Latest / The Financial Exchange Show / Tariffs Overturned: What the Supreme Court’s Ruling Means for Markets

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Tariffs Overturned: What the Supreme Court’s Ruling Means for Markets · The Financial Exchange Show

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Speaker 1: a donation Today. Face is the Financial Exchange with Mike
1:06
Speaker 1: Armstrong and Mark Vandetti.
1:13
Speaker 2: Well, if you are looking for a quiet Friday leading
1:16
Speaker 2: into the weekend, you're not getting it.
1:19
Speaker 3: Today.
1:19
Speaker 2: We are reporting that major news outlets reporting that President
1:23
Speaker 2: Trump's tariffs have been struck down by the US Supreme Court,
1:27
Speaker 2: being reported by Bloomberg, CNBC, Wall Street Journal, among other
1:32
Speaker 2: major news outlets. It is very much a breaking news
1:36
Speaker 2: story here, as we just got the I think what
1:41
Speaker 2: been in mark three four minutes ago. We just saw
1:44
Speaker 2: this announcement come across the screens. So a lot more
1:47
Speaker 2: to be figured out on this and no real details
1:50
Speaker 2: at this point. But again, major news outlets this morning
1:54
Speaker 2: reporting that the president's long in place now tariffs that
1:59
Speaker 2: were implemented back largely in April of twenty twenty five,
2:03
Speaker 2: have been struck down by the US Supreme Court. So
2:06
Speaker 2: we will be discussing this, I'm sure later in the
2:08
Speaker 2: program and throughout the course of the next few weeks
2:11
Speaker 2: as we figure out the implications for major publicly traded companies,
2:16
Speaker 2: for those who have filed suit against the administration looking
2:19
Speaker 2: for refunds of tariffs. In the case that this happened,
2:22
Speaker 2: there are a series of potential other outcomes here. But
2:27
Speaker 2: back to the drawing board for the White House as
2:30
Speaker 2: the Supreme Court. Again, if you're just joining us knocks
2:33
Speaker 2: down and kills the majority of Trump's emergency tariffs on
2:40
Speaker 2: foreign nations. Mark, we are again just getting this news
2:44
Speaker 2: here and so I'm reacting to it live. But any
2:48
Speaker 2: major thoughts on what this might mean for some different
2:52
Speaker 2: areas of the market and different areas of the economy
2:54
Speaker 2: as this strikedown occurs.
2:55
Speaker 4: Now, Mike, I don't think, as you've already pointed out,
2:58
Speaker 4: I don't think we know enough.
3:01
Speaker 2: Yeah, so, look, there are certain tariffs that are likely
3:04
Speaker 2: to be staying in place. For instance, the use of
3:07
Speaker 2: stealing aluminum tariffs. We've talked about how those have some
3:10
Speaker 2: precedent of being able to be used.
3:12
Speaker 3: But these are these specific.
3:14
Speaker 2: Economic emergency tariffs that were put on a number of
3:16
Speaker 2: nations across the globe. And then also calls into questions
3:21
Speaker 2: any of the negotiations that happened with other nations, because again,
3:25
Speaker 2: many of these trade agreements that have had handshake agreements
3:28
Speaker 2: on have not been inked, have not been signed in
3:31
Speaker 2: any meaningful way, and so big questions as to what
3:33
Speaker 2: those trade.
3:34
Speaker 3: Deals could look like.
3:36
Speaker 2: Markets not reacting dramatically in early trading. We have the
3:40
Speaker 2: NASDAC up about sixty eight points or third of one percent,
3:43
Speaker 2: the S and P up seventeen points a quarter of percent,
3:45
Speaker 2: and the Dow Jones Industrial average up about one fifth
3:49
Speaker 2: of a percent in early trading here. But we'll be
3:52
Speaker 2: covering it and you know, getting I'm sure commentary from
3:56
Speaker 2: members of the White House, members of large public traded
3:59
Speaker 2: come companies, and many others as the day goes on.
4:04
Speaker 4: I'm just thinking, oh, sorry.
4:05
Speaker 3: Sorry, go ahead, please.
4:06
Speaker 4: This is more of a legal issue than an economic issue.
4:10
Speaker 4: The economic effect of tariffs is the same whether they
4:13
Speaker 4: come from an executive by fiat, like Trump just saying
4:17
Speaker 4: I'm going to tariff Japan if they don't pour more
4:20
Speaker 4: investment into the United States versus Congress doing it. The
4:23
Speaker 4: economic effect is the same. And I'm leaving aside the
4:26
Speaker 4: question of uncertainty for now because Trump can always change
4:30
Speaker 4: his mind, whereas if Congress votes on something, I think
4:33
Speaker 4: it's harder to change it x post or or on
4:36
Speaker 4: the fly. So from maybe from I'm not saying from
4:39
Speaker 4: a market point of view, sure, markets may like the
4:42
Speaker 4: certainty of knowing that Congress now has to debate may
4:46
Speaker 4: refine these tariffs, may not accept them at all, and
4:51
Speaker 4: if they do, they probably won't be changing them every
4:53
Speaker 4: other week as the White House was doing as their
4:57
Speaker 4: negotiating position sort of evolved. But the economic effective tarrafs
5:02
Speaker 4: is kind of the same no matter what their origin agreed.
5:05
Speaker 2: The economic effects I mean, look, the revenue was collected,
5:09
Speaker 2: the money came into the Treasury's coffers, regardless of how
5:12
Speaker 2: they are implemented.
5:15
Speaker 3: To your point, though, clearly they.
5:18
Speaker 2: Are a lot more volatile when done via executive order
5:21
Speaker 2: here here as we are seeing where they're getting wiped
5:24
Speaker 2: away by the.
