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What does the future hold for American automakers? · The Financial Exchange Show

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Speaker 2: Good morning, Happy April Fool's Day. It is the day
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Speaker 2: before the rollout of a wide range of tariffs that
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Speaker 2: have been hinted at, alluded to, and apparently finalized by
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Speaker 2: the Trump administration, but not rolled out. That's what he
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Speaker 2: said yesterday. Yeh sure, not yet rolled out. That will
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Speaker 2: be happening tomorrow, Liberation Day, as it's being called, roughly
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Speaker 2: twenty percent tariffs on most imports, according to some reports.
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Speaker 2: That's reporting from the Washington Post, roughly twenty percent on
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Speaker 2: most imports. They cited three people familiar with the matter, which, again,
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Speaker 2: if we're going to rely on reporting that's been done
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Speaker 2: previously around the tariffs, this is probably way off base
1:52
Speaker 2: and could be completely different tomorrow. So I think take
1:55
Speaker 2: any of this with a grain of salt when it
1:57
Speaker 2: comes to this country byree reciprocal tariff approach that is
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Speaker 2: being discussed here. Nonetheless, that was well, that is what
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Speaker 2: we will learn about tomorrow. This morning, at ten am,
2:09
Speaker 2: we received a job Opening's labor Turnover Survey, the Jolts Report,
2:13
Speaker 2: that was released by the Bureau of Labor Statistics. Sometimes
2:16
Speaker 2: this can indicate things to worry about when it comes
2:19
Speaker 2: to labor market or worry about when it comes to
2:21
Speaker 2: inflation predictions, didn't really do much of that. Today is
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Speaker 2: status quo report. Little change going on in the state
2:29
Speaker 2: of hirings, firings, and job openings in the economies. That
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Speaker 2: a fair way to describe it.
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Speaker 3: So far stable.
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Speaker 2: Taking a look at markets in early trading, thus far,
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Speaker 2: we started the day once again in negative territory and
2:42
Speaker 2: have moved back to positive gains on large swaths of
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Speaker 2: US equities. The NASDAK currently up ninety five points, are
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Speaker 2: a little bit more than half a percent, yes, and
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Speaker 2: P five hundred up thirteen points about a quarter of
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Speaker 2: a percent, and the Dow Jones Industrial average is flat
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Speaker 2: for the day. European markets actually finished strong in positive territory. Uh,
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Speaker 2: the Dacks up one point four percent or maybe they're
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Speaker 2: still No, I don't think they're still trading today. Yeah,
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Speaker 2: it's it's eleven am. What time is it in Europe?
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Speaker 3: Mike, Nobody cares? Yeah, what are we doing here?
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Speaker 2: Don't care?
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Speaker 3: No, No one cares.
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Speaker 2: Well, we're about to mount some massive tariffs on all
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Speaker 2: of the European Union. Nobody cares. What European stocks are doing? Fine?
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Speaker 2: US ten year treasury down to four point one six
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Speaker 2: seven percent. Pretty significant move there, oil, which was up
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Speaker 2: significantly yesterday flat to day. Anything else catching your eyes
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Speaker 2: in markets, Mark and Tucker, since you're apparently uninterested in
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Speaker 2: what foreign equities are doing.
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Speaker 3: No, No, let's talk about the best performers on the German.
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Speaker 2: Dacks, which by the way, have significantly outperformed every single
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Speaker 2: US benchmarks UBER year. Yeah. Uh so, following along the
3:49
Speaker 2: tariff talk, let's talk about the ones that we in
3:52
Speaker 2: Uber year a year for the year above.
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Speaker 3: Germans is a complicated language.
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Speaker 2: I'd have to explain it to taking a look here
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Speaker 2: at tariffs that we do know exist already and are
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Speaker 2: going into place tomorrow as well. Those would be those
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Speaker 2: surrounding automakers and specifically any autos that are built anywhere
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Speaker 2: outside the United States. And there's a piece in Bloomberg
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Speaker 2: about Ford being as American as apple Pie or is
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Speaker 2: that Honda? And he raises this question not because there's
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Speaker 2: any confusion about where those companies are actually headquartered or
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Speaker 2: where the majority of their employees are, but really commentary
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Speaker 2: coming from trade advisor Peter Navarro, when he was asked
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Speaker 2: about American automakers and what he said. So, the first
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Speaker 2: thing that's really important to understand is that the big
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Speaker 2: three so called American companies GM, Ford, Stilantis, they're not
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Speaker 2: really American companies. What on earth does he mean by
4:57
Speaker 2: the Estalantis is not They are not a US based
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Speaker 2: based centerification. They are a company headquartered in the Netherlands.
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Speaker 2: But as far as I'm aware, General Motors and Ford
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Speaker 2: are American companies in every way that you could possibly
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Speaker 2: describe them.
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Speaker 3: The problem with this kind of tariff policy, and I'm
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Speaker 3: putting policy in gigantic quotes here is the hair splitting
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Speaker 3: that you start to do when you don't have clarity
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Speaker 3: that you pointed out you wanted Mike at the start
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Speaker 3: of the last hour. When you don't have clarity from
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Speaker 3: the very beginning, we're all scrambling. This hurts in the
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Speaker 3: long run economic growth because it makes investment costly. Or
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Speaker 3: all of this uncertainty and that's a very vague term
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Speaker 3: that gets thrown around carelessly, but uncertainty is manifested in
5:44
Speaker 3: find I'm gesturing here for those of you watching up
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Speaker 3: to our Bloomberg screen looking at financial market gyrations day
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Speaker 3: to day uncertainty in surveys from financial from managers who
5:56
Speaker 3: tell us they're not making investments that they otherwise would.
