Loading summary
Transcript33 lines
- [00:00]
A
Foreign.
- [00:05]
B
The landscape of commerce is turning increasingly social. EV demand has been dampening. And are tariffs actually working? We'll discuss today on Motley Fool Money. I'm Emily Flippen, and today I'm joined by analysts Jason hall and Dan Kaplinger to discuss how the sale of TikTok in the United States could change the way we shop here at the start of prime day, as well as expectations for demand for electric vehicles now that domestic EV tax credits have expired. But first, I think it's worth taking a deeper look at whether or not we can call tariffs a success. I suspect all of our listeners are already familiar with the tariffs that the Trump administration has sought to implement over the course of the past year. Most empirical evidence says that, generally speaking, tariffs don't spur economic growth. In fact, most economists and investors speculated that they would actually cause profits to drop, starting stocks to fall, consumer spinning to ease, and inflation to rise. But so far, it doesn't really seem like that's been the case. In fact, it's really been the opposite. I mean, stocks are up, the economy's been really resilient, and inflation does seem to be moderating. I mean, Jason, when you look at this picture in terms of the economic policies we're seeing here, is it too early to call tariffs a relative success?
- [01:20]
C
So I think if you're talking about the administration's goal of boosting US Manufacturing, it's definitely way too early. So far, the only industries that have really been helped are the ones where there's already an entrenched base. You think about metals production, steel manufacturing, they've basically gotten a free license to increase their prices based on the tariffs that are in place on imports in those industries. You look at other manufacturing industries like the auto industry, home building, construction is a massive buyer of manufactured goods. They've actually been net hurt because they rely on a lot of imported goods and the US Just can't flip the switch quickly to produce those goods. Domestically, the agricultural sector has been impacted. We've seen countries like China has pulled back on buying U.S. soybeans because of reciprocal tariffs and tariffs on Chinese goods that are imported. In the U.S. semiconductor companies are feeling a huge pinch in China. Chinese companies are basically being told, don't buy US Chips unless you have no other choice. You look at the stock market, guys, this is an AI story. A JP Morgan analyst put out a research note and he pointed out that since ChatGPT came out in November of 2022, three quarters of the S&P 500 returns have come from AI related companies. And over that same period, 80% of the S&P 500's earnings growth has come from those companies, you start peeling back the layers. It's obvious that we kind of have a bifurcated market and economy. Plenty of companies are not doing, and in a lot of cases because tariffs are either increasing their costs and or putting pressure on already squeezed consumers who have been feeling the pinch from inflation for four years now.
- [03:04]
B
Yeah, I think it's a fair point that there's clearly this disconnect that's happening between what consumers are feeling and what the stock market is doing and what investors are experiencing. But if the stock market isn't actually the correct indicator of how well the economy is doing, if that's not the barometer we're looking at, if that's not the scoreboard, Dan, when look at it, what is the right gauge for gauging or judging success?
- [03:30]
A
Well, I think there's a couple of directions that you can go with that, Emily. The first is to judge it from the goals that the administration had. I think that one of the primary goals that the Trump administration had was to make companies, both foreign and domestic, have the internal conversation, are we Interested in expanding U.S. manufacturing capacity? Are we, are we interested in sourcing more products that go to U.S. consumers from U.S. sources? That's the goal. I think those conversations are happening that they have taken place. As Jason said, the answer is not always going to be necessarily what the administration wanted, but they've definitely been able to define the conversation. They've been able to set the subject and put that in front of people and let those folks come to whatever conclusions they have for their businesses. I think for big businesses, like Jason said, it's not always going to be a matter of flipping the switch, but it is a matter of if they make the decision to move more production and sourcing to us, that's going to be an option for them. It's the small businesses that I think have more trouble. Emily, I live kind of in the middle of nowhere in western Massachusetts, no big cities near me. And there are plenty of small businesses that really did rely on cheaper goods from other countries in order to keep afloat. And so these tariffs are. They are the marginal companies. They are the companies that are having to go out of business because of the extra cost due to the tariffs. They don't have the margins to be able to absorb those tariffs temporarily. That's the distinction that I see. And the other thing that I think is a real issue is not so much the Tariffs themselves. But the uncertainty surrounding how long are tariffs going to be in place? Are they going to be permanent? Is the rate going to change? Is it going to go up? Is it going to go down? It's impossible for businesses to have a good long term sense of okay, if an investment is going to take 5 to 10 years to pay off, is the policy just going to change back or is it going to get worse? Or am I making a smart decision? It's just really difficult to figure that out.
