Trump on Brink of $1.3 Billion Stocks Windfall | Business Matters Full Broadcast (April 22)

Trump could be getting richer by an additional 1 billion dollars. We'll tell you more coming up on Business Matters. Good afternoon and thank you very much for joining me here today. I'm your host Don Ma. To start off, I want to go to Wall Street. Stocks here, as you can see, ended higher. This is following a market sell-off in previous sessions, where in fact we were actually quite oversold. So the S&P 500 benchmark index and the Nasdaq as well rebounded from a decline over the past six sessions, which has been caused by things like investors re-evaluating their expectations on things like interest rate cuts. And this is in the context of strong economic data as well as geopolitical tensions, persistent inflation and commentary from Federal Reserve officials. Now, all 11 S&P 500 sectors here closed higher with technology and financial stocks leading those gains. And markets were gearing up for quarterly results from mega cap companies as well this week. And I want to have a brief mention here of oil futures as well. As you can see, it's down today. This is as traders focused on market fundamentals and seeing little near-term risk that the Middle East conflict would impact supply. At the same time, traders are seeing a tightening supply-demand balance in the coming months. Meanwhile, Tesla slashing prices again, and this time in key markets. That's including China, Germany, and this is amid facing increasing competition for electric cars. And all this is following price cuts in the U.S. last week and Tesla slashing prices on three of its models by around $2,000. Musk posted on X on Sunday that, quote, Tesla prices must change frequently in order to match production with demand. Now, the flurry of cuts comes during a tough time for Tesla. Its stock had plunged more than 40 percent so far this year. And this is after it reported a drop in quarterly deliveries for the first time in nearly four years. And as well as, of course, announcing job cuts of 10 percent of its global staff. Clothing store Express filing for Chapter 11 bankruptcy. Its portfolio includes brands such as Express, Bonobos, and UpWest Express. So as part of the process here, the company plans to close all UpWest stores and about 95 Express locations. The bankruptcy filing shows that retailers that are listed assets and liabilities in the range of around $1 billion to $10 billion. At the same time, the retailer previously has been struggling with reduced demand, and analysts are saying that it hasn't adapted to the rise of casual wear and the decline of formal and smart casual fashions. Express says WHP Global has shown interest in buying a majority of retail stores and operations. Now, a bit on Trump. The former president is on the brink of receiving another windfall, and this time around $1.3 billion worth in additional truth social stock. Ntd's Virginia Gibson explains. Trump is in line to obtain around $1.3 billion in truth social stock, bringing his overall ownership into the $4 billion range. SEC filings say truth social can issue these new shares to Trump if the stock hits certain benchmarks. It would have to stay above $17.50 a share for 20 days in a row. Truth social is trading above the required price, but it has to stay there on Tuesday, the 20th day. He's going to come out ahead as a winner, pretty much regardless of what the stock price will do in the short term. Financial expert Vijay Marolia says Donald Trump is certain to collect. The stock has stood firm around a high $35 per share. The only way Trump loses is if it dramatically collapses before Tuesday's closing bell. The value of Trump's shares only exists on paper. The actual cash amount he could collect is uncertain. The stock is extremely volatile, bouncing up and down at over 1,000 times sales. The typical social media stock trades at 10 times sales. They're trying to compare it to, let's say, the S&P 500 or a typical company that has, let's say, been run by a founder for decades over time. But that's not what this is. This is A, a startup. This is two, a media company. When you have a brand this strong, he's arguably the most famous human being on the planet. It's hard to put a valuation on that. Marolia says the map is different for startups such as Trump's Truth Social. There isn't a lot of operating history, so it's hard to predict future performance. Marolia Virginia Gibson, NTD News. And staying a bit longer on Donald Trump, the former president was again in court today. This is to attend opening statements in his historic criminal trial in the Hush money case. Meanwhile, there's also an update in his New York civil fraud case. And let me tell you what that is. The court has just approved his $175 million bond. And this is despite New York Attorney General Letitia James questioning its sufficiency. Knight Specialty Insurance issued the bond to secure Trump's compliance with the $454 million judgment. Now, Judge Arthur Engron ruled