October 14, 2025 • 38 mins
Mike Armstrong and Paul Lane discuss China escalating the US trade war with curbs on shipping. JP Morgan profit jumps as business booms on Main Street and Wall Street. Which businesses have the most to lose on continued tariff policies. Silver prices just hit their first record since 1980. Ford cuts production of trucks and SUVs after fire at aluminum plant. New vehicle prices top $50,000.
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Episode Transcript
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Speaker 1 (00:00):
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(01:03):
This is the Financial Exchange with Mike Armstrong and Paul
lane Well.
Speaker 2 (01:11):
On Friday, markets took it on the Chin over China
tariff announcements. Over the weekend, President Trump alleviated some of
those concerns, ensuring everybody that would come to a deal.
Markets floated back upwards or racing about half of their losses.
Speaker 3 (01:27):
And then this morning.
Speaker 2 (01:29):
We have new escalations on the US China trade front,
and we have markets sinking once again.
Speaker 3 (01:36):
It's been an interesting.
Speaker 2 (01:37):
Three days after a historic bout of low volatility and
just markets moving their way upwards for the last several months.
It's Mike, Paul and Tucker with you on a bank
earnings Tuesday. We did hear from JPM Morgan, Chase, Goldman,
Sachs City Group. Who else was in there? Paul?
Speaker 4 (01:56):
We had black Rock, Wells, Far Far Go.
Speaker 2 (02:00):
Yeah, So a whole slew of bank earnings to get
through and some interesting commentary from some of the CEOs.
Yesterday we posed the question what sort of exposure might
some of them have to the recent auto bankruptcies and
the seeming seemingly fraud in some of those instances.
Speaker 3 (02:18):
So we'll be covering that.
Speaker 2 (02:19):
But markets are being driven today at least by the
China news and so we need to start right there.
So overnight China escalated the US trade front fight with
some curbs on shipping. What did they announce, Paul, You know,
we can get to the market reaction here, but what
are we seeing on the US and China trade tensions front.
Speaker 5 (02:40):
China sanctioned the US units of a South koreaing shipping
giants and then threatened to have further retaliatory measures on
the industry. In particular, they sanctioned five US units of
Hanua Ocean Company. And that's sort of the latest back
and forth that we've seen between the two countries. Obviously,
prior to this, as you likely covered on Friday's program,
(03:03):
all the actions that have been in place with the
rare earth materials. But now what we're dealing with this
morning is specifically targeting on the shipping front. What you've
had over the course of the last couple of years
or so, but this issue goes back a decade is
where China really dominates in terms of shipbuilding. They've sort
of overtaken the lead from South Korea and Japan. South
(03:24):
Korea had committed one hundred and fifty billion in expertise
and investments to try and stimulate US ambitions in the sector, because,
to be clear, we don't really produce ships at all anymore.
And as a result of that, the theory behind some
of these moves is that China is really sticking it,
trying to stick it to South Korea to make them
(03:45):
decide are you with us? Are you with them? In
that case, that would be them being the United States.
Speaker 2 (03:50):
Yeah, so another shot across the bow here. Frankly, I
if you end up in a place where China doesn't
sell any rare earth to the United States and the
USA one hundred percent tariffs on all Chinese made goods,
then sanctions on US shipping investments are irrelevant. And so
I look at this story as not so much the
(04:11):
relevance as oh, look what they did. Now we've escalated
to the point of targeting shipping giants. I think that's
far less important than rare earth materials and tariffs on
all Chinese made goods. What it does indicate is that
the words that we have heard over the last several
days of reconciliation or attempting to de escalate by Scott
(04:34):
Bessen or President Trump himself.
Speaker 3 (04:37):
Are put into a new light here.
Speaker 2 (04:38):
They're cast into a new light when you have an
announcement like this, because this is the exact opposite direction,
and it was once again, I think Chinese leadership kind
of looking for an attempt to embarrass the United States
here on these negotiations. So again to be clear, on Friday,
on let's say Wednesday, I believe it was Wednesday night
you first had the announcement from China that they were
(05:02):
imposing new export restrictions on in rare earths, and that
started with I know we've covered this a few times,
but it's important to repeat basically, requiring licenses for any
company who sells a product where more than zero point
one percent of the finished value of that product is
derived from the rare earth that China sells them. That's
(05:25):
like everything, certainly cars, semiconductors. I don't think it would
include like my kids Laboo Boo dolls that everyone's obsessed with,
but just about everything else is going to be captured
by this requirement. And so again doesn't necessarily restrict the sale,
but it does say, if you want these things, you
have to apply for a license through the Chinese government
(05:45):
before we will.
Speaker 3 (05:46):
Sell you the stuff.
Speaker 2 (05:47):
Okay, Friday rolls around and Just before eleven am, President
Trump announces on true social that this is a big
escalation that he sees no need to meet with President
She based on this in there at their upcoming scheduled
meeting UH somewhere in the Pacific region.
Speaker 3 (06:03):
I don't remember where that's schedule.
Speaker 2 (06:05):
I believe it's in South Korea and South Korea, okay,
UH and threatens one hundred percent tariffs on all Chinese
made products. Markets sank nearly three percent on that news
for the rest of the day, just a steady sell
off through the rest of the day, Friday, over the weekend.
The President, you know, alludes to the fact that, you know,
he hoped. I don't think he even said he hopes,
but there's a possibility that these terriffs never go into
(06:26):
place if we can reach some sort of deal. Scott
Bessen says the similar thing. Markets move up yesterday and
then today we get this and markets are selling off.
So it's been a, you know, an interesting three days.
And honestly, this is the most markets have paid attention
to anything terriff related since April, definitely, and I consider
(06:46):
that to be significant. I do think that that's important
for us to acknowledge that markets are paying closer attention
to this at any you know, more attention to this
than at any time since April of this year. I
gotta be honest, though, since the beginning of this, when
when this was first we had the opportunity to cover
it on Thursday, my attitude towards it has been this
(07:09):
seems like posturing ahead of a negotiated summit. You now
have a bunch of things that Chinese do that they
are putting on the table that they can walk back
from the table. The you know, the direction of negotiations
over the last several months since April has been a
positive one. You've you know, made a deal on TikTok,
which I don't again, not the biggest deal for anybody,
(07:33):
and it's not a huge you know move the needle
item for national security in my view, but again, taken
with everything else, was a step in the right direction,
and this is seemingly a step back. I'm encouraged, and
I think investors were encouraged by the fact that the
President himself has come out and said words of de
escalation and don't worry about this, and to me, that's
(07:57):
the exact same wording he was using back on April
eight through April, right, you know, he's coming out there
and saying, this is not something.
Speaker 3 (08:02):
To worry about.
Speaker 2 (08:03):
The markets are overdoing it, don't get concerned about it.
And based on his actions, he was right. Yeah, like
he readjusted everything. H you know, he took a big
hard look at all the tariffs that they had announced,
waived a bunch of them, delayed a bunch of them,
and based on those actions, markets were, you know, as
(08:24):
we look at it now, pretty over sold and have
appreciated dramatically based on all of that. The question, of course,
is is right now another instance of that same effect
where this is all posturing and it's about to go away,
or is it a new escalatory environment? And frankly, this
is the difficult part invest of investing in a game
(08:45):
of chicken. My guess would be that we get a
similar result to what we got back in April, because
that was the most recent result and that's what we
have the most evidence to point to. But when you
have a game of chicken between two world superpowers that
are you know, scaring you know, staring down economic gridlock
and dealing with you know, parties in their own country
(09:05):
that are pushing for certain outcomes, you don't know which
direction it's going to go, and so for that reason,
I think markets are taking some appreciation here or depreciation,
but appreciating the gravity of the issue of the moment,
even if it seems pretty unlikely to escalate.
