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Inflation rate hits lowest level since 2021 · The Financial Exchange Show

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  Speaker 1: and Paul Lane.
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  Speaker 2: Good morning, Welcome back to the Financial Exchange. It's Mike Armstrong,
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  Speaker 2: Paul Lane, and Ben Kitchen with you on a Tuesday morning,
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  Speaker 2: the day after just a huge market rally yesterday on
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  Speaker 2: the news. On the heel of the news on the
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  Speaker 2: Chinese trade tariffs and negotiations that were done over in
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  Speaker 2: Switzerland over the weekend. Yesterday markets S and P five
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  Speaker 2: hundred finished up three and a quarter percent. Today we'll
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  Speaker 2: continue to discuss the fallout from those negotiations, where things
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  Speaker 2: may go next. We have a few more details as
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  Speaker 2: well in terms of the Deminimus rules and how that's
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  Speaker 2: going to apply. We're starting to hear more and more
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  Speaker 2: hints about a tax bill making its way through Congress.
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  Speaker 2: But I think we probably have to start off this
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  Speaker 2: morning here, Paul, with the inflation read that we got.
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  Speaker 2: We got to read on inflation about an hour and
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  Speaker 2: a half ago and really kind of clear good news.
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  Speaker 2: There wasn't much in there to be disappointed over. So
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  Speaker 2: let's start with the headline news top line inflation year
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  Speaker 2: over year running two point three percent. When we strip
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  Speaker 2: out that food and energy, it's a little bit hotter
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  Speaker 2: because energy has been helping you out of the last
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  Speaker 2: twelve months, so stripping out food and energy, you're sitting
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  Speaker 2: at two point eight percent. But quite honestly, anything over
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  Speaker 2: three I take as a win. Right now. We did
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  Speaker 2: bump up a little bit in the month of April
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  Speaker 2: compared to March. We saw deflation in the month of March,
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  Speaker 2: which I haven't seen in a long time. We've bumped
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  Speaker 2: back up to zero point two percent month over month there.
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  Speaker 2: But honestly, you know, any of the areas that you
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  Speaker 2: might have been expecting a bump from tariffs didn't really
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  Speaker 2: show up at least in the month of April.
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  Speaker 3: No, and perhaps it's too early necessarily for them to
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  Speaker 3: make their impacts through this inflation report. But because we've
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  Speaker 3: heard of you know, businesses built burning through excess vatory
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  Speaker 3: and using other measures to perhaps mitigate some of the
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  Speaker 3: price increased impacts there. But overall, you really can't be
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  Speaker 3: critical of this report, Mike. The two point three percent
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  Speaker 3: year over year number is a strong figure. Also, you
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  Speaker 3: didn't have as much of a benefit from energy that
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  Speaker 3: you did in the prior month. We saw almost a
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  Speaker 3: two and a half percent decline and energy prices in
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  Speaker 3: the month of March. That was a large contributor to
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  Speaker 3: that headline decline that Mike was speaking about there. And
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  Speaker 3: then if you look at just what was leading to
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  Speaker 3: the increases that we saw in the month of April,
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  Speaker 3: largely it was shelter up about zero point four percent
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  Speaker 3: month over month. It was responsible for about half of
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  Speaker 3: the move that we saw for the month of April.
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  Speaker 3: Shelter makes up about a third of all the components
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  Speaker 3: of the monthly inflation report that we get. There also
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  Speaker 3: notable the prices for used cars and trucks was up
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  Speaker 3: about one and a half percent. I believe that's I
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  Speaker 3: believe that's a year over year number, but certainly seeing
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  Speaker 3: a significant increase there on some of the used car
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  Speaker 3: prices with some of the tariff impacts there, that's something
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  Speaker 3: you did see perhaps a trickle down effect there in
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  Speaker 3: that category.
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  Speaker 2: Yeah, I don't know. I hesitate to call it that
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  Speaker 2: because month over month had declined. So taking a look
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  Speaker 2: at the key areas that I would look for in
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  Speaker 2: this report to see any hints of tariff front running
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  Speaker 2: effects on prices, right, because that's what everybody's been talking
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  Speaker 2: about is, oh, you know, people are going to be
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  Speaker 2: buying cars, buying apparel, buying, toys, buying all sorts of
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  Speaker 2: stuff that comes from China in order to get ahead
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  Speaker 2: of it, and you know the dealers are going to
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  Speaker 2: raise prices. Well, month over month, you saw new cars down, sorry,
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  Speaker 2: new cars were flat month over month after being flat
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  Speaker 2: for the last three months. You had used cars and
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  Speaker 2: trucks down half a percent month over month, apparel down
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  Speaker 2: two tenths of one percent. I went and looked through
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  Speaker 2: like the back appendix to look at to games, hobbies
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  Speaker 2: and playground equipment, and those were down month over month
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  Speaker 2: as well. So yeah, I don't see much in the
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  Speaker 2: way of effects from tariffs thus far. I think any
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  Speaker 2: of those concerns seemed to be overblown thus far. And
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  Speaker 2: with the new news on the Chinese agreement on tariffs
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  Speaker 2: and trade reducing the rate down to thirty percent, here
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  Speaker 2: we may see an effect on prices, and we should
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  Speaker 2: talk about that a little bit. But some of those
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  Speaker 2: worst concerns that we have been talking about empty store
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  Speaker 2: shelves come July fourth at you know, dollar store retailers,
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  Speaker 2: vehicle shortages, parts shortages, those types of scenarios seem for
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  Speaker 2: the moment to be off the table, and I think
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  Speaker 2: there's there's just a general sigh of relief on maybe
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  Speaker 2: not the part of individuals, because I don't think that
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  Speaker 2: there had been an elevated level of concern quite yet.
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  Speaker 3: From them, but probably not a proper understanding the individual
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  Speaker 3: side of things.
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  Speaker 2: I don't know many people who were telling me, like,
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  Speaker 2: I'm loading up on things right now because I'm worried
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  Speaker 2: about empty store shelves come July. Right there just wasn't
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  Speaker 2: either they were ignoring it or they just didn't buy it.
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  Speaker 2: Whatever it was, there doesn't didn't seem to be that
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  Speaker 2: big rush to the storefront in April or recently because
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  Speaker 2: of all this.
