September 5, 2024 • 38 mins
Chuck Zodda and Mike Armstrong discuss why this jobs report could be the most pivotal one in years. The hot labor market has melted away. Just ask college grads. Harris pushes 28% capital gains tax rate on $1M earners. Biden prepares to block $14B steel deal. Volvo scraps plan to sell only EVs by 2030.
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Speaker 1 (00:00):
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(00:43):
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(01:04):
Veterans Development Corporation. This is the Financial Exchange with Chuck
ZATDA and Mike Armstrong.
Speaker 2 (01:14):
Chuck, Mike, and Tucker with you today, and we kick
things off with a.
Speaker 3 (01:20):
Piece titled.
Speaker 2 (01:23):
Why this job's report could be the most pivotal one
in years? Yes, that's right, that title brought to you
by the same people that brought you Season one hundred
and thirty two of The Bachelorette. The most dramatic conclusion ever.
I mean, look, it's gonna be an important jobs report.
(01:43):
It's one data point, and ultimately it's not going to
determine whether or not the United States is going into
recession or not.
Speaker 4 (01:52):
No, No, it's not. I mean, how do you judge
these things?
Speaker 3 (01:56):
Right?
Speaker 2 (01:57):
Could this I rank the most job reports in history?
I think of none of them because no one remembers them.
Speaker 4 (02:05):
Yeah, there's not a single one that really matters. No,
there's the trend line.
Speaker 2 (02:08):
There really isn't and it's not to Like, again, we
have no idea what we're gonna see tomorrow. We could
see four hundred thousand jobs gained or lost. Like, that's
probably the realistic range that you could be in.
Speaker 4 (02:20):
Yeah, or anywhere in between.
Speaker 2 (02:22):
And The other thing that you got to remember that
Mark Vandetti talks about often is the average that you
get on the jobs report is like one hundred and
fifty thousand historically, but the margin of error is seventy
eight thousand.
Speaker 3 (02:34):
So it's like, okay, so what does this even mean?
What are we doing here?
Speaker 2 (02:38):
And this is why you have to look at the
trends and things like that and not put too much
stock in anyone number. But ultimately, look, people are gonna
be watching this closely because we want to see if
the labor market is weakening.
Speaker 4 (02:50):
Further.
Speaker 2 (02:51):
Hint, it is, and we know this because basically all
of the labor market data that we're getting in the
aggregate is showing us that the labor market is weakening.
Yesterday we got the Jolts date of the job openings
in the Labor Turnover Survey. It showed job openings contracting
more sharply than anyone had predicted any of the economists
(03:14):
surveyed by Bloomberg.
Speaker 3 (03:15):
It showed that.
Speaker 2 (03:18):
Basically the ratio of job openings to unemployed people continues
to come down and now is firmly in pre pandemic levels.
Speaker 4 (03:29):
I'll go a step further There are a number of
these statistics that are looking you know, we were talking
about how they looked like twenty nineteen. These are our
stats now that are looking like twenty seventeen levels of employment.
Speaker 3 (03:40):
And the other thing is they're continuing to worsen.
Speaker 2 (03:42):
They're not bottoming out and below towing as you'd like
to see.
Speaker 4 (03:46):
They're just Chuck's favorite word that he created.
Speaker 3 (03:49):
I'm going to get there.
Speaker 4 (03:50):
You're trying to get it in Webster.
Speaker 3 (03:51):
I got it.
Speaker 2 (03:52):
Life goal below toe is going to be in the dictionary.
Speaker 3 (03:57):
I'm more of a English Is that the other?
Speaker 4 (04:00):
Yeah?
Speaker 3 (04:00):
Yeah, I like those ones. Yeah.
Speaker 2 (04:03):
In any case, I like the nerds at Oxford better
than Webster. You know, Merriam. Webster's a dime a dozen
these days. You know, what are we really doing here?
Speaker 4 (04:12):
But I'll talk about a few of these so just
for a moment here, you know, check the ratio of
unemployed to open jobs at one point zero seven. We
had talked about this when it got over two back
in March of twenty twenty two, and a few times
in twenty twenty two it hit those level.
Speaker 3 (04:30):
It was insane.
Speaker 4 (04:30):
It was too hot during the late twenty tens, you know,
we were up above the current levels that we're seeing
from mid twenty eighteen on, so you know, we were
at a hotter labor market from mid twenty eighteen. And
on the unemployment rate at four point three percent, this
is another one where hey, you know, let's let's exclude
the twenty twenty pandemic impact for a moment here. We
(04:53):
haven't seen the unemployment rate that we're experiencing right now
since late twenty seventeen. Mid twenty seven. Summer of twenty
seventeen was with the last time we were up at
four point three percent. A number of different ways. The
black or African American unemployment rate that we see that
we track six point three percent right now, haven't seen
it that high again since the twenty eighteen range. The
(05:15):
youth unemployment rates sixteen to twenty four year olds who
are unemployed currently at nine point one percent, haven't seen
that hit that level since early twenty eighteen. And so yeah,
we are in a labor market that has weakened and
why tomorrow's important. Again, one data points does not completely
reverse things, but in recessions, you know, go take a
(05:36):
look at the trend on unemployment in recessions. It tends
to trend pretty consistently upwards. And yes, you do have
here and there a dip where hey, it went to
four to three, then it went to four to one,
but it usually doesn't last long. It usually is a
pretty persistent trend upwards in unemployment during recessions. And that's
what I think everybody's really looking for here. There's not
(05:57):
a whole lot of there's not a whole you know,
we talked about the stock market during recessions of oh yeah,
you know, headfake, it went up and it went down,
it went up four times. That doesn't really happen with
unemployment pretty commonly.
Speaker 2 (06:08):
And the other thing, like you were citing a few
things from the jobs report, but look across all different
types of surveys. You know, the New York Fed does one,
I'm sorry. University of Michigan does their consumer sentiment survey,
and one of the questions they ask is, hey, how
easy is it to find a job these days? It's
consistently trending harder right now. ADP does a monthly job
(06:31):
survey that no one pays attention to because it doesn't
correlate with any of the other numbers in any meaningful fashion.
Came out this morning ninety nine thousand jobs created, a
drop from the previous number of one to eleven and
well below the estimates of one hundred and fifteen to
one hundred and forty five thousands. So across different numbers
measured by different people at different times, using different methodology,
(06:55):
the labor market is weakening over the last eighteen months,
and it's weakening at a pace where if it continues
for a couple more you kind of start to say, okay,
are we're reaching like the point? And oh return and
recession is baked in now and now you can't escape it.
On the other hand, you get another day to point.
This morning on jobless claims, two hundred and twenty seven
(07:18):
thousand nothing Burger, jobless claims are not barking. And the
question that Sherlock Holmes always likes to ask is how
come the dog that always barks didn't bark? I think
that was the first Sherlock Holmes. That was how he
solved the case, is like, look, why didn't.
Speaker 3 (07:35):
The dog bark?
Speaker 2 (07:37):
And in this case we have to ask, look, why
are jobless claims not barking? Because in every other recession
in history, as the labor market weekends, jobbles claims start
to go up, and a couple of possibilities here, Like, again,
none of us know, we were all figuring this out
as we go through it. One possibility, Hey, we just
(07:59):
haven't reached that point where jobless claims start to spike
in recessions. Possible, It might just not have happened yet,
and that doesn't mean it won't, but it's just not
there yet, right.
Speaker 4 (08:10):
We're just not in a recession yet, is what that
would possibly indicate.
Speaker 2 (08:14):
Possibility Number two, Hey, in a world in which you
can go out and find different kinds of gigwork that
may pay better than unemployment, maybe people are doing that
instead of going on unemployment the same way they used to.
Unemployment benefits don't pay particularly well. Gigwork doesn't pay great either,
(08:35):
but it might pay better than unemployment benefits.
Speaker 4 (08:37):
Let's tease that out for a minute here, Chuck, Because
there's been surveys that have found that gigwork today in
terms of number of people doing it, is not all
that significantly different than say the early two thousands, in
terms of total workforce working in the gig economy. What
is different, however, is how that's tracked by the irs,
and so you could convince me that, Hey, in two thousand,
(09:00):
if you lost your job and took up a gig job,
you were paid in cash and you were whatever it
might be, you know, working at a bar, working at
a restaurant, paid in cash, not exactly tracked in the
same way as Hey, if you pick up gigwork working
for Uber, you're probably not going to be able to
also collect unemployment because you get a ten ninety nine.
