September 10, 2024 • 38 mins
Mike Armstrong and Paul Lane discuss Google and Apple facing billions in penalties after losing appeals in the EU. The economy needs and bold Fed. Will it get it? Where should you put your cash now that high yield savings accounts are getting less attractive? Car giants are being forced to confront some hard truths over the EV transition. The rise and fall of Red Lobster.
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Speaker 1 (00:00):
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Corporation DACE is the Financial Exchange with Mike Armstrong and
Paul Lane.
Speaker 2 (01:13):
Good morning, and welcome back to the Financial Exchange. We've
got markets that were strongly positive yesterday basically not moving
this morning. We've got the Dow to off one hundred
and eighty points four ten percent, SMP almost exactly flat,
the S and P five hundred up one point, the
NASDAC up thirty one points, basically one fifth of a percent.
(01:36):
In bond markets, we've got the yield and the ten
year Treasury continuing downwards to three point six seven to
two percent. And the best news of the day that
I can bring up would be crude prices. Crude prices
off another three point three percent, down below sixty seven
dollars per barrel. I've been noticing this at the gas station.
About you, Paul, I paid I think I paid under
(01:57):
three bucks a gallon the other day at beach. But yeah,
definitely seeing a distinct move in gas prices here and
and oil prices. Taking a look at gas prices throughout
the country, we're sitting on a national average of three
twenty six in Massachusetts and New Hampshire. You're sitting below
that average. Three twenty five here in Massachusetts, three twenty
(02:18):
one in New Hampshire, Maine, three two twenty nine, sorry,
three thirty five round properly, three thirty two in Vermont,
three twenty eight in Connecticut, and Rhode Island three dollars
and thirteen cents. So if you can make your way
through Rhode Island on the direction of wherever you're going,
then you can save a little bit on gas there
(02:40):
as well. But yeah, I mean, that's the one positive
thing I can look at as a global slowdown clearly
takes shape. And it's not just the United States that's
driving prices lower here. It's you know, certainly demand from
China impacting things. But we've had oil now under that
eighty bucks a barrel range for quite some time, and
we're seeing that, yeah, take shape in lower gas prices,
(03:02):
which I will take albeit not a great signal for
the state of the economy. Anything else catching your eyes
market wise this morning.
Speaker 3 (03:09):
Paul, No, nothing else out there.
Speaker 2 (03:10):
So let's talk about this Google and Apple case that
got handed down just this week. So these are not
recent cases, to be clear. These are rulings that came
from courts back in the twenty tens. In Apple's case,
I think it goes back to a case from twenty
sixteen where the European Union said, look, you know, Ireland's
(03:31):
tax code violated EU rules and you're going to be
forced to go and collect another fourteen point four billion
dollars in taxes that Apple had been appealing. They'd appealed
this all the way to this year, and final ruling
came down in Luxembourg saying no, yeah, Ireland, you got
to go collect this. I know you don't want to
collect this tax revenue because it's going to prohibit you
(03:52):
from you know, getting those new businesses that want to
do whatever, the reverse double Dutch Irish whatever crazy tax
loophole thing. But Ireland going to be collecting fourteen point
four billion dollars in back taxes and that's been sitting
in an escrow account as this lawsuit plays its way
through the European Union, which fourteen point four billion. I mean,
(04:14):
Apple's revenues are massive, but that's not an insignificant sum.
Speaker 4 (04:17):
That's a couple quarters.
Speaker 2 (04:18):
Of MAC revenue just being paid out in back taxes
by Apple here.
Speaker 3 (04:22):
Yeah, and that I from revenue maybe rack MAC revenue.
But it's interesting the EU has really been at the
forefront of being the technology watchdog out there. There are
several cases that it's had and finally in these two instances,
proving out that they can win out through the appeals process,
something that the US has really struggled with on the
(04:44):
antitrust side of things two different cases. Like Mike mentioned
the first one with Apple, they were upset because they
were claiming that they're basically being double tax They paid
taxes on the income already in the US, and now
the EU has come and said, no, you have to
pay taxes to Ireland for the European revenue generated well
(05:04):
as well. On the Google side of things, that was
much more of an antitrust ruling that the EU came
out with where they are assessed to pay a two
point four billion eurofine for a decision that was made
in twenty seventeen claiming that Google unfairly put its predominant
comparison shopping center over its competitors during that period of time.
(05:27):
So that decision was upheld and so I'm.
Speaker 4 (05:29):
Just trying to think practically what that means.
Speaker 2 (05:31):
So I think what it means is if I Googled
a rain jacket, for example, in years past in the
European Union, instead of being directed towards eBay, Amazon, Nordstrum,
anywhere else, I would be driven to Google Shopping, where
they get presumably some advertising revenue from any of those
vendors who want to advertise on Google Shopping, which I'm
(05:52):
sure Amazon didn't, but Nordstrum I'm sure paid fees to
be filtered in through the Google Shopping network.
Speaker 3 (05:58):
Yeah, that's what it seems like here is kind of
funneling people into their price comparison stopping service over some.
Speaker 4 (06:04):
Of the rival offerings. Ye, that makes sense.
Speaker 2 (06:07):
I mean Google here has now faced a number of
successful anti trust it really you know, we're talking about
monopoly power cases both in the EU and domestically here
in the United States. We covered one yesterday, but they
just finished up and lost the case on monopoly power
on search, and at the same time Justice Department now
(06:29):
bringing a case for them on advertising revenue and the
interesting case this is a US case, not in the
U case, but the interesting piece on the advertising revenue
or the advertising you know, monopoly power piece one. It's
not terribly well known outside of you know, people that
work in tech advertising of how.
Speaker 4 (06:49):
That system works.
Speaker 2 (06:50):
It's not like the everyday person who does Google searches
understands the functionality.
Speaker 4 (06:54):
Of all that. But two, the lawsuits also.
Speaker 2 (06:57):
Coming at a time where Google's losing a lot of
that dominance. If you take a look at how Apple
and Amazon and Meta are pushing their way into the
online advertising market, they are directly taking dollars from Google
at the same time that they're facing this massive anti
trust case. So the the Quite honestly, I feel as
though the EU's way of doing things on a lot
(07:20):
of these cases makes hell of a lot more sense
than the way we handle privacy and tech on the
United States landscape. The one power that they're never going
to have, which the United States does have is to
say this.
Speaker 4 (07:32):
Is a monopoly, break it up, right, you know.
Speaker 2 (07:34):
For instance, their take the EU is taking Live Nation
to court I think this year over their monopoly power.
But worst case scenario, Live Nation faces a bunch of fines.
It's up to the United States to break up a
US company, which god, I wish they would in the
case of Life Passion. So yeah, interesting developing cases and
(07:55):
continue these big tech companies, you know, not as they
paid a ton of taxes over in the EU, but
if you want to have operations there becoming more and
more costly to do so on these lawsuits of what
in many cases I think is pretty founded abuse of
antitrust and anti competitive practices that Google, Apple and all
(08:18):
these others employ. There interesting piece here from the Census
Bureau before we go to break taking a look at
where incomes actually came in. So the US Census Bureau
puts together their data on all of this on a
regular basis, and new data out from the USNSUS Bureau
(08:38):
finally kind of proving out what I think most of
us had known, but that incomes did substantially rise. And
it's really the first time since the pandemic that you
can look at this on an inflation adjusted basis. Right,
Like we talked about this early on in twenty twenty
one and twenty two, which was hey, wages moving up,
but when you factor in inflation, people are still losing money.
(08:59):
And in twenty two twenty three it was the first
time that you saw real wages grow. So inflation adjusted
median household income was eighty thousand, six hundred and ten
dollars in twenty twenty three. So again that's inflation adjusted
median household income, so you know, oftentimes dual working household
that's up four percent from the twenty twenty two estimate,
(09:21):
which came in at seventy seven thousand and five forty,
which was again announced in its annual Report for Households
Financial Wellbeing. You know, this report comes at the same
time as others that we have seen looking at just
how dramatically we're seeing things like credit card.
Speaker 4 (09:38):
And auto loan default rates on the uptick here.
