January 12, 2026 • 38 mins
Chuck Zodda and Mike Armstrong discuss Jerome Powell under investigation over renovations. Is Central Bank independence a good or bad thing? Americans are right to be worried about the labor market. Why do we care so much about jobs data? Magnificent 7's stock market dominance shows signs of cracking. GOP lawmakers back stock trading crackdown.
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Speaker 1 (00:01):
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(00:21):
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(00:43):
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(01:06):
Zada and Mike Armstrong.
Speaker 2 (01:12):
Hope y'all had a great weekend. It's Chuck, Mike and
Tucker with you. And we've got a busy week on
tap here as far as a combination of economic data,
We've got earning season kicking off as well. Tomorrow, we're
going to be getting the CPI data consumer Price Index
(01:33):
at eight thirty am. Also new home sales data coming
out at ten am. Wednesday, We've got the Producer Price
Index at eight thirty am along with retail sales, and
then existing home sales come out at ten am. Thursday.
We've got weekly jobless claim, so again not you know,
not nothing, You've got, you know, some pretty decent stuff
(01:54):
that we're going to be looking at this week, and
then on the earning side, if they tomorrow, We've got
JP Morgan Bank, New York, Mellon and Delta. We've got
Bank of America's City Group in Wells Fargo on Wednesday,
and then Thursday Morgan Stanley, Goldman, Sachs and Blackrock all reporting.
So overall, pretty busy week As we continue into the
(02:18):
new year, I do believe it's no longer appropriate to
say Happy New Year. Now you can only say it
with a question. Now, you know, hey, Mike, Happy New Year.
Speaker 3 (02:26):
I've been trying to trick people into saying Happy New
Year to Tucker on the show every day, but we
basically did just say Happy New Year. So I think
we got it covered for today. I asked Paul, yes,
you know, hey, Paul, have you seen Tucker yet since
twenty twenty five? Hattie, do you have anything.
Speaker 2 (02:41):
To say you seen him?
Speaker 4 (02:42):
He had not, and he said happy.
Speaker 2 (02:43):
No, Yeah, well that's great in any case, over the weekend,
rather last night, I think it was maybe seven o'clock
seven thirty or so. J Powell or not him. I'm
sure he doesn't run the Federal Reserves website or x
account either one. I'm sure it's not really his thing.
(03:03):
But the Federal Reserve put up a video of j. Powell,
and here is what Jay had to say.
Speaker 5 (03:12):
On Friday, the Department of Justice served the Federal Reserve
with grand jury subpoenas threatening a criminal indictment related to
my testimony before the Senate Banking Committee last June. That
testimony concerned, in part, a multi year project to renovate
historic Federal Reserve office buildings. I have deep respect for
(03:33):
the rule of law and for accountability in our democracy.
No one, certainly not the Chair of the Federal Reserve,
is above the law. But this unprecedented action should be
seen in the broader context of the administration's threats and
ongoing pressure. This new threat is not about my testimony
last June, or about the renovation of the Federal Reserve buildings.
(03:55):
It is not about Congress's oversight rule. The Fed, through
testimony and other public disclosures, made every effort to keep
Congress informed about the renovation project. Those are pretexts. The
threat of criminal charges is a consequence of the Federal
Reserve setting interest rates based on our best assessment of
(04:16):
what will serve the public, rather than following the preferences
of the President. This is about whether the Fed will
be able to continue to set interest rates based on
evidence and economic conditions, or whether instead monetary policy will
be directed by political pressure or intimidation. I have served
at the Federal Reserve under four administrations, Republicans and Democrats alike.
(04:39):
In every case, I have carried out my duties without
political fear or favor, focused solely on our mandate of
price stability and maximum employment. Public service sometimes requires standing
firm in the face of threats. I will continue to
do the job the Senate confirmed me to do with
integrity and a commitment to serving the American people.
Speaker 2 (05:04):
Okay, so J Powell saying, Hey, on Friday, we received,
you know, a subpoena from a grand jury requesting information.
It is ostensibly related to the renovation project at the FED.
Speaker 4 (05:18):
And the testimony they gave about it. Yep.
Speaker 2 (05:20):
And then Jay saying, in no uncertain terms, this is
not what this is actually about. This is about the
President trying to use this to force me to lower
interest rates where the Federal Reserve Committee doesn't believe it's warranted.
So my first take on this when I heard it is,
(05:41):
y'all ever watch Wolf of Wall Street. Yes, you got
Leo standing up there, and you know he's, you know,
thinking about stepping down, and then he goes, you know,
I'm not effing leaving Like that's that's basically J. Powell
doesn't really answer these questions ever, Like, pretty much, whenever
asked questions about any of this stuff, he has generally said,
(06:03):
that's not for me to say. There's you know, you know,
an ongoing project. We're not going to talk about this
this is for Congress, this is for the executive branch.
Like he basically always defers.
Speaker 3 (06:12):
You could teach a masterclass in speaking for four hours
while not answering any questions.
Speaker 2 (06:16):
The fact that he came out and said this is
not about what it sounds like it is about is
about as aggressive as you will get Jay Powell to be.
Speaker 3 (06:29):
It's a huge departure for him, and frankly any recent
leader of the Federal Reserve correct.
Speaker 2 (06:35):
And so I think it puts Powell and the executive
branch on a clear collision course where someone is either
going to have to back down on this or it's
going to be a very nasty, ugly public fight that
I have no idea how it will resolve.
Speaker 3 (06:56):
Right, And let's be clear, it's not as though Chuck
and I have any idea what the grand jury is reviewing.
Perhaps there is incredibly damning evidence of j. Powell that
is being presented, but if there were, I would have
expected to see it by now, I guess is the concern.
Speaker 4 (07:14):
But nonetheless, this is going to proceed, and.
Speaker 3 (07:18):
With a lot of these grand juries that have happened
recently over the course of the last few as the
last year, there's many of them that have not gotten
very far at all. They've been tossed out pretty immediately,
and so I don't think it's going to take months
and years to discover, you know, what it is the
White House is attempting to do here and what evidence
they have to support their claims.
Speaker 2 (07:38):
Well, I hope if you're on the grand jury, it
doesn't take years, right, you know, you got to get
back to work pretty quick. So I think, look, ultimately,
we don't know anything about the facts that are being
debated by the Grand Jury. I couldn't tell you if
there's anything legit in there or not. This is the
same thing that we said last summer when this was
you know, first being brought up. What I can't tell
(07:58):
you is whatever's going on with the rent at the Fed. A.
It's being paid for by the Fed. It's not like
taxpayer dollars around the hook. B. It's something where it's
not you know, impacting positively or negatively. J Powell and
the whole rest of the cruis ability to manage interest rates.
There have been times in the last you know decades
(08:19):
under Powell where I think the Fed's done an admirable
job managing things. There are times when I think they've
done a remarkably poor job that I think Mark Vandetti
would adequately characterize as a what's the world here? That's
the one. So I think that when you look at
this ultimately, it boils down to one question more than
(08:43):
anything else, and that is should there be an independent
Federal Reserve? How bright should those lines be? And what
are the pros and cons of central bank independence? Because
that's the whole ballgame here that we're getting it.
Speaker 4 (09:01):
Yeah, and by the way, like my personal hope, how
do I say this? Right?
Speaker 3 (09:06):
I wouldn't want to see a corrupt head of the
Federal Reserve, but I kind of hope that there is
some very clear evidence here because if not, if this
is a bullying intimidation aspect here, then it is going
to get much uglier and going to be really problematic
for the entire future of the FED for a whole
(09:27):
bunch of reasons. The biggest one has to do with
the fact that it is a committee that very much
believes they themselves should be independent. And so I'm kind
of sitting here saying, wow, I hope that there is
some really damning evidence for J. Powell that causes him
to be in some serious.
Speaker 4 (09:46):
Hot water brigs.
