October 9, 2024 • 38 mins
Chuck Zodda and Marc Fandetti discuss JPMorgan kicking off bank earnings this week and what we should know as more banks report. The federal deficit hit $1.8T for 2024. Why does congress not care about the deficit? Boeing withdraws contract offer as union talks break down. The battle over robots at US ports is on. Home Depot orders corporate staff to take 8-hour retail shifts.
Mark as Played
Transcript
Episode Transcript
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Speaker 1 (00:00):
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(01:07):
He's the Financial Exchange with Chuck Zada and Mark Vandetty.
Speaker 2 (01:12):
Kicking off hour two of the Financial Exchange Chuck, Mark
and Tucker with the O. The dows up one hundred
and ninety six points, the S and p's have twenty
two points. Just checking quickly to see if yep, it's
a new all time high on the S and P
five hundred, just pointing that out.
Speaker 3 (01:29):
I was waiting for sound effect.
Speaker 2 (01:32):
It's fine. You know why there's no sound effect because
the market didn't crash in September like everyone thought it
was going to. Oh, September's the wars month for stocks.
You know, the first three days went Yeah, it's October ninth.
I'm still going on about it for a month. Sorry,
let's just summed it up.
Speaker 3 (01:50):
There is this this strange, curious, interesting regularity whereby the
fall is typically tough for stocks, and it's not just
nineteen twenty nine and nineteen eighty seven. So it's it's
kind of funny. You know, in finance, there's not always
something new to do, so you look for these these regularities,
These little accidents may be of history in the September effect,
(02:10):
if you want to call it that, which obviously was
not born out recently. Nope, the September in fact, is
one of those kind of curious regularities that you run
into that there's no obvious explanation for.
Speaker 2 (02:21):
So in any case, the S and P five hundred
hitting a new intra day all time high of fifty
seven to seventy three point six y nine. So just
chugging along again as we get, you know, kind of
into the middle part of October, the Nasdaq up sixty
nine points to eighteen two point fifty two. When we
take a look at Oil West Texas Intermediate down another
ninety cents a barrel today is seventy two sixty seven
(02:43):
on the back of again no further escalation in the
Middle East to this point, and also China stimulus continuing
to disappoint investors at the moment. When we look at
the impact on gas prices still moving up again, there's
a little bit of a lag here. So you've got
gas prices up two point four cents over nine to
(03:05):
three twenty and five tenths of a cent. If we
continue to see prices sliding back into the low seventies,
this should reverse and we'll probably fall back into right
around that three twenty range after a brief move, probably
up to three twenty five ish. And when we take
a look at gold, we've got gold off six dollars
and forty cents an ounce today to twenty six twenty
(03:28):
nine even, And so that is what is moving in markets. Markets.
Talk a little bit about earnings, because later this week
we got JP Morgan and Wells Fargo kicking off earning
season four Q three.
Speaker 4 (03:43):
How excited are you?
Speaker 3 (03:45):
I don't get overly excited, as you know about earnings.
There's not much correlation between stock market performance quarter over
quarter and earnings. Longer term, there certainly is. That's one
of the reason your own stocks. But you pointed out
in the last hour, and can you recap. I don't
want to put words in your mouth, but you talked
about why, for example, watching financial services companies, specifically the
(04:07):
bank part of that sub index, which is not a
huge part of the overall sure market maybe what three
four percent banks in total, but they can be a
harbinger of good or bad economic outcomes.
Speaker 2 (04:20):
Yeah, you can just get a little bit of a
sense of what's going on as far as the lending
that they're doing simply because one of the ways that
the US economy grows, typically the major way that it grows,
is through borrowing in order to fund future expansion of
businesses or households, whatever it might be. And so banks
can give you a little bit of an idea as
(04:41):
to what's going on in the US economy. And I
think this is particularly important right now just because look,
we're gonna have messy economic data from these two hurricanes.
For quite honestly, probably most of the fourth quarter is
just going to be messy. October might look really slow,
November it might look really hot December, who the heck knows,
(05:04):
And so you might have like a two to three
month period where it's kind of hard to tell what's
going on with all the noise in the broader data.
And so I think that when you look at banks,
not looking at the earning specifically, because bank earnings quite honestly,
unless you really study banks, like, you don't really know
what you're looking at with bank earnings, but just hearing
(05:25):
how they describe what they're seeing as far as loan growth,
their loan book charge off rates, things along those lines,
they can give you a little bit of an insight
as to what some of the trends might be from
households and businesses as far as borrowing in their ability
to pay back those loans. I think that's something that
might be data that we need given the unreliability of
(05:47):
data in the coming months because of the impacts of
these two hurricanes here.
Speaker 3 (05:50):
Yeah, so credit card delinquencies is one of the areas
that typically are commented on, I guess in these calls.
I'm not an analyst in this sector or any sector
for that matter, to just generalist comment here on my part,
but credit card delinquencies and what they may apply for
the health of the consumer is always of interest. But
they've been inc they breached a trillion dollars. You may
(06:12):
recall credit card balances a year ago to great fanfare
or despair, depending on your point of view. The economy
didn't break far from it. It's been growing at a
very respectable clip. Nevertheless, some color on that from them
might be from those reporting earnings overall might be interesting.
(06:33):
Just hard to know what to make of it, how
to put it all in context, and hard to know
whether to generalize from as you pointed out, from what
one company's saying are they trying to are they making
excuses for bad operational execution? Are they trying to blame
the macro environment?
Speaker 2 (06:49):
Now the good news, we're going to be getting a
whole bunch more earnings coming out over the next couple weeks.
This is kind of the unofficial kickoff of earning season.
And as we get into next week, next Wednesday, we've
got Tests reporting. Thursday we got Netflix, and Friday you
got P and G American Express, so you know, again
a few major companies next week. But then the week after,
so two weeks from now is where you really get
(07:11):
into the bulk of it. October twenty second, you got Microsoft,
Alphabet and Visa all reporting, so you got just you know,
some monsters there. The day after that you get Meta,
Coca Cola reporting McDonald's as well. Day after that you
are going to be getting Apple, Amazon. So it's it's
just all lined up that third week, third full week
(07:34):
of October here, and so we're gonna be hearing from
companies in lots of different areas about what they are seeing.
Are those AI trends continuing in tech? Are we you know,
still seeing retailers concerned about inventories retailers don't report until
a little later in the cycle. Those will typically be
I think at this point it will be like early
(07:54):
November when we start to get the walmarts and home
depots and targets of the world reporting. But this is
going to be important in terms of us trying to
figure out, hey, where is the economy going? Because the
broader economic data is just going to be an absolute mess.
I mean, if if you end up with Hurricane Milton,
you know, again, right now it looks like it's making
(08:15):
a straight b line for a kind of right between
Bradenton and Sarasota. Look, think about all the consumer spending
that happens in that area as you head into the winter.
The thousands of people that traveled down to the west
coast of Florida either to vacation for a week or hey,
(08:35):
the snowbirds that head down to their place for the winter.
That like normally this is the time of year when
that stuff starts happening. And you think about the amount
of spending that might not happen as a result of that.
Rental car cancelations, hotel cancelations, Disney trips that don't have like,
all this stuff that might not be happening. We're not
(08:58):
really gonna have a ton of insight into at you know,
with the broad government data, but we're gonna hear from
companies in the next few weeks. Hey, here's what we're
seeing as a result of you know, these hurricanes and
how they're impacting our businesses, and that I think is
going to give us some important data about the health
of the US economy because we're going to be kind
of blind as far as the broader data.
Speaker 3 (09:19):
I think, yeah, it's interesting. There has been a lot
of work done on the economic impact of natural disasters,
and if I had to sum it up, just having
looked at it quickly this morning, some of the literature,
and it's a it's a it's a it's a specialization.
