February 6, 2025 • 38 mins
Mike Armstrong and Marc Fandetti discuss how earnings reports are impact marketing currently. Tesla's sales in Europe are falling fast adding to US troubles. What to look for in tomorrow's jobs report. Treasury Secretary Bessent says Trump wants lower ten-year yields, but not rate cuts. A heated debate breaks out over KFC and Taco Bell. How are Federal Reserve officials feeling about tariffs impact on inflation? Has Ford fallen too far behind?
Mark as Played
Transcript
Episode Transcript
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Speaker 1 (00:00):
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(00:43):
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(01:06):
Mike Armstrong and Mark Vandetti.
Speaker 2 (01:10):
Good morning, happy snowy Thursday. Here on the Financial Exchange,
It's Mike Armstrong, Mark Vandetti and Tucker Silva with you
on a continued busy earnings week. We're going to be
talking a little bit about the Trump administration's view on
interest rates the upcoming jobs report. But first things first,
on those earnings. Today we heard from a number of companies,
(01:31):
some big, some small, some little bit nostalgic. We had
Peloton reporting earnings, for example, which doesn't move markets at all,
but I do kind of miss the early twenty twenty
days of talking about the craziness that was Peloton. Eli
Lilly reported, Astra Zeneca, Phillip Morris Honeywell new breakup talks there.
And the big one will be Amazon, the two and
(01:54):
a half trillion dollar company. Almost said billion. That would
be wrong. Two and a half trillion dollar company will
be reporting today day after the bell around five pm. Uh.
Anything catching your market your eyes in terms of markets
this morning, mark or any in companies you want to
jump into. Dow is flat for the day, SMP and
NASDAC are very slightly up at the at the moment,
(02:15):
so it seems to me that no big moves from
earnings yet and some baited breath waiting for tomorrow's jobs report,
which will be somewhat complicated for people to digest. So
we can jump out.
Speaker 3 (02:26):
You didn't mention it. I hope it's okay that I
bring up Tesla and how much there's sales plummeted is not?
Speaker 2 (02:35):
Yeah, we gonna We're gonna go there, like no, I wasn't.
You weren't available on the show, so we should jump
in there because that was a report from what was
it Monday or Tuesday of this week that.
Speaker 3 (02:44):
Your report europe numbers specifically.
Speaker 2 (02:46):
Okay, So the European numbers specifically came.
Speaker 3 (02:48):
Out fresher according to this the Financial Times there about
five hours so Tesla?
Speaker 2 (02:54):
When when was the earning report for Tesla? Tucker? Was
that this week or last week?
Speaker 3 (02:57):
Last week?
Speaker 2 (02:58):
Okay? So I remember discussing it at the moment because
the market reaction was up on Tesla shares and the
earnings themselves were a dumpster fire. They reported, Oh that, yes,
bad sales, bad earnings, bad forecasted sales. But Elon Musk
said he's never been more excited, and so people bought
the company. What was this announcement?
Speaker 3 (03:18):
So compounding that and adding really to the narrative that
their core business is arguably sucking wind or.
Speaker 2 (03:27):
Don't worry, robots right dancing robots, right right, right for everyone.
Speaker 3 (03:31):
But there's sales in Germany and France down sixty three
percent in the latter, fifty percent in the former excuse me,
sixty percent in the former as well, just a fraction
of new ev sold I mean a fraction less than
ten percent, where Tesla is a dramatic change from only
several quarters ago. If you're a shareholder, of course you
(03:54):
own it, possibly for other reasons, you believe the story.
Somebody say the shype. But if you're focused on it's
core business, when's the last time they had good news
on that?
Speaker 2 (04:04):
Right? Yeah, it's an interesting pivot moment here because, as
you say, the sales have been declining for a number
of reasons.
Speaker 3 (04:12):
I mean, yeah, dated models, dated.
Speaker 2 (04:14):
Models in Europe. They're facing a lot more competition from
Chinese manufacturers that we are not facing here Domestically, there's
the politics situation going on, and so it is a
important pivot point. And I mean there's been a few
moments in Tesla's history that are more important. There was
the point in time where they were very close to
(04:34):
running out of cash and going out of business a
few years ago, So it doesn't quite it doesn't quite
line up with that importance. But you know, execution on
some of their promises is going to become increasingly important
if their vehicle sales volumes are actually showing some form
of cyclical.
Speaker 3 (04:51):
Dealers when you price in his political activism, the only
conspicuous figure I could think of historically was Henry Ford.
He wrote of he was famously anti Semitic. He was
a flake. He thought the Revolutionary War was the War
of eighteen twelve. I mean, he knew very actually fit
right into today's political scene, but knew very little about
our history and didn't give I think he said something like,
all I wouldn't give a dime for all of history.
(05:13):
I think it's bunk or something like that. Anyway, he's
the only figure that sort of comes to mind an industrialist.
He was also very very opinionated, but that was of
course before social media, and most Americans probably had no
idea what Henry Ford thought about the issues. So it's
an interesting it's just no parallel it's.
Speaker 2 (05:30):
An interesting and important one to keep an eye on.
Important because it is a still massive company that is
more valuable right all other automakers combined, and is seeing
similar trends that other automakers are, but stock price is
not reacting that way. You know, Ford, for example, down
nineteen percent last year and reported that they expect their
earnings to fall some no, no, that was a Nissan,
(05:52):
but falling earnings and rolling out new models, and so
it'll be interesting to me to see how they can
peat with all this. But let's move on to tomorrow.
Tomorrow is a job's report. It's also a revision jobs reports,
So Mark, can you kind of bring us up to
speed on what exactly happens tomorrow, because they do go
(06:12):
back and revise a bunch of previous numbers. And it
seems to me that everyone's making a big deal of this,
that it's going to confuse everybody, And what I suspect
will happen is one you shouldn't be confused about this
because nobody actually pays attention to the jobs report other
than the people on this show and people that watch
financial markets really closely. But I suspect the confusion might
(06:34):
come from politicians poking the bear here and saying, ah
BLS is messing with their data, and you know they
were making the jobs market look stronger.
Speaker 3 (06:44):
Than who's going to say now the people that most
reliably voiced the conspiracy theories about data are now in
charge of the data right right. By that, I mean
Trump and his administration. Look, these revs, as you said, Mike,
their routine. They are typically large. They won't impact the
monthly number, but they'll impact the cumulative change over the
(07:07):
past twelve months to people in the job market and
to pay rolls. There are people who are knee deep
in the nuances of this who have opinions on what
will move in what direction. The labor force growth will
probably go up large upward revisions to employment levels is
sort of the consensus opinion, and possibly downward revisions to
(07:28):
pay rolls. Those do come from two different surveys. As
you and Chuck talk about a lot, it's ancient history, Mike, Well.
Speaker 2 (07:35):
I mean it's twelve months ago. So again, what will
be happening here is you will have a read on
the January Employment Summary that will be coming out tomorrow
at eight thirty am. Yes, Tucker, Tucker shaking his head. Yes,
you know, it's eight thirty am tomorrow. Alongside that, you
get revisions to the last twelve months. And we've seen
this before, but you know very obviously. What happens is
(07:58):
they go out and survey a whole of people and
businesses every single month, and as you can imagine, not
everybody gets those surveys right back to the Bureau of
Labor Statistics immediately. Sometimes it takes a few months, and
so they compile all those and once every is it
six months, do a bunch of revisions to it, I believe,
and that leads to a fair bit of confusion on occasion,
because all of a sudden you've got these massive changes
(08:20):
to oh there were actually nine hundred thousand fewer jobs created,
or there were you know, upticks in the unemployment rate
beyond what we previously saw. But it is a normal
course of business. But it is an important jobs report
for that reason, because you will not only learn about
the month of January, but you will get more accurate
information about the course of the last year when it
(08:41):
came to the labor market. Anything else to add on Tomorrow's.