Speaker 5 (09:21):
In my mind, I think if you step back and
ultimately think about what each party on the negotiating table
stands to lose, if this is to get worse and
to get exacerbated, it really doesn't help anybody if this
is to continue, or they're forced these respective countries, both
China in the US, to go to these levels that
(09:43):
are mentioned here.
Speaker 3 (09:45):
It devastates the Chinese economy.
Speaker 2 (09:46):
Yep, it devastates the US economy right right Like it's
no we can talk about which one is worse off
in these scenarios. I honestly am not sure. I think
our economy probably fares a little bit better, where as
China's defense network probably fares a little bit better in
all of it. But in either case, it's devastating to
both economies and really really problematic. And so to your point,
(10:11):
I can't imagine we get to a point where China
just says nope, no rare earth materials for any US
end made product, and the United States says one hundred
percent terriffs on any product moving from China, which by
the way, just means no product moving from China to
the United States.
Speaker 3 (10:26):
Yeah.
Speaker 5 (10:26):
It just the image of my head age is two cars,
like you said, a game of chicken driving directly at
each other head on. What benefit is there to either
one to crash into one another?
Speaker 3 (10:36):
So again, taking recent history, nice, there we go.
Speaker 2 (10:39):
Wow, Tucker's just Johnny on the spot with the sound
effects today, taking recent history into account, you know, you
would bet that this stuff de escalates, but you never
do know until that comes.
Speaker 3 (10:51):
And do you know the date of the scheduled meeting?
Speaker 5 (10:53):
And so twenty was it the twenty nine? It's towards
the end of the month.
Speaker 2 (10:56):
Towards the end of the month this is scheduled to happen.
Whether or not it happened will be a pretty big
tell in terms of where this goes from here. Let's
take a quick break when we come back, a bunch
of bank earnings to digest, and all taken in the
context of two big bankruptcies in the auto space. What
do the banks have to say about that and their
general earnings. That's next on the Financial Exchange.
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Speaker 2 (12:24):
So we add four major banks reporting earnings this morning
before the bell, Goldman, Sachs, Wells, Fargo, JP Morgan and
Citygroup just covering the market reaction to these four companies.
Goldman Sachs currently down three point six percent in early trading,
Wells Fargo up four point two percent, JP Morgan Chase
down nearly two point nine percent, and City Group up
(12:46):
about nine tens percent. Again taken in the context that
today markets are selling off a fair bit on the
S and P five hundred about two thirds of one percent.
But let's start right off with the biggest of them,
JP Morgan, who beat on profit and revue profit to jump.
What do you suppose might be moving the stock down
(13:06):
today as we've got again a slight sell off. My
take was it's kind of the Jamie Diamond's commentary and
loan loss provisions that are out there. But you know,
we do have the stock moving down a fair bit
on a bead on profits.
Speaker 3 (13:20):
Yeah.
Speaker 5 (13:20):
I was trying to reconcile that this morning, looking at
the pre market and now the activity that we've seen
the first hour of the show. Because all these numbers
are relatively solid. The one potential concern that you can
mention is they did set aside a little bit more
than was anticipated for for credit losses, where initially there
(13:42):
was an estimate that the reserves that they would set
aside was about three point zero eight billion. For losses
from some of the loans that they had made, that
number came in at three point four million, so a
little bit higher three point four billion, a little higher
than anticipated there, But ultimately, you know, you're talking about
a company that does forty six billion of revenue quarter
(14:03):
and just reported fourteen billion of net income for the quarter.
So I don't want to make it seem as if
this differential on credit losses is so significant that it
should be sending the stock down as much as it
is right. So other than that, it can only be
commentary from Diamond, but the market should be used to
his pessimistic measure commentary for the last decade. So I'm
(14:26):
a little bit scratching my head as to why that
would be the case, because otherwise these numbers are pretty strong.
Speaker 2 (14:33):
They are continuing on to the other three. So Goldman
Sachs beat on both profit and revenue. Where they specifically
saw a lot of help was investment banking revenue. We're
seeing more deal making that is boosting this company stock.
They had some weakness in other areas, but the deal
making was enough to see a fairly solid quarter there,
and nonetheless that equity trading concerns moving the stock down
(14:57):
three point six percent. So again beat on expectation, but
with a bank like Goldman Sachs, they wanted to see
a little bit more, it seems wells Fargo, on the
other hand, beat on both earnings and sales. They also
raised their targets, so you know, that would be one
piece that I think you can point to.
Speaker 1 (15:13):
Uh.
Speaker 2 (15:13):
They saw strong net investment income revenue growth as the
commercial and consumer businesses did fairly well. Finally, City Group
beat on revenue but missed on earnings per share, So
a bit of a mixed report from City Group, but
expectations weren't all that high. If I, you know, looked
through these different earnings, and you know, I caught clips
of each of the CEO speaking.
Speaker 3 (15:34):
Didn't listen to.
Speaker 2 (15:35):
The entire press conferences, but there are a few things
that I kind of saw there that looked like common themes.
Speaker 3 (15:43):
One.
Speaker 2 (15:44):
You know, both Solomon CEO of Goldman Sacks, as well
as Jamie Diamond pointed out some of their concerns. Jamie
Diamonds were far larger than David Solomon's. You know, basically
David's only quote was, you know, conditions can change quickly
in spite of where they're seeing things right now, whereas
Jamie Diamond was just talking about a heightened degree of
uncertainty stemming from geopolitical tariffs, trade uncertainty, asset prices, sticky inflation.
(16:11):
He cited a number of different things, which also makes
me think that there is no real direction there, because
he's just saying every possible thing that could be a
concern is a concern for him. The consumer health piece
continues to be an item that investors or CEOs are
bringing up again. These banks tend to make their money
off of the very high net worth consumer, and so
(16:33):
I don't think they're seeing it show up in their financials,
but many of them have talked about stress for lower
income consumers, and analysts especially been pointing that out. But
I think for these four banks it's not really a concern.
There are other financial institutions where it could be. The
area that's been of interest to us over the course
of the last few weeks has been the auto sector,
(16:56):
and so I've been kind of on heightened alert trying
to find out which banks might have any exposure to
this Jamie Diamond and JP Morgan was really the only
one of these four that cited it, and his point
was this dropping the bucket for us. Specifically, he had
his bank had exposure to Tricolor, so this was the
subprime auto lender, and he specifically pointed out that this
(17:21):
is something that we normally wouldn't even talk about, but
it has been getting a lot of attention, and so
he spoke about it. Specifically, they had charge offs of
about one hundred and seventy million dollars in the quarter,
which again irrelevant to Jamie Diamond and JP Morgan, but
he did cite it. As you know, not our finest
moment was his word. And I only bring that well,
(17:42):
I bring that up because I'm interested in the Tricolor
piece and who has exposure to it. But it is
the second time we've talked about JP Morgan in the
context of not their finest moment. The first one was
the fraudster who had.
Speaker 3 (17:53):
Been baking a business Frank Counts.
Speaker 2 (17:56):
Was that Frank was the business, Oh jeez, I think
that was the name of the company that she sold
to JP Morgan for basically a bunch of fraudulent customers,
and so they have some exposure there. Fifth Third Bank
has disclosed that they have quite a bit of disclosure,
bigger deal for them than it is for JP Morgan
Barclays also seems to have some exposure to it. And
(18:19):
then on the first brand side, this was the autoparts
supplier that is still working through their bankruptcy. You have
big exposure from Ubs as well as Jeffreys, and so
we'll be diving into those more over the course of the
next few weeks. But again, were these the only two issues,
I don't think it would be a systemic problem. Our
(18:41):
concern is where they's smoke, there's fire. It is the
hypothetical here, and I don't know that I'm not convinced
that in this case, where there's smoke, there's fire. But
when you have two companies attached to this space that
have similar kinds of issues, right, I mean, they're dealing
with too much debt, a bunch of lenders that didn't
(19:04):
really realize how much debt they had, and both marginally
attached to the same industry, you start to wonder just
where the other stuff starts popping up. And the good
news is it's not popping up in any of our
major banks. The bad news would be that means it's
somewhere else. Right quick break, Wall Street Watch is coming
up next.
