be if we're
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talking about the real economy, One of the things that
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is going to be interesting to me over the next
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couple of months is having talked to a couple of
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people that work in making actual products, you know, not services,
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but in the selling of goods and things like that.
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I've talked to three different people that maken and currently
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import products, and they are accelerating imports significantly ahead of
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January twenty twenty five because of questions about what a
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Trump term could look like from a tariff stand right,
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And they're not saying, hey, we're definitely going to be
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you know, struck by these, you know, because no one
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really knows what the format is going to be yet.
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But I think that one thing that we may see,
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it's not going to show up in retail sales because
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remember that's well, hey, look it may show up in
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retail sales. Another buddy who I was talking to is
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now thinking about buying again. This is all anecdotal, so
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it's it is what it is said. Look, I'm thinking
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about buying a TV in the next month or two.
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I didn't want to this year, but I'm nervous about
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you know, hey, if tariffs get implemented next year and
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I went to buy the same TV twelve months from now,
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could it be more expensive? So he's going to buy
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that TV that you know in the next two months
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now instead, what about.
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Speaker 3: The single largest I believe, the single largest contributor every
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month to retail sales because of the ticket price dollar
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car sales. I mean, hey, I think the EV tax
7:38
credit may go away, or I think that you know,
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imported cars are going to face higher tariffs. I'm going
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to maybe buy that car now because I'm not sure
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what the EV credit would look like. I could see
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a lot of these things playing out and being pulled forward.
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Speaker 2: So I think from an economic data standpoint, I wouldn't
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be particularly surprised if you see an uptick just in
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the next couple months in goods related per and or imports.
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I think that's something that's very real, just because, hey,
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if you are nervous about higher tariffs coming through in
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the future, you might say, look, if they're not implemented yet, great,
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let's buy it now, even though you know you might
8:13
have wanted to defer it. So I think this is
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something interesting to watch as far as the economic data
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that we get here other things, as far as the
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overall health of the job market. This was one of
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our areas of concern back really kind of July and
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August before. We got some better data recently, and I
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think the labor market is still not showing any consistent
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signs of weakness. There are places where the Jolt survey
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is showing that it's less dynamic. We're not seeing the
8:44
same level of hiring quits and anything like that. The
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jobs data from the monthly Jobs Report is still showing
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a decline in the unemployment rate even as the number
8:56
of jobs added has gone down, which is, yeah, a
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little confusion just because again the data has been a
9:02
mess because of these hurricanes and things.
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Speaker 3: Right, I mean, what if we averaged in terms of
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new jobs created over the last few months, I think
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it's in the less than one hundred thousand per month range.
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Speaker 2: So I'm pulling it up right now. And so yeah,
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I mean you're yeah, you're you're looking in it's it's
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like right around one hundred. I'm just eyeballing it.
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Speaker 3: So that's I mean, look that that were it to
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persist is problematic. It's problematic because our our labor force
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is growing. Sorry, the number of people looking for work
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on any monthly basis is growing faster than those jobs
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are getting created at a pace like this, and so
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Eventually that likely leads to a you know uptick in
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the unemployment, right, so it continues. I think there's some
9:48
concern there.
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Speaker 2: So I think that's something that we're continuing to monitor.
9:52
But look on a weekly basis. Aside from a couple
9:55
of weeks of hurricane related you know, jumps in initial claims.
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Speaker 4: Yep, no layoffs, there's not much there.
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Speaker 2: In terms of increased you know, stress in the labor market.
10:06
It's it's just not filtering through in terms of more
10:10
people you know, on unemployment. We are seeing people are
10:14
unemployed longer. That is something that the data is showing,
10:17
which shows you that you have a less dynamic labor market.
10:20
But overall, there's still a lot of questions as we
10:23
head into the next few months about hey, where is
10:25
the economy going from here, because it doesn't have a
10:28
clear direction. It's it's been better the last two months,
10:31
but we've seen these two month headfakes before, and it's
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just it's unclear if it's strong enough to you know,
10:37
take things up, or you know, if we kind of
10:39
soft lend, you know, bounce back and forth between things
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are fine and things are not.
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Speaker 3: I hate to blame everything on politics, but We talked
10:47
a lot about the like decision paralysis leading up to
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the election. Yeah, do you suspect that there will be
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any sort of decision paralysis on the part of companies
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as they wait out to see what just what does
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the environment look like in twenty twenty five, in terms
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of tariffs, in terms of deportations, in terms of you know,
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all these different things that are going to be playing out.
