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Big Tech keeps avoiding trade war impacts · The Financial Exchange Show

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Speaker 1: making a donation Today. Face is the Financial Exchange with
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Speaker 1: Mike Armstrong and Mark Vandetti.
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Speaker 2: Good morning, Welcome back to the Financial Exchange. It is Mike,
1:14
Speaker 2: Mark and Tucker with you on a Tuesday morning. Mark,
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Speaker 2: how much longer do we have you before you're moving
1:19
Speaker 2: on to your appointed role at Berkshire Hathaway to replace
1:22
Speaker 2: to replace the Buffett.
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Speaker 3: The Oracle of Rhode Island gonna be. We're pretty much
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Speaker 3: through earning seasons. I guess no, it's not an insult.
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Speaker 2: You're the only person at our entire firm who would
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Speaker 2: I even would even consider it to be.
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Speaker 3: A candidate for a role at Berkshire Hathaway.
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Speaker 4: It's not really I think of all the co hosts
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Speaker 4: of this show, you Paul Lane chunks out, I'm the
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Speaker 4: least qualified to select individual companies.
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Speaker 3: I disagree.
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Speaker 2: In either case, we are most of the way through
1:54
Speaker 2: earnings here. We do have a few other significant companies
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Speaker 2: to report. A notable in video will report in a
2:01
Speaker 2: few weeks. That's not until I believe May twentieth. It
2:04
Speaker 2: could be a little bit later. Advanced micro Devices will
2:07
Speaker 2: go after the bell today. A few utility companies Duke
2:12
Speaker 2: Energy reporting today, Nova, NORDESK will go tomorrow morning. Uber
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Speaker 2: and Disney as well but like I mentioned, we're pretty
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Speaker 2: much through earning season, and the takeaway I don't know
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Speaker 2: if you have any earnings takeaways. This wasn't really on
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Speaker 2: our calendar, but for today, my main takeaway from the
2:30
Speaker 2: last few weeks of earnings has been, you know, the
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Speaker 2: big tech companies have largely skirted this trade war without
2:37
Speaker 2: any impact to their bottom line so far, and many
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Speaker 2: of them not really warning of any impact to their
2:43
Speaker 2: bottom line either. They have other concerns, they have anti
2:45
Speaker 2: trust concerns, they have recession concerns, but by and large,
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Speaker 2: whether it's Amazon, Google, Meta, Microsoft, they buy and large
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Speaker 2: reported pretty solid earnings and were rewarded for it. When
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Speaker 2: you look at the other four hundred and ninety companies
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Speaker 2: in the S and P five hundred or so, they
3:01
Speaker 2: are reporting some pretty significant concerns about tariffs and recession.
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Speaker 2: And they're doing so not by saying, hey, we think
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Speaker 2: we're gonna lose a bunch of money. They're basically coming
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Speaker 2: out and saying, we have no idea whether or not
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Speaker 2: we'll be able to make any money in twenty twenty five.
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Speaker 3: We don't know how much we will earn.
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Speaker 2: We don't know where those forecasts will be and we'll
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Speaker 2: basically let you know once we have some idea of
3:22
Speaker 2: what that's going to look like. So that's that's my
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Speaker 2: takeaway from first quarter earning season. I don't know if
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Speaker 2: you had any other meaningful takeaways. Not all tech companies,
3:30
Speaker 2: not all of the Magnificent seven got away scotfree. Obviously,
3:34
Speaker 2: Tesla is in that group, and they have seen a
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Speaker 2: massive hit to their sales and earnings, not so much
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Speaker 2: as a result of teriffs so per se, but as
3:43
Speaker 2: backlash against President Trump as well as elon Muska. Any
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Speaker 2: other big takeaways though that you had so far through earnings,
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Speaker 2: The main one to me was just the uncertainty I have.
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Speaker 4: Never experienced, and I dare say anybody doing this has
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Speaker 4: ever experienced. A pivot on Poulo is dramatic is the
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Speaker 4: one we're living through right now. We've just come off
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Speaker 4: two consecutive quarters of outstanding earnings from the S and
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Speaker 4: P five hundred thirteen or so percent might be close
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Speaker 4: to ten at this point, somewhere in that ballpark year
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Speaker 4: over year in the most recent quarter. Ancient history doesn't matter.
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Speaker 4: The regime has changed, and as you said, what matters
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Speaker 4: for markets is what's going to happen, not what has happened.
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Speaker 4: Don't let anybody tell you markets are moving in response
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Speaker 4: to what happened six months ago. They're always forward looking,
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Speaker 4: ideally heavily future oriented, oriented, deep into the future. And
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Speaker 4: people don't understandably, they don't know what their inputs are
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Speaker 4: going to cost, what the rules of the game will
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Speaker 4: be in two weeks, two months, two years, even how
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Speaker 4: can you plan?
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Speaker 2: Yep, And look, this is the hallmark of the Trump
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Speaker 2: administration right their first hundred days. All the speeches that
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Speaker 2: have been given over the last week or so have
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Speaker 2: been all about the pace of change in the first
4:54
Speaker 2: hundred days of this administration. They've also acknowledged that that
4:57
Speaker 2: pace is likely to slow down over the next hundred
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Speaker 2: days because there isn't quite as much they can do
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Speaker 2: via executive action going forward compared to what they're able
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Speaker 2: to do via legislative action, and so it is likely
5:09
Speaker 2: to slow.
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Speaker 3: But what doesn't seem likely to slow is the action
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Speaker 3: on tariffs.
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Speaker 2: That seems to be an area that is going to
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Speaker 2: continue to be negotiated, and in the absence of some
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Speaker 2: sort of big Supreme Court case removing power from the
5:22
Speaker 2: executive branch, which I deem unlikely.
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Speaker 3: We are likely to see.
