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Can the construction industry survive with tariffs and deportations? · The Financial Exchange Show

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Speaker 2: Good morning, Welcome back to the Financial Exchange. Happy December.
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Speaker 2: back to the Financial Exchange. This morning at ten am,
1:37
Speaker 2: we receive some economic data from the Labor Department, the
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Speaker 2: Job Openings Labor Turnover Survey, basically indicating the same thing
1:45
Speaker 2: it has for the last several months, which is a
1:46
Speaker 2: stagnating but still strong labor market. There's still some churn
1:50
Speaker 2: to it, but seven and a half million jobs open
1:56
Speaker 2: right now. Total separations rate at around three point three percent,
2:00
Speaker 2: and for some context, that's around levels that we were
2:02
Speaker 2: seeing back in the mid twenty tens, which is probably
2:06
Speaker 2: why people are responding to surveys right now saying yeah,
2:09
Speaker 2: not terribly happy with the state of the job market
2:11
Speaker 2: at the moment. Dow Jones Industrial average off one hundred
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Speaker 2: and forty one points a third of a percent this morning,
2:16
Speaker 2: SMP down six and a half or a tenth of
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Speaker 2: a percent, and the NASDAC up about twenty five points,
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Speaker 2: about one tenth of a percent as well. Yield on
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Speaker 2: the ten year treasury now up for the day, up
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Speaker 2: over four point two percent, and the price for a
2:31
Speaker 2: barrel of oil on West Texas crewed sixty nine dollars
2:34
Speaker 2: and sixty six cents. I have been rather enjoying all
2:37
Speaker 2: of the under three dollars a gallon gas price. That's
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Speaker 2: what I was saying. That that's been a good feeling
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Speaker 2: around here. Any other thing else catching your eyes this
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Speaker 2: morning in markets or data, Paul, No, I think we
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Speaker 2: hit it so peace from the Wall Street Journal. Construction
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Speaker 2: industry bracing for a one to two punch tariffs and deportation.
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Speaker 2: So let's focus in on this construction industry for a moment,
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Speaker 2: which is, you know, for better or worse. Definitely very
3:04
Speaker 2: reliant on imports. We import most of the different pieces
3:11
Speaker 2: of the construction industry in one shape or another, whether
3:13
Speaker 2: it is you know, raw construction materials like lumber, whether
3:17
Speaker 2: it is garage, doors and windows. We do end up
3:21
Speaker 2: importing a lot of this, and so with tariffs potentially
3:25
Speaker 2: going into place, I can see why construction companies might
3:28
Speaker 2: be a little bit concerned. And then, according to some
3:31
Speaker 2: surveys that are out there, the portion of the construction
3:36
Speaker 2: industry that is comprised of undocumented workers, which I would
3:41
Speaker 2: take anything on this front with a grain of salt,
3:43
Speaker 2: because by its very nature, you're serving people about an
3:46
Speaker 2: activity that's illegal. So are you one hundred percent right
3:49
Speaker 2: on this? I doubt it. But undocumented workers make up
3:52
Speaker 2: an estimated thirteen percent of the overall construction industry, which
3:56
Speaker 2: is more than twice that of the overall workforce according
3:59
Speaker 2: to an estimate from the Pew Research Center. And you know,
4:02
Speaker 2: one step further, immigrants make up more than half of
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Speaker 2: construction trade workers. And why that's important is, let's say
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Speaker 2: you are a first generation immigrant living in the United States.
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Speaker 2: You are very likely to have some family members who
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Speaker 2: are undocumented immigrants. Might be a spouse, might be a parent,
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Speaker 2: And if you end up in a place where, hey,
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Speaker 2: that person's been deported, you're less likely to stay in
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Speaker 2: the United States because of that, even if you are
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Speaker 2: documented doing everything properly, and so the construction industry. I
4:32
Speaker 2: don't know to what degree they actually have something that
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Speaker 2: could be concerned about, but you know, we talk about
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Speaker 2: the economic side of a lot of these things, and
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Speaker 2: you know, in addition to tariffs, in addition to lower taxes,
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Speaker 2: I think it's pretty clear that the Trump administration is
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Speaker 2: going to have some very no nonsense, zero tolerance policies
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Speaker 2: towards illegal immigration and likewise look at deportations as a
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Speaker 2: tool that they intend to That's what it seems like.
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Speaker 3: How effective can those be or how much enforcement will
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Speaker 3: we see in that area?
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Speaker 2: Is anybody guess?
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Speaker 3: Anyone's guess? You know there. I think I do have
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Speaker 3: some skepticism how effective you are going to be in deportations.
5:14
Speaker 3: I'm sure that the headlines that they'll garner will indicate
5:17
Speaker 3: that they are. But the bottom line is, from an
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Speaker 3: economic policy standpoint, and we've talked about this ad nauseum
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Speaker 3: is tariffs and the idea of deportations in some of
5:27
Speaker 3: these industries are going to be inflationary. That's just the
5:30
Speaker 3: bottom line. That's going to be the impact. I'm all
5:32
Speaker 3: for legal documented immigrants in these spaces, because, to be clear,
5:38
Speaker 3: if you are to deport a significant amount of workers
5:42
Speaker 3: in the construction industry, for example.
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Speaker 2: Well, they wor building homes first, there's not a.
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Speaker 3: Lot of people who are going to take on. Mike
5:49
Speaker 3: talked about in the first hour of the show that
5:51
Speaker 3: the target the prime age working population from ages twenty
5:55
Speaker 3: five to fifty for the percentage of those people working
5:58
Speaker 3: at this point in time in the United States eighty
6:00
Speaker 3: point six percent, high that we haven't seen since twenty
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Speaker 3: sixteen or close to the late nineties, early two thousand.