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I certainly don't think it leads you to lay people off,
11:15
but does it continue to kick the you know, kick
11:18
the can down the road on big hiring decisions, big
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expansion decisions.
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Speaker 4: Things along those lines.
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Speaker 3: My problem is that not everything can be a oh,
11:28
we just have to wait and see, Like at some
11:30
point you robber hits the road and you have to
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make it.
11:32
Speaker 2: And that's kind of where I was going, which is, look,
11:36
with with any big decision, whether it's in your personal life,
11:40
in your business world, like whatever it might be, there's
11:43
always a reason where you can be like, hey, we
11:45
got to hold up. Yeah, you know, ultimately, at some
11:49
point you just got to go for it. And I
11:53
think companies are going to try to do so in
11:55
ways that will potentially mitigate the outcomes. Hey, frontloading a
11:59
bunch of buying before four year end. If you're an
12:00
importer or stuff, great, that gives you a way to
12:03
manage it so that you can get some clarity. You
12:05
might say, yeah, let me import you know, six months
12:08
worth of sales in the next two and that way
12:11
I don't have to worry about what tariffs look like
12:14
in the first half of next year. Right, and we
12:16
can figure out a longer term plan. But ultimately you
12:19
still have to do something because doing nothing it's still
12:23
a decision. It's just well, we're not doing anything, and
12:27
that it's still a decision that you're making. Let's take
12:30
a quick break here. When we come back, talk about
12:33
what's going on in markets. With small caps, banks, and
12:36
Tesla stock among the leaders last week, We'll see what
12:41
the future looks like for those areas after this.
12:46
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13:47
Speaker 2: So, if we take a look at the last week
13:50
or so of trading post election, we've got basically stocks
13:59
across a number of different areas surging. It's hard to
14:01
say everything because there are some areas market that actually
14:05
haven't done well in the last week or so, I mean,
14:07
like utility stocks. But sure, okay, you know, part of
14:12
that's just because who is the company that had their
14:14
application to turn back on one of the three Mile
14:19
Island things rejected.
14:21
Speaker 4: Oh I didn't see the rejection.
14:23
Speaker 2: Someone did it. There was a reject It was I
14:25
think it was Susquehannas the or something like that is
14:30
the company that runs the plant, and the State Energy
14:34
Commission was kind of like, no, we're not just going
14:37
to authorize another nuclear power generator to be turned on
14:41
because you need it for AI. That's that's not what
14:43
we do here. So no, like we're not going to
14:46
do this, Go build one yourself, basically is what they said.
14:50
Speaker 3: Meta Stock, Facebook's parent company, not exactly rolling in the
14:53
money over the last week. I think they're still up
14:55
about two percent over the last five days. But you know,
14:58
as you can imagine, they've butted heads a little bit
15:03
over the years.
15:03
Speaker 2: Yeah, so Donald Trump, what we have going on here? Well,
15:06
not just him, remember Elon Musk, who is you know,
15:08
in deep conversations with the Trump administration as well. So
15:13
I think look that the message from markets last week
15:16
was hey, in Trump term one, we saw things like
15:20
cyclical small caps and financials do very well. That's the
15:25
exact stuff that has rallied the most in the last
15:29
week or so. The question is is this going to
15:33
be the same set up here. I've made the case
15:36
a couple times. I don't think it is, Connor said
15:38
in Bloomberg Opinion, kind of echoes what I was talking about.
15:42
So I guess maybe Connor listens to the show. He must.
15:46
But look, this is a market right now that is
15:50
reacting as if it's late twenty sixteen and it's going
15:53
to get that twenty seventeen that came afterwards.
15:56
Speaker 4: It may, but I.
15:57
Speaker 2: Don't think that this is set in stone, because I
16:01
think the playbook has to be a little bit different
16:03
this time.
16:03
Speaker 4: Yeah, let's run through a few of these though.
16:05
Speaker 3: I mean, I do want to compare like we did
16:07
before twenty sixteen to twenty twenty four. But let's run
16:09
through a few of these sectors and just kind of, yeah,
16:12
you run them out. I mean, the Tesla one's pretty obvious.
16:15
Elon Musk was Elon.