5:24
Speaker 3: Supreme Court on those grounds.
5:28
Speaker 2: In terms of sectors that are moving this morning, we
5:30
Speaker 2: do have communications services up one point six percent, We
5:34
Speaker 2: have consumer discretionary stocks up over one percent, one point
5:38
Speaker 2: two percent, a few sectors moving down in trading too.
5:42
Speaker 2: So again looking for any detection that certain companies or
5:45
Speaker 2: certain areas of the market are moving on this news.
5:48
Speaker 2: But again very very early here. The news came out
5:52
Speaker 2: if ten minutes ago, on the Supreme Court striking down
5:57
Speaker 2: these tariffs, and so we will be hearing more presumably
6:00
Speaker 2: they will be either either ruling on or sending back
6:04
Speaker 2: to lower courts whether or not the collection of tariff revenue,
6:09
Speaker 2: which jeez, I don't Mark, do you happen to know
6:11
Speaker 2: a number off the top of your head. I wasn't
6:13
Speaker 2: prepared to think. I know it was hundreds of millions.
6:17
Speaker 4: Yeah, it was about three closing in on three hundred billion.
6:20
Speaker 3: I think, Mike, three hundred billion dollars in collections.
6:23
Speaker 2: Now not all of that would have to be reimbursed,
6:25
Speaker 2: because again the Supreme Court has not likely ruled out
6:28
Speaker 2: every tariff, but could a large portion of that now
6:32
Speaker 2: go back into the system. It's not an insignificant sum
6:37
Speaker 2: of money that we are taught.
6:38
Speaker 4: I'll say only this. The ruling was six to three,
6:41
Speaker 4: so they couldn't get the most I assume the most
6:44
Speaker 4: conservative block voted to leave this power with the President
6:51
Speaker 4: Thomas Alito, and who am I leaving out? Well whatever,
6:54
Speaker 4: that's not really.
6:55
Speaker 2: Our regardless of six to three vote is not terribly
6:57
Speaker 2: close either.
6:58
Speaker 4: No, No, it is not artisan in line. I'm thinking,
7:01
Speaker 4: And I'll just hazard a guess here, kind of for
7:03
Speaker 4: the fun of it on a Friday, go a little
7:05
Speaker 4: crazy and say they wiped them out. There was no
7:08
Speaker 4: compromise here. They didn't allow the revenues that were collected
7:12
Speaker 4: to this point to stay in the Treasury's coffers. I'm saying,
7:16
Speaker 4: with no basis whatsoever, we're gonna have to wait. But
7:19
Speaker 4: that looks to me like this might be kind of
7:21
Speaker 4: kind of lopsided.
7:23
Speaker 2: Yeah, let's take a quick break. When we come back,
7:26
Speaker 2: we'll see if we can dig up anything new on
7:29
Speaker 2: the breaking news on tariffs from the Supreme Court. But
7:32
Speaker 2: this morning at eight thirty a and we had a
7:34
Speaker 2: scheduled release of gross domestic product that came in worse
7:37
Speaker 2: than anticipate, and we've got to.
7:39
Speaker 3: Dive in there as well. Let's take quick break.
7:41
Speaker 2: We'll be talking about GDP next here on the Financial
7:43
Speaker 2: Exchange tekst.
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8:45
Speaker 2: Welcome back to the Financial Exchange. If you're just joined,
8:47
Speaker 2: it's Mike Armstrong, Ben Kitchen and Mark Vandetti with you
8:51
Speaker 2: on a Friday, And if you did not already see it,
8:55
Speaker 2: About eighteen minutes ago, it was announced that the US
8:58
Speaker 2: Supreme Court has struck down in Trump's reciprocal tariffs and
9:02
Speaker 2: sending the decision about reimbursement seemingly back to the lower
9:06
Speaker 2: lower courts in a six to three vote. If fully allowed,
9:11
Speaker 2: the refunds could total as much as one hundred and
9:13
Speaker 2: seventy billion dollars, but it has been described as what
9:17
Speaker 2: would be.
9:18
Speaker 3: A very messy process.
9:19
Speaker 2: If that does in fact happen, we'll be tracking this
9:22
Speaker 2: probably for the next few weeks as it is a
9:24
Speaker 2: major breaking news item, but I did want to get
9:27
Speaker 2: over mark to the GDP release that also surprised this.
9:30
Speaker 3: Morning eight thirty am.
9:32
Speaker 2: We were anticipating, I believe it was GDP to come
9:35
Speaker 2: in at around two and a half percent for the quarter.
9:39
Speaker 2: That would be a dramatic slowdown from the fourth the
9:43
Speaker 2: third quarter number of four point four percent annualized rate.
9:46
Speaker 2: We came in well below that though, and a few
9:50
Speaker 2: things were pointed to. But what would you highlight as
9:53
Speaker 2: most important to this fourth quarter GDP report, Mark, Well.
9:58
Speaker 4: There were some big tractors. So GDP is the sum
10:03
Speaker 4: of spending by people business in the form of investment,
10:08
Speaker 4: and that includes housing, so business and people in the
10:11
Speaker 4: form of housing. But the total category name is investment
10:17
Speaker 4: and government spending, with a little adjustment for exports because
10:20
Speaker 4: GDP stands for gross domestic products. So you have to
10:23
Speaker 4: take I said exports, I meant to say imports. You
10:26
Speaker 4: have to take imports off of that because imports are
10:28
Speaker 4: not produced domestically obviously, So in terms of the high
10:33
Speaker 4: level story, GDP increased, you hear the reported number is
10:36
Speaker 4: one point four percent, but that's actually annualized. That's not
10:41
Speaker 4: how much spending increased quarter over quarter. That's that number
10:45
Speaker 4: times for so that's that's what they mean when they
10:47
Speaker 4: say they annualized it. It's also real. It's also after inflation.
