February 13, 2026 • 38 mins
Chuck Zodda and Mike Armstrong break down the latest CPI report and what steady inflation means for the Fed in the months ahead. They also explore growing investor anxiety around AI-driven disruption, rising consumer debt concerns, and how policy proposals could impact markets and household finances.
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Speaker 1 (00:00):
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(00:42):
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(01:06):
and Mike Armstraw.
Speaker 2 (01:13):
All right, it's Chuck, Mike and Sucker with you here,
and just say y'all listening, No, Mike's Mike is in
danger of tipping over. So, uh if if you call
me floppy Mike, Mike, if you're that's what we call
him in the office, and uh, floppy Mic Mic, it's
it's great. But in any case, this morning we got
(01:34):
the latest inflation data, uh, the Consumer Price Index or
the CPI if you will, that's what the people in
the biz call it. And the CPI showed this, Uh,
inflation for the month of January came in at point
two percent month over month on headline, point three percent
month over month on core. So twelve months for headline
(01:57):
are now at two point four percent. Twelve month four
core are at two point five percent. So I think
that when we look at this, I know there's a
two percent target on inflation, but as we've gone through
the data previously.
Speaker 3 (02:09):
Nobody actually cares about it.
Speaker 2 (02:10):
Well, it's not that nobody cares, it's like you basically
never actually get to two percent historically. So if you
have a target that you can never reach, is it
really a target or.
Speaker 3 (02:19):
Is it just a number. It's just there.
Speaker 2 (02:24):
Here's what we are seeing right now, and I'm kind
of trying to reconcile this because I don't understand some
of it. One of the things that pulled headline prices
down was gas prices, according to CPI, following three point
two percent. This despite the fact that gas prices have
moved up over the last month and a half, so I.
Speaker 4 (02:45):
Hadn't really paid attention to that. So gas prices are
up in the month of January, not a.
Speaker 2 (02:49):
Ton, but like, so gas price right now, we're two
ninety four. I know we're in February right now, but
the start of January we were around two eighty and
as of about a week and a half ago we
were at two ninety, So like a three percent upswing,
and the CPI here is down, so expect some reversion there.
It was probably just a sampling thing or timing right
by right exactly January. I'm not describing like there's no
(03:11):
ill intent here. It's just a sampling and timing thing
in terms of when they must have done it.
Speaker 4 (03:16):
Remember too, that sampling in general in January might have
just been screwed up based on the fact that one
hundred and eighty million Americans were in the path of
a pretty big snowstorm.
Speaker 2 (03:24):
Correct, So that's something I would expect to reverse here.
Other things that I would expect to end up reversing here.
You saw a one point eight percent decline in used
cars and trucks. Some of that is real, but that's
a huge magnitude. You're not going to see a one
point eight percent decline in used vehicle prices every month,
(03:47):
so don't expect to see that. Things that I will
expect to see were continuing to get better prints on shelter,
which came in at point two percent for the month,
And I do think continued shelter disinflation is real, So
I think that's going to be a nice little help
for inflation going forward. But I continue to be of
the opinion that in the next few months, you know,
(04:08):
probably through the end of certainly through the end of
Q one, and probably into early Q two. I just
don't think inflation is the biggest potential problem facing the
US economy. I think there are some things that we
could talk about in terms of, hey, could it develop
into a bigger issue by the second half of the year. Yes,
if a certain set of things fall in a certain way.
(04:31):
But I think this report, in my opinion, continues to
reinforce that, hey, while inflation is still a little bit
above that target, if you're printing two and a half percent,
you can have a fantastic economy with two and a
half percent inflation and this is not a problem today.
Speaker 4 (04:47):
Yeah, I'm trying to remember when did the Fed FED
cut rates in twenty nineteen, right pre COVID normalized. It
was that earlier.
Speaker 3 (04:56):
Hold please.
Speaker 2 (04:59):
The effect of federal funds rates, So in terms of
what they did, you're talking twenty nineteen.
Speaker 4 (05:04):
Yeah, I'm time pre covid. I'm just I'm trying to
think about the justification.
Speaker 2 (05:08):
Rate cuts there, And quite honestly, it was a case
where there were some signs that we were going to
be getting into a little bit of a gnarly labor
market situation. Not like horrible, but there were some signs
of weakness developing there.
Speaker 4 (05:22):
You know, I'm just looking at the context for this. Now.
The big difference between twenty nineteen and now is that
the CPI back at the end of twenty nineteen was
running one seven, so like that's you know, abnormally low,
and we were getting to this you know point in
twenty eighteen, twenty nineteen where people were just saying, hey, look,
(05:43):
you know, unemployment rate being this low might not just
contribute to higher inflation right now.
Speaker 3 (05:49):
And yeah you did.
Speaker 4 (05:50):
You did see the FED cutting an environment where unemployment
was at three point six percent. But I think that
if you are Kevin Worrish, you're going to use that
same logic from back then to say, yeah, you know what,
unemployment is four point three percent, which seems healthy, but
you know, inflation is not really showing signs of sparking
in spite of that lower unemployment. So that's what we're
(06:12):
going to be doing the inflation read Ultimately, I think
what we've focused on the last several readings, if you
get a reversal in energy prices, we could be in
pretty rough waters because the core prices are still running
in that slightly uncomfortable zone that you know, should something
reverse on energy, you could have something ugly.
Speaker 2 (06:35):
Yeah, we're still waiting to see what we get from
the Cleveland Fed on median CPI and TRIM mean those
measures both still running around three percent year over years,
So it does tell you like things are hotter than
you'd like to see in a perfect world. And remember
when we're talking about inflation, there are a few different
things that get kind of confused when people talk about inflation.
(06:57):
What we're talking about here is the rate of inflation,
how quickly are price is going up. And what we're
telling you today is that the rate that prices are
going up is generally within at least the realm of
what would be acceptable. If you saw two and a
half percent year over your inflation for the next decade,
you could look back and say that was fine, Like
(07:19):
you would not have any problem there. We are not
talking about the price level, which is prices have risen
by x amount in this case a large amount over
the last five years, and those are not going down because.
Speaker 3 (07:31):
That's just not how it works. Quite honestly. I know
everyone's like, oh, I wish we could have deflation. No,
you don't.
Speaker 2 (07:38):
Deflation sucks because it generally happens when demand is really bad.
And think about this from this perspective. Let's say that
you're in a deflationary environment. My name is Chuck, and
I'm in a deflationary environment. Do I go out and
buy a car today?
Speaker 3 (07:53):
No?
Speaker 2 (07:53):
No, I wait, because it's going to be cheaper next year,
which means demand gets sucked out even more, which means
businesses die. You want disinflation, not deflation. Seventy five years
worth of data. Let me show you the points of
year of a year deflation. August August of nine was
one of them.
Speaker 4 (08:11):
Not a great period if time, Uh nope, didn't get there.
Let's see October of fifty.
Speaker 3 (08:19):
Four really bad as well.
Speaker 2 (08:21):
The feder just like jammed rates higher to stop like
twenty percent annualized inflation September of forty nine also not
a great economy.
Speaker 4 (08:29):
Yeah, so again, we barely have context for what the
economy was like in the forties and fifties. Few people
living today truly understand what the economy is like back then. Yes,
so you the only time in modern history what's happened
was post Great Financial Crisis, when unemployment was absurdly high
and nobody could afford to buy anything.
Speaker 3 (08:48):
Yes.
Speaker 2 (08:49):
Uh so you can make a case that, yes, like
if inflation runs two and a half percent for the
next you know, ten years, you're completely fine.
Speaker 3 (08:57):
The question is, hey, what could this run that?
Speaker 2 (09:01):
And for this we're gonna go back to the job
support that came out two days ago. We don't need
to fire up the time machine for it, because I
saw you getting the flex capacitor ready. But we don't
need to Tucker. Plutonium is through the roof these days.
We can't afford to run the time machine for a
couple days.
Speaker 3 (09:18):
Okay. So here's the thing.
