March 18, 2025 • 38 mins
Mike Armstrong and Paul Lane discuss the upcoming Fed meeting and how Powell will contend with economic chaos and political hostility. Trump says a recession might be worth the cost. Economists disagree. How tariffs are creating stock market volatility. How are Social Security beneficiaries supposed to seek help from the agency now? Amazon plans to reshape its Alexa business devision.
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Speaker 1 (00:00):
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(00:42):
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(01:06):
and Paul Lane.
Speaker 2 (01:09):
Good morning, Happy Tuesday, Welcome back to the Financial Exchange.
We've got markets that are back in flip flop mode
after two days of solid games Friday of last week
and Monday of this week. We've got all three major
indices selling off, with the NASDAC off the worst about
one and three quarters percent. We've got Google's parent company,
Alphabet in the news, potentially making its largest acquisition ever.
(01:32):
Apparent innovations and movement being made on the electric battery
side out of China. Will be covering that as well.
But the first story we've got to dig into here
on a Tuesday morning is tomorrow's Federal Reserve meeting. Jay
Powell will be taking the stage at two thirty pm
to answer questions about what the FIT is thinking about
this economy, and for probably the first time in two
(01:57):
or three years, I don't think investors are going to
be hanging on his every word in the same way
that they have been for this period of high inflation.
Not that people will be ignoring it, but frankly, what's
coming out of the White House right now is far
more relevant to the stock market and its performance recently.
Speaker 3 (02:16):
I would say that this is probably the last two
the last couple months. Right, this meeting is certainly one
that there won't be a tremendous amount of attention paid
to it. And I believe when was our last one?
Was it six weeks prior?
Speaker 4 (02:30):
I guess right, Yeah, so six weeks right around beginning
of the year.
Speaker 3 (02:33):
Yeah, I think similar sort of sentiment there. But I
agree with you the overall takeaway is that this used
to be sort of our headline event for our show.
Is the focus on what the results of the Federal
Reserve meeting will be for Thursday. It will be something
that of course will cover and we will be parsing
through to look at any sort of commentary that the
Fed may have on the economy and thoughts. But ultimately,
(02:57):
what I would anticipate is very what incentive do they
have to really show much of their hand. They should
keep it tight lipped and keep it as very fluid.
From a policy perspective, I don't really see any reason
for the Fed to make waves. We're battling enough waves
economically as it is, with the uncertainty on tariffs and
other fronts. There's no reason for the Fed to really
(03:20):
rock the boat and not stick to sort of the
party line of we'll see as more data comes out.
Speaker 2 (03:25):
Yeah, and I do expect that to mainly dominate the conversation.
The Fed is widely anticipated to be keeping interest rates
at the current four and a quarter to four and
a half percent, led by Scott Bessens from the White House.
It seems that they are not facing immense pressure today
to move that. Scott Besson's Treasury Secretary for the Trump administration,
(03:46):
has been much more focused on that ten year treasury yield,
which the Federal Reserve.
Speaker 4 (03:50):
Does not control, does not move.
Speaker 2 (03:51):
And the reason he's focused there is because he wants
to see frankly, borrowing costs for average Americans improve. He
cares a little bit less about borrowing costs for banks,
which is what the FED really moves around here when
we talk about things the short end of the curve.
Far more influential when it comes to asset prices like
the stock market, far less influential when it comes to
(04:12):
housing affordability, car affordability, things along those lines. And so
I think the White House has appropriately focused in on
that type of interest rate instead of the FED funds rate.
I don't think that will allow the FED to escape
blame should this economy start turning into recession. Right, they
are an easy scapegoat, and President Trump has a history
(04:33):
of blaming the FED when things are not going his way,
so I would anticipate that they could face some of that,
but they are largely not today.
Speaker 4 (04:41):
I think one of.
Speaker 2 (04:43):
The questions that I'll be interested to hear an answer
on is they always get asked the question of you know,
where do you put the balance of risks to the
economy today? And for the last several years it has
been more of a risk of inflation than higher unemployment,
and that's slowly been and most recently they've called those
equally weighted risks. Right, they're as concerned about an uptick
(05:06):
in unemployment and a recession as they are about a
resurgence and inflation.
Speaker 4 (05:10):
And my question would be, where are you now, right?
Speaker 2 (05:14):
I mean, I don't think that anybody should assume that
inflation is done with, especially in the face of rising tariffs.
But quite honestly, I'm personally a fair bit more concerned
about unemployment. And you know where business uncertainty has been
going in terms of polls that you see from CEOs,
and they're hiring plans and so does the Federal Reserve
(05:35):
view one of those as a more significant risk, because
that's likely to drive their next decision when it comes
to policy. Right, they're not doing anything today, But I
think this economy is anything but stagnant.
Speaker 4 (05:47):
Right. It is certainly moving quite rapidly.
Speaker 2 (05:50):
And I suspect that we will see changes to the
state of both inflation and unemployment over the course of
the next several months should it continue this way.
Speaker 3 (05:59):
Just such a awful job to have Mike every time
we do, every time we do these segments, I'm like,
I'm so glad I don't have a job at the
Federal Reserve. Not like I have anywhere near that the
qualifications for it, but it's just so challenging. I have
to give them credit. They did a really great job
last year in terms of navigating the inflationary environment that
(06:19):
we saw in twenty twenty two and twenty twenty three.
You can absolutely beat them up for being late to
the game to react to the inflationary pressures that we
saw in twenty two and leaving their quantity of easing
programs in for too long. But last year we were
complementary of the efforts that they had to navigate a
difficult environment, but the challenges are only picking up in
twenty twenty five, making things more difficult because it's just
(06:43):
it's going to be so hard to determine if you
were to see inflationary price increases and a shock to
the system, is that going to be something to bring
up their favorite phrase that they got beat up on
big time transitory, which is what they used of the
supply shocks in twenty twenty two that turned out to
not be so transitory. Or is it going to be
(07:03):
something that's a longer term problem. You also have the
fears of economic growth potentially slowing too. It's just a
really challenging environment to navigate. It's just the level of
difficulty it seems like, just gets more and more increase
for these Federal Reserve members.
Speaker 2 (07:20):
As I said, fortunately, I have not seen much talk
of the Federal Reserve from the White House, and I
suspect that that may continue for a period of time.
But I do want to talk about the Federal Reserves
independence because every single meeting they've had since the election
of Donald Trump has been focused on the Fed's independence
and how they are going to go about maintaining it,
and so The question is why does that matter, right, why.
Speaker 4 (07:43):
Do we need an independent FED?
Speaker 2 (07:45):
And the answer the easy answers go look at a
few countries that don't have an independent FEDS, such as China,
such as Turkey, and how their policies shape out and
what works and what doesn't work there. But the general
answer is that the Federal Reserve controls the money supply,
and when the money supply goes up, asset prices go up.
Go take a look at twenty twenty. You pour a
(08:08):
whole bunch of money into the economy, which Congress did,
which the Federal Reserve allowed to happen, and asset prices
went through the roof. You didn't immediately have inflation, right.
We weren't talking about huge inflation numbers in twenty twenty
when the money supply went up, But it did eventually
contribute to a whole degree of art higher inflation. And
maybe that was purely result of COVID, maybe a supply
(08:30):
chain related, but probably a mixture of all mixture of
all of those things. The problem is that in the
very short term, the Fed's actions don't really control much
on the way of inflation.
Speaker 3 (08:41):
Right.
Speaker 2 (08:41):
We talk about these very technical details but when you
go take a look at the actual results, they're much
more in control over inflation over a ten year time period.
Right when you look at how they influence the money
supply and the direction of things. Ten years later, you
start to see the picture shape out where you say, oh, yeah, yeah,
a money supply increased here, and look how much higher
(09:03):
inflation was over that course of the next ten years.
And therefore you have a central bank that's independent because
in the short term, what the Federal Reserve does does
impact the economy. It drives a surprises up, it drives
a stock market up. Historically, you have a lot of
influence over what can happen in things that might get
you reelected. But the tail risk of that, as we've
(09:26):
experienced here of the last few years, could be really
burden some inflation. And if you are an elected official
seeking reelection, you care a little bit less about what
inflation looks like a decade from now and a lot
more about what the stock market looks like over the
next two years, for example.
