Latest / The Financial Exchange Show / Trump tariffs won’t lead supply chains back to U.S.

Transcript

Trump tariffs won’t lead supply chains back to U.S. · The Financial Exchange Show

• 0:00
  Speaker 1: The Financial Exchange is produced by Money Matters Radio and
• 0:03
  Speaker 1: is hosted by employees of the Armstrong Advisory Group, a
• 0:06
  Speaker 1: registered investment advisor. All opinions expressed are solely those of
• 0:09
  Speaker 1: the hosts. Do not reflect the opinions of Armstrong Advisory
• 0:12
  Speaker 1: or anyone else. Investments can lose money. This program does
• 0:14
  Speaker 1: not offer any specific financial or investment advice. Please consult
• 0:18
  Speaker 1: your own financial, tax, and estate planning advisors before making
• 0:20
  Speaker 1: any investment decisions. Armstrong Advisory and the advertisers heard on
• 0:24
  Speaker 1: this program do not endorse each other or their services.
• 0:26
  Speaker 1: Armstrong and Money Matters Radio do not compensate each other
• 0:29
  Speaker 1: for referrals and are not affiliated. This is the Financial
• 0:35
  Speaker 1: Exchange with Mike Armstrong and Mark Vandetti. Your exclusive look
• 0:40
  Speaker 1: at business and financial news affecting your day, your city,
• 0:44
  Speaker 1: your world. Stay informed and up to date about economic
• 0:47
  Speaker 1: and market trends, plus breaking business news every day. The
• 0:51
  Speaker 1: Financial Exchange is a proud partner of the Disabled American
• 0:54
  Speaker 1: Veterans Department of Massachusetts. Help us support our great American
• 0:58
  Speaker 1: heroes by visiting a V five K DOC Boston and
• 1:02
  Speaker 1: making a donation today. Face is the Financial Exchange with
• 1:06
  Speaker 1: Mike Armstrong and Mark Vandetti.
• 1:10
  Speaker 2: Good morning, Happy Tuesday, Welcome back to the Financial Exchange. Uh,
• 1:15
  Speaker 2: we're gonna have a show here that is I think
• 1:18
  Speaker 2: primarily focused on two main items. One would be traded
• 1:21
  Speaker 2: with China. The other would be signs of recession that
• 1:25
  Speaker 2: continue to perk up and whether they be the official
• 1:29
  Speaker 2: signs or rather conversations like the one I had yesterday
• 1:32
  Speaker 2: with a client who was over at the Chestnut Hill
• 1:35
  Speaker 2: Mall and then went out to dinner, and you know,
• 1:37
  Speaker 2: felt like they were in some sort of zombie apocalypse
• 1:39
  Speaker 2: movie because there's nobody around.
• 1:41
  Speaker 3: What are you complaining about?
• 1:43
  Speaker 2: You got right in no if they were quite happy
• 1:45
  Speaker 2: with the situation, but also quite concerned about what it
• 1:48
  Speaker 2: might mean, which is fair. We have earnings that are
• 1:51
  Speaker 2: continuing on Johnson, Johnson, Bank of America, City Group all
• 1:55
  Speaker 2: reported earnings prior to the bell this morning. Tomorrow we
• 1:58
  Speaker 2: will hear from asms Well Abbott Labs, and then Thursday
• 2:03
  Speaker 2: we'll be hearing from Taiwan, Semi United Health as well
• 2:05
  Speaker 2: as Netflix. Who wants to become a trillion dollar company,
• 2:09
  Speaker 2: which you know.
• 2:10
  Speaker 3: I what does it?
• 2:11
  Speaker 2: I want to lose fifteen pounds and grow six inches,
• 2:14
  Speaker 2: But we'll see. In any case, we're starting off with
• 2:19
  Speaker 2: the China trade situation, and to set the groundwork first,
• 2:24
  Speaker 2: I think it's important to contextualize the point that's been
• 2:27
  Speaker 2: made over and over by myself, included of the fact
• 2:31
  Speaker 2: that China is heavily dependent on US consumers, their factory
• 2:35
  Speaker 2: capacity and exports go a large portion of them to
• 2:40
  Speaker 2: the United States. And that is absolutely the case. According
• 2:45
  Speaker 2: to data from twenty twenty three that I have here,
• 2:48
  Speaker 2: approximately one in seven of Chinese manufactured goods when you
• 2:52
  Speaker 2: look at the dollars spent anyway, went to the United States.
• 2:56
  Speaker 2: Twenty two percent of Chinese made consumer electronic, nineteen percent
• 3:01
  Speaker 2: of home appliances, seventeen percent of textiles and clothing. Those
• 3:05
  Speaker 2: are the top three in terms of exports to the
• 3:07
  Speaker 2: United States. But a large portion of that Chinese manufacturing
• 3:12
  Speaker 2: capacity goes to the US, and so I think many
• 3:16
  Speaker 2: people logically concluded, well, China is a little bit more
• 3:19
  Speaker 2: reliant on us than we are on them, and that
• 3:24
  Speaker 2: argument may still hold true. However, what we are seeing
• 3:29
  Speaker 2: here is what frankly we talked about and expected, which
• 3:33
  Speaker 2: is when China is faced with tariffs, they are not
• 3:37
  Speaker 2: going to respond The same way in which the United
• 3:40
  Speaker 2: States would, which is higher tariffs or you know, changes
• 3:45
  Speaker 2: to policy. They're going to act differently because they have
• 3:48
  Speaker 2: a different set of tools, and we're beginning to see
• 3:50
  Speaker 2: that with the news about Boeing. So Mark, let's start
• 3:53
  Speaker 2: right there. What did we hear from the Chinese in
• 3:56
  Speaker 2: terms of their dealings with Boeing, our you know, single
• 3:59
  Speaker 2: largest manufacturer in the United States, both in terms of
• 4:03
  Speaker 2: dollars and many other factors, basically halting sales.
• 4:07
  Speaker 4: Yeah, I think you just summed it up. They've put
• 4:09
  Speaker 4: all orders on ice. This is a trade war, and
• 4:12
  Speaker 4: retaliation will take It will sometimes be surgical and sometimes
• 4:20
  Speaker 4: it'll be broad. And this is one example of how
• 4:22
  Speaker 4: the two economies are intertwined. I was going to ask,
• 4:25
  Speaker 4: do you ever hear the hybrid term chi America? About
• 4:29
  Speaker 4: twenty years ago Neil Ferguson, the historian, coined this term.
• 4:32
  Speaker 4: It's a combination of China in America. And the point
• 4:35
  Speaker 4: he was making then and it still holds true, is
• 4:37
  Speaker 4: that we don't save enough here in America, but we've
• 4:41
  Speaker 4: got great investment opportunities. China has a lot.
• 4:46
  Speaker 3: Of excess savings.
• 4:47
  Speaker 2: Yep.