Speaker 3 (08:43):
Other than what you just inted that these are always
estimates subject to revisions. Some reports are more heavily revised,
like GDP and employment than others like CPI IE inflation,
which tends to not change much. But they are always estimates, Mike.
Like you said, the government surveys a relatively small number
of employers or households, and thus there's a lot of
(09:06):
uncertainty tied to these numbers, which underscores the point you chuck,
make a lot, which is, don't put too much credence
in any one report, or even any two or or three.
You need several to get a sense for where things
are trending.
Speaker 2 (09:19):
Let's take a quick break here when we come back,
commentary out of the Treasury Department. When it comes to
interest rates, We've got another Federal Reserve meeting coming up
in March. Latest comments from Scott Bestt and the Treasury
on where they see rates needing to go in twenty
twenty five. That's next here on the Financial Exchange.
Speaker 1 (09:37):
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Speaker 4 (09:56):
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Speaker 2 (10:33):
Scott Bessett, newly appointed and confirmed Treasury secretaries out there
talking interest rates today and focusing a little bit on
or trying to divert attention away from the Federal Reserve
a little bit, I think here and saying quote, he
referring to Donald Trump is not calling for the FED
to lower rates, and then goes on to further talk
(10:54):
about the FED and their independence a little bit by saying, quote,
I will only talk about what they they've done, not
what I think they should do from now on. He
said that tenure treasure yields climbed after the Fed's jumbo
rate cuts, referring to the fifty base point reduction that
Jerome Powell and his colleagues enacted in September. So what
he's talking about there is one I do like to
(11:15):
see it, because I don't want to see the Treasury
Secretary piling on and saying I'm going to influence what
the FED has to do here, and he's clearly saying
the president's job. I'm not going to plan to do that.
But what he's speaking to in particular, I think is
an important quick lesson about the Federal Reserve, which people
have already gotten here, which is that they don't control
(11:35):
interest rates that most Americans care about. What I'm referring
to is that they don't control long term rates. And
most people don't really care that much about what their
money market mutual fund is paying. They care a lot
more about what they're going to be paying on a
car loan, a student loan, a mortgage loan, you know,
things along those lines that are much more tied to
(11:56):
the longer rates. And his point that he made in
more complex language is the FED cut rates and mortgage
rates went up. So here's the data. On September seventeenth,
which was the day before the FED began their rate
cutting cycle, the FED Fund's target rate was at a
high range of five point five percent. They don't actually
set these rates, They target a range between. At this
(12:17):
point it was five and a quarter to five and
a half percent. They then cut rates by fifty basis
points and did two more rate cuts at the end
of twenty twenty four to bring that target rate down
a full percentage point, so it went from five to
five to four and a half. The thirty year mortgage
rate during that same time period from September seventeenth. On
September seventeenth, it was sitting at six point one point
(12:39):
one according to Mortgage News Daily. By December eighteenth, when
the FED was done with their most recent rate cutting cycle,
the thirty year mortgage had gone up to seven point
one to three percent. And that is specifically what Beson
is talking about here is Look, we can pressure the
FED all all we want, but recent history was lower
rates and long term rates spike. What would you attribute
(13:01):
I guess, first and foremost, just to focus on the
education part, of this rather than the politics part of this.
Why would it be that the FED cuts rates and
markets respond by driving long term rates up higher. What
is the expectation there, what's the concern there, or what
causes all of that?
Speaker 3 (13:18):
The short answer is anticipation of higher perhaps higher growth.
So when the FED, which controls the supply of money,
as you pointed out, not interest rates, they don't even
control very short term interest rates, they effectively control them
because they can dump so much money in the form
of reserves into banks. Banks thereby banks are thereby and
(13:42):
able to make interest rates, make loans at lower interest rates.
They effectively control, but they don't in fact control any
interest rate. Important point that you made, so longer term
rates rising when the FED stimulates the economy does make sense,
and it happens more often than not. As people that
this may not be happening in this case, it could
be other things like fear of larger budget deficits or
(14:04):
fear of a resurgence and inflation. These things can also
drive up longer term rates, but it is not uncommon
for the FED to cut short term rates and at
the same time see long term rates perk up. Yeah,
I'll just oversimplify here and say that is an expectation
of increased economic activity, though there may be other factors
in play.
Speaker 2 (14:22):
So other than intentionally causing a recession, which I assume
Scott Bessont and Donald Trump don't really want to do.
What sort of methodology, what sort of methods or policies
has Besson talked about? Or can you imagine up that
they might be able to do to influence those longer
term rates? Because if that's their goal, what can you do?
Because it's mainly driven, at least in the latter half
(14:46):
of last year, by expectations that, hey, this economy isn't
as bad as we thought it might get. The warnings
about a recession from the PSALM rules seem to have dissipated,
and so we're in pretty good shape here. How do
you go about trying to bring those longer term rates
down through policy.
Speaker 3 (15:04):
Curtailing spending and deficits, just like George H. W. Bush
and then Bill Clinton did in the early nineteen nineties. Famously,
they struck an informal deal with Alan Greenspan. At the time,
Clinton said I will get the government's fiscal house in order,
and Greenspan in turn implicitly, they didn't actually work this out.
(15:24):
Greenspan agreed to keep monetary policy accommodative, so you had
tight fiscal policy throughout the nineteen nineties, really easy if
you will, or at least not overly stringent monetary policy.
And it was the perfect brew that tight fiscal policy
pursued by George hw who gets no credit for it,
indeed is blamed for the recession wrongly that followed and
(15:46):
lost the election of ninety two as a consequence. He
started it. Clinton continued along the path of fiscal responsibility.
This helped bring virtually everybody agrees, this helped bring long
term interest rates down during the nineteen nineties. Mikes. So
there's one model tight fiscal policy and at the other
end monetary policy working to keep the economy going. Even
(16:07):
though we're mainly concerned with fiscal policy and its impact
on rates, there's this little discussion.
Speaker 2 (16:12):
In this piece, and Scott Best in particular, I spoken
a lot about energy energy supply, increasing gasoline prices down.
How might that possibly impact or affect the longer term
end of the yield curve? I have a tough time seeing.
Speaker 3 (16:26):
It was also, you know, Bessant made his bones in
the nineties, and he remembers well the mix of fisk,
responsible fiscal and effective monetary policy that laid the groundwork
for the prosperity of the nineties, in addition to some
good luck with computers coming into their own in the
Internet obviously becoming pervasive. Bessant knows that that favorable policy
(16:50):
mix can influence rates and inflation, as we discussed. He
also recalls that energy prices were subdued for much or
falling through much of the ninety nine It's not necessarily
the case, though, that just because energy prices remain or
increases in energy prices are moderate, that you won't have inflation.
(17:11):
Inflation is the persistent kind, the really bad kind, the
underlying kind is a function of demand. So if they
run big deficits instead of getting a handle on the deficit,
and he's famously promised to reduce the debt to the
deficit excuse me, to three percent of GDP. That sounds
like a fantasy, but it's what he thinks he can do.
If they fail to do that, they will fail.
Speaker 2 (17:33):
To bring those term term restricts.
Speaker 3 (17:35):
I mean, it may also fail to get inflation under
control completely.
Speaker 2 (17:38):
So yeah, no, I think that is the key point
here is if you want to get those longer term
rates down, well, there's the accidental way, which would be
unexpected recession, a bunch of people know their jobs. That's
not what he wants to do. He wants to try
and get dose to work to actually bring down government
spending in some meaningful way to bring deficits down. And
(17:58):
where I will find it very interesting is eventually Bessett
will need to input his opinion on tax policy. And
that's where I'm going to be interested to see he
will eventually be asked. It's not being talked about seriously
in Congress in terms of what those tax cuts look like.
There's been discussion most recently of locking in the Trump
(18:19):
tax cuts for just another five years in order to
get a to get a deal actually done. But if
he is very fundamentally serious about deficit control and trying
to get those two a three percent target, then I'll
be very intrigued to see what he says when asked, Okay,
there's a bill on the table now to reduce the
corporate tax rate even further. It's estimated that it'll blow
(18:41):
up deficits to this level. What's your doing on.
