May 9, 2025 • 38 mins
Chuck Zodda and Mike Armstrong discuss...
Trump Team Seeks Tariff Cuts, Rare Earths Relief in China Talks
With U.K. Deal, U.S. Signals That 10% Tariff on World Is New Baseline
Key S&P 500 Model Turns Bearish for First Time in Two Years
Why This Stock-Market Bounce Won’t Hold
Trump Brings Millionaire Tax Idea Back to Life
In 233 U.S. Cities, Even a Starter Home Costs $1 Million
Trump Team Seeks Tariff Cuts, Rare Earths Relief in China Talks
With U.K. Deal, U.S. Signals That 10% Tariff on World Is New Baseline
Key S&P 500 Model Turns Bearish for First Time in Two Years
Why This Stock-Market Bounce Won’t Hold
Trump Brings Millionaire Tax Idea Back to Life
In 233 U.S. Cities, Even a Starter Home Costs $1 Million
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
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(00:20):
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(00:42):
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(01:05):
Zatith and Mike Armstrong.
Speaker 2 (01:11):
Chuck, Mike and Tucker with you here on a Friday.
There are nine Federal Reserve speakers set to talk today,
and so we're just gonna call to day and go
home time. Yeah, we're just gonna call it a day
and go home, because you know, like, how can you
compete with that when you got nine members of the
Federal Reserve getting out there and chatting it up, including Well,
(01:33):
here's the thing, it's really only eight because John Williams
is scheduled for two different talks. He did one at
six fifteen this morning, waking up early at least, getting
after it early, and then he's gotten eleven thirty. I
believe that his schedule's clear for the afternoon. Do people
(01:57):
get this joke? The force is strong with the swan.
Speaker 3 (02:01):
Okay, we do it every once in a while. I
hope people get it.
Speaker 2 (02:03):
I think people get it. Sometime we talk about John Williams.
Speaker 3 (02:06):
Yeah, Okay, it's not the same John Williams. Is it?
It is?
Speaker 2 (02:09):
He went from being a composer to working on the
Federal Reserve.
Speaker 4 (02:13):
What do you think is a larger percentage of the
American public, those who care about when the Federal Reserve speaks,
or those who are currently in default on their student
loan debt.
Speaker 2 (02:24):
The latter. It's not even close.
Speaker 3 (02:26):
Yeah, because wait, wait.
Speaker 2 (02:28):
It's five million people that are in default on student
loan debt.
Speaker 4 (02:31):
Yeah, I think so. So what's that like two percent
of the adult population.
Speaker 2 (02:35):
Yeah, the number of people that actually like know when
the Federal re like, not even care. The number of
people that know when the Federal Reserve speaks.
Speaker 3 (02:46):
Eh, there's half a percent.
Speaker 2 (02:48):
There's twelve of us, you know, it's it's you, me
and Tucker and nine other people something like that. Anyways,
I digress. Uh so, uh this morning, again, this is
our top story just because it's it's at the top
of the stack, so it's our top story.
Speaker 4 (03:06):
It should be too. It's most important thing of the day.
I disconcur and I'll explain why.
Speaker 2 (03:10):
Okay, headline from Bloomberg Trump says eighty percent China tariff
seems right ahead of talks. So here's why I don't
think this is particularly important is because we don't know
exactly what is going to happen this weekend. The Trump administration, specifically,
President Trump has had four different numbers that he's referenced
(03:31):
for tariffs this week. Yeah, one of which was we're
not going to move off the one hundred and forty
five percent. One of which was, well, we're going to
lower it maybe to fifty or sixty percent, and now
this at eighty. So my whole point is stop paying
attention to what the President is saying on tariffs each
and every day, and instead pay attention to what they
are actually doing, because otherwise you're gonna drive yourself batty.
Speaker 3 (03:53):
Oh, I agree.
Speaker 4 (03:54):
I was just referring to this weekend's talks on China
tariffs probably being the most important thing to have the
economy in markets between now and Monday. Where it goes.
I don't think anyone has any real idea, but it
seems like they're coming down. I think it's kind of
meaningless if they come down to eighty percent. But it
seems as though the President is setting up the conditions
(04:17):
under which rates of tariffs can come down this weekend.
Speaker 2 (04:22):
And everyone knows that, which is why I kind of
look at it and I go, so, what do you
do with that information? Then when everyone knows something, there's
no edge, there's nothing that you can do with it.
And so I think that the interesting thing to consider
is not, hey, what happens if tariff's come down to
fifty percent, because it's kind of what's being baked in
(04:43):
here to the market. We can talk about what it
means to the real economy and this and that, but
let's from a market perspective. The interesting things to consider are, hey,
what if they move more than that, if terrors come
down to twenty five percent? Or hey what if things
go off the rails and we're still sitting here Monday
Tuesday and they haven't budged Yep, you.
Speaker 4 (05:06):
Know, distinct possibility that these negotiations look something similar to
when the President's.
Speaker 3 (05:12):
Met with Zelenski.
Speaker 4 (05:14):
So there's no real predicting how these negotiations go. But
look again, we do have to cover the change in
tone over the course of the last week, and the
change in tone over the course of the last week
has been more conciliatory from the Trump administration.
Speaker 2 (05:31):
Let's talk about this change in tone because there's two
tones that matter. It's a two tone engagement. And I
use that word engagement here because that's the word that
China has been using for the last couple of days
in describing what they're heading into this weekend. Now, I
am not an expert when it comes to internal Chinese politics,
(05:53):
nor am I an expert in anything relating to Chinese language.
Speaker 3 (05:57):
Doesn't even speak Mandarin.
Speaker 2 (05:59):
I don't know what. I literally could not tell you
one word in Mandarin, not one, not even gonna try.
Speaker 3 (06:06):
My entire Chinese language came from the movie Rush Hour.
Speaker 2 (06:12):
It's probably wrong, then, yeah, probably wrong. So here's what
I do know from people that tell me these things,
that know something about China. What they inform is there's
a very specific reason that China is characterizing this as
an engagement rather than as a negotiation, and that from
a Chinese perspective, they are not expecting to negotiate. They
(06:36):
are expecting to talk about what a potential negotiation could
look like. So on one hand, I look at that
and I go, okay, that could mean that maybe the
market is overpricing We're what it's expecting to get this weekend.
You know, market might be pricing in like an eighty
percent chance the tariffs come down to fifty percent, and
(06:58):
maybe the reality is closer to fifty fifty.
Speaker 3 (07:00):
Yeah.
Speaker 4 (07:01):
The way that they have phrased this engagement has been
if the United States would like to negotiate, then do
so in good faith and eliminate the tariffs prior to
us negotiating anything. That has been the pretty consistent messaging
from them. And so if we take that as the
Chinese perspective going into this, then maybe the takeaway is
(07:22):
that teriff rates do in fact come down this weekend,
but it's merely as a promising starting point to a
future negotiation.
Speaker 2 (07:30):
The other way that you can read that is, look,
the Chinese government obviously needs to present a certain image
to its domestic populace and doesn't want to be seen
as moving too far, and so that's why they use
the term engagement. And then after they can say, hey,
we started off, this was where we were gonna be,
but the US side blew us away with you know
what they were gonna be, you know, doing, and so
(07:52):
we decided to, you know, move forward with X, Y
or Z whatever.
Speaker 4 (07:56):
What are the important things that the Chinese government wants
other than just produce terrorists and continued trade.
Speaker 2 (08:02):
Stop borrowing and stop bothering us.
Speaker 4 (08:05):
I think that I think they really want semiconductors. They're
not gonna get it, no, but if they if we're
talking about things that they are, you know, desperately seeking
the Chinese want American technology products.
Speaker 3 (08:19):
What is it that the United States wants from China?