10:51
Speaker 4: This was much slower than the previous a couple quarters
10:54
Speaker 4: pace of about four percent, And the big detractors might
10:57
Speaker 4: to answer your question, drop in government spending do presumably
11:00
Speaker 4: to the shutdown, at least that's the commentary that I've seen.
11:03
Speaker 4: And a little adjustment for imports, which is necessary because
11:08
Speaker 4: they're not produced domestically by definition. Consumer spending, on the
11:12
Speaker 4: other hand, held up. It was more modest the rate
11:16
Speaker 4: over the quarter of a quarter increase than at previous quarters.
11:20
Speaker 4: And this time investment actually contributed, whereas investment had been
11:24
Speaker 4: a bit and investment is a very broad category. It
11:27
Speaker 4: includes investment by businesses and consumers in the form of
11:30
Speaker 4: housing and stuff like that. That contributed somewhat. So a
11:35
Speaker 4: slowdown mic but not surprising because the pace of the
11:38
Speaker 4: third and fourth quarter was absolutely scorching, or second and
11:41
Speaker 4: third quarter, pardon me, was scorching.
11:43
Speaker 2: It was quite substantial. That brings the full year GDP
11:46
Speaker 2: number to two point two percent. From what I'm seeing
11:49
Speaker 2: for twenty twenty five that again arguably might be more
11:53
Speaker 2: than the capacity of the US economy, but a dramatic
11:55
Speaker 2: slowdown to the two point eight percent pace in twenty
11:58
Speaker 2: twenty four. What is do in your mind to all
12:01
Speaker 2: the commentary that we have been having about productivity mark,
12:05
Speaker 2: because right, ultimately the QUEST economy still grew two point
12:09
Speaker 2: two percent in spite of only adding what was it,
12:12
Speaker 2: two hundred thousand jobs in total across the course.
12:14
Speaker 4: Yeah, there's still a productivity story there, that is, we
12:18
Speaker 4: grew without adding workers. Therefore existing workers must have produced more.
12:23
Speaker 4: It's just not as dramatic as some had speculated and
12:26
Speaker 4: some had hoped. So there's that there's that implication for
12:31
Speaker 4: that narrative. This number caused me to get set back
12:38
Speaker 4: on my heels a bit this morning, because I've been
12:39
Speaker 4: thinking we were going to get something closer to three
12:41
Speaker 4: to four percent, because there tends to be persistence, and
12:44
Speaker 4: I use that term loosely, not like technically. In GDP,
12:47
Speaker 4: strong quarters tend to be absent, like a shock followed
12:51
Speaker 4: by strong quarters. I was expecting a higher number, frankly,
12:54
Speaker 4: and now I'm wondering if the Fed wasn't right to
12:57
Speaker 4: do what it did the past several meetings, which is
13:00
Speaker 4: ease policy somewhat.
13:02
Speaker 1: Mike.
13:02
Speaker 4: We had no job creation last year, as you pointed out,
13:04
Speaker 4: though there could be a silver lining in the form
13:07
Speaker 4: of a leap in productivity, which almost certainly happened. But
13:12
Speaker 4: GDP growth stalled is too strong of a word. We
13:16
Speaker 4: need more data to conf We need to see a
13:18
Speaker 4: couple more quarters worth of data to confirm that. But
13:21
Speaker 4: not as breakneck as some had thought. So you might
13:24
Speaker 4: take solace on that, Well, the economy is probably not overheating.
13:28
Speaker 4: You might also be a little sort of jolted, as
13:31
Speaker 4: I was this morning by that.
13:33
Speaker 2: Yeah, I was going to say a lot of I
13:34
Speaker 2: has also been written about the government shutdown, and the
13:36
Speaker 2: President himself, I think tweeted or posted untrue social about
13:40
Speaker 2: blaming Democrats for the weak GDP report because of the
13:43
Speaker 2: government shutdown, and it was certainly a contributing factor. You
13:47
Speaker 2: can you can track down the decrease in government spending
13:49
Speaker 2: in the fourth quarter. My point, however, would be economists
13:55
Speaker 2: knew Unless they knew that, I think they were aware
13:59
Speaker 2: that the government had shut down for the longest time since. However,
14:04
Speaker 2: you know, however many decades it was, and so they
14:07
Speaker 2: had put that into their forecast of expecting two and
14:10
Speaker 2: a half percent GDP, and so by all accounts, this
14:12
Speaker 2: was still a pretty substantial miss. And I think that
14:16
Speaker 2: point is important. You know, they didn't come up with
14:19
Speaker 2: this forecast a year and a half ago before they
14:21
Speaker 2: knew about the government shutdown.
14:22
Speaker 3: This was a forecast that gets revised every few days.
14:26
Speaker 2: And so, yes, the government shutdown was a drag on
14:30
Speaker 2: economic activity. Likewise, that spending. Everybody that worked for the
14:35
Speaker 2: government ultimately got paid just in arrears for the work
14:39
Speaker 2: that they didn't do. All of the contracts that didn't
14:42
Speaker 2: get paid in that quarter eventually were paid come the
14:46
Speaker 2: end of the government shutdown, or maybe delayed into the
14:48
Speaker 2: first quarter. So that is a question too. How much
14:51
Speaker 2: of a snapback do we see if a lot of
14:53
Speaker 2: this miss was due to government shutdown, we should see
14:56
Speaker 2: that just move into the first quarter rather than disappear entirely.
