October 27, 2025 • 38 mins
Chuck Zodda and Mike Armstrong discuss this week's massive earnings reports. Milei wins mandate for free-market revolution in Argentina's election. Latest US-China truce leaves fundamental issues unresolved. Why the Fed may lower rates slower than expected this year. More big companies bet they can still grow without hiring. Bill would limit number of self-checkout kiosks at Massachusetts grocery stores.
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Episode Transcript
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Speaker 1 (00:00):
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(00:42):
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(01:06):
and Mike Armstrong.
Speaker 2 (01:09):
Chuck, Mike and Tucker with you kicking off a major
week of earnings, probably the week of earnings for Q
three as you look at what is set up out
there and today nothing particularly you know, overly exciting. Yeah, sure,
if you're into Currig, doctor Pepper, hopefully not. At the
same time, they reported earnings before the bell today they
(01:31):
were fine, in line with expectations. But ultimately, you don't
have a single company with a market cap of one
hundred billion dollars or more reporting earnings today, and so yeah, well,
you know, you might personally be wondering, Hey, how is
you know, Avia's budget going to do today? It's a
five billion dollar company and it's not going to move
the markets the rest of this week, though, Dolly g Willkers,
(01:56):
We've got all kinds of action tomorrow. We've got Visa,
United Health, Booking Holdings, Royal Caribbean, Sherwin Williams, Corning, Ups, PayPal.
That's just a handful of the ones that are reporting.
Speaker 3 (02:09):
That gives you a pretty good insight into that phenomenon
we've been talking about with the top end consumer right
between Booking Holdings, Visa, like these companies really have something
to tell you about that state of the consumer.
Speaker 2 (02:21):
Totally ups what's going on with you know, shipping and
things like that. PayPal, tell me what you're seeing. You've
run a bunch of credit cards. Now you've got a bank, Like,
what's happening on that side of things. Wednesday we get
really heavy into the tech earnings, but also just again
a monster day overall, Microsoft, Meta and Alphabet all reporting.
Then we've got Caterpillar, We've got Verizon, We've got Boeing,
(02:44):
We've got CVS, we've got Starbucks, we got Chipotle. I mean,
if you can't learn what's happening with you know, households
and businesses after this, you're kind of missing the boat. Yeah,
you're not going to if that's not enough for you, though,
you say, okay, what's going on on Thursday? Do you
have anything interesting for me? Then yes, in fact we do.
We've got Apple, Amazon, MasterCard, Comcast, We've got let's see,
(03:11):
those are kind of the big ones. I mean, I
just I'm not sure the rest of these really rise
to the level of being sure overly interesting. But that's enough.
I mean, Apple and Amazon, I mean okay, fine, like
just alone is enough for me.
Speaker 3 (03:24):
To be clear, for markets in general, between Alphabet, Meta, Apple, Amazon,
and Microsoft, you're talking about fifteen trillion with a T
dollars worth in market capitalization that are reporting this week.
Speaker 2 (03:36):
Yeah, over two days, So that's that's five hundred right now.
That's the whole ball game.
Speaker 3 (03:41):
Yes, and video will come out a few weeks later,
but this is the week and they will have a
massive influence on the direction of markets overall.
Speaker 2 (03:52):
Now you might be sitting there saying, hum chuck, that's okay,
I'm not really interested in individual stock girnings. What do
we have for data? Not my government's closed. Government's closed.
Data is closed. We were supposed to get durable goods
orders this morning. We did not get durable goods orders
this morning. Tomorrow we're supposed to get case Shiller home
Price Index and FHFA Home Price Index. We will get
(04:14):
case Shiller, we will not get FHFA. On Wednesdays, F's
stands for federal one would imagine, you know, it's the
fuffa is how it's referred to in the biz. That
makes sense. Wednesday, we do have a FED meeting. I
think it's going to be one of the most boring
FED meetings we've had, just because the FED is almost
(04:35):
assuredly going to cut by a quarter percent, and I'm
not sure they're going to have much to tell us
because they haven't been getting the government data either.
Speaker 3 (04:44):
Yeah, the only questions that are going to exist are
how do you assess the economy without government data?
Speaker 2 (04:49):
What do you ask J Powell this week?
Speaker 1 (04:50):
Right?
Speaker 2 (04:52):
You know, like you're not gonna askhim about Argentina.
Speaker 3 (04:54):
Maybe we get a ton of questions about how the
building improvement project.
Speaker 2 (04:59):
Is going O day? What are you going as for Halloween? Yeah? Yeah,
that might be the most interesting. You know, like this
is kind of going to be it, So I think
you're kind of baked in there. On Thursday, we're supposed
to get first reading of Q three GDP not getting
it right. We're supposed to get initial and continuing jobless
claims not getting it. We were supposed to get PCE
(05:21):
prices not getting it. Okay, Like what does one do
with this Friday? We are supposed to get personal income
and spending not getting it, Employment Cost Index not getting it.
So there's really not much. The only major driving force
for data this week is going to be the FED,
(05:42):
and that's not really data that's just Ja Powell showing
up and saying I pressed the down button once. And
beyond that, I'm not sure that there's much on that side,
but there's enough in earnings that you don't really need
too much in the way government data to get excited
this week. It's just at a certain point what you'd
like to, you know, see that data. Maybe.
Speaker 3 (06:04):
So we're twenty seven days into the shutdown, you are
starting to see more in the way of flight delays.
I think you had eight thousand flight delays or cancelations yesterday,
which is about twenty percent of US flights yep, in
a pretty big increase over the prior week. So you're
starting to see some pressure coming from there. We're also
getting to the point now, Chuck, where.
Speaker 2 (06:22):
Actually, sorry, I overestimated it's forty thousand flights world it's
about forty five thousand worldwide. It's about twenty seven thousand
flights domestically, I believe.
Speaker 3 (06:31):
Okay, So we're starting to get to the points, not
only Chuck, where we are missing weekly data points that
can't be released. But let's imagine that the government reopened tomorrow,
we probably aren't getting it gonna happen because the House
is not in session, right, not going to happen in
the first place. But even if it did, we probably
wouldn't be getting our jobs report for the month of
(06:52):
October because the data wasn't collected.
Speaker 2 (06:54):
We might not get inflation reports.
Speaker 3 (06:56):
And so if you're wondering, like, how could this government
shutdown actually cloud things quite a bit, it would be
that the economy could be changing now and we might
not find out until December, hypothetically, because the releases that
would normally occur even if the government's open. You know,
what are you gonna do release the data and say
(07:16):
we didn't have anybody working so we couldn't collect the data.
Speaker 2 (07:20):
Right.
Speaker 3 (07:21):
It is a two part process. First you collect it
and analyze it, and then you release it to the
general public. It doesn't matter if the government's open by
the time you're supposed to release to the general public
if you didn't have time to collect it in the
first place.
Speaker 2 (07:32):
Yeah, and this is where we get into Okay. You know,
you start looking at like the Indeed Postings Index, and
you start looking at you know, the Paychecks Small business
Jobs Index to try to, you know, figure out what's
happening here. You start looking at things like, hey, what
are we seeing and tax withholding for Social Security and
fight attaxes and things like that, and you try to
(07:55):
piece together, you know, an idea based on it, but ultimately,
if you're not getting the same data point that you're
used to, it's just not as easy to tell what's happening.
So I think that as we sit here right now,
those supplemental data points do continue to point to a
weakening in the labor market. And so given the fact
(08:15):
that we got CPI data on Friday that was pretty
darn good. Not perfect, but like, if you're grading it out,
it's a solid B, I'll give it a solid BEE.