Speaker 2 (09:42):
So again, I don't think any of those things are
powerful enough to bring down the US economy and the
way the housing lunacy did of eight, but important to
look at when you consider the state of American households,
and you know, more and more consumers getting into default
on their credit cards and auto loans can't be really
seen as a good sign other than for anything other
(10:03):
than hey, maybe I can pick up a cheap used
vehicle sometimes in your future.
Speaker 3 (10:07):
Yeah, those delinquency rates. I was ready to sort of
poo poo them, But if you look back twelve years,
you know we're getting two levels. It's not eight oh
nine levels of craziness, but it is a little bit
more significant than what we've seen over the last ten
plus years or so. And this data on the income side,
to me is really helpful because of that inflation adjustment,
(10:27):
you know. Like you mentioned, we talked about how wage
growth peaked in twenty twenty two, but that was on
the heels of things costing. More helpful to get this
context that, hey, wages have come up even with the
substantial impacts of inflation that we've seen over the last.
Speaker 4 (10:41):
Couple of years. Let's take a quick break.
Speaker 2 (10:42):
When we come back, we're gonna have a little bit
of trivia and then we'll dive into a piece about
the Federal Reserve and why they need to be more bold.
That's next on the Financial Exchange.
Speaker 1 (10:53):
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(11:14):
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Speaker 3 (11:27):
Trivia, brought to you by Applebee's.
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(11:52):
Today is Ali Baba founder Jack Ma's sixtieth birthday. Jack
Ma and a group of seventeen others founded Ali Baba
and ran the company until he resigned under suspicious circumstances
back in twenty nineteen. Drew your question today, what year
did jack Ma launch Ali Baba? Once again, what year
(12:13):
did Jack Ma launch Ali Baba? Be the eighth person
today to text us at six one, seven, three, six
two thirteen eighty five with the correct answer, and you
win a Financial Looks Shane Show t shirt. Amb registered
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Space shirt include the keyword to Applebee's in your text,
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(12:34):
show six one, seven, three, six, two, thirteen eighty five,
and the eighth correct response will be our winner. See
complete contest rules at Financial Looks Shane show dot com.
Speaker 2 (12:43):
I don't remember if it's airplane one or airplane two,
but there's a scene where they're covering the you know,
airplane that's gone rogue or an airplane two case, spaceship
that's gone rogue, and you know, it cuts from clip
to clip of news anchors across the world covering the story,
and one of them is meant to be the Soviet Union,
and there's just an off camera gun pointed at the
(13:05):
newscaster's head as he's doing the story. And that scene
right there just reminds me of the quote suspicious circumstances
under Jack Ma's resignation. It's like, yes, I'm writing this
resignation of my free will while there's a gun off
off camera pointed directly at my head.
Speaker 3 (13:22):
He hasn't been heard from ever.
Speaker 2 (13:24):
Agne, Yeah, why is that funny? That that's not funny?
It is genuinely terrifying. And the only reason that I
can fathom of that we we seem to know here
is that he was seen as too popular and too influential,
and anyone that gets too popular under this Chinese administration
(13:48):
of you know, taking influence away from the all powerful leader,
gets stuffed in a closet somewhere and you never hear.
Speaker 3 (13:56):
Well, they thought he was adversarial against their their their party.
Speaker 4 (13:59):
I'm not even sure it was that where you never
even said anything like that.
Speaker 3 (14:02):
I think he was just supporting.
Speaker 4 (14:05):
Hong Kong right independence, Yes.
Speaker 3 (14:08):
A little bit, I mean, but it doesn't take much
to your point.
Speaker 2 (14:11):
Yeah, My sense was just, you know, okay, if anybody
here is growing to the point where people listen to
them more than they listened to Shi Jingping, then you.
Speaker 4 (14:21):
Get stuffed in a closet somewhere and you're never heard
from the game I'm seeing.
Speaker 5 (14:24):
August tenth, he reappeared in public view for the first
time in months.
Speaker 4 (14:28):
Yeah, it was August tenth of this year, correct, Yeah, yeah,
when was the resignation.
Speaker 5 (14:35):
Oh boy, twenty nineteen, I think it was.
Speaker 2 (14:37):
Yikes, I mean he's made public appearances since then. No,
he had not been out in public for a very
long time the economy needs a bold FED, we won't
get it. That's an op ed from Larry Hathaway. He
is the co founder of the Jackson Hole Economics and
a former chief economist of UBS. And quite honestly, I
(14:57):
haven't read I don't recall having read any of his
prior to but he lays out an interesting argument, I think,
and it's one that we ourselves have debated on this
program before, but it had more. We previously debated it
when inflation was clearly getting out of control, and we said, well,
you know, clearly inflation's running wild. Why shouldn't the Fed
(15:17):
just increase interest rates by four percent all at once
and be done rather than this, you know, this slow
approach that they have. Wouldn't that be better for the economy?
And at the time, so Chuck was really landing in
that argument of hey, why not, like we know that's
where interest rates need to go long term, why not
just bump them up all at once, by like four
percentage points and just see what happens. And my my
(15:39):
main argument against that was I would imagine that there's
a whole bunch of banks and investment companies that would
just overnight fail if that were the case if you
had rates going up, I have a tougher time making
that same argument on the way down. I don't know
who would fail if rates moved down by three percentage
points overnight. I'm sure there's somebody making some crazy bet
(16:00):
like the Japanese carry trade that would blow them out
overnight and to make it not doable. But that's the
argument that Larry's making here is, Look, the Federal Reserve
knows or has a very strong sense that their policy
right now is restrictive in terms of you know, in
terms of growth and inflation. According to them and most critics,
(16:24):
is really an issue of the past. So why are
we taking this twenty five or fifty basis point approach
to interest rates? Why shouldn't we just say, hey, we
know rates are too high, bring them down to four
percent immediately, and then we'll go from there.
Speaker 3 (16:38):
My argument would be, and I'm not gonna be able
to back this up with any type of numerical data,
but let's say they do step in and do one
fifty like that, you know, next meeting, all of a sudden,
We've talked about Mike, you know, Mike conundrum before about
not even looking at a whole echuy line of credit
to do a renovation on a porch because the interest
rates were just too high. But all, all of a sudden,
(17:00):
immediately overnight, that helock that I could get. Let's say
it's six and a half or seven today, and overnight
defence is we're cutting one hundred and fifty base spoorts,
So one point five percent, all of a sudden, that's
gonna sit in let's call it the five percent ballpark.
Does that do enough to stoke inflation that me and
every other Joe Schmoe collectively out there, or there's just
(17:21):
a tremendous amount of focus now on home improvement barring
that puts inflationary pressure in the economy. I don't know,
but that would be perhaps my guess, and the trickle
down impact they could have to the housing market. I'm
talking about the short end of the curve with the
helocks there, but maybe the ten yure moves in lockstep
as well and it comes down significantly.
Speaker 4 (17:41):
I would agree.
Speaker 1 (17:42):
Yeah.
Speaker 2 (17:42):
See, like Larry pits this piece out and makes the
assumption that inflation is one hundred percent defeated and it's gone,
it's behind.
Speaker 4 (17:50):
Us, and I think so. But you know, the worst
possible outcome you.
Speaker 2 (17:58):
Can have is stagflation, right where the stagnating and inflation
is taken off. I don't think we can possibly head
for their based on current policy. But if the FED
all of a sudden cut rates by two percent or
one and a half percent, do I have some twinge
of concern that inflation.
Speaker 4 (18:12):
Could take back off.
Speaker 1 (18:13):
Yeah?
Speaker 2 (18:14):
Absolutely, Like I think that most of the inflation we
saw was due to supply chains, was more due to
supply constraints than it was to surge and demand.
Speaker 4 (18:22):
But clearly it was a little bit of both, right
and and so, and.
Speaker 3 (18:27):
What if you have you know, you cut the rates immediately,
you stoke up demand, and then you have a commodity
shock that is unexplained out there, whether it's some global
event that just you can't plan for. And you have
the two of those combined, and that cocktail leads to
inflation rearing its head again. Your pot committed. You can't
just flip back and go another one hundred basis points
back in the other directions. So that's why they likely
(18:49):
take the gradual approaches that it allows for them to
time to sit and process and react.