Speaker 2 (08:22):
Uh, to go away? To just China not exist anymore, No,
not not exist, but just stop behaving the way you've
been behaving as it relates to trade. Like go away
and like act like a normal country as it relates
to trade. That's that's the simplest and cleanest way that
if Okay, if you actually want to know what the
(08:43):
US government wants as it relates to China, it can
probably be encapsulating four or five things, a couple of
which we saw in this UK deal from yesterday. Number one,
stop producing way too much stuff and then just dumping
it into the world every time that you realize you
produced way too much stuff, because that's not good for
anyone's business. Number two, stop engaging in export fraud where
(09:05):
you send stuff to another country in order to avoid
tariffs and then have it relabeled as made in country
X y z instead of made in China. So those
are a couple things. Number Three, hey, stop requiring these
joint ventures in China where you basically end up stealing
a bunch of intellectual property from foreign companies in order
(09:25):
to grant them access to the Chinese market. Number four,
let your currency float freely and stop using it as
a way to maintain a trade surplus with US in
perpetuity and instead, you know, allow your country to develop
the way that otherwise would with the trade flows that
(09:47):
are flowing into it. I think those are probably the
four big things that the US would want.
Speaker 4 (09:52):
Fence and All's on that list too, but I think
it's more of a negotiating attacking.
Speaker 2 (09:56):
Yeah. Yeah, And here's the thing on those four items.
If you are the Chinese government, things worked out pretty
well for you doing what you've been doing for the
last twenty thirty years. Why are you going to change?
You know, are you going to change just because of
a month of pressure on your economy?
Speaker 4 (10:19):
The Chinese, the entire philosophy of your country has been
based on the idea that it is a country that
has taken advantage of and suffered for a century a
generation of.
Speaker 2 (10:29):
At the hands of westerners, at.
Speaker 4 (10:31):
The hands of westerners, and so we will not allow
that to happen to us again. That's the entire Chinese
mantra in ideology. And therefore, changing something that's been working again,
to Chuck's point, fairly well for the last thirty years,
based on an ideology that's unrecognizable in the United States.
The ideology in China has been and continues to be
(10:53):
that the government directs investment and provides for the people,
and that is very different from the United States and
Western ideology of demand drives investment. Consumers and free markets
drive investments, not the government. And I don't think you're
going to shake them from that view based on a
(11:13):
weekend negotiations.
Speaker 2 (11:15):
So I think ultimately what markets are looking for is
some kind of step down. The one that's being talked
about that even the New York Post floated yesterday is yeah,
we're probably gonna see like a tariff raiate of you know,
between forty five and sixty percent, somewhere in that range. Okay,
that's like expected.
Speaker 3 (11:33):
Now.
Speaker 2 (11:35):
The thing that has the potential to move markets is
if you get something outside of there. And again I
don't know how you exactly you handicap you know what
the chances of these things are, but that's kind of
where we are heading into the weekend at this point.
Let's take a quick break when we come back now
that We've had a day to look through the details
(11:56):
of the deal between the UK and you wes, Let's
talk a little bit about what we found there and
what we think that means for future negotiations with other
countries as well.
Speaker 1 (12:08):
Market volatility is at its highest point since the pandemic.
Keep it here for the most comprehensive coverage of the
global trade war. This is the Financial Exchange Radio Network.
Well Street watch a full update on the markets performance
todate weekdays at ten thirty only here on the Financial
Exchange Radio Network.
Speaker 5 (12:31):
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Speaker 2 (13:05):
All right, let's talk a little bit about this deal
between the US and UK, because I think it helps
to inform my thinking on where we're going with other
countries here, so key starting points. Just background, the US
runs a trade surplus with the UK, yes, twelve billion
(13:25):
dollars last year. We sent them twelve billion dollars more
in stuff than they sent us. Other things of note,
the US and the UK, we've got some pretty close
historical ties all the way back to the point where
we literally fought each other over America, did we and
we won? It was a long time ago, but two
hundred and fifty years next year. By the way, Mel
(13:46):
Gibson was there two hundred and fifty he was. He
was He's ledger to rest in peace. But in any case,
some really close historical ties. I mean you talk about
like fighting alongside each other in World War One, World
War TI two, all the way up through you know,
Gulf War one, the Afghanistan War. I mean, yeah, these
are countries with like deep, deep, you know, historical ties.
(14:10):
I would you even get to like language and governance
and stuff like that.
Speaker 4 (14:14):
I would argue the only country you can put in
the same category would be Canada.
Speaker 2 (14:18):
It's it's a short list. I have like a top
five that I would put there that also again just
because of like language reasons, includes Australia. You probably put
Japan in the conversation, but probably in the next tier,
same with Germany and France. Other than that, I don't
know who else you would include in that list. So
it's a very short list, huge areas of strategic cooperation, military, intelligence, economic.
(14:45):
So you put all this together and you say, Okay,
this is gonna be one of the easiest deals to
negotiate and should receive some of the most favorable terms agreed.
So here's the interesting thing in terms of what the
deal actually says. First, not a deal that is going
through Congress for full fledged congressional approval. So it's not
a true, you know, free trade agreement or any kind
of trade agreement. It is basically a handshake deal on
(15:09):
tariffs between leaders, which is fine, Like, it's not good
or bad, it just is just.
Speaker 3 (15:14):
It's also not permanent because of that.
Speaker 2 (15:16):
Correct, it can always be amended by either side at
any point in time or by the next leader of
the country. Correct, here's what's going on. The UK gets
to export jet engines and aerospace parts to the US
with no tariffs. They also get to export one hundred
thousand cars a year at ten percent rather than the
twenty five percent global auto tariff, and they get to
export steal to the US at zero percent. There also
(15:38):
is a mutual reduction of tariffs on ethanol and beef,
so US farmers get a little bone thrown to them
as far as hey, you can export a little bit
more easily to the UK, but the ten percent tariffs
on all other imports from UK, the UK stays in place. Yep,
still in place. So what do we actually make of this?
The first is it's a really minor adjustment in the
(16:01):
tariff rate. It's not something that is huge by any means.
It's not dramatically reducing that terif rate that the UK
is going to.
Speaker 3 (16:09):
Pay to the United States.
Speaker 2 (16:10):
There are some carve outs that they have, Obviously, the
biggest one is that aerospace piece, where it's about a
ten billion dollars a year export business to the US,
largely to Boeing Because if you're not familiar with them,
Rolls Royce the automaker who sells, you know, really expensive cars.
They also make jet engines. They're one of like a
couple major jet engine providers in the world, and they
(16:32):
do sell to Boeing and to Airbus for use on
their planes.
Speaker 4 (16:36):
Correct me if I'm wrong. Because of this surplus, the
UK was not included on the list of reciprocal tariffs
that came out back on April second, and so this
was not something where we needed to start at twenty
percent and negotiate our way down here. What we knew
was that ten percent was in place a few months ago,
and it's largely still in place.
Speaker 2 (16:55):
So here's where I think I end up landing on this,
the ten percent blanket tariff. That's a minimum globally. The
Trump administration wants to raise money via tariffs, potentially to
help pay for, you know, some of the tax cuts
they're looking to push through, but they view this as
a revenue raiser. It is absolutely something that they want
to keep out there.
Speaker 3 (17:15):
Yep.
Speaker 1 (17:16):
Uh.
Speaker 2 (17:17):
So you say, okay, the UK is you know, the
easiest one of these to negotiate. You start getting into
countries that have closer economic ties with China, and this
is where I think the meat is. The US wants
to try to isolate China. The airplane parts. The thing
is a key piece here to me, which is, look,
we'll give you the ability you want to build your
you know, your country through exporting jet engines, fine sell
(17:40):
them to us. We will give you the best terms
out of anyone. And by the way, the UK has
wanted to do this for a while. They've been negotiating
on that jet engine piece for like ten years with
the US. Fine, here you go. This is the carrot
to the stick. You want this, you got it, But
you're gonna deal with US if you're a country with
colaster ties to China, countries like Vietnam, Malaysia that have
(18:03):
really you know, big import exports with China and also
are you know, really heavily at risk of China trying
to dump product into them that they then gets rerouted
to the US. Teriff rates probably aren't gonna end up
landing at ten percent, I would think, not fifteen to
thirty probably feels right. It might take longer to negotiate,
(18:23):
so don't be surprised if this is something where that
ninety day waiver of the reciprocal tariffs maybe get another
ninety day or one hundred and eighty day that comes
on the back of it.
Speaker 4 (18:31):
Because think of how long this one negotiation seemed to sick.
We don't know how long they were negotiating behind the scenes.
