October 24, 2025 • 38 mins
Chuck Zodda and Mike Armstrong discuss the long delayed CPI report that showed inflation coming in lower than expected. Mike is tired of reading stories about companies shielding buyers from tariffs. Decent earnings satisfies investors starved for data. Why is Trump terminating trade talks with Canada? What’s at stake as US and China trade negotiators meet ahead of Trump-Xi summit? Ford profit doubles. Target slashes corporate workforce.
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Episode Transcript
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Speaker 1 (00:00):
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(01:06):
and Mike Armstrong.
Speaker 2 (01:10):
Chuck, Mike and Tucker with you here on a wonderful
day here on the Financial Exchange. Wonderful Mike. We've got
the CPI report for September. The wait was long, the
way it was difficult. Our government data withdrawals are over.
Oh I started, I've stopped shaking. I got, I got
my fixed, and I'm just I'm good, you know. So
(01:34):
CPI data for the month of September came in. This
was originally supposed to be published in the middle of
last week. It was obviously not published them because the
government shut down, and early last week the BOS folks
who were responsible for this were called back because the
September collection had basically it had been completed because the
government did not shut down until October one. They just
(01:56):
had to take the completed data and actually plug it
into their stuff in order to get the numbers. So
they came back last week, worked over the last two weeks,
and today this morning we got the CPI data four September.
What did it show.
Speaker 3 (02:13):
Calmer than anticipated price increases is what it showed from
a headline perspective, So getting into the details here, year
over year prices are firmly up three percent. It doesn't
matter if you're stripping out food and energy or including it.
Prices are pretty firmly up three percent compared to this
time last year. On a month over month increase, we
(02:33):
came in at three tenths of a percent on headline prices,
two tenths of a percent on core prices. Again stripping
out the food and energy impact there you get to
a little bit lower. This is a big relief to
markets who are anticipating again, like I mentioned, more like
four tenths of a percent monthly increase on the headline CPI.
Speaker 2 (02:51):
And a slightly higher year over year number.
Speaker 3 (02:54):
It also comes in the context of August, where the
pace of increases was fairly high, right at four tenths
percent increase in the month of August, and this came
down from that, from that rough patch there. So what
I'm comfortable saying is that this firmly beat expectations and
markets are reacting to that, and it is a level
of inflation that the Fed has publicly stated they are
(03:16):
pretty comfortable with. It is also very firmly in a
range that I think most Americans aren't terribly comfortable with.
That three percent level long term is also not the
Fed's goal, and I don't think they should be comfortable
with it long term. But for the short term they've
pretty publicly stated, Look, if it's right here, then we're
gonna keep doing what we think we should be doing,
which is lowering rates because of concerns about the jobs
(03:39):
market instead of being concerned about price levels.
Speaker 2 (03:41):
So here's the interesting thing, like you talk about, you know,
markets are excited about this. Equity markets are yep s
and P five hundred up almost one percent, NASDAC up
more than one percent, Dow up almost one percent. Great,
the bond market doesn't really care about this in any
meaningful fashion. And what I mean but that as the
tenure Treasury today is up one point two basis points, Like,
(04:04):
that's not a meaningful move in any way, shape or form.
It's it's basically flat, is what you can say. And
so here's how I am thinking about this in you know,
the immediate aftermath of this, because obviously, like we could,
you know, see how this plays out over the next
couple of years, But the immediate aftermath of this report
(04:25):
is okay for equity markets. This takes off the table
the idea that the FED is going to have to
that the FED won't be able to cut the next
couple months because of my inflation. Especially. White House came
out today and said, guys, we're probably not going to
be getting in October CPI reading because the data is
(04:47):
not being collected. Yep, got it. So if you're not
going to get in October one, which means that's not
showing up in November, odds are, hey, there's a chance
you get the November one in December, but you might
not get another SEA until twenty twenty six. Possible. Possible.
So in the you know, immediate future, we've got a
(05:07):
FED meeting next week, in another one mid December, it's
pretty hard to see there being any data that comes
out in the interim suggesting, hey, you can't cut because
of high inflation. Yeah.
Speaker 3 (05:19):
I'm trying to think of like what could actually spike
inflation and would the FED react to it. The only
thing I can think about would be energy prices.
Speaker 2 (05:27):
And the FED wouldn't react. I wouldn't react. No, So
I think we are pretty darn coast to solidifying additional
quarter percent cuts at a minimum in the next two meetings,
but beyond that, if inflation continues to run at three percent,
and the ten year Treasury right now is sitting at
four There's not really anything in this report that says, yeah,
(05:50):
you can get interest rates down to you know, one
percent on the Fed funds rate or anything like that,
or that you need to get interest rates down there.
Certainly not.
Speaker 3 (05:59):
And it's all so really again to your point about
the bond market not moving, What is this going to
do to long term rates?
Speaker 2 (06:06):
Seemingly not much? No, not much here. It's okay, great,
you've got inflation that's pretty consistently running three percent. Dish, Okay,
we'll take four percent on the ten years what the
bond market is telling you mean, we'll take six cent
a quarter on mortgages? Correct, like you're gonna hang out
in that range. Now, the problem there, six and a
(06:28):
quarter isn't enough to reduce the housing market. We know this,
by the way, because we've seen what's going on with
the housing market, the housing market and specifically mortgage applications. Wednesday,
we got the Mortgage Purchase Index from the Mortgage Bankers
Association the NBA, if you will, This is the preferred MBA,
(06:51):
not the nbas that get turned out of business schools
got it and then say hey, fire all of the
people with the institutional knowledge because we can get someone
cheaper or ai in there. I just had to get
that in. Yeah, the end of the week. You gotta
make these count, you know. So here's what we saw
for mortgage purchase applications this week. They declined about six
percent week over week, and right now are running at
(07:14):
the same place that they were in January. Mike, is
January typically a hot time for the housing market? Not
as far as I know, No, it's usually pretty cold.
So I think that overall, when we look at this,
the message that I am getting is twofold on housing.
Number one, it's affordability concerns. But the other thing we
(07:34):
cover quite often, Connorson writes for Bloomberg Opinion. He also
tweets about a whole lot of stuff. And he's been
kind of beating this horse. I don't know where that
idiom comes from, but he's been. He's been riding this tops.
He's been riding this horse for a while. Now. Why
would you beat a horse, Well, it's already dead stop.
(07:57):
He's been riding this horse for a while now. That
the problem with housing isn't just affordability. Part of the
reason why people buy housing, either for themselves or as
an investment, is because prices are expected to go up. Okay,
if you have large parts of the housing market now
where prices are falling, falling prices are a signal two buyers, Hey,
(08:23):
maybe this isn't the best time to buy. Think about
this in the context of the financial crisis. Prices started
falling in two thousand and six, a year before the
subprime issues even showed up. Sure, but housing activities slowed
over the next couple of years. It wasn't just oh, hey,
people don't want to lend its. People see like you
hear the stories about you know a friend who bought
(08:45):
a house and then had to sell and take a
five percent loss on it, and you say, gee, I
don't want that to be me. And that happens more
and more, And basically Connor's point is, look until you
get to a place where the affordability concerns are such
that prices aren't falling in large parts of the country
for housing, it's tough to see housing activity picking up.
(09:09):
Because pricing informs why people buy, either as an investment
or as a personal decision. Part of The reason why
people want to buy homes is because they think they're
going to go up in value. And so, yeah, if
you're stuck with six and quarter percent mortgage rates and
falling prices in Florida, Colorado, Texas, you know, like big,
(09:29):
big housing markets, it's kind of hard to see housing,
you know, having any kind of major recovery. It's also
hard to see it falling apart because there are also
parts of the country where prices are still rising, right,
so kind of messy on that side. Back to the
inflation report.
