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Is the economy on shakier ground than most believe? · The Financial Exchange Show

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Speaker 2: Welcome to this Tuesday edition of The Financial Exchange. Paul Lane,
1:15
Speaker 2: Mark Vendetti, and Tucker Silva here with you, and we
1:20
Speaker 2: start our show with some breaking news that was just
1:23
Speaker 2: released in relation to the job market. So typically on
1:28
Speaker 2: our program we'll cover every single month the BLS Labor Report,
1:32
Speaker 2: where we'll get the unemployment rate for the country as
1:35
Speaker 2: well as how many jobs were added over a period
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Speaker 2: of time, and so the way that that is calculated
1:41
Speaker 2: through a monthly survey. But that survey isn't perfect for
1:45
Speaker 2: many listeners out there. I know I'm very guilty of this.
1:48
Speaker 2: How often do you take time at all, Mark, to
1:51
Speaker 2: fill out any kind of surveys that come your way
1:53
Speaker 2: from whomever. I'm awful at it, And the BLS has
1:59
Speaker 2: the same sort of difficulty getting the same precise responses.
2:03
Speaker 2: So what they do is they'll do the monthly collection
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Speaker 2: and then after a period of time they'll go back
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Speaker 2: in and make revisions to that data. And so what
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Speaker 2: we just released this morning within the last five minutes
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Speaker 2: or so, is from the period of March of twenty
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Speaker 2: twenty five through March of twenty twenty four, those trailing
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Speaker 2: twelve months, there was a job growth revision down by
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Speaker 2: nine hundred and eleven thousand jobs over the period from
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Speaker 2: March of twenty five to March of twenty twenty four.
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Speaker 2: So it is important to note that that is a
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Speaker 2: pretty significant revision. This is somewhat similar to what we
2:38
Speaker 2: saw last year, where initially it was announced that we
2:42
Speaker 2: had eight hundred and eighteen thousand jobs that were revised
2:47
Speaker 2: down from what we saw, and then that number was
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Speaker 2: amended in a later period in February of twenty twenty
2:53
Speaker 2: five to be five hundred ninety eight thousand. So it's
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Speaker 2: constantly a moving target that is being adjusted. What this
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Speaker 2: number means in terms of context for the labor market
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Speaker 2: we already covered recently from the jobs report that came
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Speaker 2: out on Friday, the labor market has been relatively weak
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Speaker 2: over the last few months, and this just reinforces this
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Speaker 2: idea that over the period from March of twenty five
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Speaker 2: and prior to that, that the labor market was perhaps
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Speaker 2: slowing more than we knew at that point in time,
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Speaker 2: the average monthly jobs gain during that period was coming
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Speaker 2: in around one hundred and fifty thousand. You know, with
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Speaker 2: this revision, the average I don't have the exact finger,
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Speaker 2: but it would be sitting more at seventy four seventy
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Speaker 2: five thousand on average a month that we were adding
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Speaker 2: in jobs during that period of time.
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Speaker 3: Yeah, I think Paul, your assessment is absolutely right. We
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Speaker 3: knew the labor market was softening. Softening is a relative term.
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Speaker 3: It was remarkably strong and really twenty twenty one, twenty two,
3:52
Speaker 3: twenty three, coming off the COVID recession too strong. In fact,
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Speaker 3: the economy was overheating. That was obvious at the time,
4:00
Speaker 3: obvious in retrospects, so the labor market had to weaken.
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Speaker 3: That's part of the reason why inflation has come down.
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Speaker 3: But at four point three percent, and it may be
4:08
Speaker 3: heading higher. So in retrospect this comment may sound overly
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Speaker 3: optimistic and a little bit naive. But at four point
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Speaker 3: three percent, all else equal, unemployment is very low in
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Speaker 3: historical firms and by all real time measures of GDP,
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Speaker 3: the economy continues to expand it about its trend rates.
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Speaker 3: So I would think financial market participants would look past
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Speaker 3: this number as they are forward looking. This number is
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Speaker 3: more backward looking than most statistics that we get, which
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Speaker 3: are already backward looking. So I don't know that it
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Speaker 3: would make much sense to read much into this beyond
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Speaker 3: the obvious interpretation.
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Speaker 2: Yeah, and even just taking a look around at markets
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Speaker 2: at the moment, the S and P, DOW, and NASDAK
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Speaker 2: are all very flat and very little movement going on there.
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Speaker 2: The US tenure Treasury has held relatively steady here as well.
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Speaker 2: Nothing is really moving markets significantly from this release, like
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Speaker 2: you mentioned, because it is so backward looking, and you know,
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Speaker 2: from a political perspective to you know, this encompasses a
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Speaker 2: period of time that was, you know, prior to any
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Speaker 2: of the tarifts, prior to the new administration. So this
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Speaker 2: only covers two months in office for President Trump. A
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Speaker 2: lot of this time frame goes back to President Biden.
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Speaker 2: So really it ranges back from a further period of
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Speaker 2: time and it is truly information that was in the past.
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Speaker 2: But in terms of the context for where we go
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Speaker 2: from here, and we'll talk about it as the program
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Speaker 2: goes on, the labor market has been earmarked as a
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Speaker 2: concern for the Federal Reserve, and in the Jackson Hole
5:42
Speaker 2: summit that J. Powell gave, he did mention that the
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Speaker 2: labor market was softening, weakening, whatever term you want to use.