I hesitate to give it a B plus because anytime
you get point three percent in the headline, I don't
think you can go B plus on it because that's
a three and a half percent annualized inflation rature. But
(08:36):
you can give it a solid B and say core
CPI came in at point two, median came in at
point two, trimmed mean came in at point two. So
there's nothing in that Friday report that suggests the FED
is going to suddenly pivot and say no, we're now
more concerned about inflation, and so given that plus the
weakening of you know, some of this supplemental data on
(08:57):
the job side, you look at it and say, yeah,
I would be pretty shocked if the Fed does not
cut another quarter percent on Wednesday, right.
Speaker 3 (09:06):
But yeah, I mean I think the risk, Chuck, We've
got enough inflation data with this most recently released on
Friday that I think we can for the time being
at least put that to the back seat. And the
fact is we've been more concerned about job growth and
the labor market of the last few months, and that
(09:27):
is going to be the piece that we have very
little data on and risk not knowing what's going on
under the surface based on the government shutdown. So if
there's one piece of this on the government data piece
that concerns me, it is the labor market data and
the lack thereof.
Speaker 2 (09:41):
And by the way, currently the shutdown is into its
twenty seventh day at the moment. Prediction markets, if you
look at CALSHI right now, they've got the shutdown lasting
forty five point two days, the longest ever. Oh yeah,
the longest ever is thirty four. So if we get
to November fifth, with which is next Wednesday, then we're
(10:05):
part of history, Michael, record breaking territory. I mean you
and me aren't part of it, no, but we're seeing it.
Then if we get to Wednesday, which I don't want
to say is like a foregone conclusion, but it's it's
pretty likely. I mean again, the House is not in
session this week at all, and so you know, it's
(10:27):
just kind of like, okay, like here we are, so
I think there's a decent chance, Like if you don't
have something by next week, By like the end of
next week, it's tough for me to see this going
to Thanksgiving, just because no one wants Thanksgiving travel with
low levels of TSA agents and low levels of air
(10:51):
traffic controllers, right, So you kind of look at the
calendar and you're like, Okay, it's that week of the
tenth or the seventeenth that you maybe get this resolution.
And that falls right in that forty five day window,
which is why I think betting markets are kind of
circling that. Now we've kind of been in that range
for the last week or so, aside from that brief
period last Monday. Remember when I forget who it was
(11:13):
said they were hoping to get a vote on the deal.
Last week someone said that, and we were like, okay,
like betting markets aren't quite buying it, but yeah, they
bought it a little. Aside from that little optimism last Monday,
we've basically been in this range for the last you know,
seven ten days, everyone thinking, okay, it's going to be
about a forty five day shutdown. Quick break here. When
we return, we're going to talk Argentina next.
Speaker 1 (11:38):
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Speaker 4 (12:08):
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Speaker 2 (12:38):
All right, let's talk a little bit about Argentina. We're
gonna not really put on our Argentina expert hats because
we're not. But here is what we do know is
over the weekend, Javier Malay's party won almost forty percent
of the national vote, which more than doubles its representation
in the Argentinian Congress. So what this means. Remember about
(13:03):
a month ago, there was a vote, I forget exactly
where it was in Argentina, but the candidate aligned with
Malay's party came in far weaker than people were expecting.
It was in the Buenos and this is what kind
of triggered some of the concern about the Argentinian peso
and where things would go. So I think what this
likely does as it relates to US in the United States,
(13:26):
where look, let's be one hundred percent honest, the US
does not have like some huge trade relationship with Argentina
or anything along those lines. But we did just lend
Argentina twenty billion dollars through a currency swap and have
promised to raise another twenty billion. It takes some of
the short term potential for losses on that off the table,
(13:47):
simply because Malay's party is now going to basically be
in a position where, yes, they are not in you know,
the majority, but it gives them enough power to put
potentially veto any of the or reject any potential reforms
to the reforms that Malay has put in place to
(14:08):
this point, Whether or not any of this ends up
actually working out for Argentina, I have no idea, because
who knows what happens over the next couple of years.
But I think that in terms of the you know
why it matters for the US, had this election gone
against Malay, you probably would have seen significant additional pressure
(14:28):
on the Argentinian peso as early as today, and that
would have likely made those that swap line very likely
to be defaulted on.
Speaker 3 (14:38):
And President Trump probably said that if the election went
against Malay, then the United States would basically wash our
hands of the issue and step away.
Speaker 2 (14:46):
I don't know.
Speaker 3 (14:48):
I guess it would have been painted into a corner
where that the case, because it would have been a
situation where, to your point, that PESO might have sold off,
they might have started burning through the US cash and
we would have to decide whether we were doubling down
on that that pushes off that need. I think there
is likely still the strong desire for and need for
the additional twenty billion that was discussed with large US banks.
(15:08):
Whether or not they will get over the hump to
feel comfortable doing that, and have you know, enough of
an incentive to do so, is still an open question.
And look, the other big open question remains, how does
this benefit the United States? And you know there's been
discussion of agricultural trade and other pieces here, but does
(15:29):
it genuinely change the US influence in the region, Does it,
you know, put up some new type of guardrail against
Chinese influence. I think those are all open questions that
I don't see a ton.
Speaker 2 (15:43):
Of evidence for.
Speaker 3 (15:44):
And so I think generally speaking, if you are the
US taxpayer, good news over the weekend for this election.
But ambiguously yeah, yeah, but you know, very unclear as
to what happens next there, and like you said, kind
of throws an additional several month lifeline out to Argentina
in terms of continuing the policies of Malay, which again
(16:07):
are controversial and big changes compared to the last several decades.
Speaker 2 (16:13):
Yeah, the big thing. Look, next presidential election in Argentina
is going to be in two years, at the end
of October and twenty seven, and so it gives Malay
another two years to be able to try to prove yeah,
this is what is going to work for Argentina in
the long run. Had this one gone against him, there's
a pretty good chance that the Argentinian government would not have,
you know, continued to exist in its current form through
(16:35):
that time, because Malay would not have been able to
do what he wanted to and you know, probably run
into some debt problems pretty darn quickly, as you tend
to in Argentina. So I think that you've got the
next couple of years to see how this plays out
for you know, any of you listening wondering how does
this affect me? It just means that that twenty billion
dollars swap line, that twenty billion dollar loan that the
(16:57):
US is making Argentina much less likely to be defaulted
on in the short term. But we still don't know
the full outcome there. Yeah, I think that's fair to say.
Speaker 3 (17:06):
I would be fascinated in a comparison piece between the
point has been made by Mark Fandetti and others that
you know, one hundred years ago, these two countries, the
United States and Argentina, from an economics perspective, looked pretty similar. Yeah,
wealth per capita, income per capita looked very similar on paper.
And then you had the next hundred years that just developed.
Speaker 2 (17:28):
In a way where.
Speaker 3 (17:31):
For whatever reason, the US went in one direction and
Argentina went in a very different one. And you know,
people point to institutions, they point to corruption, they point
to all sorts of different things. But that piece is
very fascinating to me.
Speaker 2 (17:44):
I mean, some of it's probably just luck luck, Yeah, right,
Like how much how much of it is is luck
over the course of the last hundred years.
Speaker 3 (17:51):
It is a really really interesting case study. And I
mean how economies developed.
