Latest / The Financial Exchange Show / President Trump tweets about China being 'hostile', markets tumble

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President Trump tweets about China being 'hostile', markets tumble · The Financial Exchange Show

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Speaker 1: and Mike Armstrong, Chuck, Mike.
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Speaker 2: And Tucker with you on about eight am this morning.
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Speaker 2: I did an interview on WGR in New Hampshire and
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Speaker 2: I was in a cranky mood. And I was in
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Speaker 2: a cranky mood because I was talking to Chris Ryan.
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Speaker 2: That's not why I was in a cranky mood, but
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Speaker 2: I was talking to Chris and basically I was like, Chris,
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Speaker 2: I don't know why, Like we got up this week,
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Speaker 2: like there's no data, there's no exciting earnings, like nothing's
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Speaker 2: really happening. I wasted five clean shirts, like what is
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Speaker 2: my life? It was kind of like the place I
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Speaker 2: was in now.
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Speaker 3: I'm just wondering if you don't wear shirts when you
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Speaker 3: don't come to work. But let's go on.
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Speaker 2: There's no need to wonder about that, Michael. And you know,
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Speaker 2: it was just like, you know, futures are set to
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Speaker 2: open flat, there's nothing exciting going on, blah blah blah,
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Speaker 2: blah blah. And about ten minutes ago, President Trump decided
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Speaker 2: to fire up the old social media machine, and this
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Speaker 2: is what came out. Some very strange things are happening
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Speaker 2: in China. They are becoming very hostile and sending letters
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Speaker 2: to countries throughout the world that they want to expose
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Speaker 2: export controls on each and every element of production having
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Speaker 2: to do with rare earths and virtually anything else they
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Speaker 2: can think of, even if it's not manufactured in China.
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Speaker 2: Nobody has ever seen anything like this, but essentially it
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Speaker 2: would clog markets and make life difficult for virtually every
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Speaker 2: country in the world, especially for China. We've been contacted
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Speaker 2: by other countries who are extremely angry at this great
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Speaker 2: trade hostility which came out of nowhere. Our relationship with
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Speaker 2: China over the past six months has been a very
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Speaker 2: good one, thereby making this move on trade an even
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Speaker 2: more surprising one. I've always felt they've been lying in wait,
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Speaker 2: and now, as usual, I've been proven right. There's no
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Speaker 2: way that China should be allowed to hold the world captive.
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Speaker 2: But it seems that this has been their plan for
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Speaker 2: quite some time. Starting with magnets and other elements, they've
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Speaker 2: quietly amassed into somewhat of a monopoly position, a rather
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Speaker 2: sinister and hostile move, to say the least. But the
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Speaker 2: US has monopoly positions also, much strong, unger, and more
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Speaker 2: far reaching than China's, and I have just chosen not
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Speaker 2: to chosen not to use them until now. The letter
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Speaker 2: they sent is many pages long and details with great specificity,
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Speaker 2: each and every element they want to withhold from other nations.
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Speaker 2: Things that were routine are no longer routine at all.
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Speaker 2: I've not spoken to President G because there was no
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Speaker 2: reason to do so. This was a real surprise, not
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Speaker 2: only to me, but to all the leaders of the
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Speaker 2: free world. I was to meet President G in two
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Speaker 2: weeks at Apec in South Korea, but now it seems
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Speaker 2: to be there's no reason to do so. The Chinese
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Speaker 2: letters were especially inappropriate, and that this was the day
3:31
Speaker 2: after after three thousand years of bed women fighting, there's
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Speaker 2: peace in the Middle East. I wonder if the timing
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Speaker 2: was coincidental, depending on what China says about the hostile
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Speaker 2: order they've just put out. I will be forced as
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Speaker 2: President of the United States to financially counter their move.
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Speaker 2: For every element they've been able to monopolize, we have too.
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Speaker 2: I never thought it would come to this, but perhaps,
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Speaker 2: as with all things, the time has come. Ultimately, though
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Speaker 2: potentially painful, it will be a very good thing in
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Speaker 2: the end for the USA. One of the policies that
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Speaker 2: we are calculating at this time is a massive increase
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Speaker 2: of tariff's on Chinese products coming into the United States
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Speaker 2: of America. There are many other countermeasures that are likewise
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Speaker 2: under serious consideration. Thank you for your attention to this matter.
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Speaker 2: Donald J. Trump, President of the United States of America. So,
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Speaker 2: in the two minutes that followed that, the S and
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Speaker 2: P five hundred promptly fell from sixty seven to fifty
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Speaker 2: seven down to sixty six seventy five, so about an
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Speaker 2: eighty point reversal or about one point two percent in
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Speaker 2: a couple minutes. And now it's hanging out right around
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Speaker 2: sixty six eighty four, so not really mounting any meaningful rebound.
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Speaker 2: So we're left with the question of does this mean
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Speaker 2: anything and does this matter to markets in the economy,
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Speaker 2: Because in the first four months of the Trump presidency
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Speaker 2: this did matter. The tweets about tariffs and the relationship
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Speaker 2: with China, in relationship with any country, they mattered. Yep.
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Speaker 2: For the last six they have not. Is this a
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Speaker 2: fundamental shift in the t matter of how the Trump
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Speaker 2: administration is going to approach things now? And look, you
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Speaker 2: can make the case markets are at all time highs,
5:05
Speaker 2: consumer spendings, remain strong, like there's some economic ammunition potentially
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Speaker 2: to use to say yeah, like we could potentially do this.