Speaker 3 (09:47):
The reason that we got it, the reason that we
had this inflation report in spite of a government shutdown,
was all because of Social Security. So going to that
topic for a moment here. Soci Security Administration has now
published the twenty twenty six COLA. It's coming in at
two point eight percent is your cost of living adjustment
for twenty twenty six. So practically speaking, what does that
(10:07):
mean the average SOCID security recipient receiving two thousand and
five dollars in twenty twenty five, we'll see an increase
of fifty six dollars per month in that Social Security payment.
On the other hand, detracting from that Medicare Part B
premiums expected to rise twenty one dollars and fifty cents
in twenty twenty six. So again, for vast majority of
(10:30):
Social Security recipients, that premium is coming right out of
that Social Security payment. And so if you're making the average,
you're seeing a little bit less than half of that
increase go towards Medicare. If you're making less than that
average source security premium, then a bit more of it
is going towards that Medicare cost, which which is eating
up a big chunk of it. So think about what
(10:52):
the break even point is there. A little bit less
than one thousand dollars a month in payments means all
of it would go to that Medicare increase.
Speaker 2 (10:58):
Let's take a quick break here. When we come back,
we're talking tariffs and earnings.
Speaker 1 (11:03):
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Speaker 2 (11:58):
Mike, we get a piece from the New York Times.
It's titled Companies of shielded buyers from tariffs but not
for law.
Speaker 3 (12:04):
I'm done with this story. I am too, Like tell
me when we see it, because I've reported on this
fifteen times since April.
Speaker 2 (12:11):
And like it. It's I And look, here's the thing
you are seeing. It showing up in areas that do
not have widespread tariff exemptions like if if you want
to look, just in the latest CPI report, look at
audio equipment. Just as an example, audio equipment is one
of the only pieces of electronics that has no exemptions
(12:33):
out there on a tariff from any of the tariffs
that are out there. And if you look at where
it's where it is year over year, it's closing in
on fourteen percent year over year price change for audio equipment. Sure,
and so it's like, yeah, there's no exemption on this stuff,
and so prices are moving up. It's it's really really clear.
(12:55):
I mean, if you want to look at other areas
where this is happening, another place where look, we don't
produce any of it domestically, and you know what is uh,
what's what's happening with it because of tariff's coffee Coffee
prices are up eighteen percent year over year. My god,
most of it in the last couple months because of
the new Brazil tariffs and so like you look at
(13:19):
July was up here we go roasted coffee two point
three percent. August was up three point six percent. Like sure,
you can point to tariffs applied. This price went up
because there's no exemption for all the other stuff. Where
you're like, hey, is it gonna happen or not? Yeah,
they're definitely are companies that you know are still working
through old inventory in this they're going to pass it
(13:39):
through when it happens, and like, I'm tired of being like, oh,
is it gonna show up or not? It either is
or it isn't. And if it's not right now, odds
are you're not gonna get too much more showing up
in the future. I'm kind of done with it, to
be honest.
Speaker 3 (13:55):
Yeah, yeah, I don't know about the last statement, like
too much more of it will show up in the future.
I guess it depends on how all this stuff goes.
But it's been six months, folks.
Speaker 2 (14:06):
Well you're look, you're you are seeing broad based goods
inflation at this point. Like I don't know why we're
trying to pretend that it's just like it hasn't happened. Right,
If you look at non durable goods in the last year,
they've gone from almost five percent deflation to two percent inflation.
That's a seven percent shift that you've seen. What else
(14:28):
are you expecting crisis? You know, like Pet's had that.
Speaker 3 (14:34):
That's the piece that I'm getting fed up with is
these stories get printed on the premise that it's going
to break our financial system, and I think the evidence
is out on that one.
Speaker 2 (14:44):
Now.
Speaker 3 (14:44):
It's not this the inflation from goods is not what's
going to break things. What could break things would be
negotiations breaking down and we can't source rare earth materials,
or or if.
Speaker 2 (14:55):
You had one hundred percent tariffs on China from here
going like sure, yeah, this starts to become problem. Which
is what markets were freaked out about in April was
you had that in place and there wasn't the sense
that that was going to be something that was capitulated. Right.
Speaker 3 (15:07):
The point the narrative on April second was not that
we're going to end up with where are we fourteen
percent average effective teriffs?
Speaker 2 (15:13):
Do you think in that ballpark?
Speaker 3 (15:14):
It was a story there was thirty seven, right, it
was three x where we ended up landing. So of
course markets were freaking out at that point in time.
We've landed at a place that is a lot lower
than that. It might be actually twelve where we are
right now.
Speaker 2 (15:27):
I haven't seen any updates because part like we're not
getting government data now on what's being collected in everything,
and so yeah, we are seeing it.
Speaker 3 (15:37):
It's part of why you can't get inflation much down
below three percent.
Speaker 2 (15:41):
We're going to continue to see it.
Speaker 3 (15:42):
I think the stories about the individual businesses that are
facing it and how they are reacting to it are
fascinating from a business perspective. But don't tell me it's
gonna be world ending right now, because it's been six
months and it hasn't been right.
Speaker 2 (15:58):
It's I just I'm tired of, you know, reading the
pieces of well just wait until like this. No, Like,
I'm not just gonna keep like waiting for this to happen.
I'm not saying that the tariffs are good, bad, or ugly.
What I am saying is you're seeing the effects or
you're not. In audio equipment, they're showing up. In coffee,
(16:19):
they're showing up. Are those the only two industries where
businesses are like, yeah, pass this on and everyone else
is like, no, we can't pass this song. We are
not coffee or audio equipment manufacturers, and so we can't
pass the tariffs song. Like no, Like, businesses are gonna
try to do what they need to do to maintain
their margins. Sometimes that's gonna be raising prices, sometimes it's
(16:43):
gonna be cutting head count, and other times it's gonna
be pressuring suppliers. Yes, so, so we're seeing all these
things here, audio equipment and coffee that's literally my job. Great,
I know that's true. I feel for you. It really
(17:03):
on both sides. Dissuades you from when you're having a
bad day throwing a cup of coffee at the audio equipment.
Speaker 3 (17:09):
Tucker wakes up at four am and spends all of
his day working with audio equipment. I mean, what two
products are more important to his well being?
Speaker 2 (17:18):
Or aren't any devastating? Trying to think of anything else
that seeing. Let's see what else is up big in
the last year. Oh, utility gas service up eleven point
seven percent cause of teriffs. Well, we need the heat
we're getting into winter. No, that's not because the tariffs.
Let's see, let's talk a little bit about earnings, cause
I feel like earnings have been fine this week, but
(17:42):
you get this piece in the Wall Street Journal strong earnings,
reassured jittery, data deprived investors. There hasn't been anything bad
in earnings this week. But I'm not looking at this
earning set being like, wow, what a knockout. It's you're
seeing some small beats. The beats that we're seeing are
smaller than they typically are, about a third of a
percent compared to normally a one to two percent beat,
(18:03):
and so there's nothing in earnings that you see that's like, hey,
things are gonna fall off a cliff or their problems.
But this is just kind of a run of the
mill earning season in my book, not one that is
strong as I would call, like I would have said,
like Q two earnings was Q two earnings was a
freaking monster stuff.
Speaker 3 (18:22):
And look, we have very big companies reporting next week,
and so that narrative can shift too. But you know,
Tesla wasn't anything to scream about Netflix. Some of the
big companies that reported this week not And Ifli's missed
on all that special, I do think some of the
small companies that have big names, Ford and GM in particular, reported.
