Latest / The Financial Exchange Show / Strong jobs report has some hidden signs of weakness

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Strong jobs report has some hidden signs of weakness · The Financial Exchange Show

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Speaker 1: a donation today. This is the Financial Exchange with Chuck
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Speaker 2: Jobs Friday here on the Financial Exchange is Chuck Mike
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Speaker 2: Tucker with you, And at eight thirty am Eastern time
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Speaker 2: this morning, we received the jobs report from the Bureau
1:21
Speaker 2: of Labor Statistics. We thank all the fine folks at
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Speaker 2: BLS for all the work they did in preparing this
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Speaker 2: for us. I know it's their job and they get
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Speaker 2: paid for it, but thank you for giving us something
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Speaker 2: to talk about today, because yesterday was otherwise pretty uneventful.
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Speaker 2: Not too much going on that would, you know, be
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Speaker 2: of note in any way, shape or form.
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Speaker 3: If you like WWE, you'll like what you saw yesterday
1:44
Speaker 3: afternoon everything got normal.
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Speaker 2: But Mike, I gotta tell you, I was sitting there
1:48
Speaker 2: yesterday afternoon and I was like, Jerry, I wish that
1:52
Speaker 2: we could have done an afternoon like bonus show or
1:56
Speaker 2: something for like an additional six hours or so. I
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Speaker 2: wish we could have, but alas we can't, and so
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Speaker 2: we're forced to, you know, stay in our regularly scheduled
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Speaker 2: time slot, which is wonderful, and talk about the job
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Speaker 2: support where we saw one hundred and thirty nine thousand
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Speaker 2: jobs created for the month of May. The unemployment rates
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Speaker 2: stayed at four point two percent. Expectations were for about
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Speaker 2: one hundred and thirty thousand jobs to be added and
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Speaker 2: the unemployment rate to stay at four two So you
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Speaker 2: the head writers, and you're like, you're you're basically completely
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Speaker 2: in line with expectations.
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Speaker 4: Within margin of error. Yep.
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Speaker 2: Yeah, the under the surface stuff is a little concerning
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Speaker 2: in the aggregate.
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Speaker 3: Yeah, so let's start with the revisions, because I'm guessing
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Speaker 3: that would top the list of potentially concerning. They they
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Speaker 3: every month this survey, right, it is a survey, it's
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Speaker 3: not a census. They go out and talk to employers
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Speaker 3: and households and say how many did you hire, how
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Speaker 3: many did you fire?
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Speaker 5: Are you working? Are you not? Are you're looking for
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Speaker 5: a job?
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Speaker 3: And some of those get in in time for them
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Speaker 3: to publish this stuff at eight thirty am. Others trickle
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Speaker 3: in over the course of the next few months, and
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Speaker 3: so they make revisions regularly. And these revisions showed that
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Speaker 3: there were nearly one hundred thousand fewer jobs created over
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Speaker 3: the last two months than we thought going into today,
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Speaker 3: and that was a pretty big revision down. So, yeah,
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Speaker 3: this job's report came in line with expectations or even
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Speaker 3: slightly beat them. But when you factor in the ninety
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Speaker 3: five thousand revision over the last two months, it's definitely
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Speaker 3: a bit of a different job creation.
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Speaker 5: Labor market than we previously thought.
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Speaker 2: Yeah, so the previous two months, the reporting was originally
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Speaker 2: that you had three hundred and sixty two thousand jobs created,
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Speaker 2: and the updated figures now take us too. I'm sorry,
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Speaker 2: did the wrong map there. The updated figures take us
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Speaker 2: to two hundred and sixty seven thousand jobs created. So ultimately,
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Speaker 2: what this means is that the rate of job creation,
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Speaker 2: not rate of job the number of jobs added was
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Speaker 2: about twenty six percent smaller than what we originally thought.
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Speaker 2: And the reason that these revisions happen is because it's
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Speaker 2: not that the government like looks at the data is like, well,
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Speaker 2: maybe we were wrong. It's no, they keep getting responses
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Speaker 2: that come in after the fact, just because you know,
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Speaker 2: if if you're anything like me, occasionally you get like
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Speaker 2: an email or a text and you're like, okay, I'll
4:22
Speaker 2: get to that, and then you wake up a week
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Speaker 2: and a half later and you're like, I don't know
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Speaker 2: if I ever got back to Jim on that mm hmm.
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Speaker 2: And that happens with the BLS survey as well. So
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Speaker 2: what it does tell you is that the data that
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Speaker 2: has come in since the original reports has been weaker
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Speaker 2: than what they originally received, which is not a great sign. Typically,
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Speaker 2: negative revisions, if they're consistent and meaningful, can be an
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Speaker 2: early sign of labor market weakness.
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Speaker 4: So that's peace number one that we have here.
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Speaker 2: Peace number two. Remember the BLS survey, it's actually two
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Speaker 2: different surveys. The first they go to a bunch of
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Speaker 2: businesses and ask how many people to do hire. They
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Speaker 2: go to a bunch of households and say do you
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Speaker 2: have a job or not? And the household one is
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Speaker 2: the one that is troubling here because what it showed
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Speaker 2: two different pieces. The first is six hundred and twenty
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Speaker 2: five thousand people dropped out of the labor force. You go,
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Speaker 2: ohre they go, that's interesting, like what happened to them?
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Speaker 2: Where did they go? The second piece is six hundred
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Speaker 2: and ninety six thousand fewer people reported having a job.