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Speaker 3: So play that on your mind and think about if
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Speaker 3: these jobs become available because undocumented immigrants are deported. Who
6:14
Speaker 3: wants to frame or lay pipe in one hundred degree
6:17
Speaker 3: weather in Texas? You know, these are not aenviable jobs
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Speaker 3: all the time, and.
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Speaker 2: So yeah, good paying, but they're tough.
6:23
Speaker 3: They're very difficult jobs. And if you have a prime
6:25
Speaker 3: working population where you're sitting at eighty one percent of
6:28
Speaker 3: the people working, it's hard to find the backfill for it.
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Speaker 3: So I'm all for, you know, legal document integration. I
6:34
Speaker 3: feel as if there is a lot of effort and
6:36
Speaker 3: work that should be done in that space, but it's
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Speaker 3: just you're gonna have to be careful when you import
6:40
Speaker 3: millions of dollars of cement and iron and steal from
6:43
Speaker 3: the other countries. Increasing tariffs and lessening the workers in
6:47
Speaker 3: a workspace is going to lead to potentially more inflationary pressers.
6:51
Speaker 2: I'm also just constantly flabbergasted by our approach to dealing
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Speaker 2: with this problem. And you just think about the cost
6:59
Speaker 2: of employing ice agents, of raiding places and deporting people
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Speaker 2: who just constantly find their way back into the United States.
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Speaker 2: The criminal penalty, according to the US Code, for any
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Speaker 2: person who engages in a pattern or practice of violations
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Speaker 2: of the subsection when it comes to employing illegal immigrants,
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Speaker 2: shall be fined not more than three thousand dollars. Now
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Speaker 2: that for each unauthorized alien with respect to the violation
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Speaker 2: that occurs. But that is the criminal penalty for employing
7:33
Speaker 2: illegal immigrants in this country. Who is that going to
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Speaker 2: deter Wouldn't it be a lot easier to just publicly,
7:41
Speaker 2: really make a big deal of this, pass a bunch
7:45
Speaker 2: of laws that say, look, if you go and do this, like,
7:47
Speaker 2: we're going to create a path where you can get
7:50
Speaker 2: documented people to work in your jobs. We're going to
7:52
Speaker 2: create a path for citizenship, We're going to create a
7:54
Speaker 2: path for legal work permits so that you will not
7:57
Speaker 2: be burdened by all this. But if you can, you
8:00
Speaker 2: need to break the rules. Pay people in cash and
8:01
Speaker 2: don't pay taxes, and pay under domrements, penalize the employer,
8:05
Speaker 2: and actually stop the economic side of this problem, because
8:08
Speaker 2: all you are doing now is paying millions of dollars
8:12
Speaker 2: to block people from coming in, deport them on planes, buses,
8:17
Speaker 2: and other and other means of doing so, which are
8:19
Speaker 2: outrageously expensive, rather than just go after the economic incentives.
8:23
Speaker 2: I recognize why this doesn't happen because those employers happen
8:27
Speaker 2: to be very well connected individuals that have lobbyists that
8:31
Speaker 2: have a lot of means to go in there and
8:33
Speaker 2: make a big deal of this in other ways. But
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Speaker 2: it is just preposterous, Like the the incentives here are
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Speaker 2: massive for you to just find that undocumented person, employ them,
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Speaker 2: pay them in cash. You don't have to pay any
8:48
Speaker 2: payroll taxes, you don't have to pay any health insurance,
8:50
Speaker 2: you don't have to do anything in that front, and
8:52
Speaker 2: we barely penalize them when we catch them. Tell me
8:55
Speaker 2: the last person that served, you know, legitimate prison time
8:59
Speaker 2: for employing a labor force of undocumented undocumented immigrants. I
9:04
Speaker 2: bet I can't even find a story on it. So again,
9:08
Speaker 2: I'm always in favor of economic solutions these problems because
9:11
Speaker 2: that's how you actually fix them.
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Speaker 1: Right.
9:13
Speaker 2: If you have a serious, you know, undocumented immigration problem
9:18
Speaker 2: in this country, fix the economic problems that incentivize people
9:21
Speaker 2: to come here, which are darn good paying jobs and
9:25
Speaker 2: a government that doesn't really care or at least turns
9:28
Speaker 2: a blind eye to those people receiving the under the
9:32
Speaker 2: table work for those darn good paying jobs. Construction is
9:35
Speaker 2: just an example. I mean, I mean, the same thing exists
9:37
Speaker 2: in hospitality, the same king exists in childcare and many
9:40
Speaker 2: other areas as well, house cleaning, all sorts of different
9:44
Speaker 2: areas where if you just remove the economic incentive for it,
9:48
Speaker 2: you'll fix the issue a lot faster than building a
9:50
Speaker 2: border wall.
9:51
Speaker 3: So good. I'm not in politics.
9:52
Speaker 2: Yeah me too. Let's take a quick break. When we
9:54
Speaker 2: come back. I want to talk a little bit about
9:57
Speaker 2: the already coming to the surface of the China tit
10:02
Speaker 2: for tat trade policies. And that's before Trump takes office.
10:06
Speaker 2: That's next year. On the Financial Exchange.
