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What does the Nvidia and AMD deal in China mean for other US businesses? · The Financial Exchange Show

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Speaker 2: from now on. And that'll be uh, that'll be how
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Speaker 2: we go about this.
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Speaker 3: But in any case, we do have a busy week to.
1:49
Speaker 2: This week, with a few important data releases, pretty quiet
1:54
Speaker 2: on the earning side of things. Look, if you get
1:57
Speaker 2: all hopped up on something called radnet that reported earnings yesterday,
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Speaker 2: go for it.
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Speaker 3: If you're a big uh.
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Speaker 2: What what, I don't even know how to pronounce this,
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Speaker 2: sell an ease, sell an easy. If that's your thing,
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Speaker 2: go for it. But otherwise, the only earnings report that
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Speaker 2: I'm kind of interested in this in this week is Deer,
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Speaker 2: who reports on Thursday. Beyond that, there's just not that
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Speaker 2: much there in terms of major intrigue. Next week it
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Speaker 2: gets a little better with Home Depot Salesforce TJX lows,
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Speaker 2: so you get a few of them next week.
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Speaker 3: Walmart's next week as well.
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Speaker 4: Cisco Wednesday after the bell. But again, do I have
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Speaker 4: anything thrilling to ask?
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Speaker 2: Is Cisco the least relevant two hundred and seventy seven
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Speaker 2: billion dollar company ever? I don't say that they're like unimportant,
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Speaker 2: but they don't matter for markets? Yeah, like they just
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Speaker 2: kind of exist. They're just there, which is fine, Like
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Speaker 2: you can there's plenty of companies that do that. But
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Speaker 2: they're worth two hundred and seventy seven billion dollars. When's
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Speaker 2: the last time they drove the market in either direction?
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Speaker 3: I agree?
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Speaker 4: I mean, deer is worth half of what they are,
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Speaker 4: and I'm more interested in their earnings.
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Speaker 2: They tell you about what's going on in the economy Cisco,
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Speaker 2: which is kind of like, all right, how many routers
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Speaker 2: did you sell?
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Speaker 3: This month? Oh?
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Speaker 2: Great, again, we'll see what happens. But we do have
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Speaker 2: some data releases this week. Tomorrow we're going to be
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Speaker 2: getting CPI data for the month of July. On Thursday,
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Speaker 2: PPI data for the month of July. We also have
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Speaker 2: initial jobless claims on Thursday as well, and then Friday,
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Speaker 2: we finish up the week with retail sales, New York
3:36
Speaker 2: State Manufacturing Index, and the University of Michigan Consumer Sentiment,
3:42
Speaker 2: which even though I admittedly am kind of like, hey,
3:46
Speaker 2: is this a relevant data series anymore, it still is
3:49
Speaker 2: followed by a lot of people. So if people care
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Speaker 2: about it, then you kind of have to as well.
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Speaker 4: Yeah, if it'll change mind on the state of the economy,
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Speaker 4: then it should be reported exactly.
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Speaker 3: But all that is later in the week.
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Speaker 2: Our top story today is quite honestly, it's a strange
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Speaker 2: one that came out yesterday, so originally.
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Speaker 3: Reported I don't know who had the first report.
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Speaker 2: On Financial Times Financial Times did. I'll quote here from
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Speaker 2: the New York Times now in video and Advanced micro
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Speaker 2: Devices are expected to pay the United States fifteen percent
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Speaker 2: of the money they take in from selling artificial intelligence
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Speaker 2: chips to China as part of a highly unusual financial
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Speaker 2: agreement with the Trump administration. The deal, which was described
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Speaker 2: by three people familiar with the agreement who spoke anonymously
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Speaker 2: because they didn't have permission to discuss it publicly, comes
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Speaker 2: a month after In video received permission to sell a
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Speaker 2: version of its artificial intelligence chips to China. It's called
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Speaker 2: the H two oh chip or the H twenty chip.
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Speaker 2: I don't know how you pronounce it, but I like
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Speaker 2: H two oh because it sounds like water and that's nice.
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Speaker 4: So in terms of why it's so on you usual,
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Speaker 4: there's a lot of reasons why they would be considered unusual.
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Speaker 4: But I think first and foremost is reading from the Constitution,
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Speaker 4: Article one, Section nine, clause five prohibits Congress from laying
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Speaker 4: taxes and duties on articles exported from any state. So
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Speaker 4: generally speaking, the idea of an export tax, at least
5:22
Speaker 4: imposed by the traditional methods of Congress creating a law,
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Speaker 4: wouldn't be considered constitutional. If Congress went and pass this
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Speaker 4: exact thing and said, yeah, go ahead and sell these
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Speaker 4: chips wherever you want, but we're going to collect fifteen
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Speaker 4: percent in taxes once it leaves the United States, or
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Speaker 4: I guess they're not even manufactured in the United States,
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Speaker 4: which makes it more interesting. But by the manufacturer in Taiwan, right,
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Speaker 4: it wouldn't generally pass muster generally speaking, that companies would sue,
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Speaker 4: and not being a legal expert, I don't think that
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Speaker 4: Congress would win on this one.
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Speaker 3: What's unique about this is it's not a law. It
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Speaker 3: is seemingly an agreement between the White House and to
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Speaker 3: publicly traded.
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Speaker 2: Companies, and so naturally you kind of start to think
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Speaker 2: about this and the implications of this and what it
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Speaker 2: could mean. And look, the first thing that I will state,
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Speaker 2: I have no idea if this is legal, right. I
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Speaker 2: don't know if the executive brands can actually do this
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Speaker 2: because we've never seen anything like this before that I
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Speaker 2: can remember.