I don't mean to give it your shrift or to
be cavalier about it, but as you would expect, the
local impact is severe and takes years to resolve, and
(09:39):
it may never resolve if people determine that an area
is just unsafe where they can't live there because home
insurance becomes prohibitively expensive, which is the whole point of insurance,
after all, it's to change behavior to an extent. So
we just don't know overall activity. It'll be a blip.
I'm confident of that. It's it may affect the course
of the economy over one or two quarters, or seem to,
(10:00):
but in the long run, it will, like so much
turmoil historically, God willing anyway, be nothing but a blip.
Speaker 2 (10:08):
Take a quick break here. When we come back, we'll talk,
we'll do a little bit of trivia, and then we're
talking deficits After this.
Speaker 1 (10:16):
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(11:30):
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Speaker 3 (12:00):
Such a sober delivery of a wacky slogan. I've never
heard it. I've never you really took the fun out
of Sometimes you feel like a nut. It's mostly you're
supposed to sing it, and it's supposed to be a beat.
Speaker 4 (12:10):
It was.
Speaker 3 (12:11):
You delivered that like Walter Cronkite, which he was.
Speaker 2 (12:15):
It was a little jingle, Oh, an American. Sometimes you
feel like a nut, and sometimes you don't.
Speaker 3 (12:20):
Good evening, right. You delivered it like a nineteen fifties
newscast or something.
Speaker 1 (12:26):
It was.
Speaker 2 (12:27):
It was perfect, by the way, but we could do
the whole segment. Sorry, sorry, no, no, no, we could do
the whole segment that way. The federal deficit hit one
point eight trillion dollars for twenty twenty four, according to
a CBO study.
Speaker 5 (12:39):
Now do Tom Brokaw, sometimes you'll feel it. I can't
even do it. That was more Sean Connery.
Speaker 2 (12:48):
Sean Connery reads economics headlines. Sometimes you feel like a nut.
Sometimes you don't duffer shut Now I'm doing like celebrity Jeopardy,
Sean Connery. So, anyways, federal deficit hit one point eight
trillion dollars for I can't even get.
Speaker 4 (13:06):
Through one one article doing it.
Speaker 2 (13:08):
That way one point eight trillion dollars in twenty twenty
four on a percentage basis, which is what really matters,
Like the number of dollars. It's always I find that
it's just out there to shock people, because the first
time that the deficit went over, you know, a billion
dollars one hundred years ago, people were probably like, oh,
the deficit's too big, But the number is not what matters.
(13:29):
Like if you have a one point eight trillion dollar
annual deficit but your economy is two hundred trillion dollars,
you're probably fine. It's probably not a big deal as
long as your economy is growing faster than that one percent.
The unfortunate thing is that the US economy is about
twenty nine trillion dollars in terms of GDP, and so
if you will get the annual you know, deficit and say, okay,
(13:51):
it's like six percent change of GDP, that's kind of
a problem simply because the US economy is growing at
a nominal rate somewhere in the five to five and
a half percent range, and so the deficit is continuing
now to expand as a percentage of GDP, not contracting
as it did for the last couple of years.
Speaker 3 (14:10):
Yeah, so the big question is at what point will
debt markets bulk at such high deficits and debt and
demand to be compensated more for holding it said differently,
winter interest rate's going to start going.
Speaker 2 (14:24):
Up and there is an expirical answer to this.
Speaker 3 (14:26):
Well, in twenty ten, the seminal study was done on this.
They wrote a book based on a paper these two
economists did. Their names are Ryan Hart and Rogue offf
More detail is not really important right now, and this
was controversial at the time. It remains controversial. They've found
that after debt to GDP gets above ninety percent in
(14:47):
developed countries. I'm not gonna I won't bore you with
too much of the detail, but at that point you
get a phenomenon that they coined as debt intolerance.
Speaker 4 (14:57):
But with debt but without the gas can't digest it.
Speaker 2 (14:59):
Yeah, it's a little gassy, it's a little it's uncomfortable
for everyone.
Speaker 3 (15:06):
So I guess they found and this again, there is
no tipping point, per se. It's different for every economy
at different points in time. But there will come a
point when investors just think to yourself, do you want
to lend to a government that might have to say,
print money to pay off its debts because of these
chronic deficits. And we use these two terms interchangeably, but
(15:27):
deficits are the flow, they're the change. The debt is
the stock. The debt is the thirty four trillion you
were talking about, some of which is held by the FED.
The deficit is what we're adding every year. It's roughly
two trillion, is Chuck just pointed out. So at some
point investors will demand higher interest rates to compensate for
the risk that some of this will get inflated away.
(15:48):
It's a very real risk. It's just a question of
where the tipping point is. And there is no easy, empirical,
Chuck as you put it, answer, but it will come.
It's just a question to win.
Speaker 2 (15:57):
And the other tough thing that you have to remember
is that not all developed countries are created equal when
it comes to the amount of debt that they can't
sustain it. Quite honestly, in the last one hundred years,
there has been no country that exists in a situation
that resembles the United States in any way, shape or
form today. And that look, the US is still about
twenty percent of the world economy. So it's just a huge,
(16:20):
you know engine in a way that no other economy
that we have accurate data for has been. The US
dollar is still the single biggest UH currency that is
used for world trade by a large margin, despite you know,
all the claims to the contrary about how the dollar
is you know, being replaced and blah blah blah, like
(16:41):
it's it's just not I'm sorry, the data is pretty
conclusive on this. For all the people that want to
say that, you know, countries are choosing to use the
yuan and this no, I mean outside of Russia, basically,
no one's using it in any meaningful fashion at this point.
And even Russian and China, by the way, they they
don't settle any of their trades in each other's currencies
(17:03):
because they specifically don't trust each other's currencies. So yes,
they may have trades that you know, take place initially there,
but they're settling in a third No, that's right.
Speaker 3 (17:11):
Current Trump sends Putent birthday gifts. He sends him hundred
dollars bills.
Speaker 2 (17:15):
Well, it's as good as gold, right, you know. So
in any case, when you look at where the US
is with regards to the deficit, like it's going to
be a problem at some point if it continues on
this track. The problem is you don't know where that
point is from a time perspective. You don't know if
it's a week from now, a month from now, a
(17:37):
year from now, a decade from now, or one hundred
years from now.
Speaker 3 (17:39):
I would keep the rogue off Ryan hart tipping point estimate,
which is just an average of all the countries they
looked at. And it's always hard to say why rates
are going up. And this work remains controversial, but we're
probably in the danger zone now at ninety five percent
of the debt held by or public. That's the ratio
of debt held by the public did GDP. Everybody agrees
that it's too high. Nobody agrees on how to get
(18:02):
it down. It's going to require, as you guys talk about,
a lot on the financial has change, some combination of
tax increases, in spending cuts, particularly entitlement spending cuts. And
there's another article in the stack, I don't know if
we'll get to it that addresses that these problems are
virtually intractable, and it seems like it's going to take
a crisis for us to deal with them.
Speaker 2 (18:18):
Yeah, I mean we've been putting off this stuff for
my whole life quite a while, honestly since the nineteen eighty.
But this is also the other problem in like, if
you're if you're trying to build an investible thesis, you
can't because you don't know when this is going to
actually become a problem. If if you spent the last
forty years saying, well, I need to change how I
invest because the US deficit is a problem, it's been
(18:40):
a horrible strategy for you, Like it's.
Speaker 3 (18:42):
Not actionable now, and that's this Unfortunately, that's the.
Speaker 2 (18:45):
Thing is you hear people say well, the US deficit's
a problem, like now's the time to buy you know,
gold or real estate or this or pigs or whatever
the heck it is. And it's like, well why now,
Like what what do you know? Well, I read this piece? No, no, no, no, no.
