Business Matters Full Broadcast (April 3)

What was the outcome? That's coming up on Business Matters. Good afternoon and glad you could join me here today. Appreciate it. I'm your host, Don Ma. We have a great show for you today. A lot of important things happening. So let's get right into it with first a brief recap of markets. S&P 500 and Nasdaq ended slightly up today and this is after data showing that the U.S. services industry growth slowed further in March. And we also had comments by the U.S. Federal Reserve Chair Jerome Powell who said there is a need for more debate and data as well before interest rate cuts. So these are factors combined that limited the advances of the indexes. But nevertheless, most of the S&P 500 major sectors advanced led by materials and energy. S&P 500 gained six points or 0.1 percent. Nasdaq gained 37 points or 0.2 percent. The Dow, however, fell 43 points or 0.1 percent. Now on the topic of the Federal Reserve, traders were actually pricing in a 57 percent chance that the Federal Reserve will cut interest rates by June by 25 basis points. Also, Intel shares today dropped about 8 percent after the chipmaker disclosed $7 billion in operating losses for its foundry business in 2023. We'll have more on that later. So let's move on to Disney now. A major win for the head of the company, shareholders, voted to back Bob Iger and fend off activist shareholders in its annual meeting. Let's go deeper into this. Billionaire investor and head of Tri-Am Partners Nelson Peltz was fighting for a seat on the board he advocated for change at the entertainment and media giant. The company voted to re-elect the full board by a substantial margin, according to Disney. So Peltz's loss also seems like a vote of confidence in Iger and the current board and the direction of the company is heading as well. Now, in a statement, let me read this to you. Iger said with the distracting proxy contest now behind us, we're eager to focus 100 percent out of our attention on our most important priorities, growth and value creation. Peltz, on the other hand, said he and his partners will continue to watch the company's performance. Now, this was a rather pricey showdown. Tri-Am Partners estimates that it spent about 25 million dollars on its campaign, while Disney's estimates came in around 40 million dollars to fend off the proxy fight. Disney stock fell three percent at market close. Now, besides Disney, you're also going to want to hear this. We're seeing another twist in the saga of Truth Social's public offering. So Donald Trump, owner of Trump Media and Technology Group, is suing two of its co-founders to eliminate their stakes in the company. The lawsuit alleges that the two failed, quote, spectacularly to establish corporate governance and that caused damage to Trump Media and a decline in the stock price of its merger partner. Trump Media is asking the courts to force them to return the 8.6 billion shares they were to receive. So at Tuesday's closing price, that would have been worth 444 million dollars. The two both were contestants on Trump's reality TV show, The Apprentice, and they previously filed their own lawsuits against Donald Trump. They argue the former president was planning to dilute their stake in the new company. Okay, just a little bit more on that. The two people have pleaded guilty, a different two have pleaded guilty to insider trading in the Trump Media merger. So turning to President Biden now. Lower prices for prescription drugs. That's what he was touting during the White House press conference today. Biden says that Americans pay more for the same drugs that people pay in other countries. Because of all of you, our Inflation Reduction Act, drug companies that raise prices more than inflation are going to pay back Medicare the difference between what they charge and the inflation rate. This is based on the price of their drugs in 2021. That means consumers will pay less for prescription drugs, and they'll save taxpayers money and discourage companies from hiking prices faster than inflation in the first place. But we want to do more. It's time that drug companies pay rebates when they increase prices faster than inflation, not just for seniors, but for every single American. Biden and Vermont Senator Bernie Sanders worked together to pressure the makers of asthma inhalers to lower the cost from hundreds of dollars without insurance to just $35. Biden's remarks come as he begins to highlight his administration's legislative achievements ahead of the 2024 election. Now staying with the White House, the Biden administration is backing off on refilling America's energy oil stockpile. The Energy Department says the administration will no longer buy up to 3 million barrels of crude for a reserve site in Louisiana. The department says that the shift comes amid rising prices at the pump. According to AAA, the national average has climbed by 20 cents over the past month to $3.55. And prices have climbed in part over fears that the war in the Middle East could escalate and disrupt oil supplies. Now let me ask you a question here. Do you prefer electric cars or gas-powered cars? Well, if you do prefer gas-powered cars, it seems like you're not alone. In fact, far from it because apparently