Speaker 3 (09:43):
And on the other end, the Fed sometimes has to
be the bad guy. They have to take away the
punch bowl exactly. Yeah, they have to come in and
that really, if you think about the last presidential term,
the mismanagement of inflation under President Biden likely was the
major factor that led to him not get being re elected.
And as a result of that, you had the Federal
(10:04):
Reserve sort of as part of that equation because they
were the ones going in there and saying we need
to raise rates to bring down inflation. Now they were
the bad guy doing that. No one likes to see
variable lines of credit increase for borrows out there, and
we've seen the impact on the housing market too, where
a mortgage sits at maybe six and a half seven
percent for a thirty year fixed mortgage. If you still
(10:26):
had the same levels of three or four percent that
we were sitting at previously and Fed funds rate near zero,
we would be in a runaway inflation environment. They have
to be the bad because of that. So that is
another aspect of it that is so important to keep
them a political because if you're going to have to
serve as a you know, takeer away of the punch bowl,
then it is better to keep that separate from a
(10:47):
president who wants to be re elected or wants to
be viewed in a favorable manner by its constituents.
Speaker 4 (10:53):
Let's take a quick break. When we come back.
Speaker 2 (10:57):
White House officials can't stop talking about recessions, so we're
going to talk about it as well. Peace from the
New York Times here on recession maybe being worth the cost?
What do they mean when they say that? And what
would it mean for you? That's next year on the
Financial Exchange.
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Speaker 2 (12:04):
If I think about the economic policies of the Trump
administration so far, and let's let's caveat all this with
it hasn't even been two months yet, fewer than two months,
and we are still trying to sort this out. But
if I think them through, the two major things that
(12:24):
I think of AAR tariffs and b our government reforms
focused on spending in taxes, right, that's where it comes
down to. I think a lot of it's about efficiency,
and plenty more about DEI and other focuses of the administration,
but that that's not economics. Like I'm focused on these two,
and the administration has been making an argument Scott Bessen
(12:47):
has been making at President Trump has been making it,
many others have been as well, that when laid out concisely,
I think makes.
Speaker 4 (12:54):
A lot of sense.
Speaker 2 (12:55):
And so I'm going to attempt to lay out the
economic reform and government reform side of that equation. Put simply,
the United States government, over the course of the last
thirty years, but especially over the course of the last
few has been spending like it is going out of style.
(13:17):
If you take a look at government spending deficits as
a percentage of GDP over the course of the last
few years, they've been averaging somewhere around three percent, which
many would have said years ago was unsustainable, but over
the course of the post COVID period accelerated to something
like six percent. And so, in my opinion, at least,
you know, an economy that might have faced recession in
(13:39):
twenty twenty two, twenty three, twenty twenty four, that was
largely sidestepped because frankly, it's tough to have a downturn
and unemployment in the market when there is so much
government spending pouring into the economy. Still, right, it didn't
take in twenty twenty three and four, might not have
taken the form of stimulus payments, but you know, you
had the Giant Chips Act, you had the Inflation Reduction Act,
(14:04):
and all of these things led to big, big US
government deficits. And the incoming administration has said, look, that
is not a sustainable path.
Speaker 4 (14:12):
To be on.
Speaker 2 (14:13):
Right, if you are worried about the full faith and
credit of the United States government, if you are concerned
about you know, long term inflation that needs to be
rained in. And I have to say I agree on
that entirely, and I don't know if you do it
by cutting government spending by raising taxes, but the net
deficit right, the spending number from the United States government
(14:36):
probably should not be sustained at six percent a year
because I think ultimately it leads to a crisis at
some point in the future.
Speaker 4 (14:44):
No idea what that looks like.
Speaker 2 (14:45):
I think better trained people than I am would have
a better idea of it than I would, And in
my opinion, it may even be worth going through a
recession in order to deal with that problem.
Speaker 3 (14:56):
I would agree. I would agree with all those facts.
Speaker 2 (14:59):
There Again, the problem with what you're describing here is
if it were to continue at that pace, someday it
might lead to a much larger disruption. And I think
that's what Scott Besint has pointed out, is, Hey, you know,
I'd rather deal with a short term recession to get
government spending under control than fifteen years from now have
(15:20):
a bunch of nations that no longer want to buy
US debt because it's not as powerful and strong as
it once was.
Speaker 4 (15:25):
It's no longer the reserve currency.
Speaker 2 (15:27):
And that's the fight that we are trying to head
off with our changes to government policy.
Speaker 4 (15:32):
When it comes to deficis agreed.
Speaker 3 (15:33):
The problem which you probably were getting to, is this
idea that while that in its essence, I couldn't be
more in agreement with this idea that we need to
get the depth cent under control, that we have way
too much does the country. I think many people would
agree to that. There's very few people who would disagree
with the levels of debt right now being tenable.
Speaker 2 (15:51):
Whether people are willing to go through a recession to
deal with that problem, that's that's a different question. But
I think most people would agree with that fundamental piece
of Hey, I wouldn't manage my head household this way,
you probably shouldn't manage a country this way, and it needs.
Speaker 4 (16:04):
To be addressed.
Speaker 3 (16:05):
But from a policy perspective, what you've seen, and again
you're right, it has been a very short span of
time here, but the efforts of the Department of Government
efficiency the areas that they are targeting. While the message
and the idea behind it, many of or at least
you and I agree with this idea cutting down government spending.
I'm behind that. But the items that you have to
(16:26):
go after, our big ticket items that no one really
feels comfortable going with. From a political perspective, that social
security medicare, Medicaid has been one that's been bantered about,
and defense spending. Those are four of the biggest areas
that you'd need to target. Those have not been touched.
They're very difficult to touch. And then you combine that
with this idea that we're coming up on the looming
(16:46):
deadline for the twenty seventeen tax cuts. All of us
have collectively benefited from lower tax rates over the course
of the last eight years or so. Those are set
to sunset at the end of twenty twenty five. Yeah,
if nothing were to happen, they were to revert back
to their prior levels. However, a lot of the discussion
around this administration coming in is keeping those in and
(17:07):
reinstituting them for a longer period of time. Just doing that,
just the signature of instituting the those in for a
longer period of time. As much as you and I
would benefit and I would love to see the rates
where they are because they've been really low relative to
historical norms, it's gonna add trillions of dollars to the deficits.
So in one end, you have actions being taken to
cut down on the deficit by cutting out some areas
(17:31):
of the government that they're probably is excess spending. But
that's like looking at your household budget and let's say
someone spends the one hundred grand and you're starting to
target well maybe here or there.
Speaker 4 (17:41):
You know, I won't go after it, cut out the
avocado toasts.
Speaker 3 (17:44):
I won't you know, get coffee, you know, twice a week.
But instead of ignoring, you know, your mortgage payment and
your car payment. It's like, that's kind of the efforts
that we've seen recently, particularly if you're going to reinstitute
the tax cuts.
Speaker 2 (17:58):
I'm gonna reown. I'm gonna rain open minded. Right, I'll
judge this in a few years when we see where
it goes. I agree with you to this point, Like
you know, you cut ten thousand employees from Social Security. Yeah,
I mean that's not going to do the same thing
as making giant cuts to Medicare and the program of
Social Security itself.
Speaker 4 (18:14):
And so is it actually meaningful. We'll have to wait
and see.
Speaker 2 (18:18):
The problem that you've seen in markets has not been
related to that to this point, right, you have not
seen a big uptake in unemployment to this point in
reaction to that. The problem that you have seen in
markets has everything to do with tariffs.
Speaker 4 (18:30):
And when you when you.
Speaker 2 (18:31):
Layer on that side of the equation, that's where I
start to get lost, and that's where I think American
CEOs and others are starting to get lost as well.