• 4:48
  Speaker 3: Because their system is different.
• 4:50
  Speaker 2: Which should not necessarily be thought of as a good thing.
• 4:53
  Speaker 2: Not necessarily excess savings. I know we think about that
• 4:56
  Speaker 2: at the household level and say, oh, well, that's that's
• 4:58
  Speaker 2: a financially discipline save too much.
• 5:00
  Speaker 4: As an economy, there are states of there's a there's
• 5:04
  Speaker 4: an economics. There's this golden rule level of capital accumulation,
• 5:08
  Speaker 4: and the golden rule is you're saving just enough to
• 5:11
  Speaker 4: satisfy your investment opportunities and consumption is maximized. We don't
• 5:17
  Speaker 4: save enough. China saves too much. Different systems, sure, so
• 5:21
  Speaker 4: there are reasons behind that, But the point is where
• 5:23
  Speaker 4: interdependent is a result. They ship us, we send them
• 5:26
  Speaker 4: their dollars. We send them our dollars. Excuse me, when
• 5:29
  Speaker 4: we buy cheap Chinese, I shouldn't say cheap is if
• 5:32
  Speaker 4: I'm diminishing them. We buy the stuff they send us,
• 5:35
  Speaker 4: we ship our dollars abroad.
• 5:36
  Speaker 2: I don't think you're saying anything controversial, by the way,
• 5:39
  Speaker 2: by describing China, some of the session goods is largely cheap.
• 5:42
  Speaker 4: Okay, fair enough. We wouldn't be making stuff there if
• 5:45
  Speaker 4: it wasn't relatively cheap. Yep, I yeah, okay, Whatever point is,
• 5:50
  Speaker 4: we send them dollars. They recycle those dollars into US
• 5:52
  Speaker 4: treasuries into factories.
• 5:55
  Speaker 3: This is the.
• 5:56
  Speaker 4: Flip side of our current account or trade deficit. We
• 5:59
  Speaker 4: have a huge capital account surplus. The trade deficit is
• 6:03
  Speaker 4: not a result of people cheating us or erecting trade barriers.
• 6:09
  Speaker 4: It's a result of us not saving enough to satisfy
• 6:11
  Speaker 4: investment opportunities. That's not intuitive, you really have to think
• 6:15
  Speaker 4: about it. But the point is our economies are intertwined.
• 6:17
  Speaker 4: China build its whole economy arguably around satisfying the investment
• 6:22
  Speaker 4: deficit that we have and providing for the excess consumption
• 6:26
  Speaker 4: that we do. So decoupling would be very disruptive as
• 6:29
  Speaker 4: a result to both.
• 6:31
  Speaker 2: And I think we are seeing some of those signs now.
• 6:33
  Speaker 2: In terms of Boeing's exposure here, it is substantial. According
• 6:39
  Speaker 2: to most estimates that I'm seeing, China is expected to
• 6:43
  Speaker 2: account for between ten and twenty percent of global aircraft
• 6:49
  Speaker 2: demand over the next decade. And so you know, the
• 6:52
  Speaker 2: hope was obviously that Boeing would be able to supply
• 6:55
  Speaker 2: a large portion of that because there is only real want,
• 6:58
  Speaker 2: really one other company out there that can, which would
• 7:01
  Speaker 2: be air Bus. Now short term, Boeing doesn't really have
• 7:04
  Speaker 2: a problem here. There's a long wait list for anyone
• 7:07
  Speaker 2: that wants Boeing jets, and they can sell these things
• 7:11
  Speaker 2: elsewhere in all likelihood long term. Yeah, if China disappears
• 7:16
  Speaker 2: as a buyer of American made aircraft and aircraft supplies, yeah,
• 7:21
  Speaker 2: you've got a bit of a problem here. I don't
• 7:22
  Speaker 2: know how practical that is, probably not terribly, but it
• 7:25
  Speaker 2: would be a massive problem for an already beleaguered Boeing.
• 7:29
  Speaker 2: The other area that we covered briefly yesterday that China
• 7:34
  Speaker 2: seems to be hitting in ways that are not again
• 7:38
  Speaker 2: not exactly what we would anticipate, and well should be anticipated,
• 7:42
  Speaker 2: but not in the way that we would handle it
• 7:44
  Speaker 2: is the rare earth materials that they have now put
• 7:47
  Speaker 2: in new restrictions on. So China is in many cases
• 7:51
  Speaker 2: the sole minor of many of these types of materials,
• 7:55
  Speaker 2: magnet materials and other types of things that go into
• 7:57
  Speaker 2: everything from electric vehicle batteries to weapons systems, and they have,
• 8:04
  Speaker 2: as of I believe the weekend, set up a new
• 8:07
  Speaker 2: process by which if you want to export any of
• 8:10
  Speaker 2: this stuff to the United States, you must apply for
• 8:13
  Speaker 2: and receive a permit, and the estimates that I have
• 8:16
  Speaker 2: seen are that it's going to be a good six
• 8:19
  Speaker 2: months before they even set up that permitting system. So
• 8:24
  Speaker 2: it brings me back to the overall point here where
• 8:27
  Speaker 2: look the trend over the last week I think I'm
• 8:29
  Speaker 2: willing to acknowledge, and certainly equity market investors have been
• 8:32
  Speaker 2: excited by the de escalation that has occurred generally on trade.
• 8:38
  Speaker 2: I think that's been the trend as far as I'm concerned.
• 8:41
  Speaker 2: Is you know, we had the suspension of the reciprocal tariffs,
• 8:44
  Speaker 2: we had the suspension of the electronics equipment and semiconductors
• 8:50
  Speaker 2: on China, though there's apparently new rules that are coming
• 8:53
  Speaker 2: out there. We've had speaking of suspension on auto tariffs.
• 8:59
  Speaker 2: But these stuff on China I think is just beginning
• 9:02
  Speaker 2: to heat up. And while they are heavily dependent on US,
• 9:08
  Speaker 2: I keep asking myself the question, right, who is more
• 9:11
  Speaker 2: willing to make their population suffer during an escalated and
• 9:16
  Speaker 2: protracted either war or trade war with China? And I
• 9:21
  Speaker 2: don't think it's much of a secret.
• 9:23
  Speaker 4: So two points one. I don't view it as de
• 9:26
  Speaker 4: escalations so much as ad hoc retreats based on pain
• 9:30
  Speaker 4: that markets were inflicting on the administration. None of this
• 9:33
  Speaker 4: seems well thought out. None of this seems part of
• 9:37
  Speaker 4: a broader plan. It's all knee jerk. And that's why
• 9:41
  Speaker 4: I'm not saying anything any informed commentator that I've not
• 9:44
  Speaker 4: heard any other informed commentator say.
• 9:47
  Speaker 1: No.