5:27
Speaker 2: Continued change, continued negotiation, and continued I guess uncertainty on
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Speaker 2: behalf of American companies and CEOs on what comes next.
5:37
Speaker 2: And so, you know, as we've talked a lot about,
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Speaker 2: and you've kind of said it tongue in cheek a
5:42
Speaker 2: few times, wake me up in a few years, let's
5:45
Speaker 2: see what happens. But I think, realistically, wake me up
5:48
Speaker 2: June July timeframe and give me an idea of what's
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Speaker 2: been happening at that point in time. You know, what
5:54
Speaker 2: do store shelves look like, what does employment look like.
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Speaker 3: It's not going to happen overnight.
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Speaker 2: And you've got investors here that are trying to kind
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Speaker 2: of sift through it all. And it's true that sentiments
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Speaker 2: is quite negative for the economy, But at the same time,
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Speaker 2: you have some of the largest companies in the world
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Speaker 2: who are basically saying, yah, at this point, we're not
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Speaker 2: really affected by these tariffs things, and we'll see what
6:18
Speaker 2: happens next.
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Speaker 4: I think the only thing you can say with certainty
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Speaker 4: is that our reputation internationally for stability and consistency in
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Speaker 4: dealing on trade has been tarnished. I don't know if
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Speaker 4: it's been irreparably damaged or not. But to hear foreign
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Speaker 4: leaders talk and people in the know about the sentiment
6:38
Speaker 4: among foreign leaders and populations talk about stuff like this,
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Speaker 4: it sounds like our reputations taken a pretty big hit.
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Speaker 4: That likely means less foreign investment going forward. You're already
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Speaker 4: seeing that play out in the dollar weakening relative to
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Speaker 4: other currencies, which assuming no change in savings rate here
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Speaker 4: either on the part of people or the government, and
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Speaker 4: that looks unlikely. Deficits seem to be growing, not shrinking,
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Speaker 4: for example, it probably means slower long term growth for
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Speaker 4: the United States and lower equity returns all else equal,
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Speaker 4: because those two things are tied together. That's about all
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Speaker 4: you can say with certainty right now. But we could
7:17
Speaker 4: also turn on a dime here, get our act together,
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Speaker 4: and resolve this in an orderly way.
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Speaker 1: Yeah.
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Speaker 2: I mean, that's what I keep going back to, is,
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Speaker 2: you know, raise your hand if you would be terribly
7:32
Speaker 2: surprised if three months from now, tariffs on China and
7:36
Speaker 2: every other country looked dramatically different than they do today.
7:40
Speaker 2: I wouldn't be shocked by that. Even with China, I
7:42
Speaker 2: don't think they're going to zero. But I would not
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Speaker 2: be shocked if tariffs and relations between the US and
7:47
Speaker 2: China looked dramatically different than they do today on May
7:51
Speaker 2: six of twenty twenty five. And so you know, that
7:54
Speaker 2: is exactly why companies are not importing a whole bunch
7:57
Speaker 2: of stuff. That is exactly why companies are delaying decisions
8:00
Speaker 2: because I think they too acknowledge I don't know what
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Speaker 2: the what the game is going to look like a
8:06
Speaker 2: few months from now. And so in the face of
8:08
Speaker 2: that delay. Speaking of delay, we have a FED meeting tomorrow,
8:13
Speaker 2: the press conference coming at two thirty pm, announcement at
8:16
Speaker 2: two pm on interest rates. At the moment, very likely
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Speaker 2: that rates will be sticking exactly where they are and
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Speaker 2: a lack of a decision coming from I suppose doing
8:28
Speaker 2: nothing is still a decision, but a federal reserve that
8:32
Speaker 2: is going to be faced with a lot of challenging
8:35
Speaker 2: decisions to be made here in the face of uncertainty
8:37
Speaker 2: around policy. We'll get into the FED a little bit,
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Speaker 2: but that is the I would say, the compelling story of.
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Speaker 4: Just wind me up like that and then.
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Speaker 3: Then just punt on it. Yeah, and now we're gonna
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Speaker 3: take quick break.
8:48
Speaker 4: Waving a bone in front of a dog later.
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Speaker 2: Buddy, precisely, we do have markets off to a bad
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Speaker 2: start so far this morning after was it ten days
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Speaker 2: of gains? Nine or ten days gains of the last
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Speaker 2: week and a half, So pretty good rally coming into
9:03
Speaker 2: this week. But at the moment now SMP and NASDAC
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Speaker 2: off a little bit more than a third to one percent,
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Speaker 2: depending on the index you are looking at. Let's take
9:13
Speaker 2: a quick break when we come back. I do want
9:16
Speaker 2: to dive into that FED meeting because I don't want
9:18
Speaker 2: to just leave you two minutes to gnaw on that bone. Mark,
9:22
Speaker 2: So quick break, FED talk is next year on the
9:24
Speaker 2: Financial Exchange, the.
9:26
Speaker 1: Global trade war has royal markets and a recession could
9:29
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10:26
Speaker 2: We have a Federal Reserve meeting going on today. The
10:29
Speaker 2: press conference will happen tomorrow alongside the rate announcement. We've
10:34
Speaker 2: got this on the backdrop of you know, sentiment polls
10:37
Speaker 2: telling us that the economy sucks, corporate CEOs telling us
10:43
Speaker 2: that they don't know what to do. And yet it's
10:46
Speaker 2: widely anticipated that the Federal Reserve is not going to
10:48
Speaker 2: cut interest rates at this next meeting.
10:50
Speaker 3: So what gives man?
10:52
Speaker 2: You could make the president pretty happy by cutting interest
10:55
Speaker 2: rates at this point, and yet it seems as though
10:58
Speaker 2: Jerome Powell is going to do nothing of the sort.
11:01
Speaker 2: How do you put yourself in these shoes and evaluate
11:04
Speaker 2: what's going on right now?