Speaker 2 (18:41):
Pretty darn good earnings.
Speaker 3 (18:42):
And there's been a lot of concern about the auto
sector generally over the course the last few weeks, So
I think some of that narrative helps the overall earning story. Yeah,
because you know, Ford and GM swing bigger than they
are actually market cap does, right, It just the name
recognition does something there. But overall earning season has been fine,
beat expectations, not quite as much as historically Google, Apple,
(19:07):
Amazon Meta sorry Alphabet Meta, Google and Apple.
Speaker 2 (19:11):
All reported all them by their name.
Speaker 3 (19:14):
I think I screwed it up twice in any case,
ten plus trillion dollars and alphabet I did reporting. Just
next we do a few classes, and so you know
this has the ability to twist and turn.
Speaker 2 (19:26):
Next week quick break, here we got Wall Street Watch,
and then we're talking China after this.
Speaker 1 (19:41):
Like us on Facebook and follow us on Twitter at
TFE show. Breaking business news is always first right here
on the Financial Exchange Radio Network. Time now for Wall
Street Watch. A complete look at what's moving markets so
far today right here on the Financial shall Exchange Radio Network.
Speaker 4 (20:01):
Markets have hit fresh all time highs, with investors reacting
favorably to the Consumer Price Index posted earlier this morning,
where the or excuse me, consumer prices climb three percent
year over year, lower than expectations of three point one percent.
Right now, the Dow is up three quarters of a percent,
or three hundred and forty nine points higher. SMP five
(20:22):
hundred also up three quarters of a percent, NASDAC up
over one percent higher at two hundred and forty four points.
RUSTED two thousand is up one point six percent. Tenure
treasreeled is flat at three point nine to nine three percent.
In crude oil up about a half a percent, rating
just above sixty two dollars a barrel. Procter and Gamble
posted earnings ahead of the open this morning, beating street expectations,
(20:45):
driven by higher demand for its beauty and grooming products
despite higher costs from tariffs and what its CEO called
a challenging consumer in geopolitical environment. The consumer goods company
reiterated its forecast for all in sales and earnings for
the fiscal year. Procter and Gamble shares are up one percent. Meanwhile,
Intel shares are up one percent, part our retreating from
(21:08):
an earlier rally after the chip maker reported better than
expected revenue as demands for its core x eighty six
processors four PCs recovered elsewhere. Ford said strong sales propelled
the automaker's revenue in operating income handily beating street estimates
for the previous quarter. Ford share Ford shares are up
(21:29):
ten percent. Decker's Outdoor posted a full year sales forecast
that missed analysts estimates. That stock is off by thirteen
percent now, and Target stock is dipping slightly after the
Wall Street Journal reported the retailer plans to slash around
eighteen hundred corporate roles as part of an effort to
remake its strategy. I'm Tucker Silva and that is Wall Street.
Speaker 2 (21:51):
Watch Mike. We got two pieces here related to trade,
actually a few of them, but once more on oil.
So I do want gonna take both of these kind
of as they come. Let's talk Canada first, actually, sure,
President Trump said late yesterday that he's terminating trade negotiations
with Canada. This after a television advertisement that has been
(22:15):
airing over the last week or so featuring the voice
of Ronald Reagan speaking negatively about tariffs was taken out
by the Ontario government.
Speaker 3 (22:26):
Context here, Ontario has been hit pretty hard by tariff changes.
Is it Ford that relocated their plant out of Ontario?
Speaker 2 (22:33):
No, it's Jeep GM. Okay, maybe GM did too.
Speaker 3 (22:37):
I saw Jeep some Jeep brand was being brought to
Illinois from Ontario as well.
Speaker 2 (22:42):
I know GM has been like dealing with suppliers and
everything in the region just because look, if you know
anything about Detroit, it's basically right next to Canada. Yeah.
Like I always tell people, you know, I get upset
about the song. They're like, you know, born and raised
in South Detroit. There is no South Detroit. It's Canada,
so neither here nor there, but kind of there. And
(23:02):
so what do I make of this? Not much, quite honestly,
in that look eight ten when was it, Yeah, eight
months ago, seemed like things were you know, awfully dodgy
between the US and Canada. Over that subsequent eight months,
things seem to add have you know, recovered to the
point at least diplomatically where you know there was progress
being made. Do I think that this is inherently going
(23:25):
to be something that derails things from future progress. No,
it could be, but we could also be sitting here
six months now being like, hey, they end up getting
back together after a few months, and they negotiated and
hashed out some of these issues and things were fine.
So I don't really make too much of this as good, bad,
(23:46):
or ugly. It's just it's there, and this is kind
of the state of play for the entire year. Canadian
economy remains really.
Speaker 3 (23:53):
Bad, pretty much in a recession. Unemployment rate I think
at last check was up over five percent maybe closing outside.
So not a good economy there, and I think wants
to see some progress on this stuff, but also it
bitten shambles over the tariffs.
Speaker 2 (24:11):
Then you get this piece from is this market Watch? No,
this is CNN, Yeah, sure, this is CNN. You get
this piece talking about US China trade negotiations in advance
of President Trump and President g potentially meeting on I
think the date now is October thirtieth, that they're talking
(24:31):
about meeting after the big Pacific kind of trade meeting
and everything, and it's talking about, you know, what's at stake,
And quite honestly, I think there's a difference between what's
at stake and what is likely to be decided, with
the former being much greater than the latter in that sure,
(24:51):
what's at stake is a ton at stake, trade.
Speaker 3 (24:54):
And rare earths and national security and all very dramatic things.
Speaker 2 (25:00):
I don't really believe you're going to get anything conclusive done.
And the reason why is that China uses the same
strategy over and over and over and over and over
and over and over. And it's exactly what I just did.
They just talk and delay and run out the cock
that is really good at it. It's the whole ball game.
Even in President Trump's first term, remember it took like
(25:22):
three years to get this Phase one trade deal, which
was basically a purchase order from China for about two
hundred billion dollars worth of US goods, mostly agricultural. They
then did not actually purchase any of them. And so
this is why for you know, all of the hype
and excitement about you know, oh, is there going to
(25:42):
be a meeting between you know, President Trump and President
g There might be, there might not be. But are
we actually going to see meaningful progress on any of
these issues? I don't really think so, because the Chinese
government consistently just runs out the cock on this stuff.
Speaker 3 (26:00):
If you're the Chinese, you want to do you want
to give the US as little as possible that will
still prevent them from escalating dramatically.
Speaker 2 (26:11):
And I'm also, again I was talking about this last week,
I'm more convinced than ever that she is now kind
of looking at his own mortality in the next you know,
ten to fifteen years, and the negative demographics in China
with a shrinking population and specifically a shrinking workforce, and
saying this is my time to get you know, what
(26:34):
China deserves in his opinion, And so I don't think
he's just going to be like, yeah, like sure have
all the rarers.
Speaker 3 (26:46):
It's very clear to me that again, with all the
China and US trade talks, I'm with you, I don't
think much progress gets made. We need something on the
scale of the Chips Act when it comes to rare
earths to be done by Congress.
Speaker 2 (27:03):
I think it needs to be more than just executive actions. Yeah.
Speaker 3 (27:06):
I think the idea that the US government's just going
to take stakes in mining companies and pick winners there
and do so without market interference is kind of a
false premise. I don't think it's going to work terribly well.
And I don't I am not any sort of expert
on these rare earths and what the price levels are
(27:28):
that you need in order to get them out of
the ground in the US. But an open free market
for that stuff is not going to work given what
China is capable of selling them for. Yeah, and so
something on the scale of.