Speaker 3 (18:43):
This as you know, as you guys have talked about
a lot. Their math doesn't work. They're hoping for I
don't know what productivity miracle or something. Their economic goals
are frankly preposterous. I get it. Politically, you have to
say your goals have to be stretch goals. A lot
of hyperbole underlying all this, as is characteristic of these folks.
(19:05):
But their goals three percent GDP growth, which is about
where we've been the past two years, by the way,
so it's not like it's impossible we've been doing it.
Maybe that's not a stregical three percent deficit, slow inflation,
all the rest of it. Some of these things are
just plain incompatible. And Bessen knows.
Speaker 2 (19:22):
That it's been a week of tariff talk and Federal
Reserve officials are hitting the media circus talking about the
risk of terras. When we cover that next right after
Wall Street Watch, Like.
Speaker 1 (19:45):
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today right here on the Financial Exchange Radio Network.
Speaker 4 (20:04):
Busy Day on Wall Street. However, markets are mostly quiet
and in mixed territory ahead of tomorrow morning's anticipated jobs report,
and also ready for more big tech earnings after today's
closing bell, this time from Amazon. At the moment, the
Dow is off by eighty four points, SMP five hundred
is up by ten points, and the Nasdaq is up
(20:26):
about a quarter percent, or forty seven points. Russell two
thousand edging four points higher, ten year Treasure reeled up
by one basis point of four point four to three percent,
and crude oil is up about three quarters of a percent,
rating at seventy one dollars and fifty five cents a barrel.
Big news out of Honeywell this morning, after the conglomerate
(20:47):
announced plans to split into three separate companies after facing
pressure from activist investor Elliott Management. Furthermore, the company offered
a twenty twenty five forecast that was lighter than expected.
Honeywell shares off by five percent. Meanwhile, four down by
six percent after the automaker said deep losses in its
electric car business would weigh and profitability this year. The
(21:10):
company did, however, beat fourth quarter earnings expectations elsewhere Armholdings
posted record quarterly sales due to AI chip buying. However,
the semiconductor design companies guidance disappointed investors, that stock pulling
back by three percent, Qualcom down by four percent despite
the chip maker reporting better than than expected quarterly results
(21:32):
and forward guidance. Eli Lilly posted mixed fourth quarter results
after beating on earnings but missing on revenue, while sales
of its weight loss drug zep Bound and diabetes drug
Monjarro Sword they had lower realized prices. That stock up
by two percent, Peloton jumping by fourteen percent after the
exercise equipment company hiked its full year earnings guidance. Young Brands,
(21:57):
the parent company to Taco Bell, up by seven percent
after it beat fourth quarter earnings, and Hershey up by
five percent as it's quarterly profit and sales also beat
expectations on Tucker Silvan and that's Wall Street watch Tucker.
Speaker 2 (22:12):
You and Chuck always talk about Taco Bell, and can
we just all admit that the better brand under the
Young brand's name is undoubtedly KFC. Like, is there any
real debate about what's better KFC or Taco Bell?
Speaker 1 (22:25):
Yeah?
Speaker 4 (22:25):
I would say that Taco Bell is the edge in
terms of popularity or just taste, just taste in terms
of popularities.
Speaker 2 (22:34):
Taco Bell, Yeah, I'm sure there's more. Taco Bell Yeah yeah,
thanks Mark.
Speaker 3 (22:41):
Well, buttermilk biscuits, KFC hands down tacos. You want to
go to? Taco Bell is what you're in the mood for.
How can you compare the two? Just use a very
different culture.
Speaker 2 (22:51):
Plain and simple. Which one is better?
Speaker 3 (22:53):
Which one makes your stomach?
Speaker 2 (22:55):
KFC is better than Taco Bell? Well yeah, can you
tell me how many locations each of them have? Uh
us locations? Taco bell us locations is coming from? I
just I don't like the KFC doesn't get from KFC
doesn't get any of the love. When we talk about
(23:15):
young brands, it's all Taco Bell and Taco Bell quite honestly,
kind of sucks.
Speaker 3 (23:20):
Hey, where's this coming from?
Speaker 2 (23:21):
You bite your frigging tons? Just disgusting, Just no good.
Speaker 3 (23:25):
Did you have a bad experience there recently?
Speaker 2 (23:27):
No, it's just you know, I can get cheap tacos
from somewhere that actually knows how to make taco tacos.
Where tell me where? Where?
Speaker 3 (23:36):
Where can you get cheap tacos?
Speaker 2 (23:38):
I'm waiting at Chapote, a place called Hungry Coyote in
my town. Yeah, local businessman, if you're talking about makes
a good taco. If you're talking about town's got a
good local taco.
Speaker 3 (23:50):
But that's not what we're discussing though.
Speaker 2 (23:54):
You don't eat the kyot.
Speaker 3 (23:57):
No, no really, I lost my appetite.
Speaker 2 (24:00):
Uh. By the way, as the let's go to the
mangy Beaver. As of twenty twenty five, there are eight thousand,
ninety Taco Bell locations in the United States, compared to
nearly half that of KFC locations. So but if you
want to text in the show and agree with me
on this on this point, that k an institution in.
Speaker 3 (24:23):
This country, though since the forties or fifties they had
a bit of a.
Speaker 2 (24:27):
One more reason that they're better than Taco Bell. Yeah,
just plenty of more history, better food, and uh, I'll
just I'll just leave it right there.
Speaker 3 (24:39):
Somebody's feeling very maga today.
Speaker 2 (24:43):
So we are continuing to kind of unwind the discussion
of tariff talk that was really the focus of all week,
and we'll have some pieces later about these deminimous exceptions
what they mean for for folks out there. But there's
two pieces from members of the Federal Reserve this week.
I don't know that Barkin is currently a voting member,
(25:04):
but Goulesby is, and so I want to jump in
here and talk about these and what it actually means.
Less from whether they are right or wrong about tariffs,
but I want to take it from the perspective of
what does it mean for what the Federal Reserve is
likely to do. Because Goulesby has a piece today an
interview stating that, look, you know, higher tariffs very well
(25:26):
could lead to high inflation. Supply side quote, supply side
disruptions can have a material impact on aggregate inflation. Barkin says, look,
economy is in good shape. It's really just government policy
that's the wild card to me. Anyway, Both of these
stories read as we are in charge of monetary policy
in this country and we are not really ready to
(25:50):
move things around on interest rates until we have a
lot more certainty about what's going to happen with tariffs,
tax policy, and things that could be good big contributions
to inflation. Am I misreading anything there? Now?
Speaker 3 (26:03):
I think the prevailing view among economists, and they're both
accomplished economists and their own right, in addition to having
scores of economists advise them. Inflation can be thought of
as having two components. An underlying part of persistent part
that's demand driven. That's driven ultimately by monetary policy, which
(26:24):
influences demand. That's kind of the steady part. It tends
to grow two to three percent a year. Then there
are these so called shocks. We use the term supply
shock a lot. That could mean anything. It doesn't have
to mean energy. Supply shocks can come from a positive
productivity development, they can come from a food shortage somewhere.
The seventies were characterized by supply shocks and food and energy.
(26:44):
So you've got these noisy things distorting the trend in inflation,
and the feds perennial problem, if you like, is is
inflation going up or down because the trend is changing
and that's something you can control. Or is it because
there's some unfavorable or favorable change in relative prices? Chicken
(27:08):
gets more expensive because we just wiped out a bunch
of chickens to stave off avian flu. Those things the
FED maybe can look past because supply shocks tend to
be self correcting or tend to be fleeting, but maybe
not if they push up expectations or if they last
for a while. This is why if this sounds a
little bit bewildering, that's the normal. You're having the right reaction.
(27:31):
This is why a FED policy maker's job is hard.
They're always thinking, should we be reacting to what's happening
in the economy or is it likely a change in
relative prices? Is it a special case that we can
look past? And even so, if it's a special case,
should we be looking past it? Are people looking past it?