Speaker 1 (19:40):
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 market so
far today right here on the Financial Exchange Radio Network.
Speaker 4 (19:59):
Mark kuts are giving back gains from yesterday's rally after
further escalation of tensions between the US and China after
Beijing moved to effectively banned Chinese companies from doing business
with US subsidiaries of a South Korean ship building giant.
Outside of trade, Wall Street's also sifting through third quarter
bank earnings posted earlier this morning. Right now, the Dow
(20:23):
is down by three tenths of one percent, or one
hundred and thirty six points lower. SMP five hundred down
nearly six tenths of one percent or thirty eight points lower,
Nasdaq down one percent or two hundred and twenty seven points.
Russell two thousand is down about a quarter percent. Ten
year treasreel is flat and currently at four point zero
four to two percent in Crude oil down nearly two
(20:45):
percent lower, trading a fifty eight dollars in thirty seven
cents a barrel. Jp Morgan Chase b third quarter earnings expectations,
where it's trading revenue hit a record of nine billion dollars.
Shares are down by two percent. Goldman Sachs also exceeded estimates,
posted better than expected investment banking activity and bond trading.
(21:07):
Goldman stock is down by three percent. Wells Fargo beat
third quarter expectations as well, where the bank raised its
profitability targets, sending that stock up by four percent. Black
Rock in City Group also be third quarter forecast. Those
stocks are seeing modest gains outside of bank earnings. Johnson
and Johnson beat third quarter estimates and raised its annual
(21:28):
sales outlook. The healthcare giant also said it plans to
split it split off its orthopedics unit within two years.
Jane j stock is down nearly one percent. Meanwhile, AMD
shares up two percent after the chip maker struck a
deal that will see its AI chips used in data
centers run by Oracle. According to the Wall Street Journal,
(21:49):
Ford is temporarily cutting production of at least five models
following a devastating fire at a crucial aluminum suppliers plant.
Ford stock is flat, and General Motors is cutting electric
vehicle manufacturing capacity citing reduced demand following the end of
EV tax credits. The company will take a one point
(22:11):
six billion dollar hit as a result. GM shares are
edging higher. I'm Tucker Silva and that is Wallstree.
Speaker 1 (22:18):
Watch.
Speaker 2 (22:18):
As we are now six months into the President Trump's
newly announced tariffs, we're starting to see the map of
international trade really change. You know, one very obvious one
that's not obvious to folks here in the Northeast would
be agricultural trade. China is effectively importing very little agricultural
(22:40):
goods from the United States, a lot of that shifting
to South America instead, Brazil specifically. And so if you
grow soybeans, for example, in the United States, you're having
a pretty tough go of it. But even you know,
less obvious things, right Canada purchases of cars, they're mainly
importing cars from Mexico now instead of the United States
based on those tariff concerns, and so we're seeing a
(23:01):
lot of this reshape.
Speaker 3 (23:02):
What we are.
Speaker 2 (23:03):
Seemingly not showing is big surges in US inflation and
globally too. By the way, like any of those big
concerns about price increases across the board have not showed up,
have not shown up dramatically yet, and it's not to
say that they will never. We'll get another CPI report
(23:25):
I think by end of next week, if I'm not
mistaken Targey, is that right? The BLSB and callback. I
think it's by end of next week. We'll get that report.
Speaker 4 (23:32):
Maybe this week CPI, Yeah, yeah, next week, twenty four.
Speaker 2 (23:35):
Week, Okay, so we'll be getting that report on where
prices have gone, but I expect to see it fall
somewhere in the three percent range. One other, you know,
just interesting piece on the whole tariff side of things.
I've been following since she came on the show. Jenny
Tang works for the Boston Federal Reserve. She has been
doing surveys or their office has been doing surveys on,
(23:55):
you know, just who will pay for tariffs and where
are we seeing it, because like I said, I think,
by and large, you haven't seen a huge effect here
in the United States from these tariffs, and I think
a lot of large companies especially have been able to
rejigger their supply chain or put pressure on suppliers to
keep prices down. Where's those smaller businesses have not so
(24:16):
much seen that effect, And Jenny notes that in her
research that you know, when you talk to those small
and medium sized businesses where they employ fewer than five
hundred people, the expected pass through rate on tariffs is
pretty high. It's about fifty percent of businesses say they
plan on passing through those tariff rates. That's actually lower
than it was back in April when we had the
(24:36):
real concerning stuff for small businesses, but.
Speaker 3 (24:39):
It's fairly high.
Speaker 2 (24:39):
And so where I land is, I'm really unsure as
to whether or not we will get a lot of
direct pass through of tariffs and a true dramatic increase
in prices in the short term from tariffs based on
big business's ability to absorb some of that. But I
do have some pretty big concerns for smaller companies that
(24:59):
are are exposed to tariffs devil.
Speaker 5 (25:02):
That's been my biggest concern this whole time, is that
this could create a further divergence between kind of Wall Street,
not Wall Street and main street. But you know, big
businesses versus the small to mid sized businesses because they
already have a trendous amount of scale and advantage. The
amazons think of, you know, all those big retailers out there,
and this tear these tariff policies only really.
Speaker 3 (25:24):
Allows for them to.
Speaker 5 (25:27):
Utilize their scale and just their leverage to not benefit
from it, but do a better job of siphoning off
any type of impact versus your local mom and pop
shop that don't have that same sort of flick.
Speaker 3 (25:43):
Right.
Speaker 2 (25:43):
And to be clear, maybe that bigger problem then is
for employment, right, because while small businesses might not represent
a huge portion of your budget, they employ about half
of Americans right, right, So this data is a little
bit older from twenty twenty three, but businesses with fewer
than five hundred employees. According to the Office of Advocacy,
(26:05):
businesses with frewer than five hundred employees employed about forty
six percent of the private sector workforce. They make up
about ninety nine point nine percent of all businesses in
the US. That one makes sense, but you know forty
six percent. Now, not everyone is impacted by tariffs, are
you know? My business? Our business is not affected directly
by tariffs in any meaningful way. But yeah, you know,
(26:27):
half of American workers work for those small companies, and
a number of them are and a number of them
probably have no choice but to absorb it, because you know,
if you have a million dollars in sales a year,
you're not going to have a lot of ability to
pressure that Chinese supplier to lower those prices, Paul. Silver
prices just hit their first record since nineteen eighty. Gold
(26:48):
prices have been there for a little while. Now, what
are we seeing in the other companies.
Speaker 5 (26:53):
It's been a crazy year for metals in general. You've
got gold up fifty six percent year date, and silver
now up seventy three percent. It has hit that record
that you alluded to, which is fifty dollars and thirteen
cents per troy ounce. That was ahead of the nineteen
eighty record. And the reason I like to highlight a
bit is because that nineteen eighty record came about from
(27:15):
a scandal that was ultimately made into a Murphy that
an Eddie Murphy movie called Trading Places, where the Hunt brothers,
one in particular, put together a scandal, not a scheme,
rather to put together one third of all of the
available silver in the world, and caused a ton of
(27:39):
market manipulation to drive that nineteen eighty record price, which
is at the beginning of the year nineteen eighty in
January of nineteen eighty. As a result of that, the
Commodity Exchange had to make a rule on March twenty
seventh of nineteen eighty saying that you could only sell silver,
and as a result of that, the price of silver
went from forty eight dollars in seventy sense to ten
(28:01):
dollars and eighty cents a year. And imagine having one
third of all the silver in the world. One hundred
million ounces is what they had procured, and they were
leveraged to the gills. So this particular there's three Hunt brothers.