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Speaker 2: And now there is very likely the case that from
5:53
Speaker 2: what we got on the Friday job support that we
5:55
Speaker 2: will see it's almost, you know, a certainty that we'll
5:58
Speaker 2: see a quarter basis point cut coming up in the
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Speaker 2: meeting next week, a week from today. But now on
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Speaker 2: the table perhaps the idea of a fifty percent or
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Speaker 2: a half percent cut next week. But I don't this
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Speaker 2: doesn't really do anything to move the needle on that.
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Speaker 2: Like we said, this is all backward looking at now.
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Speaker 2: It'll probably.
6:19
Speaker 3: Put wind in the sales of the chorus to mixed
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Speaker 3: metaphors a little bit of people who are clamoring for
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Speaker 3: a rate cut.
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Speaker 2: It shouldn't really What they.
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Speaker 3: Should be focused on is what the economy is doing
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Speaker 3: right now and what's reasonable to expect in terms of
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Speaker 3: the next few months worth of data, which is obviously
6:41
Speaker 3: subject to a lot of uncertainty, forecast of which are
6:44
Speaker 3: subject to a lot of uncertainty. Look, the Fed's job
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Speaker 3: is to stimulate demand when the economy slows if inflation
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Speaker 3: is under control, and to curb demand when inflation is
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Speaker 3: running too hot. As a result of the economy exceeding
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Speaker 3: it's the economy's growth rate exceeding it's potential rated speed
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Speaker 3: limit if you like. So the FED is constantly trying
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Speaker 3: to balance the forces that push the economy beyond its
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Speaker 3: speed limit and thus push inflation up against the forces
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Speaker 3: that caused the economy to from time to time slow
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Speaker 3: down and even contract. Getting it right is something the
7:21
Speaker 3: FED is so rarely done historically that there were really
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Speaker 3: only one or two instances in the modern era of
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Speaker 3: prolonged soft landings. Arguably the FED engineered help to engineer
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Speaker 3: with a lot of luck on its side, a soft
7:39
Speaker 3: landing during the most recent episode. There was another one,
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Speaker 3: arguably in the mid nineties.
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Speaker 2: But they're pretty rare.
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Speaker 3: Normally, the FED titans too much. It's not to say
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Speaker 3: that they should have known differently, nobody did at the time.
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Speaker 3: But normally the FED titans too much and causes recessions,
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Speaker 3: or let's interest rates remain too low for too long
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Speaker 3: and allows inflation to overheat, which in turn requires that
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Speaker 3: they overtighten, causing recessions. I guess from my sort of
8:06
Speaker 3: confused a little description here, you could tell it's really
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Speaker 3: hard to do.
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Speaker 2: As they would say in the office Michael Scott in
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Speaker 2: the episode Sip Snap Sip Snap, Sip, Snap back and forth,
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Speaker 2: back and forth tighteningaff There we go.
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Speaker 3: Awesome, Yeah, yeah, it's a constant. These two things are
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Speaker 3: intention and it's very hard to get that tension just right.
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Speaker 2: It's a brutal gig. We'll get a further speed limit
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Speaker 2: reading as Mark was alluded to on the inflation side
8:33
Speaker 2: of things. That report is going to come out on Thursday,
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Speaker 2: so we'll have some more CPI data to sort of
8:39
Speaker 2: go over at that point in time. Let's talk shift
8:41
Speaker 2: gears slightly a little bit. The BLS. Some people may
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Speaker 2: be listening, say, geez, these revisions nine hundred and eleven
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Speaker 2: thousand or the eight hundred plus thousand that we saw
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Speaker 2: in the priory. You know, why do we see such
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Speaker 2: significant revisions? And part of it is what I mentioned
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Speaker 2: earlier in Mark, you probably have more insight than me
8:58
Speaker 2: on this. But in terms of the survey responses and
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Speaker 2: all of the data collection that the BLS, you know,
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Speaker 2: sets out to try and make these these surveys as
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Speaker 2: accurate as possible from a data collection standpoint, they have
9:13
Speaker 2: struggled the budget coverage that they have in terms of
9:16
Speaker 2: funds allocated to their department. I was looking at some
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Speaker 2: statistics earlier the budget dollars that they're allocated really hasn't
9:24
Speaker 2: moved much over the course of the last twenty years
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Speaker 2: or so, and we know all the information that.
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Speaker 3: It's totally a question of resources. It's a little like
9:32
Speaker 3: you could have zero crime in Washington, DC if you
9:34
Speaker 3: put a guy armed with you know, a law enforcement
9:37
Speaker 3: official armed with military gear on every corner. Trump figured
9:41
Speaker 3: this out and he's patting himself on the back. Okay, great.
9:43
Speaker 3: You know why we don't do that, though, because it's
9:45
Speaker 3: disruptive and it's expensive. Like I could, I could make
9:47
Speaker 3: crime in this country zero tomorrow with enough resources and
9:51
Speaker 3: if people were willing to sacrifice individual freedom of mobility. Similarly,
9:57
Speaker 3: I could have I could give you perfect employment data
9:59
Speaker 3: if we put a government census taker in every place
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Speaker 3: of employment. That would be expensive, that would be disruptive.
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Speaker 3: There are trade offs. It may sound like a reach there,
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Speaker 3: but I think this resources versus accuracy trade off is
10:14
Speaker 3: worth keeping in mind when you're talking about any government undertaking,
10:17
Speaker 3: at least in certain domains. So as you say budgets
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Speaker 3: have been cut, resources are limited, that's going to result
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Speaker 3: in greater error in estimates from month to month. There's
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Speaker 3: usual sampling error. We don't know the true population value.