Speaker 2 (17:57):
You can I can personally think of at least like
three or four different situations where it's like, hey, if
this went differently, things would have turned out badly for
the US in the twentieth century, or things would have
turned out well for Argentina based on like a few
key events going just a little bit differently than they had. Right,
speaking of events that can go a little differently than
(18:19):
they have over the weekend, the US and China have
apparently agreed to a framework for a deal for at
least the second or third time this year. I go
back to I think it was May when we thought
we had a framework for a deal, and now we've
got a new framework for a deal. The things that
are likely to be we don't have specifics on any
(18:41):
of this yet, but the things that are likely to
be included in this that are being talked about are
a China resuming soybean purchases, potentially b China potentially starting
to reduce exports of fentanyl and fentanyl precursor to the
United States, both countries looking at reforming new port fees
(19:05):
for ships, and the Chinese side agreeing to potentially a
one year halt in any changes to their rare earth
exports before new export controls go into place. The reason
that I say potentially on all this is we still
don't have any specifics and are still waiting to know them.
We might later this week, it might take longer, but
(19:28):
these are the things being talked about quick Break. We've
got Wall Street Watch, and then we'll dig in a
little bit more on this when we return.
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 Network.
Speaker 4 (20:00):
Markets are beginning a significant week on tap well into
positive territory is Wall Street Await. It's a flurry of
big tech earnings, a FED meeting, and a pivotal meeting
between President Trump and Chinese President g on Thursday. Right now,
the DOO is up about a half a percent er
two hundred and fifty three points, SMP five hundred is
(20:21):
up nine tenths of one percent or sixty one points higher,
Nasdaq up one and a half percent now where three
hundred and forty seven points higher, Rusted two thousand is
up two thirds of one percent, Tenure Treasure reeled up
two basis points at four point zero two two percent,
and crude oil up about three tenths of one percent,
trading at sixty one dollars and sixty seven cents a
(20:43):
barrel rare earth stocks including MP Materials, Critical Metals, and
USA Rare Earth are seeing losses on the day after
US officials said they'd expect China to delay introducing export
controls on critical minerals as part of a broader trade deal.
Chip stocks, including IN Video, AMD and others are seeing
gains on the day following optimistic comments from both the
(21:05):
US and China following trade talks over the weekend. And
Videos up about two percent, while AMD shares are flat
at the moment. Some breaking news in the chip sector
after Qualcomm announced that it will release new AI accelerator chips.
Qualcomm is surging eighteen percent on that news. Meanwhile, shares
(21:26):
in Cured Doctor Pepper climbing six percent after the beverage
company beat third quarter revenue forecast and also raised its
full year guidance. Lululemon up four percent after the athletic
apparel maker said it was partnering with the NFL and
Fanatics to launch an apparel collection for all NFL teams.
And As for earnings this week, Visa and United Health
(21:48):
will report tomorrow. Wednesday, we'll see Microsoft, Alphabet, Meta and
Caterpillar report Thursday, Apple, Amazon, and MasterCard will post their
results and on Friday we'll see earnings from Exxon Mobile
and Chevron. I'm Tucker Silva and that is Wall Street Watch.
Speaker 2 (22:04):
So last segment towards the end, we noted that the
US and China appear to be, you know, inching closer
towards a framework of a deal. Actually just had you know,
like again you read stuff like on social media it's like, yeah,
like this is the fourth time that like we've had
one of these this year. So I do think, Look,
(22:26):
it's it's positive that at least in the short term,
it takes some of those bigger issues off the table potentially,
but we've seen these issues return time and time again.
Remember it was, you know, late in the first half
of the year when we had questions about rare Earth exports,
and then that came up again just a month or
(22:46):
so ago, and and so I guess the question is
on the stuff that really matters Rare Earth's, which is
you know one of them, are you going to see
actual progress made, not just in terms of, hey, we
could potentially sign something that says we're going to do
X y Z, but then also what's the follow through
from it? Remember, towards the end of President Trump's first term,
(23:09):
the Phase one trade deal with China was signed, which
by and large was a purchase order from China in
order to buy a bunch of American goods over a
fixed period of time. Mike, did China end up fulfilling
those promises? So it's not just can you get it
done in signing, but then can you enforce it? And
to this point we still don't have the details on
(23:30):
you know, exactly what this means, and you know, we
can't get to enforcement beyond there. But obviously, look, one
of the threats that was out there was, hey, you
could have these new one hundred percent tariffs on China
put in place on November first. Clearly, if you're moving
towards the framework of a deal or the framework of
a framework, then at least to take some of those
short term things off the table, which is why you
(23:52):
can have markets rally, you know. In response, the other
piece that just.
Speaker 3 (23:58):
Was important to me, so Tucker mentioned USA rare earth
off thirteen point seven percent today, MP materials off nearly
ten percent today. This is just a stark reminder that
whatever happens between the US and China in terms of
a trade deal. It would seem to me that a
piece of legislation on rare earth sourcing in the United
(24:21):
States and a few close allies nations is exceedingly important
right now because you have the hypothetical rumor that maybe
rare earths aren't going to be as heavily restricted as
they previously were, and these companies are volatile and small
enough that their stocks are going wild on this new
I mean again, I guess wild would be down like
fifty percent. You don't have that, But you have these
(24:43):
companies depreciating by ten and fourteen percent on the rumor
of something that might come in the future. These companies
need some very public commitments from Congress saying that, yeah,
you have a business model for the next thirty years.
Speaker 2 (24:59):
Right now they don't, no exactly. So I think ultimately
this US China framework, what it develops into, it could
be something important, it could be nothing, And I just
don't think we know enough right now to be able
to tell.
Speaker 3 (25:16):
Right I think one thing that would be immensely surprising
to both of us, Chuck, would be any sort of
verifiable long term commitment from either of these two from
either US or them, right like, yeah, purchases of agricultural goods.
But you know what I'd be surprised to hear is
some sort of commitment on something like that with a
(25:39):
real framework for what happens if it doesn't get fulfilled. Yeah,
because in all likelihood I think we sign something along
those lines, neither group really fulfills the promises, and it's
just a question of do we punish each other or
do we just continue with the status quo of being
slightly uncomfortably reliant on each other for different things.
Speaker 2 (26:00):
Do we want to talk any more about I don't
really have any further I don't have anything interesting to
say on this. I don't think keep saying conclusion.
Speaker 3 (26:12):
The main conclusion is that thirty years of history tell
you that the Chinese strategy is to wait out the
United States for either a change of administration or a
you know, focus on something else so that they can
get distracted from the issue of challenging China. And I
don't see any compelling reason why that wouldn't be the
strategy this time.
Speaker 2 (26:30):
Can we talk about the Federal Reserve then, then? Yeah, okay,
because they do have some interesting thoughts on them, or
at least I think they are our listeners can ultimately
decide yes, is it worth continuing to tune into peace
from barons? Sure? Sure piece from barons. The FED may
lower rates slower than markets are expecting in twenty twenty six.
(26:52):
Quite honestly, I'm not sure that they can lower them
that much slower and less inflation picks up. And what
I mean by this is, right now, we've got two
more FED meetings in twenty twenty five. As of right now,
there's a ninety three point nine percent chance that the
FED has cut by another half percent by the end
of the year, twenty five quarter percent this month and
(27:15):
a quarter percent in December. Beyond that, if you look
out to twenty twenty six and kind of the you know,
the end of twenty six, the last meeting next year
is going to be on twelve nine. What's being priced
in is basically like a ninety six percent chance of
additional cuts, with it being a toss up as to
(27:36):
whether it is greater than or fewer than two cuts.
So basically it's like, yeah, we're pricing in like two
more cuts in markets right now. Yeah.
Speaker 3 (27:45):
I think if markets were telling you that rates are
going to be two percent lower by the end of
next year.
Speaker 2 (27:50):
I would agree with this piece. They're just not right.
Speaker 3 (27:53):
I think the median case right now, based on betting markets,
is that rates are what may be a percentage point
lower than where they are, and we are fairly certain
that we're going to get two of these things this year.
