00:00hey everyone it's spencer akimian and welcome back to yet another episode of what's moving your money
00:05on forbes on today's episode we have a lot of things to cover we're in the thick of earnings
00:11season now and we are starting to get some early signs that tariffs are materially impacting
00:19companies this is no longer theoretical we are getting major massive blue chip household american
00:27company names that are telling us we are literally being impacted by tariffs tariff so as we drive into
00:34it we're going to focus on two companies one is going to be gm general motors and the other is
00:39going to be cleveland cliffs which is the biggest steel maker in the united states so everyone sit
00:44back tight get ready and i hope you enjoy another show so gm reported earnings this morning and to
00:54say the least they weren't pretty not one bit there's not really much to sugarcoat about this
01:00there was very few positives to take out of this entire report particularly gm had noted that their
01:07earnings their net income had fallen by 35 percent versus the last this quarter last year 35 that's a
01:17massive fall now what was behind this significant drop in their earnings well they said it explicitly
01:24they had to do a 1.1 billion dollar charge off as it related to tariffs and the cost of decreased
01:30production both in the united states canada and in mexico and it was related to all of those charges
01:37where they saw their free cash flow drop by again a billion dollars now this is particularly
01:45significant because gm is projected to only earn eight billion dollars of free cash flow in fiscal year 2025.
01:53now if they're losing a billion dollars extra per quarter versus what we were expecting at the
01:58beginning of the year due to all of these tariffs then you can expect four billion dollars to come off
02:05their entire years you know bottom line due to all of these tariffs if four billion of their eight
02:11billion dollars of profit gets wiped out that's that's half the year's profit gets wiped out the stock
02:17will have to trade down you have to remember that all the stock market is at the end of the day
02:23is a reflection of the future earning power of a company that's all it is stocks move based on
02:29what was priced in to happen versus what was expected to happen and we're validated today market
02:35pricing validated everything that we thought gm was down eight percent today that was the biggest fall
02:42it take it had taken since april and before that since february now gm is particularly notable as it
02:51relates to tariffs because there are so many ways that gm was impacted by all of the previous and to be
02:59frank ongoing tariff drama that we've experienced gm is obviously exposed to auto tariffs they're obviously
03:07also exposed to steel and aluminum tariffs gm is also exposed to tariffs on canada mexico and south korea
03:15they have a lot of production happening in those areas on top of that gm also has a pretty significant
03:22electric vehicle line all of the battery tariffs affects gm so it's one of the companies that was most
03:28significantly impacted by the totality of the tariff program remember i always say it's not one tariff
03:36that's particularly problematic it's the compilation it's the assortment of all of these tariffs stacked
03:43on top of one another that is where the problems happen and unfortunately we're seeing it my big
03:49concern is that gm the for the auto industry in general has one of the deepest supply chains in on
03:58earth to make a car requires in some cases two three four hundred different vendors someone does the wheels
04:06someone does the brakes someone does the glass someone does the leather someone does the electronics
04:13someone does the engine someone does the pistons there are so many different vendors that go in
04:19if you start getting layoffs in the auto industry that historically tends to cascade through the entire
04:25economy most people at this point have forgotten but one of the main causes of the 2008 financial crisis
04:33was the auto crisis it was so deep and so extensive that so many different parts of the economy got
04:40impacted by it so we covered autos next let's go on to something that's really been troubling me and i'm
04:47pretty alarmed by it and frankly i don't want to pat myself on the back but this was something i've been
04:52sounding the alarm on for months it was obvious then it's materializing and it's obvious now cleveland
05:00cliffs which is the biggest steel maker in the united states just announced that they are raising their
05:06prices 15 they announced they had rose they already rose they already picked up their prices just from
05:13the previous quarter double digits now why do you think that is well when we place a 25 tariff on all
05:21foreign steel that's coming into the united states guess what the domestic steel makers do they take advantage
05:28of that it's just simple supply and demand there's less supply coming into the united states there's
05:33a 25 penalty if you want to import steel from brazil as an example into the u.s so the domestic
05:40manufacturers say hey look at this freebie we got from the u.s government let's raise our prices 15
05:46will still be 10 cheaper than our competitors or our previous competitors i should say so this is not real
05:55growth right this is not real prosperity this is pure textbook inflation there is no benefit to having
06:02this company just be allowed to raise their prices by 15 as a matter of fact as a matter of fact in the
06:09long run this makes cleveland cliffs less competitive in the global world hey they got a 15 advantage in the
06:17united states they're not going to bother selling it in france or in argentina or in south africa and if
06:24they do try it and guess what in those countries they're not going to have the advantage of tariffs
06:30right the that protection that our tariffs are giving them they become less competitive this is
06:35literally one of the most clear and definitive lessons of the history of tariffs the companies that
06:42you toddler the companies that you put on you know training wheels on a tricycle they become babies right
06:49they they they can no longer compete with the rest of the world and a recurring theme of this podcast
06:55i've always said it is this is a competitive world we are no longer just competing with whoever's in our
07:01backyard let's give let's use me as an example i spencer kimian i do not as a hedge fund manager
07:08just compete with the 40 and 50 other hedge fund managers on the upper east side in new york city
07:13i'm competing against the hedge fund manager in paris he's competing with the hedge fund manager in
07:18dublin that lady is competing with the hedge fund manager in singapore that guy is competing with
07:24the private equity firm in the united arab emirates we are all competing against one another in the era
07:30of the internet in the era of transparent prices in the era of high information you have to compete more
07:39it is just the reality of what it is and by putting tricycles by putting training wheels on our own
07:45companies in the long run we're actually most likely going to hurt all of them now this was a very busy
07:52week in markets but it pales it pales in comparison to how busy next week is going to be for markets we
07:59have a federal reserve meeting all of the drama that's going to involve powell and whether he's going to
08:05get fired or whether he's going to voluntarily step down or whether he's going to get criminally
08:10investigated for that uh renovation that we spoke about in the podcast earlier this week that's all
08:16going to come to light beyond that we are rapidly approaching the august 1st deadline for tariffs again
08:23and frankly if president trump does not go through with the tariffs at this point on august 1st
08:30i struggle to see how he's going to maintain any credibility with not just the market but with
08:37our trading partners with our allies and our adversaries alike if every single time he sets a
08:44deadline and then he just blows past it and extends it no one's going to come forward and negotiate with
08:49him tragically i think we're already seeing it we really aren't seeing any substantial trade deal
08:55the biggest trade deal that we've announced in the past six weeks was maybe today with the philippines
09:00we announced we are lowering their tariff rate from 20 to 19 we do about 10 billion dollars a year
09:08worth of trade with them so a one percent difference is we're talking about a hundred
09:14a hundred million dollars i mean we're talking about peanuts in a 30 trillion dollar economy
09:19so again the warning signs are there i don't want to sound too pessimistic but if we have another taco
09:25situation i don't know how he maintains credibility much longer beyond that so these are all the things
09:32that we're going to be looking forward to in the week ahead i'm going to ask you guys if there's any
09:38specific episode or topic or idea that you want me to cover always feel free to comment it on our website
09:46you can comment it on forbes's youtube page you can comment it on my twitter page
09:51on my tick tock or my instagram page it's on forbes website on spotify on apple podcast wherever you
09:57might get this i read all the comments and i respond to all the comments so if there's a specific episode
10:02that you want for next week or in august as we get into the dog days of the summer that really slow lull
10:08in august please let me know and i'd be very glad to make a podcast about it so i hope you guys enjoy and
10:14i'll talk to you guys soon
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