Is what do tariffs? What role do tariffs play in
this overall new view of the economy. Is it that
they are there to reduce the deficits? Further, is that
(18:53):
is it that they are there to drive a better
bargain on trade because we've been getting screwed over on
trade by our global partners for the last you know,
thirty years, fifty years. Is it to bring jobs back
to the United States? And what will that do to
help with deficits and economic growth over the long term? Those,
I think are the open questions that just has a
(19:15):
lot of people and clearly a lot of market participants,
as displayed by today's selloff confuse as to where exactly
all of this goes.
Speaker 4 (19:23):
We got to take a quick break.
Speaker 2 (19:24):
We're going to have Wall Street watch when we return,
and then more tariff talk, especially when it comes to automakers.
Speaker 4 (19:30):
Next here on the Financial Exchange.
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 markets so
far today right here on the Financial Exchange Radio netw.
Speaker 5 (20:00):
Well, after two consecutive winning days, markets are in the
red today, led by a sell off in the tech
sector as a FED begins their two day monetary policy meeting,
followed by a press conference from FED Chairman Jerome Powell
tomorrow afternoon at two thirty. At the moment, the Dow
is down by four tenths of a percent or one
hundred and seventy eight points, SMP five hundred down about
(20:23):
one percent or fifty five points, and the tech heavy
NASDAC down by one in seven tenths of a percent
or three hundred and two points. Russell two thousand is
down by eight tenths of a percent. Tenure Treasure realed
is flat at four point three zero percent, and crude
oil edging higher, trading at sixty seven dollars in sixty
eight cents a barrel. Big news from the tech sector
(20:46):
this morning, after Google signed a definitive agreement to acquire
cybersecurity startup Whiz for thirty two billion dollars in an
all cash deal. Whiz previously walked away from a twenty
three billion dollar deal by Google last summer. Alphabet shares
down by four percent. Meanwhile, in Video shares down by
(21:07):
three percent ahead of a keynote speech from CEO Jensen
Huang at its GtC Developers conference, where he is expected
to showcase a new version of the company's Blackwell AI chips. Elsewhere,
China's top domestic ev maker, BYD, reached a record high
in Hong Kong after the company unveiled a technology that
(21:28):
can charge an electric car in merely five minutes. More
volatility for Tesla, with that stock down another five percent
after analysts at RBC Capital Markets reduced their price target
on the stock, citing increasing competition. Lucid up by twelve
percent after Morgan Stanley upgraded the stock to equal weight,
(21:50):
noting the ev maker's AI strategy could be a positive catalyst.
In Goldman Sachs upgraded Ralph Lauren to buy from neutral.
The banks said the fashion company has limited exposure to
tariffs versus its peers. That stock is up by about
a third of a percent. I'm Tucker Silvan, That's Wallstree.
Speaker 4 (22:09):
Watch Paul is a bit off script.
Speaker 2 (22:12):
But this morning I was listening to an interview with
a I believe he was a professor of economics or
maybe business from Duke University, and he pointed something out
which I've heard before, and I pulled some data on
it about the United States being relatively insulated from trade
compared to other countries. And what I mean by that
is when you look at the United States GDP, you know,
(22:34):
add up everything in the United States produces, sells, services,
add it all together, and you look at trade in particular,
it's a relatively small portion compared to other countries. So
trade imports plus exports divided by GDP gives you a
percentage of GDP that trade makes up. And in the
United States in twenty twenty three, I've heard sources as
(22:57):
high as twenty seven percent, but the data I have
from the World Bank puts the United States at twenty
five percent of GDP. There are two countries in the
world that that's lower, Ethiopia and Sudan, So not exactly
global competitors on the when you go compare that to
other big economic powerhouses, and I kind of doubt the
(23:18):
data coming from China, but the estimates there thirty seven
percent of their economy comes from trade. A giant like Germany,
for example, another developed country eighty three percent trade related
from GDP. Canada obviously being talked about, sixty seven percent,
Mexico seventy three percent. You can have more than one
(23:40):
hundred percent of your GDP coming from trade too, right.
You can have some countries where trade makes up such
a huge value of the economy. These are usually like
Singapore and other countries like that, where they're trading very
high value goods but not realizing a whole bunch of
that in their GDP. But I bring it up to
say that, you know, the President is direct when he
says that, look, you know we are perhaps uh getting
(24:04):
you know, screwed over by trade. But honestly, our economy
is not all that reliant on trade. We can make
things based economy. I don't I don't know, But we're
a services based economy. But be a geographically and very
large country that has the ability to grow things domestically
and sell things domestically. And yes, when you think about
(24:25):
the value of high tech services for example, Google, Amazon,
the likes of them, that being US businesses, that that
helps as well.
Speaker 4 (24:33):
What this ignores, however, and why I'm trying to make
a point here.
Speaker 2 (24:37):
About you know, hey, this might not be that bad
for the economy, we're tariffs to be in place, but
it might be very bad for the stock market. And
I think it comes back to once again separating those two.
The economy is not the stock market, and the stock
market is not the economy. Let's take just purely trade
with Canada and think about the companies that are most
(24:58):
heavily affected by I trade tariffs on Canadian goods. Right,
If you have tariffs of twenty five percent on anything
imported from Canada into the United States, and those terraffs
get paid by the company that's doing the importing, because
that's how tariffs work. It's not paid by the Canadian
company that's exporting the good. It's paid by the American
company or the foreign company that's doing business in the
(25:20):
United States that's importing the good.
Speaker 4 (25:23):
Think about for a.
Speaker 2 (25:24):
Minute who those companies are that are doing the importing
for a moment here, and you can understand why it's
creating stock market volatility. It's Ford, it's Stilantis, it's General Motors,
it is food growers, it's a whole bunch of US
domiciled companies that just happen to do a lot of
business in Canada. And that's in part what the President's
(25:47):
trying to change is he doesn't want those US based
companies doing business there. But I think speaks to some
of the confusion that we're seeing out there, like why
are European stocks up ten percent this year? Why are
Canadian stocks doing well in the face of teriffs? And
the answer is it might be really bad for their economy.
Canada's pretty much been in a recession the last few years.
But when you think about Canada's largest public companies, Power,
(26:14):
the Hockey Company, the Royal Bank of Canada, Ye, not
doing a whole lot of exports to the United States.
Shopify it's an entirely service based payment system. Toronto, Dominion Bank,
TD Bank, Enbridge Energy. Okay, yeah, you've got one there
where they are going to be subject to tariffs. But
you take a look at this, and you know, Thompson Reuters,
(26:36):
these are not big companies that are exporting a whole
bunch of stuff to the United States that are going
to face massive increase in teriffs. When you think about
which companies are going to face that it's largely US
companies that happen to.
Speaker 4 (26:47):
Be doing business in these foreign countries.
Speaker 2 (26:49):
So again, it was an interesting conversation that I overheard
and kind of led me down this path of why
would US stocks which I don't know where they are today,
but you're to date down like four percent, whereas you've
got the rest of the developed world up a good
ten percent in the stock market.
Speaker 4 (27:04):
And I think this largely explains it a lot. Is
the companies who are most subjected to tariffs under these
plans or buy and large US companies, they are going
to face higher prices.
Speaker 3 (27:14):
Well, I take it even one step further, where it's
the US consumer that ultimately is going to feel yes,
the brunt of that, and that can impact the earnings
of all these publicly traded companies out there. If the
consumer's budget is constrained by the fact that vehicles are
going to potentially cost more, going to see an upticking
price or T shirts or whatever item you want to
(27:35):
throw out there, overall consumption could decrease, and that's why
you could see a challenging earnings environment for some of
these public companies out there. I think that's the largest
contributory factor amongst others on the stock market itself. Is
it was a very overpriced market too. We've covered that also.
Speaker 2 (27:51):
Look, and I'm not standing here saying do or don't
do this. One thing I will say is I think
the back and forth uncertainty on it, I think that's
a bad idea. Like I think conclusively, you know, if
you have tariffs in place, I don't know what the
impact is going to be. I don't think anybody does.
And if anybody's telling you they do, then they're full
of it. Because we haven't seen tariffs of this sort
(28:11):
since the nineteen forty, so nobody actually knows how it's
all going to play out. Will the jobs return to
the United States at a higher degree? Will we see
a manufacturing boom in the United States. I'm open to
the concept of it.