Speaker 2 (18:54):
Now the question will be basis, I want to replay
this tape. If six months from now we're sitting here
with unemployment up over five percent, then.
Speaker 3 (19:05):
Well that's the Monday Morning quarterback everyone's gonna do if
they don't get it right.
Speaker 2 (19:10):
I recognize that, but you know that's the exact morning
quarterback that the Fed themselves should be doing to say, hey,
if we do end up in recession here, what mistakes
were made and should we be acting more boldly rather
than just trying to be ultra predictable, which is what
drum Powell has tried to be ultra predictable in terms
of action. Quick break, we're gonna have the trivia winner
(19:30):
for you next, and then some EV discussion, especially what's
coming out of China right now.
Speaker 4 (19:34):
That's next.
Speaker 1 (19:40):
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Speaker 5 (20:04):
That trivia question today was what year did Jack mad
launch Ali Baba? That'll be nineteen ninety nine winner today
of the Financial Exchange Show ta shirt with Steven from Worcester,
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only Paul.
Speaker 2 (20:39):
For the last let's see year and half, the place
to have your money arguably has been high yield savings
accounts because they've been paying a good deal of interest,
more interest generally speaking, than any longer duration type products
like a three year CD or anything like that. It's
(21:00):
pretty clear that next week rates on those types of
products are going to start coming down. If you haven't
been participating, you know, you should know that. Yeah, there's
high yield savings out there with FDIC insurance paying highest
one I'm seeing right now is five point three percent.
That's according to bankreat dot com. My expectation would be
that sometime next week that probably gets cut down by
(21:21):
a quarter percent, and people are finally starting to question, Okay,
what do I do if rates are going to start
coming down? Is there a better place for my cash?
What do I do with it? And unfortunately, this might
be another one of those stories where the time to
act might have been several months ago.
Speaker 3 (21:40):
Yeah, at some point here. The solutions that are proposed
to perhaps extend the yield party a little bit longer
to collect safely some interest on the excess cash that
you have are really all short term options, Mike, in
terms of looking at CDs or even the one. Your
treasuries have come down significantly there as well. Even if
(22:01):
you are to jump into the let's say that five
point three percent savings that you're mentioning, that's truly temporary
in nature. Some banks out there are still gonna be
a little late to lower those rates down as they're
trying to attract deposits, but they move very swiftly to
change those And they mentioned the idea of divin in stocks.
You know, that's also a risky proposition too, because you
(22:22):
have the loss.
Speaker 2 (22:23):
Going from FDIC insurance to oh A or a basket
of dividend paying stocks like Okay.
Speaker 3 (22:31):
I was speaking with a listener the other day, a
perspective client who had, you know, a significant sum in
Verizon and in AT and T, and was you know,
lauding their the divinend that they pay, which is high
in terms of percentage, But you have to be clear
that stock like AT and T and Verizons down twenty
percent over the last five years in terms of your principle.
So yeah, it's great you put in one hundred grand
(22:52):
and you got paid six or seven percent, But when
your one hundred grand is valued at eighty after that
period of time, yeah, the percentage you're getting paid is higher,
but you've you've effectively lost that twenty percent principle. Temporarily,
you know, the stock will go up and down, but
that's something important to note. I mean maybe temporarily, yeah,
who knows. Yeah, right, it could be and it could
be further. You could take it further hit. So big
(23:13):
distinction between divid and stocks and a CD or money market.
But I would say that, well.
Speaker 2 (23:20):
It all comes down to a core thing that we've
talked about over and over, diversification and also aligning your
assets with your goals, right, Like you know, if this
money was money that you want to permanently have generating interest,
then all of it shouldn't have been in highyield savings
to begin with. Right as recently as April of this year,
you would have been able to lock in a loan
(23:41):
to the United States government for four point seven percent.
Speaker 4 (23:44):
Right, it's looking pretty good.
Speaker 2 (23:46):
Now if you go take a look at that back
in October of last year, you could have done it
at five. So, I mean, you know, it has to
do again with putting all of your eggs in one basket,
and we're seeing the pitfalls of that now where hey, yeah,
you can continue to you know, if you had done that,
you've continued to outperform from the yield on that savings
(24:07):
account being over five percent, but you're about to very
likely see that take a pretty persistent hike over the
cut over the next twelve months.
Speaker 4 (24:15):
Would be my guess.
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Speaker 2 (25:21):
Paul, I'll to talk a little bit about EV's I
know you guys are gonna find this hard to believe,
but as it turns out, some of the big car
companies commitments that they made just a few years ago
to only make evs forever may have been a little
bit overstated. Vol those the most recent to back away
(25:41):
from their pretty heavily promoted commitment to only building EV's
by twenty thirty, citing a need to be pragmatic and
flexible amid demand that just hasn't really been a thing
so far. And yeah, we're continuing to see this that. Yeah,
the car companies who had previously been saying no, no,
(26:04):
we're we're only going to make evs five years from now,
We're going to sell eighty percent of our fleet being
electric ten years from now are realizing that A the
cost to make that transition is very, very significant, and
B that's not really what the consumer wants, unless I
think there could be a scenario where that's where the
(26:25):
consumer wants, but the federal government is going to need
to be heavily involved, or someone's going to need to
be heavily involved in building out the charging infrastructure, which
is just not there.
Speaker 3 (26:34):
Yeah, we've talked about this a lot for a long
period of time where there was a significant amount of
enthusiasm wherein borrowing costs were low, for these companies on
the manufacturing side to get out there and say we're
going to invest billions of dollars to build out these
factories to produce electric vehicles. But as you mentioned, the
demand has lagged and a lot of that ties into
(26:55):
the infrastructure. If you issues, and you're right, it's going
to be something that is going to require a significant
amount of government intervention and subsidy. Difficult in a time
where the government is running at a very significant deficit
as it is, and it's harder to make those investments
when the market share is so minimal that the electric
(27:17):
vehicles make up of the overall vehicle market in the
United States, and you're trying to reverse one hundred and
thirty year trend. It's hard to sell to consumers that
way if you haven't built out the infrastructure.
Speaker 2 (27:29):
I mean gas, Look, fueling a car has always been
this kind of lost leading proposition, right. I mean, when
gas stations were initially opened up, they were heavily subsidized
and invested in by big oil as well as car
companies because they recognize, like, hey, we've got this fantastic
new product, but nobody's gonna buy it unless they can
(27:50):
buy gasoline somewhere, and so these were the reason that
every gas station you visit also has a convenience store
in other ways of making money is because selling gas
is not such.
Speaker 3 (28:02):
A low margin business. Yeah, I don't think people realize
how low margin it is for the gas station own.
Speaker 2 (28:06):
And so then take that and make the problem worse, right,
because you can fill up your tank. I can fill
up my tank in no more than five minutes, so
long as you know four people aren't also using the station.
Take that and exacerbate it to the point where, okay,
it's going to take me, what a minimum of thirty
minutes more to fully charge most electric vehicles, even in
(28:28):
a high capacity charger. And you can envision a scenario
where it's not as though we just need to build
out a whole bunch of gas stations that have ev
charging stations. We need to completely rethink the process there,
because you need something to do for half an hour
while your car charges, And I don't think it's going
to be sitting in the seven eleven staring at the
revolving hot dog.
Speaker 3 (28:47):
Yeah, when you were up against I just was looking
at you know, we've got one hundred and fifty thousand
or two hundred thousand retail gas stores in the United States,
depending on what numbers you look at. To replicate that
to the point where you anywhere close, it just takes you.
Speaker 2 (29:01):
Know, that's an important distinction, Like, I know people think
about it that way, but you don't need to replicate
that because.
Speaker 3 (29:07):
You're going to have the home charging.
Speaker 2 (29:08):
Now, seventy five eighty percent of charging happens at home, right,
and so that's that's where most of this is happening.
Speaker 3 (29:14):
But you need some percentage closer to that.
Speaker 2 (29:17):
Right, You need critical routes of you know, EV charging networks,
and you need enough of them so that when everyone
goes to Vermont for the solar eclipse, they actually have
a method of charging their car afterwards and getting down.