There was one who was involved, I believe Herbert was
his name. One hundred billion dollars of losses. All sorts
(28:23):
of different issues that came from this, but it was
something that really caused the commodity industry to put a
little bit more scrutiny on some of its practices and
the market manipulation.
Speaker 2 (28:32):
For us to move into the ketchup industry.
Speaker 5 (28:36):
No relation there with the Hunts, but I don't think
at least they're all over the place.
Speaker 3 (28:44):
Right now.
Speaker 5 (28:44):
They're in the NFL and they're elsewhere. But the reason
why it's it's noteworthy today, besides going back to the eighties,
is that there's a lot more consumption on the silver front.
You have ai evs and just the energy transition in
general that is requiring more soil over solar panters in particular,
higher need for silver. That has really driven up a
(29:05):
lot of the demand. And there is some scarcity of supply,
hopefully not from anything like what was going on in
the eighties with the Hunt brothers. But it has been
just a incredible year for for meadows silver. At least
it's it's the use case that is kind of driving
some of this up, but gold also seen tremendous demand
as well.
Speaker 2 (29:23):
It is pretty shocking though to think that it has
taken forty five years.
Speaker 3 (29:27):
That's capture high, right. Granted that high was kind of
falsely and.
Speaker 2 (29:33):
Had you bought it years later than you would have
made a tremendous amount of money over the course of
the last forty But if you had invested a dollar
in you know, and out and go and silver and
a dollar in stocks over the course of the last
forty five years, you'd have a pretty big difference between
how much you'd accumulated by then let's take a quick break.
(29:53):
When we come back forward cutting production on some of
their vehicles. We'll talk about why next on the Financial Exchange.
Speaker 1 (30:00):
This news on inflation, the FED, the economy, and how
the markets are reacting every morning right here on the
Financial Exchange Radio Network. Text US six one seven three
six two thirteen eighty five 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
(30:20):
Exchange Radio Network.
Speaker 2 (30:33):
Well, we spoke about last week the fire at the
aluminum supplier in Ohio of New York, Say New.
Speaker 3 (30:40):
York, excuse me, close, Yeah, you got it.
Speaker 2 (30:44):
They're right next to each other. I ninety cuts right
through both of these places, guys, don't Tom.
Speaker 3 (30:54):
Let's get that.
Speaker 2 (30:55):
In any case, the fire at the aluminus supplier knocking
off production UH two Fords, well several of their most
valuable and profitable vehicles. They're temporarily cutting production of at
least five models, including popular SUVs F one fifties. Because
this one supplier accounts for pretty much all of the
(31:16):
domestic supply of aluminum, and if you import it from elsewhere.
You're talking about fifty percent test. So yeah, their cars
are already expensive enough. They can't quite justify paying a
giant tariff on a whole bunch of illuminum, which I'm
sure they will eventually justify, because you're not going to
stop making explorers in f one fifties for a prolonged
period of time, but certainly doesn't help much for Ford
(31:40):
who look, I mean, they are already struggling with all
sorts of other supplies. They can't make these vehicles if
China puts in their rare earth materials.
Speaker 3 (31:50):
You need a whole bunch of.
Speaker 2 (31:51):
Magnets to make any of these engines work and any
of these other things to work. So they've already got
some supply chain issues. This one is a fairly critical one,
is slowing down production. But even if they do find
a new supply of aluminum, there are some other threats
to this business that are unique to Ford, and GM
seems a little bit more prepared for. We have not
(32:13):
seen a similar announcement from General Motors on this same
issue when it comes to aluminum supplies.
Speaker 5 (32:18):
It's surprising how well Ford Stock has fared year to
date with some of the headwinds that they're battling, whether
it be on the tear front, which they're anticipated of
paying two billion in tariff costs this year, and just
in general, their ev investments are you know, creating a
lot of losses too. Obviously, their bread and butter of
(32:40):
the F one fifty is still incredibly profitable, and that's
probably what has kind of kept them up or kept
them hanging around year to date. But it's very clear
by this shift that it's really all hands on deck
on the production side to focus on the F one fifties,
and clearly with these other five models, which don't have
the same popularity, they're just halting for the moment to
get with their crown jewel. You'd kind of.
Speaker 2 (33:02):
Think, I'll tell you, the entire auto sector just seems
like a mess to me. Yeah, especially with these two companies.
It's becoming increasingly evident that they don't really have the
ability to sell their cars pretty much anywhere else in
the world because China keeps putting them out of business,
and so like is what we're facing. Not that the
American market is anything to pooh pooh, we have a
(33:24):
terrible car buying appetite and spend a ton of our
money on these things. But these companies do not look
all that attractive if they have to make everything in
the United States and only can sell into the United States.
And that's not directly where we're going, because other countries
have recognized the unfair trade practices of China and started
to clamp down on them. But increasingly every country is
(33:47):
kind of coming to the same collusion of oh, we
need our we need to protect our auto industry, and
in that universe it means to me at least very
expensive and kind of boring cars.
Speaker 5 (33:58):
For what was always a really hard business to be
effective executors in right, because it's a low margin business
in the first place, and heavy in terms of capital expenditure,
so it's it's not easy to do well.
Speaker 4 (34:13):
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The proceeding was paid for and the views expressed are
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Cushing and Armstrong did not endorse each other and are
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Speaker 2 (35:29):
Tucker, we have a new US record to announce. Would
you mind queuing up the balloons and just party related items,
Because for the first time ever, new vehicle prices topped
fifty thousand dollars on average in the United States, So
the average new car, not the not the highest price
(35:50):
that you can get. But the average new car sold
in the United States topped fifty thousand dollars for the
first time ever. I'm part of the problem. We bought
a new.
Speaker 3 (35:58):
Car earlier this year.
Speaker 2 (36:00):
You're a new minivan, and that thing topped fifty thousand dollars.
Speaker 3 (36:03):
In your defense though, minivan.
Speaker 4 (36:05):
In your defense, though, it is an essential vehicle with
three kids, so I don't fault you for that.
Speaker 3 (36:11):
Yeah, what else you and I bought could about a
ten year old one, I guess.
Speaker 2 (36:15):
But nonetheless, we're sitting on a new I think it
came in at like fifty eight thousand, maybe sixty thousand
dollars for a new minivan, which is insane to me
even saying it out loud. But anybody that's been shopping
is aware of this stuff. Yeah, fifty thousand dollars for
the first time ever. And increasingly it's becoming evident that
(36:36):
many many Americans cannot afford that and aren't participating it.
Speaker 1 (36:41):
It.
Speaker 2 (36:41):
Don't get me wrong, right, they're buying used cars and
doing other things, But the evidence is in the defaults
on auto loans. I mean, the entire reason that Tricolor
went bankrupt. I mean The underlying fundamental reason might have
been because of allegations of fraud and other concerns, but
the mathematical reason they went under is because a bunch
of their customers could not afford to pay the loans
(37:03):
on their vehicles anymore, or just refuse to pay because
they were no longer in the country. It is a
you know, another story of this kind of K shaped
economy right where you have the wealthy supporting you know,
upper ends of this economy and really driving the markets forward,
whereas you know that bottom quartile to half is very
(37:26):
much struggling, and we're seeing it show up now not
only in some of the data but in actual companies
that support that lower end consumer.
Speaker 5 (37:34):
Yeah, I mean you also have higher borrowing rates too,
where the average new auto loan is about nine percent
according to the most recent data from Cox Automotive.
Speaker 2 (37:44):
In really for it, like flips all the math that
anyone in financial planning has been doing for the course
of the last decade and a half. When it comes
to hey, should I pay off my car loan? Should
I pay off my mortgage? Where should I focus my
next dollar of savings investing versus things off? It really
restructures that entire equation. When you're talking about nine percent
(38:05):
auto loans.