Or is it getting embedded in their expectations and likely
(27:54):
to push up future inflation through wages and prices. Again,
if this sounds a little complicated, it's because it is.
Speaker 2 (28:00):
Their job is hard, and there are examples of both
successfully waiting out policy and assuming that it will pass
and it won't have a long term impact inflation and missteps.
I mean, I think the very clear misstep that we
talk about over and over again, which was ultimately a
read of a policy decision, was Hey, how is all
(28:22):
this stimulus going to affect inflation? What are the government's
policies on COVID going to do to inflation expectations? And ultimately,
I think kind of misreading the room in terms of
what it's going to do.
Speaker 3 (28:34):
To the nation and for years to come. Economists disagree
on whether the inflation of the covid Era and immediate
post covid era was supply or demand driven. There are ongoing,
vigorous and intense disagreements. If they're all empiricals. The way
economists disagree is to say, well, my models suggests slightly
more influence from supply side factors than demands, and they
(28:57):
very politely bash each other's head in using models and evidence.
These discussions will continue. Nobody really knows if the FED
could have stopped the covid era inflation without a huge
cost in terms of employment. It upset people a lot,
so you could argue that, well, on its face, it
was a bad thing, But did the FED do the
(29:19):
right thing by looking past it, by not tightening too
much too quickly. It eventually kind of went away on
its own without too much pain. That's the supply shock.
Look past the supply shock if you like. Argument. On
the other hand, people got very upset. They tossed a
bunch of incumbents out, and now the Fed's faced with
a president who might take away their independence. How do
(29:42):
you like them? Apples federal reserve? So I don't know
the right answer, Minke.
Speaker 2 (29:45):
Likewise, they are taking that similar road right now, which
is we don't know what policy could look like, and
we don't know what it's impact it will be on inflation,
and so we're going to wait and see. Seems to
be the answer right now.
Speaker 3 (29:58):
They't. They didn't say anything else else could they say?
Speaker 2 (30:01):
It's exactly what we're saying. Nothing, it's it's justified to
say it. And Uh, the less clarity you get on
where and where tariffs will be and where tax rates
will be, the less clarity you're going to get on
where interest rates will be. Next, let's take a quick break.
When we come back, I want to talk a bit
about Ford massive drop in profit among some other automakers
(30:23):
that are experiencing the same thing. We'll be back with
some talk about Ford Motor Company. Next.
Speaker 1 (30:28):
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Speaker 2 (31:06):
There's been a mix of kind of two stories when
it comes to American automakers over the last year or so.
General Motors has generally been seeing a fairly good turnaround
their stock price over the course of the last twelve months,
up twenty six percent. Ford, on the other hand, exact
opposite direction, down twenty two percent over the course of
the last twelve months, and speaks to I think just
(31:27):
some choices that were made over the last few years
when it comes to these two brands. But you Ford
very much leaned, as far as I can tell, more
quickly and heavier into the electric vehicle market with their
investments that they made in the electric F one P
fifty as well as the Mustang Mochi. General Motors has
(31:48):
more vehicle models for sale that are electric, but they
haven't quite leaned in in the same way to it
that from what I can tell, and just seem to
be executing a little bit better. They also, from what
I can tell, have these second best driving automation tool
that's out there with the GM Cruse or super CRUs
GM IS Cruise. Yeah. They again not the self driving cars,
(32:13):
but rather the tools that they put into many of
their vehicles today competes with Tesla's product, if not quite
as good of it as it from what I have read.
I don't own a Tesla or a General Motors vehicle,
but in any case, the second largest US automaker, Ford
expects no more than eight and a half billion in
earnings before interest in taxes this year. That's down from
(32:34):
ten points two billion generated in twenty twenty four. They're
expecting a two percent decline in pricing industry wide, and
then they have some big expenses from launching a new
Lincoln Navigator and Ford Expedition SUVs. So continuing just to
lean into their big profit centers of massive SUVs that
really drive this company, and appear to be slowing down
(32:57):
some of that investment in ev because because they are
just not seeing the demand that they were looking for.
But at some point Jim Farley starts to face a
little bit more pressure here in terms of the turnaround story. Here.
He's been quick to latch onto new trends, but overall
missed the ball over the course of the last last
(33:17):
year at least, and probably some questions being started to
be asked about this company and where it goes from here?
Speaker 3 (33:24):
How could they not? In the past twelve months, GM's
up nearly thirty percent forwards, down twenty the cumulative stock
price change in the past five years. The difference is
a little less star sure, but pretty dramatic. Up for
GM is up roughly forty percent, forwards up a little
under thirteen.
Speaker 2 (33:42):
Yeah, I mean, they've more and more become a very
specialty automaker. Ford has right if your general leaders on
passenger cars, they gave up on passenger cars. They said,
you know, we're going to lean heavily into two segments,
EV and big SUV, and those are kind of contradictory.
But I think what people are finding is they don't
(34:03):
necessarily want an F series electric vehicle. The buyer of
an electric vehicle might be okay with a smaller car,
and Ford doesn't have one to offer. And if you're
not in the market for a big, giant truck or suv,
Ford doesn't have much to offer. You these days, and
so I grow increasingly concerned that they've kind of pigeonholed
(34:23):
themselves here into a very specific and high profit margin,
but narrow segment of the vehicle market. And if you
continue to see interest rates this high and people struggling
to make payments, then tough to see people continuing to
buy sixty seventy eighty thousand dollars cars in perpetuity.
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Speaker 2 (36:01):
We've got two egg stories to cover today, Mark, do
you want to start with the heist or the waffle house?
We did waffle house yesterday? We did, But if you
want to die yesterday those okay, Sorry so I missed it,
but thanks for waffle House famous for their hurricane Detection Index.
If you haven't heard of the waffle House Index, you
(36:21):
just take a look at how many locations are closed
and it's a really good barometer of what sort of
natural disasters are going on across the country.
Speaker 3 (36:28):
Relation between mortality.
Speaker 2 (36:30):
And eating a waffle house? No, no, no, okay, So
the waffle House Index gives you a good idea of
how bad a natural disaster is because they never close
unless they really have to. But waffle House imposing a
fifty cent egg surcharge on any egg dishes on their
menu was apparently covered yesterday. Sorry Tucker. But the real
(36:51):
story here is the biggest heist of twenty twenty five,
where one hundred thousand eggs were stolen in pencil Vania
amid the massive shortage that we're talking about, the theft
of eggs which the authorities said were worth only Yeah,
I guess that. I guess that that plays up forty
thousand dollars comes as grocery store shoppers across the country
(37:14):
are facing empty shelves. And my question actually have two questions. One,
how do you move stolen eggs? You know, if I
walk into downtown Pittsburgh, is somebody just gonna be like
selling eggs out of a sketchy alley somewhere, because that
is out of the back of your cameray amazingly entertaining to me.
I hope it's just like New York City when you know,
(37:34):
the guy with the big trench co comes up to you,
opens it up, and he's got all sorts of watches
and other jewelry that he can sell you. And it's
just a pockets full of eggs. But that's dangerous because
they crack pretty easily, So I don't know how that's
gonna work.
Speaker 3 (37:46):
Don't touch me.
Speaker 2 (37:47):
The second piece is, can you imagine being the mob
boss who has fallen so far from his forefathers, you know,
decades ago, that you have fallen into egg heists? Like harrassing?
Is that for you if you're a Pennsylvania mob boss
who had to jump into stealing eggs as opposed to
like precious metals bank robberies. Way, Like I just yeah,
(38:12):
it's just hilarious to me. But in any case, one
hundred thousand eggs stolen.
Speaker 3 (38:16):
From the legendary right up there with the Luftanza heist,
the egg heist, it will be one of the old
time legendary heists.
Speaker 2 (38:22):
Quick break. We'll be right back with more on the
financial exchange.