Speaker 2 (09:20):
And it might just be easier for you to do.
All you got to do is great, I signed up
on my phone. I don't have to go and see
if there's an open job as a bartender, as a waiter, Like.
Speaker 4 (09:29):
Wouldn't that be fascinating If that were a new just
a new thing in the late twenty tens and early
twenty twenties that we didn't previously know.
Speaker 2 (09:37):
About it, it's possible and we just don't know. And
if that's the case, it means that, look, this labor
market might be weaker than we think because we're just
not getting the signal that we got previously. But maybe
things aren't really great because maybe there would be more
people claiming unemployment and they're just not right now, which
is good in one respect, but in the other it's okay,
(09:59):
we have to rethink what's actually going on.
Speaker 4 (10:02):
Which I know we're gonna get to this, but I'll
just mention that Challenger, Gray and Christmas did a survey
and found that layoffs in August were their highest total
for the month in fifteen years, and yet we are
not seeing those people filing for unemployment. So again, when
we talk about different surveys, one survey saying yeah, no,
the layoffs are happening, But on the other hand, states
are telling us that nobody's filing for unemployment at an
(10:23):
increase level.
Speaker 2 (10:24):
So again we're at the point right now where it's
still kind of murky what's happening. But the labor market
is not trending favorably, and if it doesn't reverse itself soon,
it's gonna start becoming undeniable that there's a.
Speaker 3 (10:41):
Real problem there.
Speaker 4 (10:44):
And I think that's what does make this report, maybe
not the most significant in years. Maybe you know, it
may be a big nothing, but certainly impacts things like
what the Fed's going to do in two weeks and
certainly would convince me, you know, if we what do
we see last time and up taken unemployment rate by
(11:04):
two tenths of percent. Yes, so you see another two
tenths I'm much more concerned about recession in that case
than if you see it flat line or going to
come down like economists are predicting. The economists are predicting
right now, unemployment rate goes from four to three to
four two goes to four to five instead. Well it's
a very different story, but go up.
Speaker 2 (11:24):
Let's take a quick break here. When we return, let's
talk a little bit more about the jobs market, specifically
as it relates to new college grads and what they
are finding as they are looking for jobs today.
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Speaker 2 (12:47):
All Right, so talking a little bit more about the
labor market. There's a peace from the New York Times,
specifically talking about recent college grads and what they are seeing.
And the big story that I think is con here is, look,
companies aren't necessarily laying people off very rapidly, like they're
not saying we want to get rid of people, but
(13:10):
they're not really backfilling a ton of jobs the same
way they normally would, and so as a result, hiring
has gotten pretty sluggish as well, and new grads are
finding it harder than the last couple of years, which
a not surprising be kind of the fed's goal. But
see you don't want to see go too much further
because then it becomes problematic and it.
Speaker 4 (13:31):
You know, further, I think makes people question the value
of a collegy degree, and all these trends that we've
been seeing over the last few years. You know, one
temptation here is I do just look at that you know,
sixteen to twenty four year old unemployment rate, and it
is high. It's in the nines, but it's always considerably
higher than the overall unemployment rate for a number of
(13:51):
structural reasons. But what this piece is specifically talking about
is not just sixteen to twenty four year olds. We're
talking about college grads, and so therefore you're talking about
a different hire. We are still seeing a fairly tight
labor market in some areas of for instance, construction. If
you want to go find a trade job working at
(14:11):
a semiconductor plant, you can do so in parts of
the country with quite a bit of ease and no
college degree. What we're seeing a big pullback on, as
this points out, is you know, insurance, finance, real estate
corporations really pulling back on hiring at pretty significant levels.
And those are you know, fairly big employers for new
college grads, and so, yeah, I'm not shocked to see this,
(14:36):
and I've been I guess I've been pushing back on
this narrative for the last year or so, Like you know,
whate was me tried graduating in two thousand and nine,
and we're still not there.
Speaker 3 (14:48):
Right.
Speaker 4 (14:48):
This is not the type of labor market that I
think anyone that graduated in you know, two thousand and
eight through let's call it twenty twelve was dealing with.
But you know, it is magnificantly weaker than anything we've
seen in the last six or seven years for college grads.
Speaker 2 (15:03):
Yeah, and look, you have anecdotes in here where hey,
someone finished college and said it took four months to
you know, find a job, and then other new graduates
spent six to nine months. And I have no doubt
that this is the case for some new grads. But
it also doesn't speak about the fact that in most
cases that's not necessarily what you're seeing. So things have worsened.
(15:27):
But I still think that when we're trying to figure
out where this economy is and where the labor market is,
it's in a place right now that I think is
fairly balanced between labor and capital. If I had to
judge it, like the most of the twenty tens, or
at least the early part of the twenty tens, like
twenty ten through twenty fourteen, was very much skewed in
(15:51):
favor of employers in capital. Hey, if you wanted to
hire someone, you had just a bevy of people you
could choose from. Because there's a guy was that bad? Yeah,
this guy with a PhD driving pizza delivery truck.
Speaker 3 (16:03):
So courreer goal.
Speaker 2 (16:05):
Two years ago. In twenty twenty two, it was skewed
completely in the other direction. Hey, we're Walmart, and we're
going to pay you one hundred and fifty thousand dollars
to teach you how to drive an eighteen wheeler. Today,
it's neither of those things. It's I think we're actually
at a point that is pretty close to healthy balance
in the labor market, but it is skewing fairly quickly
(16:29):
towards employers. And that's something that I think is problematic,
just because you want people to be employed so that
you know they can pay for their stuff and live
their life and YadA YadA.
Speaker 4 (16:42):
Yeah, I think the answer for a lot of college
grads right now is you may not find employment in
your field right now. You know, by one measure, the
pace of hiring in professional and business services, which let's
be clear like that that covers a lot of fields
that are a pretty commonplace to hire for college grads
is down now to levels that we have not seen
since two thousand and nine. And so I think that's
(17:03):
I mean, that's my message if I am a graduating
college student right now is I may not be able
to find a job in my preferred area of work.
And you're not alone in that. There have been plenty
of college graduates who have found a similar type of thing.
And that is going to be the key here, because
there are areas If we look at the overall labor market,
(17:25):
like you said, Chuck, it's fairly well in balance, and
there are areas where you know employers are desperate for employees. Still,
it just might not line up with what you were
hoping to do at the early stages of your college
graduation career.
Speaker 2 (17:38):
And also, I've said this before, first jobs are supposed
to suck. Like you, you're not going to do something
cool at first because you get to do the stuff
that no one else at your company wants to do.
That's that's kind of how first jobs are. And I'm
not saying that you should like seek out companies that are,
(18:01):
you know, abusive, retreat you badly, Like that's not what
I'm saying in terms of the kind of suck. But yeah,
you're gonna be doing stuff that no one wants to do.
I still remember when I started working fifteen years ago.
I was coming in on weekends licking envelopes, and you know,
that was the gig, Like that's what you had to
do because no one wanted to come in on weekends
(18:22):
and look envelopes. And I'm, you know, very thankful I
didn't end up like George someone nearly George Costanza. You know,
it would have been like really bad, but I made
it and I'm still here today, So it's it's it's
good to know. But look, first jobs, don't set your
expectations too high. You want to be somewhere that yeah,
you've got a path to learning and understanding the business
(18:45):
and growth from there. But you're gonna do a lot
of stuff that you don't like and that you don't
want to do. And that doesn't mean it's a bad
first job or a job you shouldn't take as a
college grad.
Speaker 4 (18:54):
And you know, furthermore, I think a lot of people
are hesitant to take jobs that don't fit their resume.
But what's worse than a job that doesn't fit your resume.
Speaker 3 (19:03):
Is no job.
Speaker 4 (19:04):
No job and a gap in that resume, even if
you're not worried about the financial piece of it, Like
the no job on the resume is a lot worse
than the Yeah, I worked at a restaurant for a
year and a half and that was my way of
making I'll hire that person all day.