Speaker 3 (38:06):
And that's for new ones.
Speaker 2 (38:07):
Nine time quick break markets still strongly in negative territory
will have a full recap and more next 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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(00:20):
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(01:03):
This is the Financial Exchange with Mike Armstrong and Paul
lane Well.
Speaker 2 (01:11):
On Friday, markets took it on the Chin over China
tariff announcements. Over the weekend, President Trump alleviated some of
those concerns, ensuring everybody that would come to a deal.
Markets floated back upwards or racing about half of their losses.
Speaker 3 (01:27):
And then this morning.
Speaker 2 (01:29):
We have new escalations on the US China trade front,
and we have markets sinking once again.
Speaker 3 (01:36):
It's been an interesting.
Speaker 2 (01:37):
Three days after a historic bout of low volatility and
just markets moving their way upwards for the last several months.
It's Mike, Paul and Tucker with you on a bank
earnings Tuesday. We did hear from JPM Morgan, Chase, Goldman,
Sachs City Group. Who else was in there? Paul?
Speaker 4 (01:56):
We had black Rock, Wells, Far Far Go.
Speaker 2 (02:00):
Yeah, So a whole slew of bank earnings to get
through and some interesting commentary from some of the CEOs.
Yesterday we posed the question what sort of exposure might
some of them have to the recent auto bankruptcies and
the seeming seemingly fraud in some of those instances.
Speaker 3 (02:18):
So we'll be covering that.
Speaker 2 (02:19):
But markets are being driven today at least by the
China news and so we need to start right there.
So overnight China escalated the US trade front fight with
some curbs on shipping. What did they announce, Paul, You know,
we can get to the market reaction here, but what
are we seeing on the US and China trade tensions front.
Speaker 5 (02:40):
China sanctioned the US units of a South koreaing shipping
giants and then threatened to have further retaliatory measures on
the industry. In particular, they sanctioned five US units of
Hanua Ocean Company. And that's sort of the latest back
and forth that we've seen between the two countries. Obviously,
prior to this, as you likely covered on Friday's program,
(03:03):
all the actions that have been in place with the
rare earth materials. But now what we're dealing with this
morning is specifically targeting on the shipping front. What you've
had over the course of the last couple of years
or so, but this issue goes back a decade is
where China really dominates in terms of shipbuilding. They've sort
of overtaken the lead from South Korea and Japan. South
(03:24):
Korea had committed one hundred and fifty billion in expertise
and investments to try and stimulate US ambitions in the sector, because,
to be clear, we don't really produce ships at all anymore.
And as a result of that, the theory behind some
of these moves is that China is really sticking it,
trying to stick it to South Korea to make them
(03:45):
decide are you with us? Are you with them? In
that case, that would be them being the United States.
Speaker 2 (03:50):
Yeah, so another shot across the bow here. Frankly, I
if you end up in a place where China doesn't
sell any rare earth to the United States and the
USA one hundred percent tariffs on all Chinese made goods,
then sanctions on US shipping investments are irrelevant. And so
I look at this story as not so much the
(04:11):
relevance as oh, look what they did. Now we've escalated
to the point of targeting shipping giants. I think that's
far less important than rare earth materials and tariffs on
all Chinese made goods. What it does indicate is that
the words that we have heard over the last several
days of reconciliation or attempting to de escalate by Scott
(04:34):
Bessen or President Trump himself.
Speaker 3 (04:37):
Are put into a new light here.
Speaker 2 (04:38):
They're cast into a new light when you have an
announcement like this, because this is the exact opposite direction,
and it was once again, I think Chinese leadership kind
of looking for an attempt to embarrass the United States
here on these negotiations. So again to be clear, on Friday,
on let's say Wednesday, I believe it was Wednesday night
you first had the announcement from China that they were
(05:02):
imposing new export restrictions on in rare earths, and that
started with I know we've covered this a few times,
but it's important to repeat basically, requiring licenses for any
company who sells a product where more than zero point
one percent of the finished value of that product is
derived from the rare earth that China sells them. That's
(05:25):
like everything, certainly cars, semiconductors. I don't think it would
include like my kids Laboo Boo dolls that everyone's obsessed with,
but just about everything else is going to be captured
by this requirement. And so again doesn't necessarily restrict the sale,
but it does say, if you want these things, you
have to apply for a license through the Chinese government
(05:45):
before we will.
Speaker 3 (05:46):
Sell you the stuff.
Speaker 2 (05:47):
Okay, Friday rolls around and Just before eleven am, President
Trump announces on true social that this is a big
escalation that he sees no need to meet with President
She based on this in there at their upcoming scheduled
meeting UH somewhere in the Pacific region.
Speaker 3 (06:03):
I don't remember where that's schedule.
Speaker 2 (06:05):
I believe it's in South Korea and South Korea, okay,
UH and threatens one hundred percent tariffs on all Chinese
made products. Markets sank nearly three percent on that news
for the rest of the day, just a steady sell
off through the rest of the day, Friday, over the weekend.
The President, you know, alludes to the fact that, you know,
he hoped. I don't think he even said he hopes,
but there's a possibility that these terriffs never go into
(06:26):
place if we can reach some sort of deal. Scott
Bessen says the similar thing. Markets move up yesterday and
then today we get this and markets are selling off.
So it's been a, you know, an interesting three days.
And honestly, this is the most markets have paid attention
to anything terriff related since April, definitely, and I consider
(06:46):
that to be significant. I do think that that's important
for us to acknowledge that markets are paying closer attention
to this at any you know, more attention to this
than at any time since April of this year. I
gotta be honest, though, since the beginning of this, when
when this was first we had the opportunity to cover
it on Thursday, my attitude towards it has been this
(07:09):
seems like posturing ahead of a negotiated summit. You now
have a bunch of things that Chinese do that they
are putting on the table that they can walk back
from the table. The you know, the direction of negotiations
over the last several months since April has been a
positive one. You've you know, made a deal on TikTok,
which I don't again, not the biggest deal for anybody,
(07:33):
and it's not a huge you know move the needle
item for national security in my view, but again, taken
with everything else, was a step in the right direction,
and this is seemingly a step back. I'm encouraged, and
I think investors were encouraged by the fact that the
President himself has come out and said words of de
escalation and don't worry about this, and to me, that's
(07:57):
the exact same wording he was using back on April
eight through April, right, you know, he's coming out there
and saying, this is not something.
Speaker 3 (08:02):
To worry about.
Speaker 2 (08:03):
The markets are overdoing it, don't get concerned about it.
And based on his actions, he was right. Yeah, like
he readjusted everything. H you know, he took a big
hard look at all the tariffs that they had announced,
waived a bunch of them, delayed a bunch of them,
and based on those actions, markets were, you know, as
(08:24):
we look at it now, pretty over sold and have
appreciated dramatically based on all of that. The question, of course,
is is right now another instance of that same effect
where this is all posturing and it's about to go away,
or is it a new escalatory environment? And frankly, this
is the difficult part invest of investing in a game
(08:45):
of chicken. My guess would be that we get a
similar result to what we got back in April, because
that was the most recent result and that's what we
have the most evidence to point to. But when you
have a game of chicken between two world superpowers that
are you know, scaring you know, staring down economic gridlock
and dealing with you know, parties in their own country
(09:05):
that are pushing for certain outcomes, you don't know which
direction it's going to go, and so for that reason,
I think markets are taking some appreciation here or depreciation,
but appreciating the gravity of the issue of the moment,
even if it seems pretty unlikely to escalate.
Speaker 5 (09:21):
In my mind, I think if you step back and
ultimately think about what each party on the negotiating table
stands to lose, if this is to get worse and
to get exacerbated, it really doesn't help anybody if this
is to continue, or they're forced these respective countries, both
China in the US, to go to these levels that
(09:43):
are mentioned here.