Speaker 3 (19:02):
That's a good point.
Speaker 2 (19:03):
Yeah, you have to remember that just because we're saying, hey,
there are potential problems because of this, that does not
make something an investible thesis. You have to be able
to go further and say here's the edge that I
have that explains why this is going to happen at
this time, and why what I'm proposing is the right
thing to do. Quick break here. When we come back,
(19:23):
we've got the trivia answer, and then let's talk a
little bit of Boeing when we return.
Speaker 1 (19:38):
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Speaker 5 (20:05):
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(20:28):
Mounds Candy has no nuts and a dark chocolate candy coating.
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Speaker 2 (20:58):
Boeing is in the midst of a negotiation with their union,
the International Association of Machinists. It's not their union, it's
the union that employs people that work at their factories
out on the West Coast, and they decided yesterday that
Boeing decided to step back from negotiations. Boeing said the
(21:19):
union was making quote non negotiable demands, while the IM
said the company was quote hell bent on standing on
the non negotiated offer. So you've got this strike that's
been going on since I believe it's September thirteenth, So
we're closing it on a month now, and Boeing is
losing a bunch of money each day because well, they
(21:40):
make airplanes with these workers, or rather these workers make airplanes.
I guess that's the better way to phrase it. And
so if you're an airplane manufacturer that can't make some
of the airplanes that you sell, it results in the
loss of revenue, which typically impacts profit as well, And
so Bowing continues to head towards a place where S
(22:01):
and P Global Ratings is now saying that it might
cut the plane maker's credit grade. To junk your thoughts, Mark.
Speaker 3 (22:10):
I'd forgotten there was a strike, to be honest, at
the risk of sounding of twos, But one does wonder
how long. First of all, I didn't realize one party
could just walk away. They haven't taken that rather severe
step yet, but at some point, I guess the FEDS
can come in and force them to talk, if not
force a settlement on them.
Speaker 2 (22:28):
Boeing is also apparently considering selling ten billion dollars of
new stock once they know the extent of the damage.
And so it's just just kind of a continuation of again,
different struggles in this case than you know, building planes poorly,
but continuation of struggles for a company that has been
(22:49):
struggling really for the last six to eight years. Now,
I mean this goes back you're talking. I mean the
decision making on their struggles goes back over a decade,
but you're really talking like twenty seventeen twenty eighteen where
this company started to run into two problems in the manufacturing.
Decisions that they made started resulting in the deaths of
(23:11):
people flying on Boeing airplanes. So we'll continue to keep
you updated on what is going on on that front.
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com piece in.
Speaker 2 (24:27):
The Wall Street Journal. It's titled the battleover Robots at
US Ports is on, and basically what it's talking about is, Look,
you've got this tentative agreement on wages between the dock
workers now and the shippers and.
Speaker 4 (24:45):
Ports.
Speaker 2 (24:46):
But one of the things that still needs to be
negotiated before the short term expiration the short term extension
expires on January fifteenth, is what are these ports going
to do with regard yards to automation. And obviously, look,
the ports and the shippers are pushing for much higher
levels of automation because they think it'll build efficiency and
(25:08):
lower cost. The workers are saying, no, we don't want
to be automated out of jobs. Both of these are
positions that I can understand, but Ultimately, when we look
at the idea of economic growth and the creation and
(25:28):
building of wealth, the way that it happens is through
productivity gains and efficiency gains that allow us to produce
more stuff with fewer inputs. It's basically the entire principle,
which is, Look, if we were still restricted to, you know,
having to manually plant every farm and catch every fish
(25:50):
by hand, and it would be, you know, an awful
lot of work. You know, imagine a world in which
you say, hey, hey, you know what, I'm gonna go
out and get some shrimp for tonight, and you have
to go out there with like a harpoon and get
all of the shrimp one by one. That would be
really bad.
Speaker 5 (26:11):
It seems aggressive.
Speaker 2 (26:12):
Rump shrimp. It does seem like a tiny harpoon, little
tiny harpoon, maybe harpoon, just toothpick, just a little, little
tiny one. It gets right into the cocktail size.
Speaker 1 (26:21):
You know.
Speaker 2 (26:21):
It's it's that toothpick that.
Speaker 5 (26:23):
Use the spear that goes into a sandwich. That that
that's what I mean by harpoont.
Speaker 3 (26:28):
Why poor Chucks ever enjoyed a shrimp. He's been obliterating
them with harpoons. It's like, how do you guys do it?
There's nothing left By the time.
Speaker 2 (26:35):
Guys, I got a big one. It's a jumbo eventually, though, Look,
I know that's not how they caught them originally. But look,
someone comes along with, hey, a net that's you know,
a fine mesh and actually catches hundreds of them. The
person using the harpoon doesn't say, hey, you can't use that,
it's gonna put me out of business. We adapt because
new technology makes things easier, and the companies and workers
(26:56):
that adapt us to new technologies are able to be
on the cutting edge. So this is a place where
again I say, this is someone who realizes that for
the last I don't know, fifty years, the bulk of
that time, we've seen wage gains not keeping up with productivity,
meaning we've been generating more wealth, but it hasn't been
(27:18):
distributed out to workers as well. Like that's been one
of the major problems. The answer to that is not
to say, let's restrict productivity. In my opinion, like that's
that's a bad way to go about it. Hey, we've
got this new technology that can make things easier, cheaper,
and faster for us. Let's not use it because we're
(27:40):
worried about losing jobs. That's like, imagine if that's the
point is imagine if we said that about the combine,
or the word processor or the airplane.
Speaker 3 (27:51):
These jobs aren't really lost. These workers will be retrained
gradually moving into new industries, or perhaps if it's done
in a more humane, slow but more humane way, by attrition,
the adjustment could be made far less painful. But the
we'll just call it progress, which there was not for
a long time. The economics profession has spent and continue
(28:12):
to spend a lot of time answering the question what
causes growth? It might surprise you to know economist don't
agree on that question. Productivity is a residual. It's like
what is driving it? But we don't really know how.
They're a model.
Speaker 4 (28:24):
We don't know what causes productive Yeah.
Speaker 3 (28:26):
There are theorist right, there are. There are different schools
of thought on this is my point. So if it's
not obvious to you, you're in really good company as
to what causes economic growth. Nobody really understands it. We
can describe it, but what causes it harder to say.
Good institutions are important. I'll just leave it at that.
Stable government, independent federal reserve, the stuff basically that we have.
But you're right, Chuck, you can't fight. I'll just call
it progress. The right solution is for politicians to get
(28:48):
in front of this and establish funds for retraining people
hurt by free trade, which is another example of your
temporary job disruptions losses. To be more blunt is free trade.
You can either throw up barriers like JD Vance wants
to do when he says five million cheap toasters is
not worth one job. Really, JD. If you're saving ten
bucks on each toaster, that's fifty million dollars. Got plenty
(29:11):
of money. You could tax half of that, use it
to retrain workers, put them in a new industry. So
one solution, which both the left and right have embraced,
is to throw up barriers and hide from the world.
This view seems prevalent right now. Sadly, it make us
less wealthy, a lot less wealthy in the long term.
Another view is to get ahead of it through education
through universal basic income, something I'm not a huge fan of,
(29:32):
but it's another way to support people who are displaced
or look.
Speaker 2 (29:35):
This is at the risk of getting you know, really
really basic on this. This is a collective bargaining agreement.