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Speaker 4: No, it is genuinely unique. And to your point about legality,
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Speaker 4: were they forcing these two companies to pay this fifteen
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Speaker 4: percent and they sued them, I'm in agreement with you.
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Speaker 4: The legality of this is very much in question.
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Speaker 5: Right.
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Speaker 3: It is effectively a payment being made to the Treasury
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Speaker 3: that either bought its way or coincides with the lifting
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Speaker 3: of export restrictions on these chips due to national security concerns,
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Speaker 3: which is solely in control of the White House.
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Speaker 2: And not just that, by the way. But it's something
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Speaker 2: where even though in Vidia had gotten permission about a
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Speaker 2: month ago to export to China, the actual export licenses
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Speaker 2: were not given until after the meeting. Between Jensen Hang
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Speaker 2: and President Trump.
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Speaker 3: Last week Wednesday. Yeah, something like that.
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Speaker 2: So you look at this and I poked around just
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Speaker 2: because I was I was curious in general, I'm like, okay,
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Speaker 2: in terms of either fees or money that businesses may
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Speaker 2: pay to the federal government. What's actually out there that
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Speaker 2: you might actually pay and like how is it authorized?
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Speaker 2: Like I was trying to get a sense of, like
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Speaker 2: what money do businesses actually pay to the federal government.
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Speaker 2: The obvious one is anything tax related, whether you're talking about,
7:58
Speaker 2: you know, taxes on your profits, whether you're talking about
8:01
Speaker 2: fiighter contributions, even the tax withholding that you do for
8:04
Speaker 2: your employees as part of your payroll. Those are all,
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Speaker 2: you know, common ones that you typically pay. In certain industries,
8:13
Speaker 2: there might be fees that you pay two different agencies
8:17
Speaker 2: within the executive branch within the federal government as well.
8:20
Speaker 2: If you work in the financial services industry, you might
8:24
Speaker 2: have SEC fees that you have to pay as part
8:27
Speaker 2: of trading activities. If you're in healthcare, you might have
8:32
Speaker 2: FDA fees that you have to pay. If you're in
8:34
Speaker 2: the aviation business, you got FAA fees that you have
8:37
Speaker 2: to pay. If you're in the radio or TV business,
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Speaker 2: you've got licensing fees that you have to pay to
8:42
Speaker 2: the FCC.
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Speaker 4: I'm thinking also, I'm trying to find specific examples here,
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Speaker 4: but I believe that companies in certain industries have previously
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Speaker 4: paid the United States government something in the akin to
8:57
Speaker 4: royalty fees for intellectual property developed by say the military,
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Speaker 4: and then license to the public. I think for GPS
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Speaker 4: for example, and the military development that was then licensed
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Speaker 4: to private companies.
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Speaker 3: Yeah, like, look, you pay a feed just for like,
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Speaker 3: if you're filing a patent stuff like that.
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Speaker 2: You have those kinds of fees. If you are in
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Speaker 2: the energy industry, you might have permitting fees with the EPA.
9:19
Speaker 2: You might have if you work in you know, gas
9:22
Speaker 2: and oil. There are liability trust funds that are set
9:26
Speaker 2: up in order to make sure that if something happens,
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Speaker 2: there's funds to be able to pay you know, a
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Speaker 2: certain percentage of damages out.
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Speaker 3: So nothing new here.
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Speaker 4: I mean the idea of private companies paying the United
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Speaker 4: States government. It does even of sales or any of
9:42
Speaker 4: those things in certain situations. The big thing is that
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Speaker 4: it's all spelled out statutorily, right through legislation that's been
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Speaker 4: written by Congress, which is, hey, the EPA has the
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Speaker 4: ability to collect fees and permitting for blah blah blah.
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Speaker 4: Those can be set and in writing in this and that,
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Speaker 4: but ultimately it's authorized by Congress in order for that
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Speaker 4: to happen. The big thing here is there doesn't appear
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Speaker 4: to be any authorization from Congress for this to happen,
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Speaker 4: and there's no set schedule of fees.
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Speaker 3: So by all accounts, this is a handshake, voluntary agreement
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Speaker 3: by Nvidia and AMD to pay a portion of their
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Speaker 3: sales to the United States government that happened to coincide
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Speaker 3: with them getting a bunch of export licenses to sell
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Speaker 3: to the Chinese government, avoiding any national security concerns.
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Speaker 2: Which obviously then has problematic implications for where this could
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Speaker 2: go in the future. And I always, again, I know
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Speaker 2: that anytime that you're talking about like a specific example
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Speaker 2: right now, it gets a little bit you know, politicized.
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Speaker 4: But let's think back to the Biden administration for a
10:46
Speaker 4: moment here check. I'm trying to think of what the
10:49
Speaker 4: biggest concerns were between Biden and a foreign entity, probably Ukraine.
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Speaker 4: I mean, you know, given Hunter's alleged involvement with that,
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Speaker 4: I don't even know if it's a legged at this point.