Speaker 3 (28:22):
I'm not even sure if I am, I'm highly skeptical.
Speaker 2 (28:25):
I should say yeah, But again I'm not certainly, and
I'm not saying that never do it right. What I
am saying is that very clearly, what CEOs are telling
you now is I'd be okay with the tariffs, but
I can't deal with the uncertainty of whether or not
I will have tariffs, And that's what I think this
administration is going to need to address and address quickly,
because that's the piece that is tougher to recover from.
(28:48):
Right If if you develop so much uncertainty that businesses
are simply unwilling to spend money, then you get a
real problem in the economy that's tougher to resolve from.
By just waving away tariffs or waving away some change,
then it becomes tougher to rebuild the economic success story.
Speaker 3 (29:04):
Yeah, it plays the devil's advocate to me expressing skepticism
as to whether or not manufacturing will be brought back
domestically with some of the tariff agenda. There needs to
be clear, concise plan as to what the tariffs are
going to look like. For companies, to your point, to
invest domestically to build up manufacturing capability, they need to
be assured that it is something that is going to
(29:25):
be worth investing in. And if the policy is going
to continually change, then you're just going to have companies
withhold investment until they get a clear sense of what
it's going to look like. And that's what this comes
down to, is getting a little more certainty here quick Break.
Speaker 2 (29:37):
When we come back, big changes over at the Social
Security Administration in terms of staffing. What has that meant
so far for recipients and those going to file? Quick
Break will be covered that next here on the Financial Exchange.
Speaker 1 (29:49):
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Speaker 2 (31:11):
There's been a lot going on at Social Security Administration
over the last few months. We had the Social Security
Fairness Act that went into place back in January. Obviously
the normal cost of living adjustments. Elon Musk called social
Security a Ponzi scheme. There's been job cuts at the administration.
I think for the average person it can be a
little bit tough to navigate. Hey, what's the real news
(31:33):
here that might affect me and what's the noise when
it comes to Social Security. So let's start with the
easiest one first before we move into the tougher stuff.
The sourci Security Fairness Act eliminated what's called the government
pension offset and the windfall elimination provision if you worked
for a government in a job that did not require
(31:53):
you to pay in to Social Security. That could be
the Commonwealth of Massachusetts, a local town, parts of the
federal government, or even a foreign country. Let's say you
worked in the United Kingdom for a while and receive
a government pension from there that could offset your Social Security.
Those rules are now gone. You are not subject to
that anymore, and many recipients have started receiving payments already
(32:14):
on the calculation of what they are owed. From twenty
twenty four and now into twenty twenty five. Elon Musk
calling Social Security a Ponzi scheme and talking about cuts
there legitimate thing to be worried about, or.
Speaker 4 (32:29):
Just kind of loud talk that we should ignore.
Speaker 3 (32:33):
Loud talk that we should ignore.
Speaker 2 (32:34):
Yeah, yeah, that's kind of my conclusion as well. Like
I think that, you know, he will continue to attack
it from a staffing perspective, but it doesn't sound like
Elon Musk has a great solution to fixing what he
described as a Ponzi scheme, and any changes to it
must go through Congress. So I'm not immensely concerned about
Elon Musk forcing changes to the Social Security payment system
(32:58):
or you know, el ability for Social Security.
Speaker 3 (33:01):
We can all agree that changes need to be made
to it, but just not going.
Speaker 2 (33:05):
To be led by Elon. No, and I don't think
his perspective of it being a Ponzi scheme is going
to be influential on members of Congress. No, the tougher
question to answer is customer service. And look, for a
lot of people, they never need customer service from Social Security,
but sometimes you do. And here's where it's getting a
little bit tricky. Like the market Watch here interviewed somebody
(33:28):
who is dealing with an employer that screwed up their
pay systems and didn't either didn't record their payments into
Social Security for a couple of years or just didn't
make the payments into Social Security. And so it looks
like they didn't work for two years and their earnings
records all screwed up, and they have to supply W
two's and a whole bunch of basically proof that hey,
(33:49):
I did work, I did pay into Social Security for
these two years, even if my employer didn't cover it.
The answer that people are hearing is good luck, get
in line is kind of the answer on that one,
and I think that's the message that I have for
anyone trying to interact with folks. There's some scarier ones too,
like that that would be concerning and annoying, but you
would eventually get this problem solved if you had the
(34:11):
documentation on it, and they would pay you the money
that you were owed. The other ones that I'm hearing from, like, hey,
somebody hacked my Social Security account and change my direct deposit.
So far, they've been able to respond to that quickly
and lock your account down. But those are the ones
that I get worried about because that's a pretty common scam. Right, Hey,
can I redirect someone's tax return or someone's Social Security
(34:33):
payment to a different bank account and take those funds?
Speaker 4 (34:37):
Those are the ones that.
Speaker 2 (34:38):
You do want Social Security employees responding to responding to quickly,
and at least one case they did. But I am
hearing more and more that getting an appointment with Social
Security is now taking weeks. There's no real ability to
drop into a Social Security office, and I think that's
frustrating some beneficiaries.
Speaker 3 (34:55):
Medicare is another one, just to kind of be aware
of when you're applying for it. You want to look
to try and apply for it anywhere from two to
three months prior to you reaching that magic age sixty five,
So that's one thing to note there. If you have
lesser staff staffing there, the processing times on those applications
could slow. So it's something that you may want to
(35:16):
make sure that you're on top of and not leave
to the last minute.
Speaker 2 (35:19):
We know that you have questions about social security, and
when there are big changes going on at a program
this big to people's financial security and future, it can
add some apprehension into that decision making process, and frankly,
I think it leaves people open to making the wrong
decision when it comes to social security out of fear
(35:40):
about the program, uncertainty about it, about its customer service,
and just how it's going to wind up. If you're
wondering how you should change your social security plan or
how you should have a social security plan for the future,
please give the folks at arm Strong Advisory Group a call.
We work with our clients every day on questions like
pensions and social security and how they will contribute to
their larger financial plan and really how to take advantage
(36:03):
of those programs to make them work best for you.
If you have questions like that, give us a ring
at eight hundred three nine three four zero zero one
how to talk with you about your specifics. That number
again for the Armstrong Advisory Group eight hundred three nine
three four zero zero one.
Speaker 1 (36:19):
The proceeding was paid for by Armstrong Advisory Group, a
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Speaker 2 (36:35):
Amazon planning to reshape their Alexa device business. The story
with Amazon's Alexa devices has been for years that they
are going to produce them and sell them at basically
no profit.
Speaker 4 (36:51):
We talk about the you know what are the small ones,
the dots that are around epos houses, and these these devices.
Speaker 2 (36:59):
The idea initial was, Hey, if we pop these into
people's homes, A will learn about them substantially, and b
maybe it'll make them more interested in buying Amazon goods
in the short term. Right, Like if I can just
talk to my Amazon speaker and say blah blah blah,
order me new toothpaste and then maybe I'll be a
(37:20):
more frequency buyer on these platforms.
Speaker 4 (37:23):
The answer is that hasn't worked out well.
Speaker 2 (37:26):
They've had no real uptake when it comes to things
like the Amazon Music platform that has integrated into these
at least in the paid versions of those things. And
so they're taking a second hard look at this business
to see how they go about monetizing it and offering
new products. And I'm here to say that I just
don't know that Amazon can do anything on the smart
device base that I'd be personally willing to pay for
(37:49):
the ring video doorbells as close as I get. And
they bought that business, they didn't develop it in house, right,
is that Yeah? That's Amazon, it is, right, Yeah, Like
I do pay for that service. I pay them a
monthly monitoring like I find that stuff useful. But when
it comes to these smart devices in my home, I
just don't know what perfection they're going to get to
that I would actually shell out money for it quick break,
(38:10):
but a lot more to cover, including big innovation potentially
out of a Chinese automaker that's next year in the
financial exchange,
The Financial Exchange is produced by Money Matters Radio and
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(00:20):
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(01:06):
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Speaker 2 (01:09):
Good morning, Happy Tuesday, Welcome back to the Financial Exchange.