• 9:47
  Speaker 4: One feels like anything about this is coherent. The administration
• 9:51
  Speaker 4: had to respond at some point to the pain that
• 9:52
  Speaker 4: markets were inflicting on it. The second and related point
• 9:56
  Speaker 4: is that an authoritarian regime can inflict an unlimited amou
• 10:00
  Speaker 4: of pain.
• 10:00
  Speaker 3: On its citizens. There's no feedback.
• 10:03
  Speaker 4: There are limits to the amount of pain that Americans
• 10:07
  Speaker 4: will tolerate, and they can respond through the ballot box.
• 10:10
  Speaker 4: They can respond. Related to the first point I tried
• 10:13
  Speaker 4: to make through capital markets, you can't suppress that mechanism. So,
• 10:18
  Speaker 4: as I said a couple of weeks ago, when I'm
• 10:21
  Speaker 4: not like quoting myself, I hate it when people do that.
• 10:23
  Speaker 4: But I continue to feel like we're going to have
• 10:25
  Speaker 4: to flinch first, because as strongly as the administration, our
• 10:29
  Speaker 4: administration feels about this, they've got to respond to voter
• 10:34
  Speaker 4: pressure and market pressure. China does not. These regimes, the
• 10:38
  Speaker 4: communist regimes, they kill tens of millions of their own
• 10:42
  Speaker 4: people to affect economic and cultural reforms. They're probably not
• 10:45
  Speaker 4: going to make that mistake again. And there are countless
• 10:49
  Speaker 4: examples of other authoritarian regimes and totalitarian regimes technically different.
• 10:52
  Speaker 4: I'll just group them all together doing that throughout history. Thankfully,
• 10:56
  Speaker 4: we live for now in a democratic republic. Feedback, and
• 11:01
  Speaker 4: you can't ignore that.
• 11:02
  Speaker 2: Let's take a quick break. When we come back, I
• 11:04
  Speaker 2: want to talk more about the supply chain story here,
• 11:07
  Speaker 2: so the effect of teriffs, where companies will go, recent
• 11:11
  Speaker 2: survey that CNBC did of executives in the manufacturing space
• 11:14
  Speaker 2: and their own views on tariffs. That's next. Here are
• 11:16
  Speaker 2: the Financial Exchange market.
• 11:18
  Speaker 1: Volatility is at its highest point since the pandemic. Keep
• 11:22
  Speaker 1: it here for the most comprehensive coverage of the global
• 11:25
  Speaker 1: trade war. This is the Financial Exchange Radio Network, breaking
• 11:29
  Speaker 1: business and financial news first throughout the day, only here
• 11:34
  Speaker 1: on the Financial Exchange Radio Network.
• 11:48
  Speaker 2: The Cato Institute conducted a poll recently on Americans views
• 11:53
  Speaker 2: on manufacturing and Mark and I were just talking about
• 11:56
  Speaker 2: it over the break here, and I think it's a
• 11:58
  Speaker 2: good precursor to our next story about supply chains and
• 12:02
  Speaker 2: where companies are considering manufacturing. But when they asked Americans
• 12:07
  Speaker 2: on their views on manufacturing, there's general agreement in this
• 12:11
  Speaker 2: country that the country itself would be better off if
• 12:14
  Speaker 2: more Americans worked in the manufacturing sector. In fact, eighty
• 12:18
  Speaker 2: percent of the respondents said, yes, we believe that it
• 12:23
  Speaker 2: would be better for the country if more people in
• 12:27
  Speaker 2: America worked in manufacturing. However, when you asked those same respondents,
• 12:33
  Speaker 2: only twenty five percent of them stated that they would
• 12:36
  Speaker 2: personally be better off in a factory instead of their
• 12:40
  Speaker 2: current work, which is not surprising, I don't think, but
• 12:45
  Speaker 2: speaks to I think the huge problem that we are
• 12:48
  Speaker 2: going to have with any sort of reassuring of manufacturing
• 12:52
  Speaker 2: jobs in this country, which is vast majority of people,
• 12:55
  Speaker 2: according to these polls, even when they think, yeah, it'd
• 12:58
  Speaker 2: be better for the country if we did this, vast
• 13:00
  Speaker 2: majority don't want to work in the sector. In any case,
• 13:03
  Speaker 2: CNBC conducted another survey of gonna make one.
• 13:06
  Speaker 4: Point about that, because it's about wages, not look. First
• 13:09
  Speaker 4: of all, anybody who's done both knows you can't toggle
• 13:13
  Speaker 4: over to your favorite website when you're in a manufacturing job.
• 13:16
  Speaker 4: If you take your eyes off the machine. Or off
• 13:18
  Speaker 4: the product you're working on, you get cut, somebody else
• 13:21
  Speaker 4: gets hurt. In the summer, it's hot. It's just generally
• 13:25
  Speaker 4: really tough work. That's why these people are out in
• 13:27
  Speaker 4: their mid fifties.
• 13:29
  Speaker 3: For the most part.
• 13:30
  Speaker 4: It's hard on your body, it's hard on your eyes
• 13:33
  Speaker 4: as you get older.
• 13:34
  Speaker 3: These are tough.
• 13:35
  Speaker 4: Manufacturing jobs are generally tough jobs, as anybody who's done
• 13:38
  Speaker 4: both manufacturing and an office job knows. It is no
• 13:41
  Speaker 4: contest that we're not focused instead on wages and on
• 13:47
  Speaker 4: on infusing people with the human capital the skills necessary
• 13:50
  Speaker 4: to earn higher wages, and instead focused on restoring the
• 13:54
  Speaker 4: economy of the nineteen fifties or something.
• 13:57
  Speaker 3: It's just baffling.
• 13:59
  Speaker 2: So when CNBC conducted to a survey, they did a
• 14:02
  Speaker 2: supply chain survey, and they went out and they talked
• 14:04
  Speaker 2: to companies that are doing manufacturing across the globe, specifically
• 14:08
  Speaker 2: asking about bringing supply chains back to the United States.
• 14:12
  Speaker 2: Over half of those surveyed said that cost was the
• 14:16
  Speaker 2: top reason for saying they would not be reshoring their products.
• 14:19
  Speaker 2: Twenty one percent said that it would be significantly Twenty
• 14:24
  Speaker 2: one percent did say they would be lower to manufacture
• 14:26
  Speaker 2: in the United States, but vast majority of respondents saying no,
• 14:30
  Speaker 2: it would be more expensive. Taken together, the majority of
• 14:32
  Speaker 2: respondents estimated that the price tag of building a new
• 14:36
  Speaker 2: domestic supply chain would be at least double the current costs,
• 14:41
  Speaker 2: and more thought there would be more than double. Forty
• 14:44
  Speaker 2: seven percent actually said it would be more than double,
• 14:46
  Speaker 2: but at least half said it would be double or
• 14:48
  Speaker 2: more the current cost of manufacturing, which brings me back
• 14:52
  Speaker 2: to one general conclusion. If your goal is to reshure
• 14:59
  Speaker 2: a whole bunch of manufacturing jobs, you are going to
• 15:04
  Speaker 2: have to stick with those reciprocal tariffs that the President proposed.