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Speaker 2: Like I'm trying to think of what would be Let's
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Speaker 2: say that the Biden administration decided, you know what, Raytheon
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Speaker 2: comes to them and says, hey, we want to sell
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Speaker 2: And I'm not saying that Raytheon would actually do this,
11:13
Speaker 2: but like I'm making a hypothetical here, we want to
11:17
Speaker 2: sell some Patriot missile batteries to Iran, which again they
11:23
Speaker 2: wouldn't they wouldn't, but like hypothetically, like, what what can
11:28
Speaker 2: we do to make this happen? You know, hey, we'll
11:30
Speaker 2: give you twenty percent of the revenue in order to
11:32
Speaker 2: make this happen. We would all find this problematic if
11:34
Speaker 2: it if it actually ended up occurring. Now, obviously those
11:36
Speaker 2: are weapons transfers, so you can't actually do that without
11:39
Speaker 2: congressional approval. Yeah, but let's go, you know, a step
11:43
Speaker 2: down on the ladder. Let's you want to talk about Okay, hey,
11:46
Speaker 2: let's say that you are a big mining company and
11:51
Speaker 2: you say, hey, Ukraine's got a bunch of resources. All
11:57
Speaker 2: these companies are bidding on it. We'll throw twenty percent
12:00
Speaker 2: center of the revenue back to the US government. If
12:03
Speaker 2: you give us the contract right. This is the kind
12:05
Speaker 2: of stuff that becomes problematic in a hurry when there's
12:08
Speaker 2: no set schedule, there are no broadly defined rules, and
12:13
Speaker 2: depending on who may or may not be in office
12:16
Speaker 2: at any particular point in time, this can all change,
12:19
Speaker 2: not because of any congressional authorization, but just because the
12:24
Speaker 2: White House does or does not like whoever is running
12:28
Speaker 2: the companies that are in power. So big questions about
12:32
Speaker 2: legality here. But I keep going back to this, and
12:34
Speaker 2: we talked about this up before the show. I also
12:37
Speaker 2: don't know who would sue over this. I don't think
12:39
Speaker 2: Congress would sue because who has standing to I.
12:42
Speaker 4: Mean Congress hypothetically maybe could sue because they, you know,
12:45
Speaker 4: this is their power to control the purse strings. And
12:49
Speaker 4: Congress ever sued the executive branch, I don't know, and
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Speaker 4: they certainly I don't even know if they can, and
12:53
Speaker 4: they certainly wouldn't right now. These companies are voluntarily paying
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Speaker 4: this for access to the Chinese market. They're not going
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Speaker 4: to sue, so it raises a ton of questions. It
13:07
Speaker 4: is obviously very unique, and it's set up. The stocks
13:12
Speaker 4: aren't moving, as far as I know much on this
13:14
Speaker 4: because they the news that they were able to sell
13:16
Speaker 4: these to China was already baked in. This revenue share
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Speaker 4: is just a new piece of the agreement.
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Speaker 2: So I don't really know what to make of this
13:25
Speaker 2: other than it opens up some potentially really dodgy stuff
13:29
Speaker 2: as you go down, Like the line of like, hey,
13:32
Speaker 2: how could this play out under different administrations and depending
13:36
Speaker 2: on you know, their wants and desires and how they
13:40
Speaker 2: want to collect revenue and who from it potentially is
13:44
Speaker 2: quite problematic. Here, let's take a quick break. There's one
13:48
Speaker 2: other item that I want to discuss with regards to
13:51
Speaker 2: Nvidia and China, and we'll do that right after this.
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14:47
Speaker 2: So I actually have two additional thoughts just on this
14:51
Speaker 2: whole in Vidia China thing.
14:52
Speaker 4: And if you're just joining us again, in Vidia ANDAMD
14:55
Speaker 4: apparently have come to an agreement with the Trump White
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Speaker 4: House to pay a fifteen percent revenue sharing of chips,
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Speaker 4: specifically AI chips sold to China back to the US Treasury.
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Speaker 2: So a couple of things that I'm just trying to
15:09
Speaker 2: wrap my head around. The well, actually one that I'm
15:11
Speaker 2: trying to wrap my head around. The other is just
15:12
Speaker 2: something that I think would be interesting. I'm trying to
15:18
Speaker 2: think of the best way to say this. If the
15:22
Speaker 2: Trump administration is serious that they want more US exports,
15:26
Speaker 2: then doesn't imposing an export tax go directly against that?
15:34
Speaker 3: Yes, it would.
15:35
Speaker 4: I guess what makes this situation a bit unique is
15:38
Speaker 4: it's not even really being developed here.
15:42
Speaker 2: Sure, but just like even US products, you'll have to
15:44
Speaker 2: sell more of them if you're going to make it
15:46
Speaker 2: more expensive to do so, if you're gonna take fifteen
15:47
Speaker 2: percent of revenue, that you're.
15:49
Speaker 3: Gonna make it less competitive on that market.
15:51
Speaker 2: The other piece to me, that's interesting, And I said
15:53
Speaker 2: this a few weeks ago when in Nvidia got the
15:57
Speaker 2: approval to send the H twenty chips over to China.
16:02
Speaker 2: Wouldn't the most interesting thing be if China all of
16:05
Speaker 2: a sudden just said, eh.
16:08
Speaker 3: We're not interested anymore.
16:09
Speaker 2: And I bring this up because yesterday through let's see,
16:15
Speaker 2: this was I don't know, it was a through someone
16:19
Speaker 2: by the name of Yu Yuan Tensin, who is affiliated
16:23
Speaker 2: with Chinese state broadcaster CCTV, said quote, when a type
16:29
Speaker 2: of chip is neither environmentally friendly, nor advance nor safest consumers,
16:33
Speaker 2: we certainly have the option not to buy it, referring
16:35
Speaker 2: to invidious chips. And I just think it would be
16:39
Speaker 2: very interesting if China, at this point in time, as
16:42
Speaker 2: they're going through these negotiations, might say, you know what,
16:48
Speaker 2: we can figure out ways to develop AI in the
16:50
Speaker 2: short term without in Nvidio chips. But gosh, it would
16:53
Speaker 2: sure hurt the US economy or the US stock market
16:56
Speaker 2: if we just decided not to buy them right now?
