T-mobile to Buy Most Of US Cellular for $4.4B | Business Matters Full Broadcast (May 28)

A new report showing consumers believe the economy could slip into a recession in the next 12 months. We'll tell you more about it coming up today on Business Matters. Good afternoon and thank you so much for being here with me. I'm your host Don Ma. So today is the first day back from the memorial holiday for markets and the Nasdaq crossed 17,000 for the very first time ever. It was boosted by gains in NVIDIA. The chipmaker's shares boosted shares of other chip stocks as traders returned from a holiday extended weekend here. Some would actually argue in fact that it is all about technology right now and NVIDIA continues to be among the winners. As well, meme stock GameStop climbed after it raised more than $900 million in share sales. The company cashed in on a rally from earlier this month. It was fueled by the return of influencer Roaring Kitty, Keith Gill. He's a key figure in the 2021 retail trading frenzy. And earlier I spoke to an investor who told me that he's actually concerned that many investors now are assuming the current market returns are going to continue and that they have expectations that don't align with a slow growth economy. Here's David Hay, Co-Chief Investment Officer Partner at Evergreen Capital. David, thank you so much for your time today. First trading day back from the Memorial Day holiday weekend. I understand you have some concerns about the market, specifically that you're saying you're concerned about investors extrapolating the unsustainable. Would you like to elaborate on that? Sure. I think the problem is that returns have been so high here recently coming out of the 2022 swoon and investors are just assuming that's going to continue. And then if you look at the second half of this year, the analysts are expecting 20% earnings growth in the third or fourth quarter. And I think that's extrapolating the very unsustainable and it really hasn't been achieved except coming out of recessions to have that kind of earnings growth rate. So I think there's an awful lot of optimism built in and also the fact that insiders are selling so ferociously. That's like 50, 50 times the sales relative to buys while retail is buying hand over fist. So not, not great. You don't like to see that kind of divergence. Well, you know, what are the returns on the S&P historically? 9%. And that includes dividends, which right now are only running at one and a half percent. So this idea that you're going to continue to get, which seems to be the expectation of most investors, more like 15% a year in returns, is just extremely hard to do, at least in the U.S. with most stocks. Now there are pockets of value areas that are attractive, but when you look at the overall S&P 500 and the NASDAQ, they've had such huge returns over the last 15 years, but even since COVID, that's going to be very hard to maintain. But wouldn't you say if the Federal Reserve, the central bank here, starts actually cutting rates later this year, many are expecting that, in fact, wouldn't that set markets even higher? It could. It depends on the type of rate cuts you get. I mean, if you look historically, one or two rate cuts is bullish because then that would mean we've achieved a soft landing if it stops there. Where you'd have to be concerned would be, like we had in 2000, 2001, and again in 2007, 2008, where the Fed was cutting drastically and markets got crushed. And that's because we had a recession. Now right now, nobody seems to believe we could have a recession. For very few people, there are some outliers like Daniel DiMartino Booth, David Rosenberg, but right now the consensus is also very complacent in that regard. And I have my doubts. I'm not prepared to say that we're going to have a recession right now because there is a tremendous amount of fiscal stimulus from these trillion-dollar deficits. Hard to have a recession when you have trillion-dollar deficits. But I do think that at some point the bond market is going to call time out on that and say we're just not going to keep funding these absolutely inexcusable deficits that the federal government is running. I understand that you believe it's not likely for a soft landing to happen in the U.S. economy. What are those signs that are pointing that a soft landing is unlikely? Well, I think they're mixed. You look at the jobs market, it's looking increasingly fragile and also revisions, which have been running significantly negative. We're looking at consumer confidence, which came out in April shockingly low. It was revised upward, but it's still at a very, very low number. So there are signs that we're starting to see trouble in certain parts of the economy, particularly the more highly leveraged consumers and the highly leveraged companies. It's really a tale of two. It's a tale of two consumers. It's a tale of two corporate sectors, a tale of two economies. And you look at credit card default rates, they're absolutely soaring. Auto loan default rates, they're soaring. Corporate bankruptcies are soaring. I mean, there's a lot of warning flags out there, but it's going