11:05
Speaker 3: If you are j Powell or a board member the FEDS.
11:08
Speaker 4: Models use what we would call hard data, what you
11:12
Speaker 4: and Chuck and Paul typically call hard data, stuff that
11:15
Speaker 4: comes from the unemployment report, from the inflation report, from
11:19
Speaker 4: aspects that make up the GDP report, and a lot
11:22
Speaker 4: of private sector stuff. They talk to industry people, the
11:25
Speaker 4: FED presidents do. The FED regional presidents talk to people
11:29
Speaker 4: in their regions, talk to business people about conditions that I imagine.
11:33
Speaker 4: Now I've never obviously worked at the FED, I should say,
11:36
Speaker 4: obviously I've never worked at the FED. But well, it's
11:39
Speaker 4: pretty transparent. We kind of know how it works. So
11:41
Speaker 4: they're about in the same position that we are, where
11:45
Speaker 4: there's a lot of apprehension. There's a lot of concern
11:48
Speaker 4: about a stagflationary shock from the tariffs, and by that
11:51
Speaker 4: I mean tariffs will probably slow growth and increase prices
11:56
Speaker 4: at the same time, thus the stagflation in that in
12:00
Speaker 4: that Eybrid term, But there's nothing. There's a there's a
12:07
Speaker 4: disturbingly small amount disturbingly in the sense that you'd like
12:10
Speaker 4: more clarity, but you don't have it small amount of
12:12
Speaker 4: actual data with which to come to the conclusion that
12:15
Speaker 4: anything the FED could do right now would make a difference.
12:17
Speaker 4: The Fed's main policy tool is the short term instrument
12:19
Speaker 4: known as the federal funds rate. They increase the money
12:21
Speaker 4: supply that pushes down the federal funds rate. They effectively
12:25
Speaker 4: control it. It takes several quarters, though, for that to work,
12:28
Speaker 4: and it also works on demand. The FED stimulates demand
12:32
Speaker 4: by lowering the federal funds rate by printing more money.
12:35
Speaker 4: You could think of it that way. That's pretty simple.
12:37
Speaker 4: That's a simplistic but a reasonably accurate description of how
12:40
Speaker 4: the FED works. Why would increasing demand solve this problem?
12:44
Speaker 4: If anything, it might actually exacerbate the inflationary impact of tariff.
12:48
Speaker 4: So it's not clear that the FED, even if it
12:51
Speaker 4: wanted to now, they will cut rates at the first
12:53
Speaker 4: sign of serious economic weakness, don't get me wrong.
12:57
Speaker 2: And what do we define as serious economic weakness? I mean,
13:00
Speaker 2: we just got a job's report last Friday that indicated
13:03
Speaker 2: nothing of the sort. Right, We had unemployment rates still
13:07
Speaker 2: at four point two percent. What was it, one hundred
13:09
Speaker 2: and ninety thousand jobs created.
13:11
Speaker 4: Seventy seven I think, but one could easily have advised
13:13
Speaker 4: up or down.
13:14
Speaker 2: So you know, in the range above estimates for job creations.
13:18
Speaker 2: So where what are we looking for? What is the
13:20
Speaker 2: FED looking for when it comes to hard data that
13:23
Speaker 2: would indicate it turned down in economic growth, because on
13:26
Speaker 2: the other side, you know, we had a strong jobs report,
13:30
Speaker 2: and I think the same week or the week prior,
13:32
Speaker 2: we had a two point four percent print on inflation
13:34
Speaker 2: according to the PCE Price indexit a year of a
13:37
Speaker 2: year inflation.
13:38
Speaker 4: Mike, I would it look they all come to each
13:40
Speaker 4: of the regional presidents and those who serve on the
13:42
Speaker 4: others who serve on the FOMC who were appointed by
13:46
Speaker 4: the by the US President. They all come to this
13:48
Speaker 4: with different backgrounds. Some are business people, many are trained economists.
13:51
Speaker 4: The trained economists will lean on the model that they
13:54
Speaker 4: use their workhorse model of the economy. They plug in
13:58
Speaker 4: these numbers and this model will tell you with certain
14:02
Speaker 4: amount of confidence where how the economy is likely to
14:05
Speaker 4: unfold over the next few months. So people with macroeconomic
14:09
Speaker 4: so to speak, backgrounds, will I would think, rely a
14:11
Speaker 4: little bit more on that than others who rely more
14:14
Speaker 4: on their gut. And I would include Powell in this
14:16
Speaker 4: as he's not an economy So, Mike, I think it
14:18
Speaker 4: depends on their background and their life experience which informs
14:22
Speaker 4: their judgment. As I said, I don't have any special insight.
14:26
Speaker 4: None of us really know any more than policymakers do
14:30
Speaker 4: about the economy. Data is that current and transparent.
14:33
Speaker 2: So rates as they stand today are targeting between four
14:37
Speaker 2: and a quarter and four and a half percent. That's
14:39
Speaker 2: how they run all of this. The upper end of
14:42
Speaker 2: the rates right now are four and a half percent
14:44
Speaker 2: on the Fed funds right they always target a quarter
14:47
Speaker 2: percentage point.
14:48
Speaker 3: Range with all of this.
14:50
Speaker 2: Practically speaking, what that means is your home equity lines
14:53
Speaker 2: of credit are in the seven and a half to
14:56
Speaker 2: eight and a half percent range. Credit Card rates have
14:59
Speaker 2: come down a little bit, but not substantially, but your
15:02
Speaker 2: mortgages and things like this are not directly tied to
15:04
Speaker 2: what the Federal Reserve is doing. That's much more tied
15:07
Speaker 2: to the long term rate, which we've talked about quite
15:09
Speaker 2: a bit. What about that soft data mark, because I
15:12
Speaker 2: know that it doesn't necessarily go into their models, but
15:15
Speaker 2: when we are thinking about expectations around inflation, because this
15:20
Speaker 2: is soft data, right when you pull Americans and ask
15:24
Speaker 2: them what do you think prices will look like a
15:26
Speaker 2: year from now? That is not speaking to anything in particular,
15:30
Speaker 2: But when you think about those expectations.