Speaker 3 (09:47):
If there isn't, then it is pure intimidation and a
really dangerous threat to the Federal Reserve and to just
kind of generally our financial system.
Speaker 2 (09:58):
Let's take a quick break when we come back. What's
kind of start from the first question that this all
resides upon. Is an independent central bank a good or
bad thing? We'll discuss right after this.
Speaker 1 (10:15):
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Speaker 2 (10:54):
All right, So we're talking about the idea of central
bank independence here, and the question that we need to
start from is central bank independence a good or bad thing?
And I think even before there, like we have to
kind of define what central bank independence actually means. So
(11:18):
I don't think anyone is you know, sitting out there suggesting, hey,
let's go and just you know, we're not gonna you know,
control monetary policy at all. We're just gonna let you know,
JP Morgan Chase, whatever they want to do is gonna
be you know what monetary policy is.
Speaker 4 (11:38):
Sure.
Speaker 3 (11:38):
So I mean prior to what nineteen fifty, the Federal
Reserve was basically an arm of Treasury, correct, right, So
that's what we're talking about by it.
Speaker 2 (11:49):
Yes and no, there was something basically called the Fed
Treasury Accord where they basically, in order to finance the
World War II effort, work together for you know, almost
a decade in order to make sure that the US
could finance it, and they still almost didn't because it's
really hard to finance World War two. The way that
it works right now, on the Federal Open Market Committee,
there are two distinct groups. There are members of the
(12:12):
Federal Reserve Board of Governors and there are members of
presidents of the twelve regional Federal Reserve Banks.
Speaker 4 (12:20):
Ye.
Speaker 2 (12:21):
The way that this works, the Federal Reserve banks, those
twelve regional ones, they are not presidential appointees. They are
selected by their regional banks board of directors and their
appointment must be approved by the Board of governors, but
not by the Senate. So they're not Senate approved and
they serve renewable five year terms. They rotate through the FOMC,
(12:46):
so five of them are voting in any particular year.
The other seven do not. The Federal Reserve Board of Governors,
there are seven of them, so majority of voting members
in any year are from that Board of Governors.
Speaker 4 (13:00):
Yep.
Speaker 2 (13:00):
They have to be nominated by the President of the
United States, they have to be confirmed by the US Senate,
and terms are fourteen years and they are staggered, you know,
for those and the chair and vice chair are picked
from the governors and those are Senate confirmed as well
for four year leadership terms. So basically what you have
(13:21):
is the a slight majority of members of the voting
committee at any point in time are confirmed by the
US Senate after being proposed by the President. So we're
not just saying hey, like, get you know, anyone off
the street and run this. It still is something that
does have Congressional oversight through who gets voted into the
(13:42):
majority of spots on the Federal Reserve Open Market Committee.
Speaker 4 (13:45):
Okay, yeah, good distinction.
Speaker 3 (13:46):
It is still influenced by the White House, but given
the term length and everything else, it is not as
though the current executive can dramatically currently influence interest rates
setting policy.
Speaker 2 (13:58):
And the removal is generally understood to be for cause only,
and cause is not you know, hey, J. Powell showed
up late to work today. Cause is generally you know,
believed to be not even like I'm disagreeing with you
on rate policy, but hey, like you did something we
all know. It's like how you know, the Supreme Court
(14:19):
defines pornography. You know, when you see it, you did
something wrong.
Speaker 3 (14:23):
And by the way, we're about to find that out
because one of them is taking one of the Federal
Reserve appointees, not the not J. Powell, but one of
the Federal Reserve appointees that President Trump attempted to fire,
issuing the government to over the removal. And we're gonna
find out where that line really is according to the
Supreme Court pretty darn soon.
Speaker 4 (14:40):
Correct.
Speaker 2 (14:41):
So when we talk about now that we've kind of
defined what you know, FED independence is and isn't. Is
it a good or bad thing?
Speaker 4 (14:49):
We both you and I believe good here.
Speaker 2 (14:52):
Here's look, yes, quite simply, I believe it's a good thing.
And here's why, uh, what I want everyone to do
right now, unless you're driving, don't close your eyes. But
if you're not driving, close your eyes. If you're driving,
keep them open. But I want you to picture in
your mind's eye the person, the politician that you believe
to be least qualified to run monetary policy. It may
(15:15):
be a Democrat, it may be a Republican, it may
be an independent. It may be a thirty year old,
it may be a sixty year old, it may be
an eighteen year old. Whoever it might be, I want
you to picture that person where you're like, man, those
ideas are bad. And now what I want you to
imagine is that some at some unforeseen point in time
in the future, maybe it's twenty twenty eight, twenty thirty two,
twenty thirty six, twenty forty, whenever it may be that
(15:37):
there's a presidential election. I want you to imagine that
that person comes into the Oval office and says, can't
wait to set interest rates. And this is ultimately why
you don't want the president, specifically like the president c
to be able to decide interest rates, is because there
(15:58):
is no president in the history of the United States
who would ever sit there and say, hey, you know
what we really need. We got to raise the cost
of borrowing for businesses and households. That's really gonna get
me reelected. Yeah, it's a one way street. Presidents want
lower rates always.
Speaker 3 (16:15):
They tend to influence more business activity. They have a
tail risk of higher inflation, but it is a tail
risk that usually comes on a fair bit later. And
a president's job is get reelected and so correct. You might,
I hate saying that out loud, but that that's you know,
reality when the first when you're serving first term, that's
a big goal of yours is to get re elected
(16:36):
to a second term.
Speaker 4 (16:37):
And so good way to do that.
Speaker 3 (16:38):
Juice the economy, make sure unemployment stays low, even if
there is a tail risk of inflation down the road.
We have seen this in many other countries that are,
granted the far less stable than the United States is.
But go look at Turkey, go look at many other
countries that do not have an independent central bank.
Speaker 4 (16:53):
That's what you get.
Speaker 2 (16:54):
So the idea of hey, the central bank has you know,
presidential appointed, Senate confirmed voting members that are in the
majority on that Open Market Committee. What it does is
again they cannot be removed except for cause. It allows
them to vote, not based on the political whims of
any one particular point in time, but rather based on
(17:17):
what they believe to be right, and by the way,
they're gonna be wrong a decent amount. I want you to,
you know, travel with me, Tuck. Can you get the
time machine fired up? We don't need too much juice
in it. We're just going back four years now. But
we're all gonna go back to January of twenty twenty two,
and inflation is north of seven percent, on its way
to nine percent, and J. Powell and crew are hiking
(17:41):
interest rates a quarter percent at a time because they
they don't want to break something. They're a little and
look like they did a bad job in late twenty
one and through all of twenty two in my opinion,
like they were wrong, but they weren't wrong because they
were sitting there like g like Jay's not sitting there
(18:03):
being like, well, I need to get re elected. Like no,
like Jay doesn't get elected that way. It doesn't work
that way for him. So ultimately I think that when
you look at this, it's something where I do believe
in central bank independence, because you don't want the power
to control the money supply to be held by the
(18:25):
same person that is going out campaigning for votes at
any particular point in time. And this is before you
even get to the qualifications of you know, whoever might
come into the office at some point in the future.
What if we elect an actual dog to the office.
Speaker 3 (18:41):
So two things that I want to set up for
you talked about on a collision course here. Powell's term
as chair is up in May. His terma sitting on
the Federal Reserve is not. It's not He could sit
on there and basically be a dueling influence for voting
members of the FED if he wants to really dig
in here. That is ugly if you have that come
(19:02):
this year of Kevin versus Jay trying to influence Federal
Reserve members. Two which Kevin right, you are now as
the new incoming FED going to have to prove to
every single Federal Reserve voting member that what you are
trying to do is not because of influence from the
White House. This is making the next person's job way
(19:24):
more difficult and I think is frankly shooting himself in
the foot by doing this.