to be a huge tug-of-war with all this fiscal stimulus. All right, David, thank you so much for your time today. I wish we had more, but that's all for today. Thanks, Don. All right, a lot happening today. Let me just try to get through all of them with you. We got an unexpected improvement in U.S. consumer confidence this month. This comes after deteriorating actually for three months straight before that. The conference board reported that its consumer confidence index increased in May. The improvement was seen across all age groups. Consumers reported being upbeat about the stock market and the labor market, and more are planning to buy major household appliances in the next six months. But there's some bad news here. The survey also found more consumers believe that the economy could slip into a recession in the next 12 months. For a deeper analysis here on how the U.S. consumer is doing, I spoke to Mark Hamrick. He's the senior economic analyst at bankrate.com. Here's what he said. Mark, thank you so much for your time today. Conference board came out with its latest reading of consumer confidence. So after falling for three consecutive months, this month we're seeing an uptick in sentiment. How should we feel about this reading today from the conference board? It's good to see improvement in not only the headline measurement of consumer confidence, but the indices that also gauge assessments of the current situation as well as the future. We would note, though, that the future is fairly well depressed in the sense of consumer's perception, and I would say that that's concerning. The job market continues to be supportive of consumer spending, but we still have high interest rates, high prices. Gasoline prices have leveled off, actually are, you know, kind of unchanged from a year ago or possibly even lower, but people are agitated by high food prices, and we are seeing some improvement there. So it's a mixed bag. You know, we have the job market supporting the economy, but inflation continues to be the irritant that it has been all along. I think ultimately consumer confidence is not as important as consumer spending, and consumer spending has been showing some signs of moderation, no question about that. We are seeing moderation in the job market. It's still the case that demand for labor is outstripping supply, and so that not only lends support to incomes and employment, but also helps to affirm job security. Now I'm glad you mentioned consumer spending because that's the next thing I wanted to know. So some, of course, are worried that consumer spending is slowing down consumers. Some of them at least are tapping out. So this worry about consumer spending, do you think that's going to get worse or get better? It'll get worse before it gets better as long as interest rates and prices remain high. What we really need is for the job market to hang in there as it has, but if we were to see, let's say, wholesale unemployment, you know, a lot of layoffs, people losing their jobs, losing their sources of income, that's where consumer spending really falls precipitously. But we're seeing, you know, some interesting trends here where across a variety of important consumer-facing industries, whether it's those who are selling groceries and other consumer products such as grocery stores, I should say drugstores, grocery stores, as well as the big box stores like Walmart and Target, all of them are noting essentially some weakening of the consumer. All right, Mark, just one more thing I want your thoughts on, on today's reading. So consumers' short-term outlook for income, business, and labor market conditions remained under the threshold, which usually signals a recession ahead. Your thoughts on that? Well, I would say consumers are better judges of their current situation than they are for the outlook. And so I would not be placing an immense amount of importance on their assessment of the outlook when they're basically saying the current situation is acceptable or better. But consumers can also be in the process of creating a self-fulfilling prophecy, and we don't want that to happen, where essentially they pull back because they fear the worst for the next, let's say, six or 12 months. And we'll just have to see whether the job market holds in there. I would say that it's concerning, but it's not an indication that some sort of abrupt slowdown is in the offing in the near term. All right, Mark, as always, it's great speaking with you. Thank you, Don. All right, this next story, pretty important. Potentially a new era on Wall Street here, because trades for stocks now need to be settled in one day. And by the way, this is a first in the past 100 years. And it is in response to the meme stock trading mania around GameStop in 2021. It highlighted the need to reduce risk and improve efficiency and liquidity in transactions. The new standard is commonly called T plus 1. Firms now have less time to line up dollars to buy stocks or recall shares out on loan or fix transaction errors. This could potentially increase settlement failures and raise transaction costs. So Wednesday, tomorrow, will be a big