Speaker 2 (09:22):
Every jobs report, we get a data point that is
called weekly change changing weekly payrolls. And in two of
the last three now it's come in at point seven
percent month over month. The one in between did see
a modest decline, but it's still over the last three months,
weekly payroll growth or not payroll growth, weekly wage growth
(09:43):
is running at a six percent annualized rate, which is Tucker.
Speaker 3 (09:48):
In this case, you can fire up the bongos if
you will. No, no bongos, bongos out bongos.
Speaker 2 (09:56):
Give me the steel drum. Steal drums. I need to
steal drums. How we waste our plutonium. That's what the
wage growth is goes. And so here's the potential problem.
Mike pretends to own a restaurant, and in this scenario,
Mike's margins are like two percent. One of his servers
leaves and in order to hire a new one, because
(10:18):
the supply of labor is so tight, he's got to
pay through the roof. His labor cost goes up, and
in doing so, it puts pressure on his very meager margins,
and so Mike has to raise prices in order to
stay in business. That is the potential path to inflation
getting a little bit gnarly in the second half of
the years. If the labor market is indeed inflecting up
and starting to strengthen, labor supply right now, you can
(10:42):
make a case is declining two reasons. Number one, raise
your hand for your baby boomer, not two if you're driving.
Speaker 3 (10:48):
Just one.
Speaker 2 (10:49):
If you're a baby boomer, how many of your friends
are either retired, retiring, or going to retire in the
very near future most of them? And if you are
agen zer, raise your hand. There's not enough of you
to replace all of the boomers that are retiring. And
coupled with the fact that we have immigration now either
(11:10):
somewhere around zero or net negative at this point, there
is no labor supply to fill that gap. And so
the potential issue that you run into is you might
see very modest job gains, but wages have to go
through the roof to fill them because there just aren't
enough people to fill those jobs.
Speaker 4 (11:28):
Actually, yeah, the Titaness piece was echoed elsewhere, right, that
wage growth is one of them. The unemployment rate sank
to four point three percent.
Speaker 2 (11:34):
So I don't think that CPI that inflation is something
that we need to worry about right now. But let's
watch this data closely over the next three to six
months because it could be something that matters in the
second half of the year.
Speaker 3 (11:50):
Quick break.
Speaker 2 (11:51):
When we come back, we're talking about why AI is
scaring the heck out of everyone.
Speaker 1 (11:56):
Right after this, find daily interviews in full SHOs of
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Speaker 2 (12:46):
All right, we got a piece here in the Wall
Street Journal. It's titled Worries about AI disruption's fuel stock slide.
And to bring this together, we've got this piece in Bloomberg.
Former karaoke company drags Logist into the AI scare trade.
So here's what happened yesterday. There's a company by the
name of Algorithm.
Speaker 3 (13:06):
Holdings used to be the Singing Machine Company, and they
made karaoke machines. They earlier this week rolled out.
Speaker 2 (13:16):
Or announced I don't even know if rolled out is
the right word, but they announced that they had put
together an AI app that held quot here the chief
executive officer of the karaoke turned AI company, The chief
executive officer of the karaoke turned AI company, yep, the
chief executive officer of the karaoke turned AI company, was
(13:39):
among those left shocked by the market action, which began
after the company said its semiicab platform was helping customers
scale freight volumes by three hundred to four hundred percent
without a corresponding increase in operational headcounts.
Speaker 4 (13:55):
Okay, so seems kind of silly on the surface. It
is silly on the surface. This is a pen You
also don't know if it's real true like, So here's
what I think is silly. The algorithm Holding's penny stock,
which was trading around eighty cents per share prior to
this announcement, shot up to like a buck twenty five
(14:18):
a share, which I know that's tiny pennies, but percentage
wise massive. I think there is very little evidence that
this company is going to be able to deliver on
much of anything, So I think that part is a
little bit wonky. The idea of major trucking companies and
logistics companies getting hit by ten to fifteen percent, I'm
(14:43):
not sure is quite as silly as the stock price
of the penny stock going up. Here's where I land,
which is the exact place I land with software companies.
Speaker 3 (14:54):
Might it be overstated, yes, But will.
Speaker 4 (14:59):
H Raw Robinson Worldwide or land Star or you know
any of these giant trucking logistics companies whose main compelling
case is, hey, we help you get your stuff from
point A to point B. We have the network of shippers,
and we will be able to logistically find the best
and cheapest way to get you from point A to
(15:20):
point B. I am certain that they are investing in
the same type of modeling software that this company just
claims to.
Speaker 3 (15:26):
Have ruled out.
Speaker 4 (15:28):
But they will face increased competition from a bunch of
new companies, and so there is a new inherent risk
that should have been thought of before, but was thought
of just yesterday when it came to these companies.
Speaker 3 (15:42):
Here's where I struggle with this one.
Speaker 2 (15:44):
Okay, see it's Robinson, just as the example, because it's
discussed in this piece. Their operating margins are four point
nine to one percent. There's not a lot of fat
on that bone. It's a pretty skinny bone. And if
you look at this, especially given like given the very
limited amount that I know about trucking and logistics, it's
(16:07):
enough to make me dangerous, Especially if you put me
behind the wheel of one of those trucks.
Speaker 3 (16:11):
Yeah, you wouldn't be able to get into first gear.
I wouldn't be able to see over the hood singing karaoke.
Speaker 2 (16:16):
You know, I'd be like, Okay, where's the booster, Jimmy,
can you pop me up?
Speaker 3 (16:19):
A little business. Hi's the sea cos.
Speaker 4 (16:21):
It'd be exactly like the scene in Supertroopers where neither
of us can.
Speaker 3 (16:24):
Get the truck in difference.
Speaker 2 (16:25):
Yes, no, we'd have no chance. So the margins are
five percent, and the reasons why the margins are low.
In the trucking business, it's already a commoditized business. There
are already marketplaces online that you can go to that
will help to match you up with available trucks in
order to ship what you want. In fact, h Robinson
(16:46):
runs one of those. I'm just not sure that you
can actually get there without ch Robinson figuring out how
to get there at the exact same time, which.
Speaker 4 (16:57):
Might bring prices down.
Speaker 2 (16:59):
For prices may come down, but they still probably end
up winning. Maybe yeah, Because this is one case where
like the network matters. It's it's not like if you're
selling someone photo editing software, there's no network effect to that.
You just go, Okay, what'sever cheapest and does the coolest
(17:19):
stuff this? There's a network that has to be present,
and so given that, it's kind of like okay, if
if you know you were starting a competing you know,
sports league, you need the best players. It doesn't matter
how low your cost is. Like, if you got a
bunch of you know, AI players, they would have to
(17:41):
be doing things that the real humans can't do.
Speaker 4 (17:44):
This one does not seem as logical to me as say,
wealth management businesses or software companies.
Speaker 3 (17:51):
I'm I'm with you there.
Speaker 4 (17:53):
Do you remember a few years ago Uber ruled out
shipping logistics. Yes, it had no impact, So, like you know,
first and foremot I don't think any of those existing
logistics companies. They might have been investors, might have been
spooked initially, but I don't think it had any substantial impact.
I think the point about AI is that there will
be ten to fifteen new ubers attempting to do this
(18:15):
in the logistics space, and what's the risk that one
of them actually does it a lot better?
Speaker 3 (18:19):
Which is fair?
Speaker 4 (18:20):
Now, maybe that doesn't justify a fifteen percent self off,
I'm not sure, but what we are clearly experiencing right
now is investors going industry by industry, not with any
sort of checklist, just how can this be disrupted?
Speaker 3 (18:33):
How can this be disrupted?
Speaker 4 (18:34):
Right and just by the tiny announcements of previously unknown companies.
They're shooting first and asking questions later. Yeah, I don't
know that we've reached peak silly on this though.
Speaker 2 (18:50):
It's hard to know when you get there, but it's
always painfully obvious in hindsight. I mean, Long Island Iced
Tea changing its name to Long Island Blockchain, and it
was like, that's the moment right there. This a karaoke
company rolling out logistics software. It's a hard maybe, it's
a hard maybe.
Speaker 3 (19:09):
Yeah. So I think that this is going to continue.