So that doesn't seem like a far cry away from
what I would generally expect in this type of economy
where inflation is concerning but not alarming, and labor market
(28:15):
has showed significant deterioration. Yeah, I mean, we've got what
fifteen months before year end of twenty twenty six, it'd
be pretty surprising to me if rates weren't a full
percentage point lower.
Speaker 2 (28:27):
So I think ultimately, when looking at this, you think
about this in terms of this is kind of the
way that we think about things here basically all the time. Okay,
what's the situation where you get exactly what the market's
pricing in economy doesn't fall off a cliff, Inflation doesn't
(28:47):
become a problem, and in fact starts to get better
as you head into twenty twenty six, So like last
Friday's inflation report becomes more the norm, and you say, yeah,
the Fed could probably cut a couple time next year
without any major problem. And that's the path to getting
exactly what the market predicts. Cool, what's the way that
(29:09):
the market gives you that the economy gives you fewer
cuts than what's priced in. Hey, inflation doesn't really get
much better, maybe even gets a little bit worse, and
the economy takes off like a rocket ship because of
provisions from the One Big Beautiful Bill Act. And there's
no need for the Fed to cut next year. Okay,
(29:31):
that's that's possible. I could see that as you know,
a path we can take. What's the path to more
cuts that are being priced in? Things fall apart in
the next few months. Private credit is a big problem.
Housing continues to be a problem. Job loss becomes a
big problem, and you end up needing to take the
Fed funds rate down to two percent instead of you know,
four percent where it is today. If you're trying to
(29:54):
price out like the probabilities of these guys, we're not
getting economic data right now. I have no eye idea.
Twenty twenty six is the choose your own adventure economy.
It's we have no idea what we are going to
be getting there, and I think we have to remain
open to a wide, wide range of possibilities. What I
(30:15):
can tell you right now, based on the data that
we have gotten in the last six weeks or so,
it probably skews towards more cuts than are water being
priced in right now, because inflation is coming better than
we expected, and the jobs data that we do have
where we can glean from other sources is continuing to weaken,
(30:36):
and that would point towards more help being needed on
the rate side. The big question that I do think
looms out there is, hey, how effective can interest rates
be it managing this problem? Because we're clearly seeing even
though interest rates and mortgage rates have now come down
over the last six weeks, there's no more upward inflection
in mortgage applications. You're not seeing improved housing activity, and
(30:59):
so you know, housing is not a great transmission mechanism
in this cycle, at least towards more activity. And is
is cutting rates another you know, couple percent going to
do it if in fact, the economy you know, starts
to really struggle. I don't know, it's it's it's a
hard maybe in my opinion. So we'll see. But we're
(31:22):
also not there right now. You might not need that.
You might see the economy start to inflect back up
and boom, now you're in great shape and you don't
need more cuts. Like that's very possible too. To take
a quick break here when we return, anything more on
inflation or do we want to talk hiring. Let's go
to hiring stalk hiring, and then we'll talk housing in Austin,
Texas after this.
Speaker 1 (31:44):
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(32:06):
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Speaker 2 (32:17):
Piece from the Wall Street Journal that really captures the
zeitgeist of the current business cycle. More big companies bet
they can still grow without hiring. And this is like
you see all these announcements, you know, whether it's Walmart,
whether it's JP Morgan, whether it's Amazon saying yeah, we
(32:38):
want to grow, but we're gonna do it without growing headcount,
which is something that we have not seen before in
the American economy and I would argue we're not seeing
it right now either. What's the what's the work schedule
that's making straight through AI right now? I don't even
(32:59):
know what that is.
Speaker 3 (33:00):
The nine nine refers to the nine am to nine pm,
six days a week schedule. Yeah, that's a crappy schedule, yes,
and it originated in China's tech industry.
Speaker 2 (33:10):
And my point is just.
Speaker 3 (33:13):
I'm unconvinced that we are seeing any massive productivity growth
right now. I think we are seeing this pressure on
don't hire, we want to grow without hiring new people.
But I'm also seeing immense new pressure put on employees
to be more productive and to work longer hours. And
so I have a tough time figuring out, Hey, are
we actually seeing a big productivity boom right now? Is
(33:35):
it because of artificial intelligence and CANNA continue or did
things get so loose in terms of employment back in
twenty twenty twenty one that employers are feeling like they
have the leverage and are really pressing them to work
longer hours.
Speaker 2 (33:50):
Be more productive.
Speaker 3 (33:52):
And I you know, I'm using that word productivity here
when I'm describing all of this, but so much of
this is being point to that is AI is going
to revolutionize things, and I'm just not willing to say
it until I see it.
Speaker 2 (34:05):
No, but I do think, like, if you look at
what we're going through right now in the US economy,
companies are growing without raising headcount. I mean, yeah again
the last three months that we have for jobs data,
twenty nine thousand jobs a month added according to the
BLS data. And they're growing their profits and profits are
moving up. Yeah. Now again because this is more big
(34:26):
companies as the headline. If you are a small firm,
I don't know that you're necessarily seeing that you maybe
you may not be, but like in the aggregate, it's
not like we look at the Russell two thousand and
we're like, wow, look at the productivity and they're cutting
head count. Like no, that's it's not what we're seeing.
Speaker 3 (34:42):
So such is unique and weird during a market cycle
like this because generally speaking, when when companies talk about
bringing on some new, big innovative thing, they're talking about
raising headcount along with those announcements, yes, and when their
stock price is getting killed and they're talking about cutting
head counts, And we have kind of the opposite thing
(35:03):
going on here right We're reaching all to all new
highs in the stock market. Companies are beating earnings and
then also saying and here's how we intend to do
this with fewer people in the future.
Speaker 4 (35:13):
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Speaker 1 (36:06):
The proceeding was paid for and the views expressed are
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Speaker 2 (36:16):
File this one under legislation that I don't think is
going to have the effect that you intend it to. Uh.
There is a bill that is penning in the Massachusetts
state legislature that would limit the number of self check
self checkout kiosks at grocery stores in Massachusetts. So it
looks like really nothing better for you to do. It
(36:37):
looks like the framework on this is that it would
limit grocers to eight self service checkout stations operating at
any one time per location, and grocers with self checkout
stations will have a minimum of one manual checkout station
operating for every two self checkout stations operating.
Speaker 3 (36:54):
So a few thanks on this. Hold on you have
to have one manual one per for every two. Oh man,
that like Costco and BJS are screwed, Yes, like literally screw.
Speaker 2 (37:05):
But when I go to BJ's to buy groceries, there
are eight self checkout lines and one person one. So
a couple things on this. The first is this directly
goes against like improve productivity, because if you can do
more with less, that's what productivity is. Now, my first
job ever was at a grocery store as a cashier,
so I know what the job entails. I worked there
(37:25):
for I don't know, it was a couple of years,
I think, so, Like it wasn't just you know, one
weekend and I called it quits. Like I know what
the job is and what it isn't. And here's the thing.
There are times when I want to have someone help
me bagging stuff because I got a big load of
whatever and it's a huge pain in yaudia? Are there
other times I'm like, no, Like I don't want that.
(37:46):
But ultimately, why does this state think it has the
right number of self checkout lines that should operate? And
b is this trying to predict protect like check out uh,
you know, cashier jobs? Is that what we're trying to
do here? Because if that's the case, Okay, did in
the state of Massachusetts get rid of all toll boots
in order to move to the automated tolls? And gee,
(38:09):
isn't it a lot better not having to sit in
toll traffic protecting obsolete jobs?