The union and the companies can collectively bargain the retraining
in this case like it's it's what they've done, you know,
these are things. It's not. You don't just have one
worker out there saying, oh, gee, what am I going
(29:55):
to do? Like you can literally bargain in hey, for
every worker displace, the companies will commit X dollars to retraining,
you know in the fields that specialize in X, Y
or z and blah blah blah. You can literally collectively
bargain it. So I have sympathy for, you know, workers
(30:17):
who say, hey, we're going to be automated out of existence.
Like again, no one says thinking this might be coming
for all of us with AI and where it could
be going chuck.
Speaker 3 (30:25):
Nobody's saying good luck, sorry, a robot takes seven jobs.
As the research from Darren as mcglu works at MIT,
which is cited in this article, rightly points out, that's
over a thirty year, multi decade period, though, plenty of
time again to get ahead of this. Nobody's saying kick
these people out of work and wish them good luck.
I'll use the same argument with respect to free trade.
(30:46):
You don't hide from the world, so we could produce
again JD Vance's fantasy. Sorry for picking on the Republican ticket,
but he's the one out there saying he wants all
cars to be made here and toasters to be made here.
We remember what all American cars was like those of
us who drove a car made in the night, teen
eighties or seventies, we didn't always get the best quality.
Competition is good.
Speaker 2 (31:05):
Let's take a quick break here. When we return, let's
do a little bit of stack roulette.
Speaker 1 (31:11):
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Speaker 2 (32:18):
Do you have for me for stack Roulette?
Speaker 3 (32:21):
Home depot ordering corporate staff so desk jockeys basically to
take an eight hour shift at a retail location at
least once I read this yesterday, I hope I'm remembering
this correctly at least once a year, and it sounds
I'm not sure whether I feel like this is a
gimmick or whether it's likely to help people better appreciate
(32:41):
the challenges faced by the people on the front lines.
And this would apply to any corporate structure. Farm depot
has its unique challenges. Big box home improvement stores exploded.
Their sales exploded after COVID as people were stimulus flush
and very few places to have, very few places to
spend it. They've since sagged, so this is partly perceived
as a way to shore up confidence in there what
(33:04):
I'll call turnaround plan, even though that's probably a little
bit too dramatic a way to put it. But how
in the world could you come to appreciate the challenges
faced by your frontline people with only an eight hour
shift spent god knows how doing who knows what once
a year. It seems like a gimmick.
Speaker 2 (33:20):
It is, And here's why it's it's a gimmick that
sounds good. People to be like, Oh, that's that's what
you need. You got to get the experience of being
an average joe. Well, here's the thing. First, that one
day that you're working there, you can have no idea
what to do. So you're gonna be spending the entire
day just asking people what to do.
Speaker 3 (33:36):
Yeah, which, unless there's a plan were there?
Speaker 5 (33:38):
Sorry, no, no, I was just gonna say, that's literally
what you said, Chuck is going to piss off the
retail workers who are there on a deal basis.
Speaker 3 (33:44):
In the way, unless there's a well thought out, correct
maybe there is a plan I shouldn't prejudge.
Speaker 2 (33:49):
But the other thing is that one day does not
give you a representative experience. Even assuming let's say let's
say you knew everything going and you like a month
training for this, and you're like, Okay, I know what
I'm gonna do. It's not just one day. It's hey,
you got to experience what it's like to be in
that role long term, because the lived experience is just
(34:11):
fundamentally different. You tell someone, hey, you know you're gonna
make X dollars an hour, and you say, okay, I'll
cut my wage to that for a day. That's not
the lived experience of living at those wages or with
the pressures that they have, because you know that you
can walk away from them. It's just it's fundamentally different.
Having to actually have that like hanging over your head
(34:32):
the whole day as something that you deal with day
in day out for months or years at a time,
is just a fundamentally different experience because you actually have
to live it. You can't just be like, well, I'm
going back to corporate tomorrow.
Speaker 3 (34:46):
I think everybody knows shadowing is, which is corporate speak
for watching somebody all day can have indifferent or even
negative results. The person being shadowed tends to resent it.
When it's somebody from another department. I mean, in a
big corporate structure kind of like this one, the person
shadowing wonders, what am I supposed to get out of this?
How will the success of it be evaluated? Is today
(35:07):
a good sample of a day in the life of
the person that i'm or the department that I'm shadowing.
It feels like a gimmick. And I think if if
I were on the board and the CEO brought this
to me, is this great innovative thing, I'd start to
wonder if I'm not I should be generalizing here. There's
probably a lot more going on. But if this were
the big idea, and there's no indication that it is,
(35:29):
not that it is the only big idea circulating at home, depot,
C suite, but I would start to wonder about leadership.
Speaker 2 (35:36):
I mean, look, if you really want to know what's
going on at your different locations, talk to your people
and listen to them like they're the ones who will
give you this without you having to spend a day
pretending that you're a cashier.
Speaker 3 (35:51):
And maybe they've tried that in fairness, we don't really know.
Speaker 2 (35:54):
Well they're not listening well enough, then I guess not
like you're either not listening well enough or you're just
not listening well enough.
Speaker 3 (36:00):
I'm sorry. Do you repeated that?
Speaker 2 (36:01):
Yes, I want to talk a little bit about McDonald's nanks, Tucker.
I thought you would like that McDonald's is suing a
number of meat packing companies claiming that they are colluding
to inflate beef prices. And this is wild to me because,
like you, you don't really see this that often where hey,
(36:23):
company who is dependent on you know, wholesale, x Y
and Z for its you know, livelihood suing the only
companies that can make the stuff that they need. Kind
of wild. Actually, I mean like you've got you've got
big fast food suing big beef. This this stuff doesn't
(36:43):
really happen. Imagine as an example, let's say that Toyota
sued a bunch of steel producers.
Speaker 3 (36:50):
Somebody did this when the last year they sued a supplier,
who was it? You would know you followed this. This
is this is ringing a bell, getting somebody suit a
supplier in the last year, big company, big so both
household names. I forget.
Speaker 2 (37:02):
There have been all kinds of things with food suppliers,
like food holds.
Speaker 3 (37:05):
I'm remembering one of those.
Speaker 2 (37:07):
I think Tyson Foods has gone through like three different
like chicken fixing things that I forget if it's the
ftc or the DOJ is looking into tuna collusion. Do
you remember that story we covered Tucker Tucker Big.
Speaker 4 (37:20):
Taca.
Speaker 2 (37:22):
Yeah, Big Tuna's getting out of control. But this is
fascinating me because McDonald's filed a federal complaint against Tyson Foods, JBS, Cargill,
and National Beef Packing Company alleging that they are engaging
in a price fixing scheme for beef. Now, again, there
have been a lot of these things that have been filed,
but they've typically been by the government. What makes this
(37:43):
difference is McDonald's saying, hey, you guys are colluding because
McDonald's needs the beef. And you know, the obvious threat
here is that Tyson, JBS or Cargo is like, okay, fine,
we're gonna send our stuff somewhere else and now you're
not gonna have any beef.
Speaker 4 (37:58):
How do you like it? Now?
Speaker 2 (38:00):
So I think this is fascinating also to me, I
wonder the cynic in me. McDonald's been catching some flak
for raising prices quickly. Is this something public they can
point to to push back? And then they're like, no,
we'll just let this go. A couple months later, quick
break for the rest of the day. We'll see you
Speaker 4 (38:20):
Tomorrow on the Financial Exchange
The Financial Exchange is produced by Money Matters Radio and
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(01:07):
He's the Financial Exchange with Chuck Zada and Mark Vandetty.
Speaker 2 (01:12):
Kicking off hour two of the Financial Exchange Chuck, Mark
and Tucker with the O. The dows up one hundred
and ninety six points, the S and p's have twenty
two points. Just checking quickly to see if yep, it's
a new all time high on the S and P
five hundred, just pointing that out.
Speaker 3 (01:29):
I was waiting for sound effect.