Speaker 2 (19:12):
And by the way, just because I might poopoo a
specific example, this stuff's gonna come for everyone, and I
think faster than people think, which is what's starting to
get priced in quick break here, Wall Street Watch is next.
Speaker 1 (19:30):
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 markets so
far today right here on the Financial Exchange Radio Network.
Speaker 5 (19:49):
Following a busy week, market to modestly higher as Wallstree
reacts to the Consumer Price Index this morning, where consumer
prices row zero point two percent in January, softer than
forecasts of zero point three percent. Traders are also continuing
to weigh concerns around AI disruption, impacting various sectors, including
real estate, trucking, and software.
Speaker 3 (20:09):
Right now, the Dow is.
Speaker 5 (20:10):
Up about three tenths one percent or one hundred and
thirty eight points, SMP five hundred, up four tenths of
a percent, Nasdaq also up about four tenths of one
percent or eighty seven points higher. Russell two thousand and
up almost one percent. Tenure treasure reeled is down three
basis points at four point zero six nine percent, and
crude oil retreating about a quarter percent. Today, Training at
(20:33):
sixty two dollars and sixty nine cents a barrel. Applied
Materials rallying ten percent after the maker of semiconductor equipment
posted stronger than expected quarterly results, lifted by soaring demand
for AI computing. Meanwhile, cryptocurrency exchange coinbase swung to a
loss in the previous quarter, driven by a selloff in
digital currencies. However, Coinbase shares are rebounding about fifteen percent today. Elsewhere,
(20:58):
online sports betting operator Draftking saw its revenue jump forty
three percent. However, its annual sales outlook disappointed, sending shares
tumbling twelve percent. Rivian Automotive is jumping twenty percent after
the electric truck maker said it sees twenty twenty six
vehicle deliveries ranging from sixty two thousand to sixty seven
(21:19):
thousand units, which would be roughly fifty percent higher compared
to twenty twenty five. AIRBNBA reported better than expected quarterly results,
although investment in new business drove up expenses. Airbnb stock
is up about five percent. An online travel agency Expedia
posted solid quarterly results. However, the company identified emerging AI
(21:42):
powered platforms as a potential risk. Expedio stock is down
about five percent. I'm Tucker Silva and that is Wall Street.
Speaker 3 (21:49):
Watch forget this?
Speaker 4 (21:51):
What Who is the investor that was surprised by that?
Speaker 3 (21:54):
Wait?
Speaker 4 (21:55):
You see emerging AI technologies as a risk to your
business after your stock sold off by fifteen percent the
week before because of.
Speaker 2 (22:00):
That, Tucker was surprised at forget the cell America trade.
Here comes Hedge America. What are we doing now, Michael?
Speaker 3 (22:12):
What are we just?
Speaker 1 (22:12):
Like?
Speaker 3 (22:13):
What does that mean? What is the point of all
of this? Yeah?
Speaker 4 (22:20):
I don't really have a great answer here. We haven't seen, uh,
have you seen tremendous evidence of either a sell America
or hedge America trade, I think mendous.
Speaker 2 (22:31):
There's occasional things around the margins, which I think is
how it is because remember when we talk about allocations
that come from Europe, the Middle East, Asia, where they say, hey,
we want to buy American assets, generally, the vast majority
of those allocations are coming from large institutional investors. And
(22:55):
let me tell you something about how large institutional investors operate.
They like I'll give you an example. The investors that
were nervous about you know, American assets last April are
(23:19):
sitting down in their investment meetings today being like, hey, guys,
what should we do about this? That like that is
where they are. These things take not weeks to unfold.
It's not like retail traders sitting there being like, Jimmy,
do you think we should sell America in order to
get buy in from all of your institutional like pieces
within a large investment firm. It takes months, quarters, and
(23:44):
usually years for that to happen. So I just look,
it's not to say that you don't have you know,
higher cadence, higher frequency traders.
Speaker 3 (23:55):
That are you know, playing in these waters.
Speaker 2 (23:57):
They are, But I I just am not buying that
we've seen anything, aside from a few sporadic things here
and there that indicate this is real. Now, the interesting
piece is that because American markets have gotten so large,
especially relative to their worldwide counterparts, all it takes is
(24:19):
a small fraction of change at the margins to drive
worldwide markets higher than American ones if you're changing marginal flows, which,
by the way, helps to explain why international stocks absolutely
knocked the pants off of American stocks last year, even
in a compellingly good market for.
Speaker 3 (24:40):
US doox right.
Speaker 2 (24:41):
And by the way, this phenomenon is continuing. When you
take a look this year, Yeah, the S and P
five hundred, let's just say that it's flat, just because
again it's moving like half a percent every five minutes
right now. The S ANDP is flat year to date,
the MSCI Emerging Markets Index is up almost twelve percent,
(25:04):
the IFA's up eight. And then if you look at
like narrow Warriors, Japan's up seventeen, Europe's up five. International
markets are trouncing US markets again. Yeah, and so if
you were an investor who looked at you know, the
twenty tens in the early twenty twenties and was like, gee,
why would I ever want to invest in international markets.
The answer is, well, because they're not always going to underperform.
Speaker 4 (25:25):
I was speaking with somebody just yesterday, actually who first
person I met who reads thoroughly the prospectuses that they get.
And but he didn't. He wasn't looking at them in detail.
He was really looking at Okay, let me look at
all these and tell me what the ten year return
on them is. And he brought up some of these
specifically country, you know, investments that represent holdings in Japan
(25:48):
or Brazil, and how abysmal the ten year return is.
Speaker 3 (25:51):
Yeah.
Speaker 4 (25:51):
And then you know, we open it together and you
look at, Okay, now look at the calendar year return
for the last twelve months. Yeah, and he kind of
floored like that, oh wow, oh yeah, up thirty percent
a year millikers, but down two percent a year for
the last decade. And then that has been the experience
of many many foreign investments as of late. Is huge
(26:12):
upside recently terrible performance over a decade and a half.
Speaker 2 (26:16):
President Trump plans to roll back tariffs on metal and
aluminum goods. This is report from the Financial Times. I'll
quote here. Donald Trump is planning to scale back some
tariffs on steel and aluminum goods as he battles an
affordability crisis that has sapped approval ratings ahead of midterm elections.
The US President hit steel in aluminum tariffs imports with
tariffs of up to fifty percent last summer, and has
(26:37):
expanded the taxes to a range of goods made from
those medals, including washing machines and ovens. But the administration
is now reviewing a list of products affected by the
levies and plans to exempt some items, halt the expansion
of the lists, and instead launch more targeted national security
probes into specific goods. According to three people familiar with the.
Speaker 4 (26:56):
Matter, one European business leader, who declined to be named
for the story set they knew of a company who
had sent four identical containers of machinery to the United
States and must charged different rates for each one of tariffs.
Here's the answer. This stuff is confusing. Yeah, it's leading
to higher prices for consumers in some cases too. But
it does not appear that there is a real coherent
(27:17):
formula that is used to apply to some of these things,
and trade officials themselves, Commerce department officials are just kind
of scratching their head on how do we actually implement
to this stuff. And that's a perfect example of why
it's so complicated is you're trying to figure out what
is the content portion of the finished product that comes
from stealing aluminum.
Speaker 3 (27:37):
Guess what, that's pretty tricky.
Speaker 2 (27:39):
Yeah, and again, we don't have any specifics or anything
on timing or you know exactly how this will apply,
but we'll keep you updated and let's know you know
how it evolves.
Speaker 3 (27:48):
Here, let's take a quick break.
Speaker 2 (27:50):
When we return, we'll talk about Americans with higher incomes.
Speaker 3 (27:55):
They are starting to show.
Speaker 2 (27:56):
Some signs that they might be falling behind on loan payments,
and that would represent a distinct change from the last
couple of years. We'll discuss that in its potential impacts
after this.
Speaker 1 (28:09):
If you missed any of today's show, catch up whenever
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Speaker 2 (28:35):
Piece in the Wall Street Journal for the Americans with
higher incomes are starting to fall behind on payments.