16:59
Speaker 3: Well, yeah, and who knows.
17:01
Speaker 4: I think ultimately that's obviously China's goal, because they are
17:06
Speaker 4: I think probably rightly suspicious that we would have all
17:09
Speaker 4: sorts of ability backdoor entry into these chips just.
17:12
Speaker 3: Stop buying them.
17:13
Speaker 4: To this point, though agreed, I don't think it's gonna
17:16
Speaker 4: stop it, but it's it's going to be a race
17:17
Speaker 4: to develop them domestically, I think very obviously. Just as
17:21
Speaker 4: we're racing to develop this stuff domestically, China's going to
17:24
Speaker 4: race to develop it domestically as well. And so that
17:30
Speaker 4: statement comes at some point where I think.
17:33
Speaker 3: We're likely to head.
17:35
Speaker 4: What would in Vidi, a AMD's response be if China
17:38
Speaker 4: came out and said.
17:38
Speaker 2: That, Well, in Vidio already responded and basically was like, no,
17:43
Speaker 2: this is not the case, you know, like, of course,
17:45
Speaker 2: we don't do this.
17:47
Speaker 4: I'm more meant, if China said we don't need these
17:49
Speaker 4: chips because they're not good enough, what would in Vidia do?
17:51
Speaker 4: They would I think that they would start lobbying the
17:54
Speaker 4: Trump administration to say, let us sell the latest and
17:56
Speaker 4: greatest chips to China the highest possible. You know, what's
18:01
Speaker 4: the black visit the black Yeah, you know, let us
18:04
Speaker 4: sell the latest and greatest because otherwise, look, they already
18:07
Speaker 4: developed the h twenties domestically. If this was the case, right,
18:11
Speaker 4: I don't think we have any evidence that they have.
18:13
Speaker 4: But if it came to pass that China is now
18:16
Speaker 4: saying we don't need these chips, so we're not going
18:18
Speaker 4: to buy them, I think the logical next step for
18:20
Speaker 4: Nvidia and AMD, if they're going to be self interested
18:24
Speaker 4: greeting companies, which is what you do, would be, Hey,
18:27
Speaker 4: give us access to the Chinese market on the latest
18:29
Speaker 4: and greatest, because otherwise they're going to develop.
18:31
Speaker 3: Is it what you do? I I would not, but
18:35
Speaker 3: I mean, let's let's be one hundred honest.
18:40
Speaker 2: You shouldn't be selling AI chips to China, agreed. There's
18:46
Speaker 2: a fundamental problem that in Vidia and AMD are so
18:49
Speaker 2: self interested in trying to make as much profit as
18:52
Speaker 2: they can that they are willing to sell this to
18:55
Speaker 2: China despite the fact that it could very easily end
18:58
Speaker 2: up in Chinese military hands. Yep, like and plenty amount right, correct,
19:06
Speaker 2: And so I don't know, I kind of look at
19:09
Speaker 2: this whole thing and I'm just like, I.
19:13
Speaker 3: Feel a little bit dirty about the whole thing. Yes,
19:16
Speaker 3: it does, like I do.
19:17
Speaker 2: It's it's kind of like, what are we doing here?
19:19
Speaker 2: You're you're gonna You're just gonna trust the Chinese government
19:22
Speaker 2: who has proven time and time again to not.
19:24
Speaker 3: Be a trustworthy and partner. But that's just me. Let's
19:30
Speaker 3: take a quick break here. When we come back, we
19:32
Speaker 3: got Wall Street Watch after this.
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Speaker 5: and the Nasdaq is up twenty nine points. Shares of
20:17
Speaker 5: paramount Skuidancer down about half percent. After the media company
20:20
Speaker 5: acquired the US rights to TKO Groups UFC for seven
20:24
Speaker 5: years beginning in twenty twenty six, TKO shares are currently
20:27
Speaker 5: up six percent. AI Software Company C three dot AI
20:31
Speaker 5: shares are down twenty two percent.
20:33
Speaker 3: Effort.
20:33
Speaker 5: Issued guidance for the fiscal first quarter C three dot
20:37
Speaker 5: Ai expects revenue to arrange between seventy point two million
20:40
Speaker 5: and seventy point four million dollars. Its non gap loss
20:44
Speaker 5: is expected to come between fifty seven point seven million
20:46
Speaker 5: and fifty seven point nine million dollars. Shares of an
20:50
Speaker 5: Nvidia are up just about half a percent and shares
20:53
Speaker 5: of AMD are up two point three percent. After closing
20:56
Speaker 5: an unprecedented arrangement with the Trump administration, Both Chimp companies
21:01
Speaker 5: agreed to give the US government fifteen percent of their
21:03
Speaker 5: revenue from chips sold to China in exchange for exports
21:07
Speaker 5: export licenses. Shares of the movie theater chain AMC are
21:11
Speaker 5: up five and a half percent after second quarter results
21:13
Speaker 5: exceeded analyst expectations. AMC broke even after excluding one time items.