14:59
Speaker 2: Some of the the activity disappears entirely. Right, if you
15:03
Speaker 2: were a government worker who didn't spend your lack of
15:06
Speaker 2: a paycheck on lunch in DC, then that restaurant is
15:09
Speaker 2: never going to make those sales back, but the bulk
15:12
Speaker 2: of it probably just shifted to another quarter. So may
15:15
Speaker 2: we get that bounce back in the first quarter. I
15:17
Speaker 2: suppose we will have to see.
15:19
Speaker 4: But spending did slow. The annualized rate in the fourth
15:23
Speaker 4: quarter was two point four percent. That's down from three
15:25
Speaker 4: point five in the second quarter, the same roughly as
15:29
Speaker 4: the two point five percent rate. Sorry for all the
15:31
Speaker 4: numbers here. What I'm trying to get at here is
15:33
Speaker 4: that spending spiked PCE is the technical term for that
15:37
Speaker 4: category personal consumption expenditures. It spiked in Q three. That
15:42
Speaker 4: contributed to the to the rapid pace of GDP growth
15:46
Speaker 4: four point four percent annualized in Q three, and it dragged.
15:51
Speaker 4: It was a bit of a drag on GDP in
15:53
Speaker 4: the fourth quarter because its rate slowed.
15:56
Speaker 2: The PC Price Index was released as part of this
15:59
Speaker 2: as well, right, so we came in at two point
16:01
Speaker 2: nine percent year over year. I believe that is a
16:04
Speaker 2: fair bit higher than the CPI reading we got for
16:07
Speaker 2: the same time period. So that's the important piece to
16:09
Speaker 2: keep in mind that the yeah, two five versus two
16:12
Speaker 2: point nine percent ultimately is a pretty.
16:14
Speaker 3: Big gap, and you alluded to it earlier.
16:18
Speaker 2: But how does the FED read all into this is
16:22
Speaker 2: an interesting question. Now to your point, the Fed cut
16:24
Speaker 2: interest rates? Was it twice or three times in the
16:27
Speaker 2: in the fall and into the winter of last year.
16:29
Speaker 4: I want to say they did a few more rate cuts, Mike,
16:32
Speaker 4: but don't hold me to that.
16:34
Speaker 3: It was either two or three.
16:35
Speaker 2: We're now sitting at three point five to three point
16:39
Speaker 2: seventy five percent. They target a band of interest rates,
16:41
Speaker 2: but the high end of their policy is sitting at
16:43
Speaker 2: three point seventy five percent. Yesterday, the likelihood of a
16:47
Speaker 2: rate cut at the meeting in March was sitting at
16:51
Speaker 2: around five and a half percent. It has barely budged
16:54
Speaker 2: this morning on the Chicago Mercantile Exchange. So to your point,
16:59
Speaker 2: in fact, it's it's now moved down. As you know,
17:03
Speaker 2: you have the I think what's happening here? My guess
17:06
Speaker 2: would be, you know, in the fourth quarter you're seeing
17:09
Speaker 2: a weaker GDP report, but betters are now saying, okay,
17:13
Speaker 2: tariffs are now off the table. What does that do
17:15
Speaker 2: for economic activity and inflation? If surprisingly right, teriffs go
17:20
Speaker 2: away and people are worried more about inflation, well, yeah,
17:23
Speaker 2: they may be. If one hundred and seventy billion dollars
17:26
Speaker 2: in collective tariff revenue gets shot right back to or
17:30
Speaker 2: not to consumers, but to businesses all across the United States.
17:35
Speaker 4: I think my impression, based on all the news, and
17:39
Speaker 4: it's a lot that we are trying to digest here today,
17:42
Speaker 4: is that it makes a stronger case. I don't share
17:45
Speaker 4: the argument, or I don't buy the argument, I don't think,
17:48
Speaker 4: but it makes a stronger case for FED easing. What
17:51
Speaker 4: we know now does than what we knew at eight
17:54
Speaker 4: twenty nine this morning.
17:56
Speaker 2: I think maybe GDP make your argument GDP lower than GDP.
18:01
Speaker 4: All the one office a side blaming the shutdown, et cetera.
18:04
Speaker 4: Shutdowns still happened, and changes in GDP tend to carry over.
18:09
Speaker 4: There's a there's a high correlation between the change in
18:11
Speaker 4: GDP in one period and the next, like you can
18:13
Speaker 4: accidentally send the economy into recession, is what I'm trying
18:15
Speaker 4: to say. Shutdowns couldn't theory do that. So I'm not
18:18
Speaker 4: saying that's what's happening here. I suspect I'll just defer
18:20
Speaker 4: to people who do this type of forecasting for a
18:22
Speaker 4: living and say, Okay, it's plausible that it should bounce back.
18:26
Speaker 4: But suppose it doesn't. So growth slowed Mike, quarter over quarter.
18:29
Speaker 4: We were already a little bit concerned about jobs. I
18:32
Speaker 4: was not in the extreme concern camp, but there's there
18:37
Speaker 4: were some signs of weakening in the labor market, even
18:39
Speaker 4: though the last employment report was stronger than we've become
18:42
Speaker 4: accustomed to. And with tariffs, tariffs will not be imposed arbitrarily,
18:46
Speaker 4: going this sort of willy nilly putting tariffs on you
18:50
Speaker 4: because I didn't like a TV ad you ran stuff
18:52
Speaker 4: like that. That's that that monkey business is going to stop.
18:56
Speaker 4: So where does that leave us? Well, lower tariffs and
18:59
Speaker 4: fewer tears on average, even if some of them are
19:01
Speaker 4: reinstated in a different form. That's good for inflation in
19:05
Speaker 4: the short term because tariffs do push the average price up.