Speaker 2 (27:43):
And we've seen that, by the way, Like a couple
of years ago, you had a few different places that
tried to ramp up rare earth production outside of China,
and China just said, okay, we're cutting our prices by
like fifty percent, and they never got off the ground.
You have to like, does it all need to be
here in the US.
Speaker 3 (28:00):
But I would see, you know, I would view it
as price levels on domestically produced stuff and then other
price levels on non Chinese produced stuff.
Speaker 2 (28:13):
I think, like if I'm just you know, spitballing as
I'm inclined to on this stuff. In terms of US demand,
I think thirty to forty percent of that demand needs
to be satisfied by domestic production, and the rest you
can source from countries that are friendlier than China. But
(28:34):
it still is going to require effort to make sure
that that production happens. It's this is stuff that we
talk about a lot. It might not be in the
best interest economically to set price floors on, you know,
producing these kinds of things, but it is in the
best interest from a national security perspective, both because of,
quite literally the fact that this stuff needs to go
(28:56):
into defense projects like you know, missiles and fighter jets
and stuff like that, and the fact that, hey, it
goes into everyday stuff like you know, credit card readers
and windshield wipers and like, this stuff is everywhere.
Speaker 3 (29:12):
What I hope we don't see is a further continuation
of what we've been seeing over the last several years
in administrations of the government taking stakes in companies. I
really have a lot of hesitation about what that spells
for the future, what the future administrations are going to do.
Speaker 2 (29:30):
With those shares that they hold.
Speaker 3 (29:32):
And I just think there is no compelling evidence that
the US government is capable of picking individual winner companies.
Speaker 2 (29:40):
Let's take a quick break. When we return, let's talk
a little bit about Ford's earnings. We'll discuss them. We're
also going to talk about Tarja when we come back.
Speaker 1 (29:51):
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(30:13):
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Speaker 2 (30:28):
Let's talk a little bit about Ford. They reported earnings
yesterday and this is one of those companies that did
have a really nice quarter for earnings, and it comes
on the back of Ford really have some questions in
the last year or two that they've tried to answer,
specifically in terms of they had committed to this EV
strategy that they then have rightly decided, Okay, we kind
(30:50):
of over committed to the EV strategy. We need to,
you know, maybe pick that up. We maybe need to
not produce quite as many as we intended to. And
what they are seeing here is consist I mean, look,
it's when you talk about Ford, it's basically one model
that pulls the whole thing at this point, it's the
F one fifty YEP. And so the fact is they're
(31:11):
seeing good numbers there. SUVs are moving well as well,
and they're trying to actually boost production of the F
series pickups by about fifty thousand. Vehicles are about six
percent in twenty twenty six. If they can find any aluminum, well,
you can always find illuminum. Questions at what costs?
Speaker 3 (31:30):
So both Ford and NGM had a pretty similar story
this quarter, right as far as I'm concerned. They both
made a boatload of money on trucks and SUVs, and frankly,
I think it plays right into the same exact story
we've been telling from other big companies, whether it's Delta, Marriott, Ford,
General Motors. People are with money, are still spending YEP
(31:55):
and the flip side of that, right, if you're looking
for you know, Delta and Marriott if you missed it,
reported that their luxury brands or cabins were boosting all
their sales, whereas their lower end brands were struggling. They
were seeing declines. You're over a year in sales or
just very modest growth. The I don't know the GM
and Ford really break out their different lines, and I
(32:17):
haven't seen anything on like what the really cheap vehicles
are selling for.
Speaker 2 (32:21):
No.
Speaker 3 (32:21):
But on the other hand, in the auto sector itself,
we've had a bankruptcy of a subprime lender, a bankruptcy
of an autopart supplier, and a threatened bankruptcy of a
second subprime lender, primal lend. So I see it as
this yeah, multiprong thing. Mainly GM and Ford their sales
are driven by high income consumers, because if you are
(32:43):
making less than seventy thousand dollars a year as a household,
you're not buying large buying a new Ford or GM vehicle.
Speaker 2 (32:52):
Yeah. I look, I am not a subprime auto lender myself,
but my guess is it's probably pretty hard for someone
with subprime credit to qualify for a payment on an
eighty thousand dollars F one fifty. It's probably much more
on the twenty thousand dollars used RAV four where that
(33:15):
transaction is taking place. But I admit to not knowing.
Maybe maybe you can qualify as you know, a barrow
or with a you know, six thirty credit score for
a an eighty thousand dollars car loan. I don't know,
but it's the problems that we're seeing in the auto
sector are not showing up as it relates to manufacturers
(33:38):
adjusting their production as a result of it. It seems
to be much more concentrated in two areas right now,
which is used vehicles and parts like that seems to
be where most of the problem is, and we'll just
have to keep an eye on it and see where
things go.
Speaker 4 (33:59):
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Speaker 2 (35:12):
Target is going to be laying off a thousand corporate
employees and cutting eight hundred open roles. It's gonna cut
their staff by approximately eight percent as a result of this.
With most of the cuts happening domestically, I'm not entirely surprised.
Your Target's been having some trouble over the last couple
of years, trying to stay competitive in the retail environment,
(35:35):
and so if you are trying to maintain margins and
reshape your business, headcount reductions are often what you end
up seeing.
Speaker 3 (35:42):
Here incoming CEO Michael Fiddlk, I'm gonna go with Fiddlek
on that pronunciation quote. The truth is the complexity we've
created over time has been holding us back. Too many
layers and overlapping work have slow decisions, making it harder
to bring ideas to life.
Speaker 2 (35:58):
Maybe we'll say.
Speaker 3 (36:00):
I don't know that an eighteen hundred person layoff is
going to really be the thing that turns around Target
in the near future.
Speaker 2 (36:09):
You can't grow through layoffs. I know that that sounds
like a Yogi bearra statement, and maybe he said that,
but he probably didn't. But ultimately, look, you got to
figure out how to get to sales growth. Why do
people choose either your stores or your online platform. There
used to be a reason, and that reason that people
(36:31):
believed was, hey, it's Tarje it's nicer stuff than Walmart,
but I still get great pricing these days.
Speaker 3 (36:40):
Only time I'm going in is because I am looking
for a Starbucks and I don't realize that it's inside
a Target. And so accidentally walk in.
Speaker 2 (36:48):
My wife goes in occasionally, Yeah, she same here. It's
mostly because the place where she takes my daughter's for
swimming lessons is right next to a Target, and if
they have twenty minutes to kill, they'll pop in there
and just walk around. Other than that, it just exists,
you know. It's it's a retailer without a compelling reason
(37:13):
for being right now. And look they can find do you.
I mean, I remember all of the questions about best
Buy ten fifteen years ago, and hey, can best Buy survive?
And they figured out how to make it work.
Speaker 3 (37:24):
I think either need to double down on grocery or
get rid of it. Target their grocery stuff is a mess.
Speaker 2 (37:30):
I was just thinking the same thing. Oh, they're not
making strides in grocery. It seems like I thought you
were talking best Buy. I'm like, I didn't know they
did grocery.
Speaker 3 (37:37):
Yeah, like Target, just they don't have enough to fill
your actual basket. They have some interesting, compelling brands that
they own, but they either need to like double down
and actually do what the Walmart's doing and offer a
full grocery store, or.
Speaker 2 (37:52):
Just get rid of it entirely. Why Yeah, I go
to a Walmart and we'll at the grocery selection there
and I'm like, this is legit. Yeah, you know, this
is a vast change from where it was ten to
fifteen years ago, and certainly for the better. And those
of you who listen know that I can be a
little discerning, especially when it comes to the produce. But
(38:12):
you see some good stuff there. Let's take a quick break.