EV demand is waning. I spoke to expert and founder of Car Coach Reports. Let's hear what she told me. Lauren, thank you very much for your time today. Let's start with Tesla. We just had its earnings report yesterday. How are we looking here? Well, Tesla's in a little bit of trouble. They haven't had sales this soft since 2020. So now we're in an interesting situation. The last quarter BYD, which is a Chinese car manufacturer, they were number one globally in sales. Now they're number two. Tesla has retaken it, which tells me that electric vehicle sales as a whole has softened. But we're down about 9% from what expectations were. And so that's not good. And part of it is because vehicles haven't been updated like other car brands such as like Ford, GM, Stellantis. When they redo their cars every few years, you see changes. Tesla seems to look the same. It's like an old Taurus. It just sort of looks the same. That's hurt them a little bit as well as Cybertruck sales are still on the soft side. So the early adapters got one that they wanted, but now their sales have gotten very soft. So these weak sales, do you believe this is an outlier or perhaps it is in fact a part of a bigger trend? And what do you think? Well, Tesla is still number one and leading the pack when it comes to electric vehicles. So a lot of people look at him as a tech company. They don't look at him as a car company. There are still a lot of enthusiasts that love his product and what he offers. But overall, electric vehicle sales are very soft. The problem is that customers are starting to wake up to the fact that they need to get a charging station at their home. It's not charging quick enough. They like that freedom to be able to fill up with fuel and go on their way. So people found that happy medium, which is hybrid. So the hybrid market of SUVs and crossovers have been booming. They're up about 30 percent. That's a big growth number in the last quarter. And you're starting to see car manufacturers such as Hyundai and Ford for their 24 and 25 models saying we're not going to offer electric, we're going to offer a hybrid option and a gas option. And that is what consumers want. And that's where the free market really does have the power. Do you think this weaker demand, do you think this is going to get worse or are we going to turn back up? Well, it all depends on the elections and what happens in November. If the current administration returns to power, they're going to put the foot down on the gas pedal or the electric gas pedal and mandate electric cars, making the ownership of gasoline powered cars more expensive, more difficult, forcing you to make a change. A lot of people will keep their vehicles and cause used car prices to increase. If President Trump gets reelected, we already know what he said he's going to do. So we're going based off of that. He says he's going to eliminate the mandate and allow people to have choices. And if he says drill, baby, drill, that means gas prices drop. Consumers make choices. And maybe just one more question, and I don't really know what to think about this. Maybe you can tell me, are electric vehicles better for the environment than gas vehicles? Some people say that the production process that goes into electric vehicles is not that good. Tell us, what is it? Well, it's funny, I just literally pulled up some interesting information. The electric vehicle battery, what's involved in it, there's 12 tons of rock for lithium. That's how much drilling they have to do. That's a lot of use of gasoline powered vehicles in order to do that. They're not using electric powered diggers to do this. Five tons of cobalt materials, three tons of mineral for nickel, 12 tons for copper and ore. And then when you look at the 250 tons of soil that's needed to obtain lithium, nickel, manganese, cobalt, aluminum, and all the plastics and steel, it is not better for the environment. Basically, the equipment that's needed, this is far from a zero emissions car. If you call what we call in our industry cradle to grave, all the raw materials to the end of life, and what's recyclable and not recyclable versus today's current gasoline powered vehicles, when you start looking at it, people are starting to turn back to the gasoline powered vehicles. They get better fuel economy or hybrid like a Toyota Prius. They get 56 miles to the gallon. It's probably a better option in the bigger picture. Well, maybe it is good for the U.S. in terms of environment because these parts are not actually made in the country. But thank you very much today, Lauren, for your insight. Pleasure having you on. Thank you. Now on to some China related stories. The U.S. government gives a scathing review of Microsoft's cybersecurity. So last year, if you remember, Chinese hackers successfully invaded hundreds of Microsoft email accounts. That's including those of Commerce Secretary Gina Raimondo, U.S. Ambassador to China Nicholas Burns, and Congressman Don Bacon. So the U.S. Cyber Safety Review Board says Microsoft's security culture is, quote, inadequate and requires an overhaul. That made it a cascade of avoidable errors that allowed this to happen. So we got an expert opinion from cybersecurity law scholar Star Cashman on this. Here's what she