15:34
Speaker 3: It can become a self fulfilliation.
15:35
Speaker 4: Right, and I misspoke a little bit. Expectations do make
15:38
Speaker 4: it into their big sophisticated model. The state of the
15:42
Speaker 4: art does recognize, and has since the nineteen seventies, that
15:47
Speaker 4: people are forward looking and that expected inflation influences the
15:51
Speaker 4: inflation heavily influences the inflation process.
15:54
Speaker 2: And plain and simple here explanation of this expectations. I'm
15:58
Speaker 2: remodeling a backyard deck that we're doing right now. The
16:03
Speaker 2: stone that we are installing was coming from China. I
16:07
Speaker 2: expected the price to go up. I bought it a
16:09
Speaker 2: month ago and it's all sitting in my backyard not
16:12
Speaker 2: ready to be installed yet, because I wanted to avoid
16:15
Speaker 2: that price increase. If you've talked to anybody about buying
16:18
Speaker 2: a car over the last few months because they're worried
16:20
Speaker 2: about price increases, that's the same thing in terms of
16:23
Speaker 2: expectations of prices going up, kind of becoming a self
16:26
Speaker 2: fulfilling prophecy.
16:28
Speaker 3: That does go into the models.
16:29
Speaker 2: And I guess the question is is policy significantly restrictive
16:35
Speaker 2: right now given those expectations for inflation.
16:38
Speaker 4: When expected inflation goes up, the real interest rate the
16:42
Speaker 4: after inflation interest rate that the FED targets comes down,
16:45
Speaker 4: and they don't control expected inflation. So in the past
16:48
Speaker 4: several weeks we've seen many different though not all agree
16:52
Speaker 4: on this. Not all measures of expected inflation agree on this,
16:55
Speaker 4: but many different expected inflation measures, both survey based those
16:58
Speaker 4: that ask people what they think and market based those
17:01
Speaker 4: that are based on tradable financial instruments, suggest that expected
17:05
Speaker 4: inflation has gone up. Some suggest it's gone up by
17:07
Speaker 4: a lot. This makes the Fed's job harder because when
17:10
Speaker 4: expected inflation goes up, real interest rates, that is, after
17:14
Speaker 4: expected inflation interest rates come down. That means policy, which
17:18
Speaker 4: was previously restrictive has become less so, and again the
17:22
Speaker 4: FED doesn't control this.
17:24
Speaker 2: Mark Kearney, the new Canadian Prime Minister, is scheduled to
17:27
Speaker 2: visit with President Trump today at the White House.
17:29
Speaker 3: That's their first.
17:30
Speaker 2: Meeting since Karna became Canada's leader, and to continue conversations
17:34
Speaker 2: about trade between the two countries. We will see how
17:37
Speaker 2: this meeting goes. I am relatively optimistic, and I just
17:41
Speaker 2: mean relatively compared to the EU or compared to China
17:44
Speaker 2: on the direction of these negotiations. We've heard from for
17:48
Speaker 2: General motors recently, just in terms of the tariff hit
17:50
Speaker 2: that they will be facing due to the trade relations
17:54
Speaker 2: with Canada and Mexico right now. But I think this
17:58
Speaker 2: will be This will be telling. And you know, one
18:02
Speaker 2: trend that I've seen starting to play out here when
18:04
Speaker 2: it comes to these trade negotiations is the President and
18:09
Speaker 2: his advisors seem to negotiate a little bit more when
18:12
Speaker 2: markets are under pressure.
18:14
Speaker 3: Right.
18:14
Speaker 2: We saw that with the retaliatory tariffs getting waves during
18:17
Speaker 2: the bond market sell off. Equity markets have rallied pretty
18:21
Speaker 2: significantly over the last couple of weeks. I think the
18:23
Speaker 2: President is likely going into this negotiation feeling as though
18:26
Speaker 2: he's got the upper hand, which admittedly right the Canadian
18:30
Speaker 2: economy in the face of these tariffs will be far
18:33
Speaker 2: worse off than.
18:33
Speaker 3: The United States economy.
18:35
Speaker 2: But this, to me will be an indicator, Hey, is
18:37
Speaker 2: there room to get these types of deals done with
18:41
Speaker 2: our closest allies? Because we are certainly closer with Canada,
18:46
Speaker 2: both in terms of trade and just politics than we are, say,
18:50
Speaker 2: with the European Union, and those negotiations are heating up
18:53
Speaker 2: as well. So what happens here with autos, what happens
18:58
Speaker 2: here with the new tariff on films produced overseas, that
19:02
Speaker 2: we're going to be talking about this again. It's not
19:06
Speaker 2: as though trade between the United States and China is
19:09
Speaker 2: the most significant and only thing that matters, but I
19:13
Speaker 2: do think it could be a bit of a bell
19:14
Speaker 2: weather for what we are likely to see over the
19:17
Speaker 2: next ninety days with other countries and those negotiations. So
19:21
Speaker 2: I expect that we'll see some sort of press conference
19:23
Speaker 2: later this afternoon on the subject quick break, We've got
19:25
Speaker 2: Wall Street Watch coming up next.
19:41
Speaker 1: Like us on Facebook and follow us on Twitter at
19:44
Speaker 1: TFE show. Breaking business news is always first right here
19:49
Speaker 1: on the Financial Exchange Radio Network.
19:52
Speaker 3: Time now for.