Our two coming up. We're gonna be talking Argentina and
much more.
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(01:06):
and Mike Armstrong.
Speaker 2 (01:10):
Chuck, Mike and Tucker with you here on a wonderful
day here on the Financial Exchange. Wonderful Mike. We've got
the CPI report for September. The wait was long, the
way it was difficult. Our government data withdrawals are over.
Oh I started, I've stopped shaking. I got, I got
my fixed, and I'm just I'm good, you know. So
(01:34):
CPI data for the month of September came in. This
was originally supposed to be published in the middle of
last week. It was obviously not published them because the
government shut down, and early last week the BOS folks
who were responsible for this were called back because the
September collection had basically it had been completed because the
government did not shut down until October one. They just
(01:56):
had to take the completed data and actually plug it
into their stuff in order to get the numbers. So
they came back last week, worked over the last two weeks,
and today this morning we got the CPI data four September.
What did it show.
Speaker 3 (02:13):
Calmer than anticipated price increases is what it showed from
a headline perspective, So getting into the details here, year
over year prices are firmly up three percent. It doesn't
matter if you're stripping out food and energy or including it.
Prices are pretty firmly up three percent compared to this
time last year. On a month over month increase, we
(02:33):
came in at three tenths of a percent on headline prices,
two tenths of a percent on core prices. Again stripping
out the food and energy impact there you get to
a little bit lower. This is a big relief to
markets who are anticipating again, like I mentioned, more like
four tenths of a percent monthly increase on the headline CPI.
Speaker 2 (02:51):
And a slightly higher year over year number.
Speaker 3 (02:54):
It also comes in the context of August, where the
pace of increases was fairly high, right at four tenths
percent increase in the month of August, and this came
down from that, from that rough patch there. So what
I'm comfortable saying is that this firmly beat expectations and
markets are reacting to that, and it is a level
of inflation that the Fed has publicly stated they are
(03:16):
pretty comfortable with. It is also very firmly in a
range that I think most Americans aren't terribly comfortable with.
That three percent level long term is also not the
Fed's goal, and I don't think they should be comfortable
with it long term. But for the short term they've
pretty publicly stated, Look, if it's right here, then we're
gonna keep doing what we think we should be doing,
which is lowering rates because of concerns about the jobs
(03:39):
market instead of being concerned about price levels.
Speaker 2 (03:41):
So here's the interesting thing, like you talk about, you know,
markets are excited about this. Equity markets are yep s
and P five hundred up almost one percent, NASDAC up
more than one percent, Dow up almost one percent. Great,
the bond market doesn't really care about this in any
meaningful fashion. And what I mean but that as the
tenure Treasury today is up one point two basis points, Like,
(04:04):
that's not a meaningful move in any way, shape or form.
It's it's basically flat, is what you can say. And
so here's how I am thinking about this in you know,
the immediate aftermath of this, because obviously, like we could,
you know, see how this plays out over the next
couple of years, But the immediate aftermath of this report
(04:25):
is okay for equity markets. This takes off the table
the idea that the FED is going to have to
that the FED won't be able to cut the next
couple months because of my inflation. Especially. White House came
out today and said, guys, we're probably not going to
be getting in October CPI reading because the data is
(04:47):
not being collected. Yep, got it. So if you're not
going to get in October one, which means that's not
showing up in November, odds are, hey, there's a chance
you get the November one in December, but you might
not get another SEA until twenty twenty six. Possible. Possible.
So in the you know, immediate future, we've got a
(05:07):
FED meeting next week, in another one mid December, it's
pretty hard to see there being any data that comes
out in the interim suggesting, hey, you can't cut because
of high inflation. Yeah.
Speaker 3 (05:19):
I'm trying to think of like what could actually spike
inflation and would the FED react to it. The only
thing I can think about would be energy prices.
Speaker 2 (05:27):
And the FED wouldn't react. I wouldn't react. No, So
I think we are pretty darn coast to solidifying additional
quarter percent cuts at a minimum in the next two meetings,
but beyond that, if inflation continues to run at three percent,
and the ten year Treasury right now is sitting at
four There's not really anything in this report that says, yeah,
(05:50):
you can get interest rates down to you know, one
percent on the Fed funds rate or anything like that,
or that you need to get interest rates down there.
Certainly not.
Speaker 3 (05:59):
And it's all so really again to your point about
the bond market not moving, What is this going to
do to long term rates?
Speaker 2 (06:06):
Seemingly not much? No, not much here. It's okay, great,
you've got inflation that's pretty consistently running three percent. Dish, Okay,
we'll take four percent on the ten years what the
bond market is telling you mean, we'll take six cent
a quarter on mortgages? Correct, like you're gonna hang out
in that range. Now, the problem there, six and a
(06:28):
quarter isn't enough to reduce the housing market. We know this,
by the way, because we've seen what's going on with
the housing market, the housing market and specifically mortgage applications. Wednesday,
we got the Mortgage Purchase Index from the Mortgage Bankers
Association the NBA, if you will, This is the preferred MBA,
(06:51):
not the nbas that get turned out of business schools
got it and then say hey, fire all of the
people with the institutional knowledge because we can get someone
cheaper or ai in there. I just had to get
that in. Yeah, the end of the week. You gotta
make these count, you know. So here's what we saw
for mortgage purchase applications this week. They declined about six
percent week over week, and right now are running at
(07:14):
the same place that they were in January. Mike, is
January typically a hot time for the housing market? Not
as far as I know, No, it's usually pretty cold.
So I think that overall, when we look at this,
the message that I am getting is twofold on housing.
Number one, it's affordability concerns. But the other thing we
(07:34):
cover quite often, Connorson writes for Bloomberg Opinion. He also
tweets about a whole lot of stuff. And he's been
kind of beating this horse. I don't know where that
idiom comes from, but he's been. He's been riding this tops.
He's been riding this horse for a while. Now. Why
would you beat a horse, Well, it's already dead stop.
(07:57):
He's been riding this horse for a while now. That
the problem with housing isn't just affordability. Part of the
reason why people buy housing, either for themselves or as
an investment, is because prices are expected to go up. Okay,
if you have large parts of the housing market now
where prices are falling, falling prices are a signal two buyers, Hey,
(08:23):
maybe this isn't the best time to buy. Think about
this in the context of the financial crisis. Prices started
falling in two thousand and six, a year before the
subprime issues even showed up. Sure, but housing activities slowed
over the next couple of years. It wasn't just oh, hey,
people don't want to lend its. People see like you
hear the stories about you know a friend who bought
(08:45):
a house and then had to sell and take a
five percent loss on it, and you say, gee, I
don't want that to be me. And that happens more
and more, And basically Connor's point is, look until you
get to a place where the affordability concerns are such
that prices aren't falling in large parts of the country
for housing, it's tough to see housing activity picking up.
(09:09):
Because pricing informs why people buy, either as an investment
or as a personal decision. Part of The reason why
people want to buy homes is because they think they're
going to go up in value. And so, yeah, if
you're stuck with six and quarter percent mortgage rates and
falling prices in Florida, Colorado, Texas, you know, like big,
(09:29):
big housing markets, it's kind of hard to see housing,
you know, having any kind of major recovery. It's also
hard to see it falling apart because there are also
parts of the country where prices are still rising, right,
so kind of messy on that side. Back to the
inflation report.
Speaker 3 (09:47):
The reason that we got it, the reason that we
had this inflation report in spite of a government shutdown,
was all because of Social Security. So going to that
topic for a moment here. Soci Security Administration has now
published the twenty twenty six COLA. It's coming in at
two point eight percent is your cost of living adjustment
for twenty twenty six. So practically speaking, what does that
(10:07):
mean the average SOCID security recipient receiving two thousand and
five dollars in twenty twenty five, we'll see an increase
of fifty six dollars per month in that Social Security payment.