that Trump inflated his net worth and real estate assets to get better terms from banks and insurers. Now, after a lengthy effort, Trump managed to secure a reduced bond while he appeals. James then raised doubts about the bond provider. And the court just ruled that the provider has to keep the bond in full and in cash and provide a guarantee of that to James every month. Profit growth momentum of major tech stocks could collapse over the next few quarters. This is according to a new analysis by UBS today. The big tech mentioned includes Apple, Amazon, Google Parent Alphabet, Meta, Microsoft, and Nvidia. So what UBS is predicting is that growth in earnings per share of these stocks could decline nearly 30% by the first quarter of 2025. And ratings on the mega cap companies was also downgraded. This is because the companies are facing tough, tough comparisons to previous performance and is facing potential changes in consumer spending, as well as things like interest rates, business investment, and overall economic growth. So these big six companies, Apple, Alphabet, Amazon, Meta, they're major movers of markets, right? So I wanted to get further insight into what UBS is saying. I talked to Tavi Costa, strategist at Prescat Capital. So Tavi, as always, great to have you here with us. I wanted your thoughts on this. So apparently profit growth momentum is going to quote unquote collapse for these six big tech companies according to UBS. I just want to get a sense of where you stand on this. I don't think it's a surprise by any means, for myself at least, because I'm not seeing really, it's not a collapse of the actual earnings, it's just a collapse on the growth rate. And the collapse of growth rate, I think, was highly expected. So that's why the market is not really considering this as a new idea. Now, when I think about valuations historically, and how much we're paying as investors to buy a technology company today, relative to the other opportunities elsewhere, it's where I continue to think there's much better things to be doing with your capital, much better opportunities to deploy capital elsewhere. And we're still seeing lots of attractive assets in the commodities space and also natural resource industries and also countries that have resource rich economies and so forth. All right, just a quick follow up on what you said about these companies. So are you sort of grouping these six companies, Apple, Amazon, Alphabet, Meta, Microsoft, are you grouping these under the same umbrella or what's the story here? I usually look at them under the same umbrella. I think there's some of them that are more consumer discretionary nature. Others are really becoming more competitive among themselves. Mostly, I would say Google and Microsoft would be in sort of that realm. But Apple, which appears to be a little bit behind on the AI curve and carries more risk in China. But overall, it's the valuation proposition that becomes really difficult to justify buying those things. I mean, I've been wrong in the last year or so of how much it even shocked me how much these companies have gone up. But that doesn't mean that the things are just completely irrational. I'd much rather spend my time on things that I believe have much bigger upside and much lower risk as well relative to those things. I mean, gravity works. And at some point, you're going to see some re-rating of valuations much lower. We just don't know when. We don't know what's exactly going to be causing this. But when you think about how much we've seen of tightening of monetary conditions, we all remember not too long ago, there were seven interest rate cuts already priced in the curve. We went from that to less than two cuts now priced in the curve. And so, you know, that on itself is also a sort of a hawkish stance in the markets really driven by investors, not the Fed, believe it or not. And so all that is going to have ramifications in the markets, too. So these mega cap companies, they have in part led the rally of the past few months. And these are sort of, if you will, bellwethers of the tech sector. So if UBS is saying something like this, what is your assessment? Are we going to move away from tech in terms of what's powering the markets? Well, I've been of the belief that we're going to see a rotation and a rotation out of things that are very expensive, things that have led the market for so long and into things that have not led the market at all for many years. And those are usually resource rich or I should say resource businesses related. And so I've been of that view, and I think we're going to see that. We've seen pockets of that occurring, especially with energy markets. But we're back again with energy markets being incredibly cheap, one of the best margins we've seen in many decades, best margins across all sectors. And despite the fact that most of those companies have very capital intensive sort of business models, compared to technology, it's shocking. But technology is requiring more and more