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10:39
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11:33
Speaker 2: The way, we were talking about the construction industry, tariffs,
11:35
Speaker 2: immigration reform in the prior segment, and I was looking
11:39
Speaker 2: for a little bit day like who actually does get
11:41
Speaker 2: prosecuted for this? In twenty twenty three, which is the
11:44
Speaker 2: only year I could find information on, fewer than a
11:47
Speaker 2: dozen employers were prosecuted for hiring immigrants who did not
11:52
Speaker 2: have proper documentation, according to Secure Syracuse University's Transactional Records
11:57
Speaker 2: Access Clearinghouse. So fewer than a dozen employers were charged
12:02
Speaker 2: in all of the United States in all of twenty
12:05
Speaker 2: twenty three for employing illegal labor, which I guess just
12:10
Speaker 2: means that there were fewer than a dozen that actually
12:11
Speaker 2: did so exactly. Yeah, that's that's the facts. On the
12:15
Speaker 2: other hand, there were nearly thirteen hundred cases in which
12:20
Speaker 2: migrants were prosecuted for illegally entering the country, which also
12:23
Speaker 2: seemed small more than six thousand prosecutions for bringing in
12:27
Speaker 2: and harboring certain aliens. So again, want to fix the problem,
12:32
Speaker 2: go after the economic incentives. Otherwise it's just not going
12:35
Speaker 2: to work. China a bit of a tit for tat here,
12:38
Speaker 2: targeting rare earth materials in response to President Biden's new
12:44
Speaker 2: announcement of tariffs on export of semiconductors and technology products,
12:49
Speaker 2: China announce an outright ban on exports of several materials
12:52
Speaker 2: with both high tech and military applications. And yeah, I
12:57
Speaker 2: think this is trying to show a strong face here
13:02
Speaker 2: as the Biden administration wraps up their last few months
13:05
Speaker 2: and we head into what will likely be increased talks
13:09
Speaker 2: but also increase ratcheting up of tensions between the US
13:13
Speaker 2: United States and China and trade.
13:14
Speaker 3: Yeah, I'm not going to pretend to know germanium and gallium.
13:17
Speaker 3: And you know how.
13:19
Speaker 2: Wildly gallium in my coffee every morning, Actually, how wildly
13:22
Speaker 2: viewed drips of gallium really gets you going.
13:24
Speaker 3: You know, my chemistry and element knowledge is really pretty minimal.
13:30
Speaker 3: But it does speak to the larger trend that we've
13:32
Speaker 3: seen in general that the United States has made a
13:36
Speaker 3: very big focus on the chip side of things to
13:37
Speaker 3: make sure that they're limited in terms of what gets
13:40
Speaker 3: exported to China. And like you said, vice versa. Now
13:43
Speaker 3: China trying to show some strength on the other side
13:45
Speaker 3: of things. And to your point, we're only going to
13:48
Speaker 3: see more and more of this and the concerns with
13:51
Speaker 3: the idea of global tariffs is that we're not going
13:55
Speaker 3: to be dealing with China in this tip for tax exchange.
13:58
Speaker 3: It's going to be others that retally, potentially.
14:01
Speaker 2: We will see again. It's when we talk about this stuff,
14:05
Speaker 2: it is just incredibly difficult to know unless you are
14:09
Speaker 2: literally down at mar Lago in the room to understand
14:12
Speaker 2: which of these are negotiating tactics and which ones are serious.
14:15
Speaker 2: My hope is that you take this moment and really
14:19
Speaker 2: use it to stick at the China and get them
14:22
Speaker 2: to the negotiating table, because, unlike in other times, unlike
14:26
Speaker 2: in the twenty tens, unlike over the last few years,
14:29
Speaker 2: you've got China on the ropes. Right now. They are
14:32
Speaker 2: facing backlash from a number of their key allies from Indonesia,
14:36
Speaker 2: Pakistan to Brazil who are frustrated about, you know, the
14:40
Speaker 2: same things that we are, the Chinese dumping cheap products
14:43
Speaker 2: onto their markets and putting their local manufacturers out of business.
14:46
Speaker 2: If you're in Brazil and trying to sustain a local
14:49
Speaker 2: vehicle manufacturing market, good luck when China is dumping evs
14:54
Speaker 2: with far better technology into your market at way discounted
14:58
Speaker 2: and subsidized prices, and so if you can build something here.
15:01
Speaker 2: And I recognize that we probably see very little eye
15:06
Speaker 2: to eye with Indonesia, Pakistan and Brazil when it comes
15:09
Speaker 2: to policy, politics, economics and trade. There's not a lot
15:13
Speaker 2: of common allies we have there. But if you can
15:16
Speaker 2: at least get people to say, yeah, some of these
15:18
Speaker 2: practices by the Chinese government are unreasonable and we are
15:24
Speaker 2: going to it doesn't need to be a coalition, it
15:27
Speaker 2: doesn't need to be allies. We don't need to have
15:29
Speaker 2: a military defense pact, but simply agree on one thing,
15:32
Speaker 2: which is trade practice is coming out of China are unreasonable,
15:35
Speaker 2: unfair for global trade. Then that seems to be something
15:39
Speaker 2: that a lot of countries can get on board with
15:41
Speaker 2: and agree with and say change this behavior or we're
15:44
Speaker 2: not going to deal with it anymore.
15:46
Speaker 3: Yeah, it's incredible. You know the fact that Brazil one
15:50
Speaker 3: of the large suppliers of iron ore, it's cheaper for
15:53
Speaker 3: them to ship that iron ore ten thousand miles out
15:56
Speaker 3: to China and have it come back as steal rather
15:59
Speaker 3: than producing it locally. That to me is just mind blowing.