Speaker 3 (38:14):
Which check out person is not yet but just foolhardy
quick break here.
Speaker 2 (38:18):
Hour two coming up in a bit
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(01:06):
and Mike Armstrong.
Speaker 2 (01:09):
Chuck, Mike and Tucker with you kicking off a major
week of earnings, probably the week of earnings for Q
three as you look at what is set up out
there and today nothing particularly you know, overly exciting. Yeah, sure,
if you're into Currig, doctor Pepper, hopefully not. At the
same time, they reported earnings before the bell today they
(01:31):
were fine, in line with expectations. But ultimately, you don't
have a single company with a market cap of one
hundred billion dollars or more reporting earnings today, and so yeah, well,
you know, you might personally be wondering, Hey, how is
you know, Avia's budget going to do today? It's a
five billion dollar company and it's not going to move
the markets the rest of this week, though, Dolly g Willkers,
(01:56):
We've got all kinds of action tomorrow. We've got Visa,
United Health, Booking Holdings, Royal Caribbean, Sherwin Williams, Corning, Ups, PayPal.
That's just a handful of the ones that are reporting.
Speaker 3 (02:09):
That gives you a pretty good insight into that phenomenon
we've been talking about with the top end consumer right
between Booking Holdings, Visa, like these companies really have something
to tell you about that state of the consumer.
Speaker 2 (02:21):
Totally ups what's going on with you know, shipping and
things like that. PayPal, tell me what you're seeing. You've
run a bunch of credit cards. Now you've got a bank, Like,
what's happening on that side of things. Wednesday we get
really heavy into the tech earnings, but also just again
a monster day overall, Microsoft, Meta and Alphabet all reporting.
Then we've got Caterpillar, We've got Verizon, We've got Boeing,
(02:44):
We've got CVS, we've got Starbucks, we got Chipotle. I mean,
if you can't learn what's happening with you know, households
and businesses after this, you're kind of missing the boat. Yeah,
you're not going to if that's not enough for you, though,
you say, okay, what's going on on Thursday? Do you
have anything interesting for me? Then yes, in fact we do.
We've got Apple, Amazon, MasterCard, Comcast, We've got let's see,
(03:11):
those are kind of the big ones. I mean, I
just I'm not sure the rest of these really rise
to the level of being sure overly interesting. But that's enough.
I mean, Apple and Amazon, I mean okay, fine, like
just alone is enough for me.
Speaker 3 (03:24):
To be clear, for markets in general, between Alphabet, Meta, Apple, Amazon,
and Microsoft, you're talking about fifteen trillion with a T
dollars worth in market capitalization that are reporting this week.
Speaker 2 (03:36):
Yeah, over two days, So that's that's five hundred right now.
That's the whole ball game.
Speaker 3 (03:41):
Yes, and video will come out a few weeks later,
but this is the week and they will have a
massive influence on the direction of markets overall.
Speaker 2 (03:52):
Now you might be sitting there saying, hum chuck, that's okay,
I'm not really interested in individual stock girnings. What do
we have for data? Not my government's closed. Government's closed.
Data is closed. We were supposed to get durable goods
orders this morning. We did not get durable goods orders
this morning. Tomorrow we're supposed to get case Shiller home
Price Index and FHFA Home Price Index. We will get
(04:14):
case Shiller, we will not get FHFA. On Wednesdays, F's
stands for federal one would imagine, you know, it's the
fuffa is how it's referred to in the biz. That
makes sense. Wednesday, we do have a FED meeting. I
think it's going to be one of the most boring
FED meetings we've had, just because the FED is almost
(04:35):
assuredly going to cut by a quarter percent, and I'm
not sure they're going to have much to tell us
because they haven't been getting the government data either.
Speaker 3 (04:44):
Yeah, the only questions that are going to exist are
how do you assess the economy without government data?
Speaker 2 (04:49):
What do you ask J Powell this week?
Speaker 1 (04:50):
Right?
Speaker 2 (04:52):
You know, like you're not gonna askhim about Argentina.
Speaker 3 (04:54):
Maybe we get a ton of questions about how the
building improvement project.
Speaker 2 (04:59):
Is going O day? What are you going as for Halloween? Yeah? Yeah,
that might be the most interesting. You know, like this
is kind of going to be it, So I think
you're kind of baked in there. On Thursday, we're supposed
to get first reading of Q three GDP not getting
it right. We're supposed to get initial and continuing jobless
claims not getting it. We were supposed to get PCE
(05:21):
prices not getting it. Okay, Like what does one do
with this Friday? We are supposed to get personal income
and spending not getting it, Employment Cost Index not getting it.
So there's really not much. The only major driving force
for data this week is going to be the FED,
(05:42):
and that's not really data that's just Ja Powell showing
up and saying I pressed the down button once. And
beyond that, I'm not sure that there's much on that side,
but there's enough in earnings that you don't really need
too much in the way government data to get excited
this week. It's just at a certain point what you'd
like to, you know, see that data. Maybe.
Speaker 3 (06:04):
So we're twenty seven days into the shutdown, you are
starting to see more in the way of flight delays.
I think you had eight thousand flight delays or cancelations yesterday,
which is about twenty percent of US flights yep, in
a pretty big increase over the prior week. So you're
starting to see some pressure coming from there. We're also
getting to the point now, Chuck, where.
Speaker 2 (06:22):
Actually, sorry, I overestimated it's forty thousand flights world it's
about forty five thousand worldwide. It's about twenty seven thousand
flights domestically, I believe.
Speaker 3 (06:31):
Okay, So we're starting to get to the points, not
only Chuck, where we are missing weekly data points that
can't be released. But let's imagine that the government reopened tomorrow,
we probably aren't getting it gonna happen because the House
is not in session, right, not going to happen in
the first place. But even if it did, we probably
wouldn't be getting our jobs report for the month of
(06:52):
October because the data wasn't collected.
Speaker 2 (06:54):
We might not get inflation reports.
Speaker 3 (06:56):
And so if you're wondering, like, how could this government
shutdown actually cloud things quite a bit, it would be
that the economy could be changing now and we might
not find out until December, hypothetically, because the releases that
would normally occur even if the government's open. You know,
what are you gonna do release the data and say
(07:16):
we didn't have anybody working so we couldn't collect the data.
Speaker 2 (07:20):
Right.
Speaker 3 (07:21):
It is a two part process. First you collect it
and analyze it, and then you release it to the
general public. It doesn't matter if the government's open by
the time you're supposed to release to the general public
if you didn't have time to collect it in the
first place.
Speaker 2 (07:32):
Yeah, and this is where we get into Okay. You know,
you start looking at like the Indeed Postings Index, and
you start looking at you know, the Paychecks Small business
Jobs Index to try to, you know, figure out what's
happening here. You start looking at things like, hey, what
are we seeing and tax withholding for Social Security and
fight attaxes and things like that, and you try to
(07:55):
piece together, you know, an idea based on it, but ultimately,
if you're not getting the same data point that you're
used to, it's just not as easy to tell what's happening.
So I think that as we sit here right now,
those supplemental data points do continue to point to a
weakening in the labor market. And so given the fact
(08:15):
that we got CPI data on Friday that was pretty
darn good. Not perfect, but like, if you're grading it out,
it's a solid B, I'll give it a solid BEE.
I hesitate to give it a B plus because anytime
you get point three percent in the headline, I don't
think you can go B plus on it because that's
a three and a half percent annualized inflation rature. But
(08:36):
you can give it a solid B and say core
CPI came in at point two, median came in at
point two, trimmed mean came in at point two. So
there's nothing in that Friday report that suggests the FED
is going to suddenly pivot and say no, we're now
more concerned about inflation, and so given that plus the
weakening of you know, some of this supplemental data on
(08:57):
the job side, you look at it and say, yeah,
I would be pretty shocked if the Fed does not
cut another quarter percent on Wednesday, right.