19:54
Speaker 1: Wall Street Watch. A complete look at what's moving market
19:57
Speaker 1: so far today right here on the Financial lik Change
20:00
Speaker 1: Radio Network.
20:01
Speaker 5: Well, markets are extending their losses from yesterday as the
20:05
Speaker 5: Fed kicks off its two day monetary policy meeting, where
20:08
Speaker 5: rates are expected to remain steady when the meeting concludes
20:12
Speaker 5: tomorrow afternoon at two. Wall Street also continues to monitor
20:15
Speaker 5: ongoing developments on the trade front, where yesterday Treasury Secretary
20:20
Speaker 5: Scott Bessen told CNBC that the US is very close
20:23
Speaker 5: to some trade deals at the moment the Dow is
20:26
Speaker 5: down by about a third of a percent, or one
20:29
Speaker 5: hundred and fifty two points. SMP five hundred is down
20:32
Speaker 5: by four tenths of a percent or twenty one points.
20:35
Speaker 5: In the Nasdaq down by just over half a percent
20:37
Speaker 5: lower or one hundred points. Ten year treasure realed is
20:40
Speaker 5: flat today at four point three five percent, and crude
20:44
Speaker 5: oil jumping four percent higher today trading just below sixty
20:49
Speaker 5: dollars a barrel. Despite meeting earnings expectations and boosting its
20:53
Speaker 5: full year revenue guidance, Pallantier down by thirteen percent. Some
20:59
Speaker 5: analyst side of the defense technology in AI company's lower
21:02
Speaker 5: magnitude of first quarter beat, weaker Europe and slowing customer
21:06
Speaker 5: growth rates as causes for today's decline. Meanwhile, Ford suspended
21:11
Speaker 5: its annual guidance, where the automaker said it couldn't predict
21:14
Speaker 5: the full impact of President Trump's tariffs. Ford also reported
21:19
Speaker 5: a steep decline in quarterly profit. However, Ford is up
21:23
Speaker 5: by four percent at the moment. Elsewhere, toy maker Mattel
21:27
Speaker 5: said it was moving more of its production out of China,
21:30
Speaker 5: making plans to raise prices on American toys. The company
21:33
Speaker 5: also scrapped its annual financial forecast. Mattel shares are up
21:38
Speaker 5: by two percent. Busy day for door Dash after it
21:42
Speaker 5: agreed to acquire British food delivery company Deliveryo for about
21:46
Speaker 5: three point nine billion dollars and also said it would
21:49
Speaker 5: acquire restaurant booking platforms seven Rooms for one point two
21:54
Speaker 5: billion dollars. Door Dash retreating by eight percent. Clorox posted
21:59
Speaker 5: disapp when in quarterly results where the cleaning products maker
22:02
Speaker 5: missed on earnings in revenue forecast that stocked down by
22:06
Speaker 5: three percent. Hymns and Hers up by nine percent after
22:10
Speaker 5: the telehealth provider guided for lighter than expected revenue in
22:13
Speaker 5: the previous quarter but said more collaborations were coming and
22:17
Speaker 5: after today's closing bell, we'll see earnings from super micro Computer,
22:21
Speaker 5: Rivian and AMD. I'm Tucker Silvan. That's Wall Street.
22:25
Speaker 1: Watch.
22:26
Speaker 3: My brother works for DoorDash.
22:27
Speaker 1: Cool.
22:28
Speaker 3: Yeah you do? You want to know? No? I always
22:30
Speaker 3: tell people that he delivers food, but he actually works
22:32
Speaker 3: in finance. How long has he been doing that, delivering
22:35
Speaker 3: food or working in finance door Dash? I don't know, several.
22:39
Speaker 2: Years, I think, so. Yeah, I'll get him on the
22:41
Speaker 2: show sometime. We can ask him about his personal work
22:44
Speaker 2: experience working for door Dach.
22:45
Speaker 3: Now we're good.
22:46
Speaker 2: We're doing Chinese exporters are skirting Trump tariffs through probably
22:51
Speaker 2: illegal action in the most predictable story that you could
22:54
Speaker 2: have seen coming out here. Look, this is a defining
22:59
Speaker 2: factor of any new tax or prohibition that goes out there.
23:03
Speaker 2: I mean you think about I said prohibition. Prohibition, Right,
23:08
Speaker 2: you try and ban alcohol sales, and guess what, people
23:11
Speaker 2: are going to skirt that and find ways to find alcohol.
23:13
Speaker 2: You put in a new income tax or a state tax,
23:16
Speaker 2: they're going to find ways to try and avoid it
23:18
Speaker 2: or skirt it. And likewise, you put in a new
23:21
Speaker 2: tax on imports, and Chinese exporters are going to try
23:24
Speaker 2: and find ways around this, creative ways to undervalue the
23:28
Speaker 2: items that are being shipped here. And that seems to
23:30
Speaker 2: be what they are doing is saying, hey, when this
23:34
Speaker 2: container ship enters the United States, we are going to
23:38
Speaker 2: tell the customs agent that it's worth X number of dollars.
23:42
Speaker 2: But then we'll have kind of a workaround to sell
23:44
Speaker 2: this stuff to you in the United States at a
23:47
Speaker 2: larger dollar value in order to maybe not eliminate the
23:50
Speaker 2: tariff entirely. But dramatically reduce the rate of tariff here.
23:55
Speaker 2: And this is going to be a challenging one for
23:57
Speaker 2: the Trump administration to combat one. I don't think you're
24:02
Speaker 2: going to have a lot of buy in from Hijing
24:04
Speaker 2: Ping and the Chinese Communist Party to say, hey, we
24:07
Speaker 2: need you to crack down on these domestic companies who
24:10
Speaker 2: are trying to skirt these tariffs that you hate and
24:13
Speaker 2: disagree with fundamentally. So I don't think you can be
24:15
Speaker 2: getting any help from the Chinese, and therefore the only
24:19
Speaker 2: real way to go about it is punishing the American
24:22
Speaker 2: buyers of these goods who are knowingly participating in a fraud,
24:27
Speaker 2: which you also don't really want to do. If you're
24:29
Speaker 2: the Trump administration, will be my guests.