16:02
Speaker 2: Yeah. And Europe here too, right, Like if you're Germany,
16:05
Speaker 2: you're concerned about all this. There are Let's face it,
16:09
Speaker 2: Indonesia and Pakistan are not exactly economic powerhouses. But India is,
16:14
Speaker 2: the European Union, absolutely is Germany. We are talking about
16:17
Speaker 2: big countries that share our concerns about a lot of
16:19
Speaker 2: this stuff. The problem is those concerns differ country by country.
16:23
Speaker 2: Right if you're Brazil, you really want that iron ore
16:26
Speaker 2: manufactured over there, you really want some of these trade
16:29
Speaker 2: relationships with China, and you likely can't afford to go
16:34
Speaker 2: it your own. But if you've got a number of
16:37
Speaker 2: countries forming a coalition to go and attack this type
16:39
Speaker 2: of thing, that's where I'm hopeful we'll see some progress
16:42
Speaker 2: over the next few years when it comes to trade
16:44
Speaker 2: with China. Not hey, the US is slapping tariffs on
16:47
Speaker 2: China and everybody else, but rather, hey, we all agree
16:51
Speaker 2: that this is a real problem. Let's go fix it.
16:55
Speaker 2: Changing gears here, General Motors exiting a Michigan electric vehicle
16:59
Speaker 2: bat replant that they had invested in and announced back
17:02
Speaker 2: in twenty twenty two. There's a two point six billion
17:05
Speaker 2: dollar facility that they were working on with their Korean partner,
17:10
Speaker 2: LG Energy. It was gonna be in Lansing, Michigan thirty
17:15
Speaker 2: football fields. In terms of the size of this thing,
17:19
Speaker 2: they had been planning to produce over one million electric
17:22
Speaker 2: vehicles by twenty twenty five. I don't think I need
17:24
Speaker 2: to tell anybody that they have backed way off of
17:26
Speaker 2: those plans, and I think probably are calling into doubt
17:30
Speaker 2: whether or not the EV tax credit will still exist
17:32
Speaker 2: come twenty twenty five, twenty twenty six, and so taking
17:36
Speaker 2: a look at their plans and acting some of them
17:38
Speaker 2: when it makes sense to do so, which I think
17:39
Speaker 2: is probably a smart step by them at the moment.
17:42
Speaker 3: GM's been doing this all year long. It seems like
17:44
Speaker 3: they've been cutting back on investment in evs, and this
17:46
Speaker 3: is just another headline that comes to mind here the
17:49
Speaker 3: stocks up over fifty percent year day. It's really, from
17:52
Speaker 3: an investor standpoint, been lauded for its efforts to cut
17:56
Speaker 3: back on some of these expenses. I can't emphasize in
17:58
Speaker 3: us how much they were hounding on the table in
18:00
Speaker 3: twenty twenty two because we were covering the articles on
18:02
Speaker 3: the show that EV's were the future. They were invest
18:05
Speaker 3: billions of dollars and that was another way to try
18:07
Speaker 3: and stoke their stock price. At that point in time,
18:10
Speaker 3: and there were a lot of us who said that, gee,
18:13
Speaker 3: they're really putting a lot of chips in. I guess
18:15
Speaker 3: they didn't fully put the chips in and get the
18:17
Speaker 3: capitol and.
18:19
Speaker 2: Watch what I do, not what I say exactly. Yeah,
18:21
Speaker 2: I think that's the key takeaway. I think GM, especially
18:24
Speaker 2: compared to Ford and Stilantis, has just been executing a
18:27
Speaker 2: lot better over the last few years. They do have
18:29
Speaker 2: a lot of EV's by the way, you go take
18:31
Speaker 2: a look at Chevy's web page and go take a
18:32
Speaker 2: look at all your options there. There are a bunch
18:34
Speaker 2: of them. But I think honestly they're executing on gas
18:38
Speaker 2: powered vehicles, which is where the demand is, and they're
18:41
Speaker 2: also doing some really interesting stuff on the autopilot self
18:45
Speaker 2: driving features that Tesla is so famous for. Go take
18:48
Speaker 2: a look at Chevy. You know, the GM Supercruise product.
18:51
Speaker 2: In terms of the number of miles that can handle
18:54
Speaker 2: and the technology there, it's probably not quite where Tesla is,
18:57
Speaker 2: but it's not that far behind. So yeah, that's an
19:01
Speaker 2: area that I think they're interested in investing in, and
19:04
Speaker 2: they're probably assuming, look, this EV stuff will develop, but
19:07
Speaker 2: we don't need to be the ones to lay the
19:09
Speaker 2: groundwork for it. We know how to build these things
19:11
Speaker 2: at this point. We know where we can source this stuff.
19:14
Speaker 2: If the demand ends up showing up, we know how
19:16
Speaker 2: to make them. We don't need to create the demand
19:19
Speaker 2: because that's not usually a it's not usually a thing
19:22
Speaker 2: that works very well trying to attempt to create demand
19:24
Speaker 2: on behalf a company. Let's say a quick break. When
19:26
Speaker 2: we come back, we'll have the trivia for Trivia Winner
19:29
Speaker 2: and then talk more about the big changes over at Intel.
19:32
Speaker 2: That's next.
19:41
Speaker 5: Bringing the latest financial news straight to your radio. Every day.
19:45
Speaker 5: It's the Financial Exchange on the Financial Exchange Radio Network.
19:51
Speaker 5: Text us at six one seven three, six two one
19:54
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19:58
Speaker 5: stories we are covering. This is the Financial Exchange Radio Network.
20:05
Speaker 4: Triviute question today was who is the current CEO of
20:08
Speaker 4: Google parent company Alphabet Well, that will be Soundar Putchai.