- [05:49]
C
Yeah, that's exactly right, Dan. And it takes years to transition manufacturing and supply chains. We're six months into this, guys. The bigger question that I think we don't know the answer to is will US buyers, whether it's consumers or businesses, are they going to be willing to soak up the higher cost to manufacture more things domestically? According to an American Enterprise Institute study, there's about 1.7 billion goods that seems to, excuse me, $1.7 trillion in goods that the administration is targeting to try to bring to domestic manufacturing. And it would cost about 21% more to manufacture them at home. That's an extra $257 billion a year. Plus there's another $348 billion in tariffs that the AEI estimates would have to remain in place to keep that U.S. manufacturing. That's $606 billion a year that American buyers would have to pay for the same goods we're buying today. Guys, maybe I mentioned AI before. Maybe this is the problem that AI can help solve. Huh? All right, being a little glib, but maybe that actually is part of, part of the answer.
- [06:58]
B
Yeah, dare to dream here. I, I, I have to say I think that part of the impact and part of the reason why there is that disconnect is just because we haven't felt the full force of the economic brunt of these tariffs. And I saw some interesting data that was collected by Bloomberg over the course of the past month. They tracked more than two dozen of temu, that is the shopping site owned by Penduoduo PDD holdings, their most popular products. They found that their prices actually fell nearly 20% between April and September because they were attempting to kind of make up for some of the costs that consumers were going to be paying for these tariffs. And further data collected by Goldman Sachs has shown that even American businesses have taken on the majority of the brunt of the cost of tariff impacts. That shoe will have to drop eventually, which is to say they can't continue to take on the impacts of terrorists to your point, Dan we don't know exactly how long they're going to continue or what they could look like over the long term. And so right now, consumers aren't bearing the full impacts. I expect that, especially as we go into the holiday season. If we start to see some of those price increases come down the line and businesses, whether they be domestic or foreign, start to pass along those price increases, that's when we'll really start to see the economic impacts, and that's when we'll start to have it show up in our economic data as well. Up next, we'll be moving to the other side of the purchase equation to discuss TikTok Prime Day and how social commerce has redefined the shopping experience. Stick with us.
- [08:20]
D
You know, like many of you, I've been using AI tools for a while now, but CLAUDE is different. Here's a quick example. When I've conducted my own LLM taste tests, one thing that stood out is CLAUDE citations. As I was researching trending market shares in the Athleisure market, for instance, the backup for each data point helped me work with Claude and dive deeper. CLAUDE is the AI for minds that don't stop at good enough. It's the collaborator that actually understands your entire workflow and thinks with you, not for you. Whether you're debugging code at midnight or strategizing your next business move, Claude extends your thinking to tackle the problems that matter. Ready to tackle bigger problems? Sign up for CLAUDE today and get 50% off Claude Pro when you use our link Claude AI fool that's Claude AI fool right now for 50% off your first three months of Claude Pro. That includes access to all of the features mentioned in today's episode. Claude AI Fool Today is the first.
- [09:21]
B
Day of Prime Day, and we're all underwhelmed, it seems like. Despite posting record dollars every year, a result that I have no doubt is driven by mainly inflation, enthusiasm from shoppers just always feel increasingly diffused year after year. Dan, when you look at Prime Day and social commerce in general, is this just a combination of like, weaker economic conditions or just shoppers changing the way that they're shopping? Or is it just something else entirely?