But my guess would be pretty immediately, starting in April,
this negotiation started.
Speaker 3 (18:43):
And we are not done yet.
Speaker 2 (18:45):
Correct.
Speaker 4 (18:45):
This was the framework for a deal to be made
that has not been executed or signed in any way. Again,
it's kind of a handshake agreement between leaders, so it
might not need to be executed in the same way
that a congressional deal would be. But it took seemingly
a month to get this one done.
Speaker 2 (19:02):
Now you'll probably again some of those ones that I referenced,
you know, whether it's Japan, Australia, you may get a
few of these popping up over the next couple weeks
or so, because I think that the frameworks are likely
to be pretty similar, but some of these other ones
are going to be more challenging. I mean, if you're
Vietnam and one of the key US asks is, hey,
we're going to really push back on the amount of
(19:23):
you know, stuff that you do with China. It's a
much bigger deal for them than it is for the UK.
And this is before we even get to the EU,
and you know how they have some very deep China
ties at this point. S take a quick break here
when we come back. Wall Street watches next.
Speaker 1 (19:40):
Like us on Facebook and follow us on Twitter at
TFE show. Breaking business news is always first right here
on the Financial Exchange Radio Network. Time now for Wall
Street Watch a complete look at what's moving market so
far today right here on the Financial Exchange Radio Network. Well.
Speaker 5 (20:00):
Markets are now flat after yesterday's rally, one day after
a trade agreement between the US and UK, as Wall
Street aways developments from trade talks this weekend between the
US and China in Switzerland. This morning on truth Social,
President Trump posted that eighty percent tariffs on China seems
right right now. The Dow is off by fifty four points,
(20:23):
just over a tenth of a percent, SMP five hundred
is down by only six points, and the Nasdaq is
down by merely ten points. RUSS two thousand is up
just over a third of a percent. Ten year treasure
Field for treating two basis points now at four point
three four percent, and crude oil up three quarters of
a percent, trading at sixty dollars in thirty seven cents
(20:46):
a barrel. More travel demand worries have emerged after travel
booking platform Expedia saw its quarterly revenue come up short
of street expectations. Expedia also issued soft guidance as it
saw weaker than expected ravel demand two and from the
US that stocked down by eight and a half percent. Meanwhile,
(21:07):
social media company Pintrest swung to a profit and guided
for higher than expected revenue this quarter, helping ease concerns
that trade policy would potentially hurt spending on digital advertising.
Pinterest is jumping by eight percent. Elsewhere, shares in buy Now,
Pay Later platform A firm down over eleven percent after
(21:28):
its revenue guidance disappointed. A firm also said it would
start a partnership with Costco after a lost Walmart in March.
Lift shares popping by twenty one percent after the ride
hailing company swung to an unexpected quarterly profit. Lift also
increase its share buyback plan to seven hundred and fifty
(21:48):
million dollars and shares in Monster Beverage up by one
percent after the energy drink maker saw its first quarter
revenue fall short of analyst's estimates. I'm Tucker Silvan. That's
Wall Street.
Speaker 3 (22:00):
Watch Mike.
Speaker 2 (22:01):
There's a piece in Bloomberg. It has the headline key
s and P five hundred model turns bearish for the
first time. So Bloomberg wrote this about their own model,
and it sounds like it must be a very key model.
Speaker 3 (22:18):
Then have you ever heard of this model? Chuck?
Speaker 4 (22:21):
No, yeh, it's the equity market Regime model, which is
a Bloomberg intelligence model that tracks the benchmark stockage and
clusters periods into three phases, green, yellow, and red. Effectively
is all you need to know. And as you can imagine,
the red is not so good, the green is pretty good.
It fell into the red category recently. Okay, So I
(22:43):
guess what I think this falls into that same category
of stories that we've covered before, which is, if any
story like this makes you completely upend your view on
markets or the economy, then either you must have a
lot of context and work for Bloomberg enough to know
that this model exists and you really follow it, or
(23:05):
you should in which case you already knew that this
turned red, or you should ignore this story entirely.
Speaker 3 (23:10):
Is my general takeaway.
Speaker 2 (23:12):
Yeah, I just this is what you like what you're
about to do with it? Where it's like, okay, like,
do they update you every day whether it's red, yellow,
or green? The answer is no, but they maybe if
you subscribe to a Bloomberg terminal for ten grand a year? Uh,
more than double that?
Speaker 3 (23:28):
Really? Yeah, that's what Bloomberg terminal is going for.
Speaker 2 (23:30):
More than double that?
Speaker 3 (23:31):
Wow? Yep, wow, yeah, that's a lot of money.
Speaker 2 (23:34):
Yeah, inflation, you know, right, it's yeah.
Speaker 4 (23:37):
So, yes, we are apparently in a red regime in
this Bloomberg intelligence model. The biggest warning was that the
sess and P five hundred clothes below it's two hundred
day moving daily moving average in March, the first time
since November of twenty twenty three. Again, if that means
nothing to you, then ignore this story entirely.
Speaker 2 (23:58):
It brings us to our next piece from the Wall
Street Journal, why this stock market bounce won't hold subheadline.
After Liberation Days, stocks fell a lot, perhaps too much.
Speaker 4 (24:09):
We were talking about today's market bounce because that one
did start positive and is now negative.
Speaker 2 (24:12):
They've now rebounded a lot, perhaps too much. So, I mean, look,
here's here's the deal. I work in the investment business,
you do, I've done that for almost sixteen years, and
I have absolutely no idea, no idea where the stock
(24:37):
market is going to be six twelve, twenty four months
from now. I don't have a price target for it.
I don't know the exact path that's going to follow
to get there. I have some ideas about what I
think might happen, but I've seen enough and I'm humble
enough to know that all kinds of weird stuff can
happen that you don't expect, and you don't have any
(25:00):
idea whether you're actually gonna be right or not. In
this business, If you're right fifty five percent of the time,
you're a rock star.
Speaker 3 (25:08):
You're war.
Speaker 2 (25:09):
If you're right sixty percent of the time, you are
like deified as like some kind of savant.
Speaker 3 (25:17):
Yes.
Speaker 2 (25:17):
So the fact that, yeah, like I can look out
at the horizon now and be like, yeah, there's still
some high tariffs in place, and even if the China
ones come down a little bit, it's still gonna be,
you know, tough, and you know there's still this you
know issue that you're gonna have with supply chains. I
can look out and say that all those things are true,
But I can also envision a world in which I
(25:38):
don't know, something unexpected happens and all of a sudden,
we're sitting here, you know, at the end of the
year and we're like, man, how'd the S and P
five hundred get to seven thousand?
Speaker 3 (25:49):
Yeah?
Speaker 2 (25:49):
I could also see a world where we're like, oh,
how to get to like four thousand? Each of those
are possible through a unique set of circumstances. And what
what anyone in this business will tell you is you're
always trying to look at the probabilities that something will happen,
not just this is what's going to happen.
Speaker 3 (26:06):
Yeah.
Speaker 4 (26:07):
I think maybe an important reminder that the Wall Street
Journal article title at least reminded me of was that
it is a typical for recessions and market dow turns
to go the way they did in twenty twenty two
and twenty twenty. As a reminder, in twenty twenty the
market turned down and over the course of about three
weeks by thirty three percent, marked by more than one
(26:32):
freezen trading due to the volatility, and then bounced back
either faster or nearly as fast as it fell in
two thousand and eight in the dot com bubble.
Speaker 2 (26:42):
Twenty twenty two was a much more normal sell off,
like it took place over like ten months.
Speaker 4 (26:47):
Yep, it lasted a little bit longer, but again it
had recovered itself in what six months?
Speaker 3 (26:54):
Yeah, so not terribly long time. Oh eight.
Speaker 4 (26:57):
As an example, a fifty five fifty three percent full
draw down on the S and P five hundred, defined
by several periods where the stock market rallied in between
there and it took a good year and a half
to get to that bottom. The dot com bubble similarly
behaved that way. And so one of my words dot
com bubble, I mean you want to last it longer
(27:17):
and defined by even more volatility and spikes in price.
Speaker 2 (27:21):
I mean you want to talk about well and not
just that the dot com bubble. It took you fifteen
years to get back above water, right at least if
you're talking about the tastocks.