20:12
Speaker 4: Pachai joined Google in two thousand and four, where we
20:15
Speaker 4: led the product management and innovation efforts for a suite
20:18
Speaker 4: of Google's client software products, including Google Chrome Winner. Today
20:24
Speaker 4: of the Financial Looks Change Show t show was Bobby
20:26
Speaker 4: from Revere, Mass Congrats to Bobby, and we played trivia
20:30
Speaker 4: every day here on the Financial looks Change. See complete
20:33
Speaker 4: contest rules at Financial Exchange show dot com.
20:37
Speaker 2: We mentioned yesterday on the show that Intel CEO Pat
20:39
Speaker 2: Gelsinger is out. The stock had lost sixty one percent
20:43
Speaker 2: of its value between Gelsinger's first day on the job
20:46
Speaker 2: back in early twenty twenty one and Friday's close, and
20:50
Speaker 2: the company is looking for a shake up very clearly,
20:54
Speaker 2: and desperate need of one as they struggle to compete
20:58
Speaker 2: in the semiconductor industry. It has frankly changed a lot,
21:02
Speaker 2: as it always does over the last decade. What I've
21:06
Speaker 2: struggled with is, let's take Boeing for an example, another catastrophe,
21:11
Speaker 2: dumpster fire of a company over the last five to
21:14
Speaker 2: ten years. While implementing the solution to the problems is
21:19
Speaker 2: going to be complicated, and there's been labor deals and
21:21
Speaker 2: all sorts of things, It's been pretty clear what Boeing
21:24
Speaker 2: needs to do. They just need to have better manufacturing
21:27
Speaker 2: processes so that their planes don't fall apart in the air. Right,
21:30
Speaker 2: that's immensely complicated. I'm not saying that I have any
21:33
Speaker 2: way to do that. But you can name the problem
21:37
Speaker 2: and you can say this is how we're going to
21:38
Speaker 2: fix it. Can you name the problem at Intel, because
21:42
Speaker 2: I really struggle to do so, Okay, okay, give it
21:45
Speaker 2: to me, because I have a tough time naming how
21:47
Speaker 2: they're going to fix this company.
21:49
Speaker 3: Oh, I don't know how to fix it, but I
21:51
Speaker 3: can tell you what the problem is. The problem is
21:52
Speaker 3: basically they're stuck between two different errors of computing and
21:57
Speaker 3: they no longer preside with any advantage of their eyeb
22:00
Speaker 3: So very simply put, there are two different types of
22:03
Speaker 3: computer chips out there. There are GPUs graphic processing units,
22:07
Speaker 3: or there are CPUs, I believe, computing processing units. CPUs
22:11
Speaker 3: were used in very basic PCs and were the foundation
22:16
Speaker 3: of Intel's success over the course of the last twenty
22:18
Speaker 3: or thirty years. They were big in manufacturing these basic
22:22
Speaker 3: CPU chips. Now the industry has evolved to a point
22:26
Speaker 3: where first of all, they're losing market share in that
22:29
Speaker 3: traditional sort of CPU server business where Advanced micro Devices
22:33
Speaker 3: is a company that you may have heard about a lot,
22:35
Speaker 3: they're gaining market share there. And then on the other
22:38
Speaker 3: side of it, on the GPU side, that's all about
22:40
Speaker 3: in Nvidia the graphics processing unit chips they're used initially
22:44
Speaker 3: was in gaming now and all the AI stuff we
22:46
Speaker 3: talk about. Those chips are critical, so they're in neither
22:48
Speaker 3: part of those. They are no longer the foothold on
22:51
Speaker 3: either one. They've made the strategic pivot to focus more
22:55
Speaker 3: on this idea of manufacturing chips. So to be clear,
22:59
Speaker 3: in Vidia and any others out there like Zion Bitch,
23:01
Speaker 3: they design it, they create the design for it, but
23:04
Speaker 3: in terms of actually putting the thing together, Taiwan's semiconductor
23:08
Speaker 3: is the biggest one in terms of the manufacturing out there.
23:11
Speaker 3: Samsung does some too, So Intel has gone through the
23:14
Speaker 3: strategic pivot of okay, we're in to manufacture. When you're
23:17
Speaker 3: talking about technology, it's not like you're manufacturing a house
23:21
Speaker 3: or a office space. This technology is. It's really capital intensive.
23:25
Speaker 3: It's constantly evolving to what you may be trying to
23:28
Speaker 3: set out to manufacture might get unseeded by a new
23:31
Speaker 3: technology that is better and more efficient. So that's the
23:34
Speaker 3: issues that they're in no man's land. They didn't take
23:36
Speaker 3: enough steps to anticipate the mobile demand. They didn't take
23:40
Speaker 3: enough steps to potentially acquire and video back in the day.
23:43
Speaker 3: They just have missed so many opportunities. And now to
23:46
Speaker 3: answer the question that I can answer is where do
23:49
Speaker 3: you go from here? What is the strategic move because
23:51
Speaker 3: the manufacturing endeavor which is going to be subsidized by
23:55
Speaker 3: the US.
23:55
Speaker 2: Yeah, you're talking about seven and a half billion dollar
23:57
Speaker 2: investment from the US government here. If they can actually
24:01
Speaker 2: execute on any of.
24:01
Speaker 3: It huge part. Can they execute Thailand Semiconductor the manufacturing
24:05
Speaker 3: side of this TSM, they are fifteen twenty years ahead
24:10
Speaker 3: of Intel when it comes to this type of just
24:12
Speaker 3: accrude knowledge in the space. So it's just going to
24:14
Speaker 3: be a real uphill battle.