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  Speaker 3: Yeah, it seems like the what suggests that perhaps the
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  Speaker 3: back to school season or the holiday shop season might
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  Speaker 3: see some of the shores because of this. I guess
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  Speaker 3: you'd call it a freeze for the last what's it
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  Speaker 3: been four four to five weeks since the initial probably
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  Speaker 3: longer than that, just with the negative sentiment on China
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  Speaker 3: in general, maybe six to eight weeks that.
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  Speaker 2: Yeah, I'm trying to think it through six weeks probably
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  Speaker 2: April second, maybe late March through now. You've been holding
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  Speaker 2: off on necessarily bringing things into the country because of
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  Speaker 2: these tariff threats.
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  Speaker 3: So perhaps that is where you'll see an impact, but
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  Speaker 3: for the most part, a side of relief. It seems
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  Speaker 3: like for a lot of importers out there with the
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  Speaker 3: news yesterday, that thirty percent level that it sits at
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  Speaker 3: today in previous times would have been a very difficult,
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  Speaker 3: challenging number to overcome. But coming off the heels of
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  Speaker 3: one hundred and forty five percent on the import side
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  Speaker 3: of things, that at least allows businesses to kind of
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  Speaker 3: move forward for those that import heavily from China.
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  Speaker 2: So thinking about what inflation might come, what it means
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  Speaker 2: also for the Federal Reserve. Taking a look right now
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  Speaker 2: at the Chicago Mercantaleic change is FED watch tool. This
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  Speaker 2: is publicly available. We don't have a subscription or anything.
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  Speaker 2: You can go to just cme group dot com and
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  Speaker 2: check it out yourselves. But the next meeting is June eighteenth.
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  Speaker 2: It is widely anticipated the Fed would be holding rates
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  Speaker 2: at the current four and a quarter percent level. That
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  Speaker 2: has not changed much over the last couple of days,
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  Speaker 2: but did change a little bit over the last week
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  Speaker 2: as the Chinese trade tariffs kind of walked their way
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  Speaker 2: backwards and the way to the way that I'm reading
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  Speaker 2: that anyway, is the can concern about recession was so
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  Speaker 2: high with even just these Chinese tariffs, in that many
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  Speaker 2: people were betting on a FED that might need to
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  Speaker 2: cut rates as early as June. With this negotiation done,
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  Speaker 2: it does not seem likely. And in fact, if I
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  Speaker 2: go out to the July thirtieth meeting, there's still a
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  Speaker 2: pretty low likelihood that rates end up getting cut there.
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  Speaker 2: And so I've been thinking about this a little bit,
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  Speaker 2: which is, we were talking a lot about how with
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  Speaker 2: tariffs there are a number of concerns for businesses. Where
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  Speaker 2: am I going to get my supply? Is the consumer
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  Speaker 2: going to be ready to buy it at elevated prices?
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  Speaker 2: How much of this am I going to eat? What's
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  Speaker 2: it going to do with my margins? And you know,
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  Speaker 2: all of those different things. But my main takeaway was
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  Speaker 2: that with all of that going on, I'm more worried
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  Speaker 2: about recession than I am inflation. If the tariffs were
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  Speaker 2: to stay in place for any prolonged period of time,
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  Speaker 2: inflation might rear its ugly head briefly, but ultimately there
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  Speaker 2: wouldn't be enough cash slashing around in the system to
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  Speaker 2: cause a prolonged period of inflation with tariffs moving off
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  Speaker 2: to the sideline, with every retailer out there rushing and
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  Speaker 2: we'll talk a little bit more about this, to get
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  Speaker 2: anything they can find from China over to the US
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  Speaker 2: over the next ninety days, paying extra and freight costs,
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  Speaker 2: to be the first one on the ship, paying extra
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  Speaker 2: to the manufacturer, the factory that's been shut down for
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  Speaker 2: the last five weeks, and not supplying these goods. I
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  Speaker 2: just do wonder if now with that, combined with a
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  Speaker 2: tax bill we're not I still don't think we're talking
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  Speaker 2: about prolonged periods of inflation. But does it actually stoke
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  Speaker 2: up inflation, stoke up inflation and you know, reduce the
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  Speaker 2: probability of a rate cut this year. I think it's
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  Speaker 2: kind of compelling argument, which is funny again because if
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  Speaker 2: you place it all out, you're saying, hey, they cut
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  Speaker 2: tariffs and inflation is going to be higher as a
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  Speaker 2: result of that. I think it's a possibility. I think
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  Speaker 2: it's a we your series of events that gets you there.
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  Speaker 2: But I think it's a possibility based now on where
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  Speaker 2: these expectations are and the actions that companies are taking
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  Speaker 2: right now to front run this and get everything they
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  Speaker 2: can into the US as quickly as possible. We're going
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  Speaker 2: to be facing some of those weird scenarios like we
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  Speaker 2: did in twenty twenty with ports backed up, not enough
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  Speaker 2: drivers getting the stuff off the trucks, and I'll be
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  Speaker 2: very interested to see what the next six weeks look
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  Speaker 2: like on that front. Let's take a quick break. When
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  Speaker 2: we come back, I want to talk a bit more
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  Speaker 2: about these teriffs. We now have some data on the
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  Speaker 2: revenue that was brought in, and then what exactly is
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  Speaker 2: going on in factories in China. How long is it
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  Speaker 2: going to take these CEOs to get their stuff over here?
• 10:39
  Speaker 2: That's next. Here on the Financial Exchange.
• 10:41
  Speaker 1: Market volatility is at its highest point since the pandemic.
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  Speaker 1: Keep it here for the most comprehensive coverage of the
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  Speaker 2: Last month, teriff re seats topped some sixteen billion dollars
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  Speaker 2: for the month of April. That's a record. It helped
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  Speaker 2: cut the budget deficit a bit, so great news. We
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  Speaker 2: only ran a one point zero five trillion dollar budget
• 11:47
  Speaker 2: deficit so far this year compared to last year. The
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  Speaker 2: previous month in March, before some of these tariffs went
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  Speaker 2: into effect, was eight point seventy five billion dollars, so
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  Speaker 2: effectively a doubling base with the baseline ten percent. As
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  Speaker 2: well as the China tariffs, which from what we've been
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  Speaker 2: reading so far, anyone who paid that one hundred and
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  Speaker 2: forty five percent tariff freright coming in from China is
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  Speaker 2: not seeing any reimbursement of that down to the thirty percent.