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Speaker 3: They're holding off. All of this stuff makes it more
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Speaker 3: expensive to invest and is a drag on economic growth.
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Speaker 3: We desperately need clarity.
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Speaker 2: So one, I just think the comments from Peter Navarro
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Speaker 2: here are not useful. I don't know what makes a
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Speaker 2: company American if they are other than being headquartered in
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Speaker 2: the United States and employing the majority of their employees
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Speaker 2: in the United States. That sounds pretty American to me.
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Speaker 2: But I think his point is one that everyone has
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Speaker 2: come to realize just over the last few months, which
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Speaker 2: is even American auto manufacturers like GM and Ford manufacture
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Speaker 2: a significant portion of their vehicles overseas. They source a
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Speaker 2: lot of their parts overseas.
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Speaker 3: It's Mexico, Canada though, Mike, we've been integrating these markets
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Speaker 3: for thirty years. People have been making investment decisions predicated
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Speaker 3: on that relative certainty that they would be able to
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Speaker 3: import without hindrance, because that's what NAFTA provided for. It
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Speaker 3: was a great stabilizing force. And now we stre with
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Speaker 3: through about the window, we're upending that and we haven't that. Look,
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Speaker 3: that's so if people think that the current arrangement is
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Speaker 3: not satisfactory for whatever reason. That is a political decision.
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Speaker 3: But you you've got to introduce something in its place
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Speaker 3: where the rules are clear and we may not like them,
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Speaker 3: but the rules should be clear and stable, and we
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Speaker 3: clearly do not have that right now. Our quarrel is
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Speaker 3: not with tariffs per se. I think, as you've already said, Mike,
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Speaker 3: it's with the haphazard helter skelter on off rollout. I mean,
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Speaker 3: up to the last minute here we have no certainty.
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Speaker 3: It's like these people like torturing us.
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Speaker 2: So I keep going back to a few things. One,
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Speaker 2: it is still early days, and perhaps that clarity is coming,
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Speaker 2: but let's say that it doesn't. I want to address
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Speaker 2: why that matters, Why uncertainty around the rule of law
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Speaker 2: is such a threat to to this because and I don't,
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Speaker 2: I don't that's right.
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Speaker 3: No, I think that's a good way to put it, Mike.
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Speaker 3: This is about rules and rule of law.
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Speaker 2: Though like we have rule of law, you can still
7:56
Speaker 2: file you know, it's not it's not business in China, okay,
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Speaker 2: Like you know it's not going there, and then no
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Speaker 2: more certainty right now it's not going to China and
8:09
Speaker 2: finding out that, oh, the government doesn't like me, and
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Speaker 2: so they have told all of their government agencies to
8:14
Speaker 2: basically root me out of the country. There are means
8:16
Speaker 2: of recourse in the United States, there's still rule of law,
8:19
Speaker 2: but this degradation of certainty around the rules of the road,
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Speaker 2: were it to continue, I think completely up ends the
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Speaker 2: idea of what has made americ An attractive places.
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Speaker 3: This is the art of the deal. Though Mike Trump
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Speaker 3: believes this deeply in his being key people guessing, remain
8:35
Speaker 3: the center of attention. Throw your opponent. It's sort of
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Speaker 3: like his judo. I think this is what we're in
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Speaker 3: for for that because this has worked for him in
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Speaker 3: other domains. This is all again call it the art
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Speaker 3: of the deal. I didn't read the book, though it
8:48
Speaker 3: was on my family's bookshelf for a long time. I
8:51
Speaker 3: didn't read it. But as I understand it, this is
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Speaker 3: part of his judo. So the question is are we
8:57
Speaker 3: willing to for how long we are the political game
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Speaker 3: whatever those are. And I don't mean for him and
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Speaker 3: his party, I mean for all of us. Are they
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Speaker 3: enough to compensate for the increased cost of investment that
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Speaker 3: this uncertainty imposes and.
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Speaker 2: I think the answer to me is the only chance
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Speaker 2: that it becomes a good trade off is if there
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Speaker 2: is ultimately and I think we will get here, but
9:19
Speaker 2: if there is ultimately some clarity around what is the
9:24
Speaker 2: end game.
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Speaker 3: That's not part of the art of the deal.
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Speaker 2: Mike.
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Speaker 3: You keep them guessing is to the end game. You
9:27
Speaker 3: don't want them to know what your objectives are. Apply
9:30
Speaker 3: the psychology use when buying a car, where you're perfectly
9:33
Speaker 3: willing to walk away at least I am. I'll walk
9:35
Speaker 3: away last minute when it seems like the deal is
9:38
Speaker 3: almost done, just to get a marginal benefit from it.
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Speaker 3: That's the mentality that this regime, and I don't mean
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Speaker 3: that negatively. Is the description of a group of people.
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Speaker 3: The last group was a regime too. That's their mentality.
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Speaker 3: Keep everybody guessing until the last minute, and even after
9:55
Speaker 3: the last minute. That works. I think when you're buying
9:57
Speaker 3: and selling buildings in midtown Manhattan, maybe I'm not sure
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Speaker 3: that works when you're managing the world's biggest, most advanced,
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Speaker 3: sophisticated economy. I'm just not sure that the art of
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Speaker 3: the deal works in the trade domain. I guess we'll
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Speaker 3: find out, but we don't know what the objective is,
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Speaker 3: so how do we even measure it?