24:17
Speaker 2: And she talks about spinning off that manufacturer business, but
24:19
Speaker 2: then there's big questions. Okay, so who's the acquirer? Is
24:23
Speaker 2: there a US company that would consider doing it? Because
24:26
Speaker 2: if there's not, then you're not going to get the subs.
24:29
Speaker 2: You know, you're not going to get the US government investment.
24:30
Speaker 2: If Taiwan Semi goes and picks this thing up, because
24:33
Speaker 2: they're looking for US companies, there's no Korean or Japanese
24:37
Speaker 2: company likely that's going to pass those checks. And so
24:40
Speaker 2: you're in this business now where there's big government incentives
24:43
Speaker 2: to do it. You probably can't sell it off, you're
24:46
Speaker 2: not executing well on it, and you've had a missed
24:49
Speaker 2: decade of investment to catch up on the AI side
24:52
Speaker 2: of the design because they also do chip design in
24:54
Speaker 2: house and they're not cutting edge there either. So yeah,
24:58
Speaker 2: good job defining the problem. I don't know how you
25:02
Speaker 2: fix it without without a massive investment, or just stripping
25:05
Speaker 2: this company for the parts. I don't know how you
25:07
Speaker 2: go about fixing it.
25:08
Speaker 3: And you're getting to the point where the stock is,
25:10
Speaker 3: you know, sixty one percent off of its value in
25:12
Speaker 3: twenty twenty one, making it an activist target or a
25:16
Speaker 3: takeover target due to you know its market cap.
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26:20
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26:22
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26:30
Speaker 2: All Right, So we just spent five minutes ripping apart. Intel,
26:33
Speaker 2: you want to give some compliments out.
26:36
Speaker 3: They've historically been a fantastic com.
26:39
Speaker 2: I'm not talking about it, Intel, Let's talk about ATNT,
26:41
Speaker 2: because here's actually a story of I think some good
26:45
Speaker 2: lessons in just business management and you know, making big bets.
26:50
Speaker 2: So AT and T has made some very big bets
26:54
Speaker 2: over the last decade, and I can't really think of
26:57
Speaker 2: many of them that have panned out well. Position of
27:00
Speaker 2: Direct TV, acquisition of HBO, Time, Warner, all of these
27:03
Speaker 2: tie ups in the media business, they have since been
27:07
Speaker 2: spinning off and getting back to basics. And I think
27:10
Speaker 2: there's an important lesson in here for AT and T,
27:13
Speaker 2: but I think for many executives, which is, don't try
27:16
Speaker 2: to be everything to everybody, all right, like AT and
27:20
Speaker 2: T does have and a decade ago, had a dominant
27:26
Speaker 2: space in a few different businesses, and they did it really,
27:29
Speaker 2: really well. Their wireless service was arguably only second to
27:34
Speaker 2: Verizon Wireless and still is today and has a fantastic reputation.
27:38
Speaker 2: Their broadband internet same store. You've got this almost utility
27:42
Speaker 2: type company with a lot less regulation than a utility company,
27:47
Speaker 2: and was incredibly profitable. And their decision was, Hey, instead
27:51
Speaker 2: of returning those profits to shareholders, We're going to go
27:54
Speaker 2: out there and make some acquisitions because we think that
27:56
Speaker 2: we know how to run a satellite TV business. Turned
27:59
Speaker 2: out they did not know how to run a satellite
28:00
Speaker 2: TV business or a content media creation business like HBO,
28:05
Speaker 2: and they were dumpster fires. And so the new CEO
28:08
Speaker 2: here has rolled that stuff out. They have you know,
28:12
Speaker 2: successfully gotten rid of their Direct TV as well as
28:16
Speaker 2: their Warner Brothers units and spun them off. Probably still
28:19
Speaker 2: has some tie ups there in terms of where they
28:21
Speaker 2: generate some revenue and profit, but they're not running them anymore.
28:25
Speaker 2: And the stock over the last twelve months is up
28:27
Speaker 2: forty one percent, so up thirty six percent just so
28:30
Speaker 2: far this year. So very much a back to basics
28:33
Speaker 2: on the part of the CEO here. But honestly, if
28:36
Speaker 2: you're if you're you're basically a regulated utility company. If
28:40
Speaker 2: you're AT and T or Horizon, you had no business
28:44
Speaker 2: trying to run a creative business like HBO. In my view,
28:48
Speaker 2: Big Bet did not pan out. But again a good
28:51
Speaker 2: lesson here to say, hey, when things not working very well,
28:55
Speaker 2: take the loss, move on and get back to your
28:58
Speaker 2: core competencies, which are again growing and profitable.
29:02
Speaker 3: And it's a similar story to what we talked about
29:04
Speaker 3: with GM, you know, get back to your core competency,
29:06
Speaker 3: which is selling your gas powered vehicles, and focus on
29:09
Speaker 3: the evs that will later date when the demand's there.
29:12
Speaker 3: At and T still has a long way to go.
29:14
Speaker 3: I think you're right. They've certainly made great inroads the
29:17
Speaker 3: acquisition of Warner Brothers. You can't just eighty billion dollars.
29:21
Speaker 3: We're talking about here back in twenty eighteen, and another
29:24
Speaker 3: forty nine billion for Direct TV. As a result of that,
29:26
Speaker 3: they sit on one hundred and twenty six billion of
29:29
Speaker 3: net debt through the end of September. It's down from
29:32
Speaker 3: their peak of one hundred and seventy billion and twenty nineteen.