The Financial Exchange is produced by Money Matters Radio and
is hosted by employees of the Armstrong Advisory Group, a
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(01:06):
Mike Armstrong and Mark Vandetti.
Speaker 2 (01:10):
Good morning, happy snowy Thursday. Here on the Financial Exchange,
It's Mike Armstrong, Mark Vandetti and Tucker Silva with you
on a continued busy earnings week. We're going to be
talking a little bit about the Trump administration's view on
interest rates the upcoming jobs report. But first things first,
on those earnings. Today we heard from a number of companies,
(01:31):
some big, some small, some little bit nostalgic. We had
Peloton reporting earnings, for example, which doesn't move markets at all,
but I do kind of miss the early twenty twenty
days of talking about the craziness that was Peloton. Eli
Lilly reported, Astra Zeneca, Phillip Morris Honeywell new breakup talks there.
And the big one will be Amazon, the two and
(01:54):
a half trillion dollar company. Almost said billion. That would
be wrong. Two and a half trillion dollar company will
be reporting today day after the bell around five pm. Uh.
Anything catching your market your eyes in terms of markets
this morning, mark or any in companies you want to
jump into. Dow is flat for the day, SMP and
NASDAC are very slightly up at the at the moment,
(02:15):
so it seems to me that no big moves from
earnings yet and some baited breath waiting for tomorrow's jobs report,
which will be somewhat complicated for people to digest. So
we can jump out.
Speaker 3 (02:26):
You didn't mention it. I hope it's okay that I
bring up Tesla and how much there's sales plummeted is not?
Speaker 2 (02:35):
Yeah, we gonna We're gonna go there, like no, I wasn't.
You weren't available on the show, so we should jump
in there because that was a report from what was
it Monday or Tuesday of this week that.
Speaker 3 (02:44):
Your report europe numbers specifically.
Speaker 2 (02:46):
Okay, So the European numbers specifically came.
Speaker 3 (02:48):
Out fresher according to this the Financial Times there about
five hours so Tesla?
Speaker 2 (02:54):
When when was the earning report for Tesla? Tucker? Was
that this week or last week?
Speaker 3 (02:57):
Last week?
Speaker 2 (02:58):
Okay? So I remember discussing it at the moment because
the market reaction was up on Tesla shares and the
earnings themselves were a dumpster fire. They reported, Oh that, yes,
bad sales, bad earnings, bad forecasted sales. But Elon Musk
said he's never been more excited, and so people bought
the company. What was this announcement?
Speaker 3 (03:18):
So compounding that and adding really to the narrative that
their core business is arguably sucking wind or.
Speaker 2 (03:27):
Don't worry, robots right dancing robots, right right, right for everyone.
Speaker 3 (03:31):
But there's sales in Germany and France down sixty three
percent in the latter, fifty percent in the former excuse me,
sixty percent in the former as well, just a fraction
of new ev sold I mean a fraction less than
ten percent, where Tesla is a dramatic change from only
several quarters ago. If you're a shareholder, of course you
(03:54):
own it, possibly for other reasons, you believe the story.
Somebody say the shype. But if you're focused on it's
core business, when's the last time they had good news
on that?
Speaker 2 (04:04):
Right? Yeah, it's an interesting pivot moment here because, as
you say, the sales have been declining for a number
of reasons.
Speaker 3 (04:12):
I mean, yeah, dated models, dated.
Speaker 2 (04:14):
Models in Europe. They're facing a lot more competition from
Chinese manufacturers that we are not facing here Domestically, there's
the politics situation going on, and so it is a
important pivot point. And I mean there's been a few
moments in Tesla's history that are more important. There was
the point in time where they were very close to
(04:34):
running out of cash and going out of business a
few years ago, So it doesn't quite it doesn't quite
line up with that importance. But you know, execution on
some of their promises is going to become increasingly important
if their vehicle sales volumes are actually showing some form
of cyclical.
Speaker 3 (04:51):
Dealers when you price in his political activism, the only
conspicuous figure I could think of historically was Henry Ford.
He wrote of he was famously anti Semitic. He was
a flake. He thought the Revolutionary War was the War
of eighteen twelve. I mean, he knew very actually fit
right into today's political scene, but knew very little about
our history and didn't give I think he said something like,
all I wouldn't give a dime for all of history.
(05:13):
I think it's bunk or something like that. Anyway, he's
the only figure that sort of comes to mind an industrialist.
He was also very very opinionated, but that was of
course before social media, and most Americans probably had no
idea what Henry Ford thought about the issues. So it's
an interesting it's just no parallel it's.
Speaker 2 (05:30):
An interesting and important one to keep an eye on.
Important because it is a still massive company that is
more valuable right all other automakers combined, and is seeing
similar trends that other automakers are, but stock price is
not reacting that way. You know, Ford, for example, down
nineteen percent last year and reported that they expect their
earnings to fall some no, no, that was a Nissan,
(05:52):
but falling earnings and rolling out new models, and so
it'll be interesting to me to see how they can
peat with all this. But let's move on to tomorrow.
Tomorrow is a job's report. It's also a revision jobs reports,
So Mark, can you kind of bring us up to
speed on what exactly happens tomorrow, because they do go
(06:12):
back and revise a bunch of previous numbers. And it
seems to me that everyone's making a big deal of this,
that it's going to confuse everybody, And what I suspect
will happen is one you shouldn't be confused about this
because nobody actually pays attention to the jobs report other
than the people on this show and people that watch
financial markets really closely. But I suspect the confusion might
(06:34):
come from politicians poking the bear here and saying, ah
BLS is messing with their data, and you know they
were making the jobs market look stronger.
Speaker 3 (06:44):
Than who's going to say now the people that most
reliably voiced the conspiracy theories about data are now in
charge of the data right right. By that, I mean
Trump and his administration. Look, these revs, as you said, Mike,
their routine. They are typically large. They won't impact the
monthly number, but they'll impact the cumulative change over the
(07:07):
past twelve months to people in the job market and
to pay rolls. There are people who are knee deep
in the nuances of this who have opinions on what
will move in what direction. The labor force growth will
probably go up large upward revisions to employment levels is
sort of the consensus opinion, and possibly downward revisions to
(07:28):
pay rolls. Those do come from two different surveys. As
you and Chuck talk about a lot, it's ancient history, Mike, Well.
Speaker 2 (07:35):
I mean it's twelve months ago. So again, what will
be happening here is you will have a read on
the January Employment Summary that will be coming out tomorrow
at eight thirty am. Yes, Tucker, Tucker shaking his head. Yes,
you know, it's eight thirty am tomorrow. Alongside that, you
get revisions to the last twelve months. And we've seen
this before, but you know very obviously. What happens is
(07:58):
they go out and survey a whole of people and
businesses every single month, and as you can imagine, not
everybody gets those surveys right back to the Bureau of
Labor Statistics immediately. Sometimes it takes a few months, and
so they compile all those and once every is it
six months, do a bunch of revisions to it, I believe,
and that leads to a fair bit of confusion on occasion,
because all of a sudden you've got these massive changes
(08:20):
to oh there were actually nine hundred thousand fewer jobs created,
or there were you know, upticks in the unemployment rate
beyond what we previously saw. But it is a normal
course of business. But it is an important jobs report
for that reason, because you will not only learn about
the month of January, but you will get more accurate
information about the course of the last year when it
(08:41):
came to the labor market. Anything else to add on Tomorrow's.
Speaker 3 (08:43):
Other than what you just inted that these are always
estimates subject to revisions. Some reports are more heavily revised,
like GDP and employment than others like CPI IE inflation,
which tends to not change much. But they are always estimates, Mike.
Like you said, the government surveys a relatively small number
of employers or households, and thus there's a lot of
(09:06):
uncertainty tied to these numbers, which underscores the point you chuck,
make a lot, which is, don't put too much credence
in any one report, or even any two or or three.
You need several to get a sense for where things
are trending.