And you know that's not a problem for gas stations.
It's a massive problem for EV charging stations. So there's
(29:40):
I said at the time, right when the when the
Biden administration was passing these new tax breaks for producing
and selling electric vehicles, as like you're you're subsidizing this
part of the business, but that's not where it needs
to be subsidized, right, Like you cannot have I have
the sale of those vehicles without the investment and the
(30:03):
charging infrastructure, and in my mind, one of them really
needs to come before the other if you're going to
create the demand for these things. And we're just not
seeing that investment yet, not to say it won't come later,
and you know, Tesla's playing a big role in that,
but unless the other manufacturers get on board, I just
don't really see it happening. And then also there's the
(30:24):
bigger question of is this what the federal government has
any business in doing.
Speaker 4 (30:28):
So let's take a quick break. When we come back,
Stack Roulette.
Speaker 1 (30:32):
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Speaker 4 (30:59):
Time for a bit of stack rou Lett. Paul. I'm
gonna kick things off here with.
Speaker 2 (31:04):
What I find to be almost a laughable story, but
I want to just compare and contrast what I'm hearing
from the auto industry coming out of China, which is
just the Chinese Communist Party, and then what I'm hearing
out of American car makers, and just think about this
in terms of whether you're gonna be able to sell
cars globally. China's BYD is pushing out some electric vehicles
(31:28):
these days that sell for as little as thirteen to
fifteen thousand dollars.
Speaker 4 (31:32):
They are incredibly basic.
Speaker 2 (31:34):
I was listening on a podcast about one of these
things that does not even have air conditioning in the
back seats.
Speaker 4 (31:39):
It's a five seater, gets about a.
Speaker 2 (31:41):
Two hundred and thirty mile range, does not have any
even radio or electronics in the front. It is so
stripped down in basic to get this price points down
that it is just purely a vehicle of function designed
for a working class Chinese citizen primarily, although they're also
selling these things in Brazil and Mexico, you know, in
other emerging markets countries, and so, you know, low cost,
(32:03):
practical ev for for working class. Ford, on the other hand,
just patented an in car system that eavesdrops on you
so it can play you ads. And I'm you know, granted,
they haven't actually ruled this out. It's just a patent.
But the message that I'm hearing from Ford is Facebook.
But listen here here's the catch on wheels.
Speaker 4 (32:26):
If you are a you know, individual, I get that.
Speaker 2 (32:30):
You know, in the United States, you're not gonna be
buying a Chinese made ev But if you are anywhere in.
Speaker 4 (32:35):
The world, which one of these is more appealing to you?
Speaker 5 (32:38):
Right?
Speaker 2 (32:38):
Like, why if I live in India, would I even
entertain buying a Ford vehicle or anything other than like
in I get in India, why you wouldn't want to
buy a Chinese made electric vehicle either? But if I'm
living in Brazil, if I'm living in Mexico and I've
got two big producers who do not make cars in
(33:02):
my country. By the way, I know, Ford probably has
plants in Brazil, but definitely in Mexico. But I have
the option of buying, hey, a really stripped down basic
car from China that is going for next to nothing,
and yeah, it might spy on me, it might do
some nasty things and it's certainly subsidized by the Chinese government.
Or I can go buy an American made car. I
(33:24):
just don't understand why anyone out there would be doing so.
And what's really disappointing to me here is just like
all the innovation that I'm seeing, I'm not saying that
these are well made cars. I'm sure that at the
pace they in China are, you know, putting these cars
through and getting them out there on the market, there
are going to be quality issues. I'm sure there are
(33:44):
fires and other issues like we see here in the
United States. But I see innovation there. And just if
this is the innovation we're getting in the US car
market is hey, we're going to listen to your conversation
and deliver you ads while you're driving, then we are in.
Speaker 4 (33:59):
For some serious problems in the US.
Speaker 3 (34:02):
Yeah, you have to think about it. How does that
benefit the end consumer FORD at all? You know, first
of all people.
Speaker 4 (34:08):
It doesn't. It's gonna drive up the profit margin of Ford.
Speaker 3 (34:10):
Yeah, it's just it's just crazy. That's not the focus
when you drive around. First of all, you don't want
your conversations to be listening to the privacy issue there.
Speaker 2 (34:19):
Is And I love, by the way, that like a
big reason that we've talked about on this show of
not allowing Chinese made evs into this country is oh
what about privacy concerns? Yeah, for it's talking about listening
to your conversation so that they can better deliver ads
to you talking about privacy concerns, are you are you
kidding me?
Speaker 3 (34:38):
Absolutely insane, it's uh. But rather at least on the
Chinese side, you can make there, Hey, they're providing something
that is that is lower costs. Now, granted they're subsidized,
and the heck out of that intera.
Speaker 2 (34:48):
It's only lower cost because if you go to work
for one of these Chinese manufacturers, you are making about
three bucks an hour. You're living in government subsidized housing
at the factory to work sixty seven hours a week.
Like I get all the right right, Like, it is
absolutely subsidized, and it's also you know, really off putting
(35:10):
labor practices.
Speaker 4 (35:11):
Right, You're literally living.
Speaker 2 (35:12):
At your factory in uh factory owned subsidized housing and
being if you want that job, you're making about one
thousand bucks a month and you're expected to work sixty
plus hours a week with a day and a half
off per.
Speaker 4 (35:26):
Month something along those lines. It's insane.
Speaker 2 (35:30):
We would never agree to that here. But that's why
these things are so cheap. That's I mean, you know,
that's the result of it. It's not as though the
Chinese government is you know, just setting the price for
these it's just providing massive incentives and requirements of people
to you know, work specific schedules, and they've got the
people that are desperate to do it.
Speaker 3 (35:51):
I've got Mike here, Red Lobster. We've got the rise
and fall of the chain that was once valued at
two billion dollars just ten years ago. Now house selling
in bankruptcy court for a dizzying three hundred and seventy
five millions, significantly lower than what it was worth ten
years ago. And there's a longer piece here that goes
through the whole history where Red Lobster had developed a
(36:13):
really strong foothold in areas of the country that are
landlocked and don't have the access that many of our
listeners do on the New England region to seafood readily.
Speaker 4 (36:22):
Or the Portland, Oregon region. Thank you Portland Oregon. Yeah,
we picked up Porland organ all.
Speaker 3 (36:28):
Right, all right for them too. But now you've got
to a point where the ultimate demise came on the
backs of them offering free shrimp all day, every day
throughout many of their change, which created all sorts of
staffing issues, chaos, and restaurants customers that were taking advantage
(36:49):
of the offering to the company's detriment as prices in
some areas of the country there weren't offset the subsidy
in New York versus you know, in a rural area,
and it's it just became a absolute disaster as they
closed one hundred and forty restaurants and posted a seventy
six million dollar net loss in twenty twenty three with
a billion dollars of debt. It'll be interesting to see
(37:11):
if they can continue to scrape along after what's been
a very tumultuous ride over the last couple of years.
Speaker 2 (37:18):
I got to say, I think perhaps the most impressive
part of this whole thing is that The New York
Times managed to write a seventeen page article about Red Lobster.
Speaker 3 (37:28):
Some of the tidbits on the hiring front were just incredible,
where they were meeting with sixteen people a week, hiring everyone,
but then hoping just two or three of them would
show up during the free shrimp craze. A company that
has just been really taken out and cracked.
Speaker 2 (37:45):
Yeah a part. Yeah. Markets moving more into negative territory.
As we close out the show today, the Dow now
off three hundred points three quarters of one percent. The
s and p off fifteen points or one quarter of one,
and the NA NASDAC now down twenty eight points, a
little bit less than one fifth of a percent. We
(38:06):
will be back at it tomorrow, folks, breaking down the
results of the debate, and then we also have inflation
data coming out tomorrow, So big show tomorrow, Tune in
and have a great rest of your day.
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(01:05):
Corporation DACE is the Financial Exchange with Mike Armstrong and
Paul Lane.