29:35
Speaker 3: So they're making progress, but still a lot of debt
29:37
Speaker 3: on the books. But focusing back on their core competencies
29:39
Speaker 3: has put them in a much better spot from a
29:41
Speaker 3: stock perspective. They did hit a peak market cap back
29:44
Speaker 3: in twenty nineteen of two hundred and eighty nine billion.
29:47
Speaker 3: Now we sit at close to half of that at
29:49
Speaker 3: one hundred and sixty four billion, a little bit over.
29:52
Speaker 3: So there's some ways to go, but making the right
29:54
Speaker 3: strive in the right direction. I think the stock was up,
29:56
Speaker 3: you know, four or five percent today on some of
29:58
Speaker 3: their recent numbers.
29:59
Speaker 2: Let's take a qu quick break when we come back.
30:01
Speaker 2: Bit a stack roulette here on the Financial Exchange.
30:04
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31:11
Speaker 2: We had an email or text come into the program
31:14
Speaker 2: from Linda who worked for the Connecticut Teachers Well, she
31:19
Speaker 2: worked in a job that she was eligible for the
31:21
Speaker 2: Connecticut Teachers Retirement Board and in that job did not
31:24
Speaker 2: pay into Social Security. But her point was, look, I
31:26
Speaker 2: started working when I was sixteen years old, paid into
31:28
Speaker 2: Social Security for a number of years. You know, was
31:31
Speaker 2: earned and was covered by both Social Security and my
31:36
Speaker 2: job through the state, and you know, should be in
31:40
Speaker 2: my view, in her view, eligible for both. And I
31:43
Speaker 2: think she brings up a very valid point. She is
31:45
Speaker 2: subject to what we called the windfall elimination provision, and
31:49
Speaker 2: I tend to agree if you paid into both of
31:51
Speaker 2: them personally for your own work, then you should be
31:54
Speaker 2: eligible to collect from both. And I don't really think
31:56
Speaker 2: that either of them should be eliminated or hit based
31:59
Speaker 2: on the fact that, hey, you didn't pour into Social
32:01
Speaker 2: Security for that full time period. That's already being factored
32:04
Speaker 2: into the calculation. So Linda, I agree with you. I
32:07
Speaker 2: take my biggest issue with it all is okay, but
32:11
Speaker 2: you still need to figure out a way to pay
32:12
Speaker 2: for this. And that's the piece that I hate that
32:14
Speaker 2: has just completely swept under the rug is Yeah, we'll
32:17
Speaker 2: just do this and it'll make the bucket go belly
32:20
Speaker 2: up a little bit faster. The bigger issue one that
32:23
Speaker 2: I have is the government pension offset. And again we're
32:26
Speaker 2: getting a little technical here, but this is the one
32:28
Speaker 2: where hey, you know, I've worked my entire career for
32:34
Speaker 2: you know, the state or an entity that doesn't pay
32:36
Speaker 2: into social Security and then I'm allowed to collect spousal
32:40
Speaker 2: social security benefits even though I'm collecting that pension. Also,
32:44
Speaker 2: if they got rid of that rule and started allowing
32:46
Speaker 2: people to collect both, I would take more of an
32:47
Speaker 2: issue with that one. But what you're subject to, Linda
32:50
Speaker 2: the Web, I tend to agree. I hope they do
32:52
Speaker 2: repeal it.
32:53
Speaker 3: Yeah, not popular across the board for many workers out there.
32:56
Speaker 2: What do you have for us for sacri let, Paul.
32:58
Speaker 3: So this is more of a personal story. Much has
33:00
Speaker 3: been made about my lack of grocery store knowledge on
33:03
Speaker 3: the show in terms of pricing.
33:05
Speaker 2: Yes, oh, yes, seven dollars for a dollon of milkstone garlic.
33:09
Speaker 3: Close garlic, I head of garlic, garlic clod.
33:12
Speaker 2: How much did we guess?
33:13
Speaker 3: Seven dollars? Did I guess that high?
33:14
Speaker 2: Pardon me?
33:16
Speaker 3: Was that a little high? I don't think it was
33:19
Speaker 3: that high, Tucker, It was guess call gates. So I
33:26
Speaker 3: found myself in a position on Sunday, after numerous days
33:30
Speaker 3: of being stuck inside with three kids under the age
33:32
Speaker 3: of four, I said to my wife, I got to
33:34
Speaker 3: get out of the house.
33:35
Speaker 2: And to be clear, and your wife and my wife,
33:37
Speaker 2: who's lovely.
33:39
Speaker 3: I got to get out of the house and do something.
33:41
Speaker 3: So She's like, okay, you can go to Trader Joe's. Now.
33:43
Speaker 4: Typically, when I've got a Trader JOE'SJS, there you go.
33:46
Speaker 3: I have to get two or three items, and this
33:49
Speaker 3: time the list was about twenty to twenty two items.
33:52
Speaker 3: I can't tell you how often I've been in grocers
33:57
Speaker 3: over the years. I never would go when I lived
33:59
Speaker 3: in writing Cambridge. I would only go to get milk
34:03
Speaker 3: eggs at like convenience stores. So my grocery store knowledge
34:05
Speaker 3: is limited. However, I can navigate stop and shop. When
34:08
Speaker 3: I stepped into these Trader Jokes, that was varsity shopping
34:13
Speaker 3: right there. I was just like zach alphan Axes and
34:16
Speaker 3: the hangover. There was all these calculus symbols and stuff
34:19
Speaker 3: oh going over my head. I didn't know what was
34:21
Speaker 3: up and what was down. I could not find any
34:24
Speaker 3: of these items, and my poor son, who was with
34:27
Speaker 3: me in the carriage, was a trooper. But I finally
34:30
Speaker 3: got to the point of no return where I said,
34:31
Speaker 3: we either are gonna have to walk out of the store.