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Speaker 3: You're trying to approximate it by taking a sample, and
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Speaker 3: if you do that enough times you get close to
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Speaker 3: the true value. In this case, more information comes in
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Speaker 3: from other sources as the year unfolds, so you supplement
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Speaker 3: the initial initial estimates with this additional information, and you
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Speaker 3: end up with these revisions. But as we devote fewer
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Speaker 3: resources to data collection, the data will become more uncertain,
10:55
Speaker 3: thus less useful, and revisions will be bigger. We won't
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Speaker 3: know for years, potentially quarters, maybe years in some data
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Speaker 3: series cases, what the true state of the economy was
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Speaker 3: at a given point in time.
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Speaker 2: Now, the fiscal year two thousand and three budget for
11:09
Speaker 2: the BLS, the labor of Bureau Statistics was four hundred
11:13
Speaker 2: ninety two million. In twenty twenty four it was four
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Speaker 2: hundred and twenty seven million. A clord into a piece.
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Speaker 2: I read in Bloomber the Star no inflation and there
11:20
Speaker 2: was no inflation. I'm just going real those, Yes, those
11:23
Speaker 2: are real. So when you see the nominal difference between
11:27
Speaker 2: what four hundred ninety two million was worth in two
11:29
Speaker 2: thousand and three versus what it was in twenty twenty four,
11:31
Speaker 2: I think we can all know just looking at our
11:33
Speaker 2: bills and things like that, just how stark of a
11:36
Speaker 2: difference is. And also when you're looking at the response
11:39
Speaker 2: rate for the survey that I've been talking about, it
11:41
Speaker 2: had a ninety percent response rate a decade ago. That
11:44
Speaker 2: figure now sits at about seventy percent today. So it's
11:47
Speaker 2: just harder to get a hold of people to get
11:49
Speaker 2: accurate data. But that's what needs to continue to be
11:51
Speaker 2: worked on. I think we all want accuracy of data.
11:54
Speaker 2: So whatever it takes to do that, I'm all for it,
11:57
Speaker 2: and so hopefully we can get to that point. We're
11:58
Speaker 2: gonna take a quick break on the Financial Exchange. When
12:01
Speaker 2: we come back, we're gonna be talking a little bit
12:03
Speaker 2: more about the labor market as well as US consumer
12:06
Speaker 2: barring has risen the most in the last three months
12:09
Speaker 2: on credit cards. We'll be discussing both those topics right
12:12
Speaker 2: after this break here in the Financial Exchange.
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13:19
Speaker 2: American workers feel less confident about finding a job headline
13:23
Speaker 2: here from the Wall Street Journal. The Federal Reserve Bank
13:27
Speaker 2: of New York puts together a confidence survey where it
13:32
Speaker 2: tries to get the perceived probability that people would have
13:35
Speaker 2: of finding a new job if they were looking for one.
13:39
Speaker 2: The Fed started doing the survey from the Bank of
13:41
Speaker 2: New York back in twenty thirteen. They recently saw a
13:44
Speaker 2: drop of about six percent on the probability of people
13:49
Speaker 2: finding a new job. So just echoing the sentiments that
13:52
Speaker 2: the labor market is weakening and that Americans are a
13:56
Speaker 2: little bit more pessimistic about their future of potentially finding
14:00
Speaker 2: new job. You hear new phrasing being thrown around about
14:03
Speaker 2: job hugging rather than all the job hopping that we
14:06
Speaker 2: saw back in twenty one and twenty two, a lot
14:08
Speaker 2: more people just hanging on to the jobs that they
14:10
Speaker 2: have rather than looking for new opportunities. We had seen
14:14
Speaker 2: the quits rate, which is a proxy for people leaving
14:17
Speaker 2: from one job, typically for the most part, to take
14:20
Speaker 2: a higher paying job, has really plateaued to a point
14:23
Speaker 2: where we haven't seen anywhere near the growth that we
14:26
Speaker 2: saw back in twenty one and twenty two. And you
14:29
Speaker 2: hear it from a lot of executives and CEOs. It
14:31
Speaker 2: seems like the new push mark on these quarterly earnings
14:34
Speaker 2: calls is to do more with less, really a focus
14:38
Speaker 2: on cutting down the amount, and that's always, I mean,
14:40
Speaker 2: that's always the focus for businesses out there. But if
14:43
Speaker 2: you look at companies like Bank of America that had
14:46
Speaker 2: two hundred and eighty five thousand employees back in twenty
14:49
Speaker 2: ten now they sit with two hundred and thirteen thousand.
14:51
Speaker 2: I mean, in general, that's what you want. You want
14:56
Speaker 2: productivity gains. That's how you can increase GDP is by
14:59
Speaker 2: doing less with doing more with less employees. But from
15:03
Speaker 2: a job growth standpoint, it certainly doesn't bode well if
15:07
Speaker 2: you have employers looking to really be extremely cautious about
15:11
Speaker 2: bringing on new employees into the workforce.
15:15
Speaker 3: We have too many friggin measures of the labor market
15:17
Speaker 3: out there. Okay, there's just too there's just too damn many.
15:20
Speaker 3: If resources are going back to the point you made
15:22
Speaker 3: in the last segment, we're spending less now and expecting
15:26
Speaker 3: on data collection and expecting that data to serve more purposes.