19:08
Speaker 4: We can get into why later, but you just have
19:10
Speaker 4: to accept that. So I think the sum total mic
19:13
Speaker 4: of everything we've learned today argues for more dubbish. Monitor
19:18
Speaker 4: argues for more dubbish stands. I don't share it, but
19:20
Speaker 4: I could see it.
19:22
Speaker 3: We've got to take a quick break.
19:24
Speaker 2: We're going to have a full market update when we
19:26
Speaker 2: come back with Wall Street Watch, So don't go anywhere.
19:28
Speaker 2: We'll be right back here on the Financial Exchange.
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19:42
Speaker 1: TFE show. Breaking business news is always first right here
19:46
Speaker 1: on the Financial Exchange Radio Network. Time now for Wall Street.
19:52
Speaker 1: Watch a complete look at what's moving markets so far
19:55
Speaker 1: today right here on the Financial Exchange Radio Network.
20:00
Speaker 5: The markets have been moving off of some breaking news
20:02
Speaker 5: just before the show started. Trump's tariffs have been struck
20:06
Speaker 5: down by the Supreme Court, and that sent markets into
20:10
Speaker 5: the green. The Dow Jones is currently off currently up
20:14
Speaker 5: by one tenth of a percent, or fifty points. The
20:16
Speaker 5: S and P five hundred is up two tenths of
20:18
Speaker 5: a percent or twelve and a half points, and the
20:20
Speaker 5: Nasdaq is up three tenths of a percent or sixty
20:23
Speaker 5: eight points. Blue Owl shares are off by one and
20:28
Speaker 5: a half percent, a day after the private market and
20:30
Speaker 5: Alternative Assets manager fell five point nine percent following the
20:35
Speaker 5: sale of one point four billion dollars in loans. Residential
20:39
Speaker 5: real estate sales platform open Door Technology is seeing shares
20:43
Speaker 5: rise eighteen percent. Fourth quarter revenue of seven hundred and
20:47
Speaker 5: thirty six million dollars beat the LSEG consensus estimate of
20:51
Speaker 5: five hundred and forty nine million dollars. Management said that
20:54
Speaker 5: the company is driving to adjusted net income positive by
20:58
Speaker 5: the end of twenty twenty six, measured on a twelve
21:01
Speaker 5: month go forward basis. Cloud storage company drop Boxes up
21:06
Speaker 5: two percent after they reported earning adjusted earnings of sixty
21:11
Speaker 5: eight cents per share, narrowly beating the LSEG consensus of
21:15
Speaker 5: sixty seven cents per share. Revenue for the period was
21:18
Speaker 5: six hundred and thirty six million dollars, surpassing the street's
21:21
Speaker 5: call for six hundred and twenty nine million dollars. Casual
21:25
Speaker 5: dining chain Texas road House is off one point seven percent.
21:29
Speaker 5: Texas road has said that comparable sales at its company
21:32
Speaker 5: restaurants in the first seven weeks of the first quarter
21:34
Speaker 5: of the twoenty twenty six fiscal year increased eight point
21:39
Speaker 5: two percent from the year ago period. The company also
21:42
Speaker 5: expects to lift menu prices by one point nine percent.
21:46
Speaker 5: In early April, and finally, Live Nation Entertainment posted strong
21:51
Speaker 5: fourth quarter results, sending shares up just over five and
21:54
Speaker 5: a half percent. Live Nation reported six point three one
21:57
Speaker 5: billion dollars in revenue for the period, exceeding the six
22:00
Speaker 5: point one one billion dollars estimated from analysts. I am
22:04
Speaker 5: Ben Kitchen and that was Wall Street Watch.
22:07
Speaker 2: Well Mark, we've been spending all morning talking about GDP
22:10
Speaker 2: and the Supreme Court's ruling on President Trump's tariffs. Anything
22:14
Speaker 2: additional to to get to on those two subjects. I
22:17
Speaker 2: am sure that they'll be, you know, peeking their head
22:20
Speaker 2: in to the show throughout the course of the next
22:22
Speaker 2: hour and a half.
22:23
Speaker 3: But any any final thoughts on either subject.
22:26
Speaker 4: Not no final thoughts, as you say, our thoughts will
22:29
Speaker 4: be evolving as we learn more.
22:31
Speaker 2: Let's let's switch over to what Ben just mentioned though,
22:33
Speaker 2: which is Blue Owl Capital. So not a household name
22:37
Speaker 2: for those unfamiliar. We've talked about Blue Owl several times
22:41
Speaker 2: on this program, so if you're a regular listener, you
22:43
Speaker 2: likely are aware of them. But they are a firm
22:47
Speaker 2: that dabbles heavily in the private credit space, So you
22:52
Speaker 2: are likely familiar with private equity, and you know, based
22:55
Speaker 2: on my conversations with people, likely less familiar with the
22:58
Speaker 2: subject of private credit. But just you know, think of
23:00
Speaker 2: it as the tag along or you know, step sister
23:05
Speaker 2: of the private equity investments that have been growing substantially
23:10
Speaker 2: in all sorts of industries. Over the last decade, private
23:13
Speaker 2: credit has done the same thing, and rather than buying companies,
23:16
Speaker 2: are taking stakes in them. They lend money to all
23:19
Speaker 2: sorts of different corporations, and they've been doing so and
23:22
Speaker 2: have really been a household name in that space for
23:25
Speaker 2: some time. This has been a growing area of the
23:29
Speaker 2: lending markets, really since the Great Financial Crisis, when a
23:34
Speaker 2: lot of rules and regulations were put into place to
23:36
Speaker 2: limit how much exposure banks should and can have to
23:40
Speaker 2: this area. Blue ol Capital just for some context here,
23:44
Speaker 2: Ben mentioned their stock was down four or five percent yesterday.