24:32
Speaker 4: Yeah, I guess that the buyers on this end would
24:35
Speaker 4: have to be complicit or would at least have to
24:37
Speaker 4: be aware that, for example, their prices have not gone
24:40
Speaker 4: up by as much as the amount of the tariff,
24:42
Speaker 4: so they'd have to be suspicious. As I understand it,
24:45
Speaker 4: the gaming of this is occurring on the seller end
24:47
Speaker 4: of it, on the exporter right, which in this case
24:50
Speaker 4: is China end of it. As you said, Mike, totally predictable,
24:54
Speaker 4: just another example of how tariffs create evasion and gaming
24:59
Speaker 4: type behavior that ultimately doesn't make anybody better off. It's
25:03
Speaker 4: why they are not a first best, maybe even not
25:07
Speaker 4: even a second best tool for achieving whatever the heck
25:09
Speaker 4: the objectives is for these tariffs. I don't know what
25:12
Speaker 4: it is. It changes every day, but whatever, I'm sure
25:15
Speaker 4: there's some objective in mind. Whatever that is, there are
25:17
Speaker 4: probably better ways to achieve it than setting off this
25:21
Speaker 4: type of this type of totally unproductive behavior.
25:25
Speaker 2: So, for example, Aaron Rubin, who owns the logistics company
25:28
Speaker 2: ship Hero and a martial arts equipment distributor, said his
25:31
Speaker 2: Chinese suppliers have offered to do DDP, which stands for
25:37
Speaker 2: Delivery Duties paid, meaning the Chinese exporter will actually pay
25:41
Speaker 2: the tariffs at the port and then sell the items
25:44
Speaker 2: to you. They said, we're going to cover one hundred
25:45
Speaker 2: percent of the tariffs and he would never get a bill.
25:48
Speaker 2: But you know, very clearly understood that he would be
25:50
Speaker 2: participating in a fraud if he did so. But it
25:53
Speaker 2: leaves him in a position where, look, if all of
25:55
Speaker 2: his competitors go and buy this stuff with this stuff
25:58
Speaker 2: in place and avoid the tariffs, then he's suddenly going
26:01
Speaker 2: to be sitting on supplies that are at way higher
26:05
Speaker 2: cost than all of his competitors.
26:06
Speaker 4: One thing I didn't get but is how exactly this
26:11
Speaker 4: is fraud? Is it because they're understating the value with
26:14
Speaker 4: a cargo when it comes at the Chinese in this case,
26:19
Speaker 4: exporter is understating the value, paying a rate a tariff
26:24
Speaker 4: rate on an understated value, So they are committing fraud
26:28
Speaker 4: the buyer, are they how are they complicity? To the
26:31
Speaker 4: best of their knowledge, duties were paid, that's what the
26:33
Speaker 4: exporter in this case, the Chinese seller told them. Is
26:36
Speaker 4: that your understanding of why.
26:38
Speaker 3: This sounds just like it's getting a little bit more
26:40
Speaker 3: explicit than that.
26:40
Speaker 2: For instance, a California based food manufacturer who asked not
26:45
Speaker 2: to be named for the article said that his Chinese
26:47
Speaker 2: supplier offered to change the cogs on invoices to help
26:51
Speaker 2: them evade tariffs. So basically, yes, I think you are
26:55
Speaker 2: correct that they are saying, hey, this product isn't worth
26:59
Speaker 2: X when it's actually worth X plus seventy percent in
27:03
Speaker 2: order to evade those tariffs. But I don't think they're
27:06
Speaker 2: being terribly secretive about it. With those American buyers.
27:10
Speaker 4: And again you have to know because the price you
27:12
Speaker 4: paid for it was not increased by the amount of
27:15
Speaker 4: the TERRFF.
27:16
Speaker 2: Yeah, I mean, okay, you can I suppose turn a
27:19
Speaker 2: blind eye here and claim ignorance that oh you know,
27:21
Speaker 2: I thought they just improve their efficiency by ninety percent.
27:24
Speaker 2: But yeah, that's the question is, Hey do I go
27:27
Speaker 2: and participate? This owner of that California food company basically said,
27:31
Speaker 2: you know, my options to either lay off my team
27:34
Speaker 2: or join the fraud tough call.
27:36
Speaker 4: Or turn a blind eye anyway.
27:39
Speaker 2: And I think in that case where you have explicit communication,
27:42
Speaker 2: probably via email, but hey, we're going to undervalue the
27:44
Speaker 2: We're gonna undervalue the product here.
27:47
Speaker 3: Yeah, I would.
27:48
Speaker 2: I would be a tough spot to be in because, yeah, absolutely,
27:53
Speaker 2: if you've been buying the same who knows what it
27:56
Speaker 2: is but kitchen equipment in order to manufacture this product
28:00
Speaker 2: from the Chinese for the last fifteen years, then you
28:03
Speaker 2: know exactly what it costs, and if it's coming in
28:06
Speaker 2: at the same cost that it was prior, and you
28:09
Speaker 2: know that the item is subject to the tariffs, then
28:11
Speaker 2: you kind of know you're participating in a fraud of
28:13
Speaker 2: some sort or another when you know there's been hints
28:17
Speaker 2: of this type of thing. So the problem, like I said,
28:20
Speaker 2: is you're really not going to have any luck if
28:23
Speaker 2: you're the Trump administration by going after these suppliers, right,
28:27
Speaker 2: what are you going to say? Well, now you're facing
28:28
Speaker 2: a two hundred and fifty percent tariff, It makes no difference.