21:19
Speaker 5: Analysts had anticipated a loss of seven cents a share.
21:22
Speaker 5: Revenue of one point four billion surpassed the consensus forecast
21:26
Speaker 5: of one point three four billion dollars, and finally, cloud
21:29
Speaker 5: infrastructure company core Weave shares are up seven percent after
21:32
Speaker 5: JP Morgan maintained its overweight rating and lifted its price target.
21:36
Speaker 5: The firm said that although shares require risk tolerance given
21:39
Speaker 5: volatilely trading. It remains positive on the potential for continual
21:43
Speaker 5: momentum in core Weave's business pipeline, I am ben Kitchen
21:46
Speaker 5: in That was Wall Street.
21:47
Speaker 3: Watch, PCENCMBC.
21:49
Speaker 2: It's titled Here's what US automakers are saying about Trump's
21:52
Speaker 2: changing EV policies. The big thing that this is referring
21:55
Speaker 2: to is that after September thirtieth, the seventy five hundred
21:59
Speaker 2: dollars tax credit for new EV's and four thousand dollars
22:01
Speaker 2: tax credit for used ones goes away. And it's talking about,
22:05
Speaker 2: you know, the different companies, whether it's you know, all
22:07
Speaker 2: electric companies like Tesla and Rivian or ones that simply
22:11
Speaker 2: offer evs like Ford or GM, how they are approaching this. Now, Look,
22:17
Speaker 2: these companies have known about these potential changes for I'll
22:21
Speaker 2: say quite some time. Now, I mean, you got to
22:23
Speaker 2: figure they at least knew this was a possibility for
22:25
Speaker 2: the last year or so.
22:26
Speaker 4: I think is reasonable and correct me if I'm wrong.
22:29
Speaker 4: The seventy five hundred dollars was only eligible to It
22:33
Speaker 4: was only eligible for evs that were mainly manufactured in
22:36
Speaker 4: the US or entirely or something like that that was.
22:39
Speaker 3: Going to be phased in. So I don't know how
22:41
Speaker 3: far along we got in the.
22:42
Speaker 4: Phase in there, just thinking about like big other automakers
22:46
Speaker 4: like Kia, like Hundai, who have made a dent in
22:49
Speaker 4: sales in EV's and does this really affect them at all?
22:51
Speaker 3: I think the answer is negligibly. Negligibly, but we'll see.
22:55
Speaker 3: So I think the big.
22:56
Speaker 2: Thing that I look at is look, EV growth in
22:59
Speaker 2: the life last year or so has kind of flatlined. Yeah,
23:03
Speaker 2: the previous couple of years it wasn't growing as quickly
23:06
Speaker 2: as the manufacturers wanted since they were pouring billions into
23:09
Speaker 2: making new models, but was still growing, you know, twenty
23:11
Speaker 2: to forty percent year over year. This year it's kind
23:14
Speaker 2: of okay, there's not much growth there at this point.
23:18
Speaker 2: And so, you know, we had mentioned at the time
23:21
Speaker 2: of the Inflation Reduction Acts passing.
23:24
Speaker 3: We said, look, whether you like.
23:27
Speaker 2: Evs or not, it's unclear that this is something that
23:31
Speaker 2: you need to be subsidizing right now, especially for making
23:35
Speaker 2: them in the United States. Sure, simply because one does
23:39
Speaker 2: not need to have an EV in order to get
23:42
Speaker 2: around We said, look, certainly you want to have you know,
23:44
Speaker 2: semiconductors and medicines and stuff like that made in the US,
23:47
Speaker 2: because when push comes to shove, you need these things. Ultimately,
23:51
Speaker 2: if one cannot get around in an EV, there are
23:53
Speaker 2: plenty of other ways to get around, including conventional internal
23:56
Speaker 2: combustion engines.
23:57
Speaker 4: And the climate argument always kind of fell flat to
24:00
Speaker 4: me on this front, like, oh, you're going to specifically
24:03
Speaker 4: subsidize one thing while ignoring other forms of pollutic Like,
24:09
Speaker 4: you know, if you want to genuinely attack this from
24:12
Speaker 4: a pure global warming and carbon perspective, then do a
24:18
Speaker 4: carbon tax. Everything always comes back to that exactly. You know,
24:21
Speaker 4: you're nitpicking one item versus another. So I agree that
24:24
Speaker 4: the foundation for these in the first place also completely
24:28
Speaker 4: ignored the electric electric grid conversations that we had had
24:33
Speaker 4: time over time, and so yeah, I don't think they
24:34
Speaker 4: made a ton of societal sense to begin with.
24:38
Speaker 3: Now.
24:39
Speaker 2: The other thing is, look, with EV sales slowing over
24:42
Speaker 2: the last year or two, I'm not convinced that these
24:45
Speaker 2: subsidies going away is going to dramatically alter how companies
24:49
Speaker 2: are talking about EV's at this point. They've already been
24:53
Speaker 2: doing that rethinking over the last couple of years. Sure,
24:55
Speaker 2: and maybe it accelerates it a little bit, but you're
24:58
Speaker 2: talking about a change around the margins, not hey, we
25:02
Speaker 2: have to completely change our way of thinking. The way
25:04
Speaker 2: of thinking already started changing back in twenty twenty three
25:07
Speaker 2: when it became apparent, Hey, the EV sales growth that
25:11
Speaker 2: we saw in twenty twenty, twenty one and twenty two
25:14
Speaker 2: is not going to continue at that pace. It's going
25:16
Speaker 2: to start rolling over. And so this is why in
25:19
Speaker 2: the last few years you had a lot of companies saying, Okay,
25:22
Speaker 2: we're canceling some of our EV model rollouts because we
25:27
Speaker 2: don't think the demand is going to be there.