Speaker 4 (28:43):
The stat here that I found the most interesting that
we can go through others too, But the average client
seeping seeking help from credit counseling agencies. So if you've
never been to a national Foundation for credit counseling produce
this data. Typically the step that you take before declaring
bankruptcy and is oftentimes required or strongly recommended as part
(29:06):
of that process. But the average client seeking help from
those agencies, according to this national foundation, currently makes about
seventy thousand dollars a year. Their unsecured debt levels are
now approaching thirty five thousand, about half of their income.
Sounds like a lot to me. They also let you
know that before the pandemic, typical client enrolled in counseling
(29:27):
made about forty grand a year and carried ten grand
in secured debt. So it is a market increase according
to this one statistic about credit counseling and debt loads.
Speaker 2 (29:40):
And look, it's something where we've got, you know, some
data that's out there about rising delinquencies in different parts
of the credit market. This is still again the high
quality day that we get from places like the FED
is not indicating a broad deterioration that's continued through last year.
(30:02):
Like credit card delinquency rates have plateaued in the last
twelve months, saying, with auto loan delinquency rates.
Speaker 4 (30:09):
Here's what I think you saw substantial increase on. So
the FED puts together this chart of what I'm looking
at is one hundred and twenty plus days late for
total household debt delinquency, and that would include mortgages, car payments,
student loans, credit cards, et cetera. That saw a big
jump right around third fourth quarter of last of twenty
(30:32):
twenty four.
Speaker 3 (30:32):
Which is when student loans kicked back in.
Speaker 4 (30:34):
Student loans kicked back in. So I think what we
saw here is that delinquencies were already there. They weren't
being reported, they weren't required to be paid for the
majority of the time during COVID, and now we have
shot up to levels. What is concerning is that these
levels are levels that we haven't seen since like the
twenty fifteen time frame.
Speaker 3 (30:53):
Yep.
Speaker 4 (30:53):
And so I don't like that, But I think this
is primarily a student loan problem, not some indication about
something new like car loans or credit card loans being
way in default. And by the way, that doesn't matter.
It still means that a bunch of people aren't going
to be able to spend money, especially because student loans
can't be discharged.
Speaker 3 (31:14):
It's worth monitoring.
Speaker 2 (31:17):
And if we see deteriorations start to pick back up
again in credit card or auto like we can we
can do something with it.
Speaker 4 (31:23):
Logically that would make sense, right if you're defaulting on
your student loans, the next step would probably be defaulting
on your credit cards or auto loans.
Speaker 2 (31:29):
But none of the banks have like said, anything's going
on there. They have not, you know, none of them. Yes,
you get like sporadic ones where it's like you know,
Discover might say, oh, we've seen you know, deterioration here,
or JP Morgan might see, yeah, there's been a small
one here. But in the aggregate you put it all together,
none of them are flashing red you know, warning signs
right now. And so that's I think where we stand today.
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Speaker 2 (33:08):
Jamie Diamond must lower credit card interest rates, Navarro says.
In an interview with Bloomberg Radio yesterday, White House Trade
advisor Peter Navarro said, quote, James Diamond, lower your frigging
credit card interest rates. You are a criminal the way
you charge the American people at twenty two, twenty five
and thirty percent, and the President wants you to lower that, Jamie.
(33:29):
Until you do that, please refrain from commenting on other
public policies.
Speaker 3 (33:33):
So, look, here's the deal.
Speaker 2 (33:34):
When when California comes out, No I can't, I can.
Speaker 3 (33:39):
Here's the deal.
Speaker 2 (33:41):
When California comes out and says, hey, we're going to
have a separate minimum wage for fast food workers, we
call that out and we say, guys, this is an
awful lot of intrusion into you know, the business environment
and competitive markets, and you're gonna distort the labor market
(34:02):
and you're generally gonna have some pretty bad outcomes as
a result of that, and.
Speaker 3 (34:06):
This is a bad idea.
Speaker 2 (34:09):
So when Peter Navarro says, hey, like we're gonna set
credit card interest rates, you know, from the top, likewise
we can say that's a pretty bad idea, Okay, Like
if we really want to have the federal government setting
pricing for everyone, then we can just call it a
day and like.
Speaker 3 (34:29):
Not have like an economy anymore, Okay.
Speaker 2 (34:33):
And I'm sorry if we're gonna get to the point
where it's just like, hey, the governor of each state
sets their prices and then the federal government can set
then we can just call it a day. Okay, like
that's it. But otherwise I think that generally, Look, if
you if anyone listening wants to start a credit card
(34:57):
company that charges ten percent interest, you can. That is
the beauty of the free market. Like, if you think
that you can run a credit card company charging ten
percent interest, there's nothing stopping you. Right now, you can
go and open up a bank and then start lending
money to you know, ink some agreements with Visa and
start lending money on credit cards.
Speaker 3 (35:18):
There's nothing to stop anyone from doing this. Correct.
Speaker 4 (35:22):
Well, no, the thing that's stopping anyone from doing this
is losing money.
Speaker 2 (35:25):
Terrible business. It's losing money is what's stopping people from
doing it.
Speaker 4 (35:30):
So furthermore, you're a government official and you're telling a
member of the private sector to shut their mouth. Basically, like,
give me a break. I don't like everything that Jamie
Diamond says. We critique it like every other week.
Speaker 2 (35:43):
We often talk about how he's like the worst economic
forecaster in the country.
Speaker 4 (35:47):
And that's fine, but as a government official, will say, Jamie,
until you do that, please refrain from commenting on other
public policies. Does nobody else have an issue with that?
It seems pretty problematic.
Speaker 3 (35:58):
It's not great. I know it's part for the courus,
but like, give me a break. I agree with you.
Speaker 4 (36:03):
Jamie Diamond has a bunch of bad ideas. He uh
oftentimes calls for disaster in the economy when it's just
plainly not there, and I think he deserves some criticism
for that. But we've already gone through why this credit
card policy is a pretty bad idea, and then for
a member of the administration to tell a private citizen
(36:24):
to not publicly comment on things I don't like and look.
Speaker 3 (36:29):
Good, price caps don't work.
Speaker 2 (36:32):
Okay, if if you're listening and you're being like, hey, like,
I think the ten percent credit card thing is great.
Speaker 3 (36:38):
How would you feel about rent control?
Speaker 4 (36:41):
How about grocery prices capped like was being discussed uring
the last presidential campaign.
Speaker 2 (36:46):
If we're just gonna cap all prices, then we can
call it a day and just.
Speaker 3 (36:51):
Not have a market economy.
Speaker 4 (36:53):
Yeah, but let's explain what that means. Like, plenty of
countries do.
Speaker 3 (36:57):
This, Yes, they they're generally failed state.
Speaker 4 (37:00):
Yeah, Communist Russia Rightviet Union did that, you know, Look,
go take a look at Turkey, have a look at
Argentina from time to time.
Speaker 2 (37:08):
If you like the idea of price controls, there are
places that you can go to see just how that
works out.
Speaker 4 (37:14):
Just because it's an industry that everybody hates, which is
credit cards and banking specifically, and plenty of reasons to
hate it, plenty of reasons to not want these companies to.
Speaker 3 (37:24):
Get bailouts all that stuff.
Speaker 4 (37:25):
But if we're talking about price caps, there is only
one logical place that that goes, which is shortages.
Speaker 3 (37:32):
Lower supply.
Speaker 2 (37:33):
If you're going to cap the price of something, people
just stop providing it.
Speaker 3 (37:37):
And then, if you know.
Speaker 4 (37:37):
Why the administration is obsessed with this idea, it's such
a compellingly bad idea to take a.
Speaker 3 (37:42):
Quick break here.
Speaker 2 (37:43):
When we come back, we've got our two coming up
in just a little bit,
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(01:06):
and Mike Armstraw.