Speaker 2 (19:30):
And also, by the way, doesn't mean the Jay Powell's
necessarily right in doing that. It could call yeah, problems
quick break, Wall Street Watches Next.
Speaker 1 (19:42):
Like us on Facebook and follow us on Twitter. Act
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 6 (20:02):
Markets beginning of the week slightly in the red as
investors ready for a busy week ahead, including a fresh
look at inflation tomorrow morning with the Consumer Price Index
in addition to retail sales in bank earnings this week.
Speaker 2 (20:14):
But the big story today.
Speaker 6 (20:15):
Surrounds the FED, following news that US prosecutors are investigating
FED share Jerome Powell over his testimony about the Central
Banks building renovation project. Right now, the Dow is off
four tenths of a percent or two hundred and ten
points lower. S and P five hundred down nearly two
tenths of a percent or eleven points lowered, NASDAK down
(20:35):
a tenth of a percent or twenty six points lower,
RUSS two thousands off nearly half a percent. Tenure Treasure
reeled up one basis point at four point one eighty
seven percent. DAN crude oil off about four tenths of
a percent rating just below fifty nine dollars a barrel.
Several bank stock seeing losses on the day after President
Trump called for credit card rates to be capped at
ten percent.
Speaker 2 (20:56):
For one year.
Speaker 6 (20:57):
Trump did not provide additional details on how it would work.
JP Morgan, Visa, and MasterCard are down by about two percent. Meanwhile,
Walmart stock is up two percent after the Nasdaq said
the retail giant will be added to the Nasdaq one
hundred index later this month. Elsewhere, Lululemon shares are up
one percent after the Athleisure where retailer said it sees
(21:19):
its holiday quarter sales to be on the higher end
of its guidance, where its revenue was expected to be
as much as three point five eighty five billion dollars.
In more developments on the Warner Brothers Discovery front, Paramount
said this morning it plans to launch a proxy fight
for board seats at Warner Brothers Discovery as it continues
pushing its hostile bid for the company. Paramount also filed
(21:41):
a lawsuit seeking to force Warner to release more information
about its merger agreement with Netflix. Warner stock is down
by about two percent.
Speaker 2 (21:50):
I'm Tucker, Silva and that is Wall Street Watch. All right,
so let's talk a little bit about the labor market.
For everything we talked about in the first you know,
a couple of segments regarding you know, J. Powell potentially
or not potentially being under a criminal investigation from a
grand jury subpoena. Powell said, you know, hey, this is
(22:13):
not about you know, the renovation, he said, this is
about the president wanting me to lower interest rates. The
interesting piece to me, not the interesting piece, but an
interesting piece to me is, hey, the labor market is
flashing signs that maybe lower interest rates actually could be warranted.
So this is something where when we look at the
labor market data right now, and again, don't look at
(22:35):
any one piece of data, because remember these are all
surveys and estimates. Like there's nothing out there that definitively
says like this many jobs were created versus that many.
It's you know, like estimate. We never will have that. Well,
we do have a different data sets from which we
can glean what may or may not be happening. Ultimately,
(22:57):
the reason why we care about jobs data, and this
is kind of a dirty little secret here, it's not
because of the jobs. It's because of the spending generated
by those jobs.
Speaker 3 (23:12):
Sure, if you're trying to fast forward and figure out
what the economy is going to look like, whether or
not people are working is usually a pretty good indicator,
given how consumer focused our economy is.
Speaker 4 (23:25):
We can talk about how that's changed a.
Speaker 3 (23:27):
Little bit, or we think it might have changed a
little bit recently with boomers retiring, but yeah, that's kind
of the idea.
Speaker 2 (23:32):
The reason why it matters is that ultimately demand is
based historically on people having jobs that give them income,
and if demand goes down, it creates further slack in
the labor market, which creates high unemployment, which again high unemployment.
Let's be honest, this all boils down to mostly what
capital wants. High unemployment not good for capital because if
(23:54):
you have a bunch of unemployed people, they tend to
get onhappy pretty quickly, and that's not great for capital. Likewise,
if you have high inflation because there's too much demand,
it's also not great for capital because gee, like that
pressure's margins and people get unhappy, and so yeah, that's
not really great, which is why again dirty little secret
about central banks. They're bankers. They act in service of capital.
(24:18):
The reason why they want stable inflation and low unemployment
is because those are good conditions for capital. They also
tend to be good conditions for labor. But ultimately, the
central bank, the Federal Reserve, and any other central bank,
they act in service to capital in their respective countries.
So where we stand right now is it a dangerous
(24:41):
spot that is not guaranteed to go in any particular direction.
My favorite metric from the jobs report that I look
at every single time is what's called aggregate weekly payrolls.
And it's a fancy way of saying, hey, give me
the number of people that have jobs, give me the
change over any period of time from you know, the
(25:02):
previous month or previous year, and then combine that with
the change in wages over the same time. So how
much did you know jobs go up? How what percentage
do we see jobs increase and what percentage did wages increase?
And that gives you a good proxy for spending growth
if we saw, you know, one percent job growth over
(25:22):
the last year and two percent wage growth. Okay, Americans
as a whole have about three percent more spending power
than a year ago, which means consumer spending can grow
that much based on labor now. As Mike said, look,
there are a bunch of people not in the labor force.
If you're you know, listening to this and you're retired,
you don't care what the labor markets do. Like you're
not sitting there like basing your spending on your job.
(25:45):
You're basing it on your Social Security payment, on your portfolio,
maybe a pension if you're still lucky to have one.
Speaker 3 (25:51):
So which is why I think this still matters. But
we've seen a lot of spending. It's been really interesting
over the last few years looking at surveys about how
people feel about the labor market and the economy, and
yet spending hasn't fallen off. And one of the large
items that we've pointed to is look at that wealth effect,
especially for older Americans. They seem to be the ones
supporting this economy right now, and so the labor market
(26:13):
might not really influence their decision.
Speaker 2 (26:15):
But also, aggregate payroll growth has generally been around five
percent year over year YEP. And so given that, it's
kind of hard for me to see Americans saying no,
I'm not going to spend that money because.
Speaker 4 (26:26):
We always do, we generally do.
Speaker 2 (26:28):
And then so so here's the thing. As of last
Friday's jobs report, aggregate payroll growth for the last twelve
months is now decelerated to four point two eight percent.
It's the lowest number we've had since January of twenty twenty.
Speaker 3 (26:41):
And in spite of the fact that you know, there
were some good signs from this job's report on Friday,
right the unemployment rate dropped from four to six in
the previous month that was revised down the previous during
month December went down to four to four.
Speaker 4 (26:53):
So like, there were some positive indications.
Speaker 3 (26:56):
In spite of a week hiring rate in this jobs
but those aggregate payrolls, to your point, can be a
very big factor in spending.
Speaker 2 (27:06):
We can spend a little bit of time just below this,
Like if we get into the high threes for a
couple of reports in a row, that's fine on year
over year aggregate payroll growth, but the event horizon that
we've seen again, like we haven't seen many recessions since
this metric was available, but you start getting below three
and a half and things get problematic, just because think
(27:29):
about it from a hiring perspective. Again, I say this
a lot demand leads hiring. If I am running. If
I'm running a toy store and all of a sudden,
I got, you know, all these people coming in and
I got lines out the door. Okay, I got to
hire some cashiers, some stock boys, like we got to
(27:50):
get in business. I gotta hire up for that.
Speaker 4 (27:52):
Right.
Speaker 2 (27:53):
If I've hired all those people and then people stop
coming in, okay, demand is gone. Bye, I got to
get rid of you. That's kind of we see. So
the concern that you have is if demand weekends, then
hiring weekends further and you get kind of this flywheel
effect where in most recessions then you see big job
loss quickly. This is just one data point, but the
(28:14):
other one that meshes up with this is actually directly
from the US Treasury, and specifically it's looking at tax withholding.