We've got markets that are back in flip flop mode
after two days of solid games Friday of last week
and Monday of this week. We've got all three major
indices selling off, with the NASDAC off the worst about
one and three quarters percent. We've got Google's parent company,
Alphabet in the news, potentially making its largest acquisition ever.
(01:32):
Apparent innovations and movement being made on the electric battery
side out of China. Will be covering that as well.
But the first story we've got to dig into here
on a Tuesday morning is tomorrow's Federal Reserve meeting. Jay
Powell will be taking the stage at two thirty pm
to answer questions about what the FIT is thinking about
this economy, and for probably the first time in two
(01:57):
or three years, I don't think investors are going to
be hanging on his every word in the same way
that they have been for this period of high inflation.
Not that people will be ignoring it, but frankly, what's
coming out of the White House right now is far
more relevant to the stock market and its performance recently.
Speaker 3 (02:16):
I would say that this is probably the last two
the last couple months. Right, this meeting is certainly one
that there won't be a tremendous amount of attention paid
to it. And I believe when was our last one?
Was it six weeks prior?
Speaker 4 (02:30):
I guess right, Yeah, so six weeks right around beginning
of the year.
Speaker 3 (02:33):
Yeah, I think similar sort of sentiment there. But I
agree with you the overall takeaway is that this used
to be sort of our headline event for our show.
Is the focus on what the results of the Federal
Reserve meeting will be for Thursday. It will be something
that of course will cover and we will be parsing
through to look at any sort of commentary that the
Fed may have on the economy and thoughts. But ultimately,
(02:57):
what I would anticipate is very what incentive do they
have to really show much of their hand. They should
keep it tight lipped and keep it as very fluid.
From a policy perspective, I don't really see any reason
for the Fed to make waves. We're battling enough waves
economically as it is, with the uncertainty on tariffs and
other fronts. There's no reason for the Fed to really
(03:20):
rock the boat and not stick to sort of the
party line of we'll see as more data comes out.
Speaker 2 (03:25):
Yeah, and I do expect that to mainly dominate the conversation.
The Fed is widely anticipated to be keeping interest rates
at the current four and a quarter to four and
a half percent, led by Scott Bessens from the White House.
It seems that they are not facing immense pressure today
to move that. Scott Besson's Treasury Secretary for the Trump administration,
(03:46):
has been much more focused on that ten year treasury yield,
which the Federal Reserve.
Speaker 4 (03:50):
Does not control, does not move.
Speaker 2 (03:51):
And the reason he's focused there is because he wants
to see frankly, borrowing costs for average Americans improve. He
cares a little bit less about borrowing costs for banks,
which is what the FED really moves around here when
we talk about things the short end of the curve.
Far more influential when it comes to asset prices like
the stock market, far less influential when it comes to
(04:12):
housing affordability, car affordability, things along those lines. And so
I think the White House has appropriately focused in on
that type of interest rate instead of the FED funds rate.
I don't think that will allow the FED to escape
blame should this economy start turning into recession. Right, they
are an easy scapegoat, and President Trump has a history
(04:33):
of blaming the FED when things are not going his way,
so I would anticipate that they could face some of that,
but they are largely not today.
Speaker 4 (04:41):
I think one of.
Speaker 2 (04:43):
The questions that I'll be interested to hear an answer
on is they always get asked the question of you know,
where do you put the balance of risks to the
economy today? And for the last several years it has
been more of a risk of inflation than higher unemployment,
and that's slowly been and most recently they've called those
equally weighted risks. Right, they're as concerned about an uptick
(05:06):
in unemployment and a recession as they are about a
resurgence and inflation.
Speaker 4 (05:10):
And my question would be, where are you now, right?
Speaker 2 (05:14):
I mean, I don't think that anybody should assume that
inflation is done with, especially in the face of rising tariffs.
But quite honestly, I'm personally a fair bit more concerned
about unemployment. And you know where business uncertainty has been
going in terms of polls that you see from CEOs,
and they're hiring plans and so does the Federal Reserve
(05:35):
view one of those as a more significant risk, because
that's likely to drive their next decision when it comes
to policy. Right, they're not doing anything today, But I
think this economy is anything but stagnant.
Speaker 4 (05:47):
Right. It is certainly moving quite rapidly.
Speaker 2 (05:50):
And I suspect that we will see changes to the
state of both inflation and unemployment over the course of
the next several months should it continue this way.
Speaker 3 (05:59):
Just such a awful job to have Mike every time
we do, every time we do these segments, I'm like,
I'm so glad I don't have a job at the
Federal Reserve. Not like I have anywhere near that the
qualifications for it, but it's just so challenging. I have
to give them credit. They did a really great job
last year in terms of navigating the inflationary environment that
(06:19):
we saw in twenty twenty two and twenty twenty three.
You can absolutely beat them up for being late to
the game to react to the inflationary pressures that we
saw in twenty two and leaving their quantity of easing
programs in for too long. But last year we were
complementary of the efforts that they had to navigate a
difficult environment, but the challenges are only picking up in
twenty twenty five, making things more difficult because it's just
(06:43):
it's going to be so hard to determine if you
were to see inflationary price increases and a shock to
the system, is that going to be something to bring
up their favorite phrase that they got beat up on
big time transitory, which is what they used of the
supply shocks in twenty twenty two that turned out to
not be so transitory. Or is it going to be
(07:03):
something that's a longer term problem. You also have the
fears of economic growth potentially slowing too. It's just a
really challenging environment to navigate. It's just the level of
difficulty it seems like, just gets more and more increase
for these Federal Reserve members.
Speaker 2 (07:20):
As I said, fortunately, I have not seen much talk
of the Federal Reserve from the White House, and I
suspect that that may continue for a period of time.
But I do want to talk about the Federal Reserves
independence because every single meeting they've had since the election
of Donald Trump has been focused on the Fed's independence
and how they are going to go about maintaining it,
and so The question is why does that matter, right, why.
Speaker 4 (07:43):
Do we need an independent FED?
Speaker 2 (07:45):
And the answer the easy answers go look at a
few countries that don't have an independent FEDS, such as China,
such as Turkey, and how their policies shape out and
what works and what doesn't work there. But the general
answer is that the Federal Reserve controls the money supply,
and when the money supply goes up, asset prices go up.
Go take a look at twenty twenty. You pour a
(08:08):
whole bunch of money into the economy, which Congress did,
which the Federal Reserve allowed to happen, and asset prices
went through the roof. You didn't immediately have inflation, right.
We weren't talking about huge inflation numbers in twenty twenty
when the money supply went up, But it did eventually
contribute to a whole degree of art higher inflation. And
maybe that was purely result of COVID, maybe a supply
(08:30):
chain related, but probably a mixture of all mixture of
all of those things. The problem is that in the
very short term, the Fed's actions don't really control much
on the way of inflation.
Speaker 3 (08:41):
Right.
Speaker 2 (08:41):
We talk about these very technical details but when you
go take a look at the actual results, they're much
more in control over inflation over a ten year time period.
Right when you look at how they influence the money
supply and the direction of things. Ten years later, you
start to see the picture shape out where you say, oh, yeah, yeah,
a money supply increased here, and look how much higher
(09:03):
inflation was over that course of the next ten years.
And therefore you have a central bank that's independent because
in the short term, what the Federal Reserve does does
impact the economy. It drives a surprises up, it drives
a stock market up. Historically, you have a lot of
influence over what can happen in things that might get
you reelected. But the tail risk of that, as we've
(09:26):
experienced here of the last few years, could be really
burden some inflation. And if you are an elected official
seeking reelection, you care a little bit less about what
inflation looks like a decade from now and a lot
more about what the stock market looks like over the
next two years, for example.
Speaker 3 (09:43):
And on the other end, the Fed sometimes has to
be the bad guy. They have to take away the
punch bowl exactly. Yeah, they have to come in and
that really, if you think about the last presidential term,
the mismanagement of inflation under President Biden likely was the
major factor that led to him not get being re elected.