On the other hand, detracting from that Medicare Part B
premiums expected to rise twenty one dollars and fifty cents
in twenty twenty six. So again, for vast majority of
(10:30):
Social Security recipients, that premium is coming right out of
that Social Security payment. And so if you're making the average,
you're seeing a little bit less than half of that
increase go towards Medicare. If you're making less than that
average source security premium, then a bit more of it
is going towards that Medicare cost, which which is eating
up a big chunk of it. So think about what
(10:52):
the break even point is there. A little bit less
than one thousand dollars a month in payments means all
of it would go to that Medicare increase.
Speaker 2 (10:58):
Let's take a quick break here. When we come back,
we're talking tariffs and earnings.
Speaker 1 (11:03):
After this, there's only one show that follows well Street's
continued volatility. Keep it here all morning long on the
Financial Exchange Radio Network. Thankst us six one, seven, three, six,
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today's show, and let us know what you think about
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(11:26):
Radio Network.
Speaker 4 (11:29):
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Speaker 2 (11:58):
Mike, we get a piece from the New York Times.
It's titled Companies of shielded buyers from tariffs but not
for law.
Speaker 3 (12:04):
I'm done with this story. I am too, Like tell
me when we see it, because I've reported on this
fifteen times since April.
Speaker 2 (12:11):
And like it. It's I And look, here's the thing
you are seeing. It showing up in areas that do
not have widespread tariff exemptions like if if you want
to look, just in the latest CPI report, look at
audio equipment. Just as an example, audio equipment is one
of the only pieces of electronics that has no exemptions
(12:33):
out there on a tariff from any of the tariffs
that are out there. And if you look at where
it's where it is year over year, it's closing in
on fourteen percent year over year price change for audio equipment. Sure,
and so it's like, yeah, there's no exemption on this stuff,
and so prices are moving up. It's it's really really clear.
(12:55):
I mean, if you want to look at other areas
where this is happening, another place where look, we don't
produce any of it domestically, and you know what is uh,
what's what's happening with it because of tariff's coffee Coffee
prices are up eighteen percent year over year. My god,
most of it in the last couple months because of
the new Brazil tariffs and so like you look at
(13:19):
July was up here we go roasted coffee two point
three percent. August was up three point six percent. Like sure,
you can point to tariffs applied. This price went up
because there's no exemption for all the other stuff. Where
you're like, hey, is it gonna happen or not? Yeah,
they're definitely are companies that you know are still working
through old inventory in this they're going to pass it
(13:39):
through when it happens, and like, I'm tired of being like, oh,
is it gonna show up or not? It either is
or it isn't. And if it's not right now, odds
are you're not gonna get too much more showing up
in the future. I'm kind of done with it, to
be honest.
Speaker 3 (13:55):
Yeah, yeah, I don't know about the last statement, like
too much more of it will show up in the future.
I guess it depends on how all this stuff goes.
But it's been six months, folks.
Speaker 2 (14:06):
Well you're look, you're you are seeing broad based goods
inflation at this point. Like I don't know why we're
trying to pretend that it's just like it hasn't happened. Right,
If you look at non durable goods in the last year,
they've gone from almost five percent deflation to two percent inflation.
That's a seven percent shift that you've seen. What else
(14:28):
are you expecting crisis? You know, like Pet's had that.
Speaker 3 (14:34):
That's the piece that I'm getting fed up with is
these stories get printed on the premise that it's going
to break our financial system, and I think the evidence
is out on that one.
Speaker 2 (14:44):
Now.
Speaker 3 (14:44):
It's not this the inflation from goods is not what's
going to break things. What could break things would be
negotiations breaking down and we can't source rare earth materials,
or or if.
Speaker 2 (14:55):
You had one hundred percent tariffs on China from here
going like sure, yeah, this starts to become problem. Which
is what markets were freaked out about in April was
you had that in place and there wasn't the sense
that that was going to be something that was capitulated. Right.
Speaker 3 (15:07):
The point the narrative on April second was not that
we're going to end up with where are we fourteen
percent average effective teriffs?
Speaker 2 (15:13):
Do you think in that ballpark?
Speaker 3 (15:14):
It was a story there was thirty seven, right, it
was three x where we ended up landing. So of
course markets were freaking out at that point in time.
We've landed at a place that is a lot lower
than that. It might be actually twelve where we are
right now.
Speaker 2 (15:27):
I haven't seen any updates because part like we're not
getting government data now on what's being collected in everything,
and so yeah, we are seeing it.
Speaker 3 (15:37):
It's part of why you can't get inflation much down
below three percent.
Speaker 2 (15:41):
We're going to continue to see it.
Speaker 3 (15:42):
I think the stories about the individual businesses that are
facing it and how they are reacting to it are
fascinating from a business perspective. But don't tell me it's
gonna be world ending right now, because it's been six
months and it hasn't been right.
Speaker 2 (15:58):
It's I just I'm tired of, you know, reading the
pieces of well just wait until like this. No, Like,
I'm not just gonna keep like waiting for this to happen.
I'm not saying that the tariffs are good, bad, or ugly.
What I am saying is you're seeing the effects or
you're not. In audio equipment, they're showing up. In coffee,
(16:19):
they're showing up. Are those the only two industries where
businesses are like, yeah, pass this on and everyone else
is like, no, we can't pass this song. We are
not coffee or audio equipment manufacturers, and so we can't
pass the tariffs song. Like no, Like, businesses are gonna
try to do what they need to do to maintain
their margins. Sometimes that's gonna be raising prices, sometimes it's
(16:43):
gonna be cutting head count, and other times it's gonna
be pressuring suppliers. Yes, so, so we're seeing all these
things here, audio equipment and coffee that's literally my job. Great,
I know that's true. I feel for you. It really
(17:03):
on both sides. Dissuades you from when you're having a
bad day throwing a cup of coffee at the audio equipment.
Speaker 3 (17:09):
Tucker wakes up at four am and spends all of
his day working with audio equipment. I mean, what two
products are more important to his well being?
Speaker 2 (17:18):
Or aren't any devastating? Trying to think of anything else
that seeing. Let's see what else is up big in
the last year. Oh, utility gas service up eleven point
seven percent cause of teriffs. Well, we need the heat
we're getting into winter. No, that's not because the tariffs.
Let's see, let's talk a little bit about earnings, cause
I feel like earnings have been fine this week, but
(17:42):
you get this piece in the Wall Street Journal strong earnings,
reassured jittery, data deprived investors. There hasn't been anything bad
in earnings this week. But I'm not looking at this
earning set being like, wow, what a knockout. It's you're
seeing some small beats. The beats that we're seeing are
smaller than they typically are, about a third of a
percent compared to normally a one to two percent beat,
(18:03):
and so there's nothing in earnings that you see that's like, hey,
things are gonna fall off a cliff or their problems.
But this is just kind of a run of the
mill earning season in my book, not one that is
strong as I would call, like I would have said,
like Q two earnings was Q two earnings was a
freaking monster stuff.
Speaker 3 (18:22):
And look, we have very big companies reporting next week,
and so that narrative can shift too. But you know,
Tesla wasn't anything to scream about Netflix. Some of the
big companies that reported this week not And Ifli's missed
on all that special, I do think some of the
small companies that have big names, Ford and GM in particular, reported.
Speaker 2 (18:41):
Pretty darn good earnings.