Speaker 3 (27:30):
Yeah, you know.
Speaker 4 (27:31):
So the the point that I'm attempting to make here
is it has been a long time since we have
collectively as US investors experienced a market draw down, not
of that magnitude, but of that typical.
Speaker 3 (27:47):
Yeah, tip is typicality where it is? Now?
Speaker 4 (27:50):
This is what we do on the typicality change does
that's three of normal end markets. And if you are
going into this one expecting just a rapid bounce back,
you might get it.
Speaker 3 (28:03):
But that is a typical of.
Speaker 4 (28:05):
Markets when they are experiencing a growth slowdown or a recession.
If you are investing today, maybe on your own, maybe
with a professional, and you are uncertain of how you
are preparing for what could be a prolonged period of downturn,
what the President has described as potentially a period of
(28:27):
economic difficulty for the United States, ask yourself, Hey, do
I understand how my portfoliould react? And do I understand
how I, as a worker or a retiree and prepared
for that personally? Give the folks at Armstrong Advisory Group
if call if you would like a second opinion on that,
the numbers eight hundred three nine three for zero zero one.
(28:48):
You can book a consultation online as well at Armstrong
Advisory dot com, but the number for the Armstrong Advisory
Group eight hundred three nine three for zero zero one.
Speaker 1 (28:58):
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any Armstrong guide a specific financial, legal or tax advice.
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Speaker 2 (29:14):
So speaking of things that are unexpected. Yesterday, apparently, and
this is according to reporting from the Wall Street Journal,
I'll quote here, the President, who rejected a quote millionaire
tax April twenty third, is now considering backing a tax
structure that would return the top individual income tax rate
to thirty nine point six from thirty seven percent for
(29:36):
people making over two and a half million dollars, according
to people familiar with the White House. Now this also
then this morning, I wish I had the president's exact quote,
because it was a good one. It was something along
the lines of I'm not sure whether or not this
would be a good idea or a bad idea, but
I think it would be a bad idea. But Republicans
can do it if they want to. I think was
(29:57):
like the gist of the quote, which I just thought
was fantastic. But look, here's the deal. You have Congress
trying to figure out how to get a tax bill
across the finish line.
Speaker 4 (30:10):
There are rules that they must follow. They're thinking about
changing some of those rules, but even that is difficult
in terms of how you do this. And there's a
looming threat by the way that if they are way
too wild in changing these rules and running up the deficit,
which is, you know, typically what tax cuts do then
the the economy, you know, the markets could get punished
(30:31):
from the bond perspective. We saw that back in early April,
and it would not be surprising to have that repeated.
So they're kind of under the gun, and this has
been one of the ways they have come up with
to offset the costs of you know, maybe you know,
expanding the salt cap, or no tax on security, no
tax on overtime.
Speaker 2 (30:51):
Like, there's a lot of considerations that would decrease the
amount of revenue coming in. And so they're kind of
sitting there being like, Okay, what can we do. Is
this something that is possible or not. Here's all I'll
say about this. Note it put it in the back
of your mind. See where things are in a couple months. Yeah,
Because there's so many proposals floating around out there, I
(31:13):
have no idea what's going to happen and what isn't.
Ninety nine percent of the stuff that ends up getting
discussed does not end up making it into final bills.
You can have all kinds of twists and turns that
happen here. So at this point, I don't really get
that excited or worked up about anything in either particular direction,
(31:33):
just because it's a lot of noise until it starts
getting closer to the finish line. Agreed, Just take a
quick break. When we come back, we'll talk about the
two hundred and thirty three US cities where starter homes
cost more than a million dollars.
Speaker 1 (31:47):
Gosh, the global trade warriors in full swing. How long
will it last? Is anyone's gas? Keep it here for
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Speaker 5 (32:18):
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Speaker 2 (32:52):
Peace from Zillo that I got a few problems with.
The headline is in two hundred and thirty three cities,
even a starter home costs a million dollars. And so
here's the first part. Here's how they define a starter home.
It's a home that is amongst the lowest third of
home values in a given region. Okay, I'm not sure
(33:16):
that that's actually a starter home, because you could have
a place that, as an example, might be in the
lowest third of home values, but it could be like
because there's no first floor and it collapsed into the basement, Like,
that's not really a starter home. It's not you know,
it's like a tear down, you know. So I don't
really love the methodology to begin with. On top of that,
(33:41):
there are parts of not necessarily every state, but there's
parts of there's certain towns that are just not starter
home towns. Like you don't suddenly go to Nantucket and
are like, Wow, I'd love to have a starter home here,
like sure, so would everyone, but you can't do that
because there's only so much land on Nantucket. So of
(34:04):
course it's not going to be affordable for you to
just move there for a starter home if you want
to be more reasonable than that, okay too, Like to
those people in the Boston area, you don't just sit
there and say, hey, I just graduated from college, I'm
twenty four, I put away ten thousand dollars. Let me
go buy a place in Weston. For people in New York,
(34:28):
you don't sit there and say, hey, you know what,
graduated from college, like I'm ready to settle down start
a family, Like, let me find you know a great
place in the hampton Port, Connecticut, you know, like, let's
move to the Hamptons. Like no, like that's not reasonable.
So I think some of this is, you know, skewed,
just because like there are places that are really expensive
(34:50):
where you wouldn't expect to find starter homes. Now there's
also California, and gosh, here's the deal with California. So
two hundred and thirty three towns. I did a little research,
and I hope these numbers are right because they're from Wikipedia. Okay, nationwide. Mike,
do you know how many towns there are in the
(35:10):
United States? No, I'm not even going approximately twenty thousand. Okay,
do you know how many are there are in California?
Speaker 3 (35:17):
Nineteen thousand, three thousand, it's all of them.
Speaker 2 (35:20):
It's about five hundred. Okay, so about a quarter of towns,
one hundred and thirteen towns in California have starter home
prices above a million dollars. Now, what I can tell
you is that it's not really possible that a quarter
of California is like so desirable that there should be
(35:42):
no starter homes for under a million dollars there. Rather,
I think we can conclusively say that the California real
estate market is broken for a number of reasons, the
biggest one being I forget what the proposition was called
when it passed back in the eighties, but it's basically, hey,
if you live in your home, we're not going to
raise your property taxes. And so basically no inventory comes
to market and everything that is out there.
Speaker 3 (36:02):
It's basically rent control for the entire state.
Speaker 2 (36:04):
Correct, And so the California market is horribly broken. So
outside of California, there's only one hundred and twenty towns
out of the remaining nineteen thousand in change that have
this issue. If less than one percent of the towns
in the country have this issue, it's not really an issue.
Speaker 3 (36:23):
Well.
Speaker 4 (36:24):
I think that there is in large portions of the
country a housing affordability issue. I think we've covered that.
I think that remains true. But this is not what
This doesn't define it. I don't think this gives you anything.
But I did the math. I don't think you were
on the show a few weeks ago, Chuck, when I
did the math on the median home in Dedham, Massachusetts.
(36:47):
And I know our listeners are all over the place,
but the town of Debdham has been known for a
long time as like a working class community. It's not Wellesley.
It is not what's like the nice school district in
New Hampshire, like by Bedford or Rye. New Yeah, it's
not one of these really luxury towns. But it's close
(37:07):
to Boston. It's easy to commute to. It abuts the
city of Boston. The median home for sale Endetam, which
was I think three beds and two baths, was one
point seven million dollars, not possible for most people. To,
you know, stay within the cfp's guidelines of how much
you should be spending on housing as a percentage of
your income, and buy that home. I think the math
(37:28):
I did was you as a household needed to be
making around four hundred thousand dollars, which is not the
case for most people. And so look, there are pockets
all over the country and in Eastern Maschists, especially where
housing is unaffordable for a large swath of Americans. There
is a massive portion of Florida where housing is quite
(37:49):
affordable and is about to get a lot more affordable
because of just how onerous it has gotten to maintain
buildings there and ensure them and make sure that they
don't become a disaster every time a hurricane rolls around.
And so I think overall we will actually see home
prices fall in the United States this year.
Speaker 2 (38:07):
Let's take a quick break before we get to hour two.