capital to actually be as efficient and continue to provide those growths. And so that's why we're seeing this sort of collapse of growth. One, it's just mathematically impossible to continue to have that level of growth. I hope this was simple enough, but that's that's the way I'm seeing this rotation as sort of unfolding. All right. I think you put it very well here, Tavi. Always a pleasure speaking with you. Thanks for having me. And a potential U.S. ban against TikTok took a major step toward becoming reality over the weekend. What happened was on a Saturday, the House of Representatives passed a bill that would ban the social media app if it does not divest from its China-owned parent company ByteStand. It now moves to the Senate, where it could in fact be taken up for a vote in the coming days. And President Biden, by the way, previously has said he would sign the legislation on TikTok. So what's different this time is that the TikTok bill was included in a broader foreign aid package, which also could in fact fast track the timeline for a potential ban. If signed, this version of the bill would give TikTok 270 days to find a new owner. That's that's longer than the time given under the previous versions of the bill. Now, TikTok has publicly opposed the bill, saying it infringes on its users' First Amendment rights. The company says it's planning to file a court challenge if the bill is signed into law. And still ahead after the break, the global chip race. The U.S. Commerce Secretary weighs in on the tech war against China, and she names which country is the top dog. Also, don't break the bank this summer with summer travel plans. A new survey reveals many Americans who are already in debt are planning to go deeper into debt to vacation. I spoke to senior analyst at Bankrate, and he gave me some ways for summer to be fun without busting budgets. And welcome back. Good to see you again. Just some quick updates for you guys to keep you informed for the day. President Joe Biden marking Earth Day today with $7 billion to an announcement where the money goes toward federal grants for residential solar projects. This will serve more than 900,000 households in low and middle income communities. And Verizon lost fewer subscribers in the first quarter than it expected. The carrier says it was able to retain customers with its flexible plans and streaming bundle offers. Verizon reported losing 68,000 monthly bill-paying wireless phone subscribers. But data shows it expected to lose 100,000. And Kroger and Albertsons are offloading some of their stores as part of the proposed $25 billion merger. The company said they are selling an extra 166 stores to CNS wholesale brochures. And this is as part of an amended deal to get regulatory approval for the merger. Now, some China-related news. U.S. Commerce Secretary Gina Raimondo says China still far behind the U.S. in terms of chip technology. So China, by the way, unveiled its new semiconductor last August, and this one powers Huawei's Mate 60 Pro phone. But in an interview with CBS News' 60 Minutes, Raimondo said China is still years behind the U.S. That chip is not nearly as good. It's years behind what we have in the United States. We have the most sophisticated semiconductors in the world. China doesn't. We've out-innovated China. Washington has been locked in a tech war with Beijing. The administration is trying to deprive it of advanced semiconductor chips and the tools to make them. It's worried that China would use the knowledge to advance its military capabilities. And continuing with China-related stories here. Chinese tourism to the U.S. is lagging, and experts don't expect it to reach pre-pandemic levels for at least two more years. China fully lifted travel-related restrictions last August. That resulted in nearly 1.1 million Chinese tourists coming to the U.S. But that is still down 60 percent from 2019, according to the U.S. National Travel and Tourism Office. This slower-than-expected travel rebound is being attributed to uncertainty in the Chinese economy and also as well as prioritizing travels for travelers to nearby countries. A U.S. official says the U.S. stands to gain as much as 30 billion dollars if Chinese tourism returns to pre-pandemic levels. Meanwhile, banks becoming more cautious as defaults have increased with low-income borrowers. Several major banks reported a rise in charge-offs in the first quarter. Those debts are unlikely to be recovered. The banks include the Bank of America, JPMorgan Chase, Citigroup, and Wells Fargo. B of A says this is mostly from credit cards. And the bank says that it is seeing cracks in the finance of borrowers who fall under prime credit scores. U.S. Bancorp says first-time and low-income borrowers are experiencing higher defaults on their loans than individuals with higher incomes. Banks are expecting to respond with tougher borrowing standards and an overall decline in loan volumes. Now with winter behind us, guess what? Summer is going to be here before you