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Speaker 2: So you're like, okay, like that's not great, And basically
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Speaker 2: what you ended up with was that eight hundred and
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Speaker 2: thirteen thousand people more people are now being reported as
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Speaker 2: not in the labor force and seventy one thousand more
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Speaker 2: people reporting is unemployed. So basically, the only reason why
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Speaker 2: that unemployment rate did not go up was because there
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Speaker 2: were a huge number of people who lost jobs but
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Speaker 2: just got reported as being out of the labor force
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Speaker 2: as opposed to reporting themselves as unemployed.
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Speaker 3: Yeah, the the interesting piece here is this, you know
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Speaker 3: both sides of this equation, right, you have the numerator
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Speaker 3: and the denominator of the unemployment rate, and the denominator
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Speaker 3: here shrunk pretty dramatically. That's six hundred thousand number that
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Speaker 3: you mentioned. And a few factors here, right, You do
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Speaker 3: have baby boomers retiring at a pretty quick late clip.
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Speaker 3: You also have some immigration stuff going on, certainly slower
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Speaker 3: net immigration into the United States. You also have deportations occurring.
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Speaker 3: How much of that is leading people to even if
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Speaker 3: they weren't counted in this survey previously, because it tends
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Speaker 3: to be pretty small response rates when you are working
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Speaker 3: illegally in this country. But let's say you were working
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Speaker 3: legally in this country and you stopped because a family
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Speaker 3: member was removed or either this that or the other reason.
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Speaker 3: These two factors are keeping the unemployment rate down certainly,
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Speaker 3: but not exactly speaking to a quick growing job market.
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Speaker 2: No, it's it's not what you would like to see
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Speaker 2: in terms of how the unemployment rate stays at four
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Speaker 2: point two percent, right.
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Speaker 3: You want the four point two percent to be there
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Speaker 3: because more Americans are working. And yeah, there's a slow
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Speaker 3: retirement drip, but that's being replaced by new workers and
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Speaker 3: that doesn't seem to be what's happening in this most
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Speaker 3: recent report.
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Speaker 4: So we'll have to see where that evolves.
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Speaker 2: I really I don't like reading too much until like
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Speaker 2: one month change on the civilian labor force composition, just
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Speaker 2: because there's all kinds of noise there and so who
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Speaker 2: knows what the heck this actually means. Yeah, but it
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Speaker 2: is something where if you see it, you're like, oh,
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Speaker 2: that could potentially be something bad, And so I think
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Speaker 2: it at least bears watching. And we'll just have to
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Speaker 2: see what ends up coming out of that, I guess.
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Speaker 3: Interestingly here from me, Chuck, the the employment to population
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Speaker 3: ratio for May is now sitting at fifty nine point seven.
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Speaker 3: That's the lowest level it's been at since.
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Speaker 5: January of twenty twenty two.
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Speaker 3: Yeah, the again, don't read too much into that there's
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Speaker 3: a lot of moving pieces, but that's you.
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Speaker 5: Know, that's where it is right now.
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Speaker 2: That one is so I prefer to look at that
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Speaker 2: prime age employment ever population ratio to prime age epop
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Speaker 2: is how they talk about in the biz.
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Speaker 4: And here's where we are right now.
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Speaker 2: It dropped from eighty point seven down to eighty point five.
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Speaker 2: We've basically been in a range since January of twenty
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Speaker 2: twenty three where we've been between like eighty point three
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Speaker 2: on the low end and eighty point nine on the
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Speaker 2: high end. So it's it's not showing a meaningful shift
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Speaker 2: at this point, but it is something where historically, like
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Speaker 2: the highest that reading has ever got. And what this
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Speaker 2: measures employment to population ratio is basically what percentage of
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Speaker 2: people in that age twenty five to fifty four actually
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Speaker 2: have a job. So just like how many like just
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Speaker 2: to give me the broad number they or the broad percentage,
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Speaker 2: And the highest that series has ever been is eighty
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Speaker 2: one point nine percent in April two thousand, and it
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Speaker 2: makes sense because you're never gonna have one hundred percent.
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Speaker 2: You're never even gonna have like ninety five percent. The
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Speaker 2: reason why is it's largely due to two things. The
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Speaker 2: first is there are always some people in that demo
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Speaker 2: h twenty five to fifty four that are either going
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Speaker 2: to school for grad school, think lawyer's business school, med school,
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Speaker 2: you know, things like that. And there are always people
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Speaker 2: in that demographic that are raising children. So you are
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Speaker 2: never going to get to one hundred percent. The highest
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Speaker 2: we've ever gotten is eighty one point nine, and that
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Speaker 2: was in April two thousand, arguably at the tail end
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Speaker 2: of probably the best economy that we have ever seen
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Speaker 2: in the United States. So I think that you know,
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Speaker 2: as long as that prime age employment to population continues
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Speaker 2: to hang out around eighty, you look at that and
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Speaker 2: you're like, Okay, this is fine. But it's some of
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Speaker 2: the underlying stuff that I mentioned where again the revisions
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Speaker 2: the potential for you know, the labor force shrinking is
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Speaker 2: being the only thing that's not keeping the unemployment.
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Speaker 4: Rate from going up.
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Speaker 2: And then you get the other side of things here,
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Speaker 2: which is average hourly earnings, which jumped at a monthly
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Speaker 2: rate of zero point four percent, which is an annual
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Speaker 2: rate of almost half a percent, and the thing that
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Speaker 2: has I think the long end of the yield curve
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Speaker 2: selling off today with a tenure treasuries back up to
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Speaker 2: four point four to seven after being in the four
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Speaker 2: threes for the last couple of days.