Speaker 2 (01:32):
It's fine. You know why there's no sound effect because
the market didn't crash in September like everyone thought it
was going to. Oh, September's the wars month for stocks.
You know, the first three days went Yeah, it's October ninth.
I'm still going on about it for a month. Sorry,
let's just summed it up.
Speaker 3 (01:50):
There is this this strange, curious, interesting regularity whereby the
fall is typically tough for stocks, and it's not just
nineteen twenty nine and nineteen eighty seven. So it's it's
kind of funny. You know, in finance, there's not always
something new to do, so you look for these these regularities,
These little accidents may be of history in the September effect,
(02:10):
if you want to call it that, which obviously was
not born out recently. Nope, the September in fact, is
one of those kind of curious regularities that you run
into that there's no obvious explanation for.
Speaker 2 (02:21):
So in any case, the S and P five hundred
hitting a new intra day all time high of fifty
seven to seventy three point six y nine. So just
chugging along again as we get, you know, kind of
into the middle part of October, the Nasdaq up sixty
nine points to eighteen two point fifty two. When we
take a look at Oil West Texas Intermediate down another
ninety cents a barrel today is seventy two sixty seven
(02:43):
on the back of again no further escalation in the
Middle East to this point, and also China stimulus continuing
to disappoint investors at the moment. When we look at
the impact on gas prices still moving up again, there's
a little bit of a lag here. So you've got
gas prices up two point four cents over nine to
(03:05):
three twenty and five tenths of a cent. If we
continue to see prices sliding back into the low seventies,
this should reverse and we'll probably fall back into right
around that three twenty range after a brief move, probably
up to three twenty five ish. And when we take
a look at gold, we've got gold off six dollars
and forty cents an ounce today to twenty six twenty
(03:28):
nine even, And so that is what is moving in markets. Markets.
Talk a little bit about earnings, because later this week
we got JP Morgan and Wells Fargo kicking off earning
season four Q three.
Speaker 4 (03:43):
How excited are you?
Speaker 3 (03:45):
I don't get overly excited, as you know about earnings.
There's not much correlation between stock market performance quarter over
quarter and earnings. Longer term, there certainly is. That's one
of the reason your own stocks. But you pointed out
in the last hour, and can you recap. I don't
want to put words in your mouth, but you talked
about why, for example, watching financial services companies, specifically the
(04:07):
bank part of that sub index, which is not a
huge part of the overall sure market maybe what three
four percent banks in total, but they can be a
harbinger of good or bad economic outcomes.
Speaker 2 (04:20):
Yeah, you can just get a little bit of a
sense of what's going on as far as the lending
that they're doing simply because one of the ways that
the US economy grows, typically the major way that it grows,
is through borrowing in order to fund future expansion of
businesses or households, whatever it might be. And so banks
can give you a little bit of an idea as
(04:41):
to what's going on in the US economy. And I
think this is particularly important right now just because look,
we're gonna have messy economic data from these two hurricanes.
For quite honestly, probably most of the fourth quarter is
just going to be messy. October might look really slow,
November it might look really hot December, who the heck knows,
(05:04):
And so you might have like a two to three
month period where it's kind of hard to tell what's
going on with all the noise in the broader data.
And so I think that when you look at banks,
not looking at the earning specifically, because bank earnings quite honestly,
unless you really study banks, like, you don't really know
what you're looking at with bank earnings, but just hearing
(05:25):
how they describe what they're seeing as far as loan growth,
their loan book charge off rates, things along those lines,
they can give you a little bit of an insight
as to what some of the trends might be from
households and businesses as far as borrowing in their ability
to pay back those loans. I think that's something that
might be data that we need given the unreliability of
(05:47):
data in the coming months because of the impacts of
these two hurricanes here.
Speaker 3 (05:50):
Yeah, so credit card delinquencies is one of the areas
that typically are commented on, I guess in these calls.
I'm not an analyst in this sector or any sector
for that matter, to just generalist comment here on my part,
but credit card delinquencies and what they may apply for
the health of the consumer is always of interest. But
they've been inc they breached a trillion dollars. You may
(06:12):
recall credit card balances a year ago to great fanfare
or despair, depending on your point of view. The economy
didn't break far from it. It's been growing at a
very respectable clip. Nevertheless, some color on that from them
might be from those reporting earnings overall might be interesting.
(06:33):
Just hard to know what to make of it, how
to put it all in context, and hard to know
whether to generalize from as you pointed out, from what
one company's saying are they trying to are they making
excuses for bad operational execution? Are they trying to blame
the macro environment?
Speaker 2 (06:49):
Now the good news, we're going to be getting a
whole bunch more earnings coming out over the next couple weeks.
This is kind of the unofficial kickoff of earning season.
And as we get into next week, next Wednesday, we've
got Tests reporting. Thursday we got Netflix, and Friday you
got P and G American Express, so you know, again
a few major companies next week. But then the week after,
so two weeks from now is where you really get
(07:11):
into the bulk of it. October twenty second, you got Microsoft,
Alphabet and Visa all reporting, so you got just you know,
some monsters there. The day after that you get Meta,
Coca Cola reporting McDonald's as well. Day after that you
are going to be getting Apple, Amazon. So it's it's
just all lined up that third week, third full week
(07:34):
of October here, and so we're gonna be hearing from
companies in lots of different areas about what they are seeing.
Are those AI trends continuing in tech? Are we you know,
still seeing retailers concerned about inventories retailers don't report until
a little later in the cycle. Those will typically be
I think at this point it will be like early
(07:54):
November when we start to get the walmarts and home
depots and targets of the world reporting. But this is
going to be important in terms of us trying to
figure out, hey, where is the economy going? Because the
broader economic data is just going to be an absolute mess.
I mean, if if you end up with Hurricane Milton,
you know, again, right now it looks like it's making
(08:15):
a straight b line for a kind of right between
Bradenton and Sarasota. Look, think about all the consumer spending
that happens in that area as you head into the winter.
The thousands of people that traveled down to the west
coast of Florida either to vacation for a week or hey,
(08:35):
the snowbirds that head down to their place for the winter.
That like normally this is the time of year when
that stuff starts happening. And you think about the amount
of spending that might not happen as a result of that.
Rental car cancelations, hotel cancelations, Disney trips that don't have like,
all this stuff that might not be happening. We're not
(08:58):
really gonna have a ton of insight into at you know,
with the broad government data, but we're gonna hear from
companies in the next few weeks. Hey, here's what we're
seeing as a result of you know, these hurricanes and
how they're impacting our businesses, and that I think is
going to give us some important data about the health
of the US economy because we're going to be kind
of blind as far as the broader data.
Speaker 3 (09:19):
I think, yeah, it's interesting. There has been a lot
of work done on the economic impact of natural disasters,
and if I had to sum it up, just having
looked at it quickly this morning, some of the literature,
and it's a it's a it's a it's a specialization.
I don't mean to give it your shrift or to
be cavalier about it, but as you would expect, the
local impact is severe and takes years to resolve, and
(09:39):
it may never resolve if people determine that an area
is just unsafe where they can't live there because home
insurance becomes prohibitively expensive, which is the whole point of insurance,
after all, it's to change behavior to an extent. So
we just don't know overall activity. It'll be a blip.
I'm confident of that. It's it may affect the course
of the economy over one or two quarters, or seem to,
(10:00):
but in the long run, it will, like so much
turmoil historically, God willing anyway, be nothing but a blip.
Speaker 2 (10:08):
Take a quick break here. When we come back, we'll talk,
we'll do a little bit of trivia, and then we're
talking deficits After this.