told us. It's not necessarily a Microsoft specific problem. I think that people would be surprised at the fact that many tech giants and tech companies in general who obtain and possess very high amounts of private sensitive user information and user data, they are falling behind on their cybersecurity practices. And it tends to be that cybersecurity best practices only really increase after a hack or a breach occurs. Now, the Cyber Safety Review Board says the intrusion was preventable and should have should have never occurred. That apparently Microsoft didn't even detect the hack. So what happened was that the company relied on a customer, actually, who had to inform them that they saw anomalies. The board says that Microsoft has worse security than a slew of other cloud service providers. You know, that had me wondering, why is the board saying this, right? Is it because that Microsoft is huge of its size that led to this? Or maybe because there's not a whole lot of other options for customers out there besides Microsoft? Here's cybersecurity expert Tom Pace, CEO of Netrise. You understand that people can't get rid of you as a customer, even if they really wanted to. And so that kind of creates and engenders the sense that, you know, maybe we can cut some corners and maybe we can get this thing to market as fast as we really want to and don't have the same kind of considerations that other folks might have. The board says Microsoft is a high value target for adversaries such as China. And this is because Microsoft is involved in critical, ubiquitous products that underpin the foundations of America's economy and security. You know, over a billion people, in fact, rely on Microsoft. But let's move on. It's the custodian of vast amounts of data as well, including personal information, government communications, trade secrets and intellectual property. In other news, billions in shares bought back at a record pace. Some of China's biggest Internet companies are snapping back their own stocks to boost market value. Online retailer Alibaba Group has now made the largest share repurchase by a Chinese tech company. It bought back $12 billion in shares from the U.S. and Hong Kong markets in the last 12 months. Chinese regulators have asked companies to repurchase shares since China's markets have been suffering from slumps. The idea is that fewer shares on the market should trigger an increase in stock price. Gaming and social media giant Tencent spent a record $6 billion on its own shares last year. It has pledged to at least double that. Financial data shows companies in Hong Kong spent $16 billion repurchasing stocks in 2023. That is the highest on record. Government stats show mainland Chinese firms bought back about the same amount. Another hurdle for Nippon Steel's $15 billion acquisition of U.S. Steel. A Democratic U.S. senator is calling on the White House to scrutinize the Japanese firm's relationship with Chinese Steel before approving the deal. This stems from a report by Horizon Advisory, which found Nippon had a long-running history of supporting China's steel industry and had active joint ventures with Chinese state-backed entities. In a letter to President Biden, Senator Sherrod Brown called on the administration to examine the dangers of the merger could pose to national and economic securities. In a statement, Nippon Steel said the report was filled with, quote, in its own defense, inaccuracies and misrepresentations, and added that its operations in China were very limited. Alright, now taking a short break, but when we come back, Intel is falling behind in the world of chipmaking. The company just revealed it lost billions last year and is stuck behind a leading Taiwanese manufacturing company. And there's only days left to file your taxes, but it might be worth taking the time to check for common mistakes that IRS flags for. We have tips from America's accountant. They're notifying the family. Poor guy. He doesn't even know what's coming. Another victim of senselessly expensive repair bills. Can't save them all. But we can keep trying. Didn't have to end this way. If he'd have just called CarShield before his car broke down. Exactly. Protect yourself from the unprecedented rise in cost for parts and repairs. Call now to save money with your price lock guarantee. Call 800-429-5128. Amazing grace, how sweet the sound. That saved a wretch like me. I once was lost, but now I'm found. Was blind, but now I see. They're just young people. Hungry. Homeless. 