Speaker 3 (19:19):
Let's take a quick break here.
Speaker 2 (19:21):
When we come back, we got Wall Street Watch coming
up next.
Speaker 1 (19:41):
Like us on Facebook and follow us on Twitter at
TFE show. Breaking business news is always first right here
on the Financial Exchange Radio Network. Time now for Wall
Street Watch, a complete look at what's moving market so
far today right here on the Financial Exchange Radio Network.
Speaker 5 (20:01):
The markets are a mixed territory, with the Nasdaq trying
to claw back some of its recent losses as Wall
Street readies for tomorrow mornings all Important Jobs report for August.
Right now, the Dow is down by thirty points, SMP
five hundred is up by about a third of a percent,
and the Nasdaq up by one percent, or one hundred
(20:22):
and sixty seven points. Russell two thousand is flat, ten
year Treasureel down by one basis point at three point
seventy five percent, and crude oil up one and a
half percent, trading just above seventy dollars a barrel. Verizon
announced it will acquire Frontier Communications in an all cash
deal valued at twenty billion dollars, where the deal is
(20:42):
expected to close in about eighteen months. Meanwhile, shares and
Tesla are up by seven percent after the electric car
maker said earlier today that it plans to launch fully
self driving cars in Europe and China next year. Sticking
with the auto sector, where the Wall Street Journal report
ordered that Jeep parent company Stilantis has temporarily stopped producing
(21:04):
two of its top selling US models, the Jeep Wrangler
and Grand Cherokee, that stock is off by one percent. Elsewhere,
Jet Blue raised its guidance for.
Speaker 3 (21:14):
The third quarter for its third quarter.
Speaker 5 (21:16):
Revenue, sending that stock up by ten percent. Shares in
C three dot AI whatever that is is, are down
by thirteen percent after the AI software maker posted lower
than expected quarterly subscription revenue and top golf Callaway shares
down by about one percent after the company announced it
will split into two separate businesses, where Callawei will focus
(21:40):
on golf equipment and lifestyle, while Top Golf will zone
in on golf entertainment. I'm Tucker Silvan, that's Wallstreet Watch.
Speaker 3 (21:48):
It's tough about that Stillantis news.
Speaker 2 (21:51):
I was just getting over by Jasis Stalantis yesterday and
who knows now.
Speaker 4 (21:57):
Recurring Stilantis jokes at the best.
Speaker 3 (22:00):
Is there any other kind of Stilantis?
Speaker 1 (22:02):
Nope? No.
Speaker 2 (22:04):
Let's talk a little bit about capital gains tax. The
Harris campaign rolling out yesterday a proposal for a twenty
eight percent capital gains tax rate on people earning a
million dollars or more. This differs from the Biden administration's
previous proposal to have the top capital gains rate basically
(22:25):
be at the top marginal tax rate of thirty nine
points six percent if the Trump tax cuts.
Speaker 3 (22:31):
Were to expire.
Speaker 2 (22:33):
And so it's a difference that is being talked about
as far as tax policy and its potential impact on
capital markets.
Speaker 4 (22:41):
Yeah, so let's let's jump through this because I've seen
I was asked about this by Vidi Penn this morning.
One of the affiliates down in New Haven, Connecticut who
had seen it TikTok video about this and oh, you know,
it's only going to impact people that are you know,
have hundreds of millions of dollars, and that that's not
quite the case. But I've also heard things that you know,
every American is going to be paying a twenty eight
(23:03):
percent capital gains tax rate. That's also not the case.
So today, the way that capital gains taxes work is
they are always taxed at a rate that is lower
than your ordinary income tax rate. Correct, right now, universally
the case. The way it works right now, if you
are single making under forty seven thousand dollars, are married
filing jointly making under ninety four thousand, you pay zero
(23:25):
percent on capital gains tax right now. Okay, if you're
between forty seven and five eighteen these are thousands per single,
or ninety four and five eighty three married, you pay
fifteen percent. If you are making more than five to
eighteen as a single file or more than five eighty
three is married filing jointly, you pay twenty percent on
capital gains.
Speaker 3 (23:43):
These are all federal numbers.
Speaker 2 (23:44):
Obviously, your states can differ depending on where you're listening
to us out of.
Speaker 4 (23:48):
In addition, after Obamacare was passed, there is another three
point eight percent net investment income tax put on top
of capital gains. And so in that case, I think
it's over a quarter million dollars in total income, then
you're getting up to another three point eight. So hypothetically,
if you're in that fifteen percent bracket, you could be
at eighteen eight. If you're at that twenty percent, you
(24:09):
could be at twenty three point eight. And under the
Harris proposal, if you had over a million dollars in
total income and or capital gains, you'd be looking at
something like thirty one point eight percent federal taxation on
capital gains. In this type of scenario, to your point,
then you've got state tax. And I just like explaining
(24:29):
this stuff because it doesn't ring true to people when
we say, well, fifteen percent capital gains. Yeah, if you
live in Massachusetts, you've automatically got another five percent on
top of that. Correct, If you live in Massachusetts and
you're more than a million dollars, you've automatically gotten another
nine percent on top of that.
Speaker 3 (24:42):
And so in Florida you don't have any of that
you know.
Speaker 4 (24:45):
Exactly, So it does run the gambit the I think
you know what's being talked about here, and you know
what's being proposed. Is it completely out of this world? Now,
this is a tax proposal that's been proposed by many
other candidates running for president. I think it's about as
likely as any other tax increase to actually go into place.
(25:09):
And you know, this has actually been a long standing
debate is hey, should we be taxing capital gains at
a lower rate than ordinary income? There are plenty of
arguments on either side of it.
Speaker 3 (25:20):
My answer is yes and no.
Speaker 4 (25:22):
I know your first million dollars tax free?
Speaker 3 (25:25):
Right.
Speaker 2 (25:25):
The idea that I have, and this is how I
would approach it, unify the rates, because look, long term,
why do you want to tax money that is made
buying and selling stuff at a lower rate than working.
Doesn't make sense treat capital and labor the same. But
you do want an incentive to start a business, to
(25:47):
buy home, to do these things that generate a lot
of economic activity. And so the way I would approach
it is, look, unify the rates. You could bring income
tax rates down a touch, you could bump capital gains
rates a little bit, and unifying where that number ends
up being. I don't know, but the first million dollars
that you get in capital gains in your lifetime you
(26:10):
don't pay tax on. Because I want more millionaires, I
want people having money, and so I want to make
it something where, yes, you get a significant break on
that first million dollars in capital gains.
Speaker 3 (26:24):
That you earn in your lifetime.
Speaker 2 (26:27):
Once you get past that, what are we really doing here,
you know, Like, does Jeff Bezos need preferential capital gains
tax treatment at this point?
Speaker 3 (26:38):
No?
Speaker 2 (26:38):
Like, why why should he pay a rate half as
much as if he's earning that through work.
Speaker 4 (26:45):
I guess my only qualification there will be so long
as we don't reach a rate that is burdensome in
comparison to other developed countries. And twenty eight percent isn't there,
but forty is, and so I would bring that up, Like, Okay,
if you want Jeff Bezez to create his next company
in the United States, don't put the capital gains tax
rate at a rate that's higher than it is in
(27:05):
the United Kingdom.
Speaker 2 (27:06):
I don't know what if we make it more advantageous
to earn the income through being paid as a worker, sure,
like wouldn't okay, great, so the company actually has to
produce income to be able to pay him out.
Speaker 3 (27:16):
Like, I don't know, Like these are things that I
think of.
Speaker 2 (27:20):
I don't want to make it burdensome, but I look
at it and the the justification for always having the
capital gains tax lower than earned income doesn't mesh with me.
Do I think there there's a reason that you want
to tax it lower, you know, at certain points, absolutely
(27:42):
because you want to encourage business formation and capital formation
and all these things that we know are good for
the economy. But at the same time, do you want
to bestow that tax treatment permanently just because someone's good
at trading stocks are made a billion dollars? You know,
running a company will no Like at a certain point
(28:05):
you say, why am I treating this person way better
than someone who's working nine to five every day?