• 15:07
  Speaker 2: Maybe maybe different looking, but a ten percent global tariff
• 15:12
  Speaker 2: in and of itself will not be nearly enough to
• 15:15
  Speaker 2: incentivize companies to bring manufacturing back to the United States,
• 15:19
  Speaker 2: and one hundred and fifty percent on China won't be
• 15:22
  Speaker 2: enough because instead a company will say, look, it's double
• 15:25
  Speaker 2: the cost if I bring that job back to the
• 15:27
  Speaker 2: United States, and I can avoid that ten percent tariff,
• 15:30
  Speaker 2: But it's only about twenty percent of the cost if
• 15:32
  Speaker 2: I go to Vietnam instead. And so we are left
• 15:36
  Speaker 2: with this same point here, which is what is the
• 15:40
  Speaker 2: purpose of the tariffs. If it is we want to
• 15:44
  Speaker 2: vastly expand the level of manufacturing that needs to happen
• 15:49
  Speaker 2: in the United States, then the incentives that are going
• 15:52
  Speaker 2: to need to be in place. Whether it's the carrot
• 15:54
  Speaker 2: or the stick approach, take your choice. Either way, it's
• 15:57
  Speaker 2: going to be costly, it's going to need to be significant,
• 16:01
  Speaker 2: and we saw how markets reacted to that significant approach
• 16:05
  Speaker 2: when it was in place up until Wednesday of last week.
• 16:08
  Speaker 2: So I continue to think the administration is between a
• 16:10
  Speaker 2: rock and a hard place on this overall policy. But
• 16:14
  Speaker 2: then again, I don't know that the actual end goal
• 16:18
  Speaker 2: is to bring all these manufacturing jobs back to the
• 16:20
  Speaker 2: United States, because I think there are a bunch of
• 16:22
  Speaker 2: really impractical realities when it comes to that.
• 16:24
  Speaker 4: I don't think people realize how unappealing some of the
• 16:28
  Speaker 4: manufacturing job I kind of made this point in my
• 16:31
  Speaker 4: last comment, but I'll say I'll give you a specific example.
• 16:34
  Speaker 4: Auto workers in some Southern states. I think this example
• 16:38
  Speaker 4: comes from Alabama, but I don't have to pick on
• 16:39
  Speaker 4: anyone in particular. They happen to be non unionized, They
• 16:42
  Speaker 4: make entry level jobs. Fourteen fifteen bucks an hour. A
• 16:45
  Speaker 4: worker in McDonald's in Massachusetts makes more than that. I'll
• 16:50
  Speaker 4: say again, it shouldn't be about where you work. It
• 16:54
  Speaker 4: should be about how much you make benefits. So everything
• 16:59
  Speaker 4: a total comp and I guess about prospects and say
• 17:03
  Speaker 4: self worth and stuff like that. This focus on jobs
• 17:07
  Speaker 4: that result in physical output is misguided. Plus for reasons
• 17:12
  Speaker 4: you cite, probably not realistic unless you are willing to
• 17:16
  Speaker 4: wall off your economy from the rest of the world indefinitely.
• 17:19
  Speaker 4: You could try that. Soviets did it. There was no
• 17:22
  Speaker 4: great depression there. There were other countries in which there
• 17:24
  Speaker 4: was no great depression. That's a bit of a tangent.
• 17:26
  Speaker 4: I don't want to get into it, but anyway, that's
• 17:29
  Speaker 4: one way to smooth your economy out. But of course
• 17:32
  Speaker 4: their economy stopped growing in by roughly the nineteen sixties.
• 17:35
  Speaker 2: Yep. So look, there are plenty of impracticalities here. There
• 17:38
  Speaker 2: are also plenty of things that I think the administration
• 17:40
  Speaker 2: has correctly identified as a real, genuine problem with the
• 17:44
  Speaker 2: setup of our global trade system. Well, expand on that,
• 17:48
  Speaker 2: what do you what I would identify as a real problem.
• 17:52
  Speaker 2: Massive portions of the rare earth materials coming from a
• 17:55
  Speaker 2: single country.
• 17:57
  Speaker 3: But they are where they are.
• 17:58
  Speaker 2: They are where they're well, no, they are globally. It's
• 18:01
  Speaker 2: just that one country is willing to do the dirty work,
• 18:03
  Speaker 2: and that's China. These things are all over the place.
• 18:05
  Speaker 2: We just don't want to go dig up a bunch
• 18:07
  Speaker 2: of residential communities in New Mexico to go find a
• 18:10
  Speaker 2: lot of these rare earth materials and poison the water
• 18:12
  Speaker 2: and do all the things that China is willing to do.
• 18:15
  Speaker 2: Our semiconductor supply chain, I think, honestly, I would look
• 18:20
  Speaker 2: at it as incredibly fragile. And you can say, oh,
• 18:23
  Speaker 2: it's all free markets, but no. In part, it was
• 18:26
  Speaker 2: choices that were made to say, hey, we're going to
• 18:27
  Speaker 2: place some of the strategic stuff in tai That GIA
• 18:30
  Speaker 2: detection people yawned, yep, agreed. Drug manufacturing being largely done
• 18:37
  Speaker 2: in China, or any portion of Americans necessity medical equipment
• 18:41
  Speaker 2: that needs to come into the United States. I think
• 18:43
  Speaker 2: is open for a debate as to where should we
• 18:46
  Speaker 2: require some of that stuff to be done?
• 18:48
  Speaker 4: Though, why do I have to pay two three times
• 18:49
  Speaker 4: as much for my generic prescription drugs, which is what's
• 18:52
  Speaker 4: going to happen.
• 18:52
  Speaker 2: I think at least we should have that debate, Hey, China,
• 18:56
  Speaker 2: he's moving ahead with China's had a strategic strategic country
• 19:01
  Speaker 2: that we are competing with, and do we feel comfortable
• 19:05
  Speaker 2: with them manufacturing a large portion of our necessity drugs.
• 19:08
  Speaker 2: I think these are at least realistic conversations that we
• 19:11
  Speaker 2: need to have and have debates around them. But to
• 19:14
  Speaker 2: your point, the strategy from the White House does not
• 19:18
  Speaker 2: seem to be designed to address those things, at least
• 19:22
  Speaker 2: it wasn't initially. We will see if we get more
• 19:24
  Speaker 2: clarity going around all this. Next quick break, Wall Street
• 19:27
  Speaker 2: Watch coming up next.
• 19:43
  Speaker 1: Like us on Facebook and follow us on Twitter at
• 19:45
  Speaker 1: TFFE show. Breaking business news is always first right here
• 19:50
  Speaker 1: on the Financial Exchange Radio Network. Time now for Wall
• 19:55
  Speaker 1: Street Watch a complete look at what's moving market so
• 19:58
  Speaker 1: far today right here, I'm a Financial Exchange Radio network.