And the reason why I like this one is like
there is no interpolation in like you don't have to
interpret it. You don't have to be like, oh, this
(28:34):
is just a survey. No, this is how many how
many dollars were sent to the US Treasury each day
by businesses to pay their payroll taxes. And over the
last six months we've seen a slowing in that rate
from about seven point four percent year over year growth
in June of this year, down to one point seven
(28:55):
percent year over year growth in December. End of year
always can be a little bit wonky, so we have
to see a couple more months to see exactly how
this plays out. But this has been in play each
of the last five months. It's been a down trend
for the entire second half of the year, and so
the concerning piece here is again, if you go you know,
into negative numbers on this, it suggests that you are
(29:17):
shedding not just payroll, but you're shedding spending power of
Americans and that makes it really tough for the economy
to grow based on how we typically grow it. So
it's not to say that you are going to see
this continuer. It's going to you know, become a problem.
But there's a two or three month period now where
(29:38):
we've got to pay pretty close attention to this, and
it's ultimately something where I think if there is no
weakness that develops in the next two to three months,
then I think by March and April you start to
get larger tax refunds coming in from last year from
you know, no tax on tips and other big beautiful
bill provisions that I think can propel the economy forward.
(30:00):
But if you see problems show up over the next
two to three months, they might start to spiral before
those bigger, you know, tax rebate checks can come in
to balance things out. So this is kind of what
I'm watching in the labor market. It's a dangerous position
that it's in. I'm not one hundred percent convinced that
it rolls over further from here, but it's the thing
(30:20):
to watch in the next couple months. It's take a
quick break when we return. Let's see, I had something
else I wanted to get to next. What was it?
I don't know. We'll talk Max seven after this.
Speaker 1 (30:34):
Breaking business news as it happens only here on the
Financial Exchange Radio Network. The Financial Exchange streams live on YouTube.
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Radio Network.
Speaker 2 (31:03):
Piece of the Bloomberg Magnificent seven Stock market dominance shows
signs of cracking. Look, I gotta tell you eventually it will.
But I've seen this story at least a half dozen
times over the last two years, where mag seven stocks
underperform for a week a month, even a quarter, even
(31:25):
half a year, can I It still is not enough
to free the market from that black hole of pull
towards me.
Speaker 3 (31:33):
I want to quote this piece because it's also just inaccurate.
All Right, so the article I'm gonna read it. To
beat the markets in recent years, many investors applied a
simple strategy load up on the biggest US technology stocks.
It paid handsomely for a long time. Last year, it didn't.
Then they go on to say, the Bloomberg Magnificent seven
index rose twenty five percent in twenty twenty five, compared
(31:55):
to sixteen percent for the S and P five hundred,
So that means how he did it not pay off?
Speaker 2 (32:00):
It literally paid off, it says, but that was only
because of the enormous gains by Convidia. Well, they're in
the group, so what are you gonna do? Like, my goodness,
it's not like every single one outperforms every year.
Speaker 3 (32:12):
So here is the point that they're making, is that
more of the components of the mag seven underperformed than overperformed.
But I would argue that that is irrelevant, sir, and
also wrote this person, Yeah doesn't matter beyond them.
Speaker 2 (32:29):
Yeah, like no, A I wouldn't do that. I would
only talk itself up as we've discussed. But look, the
fact is at some point that AI gross narrative is
going to break hasn't yet though. I don't know if
it's going to be this year or in thirty years.
(32:49):
It could be either or somewhere in between. It's probably
not going to be never.
Speaker 3 (32:55):
I'd be willing to bet it somewhere in between between
this year and thirty years. Yeah, yeah, that seems like
an easy bet. Put it on the board talking though, Yeah.
Speaker 4 (33:03):
But yeah.
Speaker 3 (33:04):
This is not a useful or frankly even accurately written
piece in many fashions.
Speaker 6 (33:13):
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Speaker 1 (34:20):
The proceeding was paid for and the views expressed are
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Cushing and Armstrong did not endorse each other and are
not affiliated.
Speaker 2 (34:30):
Wall Street Journal Exclusive GOP lawmakers back stock trading crackdown.
House Republicans, including GOP leaders, are lining up behind a
stock trading crackdown they think is their best shot at
addressing long simmering concerns about lawmakers potentially profiting off insider information.
Good Quite honestly, if you are a member of Congress,
you should not be allowed to own individual stocks in
(34:53):
my opinion.
Speaker 4 (34:54):
And this doesn't go quite that far.
Speaker 3 (34:56):
And no, but I do applaud it because it cuts
out a lot of stuff. So here's what it doesn't prevent.
In February of twenty twenty, a bunch of lawmakers get
a bunch of briefings on what's going on in Wuhan, China,
and can see the train coming down the track and say,
I'm going to sell all of my funds that hold
US stocks because I know what's happening here. This doesn't
(35:19):
prevent that in any way. You can still go and
offload your diversified funds that hold a whole bunch of stocks.
But the stuff that's far more common of lawmakers seemingly
getting some sort of information about a new regulation or
a new court case coming down that's going to dramatically
affect one individual company, it does prohibit. It makes it
so new purchases of individual companies are out.
Speaker 4 (35:43):
You can't do it anymore.
Speaker 3 (35:44):
And if you want to sell something, you must make
a public filing at least seven days in advance. So
it's a start again. I think this is better than
where we are now. It still leaves a lot of
opportunity for insider trading that will be difficult to prosecute,
but it cuts a fair bit of it out. So yeah,
(36:06):
I like the move. I think it's a step in
the right direction. And frankly, any action here I would applaud.
Speaker 4 (36:12):
So yeah, this, this would be.
Speaker 2 (36:14):
Good counterpoint prediction markets. Hmm.
Speaker 3 (36:21):
Right, So can I, as a lawmaker gamble on whether
or not the House will pass a certain bill today?
Speaker 4 (36:26):
Today? You can.
Speaker 2 (36:27):
I'm just saying that would seem to be a little
bit problematic.
Speaker 4 (36:31):
And they didn't really exist a decade ago, so it.
Speaker 2 (36:33):
Didn't really exist like three years ago we.
Speaker 4 (36:36):
Pass any uh.
Speaker 2 (36:37):
Yeah that Look, in a perfect world, you get elected
to Congress, great, all of your holdings can go into
basically the equivalent of whatever the TSP funds are, you know,
the G fund, the C fund, the was it, the ipund.
Speaker 4 (36:49):
The well again, they can still hold their individual stock
as they come in.
Speaker 2 (36:52):
Ideally, I'm saying, ideally, look, you go into that. You
can rebalance it every quarter if you want to, but
that's all you can do in my opinion, because if
you are elected to serve the people, then go and
serve the people. If you want to make money, then
then go somewhere else.
Speaker 3 (37:08):
So get other point here. I don't see anything written
about spouses. I would hope that they are covered under this,
but if they're not, it's problematic. Yeah, right, Like that's
that's been the entire argument over Pelosi. It's not her
conducting the trading, it's her husband. Like, there has to
be something in here, and I assume there probably is
(37:29):
about spouses, but if not, there needs to be immediate
family household members is really what this needs to apply to.
Speaker 2 (37:36):
So again, I'll take a step in the right direction.
It's good, but I personally still want uh more in
this case. But look steps in the right direction? Fine,
Like I won't uh yeah, I won't look at I
won't look at gift horse that has not yet been
gifted in the mouth. Why would you not look at
gift horse in them out? What happens if you do that?
Speaker 1 (37:57):
Oh?
Speaker 4 (37:57):
You don't want to know, Chuck.
Speaker 2 (37:58):
I've never received a gift horse, so I don't know.
Speaker 4 (38:00):
If you have to ask, you can't afford it.
Speaker 2 (38:02):
Here's a gift, don't look at it, thanks man, How
do I know? If it's good? Then you don't really
have a stable. Thanks, you can go into garage. Let
me get it up on the lift. See how it does.
Speaker 4 (38:14):
Get a receipt.