Speaker 4 (28:09):
So this will be I'm sure one of many items
that's brought up in next weeks. Is it next week's
debate next Tuesday? I think, yeah, it sounds I'm sure
it won't be the highlight because there are going to
be other border issues and other things that are going
to be more commonly discussed. But I mean, my concern
from well, my concern from the Harris campaign is, you know,
we're talking about significant tax increases and significant spending increases
(28:33):
on you know, my economic concerns about the Trump tax policy.
We're talking about significant tax cuts with zero from what
I've been able today to tell, zero proposed corresponding cuts
in spending, and so in both cases, I think the
net result that you end up seeing for either next
president is a continued dramatic increase in the deficit. And
(28:55):
I know that nobody seems to actually care about that,
But that's all I'm hearing. No from either can That's
all I'm hearing.
Speaker 2 (29:01):
You can actually make a case that it's unclear if
any president, not even it's unclear if any party has
been really serious about deficit reduction since the nineteen twenties.
Speaker 4 (29:17):
You could make that case. But at least one party
previously used to talk about it.
Speaker 3 (29:23):
But they didn't judge anyone on their talk. I hear you.
Speaker 4 (29:26):
But at least that was what was run on, and
today that's not as what is being run on.
Speaker 2 (29:30):
It is true, like no one's even talking about this
in a borderline serious way, no at all.
Speaker 4 (29:38):
You know, in fact, Democrats are probably talking I don't know. Again,
I would call them on their bs on this one,
but Democrats are probably talking more seriously about fiscal responsibility
at the federal government level right now than Republicans are,
which is a shocking reversal.
Speaker 2 (29:52):
It's no, We're a very odd spot at the moment.
Let's take a quick break here. When we return, let's
talk a little bit about US Steel. There is a
deal that's been on the table for a Japanese company
to buy them, why the Biden administration may be trying
to veto that deal, and what it means for the
(30:13):
company and US Steel going forward.
Speaker 1 (30:17):
Business and financial news affecting the markets and your wallet.
We've got it all straight from Wall Street right here
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Speaker 2 (30:54):
All right, let's talk a little bit about US Steel,
the steel that's made in the United States.
Speaker 3 (31:01):
So US Steel has a deal on.
Speaker 2 (31:04):
The table for to be bought by the Japanese company,
nip On Steel, and the Biden administration is saying that
they are going to try to block the deal. Yes,
few different competing things here, and trying to sort through
them is a mess, quite honestly.
Speaker 3 (31:24):
The first is US steal is.
Speaker 2 (31:25):
Saying, look, if we don't get this deal done, we're
not going to be able to invest a whole bunch
of money to modernize our mills that Nipon Steel is
going to invest into us if the deal's completed.
Speaker 4 (31:37):
Don't have the cash, can't be done.
Speaker 2 (31:38):
So basically saying, hey, we don't think our mills can
be competitive and we might have to close them and
end up losing a bunch of jobs as a result.
Speaker 4 (31:45):
Which, given you know steel dumping by China over the decades,
could be true.
Speaker 3 (31:51):
I think it's very much true.
Speaker 2 (31:54):
The other piece, though, is that the Biden administration is
looking at this and saying, hey, we don't want a
foreign company, even one from you know, a country that
I think we'd consider a pretty close ally.
Speaker 4 (32:06):
I'm trying to think of, like how many countries actually
I would consider it to be a closer political and
defense ally than Japan.
Speaker 2 (32:12):
Maybe three that I can think of. I would probably
go the UK, Canada and maybe maybe maybe maybe France. Yeah, yeah,
that's like about as far and you could maybe onep
Australia in that that sure in that, but Japan's central
area as well, given the sub deal with Australia that
(32:33):
angered the UK and France a couple of years ago.
Speaker 4 (32:35):
So if there is a national security block that is
put on this, then to me, what that indicates is
that there are certain companies in the United States that
can only be owned by United States corporations. There are
certain industries in the United States that can only be
owned again, because if it's not gonna be owned by
a Japanese company, then again, what are we even talking
about here? And this is my problem with this is
(32:58):
I have no idea what the overall message and strategy
on US trade is at this point, Like what are
those other industries now where we would say absolutely not
that cannot be done anywhere but the United States.
Speaker 2 (33:13):
And not even for US businesses, but even just you know,
US assets. You know the stories about China buying up
US farmland and stuff like that, and you know, oh,
we've got real estate that we're buying that's close to
military bases, Like, yeah, what are we doing about that?
There's no coherent policy on this.
Speaker 4 (33:31):
See, and I'm not necessarily saying that, by the way,
we should allow this deal to go through. But I
think not having some sort of public discourse puts us
in a disservice, like okay, the counterpoint would be, would
the Japanese allow for Ford to buy Toyota. Not that
they could, but would they allow that? I would think not.
I would think the same thing might be blocked in
(33:52):
Japan on similar types of concerns, and so that might
be the counterpoint to all this. But there's no coherent thought,
there's no go here into policy on what exactly, in
my mind, you would use as a justification for blocking
a deal like this.
Speaker 2 (34:07):
The United steel Workers Union has come out against the deal.
They're saying that the threats to close the mills are
the result of quote bad management of the company and
an ill conceived merger with Nippon Steel, so that the
union is saying no, we don't want this to happen,
and basically saying, look, if a Japanese company buys us,
they're going to be able to gut our operations and
(34:29):
benefit mills overseas. So it's I have no idea what
is actually the goal of Nippon Steel. I don't know
what is true and what is not here, But it
does seem that this deal has the potential to end
up not going through here, and if so, you know,
(34:49):
it would be a pretty big use of regulatory authority
in this fashion.
Speaker 5 (34:53):
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Speaker 2 (35:57):
Volvo abandoning its goal of sell only evs by twenty thirty.
Much like other car companies, they've realized, gee, not everyone
wants to buy an electric vehicle in the next six years,
and so this is gonna be you know, problematic for us. Instead,
they are saying that ninety to one hundred percent of
the cars sold will be fully electric or plug in
(36:18):
hybrid models by twenty thirty. So it appears that they're
going to be leaning heavily into that plug in hybrid
as the the other option h with that additional ten
percent potentially allowing for a limited number of conventional hybrid models.
Speaker 4 (36:31):
Why in twenty twenty one were we all just willing
to sop up a whole bunch of corporate lies.
Speaker 3 (36:38):
Sing it with me, now, money money, money, mone.
Speaker 2 (36:42):
Like I think about this one, say every car company
was saying, all these SPACs are getting tens of billions dollars.
Speaker 3 (36:48):
We want in on it.
Speaker 4 (36:50):
Like, think about the lie, you know, the the lies
that occurred here at Sweden's Volvo. Like I don't know,
you could pretty easily look through it and transparently know
that wasn't going to happen. But think about the lies
that occurred in the spack market during that period of
time of companies that were just saying ludicrous things like
we're going to get to revenue, we were going to
(37:11):
get to record revenue faster than any company in corporate history.
We're going to get to billions of dollars worth of
revenue faster than Facebook.
Speaker 3 (37:20):
Just all these crazy, outrageous.
Speaker 4 (37:23):
Claims that quite honestly just shouldn't have been allowed to
be made without massive, well in some cases, massive lawsuits
did follow them.
Speaker 2 (37:32):
It was one of the most fraudulent time periods in
publicly traded harkness.
Speaker 3 (37:37):
Really it really was.
Speaker 2 (37:39):
There was some very very bad stuff that was going
on in twenty twenty one and twenty twenty two in
equity markets, and.
Speaker 4 (37:48):
You can see, you know how easy it was to
get caught on that bandwagon of oh Man, everything that
goes public these days just goes straight through the roof.
So you know, I'll buy into this idea that they're
going to generate more revenue than any company in history,
be bigger than every car company in history. Like it,
just ludicrous claims that had no basis in reality.
Speaker 3 (38:09):
Let's take a quick break here. We still got.
Speaker 2 (38:13):
Well a whole lot more financial exchange in our second hour,
proximally an hour of it. Yeah yeah, stick around, We
got sixty more minutes coming up.