Speaker 2 (01:13):
Good morning, and welcome back to the Financial Exchange. We've
got markets that were strongly positive yesterday basically not moving
this morning. We've got the Dow to off one hundred
and eighty points four ten percent, SMP almost exactly flat,
the S and P five hundred up one point, the
NASDAC up thirty one points, basically one fifth of a percent.
(01:36):
In bond markets, we've got the yield and the ten
year Treasury continuing downwards to three point six seven to
two percent. And the best news of the day that
I can bring up would be crude prices. Crude prices
off another three point three percent, down below sixty seven
dollars per barrel. I've been noticing this at the gas station.
About you, Paul, I paid I think I paid under
(01:57):
three bucks a gallon the other day at beach. But yeah,
definitely seeing a distinct move in gas prices here and
and oil prices. Taking a look at gas prices throughout
the country, we're sitting on a national average of three
twenty six in Massachusetts and New Hampshire. You're sitting below
that average. Three twenty five here in Massachusetts, three twenty
(02:18):
one in New Hampshire, Maine, three two twenty nine, sorry,
three thirty five round properly, three thirty two in Vermont,
three twenty eight in Connecticut, and Rhode Island three dollars
and thirteen cents. So if you can make your way
through Rhode Island on the direction of wherever you're going,
then you can save a little bit on gas there
(02:40):
as well. But yeah, I mean, that's the one positive
thing I can look at as a global slowdown clearly
takes shape. And it's not just the United States that's
driving prices lower here. It's you know, certainly demand from
China impacting things. But we've had oil now under that
eighty bucks a barrel range for quite some time, and
we're seeing that, yeah, take shape in lower gas prices,
(03:02):
which I will take albeit not a great signal for
the state of the economy. Anything else catching your eyes
market wise this morning.
Speaker 3 (03:09):
Paul, No, nothing else out there.
Speaker 2 (03:10):
So let's talk about this Google and Apple case that
got handed down just this week. So these are not
recent cases, to be clear. These are rulings that came
from courts back in the twenty tens. In Apple's case,
I think it goes back to a case from twenty
sixteen where the European Union said, look, you know, Ireland's
(03:31):
tax code violated EU rules and you're going to be
forced to go and collect another fourteen point four billion
dollars in taxes that Apple had been appealing. They'd appealed
this all the way to this year, and final ruling
came down in Luxembourg saying no, yeah, Ireland, you got
to go collect this. I know you don't want to
collect this tax revenue because it's going to prohibit you
(03:52):
from you know, getting those new businesses that want to
do whatever, the reverse double Dutch Irish whatever crazy tax
loophole thing. But Ireland going to be collecting fourteen point
four billion dollars in back taxes and that's been sitting
in an escrow account as this lawsuit plays its way
through the European Union, which fourteen point four billion. I mean,
(04:14):
Apple's revenues are massive, but that's not an insignificant sum.
Speaker 4 (04:17):
That's a couple quarters.
Speaker 2 (04:18):
Of MAC revenue just being paid out in back taxes
by Apple here.
Speaker 3 (04:22):
Yeah, and that I from revenue maybe rack MAC revenue.
But it's interesting the EU has really been at the
forefront of being the technology watchdog out there. There are
several cases that it's had and finally in these two instances,
proving out that they can win out through the appeals process,
something that the US has really struggled with on the
(04:44):
antitrust side of things two different cases. Like Mike mentioned
the first one with Apple, they were upset because they
were claiming that they're basically being double tax They paid
taxes on the income already in the US, and now
the EU has come and said, no, you have to
pay taxes to Ireland for the European revenue generated well
(05:04):
as well. On the Google side of things, that was
much more of an antitrust ruling that the EU came
out with where they are assessed to pay a two
point four billion eurofine for a decision that was made
in twenty seventeen claiming that Google unfairly put its predominant
comparison shopping center over its competitors during that period of time.
(05:27):
So that decision was upheld and so I'm.
Speaker 4 (05:29):
Just trying to think practically what that means.
Speaker 2 (05:31):
So I think what it means is if I Googled
a rain jacket, for example, in years past in the
European Union, instead of being directed towards eBay, Amazon, Nordstrum,
anywhere else, I would be driven to Google Shopping, where
they get presumably some advertising revenue from any of those
vendors who want to advertise on Google Shopping, which I'm
(05:52):
sure Amazon didn't, but Nordstrum I'm sure paid fees to
be filtered in through the Google Shopping network.
Speaker 3 (05:58):
Yeah, that's what it seems like here is kind of
funneling people into their price comparison stopping service over some.
Speaker 4 (06:04):
Of the rival offerings. Ye, that makes sense.
Speaker 2 (06:07):
I mean Google here has now faced a number of
successful anti trust it really you know, we're talking about
monopoly power cases both in the EU and domestically here
in the United States. We covered one yesterday, but they
just finished up and lost the case on monopoly power
on search, and at the same time Justice Department now
(06:29):
bringing a case for them on advertising revenue and the
interesting case this is a US case, not in the
U case, but the interesting piece on the advertising revenue
or the advertising you know, monopoly power piece one. It's
not terribly well known outside of you know, people that
work in tech advertising of how.
Speaker 4 (06:49):
That system works.
Speaker 2 (06:50):
It's not like the everyday person who does Google searches
understands the functionality.
Speaker 4 (06:54):
Of all that. But two, the lawsuits also.
Speaker 2 (06:57):
Coming at a time where Google's losing a lot of
that dominance. If you take a look at how Apple
and Amazon and Meta are pushing their way into the
online advertising market, they are directly taking dollars from Google
at the same time that they're facing this massive anti
trust case. So the the Quite honestly, I feel as
though the EU's way of doing things on a lot
(07:20):
of these cases makes hell of a lot more sense
than the way we handle privacy and tech on the
United States landscape. The one power that they're never going
to have, which the United States does have is to
say this.
Speaker 4 (07:32):
Is a monopoly, break it up, right, you know.
Speaker 2 (07:34):
For instance, their take the EU is taking Live Nation
to court I think this year over their monopoly power.
But worst case scenario, Live Nation faces a bunch of fines.
It's up to the United States to break up a
US company, which god, I wish they would in the
case of Life Passion. So yeah, interesting developing cases and
(07:55):
continue these big tech companies, you know, not as they
paid a ton of taxes over in the EU, but
if you want to have operations there becoming more and
more costly to do so on these lawsuits of what
in many cases I think is pretty founded abuse of
antitrust and anti competitive practices that Google, Apple and all
(08:18):
these others employ. There interesting piece here from the Census
Bureau before we go to break taking a look at
where incomes actually came in. So the US Census Bureau
puts together their data on all of this on a
regular basis, and new data out from the USNSUS Bureau
(08:38):
finally kind of proving out what I think most of
us had known, but that incomes did substantially rise. And
it's really the first time since the pandemic that you
can look at this on an inflation adjusted basis. Right,
Like we talked about this early on in twenty twenty
one and twenty two, which was hey, wages moving up,
but when you factor in inflation, people are still losing money.
(08:59):
And in twenty two twenty three it was the first
time that you saw real wages grow. So inflation adjusted
median household income was eighty thousand, six hundred and ten
dollars in twenty twenty three. So again that's inflation adjusted
median household income, so you know, oftentimes dual working household
that's up four percent from the twenty twenty two estimate,
(09:21):
which came in at seventy seven thousand and five forty,
which was again announced in its annual Report for Households
Financial Wellbeing. You know, this report comes at the same
time as others that we have seen looking at just
how dramatically we're seeing things like credit card.
Speaker 4 (09:38):
And auto loan default rates on the uptick here.
Speaker 2 (09:42):
So again, I don't think any of those things are
powerful enough to bring down the US economy and the
way the housing lunacy did of eight, but important to
look at when you consider the state of American households,
and you know, more and more consumers getting into default
on their credit cards and auto loans can't be really
seen as a good sign other than for anything other
(10:03):
than hey, maybe I can pick up a cheap used
vehicle sometimes in your future.