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  Speaker 2: So you paid it, you imported the stuff with the stuff.
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  Speaker 2: In effect, you're not getting a refund on this, although
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  Speaker 2: anything new coming into the US will face the just
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  Speaker 2: thirty percent rate. Again, this is a key piece here
• 12:28
  Speaker 2: because it is being used in the budget framework for
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  Speaker 2: the tax bills. They are looking at this as tariff
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  Speaker 2: revenue that is going to exist for a period of time.
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  Speaker 2: And quite honestly, I guess I don't really know, but
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  Speaker 2: the ten percent baseline teriff right that we are seeing,
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  Speaker 2: for instance, still on the UK, even though those negotiations
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  Speaker 2: have passed, I don't know that that's going anywhere, right.
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  Speaker 2: I'm really confused and unsure as to whether or not
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  Speaker 2: that is negotiable away.
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  Speaker 3: It does seem like it would be the floor for
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  Speaker 3: most negotiations. Just given our standing with the UK. It's
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  Speaker 3: important for us to sort of contextualize if there were
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  Speaker 3: to be this baseline ten percent across the board for
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  Speaker 3: all imports. In twenty twenty four, the US imported about
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  Speaker 3: three point three trillion of goods into the country, So
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  Speaker 3: if you just flatline out that ten percent, that would
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  Speaker 3: be about three hundred and thirty billion dollars that would
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  Speaker 3: be raised through tariffs.
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  Speaker 4: There.
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  Speaker 3: We're running, as you mentioned, from a fiscal year perspective,
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  Speaker 3: a anticipated deficit of one point nine trillion, so you'd
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  Speaker 3: be talking about cutting off of seventeen percent of the
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  Speaker 3: annual fiscal projected deficit. So while it helps, you know, hey,
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  Speaker 3: anything helps, and I'm certainly all for scrutiny and focus
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  Speaker 3: on that fiscal year deficit, it's it's important to note
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  Speaker 3: that it's not an end all, be all. It is
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  Speaker 3: part of a solution, but cuts have to come from
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  Speaker 3: other places. So I just wanted to contextualize a little
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  Speaker 3: bit as how much revenue could be raised, and that's
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  Speaker 3: again just with a baseline ten percent across the board.
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  Speaker 3: One point nine trillion dollar deficit is six percent of
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  Speaker 3: GDP and the third largest in history. It's really significant.
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  Speaker 3: The other piece that we're battling here on the dead
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  Speaker 3: side of things is that we have thirty six trillion
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  Speaker 3: dollars of national debt. The net interest payments on those
• 14:15
  Speaker 3: treasuries because they've remained at more elevated rates compared to
• 14:18
  Speaker 3: what we've seen over the last ten or fifteen years.
• 14:20
  Speaker 3: The fact that you can get a four percent CD
• 14:23
  Speaker 3: sort of ties into the rates on treasuries being in
• 14:26
  Speaker 3: around those levels. It was now eighty nine billion dollars.
• 14:29
  Speaker 3: The net interest payments on the total national debt in
• 14:32
  Speaker 3: the month of April, higher than everything except for Social Security.
• 14:35
  Speaker 3: So these items are really important when you head into
• 14:39
  Speaker 3: the budgeting of the country and trying to focus on
• 14:41
  Speaker 3: getting this death cent under control.
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  Speaker 2: And you bring up an interesting point, and I'm going
• 14:46
  Speaker 2: to relate it to our next story on taxes, because
• 14:49
  Speaker 2: back on April eighth and April ninth, what we were
• 14:53
  Speaker 2: seeing in markets, in equity markets, it was messy, and
• 14:56
  Speaker 2: that was getting a lot of the headlines. But what
• 14:59
  Speaker 2: was really happening, I think was far more important had
• 15:01
  Speaker 2: to do with debt markets. Yes, and what we were
• 15:04
  Speaker 2: seeing in debt markets was the yield on US government
• 15:08
  Speaker 2: debt going through the roof up twenty thirty basis points
• 15:13
  Speaker 2: at times on debt instruments that do not usually move
• 15:18
  Speaker 2: that much. And there's a lot of conjecture and guesswork
• 15:22
  Speaker 2: as to what was going on there, but it was
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  Speaker 2: probably a combination of reciprocal tariffs hitting a bunch of
• 15:28
  Speaker 2: countries that didn't plan for it, Japan, China, the United Kingdom, Germany,
• 15:33
  Speaker 2: all taking a look at what they were facing and
• 15:38
  Speaker 2: saying one of two things, and probably realistically it was
• 15:40
  Speaker 2: probably a combination of them. One, this is going to
• 15:43
  Speaker 2: make our economy and the US economy far weaker if
• 15:46
  Speaker 2: this day is in place and we are sitting on
• 15:49
  Speaker 2: a whole bunch of government debt denominated in US dollars,
• 15:52
  Speaker 2: that could be a problem for US. Two, we might
• 15:54
  Speaker 2: be able to influence this president if we start dumping
• 15:57
  Speaker 2: this debt away and sinking, you know, sinking a lot
• 15:59
  Speaker 2: of the feasibility of the economy. Because here's why the
• 16:03
  Speaker 2: yield on government debt matters. Right, If you're taking a
• 16:06
  Speaker 2: look where are we right now, Paul, in the tenure.
• 16:09
  Speaker 3: Four and a half percent four point four in so.
• 16:11
  Speaker 2: If you are sitting at five and a quarter percent
• 16:13
  Speaker 2: instead on that ten year treasury yield, because a bunch
• 16:16
  Speaker 2: of foreign holders are selling that stuff in order to
• 16:19
  Speaker 2: buy their own currency and stabilize things, even if they're
• 16:22
  Speaker 2: not intentionally doing it just to ruin your economy. You
• 16:25
  Speaker 2: suddenly have mortgage rates at eight percent, you have car
• 16:28
  Speaker 2: loan rates shooting up by a percentage pointer or two.