test here. That's when trades executed under the former T plus 2 and the new T plus 1 closed. And we're seeing as well more consolidation for the telecommunication industry. T-Mobile is set to buy US sellers wireless operations for more than $4 billion. According to the telecom giant, this will include about a third of its spectrum assets and license agreements for more than 2,500 towers. US seller customers will be able to keep their current plans or they can switch to a T-Mobile plan. The deal is expected to close in mid-2025. OpenAI has a new security board today. The company announced a new committee that will make recommendations about safety and security. CEO Sam Altman will lead the new committee along with board chair Brett Taylor and board member Nicole Seligman. This comes just weeks after the company dissolved a team focused on AI safety. It also follows the high-profile exits of two of the team's leaders who complained tensions quote reached a breaking point. Earlier this month, a company spokesperson said dismantling the team will help it better achieve its super alignment We'll take a short break now. Coming up soon, a US appeals court today set a fast-track schedule to hear challenges to the potential TikTok ban. And remote jobs may be a thing of the past because the highest-paying jobs are going to those who come to the office. We'll tell you more after a quick break. Welcome back. Some quick headlines for you. Apple's iPhone shipments in China jumped more than 50 percent in April compared to a year earlier. This is according to data from a state affiliated Chinese research firm. Apple is not explicitly named but is the dominant phone maker in China's smartphone market. And former FTX executive Ryan Salem has been sentenced to seven and a half years in prison, according to US federal prosecutors. Salem pleaded guilty in September to making tens of millions of dollars in unlawful campaign donations. Johnson & Johnson will be paying $1.25 billion for the rights to an experimental eczema treatment. It will be acquiring a unit of Pneumab, which is backed by parent company Danish drugmaker Novo Nordisk. And this is J&J's second deal for an eczema-focused company this month. And a U.S. appeals court has scheduled a fast-track review of legal challenges to a potential TikTok ban. The U.S. Court of Appeals for the District of Columbia scheduled oral arguments for September following requests for an expedited hearing from TikTok, ByteDance, a group of TikTok content creators, and the DOJ. The creators TikTok and ByteDance must file legal briefs by June 20 and the Department of Justice by July 26, with reply briefs due by August 15. The potential TikTok ban is driven by worries among U.S. lawmakers that China could access data on Americans or spy on them with the app. And staying on China, the U.S. may be pushing China out of the medical supply industry in America, but experts expect another low-cost supplier will just take its place. Washington is stepping up tariffs on medical gloves, as well as syringes and face masks from China. Of course, this is intended to fuel domestic production and safeguard supply after shortages seen during the pandemic. Industry executives, though, don't believe this will make the U.S. producers more competitive. Experts are warning that Chinese firms could re-route shipments and supplies from other countries and seize this opportunity. For example, like Malaysia's Top Glove, which is the world's largest medical glove maker. President Biden wants to power up the power grid by launching an initiative with 21 states, all of which have Democratic governors. Take a look. President Biden is launching an initiative to bolster America's power grid through implementing new technologies, building transmission lines, and using more renewables. Energy demand is projected to surge. Biden's plan is to meet this surging demand while keeping energy affordable. It is in favor and has provisions in it that favor wind and solar installations as opposed to fossil or potentially nuclear installations. Michael Reed is a policy analyst at the Texas Public Policy Foundation. He calls Biden's plan the Green New Deal 2.0. In terms of function and implementation, he says there's little difference. The goal is eventually to have as green or non-carbon emissions as possible from the power generating sector. That will directly lead to very, very unstable grid and very, very high prices. This comes on the same day hundreds of thousands lost power in Texas because of weather. Texas is, however, not working with Biden on his initiative. Biden is partnering with 21 states, all of which have Democratic governors. It socializes the cost of transmission, meaning that it generally requires, while it doesn't say so, that the cost of new transmission needs to be paid for by all consumers rather than the generation that is causing the transmission. Analyst Michael Reed says the red states have ideological differences with Biden and that Biden wants the cost of new transmission to be socialized. That is for everyone to pay instead of just those who actually use the energy. And let's talk a little bit about