34:33
Speaker 3: I'm gonna have to start bugging employees. I gotta give
34:35
Speaker 3: him credit very nice employees disturbing. They are so friendly
34:39
Speaker 3: and couldn't have been nicer and more helpful. But the
34:42
Speaker 3: intimidation factor that I faced when there was three different
34:45
Speaker 3: types of nocky, there was a couple different types of
34:47
Speaker 3: pesto to pick from, and just the location of where
34:50
Speaker 3: things were it throws off apps. It's not for the famous.
34:54
Speaker 3: I just really had a hard time. These chicken nuggets
34:57
Speaker 3: that I had to find were placed sort of perpendicular
35:01
Speaker 3: to shows. You know how most of them are facing
35:02
Speaker 3: up front. They were just flat and so.
35:04
Speaker 4: They're on display but still also cold.
35:07
Speaker 3: It was yes, you had to look up and over
35:09
Speaker 3: to see them because they weren't even propped up front wise.
35:12
Speaker 3: It was just it was a long day and uh,
35:16
Speaker 3: I was very rattled. I said, I'm never doing that again.
35:20
Speaker 3: I'm never doing that again.
35:23
Speaker 2: I would say that Trader Joe's is like the TJX
35:27
Speaker 2: of the groceries.
35:28
Speaker 3: Yes, yeah, you don't go.
35:29
Speaker 2: To Trader Joe's with a list. No, No, you go
35:32
Speaker 2: to the Trader Joe's looking for inspiration and just see
35:36
Speaker 2: what you can find. I've never gone to Trader Joe's like,
35:39
Speaker 2: all right, I need NOOKI oranges avocados, three onions, stuff
35:45
Speaker 2: for a salad, and milk. Like, now, you're not gonna
35:47
Speaker 2: find that there. Instead, you're gonna find some new Ecuadorian
35:52
Speaker 2: coffee ingrain, yeah, in Ecuadorian coffee, along with a Peruvian
35:57
Speaker 2: spatchcocked turkey that you never knew.
35:59
Speaker 3: These are some of my lists. Crunchy chili onion in
36:01
Speaker 3: a jarliower well, crunchy Chilian chili onion in a jar.
36:07
Speaker 3: Oh yeah, uh, cauliflower egg things frozen in breakfast section.
36:13
Speaker 2: And so she had some specific TJ's things that she
36:17
Speaker 2: was looking for though, Like this wasn't a general grocery list,
36:21
Speaker 2: this was a you go to TJ's and you find
36:23
Speaker 2: me these items, which that's a different story. I do
36:26
Speaker 2: go to TJ's for the items that you can only
36:28
Speaker 2: find there, and they do have this unique thing where
36:31
Speaker 2: you know, if you're a major Walmart, you don't source
36:34
Speaker 2: your stuff from the same place that Trader Joe's does
36:36
Speaker 2: because they're just not big enough. Trader Joe's does. They
36:39
Speaker 2: go to these smaller suppliers. They also, because of that,
36:41
Speaker 2: have more issues with quality control than other groceries. If
36:44
Speaker 2: you go take a look at their recall rates, and
36:47
Speaker 2: things like that. They have had a bit of problems there,
36:50
Speaker 2: but yeah, I really I think I like that comparison.
36:53
Speaker 2: Trader Joe's is to grocery what TJ, Max, Marshalls and
36:57
Speaker 2: Home Goods is to home furnishings and retails. You walk in,
37:01
Speaker 2: you just don't know what you're gonna get exactly, and
37:03
Speaker 2: it's always a bit of a treasure on but.
37:04
Speaker 3: With a really dedicated staff that has great customer service,
37:07
Speaker 3: and you can tell it's an experiential and I've read
37:10
Speaker 3: all the things about it. I know more about the
37:12
Speaker 3: grocers than I actually do going in them because I've
37:14
Speaker 3: listened to podcasts and read stuff about it. But me
37:16
Speaker 3: going in there was deer in the headlights. But the
37:18
Speaker 3: staff does a fantastic job.
37:21
Speaker 2: I can picture Paul Deer in the headlights at Trader Joe's,
37:24
Speaker 2: just wandering.
37:25
Speaker 3: No coffee. That was another mistake. No coffee nine in
37:28
Speaker 3: the morning.
37:28
Speaker 4: Well, they have coffee there for you to drink. I
37:30
Speaker 4: should have I should have got it to the back.
37:33
Speaker 4: Yeah they do, Sure they do. They give away call
37:35
Speaker 4: fresh coffee. Yes, it depends on the tea. Trader Joe's, Tucker,
37:39
Speaker 4: I don't know what a coffee thing there.
37:42
Speaker 2: I don't know what fancy pants trader Joe's Tucker Silva's
37:45
Speaker 2: going to, but my cutthroat. As we close in on
37:54
Speaker 2: the noon lunch hour here, we've got the Dow off
37:57
Speaker 2: one hundred and eighty eight points, four tenths of a
37:59
Speaker 2: percent off ten closing in on one fifth percent to
38:03
Speaker 2: the downside, and the Nasdaq up fourteen points, a little
38:06
Speaker 2: bit less than one tenth of a percent. That is
38:09
Speaker 2: all the time we have for today's financial exchange, but
38:12
Speaker 2: we will be right back at it tomorrow. Folks, have
38:14
Speaker 2: a great rest of your day, and we'll talk to
38:15
Speaker 2: them