15:30
Speaker 3: The FED needs it, private forecasters need it. Asset allocators
15:34
Speaker 3: like us, who as a fiduciary manage money for clients
15:38
Speaker 3: with generally speaking a long term investment time frame needed
15:42
Speaker 3: and it's of general interest. We collect measures from employers,
15:46
Speaker 3: from households, from the various FED regional banks do it.
15:51
Speaker 3: What we really need to know is how many people
15:54
Speaker 3: and the unemployment rate gets at this, how many people
15:57
Speaker 3: are working relative to the pool of labor available. That
15:59
Speaker 3: is the debt definition of the unemployment rate. Historically, that's
16:02
Speaker 3: the measure that FED relied on in policy makers relied on,
16:05
Speaker 3: and economic forecasters and private sect people who do planning
16:09
Speaker 3: in the private sector like us and a lot of
16:11
Speaker 3: you listening relied on to answer the question is the
16:14
Speaker 3: economy good? Is it easy to find a job or not? Normally,
16:17
Speaker 3: the unemployment rate was the shorthand for that. Now we've
16:22
Speaker 3: got all these other measures, some of them soft, meaning
16:24
Speaker 3: they're sentiment based, how do you feel about this or
16:27
Speaker 3: how do you whatever? Versus the harder data which comes
16:31
Speaker 3: from employers records and state insurance first time unemployment insurance
16:38
Speaker 3: claims and stuff like that. It would be really nice
16:42
Speaker 3: if all these if the resources devoted, And there's no
16:45
Speaker 3: way to make this happen, so I'm just yelling at
16:47
Speaker 3: the yelling at the wind here, but it would be
16:50
Speaker 3: really nice if all these disparate efforts could be combined
16:52
Speaker 3: into better data collection that goes into the unemployment rate,
16:55
Speaker 3: and maybe the payrolls number not going to happen because
16:59
Speaker 3: there's all these little seftoms out there. Public and private
17:03
Speaker 3: creates a lot of jobs for labor economists and stuff
17:06
Speaker 3: like that, but what we're really I don't have anything
17:08
Speaker 3: constructive to add to this discussion other than it is
17:10
Speaker 3: frustrating because what I really care about, as someone who
17:12
Speaker 3: does a little bit of forecasting, and what I know
17:16
Speaker 3: business economists in a similar position to mine and academic
17:19
Speaker 3: economists and policymakers care about is the rate of unemployment,
17:23
Speaker 3: and to a lesser degree, payrolls. To an extent, they
17:26
Speaker 3: help you forecast unemployment. The Jolt's number has been a
17:31
Speaker 3: good inflation forecaster over the past few years. But maybe
17:34
Speaker 3: if we did a better job i e. Collected more
17:38
Speaker 3: data that allowed us to produce a more accurate, in
17:41
Speaker 3: a statistical sense, unemployment rate or payrolls number, maybe we
17:44
Speaker 3: wouldn't have to use the jolts in place of the
17:46
Speaker 3: unemployment rate to forecast inflation. So, of those who use
17:53
Speaker 3: data in various federal roles, I'll just be general, maybe
17:58
Speaker 3: aren't doing themselves any favors by reading themselves so thin.
18:01
Speaker 3: I mean, if the budget is what it is, then
18:03
Speaker 3: for Pete's sake, do what we do in the private sector,
18:05
Speaker 3: which is focus on the most important data point.
18:07
Speaker 2: Yeah, most ones. Yeah, for Pete's.
18:10
Speaker 3: Sake, that's my data rant of the day.
18:14
Speaker 2: Gotta do it for Pete's sake. No, it's it's now
18:18
Speaker 2: I feel guilty about not responding to Servis. You know.
18:20
Speaker 2: That's we need more of that. We need people.
18:22
Speaker 3: But we do here in our day job at Armstrong
18:24
Speaker 3: Advisory Group, we get surveyed by bls. Lois was just
18:29
Speaker 3: telling me and she does respond.
18:31
Speaker 2: And I'm sure many business are doing our part.
18:33
Speaker 3: Yeah, many businesses do, but sometimes, as you say, other
18:37
Speaker 3: things getting the way.
18:38
Speaker 2: US consumer borrowing rises for the most in three months
18:41
Speaker 2: on credit cards. We saw for the month of July
18:43
Speaker 2: a sixteen billion increase on the total credit outstanding. This
18:48
Speaker 2: according to Federal Reserve data. We sit at a point
18:52
Speaker 2: in time where delinquency rates on consumer debt have increased
18:57
Speaker 2: to the highest since twenty twenty. Are the levels that
19:00
Speaker 2: are extremely concerning. No, but we certainly are seeing an
19:04
Speaker 2: uptick there. Student loan debt delinquency has risen to about
19:08
Speaker 2: thirteen percent, that's the highest in about twenty one years.
19:11
Speaker 2: And then we also have a pretty significant amount of
19:15
Speaker 2: increase of just spending for that month of July. That's
19:18
Speaker 2: probably why we saw a pretty significant uptick on the
19:21
Speaker 2: debt side of things. There. We're going to take a
19:24
Speaker 2: quick break here on the Finished Exchange. When we come back,
19:27
Speaker 2: a little bit of Wall Street Watch and much much
19:29
Speaker 2: more right after this break.