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Speaker 4: Is okay if you've got.
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Speaker 2: Hotter wage growth happening, that potentially means that households have
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Speaker 2: additional income that they can spend on the higher prices
10:32
Speaker 2: that companies are trying to pass through for tariffs. And
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Speaker 2: so the inflation side of the equation, which has been
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Speaker 2: really tame for I would say, really tame for the
10:42
Speaker 2: last three to four months, and you know, pretty reasonable
10:45
Speaker 2: for the last.
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Speaker 4: Twelve to eighteen.
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Speaker 2: You start to look at that and you go, okay,
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Speaker 2: is there something that's just gonna whack us on the
10:52
Speaker 2: inflation side in the next couple months once the tariff
10:55
Speaker 2: stuff starts showing up in the data.
10:56
Speaker 3: Right, So let's take a quick break. But President Trump
10:59
Speaker 3: posted on True Social go for a full point rocket fuel,
11:04
Speaker 3: pushing for a full one percentage point rate cut from
11:07
Speaker 3: the Federal Reserve. Let's talk about how the Fed is
11:10
Speaker 3: likely to look at this job's report and the total
11:14
Speaker 3: data and the aggregate next here on.
11:15
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12:21
Speaker 2: Like prior to the break, you mentioned that we've got
12:23
Speaker 2: some social media postings from the President this morning.
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Speaker 3: Yeah, these are the tamest ones in the last twenty
12:29
Speaker 3: four hours. But President calling on Powell to cut interest
12:32
Speaker 3: rates once again. It's been a pretty persistent push and
12:35
Speaker 3: quite frankly with this Job's report. There's just no chance.
12:38
Speaker 3: The markets are moving up today, but they're also reflecting
12:41
Speaker 3: an anticipation of possible higher inflation. Right, we have stocks
12:47
Speaker 3: moving up and we have bonds selling off. We have
12:52
Speaker 3: a market here that is saying this Job's report was.
12:56
Speaker 3: I don't like to read too much into a single
12:59
Speaker 3: day move, but bond yields are not moving down. This
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Speaker 3: market is not moving up because it's anticipating a FED
13:05
Speaker 3: rate cut. I guess let's let's I think we can
13:07
Speaker 3: at least say that much.
13:09
Speaker 2: Yeah, I mean, it's it's we are not in a
13:12
Speaker 2: bad news is good news day? No, like a bad
13:16
Speaker 2: news is good news day would be S ANDP goes
13:19
Speaker 2: to six thousand because the tenure went to four to
13:22
Speaker 2: two because we had, you know, forty thousand jobs prints.
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Speaker 3: Right, So you know this morning you're seeing the allcross
13:30
Speaker 3: the board for later this year. The likelihood of a
13:33
Speaker 3: rate cut you're diminishing. Really, you know, at every meeting
13:37
Speaker 3: for the rest of this year. As an example, yesterday,
13:40
Speaker 3: when you took a look at the July thirtieth meeting,
13:43
Speaker 3: there was a one in three chance of a rate
13:46
Speaker 3: cut at that meeting. Today it's down to a fifteen
13:49
Speaker 3: percent chance sixteen and a half technically, but you get
13:52
Speaker 3: that overall feeling that, hey, this job's report, combined with
13:55
Speaker 3: the other data we've seen on inflation, just has the
13:59
Speaker 3: FED doing likely to do more of what they've been doing,
14:03
Speaker 3: which is, I'm guessing probably exactly where J. Powell wants
14:06
Speaker 3: to be. Take a look at all the data and
14:08
Speaker 3: have it convince you that you should do nothing.
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Speaker 4: Yeah, I mean, I think here's the thing.
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Speaker 2: In very simple terms, the Fed's mandate is maintain full
14:17
Speaker 2: employment and price stability. The evidence of weakening in this
14:23
Speaker 2: jobs report is all in the underlying stuff. It's all
14:27
Speaker 2: kind of like, hey, this could become a problem in
14:29
Speaker 2: the next few months if things play out in way X, y,
14:34
Speaker 2: or z. There's nothing on the headline data that you
14:37
Speaker 2: look at and your like screaming weakness, but there is
14:40
Speaker 2: stuff where you could say, okay, like this could be
14:42
Speaker 2: a problem.
14:44
Speaker 4: This could be a problem.
14:46
Speaker 2: Is not enough of a reason to cut when you
14:49
Speaker 2: look at what the FED is getting from their surveys
14:52
Speaker 2: of businesses talking about how they're passing through tariff costs
14:55
Speaker 2: and how those might start to show up in inflation
14:57
Speaker 2: in the next couple months. If let's say this is
15:01
Speaker 2: completely symmetrical let's say or symmetric, I don't know whichever one.
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Speaker 4: Let's say that.
15:09
Speaker 2: We go out two months and headline inflation has gone
15:14
Speaker 2: and I'll use the pce of E number just because
15:16
Speaker 2: that's what the FED looks at. And let's say that
15:18
Speaker 2: headline inflation has gone from two point two percent up
15:23
Speaker 2: to two point five and unemployment has gone from four to.
15:28
Speaker 4: Two to four five. Which way does the FED go
15:32
Speaker 4: in that scenario?
15:33
Speaker 3: What?
15:33
Speaker 4: What does the FED do there? What? What's the right
15:36
Speaker 4: move for them?