25:29
Speaker 4: So what I think this is doing is very much
25:32
Speaker 4: highlighting the automakers who were cut off sides here, and
25:36
Speaker 4: Ford was one of them.
25:37
Speaker 3: Yeah.
25:38
Speaker 4: Ford has poured a lot of investment into EV development
25:43
Speaker 4: on their Mustang Mochi, on their Ford the Light Lightning yea,
25:48
Speaker 4: and there they were already finding a look, demand is lacking.
25:52
Speaker 4: You take away this seventy five hundred dollars tax credit
25:55
Speaker 4: and it could plunge pretty significantly.
25:58
Speaker 2: And this gets us back to something that we've said
26:01
Speaker 2: for the last few years now, which is Toyota, despite.
26:04
Speaker 3: Getting a ton of crap from everyone.
26:06
Speaker 2: Back in twenty twenty, people are like, oh, Toyota is
26:08
Speaker 2: not moving forward with all EV's, Like they're just doing
26:11
Speaker 2: you know, hybrids, and everyone was like, what are they
26:14
Speaker 2: Are they missing the boat? Is Toyota even gonna be
26:16
Speaker 2: around in like ten years? And the answer is, guys,
26:19
Speaker 2: they were the only one who got it right. Everyone
26:23
Speaker 2: else was, you know, pivoting to EV And quite honestly,
26:27
Speaker 2: I do get it to a certain extent, because remember
26:30
Speaker 2: back in twenty twenty, Tesla stock was going parabolic to
26:33
Speaker 2: the upside. And if you're an automaker saying, hey, I'm
26:36
Speaker 2: gonna be judged by how my stock does, you say, okay,
26:38
Speaker 2: I gotta make EV's too.
26:40
Speaker 3: I get it.
26:40
Speaker 2: There's a lot of short term pressure to do that.
26:44
Speaker 2: The big thing about the auto business it's not a
26:46
Speaker 2: short term game. It takes years to come up with
26:49
Speaker 2: new models and billions of dollars to actually produce them.
26:53
Speaker 2: And Toyota won by saying, no, we don't think this
26:57
Speaker 2: is where things are going in the long run. We
26:59
Speaker 2: think this is tempray this rate of expansion, and they
27:02
Speaker 2: were absolutely one hundred and fifteen percent right, yep. And
27:06
Speaker 2: so Toyota's sitting here right now, and they're still saying,
27:10
Speaker 2: by the way, hey, we're making a bunch of hybrid
27:12
Speaker 2: and plug in hybrid rav fours, and we can't make
27:15
Speaker 2: them fast enough to sell all of the ones that
27:17
Speaker 2: we need to. And you've got companies like four that
27:20
Speaker 2: are trying to play ketchup right now.
27:23
Speaker 4: The still most appealing, because there's a lot of pieces
27:26
Speaker 4: of the EV that appeals to me personally as a vehicle.
27:29
Speaker 4: One would just be avoiding gas stations generally, a little
27:32
Speaker 4: bit more predictability in terms of electricity costs compared to
27:35
Speaker 4: gasoline costs on a year to year basis.
27:38
Speaker 3: Maybe about avoiding gas stations, just talking about just price
27:41
Speaker 3: fluctuations on gasoline, where's electricity doesn't fluctuate quite as much
27:46
Speaker 3: every six months of changes? Yeah, you know what you're
27:48
Speaker 3: paying generally?
27:49
Speaker 4: Yeah, I mean, I mean, you know, during my lifetime,
27:50
Speaker 4: I've seen gas prices as low as probably a buck
27:53
Speaker 4: seventy five and as high as five plus dollars per gallon.
27:56
Speaker 3: You haven't seen that same price change with electricity. No,
28:01
Speaker 3: maybe I might have.
28:02
Speaker 2: Yeah, I'll have to go back and check the rates,
28:04
Speaker 2: but I'll take a look The.
28:06
Speaker 4: Other stuff that has appealed to me is the dual
28:09
Speaker 4: usage for some of these vehicles. I know it's still
28:10
Speaker 4: an early promise, but the idea of using, for instance,
28:14
Speaker 4: the F one fifty lightning as a generator for your
28:17
Speaker 4: home was really really a cool idea. And then we're
28:20
Speaker 4: finally that newest iteration of the EV where it comes
28:24
Speaker 4: to the gasoline generator on there, Yeah, where it recharges that.
28:28
Speaker 4: I mean, like, I think we're on the cusp of
28:30
Speaker 4: some really innovative stuff. I just don't think that it's
28:32
Speaker 4: necessary to have a tax credit in there to incentivize it.
28:35
Speaker 3: No, and compete. I like be able to produce these
28:39
Speaker 3: things at competitive levels and they will stand for themselves. Personally,
28:43
Speaker 3: I love the idea of the plug in hybrid.
28:44
Speaker 2: I think like for my use it would be and
28:47
Speaker 2: I haven't found when it quite fits what I want yet,
28:50
Speaker 2: but it's the perfect use for me where it's okay, great,
28:54
Speaker 2: you got you know, forty miles of range. You can
28:56
Speaker 2: get to and from work without having to use any gas.