28:31
Speaker 2: The only real way to go after this type of
28:34
Speaker 2: thing successfully would probably be to go after the buyers
28:37
Speaker 2: in the United States, whom you can actually prosecute. And
28:41
Speaker 2: those guys are struggling quite a bit to begin with,
28:44
Speaker 2: so I don't know how popular that would be.
28:46
Speaker 3: Let's take a quick break.
28:48
Speaker 2: When we come back forward coming out and talking about
28:52
Speaker 2: their tariff effect, we'll cover that next.
28:55
Speaker 3: Here on the Financial Exchange.
28:57
Speaker 1: Market volatility is at its highest point since the fan.
29:00
Speaker 1: Keep it here for the most comprehensive coverage of the
29:03
Speaker 1: global trade war. This is the Financial Exchange Radio Network.
29:07
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29:10
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29:50
Speaker 2: Ford Motors rallying about four percent this morning on news
29:54
Speaker 2: the teriffs are going to cost them one and a
29:55
Speaker 2: half billion dollars. I guess that must be better than expected.
29:58
Speaker 2: I do know that Ford is one one of the
30:00
Speaker 2: least affected companies by tariffs. Tesla obviously the least effected
30:04
Speaker 2: given that most of their manufacturing four vehicles sold in
30:07
Speaker 2: the United States is done here in the United States,
30:09
Speaker 2: but General Motors last week said the teriffs would increase
30:12
Speaker 2: their cost by four to five billion dollars this year.
30:15
Speaker 2: I'd be most interested to see how much front running
30:18
Speaker 2: is happening here, how much. I've heard two or three instances,
30:23
Speaker 2: just anecdotally, of people pulling those purchases forward on vehicles,
30:28
Speaker 2: But you know, is it really having an effect on earnings?
30:31
Speaker 2: In the in this quarter coming up, I think will
30:34
Speaker 2: be an interesting question. But for today, at least, dock
30:36
Speaker 2: price moving a little bit higher. Goldman saying that bear
30:40
Speaker 2: market rallies are the norm. This is something we've talked
30:44
Speaker 2: about a little bit here and there. But I wanted
30:47
Speaker 2: to quote a stat here that I saw published. I
30:50
Speaker 2: think it was last week. You know, we come off
30:53
Speaker 2: this big nine day rally across financial markets NASDAK especially,
30:57
Speaker 2: But of the twenty five best day ever for the Nasdaq,
31:02
Speaker 2: which included Wednesday of last week, twenty two of them
31:07
Speaker 2: took place during the dot com collapse. So I'm not
31:11
Speaker 2: talking about during the run up of the dot bubble,
31:13
Speaker 2: but twenty two of the best days ever for the
31:16
Speaker 2: Nasdaq occurred while the Nasdaq itself was on its way
31:20
Speaker 2: down to what did it go down like eighty percent
31:22
Speaker 2: during the dot com bubble, the Oaito nine crisis or
31:27
Speaker 2: early days of COVID, So it occurred, you know, sorry,
31:29
Speaker 2: twenty two of those days occurred during that dot com
31:31
Speaker 2: bust Oaito nine or early days of COVID. One more
31:35
Speaker 2: during the eighty seven Black Monday event. So the point
31:41
Speaker 2: that I am attempting to make here and that Goldman
31:42
Speaker 2: I think makes pretty well is that it is incredibly
31:46
Speaker 2: common for markets to rally even during recessions and bear markets.
31:52
Speaker 2: And what we experienced during March of twenty twenty, which was,
31:56
Speaker 2: you know, just to remind you, like a three week
31:59
Speaker 2: straight down, you had I think three or four days
32:02
Speaker 2: where markets were paused for trading because of how significant
32:05
Speaker 2: the downturns were. That is the exception rather than the rule.
32:10
Speaker 2: Very rarely do markets fall by thirty percent in a
32:13
Speaker 2: straight line over the course of two or three weeks.
32:16
Speaker 2: Generally speaking, when markets go down, it does have moments
32:21
Speaker 2: of steep downturns, but it tends to be defined by uncertainty,
32:25
Speaker 2: changes in what people expect are going to happen, and
32:29
Speaker 2: therefore downturns followed by rallies followed by downturns that ultimately
32:34
Speaker 2: culminate in some bottom that is eventually found. But I
32:38
Speaker 2: don't think I think some of that whipsaw effect can
32:42
Speaker 2: be treacherous for investors, especially those that try and trade them.
32:48
Speaker 2: You go take a look at the last fifteen years.
32:50
Speaker 2: We haven't had a ton of that in markets. Right
32:54
Speaker 2: since the eight financial crisis, there just has not been
32:57
Speaker 2: a lot of that significant draw down inequities that plays
33:01
Speaker 2: out that way, and I just wonder how investors are
33:05
Speaker 2: navigating it today compared to previous times.
33:09
Speaker 4: Yeah, you don't know something as a trend until well
33:11
Speaker 4: after the fact, right, And it's normal too, in the
33:15
Speaker 4: midst of economic turbulence, see a little clearing patch in
33:21
Speaker 4: the sky and think, well, this could be it. The
33:23
Speaker 4: storm could be moving on, And in reality you're just
33:26
Speaker 4: in the eye of it. It's always obvious in retrospect.
33:30
Speaker 4: Obvious obviously, Yeah, because it's obvious when you're living. Yeah,
33:33
Speaker 4: because you know how it ended. So yeah, I don't really,
33:37
Speaker 4: I don't have any deep insight other than to say, yeah,
33:40
Speaker 4: volatility normal, Oh, totally normal.