• 16:31
  Speaker 2: You have a whole lot of things in the system
• 16:33
  Speaker 2: that don't work, let alone a whole bunch of hedge
• 16:35
  Speaker 2: funds that blow up overnight and become a huge problem
• 16:38
  Speaker 2: for the entire financial system. And so that, more than
• 16:41
  Speaker 2: much else, I think, is what paused the Trump administration's
• 16:45
  Speaker 2: view on reciprocal tariffs. It wasn't the pain in the
• 16:48
  Speaker 2: stock market. It probably wasn't any foreign leader calling over
• 16:51
  Speaker 2: and over and saying what are you doing. It was
• 16:53
  Speaker 2: probably the threat of, hey, people aren't going to be
• 16:56
  Speaker 2: able to afford mortgages, and you're probably gonna have to
• 16:59
  Speaker 2: bail out a whole bunch of financial institutions. That really
• 17:03
  Speaker 2: works contrary to your your your viewpoint of hey, we're
• 17:06
  Speaker 2: a main street administration. We're trying to help out the
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  Speaker 2: everyday person. My question sorry good.
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  Speaker 3: And doesn't do anything for the thirty six jillion that
• 17:14
  Speaker 3: you have on the balance sheet. Your ability to refinance
• 17:16
  Speaker 3: that at lower rates goes out the window and only
• 17:18
  Speaker 3: gets exacerbated by the fact that when you're going to
• 17:20
  Speaker 3: refinance it, it would potentially.
• 17:21
  Speaker 2: Be higher if the rate state that love tomorrow's problem.
• 17:24
  Speaker 2: As far as I'm concerned, you know, like that's always well,
• 17:27
  Speaker 2: the next guy, I'll have to figure that piece out.
• 17:28
  Speaker 2: Like if you're in that White House seat, your biggest
• 17:31
  Speaker 2: concern is, Okay, well, what if I have to go
• 17:32
  Speaker 2: bail out a bunch of hedge fund billionaires. So that's
• 17:34
  Speaker 2: not going to be a great look. My question would be,
• 17:39
  Speaker 2: let's it seems like we're on a path of de escalation.
• 17:41
  Speaker 2: I think we are going to continue that path. We
• 17:44
  Speaker 2: are also clearly on a path of tax cuts. We're
• 17:47
  Speaker 2: going to cover what those are starting to look like,
• 17:49
  Speaker 2: what the priorities seem to be, and and some things
• 17:52
  Speaker 2: that look like they're going to land in there with
• 17:54
  Speaker 2: the knowledge that all of it can get reshaped and
• 17:57
  Speaker 2: change a little bit. But most estimates I'm seeing are
• 18:00
  Speaker 2: for tax cuts to increase the deficit by some two
• 18:04
  Speaker 2: and a half to five trillion dollars over the next decade,
• 18:07
  Speaker 2: even when you consider the effect of tariff revenue coming in.
• 18:12
  Speaker 2: And so I guess my question is do we get
• 18:15
  Speaker 2: a repeat of that episode? I don't think so, because
• 18:18
  Speaker 2: we're not continuing to escalate with our with our trade partners.
• 18:22
  Speaker 2: We seem to be on this path of de escalation,
• 18:24
  Speaker 2: and and hey, we're reduced we've suspended the reciprocal tariffs,
• 18:28
  Speaker 2: we've suspended the stuff on China, We've made a deal
• 18:30
  Speaker 2: with the United Kingdom. But do are are there any
• 18:34
  Speaker 2: bond vigilantes out there? Vigilantes out there who take a
• 18:37
  Speaker 2: look at a tax bill that's working its way through
• 18:39
  Speaker 2: Congress and say we're not gonna We're not gonna finance
• 18:43
  Speaker 2: this stuff anymore. I don't think we're there, But I
• 18:46
  Speaker 2: only would say that we could be there because of
• 18:49
  Speaker 2: what happened on April eighth, which was pretty unexpected. Yeah,
• 18:52
  Speaker 2: I would.
• 18:53
  Speaker 3: I would think that it was far It would be
• 18:54
  Speaker 3: far more likely that there was some reversal and de
• 18:56
  Speaker 3: escalation policy that would spook the bond markets further than
• 19:01
  Speaker 3: overly getting concerned about a tax bill that could be
• 19:05
  Speaker 3: spread out over a ten year period. But hey, every
• 19:09
  Speaker 3: day there's something new. You could be surprised.
• 19:11
  Speaker 2: Let's go ahead and take a quick break here. We've
• 19:13
  Speaker 2: got Wall Street Watch Coach is coming up next. We're
• 19:16
  Speaker 2: also going to take a side step away from terrorists
• 19:19
  Speaker 2: for the time being, and I want to talk about
• 19:21
  Speaker 2: the new Republican led tax plan making its way through Congress.
• 19:24
  Speaker 5: That's next here on the Financial Exchange.
• 19:39
  Speaker 1: Like us on Facebook and follow us on Twitter at
• 19:42
  Speaker 1: TFFE show. Breaking business news is always first right here
• 19:47
  Speaker 1: on the Financial Exchange Radio Network. Time now for Wall
• 19:52
  Speaker 1: Street Watch a complete look at what's moving market so
• 19:55
  Speaker 1: far today right here on the Financial Exchange Radio Network.
• 20:00
  Speaker 4: Bocks are a little mixed here about ten thirty four today,
• 20:04
  Speaker 4: and sucks are mixed off the news at the annual
• 20:07
  Speaker 4: inflation rate hitting the lowest level since twenty twenty one.
• 20:10
  Speaker 4: The Dow Jones is off a one hundred and eighteen points,
• 20:13
  Speaker 4: or point two eight percent, The SMP five hundred is
• 20:16
  Speaker 4: up three quarters of a percent of forty two points,
• 20:20
  Speaker 4: and the Nasdaq is up well over a percent at
• 20:22
  Speaker 4: one point three five percent. United Health shares are down
• 20:25
  Speaker 4: fourteen percent after the company announced it was suspending its
• 20:28
  Speaker 4: twenty twenty five outlook due to higher than expected medical expenditures.