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Speaker 2: Good question, Well, I'm taking a lot of questions. I
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Speaker 2: think my answer of how we measure it is what
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Speaker 2: the ways in which we said we were going to
10:22
Speaker 2: measure it when we before we had President Trump in
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Speaker 2: the in the White House after his election, Right, we
10:29
Speaker 2: set forth a number of things that I think most
10:31
Speaker 2: Americans would agree are important when it comes to the economy,
10:35
Speaker 2: and we judge based on that. Right, what's the unemployment
10:38
Speaker 2: rate four years from now? What's the rate of inflation?
10:41
Speaker 2: What is home ownership rates? What are the number of pages?
10:46
Speaker 2: What was the obscure when you came in the federal registry?
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Speaker 3: We'll get those down because he can. That's relatively straightforward.
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Speaker 2: Government deficits are they higher or lower? Our taxes higher
10:56
Speaker 2: or lower four years from now? These are the things
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Speaker 2: that I think we don't lose sight of when trying
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Speaker 2: to judge all of these things, because in the moment
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Speaker 2: they're scary. Stock markets you're selling off, people are worried
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Speaker 2: about their jobs, and we I think our job is
11:10
Speaker 2: to kind of keep the focus on, Okay, well, what
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Speaker 2: is the actual true result.
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Speaker 3: That's really hard to do day to day number one.
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Speaker 3: The frequency of these data series doesn't conform to that
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Speaker 3: daily challenging timetable. So unless we want to go on
11:26
Speaker 3: once a year and do a report card, which maybe
11:28
Speaker 3: you do do a once a year, how's our government doing?
11:31
Speaker 3: Congress and the President and our governor and right on
11:33
Speaker 3: down the line, that's just very hard to do with
11:36
Speaker 3: macroeconomic time series because is we were talking about before
11:39
Speaker 3: the show, GDP and other time and other time series
11:42
Speaker 3: that we use to gauge economic health, they really weren't
11:45
Speaker 3: made for the purposes to which they're for which they're
11:48
Speaker 3: employed today. Remember you you asked me before the show.
11:52
Speaker 3: You brought up that point before the show. I didn't
11:54
Speaker 3: why acting like we didn't talk too.
11:57
Speaker 2: I'm just digesting at all. Let's take a quick break
12:00
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13:43
Speaker 2: Mark, you mentioned something to be over the break, so
13:45
Speaker 2: I started googling it, and I want to talk about
13:47
Speaker 2: municipal bonds and their tax treatment really quickly. Uh So,
13:52
Speaker 2: for listeners out there that are not familiar, muni bonds
13:56
Speaker 2: are generally considered what we call triple tax free. The
14:00
Speaker 2: only types of bonds out there that are treated this way.
14:03
Speaker 2: Unless I'm missing something, but they are triple tax free
14:06
Speaker 2: because they are let's start with the basics. They are
14:09
Speaker 2: issued by a municipality or a state government. So if
14:13
Speaker 2: you are the biggest city in New England, Boston, and
14:18
Speaker 2: you need to raise money for a new sewer project
14:21
Speaker 2: that you're doing, you collect some of the money from taxes.
14:25
Speaker 2: You also might borrow a bunch of the money to
14:26
Speaker 2: get the job done, and then pay those bonds out
14:28
Speaker 2: over time. And so you raise a bunch of money,
14:32
Speaker 2: people buy those bonds, You pay interest on those bonds,
14:35
Speaker 2: and the nice thing for the people that hold those
14:37
Speaker 2: bonds is they pay no taxes to the federal government
14:41
Speaker 2: because the federal government doesn't have the authority to tax it.
14:44
Speaker 2: If you live in the state of Massachusetts, you also
14:47
Speaker 2: pay no state income taxes on the interest do on
14:51
Speaker 2: those bonds, And so assuming you get paid both your
14:54
Speaker 2: interest and your principle back, there can be some big
14:56
Speaker 2: tax savings and it can make the bonds quite attract
15:00
Speaker 2: compared to say loading the government to the United States government,
15:04
Speaker 2: which might pay a similar interest rate, but you still
15:07
Speaker 2: owe federal income taxes on that interest. Triple comes in here.
15:12
Speaker 2: I kind of screwed up here. I should have done
15:15
Speaker 2: New York City instead, because they actually have a city
15:17
Speaker 2: income tax, which is why it's considered triple tax free.
15:20
Speaker 2: So if you did the same story in New York
15:22
Speaker 2: City and on Manhattan that sewer project, then the bond
15:27
Speaker 2: that's issued there would avoid the federal income tax, the
15:30
Speaker 2: State of New York income tax, as well as the
15:32
Speaker 2: City of New York income tax. So it's that triple
15:35
Speaker 2: tax free treatment there. As you can imagine, where this
15:39
Speaker 2: is most appealing is the higher income earners out there.
15:43
Speaker 2: So if you are in the city of Boston you
15:47
Speaker 2: live there, or if you you know, live in Massachusetts
15:50
Speaker 2: and you earn ten million dollars. For example, Then you're
15:53
Speaker 2: getting a big chunk of your income if you're an employee,
15:56
Speaker 2: tax at thirty seven percent plus five percent to the
15:59
Speaker 2: state Z plus another four percent for the millionaire's tax,
16:02
Speaker 2: and that adds up.
16:02
Speaker 3: There.
16:03
Speaker 2: You're suddenly sitting there at forty six percent income taxes
16:05
Speaker 2: and saying, Wow, if I go loan money to Coca Cola,
16:09
Speaker 2: I'm going to pay almost half of that out in taxes.
16:12
Speaker 2: So those communis look attractive. There are rumors going around.