• 20:02
  Speaker 5: Well after the SMP posted two straight winning sessions, markets
• 20:06
  Speaker 5: today are pretty bumpy to this point as investors sift
• 20:09
  Speaker 5: through the latest developments on the trade war between the
• 20:12
  Speaker 5: US and China, in addition to a new batch of
• 20:15
  Speaker 5: first quarter earnings. Right now, the Dow is up by
• 20:18
  Speaker 5: two tenths of a percent, or eighty three points. SMP
• 20:21
  Speaker 5: five hundred is up by about a third of a percent,
• 20:24
  Speaker 5: and the Nasdaq up a quarter percent higher are forty
• 20:27
  Speaker 5: four points, Russell two thousand is up by two thirds
• 20:29
  Speaker 5: of a percent, ten year Treasure Reel down by one
• 20:32
  Speaker 5: basis point, now at four point three five percent, and
• 20:36
  Speaker 5: crude oil pulling back by about a quarter percent, trading
• 20:39
  Speaker 5: at sixty one dollars and thirty seven cents a barrel.
• 20:42
  Speaker 5: More Bank earnings to report this morning, where a Bank
• 20:45
  Speaker 5: of America and City Group posted their first quarter results.
• 20:48
  Speaker 5: Bank of America beat analysts expectations due to stronger than
• 20:52
  Speaker 5: expected net interest income and trading revenue, where its revenue
• 20:56
  Speaker 5: increase five point nine percent. City Group also posted better
• 20:59
  Speaker 5: than ext results, driven by gains at its fixed income
• 21:03
  Speaker 5: and equities trading units. Bank of America and Citygroup are
• 21:07
  Speaker 5: up by about two to three percent so far. Meanwhile,
• 21:11
  Speaker 5: Johnson Johnson also posted first quarter results ahead of the open,
• 21:15
  Speaker 5: beating earnings and revenue expectations. The pharmaceutical giant increase its
• 21:20
  Speaker 5: sales forecast, but left its full year earnings guidance unchanged. Furthermore,
• 21:24
  Speaker 5: Janjay's CFO told The Wall Street Journal that it expects
• 21:27
  Speaker 5: costs of about four hundred million dollars this year related
• 21:31
  Speaker 5: to tariffs on medical devices. That stock is down by
• 21:35
  Speaker 5: three quarters of a percent, bowing down by two percent
• 21:38
  Speaker 5: after Bloomberg reported earlier that China has ordered its airlines
• 21:42
  Speaker 5: not to take any further deliveries of Boeing jets as
• 21:45
  Speaker 5: part of its titford tat trade war. Beijing has also
• 21:48
  Speaker 5: asked that Chinese carriers halts any purchases of aircraft related
• 21:52
  Speaker 5: equipment and parts from US companies. Albertson's down by six
• 21:57
  Speaker 5: percent after the grocery store chain offered fully earnings guidance
• 22:00
  Speaker 5: that came in weaker than expected, and according to the
• 22:03
  Speaker 5: Wall Street Journal, Netflix aims to achieve a one trillion
• 22:06
  Speaker 5: dollar market capitalization and double its revenue from thirty nine
• 22:11
  Speaker 5: billion dollars last year by twenty thirty. The streaming Giant
• 22:15
  Speaker 5: is also charting nine billion dollars in global ad sales
• 22:19
  Speaker 5: by twenty thirty as well. That stock is up by
• 22:22
  Speaker 5: five percent. I'm Tucker Silvan, That's Wall Street Watch.
• 22:26
  Speaker 2: Is that piece in the Boston Globe today? It seems
• 22:28
  Speaker 2: like no matter what happens, prices go up. Why is
• 22:31
  Speaker 2: Boston spring housing market at a standstill? Well, very easy
• 22:36
  Speaker 2: answer here, there's no homes for sale and mortgage rates
• 22:38
  Speaker 2: are over seven percent, is my answer. But I wanted
• 22:41
  Speaker 2: to give a little bit more context to this. So
• 22:43
  Speaker 2: there are obviously homes for sale, there's just not that
• 22:46
  Speaker 2: many of them. In March, according to the Saint Louis
• 22:49
  Speaker 2: Federal Reserve, in the entire state of Massachusetts, there were
• 22:53
  Speaker 2: six thousand, eight hundred and thirty properties for sale that
• 22:57
  Speaker 2: could be single family, that could be condo. Oh, but
• 23:00
  Speaker 2: it's residential properties for sale. According to the Saint Louis
• 23:03
  Speaker 2: FED a normal March market. Can we call twenty nineteen normal?
• 23:10
  Speaker 2: Is that fair to describe it? There are fourteen thousand
• 23:13
  Speaker 2: properties for sale in March of twenty nineteen, so less
• 23:15
  Speaker 2: than half of the inventory is what's out there right
• 23:18
  Speaker 2: now on markets in the Massachusetts area. I was speaking
• 23:24
  Speaker 2: to somebody yesterday though, who kind of grew up around here.
• 23:26
  Speaker 2: I think they grew up in Brookline years ago, had
• 23:28
  Speaker 2: a business around here, have since sold and moved to Florida,
• 23:31
  Speaker 2: and they see the prices, they know how ridiculous it's gotten,
• 23:35
  Speaker 2: but very few times do people actually do the math
• 23:37
  Speaker 2: to understand what that means. So I wanted to do
• 23:40
  Speaker 2: that math, and I just not randomly, but I selected
• 23:44
  Speaker 2: Deadham as an example here if you're listening from outside
• 23:47
  Speaker 2: the general Massachusetts area. Dedham is a town that is
• 23:52
  Speaker 2: right on the one twenty eight loop corridor right around Boston.
• 23:56
  Speaker 2: It's serviced by multi a few different trains that go
• 24:00
  Speaker 2: into Boston. Been a you know, I think I would
• 24:03
  Speaker 2: generally describe it in years past as kind of a
• 24:05
  Speaker 2: middle class working town. It's not your Wellesley's, it's not
• 24:10
  Speaker 2: your Weston's of very very high end family money that
• 24:14
  Speaker 2: lives there. But it's a close to Boston commuter town
• 24:18
  Speaker 2: that you know, is close to the Highway, close to
• 24:21
  Speaker 2: commuter rails, and is an easy trip into Boston and
• 24:24
  Speaker 2: borders Boston. So I selected that as just an example
• 24:27
  Speaker 2: here because I don't think most people that grew up
• 24:29
  Speaker 2: in Brookline would be like, oh, you know, you're talking
• 24:32
  Speaker 2: about hoity toity Dedham. That's not how it generally has
• 24:35
  Speaker 2: a reputation. In fact, so I took a look and said, Okay,
• 24:38
  Speaker 2: if I'm a family that wants to move to Dedham today,
• 24:41
  Speaker 2: what do I need? So I said, you know, if
• 24:44
  Speaker 2: I'm a family wants to move there, I'm at least
• 24:46
  Speaker 2: going to want a two bed, two bath home. That
• 24:49
  Speaker 2: a fair starting point. I think many families will be
• 24:51
  Speaker 2: looking for more than that, but a two bed, two
• 24:52
  Speaker 2: bath home, that's my minimum. There are currently thirty one
• 24:56
  Speaker 2: properties for sale in Dedham that fit that general characteristic.