Speaker 3 (09:06):
But yeah, I mean I think the risk, Chuck, We've
got enough inflation data with this most recently released on
Friday that I think we can for the time being
at least put that to the back seat. And the
fact is we've been more concerned about job growth and
the labor market of the last few months, and that
(09:27):
is going to be the piece that we have very
little data on and risk not knowing what's going on
under the surface based on the government shutdown. So if
there's one piece of this on the government data piece
that concerns me, it is the labor market data and
the lack thereof.
Speaker 2 (09:41):
And by the way, currently the shutdown is into its
twenty seventh day at the moment. Prediction markets, if you
look at CALSHI right now, they've got the shutdown lasting
forty five point two days, the longest ever. Oh yeah,
the longest ever is thirty four. So if we get
to November fifth, with which is next Wednesday, then we're
(10:05):
part of history, Michael, record breaking territory. I mean you
and me aren't part of it, no, but we're seeing it.
Then if we get to Wednesday, which I don't want
to say is like a foregone conclusion, but it's it's
pretty likely. I mean again, the House is not in
session this week at all, and so you know, it's
(10:27):
just kind of like, okay, like here we are, so
I think there's a decent chance, Like if you don't
have something by next week, By like the end of
next week, it's tough for me to see this going
to Thanksgiving, just because no one wants Thanksgiving travel with
low levels of TSA agents and low levels of air
(10:51):
traffic controllers, right, So you kind of look at the
calendar and you're like, Okay, it's that week of the
tenth or the seventeenth that you maybe get this resolution.
And that falls right in that forty five day window,
which is why I think betting markets are kind of
circling that. Now we've kind of been in that range
for the last week or so, aside from that brief
period last Monday. Remember when I forget who it was
(11:13):
said they were hoping to get a vote on the deal.
Last week someone said that, and we were like, okay,
like betting markets aren't quite buying it, but yeah, they
bought it a little. Aside from that little optimism last Monday,
we've basically been in this range for the last you know,
seven ten days, everyone thinking, okay, it's going to be
about a forty five day shutdown. Quick break here. When
we return, we're going to talk Argentina next.
Speaker 1 (11:38):
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Speaker 4 (12:08):
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Speaker 2 (12:38):
All right, let's talk a little bit about Argentina. We're
gonna not really put on our Argentina expert hats because
we're not. But here is what we do know is
over the weekend, Javier Malay's party won almost forty percent
of the national vote, which more than doubles its representation
in the Argentinian Congress. So what this means. Remember about
(13:03):
a month ago, there was a vote, I forget exactly
where it was in Argentina, but the candidate aligned with
Malay's party came in far weaker than people were expecting.
It was in the Buenos and this is what kind
of triggered some of the concern about the Argentinian peso
and where things would go. So I think what this
likely does as it relates to US in the United States,
(13:26):
where look, let's be one hundred percent honest, the US
does not have like some huge trade relationship with Argentina
or anything along those lines. But we did just lend
Argentina twenty billion dollars through a currency swap and have
promised to raise another twenty billion. It takes some of
the short term potential for losses on that off the table,
(13:47):
simply because Malay's party is now going to basically be
in a position where, yes, they are not in you know,
the majority, but it gives them enough power to put
potentially veto any of the or reject any potential reforms
to the reforms that Malay has put in place to
(14:08):
this point, Whether or not any of this ends up
actually working out for Argentina, I have no idea, because
who knows what happens over the next couple of years.
But I think that in terms of the you know
why it matters for the US, had this election gone
against Malay, you probably would have seen significant additional pressure
(14:28):
on the Argentinian peso as early as today, and that
would have likely made those that swap line very likely
to be defaulted on.
Speaker 3 (14:38):
And President Trump probably said that if the election went
against Malay, then the United States would basically wash our
hands of the issue and step away.
Speaker 2 (14:46):
I don't know.
Speaker 3 (14:48):
I guess it would have been painted into a corner
where that the case, because it would have been a
situation where, to your point, that PESO might have sold off,
they might have started burning through the US cash and
we would have to decide whether we were doubling down
on that that pushes off that need. I think there
is likely still the strong desire for and need for
the additional twenty billion that was discussed with large US banks.
(15:08):
Whether or not they will get over the hump to
feel comfortable doing that, and have you know, enough of
an incentive to do so, is still an open question.
And look, the other big open question remains, how does
this benefit the United States? And you know there's been
discussion of agricultural trade and other pieces here, but does
(15:29):
it genuinely change the US influence in the region, Does it,
you know, put up some new type of guardrail against
Chinese influence. I think those are all open questions that
I don't see a ton.
Speaker 2 (15:43):
Of evidence for.
Speaker 3 (15:44):
And so I think generally speaking, if you are the
US taxpayer, good news over the weekend for this election.
But ambiguously yeah, yeah, but you know, very unclear as
to what happens next there, and like you said, kind
of throws an additional several month lifeline out to Argentina
in terms of continuing the policies of Malay, which again
(16:07):
are controversial and big changes compared to the last several decades.
Speaker 2 (16:13):
Yeah, the big thing. Look, next presidential election in Argentina
is going to be in two years, at the end
of October and twenty seven, and so it gives Malay
another two years to be able to try to prove yeah,
this is what is going to work for Argentina in
the long run. Had this one gone against him, there's
a pretty good chance that the Argentinian government would not have,
you know, continued to exist in its current form through
(16:35):
that time, because Malay would not have been able to
do what he wanted to and you know, probably run
into some debt problems pretty darn quickly, as you tend
to in Argentina. So I think that you've got the
next couple of years to see how this plays out
for you know, any of you listening wondering how does
this affect me? It just means that that twenty billion
dollars swap line, that twenty billion dollar loan that the
(16:57):
US is making Argentina much less likely to be defaulted
on in the short term. But we still don't know
the full outcome there. Yeah, I think that's fair to say.
Speaker 3 (17:06):
I would be fascinated in a comparison piece between the
point has been made by Mark Fandetti and others that
you know, one hundred years ago, these two countries, the
United States and Argentina, from an economics perspective, looked pretty similar. Yeah,
wealth per capita, income per capita looked very similar on paper.
And then you had the next hundred years that just developed.
Speaker 2 (17:28):
In a way where.
Speaker 3 (17:31):
For whatever reason, the US went in one direction and
Argentina went in a very different one. And you know,
people point to institutions, they point to corruption, they point
to all sorts of different things. But that piece is
very fascinating to me.
Speaker 2 (17:44):
I mean, some of it's probably just luck luck, Yeah, right,
Like how much how much of it is is luck
over the course of the last hundred years.
Speaker 3 (17:51):
It is a really really interesting case study. And I
mean how economies developed.
Speaker 2 (17:57):
You can I can personally think of at least like
three or four different situations where it's like, hey, if
this went differently, things would have turned out badly for
the US in the twentieth century, or things would have
turned out well for Argentina based on like a few
key events going just a little bit differently than they had. Right,
speaking of events that can go a little differently than
(18:19):
they have over the weekend, the US and China have
apparently agreed to a framework for a deal for at
least the second or third time this year. I go
back to I think it was May when we thought
we had a framework for a deal, and now we've
got a new framework for a deal. The things that
are likely to be we don't have specifics on any
(18:41):
of this yet, but the things that are likely to
be included in this that are being talked about are
a China resuming soybean purchases, potentially b China potentially starting
to reduce exports of fentanyl and fentanyl precursor to the
United States, both countries looking at reforming new port fees
(19:05):
for ships, and the Chinese side agreeing to potentially a
one year halt in any changes to their rare earth
exports before new export controls go into place. The reason
that I say potentially on all this is we still
don't have any specifics and are still waiting to know them.