28:59
Speaker 2: But hey, if you going on a longer trip with
29:01
Speaker 2: the family, great pile on it. You've got six hundred
29:03
Speaker 2: miles of range because the thing's really efficient.
29:05
Speaker 3: Also. I mean that to me is something that's just
29:09
Speaker 3: a monster. The only downside to me is the dual engine.
29:13
Speaker 3: How's it a downside? Do you think more maintenance costs?
29:15
Speaker 4: I would assume, whereas to me the all electric with
29:18
Speaker 4: the generator, you have one engine, you have the ability
29:21
Speaker 4: to recharge on gas.
29:22
Speaker 3: I really find that appealing.
29:24
Speaker 4: And again they're not being sold here, but you know,
29:26
Speaker 4: I just assume that that leads to more maintenance.
29:29
Speaker 3: You're gonna have.
29:29
Speaker 2: The first one showing up in the US in the
29:31
Speaker 2: next year was the first one Dodge has. Yeah, I
29:34
Speaker 2: think they're calling it the ram Charger or the Ram
29:36
Speaker 2: something that is. It's not even Dodge. Actually, it's just
29:39
Speaker 2: rammed through that brand now. But there's also the guys
29:44
Speaker 2: who are developing the Scout brand are redeveloping it.
29:47
Speaker 1: Yeap.
29:47
Speaker 2: They are supposedly going to have one of those options
29:50
Speaker 2: when they released in a couple of years, but who
29:52
Speaker 2: knows if they're even around a couple of years. VW,
29:54
Speaker 2: who owns the brand might just say, no, this isn't
29:56
Speaker 2: gonna work anymore, and you're done with that.
30:00
Speaker 3: Let's take a quick break here.
30:01
Speaker 2: When we come back, we'll talk about how small businesses
30:04
Speaker 2: are dealing with tariffs.
30:07
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30:15
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30:42
Speaker 3: Peace from Boomberg. Here.
30:44
Speaker 2: Small US firms paying Trump terraffs face two hundred and
30:47
Speaker 2: two billion dollars annual hit. This according to the US
30:49
Speaker 2: Chamber of Commerce, who estimate estimates that the small businesses
30:54
Speaker 2: in the US will end up paying that total, which
30:56
Speaker 2: according to their math, works out to about eight hundred
30:58
Speaker 2: and fifty six dollars in additional cost per firm that's
31:03
Speaker 2: actually paying these. Obviously, if you are a small insurance company,
31:09
Speaker 2: you do not pay any tariffs. If you are a
31:11
Speaker 2: small importer of plus toys from Vietnam.
31:18
Speaker 4: True, the other complicated piece here is not just the
31:23
Speaker 4: what do we gonna call it them taxes tariffs that
31:24
Speaker 4: you are actually paying to the United States government. The
31:26
Speaker 4: compliance with all of this, right, It's not so simple
31:30
Speaker 4: as just the you know, Customs and Border Protection sends
31:34
Speaker 4: you a bill, it is much more. You have to
31:37
Speaker 4: work with your supplier to figure out the value of
31:39
Speaker 4: these goods, assess them a range for the payment of
31:43
Speaker 4: the tariffs. You also may need to buy a special bond,
31:47
Speaker 4: basically a guarantee that those companies will be able to
31:50
Speaker 4: actually pay the tariffs, because you're not usually paying them
31:53
Speaker 4: right at time of receipt of goods, and so you know, hey,
31:57
Speaker 4: what if your business goes bankrupt in the meantime, you
31:59
Speaker 4: need to have this bond in place. These are all
32:01
Speaker 4: things that well, I have no idea. For instance, if
32:04
Speaker 4: Walmart and Target are required to have a surety bond
32:07
Speaker 4: because they're big enough that they can probably guarantee payment,
32:11
Speaker 4: where it goes out.
32:12
Speaker 2: Of business before being able to pay, there's bigger problems affoots, right.
32:15
Speaker 4: And you know you're gonna be pretty sure you can
32:17
Speaker 4: collect if you're the United States government and they owe
32:19
Speaker 4: you money.
32:20
Speaker 3: If you are Bob's Toy Shop in.
32:24
Speaker 4: Wherever Rhode Island, there's a lot less guarantee that you're
32:26
Speaker 4: going to get that revenue, and so they require these
32:28
Speaker 4: bonds from insurance companies. Suffice to say, there is a
32:33
Speaker 4: lot more added cost for those small businesses who don't have,
32:36
Speaker 4: for instance, in house counsel on how to deal with
32:39
Speaker 4: customs brokering. And so I mean business opportunity for customs
32:43
Speaker 4: brokers out there, because they're suddenly gaining a whole number
32:46
Speaker 4: of new clients. But you know, added cost above and
32:49
Speaker 4: beyond just the compliance with the tariff itself.
32:51
Speaker 2: And let's be honest, not a business that increases productivity,
32:56
Speaker 2: it's one that takes away from it.
32:58
Speaker 4: Because you know, if you're a new business that's, for instance,
33:00
Speaker 4: consulting on how to deal with tariffs, yeah, you are
33:03
Speaker 4: not increasing productivity.
33:05
Speaker 2: Now, can we do an interesting Actually I know Ben's
33:08
Speaker 2: got something first, but then I have an interesting thought exercise.
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34:01
Speaker 2: So it was just something I said in passing, but
34:04
Speaker 2: I just want to I think this will be kind
34:05
Speaker 2: of fun to do. I said, Look, if Walmart can't
34:08
Speaker 2: pay you because they're out of money, there's there's bigger
34:11
Speaker 2: problems afoot. Here's the question that I have. Would we
34:17
Speaker 2: consider Walmart at this point too big to fail?