Speaker 2 (38:18):
It's got a lot of horse power. Take a quick
break when we come back. Hour two coming up.
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(00:21):
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(01:06):
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Speaker 2 (01:12):
Hope y'all had a great weekend. It's Chuck, Mike and
Tucker with you. And we've got a busy week on
tap here as far as a combination of economic data,
We've got earning season kicking off as well. Tomorrow, we're
going to be getting the CPI data consumer Price Index
(01:33):
at eight thirty am. Also new home sales data coming
out at ten am. Wednesday, We've got the Producer Price
Index at eight thirty am along with retail sales, and
then existing home sales come out at ten am. Thursday.
We've got weekly jobless claim, so again not you know,
not nothing, You've got, you know, some pretty decent stuff
(01:54):
that we're going to be looking at this week, and
then on the earning side, if they tomorrow, We've got
JP Morgan Bank, New York, Mellon and Delta. We've got
Bank of America's City Group in Wells Fargo on Wednesday,
and then Thursday Morgan Stanley, Goldman, Sachs and Blackrock all reporting.
So overall, pretty busy week As we continue into the
(02:18):
new year, I do believe it's no longer appropriate to
say Happy New Year. Now you can only say it
with a question. Now, you know, hey, Mike, Happy New Year.
Speaker 3 (02:26):
I've been trying to trick people into saying Happy New
Year to Tucker on the show every day, but we
basically did just say Happy New Year. So I think
we got it covered for today. I asked Paul, yes,
you know, hey, Paul, have you seen Tucker yet since
twenty twenty five? Hattie, do you have anything.
Speaker 2 (02:41):
To say you seen him?
Speaker 4 (02:42):
He had not, and he said happy.
Speaker 2 (02:43):
No, Yeah, well that's great in any case, over the weekend,
rather last night, I think it was maybe seven o'clock
seven thirty or so. J Powell or not him. I'm
sure he doesn't run the Federal Reserves website or x
account either one. I'm sure it's not really his thing.
(03:03):
But the Federal Reserve put up a video of j. Powell,
and here is what Jay had to say.
Speaker 5 (03:12):
On Friday, the Department of Justice served the Federal Reserve
with grand jury subpoenas threatening a criminal indictment related to
my testimony before the Senate Banking Committee last June. That
testimony concerned, in part, a multi year project to renovate
historic Federal Reserve office buildings. I have deep respect for
(03:33):
the rule of law and for accountability in our democracy.
No one, certainly not the Chair of the Federal Reserve,
is above the law. But this unprecedented action should be
seen in the broader context of the administration's threats and
ongoing pressure. This new threat is not about my testimony
last June, or about the renovation of the Federal Reserve buildings.
(03:55):
It is not about Congress's oversight rule. The Fed, through
testimony and other public disclosures, made every effort to keep
Congress informed about the renovation project. Those are pretexts. The
threat of criminal charges is a consequence of the Federal
Reserve setting interest rates based on our best assessment of
(04:16):
what will serve the public, rather than following the preferences
of the President. This is about whether the Fed will
be able to continue to set interest rates based on
evidence and economic conditions, or whether instead monetary policy will
be directed by political pressure or intimidation. I have served
at the Federal Reserve under four administrations, Republicans and Democrats alike.
(04:39):
In every case, I have carried out my duties without
political fear or favor, focused solely on our mandate of
price stability and maximum employment. Public service sometimes requires standing
firm in the face of threats. I will continue to
do the job the Senate confirmed me to do with
integrity and a commitment to serving the American people.
Speaker 2 (05:04):
Okay, so J Powell saying, Hey, on Friday, we received,
you know, a subpoena from a grand jury requesting information.
It is ostensibly related to the renovation project at the FED.
Speaker 4 (05:18):
And the testimony they gave about it. Yep.
Speaker 2 (05:20):
And then Jay saying, in no uncertain terms, this is
not what this is actually about. This is about the
President trying to use this to force me to lower
interest rates where the Federal Reserve Committee doesn't believe it's warranted.
So my first take on this when I heard it is,
(05:41):
y'all ever watch Wolf of Wall Street. Yes, you got
Leo standing up there, and you know he's, you know,
thinking about stepping down, and then he goes, you know,
I'm not effing leaving Like that's that's basically J. Powell
doesn't really answer these questions ever, Like, pretty much, whenever
asked questions about any of this stuff, he has generally said,
(06:03):
that's not for me to say. There's you know, you know,
an ongoing project. We're not going to talk about this
this is for Congress, this is for the executive branch.
Like he basically always defers.
Speaker 3 (06:12):
You could teach a masterclass in speaking for four hours
while not answering any questions.
Speaker 2 (06:16):
The fact that he came out and said this is
not about what it sounds like it is about is
about as aggressive as you will get Jay Powell to be.
Speaker 3 (06:29):
It's a huge departure for him, and frankly any recent
leader of the Federal Reserve correct.
Speaker 2 (06:35):
And so I think it puts Powell and the executive
branch on a clear collision course where someone is either
going to have to back down on this or it's
going to be a very nasty, ugly public fight that
I have no idea how it will resolve.
Speaker 3 (06:56):
Right, And let's be clear, it's not as though Chuck
and I have any idea what the grand jury is reviewing.
Perhaps there is incredibly damning evidence of j. Powell that
is being presented, but if there were, I would have
expected to see it by now, I guess is the concern.
Speaker 4 (07:14):
But nonetheless, this is going to proceed, and.
Speaker 3 (07:18):
With a lot of these grand juries that have happened
recently over the course of the last few as the
last year, there's many of them that have not gotten
very far at all. They've been tossed out pretty immediately,
and so I don't think it's going to take months
and years to discover, you know, what it is the
White House is attempting to do here and what evidence
they have to support their claims.
Speaker 2 (07:38):
Well, I hope if you're on the grand jury, it
doesn't take years, right, you know, you got to get
back to work pretty quick. So I think, look, ultimately,
we don't know anything about the facts that are being
debated by the Grand Jury. I couldn't tell you if
there's anything legit in there or not. This is the
same thing that we said last summer when this was
you know, first being brought up. What I can't tell
(07:58):
you is whatever's going on with the rent at the Fed. A.
It's being paid for by the Fed. It's not like
taxpayer dollars around the hook. B. It's something where it's
not you know, impacting positively or negatively. J Powell and
the whole rest of the cruis ability to manage interest rates.
There have been times in the last you know decades
(08:19):
under Powell where I think the Fed's done an admirable
job managing things. There are times when I think they've
done a remarkably poor job that I think Mark Vandetti
would adequately characterize as a what's the world here? That's
the one. So I think that when you look at
this ultimately, it boils down to one question more than
(08:43):
anything else, and that is should there be an independent
Federal Reserve? How bright should those lines be? And what
are the pros and cons of central bank independence? Because
that's the whole ballgame here that we're getting it.
Speaker 4 (09:01):
Yeah, and by the way, like my personal hope, how
do I say this? Right?
Speaker 3 (09:06):
I wouldn't want to see a corrupt head of the
Federal Reserve, but I kind of hope that there is
some very clear evidence here because if not, if this
is a bullying intimidation aspect here, then it is going
to get much uglier and going to be really problematic
for the entire future of the FED for a whole
(09:27):
bunch of reasons. The biggest one has to do with
the fact that it is a committee that very much
believes they themselves should be independent. And so I'm kind
of sitting here saying, wow, I hope that there is
some really damning evidence for J. Powell that causes him
to be in some serious.
Speaker 4 (09:46):
Hot water brigs.
Speaker 3 (09:47):
If there isn't, then it is pure intimidation and a
really dangerous threat to the Federal Reserve and to just
kind of generally our financial system.
Speaker 2 (09:58):
Let's take a quick break when we come back. What's
kind of start from the first question that this all
resides upon. Is an independent central bank a good or
bad thing? We'll discuss right after this.