16:17
Speaker 2: I haven't really seen any of this confirm, but it
16:19
Speaker 2: was reported in Kiplinger five days ago that Congress, in
16:23
Speaker 2: order to explore different ways to cut taxes because they're
16:27
Speaker 2: under budgetary constraints, are looking at different ways that they
16:30
Speaker 2: can make up that revenue shortfall once they go and
16:33
Speaker 2: cut overall tax rates.
16:35
Speaker 3: But how do you so the intergovernmental tax immunity? I
16:38
Speaker 3: think that's the principle here. This is as old as
16:40
Speaker 3: the Republic. It came down in a Supreme Court decision
16:43
Speaker 3: very early on. Maybe it was I don't know Marbury v. Madison.
16:46
Speaker 3: I don't remember which, but it was John Marshall, second
16:48
Speaker 3: Chief Justice, who wrote the opinion famous how do you
16:51
Speaker 3: get around the fact that the Supreme Court said that, well,
16:54
Speaker 3: the power to tax is the power to destroy. Maybe
16:56
Speaker 3: this is a Lutsky question, How do you get doesn't
17:00
Speaker 3: didn't the Supreme Court say a long time ago, and
17:03
Speaker 3: subsequent courts have upheld the precedent that governments can't tax
17:06
Speaker 3: one another? Are there any exceptions? Maybe I should put
17:09
Speaker 3: the question this way, Mike. Are there any exceptions now,
17:11
Speaker 3: like alternative minimum tax exceptions at the federal level that
17:14
Speaker 3: you know over that you've run into in your extensive
17:17
Speaker 3: practice to the general principle that the Feds can't tax
17:21
Speaker 3: state bond interest. Maybe I don't know, Okay, So for all,
17:28
Speaker 3: I mean, your your perspectiveness is pretty broad and long term.
17:31
Speaker 3: So if you've not seen it, don't think it's probably rare.
17:34
Speaker 3: If you haven't seen it, I think that's a safe statement.
17:36
Speaker 2: And you know, likewise, the state of Massachusetts cannot tax
17:40
Speaker 2: the interest that the federal government pays on treasury debt.
17:44
Speaker 2: There is president there right Like, if I live in Massachusetts,
17:46
Speaker 2: I might have to pay federal taxes on my US
17:49
Speaker 2: Treasury bonds, but the.
17:49
Speaker 3: State inter governmental tax tax me I was both ways.
17:53
Speaker 2: So in any case, that is apparently being looked at
17:56
Speaker 2: the federal government. Four goes anywhere between thirty two and
17:59
Speaker 2: forty two billion aires, and newly an estimated revenue due
18:01
Speaker 2: to MUNI bond interest. It is a question would this
18:05
Speaker 2: be constitutional?
18:07
Speaker 3: Sorry it was acolag v. Marylyn. I'm an idiot. I
18:09
Speaker 3: should never start quoting cases because I don't know what
18:11
Speaker 3: I'm talking about. Pardon me, But anyway, it is a
18:13
Speaker 3: it is a bedrock.
18:15
Speaker 2: Of our law in any case. As you mentioned some unis,
18:19
Speaker 2: did you say that muni's had taken a bit of
18:20
Speaker 2: a hit over the last week or so, seemingly.
18:23
Speaker 3: Mighty may exactly. My little sample shows a dip. That's
18:28
Speaker 3: not really I saw longer magistrates coming down. I would
18:30
Speaker 3: have expected municipal bond funds, which tend to be longer duration,
18:33
Speaker 3: or at least some of them, depends on the design.
18:35
Speaker 3: I would have expected them to benefit, but they haven't.
18:37
Speaker 2: I think unlikely to happen. But nonetheless, I mean, this
18:39
Speaker 2: would be a massive change to the tax code, and
18:41
Speaker 2: the idea is obviously, hey, we're targeting high income earners
18:45
Speaker 2: in high tech income tax states, is where you're predominantly
18:48
Speaker 2: going to hit people, right California and New York Massachusetts.
18:52
Speaker 2: But you know, certainly, if you're making fifty million dollars
18:56
Speaker 2: in Texas, the idea of buying muni bonds is attractive
18:59
Speaker 2: to you too because of that federal income tax alone.
19:01
Speaker 2: So I'll be interested to see if this gains any traction.
19:04
Speaker 2: It's strange to hear about a tax increase coming from
19:07
Speaker 2: Republicans like this, because it is a direct hit if
19:11
Speaker 2: it go if we're to go through and if it's
19:12
Speaker 2: actually confirmed at the highest income earning Americans out there.
19:16
Speaker 3: Why cut or keep low marginal top marginal rates but
19:19
Speaker 3: then eliminate the exception, It probably probably not overlap this.
19:22
Speaker 2: Yeah, it's it's it's it's fascinating to see this stuff developing.
19:25
Speaker 2: Quick break, we're gonna have the Trivia Winter when we
19:27
Speaker 2: come back, and then a bit about IPO markets coming
19:30
Speaker 2: up next.
19:41
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19:58
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20:09
Speaker 4: Trivia questions today was what is the federal minimum wage
20:12
Speaker 4: right now, I'll be seven dollars in twenty five cents.
20:17
Speaker 4: Mac from Meredith New Hampshire is our winner today, taking
20:19
Speaker 4: home a brand new Financial Exchange Show t shirt. Congrats
20:23
Speaker 4: to Mac and we played trivia every day here on
20:25
Speaker 4: the Financial Exchange. See complete contest rules at Financial Exchange
20:30
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20:32
Speaker 2: There's a piece today in Barns about the IPO market
20:38
Speaker 2: being another casualty of just declining appetite for risk that
20:42
Speaker 2: we are seeing here, and they basically speak to the
20:45
Speaker 2: fact that you know, in twenty twenty one, three hundred
20:48
Speaker 2: eleven companies are listed, whether it was through IPOs or
20:51
Speaker 2: spas or any number of means of going public, and
20:54
Speaker 2: that number has been dramatically down in twenty twenty five.