And as a result of that, you had the Federal
(10:04):
Reserve sort of as part of that equation because they
were the ones going in there and saying we need
to raise rates to bring down inflation. Now they were
the bad guy doing that. No one likes to see
variable lines of credit increase for borrows out there, and
we've seen the impact on the housing market too, where
a mortgage sits at maybe six and a half seven
percent for a thirty year fixed mortgage. If you still
(10:26):
had the same levels of three or four percent that
we were sitting at previously and Fed funds rate near zero,
we would be in a runaway inflation environment. They have
to be the bad because of that. So that is
another aspect of it that is so important to keep
them a political because if you're going to have to
serve as a you know, takeer away of the punch bowl,
then it is better to keep that separate from a
(10:47):
president who wants to be re elected or wants to
be viewed in a favorable manner by its constituents.
Speaker 4 (10:53):
Let's take a quick break. When we come back.
Speaker 2 (10:57):
White House officials can't stop talking about recessions, so we're
going to talk about it as well. Peace from the
New York Times here on recession maybe being worth the cost?
What do they mean when they say that? And what
would it mean for you? That's next year on the
Financial Exchange.
Speaker 1 (11:12):
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Speaker 2 (12:04):
If I think about the economic policies of the Trump
administration so far, and let's let's caveat all this with
it hasn't even been two months yet, fewer than two months,
and we are still trying to sort this out. But
if I think them through, the two major things that
(12:24):
I think of AAR tariffs and b our government reforms
focused on spending in taxes, right, that's where it comes
down to. I think a lot of it's about efficiency,
and plenty more about DEI and other focuses of the administration,
but that that's not economics. Like I'm focused on these two,
and the administration has been making an argument Scott Bessen
(12:47):
has been making at President Trump has been making it,
many others have been as well, that when laid out concisely,
I think makes.
Speaker 4 (12:54):
A lot of sense.
Speaker 2 (12:55):
And so I'm going to attempt to lay out the
economic reform and government reform side of that equation. Put simply,
the United States government, over the course of the last
thirty years, but especially over the course of the last
few has been spending like it is going out of style.
(13:17):
If you take a look at government spending deficits as
a percentage of GDP over the course of the last
few years, they've been averaging somewhere around three percent, which
many would have said years ago was unsustainable, but over
the course of the post COVID period accelerated to something
like six percent. And so, in my opinion, at least,
you know, an economy that might have faced recession in
(13:39):
twenty twenty two, twenty three, twenty twenty four, that was
largely sidestepped because frankly, it's tough to have a downturn
and unemployment in the market when there is so much
government spending pouring into the economy. Still, right, it didn't
take in twenty twenty three and four, might not have
taken the form of stimulus payments, but you know, you
had the Giant Chips Act, you had the Inflation Reduction Act,
(14:04):
and all of these things led to big, big US
government deficits. And the incoming administration has said, look, that
is not a sustainable path.
Speaker 4 (14:12):
To be on.
Speaker 2 (14:13):
Right, if you are worried about the full faith and
credit of the United States government, if you are concerned
about you know, long term inflation that needs to be
rained in. And I have to say I agree on
that entirely, and I don't know if you do it
by cutting government spending by raising taxes, but the net
deficit right, the spending number from the United States government
(14:36):
probably should not be sustained at six percent a year
because I think ultimately it leads to a crisis at
some point in the future.
Speaker 4 (14:44):
No idea what that looks like.
Speaker 2 (14:45):
I think better trained people than I am would have
a better idea of it than I would, And in
my opinion, it may even be worth going through a
recession in order to deal with that problem.
Speaker 3 (14:56):
I would agree. I would agree with all those facts.
Speaker 2 (14:59):
There Again, the problem with what you're describing here is
if it were to continue at that pace, someday it
might lead to a much larger disruption. And I think
that's what Scott Besint has pointed out, is, Hey, you know,
I'd rather deal with a short term recession to get
government spending under control than fifteen years from now have
(15:20):
a bunch of nations that no longer want to buy
US debt because it's not as powerful and strong as
it once was.
Speaker 4 (15:25):
It's no longer the reserve currency.
Speaker 2 (15:27):
And that's the fight that we are trying to head
off with our changes to government policy.
Speaker 4 (15:32):
When it comes to deficis agreed.
Speaker 3 (15:33):
The problem which you probably were getting to, is this
idea that while that in its essence, I couldn't be
more in agreement with this idea that we need to
get the depth cent under control, that we have way
too much does the country. I think many people would
agree to that. There's very few people who would disagree
with the levels of debt right now being tenable.
Speaker 2 (15:51):
Whether people are willing to go through a recession to
deal with that problem, that's that's a different question. But
I think most people would agree with that fundamental piece
of Hey, I wouldn't manage my head household this way,
you probably shouldn't manage a country this way, and it needs.
Speaker 4 (16:04):
To be addressed.
Speaker 3 (16:05):
But from a policy perspective, what you've seen, and again
you're right, it has been a very short span of
time here, but the efforts of the Department of Government
efficiency the areas that they are targeting. While the message
and the idea behind it, many of or at least
you and I agree with this idea cutting down government spending.
I'm behind that. But the items that you have to
(16:26):
go after, our big ticket items that no one really
feels comfortable going with. From a political perspective, that social
security medicare, Medicaid has been one that's been bantered about,
and defense spending. Those are four of the biggest areas
that you'd need to target. Those have not been touched.
They're very difficult to touch. And then you combine that
with this idea that we're coming up on the looming
(16:46):
deadline for the twenty seventeen tax cuts. All of us
have collectively benefited from lower tax rates over the course
of the last eight years or so. Those are set
to sunset at the end of twenty twenty five. Yeah,
if nothing were to happen, they were to revert back
to their prior levels. However, a lot of the discussion
around this administration coming in is keeping those in and
(17:07):
reinstituting them for a longer period of time. Just doing that,
just the signature of instituting the those in for a
longer period of time. As much as you and I
would benefit and I would love to see the rates
where they are because they've been really low relative to
historical norms, it's gonna add trillions of dollars to the deficits.
So in one end, you have actions being taken to
cut down on the deficit by cutting out some areas
(17:31):
of the government that they're probably is excess spending. But
that's like looking at your household budget and let's say
someone spends the one hundred grand and you're starting to
target well maybe here or there.
Speaker 4 (17:41):
You know, I won't go after it, cut out the
avocado toasts.
Speaker 3 (17:44):
I won't you know, get coffee, you know, twice a week.
But instead of ignoring, you know, your mortgage payment and
your car payment. It's like, that's kind of the efforts
that we've seen recently, particularly if you're going to reinstitute
the tax cuts.
Speaker 2 (17:58):
I'm gonna reown. I'm gonna rain open minded. Right, I'll
judge this in a few years when we see where
it goes. I agree with you to this point, Like
you know, you cut ten thousand employees from Social Security. Yeah,
I mean that's not going to do the same thing
as making giant cuts to Medicare and the program of
Social Security itself.
Speaker 4 (18:14):
And so is it actually meaningful. We'll have to wait
and see.
Speaker 2 (18:18):
The problem that you've seen in markets has not been
related to that to this point, right, you have not
seen a big uptake in unemployment to this point in
reaction to that. The problem that you have seen in
markets has everything to do with tariffs.
Speaker 4 (18:30):
And when you when you.
Speaker 2 (18:31):
Layer on that side of the equation, that's where I
start to get lost, and that's where I think American
CEOs and others are starting to get lost as well.
Is what do tariffs? What role do tariffs play in
this overall new view of the economy. Is it that
they are there to reduce the deficits? Further, is that
(18:53):
is it that they are there to drive a better
bargain on trade because we've been getting screwed over on
trade by our global partners for the last you know,
thirty years, fifty years. Is it to bring jobs back
to the United States? And what will that do to
help with deficits and economic growth over the long term? Those,
I think are the open questions that just has a
(19:15):
lot of people and clearly a lot of market participants,
as displayed by today's selloff confuse as to where exactly
all of this goes.