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Speaker 2: There are other concerns that you have about you know,
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Speaker 2: housing market and job market. I'm not putting those, you know,
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Speaker 2: totally to the side, but you know, you could say, okay,
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Speaker 2: with markets at all time highs, he's got, you know,
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Speaker 2: the ability to push back on China in this case
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Speaker 2: and deal with a little bit of financial pain. Or
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Speaker 2: is this just public negotiating in advance of this October
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Speaker 2: meeting that still may end up happening and it doesn't
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Speaker 2: mean anything because this is all going to be negotiated
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Speaker 2: away in two weeks.
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Speaker 3: Anyways, the last six months would tell you to bet
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Speaker 3: on the ladder.
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Speaker 2: Correct, But when to do it. When's the last time
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Speaker 2: we had a Trump tweet in markets actually sold off?
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Speaker 2: I think it's April. I mean it's been a minute.
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Speaker 3: Yeah, but we're talking about a three quarters of a
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Speaker 3: percent sell off less now.
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Speaker 2: Well, no, it's yeah, right, and and against it's it's one.
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Speaker 2: It's almost one to quarter percent from where the S
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Speaker 2: and P was. Like that, that's market moving. I'm not
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Speaker 2: gonna poop poo this and be like nothing happened here.
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Speaker 2: I mean, I'm looking at my chart and I'm like, oh,
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Speaker 2: like that's that's that's not nothing. Uh So, you know,
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Speaker 2: does this dip get bought? Does does this actually matter?
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Speaker 2: Does any of this go into effect? These are the
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Speaker 2: questions that are out there because honestly, I don't know
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Speaker 2: the last time that we had a social media post
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Speaker 2: from the president that moved markets negatively in this fashion.
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Speaker 2: It's it's been a lot, been a lot.
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Speaker 3: I'm seeing April, Yeah, it's yeah. I don't know what
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Speaker 3: you do about this as an investor because obviously, look,
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Speaker 3: if if tariffs go back up to one hundred percent
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Speaker 3: on Chinese manufactured goods are above there, it doesn't really matter.
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Speaker 3: Once you're at that level, it's irrelevant because no trade
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Speaker 3: is happening. If that actually sticks, then it is absolutely meaningful.
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Speaker 2: But it hasn't stuck.
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Speaker 3: It has not even come close to sticking anytime for
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Speaker 3: the last well since they've been talking about it.
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Speaker 2: Correct has not stuck. So I don't know.
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Speaker 3: Yeah, I don't know how you I don't know how
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Speaker 3: you trade this. I don't know how you approach it.
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Speaker 2: It's a game of chicken, and there is no stable equilibrium.
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Speaker 2: In a game of chicken, it is the question of
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Speaker 2: who blinks first, and you don't know who is going
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Speaker 2: to blink first. So game of chicken, I've been saying,
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Speaker 2: like you can go back to, you know, the first
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Speaker 2: Trump administration, and I've said the same things on multiple occasions.
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Speaker 2: In a game of chicken, you can't predict what's going
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Speaker 2: to happen. It's it's not something like well, or you know,
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Speaker 2: are are three hundred million people gonna make the decision
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Speaker 2: to buy more or less beef? You can you can
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Speaker 2: figure that out. You can't figure out who blinks first
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Speaker 2: because you like, like, you don't know if like someone
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Speaker 2: wakes up on like the wrong side of the bed
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Speaker 2: one day and says, well, I guess I'll blinker. I
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Speaker 2: won't like it's it's it's just too narrow for anyone
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Speaker 2: to predict. So this stuff hasn't mattered to markets for
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Speaker 2: the last six months. I'm not sure that it does
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Speaker 2: still look but I know what you do with this.
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Speaker 3: The Chinese announcement yesterday was, as the President pointed out,
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Speaker 3: surprising and big, but we took it in the context
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Speaker 3: of this is posturing ahead of a negotiation, and I
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Speaker 3: don't know that the reply from President Trump should be
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Speaker 3: thought of in any different way.
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Speaker 2: Correct, And so if you do think it's just posturing
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Speaker 2: in front of a negotiation, then you do nothing.
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Speaker 3: It's perfectly logical for the Trump administration to come in
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Speaker 3: with their own ammunition, which is massive increase in tariffs
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Speaker 3: and sink your industrial economy.
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Speaker 2: Correct.
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Speaker 3: The question that I find interesting, or the piece of
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Speaker 3: his tweet that I find most interesting, is what sort
8:48
Speaker 3: of conversations did you actually have with other world leaders
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Speaker 3: and how frustrated are they by this? Because I've been
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Speaker 3: hoping since the beginning of this year that what you
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Speaker 3: end up getting here out of all of the these
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Speaker 3: negotiations is some sort of coherent message between the United States,
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Speaker 3: European allies and North American allies to say, we're not
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Speaker 3: putting up with this stuff anymore, and we're going to
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Speaker 3: have a coherent message against China. I doubt this is
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Speaker 3: the moment that we're going to get it, but that's
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Speaker 3: what the President alluded to, and that's what would make
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Speaker 3: me most excited out of all this.