Speaker 2 (09:19):
Let's take a quick break here when we come back,
commentary out of the Treasury Department. When it comes to
interest rates, We've got another Federal Reserve meeting coming up
in March. Latest comments from Scott Bestt and the Treasury
on where they see rates needing to go in twenty
twenty five. That's next here on the Financial Exchange.
Speaker 1 (09:37):
Business and financial news affecting the markets and your wallet.
We've got it all straight from Wall Street right here
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Speaker 4 (09:56):
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Speaker 2 (10:33):
Scott Bessett, newly appointed and confirmed Treasury secretaries out there
talking interest rates today and focusing a little bit on
or trying to divert attention away from the Federal Reserve
a little bit, I think here and saying quote, he
referring to Donald Trump is not calling for the FED
to lower rates, and then goes on to further talk
(10:54):
about the FED and their independence a little bit by saying, quote,
I will only talk about what they they've done, not
what I think they should do from now on. He
said that tenure treasure yields climbed after the Fed's jumbo
rate cuts, referring to the fifty base point reduction that
Jerome Powell and his colleagues enacted in September. So what
he's talking about there is one I do like to
(11:15):
see it, because I don't want to see the Treasury
Secretary piling on and saying I'm going to influence what
the FED has to do here, and he's clearly saying
the president's job. I'm not going to plan to do that.
But what he's speaking to in particular, I think is
an important quick lesson about the Federal Reserve, which people
have already gotten here, which is that they don't control
(11:35):
interest rates that most Americans care about. What I'm referring
to is that they don't control long term rates. And
most people don't really care that much about what their
money market mutual fund is paying. They care a lot
more about what they're going to be paying on a
car loan, a student loan, a mortgage loan, you know,
things along those lines that are much more tied to
(11:56):
the longer rates. And his point that he made in
more complex language is the FED cut rates and mortgage
rates went up. So here's the data. On September seventeenth,
which was the day before the FED began their rate
cutting cycle, the FED Fund's target rate was at a
high range of five point five percent. They don't actually
set these rates, They target a range between. At this
(12:17):
point it was five and a quarter to five and
a half percent. They then cut rates by fifty basis
points and did two more rate cuts at the end
of twenty twenty four to bring that target rate down
a full percentage point, so it went from five to
five to four and a half. The thirty year mortgage
rate during that same time period from September seventeenth. On
September seventeenth, it was sitting at six point one point
(12:39):
one according to Mortgage News Daily. By December eighteenth, when
the FED was done with their most recent rate cutting cycle,
the thirty year mortgage had gone up to seven point
one to three percent. And that is specifically what Beson
is talking about here is Look, we can pressure the
FED all all we want, but recent history was lower
rates and long term rates spike. What would you attribute
(13:01):
I guess, first and foremost, just to focus on the
education part, of this rather than the politics part of this.
Why would it be that the FED cuts rates and
markets respond by driving long term rates up higher. What
is the expectation there, what's the concern there, or what
causes all of that?
Speaker 3 (13:18):
The short answer is anticipation of higher perhaps higher growth.
So when the FED, which controls the supply of money,
as you pointed out, not interest rates, they don't even
control very short term interest rates, they effectively control them
because they can dump so much money in the form
of reserves into banks. Banks thereby banks are thereby and
(13:42):
able to make interest rates, make loans at lower interest rates.
They effectively control, but they don't in fact control any
interest rate. Important point that you made, so longer term
rates rising when the FED stimulates the economy does make sense,
and it happens more often than not. As people that
this may not be happening in this case, it could
be other things like fear of larger budget deficits or
(14:04):
fear of a resurgence and inflation. These things can also
drive up longer term rates, but it is not uncommon
for the FED to cut short term rates and at
the same time see long term rates perk up. Yeah,
I'll just oversimplify here and say that is an expectation
of increased economic activity, though there may be other factors
in play.
Speaker 2 (14:22):
So other than intentionally causing a recession, which I assume
Scott Bessont and Donald Trump don't really want to do.
What sort of methodology, what sort of methods or policies
has Besson talked about? Or can you imagine up that
they might be able to do to influence those longer
term rates? Because if that's their goal, what can you do?
Because it's mainly driven, at least in the latter half
(14:46):
of last year, by expectations that, hey, this economy isn't
as bad as we thought it might get. The warnings
about a recession from the PSALM rules seem to have dissipated,
and so we're in pretty good shape here. How do
you go about trying to bring those longer term rates
down through policy.
Speaker 3 (15:04):
Curtailing spending and deficits, just like George H. W. Bush
and then Bill Clinton did in the early nineteen nineties. Famously,
they struck an informal deal with Alan Greenspan. At the time,
Clinton said I will get the government's fiscal house in order,
and Greenspan in turn implicitly, they didn't actually work this out.
(15:24):
Greenspan agreed to keep monetary policy accommodative, so you had
tight fiscal policy throughout the nineteen nineties, really easy if
you will, or at least not overly stringent monetary policy.
And it was the perfect brew that tight fiscal policy
pursued by George hw who gets no credit for it,
indeed is blamed for the recession wrongly that followed and
(15:46):
lost the election of ninety two as a consequence. He
started it. Clinton continued along the path of fiscal responsibility.
This helped bring virtually everybody agrees, this helped bring long
term interest rates down during the nineteen nineties. Mikes. So
there's one model tight fiscal policy and at the other
end monetary policy working to keep the economy going. Even
(16:07):
though we're mainly concerned with fiscal policy and its impact
on rates, there's this little discussion.
Speaker 2 (16:12):
In this piece, and Scott Best in particular, I spoken
a lot about energy energy supply, increasing gasoline prices down.
How might that possibly impact or affect the longer term
end of the yield curve? I have a tough time seeing.
Speaker 3 (16:26):
It was also, you know, Bessant made his bones in
the nineties, and he remembers well the mix of fisk,
responsible fiscal and effective monetary policy that laid the groundwork
for the prosperity of the nineties, in addition to some
good luck with computers coming into their own in the
Internet obviously becoming pervasive. Bessant knows that that favorable policy
(16:50):
mix can influence rates and inflation, as we discussed. He
also recalls that energy prices were subdued for much or
falling through much of the ninety nine It's not necessarily
the case, though, that just because energy prices remain or
increases in energy prices are moderate, that you won't have inflation.
(17:11):
Inflation is the persistent kind, the really bad kind, the
underlying kind is a function of demand. So if they
run big deficits instead of getting a handle on the deficit,
and he's famously promised to reduce the debt to the
deficit excuse me, to three percent of GDP. That sounds
like a fantasy, but it's what he thinks he can do.
If they fail to do that, they will fail.
Speaker 2 (17:33):
To bring those term term restricts.
Speaker 3 (17:35):
I mean, it may also fail to get inflation under
control completely.
Speaker 2 (17:38):
So yeah, no, I think that is the key point
here is if you want to get those longer term
rates down, well, there's the accidental way, which would be
unexpected recession, a bunch of people know their jobs. That's
not what he wants to do. He wants to try
and get dose to work to actually bring down government
spending in some meaningful way to bring deficits down. And
(17:58):
where I will find it very interesting is eventually Bessett
will need to input his opinion on tax policy. And
that's where I'm going to be interested to see he
will eventually be asked. It's not being talked about seriously
in Congress in terms of what those tax cuts look like.
There's been discussion most recently of locking in the Trump
(18:19):
tax cuts for just another five years in order to
get a to get a deal actually done. But if
he is very fundamentally serious about deficit control and trying
to get those two a three percent target, then I'll
be very intrigued to see what he says when asked, Okay,
there's a bill on the table now to reduce the
corporate tax rate even further. It's estimated that it'll blow
(18:41):
up deficits to this level. What's your doing on.
Speaker 3 (18:43):
This as you know, as you guys have talked about
a lot. Their math doesn't work. They're hoping for I
don't know what productivity miracle or something. Their economic goals
are frankly preposterous. I get it. Politically, you have to
say your goals have to be stretch goals. A lot
of hyperbole underlying all this, as is characteristic of these folks.