16:16
Speaker 2: Musk is a very deep relationship with Donald Trump right now. Hey,
16:19
if he's going to be, you know, involved in some
16:21
ways jape or form in the government, it's hard to
16:23
see the government letting Tesla have meaningful problems. That's your thesis.
16:28
Speaker 3: At least not yours, but the a few things that
16:31
I'll point out to people that you know they may
16:33
or may not be aware of, but has been asked
16:35
of me. So I think it's important to understand Tesla
16:39
does not own SpaceX. Elon Musk runs both companies, but
16:43
Tesla and SpaceX in terms of the publicly trade its talks,
16:46
Tesla has no interest as far as I know whatsoever
16:49
in the SpaceX business. Likewise, neither of them have anything
16:53
to do with x Elon Musk involved in all three,
16:55
but no ownership interest across those lines whatsoever. And a
17:00
pretty important distinction, because I have gotten that question like, well,
17:03
can I get some SpaceX action if I buy Tesla?
17:05
And the answer is definitively new no. But nonetheless to
17:08
your point, yeah, I think tough to see an unfriendly
17:12
government towards Tesla. And you know what, if tax credits
17:15
are going away for all the other evs that are
17:17
out there, which Tesla doesn't participate in anymore, maybe that
17:22
you know, it helps out their business a little bit,
17:24
right if you have I don't think you can get
17:26
a tax credit, a federal tax credit for buying a
17:28
new Tesla these days.
17:29
Speaker 2: So We're still being advertised on the ESTL site. I'm
17:32
taking a look right now just because I'm curious, and.
17:38
Speaker 3: I thought they had used all those up, so we
17:40
can go back to that. On financials, I think there's
17:43
a pretty obvious trade there as well. During the first
17:47
Trump presidency he rolled back some regulations and benefited a
17:52
lot of large financial institutions. Will that happen again.
17:55
Speaker 2: This Tesla calculator does include the seventy five hundred dollars
17:59
tax credit, so.
18:00
Speaker 4: I'm mistaken about that.
18:02
Speaker 3: In addition, you know, kind of I'm gonna call it
18:06
quasi financial sector as well, You've seen crypto markets responding
18:10
positively to what.
18:11
Speaker 4: Is very likely to be a well, very.
18:15
Speaker 3: Different approach from their main regulator, or the attempted regulator
18:19
of the SEC, based on you know, the the comments
18:23
that Donald Trump has had for towards the crypto current,
18:26
towards the crypto market in general. So there's been some
18:29
chatter there. Small caps a little bit less obvious to me.
18:34
I mean, I think the main story there is just, hey,
18:36
these are not generally companies that import a whole lot
18:39
of stuff. There's more companies that are focused on domestic
18:41
production within the small cap area. But other than that,
18:45
you know, you have companies with high borrowing costs and
18:48
other headwinds against them.
18:50
Speaker 2: I would say that the story there if you're trying
18:52
to build a narrative deregulation. It's more expensive for small
18:56
companies to comply with regulations as a percentage of their
18:59
overall revenue than larger ones typically, So that could be
19:03
part of the story there is. Hey, you know, regulatory
19:05
compliance costs going down would in theory help small caps
19:09
if you think that's going to happen, and that if
19:12
we're looking at the possibility for greatest similarities between Trump
19:16
term one and two, the potential for deregulation, I think
19:19
is probably where there's the most overlap. Yep, the tax
19:22
situation in the fiscal situation is fundamentally different, but from
19:26
a regulatory perspective, I think there's still are you know,
19:29
some pretty significant similarities. Let's take a quick break. Wall
19:32
Street Watches next.
19:43
Speaker 1: Like us on Facebook and follow us on Twitter at
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TFE show. Breaking business news is always first right here
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on the Financial Exchange Radio Network. Time Now for Wall
19:55
Street Watch a complete look at what's moving markets so
19:58
far today right here on the Financial exchange radio network.
20:02
Speaker 5: Markets are opening the weekend positive territory, as traders witnessed
20:06
the Dow in SMP five hundred accord their strongest weeks
20:09
in about a year in about a year last week,
20:11
while all three major averages also notched all time closing highs.