15:37
Speaker 2: Because in that situation, you project it out and you're like, okay,
15:42
Speaker 2: if these both keep going up and we get unemployment
15:44
Speaker 2: to five, and you know, we get the CPS the
15:48
Speaker 2: piece of E up to three, what do we do there?
15:51
Speaker 2: We're really going to be cutting rates into a three
15:53
Speaker 2: percent you know, inflationary environment. On the other hand, you
15:57
Speaker 2: could see a path where unemployment continues up, umployment goes
16:00
Speaker 2: to five, and you know, pec of caps out at
16:02
Speaker 2: you know, two and a half, and then you say, okay,
16:04
Speaker 2: like now it's time for us to do this. You
16:07
Speaker 2: could also see the opposite, Hey, unemployment peaks at four
16:09
Speaker 2: and a half and CPI goes to three, Hey, maybe
16:12
Speaker 2: we need to hike twenty five BIPs. So I think
16:16
Speaker 2: that if if I'm J Powell right now, the move
16:22
Speaker 2: is to do nothing right. But at the first sign
16:26
Speaker 2: that the inflation versus unemployment fight is becoming asymmetric in
16:30
Speaker 2: one direction, I have to move quickly and decisively in
16:34
Speaker 2: that direction. And that's where you do start talking about
16:37
Speaker 2: am I either cutting or hiking you know, half a
16:40
Speaker 2: percent or more at each meeting in order to move
16:44
Speaker 2: quickly enough to staunch the bleeding in whatever direction it's
16:47
Speaker 2: going in.
16:47
Speaker 3: Right, Because if I'm JA Powell looking at this job
16:50
Speaker 3: report today, he's certainly acknowledging the underlying weakness.
16:54
Speaker 5: In certain areas.
16:55
Speaker 3: But you also have to ask yourself, Okay, is that
16:58
Speaker 3: going to be more than absorbed or by changes to
17:02
Speaker 3: the size of the labor force in general? Right, Yes,
17:06
Speaker 3: there's some underlying weakness showing up in the revisions as
17:09
Speaker 3: well as the household survey of oh yeah, fewer people
17:11
Speaker 3: are finding jobs according to household survey, but such a
17:15
Speaker 3: massive number of people left the labor force entirely. That
17:20
Speaker 3: can be inflationary if you have even if it's a
17:23
Speaker 3: pretty weak job market. If you have fewer people looking
17:26
Speaker 3: for work because they're either a retiring or be not
17:29
Speaker 3: coming into this country or be leaving this country, then
17:33
Speaker 3: that can still be inflationary even in a relatively weaker
17:38
Speaker 3: labor market. So it's it's not a clear answer either
17:43
Speaker 3: direction on this job report.
17:44
Speaker 1: I think.
17:45
Speaker 2: Yeah. Also, we have a piece from the New York Times.
17:49
Speaker 2: It's speaking about the job supports titles. Can we trust
17:52
Speaker 2: a job report from the Trump administration? Yes, with caveats?
17:56
Speaker 2: And I find that yes with caveats infuriating because I'm
18:00
Speaker 2: pretty darn consistent on this. The data from the BLS
18:05
Speaker 2: is reliable. It may not always be accurate, but that's
18:10
Speaker 2: not because the BLS is trying to skew.
18:13
Speaker 4: The data in any particular way.
18:14
Speaker 2: It's a nature of the it's the nature of the beast, where, hey,
18:18
Speaker 2: if you're surveying tens of thousands of people, you may
18:21
Speaker 2: miss some stuff because either people aren't responding or you're
18:25
Speaker 2: just not surveying enough people to capture everything that's going on.
18:29
Speaker 3: So this exact story gets published in conservative publications when
18:34
Speaker 3: Biden is president, and this gets published in the New
18:36
Speaker 3: York Times when Trump is president, and it's ridiculous. This
18:39
Speaker 3: is a report from an administration of thousands of bureaucrats
18:44
Speaker 3: and there is no political bias playing in here.
18:47
Speaker 5: You want to make the.
18:48
Speaker 3: Argument that they don't have enough employees to do the survey,
18:50
Speaker 3: sure we'll cover that and we can talk about it,
18:52
Speaker 3: but it's not going to lean the data in one
18:54
Speaker 3: direction or another for political wins.
18:56
Speaker 4: Yeah.
18:57
Speaker 2: So every time this question gets asked, I come back
18:59
Speaker 2: with the same thing, which is, yes, you can trust
19:03
Speaker 2: the jobs report from any administration. It's not it may
19:07
Speaker 2: or may not actually be right, because there is no
19:10
Speaker 2: right when it comes to the jobs report. But yeah,
19:13
Speaker 2: there's no malfeasance here. There's nothing like I get frustrated
19:17
Speaker 2: when people talk about, you know, the government cooking the
19:20
Speaker 2: books on this stuff just because you know.
19:23
Speaker 5: Not everything's a conspiracy theory.
19:25
Speaker 2: No, there's plenty of stuff that can be but the
19:28
Speaker 2: burdens that proof is on someone to be able to
19:30
Speaker 2: prove it. And having known you know a number of
19:33
Speaker 2: people that have worked in these areas.
19:36
Speaker 4: There's nothing there. Let's take a quick break.
19:38
Speaker 2: When we come back, We've got Wall Street Watch and
19:41
Speaker 2: then we're talking Tesla.
19:42
Speaker 1: On Facebook and follow us on Twitter, act DFE show.