We might later this week, it might take longer, but
(19:28):
these are the things being talked about quick Break. We've
got Wall Street Watch, and then we'll dig in a
little bit more on this when we return.
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 Network.
Speaker 4 (20:00):
Markets are beginning a significant week on tap well into
positive territory is Wall Street Await. It's a flurry of
big tech earnings, a FED meeting, and a pivotal meeting
between President Trump and Chinese President g on Thursday. Right now,
the DOO is up about a half a percent er
two hundred and fifty three points, SMP five hundred is
(20:21):
up nine tenths of one percent or sixty one points higher,
Nasdaq up one and a half percent now where three
hundred and forty seven points higher, Rusted two thousand is
up two thirds of one percent, Tenure Treasure reeled up
two basis points at four point zero two two percent,
and crude oil up about three tenths of one percent,
trading at sixty one dollars and sixty seven cents a
(20:43):
barrel rare earth stocks including MP Materials, Critical Metals, and
USA Rare Earth are seeing losses on the day after
US officials said they'd expect China to delay introducing export
controls on critical minerals as part of a broader trade deal.
Chip stocks, including IN Video, AMD and others are seeing
gains on the day following optimistic comments from both the
(21:05):
US and China following trade talks over the weekend. And
Videos up about two percent, while AMD shares are flat
at the moment. Some breaking news in the chip sector
after Qualcomm announced that it will release new AI accelerator chips.
Qualcomm is surging eighteen percent on that news. Meanwhile, shares
(21:26):
in Cured Doctor Pepper climbing six percent after the beverage
company beat third quarter revenue forecast and also raised its
full year guidance. Lululemon up four percent after the athletic
apparel maker said it was partnering with the NFL and
Fanatics to launch an apparel collection for all NFL teams.
And As for earnings this week, Visa and United Health
(21:48):
will report tomorrow. Wednesday, we'll see Microsoft, Alphabet, Meta and
Caterpillar report Thursday, Apple, Amazon, and MasterCard will post their
results and on Friday we'll see earnings from Exxon Mobile
and Chevron. I'm Tucker Silva and that is Wall Street Watch.
Speaker 2 (22:04):
So last segment towards the end, we noted that the
US and China appear to be, you know, inching closer
towards a framework of a deal. Actually just had you know,
like again you read stuff like on social media it's like, yeah,
like this is the fourth time that like we've had
one of these this year. So I do think, Look,
(22:26):
it's it's positive that at least in the short term,
it takes some of those bigger issues off the table potentially,
but we've seen these issues return time and time again.
Remember it was, you know, late in the first half
of the year when we had questions about rare Earth exports,
and then that came up again just a month or
(22:46):
so ago, and and so I guess the question is
on the stuff that really matters Rare Earth's, which is
you know one of them, are you going to see
actual progress made, not just in terms of, hey, we
could potentially sign something that says we're going to do
X y Z, but then also what's the follow through
from it? Remember, towards the end of President Trump's first term,
(23:09):
the Phase one trade deal with China was signed, which
by and large was a purchase order from China in
order to buy a bunch of American goods over a
fixed period of time. Mike, did China end up fulfilling
those promises? So it's not just can you get it
done in signing, but then can you enforce it? And
to this point we still don't have the details on
(23:30):
you know, exactly what this means, and you know, we
can't get to enforcement beyond there. But obviously, look, one
of the threats that was out there was, hey, you
could have these new one hundred percent tariffs on China
put in place on November first. Clearly, if you're moving
towards the framework of a deal or the framework of
a framework, then at least to take some of those
short term things off the table, which is why you
(23:52):
can have markets rally, you know. In response, the other
piece that just.
Speaker 3 (23:58):
Was important to me, so Tucker mentioned USA rare earth
off thirteen point seven percent today, MP materials off nearly
ten percent today. This is just a stark reminder that
whatever happens between the US and China in terms of
a trade deal. It would seem to me that a
piece of legislation on rare earth sourcing in the United
(24:21):
States and a few close allies nations is exceedingly important
right now because you have the hypothetical rumor that maybe
rare earths aren't going to be as heavily restricted as
they previously were, and these companies are volatile and small
enough that their stocks are going wild on this new
I mean again, I guess wild would be down like
fifty percent. You don't have that, But you have these
(24:43):
companies depreciating by ten and fourteen percent on the rumor
of something that might come in the future. These companies
need some very public commitments from Congress saying that, yeah,
you have a business model for the next thirty years.
Speaker 2 (24:59):
Right now they don't, no exactly. So I think ultimately
this US China framework, what it develops into, it could
be something important, it could be nothing, And I just
don't think we know enough right now to be able
to tell.
Speaker 3 (25:16):
Right I think one thing that would be immensely surprising
to both of us, Chuck, would be any sort of
verifiable long term commitment from either of these two from
either US or them, right like, yeah, purchases of agricultural goods.
But you know what I'd be surprised to hear is
some sort of commitment on something like that with a
(25:39):
real framework for what happens if it doesn't get fulfilled. Yeah,
because in all likelihood I think we sign something along
those lines, neither group really fulfills the promises, and it's
just a question of do we punish each other or
do we just continue with the status quo of being
slightly uncomfortably reliant on each other for different things.
Speaker 2 (26:00):
Do we want to talk any more about I don't
really have any further I don't have anything interesting to
say on this. I don't think keep saying conclusion.
Speaker 3 (26:12):
The main conclusion is that thirty years of history tell
you that the Chinese strategy is to wait out the
United States for either a change of administration or a
you know, focus on something else so that they can
get distracted from the issue of challenging China. And I
don't see any compelling reason why that wouldn't be the
strategy this time.
Speaker 2 (26:30):
Can we talk about the Federal Reserve then, then? Yeah, okay,
because they do have some interesting thoughts on them, or
at least I think they are our listeners can ultimately
decide yes, is it worth continuing to tune into peace
from barons? Sure? Sure piece from barons. The FED may
lower rates slower than markets are expecting in twenty twenty six.
(26:52):
Quite honestly, I'm not sure that they can lower them
that much slower and less inflation picks up. And what
I mean by this is, right now, we've got two
more FED meetings in twenty twenty five. As of right now,
there's a ninety three point nine percent chance that the
FED has cut by another half percent by the end
of the year, twenty five quarter percent this month and
(27:15):
a quarter percent in December. Beyond that, if you look
out to twenty twenty six and kind of the you know,
the end of twenty six, the last meeting next year
is going to be on twelve nine. What's being priced
in is basically like a ninety six percent chance of
additional cuts, with it being a toss up as to
(27:36):
whether it is greater than or fewer than two cuts.
So basically it's like, yeah, we're pricing in like two
more cuts in markets right now. Yeah.
Speaker 3 (27:45):
I think if markets were telling you that rates are
going to be two percent lower by the end of
next year.
Speaker 2 (27:50):
I would agree with this piece. They're just not right.
Speaker 3 (27:53):
I think the median case right now, based on betting markets,
is that rates are what may be a percentage point
lower than where they are, and we are fairly certain
that we're going to get two of these things this year.
So that doesn't seem like a far cry away from
what I would generally expect in this type of economy
where inflation is concerning but not alarming, and labor market
(28:15):
has showed significant deterioration. Yeah, I mean, we've got what
fifteen months before year end of twenty twenty six, it'd
be pretty surprising to me if rates weren't a full
percentage point lower.