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Some bad news relating to Intel, it looks like. The chip making business is bringing the company down in its struggle to catch up to rival Taiwan's semiconductor manufacturing corporation. TSMC is now the world's biggest contract chip maker. Intel has spent billions trying to reclaim its dominance as the cutting-edge chip maker, but new financial reports reveal that Intel's foundry unit posted a $7 billion operating loss last year. Intel's CEO expects operating losses for its contract chip making business to peak this year before breaking even in 2027. TSMC's sales, on the other hand, also dominating Intel's foundry unit. The Taiwanese firm's first quarter sales totaled about $19.5 billion, compared to $19 billion for Intel's entire 2023 years. Now, some more bad news. The nation's largest producer and distributor of fresh eggs is experiencing a bird flu outbreak. Cao Ming Foods has temporarily stopped production of a facility in Texas. The state agriculture commissioner says the company has to depopulate 1.6 million laying hens and 337,000 pullets. Cao Ming says it's working to secure production at other plants to minimize disruption to its customers. Officials are saying that the current risk to the public is minimal, which is good. Bird flu has also been detected at a poultry facility in Michigan. And as you already know, the tax season is here, but the deadline is fast approaching, Monday, April 15th. Mark that on your calendar. So, you know, we thought it would be a good idea to give you some tips on things you should avoid and how to avoid getting audited, which of course we all want. I spoke to Dan Geltrude, or America's accountant. So Dan, being America's accountant and tax season, you know, coming up real fast, you must have some tips for us, right? Of course. Listen, the one thing that we should focus in on here are what the common mistakes are, because those are the little things that can get you in a lot of trouble. And these are simple things. Let me start with this. Many times people use the incorrect social security number, which means that your tax return is not going to be properly accounted for. Also, people put the numbers on the wrong lines. Again, simple thing, but problematic. One of the other points, too, is incorrect information. This comes into play quite a bit related to missing 1099, so the return ends up being incomplete. Another point here is the wrong filing status. Maybe you're married and you accidentally put it in single. Not going to work. One of the other points, too, is people forget about profits on cryptocurrency. One of those things that gets overlooked. Again, quite simple, but also common mistakes. If you can avoid those things, you'll really be in good shape for this filing season. Next question, how do you avoid getting audited? Well, here's the way it works. To start with, there is a audit lottery, so you could be unlucky and end up winning, and then you end up having an audit. But there are other matters that come into play here. So, as people have heard the phrase red flags, let's talk about what those red flags potentially are. First, when you fail to report all of your income, red flag. Another thing is high income earners have the tendency to be selected for audit more than others. Also, people who forget to file their tax returns or haven't filed in a while, those end up getting picked up where the IRS is going to come calling to say, you owe us more money. Potentially, we want to see what's going on. Then there's another group of people who have higher than average deductions. So, the IRS has so much data that they have the ability to analyze. And when they see people, and it doesn't mean it's wrong, by the way, but when they see people are taking more deductions than what the normal taxpayer would do, that potentially puts you in a position to be selected for audit. And then there's two more I want to mention real quick. Large charitable deductions, that's one of the red flags. And also people who file what's called the Schedule C, which means you are someone who is a sole proprietor running a business, those have a high selection rate for audit as well. Dan, let me just ask a sidebar question here. The IRS has said that it's going to increase its workforce. Does that mean more audits? Well, potentially, yes, right? Because the way the IRS increases getting more money is to go out there and check on people to make sure they're paying what they're supposed to. So, when the IRS is talking about increasing their resources, part of that is yes, they want to do more audits and try to increase tax revenues for the federal government. All right, last question here, Dan. Any major law changes that should be on our radar? One of the things that is going to be changing is because of inflation, the tax brackets have been adjusted. And this is actually good news. Because of inflation, it means the brackets have moved up, which means you have to make more money to shift into the next higher bracket. Now, of course, that's calculated automatically, but that's one of the big changes. But it's good news for all of us. All right. America's Accountant, always great speaking to you. Thank you. Just one more question I have for you guys. Are you a Taylor Swift fan? Well, even if you're not, this is still pretty impressive. Taylor Swift's record-breaking heiress tour has propelled her to billionaire status. She's officially made the Forbes Billionaires list that ranks people all around the world with the most money. So, while the singer is pretty popular, to say the least, she still has some ways to go before she climbs higher to the top of the billionaire's ladder because the magazine ranks her at number 2,545 on the list. Swift is estimated to be worth 1.1 billion dollars. All right. That's all the stories we have for you today. Thank you very much for watching. If you have any feedback, just let me know down in the comments down below. Don't forget, business matters.