know it. And for some, that means, of course, vacations. However, a new Bankrate report showed that many will potentially take on more debt to fund the fund. And I spoke to Bankrate Senior Analyst Ted Rossman on this surprising report. All right, Ted, thank you very much for being here with me this afternoon. So tell us about this new report from Bankrate. And it's about travelers and they plan to go on debt for a summer vacation. Tell us what's happening here. That's right. Yeah, more than a third of summer vacationers are likely to take on debt this year. Honestly, the real percentage may end up being even higher than that, considering that 44 percent of credit card holders already carry debt from month to month. But yeah, this is problematic just because credit card rates are very close to a record high. Credit card balances are at a record high. I don't want to tell people they can't have any fun, but I do think there are ways to have fun on a budget and not have this sort of expensive debt hangover once your summer trip is done. Right. And let's go into a bit more detail with some of the other points here with this survey. So 53 percent are planning a summer vacation this summer. I'm just wondering, this figure here, is this within the norm? We have limited historical data on this. But yeah, in the time we've been tracking it, I would say it's pretty consistent. Those non-vacationers overwhelmingly say it's because they can't afford it. I still think you can afford something, you know, even if it's a staycation or a short road trip or something like that. But I think another broader issue here is just this whole topic of pent-up demand. There's been so much of it the past couple of years after the pandemic. And I think some of this has accentuated some of the economic inequality that already existed. You know, we have basically half of cardholders who pay in full, they get rewards, they avoid interest. Then you have the other half who are carrying expensive debt. So I want to focus on a point that you mentioned earlier on those who are not planning to go on vacation. Is it because of how expensive it is that they're not going? What is the reason here? Cost, by far, is the number one answer. Yeah. To which I would say, you know, maybe there are some things you could do. Maybe you could tap into some rewards points or miles and that would offset some or all of your travel costs. Or, you know, maybe you could just be flexible about your travel planning. It's often cheaper to travel in the off-season or the shoulder season or fly midweek instead of on the weekend or maybe drive instead of fly. Or like I said, even just take a staycation. I mean, take some time off, explore your local area, relax, recharge. Don't let the summer pass you by without taking a break. Is there any worry or maybe worry is not the right word, but taking on debt to go on a vacation, what do you think? I do worry about that. I mean, not to be a downer, but I do worry about taking on this sort of expensive consumer debt. The average credit card charge is almost 21% and that's close to a record high. So I feel like that's not an ideal outcome if you're financing this over time because a lot of people already have credit card debt. I mean, the average balance is already north of $6,000. So I feel like to add to that with the vacation could be an issue. So not that you can't have any fun this summer, but just be smart about what you're spending. Also, budget out of every paycheck. I mean, if you can set money aside every two weeks that serves as your vacation or entertainment fund, that's a good way to ward off credit card debt too, is if you prepare for it on the front end. Okay, just one final thing maybe to have your comments on. If you will, what does this report, this survey from Bankrate say about consumer behavior, if at all? It shows that the you only live once trend is still in full effect. I mean, there's a lot of people who are really prioritizing experiences and hey, there's nothing wrong with that. I just do, again, want to warn of the dangers of credit card debt. And I think some of that comes back to the household level too, that it really is this tale of two cities, this haves and have nots. I mean, the rich get richer, the poor get poorer. We do see a big gap between somebody who's using credit cards for rewards and convenience and other benefits versus somebody who's using it as a very expensive financing tool. So if you have credit card debt, no shame, a lot of people do, I would suggest not digging the hole any deeper. Try to get a 0% balance transfer card, pay that debt down, worry about rewards later on. All right, Ted Rossman, Bankrate, thank you very much for your time today. No problem. Thanks for having me. All right. Thank you very much for watching today. That's all the stories we have for you. And if you have any feedback for us, feel free, don't hesitate, leave a comment down below and let me know. And as I always say, don't forget, business matters. See you tomorrow.