Speaker 2 (01:13):
All right, it's Chuck, Mike and Sucker with you here,
and just say y'all listening, No, Mike's Mike is in
danger of tipping over. So, uh if if you call
me floppy Mike, Mike, if you're that's what we call
him in the office, and uh, floppy Mic Mic, it's
it's great. But in any case, this morning we got
(01:34):
the latest inflation data, uh, the Consumer Price Index or
the CPI if you will, that's what the people in
the biz call it. And the CPI showed this, Uh,
inflation for the month of January came in at point
two percent month over month on headline, point three percent
month over month on core. So twelve months for headline
(01:57):
are now at two point four percent. Twelve month four
core are at two point five percent. So I think
that when we look at this, I know there's a
two percent target on inflation, but as we've gone through
the data previously.
Speaker 3 (02:09):
Nobody actually cares about it.
Speaker 2 (02:10):
Well, it's not that nobody cares, it's like you basically
never actually get to two percent historically. So if you
have a target that you can never reach, is it
really a target or.
Speaker 3 (02:19):
Is it just a number. It's just there.
Speaker 2 (02:24):
Here's what we are seeing right now, and I'm kind
of trying to reconcile this because I don't understand some
of it. One of the things that pulled headline prices
down was gas prices, according to CPI, following three point
two percent. This despite the fact that gas prices have
moved up over the last month and a half, so I.
Speaker 4 (02:45):
Hadn't really paid attention to that. So gas prices are
up in the month of January, not a.
Speaker 2 (02:49):
Ton, but like, so gas price right now, we're two
ninety four. I know we're in February right now, but
the start of January we were around two eighty and
as of about a week and a half ago we
were at two ninety, So like a three percent upswing,
and the CPI here is down, so expect some reversion there.
It was probably just a sampling thing or timing right
by right exactly January. I'm not describing like there's no
(03:11):
ill intent here. It's just a sampling and timing thing
in terms of when they must have done it.
Speaker 4 (03:16):
Remember too, that sampling in general in January might have
just been screwed up based on the fact that one
hundred and eighty million Americans were in the path of
a pretty big snowstorm.
Speaker 2 (03:24):
Correct, So that's something I would expect to reverse here.
Other things that I would expect to end up reversing here.
You saw a one point eight percent decline in used
cars and trucks. Some of that is real, but that's
a huge magnitude. You're not going to see a one
point eight percent decline in used vehicle prices every month,
(03:47):
so don't expect to see that. Things that I will
expect to see were continuing to get better prints on shelter,
which came in at point two percent for the month,
And I do think continued shelter disinflation is real, So
I think that's going to be a nice little help
for inflation going forward. But I continue to be of
the opinion that in the next few months, you know,
(04:08):
probably through the end of certainly through the end of
Q one, and probably into early Q two. I just
don't think inflation is the biggest potential problem facing the
US economy. I think there are some things that we
could talk about in terms of, hey, could it develop
into a bigger issue by the second half of the year. Yes,
if a certain set of things fall in a certain way.
(04:31):
But I think this report, in my opinion, continues to
reinforce that, hey, while inflation is still a little bit
above that target, if you're printing two and a half percent,
you can have a fantastic economy with two and a
half percent inflation and this is not a problem today.
Speaker 4 (04:47):
Yeah, I'm trying to remember when did the Fed FED
cut rates in twenty nineteen, right pre COVID normalized. It
was that earlier.
Speaker 3 (04:56):
Hold please.
Speaker 2 (04:59):
The effect of federal funds rates, So in terms of
what they did, you're talking twenty nineteen.
Speaker 4 (05:04):
Yeah, I'm time pre covid. I'm just I'm trying to
think about the justification.
Speaker 2 (05:08):
Rate cuts there, And quite honestly, it was a case
where there were some signs that we were going to
be getting into a little bit of a gnarly labor
market situation. Not like horrible, but there were some signs
of weakness developing there.
Speaker 4 (05:22):
You know, I'm just looking at the context for this. Now.
The big difference between twenty nineteen and now is that
the CPI back at the end of twenty nineteen was
running one seven, so like that's you know, abnormally low,
and we were getting to this you know point in
twenty eighteen, twenty nineteen where people were just saying, hey, look,
(05:43):
you know, unemployment rate being this low might not just
contribute to higher inflation right now.
Speaker 3 (05:49):
And yeah you did.
Speaker 4 (05:50):
You did see the FED cutting an environment where unemployment
was at three point six percent. But I think that
if you are Kevin Worrish, you're going to use that
same logic from back then to say, yeah, you know what,
unemployment is four point three percent, which seems healthy, but
you know, inflation is not really showing signs of sparking
in spite of that lower unemployment. So that's what we're
(06:12):
going to be doing the inflation read Ultimately, I think
what we've focused on the last several readings, if you
get a reversal in energy prices, we could be in
pretty rough waters because the core prices are still running
in that slightly uncomfortable zone that you know, should something
reverse on energy, you could have something ugly.
Speaker 2 (06:35):
Yeah, we're still waiting to see what we get from
the Cleveland Fed on median CPI and TRIM mean those
measures both still running around three percent year over years,
So it does tell you like things are hotter than
you'd like to see in a perfect world. And remember
when we're talking about inflation, there are a few different
things that get kind of confused when people talk about inflation.
(06:57):
What we're talking about here is the rate of inflation,
how quickly are price is going up. And what we're
telling you today is that the rate that prices are
going up is generally within at least the realm of
what would be acceptable. If you saw two and a
half percent year over your inflation for the next decade,
you could look back and say that was fine, Like
(07:19):
you would not have any problem there. We are not
talking about the price level, which is prices have risen
by x amount in this case a large amount over
the last five years, and those are not going down because.
Speaker 3 (07:31):
That's just not how it works. Quite honestly. I know
everyone's like, oh, I wish we could have deflation. No,
you don't.
Speaker 2 (07:38):
Deflation sucks because it generally happens when demand is really bad.
And think about this from this perspective. Let's say that
you're in a deflationary environment. My name is Chuck, and
I'm in a deflationary environment. Do I go out and
buy a car today?
Speaker 3 (07:53):
No?
Speaker 2 (07:53):
No, I wait, because it's going to be cheaper next year,
which means demand gets sucked out even more, which means
businesses die. You want disinflation, not deflation. Seventy five years
worth of data. Let me show you the points of
year of a year deflation. August August of nine was
one of them.
Speaker 4 (08:11):
Not a great period if time, Uh nope, didn't get there.
Let's see October of fifty.
Speaker 3 (08:19):
Four really bad as well.
Speaker 2 (08:21):
The feder just like jammed rates higher to stop like
twenty percent annualized inflation September of forty nine also not
a great economy.
Speaker 4 (08:29):
Yeah, so again, we barely have context for what the
economy was like in the forties and fifties. Few people
living today truly understand what the economy is like back then. Yes,
so you the only time in modern history what's happened
was post Great Financial Crisis, when unemployment was absurdly high
and nobody could afford to buy anything.
Speaker 3 (08:48):
Yes.
Speaker 2 (08:49):
Uh so you can make a case that, yes, like
if inflation runs two and a half percent for the
next you know, ten years, you're completely fine.
Speaker 3 (08:57):
The question is, hey, what could this run that?
Speaker 2 (09:01):
And for this we're gonna go back to the job
support that came out two days ago. We don't need
to fire up the time machine for it, because I
saw you getting the flex capacitor ready. But we don't
need to Tucker. Plutonium is through the roof these days.
We can't afford to run the time machine for a
couple days.
Speaker 3 (09:18):
Okay. So here's the thing.
Speaker 2 (09:22):
Every jobs report, we get a data point that is
called weekly change changing weekly payrolls. And in two of
the last three now it's come in at point seven
percent month over month. The one in between did see
a modest decline, but it's still over the last three months,
weekly payroll growth or not payroll growth, weekly wage growth
(09:43):
is running at a six percent annualized rate, which is Tucker.
Speaker 3 (09:48):
In this case, you can fire up the bongos if
you will. No, no bongos, bongos out bongos.
Speaker 2 (09:56):
Give me the steel drum. Steal drums. I need to
steal drums. How we waste our plutonium. That's what the
wage growth is goes. And so here's the potential problem.