33:43
Speaker 2: And it would be it would be fairly normal for
33:45
Speaker 2: the markets to reach new all time highs. It would
33:49
Speaker 2: also be fairly normal for us to move steadily downward
33:52
Speaker 2: into a recession here and see several more ten percent
33:57
Speaker 2: rallies over the next few months. I have to stress
34:00
Speaker 2: that quite a bit. Is that just because markets have
34:03
Speaker 2: rallied over the last nine days, and just because trade
34:06
Speaker 2: concerns have dissipated a little bit, doesn't.
34:09
Speaker 3: Necessarily mean this is over.
34:11
Speaker 2: But likewise, you know, everyone calling for the next recession
34:13
Speaker 2: doesn't necessarily mean it's going to happen either.
34:16
Speaker 4: To me, the key thing is a long term asset allocator,
34:21
Speaker 4: as we like to call ourselves. When we are stewards
34:25
Speaker 4: of other people's money, and those other people tend to
34:27
Speaker 4: be long term investors, we're asset allocating. We rely on
34:30
Speaker 4: stocks for their long term return potential. They're tied to
34:35
Speaker 4: their growth is the growth of stock prices is tied
34:37
Speaker 4: to stock earnings, which is in turn tied to economic growth.
34:41
Speaker 4: I think a long term asset allocator like us in
34:44
Speaker 4: our day Jarbs at Armstrong Advisory Group should be far
34:48
Speaker 4: more concerned about the drag on growth that could come
34:51
Speaker 4: from an unsteady trade regime and disrupted relations with our
34:57
Speaker 4: long term trading in military terry partners. If we're not
35:02
Speaker 4: going to create the conditions that allowed the spectacular growth
35:07
Speaker 4: that we experienced in the latter half of the twentieth
35:10
Speaker 4: century to happen, if we're going to turn our back
35:13
Speaker 4: on those conditions, we can probably expect lower growth, more
35:17
Speaker 4: volatile growth than all lseqel that translates into lower returns
35:21
Speaker 4: from stocks. So, as a long term asset allocator, I'm
35:24
Speaker 4: I'm far more worried about what our institutions are going
35:26
Speaker 4: to look like coming out of this than the day
35:29
Speaker 4: to day.
35:30
Speaker 2: I think the number one question to be asking yourself,
35:33
Speaker 2: if you're an individual listening right now who has an
35:35
Speaker 2: investment portfolio, is what is my strategy with all of this?
35:39
Speaker 3: Do I have a strategy with all of this?
35:41
Speaker 2: Because look for better or worse, making money in the
35:44
Speaker 2: stock market, or frankly, any market, whether it's crypto, stocks, bonds,
35:49
Speaker 2: has been pretty darn easy for the last two years
35:53
Speaker 2: twenty twenty three, twenty twenty four. There was not a
35:56
Speaker 2: whole lot that lost you money in equity markets over
35:59
Speaker 2: the last few years, and as you're approaching this regime
36:03
Speaker 2: change as we've described it, that's the number one question
36:06
Speaker 2: I would have for somebody is do I have a strategy?
36:08
Speaker 2: Do I know what I'm going to do in the
36:10
Speaker 2: event that this is a prolonged downturn? Do I know
36:12
Speaker 2: what I'm going to do in the event that it
36:14
Speaker 2: all turns around tomorrow because policy shifts.
36:17
Speaker 3: If you don't feel.
36:18
Speaker 2: Like you have that coherent strategy, if you cannot answer
36:21
Speaker 2: that question of what am I going to do? In
36:24
Speaker 2: XYZ event, Please give the folks at Armstrong a call.
36:28
Speaker 2: We'll sit down with you. We will review what you're
36:30
Speaker 2: doing today, understand how you need to use the money
36:33
Speaker 2: over the coming years, and develop a strategy that works
36:37
Speaker 2: for you. The number for the Armstrong Advisory Group eight
36:40
Speaker 2: hundred three nine three for zero zero one. Again that
36:44
Speaker 2: free consultation with the Armstrong Advisory Group available by calling
36:47
Speaker 2: eight hundred three nine three four zero zero one.
36:51
Speaker 1: The proceeding was paid for by Armstrong Advisory Group, a
36:54
Speaker 1: registered investment advisor. Nothing in the ad or in any
36:56
Speaker 1: Armstrong guide a specific financial, legal or tax advice. Consult
36:59
Speaker 1: your own financial, tax into state planning advisors before making
37:02
Speaker 1: any investment decisions. Armstrong may contact you to offer investment
37:05
Speaker 1: advisory services.
37:07
Speaker 2: The European Union is targeting one hundred billion dollars worth
37:10
Speaker 2: of US goods should tariff talks fail. Just in terms
37:13
Speaker 2: of state of play on all of this, the EU
37:16
Speaker 2: had come up with a counterlist of tariff measures totally
37:19
Speaker 2: twenty one billion dollars twenty one billion euros of US goods.
37:23
Speaker 2: That was in response to the Trump's levy on twenty
37:27
Speaker 2: five percent duty on steel and aluminum from the European Union.
37:31
Speaker 2: They agreed to waive that for ninety days as the
37:33
Speaker 2: United States lowered the tariff rates on other US exports
37:38
Speaker 2: to ten percent, But it sounds to me like that
37:40
Speaker 2: item was planning to go into effect based on just
37:43
Speaker 2: these steel and aluminum tariffs, obviously depending on how everything
37:47
Speaker 2: else goes. They are now coming up with a list
37:49
Speaker 2: allegedly of one hundred and thirteen billion US dollars of
37:53
Speaker 2: goods that would face ongoing tariffs should talks not transpire.
37:58
Speaker 3: The way they are looking for.
38:00
Speaker 2: Uh quick break here on the financial exchange, markets remain
38:03
Speaker 2: in negative territory, but have improved slightly. The Dow and
38:06
Speaker 2: SMP now off less than one half of a percent.
38:09
Speaker 2: We'll cover that and a whole lot more here next
38:11
Speaker 2: on the financial exchange