• 25:00
  Speaker 2: It could be a condo, it could be a single
• 25:03
  Speaker 2: family home, but there's thirty two of them. The median
• 25:06
  Speaker 2: and average listing price for those is around one point
• 25:10
  Speaker 2: seven million dollars. So let that sink in for a moment.
• 25:15
  Speaker 2: One point seven million dollars is the average, not the highest,
• 25:19
  Speaker 2: but it's both the average and the median for these properties.
• 25:22
  Speaker 2: So I did the math. I said, okay, well, if
• 25:24
  Speaker 2: I want to buy that one point seven million dollar
• 25:26
  Speaker 2: home and put to twenty percent down payment, what am
• 25:28
  Speaker 2: I looking at in terms of costs? First, I go
• 25:32
  Speaker 2: get a mortgage, a jumbo these days going for about
• 25:34
  Speaker 2: seven point one percent on average right now for a
• 25:37
  Speaker 2: thirty year fixed rate mortgage. So if I put down
• 25:39
  Speaker 2: twenty percent and buy that one point seven million dollar home,
• 25:42
  Speaker 2: I'm looking at a mortgage payment of ninety four hundred
• 25:44
  Speaker 2: dollars per month. I then have to pay my property taxes,
• 25:50
  Speaker 2: which you know I selected one home that was in
• 25:52
  Speaker 2: this general range in debtum, coming to about sixteen to
• 25:55
  Speaker 2: fifty a month in property taxes. Don't forget your insurance.
• 25:59
  Speaker 2: Tack on another five hundred dollars a month for insurance.
• 26:01
  Speaker 2: You are suddenly up over eleven thousand, five hundred dollars
• 26:05
  Speaker 2: per month in housing payments before you even talk about
• 26:08
  Speaker 2: home improvements, maintenance, moving costs, et cetera. So that's a
• 26:13
  Speaker 2: lot of money. No need to tell anybody here. At
• 26:16
  Speaker 2: eleven thousand, five hundred dollars per month in fixed housing
• 26:19
  Speaker 2: costs before you talk about any surprises, is a whole
• 26:22
  Speaker 2: boatload of money. If you've ever heard of CFP, it's
• 26:25
  Speaker 2: the Certified Financial Planners Board they put out. They are
• 26:30
  Speaker 2: kind of the gold standard when it comes to financial
• 26:32
  Speaker 2: planners and having a designation attached to their name, and
• 26:35
  Speaker 2: there's a bunch of rules of thumb that they have
• 26:37
  Speaker 2: that they put together, as you know, a financial Planner's guide.
• 26:40
  Speaker 2: One of those is that you should not spend more
• 26:42
  Speaker 2: than thirty percent of your gross income on housing costs.
• 26:49
  Speaker 2: So again I'm doing math on radio, which I know
• 26:51
  Speaker 2: is not all that sexy, so I apologize, But again,
• 26:54
  Speaker 2: one point seven million dollars.
• 26:56
  Speaker 3: Peep show that we have here every day from ten.
• 26:58
  Speaker 2: To noon, tw point seven million dollar home, twenty percent
• 27:01
  Speaker 2: down payment. At today's mortgage rates, you're looking at eleven
• 27:05
  Speaker 2: five hundred dollars a month. They'reabouts all in for this
• 27:08
  Speaker 2: new home and debtum. What does that mean you need
• 27:11
  Speaker 2: to make on a gross level as a household in
• 27:13
  Speaker 2: order to fit that, you know that described demographic. It
• 27:17
  Speaker 2: means that you need to be making four hundred and
• 27:19
  Speaker 2: sixty five thousand dollars per year as a household in
• 27:23
  Speaker 2: order to fall into that thirty percent guideline to buy that. Again,
• 27:28
  Speaker 2: not high end home in debtam, I'm talking about the
• 27:30
  Speaker 2: average home for a sale two day in debtum. So
• 27:35
  Speaker 2: that's the answer to my question. For the answer to
• 27:37
  Speaker 2: the question in the Boston Greater Boston area. Now again,
• 27:41
  Speaker 2: you know, I can choose Worcester, I can choose different
• 27:43
  Speaker 2: communities here that have different housing prices. But even across
• 27:47
  Speaker 2: the entire state of Massachusetts, the median home listing price
• 27:50
  Speaker 2: right now is eight hundred thousand dollars. So I think
• 27:54
  Speaker 2: my lesson here is even if you're out in western
• 27:57
  Speaker 2: mass you're still needing to pull in a couple hundred
• 28:00
  Speaker 2: grand of income to buy that home and fall into
• 28:02
  Speaker 2: the kind of comfortable range of what you should be
• 28:05
  Speaker 2: spending on housing costs according to most.
• 28:09
  Speaker 3: Estimates, assuming you need to eat meat.
• 28:11
  Speaker 2: Yeah, assuming you need any other bills that you need
• 28:14
  Speaker 2: to pay. So I just again, I thought that exercise
• 28:18
  Speaker 2: was interesting because I think everyone that lives anywhere in
• 28:21
  Speaker 2: New England knows that the housing situation around here has
• 28:24
  Speaker 2: gotten a little bit ridiculous. But to me doing that
• 28:28
  Speaker 2: math of Okay, now let's back into how much you
• 28:30
  Speaker 2: actually need to earn in this area to buy a
• 28:32
  Speaker 2: new home in one of these communities today. How many
• 28:36
  Speaker 2: people do you know that are pulling in half a
• 28:38
  Speaker 2: million dollars of income per household per year? And you
• 28:42
  Speaker 2: suddenly know why the housing market is frozen here in
• 28:45
  Speaker 2: the New England region and Boston in particular. Quick break
• 28:48
  Speaker 2: when we come back, Bank earnings are continuing heard from
• 28:51
  Speaker 2: Bank of America before the bell will be covering the
• 28:54
  Speaker 2: common threads from those bank earnings so far. That's next
• 28:58
  Speaker 2: here on the Financial Exchange Taras.
• 29:01
  Speaker 1: Fears continue to grip markets, get the latest straight from
• 29:04
  Speaker 1: Wall Street right here on the Financial Exchange Radio Network
• 29:08
  Speaker 1: miss any of the show, catch up at your convenience
• 29:11
  Speaker 1: by visiting Financial Exchange show dot com and clicking the
• 29:14
  Speaker 1: on demand icon, where you'll find all of our interviews
• 29:17
  Speaker 1: and full shows. This is your home for the latest
• 29:20
  Speaker 1: business and financial news in New England and around the country.