20:58
Speaker 2: And they point to the core Weav IPO as being
21:02
Speaker 2: a recent failure there that speaks to the overall initial
21:06
Speaker 2: public offering market. And I would just I think I
21:10
Speaker 2: would offer a different opinion there. And I'm not to
21:12
Speaker 2: say that there is a risk off appetite right now.
21:14
Speaker 2: We are clearly seeing that. But just yesterday we had
21:18
Speaker 2: another IPO very different than Core Weave, Newsmax ipo'd yesterday
21:24
Speaker 2: and shot up seven hundred percent if anybody missed it.
21:27
Speaker 2: To be clear, these are like comparing apples and orangutangs.
21:30
Speaker 2: Like the core Weav ipo raised one and a half
21:35
Speaker 2: billion dollars, the Newsmax ipo raised seventy five million. So
21:40
Speaker 2: like we're talking about completely different things here. But I
21:44
Speaker 2: think that there might be some danger in saying, hey,
21:47
Speaker 2: all IPOs are going to go off poorly here, and
21:50
Speaker 2: this is this is just an issue with risk appetite
21:53
Speaker 2: right now. I think there could be a read here
21:56
Speaker 2: with core Weave specifically that hey, there isn't a risks here,
22:00
Speaker 2: there's an AI story here, and investors are not so
22:04
Speaker 2: much worried about IPOs generally, but more specifically related to
22:07
Speaker 2: any companies attached to the artificial intelligence space and the
22:13
Speaker 2: kind of absurd valuations and promises that have been made
22:15
Speaker 2: on that industry over the last few years.
22:17
Speaker 3: Yeah, I don't know if you can generalize. The IPO
22:20
Speaker 3: count has been paltry, really just a trickle since COVID
22:25
Speaker 3: and in the years before COVID. IPOs is compared to say,
22:29
Speaker 3: the very heady days of the nineteen nineties. And this
22:31
Speaker 3: comes from the website of Jay Ritter, who's quoted in
22:36
Speaker 3: this article very helpfully, he publishes his work publicly, or
22:39
Speaker 3: at least some of it. In the nineties, you routinely
22:42
Speaker 3: had a few to several hundred IPOs a year. That
22:46
Speaker 3: shrank to under one hundred in the early two thousands,
22:50
Speaker 3: picked up again to a couple hundred, but never recovered
22:53
Speaker 3: to the levels of the nineteen nineties, probably not surprisingly
22:56
Speaker 3: even in the twenty tens. Okay, I'm making a long
22:59
Speaker 3: story necessarily.
23:01
Speaker 2: No, there is I want to dig in here actually
23:03
Speaker 2: market because because I feel like you're right, there are
23:06
Speaker 2: way fewer public this trend too.
23:10
Speaker 3: The question is are you Are you still on the
23:12
Speaker 3: trend line? And for lots of different reasons, there are
23:16
Speaker 3: few publicly traded companies half as many or fewer than
23:19
Speaker 3: half as many as there were during the nineteen nineties.
23:21
Speaker 3: Part of that is the amount of capital flowing to
23:23
Speaker 3: so called private equity, which is exactly what it sounds like. Oh,
23:27
Speaker 3: we can talk more about PE at some point, Chuck
23:29
Speaker 3: and I think talked about it last week. But there's
23:31
Speaker 3: this long term trend here too, So it's what we're
23:33
Speaker 3: seeing here is consistent with a long term trend.
23:36
Speaker 2: Yeah, and the long term trend, to be clear, is
23:39
Speaker 2: an industry that has now allowed for companies to operate
23:44
Speaker 2: efficiently while private without accessing public markets, and that trend
23:49
Speaker 2: has been towards private equity because as a private company
23:52
Speaker 2: like Uber was, for example, for a way longer time
23:55
Speaker 2: than you probably would have been in the nineties, they
23:57
Speaker 2: were able to continually raise cash through private offerings through
24:01
Speaker 2: private equity firms without needing to tap and to access
24:04
Speaker 2: those public markets until a much later point in their maturity.
24:07
Speaker 2: And that seems to be a trend that we've been seeing,
24:10
Speaker 2: I think since the nineteen nineties of hey, are there
24:13
Speaker 2: ways in which we can run as a private company
24:15
Speaker 2: efficiently and effectively without needing to deal with the IPO,
24:20
Speaker 2: without needing to deal with quarterly filings with the SEC
24:23
Speaker 2: and the compliance with all of this that goes along
24:25
Speaker 2: with it, And don't I don't know if that is
24:27
Speaker 2: a trend because of the burdens and compliance of being
24:31
Speaker 2: a public traded company, or if it's a trend because
24:33
Speaker 2: of a lot more money being in private equity these
24:36
Speaker 2: days than compared to the nineteen nineties. I don't have
24:38
Speaker 2: an answer there. I don't know if you have a
24:40
Speaker 2: theory but it's probably a combination of both. In either way,
24:43
Speaker 2: it's the status quote.