• 20:33
  Speaker 4: United Health also announced CEO Andrew Whitty was stepping down,
• 20:37
  Speaker 4: effective immediately for personal reasons. Stephen Hemsley will replace Witty
• 20:41
  Speaker 4: as chief executive. Coinbase shares are up over sixteen percent
• 20:45
  Speaker 4: following the announcement that the crypto trading platform will join
• 20:47
  Speaker 4: the s and P five hundred, taking effect before trading
• 20:50
  Speaker 4: on May nineteenth. Coinbase will replace Discover Financial Services. Hert's
• 20:56
  Speaker 4: global holding stock is down nineteen percent after first quarter
• 20:59
  Speaker 4: results came in worse than expected. Hertz reported an adjusted
• 21:03
  Speaker 4: loss of one dollar and twelve cents per share on
• 21:06
  Speaker 4: one point eight one billion of revenue. Analysts surveyed, we're
• 21:09
  Speaker 4: looking for a loss of ninety seven cents per share
• 21:12
  Speaker 4: and two billion of revenue. The company said that it
• 21:14
  Speaker 4: had one point two billion in liquidity at the end
• 21:17
  Speaker 4: of March. Under Armour shares are up half a percent
• 21:20
  Speaker 4: after under Armour beat revenue expectations for its fiscal fourth
• 21:23
  Speaker 4: quarter and lifted its adjusted earnings per share guidance for
• 21:27
  Speaker 4: the fiscal first quarter. And finally, Boeing shares are up
• 21:30
  Speaker 4: two and a half percent following a Bloomberg report that
• 21:32
  Speaker 4: China has lifted its ban on Boeing deliveries. Domestic airlines
• 21:36
  Speaker 4: and government agencies are being told this week that deliveries
• 21:39
  Speaker 4: can resume, the report said, citing people familiar with the matter.
• 21:43
  Speaker 4: I am ben Kitchen, and that was Wall Street Watch.
• 21:46
  Speaker 2: President Trump will be speaking shortly on his Middle East
• 21:49
  Speaker 2: trip from the Saudi Investment Forum, presumably announcing some investments there.
• 21:54
  Speaker 2: We'll cover that if there's anything to be covered, but
• 21:57
  Speaker 2: it sounds like there is rumors some deal making and
• 22:01
  Speaker 2: investments to be done in the United States on that,
• 22:04
  Speaker 2: and then the other piece of breaking news that we
• 22:06
  Speaker 2: just saw come across here was layoffs at Microsoft. Microsoft
• 22:10
  Speaker 2: is announcing that they will be cutting three percent of
• 22:14
  Speaker 2: all headcount. They had two hundred and twenty eight thousand
• 22:18
  Speaker 2: total employees as of last June. Presumably that's a little
• 22:21
  Speaker 2: bit higher now than the two twenty eight, but not
• 22:24
  Speaker 2: an insignificant level of job cuts. Obviously not something that's
• 22:27
  Speaker 2: going to show up in probably big high level data,
• 22:31
  Speaker 2: but interesting to me from a few standpoints. One, Microsoft
• 22:36
  Speaker 2: has been arguably you know, first or second leader in
• 22:42
  Speaker 2: the tech play space for the last couple of years.
• 22:45
  Speaker 2: Here it's them or in Vidia, take your pick as
• 22:48
  Speaker 2: to who you think is the dominant player there, but
• 22:51
  Speaker 2: benefiting strongly from their AI investments, benefiting strongly from their
• 22:56
  Speaker 2: partnerships with Nvidia, and really not subject to any sort
• 23:01
  Speaker 2: of disruption from anything tariff related so far as we
• 23:04
  Speaker 2: could tell.
• 23:05
  Speaker 3: No to me, And again, this just is breaking news,
• 23:08
  Speaker 3: so I don't have the exact specifics behind it. I
• 23:12
  Speaker 3: would imagine that what we've heard from Microsoft is a
• 23:15
  Speaker 3: laser focus on investment and development of their AI capabilities,
• 23:20
  Speaker 3: whether that's on their Azure Cloud services front, you know,
• 23:26
  Speaker 3: grabbing more revenue there. Their partnership with open Ai. They've
• 23:30
  Speaker 3: invested a significant amount of money in the open Ai
• 23:34
  Speaker 3: and Chat GPT or the parent of the chat GPT model.
• 23:37
  Speaker 3: That would be my guests here just interpreting this news
• 23:41
  Speaker 3: is that it's likely cutting out areas that don't have
• 23:44
  Speaker 3: influence on that profit center, and the rough quotes here
• 23:49
  Speaker 3: is just cutting out some middle management. So I don't
• 23:52
  Speaker 3: think that I would point to this as, oh, this
• 23:54
  Speaker 3: means there's a weakness in the technology sector or some
• 23:57
  Speaker 3: of the areas that have been a catalyst for strong
• 24:00
  Speaker 3: market performance, but more so just a certific move by Microsoft. Again,
• 24:04
  Speaker 3: but that's just me sort of going off the cuff,
• 24:06
  Speaker 3: trying to interpret the headline here.
• 24:07
  Speaker 2: So if the total employment level is about the same
• 24:10
  Speaker 2: as June, we're looking at approximately seven thousand employees globally
• 24:13
  Speaker 2: that would be cut. So not, like I said, not
• 24:15
  Speaker 2: an insignificant level of employment being cut here. I think
• 24:19
  Speaker 2: the interesting question to me in this space, which again,
• 24:23
  Speaker 2: this the tech space, especially on the recruiting advertising side
• 24:28
  Speaker 2: of things, has been a really difficult employment market to
• 24:31
  Speaker 2: be in for those that are in there because there's
• 24:33
  Speaker 2: been all sorts of hiring freezes and pushes just to
• 24:37
  Speaker 2: be lean anywhere possible in order to make those artificial
• 24:40
  Speaker 2: intelligence investments. But here's the question that is going to
• 24:43
  Speaker 2: be raised to every tech firm out there now for
• 24:45
  Speaker 2: the next few earnings calls Microsoft cut jobs. Why do
• 24:50
  Speaker 2: they do it? Why aren't you doing it? What are
• 24:53
  Speaker 2: you supposed to do other than compare yourself to Microsoft.