• 29:24
  Speaker 1: This is the Financial Exchange Radio Network.
• 29:30
  Speaker 5: The Financial Exchange is a proud partner of the Disabled
• 29:33
  Speaker 5: American Veterans Department of Massachusetts and you can register right
• 29:37
  Speaker 5: now for this year's five K at Castle Island by
• 29:40
  Speaker 5: visiting DAV fivek dot Boston. The event will sell out again,
• 29:44
  Speaker 5: so if you're interested in participating, now's the time to
• 29:47
  Speaker 5: reserve your spot. Come out and help support our great
• 29:50
  Speaker 5: American heroes by joining us for the DAV five K.
• 29:53
  Speaker 5: Visit DAV fivek dot Boston to register or to make
• 29:57
  Speaker 5: a donation. Today that's DAV five dot Boston.
• 30:01
  Speaker 2: Margaret's bank earning season and so we've had all the
• 30:05
  Speaker 2: major executives out there talking about their most recent quarter,
• 30:08
  Speaker 2: talking about consumer spending, trading, revenue, all the above. And
• 30:13
  Speaker 2: remember that this just goes through March thirty first, so
• 30:16
  Speaker 2: doesn't tell you much about the month of April. But occasionally,
• 30:19
  Speaker 2: when banks report earnings they can tell you something meaningful
• 30:22
  Speaker 2: about how those executives are thinking about the future. I
• 30:25
  Speaker 2: distinctly remember the earnings calls back in Maybe it wasn't
• 30:29
  Speaker 2: even earnings calls. Maybe it was just like news that
• 30:32
  Speaker 2: broke that. Hey, the big banks back in the early
• 30:34
  Speaker 2: days of COVID were taking out these massive loan loss
• 30:38
  Speaker 2: provisions on their balance sheet, saying, basically, we expect some
• 30:42
  Speaker 2: of our loans to fail, and so therefore we're marketing
• 30:45
  Speaker 2: as such in our accounting to account for those future
• 30:48
  Speaker 2: failed loans. We didn't really get that in this and
• 30:52
  Speaker 2: I'm just wondering, is there anything in these earnings reports
• 30:55
  Speaker 2: that indicated much to you about the larger economy? What
• 30:58
  Speaker 2: did we see from these cient behemoth banks that now exist.
• 31:02
  Speaker 3: Nothing.
• 31:02
  Speaker 4: I don't think that you and Chucks Outa don't talk
• 31:04
  Speaker 4: about all the time, which is that the economy has
• 31:07
  Speaker 4: been strong. When the economy is strong, consumers want to borrow,
• 31:10
  Speaker 4: businesses want to borrow. Banks are generally the entity that
• 31:14
  Speaker 4: makes that intermediates that hooks up lenders people who have
• 31:19
  Speaker 4: money and peak deposits with people who want to borrow money.
• 31:21
  Speaker 4: So in a strong economic environment, that's perfect for banks
• 31:24
  Speaker 4: too strong an economic environment when the FED is raising
• 31:27
  Speaker 4: shorter interest rates might not be because that puts funding
• 31:30
  Speaker 4: pressure on banks.
• 31:31
  Speaker 3: That's happened the past couple of years.
• 31:33
  Speaker 4: The FED has raised race that squeezes their so called
• 31:35
  Speaker 4: net interest margin, which is critical for most banks, as
• 31:39
  Speaker 4: I understand it an analyst in this sector or any
• 31:43
  Speaker 4: sector now that I think of it critical to their profitability.
• 31:46
  Speaker 3: As you already suggested.
• 31:47
  Speaker 4: Mike, it depends on your lines of business. To what
• 31:49
  Speaker 4: degree are you dependent on credit card.
• 31:53
  Speaker 3: Loans?
• 31:53
  Speaker 4: To what degree are you dependent maybe more than the
• 31:57
  Speaker 4: average on that net interest margin. So I've read this
• 32:00
  Speaker 4: and thought, yeah, this confirms that the economy has been strong,
• 32:03
  Speaker 4: doesn't really give us much insight as to the outlook.
• 32:07
  Speaker 2: Yeah, there were two takeaways from banks that I had
• 32:09
  Speaker 2: that kind of confirmed some things that I think we
• 32:11
  Speaker 2: already knew during and around of these earnings calls. One,
• 32:15
  Speaker 2: pretty much every large bank and investment firm out there
• 32:19
  Speaker 2: reported records in terms of trading volume.
• 32:22
  Speaker 3: And then there's during that yeah channel.
• 32:24
  Speaker 2: During the last few weeks, during the announcement of these terrorists,
• 32:27
  Speaker 2: whether it's Fidelity and Schwab, whether it's Bank from America,
• 32:30
  Speaker 2: Merrill Lynch, JP Morgan, pretty much all of them across
• 32:33
  Speaker 2: the board said we've never seen the number of trades
• 32:37
  Speaker 2: on our desks on Friday than Monday and Tuesday of
• 32:42
  Speaker 2: the last couple of weeks surrounding tariffs.
• 32:45
  Speaker 4: Is your reaction to that sort of ambivalent, like, Oh,
• 32:49
  Speaker 4: that's great for bank earnings, that's bad for like that
• 32:52
  Speaker 4: is not productive economic activity. There's just people moving money around.
• 32:55
  Speaker 4: We're all preoccupied by what's going on in finance. That's
• 32:59
  Speaker 4: not the real economy. So I always have a kind
• 33:01
  Speaker 4: of ambivalent.
• 33:02
  Speaker 2: Yeah, I don't think that's a good thing.
• 33:04
  Speaker 4: No, I don't think it is the over financialization of
• 33:06
  Speaker 4: the economy that's been a theme for the past twenty
• 33:09
  Speaker 4: five years.
• 33:10
  Speaker 2: But it does speak to the nerves that are out there.
• 33:13
  Speaker 2: That's what you could conclude about the larger question. The
• 33:15
  Speaker 2: other story that's been consistent, whether it's Bank of America
• 33:18
  Speaker 2: or JP Morgan, both said that credit and debit card
• 33:21
  Speaker 2: spending rose during the most recent quarter by four percent
• 33:24
  Speaker 2: from a year ago. So ways to read that could
• 33:28
  Speaker 2: be that consumers healthy and is just spending along. Could
• 33:32
  Speaker 2: also have been that consumers were front running concerns about tariffs.
• 33:37
  Speaker 2: I don't think we really have much evidence to support
• 33:39
  Speaker 2: one versus the other. But it's definitely fair to say
• 33:42
  Speaker 2: that the consumer did not deteriorate so much in the
• 33:45
  Speaker 2: January through March quarter that they couldn't spend on those
• 33:48
  Speaker 2: credit and debit cards. So whatever conclusion you want to
• 33:51
  Speaker 2: draw there, but overall, those are the two main ones
• 33:54
  Speaker 2: that I took away from bank earnings because everything else
• 33:56
  Speaker 2: about net interest margin, I just don't think it tells
• 33:59
  Speaker 2: me much about the broader economy as a whole.