Mike pretends to own a restaurant, and in this scenario,
Mike's margins are like two percent. One of his servers
leaves and in order to hire a new one, because
(10:18):
the supply of labor is so tight, he's got to
pay through the roof. His labor cost goes up, and
in doing so, it puts pressure on his very meager margins,
and so Mike has to raise prices in order to
stay in business. That is the potential path to inflation
getting a little bit gnarly in the second half of
the years. If the labor market is indeed inflecting up
and starting to strengthen, labor supply right now, you can
(10:42):
make a case is declining two reasons. Number one, raise
your hand for your baby boomer, not two if you're driving.
Speaker 3 (10:48):
Just one.
Speaker 2 (10:49):
If you're a baby boomer, how many of your friends
are either retired, retiring, or going to retire in the
very near future most of them? And if you are
agen zer, raise your hand. There's not enough of you
to replace all of the boomers that are retiring. And
coupled with the fact that we have immigration now either
(11:10):
somewhere around zero or net negative at this point, there
is no labor supply to fill that gap. And so
the potential issue that you run into is you might
see very modest job gains, but wages have to go
through the roof to fill them because there just aren't
enough people to fill those jobs.
Speaker 4 (11:28):
Actually, yeah, the Titaness piece was echoed elsewhere, right, that
wage growth is one of them. The unemployment rate sank
to four point three percent.
Speaker 2 (11:34):
So I don't think that CPI that inflation is something
that we need to worry about right now. But let's
watch this data closely over the next three to six
months because it could be something that matters in the
second half of the year.
Speaker 3 (11:50):
Quick break.
Speaker 2 (11:51):
When we come back, we're talking about why AI is
scaring the heck out of everyone.
Speaker 1 (11:56):
Right after this, find daily interviews in full SHOs of
the Financial Exchange on our YouTube page. Subscribe to our
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Speaker 2 (12:46):
All right, we got a piece here in the Wall
Street Journal. It's titled Worries about AI disruption's fuel stock slide.
And to bring this together, we've got this piece in Bloomberg.
Former karaoke company drags Logist into the AI scare trade.
So here's what happened yesterday. There's a company by the
name of Algorithm.
Speaker 3 (13:06):
Holdings used to be the Singing Machine Company, and they
made karaoke machines. They earlier this week rolled out.
Speaker 2 (13:16):
Or announced I don't even know if rolled out is
the right word, but they announced that they had put
together an AI app that held quot here the chief
executive officer of the karaoke turned AI company, The chief
executive officer of the karaoke turned AI company, yep, the
chief executive officer of the karaoke turned AI company, was
(13:39):
among those left shocked by the market action, which began
after the company said its semiicab platform was helping customers
scale freight volumes by three hundred to four hundred percent
without a corresponding increase in operational headcounts.
Speaker 4 (13:55):
Okay, so seems kind of silly on the surface. It
is silly on the surface. This is a pen You
also don't know if it's real true like, So here's
what I think is silly. The algorithm Holding's penny stock,
which was trading around eighty cents per share prior to
this announcement, shot up to like a buck twenty five
(14:18):
a share, which I know that's tiny pennies, but percentage
wise massive. I think there is very little evidence that
this company is going to be able to deliver on
much of anything, So I think that part is a
little bit wonky. The idea of major trucking companies and
logistics companies getting hit by ten to fifteen percent, I'm
(14:43):
not sure is quite as silly as the stock price
of the penny stock going up. Here's where I land,
which is the exact place I land with software companies.
Speaker 3 (14:54):
Might it be overstated, yes, But will.
Speaker 4 (14:59):
H Raw Robinson Worldwide or land Star or you know
any of these giant trucking logistics companies whose main compelling
case is, hey, we help you get your stuff from
point A to point B. We have the network of shippers,
and we will be able to logistically find the best
and cheapest way to get you from point A to
(15:20):
point B. I am certain that they are investing in
the same type of modeling software that this company just
claims to.
Speaker 3 (15:26):
Have ruled out.
Speaker 4 (15:28):
But they will face increased competition from a bunch of
new companies, and so there is a new inherent risk
that should have been thought of before, but was thought
of just yesterday when it came to these companies.
Speaker 3 (15:42):
Here's where I struggle with this one.
Speaker 2 (15:44):
Okay, see it's Robinson, just as the example, because it's
discussed in this piece. Their operating margins are four point
nine to one percent. There's not a lot of fat
on that bone. It's a pretty skinny bone. And if
you look at this, especially given like given the very
limited amount that I know about trucking and logistics, it's
(16:07):
enough to make me dangerous, Especially if you put me
behind the wheel of one of those trucks.
Speaker 3 (16:11):
Yeah, you wouldn't be able to get into first gear.
I wouldn't be able to see over the hood singing karaoke.
Speaker 2 (16:16):
You know, I'd be like, Okay, where's the booster, Jimmy,
can you pop me up?
Speaker 3 (16:19):
A little business. Hi's the sea cos.
Speaker 4 (16:21):
It'd be exactly like the scene in Supertroopers where neither
of us can.
Speaker 3 (16:24):
Get the truck in difference.
Speaker 2 (16:25):
Yes, no, we'd have no chance. So the margins are
five percent, and the reasons why the margins are low.
In the trucking business, it's already a commoditized business. There
are already marketplaces online that you can go to that
will help to match you up with available trucks in
order to ship what you want. In fact, h Robinson
(16:46):
runs one of those. I'm just not sure that you
can actually get there without ch Robinson figuring out how
to get there at the exact same time, which.
Speaker 4 (16:57):
Might bring prices down.
Speaker 2 (16:59):
For prices may come down, but they still probably end
up winning. Maybe yeah, Because this is one case where
like the network matters. It's it's not like if you're
selling someone photo editing software, there's no network effect to that.
You just go, Okay, what'sever cheapest and does the coolest
(17:19):
stuff this? There's a network that has to be present,
and so given that, it's kind of like okay, if
if you know you were starting a competing you know,
sports league, you need the best players. It doesn't matter
how low your cost is. Like, if you got a
bunch of you know, AI players, they would have to
(17:41):
be doing things that the real humans can't do.
Speaker 4 (17:44):
This one does not seem as logical to me as say,
wealth management businesses or software companies.
Speaker 3 (17:51):
I'm I'm with you there.
Speaker 4 (17:53):
Do you remember a few years ago Uber ruled out
shipping logistics. Yes, it had no impact, So, like you know,
first and foremot I don't think any of those existing
logistics companies. They might have been investors, might have been
spooked initially, but I don't think it had any substantial impact.
I think the point about AI is that there will
be ten to fifteen new ubers attempting to do this
(18:15):
in the logistics space, and what's the risk that one
of them actually does it a lot better?
Speaker 3 (18:19):
Which is fair?
Speaker 4 (18:20):
Now, maybe that doesn't justify a fifteen percent self off,
I'm not sure, but what we are clearly experiencing right
now is investors going industry by industry, not with any
sort of checklist, just how can this be disrupted?
Speaker 3 (18:33):
How can this be disrupted?
Speaker 4 (18:34):
Right and just by the tiny announcements of previously unknown companies.
They're shooting first and asking questions later. Yeah, I don't
know that we've reached peak silly on this though.
Speaker 2 (18:50):
It's hard to know when you get there, but it's
always painfully obvious in hindsight. I mean, Long Island Iced
Tea changing its name to Long Island Blockchain, and it
was like, that's the moment right there. This a karaoke
company rolling out logistics software. It's a hard maybe, it's
a hard maybe.
Speaker 3 (19:09):
Yeah. So I think that this is going to continue.
Speaker 2 (19:12):
And by the way, just because I might poopoo a
specific example, this stuff's gonna come for everyone, and I
think faster than people think, which is what's starting to
get priced in quick break here, Wall Street Watch is next.
Speaker 1 (19:30):
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 markets so
far today right here on the Financial Exchange Radio Network.
Speaker 5 (19:49):
Following a busy week, market to modestly higher as Wallstree
reacts to the Consumer Price Index this morning, where consumer
prices row zero point two percent in January, softer than
forecasts of zero point three percent. Traders are also continuing
to weigh concerns around AI disruption, impacting various sectors, including
real estate, trucking, and software.