• 24:56
  Speaker 2: I don't really care if you are an AI chip maker,
• 24:59
  Speaker 2: if you are a tech advertising, social media company. The
• 25:04
  Speaker 2: focus is now going to be on headcount because of this,
• 25:07
  Speaker 2: even though it is again relatively modest, and Microsoft's a
• 25:11
  Speaker 2: bit of a trendsetter, so I would not be shocked
• 25:13
  Speaker 2: to see this spill over two companies like IBM, like Intel,
• 25:17
  Speaker 2: like Amazon that need to compete with Microsoft in here.
• 25:21
  Speaker 2: And this is you know, this is an early first.
• 25:24
  Speaker 2: The stock for Microsoft, by the way, up about seven
• 25:27
  Speaker 2: percent this year, but flat on a day when the
• 25:30
  Speaker 2: rest of the market, the NASDAC especially up about one
• 25:32
  Speaker 2: on a third percent, being dragged hagger hired by in video.
• 25:35
  Speaker 2: So again, just find it interesting. I don't really have
• 25:38
  Speaker 2: a big takeaway as to why they're cutting this headcount.
• 25:41
  Speaker 2: Other than the same things that we've been describing, Let's
• 25:44
  Speaker 2: take a look over at the Republican tax plans that
• 25:47
  Speaker 2: are working their way through Congress here and what seems
• 25:51
  Speaker 2: to be some of the focus how it might benefit
• 25:54
  Speaker 2: or detract from folks here in the New England area.
• 25:57
  Speaker 2: What rumors are we hearing so far of Salt is
• 26:01
  Speaker 2: making a big headline because of the arguing that's going
• 26:06
  Speaker 2: on over it and does affect a lot of New England.
• 26:09
  Speaker 2: So let's start with the state and local tax deduction,
• 26:12
  Speaker 2: what's changed over the last few years, and what seems
• 26:14
  Speaker 2: to be the focus here.
• 26:15
  Speaker 3: Yeah, so important to note where it sits today is
• 26:19
  Speaker 3: the Salt state. In local taxes, you're able to deduct
• 26:23
  Speaker 3: ten thousand dollars off of your federal income tax return
• 26:27
  Speaker 3: if you are itemizing based on what your property taxes
• 26:31
  Speaker 3: and local taxes are. That number was put in back
• 26:35
  Speaker 3: in twenty seventeen with the Tax and Jobs Cut Act.
• 26:37
  Speaker 3: A lot of states like New York and New Jersey
• 26:40
  Speaker 3: that have very high property taxes and local taxes have
• 26:43
  Speaker 3: been trying to bump up that level or eliminator entirely.
• 26:47
  Speaker 3: Massachusetts and some of the other New England ones would
• 26:49
  Speaker 3: be candidates too. What's now been proposed is a thirty
• 26:52
  Speaker 3: thousand dollars cap on state and local income taxes on
• 26:56
  Speaker 3: that salt. That would be triple where it is today.
• 26:59
  Speaker 3: That would shrink that thirty thousand when income exceeds over
• 27:03
  Speaker 3: four hundred thousand. So that is what has been rumored
• 27:07
  Speaker 3: and again important with all of these ideas that we're
• 27:10
  Speaker 3: going to go through here, this is just stuff that
• 27:12
  Speaker 3: they're working through. This is not something that is set
• 27:14
  Speaker 3: in stone by any means.
• 27:15
  Speaker 2: So just to kind of play out that example, let's
• 27:17
  Speaker 2: say you own a home in Natick, Massachusetts. As a
• 27:22
  Speaker 2: just example here, I'm seeing one over in Natick going
• 27:26
  Speaker 2: for eight hundred, forty thousand dollars. It's a three bed,
• 27:30
  Speaker 2: one and a half bath home. You are looking at
• 27:33
  Speaker 2: a property tax bill on that sucker of five thousand
• 27:39
  Speaker 2: bucks a year. Let's say you're also working because you
• 27:42
  Speaker 2: need to be able to afford the mortgage, and I'm
• 27:44
  Speaker 2: just gonna call it a let's see, if you're going
• 27:46
  Speaker 2: to afford a home like that, what do you need
• 27:49
  Speaker 2: to have for an income? Here? Your principal and interest
• 27:51
  Speaker 2: payments are going to come to forty four hundred bucks.
• 27:53
  Speaker 2: Today insurance might be three hundred bucks, so.
• 27:57
  Speaker 3: Probably two fifty to three hundred, let's.
• 27:59
  Speaker 2: Call it two one hundred and fifty thousand dollars of
• 28:01
  Speaker 2: income in Massa, Chusetts in order to afford that three bed,
• 28:05
  Speaker 2: one and a half bath home, which I know for
• 28:07
  Speaker 2: those listening in areas outside of New England, you're saying,
• 28:10
  Speaker 2: what the hell is wrong with you people? I agree,
• 28:14
  Speaker 2: I am trying to make a point of all of this.
• 28:17
  Speaker 2: But you're looking at an income tax bill on that
• 28:19
  Speaker 2: income of about thirteen thousand dollars. Add that to your
• 28:22
  Speaker 2: property taxes you are currently paying, just you know, between
• 28:27
  Speaker 2: income taxes and property taxes. Forget about any sales tax
• 28:30
  Speaker 2: or anything like that. If you were to buy a
• 28:32
  Speaker 2: car or anything of about seventeen thousand dollars a year,
• 28:37
  Speaker 2: used to be, you would take that entire amount deducted
• 28:39
  Speaker 2: off of your federal taxes. Now you're capped at ten.
• 28:42
  Speaker 2: Under this proposal, you'd be capped at thirty, so you'd
• 28:44
  Speaker 2: be able to deduct all of that. The question here
• 28:48
  Speaker 2: seems to be from those Republicans in New York and elsewhere.