Speaker 3 (10:07):
Yeah, those delinquency rates. I was ready to sort of
poo poo them, But if you look back twelve years,
you know we're getting two levels. It's not eight oh
nine levels of craziness, but it is a little bit
more significant than what we've seen over the last ten
plus years or so. And this data on the income side,
to me is really helpful because of that inflation adjustment,
(10:27):
you know. Like you mentioned, we talked about how wage
growth peaked in twenty twenty two, but that was on
the heels of things costing. More helpful to get this
context that, hey, wages have come up even with the
substantial impacts of inflation that we've seen over the last.
Speaker 4 (10:41):
Couple of years. Let's take a quick break.
Speaker 2 (10:42):
When we come back, we're gonna have a little bit
of trivia and then we'll dive into a piece about
the Federal Reserve and why they need to be more bold.
That's next on the Financial Exchange.
Speaker 1 (10:53):
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(11:14):
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Speaker 3 (11:27):
Trivia, brought to you by Applebee's.
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(11:52):
Today is Ali Baba founder Jack Ma's sixtieth birthday. Jack
Ma and a group of seventeen others founded Ali Baba
and ran the company until he resigned under suspicious circumstances
back in twenty nineteen. Drew your question today, what year
did jack Ma launch Ali Baba? Once again, what year
(12:13):
did Jack Ma launch Ali Baba? Be the eighth person
today to text us at six one, seven, three, six
two thirteen eighty five with the correct answer, and you
win a Financial Looks Shane Show t shirt. Amb registered
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Space shirt include the keyword to Applebee's in your text,
and we'll give away that Applebee's gift card on Friday
(12:34):
show six one, seven, three, six, two, thirteen eighty five,
and the eighth correct response will be our winner. See
complete contest rules at Financial Looks Shane show dot com.
Speaker 2 (12:43):
I don't remember if it's airplane one or airplane two,
but there's a scene where they're covering the you know,
airplane that's gone rogue or an airplane two case, spaceship
that's gone rogue, and you know, it cuts from clip
to clip of news anchors across the world covering the story,
and one of them is meant to be the Soviet Union,
and there's just an off camera gun pointed at the
(13:05):
newscaster's head as he's doing the story. And that scene
right there just reminds me of the quote suspicious circumstances
under Jack Ma's resignation. It's like, yes, I'm writing this
resignation of my free will while there's a gun off
off camera pointed directly at my head.
Speaker 3 (13:22):
He hasn't been heard from ever.
Speaker 2 (13:24):
Agne, Yeah, why is that funny? That that's not funny?
It is genuinely terrifying. And the only reason that I
can fathom of that we we seem to know here
is that he was seen as too popular and too influential,
and anyone that gets too popular under this Chinese administration
(13:48):
of you know, taking influence away from the all powerful leader,
gets stuffed in a closet somewhere and you never hear.
Speaker 3 (13:56):
Well, they thought he was adversarial against their their their party.
Speaker 4 (13:59):
I'm not even sure it was that where you never
even said anything like that.
Speaker 3 (14:02):
I think he was just supporting.
Speaker 4 (14:05):
Hong Kong right independence, Yes.
Speaker 3 (14:08):
A little bit, I mean, but it doesn't take much
to your point.
Speaker 2 (14:11):
Yeah, My sense was just, you know, okay, if anybody
here is growing to the point where people listen to
them more than they listened to Shi Jingping, then you.
Speaker 4 (14:21):
Get stuffed in a closet somewhere and you're never heard
from the game I'm seeing.
Speaker 5 (14:24):
August tenth, he reappeared in public view for the first
time in months.
Speaker 4 (14:28):
Yeah, it was August tenth of this year, correct, Yeah, yeah,
when was the resignation.
Speaker 5 (14:35):
Oh boy, twenty nineteen, I think it was.
Speaker 2 (14:37):
Yikes, I mean he's made public appearances since then. No,
he had not been out in public for a very
long time the economy needs a bold FED, we won't
get it. That's an op ed from Larry Hathaway. He
is the co founder of the Jackson Hole Economics and
a former chief economist of UBS. And quite honestly, I
(14:57):
haven't read I don't recall having read any of his
prior to but he lays out an interesting argument, I think,
and it's one that we ourselves have debated on this
program before, but it had more. We previously debated it
when inflation was clearly getting out of control, and we said, well,
you know, clearly inflation's running wild. Why shouldn't the Fed
(15:17):
just increase interest rates by four percent all at once
and be done rather than this, you know, this slow
approach that they have. Wouldn't that be better for the economy?
And at the time, so Chuck was really landing in
that argument of hey, why not, like we know that's
where interest rates need to go long term, why not
just bump them up all at once, by like four
percentage points and just see what happens. And my my
(15:39):
main argument against that was I would imagine that there's
a whole bunch of banks and investment companies that would
just overnight fail if that were the case if you
had rates going up, I have a tougher time making
that same argument on the way down. I don't know
who would fail if rates moved down by three percentage
points overnight. I'm sure there's somebody making some crazy bet
(16:00):
like the Japanese carry trade that would blow them out
overnight and to make it not doable. But that's the
argument that Larry's making here is, Look, the Federal Reserve
knows or has a very strong sense that their policy
right now is restrictive in terms of you know, in
terms of growth and inflation. According to them and most critics,
(16:24):
is really an issue of the past. So why are
we taking this twenty five or fifty basis point approach
to interest rates? Why shouldn't we just say, hey, we
know rates are too high, bring them down to four
percent immediately, and then we'll go from there.
Speaker 3 (16:38):
My argument would be, and I'm not gonna be able
to back this up with any type of numerical data,
but let's say they do step in and do one
fifty like that, you know, next meeting, all of a sudden,
We've talked about Mike, you know, Mike conundrum before about
not even looking at a whole echuy line of credit
to do a renovation on a porch because the interest
rates were just too high. But all, all of a sudden,
(17:00):
immediately overnight, that helock that I could get. Let's say
it's six and a half or seven today, and overnight
defence is we're cutting one hundred and fifty base spoorts,
So one point five percent, all of a sudden, that's
gonna sit in let's call it the five percent ballpark.
Does that do enough to stoke inflation that me and
every other Joe Schmoe collectively out there, or there's just
(17:21):
a tremendous amount of focus now on home improvement barring
that puts inflationary pressure in the economy. I don't know,
but that would be perhaps my guess, and the trickle
down impact they could have to the housing market. I'm
talking about the short end of the curve with the
helocks there, but maybe the ten yure moves in lockstep
as well and it comes down significantly.
Speaker 4 (17:41):
I would agree.
Speaker 1 (17:42):
Yeah.
Speaker 2 (17:42):
See, like Larry pits this piece out and makes the
assumption that inflation is one hundred percent defeated and it's gone,
it's behind.
Speaker 4 (17:50):
Us, and I think so. But you know, the worst
possible outcome you.
Speaker 2 (17:58):
Can have is stagflation, right where the stagnating and inflation
is taken off. I don't think we can possibly head
for their based on current policy. But if the FED
all of a sudden cut rates by two percent or
one and a half percent, do I have some twinge
of concern that inflation.
Speaker 4 (18:12):
Could take back off.
Speaker 1 (18:13):
Yeah?
Speaker 2 (18:14):
Absolutely, Like I think that most of the inflation we
saw was due to supply chains, was more due to
supply constraints than it was to surge and demand.
Speaker 4 (18:22):
But clearly it was a little bit of both, right
and and so, and.
Speaker 3 (18:27):
What if you have you know, you cut the rates immediately,
you stoke up demand, and then you have a commodity
shock that is unexplained out there, whether it's some global
event that just you can't plan for. And you have
the two of those combined, and that cocktail leads to
inflation rearing its head again. Your pot committed. You can't
just flip back and go another one hundred basis points
back in the other directions. So that's why they likely
(18:49):
take the gradual approaches that it allows for them to
time to sit and process and react.
Speaker 2 (18:54):
Now the question will be basis, I want to replay
this tape. If six months from now we're sitting here
with unemployment up over five percent, then.
Speaker 3 (19:05):
Well that's the Monday Morning quarterback everyone's gonna do if
they don't get it right.