The Financial Exchange is produced by Money Matters Radio and
is hosted by employees of the Armstrong Advisory Group, a
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the hosts. Do not reflect the opinions of Armstrong Advisory
or anyone else. Investments can lose money. This program does
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(01:04):
Veterans Development Corporation. This is the Financial Exchange with Chuck
ZATDA and Mike Armstrong.
Speaker 2 (01:14):
Chuck, Mike, and Tucker with you today, and we kick
things off with a.
Speaker 3 (01:20):
Piece titled.
Speaker 2 (01:23):
Why this job's report could be the most pivotal one
in years? Yes, that's right, that title brought to you
by the same people that brought you Season one hundred
and thirty two of The Bachelorette. The most dramatic conclusion ever.
I mean, look, it's gonna be an important jobs report.
(01:43):
It's one data point, and ultimately it's not going to
determine whether or not the United States is going into
recession or not.
Speaker 4 (01:52):
No, No, it's not. I mean, how do you judge
these things?
Speaker 3 (01:56):
Right?
Speaker 2 (01:57):
Could this I rank the most job reports in history?
I think of none of them because no one remembers them.
Speaker 4 (02:05):
Yeah, there's not a single one that really matters. No,
there's the trend line.
Speaker 2 (02:08):
There really isn't and it's not to Like, again, we
have no idea what we're gonna see tomorrow. We could
see four hundred thousand jobs gained or lost. Like, that's
probably the realistic range that you could be in.
Speaker 4 (02:20):
Yeah, or anywhere in between.
Speaker 2 (02:22):
And The other thing that you got to remember that
Mark Vandetti talks about often is the average that you
get on the jobs report is like one hundred and
fifty thousand historically, but the margin of error is seventy
eight thousand.
Speaker 3 (02:34):
So it's like, okay, so what does this even mean?
What are we doing here?
Speaker 2 (02:38):
And this is why you have to look at the
trends and things like that and not put too much
stock in anyone number. But ultimately, look, people are gonna
be watching this closely because we want to see if
the labor market is weakening.
Speaker 4 (02:50):
Further.
Speaker 2 (02:51):
Hint, it is, and we know this because basically all
of the labor market data that we're getting in the
aggregate is showing us that the labor market is weakening.
Yesterday we got the Jolts date of the job openings
in the Labor Turnover Survey. It showed job openings contracting
more sharply than anyone had predicted any of the economists
(03:14):
surveyed by Bloomberg.
Speaker 3 (03:15):
It showed that.
Speaker 2 (03:18):
Basically the ratio of job openings to unemployed people continues
to come down and now is firmly in pre pandemic levels.
Speaker 4 (03:29):
I'll go a step further There are a number of
these statistics that are looking you know, we were talking
about how they looked like twenty nineteen. These are our
stats now that are looking like twenty seventeen levels of employment.
Speaker 3 (03:40):
And the other thing is they're continuing to worsen.
Speaker 2 (03:42):
They're not bottoming out and below towing as you'd like
to see.
Speaker 4 (03:46):
They're just Chuck's favorite word that he created.
Speaker 3 (03:49):
I'm going to get there.
Speaker 4 (03:50):
You're trying to get it in Webster.
Speaker 3 (03:51):
I got it.
Speaker 2 (03:52):
Life goal below toe is going to be in the dictionary.
Speaker 3 (03:57):
I'm more of a English Is that the other?
Speaker 4 (04:00):
Yeah?
Speaker 3 (04:00):
Yeah, I like those ones. Yeah.
Speaker 2 (04:03):
In any case, I like the nerds at Oxford better
than Webster. You know, Merriam. Webster's a dime a dozen
these days. You know, what are we really doing here?
Speaker 4 (04:12):
But I'll talk about a few of these so just
for a moment here, you know, check the ratio of
unemployed to open jobs at one point zero seven. We
had talked about this when it got over two back
in March of twenty twenty two, and a few times
in twenty twenty two it hit those level.
Speaker 3 (04:30):
It was insane.
Speaker 4 (04:30):
It was too hot during the late twenty tens, you know,
we were up above the current levels that we're seeing
from mid twenty eighteen on, so you know, we were
at a hotter labor market from mid twenty eighteen. And
on the unemployment rate at four point three percent, this
is another one where hey, you know, let's let's exclude
the twenty twenty pandemic impact for a moment here. We
(04:53):
haven't seen the unemployment rate that we're experiencing right now
since late twenty seventeen. Mid twenty seven. Summer of twenty
seventeen was with the last time we were up at
four point three percent. A number of different ways. The
black or African American unemployment rate that we see that
we track six point three percent right now, haven't seen
it that high again since the twenty eighteen range. The
(05:15):
youth unemployment rates sixteen to twenty four year olds who
are unemployed currently at nine point one percent, haven't seen
that hit that level since early twenty eighteen. And so yeah,
we are in a labor market that has weakened and
why tomorrow's important. Again, one data points does not completely
reverse things, but in recessions, you know, go take a
(05:36):
look at the trend on unemployment in recessions. It tends
to trend pretty consistently upwards. And yes, you do have
here and there a dip where hey, it went to
four to three, then it went to four to one,
but it usually doesn't last long. It usually is a
pretty persistent trend upwards in unemployment during recessions. And that's
what I think everybody's really looking for here. There's not
(05:57):
a whole lot of there's not a whole you know,
we talked about the stock market during recessions of oh yeah,
you know, headfake, it went up and it went down,
it went up four times. That doesn't really happen with
unemployment pretty commonly.
Speaker 2 (06:08):
And the other thing, like you were citing a few
things from the jobs report, but look across all different
types of surveys. You know, the New York Fed does one,
I'm sorry. University of Michigan does their consumer sentiment survey,
and one of the questions they ask is, hey, how
easy is it to find a job these days? It's
consistently trending harder right now. ADP does a monthly job
(06:31):
survey that no one pays attention to because it doesn't
correlate with any of the other numbers in any meaningful fashion.
Came out this morning ninety nine thousand jobs created, a
drop from the previous number of one to eleven and
well below the estimates of one hundred and fifteen to
one hundred and forty five thousands. So across different numbers
measured by different people at different times, using different methodology,
(06:55):
the labor market is weakening over the last eighteen months,
and it's weakening at a pace where if it continues
for a couple more you kind of start to say, okay,
are we're reaching like the point? And oh return and
recession is baked in now and now you can't escape it.
On the other hand, you get another day to point.
This morning on jobless claims, two hundred and twenty seven
(07:18):
thousand nothing Burger, jobless claims are not barking. And the
question that Sherlock Holmes always likes to ask is how
come the dog that always barks didn't bark? I think
that was the first Sherlock Holmes. That was how he
solved the case, is like, look, why didn't.
Speaker 3 (07:35):
The dog bark?
Speaker 2 (07:37):
And in this case we have to ask, look, why
are jobless claims not barking? Because in every other recession
in history, as the labor market weekends, jobbles claims start
to go up, and a couple of possibilities here, Like, again,
none of us know, we were all figuring this out
as we go through it. One possibility, Hey, we just
(07:59):
haven't reached that point where jobless claims start to spike
in recessions. Possible, It might just not have happened yet,
and that doesn't mean it won't, but it's just not
there yet, right.
Speaker 4 (08:10):
We're just not in a recession yet, is what that
would possibly indicate.
Speaker 2 (08:14):
Possibility Number two, Hey, in a world in which you
can go out and find different kinds of gigwork that
may pay better than unemployment, maybe people are doing that
instead of going on unemployment the same way they used to.
Unemployment benefits don't pay particularly well. Gigwork doesn't pay great either,
(08:35):
but it might pay better than unemployment benefits.
Speaker 4 (08:37):
Let's tease that out for a minute here, Chuck, Because
there's been surveys that have found that gigwork today in
terms of number of people doing it, is not all
that significantly different than say the early two thousands, in
terms of total workforce working in the gig economy. What
is different, however, is how that's tracked by the irs,
and so you could convince me that, Hey, in two thousand,
(09:00):
if you lost your job and took up a gig job,
you were paid in cash and you were whatever it
might be, you know, working at a bar, working at
a restaurant, paid in cash, not exactly tracked in the
same way as Hey, if you pick up gigwork working
for Uber, you're probably not going to be able to
also collect unemployment because you get a ten ninety nine.