20:16
At the moment, the Dow is up three hundred and
20:18
ninety two points, just under one percent, SMP five hundred
20:22
is up about a quarter percent, and the Nasdaq edging
20:25
five points higher. Russell two thousand is up one percent
20:28
so far today, ten year Treasure Reel down by three
20:31
basis points at four point three zero percent, and crew
20:35
to Oil off nearly three percent, trading at sixty eight
20:38
dollars in forty seven cents a barrel. Several cryptos stocks,
20:42
including Coinbase, micro Strategy, and Robinhood are all seeing more
20:46
gains to start the week after Bitcoin topped eighty two
20:49
thousand dollars new all time highs. Coinbase shares are up
20:54
sixteen percent in addition to micro Strategy also up by
20:57
sixteen percent. In Robinhood is up by eleven percent. Meanwhile,
21:02
after a twenty nine percent jump last week, Tesla shares
21:05
up another seven percent today. The electric vehicle maker topped
21:09
one trillion dollars in market valuation on Friday, as Wall
21:12
Street is betting the company will benefit under the Trump administration.
21:17
Elsewhere is Signa shares up by seven percent after the
21:20
health insurance giant said it will not be pursuing a
21:23
merger with Humana. Signa also reiterated its fiscal twenty twenty
21:28
four and twenty twenty five guidance. And after today's closing bell,
21:32
we'll see third quarter earnings from Live Nation tomorrow morning
21:35
ahead of the Open Home Depot and Shopify will post
21:39
their quarterly results. I'm Tucker Silvan. That's Wallstreet Watch.
21:43
Speaker 2: PC here from Bloomberg Opinion that touches on what we
21:46
were covering last segment, which is it's titled Trump inherits
21:49
an economy at a tricky time, and what it's talking
21:54
about here. Look, here's some key statistics that we have
21:57
that are just differences from Trump entering into his first
22:02
term compared to today. GDP through Q three of twenty
22:07
sixteen was growing at one point eight percent. Today it's
22:10
a two point seven a lot hotter. It's a lot
22:14
hotter right now. The unemployment rate was five percent today
22:17
it's four point one. The age twenty five to fifty four.
22:21
What's known as prime age employment to population ratio. What
22:25
percentage of your twenty five to fifty four year olds
22:28
are employed, not the unemployment rate, what percentage of them
22:32
are actually employed. Because remember, there's always someone who has
22:34
to take care of kids, who take care of aging parents, sure,
22:37
or who's in school.
22:38
Speaker 4: To say whatever, any number of things.
22:41
Speaker 2: In twenty sixteen it was seventy eight percent. Today it's
22:43
eighty point nine, which is amongst the highest we've seen.
22:47
Two year treasury yield in twenty sixteen point seven seven
22:50
percent today it's three point sixty six ten your treasury.
22:53
And again this is I'm looking at end of Q
22:55
three just because I wanted to have kind of a
22:58
bright line that I was looking at, because all this
23:00
stuff is monthly or quarterly, right right tenure US treasure
23:03
realed end of Q three in twenty sixteen one point
23:05
six percent twenty twenty four to three point eight CPI
23:09
then was one five today it's two four. Core CPI
23:11
was two to two today it's three three. Annual deficit
23:14
from the prior year twenty fifteen, the deficit was two
23:18
point four percent of GDP last year it was six
23:20
point one.
23:21
Speaker 3: So let's let's try and digest a few of these
23:24
things and what it practically means. I mean, overall, I
23:27
think the message you're trying to send is that this
23:29
economy today looks nothing like the twenty sixteen one. It
23:32
looks a lot stronger, with a lot less slack in it.
23:38
You know, like unemployment lower, you know, GDP higher, borrowing
23:44
costs higher. I think all of those are indicative of
23:46
a healthier economy. But when you talk about an economy
23:50
that has gotten here through uh, give me the numbers
23:54
on defits as part of GDP again.
23:57
Speaker 2: Two point four percent in twenty sixteen, six point one percent.
24:00
Speaker 3: So you've gotten here, at least in part by juicing
24:05
government spending over the last year. And a lot of
24:09
the proposals that Donald Trump ran on at least were
24:12
about doing so further. Now, not juicing government spending, but
24:16
juicing net government spending is ultimately what we're talking about
24:20
here through tax cuts. And it's tough to envision when
24:24
you've already juiced things so much through deficit spending, how
24:28
it's going to play out in well, just how it's
24:31
going to play out, Well, they'll stop.
24:32
Speaker 2: There are a few different things going on here. The
24:34
first is, look, we've talked about the labor market has
24:37
been weakening for the last.