19:30
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20:00
Speaker 4: Well one day after the Nasdaq notch to fresh record high,
20:03
Speaker 4: Marcus today are flat as investors sift through the annual
20:07
Speaker 4: job to revision from the Bureau of Labor Statistics. According
20:11
Speaker 4: to those revisions, the US added nine hundred and eleven
20:14
Speaker 4: fewer jobs over the twelve months that ended in March.
20:18
Speaker 4: Wall Street's also writing for two inflation readings this week. Tomorrow.
20:22
Speaker 4: We have the Producer Price Index, followed by the Consumer
20:25
Speaker 4: Price Index on Thursday. Right now, the Dow is down
20:30
Speaker 4: merely sixty one points, about a tenth of a percent.
20:33
Speaker 4: SMP five hundred is down a tenth of a percenter
20:36
Speaker 4: six points, NASDAK down a tenth of a percent as well.
20:39
Speaker 4: Russell two thousands down just over half a percent. Ten
20:42
Speaker 4: year treas reeled up three basis points at four point
20:46
Speaker 4: zero eight percent. In crude oil up over one and
20:49
Speaker 4: a half percent higher, trading right above sixty three dollars
20:53
Speaker 4: a barrel. Big news in the commodity space this morning
20:56
Speaker 4: after Anglo American agreed to merge with tech Resource, a
21:00
Speaker 4: deal that will create one of the largest copper producers.
21:04
Speaker 4: Anglo shares are up nine percent, while tech stock is
21:07
Speaker 4: soaring nearly fourteen percent. Meanwhile, Apple shares are down over
21:12
Speaker 4: half a percent ahead of its anticipated annual product event
21:15
Speaker 4: at one o'clock Eastern this afternoon, where the tech giant
21:19
Speaker 4: will unveil its new line of iPhone seventeens, among other
21:23
Speaker 4: device updates. Elsewhere, Fox down by six percent if the
21:28
Speaker 4: media giant announced the Murdoch family resolved its succession battle,
21:32
Speaker 4: with Lachlan Murdoch winning control of the company. Casey's General
21:37
Speaker 4: Stores share Casey's General Stores b quarterly earnings and revenue estimates,
21:42
Speaker 4: boosted by strong same store sales growth. However, that stock
21:47
Speaker 4: is down by over one percent. Dick's Sporting Group Goods
21:51
Speaker 4: upgraded by City Group to buy from neutral, saying the
21:54
Speaker 4: sports retailer will be a powerful force in athletic retail
21:59
Speaker 4: following its acquisition of foot Locker. However, shares they're down
22:02
Speaker 4: over half a percent, and after today's closing bell, we'll
22:06
Speaker 4: see quarterly results from GameStop and Oracle. I'm Tucker Sulvan.
22:11
Speaker 4: That is Wallstree Watch.
22:13
Speaker 2: You don't hear a lot of people named Lachlan often.
22:15
Speaker 2: I guess there are some out here, Lachlan Murdock. I
22:18
Speaker 2: was trying to see where that name comes from, Land
22:21
Speaker 2: of the Lakes. It's kind of a kind of a
22:23
Speaker 2: strange name that they have put together there. But anyway,
22:26
Speaker 2: I digress, I never heard of it, so yeah, yeah, Succession.
22:34
Speaker 2: It says a Scottish aer of Irish Gaelic origin. It's
22:38
Speaker 2: a masculine name. The name comes from Lochland, which historically
22:43
Speaker 2: referred to Scandinavia or as Norse. People are Scottish, so
22:46
Speaker 2: it comes from the Vikings. Yeah. Thanks for Google AI
22:50
Speaker 2: making my job easy to find that there. I want
22:53
Speaker 2: to talk a little bit about commodities, wood and oil.
22:56
Speaker 2: In the news headlines here, lumber prices are flashing a
22:59
Speaker 2: warning for the US economy. A piece here from the
23:03
Speaker 2: Wall Street Journal. Obviously, lumber prices were all over the
23:07
Speaker 2: news during the pandemic where we saw a three year
23:11
Speaker 2: a significant high that was reached during the pandemic, where
23:16
Speaker 2: the lumber price is tripled. I believe over a period
23:19
Speaker 2: of time we now have a recent twenty four percent
23:22
Speaker 2: drop in lumber futures. We had hit a previous three
23:26
Speaker 2: year high at the beginning of August, and then Monday
23:29
Speaker 2: we ended down twenty four percent in terms of the
23:33
Speaker 2: per thousand board feet price of lumber. Not going to
23:37
Speaker 2: attest to be a lumber expert by any means, but
23:40
Speaker 2: particularly what's at the heart of this issue here is
23:43
Speaker 2: there was a tremendous amount of concern with the tariffs,
23:46
Speaker 2: and you had a lot of lumber producers trying to
23:49
Speaker 2: focus on the impact of teriffs and as a result,
23:52
Speaker 2: stockplying a tremendous amount of lumber to try and negate
23:57
Speaker 2: most of the tariff impact as they could. But what
24:00
Speaker 2: they didn't account for was the softening demand for lumber.
24:04
Speaker 2: That is a direct impact of what's been a very
24:07
Speaker 2: slow housing market over the course of this year. We
24:10
Speaker 2: saw residential building permits drop in July to a seasonal
24:14
Speaker 2: adjusted rate of one point four million units that was
24:16
Speaker 2: the fewest since twenty twenty so over the last five
24:20
Speaker 2: years or so, building permits really slow relative to where
24:23
Speaker 2: they have been. As a result, you're having more of
24:26
Speaker 2: a glut of lumber. So you have a lot of
24:28
Speaker 2: the larger lumber producers in North America cutting back their
24:32
Speaker 2: output to try and address what is a glut of
24:35
Speaker 2: supply here on the inventory side of things here, Mark.