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Speaker 2: The most likely outcome is that this is posturing from
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Speaker 2: both sides, probably, and if that's the case, then This
9:29
Speaker 2: is going to be a very brief thing in markets.
9:33
Speaker 2: But like, look, the only reason that I even noted
9:36
Speaker 2: is because it actually moved markets. Yeah yeah, and nothing
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Speaker 2: like this has moved markets in six months, so it's different.
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Speaker 2: If nothing else. Take a quick break. When we come back,
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Speaker 2: we're joined by Trip mikel from The New York Times
9:50
Speaker 2: talking about Intel.
9:52
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Speaker 3: Joining us now is Trip mikel from the New York
11:08
Speaker 3: Times to talk to us a bit about Intel in
11:10
Speaker 3: their new fab being developed in the Phoenix area. Trip,
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Speaker 3: thanks for joining us, appreciate it.
11:15
Speaker 5: Thanks for having me so.
11:16
Speaker 3: Based on your reporting, I'm assuming you or other members
11:20
Speaker 3: of the staff got a tour of this facility. How
11:23
Speaker 3: deep into the process, how are they of building this
11:26
Speaker 3: and when are they hoping to bring it online?
11:30
Speaker 5: On Fab fifty two, which is the first of two
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Speaker 5: factories that they've built to manufactured semiconductors, they're done and
11:36
Speaker 5: they've actually started production already, and so we were able
11:38
Speaker 5: to visit that facility and take a few steps inside
11:43
Speaker 5: and see see what they've constructed. It's interesting in the
11:47
Speaker 5: sense that it's a larger factory than what they've had
11:51
Speaker 5: previously because they're putting taller machines from ASML, the Dutch
11:56
Speaker 5: lithography company inside to etch and make new wafers with
12:01
Speaker 5: this new process they've developed.
12:03
Speaker 3: So clearly this is strategically important to Intel your piece
12:08
Speaker 3: this morning, Intel's big bet inside the chip maker's make
12:10
Speaker 3: or break factory. At this stage, though, this isn't just
12:13
Speaker 3: Intel's big bet. I mean, this is the US taxpayer's
12:16
Speaker 3: big bet with the government's investment into Intel. It's in
12:20
Speaker 3: Vidia's big bet with their promised investment into Intel as well.
12:24
Speaker 3: The company has clearly fallen pretty far behind at this
12:27
Speaker 3: stage when it comes to manufacturing the latest and greatest.
12:31
Speaker 3: What confidence should outside investors have that this is going
12:35
Speaker 3: to be not necessarily this one facility, but that Intel
12:39
Speaker 3: is going to be able to actually make this turnaround?
12:44
Speaker 5: What confidence should investors have? I mean, US taxpayers have.
12:48
Speaker 5: You know, it's a wait and see honestly, you know,
12:51
Speaker 5: I mean, you know, journalists, we're all skeptical until we
12:56
Speaker 5: see something come out the other side and we know,
12:58
Speaker 5: you know, confidently that there's been changed. And right now,
13:02
Speaker 5: given Intel's track record and the choices that's made over
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Speaker 5: the past decade that caused it devolved behind and manufacturing
13:08
Speaker 5: and the struggles it's had with developing this new manufacturing process.
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Speaker 5: You know, I think there's just a collective you know,
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Speaker 5: step back moment here where the industry is saying, Okay,
13:22
Speaker 5: prove to us that you can do this, and Intel's
13:25
Speaker 5: trying to do that by making its own chips first.
13:29
Speaker 5: If it can do so, then others may come on board.
13:32
Speaker 5: You mentioned Apple, you mentioned in video. They may decide
13:35
Speaker 5: all right, you've shown us that you can actually manufacture
13:38
Speaker 5: these chips. We're willing to uh to run the risk
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Speaker 5: of having you manufacture our chips in the future. Trip.
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Speaker 3: I remember reading a few months ago about the challenges
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Speaker 3: TSMC has been finding when it comes to semiconductor manufacturing
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Speaker 3: in the US and really just the the cultural and
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Speaker 3: skill gap that they found with US workers compared to
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Speaker 3: manufacturing back in Taiwan. How did you uncover any of
14:02
Speaker 3: that in your reporting, just in terms of where they're
14:05
Speaker 3: able to find labor for this and do those do
14:08
Speaker 3: those people have the skills required to do this job.
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Speaker 5: That really wasn't a focus here. It wasn't on the
14:14
Speaker 5: labor or the workforce, So I mean, you're.
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Speaker 1: Right that.
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Speaker 5: TSMC has you know, I guess made some complaints about
14:22
Speaker 5: that they've brought a lot of engineering talent into the
14:25
Speaker 5: country to help with the factory that they're building or
14:28
Speaker 5: they've built in Arizona. But by the same token, you know,
14:33
Speaker 5: Intel has been set up in Arizona in this facility
14:36
Speaker 5: since nineteen eighty. It takes very few people to run
14:40
Speaker 5: and manage these factories, so they have the talent for it.
14:45
Speaker 5: And the process that they've developed was actually developed in Oregon,
14:49
Speaker 5: where Intel has its research and development development facility, and
14:54
Speaker 5: so it really developed the process there. And now it's
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Speaker 5: it's taking that process which it you know, developed to
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Speaker 5: miniature and it's it's enlarging it and beginning to produce
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Speaker 5: semiconductors at scale in Arizona.