24:38
Speaker 4: Year, right, So the trend line is down on the
24:40
labor market.
24:41
Speaker 2: Correct. So we've th the unemployment's low right now it's
24:43
been worsening.
24:44
Speaker 4: Yeah, and it's a lot higher than it was a
24:46
year ago.
24:46
Speaker 2: Correct, it was three point four percent where it bottomed
24:48
out in the summer last year, or might have even
24:51
been three to three. So that's piece number one is
24:54
you do have a labor market that's been slowing. On
24:57
top of it, Let's say that you need to stimulate
24:59
the economy or want to. You say, hey, look, I
25:01
want this thing to be ripping again, like I want
25:03
I want two point seven percent growth, I want three. Yeah,
25:07
the cost of doing so is higher. What do you
25:09
mean if you want to? Because again you think about
25:13
how again look at look at Trump term one. Can
25:16
we call it Trump one point oh? Because I feel
25:18
like that's catching Sure, we got Trump one point oh
25:20
and Trump two point oh. Okay, Trump one point oh?
25:23
What am I gonna do? I'm gonna throw a two
25:26
trillion dollar tax cut over ten years at the problem
25:29
of growth. What happens, I got more growth, Like, that's
25:33
what happened. You throw and again, remember the economy is
25:37
bigger and there's been inflation, So two trillion dollar tax
25:39
cut now is not the same. You might need two
25:42
and a half three trillion to get the same impact.
25:45
You throw a three trillion dollar tax cut at the
25:47
economy right now, it's unclear how much more growth you
25:50
can actually get in. And here's why, Like, I wanna,
25:53
I want to dig into this because like this this
25:55
is meaty, Like it's it's juicy. Here. There are two
26:00
ways that you can grow the economy the number of
26:03
hours worked in the aggregate and how much stuff you
26:07
make in each of those hours. If you've got unemployment
26:11
at four point one percent and eighty point nine percent
26:14
of people aged twenty five to fifty four are working today,
26:18
there's not that much more you can do in terms
26:21
of hours worked.
26:23
Speaker 4: Because some but not much.
26:25
Speaker 2: There's not much there because we're pretty close to the
26:28
peak in terms of that employment to population ratio, and
26:33
four point one percent unemployment is pretty darn low. Like,
26:37
there's just not that much more you can do, unless
26:39
you're like, well, we want everyone to work in extra
26:43
five hours a week. Great, let's see how that goes over.
26:45
I'm not saying that anyone's proposing this, but well kind.
26:48
Speaker 4: Of is right.
26:48
Speaker 3: I said Donal Chop with the campaign trail sid I'm
26:50
gonna stop taxes on overtime work. That is exact in
26:54
sense if you want go work like doesn't force you
26:57
to do it.
26:57
Speaker 4: But again, there there have been some policies that have
27:00
specifically targeted that.
27:02
Speaker 2: So the hours worked piece is going to be a
27:05
little bit challenging. At top of that, remember, on hours worked,
27:08
you're also talking about potential large scale deportations. Now there
27:13
aren't awful lot of people that are in the country
27:17
illegally that are working yep, and so that is going
27:20
to reduce overall hours worked in the event that it
27:24
does end up happening. So I think when you look
27:27
at this, the hour's work piece is one where you say, gee,
27:29
there's gonna be some real challenges to getting faster growth here.
27:34
Productivity is not something that you can legislate. True, you
27:40
can develop the conditions for it, but you can't legislate
27:43
productivity like there's no wand that you say you can
27:46
legislate minimum wage I'm not saying you should have shown.
27:49
I'm just saying you can. You can't be like, hey,
27:52
worker making one car every two days, make one every
27:56
one point nine days. It doesn't work like that. And
28:00
so I think if we're talking about a like how
28:03
do you get more growth, it's gonna be tough. But
28:05
the other part is it's gonna cost more. You borrow
28:08
three trillion dollars today, Okay, again, who knows exactly where
28:13
interest rates are going to be. But if you borrow
28:17
three trillion dollars today at a rate, call it an
28:19
average of four percent, you're talking about one hundred and
28:23
twenty billion dollars that you are paying an interest annually
28:27
on that. Once you've completed it, you go back eight
28:31
years ago and you say, hey, I'm gonna run larger
28:34
deficits in order to grow the economy. That same three trillion,
28:38
which by the way, it wasn't three trillion, it was
28:39
only two because inflation two trillion. You say, okay, we're
28:44
gonna borrow two trillion dollars and we need to pay
28:49
I don't know call it, let's just call it two percent,
28:51
just to make the math easy. Even though the rates
28:53
were lower that's forty billion dollars a year in interest.