Speaker 4 (19:23):
We got to take a quick break.
Speaker 2 (19:24):
We're going to have Wall Street watch when we return,
and then more tariff talk, especially when it comes to automakers.
Speaker 4 (19:30):
Next here on the Financial Exchange.
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 markets so
far today right here on the Financial Exchange Radio netw.
Speaker 5 (20:00):
Well, after two consecutive winning days, markets are in the
red today, led by a sell off in the tech
sector as a FED begins their two day monetary policy meeting,
followed by a press conference from FED Chairman Jerome Powell
tomorrow afternoon at two thirty. At the moment, the Dow
is down by four tenths of a percent or one
hundred and seventy eight points, SMP five hundred down about
(20:23):
one percent or fifty five points, and the tech heavy
NASDAC down by one in seven tenths of a percent
or three hundred and two points. Russell two thousand is
down by eight tenths of a percent. Tenure Treasure realed
is flat at four point three zero percent, and crude
oil edging higher, trading at sixty seven dollars in sixty
eight cents a barrel. Big news from the tech sector
(20:46):
this morning, after Google signed a definitive agreement to acquire
cybersecurity startup Whiz for thirty two billion dollars in an
all cash deal. Whiz previously walked away from a twenty
three billion dollar deal by Google last summer. Alphabet shares
down by four percent. Meanwhile, in Video shares down by
(21:07):
three percent ahead of a keynote speech from CEO Jensen
Huang at its GtC Developers conference, where he is expected
to showcase a new version of the company's Blackwell AI chips. Elsewhere,
China's top domestic ev maker, BYD, reached a record high
in Hong Kong after the company unveiled a technology that
(21:28):
can charge an electric car in merely five minutes. More
volatility for Tesla, with that stock down another five percent
after analysts at RBC Capital Markets reduced their price target
on the stock, citing increasing competition. Lucid up by twelve
percent after Morgan Stanley upgraded the stock to equal weight,
(21:50):
noting the ev maker's AI strategy could be a positive catalyst.
In Goldman Sachs upgraded Ralph Lauren to buy from neutral.
The banks said the fashion company has limited exposure to
tariffs versus its peers. That stock is up by about
a third of a percent. I'm Tucker Silvan, That's Wallstree.
Speaker 4 (22:09):
Watch Paul is a bit off script.
Speaker 2 (22:12):
But this morning I was listening to an interview with
a I believe he was a professor of economics or
maybe business from Duke University, and he pointed something out
which I've heard before, and I pulled some data on
it about the United States being relatively insulated from trade
compared to other countries. And what I mean by that
is when you look at the United States GDP, you know,
(22:34):
add up everything in the United States produces, sells, services,
add it all together, and you look at trade in particular,
it's a relatively small portion compared to other countries. So
trade imports plus exports divided by GDP gives you a
percentage of GDP that trade makes up. And in the
United States in twenty twenty three, I've heard sources as
(22:57):
high as twenty seven percent, but the data I have
from the World Bank puts the United States at twenty
five percent of GDP. There are two countries in the
world that that's lower, Ethiopia and Sudan, So not exactly
global competitors on the when you go compare that to
other big economic powerhouses, and I kind of doubt the
(23:18):
data coming from China, but the estimates there thirty seven
percent of their economy comes from trade. A giant like Germany,
for example, another developed country eighty three percent trade related
from GDP. Canada obviously being talked about, sixty seven percent,
Mexico seventy three percent. You can have more than one
(23:40):
hundred percent of your GDP coming from trade too, right.
You can have some countries where trade makes up such
a huge value of the economy. These are usually like
Singapore and other countries like that, where they're trading very
high value goods but not realizing a whole bunch of
that in their GDP. But I bring it up to
say that, you know, the President is direct when he
says that, look, you know we are perhaps uh getting
(24:04):
you know, screwed over by trade. But honestly, our economy
is not all that reliant on trade. We can make
things based economy. I don't I don't know, But we're
a services based economy. But be a geographically and very
large country that has the ability to grow things domestically
and sell things domestically. And yes, when you think about
(24:25):
the value of high tech services for example, Google, Amazon,
the likes of them, that being US businesses, that that
helps as well.
Speaker 4 (24:33):
What this ignores, however, and why I'm trying to make
a point here.
Speaker 2 (24:37):
About you know, hey, this might not be that bad
for the economy, we're tariffs to be in place, but
it might be very bad for the stock market. And
I think it comes back to once again separating those two.
The economy is not the stock market, and the stock
market is not the economy. Let's take just purely trade
with Canada and think about the companies that are most
(24:58):
heavily affected by I trade tariffs on Canadian goods. Right,
If you have tariffs of twenty five percent on anything
imported from Canada into the United States, and those terraffs
get paid by the company that's doing the importing, because
that's how tariffs work. It's not paid by the Canadian
company that's exporting the good. It's paid by the American
company or the foreign company that's doing business in the
(25:20):
United States that's importing the good.
Speaker 4 (25:23):
Think about for a.
Speaker 2 (25:24):
Minute who those companies are that are doing the importing
for a moment here, and you can understand why it's
creating stock market volatility. It's Ford, it's Stilantis, it's General Motors,
it is food growers, it's a whole bunch of US
domiciled companies that just happen to do a lot of
business in Canada. And that's in part what the President's
(25:47):
trying to change is he doesn't want those US based
companies doing business there. But I think speaks to some
of the confusion that we're seeing out there, like why
are European stocks up ten percent this year? Why are
Canadian stocks doing well in the face of teriffs? And
the answer is it might be really bad for their economy.
Canada's pretty much been in a recession the last few years.
But when you think about Canada's largest public companies, Power,
(26:14):
the Hockey Company, the Royal Bank of Canada, Ye, not
doing a whole lot of exports to the United States.
Shopify it's an entirely service based payment system. Toronto, Dominion Bank,
TD Bank, Enbridge Energy. Okay, yeah, you've got one there
where they are going to be subject to tariffs. But
you take a look at this, and you know, Thompson Reuters,
(26:36):
these are not big companies that are exporting a whole
bunch of stuff to the United States that are going
to face massive increase in teriffs. When you think about
which companies are going to face that it's largely US
companies that happen to.
Speaker 4 (26:47):
Be doing business in these foreign countries.
Speaker 2 (26:49):
So again, it was an interesting conversation that I overheard
and kind of led me down this path of why
would US stocks which I don't know where they are today,
but you're to date down like four percent, whereas you've
got the rest of the developed world up a good
ten percent in the stock market.
Speaker 4 (27:04):
And I think this largely explains it a lot. Is
the companies who are most subjected to tariffs under these
plans or buy and large US companies, they are going
to face higher prices.
Speaker 3 (27:14):
Well, I take it even one step further, where it's
the US consumer that ultimately is going to feel yes,
the brunt of that, and that can impact the earnings
of all these publicly traded companies out there. If the
consumer's budget is constrained by the fact that vehicles are
going to potentially cost more, going to see an upticking
price or T shirts or whatever item you want to
(27:35):
throw out there, overall consumption could decrease, and that's why
you could see a challenging earnings environment for some of
these public companies out there. I think that's the largest
contributory factor amongst others on the stock market itself. Is
it was a very overpriced market too. We've covered that also.
Speaker 2 (27:51):
Look, and I'm not standing here saying do or don't
do this. One thing I will say is I think
the back and forth uncertainty on it, I think that's
a bad idea. Like I think conclusively, you know, if
you have tariffs in place, I don't know what the
impact is going to be. I don't think anybody does.
And if anybody's telling you they do, then they're full
of it. Because we haven't seen tariffs of this sort
(28:11):
since the nineteen forty, so nobody actually knows how it's
all going to play out. Will the jobs return to
the United States at a higher degree? Will we see
a manufacturing boom in the United States. I'm open to
the concept of it.
Speaker 3 (28:22):
I'm not even sure if I am, I'm highly skeptical.
Speaker 2 (28:25):
I should say yeah, But again I'm not certainly, and
I'm not saying that never do it right. What I
am saying is that very clearly, what CEOs are telling
you now is I'd be okay with the tariffs, but
I can't deal with the uncertainty of whether or not
I will have tariffs, And that's what I think this
administration is going to need to address and address quickly,
because that's the piece that is tougher to recover from.