15:06
Speaker 3: I think, obviously, as you mentioned, if they are able
15:08
Speaker 3: to attract customers like Apple, like Nvidia, those are some
15:11
Speaker 3: crucial benchmarks. Are there other benchmarks Intel set for themselves
15:15
Speaker 3: in terms of hey, this is how we define success
15:18
Speaker 3: with these new plants.
15:20
Speaker 5: I think that's the most important thing here. You know,
15:24
Speaker 5: there's there's not the only other benchmark that they'll be
15:28
Speaker 5: assessed on is when they begin to produce this new
15:31
Speaker 5: chip called Panther Lake. Panther Lake is going to be
15:34
Speaker 5: Intel's latest laptop chip. As you may recall, and those
15:37
Speaker 5: of you have PCs may may be aware of this.
15:40
Speaker 5: Like Intel's laptop chips began to fall behind in recent years.
15:44
Speaker 5: Part of the reason that Apple kind of decided to
15:48
Speaker 5: shelve Intel and begin developing its own chips was because
15:51
Speaker 5: of frustration with with the performance of those chips. You know,
15:55
Speaker 5: they cause computers over heat. The battery life wasn't sufficient
16:00
Speaker 5: to run all day, and the fan was really really loud.
16:04
Speaker 5: To try to keep the laptop cool, Apple came out
16:07
Speaker 5: with its own series of chips and that really addressed
16:10
Speaker 5: a lot of those problems. And now Intel has been
16:11
Speaker 5: trying to catch up. So the first thing off this
16:14
Speaker 5: factory line is going to be a PC chip that
16:18
Speaker 5: Intel has developed called Panther Lake. It's it's kind of
16:22
Speaker 5: the first chip, that PC chip that Intel has made
16:24
Speaker 5: in its own factory to try to keep pace with
16:28
Speaker 5: Apple and others in that sector, and that will begin
16:32
Speaker 5: to go into machines in January of this year. Those
16:35
Speaker 5: machines will go into reviewers' hands at CS early next year,
16:41
Speaker 5: and once those reviewers have it, we'll get some sense
16:45
Speaker 5: of whether or not Intel has developed at chip that
16:49
Speaker 5: is competitive and satisfying for really power users, and it'll
16:55
Speaker 5: all flow down from there.
16:56
Speaker 3: Trip Nickel from the New York Times piece today Intel's
16:59
Speaker 3: bet Trips. Thanks so much for joining us, appreciate it.
17:02
Speaker 3: We'll talk to again soon, Thanks so much.
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Speaker 2: Mike just taking a look around markets as we head
17:57
Speaker 2: towards the bottom of the hour sell off that started
18:01
Speaker 2: about a half hour ago, deepening. Now the Dow's off
18:03
Speaker 2: four hundred and eleven points, the SMP is off eighty four,
18:06
Speaker 2: Nasdaq off four hundred and twenty three, so anyway from
18:09
Speaker 2: about a one to two percent decline in major US markets. Again,
18:13
Speaker 2: this is coming on the back of a post from
18:17
Speaker 2: President Trump indicating potentially renewed economic hostilities with China. Whether
18:24
Speaker 2: this is just negotiation in advance of the scheduled meeting
18:29
Speaker 2: between the two groups in a couple of weeks or
18:31
Speaker 2: something more is open for speculation. But it's moving markets
18:35
Speaker 2: in a way that we haven't seen Trump posts move
18:38
Speaker 2: markets downward in at least six months or so, and
18:42
Speaker 2: so I think it's it's noteworthy from that respect. Ten
18:45
Speaker 2: Yere treasury trading to a wow, big move in tenure.
18:50
Speaker 2: Now Tenure is down eight point three basis points to
18:52
Speaker 2: four point zero six five percent at the moment. We've
18:56
Speaker 2: got gold in response to that, up fifty four dollars
18:59
Speaker 2: and sixty cent, so now it's back above four thousand
19:01
Speaker 2: after dipping below briefly yesterday. A classic risk off move
19:05
Speaker 2: right now, and we've got and not classic risk off, Chris,
19:08
Speaker 2: Classic risk off Gold would be selling off too, because
19:10
Speaker 2: all correlations go to one when like when hedge funds
19:13
Speaker 2: have to sell everything, that's where everything, like even gold's
19:16
Speaker 2: being sold. And we've got oil down a dollar ninety
19:19
Speaker 2: seven a barrel to fifty nine to fifty four. First
19:21
Speaker 2: time in a while we've had a fifty handle on
19:23
Speaker 2: West Texas Intermediate. And that's what we're seeing in markets
19:26
Speaker 2: right now. Quick break, we've got the Trivia Answer and
19:30
Speaker 2: Wall Street Watch next.
19:40
Speaker 1: Bringing the latest financial news straight to your radio. Every day.
19:44
Speaker 1: It's the Financial Exchange on the Financial Exchange Radio Network.
19:50
Speaker 1: Time now for Wall Street Watch. A complete look at
19:53
Speaker 1: what's moving markets so far today right here on the
19:57
Speaker 1: Financial Exchange Radio Network.