28:57
So you're talking about the cost of this same scale
29:00
of program today from a tax cup perspective, is triple
29:04
what it was eight years ago.
29:05
Speaker 3: I'll make a different case on the borrowing piece. Let's
29:09
approach it from the perspective, which I think is the
29:11
wrong one to have that in the short term, government
29:14
deficits don't matter, So let's approach it from there.
29:17
Speaker 2: Toss it out for now.
29:19
Speaker 3: Let's say you are optimistic and you are a business
29:21
owner or an individual that wants to Hey, I'm getting
29:24
Trump task cuts, or my taxes aren't going up in
29:26
twenty twenty six like I thought they were. Sure, I
29:28
want to expand my business, or I want to buy
29:30
a new home, I want to go to participate in
29:33
this great new economy. It's twice as expensive to borrow
29:36
that money to do so.
29:37
Speaker 2: Correct.
29:38
Speaker 3: To get a mortgage today compared to twenty sixteen is well,
29:41
probably more than twice as expensive. Right, what was the
29:43
average mortgage rate in twenty sixteen, I don't even know. Probably, yeah,
29:47
probably about double, yeah, three and a half to four,
29:49
so yeah, double. There I go talk about expanding your business,
29:53
You're looking at borrowing costs that are twice as expensive.
29:55
And so yes, this applies to government spending, and I
29:58
think that one's going to be front and center for us,
30:00
but it permeates through every area of the economy because
30:04
by and large our economies predicated on debt.
30:08
Speaker 2: So if you have here Trump two point zero saying hey,
30:11
this is what we're going to do, the timing and
30:15
order of these different things really starts to matter so
30:18
that you can get the impact and the effect that
30:21
you want. How exactly it plays out, because there there's
30:24
a case to be made, Hey, if you do these
30:26
things in order X instead of all at once on
30:31
you know, January, what's the date of the inauguration this year,
30:33
January twentieth, twentieth. If you do this in order X
30:37
instead of all at once on January twentieth, which again
30:40
some of the stuff you need to legislate you can't
30:42
do on January twentieth. It's something where the effects are
30:46
vastly different. And so I think we just need to
30:49
keep an open mind as far as how this may
30:52
play out, because it.
30:54
Speaker 4: Could be short term pain for long term game.
30:56
Speaker 2: It could be like that, there are a lot of
30:58
different paths here, and I think we need to just
31:02
see how this plays out from an economic perspective to say, okay,
31:07
how I don't think any of us have any idea
31:11
exactly what is going to happen at the moment. We
31:15
got to have a little bit of humility. It's kind
31:17
of where I'm landing to take a quick break here.
31:19
When we come back.
31:21
Speaker 4: I want to talk about the least watched and arguably
31:24
one of the most interesting FED meetings that we had
31:27
all year that took place on Thursday.
31:29
Speaker 2: Yeah, and there's something the more I've thought about this
31:31
over the last few days talking about Juicy Mike, there's
31:37
some jews here. We're talking FED.
31:39
Speaker 1: When we return, text us at six one seven three,
31:43
six two one eight five with your comments and questions
31:46
about today's show and let us know what you think
31:48
about the stories we are covering. This is the Financial
31:51
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and clicking the on demand where you'll find all of
32:01
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32:07
around the country. This is the Financial Exchange Radio Network.
32:17
Speaker 2: So last Thursday, we had a FED meeting and no
32:20
one covered it. It's entirely true, it was covered, but
32:25
no one paid attention to the coverage because it was
32:28
just like everything was focused on what's happening now after
32:32
the election.
32:32
Speaker 3: There are several states that hadn't reported in their presidential results.
32:36
We knew the results of the election at that point,
32:37
but we didn't know a lot of things yet, and
32:40
so not a lot of attention paid to the Federal
32:42
Reserve me.
32:43
Speaker 2: And I think there's some real meet here in terms of, hey,
32:50
what is the relationship going to be between Donald Trump
32:56
and Jerome Powell going forward? And the answer, in my opinion,
33:03
is not good.