(28:48):
Right If if you develop so much uncertainty that businesses
are simply unwilling to spend money, then you get a
real problem in the economy that's tougher to resolve from.
By just waving away tariffs or waving away some change,
then it becomes tougher to rebuild the economic success story.
Speaker 3 (29:04):
Yeah, it plays the devil's advocate to me expressing skepticism
as to whether or not manufacturing will be brought back
domestically with some of the tariff agenda. There needs to
be clear, concise plan as to what the tariffs are
going to look like. For companies, to your point, to
invest domestically to build up manufacturing capability, they need to
be assured that it is something that is going to
(29:25):
be worth investing in. And if the policy is going
to continually change, then you're just going to have companies
withhold investment until they get a clear sense of what
it's going to look like. And that's what this comes
down to, is getting a little more certainty here quick Break.
Speaker 2 (29:37):
When we come back, big changes over at the Social
Security Administration in terms of staffing. What has that meant
so far for recipients and those going to file? Quick
Break will be covered that next here on the Financial Exchange.
Speaker 1 (29:49):
If you missed any of today's show, catch up whenever
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Radio Network. Miss any of the show. Catch up at
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(30:11):
clicking the on demand I coon, where you'll find all
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and around the country. This is the Financial Exchange Radio Network.
Speaker 5 (30:26):
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Speaker 2 (31:11):
There's been a lot going on at Social Security Administration
over the last few months. We had the Social Security
Fairness Act that went into place back in January. Obviously
the normal cost of living adjustments. Elon Musk called social
Security a Ponzi scheme. There's been job cuts at the administration.
I think for the average person it can be a
little bit tough to navigate. Hey, what's the real news
(31:33):
here that might affect me and what's the noise when
it comes to Social Security. So let's start with the
easiest one first before we move into the tougher stuff.
The sourci Security Fairness Act eliminated what's called the government
pension offset and the windfall elimination provision if you worked
for a government in a job that did not require
(31:53):
you to pay in to Social Security. That could be
the Commonwealth of Massachusetts, a local town, parts of the
federal government, or even a foreign country. Let's say you
worked in the United Kingdom for a while and receive
a government pension from there that could offset your Social Security.
Those rules are now gone. You are not subject to
that anymore, and many recipients have started receiving payments already
(32:14):
on the calculation of what they are owed. From twenty
twenty four and now into twenty twenty five. Elon Musk
calling Social Security a Ponzi scheme and talking about cuts
there legitimate thing to be worried about, or.
Speaker 4 (32:29):
Just kind of loud talk that we should ignore.
Speaker 3 (32:33):
Loud talk that we should ignore.
Speaker 2 (32:34):
Yeah, yeah, that's kind of my conclusion as well. Like
I think that, you know, he will continue to attack
it from a staffing perspective, but it doesn't sound like
Elon Musk has a great solution to fixing what he
described as a Ponzi scheme, and any changes to it
must go through Congress. So I'm not immensely concerned about
Elon Musk forcing changes to the Social Security payment system
(32:58):
or you know, el ability for Social Security.
Speaker 3 (33:01):
We can all agree that changes need to be made
to it, but just not going.
Speaker 2 (33:05):
To be led by Elon. No, and I don't think
his perspective of it being a Ponzi scheme is going
to be influential on members of Congress. No, the tougher
question to answer is customer service. And look, for a
lot of people, they never need customer service from Social Security,
but sometimes you do. And here's where it's getting a
little bit tricky. Like the market Watch here interviewed somebody
(33:28):
who is dealing with an employer that screwed up their
pay systems and didn't either didn't record their payments into
Social Security for a couple of years or just didn't
make the payments into Social Security. And so it looks
like they didn't work for two years and their earnings
records all screwed up, and they have to supply W
two's and a whole bunch of basically proof that hey,
(33:49):
I did work, I did pay into Social Security for
these two years, even if my employer didn't cover it.
The answer that people are hearing is good luck, get
in line is kind of the answer on that one,
and I think that's the message that I have for
anyone trying to interact with folks. There's some scarier ones too,
like that that would be concerning and annoying, but you
would eventually get this problem solved if you had the
(34:11):
documentation on it, and they would pay you the money
that you were owed. The other ones that I'm hearing from, like, hey,
somebody hacked my Social Security account and change my direct deposit.
So far, they've been able to respond to that quickly
and lock your account down. But those are the ones
that I get worried about because that's a pretty common scam. Right, Hey,
can I redirect someone's tax return or someone's Social Security
(34:33):
payment to a different bank account and take those funds?
Speaker 4 (34:37):
Those are the ones that.
Speaker 2 (34:38):
You do want Social Security employees responding to responding to quickly,
and at least one case they did. But I am
hearing more and more that getting an appointment with Social
Security is now taking weeks. There's no real ability to
drop into a Social Security office, and I think that's
frustrating some beneficiaries.
Speaker 3 (34:55):
Medicare is another one, just to kind of be aware
of when you're applying for it. You want to look
to try and apply for it anywhere from two to
three months prior to you reaching that magic age sixty five,
So that's one thing to note there. If you have
lesser staff staffing there, the processing times on those applications
could slow. So it's something that you may want to
(35:16):
make sure that you're on top of and not leave
to the last minute.
Speaker 2 (35:19):
We know that you have questions about social security, and
when there are big changes going on at a program
this big to people's financial security and future, it can
add some apprehension into that decision making process, and frankly,
I think it leaves people open to making the wrong
decision when it comes to social security out of fear
(35:40):
about the program, uncertainty about it, about its customer service,
and just how it's going to wind up. If you're
wondering how you should change your social security plan or
how you should have a social security plan for the future,
please give the folks at arm Strong Advisory Group a call.
We work with our clients every day on questions like
pensions and social security and how they will contribute to
their larger financial plan and really how to take advantage
(36:03):
of those programs to make them work best for you.
If you have questions like that, give us a ring
at eight hundred three nine three four zero zero one
how to talk with you about your specifics. That number
again for the Armstrong Advisory Group eight hundred three nine
three four zero zero one.
Speaker 1 (36:19):
The proceeding was paid for by Armstrong Advisory Group, a
registered investment advisor. Nothing in the ad or in any
Armstrong guide a specific financial, legal or tax advice. Consult
your own financial tax and to state planning advisors before
making any investment decisions. Armstrong may contact you to offer
investment advisory services.
Speaker 2 (36:35):
Amazon planning to reshape their Alexa device business. The story
with Amazon's Alexa devices has been for years that they
are going to produce them and sell them at basically
no profit.
Speaker 4 (36:51):
We talk about the you know what are the small ones,
the dots that are around epos houses, and these these devices.
Speaker 2 (36:59):
The idea initial was, Hey, if we pop these into
people's homes, A will learn about them substantially, and b
maybe it'll make them more interested in buying Amazon goods
in the short term. Right, Like if I can just
talk to my Amazon speaker and say blah blah blah,
order me new toothpaste and then maybe I'll be a
(37:20):
more frequency buyer on these platforms.
Speaker 4 (37:23):
The answer is that hasn't worked out well.
Speaker 2 (37:26):
They've had no real uptake when it comes to things
like the Amazon Music platform that has integrated into these
at least in the paid versions of those things. And
so they're taking a second hard look at this business
to see how they go about monetizing it and offering
new products. And I'm here to say that I just
don't know that Amazon can do anything on the smart
device base that I'd be personally willing to pay for
(37:49):
the ring video doorbells as close as I get. And
they bought that business, they didn't develop it in house, right,
is that Yeah? That's Amazon, it is, right, Yeah, Like
I do pay for that service. I pay them a
monthly monitoring like I find that stuff useful. But when
it comes to these smart devices in my home, I
just don't know what perfection they're going to get to
that I would actually shell out money for it quick break,
(38:10):
but a lot more to cover, including big innovation potentially
out of a Chinese automaker that's next year in the
financial exchange,
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