Speaker 2 (28:27):
So I think ultimately, when looking at this, you think
about this in terms of this is kind of the
way that we think about things here basically all the time. Okay,
what's the situation where you get exactly what the market's
pricing in economy doesn't fall off a cliff, Inflation doesn't
(28:47):
become a problem, and in fact starts to get better
as you head into twenty twenty six, So like last
Friday's inflation report becomes more the norm, and you say, yeah,
the Fed could probably cut a couple time next year
without any major problem. And that's the path to getting
exactly what the market predicts. Cool, what's the way that
(29:09):
the market gives you that the economy gives you fewer
cuts than what's priced in. Hey, inflation doesn't really get
much better, maybe even gets a little bit worse, and
the economy takes off like a rocket ship because of
provisions from the One Big Beautiful Bill Act. And there's
no need for the Fed to cut next year. Okay,
(29:31):
that's that's possible. I could see that as you know,
a path we can take. What's the path to more
cuts that are being priced in? Things fall apart in
the next few months. Private credit is a big problem.
Housing continues to be a problem. Job loss becomes a
big problem, and you end up needing to take the
Fed funds rate down to two percent instead of you know,
four percent where it is today. If you're trying to
(29:54):
price out like the probabilities of these guys, we're not
getting economic data right now. I have no eye idea.
Twenty twenty six is the choose your own adventure economy.
It's we have no idea what we are going to
be getting there, and I think we have to remain
open to a wide, wide range of possibilities. What I
(30:15):
can tell you right now, based on the data that
we have gotten in the last six weeks or so,
it probably skews towards more cuts than are water being
priced in right now, because inflation is coming better than
we expected, and the jobs data that we do have
where we can glean from other sources is continuing to weaken,
(30:36):
and that would point towards more help being needed on
the rate side. The big question that I do think
looms out there is, hey, how effective can interest rates
be it managing this problem? Because we're clearly seeing even
though interest rates and mortgage rates have now come down
over the last six weeks, there's no more upward inflection
in mortgage applications. You're not seeing improved housing activity, and
(30:59):
so you know, housing is not a great transmission mechanism
in this cycle, at least towards more activity. And is
is cutting rates another you know, couple percent going to
do it if in fact, the economy you know, starts
to really struggle. I don't know, it's it's it's a
hard maybe in my opinion. So we'll see. But we're
(31:22):
also not there right now. You might not need that.
You might see the economy start to inflect back up
and boom, now you're in great shape and you don't
need more cuts. Like that's very possible too. To take
a quick break here when we return, anything more on
inflation or do we want to talk hiring. Let's go
to hiring stalk hiring, and then we'll talk housing in Austin,
Texas after this.
Speaker 1 (31:44):
The Financial Exchange streams live on YouTube. Like our page
and stay up to date on breaking business news all
morning Long. Base is the Financial Exchange Radio Network. Miss
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leave us a five star review. This is the Financial
(32:06):
Exchange Radio Network.
Speaker 2 (32:17):
Piece from the Wall Street Journal that really captures the
zeitgeist of the current business cycle. More big companies bet
they can still grow without hiring. And this is like
you see all these announcements, you know, whether it's Walmart,
whether it's JP Morgan, whether it's Amazon saying yeah, we
(32:38):
want to grow, but we're gonna do it without growing headcount,
which is something that we have not seen before in
the American economy and I would argue we're not seeing
it right now either. What's the what's the work schedule
that's making straight through AI right now? I don't even
(32:59):
know what that is.
Speaker 3 (33:00):
The nine nine refers to the nine am to nine pm,
six days a week schedule. Yeah, that's a crappy schedule, yes,
and it originated in China's tech industry.
Speaker 2 (33:10):
And my point is just.
Speaker 3 (33:13):
I'm unconvinced that we are seeing any massive productivity growth
right now. I think we are seeing this pressure on
don't hire, we want to grow without hiring new people.
But I'm also seeing immense new pressure put on employees
to be more productive and to work longer hours. And
so I have a tough time figuring out, Hey, are
we actually seeing a big productivity boom right now? Is
(33:35):
it because of artificial intelligence and CANNA continue or did
things get so loose in terms of employment back in
twenty twenty twenty one that employers are feeling like they
have the leverage and are really pressing them to work
longer hours.
Speaker 2 (33:50):
Be more productive.
Speaker 3 (33:52):
And I you know, I'm using that word productivity here
when I'm describing all of this, but so much of
this is being point to that is AI is going
to revolutionize things, and I'm just not willing to say
it until I see it.
Speaker 2 (34:05):
No, but I do think, like, if you look at
what we're going through right now in the US economy,
companies are growing without raising headcount. I mean, yeah again
the last three months that we have for jobs data,
twenty nine thousand jobs a month added according to the
BLS data. And they're growing their profits and profits are
moving up. Yeah. Now again because this is more big
(34:26):
companies as the headline. If you are a small firm,
I don't know that you're necessarily seeing that you maybe
you may not be, but like in the aggregate, it's
not like we look at the Russell two thousand and
we're like, wow, look at the productivity and they're cutting
head count. Like no, that's it's not what we're seeing.
Speaker 3 (34:42):
So such is unique and weird during a market cycle
like this because generally speaking, when when companies talk about
bringing on some new, big innovative thing, they're talking about
raising headcount along with those announcements, yes, and when their
stock price is getting killed and they're talking about cutting
head counts, And we have kind of the opposite thing
(35:03):
going on here right We're reaching all to all new
highs in the stock market. Companies are beating earnings and
then also saying and here's how we intend to do
this with fewer people in the future.
Speaker 4 (35:13):
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(35:54):
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Speaker 1 (36:06):
The proceeding was paid for and the views expressed are
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Speaker 2 (36:16):
File this one under legislation that I don't think is
going to have the effect that you intend it to. Uh.
There is a bill that is penning in the Massachusetts
state legislature that would limit the number of self check
self checkout kiosks at grocery stores in Massachusetts. So it
looks like really nothing better for you to do. It
(36:37):
looks like the framework on this is that it would
limit grocers to eight self service checkout stations operating at
any one time per location, and grocers with self checkout
stations will have a minimum of one manual checkout station
operating for every two self checkout stations operating.
Speaker 3 (36:54):
So a few thanks on this. Hold on you have
to have one manual one per for every two. Oh man,
that like Costco and BJS are screwed, Yes, like literally screw.
Speaker 2 (37:05):
But when I go to BJ's to buy groceries, there
are eight self checkout lines and one person one. So
a couple things on this. The first is this directly
goes against like improve productivity, because if you can do
more with less, that's what productivity is. Now, my first
job ever was at a grocery store as a cashier,
so I know what the job entails. I worked there
(37:25):
for I don't know, it was a couple of years,
I think, so, Like it wasn't just you know, one
weekend and I called it quits. Like I know what
the job is and what it isn't. And here's the thing.
There are times when I want to have someone help
me bagging stuff because I got a big load of
whatever and it's a huge pain in yaudia? Are there
other times I'm like, no, Like I don't want that.
(37:46):
But ultimately, why does this state think it has the
right number of self checkout lines that should operate? And
b is this trying to predict protect like check out uh,
you know, cashier jobs? Is that what we're trying to
do here? Because if that's the case, Okay, did in
the state of Massachusetts get rid of all toll boots
in order to move to the automated tolls? And gee,
(38:09):
isn't it a lot better not having to sit in
toll traffic protecting obsolete jobs?
Speaker 3 (38:14):
Which check out person is not yet but just foolhardy
quick break here.
Speaker 2 (38:18):
Hour two coming up in a bit
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