Speaker 1 (10:15):
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(10:36):
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Speaker 2 (10:54):
All right, So we're talking about the idea of central
bank independence here, and the question that we need to
start from is central bank independence a good or bad thing?
And I think even before there, like we have to
kind of define what central bank independence actually means. So
(11:18):
I don't think anyone is you know, sitting out there suggesting, hey,
let's go and just you know, we're not gonna you know,
control monetary policy at all. We're just gonna let you know,
JP Morgan Chase, whatever they want to do is gonna
be you know what monetary policy is.
Speaker 4 (11:38):
Sure.
Speaker 3 (11:38):
So I mean prior to what nineteen fifty, the Federal
Reserve was basically an arm of Treasury, correct, right, So
that's what we're talking about by it.
Speaker 2 (11:49):
Yes and no, there was something basically called the Fed
Treasury Accord where they basically, in order to finance the
World War II effort, work together for you know, almost
a decade in order to make sure that the US
could finance it, and they still almost didn't because it's
really hard to finance World War two. The way that
it works right now, on the Federal Open Market Committee,
there are two distinct groups. There are members of the
(12:12):
Federal Reserve Board of Governors and there are members of
presidents of the twelve regional Federal Reserve Banks.
Speaker 4 (12:20):
Ye.
Speaker 2 (12:21):
The way that this works, the Federal Reserve banks, those
twelve regional ones, they are not presidential appointees. They are
selected by their regional banks board of directors and their
appointment must be approved by the Board of governors, but
not by the Senate. So they're not Senate approved and
they serve renewable five year terms. They rotate through the FOMC,
(12:46):
so five of them are voting in any particular year.
The other seven do not. The Federal Reserve Board of Governors,
there are seven of them, so majority of voting members
in any year are from that Board of Governors.
Speaker 4 (13:00):
Yep.
Speaker 2 (13:00):
They have to be nominated by the President of the
United States, they have to be confirmed by the US Senate,
and terms are fourteen years and they are staggered, you know,
for those and the chair and vice chair are picked
from the governors and those are Senate confirmed as well
for four year leadership terms. So basically what you have
(13:21):
is the a slight majority of members of the voting
committee at any point in time are confirmed by the
US Senate after being proposed by the President. So we're
not just saying hey, like, get you know, anyone off
the street and run this. It still is something that
does have Congressional oversight through who gets voted into the
(13:42):
majority of spots on the Federal Reserve Open Market Committee.
Speaker 4 (13:45):
Okay, yeah, good distinction.
Speaker 3 (13:46):
It is still influenced by the White House, but given
the term length and everything else, it is not as
though the current executive can dramatically currently influence interest rates
setting policy.
Speaker 2 (13:58):
And the removal is generally understood to be for cause only,
and cause is not you know, hey, J. Powell showed
up late to work today. Cause is generally you know,
believed to be not even like I'm disagreeing with you
on rate policy, but hey, like you did something we
all know. It's like how you know, the Supreme Court
(14:19):
defines pornography. You know, when you see it, you did
something wrong.
Speaker 3 (14:23):
And by the way, we're about to find that out
because one of them is taking one of the Federal
Reserve appointees, not the not J. Powell, but one of
the Federal Reserve appointees that President Trump attempted to fire,
issuing the government to over the removal. And we're gonna
find out where that line really is according to the
Supreme Court pretty darn soon.
Speaker 4 (14:40):
Correct.
Speaker 2 (14:41):
So when we talk about now that we've kind of
defined what you know, FED independence is and isn't. Is
it a good or bad thing?
Speaker 4 (14:49):
We both you and I believe good here.
Speaker 2 (14:52):
Here's look, yes, quite simply, I believe it's a good thing.
And here's why, uh, what I want everyone to do
right now, unless you're driving, don't close your eyes. But
if you're not driving, close your eyes. If you're driving,
keep them open. But I want you to picture in
your mind's eye the person, the politician that you believe
to be least qualified to run monetary policy. It may
(15:15):
be a Democrat, it may be a Republican, it may
be an independent. It may be a thirty year old,
it may be a sixty year old, it may be
an eighteen year old. Whoever it might be, I want
you to picture that person where you're like, man, those
ideas are bad. And now what I want you to
imagine is that some at some unforeseen point in time
in the future, maybe it's twenty twenty eight, twenty thirty two,
twenty thirty six, twenty forty, whenever it may be that
(15:37):
there's a presidential election. I want you to imagine that
that person comes into the Oval office and says, can't
wait to set interest rates. And this is ultimately why
you don't want the president, specifically like the president c
to be able to decide interest rates, is because there
(15:58):
is no president in the history of the United States
who would ever sit there and say, hey, you know
what we really need. We got to raise the cost
of borrowing for businesses and households. That's really gonna get
me reelected. Yeah, it's a one way street. Presidents want
lower rates always.
Speaker 3 (16:15):
They tend to influence more business activity. They have a
tail risk of higher inflation, but it is a tail
risk that usually comes on a fair bit later. And
a president's job is get reelected and so correct. You might,
I hate saying that out loud, but that that's you know,
reality when the first when you're serving first term, that's
a big goal of yours is to get re elected
(16:36):
to a second term.
Speaker 4 (16:37):
And so good way to do that.
Speaker 3 (16:38):
Juice the economy, make sure unemployment stays low, even if
there is a tail risk of inflation down the road.
We have seen this in many other countries that are,
granted the far less stable than the United States is.
But go look at Turkey, go look at many other
countries that do not have an independent central bank.
Speaker 4 (16:53):
That's what you get.
Speaker 2 (16:54):
So the idea of hey, the central bank has you know,
presidential appointed, Senate confirmed voting members that are in the
majority on that Open Market Committee. What it does is
again they cannot be removed except for cause. It allows
them to vote, not based on the political whims of
any one particular point in time, but rather based on
(17:17):
what they believe to be right, and by the way,
they're gonna be wrong a decent amount. I want you to,
you know, travel with me, Tuck. Can you get the
time machine fired up? We don't need too much juice
in it. We're just going back four years now. But
we're all gonna go back to January of twenty twenty two,
and inflation is north of seven percent, on its way
to nine percent, and J. Powell and crew are hiking
(17:41):
interest rates a quarter percent at a time because they
they don't want to break something. They're a little and
look like they did a bad job in late twenty
one and through all of twenty two in my opinion,
like they were wrong, but they weren't wrong because they
were sitting there like g like Jay's not sitting there
(18:03):
being like, well, I need to get re elected. Like no,
like Jay doesn't get elected that way. It doesn't work
that way for him. So ultimately I think that when
you look at this, it's something where I do believe
in central bank independence, because you don't want the power
to control the money supply to be held by the
(18:25):
same person that is going out campaigning for votes at
any particular point in time. And this is before you
even get to the qualifications of you know, whoever might
come into the office at some point in the future.
What if we elect an actual dog to the office.
Speaker 3 (18:41):
So two things that I want to set up for
you talked about on a collision course here. Powell's term
as chair is up in May. His terma sitting on
the Federal Reserve is not. It's not He could sit
on there and basically be a dueling influence for voting
members of the FED if he wants to really dig
in here. That is ugly if you have that come
(19:02):
this year of Kevin versus Jay trying to influence Federal
Reserve members. Two which Kevin right, you are now as
the new incoming FED going to have to prove to
every single Federal Reserve voting member that what you are
trying to do is not because of influence from the
White House. This is making the next person's job way
(19:24):
more difficult and I think is frankly shooting himself in
the foot by doing this.
Speaker 2 (19:30):
And also, by the way, doesn't mean the Jay Powell's
necessarily right in doing that. It could call yeah, problems
quick break, Wall Street Watches Next.
Speaker 1 (19:42):
Like us on Facebook and follow us on Twitter. Act
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 6 (20:02):
Markets beginning of the week slightly in the red as
investors ready for a busy week ahead, including a fresh
look at inflation tomorrow morning with the Consumer Price Index
in addition to retail sales in bank earnings this week.