Speaker 3 (20:09):
Right now, the Dow is.
Speaker 5 (20:10):
Up about three tenths one percent or one hundred and
thirty eight points, SMP five hundred, up four tenths of
a percent, Nasdaq also up about four tenths of one
percent or eighty seven points higher. Russell two thousand and
up almost one percent. Tenure treasure reeled is down three
basis points at four point zero six nine percent, and
crude oil retreating about a quarter percent. Today, Training at
(20:33):
sixty two dollars and sixty nine cents a barrel. Applied
Materials rallying ten percent after the maker of semiconductor equipment
posted stronger than expected quarterly results, lifted by soaring demand
for AI computing. Meanwhile, cryptocurrency exchange coinbase swung to a
loss in the previous quarter, driven by a selloff in
digital currencies. However, Coinbase shares are rebounding about fifteen percent today. Elsewhere,
(20:58):
online sports betting operator Draftking saw its revenue jump forty
three percent. However, its annual sales outlook disappointed, sending shares
tumbling twelve percent. Rivian Automotive is jumping twenty percent after
the electric truck maker said it sees twenty twenty six
vehicle deliveries ranging from sixty two thousand to sixty seven
(21:19):
thousand units, which would be roughly fifty percent higher compared
to twenty twenty five. AIRBNBA reported better than expected quarterly results,
although investment in new business drove up expenses. Airbnb stock
is up about five percent. An online travel agency Expedia
posted solid quarterly results. However, the company identified emerging AI
(21:42):
powered platforms as a potential risk. Expedio stock is down
about five percent. I'm Tucker Silva and that is Wall Street.
Speaker 3 (21:49):
Watch forget this?
Speaker 4 (21:51):
What Who is the investor that was surprised by that?
Speaker 3 (21:54):
Wait?
Speaker 4 (21:55):
You see emerging AI technologies as a risk to your
business after your stock sold off by fifteen percent the
week before because of.
Speaker 2 (22:00):
That, Tucker was surprised at forget the cell America trade.
Here comes Hedge America. What are we doing now, Michael?
Speaker 3 (22:12):
What are we just?
Speaker 1 (22:12):
Like?
Speaker 3 (22:13):
What does that mean? What is the point of all
of this? Yeah?
Speaker 4 (22:20):
I don't really have a great answer here. We haven't seen, uh,
have you seen tremendous evidence of either a sell America
or hedge America trade, I think mendous.
Speaker 2 (22:31):
There's occasional things around the margins, which I think is
how it is because remember when we talk about allocations
that come from Europe, the Middle East, Asia, where they say, hey,
we want to buy American assets, generally, the vast majority
of those allocations are coming from large institutional investors. And
(22:55):
let me tell you something about how large institutional investors operate.
They like I'll give you an example. The investors that
were nervous about you know, American assets last April are
(23:19):
sitting down in their investment meetings today being like, hey, guys,
what should we do about this? That like that is
where they are. These things take not weeks to unfold.
It's not like retail traders sitting there being like, Jimmy,
do you think we should sell America in order to
get buy in from all of your institutional like pieces
within a large investment firm. It takes months, quarters, and
(23:44):
usually years for that to happen. So I just look,
it's not to say that you don't have you know,
higher cadence, higher frequency traders.
Speaker 3 (23:55):
That are you know, playing in these waters.
Speaker 2 (23:57):
They are, But I I just am not buying that
we've seen anything, aside from a few sporadic things here
and there that indicate this is real. Now, the interesting
piece is that because American markets have gotten so large,
especially relative to their worldwide counterparts, all it takes is
(24:19):
a small fraction of change at the margins to drive
worldwide markets higher than American ones if you're changing marginal flows, which,
by the way, helps to explain why international stocks absolutely
knocked the pants off of American stocks last year, even
in a compellingly good market for.
Speaker 3 (24:40):
US doox right.
Speaker 2 (24:41):
And by the way, this phenomenon is continuing. When you
take a look this year, Yeah, the S and P
five hundred, let's just say that it's flat, just because
again it's moving like half a percent every five minutes
right now. The S ANDP is flat year to date,
the MSCI Emerging Markets Index is up almost twelve percent,
(25:04):
the IFA's up eight. And then if you look at
like narrow Warriors, Japan's up seventeen, Europe's up five. International
markets are trouncing US markets again. Yeah, and so if
you were an investor who looked at you know, the
twenty tens in the early twenty twenties and was like, gee,
why would I ever want to invest in international markets.
The answer is, well, because they're not always going to underperform.
Speaker 4 (25:25):
I was speaking with somebody just yesterday, actually who first
person I met who reads thoroughly the prospectuses that they get.
And but he didn't. He wasn't looking at them in detail.
He was really looking at Okay, let me look at
all these and tell me what the ten year return
on them is. And he brought up some of these
specifically country, you know, investments that represent holdings in Japan
(25:48):
or Brazil, and how abysmal the ten year return is.
Speaker 3 (25:51):
Yeah.
Speaker 4 (25:51):
And then you know, we open it together and you
look at, Okay, now look at the calendar year return
for the last twelve months. Yeah, and he kind of
floored like that, oh wow, oh yeah, up thirty percent
a year millikers, but down two percent a year for
the last decade. And then that has been the experience
of many many foreign investments as of late. Is huge
(26:12):
upside recently terrible performance over a decade and a half.
Speaker 2 (26:16):
President Trump plans to roll back tariffs on metal and
aluminum goods. This is report from the Financial Times. I'll
quote here. Donald Trump is planning to scale back some
tariffs on steel and aluminum goods as he battles an
affordability crisis that has sapped approval ratings ahead of midterm elections.
The US President hit steel in aluminum tariffs imports with
tariffs of up to fifty percent last summer, and has
(26:37):
expanded the taxes to a range of goods made from
those medals, including washing machines and ovens. But the administration
is now reviewing a list of products affected by the
levies and plans to exempt some items, halt the expansion
of the lists, and instead launch more targeted national security
probes into specific goods. According to three people familiar with the.
Speaker 4 (26:56):
Matter, one European business leader, who declined to be named
for the story set they knew of a company who
had sent four identical containers of machinery to the United
States and must charged different rates for each one of tariffs.
Here's the answer. This stuff is confusing. Yeah, it's leading
to higher prices for consumers in some cases too. But
it does not appear that there is a real coherent
(27:17):
formula that is used to apply to some of these things,
and trade officials themselves, Commerce department officials are just kind
of scratching their head on how do we actually implement
to this stuff. And that's a perfect example of why
it's so complicated is you're trying to figure out what
is the content portion of the finished product that comes
from stealing aluminum.
Speaker 3 (27:37):
Guess what, that's pretty tricky.
Speaker 2 (27:39):
Yeah, and again, we don't have any specifics or anything
on timing or you know exactly how this will apply,
but we'll keep you updated and let's know you know
how it evolves.
Speaker 3 (27:48):
Here, let's take a quick break.
Speaker 2 (27:50):
When we return, we'll talk about Americans with higher incomes.
Speaker 3 (27:55):
They are starting to show.
Speaker 2 (27:56):
Some signs that they might be falling behind on loan payments,
and that would represent a distinct change from the last
couple of years. We'll discuss that in its potential impacts
after this.
Speaker 1 (28:09):
If you missed any of today's show, catch up whenever
you want on our YouTube page. Find daily show segments
and full shows. Just go to YouTube dot com and
search for the Financial Exchange. This is your home for
breaking business and financial news. This is the Financial Exchange
Radio network.
Speaker 2 (28:35):
Piece in the Wall Street Journal for the Americans with
higher incomes are starting to fall behind on payments.
Speaker 4 (28:43):
The stat here that I found the most interesting that
we can go through others too, But the average client
seeping seeking help from credit counseling agencies. So if you've
never been to a national Foundation for credit counseling produce
this data. Typically the step that you take before declaring
bankruptcy and is oftentimes required or strongly recommended as part
(29:06):
of that process. But the average client seeking help from
those agencies, according to this national foundation, currently makes about
seventy thousand dollars a year. Their unsecured debt levels are
now approaching thirty five thousand, about half of their income.