Speaker 2 (09:20):
And it might just be easier for you to do.
All you got to do is great, I signed up
on my phone. I don't have to go and see
if there's an open job as a bartender, as a waiter, Like.
Speaker 4 (09:29):
Wouldn't that be fascinating If that were a new just
a new thing in the late twenty tens and early
twenty twenties that we didn't previously know.
Speaker 2 (09:37):
About it, it's possible and we just don't know. And
if that's the case, it means that, look, this labor
market might be weaker than we think because we're just
not getting the signal that we got previously. But maybe
things aren't really great because maybe there would be more
people claiming unemployment and they're just not right now, which
is good in one respect, but in the other it's okay,
(09:59):
we have to rethink what's actually going on.
Speaker 4 (10:02):
Which I know we're gonna get to this, but I'll
just mention that Challenger, Gray and Christmas did a survey
and found that layoffs in August were their highest total
for the month in fifteen years, and yet we are
not seeing those people filing for unemployment. So again, when
we talk about different surveys, one survey saying yeah, no,
the layoffs are happening, But on the other hand, states
are telling us that nobody's filing for unemployment at an
(10:23):
increase level.
Speaker 2 (10:24):
So again we're at the point right now where it's
still kind of murky what's happening. But the labor market
is not trending favorably, and if it doesn't reverse itself soon,
it's gonna start becoming undeniable that there's a.
Speaker 3 (10:41):
Real problem there.
Speaker 4 (10:44):
And I think that's what does make this report, maybe
not the most significant in years. Maybe you know, it
may be a big nothing, but certainly impacts things like
what the Fed's going to do in two weeks and
certainly would convince me, you know, if we what do
we see last time and up taken unemployment rate by
(11:04):
two tenths of percent. Yes, so you see another two
tenths I'm much more concerned about recession in that case
than if you see it flat line or going to
come down like economists are predicting. The economists are predicting
right now, unemployment rate goes from four to three to
four two goes to four to five instead. Well it's
a very different story, but go up.
Speaker 2 (11:24):
Let's take a quick break here. When we return, let's
talk a little bit more about the jobs market, specifically
as it relates to new college grads and what they
are finding as they are looking for jobs today.
Speaker 1 (11:38):
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Speaker 5 (12:09):
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Speaker 2 (12:47):
All Right, so talking a little bit more about the
labor market. There's a peace from the New York Times,
specifically talking about recent college grads and what they are seeing.
And the big story that I think is con here is, look,
companies aren't necessarily laying people off very rapidly, like they're
not saying we want to get rid of people, but
(13:10):
they're not really backfilling a ton of jobs the same
way they normally would, and so as a result, hiring
has gotten pretty sluggish as well, and new grads are
finding it harder than the last couple of years, which
a not surprising be kind of the fed's goal. But
see you don't want to see go too much further
because then it becomes problematic and it.
Speaker 4 (13:31):
You know, further, I think makes people question the value
of a collegy degree, and all these trends that we've
been seeing over the last few years. You know, one
temptation here is I do just look at that you know,
sixteen to twenty four year old unemployment rate, and it
is high. It's in the nines, but it's always considerably
higher than the overall unemployment rate for a number of
(13:51):
structural reasons. But what this piece is specifically talking about
is not just sixteen to twenty four year olds. We're
talking about college grads, and so therefore you're talking about
a different hire. We are still seeing a fairly tight
labor market in some areas of for instance, construction. If
you want to go find a trade job working at
(14:11):
a semiconductor plant, you can do so in parts of
the country with quite a bit of ease and no
college degree. What we're seeing a big pullback on, as
this points out, is you know, insurance, finance, real estate
corporations really pulling back on hiring at pretty significant levels.
And those are you know, fairly big employers for new
college grads, and so, yeah, I'm not shocked to see this,
(14:36):
and I've been I guess I've been pushing back on
this narrative for the last year or so, Like you know,
whate was me tried graduating in two thousand and nine,
and we're still not there.
Speaker 3 (14:48):
Right.
Speaker 4 (14:48):
This is not the type of labor market that I
think anyone that graduated in you know, two thousand and
eight through let's call it twenty twelve was dealing with.
But you know, it is magnificantly weaker than anything we've
seen in the last six or seven years for college grads.
Speaker 2 (15:03):
Yeah, and look, you have anecdotes in here where hey,
someone finished college and said it took four months to
you know, find a job, and then other new graduates
spent six to nine months. And I have no doubt
that this is the case for some new grads. But
it also doesn't speak about the fact that in most
cases that's not necessarily what you're seeing. So things have worsened.
(15:27):
But I still think that when we're trying to figure
out where this economy is and where the labor market is,
it's in a place right now that I think is
fairly balanced between labor and capital. If I had to
judge it, like the most of the twenty tens, or
at least the early part of the twenty tens, like
twenty ten through twenty fourteen, was very much skewed in
(15:51):
favor of employers in capital. Hey, if you wanted to
hire someone, you had just a bevy of people you
could choose from. Because there's a guy was that bad? Yeah,
this guy with a PhD driving pizza delivery truck.
Speaker 3 (16:03):
So courreer goal.
Speaker 2 (16:05):
Two years ago. In twenty twenty two, it was skewed
completely in the other direction. Hey, we're Walmart, and we're
going to pay you one hundred and fifty thousand dollars
to teach you how to drive an eighteen wheeler. Today,
it's neither of those things. It's I think we're actually
at a point that is pretty close to healthy balance
in the labor market, but it is skewing fairly quickly
(16:29):
towards employers. And that's something that I think is problematic,
just because you want people to be employed so that
you know they can pay for their stuff and live
their life and YadA YadA.
Speaker 4 (16:42):
Yeah, I think the answer for a lot of college
grads right now is you may not find employment in
your field right now. You know, by one measure, the
pace of hiring in professional and business services, which let's
be clear like that that covers a lot of fields
that are a pretty commonplace to hire for college grads
is down now to levels that we have not seen
since two thousand and nine. And so I think that's
(17:03):
I mean, that's my message if I am a graduating
college student right now is I may not be able
to find a job in my preferred area of work.
And you're not alone in that. There have been plenty
of college graduates who have found a similar type of thing.
And that is going to be the key here, because
there are areas If we look at the overall labor market,
(17:25):
like you said, Chuck, it's fairly well in balance, and
there are areas where you know employers are desperate for employees. Still,
it just might not line up with what you were
hoping to do at the early stages of your college
graduation career.
Speaker 2 (17:38):
And also, I've said this before, first jobs are supposed
to suck. Like you, you're not going to do something
cool at first because you get to do the stuff
that no one else at your company wants to do.
That's that's kind of how first jobs are. And I'm
not saying that you should like seek out companies that are,
(18:01):
you know, abusive, retreat you badly, Like that's not what
I'm saying in terms of the kind of suck. But yeah,
you're gonna be doing stuff that no one wants to do.
I still remember when I started working fifteen years ago.
I was coming in on weekends licking envelopes, and you know,
that was the gig, Like that's what you had to
do because no one wanted to come in on weekends
(18:22):
and look envelopes. And I'm, you know, very thankful I
didn't end up like George someone nearly George Costanza. You know,
it would have been like really bad, but I made
it and I'm still here today, So it's it's it's
good to know. But look, first jobs, don't set your
expectations too high. You want to be somewhere that yeah,
you've got a path to learning and understanding the business
(18:45):
and growth from there. But you're gonna do a lot
of stuff that you don't like and that you don't
want to do. And that doesn't mean it's a bad
first job or a job you shouldn't take as a
college grad.
Speaker 4 (18:54):
And you know, furthermore, I think a lot of people
are hesitant to take jobs that don't fit their resume.
But what's worse than a job that doesn't fit your resume.
Speaker 3 (19:03):
Is no job.
Speaker 4 (19:04):
No job and a gap in that resume, even if
you're not worried about the financial piece of it, Like
the no job on the resume is a lot worse
than the Yeah, I worked at a restaurant for a
year and a half and that was my way of
making I'll hire that person all day.
Speaker 3 (19:19):
Let's take a quick break here.