Speaker 1 (10:16):
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Schrivery question today, which two candy bars was that commercial
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(11:30):
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Speaker 3 (12:00):
Such a sober delivery of a wacky slogan. I've never
heard it. I've never you really took the fun out
of Sometimes you feel like a nut. It's mostly you're
supposed to sing it, and it's supposed to be a beat.
Speaker 4 (12:10):
It was.
Speaker 3 (12:11):
You delivered that like Walter Cronkite, which he was.
Speaker 2 (12:15):
It was a little jingle, Oh, an American. Sometimes you
feel like a nut, and sometimes you don't.
Speaker 3 (12:20):
Good evening, right. You delivered it like a nineteen fifties
newscast or something.
Speaker 1 (12:26):
It was.
Speaker 2 (12:27):
It was perfect, by the way, but we could do
the whole segment. Sorry, sorry, no, no, no, we could do
the whole segment that way. The federal deficit hit one
point eight trillion dollars for twenty twenty four, according to
a CBO study.
Speaker 5 (12:39):
Now do Tom Brokaw, sometimes you'll feel it. I can't
even do it. That was more Sean Connery.
Speaker 2 (12:48):
Sean Connery reads economics headlines. Sometimes you feel like a nut.
Sometimes you don't duffer shut Now I'm doing like celebrity Jeopardy,
Sean Connery. So, anyways, federal deficit hit one point eight
trillion dollars for I can't even get.
Speaker 4 (13:06):
Through one one article doing it.
Speaker 2 (13:08):
That way one point eight trillion dollars in twenty twenty
four on a percentage basis, which is what really matters,
Like the number of dollars. It's always I find that
it's just out there to shock people, because the first
time that the deficit went over, you know, a billion
dollars one hundred years ago, people were probably like, oh,
the deficit's too big, But the number is not what matters.
(13:29):
Like if you have a one point eight trillion dollar
annual deficit but your economy is two hundred trillion dollars,
you're probably fine. It's probably not a big deal as
long as your economy is growing faster than that one percent.
The unfortunate thing is that the US economy is about
twenty nine trillion dollars in terms of GDP, and so
if you will get the annual you know, deficit and say, okay,
(13:51):
it's like six percent change of GDP, that's kind of
a problem simply because the US economy is growing at
a nominal rate somewhere in the five to five and
a half percent range, and so the deficit is continuing
now to expand as a percentage of GDP, not contracting
as it did for the last couple of years.
Speaker 3 (14:10):
Yeah, so the big question is at what point will
debt markets bulk at such high deficits and debt and
demand to be compensated more for holding it said differently,
winter interest rate's going to start going.
Speaker 2 (14:24):
Up and there is an expirical answer to this.
Speaker 3 (14:26):
Well, in twenty ten, the seminal study was done on this.
They wrote a book based on a paper these two
economists did. Their names are Ryan Hart and Rogue offf
More detail is not really important right now, and this
was controversial at the time. It remains controversial. They've found
that after debt to GDP gets above ninety percent in
(14:47):
developed countries. I'm not gonna I won't bore you with
too much of the detail, but at that point you
get a phenomenon that they coined as debt intolerance.
Speaker 4 (14:57):
But with debt but without the gas can't digest it.
Speaker 2 (14:59):
Yeah, it's a little gassy, it's a little it's uncomfortable
for everyone.
Speaker 3 (15:06):
So I guess they found and this again, there is
no tipping point, per se. It's different for every economy
at different points in time. But there will come a
point when investors just think to yourself, do you want
to lend to a government that might have to say,
print money to pay off its debts because of these
chronic deficits. And we use these two terms interchangeably, but
(15:27):
deficits are the flow, they're the change. The debt is
the stock. The debt is the thirty four trillion you
were talking about, some of which is held by the FED.
The deficit is what we're adding every year. It's roughly
two trillion, is Chuck just pointed out. So at some
point investors will demand higher interest rates to compensate for
the risk that some of this will get inflated away.
(15:48):
It's a very real risk. It's just a question of
where the tipping point is. And there is no easy, empirical,
Chuck as you put it, answer, but it will come.
It's just a question to win.
Speaker 2 (15:57):
And the other tough thing that you have to remember
is that not all developed countries are created equal when
it comes to the amount of debt that they can't
sustain it. Quite honestly, in the last one hundred years,
there has been no country that exists in a situation
that resembles the United States in any way, shape or
form today. And that look, the US is still about
twenty percent of the world economy. So it's just a huge,
(16:20):
you know engine in a way that no other economy
that we have accurate data for has been. The US
dollar is still the single biggest UH currency that is
used for world trade by a large margin, despite you know,
all the claims to the contrary about how the dollar
is you know, being replaced and blah blah blah, like
(16:41):
it's it's just not I'm sorry, the data is pretty
conclusive on this. For all the people that want to
say that, you know, countries are choosing to use the
yuan and this no, I mean outside of Russia, basically,
no one's using it in any meaningful fashion at this point.
And even Russian and China, by the way, they they
don't settle any of their trades in each other's currencies
(17:03):
because they specifically don't trust each other's currencies. So yes,
they may have trades that you know, take place initially there,
but they're settling in a third No, that's right.
Speaker 3 (17:11):
Current Trump sends Putent birthday gifts. He sends him hundred
dollars bills.
Speaker 2 (17:15):
Well, it's as good as gold, right, you know. So
in any case, when you look at where the US
is with regards to the deficit, like it's going to
be a problem at some point if it continues on
this track. The problem is you don't know where that
point is from a time perspective. You don't know if
it's a week from now, a month from now, a
(17:37):
year from now, a decade from now, or one hundred
years from now.
Speaker 3 (17:39):
I would keep the rogue off Ryan hart tipping point estimate,
which is just an average of all the countries they
looked at. And it's always hard to say why rates
are going up. And this work remains controversial, but we're
probably in the danger zone now at ninety five percent
of the debt held by or public. That's the ratio
of debt held by the public did GDP. Everybody agrees
that it's too high. Nobody agrees on how to get
(18:02):
it down. It's going to require, as you guys talk about,
a lot on the financial has change, some combination of
tax increases, in spending cuts, particularly entitlement spending cuts. And
there's another article in the stack, I don't know if
we'll get to it that addresses that these problems are
virtually intractable, and it seems like it's going to take
a crisis for us to deal with them.
Speaker 2 (18:18):
Yeah, I mean we've been putting off this stuff for
my whole life quite a while, honestly since the nineteen eighty.
But this is also the other problem in like, if
you're if you're trying to build an investible thesis, you
can't because you don't know when this is going to
actually become a problem. If if you spent the last
forty years saying, well, I need to change how I
invest because the US deficit is a problem, it's been
(18:40):
a horrible strategy for you, Like it's.
Speaker 3 (18:42):
Not actionable now, and that's this Unfortunately, that's the.
Speaker 2 (18:45):
Thing is you hear people say well, the US deficit's
a problem, like now's the time to buy you know,
gold or real estate or this or pigs or whatever
the heck it is. And it's like, well why now,
Like what what do you know? Well, I read this piece? No, no, no, no, no.
Speaker 3 (19:02):
That's a good point.
Speaker 2 (19:03):
Yeah, you have to remember that just because we're saying, hey,
there are potential problems because of this, that does not
make something an investible thesis. You have to be able
to go further and say here's the edge that I
have that explains why this is going to happen at
this time, and why what I'm proposing is the right
thing to do. Quick break here. When we come back,
(19:23):
we've got the trivia answer, and then let's talk a
little bit of Boeing when we return.
Speaker 1 (19:38):
Bringing the latest financial news straight to your radio every day,
it's the Financial Exchange on the Financial Exchange Radio Network.
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Speaker 5 (20:05):
Two candy bars were featuring a famous ad with the
slogan sometimes you feel like a nut and sometimes you don't.