19:46
Speaker 1: Breaking business news is always first right here on the
19:49
Speaker 1: Financial Exchange Radio Network. Time now for Wall Street. Watch
19:56
Speaker 1: a complete look at what's moving markets so far today
19:59
Speaker 1: right here Financial Exchange Radio Network.
20:02
Speaker 6: Markets are in Browley mode as Wall Street sifts through
20:04
Speaker 6: the mad jobs report posted earlier this morning, where one
20:08
Speaker 6: hundred and thirty nine thousand jobs were added last month,
20:11
Speaker 6: higher than forecasts of one hundred and twenty six thousand.
20:15
Speaker 6: The unemployment rate also held steady at four point two percent.
20:20
Speaker 6: Right now, the Dow is up by just over one percent,
20:23
Speaker 6: or four hundred and eighty seven points, SMP five hundred
20:27
Speaker 6: up one percent or sixty one points, and the Nasdaq
20:31
Speaker 6: is up two hundred and twenty points or over one
20:34
Speaker 6: percent as well. Russell two thousand also up over one percent,
20:37
Speaker 6: or twenty five points. Daniear treasuriel jumping six basis points
20:41
Speaker 6: this morning now are four point four to six percent,
20:43
Speaker 6: and crude oil is up one point three percent, rating
20:47
Speaker 6: just above sixty four dollars a barrel. After a day
20:51
Speaker 6: of turmoil due to the online spat between Elon Musk
20:54
Speaker 6: and President Trump over the tax bill, now and in
20:56
Speaker 6: the Senate, Tesla shares rebounding nearly four percent today after
21:00
Speaker 6: plunging fourteen percent yesterday. According to NBC this morning, President
21:06
Speaker 6: Trump is quote not interested in a call with Musk
21:09
Speaker 6: to resolve their feud. Meanwhile, chip maker Broadcom narrowly beat
21:13
Speaker 6: first quarter earnings and revenue expectations. However, its free cash
21:18
Speaker 6: flow in the second quarter disappointed investors. Broadcom shares are
21:22
Speaker 6: now down over three and a half percent. Elsewhere, Lululemon
21:26
Speaker 6: sinking twenty percent after the ath leisure ware retailer cut
21:31
Speaker 6: its annual profit forecast as tariff threatened to raise costs.
21:35
Speaker 6: Lululemon sources many of its products from Southeast Asia. Another
21:40
Speaker 6: stock tumbling today is Docu sign where shares are now
21:43
Speaker 6: sliding nineteen percent. While the electronic signature company beat earnings
21:48
Speaker 6: and revenue estimates for the first quarter, its current quarter
21:51
Speaker 6: guidance four billings came up short of analyst forecasts, and
21:56
Speaker 6: after rocketing one hundred and sixty eight percent during its
21:59
Speaker 6: ip yesterday, shares and stable coin company Circle Internet Group
22:04
Speaker 6: are up another nineteen percent today. On Tucker Silvan, that's
22:09
Speaker 6: Wall Street Watch, Mike.
22:11
Speaker 2: So yesterday afternoon we got to see what quite honestly
22:16
Speaker 2: is simultaneously one of the most entertaining and most disturbing
22:23
Speaker 2: spectacles that I've seen on social media in quite some time.
22:28
Speaker 2: And this was the uh, I don't even want to
22:33
Speaker 2: say it was really a war of words, because it
22:35
Speaker 2: was basically just Elon going off on social media while
22:39
Speaker 2: the President was kind of off doing other things.
22:41
Speaker 4: For the most part.
22:42
Speaker 2: Yeah, yeah, the President had of comment yesterday morning, you know,
22:45
Speaker 2: I forget exactly what it was, but basically talking about,
22:49
Speaker 2: you know, yeah, like, you know, it's time for Elon
22:51
Speaker 2: to move on, and I think he said something about
22:55
Speaker 2: he wasn't you know, being particularly nice to Elon. But
22:59
Speaker 2: Elon then spent the afternoon pretty much like just going
23:05
Speaker 2: scorched earth on the president, talking about, you know, how
23:11
Speaker 2: bad the reconciliation bill is, talking about how he was
23:16
Speaker 2: going to start primary ing all kinds of people, talking
23:19
Speaker 2: about how the President was lying about him, how he
23:22
Speaker 2: was going to you know, pull down. Since the President
23:27
Speaker 2: then you know, threatened to cancel all of Elon's contracts,
23:30
Speaker 2: he said, okay, great, I'm gonna you know, get rid
23:32
Speaker 2: of the Dragon space capsule, which is basically the only
23:35
Speaker 2: way that people get to and from the International Space
23:37
Speaker 2: Station right now. And this went on all afternoon to
23:41
Speaker 2: the point where Tesla stock from a period from about
23:44
Speaker 2: noon through three point thirty pm was falling in a
23:48
Speaker 2: clip of about four percent an hour.
23:50
Speaker 3: By the way, the space capsule piece here, I do
23:53
Speaker 3: want to point out that while the Space Force in
23:55
Speaker 3: general does not do it's a pretty secretive government military
24:00
Speaker 3: agency or military branch. They've done interviews and they've cited
24:05
Speaker 3: the h SpaceX reliance. It's kind of a key threat
24:11
Speaker 3: to their success overall. And I think today you're seeing that.
24:15
Speaker 3: Yesterday you saw that play out, how that risk can
24:18
Speaker 3: come right to the forefront when you have one company
24:20
Speaker 3: that pretty much dominates the uh, this type of thing.