• 28:53
  Speaker 2: The problem they have is a they don't think thirty
• 28:55
  Speaker 2: grand is high enough. And if you own you know,
• 28:57
  Speaker 2: if you're a big Republican donor and living out on
• 29:00
  Speaker 2: Long Island and paying thirty thousand dollars in property taxes
• 29:03
  Speaker 2: plus the income taxes on your income, You're right, it's
• 29:06
  Speaker 2: not high enough to make a dent too, would be
• 29:09
  Speaker 2: if they're phasing it out at four hundred thousand dollars. Again,
• 29:13
  Speaker 2: it helps the average guy who's, you know, making some
• 29:16
  Speaker 2: money here and in parts of New England or the
• 29:19
  Speaker 2: Northeast and paying a fair bit in taxes, but it
• 29:22
  Speaker 2: doesn't help your hedge fund manage that lives in New
• 29:25
  Speaker 2: York that wants a lot of deductions on their taxes.
• 29:28
  Speaker 2: And so I can see why they're putting up the fight.
• 29:32
  Speaker 2: I'm sure they have very large donors who say, hey,
• 29:36
  Speaker 2: this salt change doesn't really do anything for me, so
• 29:40
  Speaker 2: vote against it until you get something bigger.
• 29:42
  Speaker 3: In the other piece that I've heard a lot of
• 29:45
  Speaker 3: client feedback on, so I at least want to touch upon,
• 29:47
  Speaker 3: is this idea that Social Security wouldn't be tax That
• 29:50
  Speaker 3: was one of the things that's rumored about. Since they
• 29:52
  Speaker 3: don't have the direct recourse in order to make that
• 29:56
  Speaker 3: change on eliminating the taxes on Social Security benefits. What's
• 29:59
  Speaker 3: been propos again just in this initial bill, is that
• 30:02
  Speaker 3: for those who are over the age of sixty five,
• 30:05
  Speaker 3: they get an additional fifteen hundred bucks on the standard deduction.
• 30:10
  Speaker 3: There's now been rumored that since they can't tweak the
• 30:13
  Speaker 3: Social Security benefit taxation, that that standard deduction would increase
• 30:17
  Speaker 3: from fifteen hundred to an additional four thousand on top
• 30:19
  Speaker 3: of that, so fifty five hundred in total on top
• 30:23
  Speaker 3: of the normal married couple joint filing as a stand reduction,
• 30:27
  Speaker 3: which is again inner around thirty thousand mic R.
• 30:30
  Speaker 2: Is there a legal reason that they can't touch that,
• 30:32
  Speaker 2: or is it just I don't know if there is
• 30:35
  Speaker 2: a rules based provision that makes it impossible for them
• 30:38
  Speaker 2: to touch so Security, or if it's just how much
• 30:40
  Speaker 2: it would cost.
• 30:40
  Speaker 3: So what they mentioned here straight out of the Wall
• 30:42
  Speaker 3: Street Journal piece is it's an alternative to removing taxes
• 30:45
  Speaker 3: on Social Security benefits, which can't be done in full
• 30:48
  Speaker 3: through the budget process the Republicans are currently using. Got
• 30:51
  Speaker 3: also important to note that that additional standard reduction would
• 30:55
  Speaker 3: be for those people who have it would get phased
• 30:58
  Speaker 3: out if you make over a hundred fifty thousand as
• 31:00
  Speaker 3: a married couple or seventy five thousand as an individual
• 31:03
  Speaker 3: for those over the age of sixty five. That additional
• 31:06
  Speaker 3: standard deduction.
• 31:08
  Speaker 2: Bad news out there for about twenty people across the country.
• 31:11
  Speaker 2: Deductions associated with purchasing sports teams would be limited now
• 31:16
  Speaker 2: under the new with It Chisholm, Chisolm, the new Chisholm,
• 31:20
  Speaker 2: the new Boston Celtics.
• 31:21
  Speaker 3: Garn it six point two?
• 31:24
  Speaker 2: What was it?
• 31:24
  Speaker 3: Six billion?
• 31:25
  Speaker 1: Ben?
• 31:25
  Speaker 3: Yeah, that's uh a bummer.
• 31:28
  Speaker 2: Let's take a quick break here. When we come back,
• 31:32
  Speaker 2: I do want to touch on a little bit of
• 31:35
  Speaker 2: self driving car news. That's been a while since we've
• 31:38
  Speaker 2: talked about self driving cars and bad news for everybody.
• 31:44
  Speaker 2: They are heading to Boston quick break. We'll be back
• 31:47
  Speaker 2: with that next.
• 31:48
  Speaker 1: The global trade warriors in full swing. How long will
• 31:51
  Speaker 1: it last? Is anyone's guess. Keep it here for the
• 31:54
  Speaker 1: most up to date information plus breaking news every day
• 31:58
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• 32:18
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• 32:50
  Speaker 2: A few years ago, Waimo entered a few different cities
• 32:53
  Speaker 2: and began offering driverless rides to people that were in
• 32:58
  Speaker 2: the area. I've been in and I think it's been
• 33:01
  Speaker 2: five way mode driverless rides now so far. Two of
• 33:06
  Speaker 2: them were in San Francisco, and then I've done three
• 33:08
  Speaker 2: in Phoenix as well. It's fun, it's entertaining. It's also
• 33:15
  Speaker 2: really cheap. You know, they're probably losing a lot of
• 33:19
  Speaker 2: money on the idea because they're driving around Jaguars with
• 33:22
  Speaker 2: tens of thousands of dollars of camera equipment on there.
• 33:25
  Speaker 2: But they are I don't know. It's just kind of
• 33:28
  Speaker 2: a fun little thing to do. But there's some downsides.
• 33:33
  Speaker 2: I mean, they are slow. They don't do at least
• 33:36
  Speaker 2: in Phoenix where I was. They weren't getting on highways
• 33:39
  Speaker 2: to get to the destination. We were going to a
• 33:41
  Speaker 2: minor league ballgame in Phoenix, and it just took another
• 33:43
  Speaker 2: like five to seven minutes that it would have been
• 33:46
  Speaker 2: an uber driver who's kept, you know, swerving through traffic
• 33:48
  Speaker 2: and going above the speed limit. But it's it's again,
• 33:51
  Speaker 2: it's entertaining and kind of cool, and there's you know,
• 33:54
  Speaker 2: there's still a steering wheel up front, and it's just
• 33:56
  Speaker 2: driving itself. So I thought it was a very entertaining experience.