24:38
Speaker 3: So it's not so much that people who buy lumber
24:40
Speaker 3: futures are souring on the economic outlook's supply demand supply
24:49
Speaker 3: specific Well, I guess demand sword and then swooned. Yes,
24:54
Speaker 3: so prices went What was the how much did they
24:57
Speaker 3: go up on the other side of this thing? Does
24:58
Speaker 3: it say in this But.
25:00
Speaker 2: They'd hit a three they'd hit a three year high.
25:03
Speaker 3: Okay, and so a lot of price pressure in one
25:06
Speaker 3: direction followed by a collapse in demand. So this is
25:11
Speaker 3: something specific to the peculiarities, if you will, of this market,
25:17
Speaker 3: not indicative of fears because you're not I was looking
25:20
Speaker 3: at other commodities quickly. You don't see this elsewhere. So
25:25
Speaker 3: it sounds like it's very market specific.
25:27
Speaker 2: Big oil slashes jobs and investments as low crew prices. Bye,
25:32
Speaker 2: you have a lot of the big oil producers out here,
25:36
Speaker 2: including Chevron and Conico Phillips cutting jobs. Chevrons started cutting
25:41
Speaker 2: eight thousand jobs beginning in February and they've been working
25:44
Speaker 2: to cut those down through the year, and Conico Phillips
25:47
Speaker 2: has mentioned that they could cut as many as thirty
25:49
Speaker 2: two hundred employees by Christmas. Just in general, capital spending
25:53
Speaker 2: on global oil and gas production is forecasts to drop
25:57
Speaker 2: about four percent this year, and this is a direct
26:00
Speaker 2: impact of what we've seen very low oil prices relative
26:04
Speaker 2: to what they were over the course of the last
26:08
Speaker 2: couple of years or so. We now sit at West
26:10
Speaker 2: Texas Intermediate at around sixty three dollars a barrel. That
26:15
Speaker 2: figure was as high as it really peaked out around
26:18
Speaker 2: some of the Russian Ukraine crisis, but over the course
26:21
Speaker 2: of the last twelve months or so, eighty dollars a
26:24
Speaker 2: barrel is the highest that we've hit, far lower than
26:28
Speaker 2: the crazy highs that we saw back in twenty twenty two,
26:31
Speaker 2: where West Texas Intermediate was well over one hundred dollars
26:35
Speaker 2: a barrow. And this is typically how oil works. It's
26:38
Speaker 2: boom and bus cycle, and a lot of these major
26:40
Speaker 2: oil producers have been a lot more disciplined from a
26:44
Speaker 2: capital spending side of things and not trying to overinvest
26:47
Speaker 2: in times that are strong. And on the same thing here,
26:51
Speaker 2: when you're seeing OPEC plus increasing some of their output,
26:55
Speaker 2: some of these big oil producers kind of scaling back
26:57
Speaker 2: their investment mark.
26:58
Speaker 3: Right, So shale oil to be profitable, that is oil
27:02
Speaker 3: that is obtained through i'll just call it modern even
27:06
Speaker 3: though they're like thirty years old drilling techniques, fracking and
27:10
Speaker 3: horizontal drilling and other practices. Shale oil is about two
27:15
Speaker 3: thirds of our oil production on a daily basis, and
27:19
Speaker 3: those guys needs sixty calling according to today's article in the
27:22
Speaker 3: Financial Times, and this sounds about right, sixty five dollars
27:25
Speaker 3: per barrel to break even. We're below that.
27:27
Speaker 2: Now.
27:28
Speaker 3: The consequence of this is US production is going to
27:31
Speaker 3: fall dramatically, and that's why the Saudis are doing this.
27:35
Speaker 3: They want to put US shale oil out of business.
27:38
Speaker 3: So you can't have both low prices and be energy
27:42
Speaker 3: independent if you're the US. Because oil is harder to
27:45
Speaker 3: get here than it is in same places like get
27:49
Speaker 3: at here, i should say, than it is in places
27:51
Speaker 3: like the Middle East. It's the paradox for the US
27:54
Speaker 3: anyway of low prices, consumers like them, producers don't will
27:57
Speaker 3: be less energy independent at the end of the day.
28:00
Speaker 2: As a result of this, US shale production has really
28:03
Speaker 2: boomed over the course of the last several years or so,
28:06
Speaker 2: and OPEK has taken this stance previously of not increasing
28:11
Speaker 2: their output and continuing to keep things pretty moderate, but
28:13
Speaker 2: as Mark mentioned, a strategic shift recently where they are
28:17
Speaker 2: boosting output to try and come after some of those
28:19
Speaker 2: American shale producers, to put them under tremendous pressure in
28:24
Speaker 2: order to regain They've.
28:25
Speaker 3: Been doing this since two thousand and eight, two thousand
28:27
Speaker 3: and nine, when was actually after the Great Recession when
28:31
Speaker 3: this practice of undermining US shale producers became a sort
28:36
Speaker 3: of dance between the Saudis and other participants in the
28:39
Speaker 3: in the oil market. But again, the implication is we're
28:42
Speaker 3: going to be making less oil here. So the implications
28:45
Speaker 3: for energy independence are bad. The implications for consumer prices
28:48
Speaker 3: in the short term are good.