20:00
Speaker 4: The markets have now reverse course and are selling off
20:03
Speaker 4: after President Trump took to social media in a lengthy
20:06
Speaker 4: post last hour saying he saw no reason to meet
20:10
Speaker 4: Chinese President Jijing paying and threatened a massive increase of
20:13
Speaker 4: tariffs on Chinese goods, citing recent hostile export controls on
20:19
Speaker 4: rare earth minerals. Right now, the Dow is down by
20:23
Speaker 4: just over one percent, or five hundred and twenty four
20:26
Speaker 4: points SMP five hundred down one point seven percent or
20:30
Speaker 4: one hundred and sixteen points, Nasdaq down two and a
20:34
Speaker 4: half percent now we're five hundred and seventy one points lower,
20:37
Speaker 4: Russell two thousands down eight tenths of one percent, ten
20:40
Speaker 4: year Treasurreel down eight basis points at four point zero
20:45
Speaker 4: five to nine percent, and crude oil down three and
20:48
Speaker 4: a half percent, trading below sixty dollars a barrel at
20:51
Speaker 4: fifty nine dollars and thirty seven cents. Qualcom pulling back
20:55
Speaker 4: nearly five percent after China said earlier it is conducting
20:59
Speaker 4: an anti monopy probe into the chip maker over the
21:01
Speaker 4: purchase of Israeli startup Auto Talks. Sticking with the chip sector,
21:06
Speaker 4: we're in Video shares down about three percent after the
21:09
Speaker 4: Senate passed legislation yesterday aimed at ensuring US companies get
21:13
Speaker 4: priority access to AI chips ahead of China. Meanwhile, apply
21:18
Speaker 4: Digital stock is up thirteen percent after the data center
21:22
Speaker 4: build A reported revenue in its fiscal first quarter was
21:25
Speaker 4: up eighty four percent from the same period a year ago.
21:28
Speaker 4: The company also said it finalized a new lease agreement
21:31
Speaker 4: with a cloud computing company. Core weave Levi down twelve percent,
21:36
Speaker 4: after it posted weaker than expected earning guidance for the
21:39
Speaker 4: current quarter, and jeep maker Staalanta saw its shipment's climb
21:43
Speaker 4: about thirteen percent in the third quarter, driven by a
21:46
Speaker 4: strong rebound in North America. However, that stock now down
21:50
Speaker 4: by over six percent, so we're seeing a broad based
21:53
Speaker 4: sell off across the board at the moment four Markets.
21:56
Speaker 4: I'm Tucker Silva and that is Wall Street Watch. And
21:58
Speaker 4: our trivia question we asked in the prior segment was
22:01
Speaker 4: what year did David lee Roth quit van Halen. That'll
22:04
Speaker 4: be nineteen eighty five. Paul from Fitchburg, Mass is our
22:07
Speaker 4: winner today, taking home a Financial Exchange Show t shirt.
22:10
Speaker 4: Congrats to Paul. We play trivia every day here in
22:13
Speaker 4: the Financial Exchange. See complete contest rules at Financial Exchange
22:17
Speaker 4: Show dot com.
22:19
Speaker 2: Peace In the Financial Times, insurers prepare for wave of
22:23
Speaker 2: First Brands claims. Remember First Brands is the autoparts manufacturer
22:27
Speaker 2: that went belly up with their creditors thinking they had about,
22:30
Speaker 2: you know, six billion dollars in debt outstanding, and it
22:32
Speaker 2: turns out it's somewhere in double digits. I do have
22:36
Speaker 2: to also just read something from Matt Levine. Do either
22:40
Speaker 2: of you read his stuff on a regular basis.
22:43
Speaker 3: Have to, because I know you do and bring it
22:45
Speaker 3: up frequently.
22:45
Speaker 2: So Matt Levine, in my opinion, is the best writer
22:49
Speaker 2: in finance these days. And his Bloomberg page, okay, it
22:53
Speaker 2: was give me an era for a second. So he
22:54
Speaker 2: wrote this yesterday to twenty seven pm. It's titled First
22:58
Speaker 2: Brands is missing some Like Matt's just really like kind
23:02
Speaker 2: of he has my sense of humor. It's kind of
23:04
Speaker 2: dry and like just like but he understands this stuff
23:08
Speaker 2: better than I do, and so he just writes it
23:10
Speaker 2: like really really well. But this is the big thing
23:15
Speaker 2: that like has come to light here. So it's we
23:18
Speaker 2: covered this on our show yesterday. There's like potentially like
23:21
Speaker 2: two point three billion dollars in assets that's just missing
23:24
Speaker 2: from First Brands. And this is what he writes. He goes.
23:27
Speaker 2: The latter allegation came into demand for an investigation from Raystone,
23:31
Speaker 2: a trade finance platform. The request for an appointment of
23:35
Speaker 2: an independent examiner follows an October second email exchange in
23:39
Speaker 2: which a bankruptcy lawyer for First Brands told Raystone that
23:42
Speaker 2: advisors don't know if the autopart supplier has received estimated
23:44
Speaker 2: one point nine billion dollars. Quote, First, do we know
23:49
Speaker 2: whether FBG actually received one point nine billion, no matter
23:52
Speaker 2: what happened to it? Raystone lawyer Emmanuel Grillo asked in
23:55
Speaker 2: an October second email. Second, would you tell us how
23:59
Speaker 2: much of is in the segregated accounts in respect of
24:02
Speaker 2: the factored receivables today? So like, how much of that
24:04
Speaker 2: money's actually there? The first brands were Structuring lawyer Sunny
24:09
Speaker 2: Singh said in response, number one, we don't know number
24:12
Speaker 2: two zero, So like they don't know how much money
24:17
Speaker 2: actually came in and there's nothing sitting in the account
24:21
Speaker 2: that's referenced there.