remote work here. While it may be popular for many seeking work, it's actually not the best match for those looking for the highest paying jobs. NTD's John Marshall looks into why that might be. Working from home has its pros and cons, but one less known trade-off is that higher wages are going to workers who come into the office and not those who stay home. This is according to Ladders. Every employer has to deal with the reality that at the end of the day, whatever they pay somebody has to produce a return greater than what they paid them in the organization, or else they go profitless and they go out of business. Ladders is a job site for those jobs that earn $100,000 or more annually. Its data shows that remote and hybrid job opportunities for $250,000 careers dropped significantly in the past year. With hybrid roles declining by 95% and remote positions falling by around 60%. It's been a swift change from 2021 when Ladders declared remote work is here to stay. A lot of folks reporting a loss of that coordination, that collaboration, and that added ability to produce a return when we don't have that. And it's much more assured in person for some people. According to Ladders data, to earn $250,000 or more annually, job seekers will likely need advanced degrees and or years of specialized training. Most of the highest paying jobs require at least five to 10 years of experience. Meanwhile, the highest require 15 or more. And I think what companies are finding is that that collaboration, that in-person communication, and sometimes it's even that space in between when you're grabbing a cup of coffee or getting ready to have lunch, that you have interactions in collaboration with people that is beneficial. According to Google search trends, remote work has continued to rise over the past five years, while hybrid work has stayed relatively steady. Sean Marshall, NTD News. Social media up next. Every day, billions of people around the world log on to social media on their phones, computers, and other devices. It connects us, keeps us up to date on the latest news and trends. But of course, there's a dark side to social media. And in this next story, we explore some potentially dangerous trends and what parents can do to keep their children safe. One of them held my hand. I already knew. It's been over a year since Norman Nazario's 15-year-old son, Zachary, died while subway surfing, riding on top of a moving train. New York's Metro Transit Authority says between 2018 and 2023, at least 10 suspected subway surfers were killed. He was like, oh, look, you know, I tried doing this. It's in TikTok challenge, one of the challenges. That's how it started. Subway surfing isn't the only dangerous trend on social media. A Massachusetts teen died after participating in the one chip challenge in 2023. And in 2021, a nine-year-old girl from Milwaukee died after taking part in the blackout challenge. While not every trend is deadly, some like drinking blackout rage gallons or borgs encourage risky behavior. Because of social media and how fast this information can get around, it's just the younger people are so much more susceptible to it. The American Psychological Association explains social media can be especially harmful to teens because, quote, adolescence is a period of heightened susceptibility to peer influence and impressionability. Following her son's death, Nazario filed a lawsuit against TikTok, its parent company, ByteDance, Meta, and the MTA. She also started advocating for legal changes to social media regulations so another child like her son won't lose their life to a dangerous trend. That's what we're trying to do. And worth mentioning here, TikTok and Meta both said have community guidelines that prohibit any kind of dangerous activity that could harm users, and that they're trying to take down videos encouraging harmful behavior and will redirect users to resources if they're searching for unsafe material. And have you heard of the no buy year challenge? For this challenge, all you have to do is make a list of non-essential items you won't spend money on and decide how long you want to do it for. It doesn't actually have to be a year. Some start with no spend month. There are no set rules either. Now, if you want to stick to this challenge, participants shared some tips to help you through that. One was to identify your weaknesses because knowing what you're vulnerable to spending money on can help you make a realistic plan. This includes social media accounts that spark the urge to buy. You may want to unsubscribe and unfollow those. Another tip to try to help you stick to this challenge if you decide to do so is, you know, take a pause. Instead of buying right away, write it down and review it, sleep on it, on the items, and then decide at the end of the month. All right. Besides that, that's all the stories we have for you today. Thank you very much for watching. If you have any feedback for the episode, please let me know. You can email us at business at ntd.com. I do read the comments and emails for every episode. And as I always say, before we go, business matters. Thank you and goodbye.