23:47
Speaker 2: It's lost half of its value in the last twelve months.
23:51
Speaker 2: As investors continue to pound on the doors of private
23:55
Speaker 2: credit and ask questions about how high quality this debt is,
23:59
Speaker 2: how how much better they are at assessing risk than
24:02
Speaker 2: other traditional lenders, and just you know, why investors should
24:06
Speaker 2: continue to pour money into them. Last year we had
24:09
Speaker 2: a number of fraud cases in lending to private credit
24:14
Speaker 2: that raised some questions on partuct to the lenders. Most recently,
24:18
Speaker 2: there's been some concern expressed about the amount of exposure
24:22
Speaker 2: they may have to major software players, who, if you
24:26
Speaker 2: haven't been paying attention, their stocks have been getting hit
24:28
Speaker 2: recently due to concerns from artificial intelligence. This most recent
24:33
Speaker 2: piece here, though Blue Owl raised some money for investors
24:37
Speaker 2: by selling some assets. The asset sales seemingly went quite well,
24:42
Speaker 2: and you know from commentary from CEOs they were kind
24:45
Speaker 2: of expecting a positive market reaction and just didn't get it.
24:48
Speaker 2: What else do you have to add on just the
24:50
Speaker 2: this moment in time for private credit.
24:52
Speaker 4: I hope it serves as a teachable moment for investors.
24:55
Speaker 4: This asset, the private market asset class general under which
25:01
Speaker 4: umbrella you could put private equity and private credit, is
25:04
Speaker 4: called private for a reason. It's a little bit opaque.
25:07
Speaker 4: That's part of its attractiveness. It allows managers to do
25:10
Speaker 4: things that your typical public market manager, and by public market,
25:14
Speaker 4: think of any brand name manager, Fidelity, Vanguard, tro Price.
25:18
Speaker 4: I'm excluding a lot there, not intentionally, but just so
25:21
Speaker 4: that you get the drift. They do things outside of
25:25
Speaker 4: the glare of spotlights because that allows them to pounce
25:30
Speaker 4: on opportunities quickly and make dramatic changes in the structure
25:34
Speaker 4: of a company in the case of private equity, or
25:36
Speaker 4: to fund it quickly and without all the oversight that
25:41
Speaker 4: comes from a relationship with a heavily regulated lender, as
25:44
Speaker 4: you would incur if you took money from a bank.
25:47
Speaker 4: It allows private markets to operate in such a way
25:51
Speaker 4: as too Historically, in the case of the very good managers,
25:55
Speaker 4: not average managers generate very high rates of return for
25:58
Speaker 4: very sophisticated investors. Most individuals, myself included, are not equipped
26:04
Speaker 4: to do the so called due diligence the homework on
26:08
Speaker 4: private market managers that sophisticated institutions can. So it might
26:13
Speaker 4: get an open question as to whether or not this
26:15
Speaker 4: stuff belongs in foal one K plans or whether retail
26:18
Speaker 4: investors like you and me. I'm not using that term
26:21
Speaker 4: in a majorative sense. I just meet people without the
26:23
Speaker 4: resources to do due diligence on what are often very
26:26
Speaker 4: sophisticated and complex investments, whether or not these investments are
26:30
Speaker 4: appropriate for folks without those capabilities.
26:33
Speaker 2: You know, I've struggled with this quite a bit because
26:35
Speaker 2: so there's a term called accredited investor that's out there,
26:39
Speaker 2: and to be an a credit investor you have to
26:42
Speaker 2: meet certain qualifications, either working directly in this industry in
26:47
Speaker 2: some way, shape or form, having an income or personal
26:52
Speaker 2: asset level over a certain threshold, and it's different for corporations.
26:55
Speaker 3: Than it is for individuals.
26:56
Speaker 2: But nonetheless, there's this term accredited investor, and there's a
26:59
Speaker 2: definition to it by the SEC, and only a credit
27:02
Speaker 2: investors may invest in certain types of assets, and this
27:05
Speaker 2: has historically been one of them, and they are talking
27:08
Speaker 2: about taking down some of those guardrails. In some sense,
27:12
Speaker 2: I've always looked at that and said, you know, if
27:16
Speaker 2: an investor chooses to go and do their own diligence,
27:19
Speaker 2: why are we barring them from any certain type of investment.
27:23
Speaker 2: But what's being discussed doing to be done here with
27:26
Speaker 2: private credit and annuities and certain other assets is make
27:32
Speaker 2: it a very available option, even within four oh one
27:34
Speaker 2: K plans, And that even to me seems a step
27:38
Speaker 2: too far, if you haven't noticed, I'm very much in
27:41
Speaker 2: favor of, hey, let investors generally do what they want,
27:45
Speaker 2: don't have guardrails to what they can or cannot do.
27:48
Speaker 2: But when you talk about, hey, we're going to either
27:52
Speaker 2: put this type of investment that very few have the
27:55
Speaker 2: expertise to be able to analyze into something like a
27:58
Speaker 2: target date fund, or as an available option to choose
28:01
Speaker 2: from on a list of other options does seem a
28:04
Speaker 2: step too far to me, and I do wonder if
28:07
Speaker 2: this recent focus on the sector itself is going to,
28:10
Speaker 2: you know, put the kebash on this and really delay it.
28:13
Speaker 3: To some degresion.