24:25
Speaker 2: And so this went on all day, like, it went
24:27
Speaker 2: down a whole bunch of different paths, and it got
24:30
Speaker 2: pretty darn ugly, and a couple a couple of things
24:34
Speaker 2: on this and and look, I gotta be.
24:36
Speaker 4: Honest, it was hilariously entertaining. Yeah.
24:39
Speaker 2: Yeah, we can say it's because you're you're watching this
24:42
Speaker 2: and you're just like, oh my goodness, I can't believe
24:44
Speaker 2: this is actually happening. And then simultaneously, like maybe three
24:48
Speaker 2: seconds later, you go in a different tone of voice.
24:50
Speaker 4: You're like, Oh, my goodness, I can't believe this is
24:53
Speaker 4: actually happening, right.
24:54
Speaker 2: Because here here's the piece that is concerning from my perspective, Mike,
24:59
Speaker 2: was there any news about Tesla in any way, shape
25:02
Speaker 2: or form.
25:02
Speaker 4: Yesterday none. None, There was nothing.
25:06
Speaker 2: We didn't learn anything new about Tesla, and yet the
25:08
Speaker 2: stock fell fifteen percent. And the reason why this is
25:15
Speaker 2: concerning as an investor is in the United States. We
25:22
Speaker 2: can debate whether there's good policy or bad policy that
25:26
Speaker 2: passes Congress at any point in time, but the fact
25:30
Speaker 2: is that the way that capital is treated in the
25:34
Speaker 2: United States is typically as level of playing field as
25:38
Speaker 2: you can and hey, here are the rules. You might
25:41
Speaker 2: not like the rules because maybe your particular industry is
25:44
Speaker 2: disadvantaged or maybe your particular business line is disadvantage for
25:49
Speaker 2: you know, one reason or another, but these are the
25:51
Speaker 2: rules that everyone needs to operate on.
25:53
Speaker 4: Right. And when you get to.
25:54
Speaker 2: The point where the wealthiest man on the planet and
25:58
Speaker 2: the most powerful man on the planet are arguing publicly
26:02
Speaker 2: in a way that moves the stock price, it gives
26:06
Speaker 2: you something entirely new that you have to worry about.
26:08
Speaker 2: When it comes to us markets. Because if any president
26:14
Speaker 2: can simply come in and say I am going to
26:16
Speaker 2: cancel contracts with this company because of an argument, because
26:20
Speaker 2: of a dispute that you might have had with the leader,
26:24
Speaker 2: that's not really a safe environment for capital to operate.
26:28
Speaker 2: And imagine that, you know, Let's play out you know,
26:32
Speaker 2: last November differently. And let's say that Kamala Harris is
26:35
Speaker 2: sitting in the presidency right now, and let's say that,
26:39
Speaker 2: you know, for whatever reason, she's got a bone to
26:42
Speaker 2: pick with. I don't know who's another like big famous
26:46
Speaker 2: CEO that people know, not even a Let's say that
26:49
Speaker 2: she's got a bone to pick with. I don't even
26:50
Speaker 2: know who runs Exon Mobile right now, couldn't even tell
26:53
Speaker 2: you who it is. But for whatever reason, like her
26:57
Speaker 2: and that person don't get along. And imagine that she
27:00
Speaker 2: eats out. Hey, you know what, I'm canceling all of
27:03
Speaker 2: Exxon's you know leases, and I'm awarding them to Chevron instead.
27:10
Speaker 4: Do we want that?
27:13
Speaker 5: No? No, And look, I'm not going to claim that.
27:19
Speaker 3: This type of thing is unique to President Trump. There's
27:24
Speaker 3: a pretty long history in the United States of presidents
27:26
Speaker 3: using the power of the White House to investigate their enemies,
27:29
Speaker 3: whether it's through the SEC or the I R S.
27:32
Speaker 3: But nobody talks about.
27:34
Speaker 2: It, right, You don't post it like social media like
27:38
Speaker 2: there's nothing to this scale. No, No, they's like, let's
27:41
Speaker 2: be one hundred percent clear, like this, this is not
27:44
Speaker 2: something that we've ever seen before. H So in any case,
27:49
Speaker 2: I'll be interested to see where this goes next. Because
27:53
Speaker 2: Elon must capped it all off by effectively claiming that
27:58
Speaker 2: Donald Trump is a pedophile, or is at least pedophile
28:01
Speaker 2: adjacent with the Jeffrey Epstein claims. And I don't really
28:06
Speaker 2: know how you walk back from that one. I guess no,
28:09
Speaker 2: you can't unring that bell.
28:10
Speaker 3: No, that one's a pretty significant one to lay blame
28:14
Speaker 3: at and to put on that doorstep, and so how
28:19
Speaker 3: you unring that is going to be interesting.
28:22
Speaker 5: I also just find it interesting.
28:24
Speaker 3: Like Elon Musk has become a pretty unpopular dude over
28:28
Speaker 3: the last nine months or so. He has now really
28:34
Speaker 3: infuriated kind of both sides of the political aisle. He
28:36
Speaker 3: still probably has his die hard, passionate, you know, group
28:41
Speaker 3: that follows him and really likes everything that comes out
28:45
Speaker 3: of his.
28:45
Speaker 5: Mouth, but that's a pretty small group.
28:48
Speaker 3: And I think how he is perceived over the coming
28:50
Speaker 3: years is going to be pretty highly dependent on what
28:53
Speaker 3: happens to this tax bill and what happens in the
28:55
Speaker 3: midterm elections in twenty twenty six.