(19:05):
But their goals three percent GDP growth, which is about
where we've been the past two years, by the way,
so it's not like it's impossible we've been doing it.
Maybe that's not a stregical three percent deficit, slow inflation,
all the rest of it. Some of these things are
just plain incompatible. And Bessen knows.
Speaker 2 (19:22):
That it's been a week of tariff talk and Federal
Reserve officials are hitting the media circus talking about the
risk of terras. When we cover that next right after
Wall Street Watch, Like.
Speaker 1 (19:45):
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. Mark gets so far
today right here on the Financial Exchange Radio Network.
Speaker 4 (20:04):
Busy Day on Wall Street. However, markets are mostly quiet
and in mixed territory ahead of tomorrow morning's anticipated jobs report,
and also ready for more big tech earnings after today's
closing bell, this time from Amazon. At the moment, the
Dow is off by eighty four points, SMP five hundred
is up by ten points, and the Nasdaq is up
(20:26):
about a quarter percent, or forty seven points. Russell two
thousand edging four points higher, ten year Treasure reeled up
by one basis point of four point four to three percent,
and crude oil is up about three quarters of a percent,
rating at seventy one dollars and fifty five cents a barrel.
Big news out of Honeywell this morning, after the conglomerate
(20:47):
announced plans to split into three separate companies after facing
pressure from activist investor Elliott Management. Furthermore, the company offered
a twenty twenty five forecast that was lighter than expected.
Honeywell shares off by five percent. Meanwhile, four down by
six percent after the automaker said deep losses in its
electric car business would weigh and profitability this year. The
(21:10):
company did, however, beat fourth quarter earnings expectations elsewhere Armholdings
posted record quarterly sales due to AI chip buying. However,
the semiconductor design companies guidance disappointed investors, that stock pulling
back by three percent, Qualcom down by four percent despite
the chip maker reporting better than than expected quarterly results
(21:32):
and forward guidance. Eli Lilly posted mixed fourth quarter results
after beating on earnings but missing on revenue, while sales
of its weight loss drug zep Bound and diabetes drug
Monjarro Sword they had lower realized prices. That stock up
by two percent, Peloton jumping by fourteen percent after the
exercise equipment company hiked its full year earnings guidance. Young Brands,
(21:57):
the parent company to Taco Bell, up by seven percent
after it beat fourth quarter earnings, and Hershey up by
five percent as it's quarterly profit and sales also beat
expectations on Tucker Silvan and that's Wall Street watch Tucker.
Speaker 2 (22:12):
You and Chuck always talk about Taco Bell, and can
we just all admit that the better brand under the
Young brand's name is undoubtedly KFC. Like, is there any
real debate about what's better KFC or Taco Bell?
Speaker 1 (22:25):
Yeah?
Speaker 4 (22:25):
I would say that Taco Bell is the edge in
terms of popularity or just taste, just taste in terms
of popularities.
Speaker 2 (22:34):
Taco Bell, Yeah, I'm sure there's more. Taco Bell Yeah yeah,
thanks Mark.
Speaker 3 (22:41):
Well, buttermilk biscuits, KFC hands down tacos. You want to
go to? Taco Bell is what you're in the mood for.
How can you compare the two? Just use a very
different culture.
Speaker 2 (22:51):
Plain and simple. Which one is better?
Speaker 3 (22:53):
Which one makes your stomach?
Speaker 2 (22:55):
KFC is better than Taco Bell? Well yeah, can you
tell me how many locations each of them have? Uh
us locations? Taco bell us locations is coming from? I
just I don't like the KFC doesn't get from KFC
doesn't get any of the love. When we talk about
(23:15):
young brands, it's all Taco Bell and Taco Bell quite honestly,
kind of sucks.
Speaker 3 (23:20):
Hey, where's this coming from?
Speaker 2 (23:21):
You bite your frigging tons? Just disgusting, Just no good.
Speaker 3 (23:25):
Did you have a bad experience there recently?
Speaker 2 (23:27):
No, it's just you know, I can get cheap tacos
from somewhere that actually knows how to make taco tacos.
Where tell me where? Where?
Speaker 3 (23:36):
Where can you get cheap tacos?
Speaker 2 (23:38):
I'm waiting at Chapote, a place called Hungry Coyote in
my town. Yeah, local businessman, if you're talking about makes
a good taco. If you're talking about town's got a
good local taco.
Speaker 3 (23:50):
But that's not what we're discussing though.
Speaker 2 (23:54):
You don't eat the kyot.
Speaker 3 (23:57):
No, no really, I lost my appetite.
Speaker 2 (24:00):
Uh. By the way, as the let's go to the
mangy Beaver. As of twenty twenty five, there are eight thousand,
ninety Taco Bell locations in the United States, compared to
nearly half that of KFC locations. So but if you
want to text in the show and agree with me
on this on this point, that k an institution in.
Speaker 3 (24:23):
This country, though since the forties or fifties they had
a bit of a.
Speaker 2 (24:27):
One more reason that they're better than Taco Bell. Yeah,
just plenty of more history, better food, and uh, I'll
just I'll just leave it right there.
Speaker 3 (24:39):
Somebody's feeling very maga today.
Speaker 2 (24:43):
So we are continuing to kind of unwind the discussion
of tariff talk that was really the focus of all week,
and we'll have some pieces later about these deminimous exceptions
what they mean for for folks out there. But there's
two pieces from members of the Federal Reserve this week.
I don't know that Barkin is currently a voting member,
(25:04):
but Goulesby is, and so I want to jump in
here and talk about these and what it actually means.
Less from whether they are right or wrong about tariffs,
but I want to take it from the perspective of
what does it mean for what the Federal Reserve is
likely to do. Because Goulesby has a piece today an
interview stating that, look, you know, higher tariffs very well
(25:26):
could lead to high inflation. Supply side quote, supply side
disruptions can have a material impact on aggregate inflation. Barkin says, look,
economy is in good shape. It's really just government policy
that's the wild card to me. Anyway, Both of these
stories read as we are in charge of monetary policy
in this country and we are not really ready to
(25:50):
move things around on interest rates until we have a
lot more certainty about what's going to happen with tariffs,
tax policy, and things that could be good big contributions
to inflation. Am I misreading anything there? Now?
Speaker 3 (26:03):
I think the prevailing view among economists, and they're both
accomplished economists and their own right, in addition to having
scores of economists advise them. Inflation can be thought of
as having two components. An underlying part of persistent part
that's demand driven. That's driven ultimately by monetary policy, which
(26:24):
influences demand. That's kind of the steady part. It tends
to grow two to three percent a year. Then there
are these so called shocks. We use the term supply
shock a lot. That could mean anything. It doesn't have
to mean energy. Supply shocks can come from a positive
productivity development, they can come from a food shortage somewhere.
The seventies were characterized by supply shocks and food and energy.
(26:44):
So you've got these noisy things distorting the trend in inflation,
and the feds perennial problem, if you like, is is
inflation going up or down because the trend is changing
and that's something you can control. Or is it because
there's some unfavorable or favorable change in relative prices? Chicken
(27:08):
gets more expensive because we just wiped out a bunch
of chickens to stave off avian flu. Those things the
FED maybe can look past because supply shocks tend to
be self correcting or tend to be fleeting, but maybe
not if they push up expectations or if they last
for a while. This is why if this sounds a
little bit bewildering, that's the normal. You're having the right reaction.
(27:31):
This is why a FED policy maker's job is hard.
They're always thinking, should we be reacting to what's happening
in the economy or is it likely a change in
relative prices? Is it a special case that we can
look past? And even so, if it's a special case,
should we be looking past it? Are people looking past it?
Or is it getting embedded in their expectations and likely
(27:54):
to push up future inflation through wages and prices. Again,
if this sounds a little complicated, it's because it is.
Speaker 2 (28:00):
Their job is hard, and there are examples of both
successfully waiting out policy and assuming that it will pass
and it won't have a long term impact inflation and missteps.