24:44
Speaker 3: Now I'm looking at years using Ritter's data hear, which
24:48
Speaker 3: is available online if you're interested, when IPOs perked up,
24:53
Speaker 3: and they are usually a few to several years after
24:55
Speaker 3: some economic turmoil, which is when commitments to private the
25:00
Speaker 3: commitments to private equity made by pension funds and college
25:03
Speaker 3: endowments and foundations. They typically slow and bad economic times
25:07
Speaker 3: when stocks go down. Why is not important, but if
25:10
Speaker 3: I took them minute to explain it, it would make
25:12
Speaker 3: perfect sense. So firms have to tap the IPO market
25:16
Speaker 3: to unlocked gains into access cap, to unlock realize value
25:20
Speaker 3: for shareholders into access capital. You're seeing that happen according
25:23
Speaker 3: to this Ritter data set exactly as exactly is when
25:28
Speaker 3: you would expect it to. I mangle that sentence, but
25:30
Speaker 3: you know what I mean. But there is an unavoidable
25:34
Speaker 3: long term down trend that's probably attributable to increased access
25:37
Speaker 3: to private equity.
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26:47
Speaker 2: I keep seeing this printed, so I just I have
26:50
Speaker 2: to go and address it a piece today. How eliminating
26:53
Speaker 2: property taxes in Florida could affect the state's real estate market.
26:58
Speaker 2: I'm trying to think of a good analogy to this here,
27:00
Speaker 2: But there is more than one proposal out there right
27:03
Speaker 2: now to eliminate the state of Florida's property taxes because,
27:08
Speaker 2: as anyone who owns property in Florida, no, it's gotten
27:11
Speaker 2: pretty burden sleep burdensomely expensive to do so, between insurance costs,
27:16
Speaker 2: multiple hurricanes over the last few years, and now property
27:18
Speaker 2: taxes going up, it's become pretty darn expensive to live there.
27:22
Speaker 2: And so the proposals that are out there are just, well,
27:24
Speaker 2: let's just do away with the property taxes and will
27:27
Speaker 2: solve homeowners' problems without addressing how you pay firefighters, not like.
27:32
Speaker 3: A Florida solution easy Mike Bottle deposits like.
27:36
Speaker 2: There's been literally no conversation of and we're going to
27:40
Speaker 2: replace that with a sales tax, an income tax, or
27:44
Speaker 2: some other piece of revenue. Like does anyone look at.
27:47
Speaker 3: Florida speeds down there are going to be five miles
27:49
Speaker 3: an hour.
27:49
Speaker 2: Yes, the five miles an hour speed limited, Rabbit.
27:52
Speaker 3: Park, Yeah, tickets track.
27:53
Speaker 2: It's easy to joke about this stuff, but I don't.
27:55
Speaker 2: I don't understand how nobody is coming up and saying, well, yeah,
27:58
Speaker 2: this is a great idea, but where's the money going
28:01
Speaker 2: to come from, Bob. Nobody looks at Florida as a
28:06
Speaker 2: Nobody looks at Florida as a Floridian here as a
28:11
Speaker 2: like horribly inefficiently run government. There's plenty of criticisms I
28:15
Speaker 2: think of the Florida government, But does anybody look at
28:18
Speaker 2: it and say, like, oh, look at all that waste
28:20
Speaker 2: compared to a place like New York, Look at the
28:22
Speaker 2: unfunded pension liabilities and horribly run system of governance there.
28:27
Speaker 2: When it comes to spending, generally, the answer is no
28:30
Speaker 2: when it come off.
28:31
Speaker 3: Does Florida have a good or bad reputation when it
28:32
Speaker 3: comes to services and schools?
28:34
Speaker 1: No?
28:34
Speaker 3: Bad, I don't know bad. That wasn't sarcastic. I know
28:38
Speaker 3: it's I mean, I know it's hard to tell.
28:39
Speaker 2: They don't have like the worst school systems out there.
28:41
Speaker 2: That's that's not you.
28:42
Speaker 3: Don't move down to Florida for the schools.
28:44
Speaker 2: No, generally speaking, no, But in any case, I just this,
28:48
Speaker 2: this conversation about property taxes is a totally fine one
28:51
Speaker 2: to have, and I would like my property taxes to
28:54
Speaker 2: go down. But unless you're just going to say, hey,
28:58
Speaker 2: you know, and by the way, all police and firefighters
29:01
Speaker 2: are laid off and all teachers are laid off too.
29:03
Speaker 2: It's just a silly conversation.
29:05
Speaker 3: Isn't being mathematically illiterate? Has that become a requirement to
29:09
Speaker 3: run for office? Something's changed in the last I don't know,
29:12
Speaker 3: twenty thirty years. Like our leaders are unusually stupid mathematically speaking,
29:17
Speaker 3: like they can't just do the basics.
29:19
Speaker 2: I just I don't even understand how it's a conversation
29:21
Speaker 2: that people are seriously entertaining without Again, you can seriously
29:26
Speaker 2: entertain the conversation, that's fine, But where's the money coming?
29:32
Speaker 3: Can cost twenty five hundred bucks to register your chihuahua
29:35
Speaker 3: with the town. Hey, good news, no property to taxes.
29:39
Speaker 3: Bad news. We've got to get rid of a few
29:41
Speaker 3: of the dogs. I don't know why I use that accent,
29:43
Speaker 3: and not everybody's from the panandle.
29:45
Speaker 2: Uh yeah, I just it's it's a mystery wrapping.
29:49
Speaker 3: We're not on in Florida, right, we are.
29:52
Speaker 2: You can stream us from anywhere in the world mark
29:54
Speaker 2: so hopefully we're that. Yeah.
29:57
Speaker 4: I know they stream us in Europe because they were
29:59
Speaker 4: very glued to the market update from earlier.