34:20
Speaker 3: No, Uh, let me think about it a little bit more.
34:25
Speaker 2: Here's here's the case I'll make. Okay, Walmart's got two
34:28
Speaker 2: point one million employees. That alone is about one and
34:31
Speaker 2: a half percent of all US employees. If something were
34:36
Speaker 2: to happen such that, for whatever reason, Walmart's continued existence
34:41
Speaker 2: is threatened, I would make the case that Walmart would
34:46
Speaker 2: be bailed out in some way, shape or form, and
34:48
Speaker 2: they are too big to fail.
34:50
Speaker 3: I would I would not argue the same.
34:54
Speaker 2: I do you think the decline would be slow enough
34:56
Speaker 2: that it would be mitigated by other stuff?
34:58
Speaker 4: Look at Sears for example. It's very unlikely to me
35:01
Speaker 4: that Walmart would be caught in an over leverage trade
35:04
Speaker 4: like bear Stearns for example, to sussade right away.
35:09
Speaker 3: Furthermore, there is.
35:12
Speaker 4: Such a quick ability for the likes of Target and
35:16
Speaker 4: other competitors to pick up capacity to replace Walmart that
35:20
Speaker 4: I just don't.
35:20
Speaker 3: I wouldn't put them in that category. Okay, it would
35:23
Speaker 3: be shocking with that. This gets me to my real thing.
35:27
Speaker 3: Top twenty five US companies. This is going to be
35:28
Speaker 3: lightning round. Too big to fail or not? Amazon? Yes,
35:34
Speaker 3: Amazon is too big to fail.
35:35
Speaker 4: I believe they are defense contracts and things on their
35:39
Speaker 4: apphile computing.
35:42
Speaker 2: No, Yes, too much importance to the stock market. Stock
35:46
Speaker 2: market goes down. The whole thing falls apart. Think about
35:48
Speaker 2: all the retirement money, all the boomers that are sitting
35:50
Speaker 2: there with their portfolios and the S and P. Five
35:52
Speaker 2: hundred five percent of it goes away.
35:55
Speaker 3: Problem. Wow, Okay, United Health yes, no, no.
36:00
Speaker 2: No, interesting because they're almost being pushed to the brink
36:03
Speaker 2: of failure right now by the DOJ, which is why
36:05
Speaker 2: I say no.
36:05
Speaker 3: How many people lose their health? Okay?
36:08
Speaker 2: Really interesting? Right, like kind of wild stuff happening this
36:11
Speaker 2: year right now as we speak.
36:12
Speaker 4: Yeah, I just I wonder about Medicare's ability to actually
36:15
Speaker 4: serve customers if United Health failed.
36:17
Speaker 3: I do too.
36:17
Speaker 2: I think they might be too big. But Donna Brooks
36:20
Speaker 2: your hathaway, No, I don't think so. CVS Health. If
36:25
Speaker 2: you're saying yes about United Health, you got about CBS
36:27
Speaker 2: because they own it.
36:27
Speaker 3: No. Yeah, Exon Mobile yes, yes as well, Alphabet Yes. No.
36:35
Speaker 2: I just don't think there's enough core use there beyond Search.
36:39
Speaker 2: McKesson Corporation don't know. I'm gonna say no because I'll
36:44
Speaker 2: just say no. Sen Kora don't don't even really they're
36:50
Speaker 2: a oh previously it was marisource Bergen.
36:54
Speaker 3: Yes, too big to fail.
36:55
Speaker 2: Otherwise you all of a sudden don't have drug distribution
36:57
Speaker 2: across most of the country. Costco No, No, JP, Morgan
37:00
Speaker 2: already been proven yes, yeah, Microsoft, Yes, Cardinal Health.
37:06
Speaker 3: I put Steve. I don't know enough about cardinals business, Chevron, yes,
37:10
Speaker 3: Signa probably Ford, Yes, already been bailed out once.
37:15
Speaker 2: Bank of America, Yes, already been bailed out once. GM
37:17
Speaker 2: already been Actually no, GM did not take bail out money.
37:21
Speaker 3: But would have been.
37:22
Speaker 2: But but what if needed Elevant's health, I don't know.
37:26
Speaker 2: City Group already been bailed out. So like this is
37:28
Speaker 2: kind of you look there.
37:30
Speaker 3: This is the largest companies by employees, by revenue, by revenue. Yeah,
37:34
Speaker 3: I mean, it just does lead you to believe that
37:36
Speaker 3: a large portion of the stock market is backstopped by
37:39
Speaker 3: the federal government. Doesn't it kind of feel that way?
37:44
Speaker 3: What a pretty good backstay.
37:45
Speaker 2: It kind of makes so it's again, this is just
37:49
Speaker 2: kind of the world we live in. It's privatized gains
37:52
Speaker 2: for THEE and socialized losses for we. Yeah, or maybe
37:56
Speaker 2: it's the other way around, sorry, but in any case,
38:00
Speaker 2: you know, it's kind of what it feels like.
38:02
Speaker 3: Let's take a quick break here when we return.
38:06
Speaker 2: We got a whole nother hour here, and maybe I'll
38:08
Speaker 2: get that last sentence right. It's privatized gains for we,
38:11
Speaker 2: socialized losses for THEE. That's the one almost stuck the landing.
38:15
Speaker 2: Quick break here, more financial exchange in a bit