28:59
Speaker 2: One question, one thing that I always do, you know,
29:01
Speaker 2: come to one on anything that you know ends up
29:04
Speaker 2: making news, is like why now?
29:05
Speaker 4: Like why why is this happening now?
29:08
Speaker 2: And certainly, look, it could be Elon's upset that, you know,
29:12
Speaker 2: his friend Jerrick Eisagman's not going to run NASA anymore.
29:15
Speaker 2: It could be that, you know, the subsidies for evs
29:18
Speaker 2: are being stripped out in the new billity, it could
29:22
Speaker 2: be any number of, you know, different things. But for
29:27
Speaker 2: all of the stuff that we talk about with you know,
29:29
Speaker 2: the potential flaws of Elon and how he's alienated, you
29:31
Speaker 2: know this person, he's a pretty shrewd operator despite that.
29:38
Speaker 2: And what I mean by that is, you know, he
29:42
Speaker 2: kind of reads where he reads very well where the
29:48
Speaker 2: money and influence is going to be and aligns himself
29:51
Speaker 2: that way pretty pretty well for the twenty tens. Was
29:56
Speaker 2: anyone sitting here in like twenty fifteen when they were
30:00
Speaker 2: talking about, you know, getting the Model three ready and
30:02
Speaker 2: being like man, how are.
30:04
Speaker 4: They gonna sell all those evs to liberals? Like?
30:08
Speaker 2: No, Like he kind of aligned himself there when he
30:10
Speaker 2: needed to write yep, And for the last year and
30:14
Speaker 2: a half two years, maybe there's been a pretty clear
30:18
Speaker 2: move to align himself politically with President Trump. He was
30:22
Speaker 2: one of the first, you know, major you know like
30:27
Speaker 2: CEOs to kind of move in that direction.
30:30
Speaker 4: And so I guess the question, like elone doesn't have.
30:32
Speaker 2: To do anything at any particular point time, I guess
30:34
Speaker 2: goet like four hundred billion dollars. Yeah, So I guess
30:37
Speaker 2: the question that I do ask is like why now,
30:40
Speaker 2: Like what's what gives here? And I don't have a
30:43
Speaker 2: great answer to that, but I just I put it
30:45
Speaker 2: out because I don't know the answer, and I find
30:48
Speaker 2: that question to be interesting. So, like all of you listening,
30:53
Speaker 2: man was yesterday entertaining, But gosh, I find it a
30:56
Speaker 2: little bit concerning that a stock that has no news
30:59
Speaker 2: about it is moving fifty not just a stock one
31:01
Speaker 2: of Like that the seven biggest stocks in the country
31:04
Speaker 2: is moving fifteen percent on a day with no news
31:06
Speaker 2: just because the CEO is getting into a tweet beef
31:11
Speaker 2: with the President. Doesn't really fill me with like the
31:15
Speaker 2: warm and fuzzies for you know, the the overall health
31:18
Speaker 2: instability of our capital markets?
31:19
Speaker 4: Does it?
31:20
Speaker 1: No?
31:21
Speaker 4: No, no, So let's.
31:22
Speaker 2: Take a quick break and when we come back, let's
31:25
Speaker 2: talk a little bit about the US and China right
31:28
Speaker 2: after this.
31:30
Speaker 1: The Financial Exchange streams live on YouTube. Subscribe to our
31:34
Speaker 1: page and stay up to date on breaking business news
31:36
Speaker 1: all morning. Long Face is the Financial Exchange Radio Network.
31:41
Speaker 1: Text does six one seven three six two one three
31:44
Speaker 1: eighty five with your comments and questions about today's show.
31:47
Speaker 1: This is the Financial Exchange Radio Network.
31:57
Speaker 4: Mike, we got a piece from market.
32:00
Speaker 2: It's titled you want income in retirement, but soaring bond
32:05
Speaker 2: yields can be risky?
32:06
Speaker 4: What should you do?
32:08
Speaker 3: If you wonder what they're talking about, just go see
32:10
Speaker 3: twenty twenty two in terms of what happened to bonds
32:13
Speaker 3: And yeah, it was the worst year for the sixty
32:16
Speaker 3: forty portfolio.
32:17
Speaker 5: Was it ever? Chuck in twenty twenty two?
32:21
Speaker 4: If it wasn't ever, it was one of the two
32:23
Speaker 4: or three worst.
32:24
Speaker 3: Yeah, And that's what people are writing about these days.
32:28
Speaker 5: And by the way, like everyone and.
32:30
Speaker 3: Their mother right now is writing about the concern when
32:33
Speaker 3: it comes to bond yields and where things go given
32:37
Speaker 3: depthsit spending and everything else going on in terms of
32:42
Speaker 3: you know, what market Watch puts together here and their thoughts.
32:46
Speaker 3: They interview a few different investment managers who have all
32:49
Speaker 3: different sorts of ideas, but you know, several of them
32:51
Speaker 3: are too shorten the duration of your bond portfolio and
32:56
Speaker 3: play it that way, which, again, any of these solutions
32:59
Speaker 3: come with their own downsides, but it does remind me
33:03
Speaker 3: of one I think critical mistake that I see over
33:07
Speaker 3: and over again when folks are assessing their own retirement
33:11
Speaker 3: and their investment allocation. Everyone is afraid of the market downturn,
33:17
Speaker 3: which I totally get. It's scary. It's all at once
33:22
Speaker 3: tends to be severe and your bottom line goes and
33:26
Speaker 3: moves big, and sometimes it also is coordinated with a
33:29
Speaker 3: job loss, and so it does get scary for most
33:33
Speaker 3: people that I meet. The far bigger risk to their
33:37
Speaker 3: scenario is if inflation is worse than we anticipate. And
33:40
Speaker 3: that's ultimately what we're talking about here, right if we're
33:42
Speaker 3: talking about higher interest rates, that we're talking about deficits.