30:02
Speaker 2: This South Wow, just trashing on my market? How well?
30:07
Speaker 2: Let's take a quick break. When we come back, Mark
30:09
Speaker 2: and Tucker can come carve into my market updates a
30:12
Speaker 2: little bit further here. I'll be spending all the next
30:14
Speaker 2: segment talking about European stocks. No we want folks.
30:18
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30:21
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30:24
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30:27
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30:30
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30:46
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31:04
Speaker 2: Catherine Edwards from Bloomberg has a column piece in the
31:08
Speaker 2: Page today about the coming recession and being self inflicted,
31:12
Speaker 2: and she makes a point about, you know, the administration
31:15
Speaker 2: being very public about their goals for tariffs and the
31:17
Speaker 2: potential result which they have themselves acknowledged, the possibility of recession.
31:22
Speaker 2: And I've found that incredibly surprising to see from this
31:27
Speaker 2: administration that I can't think of any single present out
31:29
Speaker 2: there said yeah. As a result of my policies. We
31:31
Speaker 2: might get a recession, but it'll be worth it in
31:33
Speaker 2: the long term, and that's been the message. There's one
31:35
Speaker 2: thing that she kind of miscategorizes in my mind, though,
31:38
Speaker 2: which is that we haven't seen prior recessions in the
31:41
Speaker 2: modern era as a direct result of government policy. And
31:46
Speaker 2: I have to say the one in twenty twenty was
31:48
Speaker 2: exactly that. Probably not counting that because it was so unusual,
31:51
Speaker 2: it was incredibly unusually, because it is true though, the
31:53
Speaker 2: FED has induced most recessions in the post war era. Yeah,
31:56
Speaker 2: the FED, not the f excuse me by typically, economy
32:01
Speaker 2: gets to the usual cycle as I know, you know
32:03
Speaker 2: this mic economy gets too hot.
32:05
Speaker 3: FED takes away the punch bowl. That's a colorful way
32:07
Speaker 3: of saying. They tighten the money. They raise interest rates
32:10
Speaker 3: by tightening the money supply. That causes demand to contract.
32:13
Speaker 3: You get a recession, then they start to ease. That
32:16
Speaker 3: is the conventional macroeconomic, so to speak, explanation for most
32:20
Speaker 3: of the post war recessions. A couple in the seventies,
32:23
Speaker 3: though you might blame on oil price increases. That's kind
32:26
Speaker 3: of the consensus among them.
32:27
Speaker 2: But in either case, none prior to twenty twenty that
32:30
Speaker 2: I can think of.
32:31
Speaker 3: None in the history of the world. No one's ever
32:32
Speaker 3: told let's induce a recession but then come out of
32:35
Speaker 3: it stronger. Well, I think Stalin actually tried that ended
32:39
Speaker 3: up killing a lot of people. I'm not saying that
32:41
Speaker 3: these folks want to kill a lot of people. I'm
32:43
Speaker 3: just saying it's reminiscent of the hair brain schemes. And
32:46
Speaker 3: I'm not calling these schemes hair brained, although I'm analogizing
32:49
Speaker 3: them to hair brain hair brain historical schemes of inducing
32:52
Speaker 3: a lot of pain in the like, We're not losing
32:55
Speaker 3: weight here, We're not trying to shrink a tumor. Pardon
32:58
Speaker 3: the analogy where you tolerate the pain because you the
33:00
Speaker 3: benefits are fairly are probable. You don't know how far
33:04
Speaker 3: recession is going to run. You don't know what other
33:06
Speaker 3: ugliness it's gonna let out of Pandora's box. You do
33:09
Speaker 3: not want to induce a recession.
33:10
Speaker 2: That is the multi trillion dollar question in my mind,
33:13
Speaker 2: which is if data, markets and everything else actually begins
33:18
Speaker 2: a genuine downturn, because it make no mistake what we've
33:20
Speaker 2: seen in markets that thus far and what we've seen
33:23
Speaker 2: in economic downturn in economic data thus far, I don't
33:26
Speaker 2: think anyone can accurately describe as a significant pullback.
33:29
Speaker 3: No, but it's it's broad, and it's all in the
33:32
Speaker 3: same direction.
33:32
Speaker 2: Great. And that's the question that I have is will
33:35
Speaker 2: it reach a point where this admitted if it does
33:39
Speaker 2: get bad, which it hasn't yet. But if it does
33:41
Speaker 2: get bad, let's say equity markets sell off by thirty
33:43
Speaker 2: percent and unemployment climbs to five percent, is that going
33:46
Speaker 2: to cause this government to dig in or reverse course
33:49
Speaker 2: on TAM I don't have an answer, Mike.
33:51
Speaker 3: We're not turning the burner down on the stove a
33:53
Speaker 3: little bit here to prevent the pot from boiling or
33:55
Speaker 3: achieve a desired temperature. The economy does not work.
33:58
Speaker 2: It does not.
33:58
Speaker 3: The relationships are wait complex. You can't always connect cause
34:02
Speaker 3: and effect. You might be unleashing something here that nobody
34:06
Speaker 3: can control. I would never tempt fate by provoking a
34:09
Speaker 3: recession or saying I didn't care about it, or I
34:11
Speaker 3: don't care if car prices go up. That Those were
34:14
Speaker 3: just offhanded remarks, not well thought out policy. But you
34:17
Speaker 3: don't know what kind of forces you're unleashing what do
34:21
Speaker 3: you have for us mark on the same kind of
34:23
Speaker 3: the same topic, this idea of demand being pulled forward
34:27
Speaker 3: by the threat of tariffs. The Wall Street Journal has
34:30
Speaker 3: an article today Trump tariff threat mobilizes car shoppers. And
34:33
Speaker 3: I know we've reported on this before and you've all
34:36
Speaker 3: heard it from one source or another. But early results suggest,
34:41
Speaker 3: for example, Hyundai motor retail sales surging fifteen percent in March,
34:47
Speaker 3: Ford retail sales jumping nineteen percent in March, and there
34:51
Speaker 3: are other examples in this Wall Street Journal piece today.