24:22
Speaker 3: Somebody's going to jail like this. It's gonna be some
24:26
Speaker 3: low level accountant, but he's going to jail.
24:28
Speaker 2: This is no longer a story about a company that
24:32
Speaker 2: just borrowed too much and got out over at SKIS. Yeah,
24:35
Speaker 2: there is very likely criminal activity going on here in
24:40
Speaker 2: some form of the accounting. It may be you know, embezzlement,
24:45
Speaker 2: it may be just you know, like bad report. Either way,
24:49
Speaker 2: after you know Enron and everything, CFOs, are you supposed
24:53
Speaker 2: to be held personally liable for this kind of stuff?
24:57
Speaker 2: And they're like, this is the kind of thing where
25:00
Speaker 2: if you here's the deal, if you don't have accurate
25:03
Speaker 2: financial reporting, whether a public or private company, then you
25:07
Speaker 2: don't have an economy because you can't trust anyone to
25:10
Speaker 2: make deals.
25:10
Speaker 3: With so important question. In my view, when this first
25:15
Speaker 3: came out, my point was this has the possibility of
25:19
Speaker 3: sending reverberations through the private credit industry. We saw some
25:24
Speaker 3: of that with lenders being down this year. Generally, the
25:27
Speaker 3: private credit and private equity companies that play in this
25:30
Speaker 3: space have struggled with their stock prices. Does the fact
25:35
Speaker 3: that this is pointing more and more towards fraud alleviate
25:40
Speaker 3: any concerns in the private credit side of things.
25:42
Speaker 2: No, In my mind, it worsens them, because effectively, the
25:46
Speaker 2: reason why private credit is attractive is the underwriting's easy.
25:49
Speaker 2: Like you've taken all this stuff away from banks who
25:51
Speaker 2: like if you've ever tried to get a loan for
25:53
Speaker 2: a bank as a business, it's just like relentless. It's
25:58
Speaker 2: just like okay, one thing after another, like, oh, keep
26:00
Speaker 2: giving me this, Oh can you send me like your
26:02
Speaker 2: most recent statements? Why I just did that last week? Yes,
26:05
Speaker 2: send me your next one, like you know, it just
26:07
Speaker 2: it keeps coming, like because banks are nervous by nature,
26:10
Speaker 2: they're just like they're scared of losing money. Private credit
26:14
Speaker 2: is the wild West. They're wildcatters. They're just out there
26:17
Speaker 2: like okay, fine, like throw it in the portfolio, we
26:20
Speaker 2: can repack it, like and here's the evidence of that.
26:23
Speaker 2: And this is nobody detected it. No, like all of
26:26
Speaker 2: these companies that were lending money to first brands, they
26:30
Speaker 2: didn't know there was a problem. And so if they
26:31
Speaker 2: didn't know there was a problem in first brands, do
26:34
Speaker 2: you think this is the only place where this happened
26:37
Speaker 2: in the private credit world. I do not. I'm not
26:40
Speaker 2: that naive.
26:41
Speaker 3: Yeah, I don't think it's the only place that outright
26:43
Speaker 3: fraud has happened. But even if it is, there are
26:48
Speaker 3: other situations you have to worry about then outright fraud
26:51
Speaker 3: as a lender.
26:53
Speaker 2: Right, the dry collar situation was not a situation of
26:55
Speaker 2: outright fraud like that happened two weeks before this. We're
26:58
Speaker 2: not sitting here in any way shape or for being
27:00
Speaker 2: like well, like Tricolor had like a bunch of fraud
27:02
Speaker 2: in this and that and YadA YadA, like well, actually
27:07
Speaker 2: a little I take it back. It might not have
27:09
Speaker 2: been on the tricolor side, but we do have instances
27:11
Speaker 2: recorded of vehicle vins that have been claimed to back
27:15
Speaker 2: different tranches of loans from them. So look, quite honestly,
27:21
Speaker 2: I've been saying for the last week or two something
27:23
Speaker 2: in the auto sector stinks. I hope you all are
27:26
Speaker 2: smelling what I'm smelling right now, because it's not coming
27:28
Speaker 2: up roses like something stinks in the auto sector, and
27:33
Speaker 2: it's it's getting stronger here when you just have two
27:36
Speaker 2: billion dollars in assets missing.
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28:58
Speaker 2: Let's stick with the auto industry for a second, Mike.
29:01
Speaker 2: Yesterday we talked about the there's a piece that we
29:05
Speaker 2: covered about the increase in foreclosures in the housing industry. Sure,
29:10
Speaker 2: and we made the point, hey, for closures are still
29:13
Speaker 2: like fifty to seventy percent below the lowest levels they've
29:16
Speaker 2: been at in the last twenty years. So like, even
29:18
Speaker 2: though for closures are up twenty percent in the last year,
29:21
Speaker 2: doesn't matter. It's not something that is worth worrying about.