Speaker 2 (19:10):
I recognize that, but you know that's the exact morning
quarterback that the Fed themselves should be doing to say, hey,
if we do end up in recession here, what mistakes
were made and should we be acting more boldly rather
than just trying to be ultra predictable, which is what
drum Powell has tried to be ultra predictable in terms
of action. Quick break, we're gonna have the trivia winner
(19:30):
for you next, and then some EV discussion, especially what's
coming out of China right now.
Speaker 4 (19:34):
That's next.
Speaker 1 (19:40):
Bringing the latest financial news straight to your radio. Every day,
it's the Financial Exchange on the Financial Exchange Radio Network.
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Speaker 5 (20:04):
That trivia question today was what year did Jack mad
launch Ali Baba? That'll be nineteen ninety nine winner today
of the Financial Exchange Show ta shirt with Steven from Worcester,
mass and Steven's also registered to win a one hundred
dollars gift card two Applebee's, which you'll give away on Friday.
Show and Trivia is brought to you by Applebe's. Enjoy
(20:25):
half priced late night appetizers after nine pm and join
Club Applebee's to enjoy exclusive deals and specials. You'll get
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can go in the neighborhood void. We're prohibited dine in
only Paul.
Speaker 2 (20:39):
For the last let's see year and half, the place
to have your money arguably has been high yield savings
accounts because they've been paying a good deal of interest,
more interest generally speaking, than any longer duration type products
like a three year CD or anything like that. It's
(21:00):
pretty clear that next week rates on those types of
products are going to start coming down. If you haven't
been participating, you know, you should know that. Yeah, there's
high yield savings out there with FDIC insurance paying highest
one I'm seeing right now is five point three percent.
That's according to bankreat dot com. My expectation would be
that sometime next week that probably gets cut down by
(21:21):
a quarter percent, and people are finally starting to question, Okay,
what do I do if rates are going to start
coming down? Is there a better place for my cash?
What do I do with it? And unfortunately, this might
be another one of those stories where the time to
act might have been several months ago.
Speaker 3 (21:40):
Yeah, at some point here. The solutions that are proposed
to perhaps extend the yield party a little bit longer
to collect safely some interest on the excess cash that
you have are really all short term options, Mike, in
terms of looking at CDs or even the one. Your
treasuries have come down significantly there as well. Even if
(22:01):
you are to jump into the let's say that five
point three percent savings that you're mentioning, that's truly temporary
in nature. Some banks out there are still gonna be
a little late to lower those rates down as they're
trying to attract deposits, but they move very swiftly to
change those And they mentioned the idea of divin in stocks.
You know, that's also a risky proposition too, because you
(22:22):
have the loss.
Speaker 2 (22:23):
Going from FDIC insurance to oh A or a basket
of dividend paying stocks like Okay.
Speaker 3 (22:31):
I was speaking with a listener the other day, a
perspective client who had, you know, a significant sum in
Verizon and in AT and T, and was you know,
lauding their the divinend that they pay, which is high
in terms of percentage, But you have to be clear
that stock like AT and T and Verizons down twenty
percent over the last five years in terms of your principle.
So yeah, it's great you put in one hundred grand
(22:52):
and you got paid six or seven percent, But when
your one hundred grand is valued at eighty after that
period of time, yeah, the percentage you're getting paid is higher,
but you've you've effectively lost that twenty percent principle. Temporarily,
you know, the stock will go up and down, but
that's something important to note. I mean maybe temporarily, yeah,
who knows. Yeah, right, it could be and it could
be further. You could take it further hit. So big
(23:13):
distinction between divid and stocks and a CD or money market.
But I would say that, well.
Speaker 2 (23:20):
It all comes down to a core thing that we've
talked about over and over, diversification and also aligning your
assets with your goals, right, Like you know, if this
money was money that you want to permanently have generating interest,
then all of it shouldn't have been in highyield savings
to begin with. Right as recently as April of this year,
you would have been able to lock in a loan
(23:41):
to the United States government for four point seven percent.
Speaker 4 (23:44):
Right, it's looking pretty good.
Speaker 2 (23:46):
Now if you go take a look at that back
in October of last year, you could have done it
at five. So, I mean, you know, it has to
do again with putting all of your eggs in one basket,
and we're seeing the pitfalls of that now where hey, yeah,
you can continue to you know, if you had done that,
you've continued to outperform from the yield on that savings
(24:07):
account being over five percent, but you're about to very
likely see that take a pretty persistent hike over the
cut over the next twelve months.
Speaker 4 (24:15):
Would be my guess.
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Speaker 2 (25:21):
Paul, I'll to talk a little bit about EV's I
know you guys are gonna find this hard to believe,
but as it turns out, some of the big car
companies commitments that they made just a few years ago
to only make evs forever may have been a little
bit overstated. Vol those the most recent to back away
(25:41):
from their pretty heavily promoted commitment to only building EV's
by twenty thirty, citing a need to be pragmatic and
flexible amid demand that just hasn't really been a thing
so far. And yeah, we're continuing to see this that. Yeah,
the car companies who had previously been saying no, no,
(26:04):
we're we're only going to make evs five years from now,
We're going to sell eighty percent of our fleet being
electric ten years from now are realizing that A the
cost to make that transition is very, very significant, and
B that's not really what the consumer wants, unless I
think there could be a scenario where that's where the
(26:25):
consumer wants, but the federal government is going to need
to be heavily involved, or someone's going to need to
be heavily involved in building out the charging infrastructure, which
is just not there.
Speaker 3 (26:34):
Yeah, we've talked about this a lot for a long
period of time where there was a significant amount of
enthusiasm wherein borrowing costs were low, for these companies on
the manufacturing side to get out there and say we're
going to invest billions of dollars to build out these
factories to produce electric vehicles. But as you mentioned, the
demand has lagged and a lot of that ties into
(26:55):
the infrastructure. If you issues, and you're right, it's going
to be something that is going to require a significant
amount of government intervention and subsidy. Difficult in a time
where the government is running at a very significant deficit
as it is, and it's harder to make those investments
when the market share is so minimal that the electric
(27:17):
vehicles make up of the overall vehicle market in the
United States, and you're trying to reverse one hundred and
thirty year trend. It's hard to sell to consumers that
way if you haven't built out the infrastructure.
Speaker 2 (27:29):
I mean gas, Look, fueling a car has always been
this kind of lost leading proposition, right. I mean, when
gas stations were initially opened up, they were heavily subsidized
and invested in by big oil as well as car
companies because they recognize, like, hey, we've got this fantastic
new product, but nobody's gonna buy it unless they can
(27:50):
buy gasoline somewhere, and so these were the reason that
every gas station you visit also has a convenience store
in other ways of making money is because selling gas
is not such.
Speaker 3 (28:02):
A low margin business. Yeah, I don't think people realize
how low margin it is for the gas station own.
Speaker 2 (28:06):
And so then take that and make the problem worse, right,
because you can fill up your tank. I can fill
up my tank in no more than five minutes, so
long as you know four people aren't also using the station.
Take that and exacerbate it to the point where, okay,
it's going to take me, what a minimum of thirty
minutes more to fully charge most electric vehicles, even in
(28:28):
a high capacity charger. And you can envision a scenario
where it's not as though we just need to build
out a whole bunch of gas stations that have ev
charging stations. We need to completely rethink the process there,
because you need something to do for half an hour
while your car charges, And I don't think it's going
to be sitting in the seven eleven staring at the
revolving hot dog.
Speaker 3 (28:47):
Yeah, when you were up against I just was looking
at you know, we've got one hundred and fifty thousand
or two hundred thousand retail gas stores in the United States,
depending on what numbers you look at. To replicate that
to the point where you anywhere close, it just takes you.
Speaker 2 (29:01):
Know, that's an important distinction, Like, I know people think
about it that way, but you don't need to replicate
that because.
Speaker 3 (29:07):
You're going to have the home charging.
Speaker 2 (29:08):
Now, seventy five eighty percent of charging happens at home, right,
and so that's that's where most of this is happening.
Speaker 3 (29:14):
But you need some percentage closer to that.
Speaker 2 (29:17):
Right, You need critical routes of you know, EV charging networks,
and you need enough of them so that when everyone
goes to Vermont for the solar eclipse, they actually have
a method of charging their car afterwards and getting down.