Speaker 2 (20:14):
But the big story today.
Speaker 6 (20:15):
Surrounds the FED, following news that US prosecutors are investigating
FED share Jerome Powell over his testimony about the Central
Banks building renovation project. Right now, the Dow is off
four tenths of a percent or two hundred and ten
points lower. S and P five hundred down nearly two
tenths of a percent or eleven points lowered, NASDAK down
(20:35):
a tenth of a percent or twenty six points lower,
RUSS two thousands off nearly half a percent. Tenure Treasure
reeled up one basis point at four point one eighty
seven percent. DAN crude oil off about four tenths of
a percent rating just below fifty nine dollars a barrel.
Several bank stock seeing losses on the day after President
Trump called for credit card rates to be capped at
ten percent.
Speaker 2 (20:56):
For one year.
Speaker 6 (20:57):
Trump did not provide additional details on how it would work.
JP Morgan, Visa, and MasterCard are down by about two percent. Meanwhile,
Walmart stock is up two percent after the Nasdaq said
the retail giant will be added to the Nasdaq one
hundred index later this month. Elsewhere, Lululemon shares are up
one percent after the Athleisure where retailer said it sees
(21:19):
its holiday quarter sales to be on the higher end
of its guidance, where its revenue was expected to be
as much as three point five eighty five billion dollars.
In more developments on the Warner Brothers Discovery front, Paramount
said this morning it plans to launch a proxy fight
for board seats at Warner Brothers Discovery as it continues
pushing its hostile bid for the company. Paramount also filed
(21:41):
a lawsuit seeking to force Warner to release more information
about its merger agreement with Netflix. Warner stock is down
by about two percent.
Speaker 2 (21:50):
I'm Tucker, Silva and that is Wall Street Watch. All right,
so let's talk a little bit about the labor market.
For everything we talked about in the first you know,
a couple of segments regarding you know, J. Powell potentially
or not potentially being under a criminal investigation from a
grand jury subpoena. Powell said, you know, hey, this is
(22:13):
not about you know, the renovation, he said, this is
about the president wanting me to lower interest rates. The
interesting piece to me, not the interesting piece, but an
interesting piece to me is, hey, the labor market is
flashing signs that maybe lower interest rates actually could be warranted.
So this is something where when we look at the
labor market data right now, and again, don't look at
(22:35):
any one piece of data, because remember these are all
surveys and estimates. Like there's nothing out there that definitively
says like this many jobs were created versus that many.
It's you know, like estimate. We never will have that. Well,
we do have a different data sets from which we
can glean what may or may not be happening. Ultimately,
(22:57):
the reason why we care about jobs data, and this
is kind of a dirty little secret here, it's not
because of the jobs. It's because of the spending generated
by those jobs.
Speaker 3 (23:12):
Sure, if you're trying to fast forward and figure out
what the economy is going to look like, whether or
not people are working is usually a pretty good indicator,
given how consumer focused our economy is.
Speaker 4 (23:25):
We can talk about how that's changed a.
Speaker 3 (23:27):
Little bit, or we think it might have changed a
little bit recently with boomers retiring, but yeah, that's kind
of the idea.
Speaker 2 (23:32):
The reason why it matters is that ultimately demand is
based historically on people having jobs that give them income,
and if demand goes down, it creates further slack in
the labor market, which creates high unemployment, which again high unemployment.
Let's be honest, this all boils down to mostly what
capital wants. High unemployment not good for capital because if
(23:54):
you have a bunch of unemployed people, they tend to
get onhappy pretty quickly, and that's not great for capital. Likewise,
if you have high inflation because there's too much demand,
it's also not great for capital because gee, like that
pressure's margins and people get unhappy, and so yeah, that's
not really great, which is why again dirty little secret
about central banks. They're bankers. They act in service of capital.
(24:18):
The reason why they want stable inflation and low unemployment
is because those are good conditions for capital. They also
tend to be good conditions for labor. But ultimately, the
central bank, the Federal Reserve, and any other central bank,
they act in service to capital in their respective countries.
So where we stand right now is it a dangerous
(24:41):
spot that is not guaranteed to go in any particular direction.
My favorite metric from the jobs report that I look
at every single time is what's called aggregate weekly payrolls.
And it's a fancy way of saying, hey, give me
the number of people that have jobs, give me the
change over any period of time from you know, the
(25:02):
previous month or previous year, and then combine that with
the change in wages over the same time. So how
much did you know jobs go up? How what percentage
do we see jobs increase and what percentage did wages increase?
And that gives you a good proxy for spending growth
if we saw, you know, one percent job growth over
(25:22):
the last year and two percent wage growth. Okay, Americans
as a whole have about three percent more spending power
than a year ago, which means consumer spending can grow
that much based on labor now. As Mike said, look,
there are a bunch of people not in the labor force.
If you're you know, listening to this and you're retired,
you don't care what the labor markets do. Like you're
not sitting there like basing your spending on your job.
(25:45):
You're basing it on your Social Security payment, on your portfolio,
maybe a pension if you're still lucky to have one.
Speaker 3 (25:51):
So which is why I think this still matters. But
we've seen a lot of spending. It's been really interesting
over the last few years looking at surveys about how
people feel about the labor market and the economy, and
yet spending hasn't fallen off. And one of the large
items that we've pointed to is look at that wealth effect,
especially for older Americans. They seem to be the ones
supporting this economy right now, and so the labor market
(26:13):
might not really influence their decision.
Speaker 2 (26:15):
But also, aggregate payroll growth has generally been around five
percent year over year YEP. And so given that, it's
kind of hard for me to see Americans saying no,
I'm not going to spend that money because.
Speaker 4 (26:26):
We always do, we generally do.
Speaker 2 (26:28):
And then so so here's the thing. As of last
Friday's jobs report, aggregate payroll growth for the last twelve
months is now decelerated to four point two eight percent.
It's the lowest number we've had since January of twenty twenty.
Speaker 3 (26:41):
And in spite of the fact that you know, there
were some good signs from this job's report on Friday,
right the unemployment rate dropped from four to six in
the previous month that was revised down the previous during
month December went down to four to four.
Speaker 4 (26:53):
So like, there were some positive indications.
Speaker 3 (26:56):
In spite of a week hiring rate in this jobs
but those aggregate payrolls, to your point, can be a
very big factor in spending.
Speaker 2 (27:06):
We can spend a little bit of time just below this,
Like if we get into the high threes for a
couple of reports in a row, that's fine on year
over year aggregate payroll growth, but the event horizon that
we've seen again, like we haven't seen many recessions since
this metric was available, but you start getting below three
and a half and things get problematic, just because think
(27:29):
about it from a hiring perspective. Again, I say this
a lot demand leads hiring. If I am running. If
I'm running a toy store and all of a sudden,
I got, you know, all these people coming in and
I got lines out the door. Okay, I got to
hire some cashiers, some stock boys, like we got to
(27:50):
get in business. I gotta hire up for that.
Speaker 4 (27:52):
Right.
Speaker 2 (27:53):
If I've hired all those people and then people stop
coming in, okay, demand is gone. Bye, I got to
get rid of you. That's kind of we see. So
the concern that you have is if demand weekends, then
hiring weekends further and you get kind of this flywheel
effect where in most recessions then you see big job
loss quickly. This is just one data point, but the
(28:14):
other one that meshes up with this is actually directly
from the US Treasury, and specifically it's looking at tax withholding.