• 34:00
  Speaker 2: I don't know that I would put my kids in him,
• 34:02
  Speaker 2: but it was still pretty entertaining. According to a way
• 34:07
  Speaker 2: Moo spokesperson, they are sending a test fleet to Boston
• 34:13
  Speaker 2: in May and June in order to map out the
• 34:15
  Speaker 2: city streets. Now, I want to be clear about what
• 34:18
  Speaker 2: this means. It does not mean that they're going to
• 34:21
  Speaker 2: be driverless Waymo vehicles in downtown Boston. As entertaining as
• 34:25
  Speaker 2: that might be, that is not going to be what's
• 34:28
  Speaker 2: happening here instead. During quote, during these road trips, we
• 34:31
  Speaker 2: send a limited fleet of vehicles to each city for
• 34:34
  Speaker 2: several weeks. Trained human autonomous specialists remain behind the wheel
• 34:38
  Speaker 2: at all times. Our visits begin with manual driving through
• 34:42
  Speaker 2: the densest and most complex parts of each city, including
• 34:45
  Speaker 2: downtown areas and freeways.
• 34:48
  Speaker 3: So likely take Waymo about six months to figure out Boston.
• 34:53
  Speaker 2: No, I mean, I think it'll take them six months
• 34:55
  Speaker 2: to figure out that it would never work in Boston.
• 34:58
  Speaker 2: I'm trying to think. I mean, even compared to San Francisco,
• 35:02
  Speaker 2: the idea of them navigating Boston streets, to me is
• 35:06
  Speaker 2: just kind of ludicrous. I think San Francisco is probably
• 35:10
  Speaker 2: the easiest comparison, though, of where they do operate. I mean, Phoenix,
• 35:14
  Speaker 2: it's all flat, it's on a grid, it's in a desert.
• 35:17
  Speaker 2: You're not dealing with a whole lot of weather issues
• 35:19
  Speaker 2: that prevent you from doing anything, nor are you dealing
• 35:21
  Speaker 2: with other weather issues in San Francisco. So that's also
• 35:24
  Speaker 2: fair here. But these poor driverless cars are going to
• 35:28
  Speaker 2: have no luck navigating the Boston streets. I mean, you know,
• 35:33
  Speaker 2: I'm impressed, you know, the ones in San Francisco. I
• 35:36
  Speaker 2: dealt with, you know, a double parked car that it's
• 35:38
  Speaker 2: successfully navigated around. I had to make a weird left
• 35:42
  Speaker 2: turn into you know, stopped oncoming traffic. You know a
• 35:46
  Speaker 2: lot of things that were impressive, but it's just not
• 35:50
  Speaker 2: pushed to the It's this poor suicidal Jaguar is just
• 35:54
  Speaker 2: going to be not very happy.
• 35:58
  Speaker 3: From Boston stuff.
• 35:59
  Speaker 2: I don't think it's going to work here. But nonetheless,
• 36:02
  Speaker 2: they are tackling what would undoubtedly be one of the
• 36:04
  Speaker 2: most difficult cities in the unit.
• 36:06
  Speaker 3: You're obviously being tony cheek. It will get there at
• 36:08
  Speaker 3: some point. Autonomous vehicles will get there at some point.
• 36:12
  Speaker 3: I don't know if it's the next six months or so.
• 36:14
  Speaker 2: But in May and June, yes, I am genuinely unsure
• 36:17
  Speaker 2: of whether or not they would be able to handle things.
• 36:19
  Speaker 2: December through February.
• 36:20
  Speaker 3: Well, that's the big thing. The all jokes aside. The
• 36:23
  Speaker 3: feedback here is that autonomous vehicles have had difficulty driving
• 36:26
  Speaker 3: in the snow, and yeah, Boston tough.
• 36:29
  Speaker 4: The United States, Virgin Islands has consistently voted one of
• 36:32
  Speaker 4: the top Caribbean destinations, and recently two of their beaches,
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  Speaker 4: Trunk Bay and Saint John and Maygun's Bay in Saint
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  Speaker 4: Thomas were voted a top ten best beach in the
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  Speaker 4: Caribbean at the twenty twenty five Travelers Choice Best of
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  Speaker 4: the Best awards. From the pristine beaches to its world
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  Speaker 4: class dining, rich history, incredible golf and perfect weather, the
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  Speaker 4: USVII has everything you need to make memories that will
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  Speaker 4: last a lifetime. From the moment you arrive, you'll fall
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  Speaker 4: naturally in rhythm with the heartbeat of the islands. There's
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  Speaker 4: no money to exchange and track. New England could not
• 37:01
  Speaker 4: be easier. Whether you're looking for a romantic getaway or
• 37:04
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  Speaker 4: The USVII is America's Caribbean paradise. Go to visit USVI
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  Speaker 4: dot com today. Let's visit USVII dot com.
• 37:19
  Speaker 2: So to answer your question from before, Paul, like, will
• 37:22
  Speaker 2: they ever get there? I think so, but genuinely, I
• 37:25
  Speaker 2: don't know how you go about operating a driverless car.
• 37:29
  Speaker 2: If you know on your average trip a third of
• 37:33
  Speaker 2: the lines are covered by snow, m I mean, think
• 37:37
  Speaker 2: about like driving in Boston, how many trips have you
• 37:40
  Speaker 2: taken either on the highway or in a downtown area.
• 37:43
  Speaker 2: Not just Boston, but you know any city or town
• 37:46
  Speaker 2: around New England where you're driving through, and like, it
• 37:50
  Speaker 2: wasn't a snowstorm in the last twenty minutes. It just
• 37:53
  Speaker 2: happened to be one in the last couple of days.
• 37:55
  Speaker 2: And you can't see any of the lines. They're covered
• 37:57
  Speaker 2: in sand, they're covered in you know, snow that's been
• 38:00
  Speaker 2: sit on the side. I just don't know that it's
• 38:03
  Speaker 2: going to be even there in the next decade in
• 38:05
  Speaker 2: Boston or anywhere in the North. Let's take a quick break.
• 38:08
  Speaker 2: Markets are mixed at the moment, but NASDAK leading things higher,
• 38:11
  Speaker 2: up one and a half percent. We'll have a full
• 38:13
  Speaker 2: recap and more in the second hour of the Financial
• 38:15
  Speaker 2: Exchange