We get some great stories coming up, including the tale
of the boy who ordered seventy thousand lollipops on Amazon.
You're not gonna want to miss that. After this
The Financial Exchange is produced by Money Matters Radio and
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(01:05):
Zatith and Mike Armstrong.
Speaker 2 (01:11):
Chuck, Mike and Tucker with you here on a Friday.
There are nine Federal Reserve speakers set to talk today,
and so we're just gonna call to day and go
home time. Yeah, we're just gonna call it a day
and go home, because you know, like, how can you
compete with that when you got nine members of the
Federal Reserve getting out there and chatting it up, including Well,
(01:33):
here's the thing, it's really only eight because John Williams
is scheduled for two different talks. He did one at
six fifteen this morning, waking up early at least, getting
after it early, and then he's gotten eleven thirty. I
believe that his schedule's clear for the afternoon. Do people
(01:57):
get this joke? The force is strong with the swan.
Speaker 3 (02:01):
Okay, we do it every once in a while. I
hope people get it.
Speaker 2 (02:03):
I think people get it. Sometime we talk about John Williams.
Speaker 3 (02:06):
Yeah, Okay, it's not the same John Williams. Is it?
It is?
Speaker 2 (02:09):
He went from being a composer to working on the
Federal Reserve.
Speaker 4 (02:13):
What do you think is a larger percentage of the
American public, those who care about when the Federal Reserve speaks,
or those who are currently in default on their student
loan debt.
Speaker 2 (02:24):
The latter. It's not even close.
Speaker 3 (02:26):
Yeah, because wait, wait.
Speaker 2 (02:28):
It's five million people that are in default on student
loan debt.
Speaker 4 (02:31):
Yeah, I think so. So what's that like two percent
of the adult population.
Speaker 2 (02:35):
Yeah, the number of people that actually like know when
the Federal re like, not even care. The number of
people that know when the Federal Reserve speaks.
Speaker 3 (02:46):
Eh, there's half a percent.
Speaker 2 (02:48):
There's twelve of us, you know, it's it's you, me
and Tucker and nine other people something like that. Anyways,
I digress. Uh so, uh this morning, again, this is
our top story just because it's it's at the top
of the stack, so it's our top story.
Speaker 4 (03:06):
It should be too. It's most important thing of the day.
I disconcur and I'll explain why.
Speaker 2 (03:10):
Okay, headline from Bloomberg Trump says eighty percent China tariff
seems right ahead of talks. So here's why I don't
think this is particularly important is because we don't know
exactly what is going to happen this weekend. The Trump administration, specifically,
President Trump has had four different numbers that he's referenced
(03:31):
for tariffs this week. Yeah, one of which was we're
not going to move off the one hundred and forty
five percent. One of which was, well, we're going to
lower it maybe to fifty or sixty percent, and now
this at eighty. So my whole point is stop paying
attention to what the President is saying on tariffs each
and every day, and instead pay attention to what they
are actually doing, because otherwise you're gonna drive yourself batty.
Speaker 3 (03:53):
Oh, I agree.
Speaker 4 (03:54):
I was just referring to this weekend's talks on China
tariffs probably being the most important thing to have the
economy in markets between now and Monday. Where it goes.
I don't think anyone has any real idea, but it
seems like they're coming down. I think it's kind of
meaningless if they come down to eighty percent. But it
seems as though the President is setting up the conditions
(04:17):
under which rates of tariffs can come down this weekend.
Speaker 2 (04:22):
And everyone knows that, which is why I kind of
look at it and I go, so, what do you
do with that information? Then when everyone knows something, there's
no edge, there's nothing that you can do with it.
And so I think that the interesting thing to consider
is not, hey, what happens if tariff's come down to
fifty percent, because it's kind of what's being baked in
(04:43):
here to the market. We can talk about what it
means to the real economy and this and that, but
let's from a market perspective. The interesting things to consider are, hey,
what if they move more than that, if terrors come
down to twenty five percent? Or hey what if things
go off the rails and we're still sitting here Monday
Tuesday and they haven't budged Yep, you.
Speaker 4 (05:06):
Know, distinct possibility that these negotiations look something similar to
when the President's.
Speaker 3 (05:12):
Met with Zelenski.
Speaker 4 (05:14):
So there's no real predicting how these negotiations go. But
look again, we do have to cover the change in
tone over the course of the last week, and the
change in tone over the course of the last week
has been more conciliatory from the Trump administration.
Speaker 2 (05:31):
Let's talk about this change in tone because there's two
tones that matter. It's a two tone engagement. And I
use that word engagement here because that's the word that
China has been using for the last couple of days
in describing what they're heading into this weekend. Now, I
am not an expert when it comes to internal Chinese politics,
(05:53):
nor am I an expert in anything relating to Chinese language.
Speaker 3 (05:57):
Doesn't even speak Mandarin.
Speaker 2 (05:59):
I don't know what. I literally could not tell you
one word in Mandarin, not one, not even gonna try.
Speaker 3 (06:06):
My entire Chinese language came from the movie Rush Hour.
Speaker 2 (06:12):
It's probably wrong, then, yeah, probably wrong. So here's what
I do know from people that tell me these things,
that know something about China. What they inform is there's
a very specific reason that China is characterizing this as
an engagement rather than as a negotiation, and that from
a Chinese perspective, they are not expecting to negotiate. They
(06:36):
are expecting to talk about what a potential negotiation could
look like. So on one hand, I look at that
and I go, okay, that could mean that maybe the
market is overpricing We're what it's expecting to get this weekend.
You know, market might be pricing in like an eighty
percent chance the tariffs come down to fifty percent, and
(06:58):
maybe the reality is closer to fifty fifty.
Speaker 3 (07:00):
Yeah.
Speaker 4 (07:01):
The way that they have phrased this engagement has been
if the United States would like to negotiate, then do
so in good faith and eliminate the tariffs prior to
us negotiating anything. That has been the pretty consistent messaging
from them. And so if we take that as the
Chinese perspective going into this, then maybe the takeaway is
(07:22):
that teriff rates do in fact come down this weekend,
but it's merely as a promising starting point to a
future negotiation.
Speaker 2 (07:30):
The other way that you can read that is, look,
the Chinese government obviously needs to present a certain image
to its domestic populace and doesn't want to be seen
as moving too far, and so that's why they use
the term engagement. And then after they can say, hey,
we started off, this was where we were gonna be,
but the US side blew us away with you know
what they were gonna be, you know, doing, and so
(07:52):
we decided to, you know, move forward with X, Y
or Z whatever.
Speaker 4 (07:56):
What are the important things that the Chinese government wants
other than just produce terrorists and continued trade.
Speaker 2 (08:02):
Stop borrowing and stop bothering us.
Speaker 4 (08:05):
I think that I think they really want semiconductors. They're
not gonna get it, no, but if they if we're
talking about things that they are, you know, desperately seeking
the Chinese want American technology products.
Speaker 3 (08:19):
What is it that the United States wants from China?
Speaker 2 (08:22):
Uh, to go away? To just China not exist anymore, No,
not not exist, but just stop behaving the way you've
been behaving as it relates to trade. Like go away
and like act like a normal country as it relates
to trade. That's that's the simplest and cleanest way that
if Okay, if you actually want to know what the
(08:43):
US government wants as it relates to China, it can
probably be encapsulating four or five things, a couple of
which we saw in this UK deal from yesterday. Number one,
stop producing way too much stuff and then just dumping
it into the world every time that you realize you
produced way too much stuff, because that's not good for
anyone's business. Number two, stop engaging in export fraud where
(09:05):
you send stuff to another country in order to avoid
tariffs and then have it relabeled as made in country
X y z instead of made in China. So those
are a couple things. Number Three, hey, stop requiring these
joint ventures in China where you basically end up stealing
a bunch of intellectual property from foreign companies in order
(09:25):
to grant them access to the Chinese market. Number four,
let your currency float freely and stop using it as
a way to maintain a trade surplus with US in
perpetuity and instead, you know, allow your country to develop
the way that otherwise would with the trade flows that
(09:47):
are flowing into it. I think those are probably the
four big things that the US would want.