Speaker 2 (19:21):
When we come back, we got Wall Street Watch coming
up next.
Speaker 1 (19:41):
Like us on Facebook and follow us on Twitter at
TFE show. Breaking business news is always first right here
on the Financial Exchange Radio Network. Time now for Wall
Street Watch, a complete look at what's moving market so
far today right here on the Financial Exchange Radio Network.
Speaker 5 (20:01):
The markets are a mixed territory, with the Nasdaq trying
to claw back some of its recent losses as Wall
Street readies for tomorrow mornings all Important Jobs report for August.
Right now, the Dow is down by thirty points, SMP
five hundred is up by about a third of a percent,
and the Nasdaq up by one percent, or one hundred
(20:22):
and sixty seven points. Russell two thousand is flat, ten
year Treasureel down by one basis point at three point
seventy five percent, and crude oil up one and a
half percent, trading just above seventy dollars a barrel. Verizon
announced it will acquire Frontier Communications in an all cash
deal valued at twenty billion dollars, where the deal is
(20:42):
expected to close in about eighteen months. Meanwhile, shares and
Tesla are up by seven percent after the electric car
maker said earlier today that it plans to launch fully
self driving cars in Europe and China next year. Sticking
with the auto sector, where the Wall Street Journal report
ordered that Jeep parent company Stilantis has temporarily stopped producing
(21:04):
two of its top selling US models, the Jeep Wrangler
and Grand Cherokee, that stock is off by one percent. Elsewhere,
Jet Blue raised its guidance for.
Speaker 3 (21:14):
The third quarter for its third quarter.
Speaker 5 (21:16):
Revenue, sending that stock up by ten percent. Shares in
C three dot AI whatever that is is, are down
by thirteen percent after the AI software maker posted lower
than expected quarterly subscription revenue and top golf Callaway shares
down by about one percent after the company announced it
will split into two separate businesses, where Callawei will focus
(21:40):
on golf equipment and lifestyle, while Top Golf will zone
in on golf entertainment. I'm Tucker Silvan, that's Wallstreet Watch.
Speaker 3 (21:48):
It's tough about that Stillantis news.
Speaker 2 (21:51):
I was just getting over by Jasis Stalantis yesterday and
who knows now.
Speaker 4 (21:57):
Recurring Stilantis jokes at the best.
Speaker 3 (22:00):
Is there any other kind of Stilantis?
Speaker 1 (22:02):
Nope? No.
Speaker 2 (22:04):
Let's talk a little bit about capital gains tax. The
Harris campaign rolling out yesterday a proposal for a twenty
eight percent capital gains tax rate on people earning a
million dollars or more. This differs from the Biden administration's
previous proposal to have the top capital gains rate basically
(22:25):
be at the top marginal tax rate of thirty nine
points six percent if the Trump tax cuts.
Speaker 3 (22:31):
Were to expire.
Speaker 2 (22:33):
And so it's a difference that is being talked about
as far as tax policy and its potential impact on
capital markets.
Speaker 4 (22:41):
Yeah, so let's let's jump through this because I've seen
I was asked about this by Vidi Penn this morning.
One of the affiliates down in New Haven, Connecticut who
had seen it TikTok video about this and oh, you know,
it's only going to impact people that are you know,
have hundreds of millions of dollars, and that that's not
quite the case. But I've also heard things that you know,
every American is going to be paying a twenty eight
(23:03):
percent capital gains tax rate. That's also not the case.
So today, the way that capital gains taxes work is
they are always taxed at a rate that is lower
than your ordinary income tax rate. Correct, right now, universally
the case. The way it works right now, if you
are single making under forty seven thousand dollars, are married
filing jointly making under ninety four thousand, you pay zero
(23:25):
percent on capital gains tax right now. Okay, if you're
between forty seven and five eighteen these are thousands per single,
or ninety four and five eighty three married, you pay
fifteen percent. If you are making more than five to
eighteen as a single file or more than five eighty
three is married filing jointly, you pay twenty percent on
capital gains.
Speaker 3 (23:43):
These are all federal numbers.
Speaker 2 (23:44):
Obviously, your states can differ depending on where you're listening
to us out of.
Speaker 4 (23:48):
In addition, after Obamacare was passed, there is another three
point eight percent net investment income tax put on top
of capital gains. And so in that case, I think
it's over a quarter million dollars in total income, then
you're getting up to another three point eight. So hypothetically,
if you're in that fifteen percent bracket, you could be
at eighteen eight. If you're at that twenty percent, you
(24:09):
could be at twenty three point eight. And under the
Harris proposal, if you had over a million dollars in
total income and or capital gains, you'd be looking at
something like thirty one point eight percent federal taxation on
capital gains. In this type of scenario, to your point,
then you've got state tax. And I just like explaining
(24:29):
this stuff because it doesn't ring true to people when
we say, well, fifteen percent capital gains. Yeah, if you
live in Massachusetts, you've automatically got another five percent on
top of that. Correct, If you live in Massachusetts and
you're more than a million dollars, you've automatically gotten another
nine percent on top of that.
Speaker 3 (24:42):
And so in Florida you don't have any of that
you know.
Speaker 4 (24:45):
Exactly, So it does run the gambit the I think
you know what's being talked about here, and you know
what's being proposed. Is it completely out of this world? Now,
this is a tax proposal that's been proposed by many
other candidates running for president. I think it's about as
likely as any other tax increase to actually go into place.
(25:09):
And you know, this has actually been a long standing
debate is hey, should we be taxing capital gains at
a lower rate than ordinary income? There are plenty of
arguments on either side of it.
Speaker 3 (25:20):
My answer is yes and no.
Speaker 4 (25:22):
I know your first million dollars tax free?
Speaker 3 (25:25):
Right.
Speaker 2 (25:25):
The idea that I have, and this is how I
would approach it, unify the rates, because look, long term,
why do you want to tax money that is made
buying and selling stuff at a lower rate than working.
Doesn't make sense treat capital and labor the same. But
you do want an incentive to start a business, to
(25:47):
buy home, to do these things that generate a lot
of economic activity. And so the way I would approach
it is, look, unify the rates. You could bring income
tax rates down a touch, you could bump capital gains
rates a little bit, and unifying where that number ends
up being. I don't know, but the first million dollars
that you get in capital gains in your lifetime you
(26:10):
don't pay tax on. Because I want more millionaires, I
want people having money, and so I want to make
it something where, yes, you get a significant break on
that first million dollars in capital gains.
Speaker 3 (26:24):
That you earn in your lifetime.
Speaker 2 (26:27):
Once you get past that, what are we really doing here,
you know, Like, does Jeff Bezos need preferential capital gains
tax treatment at this point?
Speaker 3 (26:38):
No?
Speaker 2 (26:38):
Like, why why should he pay a rate half as
much as if he's earning that through work.
Speaker 4 (26:45):
I guess my only qualification there will be so long
as we don't reach a rate that is burdensome in
comparison to other developed countries. And twenty eight percent isn't there,
but forty is, and so I would bring that up, Like, Okay,
if you want Jeff Bezez to create his next company
in the United States, don't put the capital gains tax
rate at a rate that's higher than it is in
(27:05):
the United Kingdom.
Speaker 2 (27:06):
I don't know what if we make it more advantageous
to earn the income through being paid as a worker, sure,
like wouldn't okay, great, so the company actually has to
produce income to be able to pay him out.
Speaker 3 (27:16):
Like, I don't know, Like these are things that I
think of.
Speaker 2 (27:20):
I don't want to make it burdensome, but I look
at it and the the justification for always having the
capital gains tax lower than earned income doesn't mesh with me.
Do I think there there's a reason that you want
to tax it lower, you know, at certain points, absolutely
(27:42):
because you want to encourage business formation and capital formation
and all these things that we know are good for
the economy. But at the same time, do you want
to bestow that tax treatment permanently just because someone's good
at trading stocks are made a billion dollars? You know,
running a company will no Like at a certain point
(28:05):
you say, why am I treating this person way better
than someone who's working nine to five every day?