Sounds like a lot to me. They also let you
know that before the pandemic, typical client enrolled in counseling
(29:27):
made about forty grand a year and carried ten grand
in secured debt. So it is a market increase according
to this one statistic about credit counseling and debt loads.
Speaker 2 (29:40):
And look, it's something where we've got, you know, some
data that's out there about rising delinquencies in different parts
of the credit market. This is still again the high
quality day that we get from places like the FED
is not indicating a broad deterioration that's continued through last year.
(30:02):
Like credit card delinquency rates have plateaued in the last
twelve months, saying, with auto loan delinquency rates.
Speaker 4 (30:09):
Here's what I think you saw substantial increase on. So
the FED puts together this chart of what I'm looking
at is one hundred and twenty plus days late for
total household debt delinquency, and that would include mortgages, car payments,
student loans, credit cards, et cetera. That saw a big
jump right around third fourth quarter of last of twenty
(30:32):
twenty four.
Speaker 3 (30:32):
Which is when student loans kicked back in.
Speaker 4 (30:34):
Student loans kicked back in. So I think what we
saw here is that delinquencies were already there. They weren't
being reported, they weren't required to be paid for the
majority of the time during COVID, and now we have
shot up to levels. What is concerning is that these
levels are levels that we haven't seen since like the
twenty fifteen time frame.
Speaker 3 (30:53):
Yep.
Speaker 4 (30:53):
And so I don't like that, But I think this
is primarily a student loan problem, not some indication about
something new like car loans or credit card loans being
way in default. And by the way, that doesn't matter.
It still means that a bunch of people aren't going
to be able to spend money, especially because student loans
can't be discharged.
Speaker 3 (31:14):
It's worth monitoring.
Speaker 2 (31:17):
And if we see deteriorations start to pick back up
again in credit card or auto like we can we
can do something with it.
Speaker 4 (31:23):
Logically that would make sense, right if you're defaulting on
your student loans, the next step would probably be defaulting
on your credit cards or auto loans.
Speaker 2 (31:29):
But none of the banks have like said, anything's going
on there. They have not, you know, none of them. Yes,
you get like sporadic ones where it's like you know,
Discover might say, oh, we've seen you know, deterioration here,
or JP Morgan might see, yeah, there's been a small
one here. But in the aggregate you put it all together,
none of them are flashing red you know, warning signs
right now. And so that's I think where we stand today.
Speaker 5 (31:52):
Stay planning is about more than just deciding who inherits what.
It also shapes how your assets are treated over to
and that's a key point from the estate planning attorneys
at Cushing and Dolan. Without a clear plan and a
state can face significant tax exposure as well as long
term care costs that can put pressure on your savings.
(32:14):
Trust off and play an important role in your overall
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term care planning while still allowing you to retain control
during your lifetime. Cushing and Dolan have put together a
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(32:34):
how these planning pieces fit together and what to consider
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Speaker 1 (32:57):
The proceeding was paid for and the views expressed are
solely those of Kush and Dolan. Cushing and Dolan and
or Armstrong Advisory may contact you offering legal or investment services.
Cushing and Armstrong did not endorse each other and are
not affiliated.
Speaker 2 (33:08):
Jamie Diamond must lower credit card interest rates, Navarro says.
In an interview with Bloomberg Radio yesterday, White House Trade
advisor Peter Navarro said, quote, James Diamond, lower your frigging
credit card interest rates. You are a criminal the way
you charge the American people at twenty two, twenty five
and thirty percent, and the President wants you to lower that, Jamie.
(33:29):
Until you do that, please refrain from commenting on other
public policies.
Speaker 3 (33:33):
So, look, here's the deal.
Speaker 2 (33:34):
When when California comes out, No I can't, I can.
Speaker 3 (33:39):
Here's the deal.
Speaker 2 (33:41):
When California comes out and says, hey, we're going to
have a separate minimum wage for fast food workers, we
call that out and we say, guys, this is an
awful lot of intrusion into you know, the business environment
and competitive markets, and you're gonna distort the labor market
(34:02):
and you're generally gonna have some pretty bad outcomes as
a result of that, and.
Speaker 3 (34:06):
This is a bad idea.
Speaker 2 (34:09):
So when Peter Navarro says, hey, like we're gonna set
credit card interest rates, you know, from the top, likewise
we can say that's a pretty bad idea, Okay, Like
if we really want to have the federal government setting
pricing for everyone, then we can just call it a
day and like.
Speaker 3 (34:29):
Not have like an economy anymore, Okay.
Speaker 2 (34:33):
And I'm sorry if we're gonna get to the point
where it's just like, hey, the governor of each state
sets their prices and then the federal government can set
then we can just call it a day. Okay, like
that's it. But otherwise I think that generally, Look, if
you if anyone listening wants to start a credit card
(34:57):
company that charges ten percent interest, you can. That is
the beauty of the free market. Like, if you think
that you can run a credit card company charging ten
percent interest, there's nothing stopping you. Right now, you can
go and open up a bank and then start lending
money to you know, ink some agreements with Visa and
start lending money on credit cards.
Speaker 3 (35:18):
There's nothing to stop anyone from doing this. Correct.
Speaker 4 (35:22):
Well, no, the thing that's stopping anyone from doing this
is losing money.
Speaker 2 (35:25):
Terrible business. It's losing money is what's stopping people from
doing it.
Speaker 4 (35:30):
So furthermore, you're a government official and you're telling a
member of the private sector to shut their mouth. Basically, like,
give me a break. I don't like everything that Jamie
Diamond says. We critique it like every other week.
Speaker 2 (35:43):
We often talk about how he's like the worst economic
forecaster in the country.
Speaker 4 (35:47):
And that's fine, but as a government official, will say, Jamie,
until you do that, please refrain from commenting on other
public policies. Does nobody else have an issue with that?
It seems pretty problematic.
Speaker 3 (35:58):
It's not great. I know it's part for the courus,
but like, give me a break. I agree with you.
Speaker 4 (36:03):
Jamie Diamond has a bunch of bad ideas. He uh
oftentimes calls for disaster in the economy when it's just
plainly not there, and I think he deserves some criticism
for that. But we've already gone through why this credit
card policy is a pretty bad idea, and then for
a member of the administration to tell a private citizen
(36:24):
to not publicly comment on things I don't like and look.
Speaker 3 (36:29):
Good, price caps don't work.
Speaker 2 (36:32):
Okay, if if you're listening and you're being like, hey, like,
I think the ten percent credit card thing is great.
Speaker 3 (36:38):
How would you feel about rent control?
Speaker 4 (36:41):
How about grocery prices capped like was being discussed uring
the last presidential campaign.
Speaker 2 (36:46):
If we're just gonna cap all prices, then we can
call it a day and just.
Speaker 3 (36:51):
Not have a market economy.
Speaker 4 (36:53):
Yeah, but let's explain what that means. Like, plenty of
countries do.
Speaker 3 (36:57):
This, Yes, they they're generally failed state.
Speaker 4 (37:00):
Yeah, Communist Russia Rightviet Union did that, you know, Look,
go take a look at Turkey, have a look at
Argentina from time to time.
Speaker 2 (37:08):
If you like the idea of price controls, there are
places that you can go to see just how that
works out.
Speaker 4 (37:14):
Just because it's an industry that everybody hates, which is
credit cards and banking specifically, and plenty of reasons to
hate it, plenty of reasons to not want these companies to.
Speaker 3 (37:24):
Get bailouts all that stuff.
Speaker 4 (37:25):
But if we're talking about price caps, there is only
one logical place that that goes, which is shortages.
Speaker 3 (37:32):
Lower supply.
Speaker 2 (37:33):
If you're going to cap the price of something, people
just stop providing it.
Speaker 3 (37:37):
And then, if you know.
Speaker 4 (37:37):
Why the administration is obsessed with this idea, it's such
a compellingly bad idea to take a.
Speaker 3 (37:42):
Quick break here.
Speaker 2 (37:43):
When we come back, we've got our two coming up
in just a little bit,
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