That was a trivia question today asking which two candy
bars they were, and that was Almond Joy in Mounds.
Both Almondjoy Mounds Candy feature a sweet coconut center. Almondjoy
Candy includes a crunchy whole almond and a chocolate candy coating.
(20:28):
Mounds Candy has no nuts and a dark chocolate candy coating.
Winner of the Financial Exchange Show T shirt today was
Joanna from Alton, New Hampshire and Joinna's also registered to
win a one hundred dollars gift card two Applebee's which
will give away on Friday and trivia is brought to
you by apple Bee's. Enjoy half price late night appetizers
after nine pm and join Club apple Bees to enjoy
(20:49):
exclusive deals and specials. You'll get a free appetizer just
for signing up. Now that's he can good in the
neighborhood void, we're prohibited dine in only.
Speaker 2 (20:58):
Boeing is in the midst of a negotiation with their union,
the International Association of Machinists. It's not their union, it's
the union that employs people that work at their factories
out on the West Coast, and they decided yesterday that
Boeing decided to step back from negotiations. Boeing said the
(21:19):
union was making quote non negotiable demands, while the IM
said the company was quote hell bent on standing on
the non negotiated offer. So you've got this strike that's
been going on since I believe it's September thirteenth, So
we're closing it on a month now, and Boeing is
losing a bunch of money each day because well, they
(21:40):
make airplanes with these workers, or rather these workers make airplanes.
I guess that's the better way to phrase it. And
so if you're an airplane manufacturer that can't make some
of the airplanes that you sell, it results in the
loss of revenue, which typically impacts profit as well, And
so Bowing continues to head towards a place where S
(22:01):
and P Global Ratings is now saying that it might
cut the plane maker's credit grade. To junk your thoughts, Mark.
Speaker 3 (22:10):
I'd forgotten there was a strike, to be honest, at
the risk of sounding of twos, But one does wonder
how long. First of all, I didn't realize one party
could just walk away. They haven't taken that rather severe
step yet, but at some point, I guess the FEDS
can come in and force them to talk, if not
force a settlement on them.
Speaker 2 (22:28):
Boeing is also apparently considering selling ten billion dollars of
new stock once they know the extent of the damage.
And so it's just just kind of a continuation of again,
different struggles in this case than you know, building planes poorly,
but continuation of struggles for a company that has been
(22:49):
struggling really for the last six to eight years. Now,
I mean this goes back you're talking. I mean the
decision making on their struggles goes back over a decade,
but you're really talking like twenty seventeen twenty eighteen where
this company started to run into two problems in the manufacturing.
Decisions that they made started resulting in the deaths of
(23:11):
people flying on Boeing airplanes. So we'll continue to keep
you updated on what is going on on that front.
Speaker 5 (23:19):
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(24:25):
com piece in.
Speaker 2 (24:27):
The Wall Street Journal. It's titled the battleover Robots at
US Ports is on, and basically what it's talking about is, Look,
you've got this tentative agreement on wages between the dock
workers now and the shippers and.
Speaker 4 (24:45):
Ports.
Speaker 2 (24:46):
But one of the things that still needs to be
negotiated before the short term expiration the short term extension
expires on January fifteenth, is what are these ports going
to do with regard yards to automation. And obviously, look,
the ports and the shippers are pushing for much higher
levels of automation because they think it'll build efficiency and
(25:08):
lower cost. The workers are saying, no, we don't want
to be automated out of jobs. Both of these are
positions that I can understand, but Ultimately, when we look
at the idea of economic growth and the creation and
(25:28):
building of wealth, the way that it happens is through
productivity gains and efficiency gains that allow us to produce
more stuff with fewer inputs. It's basically the entire principle,
which is, Look, if we were still restricted to, you know,
having to manually plant every farm and catch every fish
(25:50):
by hand, and it would be, you know, an awful
lot of work. You know, imagine a world in which
you say, hey, hey, you know what, I'm gonna go
out and get some shrimp for tonight, and you have
to go out there with like a harpoon and get
all of the shrimp one by one. That would be
really bad.
Speaker 5 (26:11):
It seems aggressive.
Speaker 2 (26:12):
Rump shrimp. It does seem like a tiny harpoon, little
tiny harpoon, maybe harpoon, just toothpick, just a little, little
tiny one. It gets right into the cocktail size.
Speaker 1 (26:21):
You know.
Speaker 2 (26:21):
It's it's that toothpick that.
Speaker 5 (26:23):
Use the spear that goes into a sandwich. That that
that's what I mean by harpoont.
Speaker 3 (26:28):
Why poor Chucks ever enjoyed a shrimp. He's been obliterating
them with harpoons. It's like, how do you guys do it?
There's nothing left By the time.
Speaker 2 (26:35):
Guys, I got a big one. It's a jumbo eventually, though, Look,
I know that's not how they caught them originally. But look,
someone comes along with, hey, a net that's you know,
a fine mesh and actually catches hundreds of them. The
person using the harpoon doesn't say, hey, you can't use that,
it's gonna put me out of business. We adapt because
new technology makes things easier, and the companies and workers
(26:56):
that adapt us to new technologies are able to be
on the cutting edge. So this is a place where
again I say, this is someone who realizes that for
the last I don't know, fifty years, the bulk of
that time, we've seen wage gains not keeping up with productivity,
meaning we've been generating more wealth, but it hasn't been
(27:18):
distributed out to workers as well. Like that's been one
of the major problems. The answer to that is not
to say, let's restrict productivity. In my opinion, like that's
that's a bad way to go about it. Hey, we've
got this new technology that can make things easier, cheaper,
and faster for us. Let's not use it because we're
(27:40):
worried about losing jobs. That's like, imagine if that's the
point is imagine if we said that about the combine,
or the word processor or the airplane.
Speaker 3 (27:51):
These jobs aren't really lost. These workers will be retrained
gradually moving into new industries, or perhaps if it's done
in a more humane, slow but more humane way, by attrition,
the adjustment could be made far less painful. But the
we'll just call it progress, which there was not for
a long time. The economics profession has spent and continue
(28:12):
to spend a lot of time answering the question what
causes growth? It might surprise you to know economist don't
agree on that question. Productivity is a residual. It's like
what is driving it? But we don't really know how.
They're a model.
Speaker 4 (28:24):
We don't know what causes productive Yeah.
Speaker 3 (28:26):
There are theorist right, there are. There are different schools
of thought on this is my point. So if it's
not obvious to you, you're in really good company as
to what causes economic growth. Nobody really understands it. We
can describe it, but what causes it harder to say.
Good institutions are important. I'll just leave it at that.
Stable government, independent federal reserve, the stuff basically that we have.
But you're right, Chuck, you can't fight. I'll just call
it progress. The right solution is for politicians to get
(28:48):
in front of this and establish funds for retraining people
hurt by free trade, which is another example of your
temporary job disruptions losses. To be more blunt is free trade.
You can either throw up barriers like JD Vance wants
to do when he says five million cheap toasters is
not worth one job. Really, JD. If you're saving ten
bucks on each toaster, that's fifty million dollars. Got plenty
(29:11):
of money. You could tax half of that, use it
to retrain workers, put them in a new industry. So
one solution, which both the left and right have embraced,
is to throw up barriers and hide from the world.
This view seems prevalent right now. Sadly, it make us
less wealthy, a lot less wealthy in the long term.
Another view is to get ahead of it through education
through universal basic income, something I'm not a huge fan of,
(29:32):
but it's another way to support people who are displaced
or look.
Speaker 2 (29:35):
This is at the risk of getting you know, really
really basic on this. This is a collective bargaining agreement.