28:14
Speaker 4: I don't have a problem with it being in a
28:15
Speaker 4: so called target date fund that's a professionally managed, diversified
28:19
Speaker 4: blend of a lot of stuff. You got emerging markets
28:21
Speaker 4: in there, You've got high yield debt in there, stuff
28:23
Speaker 4: that most people do not understand, including me, because I
28:27
Speaker 4: don't follow it as intensely as someone who specializes it
28:31
Speaker 4: in that area does. I would be very reluctant.
28:34
Speaker 2: And frankly if you're in one of those funds with
28:36
Speaker 2: a forty year time horizon.
28:39
Speaker 4: It's fine, It's fine. It's fine in a target date fund.
28:42
Speaker 4: I think, Mike, providing you've got a good fiduciary, and
28:44
Speaker 4: that's the employer, that's the consultant they may hire to
28:47
Speaker 4: vet their investments, making those selections for you. It's like
28:50
Speaker 4: the way a doctor prescribes. It's I say, it's like
28:53
Speaker 4: the way I'm not comparing investment managers to doctors is
28:56
Speaker 4: saving lives. I'm saying, you've got a doctor of us
28:59
Speaker 4: who's going to Yeah, I actually think they are everywhere.
29:03
Speaker 4: They are. Yeah, they are.
29:04
Speaker 1: They are.
29:06
Speaker 4: But in the sense that a doctor chooses the right
29:08
Speaker 4: medicine to prescribe, a fiduciary, someone in a position of trust,
29:13
Speaker 4: the plan sponsor, the employer, or the consultant that they
29:16
Speaker 4: hire to select and monitor their investments, they prescribe for
29:21
Speaker 4: you using their expertise, having done appropriate due diligence, and
29:25
Speaker 4: they're held to very stringent standards under the law, under
29:30
Speaker 4: federal law which oversees those activities. So in that context,
29:35
Speaker 4: I think I'm okay with it. I wouldn't do it
29:36
Speaker 4: personally for reasons that are not worth getting into here,
29:40
Speaker 4: But that's probably the only that's probably the only vehicle
29:44
Speaker 4: MIC a target date or otherwise balance type fund in
29:47
Speaker 4: which something as opaque in a liquid is private market
29:51
Speaker 4: investment should be offered.
29:53
Speaker 2: Let's take a quick break when we come back. Amazon
29:58
Speaker 2: recently sur Walmart to be the largest company in the
30:02
Speaker 2: United States by at least one measure. We're going to
30:05
Speaker 2: cover that next. Here on the Financial Exchange.
30:07
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30:43
Speaker 2: Mark, We've got to get out the special hats for Amazon,
30:47
Speaker 2: as they have surpassed Walmart for one measurement of the
30:52
Speaker 2: United States largest company. They are now larger than Walmart
30:56
Speaker 2: in terms of annualized revenue. They surpassed Walmart. Walmart had
31:01
Speaker 2: seven hundred and thirteen point two billion in sales in
31:04
Speaker 2: the year through January thirty first, compared with Amazon's seven
31:08
Speaker 2: hundred and sixteen point nine billion for the most recent
31:11
Speaker 2: year so one. This has been a long time coming
31:14
Speaker 2: to how relevant? I guess what does this tell us
31:19
Speaker 2: anything about either of these companies when you look at
31:22
Speaker 2: the largest companies by revenue, is it a relevant way
31:25
Speaker 2: to look at I.
31:26
Speaker 4: Think it tells us you shouldn't compare two companies sales
31:29
Speaker 4: when they do different things. I mean, the difference is
31:32
Speaker 4: Amazon Web Services right a business Walmart is not in
31:35
Speaker 4: their retail business? Is correct me if I'm wrong? And
31:38
Speaker 4: I'm stealing this from Chuckzada who made the point yesterday.
31:40
Speaker 4: Of course, their retail business is about the same size
31:44
Speaker 4: isn't that right? In terms of sales, we saw a
31:46
Speaker 4: five hundred and fifty billion or or some something in
31:49
Speaker 4: that ballpark, So don't I don't know, Mike, does it
31:51
Speaker 4: make sense to compare sales. It'd be like comparing them
31:54
Speaker 4: to General Motors or something because GM sells some merch.
31:58
Speaker 1: I don't know.
31:58
Speaker 3: It just doesn't make sure it's not it's irrelevant. Yeah, yeah,
32:02
Speaker 3: I'm with you. I think to the average consumer.
32:04
Speaker 2: Out there, yeah, Walmart and Amazon do seem like direct
32:08
Speaker 2: competitors in every way.
32:10
Speaker 3: You can see that they.
32:12
Speaker 2: Sell a lot of the same products, they have a
32:13
Speaker 2: lot of the same physical store presences. But in every
32:17
Speaker 2: other meaningful way, Amazon is nothing like Walmart, both in
32:21
Speaker 2: terms of its origin as well as its current business model,
32:24
Speaker 2: which is to be clear, the growth area for Amazon
32:29
Speaker 2: has nothing to do with all of us ordering it
32:32
Speaker 2: unbelievable amount of sorry, pardon my language, crap to our
32:36
Speaker 2: front doors. It has everything to do with cloud computing.
32:39
Speaker 4: Yeah. I think when a retailer gets big enough, they
32:41
Speaker 4: can't grow faster than the economy or spending indefinitely. They
32:46
Speaker 4: they're a good chunk of spending, so that business has
32:49
Speaker 4: to slow. Walmart's spending again. Chuck and I talked about
32:52
Speaker 4: this yesterday, so it's kind of on the tip of
32:54
Speaker 4: my tongue. Their revenues are up something like close to
32:57
Speaker 4: fifty percent in the last ten years, So annualize that
33:01
Speaker 4: and you get like high single digits. Say that's faster
33:04
Speaker 4: than the economy. That can't happen forever unless they're eating
33:08
Speaker 4: everybody else's lunch, and at some point you push up
33:12
Speaker 4: against the limits of that.