I mean, I think the very clear misstep that we
talk about over and over again, which was ultimately a
read of a policy decision, was Hey, how is all
(28:22):
this stimulus going to affect inflation? What are the government's
policies on COVID going to do to inflation expectations? And ultimately,
I think kind of misreading the room in terms of
what it's going to do.
Speaker 3 (28:34):
To the nation and for years to come. Economists disagree
on whether the inflation of the covid Era and immediate
post covid era was supply or demand driven. There are ongoing,
vigorous and intense disagreements. If they're all empiricals. The way
economists disagree is to say, well, my models suggests slightly
more influence from supply side factors than demands, and they
(28:57):
very politely bash each other's head in using models and evidence.
These discussions will continue. Nobody really knows if the FED
could have stopped the covid era inflation without a huge
cost in terms of employment. It upset people a lot,
so you could argue that, well, on its face, it
was a bad thing, But did the FED do the
(29:19):
right thing by looking past it, by not tightening too
much too quickly. It eventually kind of went away on
its own without too much pain. That's the supply shock.
Look past the supply shock if you like. Argument. On
the other hand, people got very upset. They tossed a
bunch of incumbents out, and now the Fed's faced with
a president who might take away their independence. How do
(29:42):
you like them? Apples federal reserve? So I don't know
the right answer, Minke.
Speaker 2 (29:45):
Likewise, they are taking that similar road right now, which
is we don't know what policy could look like, and
we don't know what it's impact it will be on inflation,
and so we're going to wait and see. Seems to
be the answer right now.
Speaker 3 (29:58):
They't. They didn't say anything else else could they say?
Speaker 2 (30:01):
It's exactly what we're saying. Nothing, it's it's justified to
say it. And Uh, the less clarity you get on
where and where tariffs will be and where tax rates
will be, the less clarity you're going to get on
where interest rates will be. Next, let's take a quick break.
When we come back, I want to talk a bit
about Ford massive drop in profit among some other automakers
(30:23):
that are experiencing the same thing. We'll be back with
some talk about Ford Motor Company. Next.
Speaker 1 (30:28):
Miss any of the show. Catch up at your convenience
by visiting Financial Exchange Show dot com and clicking the
on demand icon, where you'll find all of our interviews
and full shows. This is your home for the latest
business and financial news in New England and around the country.
This is the Financial Exchange Radio Network. Text us at
six one seven three six two one three eighty five
(30:50):
with your comments and questions about today's show and let
us know what you think about the stories we are covering.
This is the Financial Exchange Radio Network.
Speaker 2 (31:06):
There's been a mix of kind of two stories when
it comes to American automakers over the last year or so.
General Motors has generally been seeing a fairly good turnaround
their stock price over the course of the last twelve months,
up twenty six percent. Ford, on the other hand, exact
opposite direction, down twenty two percent over the course of
the last twelve months, and speaks to I think just
(31:27):
some choices that were made over the last few years
when it comes to these two brands. But you Ford
very much leaned, as far as I can tell, more
quickly and heavier into the electric vehicle market with their
investments that they made in the electric F one P
fifty as well as the Mustang Mochi. General Motors has
(31:48):
more vehicle models for sale that are electric, but they
haven't quite leaned in in the same way to it
that from what I can tell, and just seem to
be executing a little bit better. They also, from what
I can tell, have these second best driving automation tool
that's out there with the GM Cruse or super CRUs
GM IS Cruise. Yeah. They again not the self driving cars,
(32:13):
but rather the tools that they put into many of
their vehicles today competes with Tesla's product, if not quite
as good of it as it from what I have read.
I don't own a Tesla or a General Motors vehicle,
but in any case, the second largest US automaker, Ford
expects no more than eight and a half billion in
earnings before interest in taxes this year. That's down from
(32:34):
ten points two billion generated in twenty twenty four. They're
expecting a two percent decline in pricing industry wide, and
then they have some big expenses from launching a new
Lincoln Navigator and Ford Expedition SUVs. So continuing just to
lean into their big profit centers of massive SUVs that
really drive this company, and appear to be slowing down
(32:57):
some of that investment in ev because because they are
just not seeing the demand that they were looking for.
But at some point Jim Farley starts to face a
little bit more pressure here in terms of the turnaround story. Here.
He's been quick to latch onto new trends, but overall
missed the ball over the course of the last last
(33:17):
year at least, and probably some questions being started to
be asked about this company and where it goes from here?
Speaker 3 (33:24):
How could they not? In the past twelve months, GM's
up nearly thirty percent forwards, down twenty the cumulative stock
price change in the past five years. The difference is
a little less star sure, but pretty dramatic. Up for
GM is up roughly forty percent, forwards up a little
under thirteen.
Speaker 2 (33:42):
Yeah, I mean, they've more and more become a very
specialty automaker. Ford has right if your general leaders on
passenger cars, they gave up on passenger cars. They said,
you know, we're going to lean heavily into two segments,
EV and big SUV, and those are kind of contradictory.
But I think what people are finding is they don't
(34:03):
necessarily want an F series electric vehicle. The buyer of
an electric vehicle might be okay with a smaller car,
and Ford doesn't have one to offer. And if you're
not in the market for a big, giant truck or suv,
Ford doesn't have much to offer. You these days, and
so I grow increasingly concerned that they've kind of pigeonholed
(34:23):
themselves here into a very specific and high profit margin,
but narrow segment of the vehicle market. And if you
continue to see interest rates this high and people struggling
to make payments, then tough to see people continuing to
buy sixty seventy eighty thousand dollars cars in perpetuity.
Speaker 4 (34:42):
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Speaker 2 (36:01):
We've got two egg stories to cover today, Mark, do
you want to start with the heist or the waffle house?
We did waffle house yesterday? We did, But if you
want to die yesterday those okay, Sorry so I missed it,
but thanks for waffle House famous for their hurricane Detection Index.
If you haven't heard of the waffle House Index, you
(36:21):
just take a look at how many locations are closed
and it's a really good barometer of what sort of
natural disasters are going on across the country.
Speaker 3 (36:28):
Relation between mortality.
Speaker 2 (36:30):
And eating a waffle house? No, no, no, okay, So
the waffle House Index gives you a good idea of
how bad a natural disaster is because they never close
unless they really have to. But waffle House imposing a
fifty cent egg surcharge on any egg dishes on their
menu was apparently covered yesterday. Sorry Tucker. But the real
(36:51):
story here is the biggest heist of twenty twenty five,
where one hundred thousand eggs were stolen in pencil Vania
amid the massive shortage that we're talking about, the theft
of eggs which the authorities said were worth only Yeah,
I guess that. I guess that that plays up forty
thousand dollars comes as grocery store shoppers across the country
(37:14):
are facing empty shelves. And my question actually have two questions. One,
how do you move stolen eggs? You know, if I
walk into downtown Pittsburgh, is somebody just gonna be like
selling eggs out of a sketchy alley somewhere, because that
is out of the back of your cameray amazingly entertaining to me.
I hope it's just like New York City when you know,
(37:34):
the guy with the big trench co comes up to you,
opens it up, and he's got all sorts of watches
and other jewelry that he can sell you. And it's
just a pockets full of eggs. But that's dangerous because
they crack pretty easily, So I don't know how that's
gonna work.
Speaker 3 (37:46):
Don't touch me.
Speaker 2 (37:47):
The second piece is, can you imagine being the mob
boss who has fallen so far from his forefathers, you know,
decades ago, that you have fallen into egg heists? Like harrassing?
Is that for you if you're a Pennsylvania mob boss
who had to jump into stealing eggs as opposed to
like precious metals bank robberies. Way, Like I just yeah,
(38:12):
it's just hilarious to me. But in any case, one
hundred thousand eggs stolen.
Speaker 3 (38:16):
From the legendary right up there with the Luftanza heist,
the egg heist, it will be one of the old
time legendary heists.
Speaker 2 (38:22):
Quick break. We'll be right back with more on the
financial exchange.
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