And the reason why I like this one is like
there is no interpolation in like you don't have to
interpret it. You don't have to be like, oh, this
(28:34):
is just a survey. No, this is how many how
many dollars were sent to the US Treasury each day
by businesses to pay their payroll taxes. And over the
last six months we've seen a slowing in that rate
from about seven point four percent year over year growth
in June of this year, down to one point seven
(28:55):
percent year over year growth in December. End of year
always can be a little bit wonky, so we have
to see a couple more months to see exactly how
this plays out. But this has been in play each
of the last five months. It's been a down trend
for the entire second half of the year, and so
the concerning piece here is again, if you go you know,
into negative numbers on this, it suggests that you are
(29:17):
shedding not just payroll, but you're shedding spending power of
Americans and that makes it really tough for the economy
to grow based on how we typically grow it. So
it's not to say that you are going to see
this continuer. It's going to you know, become a problem.
But there's a two or three month period now where
(29:38):
we've got to pay pretty close attention to this, and
it's ultimately something where I think if there is no
weakness that develops in the next two to three months,
then I think by March and April you start to
get larger tax refunds coming in from last year from
you know, no tax on tips and other big beautiful
bill provisions that I think can propel the economy forward.
(30:00):
But if you see problems show up over the next
two to three months, they might start to spiral before
those bigger, you know, tax rebate checks can come in
to balance things out. So this is kind of what
I'm watching in the labor market. It's a dangerous position
that it's in. I'm not one hundred percent convinced that
it rolls over further from here, but it's the thing
(30:20):
to watch in the next couple months. It's take a
quick break when we return. Let's see, I had something
else I wanted to get to next. What was it?
I don't know. We'll talk Max seven after this.
Speaker 1 (30:34):
Breaking business news as it happens only here on the
Financial Exchange Radio Network. The Financial Exchange streams live on YouTube.
Like our page and stay up to date on breaking
business news all morning long. Base is the Financial Exchange
Radio Network.
Speaker 2 (31:03):
Piece of the Bloomberg Magnificent seven Stock market dominance shows
signs of cracking. Look, I gotta tell you eventually it will.
But I've seen this story at least a half dozen
times over the last two years, where mag seven stocks
underperform for a week a month, even a quarter, even
(31:25):
half a year, can I It still is not enough
to free the market from that black hole of pull
towards me.
Speaker 3 (31:33):
I want to quote this piece because it's also just inaccurate.
All Right, so the article I'm gonna read it. To
beat the markets in recent years, many investors applied a
simple strategy load up on the biggest US technology stocks.
It paid handsomely for a long time. Last year, it didn't.
Then they go on to say, the Bloomberg Magnificent seven
index rose twenty five percent in twenty twenty five, compared
(31:55):
to sixteen percent for the S and P five hundred,
So that means how he did it not pay off?
Speaker 2 (32:00):
It literally paid off, it says, but that was only
because of the enormous gains by Convidia. Well, they're in
the group, so what are you gonna do? Like, my goodness,
it's not like every single one outperforms every year.
Speaker 3 (32:12):
So here is the point that they're making, is that
more of the components of the mag seven underperformed than overperformed.
But I would argue that that is irrelevant, sir, and
also wrote this person, Yeah doesn't matter beyond them.
Speaker 2 (32:29):
Yeah, like no, A I wouldn't do that. I would
only talk itself up as we've discussed. But look, the
fact is at some point that AI gross narrative is
going to break hasn't yet though. I don't know if
it's going to be this year or in thirty years.
(32:49):
It could be either or somewhere in between. It's probably
not going to be never.
Speaker 3 (32:55):
I'd be willing to bet it somewhere in between between
this year and thirty years. Yeah, yeah, that seems like
an easy bet. Put it on the board talking though, Yeah.
Speaker 4 (33:03):
But yeah.
Speaker 3 (33:04):
This is not a useful or frankly even accurately written
piece in many fashions.
Speaker 6 (33:13):
This is a message for families who've been putting off
their is state planning from the elder law attorneys at
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(33:34):
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(34:18):
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Speaker 1 (34:20):
The proceeding was paid for and the views expressed are
solely those of Cushing 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
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Speaker 2 (34:30):
Wall Street Journal Exclusive GOP lawmakers back stock trading crackdown.
House Republicans, including GOP leaders, are lining up behind a
stock trading crackdown they think is their best shot at
addressing long simmering concerns about lawmakers potentially profiting off insider information.
Good Quite honestly, if you are a member of Congress,
you should not be allowed to own individual stocks in
(34:53):
my opinion.
Speaker 4 (34:54):
And this doesn't go quite that far.
Speaker 3 (34:56):
And no, but I do applaud it because it cuts
out a lot of stuff. So here's what it doesn't prevent.
In February of twenty twenty, a bunch of lawmakers get
a bunch of briefings on what's going on in Wuhan, China,
and can see the train coming down the track and say,
I'm going to sell all of my funds that hold
US stocks because I know what's happening here. This doesn't
(35:19):
prevent that in any way. You can still go and
offload your diversified funds that hold a whole bunch of stocks.
But the stuff that's far more common of lawmakers seemingly
getting some sort of information about a new regulation or
a new court case coming down that's going to dramatically
affect one individual company, it does prohibit. It makes it
so new purchases of individual companies are out.
Speaker 4 (35:43):
You can't do it anymore.
Speaker 3 (35:44):
And if you want to sell something, you must make
a public filing at least seven days in advance. So
it's a start again. I think this is better than
where we are now. It still leaves a lot of
opportunity for insider trading that will be difficult to prosecute,
but it cuts a fair bit of it out. So yeah,
(36:06):
I like the move. I think it's a step in
the right direction. And frankly, any action here I would applaud.
Speaker 4 (36:12):
So yeah, this, this would be.
Speaker 2 (36:14):
Good counterpoint prediction markets. Hmm.
Speaker 3 (36:21):
Right, So can I, as a lawmaker gamble on whether
or not the House will pass a certain bill today?
Speaker 4 (36:26):
Today? You can.
Speaker 2 (36:27):
I'm just saying that would seem to be a little
bit problematic.
Speaker 4 (36:31):
And they didn't really exist a decade ago, so it.
Speaker 2 (36:33):
Didn't really exist like three years ago we.
Speaker 4 (36:36):
Pass any uh.
Speaker 2 (36:37):
Yeah that Look, in a perfect world, you get elected
to Congress, great, all of your holdings can go into
basically the equivalent of whatever the TSP funds are, you know,
the G fund, the C fund, the was it, the ipund.
Speaker 4 (36:49):
The well again, they can still hold their individual stock
as they come in.
Speaker 2 (36:52):
Ideally, I'm saying, ideally, look, you go into that. You
can rebalance it every quarter if you want to, but
that's all you can do in my opinion, because if
you are elected to serve the people, then go and
serve the people. If you want to make money, then
then go somewhere else.
Speaker 3 (37:08):
So get other point here. I don't see anything written
about spouses. I would hope that they are covered under this,
but if they're not, it's problematic. Yeah, right, Like that's
that's been the entire argument over Pelosi. It's not her
conducting the trading, it's her husband. Like, there has to
be something in here, and I assume there probably is
(37:29):
about spouses, but if not, there needs to be immediate
family household members is really what this needs to apply to.
Speaker 2 (37:36):
So again, I'll take a step in the right direction.
It's good, but I personally still want uh more in
this case. But look steps in the right direction? Fine,
Like I won't uh yeah, I won't look at I
won't look at gift horse that has not yet been
gifted in the mouth. Why would you not look at
gift horse in them out? What happens if you do that?
Speaker 1 (37:57):
Oh?
Speaker 4 (37:57):
You don't want to know, Chuck.
Speaker 2 (37:58):
I've never received a gift horse, so I don't know.
Speaker 4 (38:00):
If you have to ask, you can't afford it.
Speaker 2 (38:02):
Here's a gift, don't look at it, thanks man, How
do I know? If it's good? Then you don't really
have a stable. Thanks, you can go into garage. Let
me get it up on the lift. See how it does.
Speaker 4 (38:14):
Get a receipt.
Speaker 2 (38:18):
It's got a lot of horse power. Take a quick
break when we come back. Hour two coming up.
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