33:14
Speaker 2: I think she always points out sure, while wile revenue
33:17
Speaker 2: is a relevant factor, I'll also point out that that's
33:19
Speaker 2: not how we weight companies when we invest in them.
33:22
Speaker 2: For example, right when we talk about the largest companies
33:25
Speaker 2: in the S and P five hundred, Walmart and Amazon.
33:29
Speaker 2: Amazon might be in the top five, but neither of
33:32
Speaker 2: them are at the top of the list. We measure
33:34
Speaker 2: that in terms of market capitalization, meaning how much do
33:37
Speaker 2: people believe their.
33:38
Speaker 3: Shares are worth, which revenue might be tied to.
33:41
Speaker 2: But it's much more derived by profit and future outlook
33:44
Speaker 2: of those companies rather than how much revenue they derive.
33:47
Speaker 2: Walmart remains the country's largest private employer. The most recent
33:51
Speaker 2: data I have here is a round two point one
33:54
Speaker 2: million employees, whereas Amazon at number two is just shy
33:58
Speaker 2: of one point six million employees. So again, there's a
34:01
Speaker 2: number of different ways to measure the largest companies in
34:05
Speaker 2: the United States, and by a number of those, Walmart
34:08
Speaker 2: still remains the biggest, but being surpassed. I think it's
34:12
Speaker 2: an interesting moment in time to cap that Amazon has
34:15
Speaker 2: surpassed them, and Walmart previously took the throne from Exon Mobil,
34:20
Speaker 2: I believe some twenty odd years ago, so you know
34:24
Speaker 2: it's something to mark. But to your point, they are
34:27
Speaker 2: pretty different companies these days compared to even a decade ago.
34:30
Speaker 4: Now you use those figures for totally different purposes, I think,
34:34
Speaker 4: for everyday conversational purposes. When you say who's the biggest retailer,
34:38
Speaker 4: nobody means market cap unless they ask for marketcap, and
34:42
Speaker 4: I don't really know why they would because that's such
34:44
Speaker 4: a fickle concept. I mean, yeah, but sales is a
34:48
Speaker 4: natural way I think to compare people who are in
34:51
Speaker 4: the business of selling things.
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35:56
Speaker 3: Market to mark today.
35:57
Speaker 2: Market watches describing the economist having reached some Goldilocks levels.
36:03
Speaker 2: They're describing a few things here. One would be inflation,
36:06
Speaker 2: there would be unemployment, the third being a number of
36:09
Speaker 2: surveys about the state of manufacturing, which are still pretty
36:12
Speaker 2: bad but have improved over the course of the last
36:14
Speaker 2: few months. I don't know why it is that they
36:17
Speaker 2: focused on those specific readings, you know, seemingly not pulling
36:22
Speaker 2: in GDP or stock market volatility. But we've talked a
36:26
Speaker 2: lot about how do you actually measure success in this economy?
36:30
Speaker 2: We talked about that when the president, when President Trump
36:32
Speaker 2: took offices. Okay, how are we going to to grade
36:34
Speaker 2: this economy a year, two years out? And by some
36:39
Speaker 2: of those measures at least, you know the I think
36:41
Speaker 2: two of the big ones we pointed at were unemployment
36:44
Speaker 2: and inflation, and I don't know that I would describe
36:48
Speaker 2: them as goldilocks. But have they significantly worsened over the
36:52
Speaker 2: course of the last year.
36:53
Speaker 3: I don't.
36:53
Speaker 2: I don't think we can say definitively that that's been
36:56
Speaker 2: the case. What other measures are we trying to focus on?
37:00
Speaker 4: Yeah, and this isn't a verdict on Trump's stewardship of
37:03
Speaker 4: the economy. I mean, in some ways his tariffs infused
37:06
Speaker 4: volatility into everything, but that's going to stop, so which
37:10
Speaker 4: is why today's ruling is welcome. And the President may
37:14
Speaker 4: not like it because he doesn't like the word no,
37:17
Speaker 4: but he will benefit from this by a little bit
37:22
Speaker 4: of restraint being imposed on a year, so this is
37:24
Speaker 4: a good thing for him too. Last year, volatility in
37:27
Speaker 4: GDP picked up by a lot. We had low growth
37:31
Speaker 4: in the first quarter, load of negative growth in the
37:35
Speaker 4: first quarter, right flat to negative. Sorry I'm not looking
37:37
Speaker 4: at it, but it was flat to negative, and a
37:39
Speaker 4: lot of people blame tariff uncertainty for that, and it
37:42
Speaker 4: was a natural thing to blame because it's the only
37:43
Speaker 4: thing that changed from a very strong fourth quarter of
37:46
Speaker 4: twenty four to the first quarter twenty five. Then we
37:48
Speaker 4: had two breakneck quarters of growth, really fast, way faster
37:52
Speaker 4: than trent, and then we had a relatively slow fourth quarter. Overall,
37:55
Speaker 4: we had an okay year about trend, about potential, I
37:59
Speaker 4: should say little two percent, but very very volatile. So
38:02
Speaker 4: things got more volatile, Mike, and we can talk about
38:04
Speaker 4: some of the other measures later, but by that statistic,
38:08
Speaker 4: twenty twenty five was not better than twenty four.
38:10
Speaker 3: We've got to take a quick break. Markets accelerating to
38:12
Speaker 3: the positive.
38:13
Speaker 2: We'll be right back here on the Financial Exchange