The union and the companies can collectively bargain the retraining
in this case like it's it's what they've done, you know,
these are things. It's not. You don't just have one
worker out there saying, oh, gee, what am I going
(29:55):
to do? Like you can literally bargain in hey, for
every worker displace, the companies will commit X dollars to retraining,
you know in the fields that specialize in X, Y
or z and blah blah blah. You can literally collectively
bargain it. So I have sympathy for, you know, workers
(30:17):
who say, hey, we're going to be automated out of existence.
Like again, no one says thinking this might be coming
for all of us with AI and where it could
be going chuck.
Speaker 3 (30:25):
Nobody's saying good luck, sorry, a robot takes seven jobs.
As the research from Darren as mcglu works at MIT,
which is cited in this article, rightly points out, that's
over a thirty year, multi decade period, though, plenty of
time again to get ahead of this. Nobody's saying kick
these people out of work and wish them good luck.
I'll use the same argument with respect to free trade.
(30:46):
You don't hide from the world, so we could produce
again JD Vance's fantasy. Sorry for picking on the Republican ticket,
but he's the one out there saying he wants all
cars to be made here and toasters to be made here.
We remember what all American cars was like those of
us who drove a car made in the night, teen
eighties or seventies, we didn't always get the best quality.
Competition is good.
Speaker 2 (31:05):
Let's take a quick break here. When we return, let's
do a little bit of stack roulette.
Speaker 1 (31:11):
Business and financial news affecting the markets and your wallet.
We've got it all straight from Wall Street right here
on the Financial Exchange Radio Network. Miss any of the show,
catch up at your convenience by visiting Financial Exchange show
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find all of our interviews in full showers. This is
(31:32):
your home for the latest business and financial news in
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Exchange Radio Network.
Speaker 5 (31:42):
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Speaker 2 (32:18):
Do you have for me for stack Roulette?
Speaker 3 (32:21):
Home depot ordering corporate staff so desk jockeys basically to
take an eight hour shift at a retail location at
least once I read this yesterday, I hope I'm remembering
this correctly at least once a year, and it sounds
I'm not sure whether I feel like this is a
gimmick or whether it's likely to help people better appreciate
(32:41):
the challenges faced by the people on the front lines.
And this would apply to any corporate structure. Farm depot
has its unique challenges. Big box home improvement stores exploded.
Their sales exploded after COVID as people were stimulus flush
and very few places to have, very few places to
spend it. They've since sagged, so this is partly perceived
as a way to shore up confidence in there what
(33:04):
I'll call turnaround plan, even though that's probably a little
bit too dramatic a way to put it. But how
in the world could you come to appreciate the challenges
faced by your frontline people with only an eight hour
shift spent god knows how doing who knows what once
a year. It seems like a gimmick.
Speaker 2 (33:20):
It is, And here's why it's it's a gimmick that
sounds good. People to be like, Oh, that's that's what
you need. You got to get the experience of being
an average joe. Well, here's the thing. First, that one
day that you're working there, you can have no idea
what to do. So you're gonna be spending the entire
day just asking people what to do.
Speaker 3 (33:36):
Yeah, which, unless there's a plan were there?
Speaker 5 (33:38):
Sorry, no, no, I was just gonna say, that's literally
what you said, Chuck is going to piss off the
retail workers who are there on a deal basis.
Speaker 3 (33:44):
In the way, unless there's a well thought out, correct
maybe there is a plan I shouldn't prejudge.
Speaker 2 (33:49):
But the other thing is that one day does not
give you a representative experience. Even assuming let's say let's
say you knew everything going and you like a month
training for this, and you're like, Okay, I know what
I'm gonna do. It's not just one day. It's hey,
you got to experience what it's like to be in
that role long term, because the lived experience is just
(34:11):
fundamentally different. You tell someone, hey, you know you're gonna
make X dollars an hour, and you say, okay, I'll
cut my wage to that for a day. That's not
the lived experience of living at those wages or with
the pressures that they have, because you know that you
can walk away from them. It's just it's fundamentally different.
Having to actually have that like hanging over your head
(34:32):
the whole day as something that you deal with day
in day out for months or years at a time,
is just a fundamentally different experience because you actually have
to live it. You can't just be like, well, I'm
going back to corporate tomorrow.
Speaker 3 (34:46):
I think everybody knows shadowing is, which is corporate speak
for watching somebody all day can have indifferent or even
negative results. The person being shadowed tends to resent it.
When it's somebody from another department. I mean, in a
big corporate structure kind of like this one, the person
shadowing wonders, what am I supposed to get out of this?
How will the success of it be evaluated? Is today
(35:07):
a good sample of a day in the life of
the person that i'm or the department that I'm shadowing.
It feels like a gimmick. And I think if if
I were on the board and the CEO brought this
to me, is this great innovative thing, I'd start to
wonder if I'm not I should be generalizing here. There's
probably a lot more going on. But if this were
the big idea, and there's no indication that it is,
(35:29):
not that it is the only big idea circulating at home, depot,
C suite, but I would start to wonder about leadership.
Speaker 2 (35:36):
I mean, look, if you really want to know what's
going on at your different locations, talk to your people
and listen to them like they're the ones who will
give you this without you having to spend a day
pretending that you're a cashier.
Speaker 3 (35:51):
And maybe they've tried that in fairness, we don't really know.
Speaker 2 (35:54):
Well they're not listening well enough, then I guess not
like you're either not listening well enough or you're just
not listening well enough.
Speaker 3 (36:00):
I'm sorry. Do you repeated that?
Speaker 2 (36:01):
Yes, I want to talk a little bit about McDonald's nanks, Tucker.
I thought you would like that McDonald's is suing a
number of meat packing companies claiming that they are colluding
to inflate beef prices. And this is wild to me because,
like you, you don't really see this that often where hey,
(36:23):
company who is dependent on you know, wholesale, x Y
and Z for its you know, livelihood suing the only
companies that can make the stuff that they need. Kind
of wild. Actually, I mean like you've got you've got
big fast food suing big beef. This this stuff doesn't
(36:43):
really happen. Imagine as an example, let's say that Toyota
sued a bunch of steel producers.
Speaker 3 (36:50):
Somebody did this when the last year they sued a supplier,
who was it? You would know you followed this. This
is this is ringing a bell, getting somebody suit a
supplier in the last year, big company, big so both
household names. I forget.
Speaker 2 (37:02):
There have been all kinds of things with food suppliers,
like food holds.
Speaker 3 (37:05):
I'm remembering one of those.
Speaker 2 (37:07):
I think Tyson Foods has gone through like three different
like chicken fixing things that I forget if it's the
ftc or the DOJ is looking into tuna collusion. Do
you remember that story we covered Tucker Tucker Big.
Speaker 4 (37:20):
Taca.
Speaker 2 (37:22):
Yeah, Big Tuna's getting out of control. But this is
fascinating me because McDonald's filed a federal complaint against Tyson Foods, JBS, Cargill,
and National Beef Packing Company alleging that they are engaging
in a price fixing scheme for beef. Now, again, there
have been a lot of these things that have been filed,
but they've typically been by the government. What makes this
(37:43):
difference is McDonald's saying, hey, you guys are colluding because
McDonald's needs the beef. And you know, the obvious threat
here is that Tyson, JBS or Cargo is like, okay, fine,
we're gonna send our stuff somewhere else and now you're
not gonna have any beef.
Speaker 4 (37:58):
How do you like it? Now?
Speaker 2 (38:00):
So I think this is fascinating also to me, I
wonder the cynic in me. McDonald's been catching some flak
for raising prices quickly. Is this something public they can
point to to push back? And then they're like, no,
we'll just let this go. A couple months later, quick
break for the rest of the day. We'll see you
Speaker 4 (38:20):
Tomorrow on the Financial Exchange
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