Speaker 3 (09:45):
It devastates the Chinese economy.
Speaker 2 (09:46):
Yep, it devastates the US economy right right Like it's
no we can talk about which one is worse off
in these scenarios. I honestly am not sure. I think
our economy probably fares a little bit better, where as
China's defense network probably fares a little bit better in
all of it. But in either case, it's devastating to
both economies and really really problematic. And so to your point,
(10:11):
I can't imagine we get to a point where China
just says nope, no rare earth materials for any US
end made product, and the United States says one hundred
percent terriffs on any product moving from China, which by
the way, just means no product moving from China to
the United States.
Speaker 3 (10:26):
Yeah.
Speaker 5 (10:26):
It just the image of my head age is two cars,
like you said, a game of chicken driving directly at
each other head on. What benefit is there to either
one to crash into one another?
Speaker 3 (10:36):
So again, taking recent history, nice, there we go.
Speaker 2 (10:39):
Wow, Tucker's just Johnny on the spot with the sound
effects today, taking recent history into account, you know, you
would bet that this stuff de escalates, but you never
do know until that comes.
Speaker 3 (10:51):
And do you know the date of the scheduled meeting?
Speaker 5 (10:53):
And so twenty was it the twenty nine? It's towards
the end of the month.
Speaker 2 (10:56):
Towards the end of the month this is scheduled to happen.
Whether or not it happened will be a pretty big
tell in terms of where this goes from here. Let's
take a quick break when we come back, a bunch
of bank earnings to digest, and all taken in the
context of two big bankruptcies in the auto space. What
do the banks have to say about that and their
general earnings. That's next on the Financial Exchange.
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Speaker 4 (11:46):
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Speaker 2 (12:24):
So we add four major banks reporting earnings this morning
before the bell, Goldman, Sachs, Wells, Fargo, JP Morgan and
Citygroup just covering the market reaction to these four companies.
Goldman Sachs currently down three point six percent in early trading,
Wells Fargo up four point two percent, JP Morgan Chase
down nearly two point nine percent, and City Group up
(12:46):
about nine tens percent. Again taken in the context that
today markets are selling off a fair bit on the
S and P five hundred about two thirds of one percent.
But let's start right off with the biggest of them,
JP Morgan, who beat on profit and revue profit to jump.
What do you suppose might be moving the stock down
(13:06):
today as we've got again a slight sell off. My
take was it's kind of the Jamie Diamond's commentary and
loan loss provisions that are out there. But you know,
we do have the stock moving down a fair bit
on a bead on profits.
Speaker 3 (13:20):
Yeah.
Speaker 5 (13:20):
I was trying to reconcile that this morning, looking at
the pre market and now the activity that we've seen
the first hour of the show. Because all these numbers
are relatively solid. The one potential concern that you can
mention is they did set aside a little bit more
than was anticipated for for credit losses, where initially there
(13:42):
was an estimate that the reserves that they would set
aside was about three point zero eight billion. For losses
from some of the loans that they had made, that
number came in at three point four million, so a
little bit higher three point four billion, a little higher
than anticipated there, But ultimately, you know, you're talking about
a company that does forty six billion of revenue quarter
(14:03):
and just reported fourteen billion of net income for the quarter.
So I don't want to make it seem as if
this differential on credit losses is so significant that it
should be sending the stock down as much as it
is right. So other than that, it can only be
commentary from Diamond, but the market should be used to
his pessimistic measure commentary for the last decade. So I'm
(14:26):
a little bit scratching my head as to why that
would be the case, because otherwise these numbers are pretty strong.
Speaker 2 (14:33):
They are continuing on to the other three. So Goldman
Sachs beat on both profit and revenue. Where they specifically
saw a lot of help was investment banking revenue. We're
seeing more deal making that is boosting this company stock.
They had some weakness in other areas, but the deal
making was enough to see a fairly solid quarter there,
and nonetheless that equity trading concerns moving the stock down
(14:57):
three point six percent. So again beat on expectation, but
with a bank like Goldman Sachs, they wanted to see
a little bit more, it seems wells Fargo, on the
other hand, beat on both earnings and sales. They also
raised their targets, so you know, that would be one
piece that I think you can point to.
Speaker 1 (15:13):
Uh.
Speaker 2 (15:13):
They saw strong net investment income revenue growth as the
commercial and consumer businesses did fairly well. Finally, City Group
beat on revenue but missed on earnings per share, So
a bit of a mixed report from City Group, but
expectations weren't all that high. If I, you know, looked
through these different earnings, and you know, I caught clips
of each of the CEO speaking.
Speaker 3 (15:34):
Didn't listen to.
Speaker 2 (15:35):
The entire press conferences, but there are a few things
that I kind of saw there that looked like common themes.
Speaker 3 (15:43):
One.
Speaker 2 (15:44):
You know, both Solomon CEO of Goldman Sacks, as well
as Jamie Diamond pointed out some of their concerns. Jamie
Diamonds were far larger than David Solomon's. You know, basically
David's only quote was, you know, conditions can change quickly
in spite of where they're seeing things right now, whereas
Jamie Diamond was just talking about a heightened degree of
uncertainty stemming from geopolitical tariffs, trade uncertainty, asset prices, sticky inflation.
(16:11):
He cited a number of different things, which also makes
me think that there is no real direction there, because
he's just saying every possible thing that could be a
concern is a concern for him. The consumer health piece
continues to be an item that investors or CEOs are
bringing up again. These banks tend to make their money
off of the very high net worth consumer, and so
(16:33):
I don't think they're seeing it show up in their financials,
but many of them have talked about stress for lower
income consumers, and analysts especially been pointing that out. But
I think for these four banks it's not really a concern.
There are other financial institutions where it could be. The
area that's been of interest to us over the course
of the last few weeks has been the auto sector,
(16:56):
and so I've been kind of on heightened alert trying
to find out which banks might have any exposure to
this Jamie Diamond and JP Morgan was really the only
one of these four that cited it, and his point
was this dropping the bucket for us. Specifically, he had
his bank had exposure to Tricolor, so this was the
subprime auto lender, and he specifically pointed out that this
(17:21):
is something that we normally wouldn't even talk about, but
it has been getting a lot of attention, and so
he spoke about it. Specifically, they had charge offs of
about one hundred and seventy million dollars in the quarter,
which again irrelevant to Jamie Diamond and JP Morgan, but
he did cite it. As you know, not our finest
moment was his word. And I only bring that well,
(17:42):
I bring that up because I'm interested in the Tricolor
piece and who has exposure to it. But it is
the second time we've talked about JP Morgan in the
context of not their finest moment. The first one was
the fraudster who had.
Speaker 3 (17:53):
Been baking a business Frank Counts.
Speaker 2 (17:56):
Was that Frank was the business, Oh jeez, I think
that was the name of the company that she sold
to JP Morgan for basically a bunch of fraudulent customers,
and so they have some exposure there. Fifth Third Bank
has disclosed that they have quite a bit of disclosure,
bigger deal for them than it is for JP Morgan
Barclays also seems to have some exposure to it. And
(18:19):
then on the first brand side, this was the autoparts
supplier that is still working through their bankruptcy. You have
big exposure from Ubs as well as Jeffreys, and so
we'll be diving into those more over the course of the
next few weeks. But again, were these the only two issues,
I don't think it would be a systemic problem. Our
(18:41):
concern is where they's smoke, there's fire. It is the
hypothetical here, and I don't know that I'm not convinced
that in this case, where there's smoke, there's fire. But
when you have two companies attached to this space that
have similar kinds of issues, right, I mean, they're dealing
with too much debt, a bunch of lenders that didn't
(19:04):
really realize how much debt they had, and both marginally
attached to the same industry, you start to wonder just
where the other stuff starts popping up. And the good
news is it's not popping up in any of our
major banks. The bad news would be that means it's
somewhere else. Right quick break, Wall Street Watch is coming
up next.