28:50
Speaker 2: Good for the short term. Longer term when you need
28:53
Speaker 2: the supply, that's where it becomes more problematic, and.
28:55
Speaker 3: We're taking alternative sources for now. Anyway, off the table,
28:59
Speaker 3: stop wind. Look, whatever you think of this we're alternative
29:03
Speaker 3: energy is an avenue to energy independence. If that's the
29:07
Speaker 3: goal to become less dependent on the insane geopolitical situation
29:13
Speaker 3: that characterizes the Middle East, we're heading in the exact
29:17
Speaker 3: wrong direction right now.
29:19
Speaker 2: We're going to take a quick break here on the
29:21
Speaker 2: financial stage. When we come back a little bit on
29:24
Speaker 2: Hasbro moving its headquarters to the seaport, and much more.
29:28
Speaker 2: Right after this break, here in the Financial Exchange.
29:30
Speaker 1: Text US six one seven twenty six to two one
29:33
Speaker 1: three eight five with your comments and questions about today's show.
29:37
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29:42
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29:45
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29:48
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29:51
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30:01
Speaker 2: Hasboro is moving its headquarters to Boston Seaport. This here
30:08
Speaker 2: from Rhode Island Business. The big loss here for Pawtucket,
30:13
Speaker 2: Rhode Island, that has been the home to Hasboro for
30:16
Speaker 2: over a for the past century. Here now, Hasboro will
30:20
Speaker 2: be moving its headquarters to the seaport, specifically to a
30:24
Speaker 2: six hundred and thirty thousand square foot sixteen story laboratory
30:28
Speaker 2: buildings seven stories of the building. Hasborough will sublease out
30:32
Speaker 2: to other tenants. The move is slated to be completed
30:37
Speaker 2: by the end of twenty twenty six. They'll move in phases,
30:39
Speaker 2: so seven hundred full time employees from Hasborough will be
30:43
Speaker 2: coming to Boston. Patucket and Rhode Island as a state
30:46
Speaker 2: in general had done a lot to try and keep
30:49
Speaker 2: Hasborough there within the state, offering a lot of different incentives.
30:53
Speaker 2: But ultimately they are going to make the move to
30:56
Speaker 2: Boston Seaport, and they are going to receive from Boston
31:00
Speaker 2: teen million in tax credits to move their headquarters here.
31:03
Speaker 2: Hasboro makes about forty percent of their toys in China,
31:06
Speaker 2: so they're trying to undergo a pretty big strategic shift
31:09
Speaker 2: to get that down to about twenty percent. With all
31:12
Speaker 2: of the tear pressure in place, but a big Lossford
31:15
Speaker 2: Island your your home state.
31:17
Speaker 3: Yeah it is, and my whole life. They've contorted themselves
31:23
Speaker 3: into all kinds of positions to try to be appealing
31:26
Speaker 3: to businesses. They did it with Fidelity famously remade a
31:31
Speaker 3: large part of Well anyway.
31:33
Speaker 2: They have a huge campus down there. Yeah they think
31:35
Speaker 2: they do. It's successful.
31:37
Speaker 3: Yeah, that's that's an example I guess I would call
31:39
Speaker 3: this industrial policy changing the rules to suit one potential
31:44
Speaker 3: employer my lament as a free market fanatic, and I
31:47
Speaker 3: would apply this to what the Trump administration is doing nationally,
31:50
Speaker 3: taking shares in this or that company, telling companies to
31:53
Speaker 3: change or not change their logo, just get the hell
31:55
Speaker 3: out of the way, create a set of rules friendly
31:59
Speaker 3: to business, but fail to consumers at the same time,
32:01
Speaker 3: and enforce those rules objectively. Rhode Island and I'm not
32:07
Speaker 3: gonna I'm not in a position to criticize Rhode Island
32:08
Speaker 3: economic policy, nor Massachusetts for that matter, but it always
32:11
Speaker 3: annoyed me when politicians fawned over one potential business when
32:15
Speaker 3: you've got hundreds, maybe thousands of small businesses that already
32:19
Speaker 3: operate there need help. They just need a less onerous,
32:23
Speaker 3: say regulatory or tax regime, and they want government to
32:27
Speaker 3: get the heck out of the way these high profile things.
32:30
Speaker 3: And again, Trump's doing the same thing nationally, So I'm
32:32
Speaker 3: not just criticizing a Democrat regime in Rhode Island. They're
32:37
Speaker 3: far less successful over time. Anybody who's ever looked at
32:42
Speaker 3: this has determined, on any level here or elsewhere, far
32:46
Speaker 3: less successful than just creating clear rules of the game
32:49
Speaker 3: and enforcing them objectively. So it's always sort of sad
32:53
Speaker 3: to see this, whether or not it is successful in
32:55
Speaker 3: this case an unsuccessful attempt to woo a business, but
32:58
Speaker 3: for Massachusetts is successful. It's it's it is successful. Excuse me,
33:04
Speaker 3: but it always strikes me as sort of misspent energy.
33:08
Speaker 2: I was trying to think of other companies that have
33:10
Speaker 2: their UH that are headquartered out of Roland. Fidelity was
33:14
Speaker 2: the only one that came to my.
33:16
Speaker 3: Well, they just said, yeah, have.