And you know that's not a problem for gas stations.
It's a massive problem for EV charging stations. So there's
(29:40):
I said at the time, right when the when the
Biden administration was passing these new tax breaks for producing
and selling electric vehicles, as like you're you're subsidizing this
part of the business, but that's not where it needs
to be subsidized, right, Like you cannot have I have
the sale of those vehicles without the investment and the
(30:03):
charging infrastructure, and in my mind, one of them really
needs to come before the other if you're going to
create the demand for these things. And we're just not
seeing that investment yet, not to say it won't come later,
and you know, Tesla's playing a big role in that,
but unless the other manufacturers get on board, I just
don't really see it happening. And then also there's the
(30:24):
bigger question of is this what the federal government has
any business in doing.
Speaker 4 (30:28):
So let's take a quick break. When we come back,
Stack Roulette.
Speaker 1 (30:32):
Breaking business and financial news first throughout the day, only
here on the Financial Exchange Radio Network. Miss any of
the show. The Financial Exchange Show podcast is available on Apple, Spotify,
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Speaker 4 (30:59):
Time for a bit of stack rou Lett. Paul. I'm
gonna kick things off here with.
Speaker 2 (31:04):
What I find to be almost a laughable story, but
I want to just compare and contrast what I'm hearing
from the auto industry coming out of China, which is
just the Chinese Communist Party, and then what I'm hearing
out of American car makers, and just think about this
in terms of whether you're gonna be able to sell
cars globally. China's BYD is pushing out some electric vehicles
(31:28):
these days that sell for as little as thirteen to
fifteen thousand dollars.
Speaker 4 (31:32):
They are incredibly basic.
Speaker 2 (31:34):
I was listening on a podcast about one of these
things that does not even have air conditioning in the
back seats.
Speaker 4 (31:39):
It's a five seater, gets about a.
Speaker 2 (31:41):
Two hundred and thirty mile range, does not have any
even radio or electronics in the front. It is so
stripped down in basic to get this price points down
that it is just purely a vehicle of function designed
for a working class Chinese citizen primarily, although they're also
selling these things in Brazil and Mexico, you know, in
other emerging markets countries, and so, you know, low cost,
(32:03):
practical ev for for working class. Ford, on the other hand,
just patented an in car system that eavesdrops on you
so it can play you ads. And I'm you know, granted,
they haven't actually ruled this out. It's just a patent.
But the message that I'm hearing from Ford is Facebook.
But listen here here's the catch on wheels.
Speaker 4 (32:26):
If you are a you know, individual, I get that.
Speaker 2 (32:30):
You know, in the United States, you're not gonna be
buying a Chinese made ev But if you are anywhere in.
Speaker 4 (32:35):
The world, which one of these is more appealing to you?
Speaker 5 (32:38):
Right?
Speaker 2 (32:38):
Like, why if I live in India, would I even
entertain buying a Ford vehicle or anything other than like
in I get in India, why you wouldn't want to
buy a Chinese made electric vehicle either? But if I'm
living in Brazil, if I'm living in Mexico and I've
got two big producers who do not make cars in
(33:02):
my country. By the way, I know, Ford probably has
plants in Brazil, but definitely in Mexico. But I have
the option of buying, hey, a really stripped down basic
car from China that is going for next to nothing,
and yeah, it might spy on me, it might do
some nasty things and it's certainly subsidized by the Chinese government.
Or I can go buy an American made car. I
(33:24):
just don't understand why anyone out there would be doing so.
And what's really disappointing to me here is just like
all the innovation that I'm seeing, I'm not saying that
these are well made cars. I'm sure that at the
pace they in China are, you know, putting these cars
through and getting them out there on the market, there
are going to be quality issues. I'm sure there are
(33:44):
fires and other issues like we see here in the
United States. But I see innovation there. And just if
this is the innovation we're getting in the US car
market is hey, we're going to listen to your conversation
and deliver you ads while you're driving, then we are in.
Speaker 4 (33:59):
For some serious problems in the US.
Speaker 3 (34:02):
Yeah, you have to think about it. How does that
benefit the end consumer FORD at all? You know, first
of all people.
Speaker 4 (34:08):
It doesn't. It's gonna drive up the profit margin of Ford.
Speaker 3 (34:10):
Yeah, it's just it's just crazy. That's not the focus
when you drive around. First of all, you don't want
your conversations to be listening to the privacy issue there.
Speaker 2 (34:19):
Is And I love, by the way, that like a
big reason that we've talked about on this show of
not allowing Chinese made evs into this country is oh
what about privacy concerns? Yeah, for it's talking about listening
to your conversation so that they can better deliver ads
to you talking about privacy concerns, are you are you
kidding me?
Speaker 3 (34:38):
Absolutely insane, it's uh. But rather at least on the
Chinese side, you can make there, Hey, they're providing something
that is that is lower costs. Now, granted they're subsidized,
and the heck out of that intera.
Speaker 2 (34:48):
It's only lower cost because if you go to work
for one of these Chinese manufacturers, you are making about
three bucks an hour. You're living in government subsidized housing
at the factory to work sixty seven hours a week.
Like I get all the right right, Like, it is
absolutely subsidized, and it's also you know, really off putting
(35:10):
labor practices.
Speaker 4 (35:11):
Right, You're literally living.
Speaker 2 (35:12):
At your factory in uh factory owned subsidized housing and
being if you want that job, you're making about one
thousand bucks a month and you're expected to work sixty
plus hours a week with a day and a half
off per.
Speaker 4 (35:26):
Month something along those lines. It's insane.
Speaker 2 (35:30):
We would never agree to that here. But that's why
these things are so cheap. That's I mean, you know,
that's the result of it. It's not as though the
Chinese government is you know, just setting the price for
these it's just providing massive incentives and requirements of people
to you know, work specific schedules, and they've got the
people that are desperate to do it.
Speaker 3 (35:51):
I've got Mike here, Red Lobster. We've got the rise
and fall of the chain that was once valued at
two billion dollars just ten years ago. Now house selling
in bankruptcy court for a dizzying three hundred and seventy
five millions, significantly lower than what it was worth ten
years ago. And there's a longer piece here that goes
through the whole history where Red Lobster had developed a
(36:13):
really strong foothold in areas of the country that are
landlocked and don't have the access that many of our
listeners do on the New England region to seafood readily.
Speaker 4 (36:22):
Or the Portland, Oregon region. Thank you Portland Oregon. Yeah,
we picked up Porland organ all.
Speaker 3 (36:28):
Right, all right for them too. But now you've got
to a point where the ultimate demise came on the
backs of them offering free shrimp all day, every day
throughout many of their change, which created all sorts of
staffing issues, chaos, and restaurants customers that were taking advantage
(36:49):
of the offering to the company's detriment as prices in
some areas of the country there weren't offset the subsidy
in New York versus you know, in a rural area,
and it's it just became a absolute disaster as they
closed one hundred and forty restaurants and posted a seventy
six million dollar net loss in twenty twenty three with
a billion dollars of debt. It'll be interesting to see
(37:11):
if they can continue to scrape along after what's been
a very tumultuous ride over the last couple of years.
Speaker 2 (37:18):
I got to say, I think perhaps the most impressive
part of this whole thing is that The New York
Times managed to write a seventeen page article about Red Lobster.
Speaker 3 (37:28):
Some of the tidbits on the hiring front were just incredible,
where they were meeting with sixteen people a week, hiring everyone,
but then hoping just two or three of them would
show up during the free shrimp craze. A company that
has just been really taken out and cracked.
Speaker 2 (37:45):
Yeah a part. Yeah. Markets moving more into negative territory.
As we close out the show today, the Dow now
off three hundred points three quarters of one percent. The
s and p off fifteen points or one quarter of one,
and the NA NASDAC now down twenty eight points, a
little bit less than one fifth of a percent. We
(38:06):
will be back at it tomorrow, folks, breaking down the
results of the debate, and then we also have inflation
data coming out tomorrow, So big show tomorrow, Tune in
and have a great rest of your day.
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