Speaker 4 (09:52):
Fence and All's on that list too, but I think
it's more of a negotiating attacking.
Speaker 2 (09:56):
Yeah. Yeah, And here's the thing on those four items.
If you are the Chinese government, things worked out pretty
well for you doing what you've been doing for the
last twenty thirty years. Why are you going to change?
You know, are you going to change just because of
a month of pressure on your economy?
Speaker 4 (10:19):
The Chinese, the entire philosophy of your country has been
based on the idea that it is a country that
has taken advantage of and suffered for a century a
generation of.
Speaker 2 (10:29):
At the hands of westerners, at.
Speaker 4 (10:31):
The hands of westerners, and so we will not allow
that to happen to us again. That's the entire Chinese
mantra in ideology. And therefore, changing something that's been working again,
to Chuck's point, fairly well for the last thirty years,
based on an ideology that's unrecognizable in the United States.
The ideology in China has been and continues to be
(10:53):
that the government directs investment and provides for the people,
and that is very different from the United States and
Western ideology of demand drives investment. Consumers and free markets
drive investments, not the government. And I don't think you're
going to shake them from that view based on a
(11:13):
weekend negotiations.
Speaker 2 (11:15):
So I think ultimately what markets are looking for is
some kind of step down. The one that's being talked
about that even the New York Post floated yesterday is yeah,
we're probably gonna see like a tariff raiate of you know,
between forty five and sixty percent, somewhere in that range. Okay,
that's like expected.
Speaker 3 (11:33):
Now.
Speaker 2 (11:35):
The thing that has the potential to move markets is
if you get something outside of there. And again I
don't know how you exactly you handicap you know what
the chances of these things are, but that's kind of
where we are heading into the weekend at this point.
Let's take a quick break when we come back now
that We've had a day to look through the details
(11:56):
of the deal between the UK and you wes, Let's
talk a little bit about what we found there and
what we think that means for future negotiations with other
countries as well.
Speaker 1 (12:08):
Market volatility is at its highest point since the pandemic.
Keep it here for the most comprehensive coverage of the
global trade war. This is the Financial Exchange Radio Network.
Well Street watch a full update on the markets performance
todate weekdays at ten thirty only here on the Financial
Exchange Radio Network.
Speaker 5 (12:31):
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Speaker 2 (13:05):
All right, let's talk a little bit about this deal
between the US and UK, because I think it helps
to inform my thinking on where we're going with other
countries here, so key starting points. Just background, the US
runs a trade surplus with the UK, yes, twelve billion
(13:25):
dollars last year. We sent them twelve billion dollars more
in stuff than they sent us. Other things of note,
the US and the UK, we've got some pretty close
historical ties all the way back to the point where
we literally fought each other over America, did we and
we won? It was a long time ago, but two
hundred and fifty years next year. By the way, Mel
(13:46):
Gibson was there two hundred and fifty he was. He
was He's ledger to rest in peace. But in any case,
some really close historical ties. I mean you talk about
like fighting alongside each other in World War One, World
War TI two, all the way up through you know,
Gulf War one, the Afghanistan War. I mean, yeah, these
are countries with like deep, deep, you know, historical ties.
(14:10):
I would you even get to like language and governance
and stuff like that.
Speaker 4 (14:14):
I would argue the only country you can put in
the same category would be Canada.
Speaker 2 (14:18):
It's it's a short list. I have like a top
five that I would put there that also again just
because of like language reasons, includes Australia. You probably put
Japan in the conversation, but probably in the next tier,
same with Germany and France. Other than that, I don't
know who else you would include in that list. So
it's a very short list, huge areas of strategic cooperation, military, intelligence, economic.
(14:45):
So you put all this together and you say, Okay,
this is gonna be one of the easiest deals to
negotiate and should receive some of the most favorable terms agreed.
So here's the interesting thing in terms of what the
deal actually says. First, not a deal that is going
through Congress for full fledged congressional approval. So it's not
a true, you know, free trade agreement or any kind
of trade agreement. It is basically a handshake deal on
(15:09):
tariffs between leaders, which is fine, Like, it's not good
or bad, it just is just.
Speaker 3 (15:14):
It's also not permanent because of that.
Speaker 2 (15:16):
Correct, it can always be amended by either side at
any point in time or by the next leader of
the country. Correct, here's what's going on. The UK gets
to export jet engines and aerospace parts to the US
with no tariffs. They also get to export one hundred
thousand cars a year at ten percent rather than the
twenty five percent global auto tariff, and they get to
export steal to the US at zero percent. There also
(15:38):
is a mutual reduction of tariffs on ethanol and beef,
so US farmers get a little bone thrown to them
as far as hey, you can export a little bit
more easily to the UK, but the ten percent tariffs
on all other imports from UK, the UK stays in place. Yep,
still in place. So what do we actually make of this?
The first is it's a really minor adjustment in the
(16:01):
tariff rate. It's not something that is huge by any means.
It's not dramatically reducing that terif rate that the UK
is going to.
Speaker 3 (16:09):
Pay to the United States.
Speaker 2 (16:10):
There are some carve outs that they have, Obviously, the
biggest one is that aerospace piece, where it's about a
ten billion dollars a year export business to the US,
largely to Boeing Because if you're not familiar with them,
Rolls Royce the automaker who sells, you know, really expensive cars.
They also make jet engines. They're one of like a
couple major jet engine providers in the world, and they
(16:32):
do sell to Boeing and to Airbus for use on
their planes.
Speaker 4 (16:36):
Correct me if I'm wrong. Because of this surplus, the
UK was not included on the list of reciprocal tariffs
that came out back on April second, and so this
was not something where we needed to start at twenty
percent and negotiate our way down here. What we knew
was that ten percent was in place a few months ago,
and it's largely still in place.
Speaker 2 (16:55):
So here's where I think I end up landing on this,
the ten percent blanket tariff. That's a minimum globally. The
Trump administration wants to raise money via tariffs, potentially to
help pay for, you know, some of the tax cuts
they're looking to push through, but they view this as
a revenue raiser. It is absolutely something that they want
to keep out there.
Speaker 3 (17:15):
Yep.
Speaker 1 (17:16):
Uh.
Speaker 2 (17:17):
So you say, okay, the UK is you know, the
easiest one of these to negotiate. You start getting into
countries that have closer economic ties with China, and this
is where I think the meat is. The US wants
to try to isolate China. The airplane parts. The thing
is a key piece here to me, which is, look,
we'll give you the ability you want to build your
you know, your country through exporting jet engines, fine sell
(17:40):
them to us. We will give you the best terms
out of anyone. And by the way, the UK has
wanted to do this for a while. They've been negotiating
on that jet engine piece for like ten years with
the US. Fine, here you go. This is the carrot
to the stick. You want this, you got it, But
you're gonna deal with US if you're a country with
colaster ties to China, countries like Vietnam, Malaysia that have
(18:03):
really you know, big import exports with China and also
are you know, really heavily at risk of China trying
to dump product into them that they then gets rerouted
to the US. Teriff rates probably aren't gonna end up
landing at ten percent, I would think, not fifteen to
thirty probably feels right. It might take longer to negotiate,
(18:23):
so don't be surprised if this is something where that
ninety day waiver of the reciprocal tariffs maybe get another
ninety day or one hundred and eighty day that comes
on the back of it.
Speaker 4 (18:31):
Because think of how long this one negotiation seemed to sick.
We don't know how long they were negotiating behind the scenes.
But my guess would be pretty immediately, starting in April,
this negotiation started.
Speaker 3 (18:43):
And we are not done yet.
Speaker 2 (18:45):
Correct.
Speaker 4 (18:45):
This was the framework for a deal to be made
that has not been executed or signed in any way. Again,
it's kind of a handshake agreement between leaders, so it
might not need to be executed in the same way
that a congressional deal would be. But it took seemingly
a month to get this one done.
Speaker 2 (19:02):
Now you'll probably again some of those ones that I referenced,
you know, whether it's Japan, Australia, you may get a
few of these popping up over the next couple weeks
or so, because I think that the frameworks are likely
to be pretty similar, but some of these other ones
are going to be more challenging. I mean, if you're
Vietnam and one of the key US asks is, hey,
we're going to really push back on the amount of
(19:23):
you know, stuff that you do with China. It's a
much bigger deal for them than it is for the UK.