33:17
Speaker 2: CBS has a big presence, but I don't know where
33:20
Speaker 2: they're headquartered in Okay. Yeah, so that they're in there
33:23
Speaker 2: as well, So yeah, certainly it's big significant.
33:26
Speaker 3: You don't have to be a hub. Don't try to
33:28
Speaker 3: compete with Boston. That's not your I've never understood why
33:30
Speaker 3: they wanted to compete to be the location where big
33:35
Speaker 3: companies cited their headquarters. That's not their appeal for whatever reason,
33:41
Speaker 3: historical reasons. So rather compete based on your skilled workforce
33:46
Speaker 3: with great work ethic and other historical or cultural legacy.
33:53
Speaker 3: If if if you like advantages that you may have, again,
33:56
Speaker 3: just set the rules up, build it and they will
33:58
Speaker 3: come build a business friendly environment, businesses will follow. You
34:02
Speaker 3: don't have to fall all over them. You don't have
34:04
Speaker 3: to beg them. You don't have to give them tax
34:05
Speaker 3: advantages over the guy that's been running a small business
34:08
Speaker 3: right down the street for his whole life and doesn't
34:11
Speaker 3: get the same advantages. Just set the rules and enforce
34:14
Speaker 3: them objectively. Politicians, I guess understandably, would rather go for
34:19
Speaker 3: the big headlines.
34:20
Speaker 4: Build the field of Rhode Island dreams. Did you see
34:23
Speaker 4: the where the location is in the seaport though it's.
34:27
Speaker 2: On Summer Street, right, They said, where's that? Where are
34:30
Speaker 2: some of the landmarks nearby?
34:31
Speaker 4: I think it's I don't. I couldn't tell you the
34:34
Speaker 4: landmarks in the seaport now because when I was going
34:36
Speaker 4: to the seaport, you know, the whiskey priests of the
34:39
Speaker 4: world like that, that was my landmark. Everything has just
34:44
Speaker 4: blown up and developed massively in the seaport over the
34:47
Speaker 4: past five years.
34:48
Speaker 2: Even Oh yeah, Vertex, they've got a couple huge and
34:51
Speaker 2: this was Foundation Medicine previously. The building that they're taking.
34:54
Speaker 4: Over, Yeah, it's an existing building, and it's like I think,
34:57
Speaker 4: if my memory serves me correct, it's down over the bridge.
35:00
Speaker 4: It's on the right side. It's actually gonna look really nice.
35:03
Speaker 2: They're definitely not gonna save money making this move, that's
35:06
Speaker 2: for sure, but much nicer offices.
35:08
Speaker 3: Yes, yeah, yeah, whatever, what go ahead. It's the stuff
35:13
Speaker 3: that RhoD Island could be good at, might not be
35:15
Speaker 3: the glamorous. Don't try to compete with Boston to be
35:18
Speaker 3: the headquarters of a global company. I'm gonna pick the
35:21
Speaker 3: seaport every time, no offense. Play to your strengths.
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36:35
Speaker 2: In twenty twenty two, Massachusetts became the thirty sixth state
36:38
Speaker 2: to legalize sports betting, and now, in a classic way
36:43
Speaker 2: that the American public sort of plays out, something gets
36:46
Speaker 2: legalized when because everyone wants it, and then there's a
36:49
Speaker 2: bunch of lawsuits and complaints after something is legalized, some
36:53
Speaker 2: frustration building up regarding the legalization of sports betting and
36:57
Speaker 2: perhaps the impact it's having on those younger people in
37:02
Speaker 2: the younger demographic eighteen to twenty five who were initially
37:06
Speaker 2: very optimistic and happy to see sports gambling legalize and
37:10
Speaker 2: then guess what they lost, Like everybody does when you gamble,
37:14
Speaker 2: and all of a sudden, a year or two later,
37:15
Speaker 2: it's not as sexy as a proposition anymore. I mean,
37:20
Speaker 2: ultimately my view in this. I know that Chuck gets
37:23
Speaker 2: a little bit more upset with with you know, the
37:26
Speaker 2: prevalence of gambling. I do think that some of the
37:27
Speaker 2: advertisements need to be rained in a little bit. But
37:31
Speaker 2: I'm a proponent that you should be able to, you know,
37:34
Speaker 2: do what you want. There's plenty of vices out there.
37:36
Speaker 2: This is one of them, just like alcohol or others,
37:39
Speaker 2: and you have to practice moderation and you know, gamble
37:42
Speaker 2: responsibly at these things. But ultimately they're now trying to
37:45
Speaker 2: get some legislation back in place to kind of push
37:47
Speaker 2: it back in the other direction. To me, it's just
37:49
Speaker 2: sort of let the market forces stick to you know,
37:52
Speaker 2: focus on trying to reign it in as best you can.
37:55
Speaker 2: I know gambling can be problematic, but they're going to
37:57
Speaker 2: get access to it regardless. There's always been a demand
38:01
Speaker 2: for it.
38:02
Speaker 3: Yeah, I don't know what the solution is here. Public
38:05
Speaker 3: opinion is a pendulum on this. We'll swing in the
38:08
Speaker 3: more moralistic direction for a while, I guess, and put
38:11
Speaker 3: restrictions on it.
38:12
Speaker 2: That's all the time that we have for the first
38:14
Speaker 2: hour of the program here. But we have much much
38:16
Speaker 2: more to cover in the second hour. Sick with us
38:18
Speaker 2: here on the finishing exchange. Right back over the break,