34:54
Speaker 3: The question is what comes next a big let down endurables.
34:58
Speaker 3: Cars are durable goods. Even if the threat of tariffs
35:03
Speaker 3: does not materialize or they're only imposed for a short
35:05
Speaker 3: period of time. The damage and that's almost too strong
35:10
Speaker 3: a word because we don't know the long term impact yet,
35:12
Speaker 3: but the damage may have already been then been done
35:14
Speaker 3: by the uncertainty that this that this fitful tariff policy
35:20
Speaker 3: is wrought.
35:23
Speaker 2: There's an April fool's joke out there from Boston uncovered,
35:26
Speaker 2: which took me entire reading of the article to confirm
35:29
Speaker 2: was an April fool's jokes, So don't fall for it.
35:31
Speaker 2: The NBTA is in fact not rolling out a South
35:35
Speaker 2: station to New York City, no stop train that would
35:39
Speaker 2: have daily tickets available for thirty two dollars apiece.
35:43
Speaker 3: Where does this joke come from?
35:44
Speaker 2: Boston Uncovered.
35:46
Speaker 4: I don't understand the point of doing these jokes, like
35:48
Speaker 4: whether it's also not a funny joke. It's it's all
35:50
Speaker 4: over Instagram. All these companies are making their cute things.
35:55
Speaker 4: You know, new Seltzer is coming out, new beer or
35:59
Speaker 4: whatever or new.
36:00
Speaker 3: Out like whatever.
36:01
Speaker 4: My stop would stop, nobody thinks so funny, stopped away.
36:05
Speaker 2: I thought this one was a little bit funny. So
36:06
Speaker 2: my wife, have you ever, guys, ever heard of less Mills? Yes?
36:10
Speaker 2: I don't know. It's a workout thing. It's like an
36:13
Speaker 2: online workout subscription. They have an app on your TV
36:17
Speaker 2: and you can do yoga and all sorts of different workouts.
36:20
Speaker 2: And my wife has subscribed to her for a few years.
36:22
Speaker 2: I hope I'm not calling around anything that people don't know.
36:24
Speaker 2: It's based out of Australia and it's just a bunch
36:27
Speaker 2: of Aussi's and New Zealanders leading workouts. And their April
36:31
Speaker 2: Fools prank was that they are changing their pronunciation to
36:34
Speaker 2: les Mill and relocating to Paris.
36:37
Speaker 4: It's not funny, though, I'm sorry, just funny funny. I
36:41
Speaker 4: got a text from my wife who thought that the
36:43
Speaker 4: concert that we booked was moving to Gillette Stadium from.
36:48
Speaker 2: Where from like our town? It's like, why is that funny?
36:52
Speaker 4: So now you gott to waste my time answering my
36:54
Speaker 4: wife to tell her it's an April Fool's joke because
36:56
Speaker 4: she thought it was for real.
36:58
Speaker 2: Like, I don't get it, there's no benefit ha ha
37:03
Speaker 2: meat Tucker's in a bad mood. I'm not Tucker. Tucker
37:07
Speaker 2: is unhappy about April.
37:08
Speaker 4: Can't stand April Fools.
37:10
Speaker 2: Can't stand it. I love April Fool's Day. My kids
37:12
Speaker 2: love apri Fols Day. It's my mother's first day.
37:14
Speaker 4: If it's kids, like, fine, it's kids, But like for adults, Like, why,
37:18
Speaker 4: as a company, do you need to play a joke
37:20
Speaker 4: on your consumers?
37:21
Speaker 1: Yeah?
37:22
Speaker 3: I don't find it funny.
37:23
Speaker 2: Yeah I don't. I don't really find the corporate April
37:25
Speaker 2: Fools pranks terribly funny. All I'm seeing today, Yeah, okay.
37:29
Speaker 3: I'm not buying any of your stuff ha ha ha.
37:32
Speaker 2: Yeah, Like geez us markets have made a sharp turn
37:36
Speaker 2: positive for the day. The Dow Jones Industrial Average is
37:39
Speaker 2: up thirty points, closing in on one tenth of a
37:41
Speaker 2: percent upwards, the sm P five hundred up twenty one
37:45
Speaker 2: points or a little bit more than a third of percent,
37:47
Speaker 2: the Nasdaq up one hundred and forty points or eight
37:49
Speaker 2: tenths of a percent, and even the Russell two thousand
37:52
Speaker 2: closing in on a forty basis point gain for the day.
37:56
Speaker 2: Yield in the tenure continuing sharply downward, which I find
37:59
Speaker 2: very thing. You have equities up as well as bonds up.
38:03
Speaker 2: Yield in the tenure now sitting at four point one
38:05
Speaker 2: point five, you'll start to feel that on mortgage rates.
38:08
Speaker 2: If it continues, we will be back tomorrow, and it
38:11
Speaker 2: is a big day tomorrow, as the White House is
38:13
Speaker 2: reportedly considering twenty percent tariffs on most imports. We'll be
38:16
Speaker 2: covering it all live here on the Financial Exchange tomorrow