29:24
Speaker 2: It's not a problem. On the other hand, I'll quote here,
29:28
Speaker 2: the portion of subprime auto loans that are more than
29:32
Speaker 2: sixty days that are sixty days or more overdue on
29:35
Speaker 2: their payments hit a record of more than six percent
29:38
Speaker 2: this year according to Fitch Ratings. That's not a record low,
29:40
Speaker 2: that's a record high. There is a problem in the
29:44
Speaker 2: auto market with loans there. And I got to tell you,
29:49
Speaker 2: these stories just keep bubbling up in different areas because
29:51
Speaker 2: here's the other thing is, once these start popping up,
29:54
Speaker 2: every good financial investigative journalist out there is looking around
30:00
Speaker 2: in the auto sector right now, being like, who else,
30:02
Speaker 2: what's going on here? Like they're trying to get the scoop,
30:06
Speaker 2: and once they start poking around, they're gonna find something.
30:09
Speaker 3: I'll make this a bigger story too. If you are
30:12
Speaker 3: defaulting on your car payment, it means you've already defaulted
30:15
Speaker 3: on your credit card, in any other debt that you
30:17
Speaker 3: have other.
30:18
Speaker 2: Than your mortgage.
30:19
Speaker 3: Your mortgage is probably the last payment that you're gonna skip,
30:22
Speaker 3: but the car payment you might not, might not. There
30:26
Speaker 3: are plenty of people that are renters that have car
30:28
Speaker 3: payments one hundred percent, and so I guess that would
30:31
Speaker 3: be my point is in many of these people cases,
30:33
Speaker 3: people's cases, this is the last payment that you default
30:36
Speaker 3: on because you know you need that vehicle to.
30:37
Speaker 2: Get to work.
30:39
Speaker 3: If you're not making the payment there, then you have
30:41
Speaker 3: already missed payments in many other places.
30:44
Speaker 2: So like there's something ugly in the auto sector. How
30:50
Speaker 2: big it gets, I don't know, But like these stories
30:54
Speaker 2: are not going away, that they're continuing to come at us,
30:58
Speaker 2: and there's a problem there. Quick break. Paul Monica from
31:01
Speaker 2: Barons joins Us.
31:02
Speaker 1: Next Here the Financial Exchange every day from eleven to
31:06
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31:10
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31:13
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31:32
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31:35
Speaker 5: Ladies and gentlemen, the weekend.
31:47
Speaker 2: Alrighty has promised Paul Monica from Barons joins Us to
31:52
Speaker 2: basking the globe of the New York Giants victory over
31:55
Speaker 2: the Philadelphia Eagles last night. Paul, how are you doing today?
31:58
Speaker 6: I'm good? Thanks, Yeah, lessons the sting of the Yankees
32:03
Speaker 6: getting knocked out by the Blue Jays. So yes, we're
32:07
Speaker 6: all camp Scatabo fans right now.
32:09
Speaker 2: How can you not be a Camp Scatabo fan? I mean,
32:11
Speaker 2: my goodness, it's you know, it's it's very exciting. Let's
32:15
Speaker 2: talk a little bit about Gemini, the crypto brokerage firm
32:20
Speaker 2: went through an IPO earlier this year. It's had a
32:25
Speaker 2: roller coaster ride, I think is probably the right way
32:28
Speaker 2: to put it, which I guess is not hat a
32:29
Speaker 2: character for a crypto firm. What's good about them? What's
32:34
Speaker 2: bad about them? What's Wall Street think about them?
32:36
Speaker 5: Yeah?
32:37
Speaker 6: Great, great questions. You know, stock popped on the first
32:40
Speaker 6: day of trading, you know, but quickly faded even on
32:43
Speaker 6: its debut day, and you know, now it's below it's
32:46
Speaker 6: IPO price. This is the company that is run by
32:50
Speaker 6: Cameron and Tyler winkleboss of Facebook, the social network fame
32:55
Speaker 6: the Twins. And you know, I think that there is
33:00
Speaker 6: still some skepticism about the business models. They are losing
33:06
Speaker 6: money even though revenue growth is pretty strong. Crypto companies
33:10
Speaker 6: are very volatile, but you know, Wall Street initiated coverage
33:15
Speaker 6: this week, mostly positive reviews from the sell side analysts,
33:21
Speaker 6: which you know, isn't surprising a lot of the companies
33:24
Speaker 6: that you know initiated coverage or the banks that were
33:28
Speaker 6: involved with the IPO. But when you look at Gemini,
33:31
Speaker 6: some of the things that stand out that differentiated a
33:34
Speaker 6: little bit from other crypto brokerage firms. They have a
33:39
Speaker 6: thriving credit card business. You know, Gemini credit cards that
33:42
Speaker 6: are issued that can give users crypto rewards, and that's
33:48
Speaker 6: I think a growing trend in the credit card industry.
33:50
Speaker 6: But what's interesting for Gemini is that people that sign
33:55
Speaker 6: up for those credit cards, a lot of them, then
33:57
Speaker 6: tend to also start trading crypto on the Gemini brokerage platform.
34:04
Speaker 6: So that whole sort of kind of cross selling is
34:07
Speaker 6: what Gemini I think is banking on to generate more
34:11
Speaker 6: users and more revenue and eventually profits. But again, they're
34:15
Speaker 6: not going to be profitable for a while, and there's
34:18
Speaker 6: a lot of competition in this industry. You've got Coinbase,
34:22
Speaker 6: You've got robinhood E, Toro, There's a Galaxy Digital, which
34:27
Speaker 6: is now a publicly traded company, as well. You know,
34:31
Speaker 6: finding a place to buy and sell crypto isn't that
34:33
Speaker 6: difficult on the internet these days.