Speaker 1 (19:40):
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 market so
far today right here on the Financial Exchange Radio Network.
Speaker 4 (19:59):
Mark kuts are giving back gains from yesterday's rally after
further escalation of tensions between the US and China after
Beijing moved to effectively banned Chinese companies from doing business
with US subsidiaries of a South Korean ship building giant.
Outside of trade, Wall Street's also sifting through third quarter
bank earnings posted earlier this morning. Right now, the Dow
(20:23):
is down by three tenths of one percent, or one
hundred and thirty six points lower. SMP five hundred down
nearly six tenths of one percent or thirty eight points lower,
Nasdaq down one percent or two hundred and twenty seven points.
Russell two thousand is down about a quarter percent. Ten
year treasreel is flat and currently at four point zero
four to two percent in Crude oil down nearly two
(20:45):
percent lower, trading a fifty eight dollars in thirty seven
cents a barrel. Jp Morgan Chase b third quarter earnings expectations,
where it's trading revenue hit a record of nine billion dollars.
Shares are down by two percent. Goldman Sachs also exceeded estimates,
posted better than expected investment banking activity and bond trading.
(21:07):
Goldman stock is down by three percent. Wells Fargo beat
third quarter expectations as well, where the bank raised its
profitability targets, sending that stock up by four percent. Black
Rock in City Group also be third quarter forecast. Those
stocks are seeing modest gains outside of bank earnings. Johnson
and Johnson beat third quarter estimates and raised its annual
(21:28):
sales outlook. The healthcare giant also said it plans to
split it split off its orthopedics unit within two years.
Jane j stock is down nearly one percent. Meanwhile, AMD
shares up two percent after the chip maker struck a
deal that will see its AI chips used in data
centers run by Oracle. According to the Wall Street Journal,
(21:49):
Ford is temporarily cutting production of at least five models
following a devastating fire at a crucial aluminum suppliers plant.
Ford stock is flat, and General Motors is cutting electric
vehicle manufacturing capacity citing reduced demand following the end of
EV tax credits. The company will take a one point
(22:11):
six billion dollar hit as a result. GM shares are
edging higher. I'm Tucker Silva and that is Wallstree.
Speaker 1 (22:18):
Watch.
Speaker 2 (22:18):
As we are now six months into the President Trump's
newly announced tariffs, we're starting to see the map of
international trade really change. You know, one very obvious one
that's not obvious to folks here in the Northeast would
be agricultural trade. China is effectively importing very little agricultural
(22:40):
goods from the United States, a lot of that shifting
to South America instead, Brazil specifically. And so if you
grow soybeans, for example, in the United States, you're having
a pretty tough go of it. But even you know,
less obvious things, right Canada purchases of cars, they're mainly
importing cars from Mexico now instead of the United States
based on those tariff concerns, and so we're seeing a
(23:01):
lot of this reshape.
Speaker 3 (23:02):
What we are.
Speaker 2 (23:03):
Seemingly not showing is big surges in US inflation and
globally too. By the way, like any of those big
concerns about price increases across the board have not showed up,
have not shown up dramatically yet, and it's not to
say that they will never. We'll get another CPI report
(23:25):
I think by end of next week, if I'm not
mistaken Targey, is that right? The BLSB and callback. I
think it's by end of next week. We'll get that report.
Speaker 4 (23:32):
Maybe this week CPI, Yeah, yeah, next week, twenty four.
Speaker 2 (23:35):
Week, Okay, so we'll be getting that report on where
prices have gone, but I expect to see it fall
somewhere in the three percent range. One other, you know,
just interesting piece on the whole tariff side of things.
I've been following since she came on the show. Jenny
Tang works for the Boston Federal Reserve. She has been
doing surveys or their office has been doing surveys on,
(23:55):
you know, just who will pay for tariffs and where
are we seeing it, because like I said, I think,
by and large, you haven't seen a huge effect here
in the United States from these tariffs, and I think
a lot of large companies especially have been able to
rejigger their supply chain or put pressure on suppliers to
keep prices down. Where's those smaller businesses have not so
(24:16):
much seen that effect, And Jenny notes that in her
research that you know, when you talk to those small
and medium sized businesses where they employ fewer than five
hundred people, the expected pass through rate on tariffs is
pretty high. It's about fifty percent of businesses say they
plan on passing through those tariff rates. That's actually lower
than it was back in April when we had the
(24:36):
real concerning stuff for small businesses, but.
Speaker 3 (24:39):
It's fairly high.
Speaker 2 (24:39):
And so where I land is, I'm really unsure as
to whether or not we will get a lot of
direct pass through of tariffs and a true dramatic increase
in prices in the short term from tariffs based on
big business's ability to absorb some of that. But I
do have some pretty big concerns for smaller companies that
(24:59):
are are exposed to tariffs devil.
Speaker 5 (25:02):
That's been my biggest concern this whole time, is that
this could create a further divergence between kind of Wall Street,
not Wall Street and main street. But you know, big
businesses versus the small to mid sized businesses because they
already have a trendous amount of scale and advantage. The
amazons think of, you know, all those big retailers out there,
and this tear these tariff policies only really.
Speaker 3 (25:24):
Allows for them to.
Speaker 5 (25:27):
Utilize their scale and just their leverage to not benefit
from it, but do a better job of siphoning off
any type of impact versus your local mom and pop
shop that don't have that same sort of flick.
Speaker 3 (25:43):
Right.
Speaker 2 (25:43):
And to be clear, maybe that bigger problem then is
for employment, right, because while small businesses might not represent
a huge portion of your budget, they employ about half
of Americans right, right, So this data is a little
bit older from twenty twenty three, but businesses with fewer
than five hundred employees. According to the Office of Advocacy,
(26:05):
businesses with frewer than five hundred employees employed about forty
six percent of the private sector workforce. They make up
about ninety nine point nine percent of all businesses in
the US. That one makes sense, but you know forty
six percent. Now, not everyone is impacted by tariffs, are
you know? My business? Our business is not affected directly
by tariffs in any meaningful way. But yeah, you know,
(26:27):
half of American workers work for those small companies, and
a number of them are and a number of them
probably have no choice but to absorb it, because you know,
if you have a million dollars in sales a year,
you're not going to have a lot of ability to
pressure that Chinese supplier to lower those prices, Paul. Silver
prices just hit their first record since nineteen eighty. Gold
(26:48):
prices have been there for a little while. Now, what
are we seeing in the other companies.
Speaker 5 (26:53):
It's been a crazy year for metals in general. You've
got gold up fifty six percent year date, and silver
now up seventy three percent. It has hit that record
that you alluded to, which is fifty dollars and thirteen
cents per troy ounce. That was ahead of the nineteen
eighty record. And the reason I like to highlight a
bit is because that nineteen eighty record came about from
(27:15):
a scandal that was ultimately made into a Murphy that
an Eddie Murphy movie called Trading Places, where the Hunt brothers,
one in particular, put together a scandal, not a scheme,
rather to put together one third of all of the
available silver in the world, and caused a ton of
(27:39):
market manipulation to drive that nineteen eighty record price, which
is at the beginning of the year nineteen eighty in
January of nineteen eighty. As a result of that, the
Commodity Exchange had to make a rule on March twenty
seventh of nineteen eighty saying that you could only sell silver,
and as a result of that, the price of silver
went from forty eight dollars in seventy sense to ten
(28:01):
dollars and eighty cents a year. And imagine having one
third of all the silver in the world. One hundred
million ounces is what they had procured, and they were
leveraged to the gills. So this particular there's three Hunt brothers.
There was one who was involved, I believe Herbert was
his name. One hundred billion dollars of losses. All sorts
(28:23):
of different issues that came from this, but it was
something that really caused the commodity industry to put a
little bit more scrutiny on some of its practices and
the market manipulation.