Speaker 4 (28:09):
So this will be I'm sure one of many items
that's brought up in next weeks. Is it next week's
debate next Tuesday? I think, yeah, it sounds I'm sure
it won't be the highlight because there are going to
be other border issues and other things that are going
to be more commonly discussed. But I mean, my concern
from well, my concern from the Harris campaign is, you know,
we're talking about significant tax increases and significant spending increases
(28:33):
on you know, my economic concerns about the Trump tax policy.
We're talking about significant tax cuts with zero from what
I've been able today to tell, zero proposed corresponding cuts
in spending, and so in both cases, I think the
net result that you end up seeing for either next
president is a continued dramatic increase in the deficit. And
(28:55):
I know that nobody seems to actually care about that,
But that's all I'm hearing. No from either can That's
all I'm hearing.
Speaker 2 (29:01):
You can actually make a case that it's unclear if
any president, not even it's unclear if any party has
been really serious about deficit reduction since the nineteen twenties.
Speaker 4 (29:17):
You could make that case. But at least one party
previously used to talk about it.
Speaker 3 (29:23):
But they didn't judge anyone on their talk. I hear you.
Speaker 4 (29:26):
But at least that was what was run on, and
today that's not as what is being run on.
Speaker 2 (29:30):
It is true, like no one's even talking about this
in a borderline serious way, no at all.
Speaker 4 (29:38):
You know, in fact, Democrats are probably talking I don't know. Again,
I would call them on their bs on this one,
but Democrats are probably talking more seriously about fiscal responsibility
at the federal government level right now than Republicans are,
which is a shocking reversal.
Speaker 2 (29:52):
It's no, We're a very odd spot at the moment.
Let's take a quick break here. When we return, let's
talk a little bit about US Steel. There is a
deal that's been on the table for a Japanese company
to buy them, why the Biden administration may be trying
to veto that deal, and what it means for the
(30:13):
company and US Steel going forward.
Speaker 1 (30:17):
Business and financial news affecting the markets and your wallet.
We've got it all straight from Wall Street right here
on the Financial Exchange Radio Network. The Financial Exchange streams
live on YouTube. Like our page and stay up to
date on breaking business news all morning long. This is
the Financial Exchange Radio Network.
Speaker 2 (30:54):
All right, let's talk a little bit about US Steel,
the steel that's made in the United States.
Speaker 3 (31:01):
So US Steel has a deal on.
Speaker 2 (31:04):
The table for to be bought by the Japanese company,
nip On Steel, and the Biden administration is saying that
they are going to try to block the deal. Yes,
few different competing things here, and trying to sort through
them is a mess, quite honestly.
Speaker 3 (31:24):
The first is US steal is.
Speaker 2 (31:25):
Saying, look, if we don't get this deal done, we're
not going to be able to invest a whole bunch
of money to modernize our mills that Nipon Steel is
going to invest into us if the deal's completed.
Speaker 4 (31:37):
Don't have the cash, can't be done.
Speaker 2 (31:38):
So basically saying, hey, we don't think our mills can
be competitive and we might have to close them and
end up losing a bunch of jobs as a result.
Speaker 4 (31:45):
Which, given you know steel dumping by China over the decades,
could be true.
Speaker 3 (31:51):
I think it's very much true.
Speaker 2 (31:54):
The other piece, though, is that the Biden administration is
looking at this and saying, hey, we don't want a
foreign company, even one from you know, a country that
I think we'd consider a pretty close ally.
Speaker 4 (32:06):
I'm trying to think of, like how many countries actually
I would consider it to be a closer political and
defense ally than Japan.
Speaker 2 (32:12):
Maybe three that I can think of. I would probably
go the UK, Canada and maybe maybe maybe maybe France. Yeah, yeah,
that's like about as far and you could maybe onep
Australia in that that sure in that, but Japan's central
area as well, given the sub deal with Australia that
(32:33):
angered the UK and France a couple of years ago.
Speaker 4 (32:35):
So if there is a national security block that is
put on this, then to me, what that indicates is
that there are certain companies in the United States that
can only be owned by United States corporations. There are
certain industries in the United States that can only be
owned again, because if it's not gonna be owned by
a Japanese company, then again, what are we even talking
about here? And this is my problem with this is
(32:58):
I have no idea what the overall message and strategy
on US trade is at this point, Like what are
those other industries now where we would say absolutely not
that cannot be done anywhere but the United States.
Speaker 2 (33:13):
And not even for US businesses, but even just you know,
US assets. You know the stories about China buying up
US farmland and stuff like that, and you know, oh,
we've got real estate that we're buying that's close to
military bases, Like, yeah, what are we doing about that?
There's no coherent policy on this.
Speaker 4 (33:31):
See, and I'm not necessarily saying that, by the way,
we should allow this deal to go through. But I
think not having some sort of public discourse puts us
in a disservice, like okay, the counterpoint would be, would
the Japanese allow for Ford to buy Toyota. Not that
they could, but would they allow that? I would think not.
I would think the same thing might be blocked in
(33:52):
Japan on similar types of concerns, and so that might
be the counterpoint to all this. But there's no coherent thought,
there's no go here into policy on what exactly, in
my mind, you would use as a justification for blocking
a deal like this.
Speaker 2 (34:07):
The United steel Workers Union has come out against the deal.
They're saying that the threats to close the mills are
the result of quote bad management of the company and
an ill conceived merger with Nippon Steel, so that the
union is saying no, we don't want this to happen,
and basically saying, look, if a Japanese company buys us,
they're going to be able to gut our operations and
(34:29):
benefit mills overseas. So it's I have no idea what
is actually the goal of Nippon Steel. I don't know
what is true and what is not here, But it
does seem that this deal has the potential to end
up not going through here, and if so, you know,
(34:49):
it would be a pretty big use of regulatory authority
in this fashion.
Speaker 5 (34:53):
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(35:16):
the information you'll need to book a trip that you'll
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(35:38):
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Speaker 2 (35:57):
Volvo abandoning its goal of sell only evs by twenty thirty.
Much like other car companies, they've realized, gee, not everyone
wants to buy an electric vehicle in the next six years,
and so this is gonna be you know, problematic for us. Instead,
they are saying that ninety to one hundred percent of
the cars sold will be fully electric or plug in
(36:18):
hybrid models by twenty thirty. So it appears that they're
going to be leaning heavily into that plug in hybrid
as the the other option h with that additional ten
percent potentially allowing for a limited number of conventional hybrid models.
Speaker 4 (36:31):
Why in twenty twenty one were we all just willing
to sop up a whole bunch of corporate lies.
Speaker 3 (36:38):
Sing it with me, now, money money, money, mone.
Speaker 2 (36:42):
Like I think about this one, say every car company
was saying, all these SPACs are getting tens of billions dollars.
Speaker 3 (36:48):
We want in on it.
Speaker 4 (36:50):
Like, think about the lie, you know, the the lies
that occurred here at Sweden's Volvo. Like I don't know,
you could pretty easily look through it and transparently know
that wasn't going to happen. But think about the lies
that occurred in the spack market during that period of
time of companies that were just saying ludicrous things like
we're going to get to revenue, we were going to
(37:11):
get to record revenue faster than any company in corporate history.
We're going to get to billions of dollars worth of
revenue faster than Facebook.
Speaker 3 (37:20):
Just all these crazy, outrageous.
Speaker 4 (37:23):
Claims that quite honestly just shouldn't have been allowed to
be made without massive, well in some cases, massive lawsuits
did follow them.
Speaker 2 (37:32):
It was one of the most fraudulent time periods in
publicly traded harkness.
Speaker 3 (37:37):
Really it really was.
Speaker 2 (37:39):
There was some very very bad stuff that was going
on in twenty twenty one and twenty twenty two in
equity markets, and.
Speaker 4 (37:48):
You can see, you know how easy it was to
get caught on that bandwagon of oh Man, everything that
goes public these days just goes straight through the roof.
So you know, I'll buy into this idea that they're
going to generate more revenue than any company in history,
be bigger than every car company in history. Like it,
just ludicrous claims that had no basis in reality.
Speaker 3 (38:09):
Let's take a quick break here. We still got.
Speaker 2 (38:13):
Well a whole lot more financial exchange in our second hour,
proximally an hour of it. Yeah yeah, stick around, We
got sixty more minutes coming up.
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