• 34:02
  Speaker 5: Consistently voted one of the top Caribbean destinations the United States,
• 34:06
  Speaker 5: Virgin Islands is the perfect place for your next vacation,
• 34:09
  Speaker 5: whether you're looking for a romantic getaway, a long weekend
• 34:12
  Speaker 5: with friends or family vacation. San Croix, Saint Thomas, and
• 34:16
  Speaker 5: Saint John have everything you need to enjoy that special
• 34:19
  Speaker 5: time away from home. Take advantage of a variety of
• 34:22
  Speaker 5: incredible promotions that are available right now. Go to visit
• 34:27
  Speaker 5: USVII dot com slash promotions, where you find details about
• 34:32
  Speaker 5: all these amazing experiences, including a stay at the Divvy
• 34:35
  Speaker 5: Karina Bay All inclusive beach Resort and casino on San Croix.
• 34:40
  Speaker 5: From the moment you arrive, you'll fall naturally in rhythm
• 34:43
  Speaker 5: with the heartbeat of the islands. There's no money to exchange,
• 34:46
  Speaker 5: and travel from New England could not be easier. Don't
• 34:49
  Speaker 5: miss your chance to enjoy America's Caribbean paradise. The United
• 34:52
  Speaker 5: States Virgin Islands had to visit USVII dot com slash
• 34:57
  Speaker 5: promotions for more information and to book your trip today.
• 35:01
  Speaker 5: That's visit USBI dot com slash promotions.
• 35:05
  Speaker 2: Mark For our listeners out there, can you give me
• 35:08
  Speaker 2: a baseline overview of what is private equity or private credit?
• 35:13
  Speaker 2: I know they're two different things, but for the average
• 35:15
  Speaker 2: listener out there was zero experience ever being exposed to
• 35:19
  Speaker 2: private equity. What's the idea?
• 35:20
  Speaker 4: Sure, let's just do private equity? Sure, it is literally
• 35:24
  Speaker 4: companies that aren't traded.
• 35:26
  Speaker 2: On NASDAK Public Exchange public.
• 35:31
  Speaker 3: Again, that's the phrase I was looking for.
• 35:33
  Speaker 4: So they're privately owned in most companies and something like
• 35:35
  Speaker 4: seventy eighty percent might even be more of US companies
• 35:38
  Speaker 4: are privately owned.
• 35:39
  Speaker 3: So it's that's it.
• 35:41
  Speaker 2: That's it.
• 35:41
  Speaker 4: And those owners, by the way, could be a small
• 35:43
  Speaker 4: group of people. And if you've ever owned a company
• 35:48
  Speaker 4: or known someone with a small business that's a form
• 35:51
  Speaker 4: of private equity, or they could be owned by institutional
• 35:54
  Speaker 4: investors through a type of partnership, a private equity investment partnership.
• 36:01
  Speaker 2: Generally speaking, when you're talking about investing in a private
• 36:03
  Speaker 2: equity partnership as you described, that might go out there
• 36:05
  Speaker 2: and buy private companies or lend you know, on the
• 36:07
  Speaker 2: private credit side, lend private companies money, or public companies
• 36:11
  Speaker 2: money for that matter. You're generally committing to that fund.
• 36:14
  Speaker 2: You're putting in a large sum of money. You're also
• 36:16
  Speaker 2: not given much in the way of liquidity during that day.
• 36:19
  Speaker 4: You can get out, but it's costly. The point is
• 36:21
  Speaker 4: you want to hold it for the term, which is
• 36:23
  Speaker 4: usually ten years.
• 36:25
  Speaker 3: Believe it or not.
• 36:26
  Speaker 4: You give your money to a proven investor, a so
• 36:29
  Speaker 4: called general partner. You are a limited partner LPs. Limited
• 36:33
  Speaker 4: partners give their money to GPS general partners. The gps
• 36:36
  Speaker 4: make the investment. You could pension funds commit tens of
• 36:39
  Speaker 4: millions of dollars to funds run by proven gps before
• 36:43
  Speaker 4: they even know where it's going to go.
• 36:45
  Speaker 3: You don't.
• 36:45
  Speaker 4: They don't tell you in advance what they're going to
• 36:47
  Speaker 4: buy or how they're going to invest it.
• 36:48
  Speaker 3: They can't know.
• 36:49
  Speaker 2: So I bring this up because I heard it theorized
• 36:52
  Speaker 2: from somebody, uh just last week that some of the
• 36:55
  Speaker 2: volatility we were seeing in this person's view was related
• 37:00
  Speaker 2: to the portion of money on the institutional side, that's
• 37:04
  Speaker 2: in private equity and private credit. So here's how it
• 37:06
  Speaker 2: plays out. According to surveys done of I think this
• 37:09
  Speaker 2: was done of education institutions endowments, the exposure to private
• 37:14
  Speaker 2: equity compared to the eight timeframe went from somewhere in
• 37:18
  Speaker 2: the mid teens to the high thirties today. The idea
• 37:22
  Speaker 2: that he put out there was, look, when you are
• 37:25
  Speaker 2: the manager of let's say Harvard's endowments, since they're in
• 37:28
  Speaker 2: the news anyway recently, and you see a bunch of
• 37:32
  Speaker 2: stuff going on in markets, and maybe you have to
• 37:35
  Speaker 2: sell something just to pay your bills. When you have
• 37:38
  Speaker 2: more in the way of private equity exposure, you're left
• 37:41
  Speaker 2: with a limited choice of things to actually sell during
• 37:44
  Speaker 2: a downturn, and therefore drives more He out.
• 37:47
  Speaker 4: That doesn't hold water to me, because they don't react
• 37:51
  Speaker 4: that quickly. They've got short term as you would advise
• 37:54
  Speaker 4: a cliity, and hey, if you need money in the
• 37:55
  Speaker 4: next year or two. You put in a short term
• 37:57
  Speaker 4: bucket that's going to be money good. You don't want
• 37:59
  Speaker 4: it invested in risky er stuff like equities.
• 38:02
  Speaker 3: They plan.
• 38:02
  Speaker 4: Similarly, there might be something to that. I haven't looked
• 38:06
  Speaker 4: at the study that this person may have been referring to,
• 38:09
  Speaker 4: but off the top of my head, I'd say that
• 38:10
  Speaker 4: doesn't really sound possible by it.
• 38:12
  Speaker 2: Let's take a quick break when we come back, second
• 38:15
  Speaker 2: hour of the Financial Exchange, a lot more cover and
• 38:17
  Speaker 2: including the continued fall of the dollar that's next here
• 38:20
  Speaker 2: on the Financial Exchange,