Speaker 2 (28:32):
For us to move into the ketchup industry.
Speaker 5 (28:36):
No relation there with the Hunts, but I don't think
at least they're all over the place.
Speaker 3 (28:44):
Right now.
Speaker 5 (28:44):
They're in the NFL and they're elsewhere. But the reason
why it's it's noteworthy today, besides going back to the eighties,
is that there's a lot more consumption on the silver front.
You have ai evs and just the energy transition in
general that is requiring more soil over solar panters in particular,
higher need for silver. That has really driven up a
(29:05):
lot of the demand. And there is some scarcity of supply,
hopefully not from anything like what was going on in
the eighties with the Hunt brothers. But it has been
just a incredible year for for meadows silver. At least
it's it's the use case that is kind of driving
some of this up, but gold also seen tremendous demand
as well.
Speaker 2 (29:23):
It is pretty shocking though to think that it has
taken forty five years.
Speaker 3 (29:27):
That's capture high, right. Granted that high was kind of
falsely and.
Speaker 2 (29:33):
Had you bought it years later than you would have
made a tremendous amount of money over the course of
the last forty But if you had invested a dollar
in you know, and out and go and silver and
a dollar in stocks over the course of the last
forty five years, you'd have a pretty big difference between
how much you'd accumulated by then let's take a quick break.
(29:53):
When we come back forward cutting production on some of
their vehicles. We'll talk about why next on the Financial Exchange.
Speaker 1 (30:00):
This news on inflation, the FED, the economy, and how
the markets are reacting every morning right here on the
Financial Exchange Radio Network. Text US six one seven three
six two thirteen eighty five 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
(30:20):
Exchange Radio Network.
Speaker 2 (30:33):
Well, we spoke about last week the fire at the
aluminum supplier in Ohio of New York, Say New.
Speaker 3 (30:40):
York, excuse me, close, Yeah, you got it.
Speaker 2 (30:44):
They're right next to each other. I ninety cuts right
through both of these places, guys, don't Tom.
Speaker 3 (30:54):
Let's get that.
Speaker 2 (30:55):
In any case, the fire at the aluminus supplier knocking
off production UH two Fords, well several of their most
valuable and profitable vehicles. They're temporarily cutting production of at
least five models, including popular SUVs F one fifties. Because
this one supplier accounts for pretty much all of the
(31:16):
domestic supply of aluminum, and if you import it from elsewhere.
You're talking about fifty percent test. So yeah, their cars
are already expensive enough. They can't quite justify paying a
giant tariff on a whole bunch of illuminum, which I'm
sure they will eventually justify, because you're not going to
stop making explorers in f one fifties for a prolonged
period of time, but certainly doesn't help much for Ford
(31:40):
who look, I mean, they are already struggling with all
sorts of other supplies. They can't make these vehicles if
China puts in their rare earth materials.
Speaker 3 (31:50):
You need a whole bunch of.
Speaker 2 (31:51):
Magnets to make any of these engines work and any
of these other things to work. So they've already got
some supply chain issues. This one is a fairly critical one,
is slowing down production. But even if they do find
a new supply of aluminum, there are some other threats
to this business that are unique to Ford, and GM
seems a little bit more prepared for. We have not
(32:13):
seen a similar announcement from General Motors on this same
issue when it comes to aluminum supplies.
Speaker 5 (32:18):
It's surprising how well Ford Stock has fared year to
date with some of the headwinds that they're battling, whether
it be on the tear front, which they're anticipated of
paying two billion in tariff costs this year, and just
in general, their ev investments are you know, creating a
lot of losses too. Obviously, their bread and butter of
(32:40):
the F one fifty is still incredibly profitable, and that's
probably what has kind of kept them up or kept
them hanging around year to date. But it's very clear
by this shift that it's really all hands on deck
on the production side to focus on the F one fifties,
and clearly with these other five models, which don't have
the same popularity, they're just halting for the moment to
get with their crown jewel. You'd kind of.
Speaker 2 (33:02):
Think, I'll tell you, the entire auto sector just seems
like a mess to me. Yeah, especially with these two companies.
It's becoming increasingly evident that they don't really have the
ability to sell their cars pretty much anywhere else in
the world because China keeps putting them out of business,
and so like is what we're facing. Not that the
American market is anything to pooh pooh, we have a
(33:24):
terrible car buying appetite and spend a ton of our
money on these things. But these companies do not look
all that attractive if they have to make everything in
the United States and only can sell into the United States.
And that's not directly where we're going, because other countries
have recognized the unfair trade practices of China and started
to clamp down on them. But increasingly every country is
(33:47):
kind of coming to the same collusion of oh, we
need our we need to protect our auto industry, and
in that universe it means to me at least very
expensive and kind of boring cars.
Speaker 5 (33:58):
For what was always a really hard business to be
effective executors in right, because it's a low margin business
in the first place, and heavy in terms of capital expenditure,
so it's it's not easy to do well.
Speaker 4 (34:13):
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Speaker 1 (35:18):
The proceeding was paid for and the views expressed are
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Speaker 2 (35:29):
Tucker, we have a new US record to announce. Would
you mind queuing up the balloons and just party related items,
Because for the first time ever, new vehicle prices topped
fifty thousand dollars on average in the United States, So
the average new car, not the not the highest price
(35:50):
that you can get. But the average new car sold
in the United States topped fifty thousand dollars for the
first time ever. I'm part of the problem. We bought
a new.
Speaker 3 (35:58):
Car earlier this year.
Speaker 2 (36:00):
You're a new minivan, and that thing topped fifty thousand dollars.
Speaker 3 (36:03):
In your defense though, minivan.
Speaker 4 (36:05):
In your defense, though, it is an essential vehicle with
three kids, so I don't fault you for that.
Speaker 3 (36:11):
Yeah, what else you and I bought could about a
ten year old one, I guess.
Speaker 2 (36:15):
But nonetheless, we're sitting on a new I think it
came in at like fifty eight thousand, maybe sixty thousand
dollars for a new minivan, which is insane to me
even saying it out loud. But anybody that's been shopping
is aware of this stuff. Yeah, fifty thousand dollars for
the first time ever. And increasingly it's becoming evident that
(36:36):
many many Americans cannot afford that and aren't participating it.
Speaker 1 (36:41):
It.
Speaker 2 (36:41):
Don't get me wrong, right, they're buying used cars and
doing other things, But the evidence is in the defaults
on auto loans. I mean, the entire reason that Tricolor
went bankrupt. I mean The underlying fundamental reason might have
been because of allegations of fraud and other concerns, but
the mathematical reason they went under is because a bunch
of their customers could not afford to pay the loans
(37:03):
on their vehicles anymore, or just refuse to pay because
they were no longer in the country. It is a
you know, another story of this kind of K shaped
economy right where you have the wealthy supporting you know,
upper ends of this economy and really driving the markets forward,
whereas you know that bottom quartile to half is very
(37:26):
much struggling, and we're seeing it show up now not
only in some of the data but in actual companies
that support that lower end consumer.
Speaker 5 (37:34):
Yeah, I mean you also have higher borrowing rates too,
where the average new auto loan is about nine percent
according to the most recent data from Cox Automotive.
Speaker 2 (37:44):
In really for it, like flips all the math that
anyone in financial planning has been doing for the course
of the last decade and a half. When it comes
to hey, should I pay off my car loan? Should
I pay off my mortgage? Where should I focus my
next dollar of savings investing versus things off? It really
restructures that entire equation. When you're talking about nine percent
(38:05):
auto loans.
Speaker 3 (38:06):
And that's for new ones.
Speaker 2 (38:07):
Nine time quick break markets still strongly in negative territory
will have a full recap and more next on the
Financial Exchange
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