33:04
Speaker 4: Okay, facts are in evidence.
33:07
Speaker 2: So here's where I'm going with this. Jay Powell was
33:09
appointed by Donald Trump during his first term in office,
33:13
and they had a relationship that was I think somewhat
33:19
contentious without being problematic.
33:22
Speaker 3: It wasn't outright hostile, but it was just somewhat contentious.
33:25
And there's, you know, a quoted comment from Donald Trump
33:28
like I guess I'm stuck with you, or you know,
33:29
some some sort of comment like that when he was
33:31
given advice by his staff.
33:34
Speaker 2: So last week j Powell was asked, hey, if asked
33:37
to step down by the president, would you And it
33:40
was like, hey, this has been floated by the campaign.
33:42
Speaker 4: Would you step down?
33:44
Speaker 2: Powell, who usually answers in a Shakespearean monologue, says no,
33:52
and then asked again, says no, and then asked a
33:56
follow up question five minutes later, says not permitted under
34:00
the law, and then repeats it not permitted under the
34:05
law when asked to clarify what he said.
34:09
Speaker 3: So there's probably a lot of questions out there from
34:11
people like, what's going on here, Why is Jerome Powell
34:14
bringing this stuff up?
34:15
Speaker 4: Is it contentious?
34:17
Speaker 3: First off, Jewell's not jape. Pell didn't bring it up.
34:19
These were questions. They were hired him by the press.
34:22
So he was asked these questions, and he clearly just
34:25
wanted to give a short response and move on and
34:29
not address it. I also genuinely don't believe that he
34:34
has some you know, hatred or distrust of Donald Trump.
34:39
I do think what he is very passionate about is
34:41
the Federal Reserve's independence. He is a big historian, a
34:47
big proponent of what the Federal Reserve has done, you know,
34:50
admires a lot of the past Federal Reserve decisions, and
34:54
I think is willing to fight tooth and nail to
34:58
ensure that the Federal Reserve may maintains its independence in
35:01
future years. And that's what you are seeing here.
35:04
Speaker 2: Where this is going. In my opinion is Donald Trump
35:10
would whether in office or out of office, loves a
35:14
foil to go against.
35:18
Speaker 1: This.
35:18
Speaker 2: Is it for the next year, because Palace term is
35:20
up in early twenty twenty six.
35:22
Speaker 1: It is.
35:22
Speaker 2: Yeah, And if you want my opinion, j Powell, I
35:29
don't know that he had any other choice but to
35:31
answer the way that he did on Thursday. But I
35:35
think that if there is anything that goes wrong in
35:39
the next year, Palell's getting blamed for it. My economy
35:44
is not doing great. Why Jay Powell's got interest rates
35:47
too high? Hey, you know the inflation's coming back. Why
35:51
Powell's got interest rates too low? Like that that is
35:55
going to be the message. And Powell didn't have a choice,
35:58
but like this is he had to answer the question,
36:00
and he did. This is what it is. But I
36:02
can see how the relationship is shaking up, shaping up here.
36:06
And I don't know that contentious but non problematic is
36:10
the way it's going to play out over the remaining
36:12
one year of Powell's term. When Trump is in office.
36:14
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37:14
Speaker 2: Cabinet secretaries obviously play an important role in determining what
37:17
policy is going to look like. The one that we're
37:20
most concerned with here on this show is obviously the
37:23
Treasury secretary.
37:24
Speaker 4: The ones that have to do with the money.
37:26
Speaker 2: Yes, exactly, we don't really you know, well in any case, Yes,
37:32
the betting favorite right now out there is Scott Bessant,
37:37
who is a money manager. But other names that are
37:40
being bandied about, John Paulson, who is a hedge fund operator,
37:45
Howard Lutnick who runs cant Fitzgerald, Glenn Younkin who's the
37:48
current governor of Virginia but formerly spent I think fifteen
37:52
or twenty years at Carlisle Group. But Bessant is the
37:55
one who is being talked about most heavily right now.
38:00
Speaker 1: Uh.
38:00
Speaker 2: And so it seems most likely in the next week
38:03
or two we'll get some clarity on some of these
38:06
early big nominations that we'll probably have for cabinet secretary positions.
38:12
So that's more stuff. That's what's going on. Right now,
38:15
let's take a quick break. We got an hour two
38:17
coming up in just a little bit.