And this is before we even get to the EU,
and you know how they have some very deep China
ties at this point. S take a quick break here
when we come back. Wall Street watches next.
Speaker 1 (19:40):
Like us on Facebook and follow us on Twitter at
TFE show. Breaking business news is always first right here
on the Financial Exchange Radio Network. Time now for Wall
Street Watch a complete look at what's moving market so
far today right here on the Financial Exchange Radio Network. Well.
Speaker 5 (20:00):
Markets are now flat after yesterday's rally, one day after
a trade agreement between the US and UK, as Wall
Street aways developments from trade talks this weekend between the
US and China in Switzerland. This morning on truth Social,
President Trump posted that eighty percent tariffs on China seems
right right now. The Dow is off by fifty four points,
(20:23):
just over a tenth of a percent, SMP five hundred
is down by only six points, and the Nasdaq is
down by merely ten points. RUSS two thousand is up
just over a third of a percent. Ten year treasure
Field for treating two basis points now at four point
three four percent, and crude oil up three quarters of
a percent, trading at sixty dollars in thirty seven cents
(20:46):
a barrel. More travel demand worries have emerged after travel
booking platform Expedia saw its quarterly revenue come up short
of street expectations. Expedia also issued soft guidance as it
saw weaker than expected ravel demand two and from the
US that stocked down by eight and a half percent. Meanwhile,
(21:07):
social media company Pintrest swung to a profit and guided
for higher than expected revenue this quarter, helping ease concerns
that trade policy would potentially hurt spending on digital advertising.
Pinterest is jumping by eight percent. Elsewhere, shares in buy Now,
Pay Later platform A firm down over eleven percent after
(21:28):
its revenue guidance disappointed. A firm also said it would
start a partnership with Costco after a lost Walmart in March.
Lift shares popping by twenty one percent after the ride
hailing company swung to an unexpected quarterly profit. Lift also
increase its share buyback plan to seven hundred and fifty
(21:48):
million dollars and shares in Monster Beverage up by one
percent after the energy drink maker saw its first quarter
revenue fall short of analyst's estimates. I'm Tucker Silvan. That's
Wall Street.
Speaker 3 (22:00):
Watch Mike.
Speaker 2 (22:01):
There's a piece in Bloomberg. It has the headline key
s and P five hundred model turns bearish for the
first time. So Bloomberg wrote this about their own model,
and it sounds like it must be a very key model.
Speaker 3 (22:18):
Then have you ever heard of this model? Chuck?
Speaker 4 (22:21):
No, yeh, it's the equity market Regime model, which is
a Bloomberg intelligence model that tracks the benchmark stockage and
clusters periods into three phases, green, yellow, and red. Effectively
is all you need to know. And as you can imagine,
the red is not so good, the green is pretty good.
It fell into the red category recently. Okay, So I
(22:43):
guess what I think this falls into that same category
of stories that we've covered before, which is, if any
story like this makes you completely upend your view on
markets or the economy, then either you must have a
lot of context and work for Bloomberg enough to know
that this model exists and you really follow it, or
(23:05):
you should in which case you already knew that this
turned red, or you should ignore this story entirely.
Speaker 3 (23:10):
Is my general takeaway.
Speaker 2 (23:12):
Yeah, I just this is what you like what you're
about to do with it? Where it's like, okay, like,
do they update you every day whether it's red, yellow,
or green? The answer is no, but they maybe if
you subscribe to a Bloomberg terminal for ten grand a year? Uh,
more than double that?
Speaker 3 (23:28):
Really? Yeah, that's what Bloomberg terminal is going for.
Speaker 2 (23:30):
More than double that?
Speaker 3 (23:31):
Wow? Yep, wow, yeah, that's a lot of money.
Speaker 2 (23:34):
Yeah, inflation, you know, right, it's yeah.
Speaker 4 (23:37):
So, yes, we are apparently in a red regime in
this Bloomberg intelligence model. The biggest warning was that the
sess and P five hundred clothes below it's two hundred
day moving daily moving average in March, the first time
since November of twenty twenty three. Again, if that means
nothing to you, then ignore this story entirely.
Speaker 2 (23:58):
It brings us to our next piece from the Wall
Street Journal, why this stock market bounce won't hold subheadline.
After Liberation Days, stocks fell a lot, perhaps too much.
Speaker 4 (24:09):
We were talking about today's market bounce because that one
did start positive and is now negative.
Speaker 2 (24:12):
They've now rebounded a lot, perhaps too much. So, I mean, look,
here's here's the deal. I work in the investment business,
you do, I've done that for almost sixteen years, and
I have absolutely no idea, no idea where the stock
(24:37):
market is going to be six twelve, twenty four months
from now. I don't have a price target for it.
I don't know the exact path that's going to follow
to get there. I have some ideas about what I
think might happen, but I've seen enough and I'm humble
enough to know that all kinds of weird stuff can
happen that you don't expect, and you don't have any
(25:00):
idea whether you're actually gonna be right or not. In
this business, If you're right fifty five percent of the time,
you're a rock star.
Speaker 3 (25:08):
You're war.
Speaker 2 (25:09):
If you're right sixty percent of the time, you are
like deified as like some kind of savant.
Speaker 3 (25:17):
Yes.
Speaker 2 (25:17):
So the fact that, yeah, like I can look out
at the horizon now and be like, yeah, there's still
some high tariffs in place, and even if the China
ones come down a little bit, it's still gonna be,
you know, tough, and you know there's still this you
know issue that you're gonna have with supply chains. I
can look out and say that all those things are true,
But I can also envision a world in which I
(25:38):
don't know, something unexpected happens and all of a sudden,
we're sitting here, you know, at the end of the
year and we're like, man, how'd the S and P
five hundred get to seven thousand?
Speaker 3 (25:49):
Yeah?
Speaker 2 (25:49):
I could also see a world where we're like, oh,
how to get to like four thousand? Each of those
are possible through a unique set of circumstances. And what
what anyone in this business will tell you is you're
always trying to look at the probabilities that something will happen,
not just this is what's going to happen.
Speaker 3 (26:06):
Yeah.
Speaker 4 (26:07):
I think maybe an important reminder that the Wall Street
Journal article title at least reminded me of was that
it is a typical for recessions and market dow turns
to go the way they did in twenty twenty two
and twenty twenty. As a reminder, in twenty twenty the
market turned down and over the course of about three
weeks by thirty three percent, marked by more than one
(26:32):
freezen trading due to the volatility, and then bounced back
either faster or nearly as fast as it fell in
two thousand and eight in the dot com bubble.
Speaker 2 (26:42):
Twenty twenty two was a much more normal sell off,
like it took place over like ten months.
Speaker 4 (26:47):
Yep, it lasted a little bit longer, but again it
had recovered itself in what six months?
Speaker 3 (26:54):
Yeah, so not terribly long time. Oh eight.
Speaker 4 (26:57):
As an example, a fifty five fifty three percent full
draw down on the S and P five hundred, defined
by several periods where the stock market rallied in between
there and it took a good year and a half
to get to that bottom. The dot com bubble similarly
behaved that way. And so one of my words dot
com bubble, I mean you want to last it longer
(27:17):
and defined by even more volatility and spikes in price.
Speaker 2 (27:21):
I mean you want to talk about well and not
just that the dot com bubble. It took you fifteen
years to get back above water, right at least if
you're talking about the tastocks.
Speaker 3 (27:30):
Yeah, you know.
Speaker 4 (27:31):
So the the point that I'm attempting to make here
is it has been a long time since we have
collectively as US investors experienced a market draw down, not
of that magnitude, but of that typical.
Speaker 3 (27:47):
Yeah, tip is typicality where it is? Now?
Speaker 4 (27:50):
This is what we do on the typicality change does
that's three of normal end markets. And if you are
going into this one expecting just a rapid bounce back,
you might get it.
Speaker 3 (28:03):
But that is a typical of.
Speaker 4 (28:05):
Markets when they are experiencing a growth slowdown or a recession.