Speaker 3 (18:42):
And there's been a lot of concern about the auto
sector generally over the course the last few weeks, So
I think some of that narrative helps the overall earning story. Yeah,
because you know, Ford and GM swing bigger than they
are actually market cap does, right, It just the name
recognition does something there. But overall earning season has been fine,
beat expectations, not quite as much as historically Google, Apple,
(19:07):
Amazon Meta sorry Alphabet Meta, Google and Apple.
Speaker 2 (19:11):
All reported all them by their name.
Speaker 3 (19:14):
I think I screwed it up twice in any case,
ten plus trillion dollars and alphabet I did reporting. Just
next we do a few classes, and so you know
this has the ability to twist and turn.
Speaker 2 (19:26):
Next week quick break, here we got Wall Street Watch,
and then we're talking China after this.
Speaker 1 (19:41):
Like us on Facebook and follow us on Twitter at
TFE show. Breaking business news is always first right here
on the Financial Exchange Radio Network. Time now for Wall
Street Watch. A complete look at what's moving markets so
far today right here on the Financial shall Exchange Radio Network.
Speaker 4 (20:01):
Markets have hit fresh all time highs, with investors reacting
favorably to the Consumer Price Index posted earlier this morning,
where the or excuse me, consumer prices climb three percent
year over year, lower than expectations of three point one percent.
Right now, the Dow is up three quarters of a percent,
or three hundred and forty nine points higher. SMP five
(20:22):
hundred also up three quarters of a percent, NASDAC up
over one percent higher at two hundred and forty four points.
RUSTED two thousand is up one point six percent. Tenure
treasreeled is flat at three point nine to nine three percent.
In crude oil up about a half a percent, rating
just above sixty two dollars a barrel. Procter and Gamble
posted earnings ahead of the open this morning, beating street expectations,
(20:45):
driven by higher demand for its beauty and grooming products
despite higher costs from tariffs and what its CEO called
a challenging consumer in geopolitical environment. The consumer goods company
reiterated its forecast for all in sales and earnings for
the fiscal year. Procter and Gamble shares are up one percent. Meanwhile,
Intel shares are up one percent, part our retreating from
(21:08):
an earlier rally after the chip maker reported better than
expected revenue as demands for its core x eighty six
processors four PCs recovered elsewhere. Ford said strong sales propelled
the automaker's revenue in operating income handily beating street estimates
for the previous quarter. Ford share Ford shares are up
(21:29):
ten percent. Decker's Outdoor posted a full year sales forecast
that missed analysts estimates. That stock is off by thirteen
percent now, and Target stock is dipping slightly after the
Wall Street Journal reported the retailer plans to slash around
eighteen hundred corporate roles as part of an effort to
remake its strategy. I'm Tucker Silva and that is Wall Street.
Speaker 2 (21:51):
Watch Mike. We got two pieces here related to trade,
actually a few of them, but once more on oil.
So I do want gonna take both of these kind
of as they come. Let's talk Canada first, actually, sure,
President Trump said late yesterday that he's terminating trade negotiations
with Canada. This after a television advertisement that has been
(22:15):
airing over the last week or so featuring the voice
of Ronald Reagan speaking negatively about tariffs was taken out
by the Ontario government.
Speaker 3 (22:26):
Context here, Ontario has been hit pretty hard by tariff changes.
Is it Ford that relocated their plant out of Ontario?
Speaker 2 (22:33):
No, it's Jeep GM. Okay, maybe GM did too.
Speaker 3 (22:37):
I saw Jeep some Jeep brand was being brought to
Illinois from Ontario as well.
Speaker 2 (22:42):
I know GM has been like dealing with suppliers and
everything in the region just because look, if you know
anything about Detroit, it's basically right next to Canada. Yeah.
Like I always tell people, you know, I get upset
about the song. They're like, you know, born and raised
in South Detroit. There is no South Detroit. It's Canada,
so neither here nor there, but kind of there. And
(23:02):
so what do I make of this? Not much, quite honestly,
in that look eight ten when was it, Yeah, eight
months ago, seemed like things were you know, awfully dodgy
between the US and Canada. Over that subsequent eight months,
things seem to add have you know, recovered to the
point at least diplomatically where you know there was progress
being made. Do I think that this is inherently going
(23:25):
to be something that derails things from future progress. No,
it could be, but we could also be sitting here
six months now being like, hey, they end up getting
back together after a few months, and they negotiated and
hashed out some of these issues and things were fine.
So I don't really make too much of this as good, bad,
(23:46):
or ugly. It's just it's there, and this is kind
of the state of play for the entire year. Canadian
economy remains really.
Speaker 3 (23:53):
Bad, pretty much in a recession. Unemployment rate I think
at last check was up over five percent maybe closing outside.
So not a good economy there, and I think wants
to see some progress on this stuff, but also it
bitten shambles over the tariffs.
Speaker 2 (24:11):
Then you get this piece from is this market Watch? No,
this is CNN, Yeah, sure, this is CNN. You get
this piece talking about US China trade negotiations in advance
of President Trump and President g potentially meeting on I
think the date now is October thirtieth, that they're talking
(24:31):
about meeting after the big Pacific kind of trade meeting
and everything, and it's talking about, you know, what's at stake,
And quite honestly, I think there's a difference between what's
at stake and what is likely to be decided, with
the former being much greater than the latter in that sure,
(24:51):
what's at stake is a ton at stake, trade.
Speaker 3 (24:54):
And rare earths and national security and all very dramatic things.
Speaker 2 (25:00):
I don't really believe you're going to get anything conclusive done.
And the reason why is that China uses the same
strategy over and over and over and over and over
and over and over. And it's exactly what I just did.
They just talk and delay and run out the cock
that is really good at it. It's the whole ball game.
Even in President Trump's first term, remember it took like
(25:22):
three years to get this Phase one trade deal, which
was basically a purchase order from China for about two
hundred billion dollars worth of US goods, mostly agricultural. They
then did not actually purchase any of them. And so
this is why for you know, all of the hype
and excitement about you know, oh, is there going to
(25:42):
be a meeting between you know, President Trump and President
g There might be, there might not be. But are
we actually going to see meaningful progress on any of
these issues? I don't really think so, because the Chinese
government consistently just runs out the cock on this stuff.
Speaker 3 (26:00):
If you're the Chinese, you want to do you want
to give the US as little as possible that will
still prevent them from escalating dramatically.
Speaker 2 (26:11):
And I'm also, again I was talking about this last week,
I'm more convinced than ever that she is now kind
of looking at his own mortality in the next you know,
ten to fifteen years, and the negative demographics in China
with a shrinking population and specifically a shrinking workforce, and
saying this is my time to get you know, what
(26:34):
China deserves in his opinion, And so I don't think
he's just going to be like, yeah, like sure have
all the rarers.
Speaker 3 (26:46):
It's very clear to me that again, with all the
China and US trade talks, I'm with you, I don't
think much progress gets made. We need something on the
scale of the Chips Act when it comes to rare
earths to be done by Congress.
Speaker 2 (27:03):
I think it needs to be more than just executive actions. Yeah.
Speaker 3 (27:06):
I think the idea that the US government's just going
to take stakes in mining companies and pick winners there
and do so without market interference is kind of a
false premise. I don't think it's going to work terribly well.
And I don't I am not any sort of expert
on these rare earths and what the price levels are
(27:28):
that you need in order to get them out of
the ground in the US. But an open free market
for that stuff is not going to work given what
China is capable of selling them for. Yeah, and so
something on the scale of.
Speaker 2 (27:43):
And we've seen that, by the way, Like a couple
of years ago, you had a few different places that
tried to ramp up rare earth production outside of China,
and China just said, okay, we're cutting our prices by
like fifty percent, and they never got off the ground.