34:35
Speaker 2: Well, and this is even before you get to the
34:37
Speaker 2: more conventional brokerages. I saw one of them this morning
34:42
Speaker 2: had loosened restrictions on you know, how advisors could advise
34:45
Speaker 2: you know, clients on crypto, and so even the big
34:48
Speaker 2: banks maybe starting to make inroads in this area in
34:51
Speaker 2: the next couple of years as well.
34:52
Speaker 7: Correct, Yeah, I think that is definitely the case, especially
34:56
Speaker 7: given that the current regulatory environment is now very pro crypto,
35:02
Speaker 7: very friendly on like what we saw probably with Gary
35:06
Speaker 7: Gensler in charge of the SEC.
35:08
Speaker 6: You know, Paul Atkins is a you know, a fan
35:11
Speaker 6: of crypto. We know that the president and members of
35:14
Speaker 6: his family are fans and investors in various crypto ventures.
35:20
Speaker 6: So I don't think that we're going to see a
35:22
Speaker 6: change anytime soon that's negative from Washington with regards to crypto.
35:28
Speaker 6: And you would think that Gemini eventually would benefit from that.
35:33
Speaker 6: But you know, this is stock that has you know,
35:36
Speaker 6: clearly lagged in the past months since it's ipo, despite
35:40
Speaker 6: the enthusiasm for bitcoin and other digital currencies.
35:44
Speaker 2: Very good, Paul, we appreciate you joining us. Hope you
35:46
Speaker 2: have a great weekend and we will catch up with
35:49
Speaker 2: you soon.
35:50
Speaker 6: Thanks a lot. I have a good one guys.
35:52
Speaker 2: That is paul A Monica from Barons. What do you
35:56
Speaker 2: got for me?
35:57
Speaker 5: Mike?
35:57
Speaker 2: College grants.
35:59
Speaker 3: I want to revisit this because this has been a
36:00
Speaker 3: story we have covered a lot this year, which is
36:04
Speaker 3: the struggle that recent college grads have been having finding
36:07
Speaker 3: a job. And I don't think we always put it
36:10
Speaker 3: in this context, but I think the story that has
36:13
Speaker 3: been going out there has been you know, hey, they're
36:15
Speaker 3: finding it not quite worth the college degree, and even
36:18
Speaker 3: compared with some other demographics, you know, might college degree
36:23
Speaker 3: holders be having a tougher time finding a job even
36:26
Speaker 3: than those without a degree. I don't think we put
36:29
Speaker 3: it that way, but I think it has been put
36:31
Speaker 3: that way that, yeah, the folks with the college degree
36:34
Speaker 3: are having an even tougher time. Financial Times took a
36:36
Speaker 3: look at the data and what they found is that
36:39
Speaker 3: people are oftentimes citing some data that shows that, you know,
36:43
Speaker 3: people without a college degree in their early twenties have
36:48
Speaker 3: seen a smaller unemployment gain, a smaller increase in unemployment
36:53
Speaker 3: than those with a college degree. And the Financial Times
36:54
Speaker 3: points out, but that's not relevant. What's relevant is comparing
36:58
Speaker 3: an eighteen year old, for instance, without a college degree
37:01
Speaker 3: entering the labor force for the first time compared to
37:04
Speaker 3: a college degree holder in their early twenties. And what
37:07
Speaker 3: they found is that, yeah, the college degree holder has
37:09
Speaker 3: seen their unemployment rate increase by one point three percentage points,
37:13
Speaker 3: but those new entrants without a degree almost double two
37:16
Speaker 3: point four percent increase in unemployment. For that demo, that
37:19
Speaker 3: new entrant to the labor force without a degree is
37:22
Speaker 3: finding it even tougher than those with a degree. Not
37:25
Speaker 3: great for anyone newly entering the workforce, but this remains
37:28
Speaker 3: a story of little firing, but very little hiring right now.
37:33
Speaker 3: And you are, according to this data, at least better
37:36
Speaker 3: off with that degree in terms of your ability to
37:39
Speaker 3: find that job right now.
37:40
Speaker 2: Taking a look at markets as we head towards the
37:42
Speaker 2: top of the hour, still a bunch of red on
37:45
Speaker 2: the board, the Dows off four hundred and fifty nine points,
37:47
Speaker 2: the S and P off ninety one, NASDAC off four
37:49
Speaker 2: hundred and thirteen, So a little bit of a sell
37:53
Speaker 2: off happening today. Again, like one to quarter percent on
37:56
Speaker 2: the s and P five hundred right now. Yes, it's
37:59
Speaker 2: a bigger sell off a single day than we've seen
38:01
Speaker 2: in recent months. But let's not make this into you know,
38:06
Speaker 2: early April or anything like that in March of twenty twenty.
38:09
Speaker 2: Quite yet. Markets can't have volatility. That is the price
38:13
Speaker 2: of admission for the returns they may generate longer term.
38:17
Speaker 2: We're done for the day, done for the weekend. Have
38:19
Speaker 2: a great weekend. We'll see a Monday