33:45
Speaker 3: It's all kind of coordinated on a few ideas, but
33:50
Speaker 3: one of them is the risk of higher inflation for
33:52
Speaker 3: a longer period of time. And as much as people
33:55
Speaker 3: try and prepare for the market downturn and recession, I
33:58
Speaker 3: don't see a whole lot of preparation for this latter
34:00
Speaker 3: factor of Oh yeah, if I face three and a
34:03
Speaker 3: half percent inflation over the next two decades instead of
34:06
Speaker 3: two and a half like I've been experiencing, my whole
34:09
Speaker 3: plan falls apart. And so I think addressing these two
34:12
Speaker 3: issues and really being conscious of them is critically important.
34:17
Speaker 5: And I don't think.
34:18
Speaker 3: Enough people pay attention to that inflation risk side of
34:21
Speaker 3: this equation. And there are ways to combat both of those.
34:24
Speaker 3: If you have questions about your own financial strategy, maybe
34:27
Speaker 3: how inflation is or is not factored into it, give
34:30
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34:34
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34:38
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34:41
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34:45
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34:48
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34:51
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35:00
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35:02
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35:04
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35:15
Speaker 2: Mike, we got a piece in Bloomberg here talking about
35:18
Speaker 2: where things stand between the US and China, and you know,
35:22
Speaker 2: kind of the after yesterday's call between President Trump and
35:25
Speaker 2: President g where do things go from here? Because the
35:29
Speaker 2: US does have some things that China obviously wants and
35:33
Speaker 2: needs in order to continue to grow the way that
35:36
Speaker 2: it wants to. Obviously they have things levers they can pull,
35:40
Speaker 2: the most notable one being the rare earth export controls
35:44
Speaker 2: that they've put in place that if the US is
35:47
Speaker 2: not behaving the way they want, they can always go
35:50
Speaker 2: back to that well. And so this, I guess is
35:52
Speaker 2: the piece that I find challenging and trying to figure
35:57
Speaker 2: out exactly where this goes in that it is a
36:01
Speaker 2: game of chicken, in that if either side is not
36:05
Speaker 2: getting what they want, their levers that they can pull,
36:08
Speaker 2: and who is going to be willing to stomach the
36:11
Speaker 2: most pain in order to resolve the situation?
36:15
Speaker 3: Right, Bloomberg's reporting here that one of the few clear
36:19
Speaker 3: takeaways appeared to be an assurance for the US to
36:22
Speaker 3: welcome Chinese students.
36:23
Speaker 5: Uh.
36:24
Speaker 3: And then you're also the clear piece here being that
36:31
Speaker 3: the US was going to start getting rare with materials.
36:33
Speaker 3: Did you find either of those things to be terribly
36:35
Speaker 3: clear from all of this, No, but that could be
36:39
Speaker 3: by design.
36:40
Speaker 5: Yeah.
36:42
Speaker 2: I mean they're like, there's there's look, there's nothing in writing,
36:45
Speaker 2: it's what happened on the call. And so I think
36:48
Speaker 2: in the interest of each side being able to maintain face, yeah,
36:53
Speaker 2: you're not gonna necessarily publish the specifics because then it
36:57
Speaker 2: becomes clear who had to give on what. And I
37:01
Speaker 2: guess that's that's part of the reason why I remain
37:04
Speaker 2: skeptical that you get some kind of grand, overarching deal
37:07
Speaker 2: that drastically restructures trade between the US and China is
37:10
Speaker 2: because in order to get to that point, someone's got
37:13
Speaker 2: to go through an awful lot of pain, more than
37:15
Speaker 2: we felt to this point.
37:16
Speaker 4: Right.
37:17
Speaker 3: I guess where you'll see it is you know, you
37:19
Speaker 3: can pretty easily tell whether or not Chinese students are
37:22
Speaker 3: getting visas in the US. You can fairly easy easily
37:25
Speaker 3: tell whether US auto manufacturers are needing to shut down
37:29
Speaker 3: again because of a lack of magnets. And you can
37:32
Speaker 3: pretty easily tell if you know, China's able to buy
37:34
Speaker 3: Boeing planes and semiconductors. Right, these are all publicly traded
37:37
Speaker 3: companies that are required to talk about these business deals,
37:40
Speaker 3: and that's where it's going to show up as to
37:42
Speaker 3: whether or not this is progressing other than hey, our
37:45
Speaker 3: tariff's increasing or decreasing.
37:47
Speaker 2: Yeah, So I think that's kind of where where things stand.
37:52
Speaker 2: There is I remain skeptical that you get something bigger.
37:55
Speaker 2: Maybe you see some you know, further incremental changes here,
37:59
Speaker 2: but it seems to me like the bulk of the
38:01
Speaker 2: shift has happened now, and I just I don't really
38:05
Speaker 2: see too much more happening other than, hey, how does
38:09
Speaker 2: each side try to gain you know, a little bit
38:11
Speaker 2: more leverage where they can on this. Let's take a
38:13
Speaker 2: quick break. We still got hour two coming up, whole
38:16
Speaker 2: lot more in just a bit