If you are investing today, maybe on your own, maybe
with a professional, and you are uncertain of how you
are preparing for what could be a prolonged period of downturn,
what the President has described as potentially a period of
(28:27):
economic difficulty for the United States, ask yourself, Hey, do
I understand how my portfoliould react? And do I understand
how I, as a worker or a retiree and prepared
for that personally? Give the folks at Armstrong Advisory Group
if call if you would like a second opinion on that,
the numbers eight hundred three nine three for zero zero one.
(28:48):
You can book a consultation online as well at Armstrong
Advisory dot com, but the number for the Armstrong Advisory
Group eight hundred three nine three for zero zero one.
Speaker 1 (28:58):
The proceeding was paid for by arms Strong Advisory Group,
a registered investment advisor. Nothing in the ad or in
any Armstrong guide a specific financial, legal or tax advice.
Consult your own financial, tax into state planning advisors before
making any investment decisions. Armstrong may contact you to offer
investment advisory services.
Speaker 2 (29:14):
So speaking of things that are unexpected. Yesterday, apparently, and
this is according to reporting from the Wall Street Journal,
I'll quote here, the President, who rejected a quote millionaire
tax April twenty third, is now considering backing a tax
structure that would return the top individual income tax rate
to thirty nine point six from thirty seven percent for
(29:36):
people making over two and a half million dollars, according
to people familiar with the White House. Now this also
then this morning, I wish I had the president's exact quote,
because it was a good one. It was something along
the lines of I'm not sure whether or not this
would be a good idea or a bad idea, but
I think it would be a bad idea. But Republicans
can do it if they want to. I think was
(29:57):
like the gist of the quote, which I just thought
was fantastic. But look, here's the deal. You have Congress
trying to figure out how to get a tax bill
across the finish line.
Speaker 4 (30:10):
There are rules that they must follow. They're thinking about
changing some of those rules, but even that is difficult
in terms of how you do this. And there's a
looming threat by the way that if they are way
too wild in changing these rules and running up the deficit,
which is, you know, typically what tax cuts do then
the the economy, you know, the markets could get punished
(30:31):
from the bond perspective. We saw that back in early April,
and it would not be surprising to have that repeated.
So they're kind of under the gun, and this has
been one of the ways they have come up with
to offset the costs of you know, maybe you know,
expanding the salt cap, or no tax on security, no
tax on overtime.
Speaker 2 (30:51):
Like, there's a lot of considerations that would decrease the
amount of revenue coming in. And so they're kind of
sitting there being like, Okay, what can we do. Is
this something that is possible or not. Here's all I'll
say about this. Note it put it in the back
of your mind. See where things are in a couple months. Yeah,
Because there's so many proposals floating around out there, I
(31:13):
have no idea what's going to happen and what isn't.
Ninety nine percent of the stuff that ends up getting
discussed does not end up making it into final bills.
You can have all kinds of twists and turns that
happen here. So at this point, I don't really get
that excited or worked up about anything in either particular direction,
(31:33):
just because it's a lot of noise until it starts
getting closer to the finish line. Agreed, Just take a
quick break. When we come back, we'll talk about the
two hundred and thirty three US cities where starter homes
cost more than a million dollars.
Speaker 1 (31:47):
Gosh, the global trade warriors in full swing. How long
will it last? Is anyone's gas? Keep it here for
the most up to date information plus breaking news every
day right here on the Financial Exchange Radio Network. Find
daily interviews and full shows of the Financial Exchange on
our YouTube page. Like us on YouTube and get caught
(32:09):
up on anything and everything you might have missed. This
is the Financial Exchange Radio Network.
Speaker 5 (32:18):
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in part by Margarita Milversort, Cape Cod. In Hyannas. Looking
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Speaker 2 (32:52):
Peace from Zillo that I got a few problems with.
The headline is in two hundred and thirty three cities,
even a starter home costs a million dollars. And so
here's the first part. Here's how they define a starter home.
It's a home that is amongst the lowest third of
home values in a given region. Okay, I'm not sure
(33:16):
that that's actually a starter home, because you could have
a place that, as an example, might be in the
lowest third of home values, but it could be like
because there's no first floor and it collapsed into the basement, Like,
that's not really a starter home. It's not you know,
it's like a tear down, you know. So I don't
really love the methodology to begin with. On top of that,
(33:41):
there are parts of not necessarily every state, but there's
parts of there's certain towns that are just not starter
home towns. Like you don't suddenly go to Nantucket and
are like, Wow, I'd love to have a starter home here,
like sure, so would everyone, but you can't do that
because there's only so much land on Nantucket. So of
(34:04):
course it's not going to be affordable for you to
just move there for a starter home if you want
to be more reasonable than that, okay too, Like to
those people in the Boston area, you don't just sit
there and say, hey, I just graduated from college, I'm
twenty four, I put away ten thousand dollars. Let me
go buy a place in Weston. For people in New York,
(34:28):
you don't sit there and say, hey, you know what,
graduated from college, like I'm ready to settle down start
a family, Like, let me find you know a great
place in the hampton Port, Connecticut, you know, like, let's
move to the Hamptons. Like no, like that's not reasonable.
So I think some of this is, you know, skewed,
just because like there are places that are really expensive
(34:50):
where you wouldn't expect to find starter homes. Now there's
also California, and gosh, here's the deal with California. So
two hundred and thirty three towns. I did a little research,
and I hope these numbers are right because they're from Wikipedia. Okay, nationwide. Mike,
do you know how many towns there are in the
(35:10):
United States? No, I'm not even going approximately twenty thousand. Okay,
do you know how many are there are in California?
Speaker 3 (35:17):
Nineteen thousand, three thousand, it's all of them.
Speaker 2 (35:20):
It's about five hundred. Okay, so about a quarter of towns,
one hundred and thirteen towns in California have starter home
prices above a million dollars. Now, what I can tell
you is that it's not really possible that a quarter
of California is like so desirable that there should be
(35:42):
no starter homes for under a million dollars there. Rather,
I think we can conclusively say that the California real
estate market is broken for a number of reasons, the
biggest one being I forget what the proposition was called
when it passed back in the eighties, but it's basically, hey,
if you live in your home, we're not going to
raise your property taxes. And so basically no inventory comes
to market and everything that is out there.
Speaker 3 (36:02):
It's basically rent control for the entire state.
Speaker 2 (36:04):
Correct, And so the California market is horribly broken. So
outside of California, there's only one hundred and twenty towns
out of the remaining nineteen thousand in change that have
this issue. If less than one percent of the towns
in the country have this issue, it's not really an issue.
Speaker 3 (36:23):
Well.
Speaker 4 (36:24):
I think that there is in large portions of the
country a housing affordability issue. I think we've covered that.
I think that remains true. But this is not what
This doesn't define it. I don't think this gives you anything.
But I did the math. I don't think you were
on the show a few weeks ago, Chuck, when I
did the math on the median home in Dedham, Massachusetts.
(36:47):
And I know our listeners are all over the place,
but the town of Debdham has been known for a
long time as like a working class community. It's not Wellesley.
It is not what's like the nice school district in
New Hampshire, like by Bedford or Rye. New Yeah, it's
not one of these really luxury towns. But it's close
(37:07):
to Boston. It's easy to commute to. It abuts the
city of Boston. The median home for sale Endetam, which
was I think three beds and two baths, was one
point seven million dollars, not possible for most people. To,
you know, stay within the cfp's guidelines of how much
you should be spending on housing as a percentage of
your income, and buy that home. I think the math
(37:28):
I did was you as a household needed to be
making around four hundred thousand dollars, which is not the
case for most people. And so look, there are pockets
all over the country and in Eastern Maschists, especially where
housing is unaffordable for a large swath of Americans. There
is a massive portion of Florida where housing is quite
(37:49):
affordable and is about to get a lot more affordable
because of just how onerous it has gotten to maintain
buildings there and ensure them and make sure that they
don't become a disaster every time a hurricane rolls around.
And so I think overall we will actually see home
prices fall in the United States this year.
Speaker 2 (38:07):
Let's take a quick break before we get to hour two.
We get some great stories coming up, including the tale
of the boy who ordered seventy thousand lollipops on Amazon.
You're not gonna want to miss that. After this
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