You have to like, does it all need to be
here in the US.
Speaker 3 (28:00):
But I would see, you know, I would view it
as price levels on domestically produced stuff and then other
price levels on non Chinese produced stuff.
Speaker 2 (28:13):
I think, like if I'm just you know, spitballing as
I'm inclined to on this stuff. In terms of US demand,
I think thirty to forty percent of that demand needs
to be satisfied by domestic production, and the rest you
can source from countries that are friendlier than China. But
(28:34):
it still is going to require effort to make sure
that that production happens. It's this is stuff that we
talk about a lot. It might not be in the
best interest economically to set price floors on, you know,
producing these kinds of things, but it is in the
best interest from a national security perspective, both because of,
quite literally the fact that this stuff needs to go
(28:56):
into defense projects like you know, missiles and fighter jets
and stuff like that, and the fact that, hey, it
goes into everyday stuff like you know, credit card readers
and windshield wipers and like, this stuff is everywhere.
Speaker 3 (29:12):
What I hope we don't see is a further continuation
of what we've been seeing over the last several years
in administrations of the government taking stakes in companies. I
really have a lot of hesitation about what that spells
for the future, what the future administrations are going to do.
Speaker 2 (29:30):
With those shares that they hold.
Speaker 3 (29:32):
And I just think there is no compelling evidence that
the US government is capable of picking individual winner companies.
Speaker 2 (29:40):
Let's take a quick break. When we return, let's talk
a little bit about Ford's earnings. We'll discuss them. We're
also going to talk about Tarja when we come back.
Speaker 1 (29:51):
The Financial Exchange streams live on YouTube. Like our page
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(30:13):
Financial Exchange Radio Network.
Speaker 2 (30:28):
Let's talk a little bit about Ford. They reported earnings
yesterday and this is one of those companies that did
have a really nice quarter for earnings, and it comes
on the back of Ford really have some questions in
the last year or two that they've tried to answer,
specifically in terms of they had committed to this EV
strategy that they then have rightly decided, Okay, we kind
(30:50):
of over committed to the EV strategy. We need to,
you know, maybe pick that up. We maybe need to
not produce quite as many as we intended to. And
what they are seeing here is consist I mean, look,
it's when you talk about Ford, it's basically one model
that pulls the whole thing at this point, it's the
F one fifty YEP. And so the fact is they're
(31:11):
seeing good numbers there. SUVs are moving well as well,
and they're trying to actually boost production of the F
series pickups by about fifty thousand. Vehicles are about six
percent in twenty twenty six. If they can find any aluminum, well,
you can always find illuminum. Questions at what costs?
Speaker 3 (31:30):
So both Ford and NGM had a pretty similar story
this quarter, right as far as I'm concerned. They both
made a boatload of money on trucks and SUVs, and frankly,
I think it plays right into the same exact story
we've been telling from other big companies, whether it's Delta, Marriott, Ford,
General Motors. People are with money, are still spending YEP
(31:55):
and the flip side of that, right, if you're looking
for you know, Delta and Marriott if you missed it,
reported that their luxury brands or cabins were boosting all
their sales, whereas their lower end brands were struggling. They
were seeing declines. You're over a year in sales or
just very modest growth. The I don't know the GM
and Ford really break out their different lines, and I
(32:17):
haven't seen anything on like what the really cheap vehicles
are selling for.
Speaker 2 (32:21):
No.
Speaker 3 (32:21):
But on the other hand, in the auto sector itself,
we've had a bankruptcy of a subprime lender, a bankruptcy
of an autopart supplier, and a threatened bankruptcy of a
second subprime lender, primal lend. So I see it as
this yeah, multiprong thing. Mainly GM and Ford their sales
are driven by high income consumers, because if you are
(32:43):
making less than seventy thousand dollars a year as a household,
you're not buying large buying a new Ford or GM vehicle.
Speaker 2 (32:52):
Yeah. I look, I am not a subprime auto lender myself,
but my guess is it's probably pretty hard for someone
with subprime credit to qualify for a payment on an
eighty thousand dollars F one fifty. It's probably much more
on the twenty thousand dollars used RAV four where that
(33:15):
transaction is taking place. But I admit to not knowing.
Maybe maybe you can qualify as you know, a barrow
or with a you know, six thirty credit score for
a an eighty thousand dollars car loan. I don't know,
but it's the problems that we're seeing in the auto
sector are not showing up as it relates to manufacturers
(33:38):
adjusting their production as a result of it. It seems
to be much more concentrated in two areas right now,
which is used vehicles and parts like that seems to
be where most of the problem is, and we'll just
have to keep an eye on it and see where
things go.
Speaker 4 (33:59):
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Speaker 2 (35:12):
Target is going to be laying off a thousand corporate
employees and cutting eight hundred open roles. It's gonna cut
their staff by approximately eight percent as a result of this.
With most of the cuts happening domestically, I'm not entirely surprised.
Your Target's been having some trouble over the last couple
of years, trying to stay competitive in the retail environment,
(35:35):
and so if you are trying to maintain margins and
reshape your business, headcount reductions are often what you end
up seeing.
Speaker 3 (35:42):
Here incoming CEO Michael Fiddlk, I'm gonna go with Fiddlek
on that pronunciation quote. The truth is the complexity we've
created over time has been holding us back. Too many
layers and overlapping work have slow decisions, making it harder
to bring ideas to life.
Speaker 2 (35:58):
Maybe we'll say.
Speaker 3 (36:00):
I don't know that an eighteen hundred person layoff is
going to really be the thing that turns around Target
in the near future.
Speaker 2 (36:09):
You can't grow through layoffs. I know that that sounds
like a Yogi bearra statement, and maybe he said that,
but he probably didn't. But ultimately, look, you got to
figure out how to get to sales growth. Why do
people choose either your stores or your online platform. There
used to be a reason, and that reason that people
(36:31):
believed was, hey, it's Tarje it's nicer stuff than Walmart,
but I still get great pricing these days.
Speaker 3 (36:40):
Only time I'm going in is because I am looking
for a Starbucks and I don't realize that it's inside
a Target. And so accidentally walk in.
Speaker 2 (36:48):
My wife goes in occasionally, Yeah, she same here. It's
mostly because the place where she takes my daughter's for
swimming lessons is right next to a Target, and if
they have twenty minutes to kill, they'll pop in there
and just walk around. Other than that, it just exists,
you know. It's it's a retailer without a compelling reason
(37:13):
for being right now. And look they can find do you.
I mean, I remember all of the questions about best
Buy ten fifteen years ago, and hey, can best Buy survive?
And they figured out how to make it work.
Speaker 3 (37:24):
I think either need to double down on grocery or
get rid of it. Target their grocery stuff is a mess.
Speaker 2 (37:30):
I was just thinking the same thing. Oh, they're not
making strides in grocery. It seems like I thought you
were talking best Buy. I'm like, I didn't know they
did grocery.
Speaker 3 (37:37):
Yeah, like Target, just they don't have enough to fill
your actual basket. They have some interesting, compelling brands that
they own, but they either need to like double down
and actually do what the Walmart's doing and offer a
full grocery store, or.
Speaker 2 (37:52):
Just get rid of it entirely. Why Yeah, I go
to a Walmart and we'll at the grocery selection there
and I'm like, this is legit. Yeah, you know, this
is a vast change from where it was ten to
fifteen years ago, and certainly for the better. And those
of you who listen know that I can be a
little discerning, especially when it comes to the produce. But
(38:12):
you see some good stuff there. Let's take a quick break.
Our two coming up. We're gonna be talking Argentina and
much more.
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