- [09:48]
A
Emily I'm embarrassed to say that when we first talked about this topic, I was kind of like, whoa, whoa, it's going to be Prime Day again. Wasn't it just Prime Day like a few months ago? And that's the thing is that we've been having Prime Day. Consumers like fresh concepts, fresh ideas, and Prime Day is maybe hitting its past Its prime, perhaps it's been going on for 10 years now. It's a long time to kind of keep it new, keep it interesting, keep it front and center. And Amazon's done what they can to try to build and iterate and make it more interesting. But it's faced a bunch of problems. One is that the rest of retail said, okay, fine, Amazon, you want to create this new holiday for shopping in the middle of the year? Well, we'll be happy to sell people at the, you know, to sell to our customers at the same time on the same days as well. And so it's not just Amazon having this random sale in the middle of the year. It's everybody else now jumping onto that and saying, hey, people are in the mood to buy. Why don't you buy from us instead of them? And so Amazon hasn't really been able to maintain, like, exclusive ownership of the event. The other thing I think is keep in mind Amazon, the original goal of Prime Day, probably first and foremost was to try to get people to sign up for Amazon prime for the subscription Service. Back in 2015, there were a lot of people who weren't prime members. But 10 years later, there are a lot of prime members. It's almost mission accomplished. There's just not that many people left to sign up. And so as a result, I think Amazon is kind of facing this existential question with Prime Day. It's sort of like, is this still. What do we want this to be going forward? We've already done a great job of increasing our market share of the number of shoppers in the US and elsewhere who are prime members. At the same time, plenty of other reasons to join prime outside of shopping. And so it may be time for a reset, I think.
- [12:01]
C
Dan, I, I think it's more an indictment of you and me as in our demographic, because I. You're not the only Gen X dude on this podcast that did not realize that prime was, was Prime Day was starting. And I, guys, I spend an embarrassing, embarrassingly large amount of money on Amazon every single week. So that's the bottom line. But here's the thing. Literally, guys, as I'm typing out the outline, I get a text from my wife. And I'm going to read it to you guys now. And I quote, I've got a slap full Amazon cart for Prime Day. I want to chat about it with you. I don't really know if there's really anything else to say. We're not really the target anymore for that. But here's the other Thing that I think maybe matters more. The noise around social shopping is pretty loud right now. But if there's anything we've learned from social media is that it's a great marketing channel, but literally nowhere across social media. His shopping is a habitual thing stuck. Facebook has tried it, Twitter has tried marketing. We've seen Pinterest make fits and starts attempts and there's not a better platform, social platform than Pinterest to be E commerce. So I think it may be a thing that maybe drives fashion trends and that sort of thing, but it's more a top of the funnel. I think shopping is just a habitual thing. And if you look at the numbers again, we know that the lower and middle income consumers are the ones being squeezed. We can look at McDonald's and Amazon competitor Walmart as just some, some data points I think support it. McDonald's comps were 2.5% last quarter. The same store sales growth that's lower than inflation. Walmart's revenue was up 5% in the second quarter. Its e commerce sales are up 25%. So there's, that shows you there's still a lot of pressure. And then thinking about those inflation and tarif that we talked about before, GAAP operating income was actually down 8% and flat on an adjusted basis. So I don't think we're going to see some massive disruption of retail from, from what's going on with TikTok potentially becoming US company or you know, any of those sorts of things. It's just a tough time for consumers right now and these big companies are feeling that pinch.
- [14:20]
B
I actually disagree, Jason. I mean, to an extent, I love.
- [14:23]
C
The fact that you disagree.
- [14:24]
B
I think you're right conceptually, big picture, you're right. But I, I do think when you look at social commerce in general, especially the way it operates in international geographies versus here in the United States, it just shows how people tend to engage with what they were raised on or habitualized. And so there's so many prime shoppers, for instance, that were habitualized with buying on Amazon. And to your point, Dan, it's no longer really about getting people to sign up for Prime. It's just a reminder you're mostly doing all your shopping on Amazon anyway. So it's just an excuse to maybe buy one or two extra things that went on sale today or maybe you delayed purchasing until they were on sale sale. But when I look at the way that social commerce and E commerce was built in places like China back when, you know, mobile Phones were accessible at the same exact time credit cards were accessible. Right. It just the way that people were going about purchasing and shopping was built on social before it was built on sites like Amazon. And that has become a habitual process of purchasing internationally. And I don't necessarily think it has taken off in the United States exactly the same way it has internationally, But I think TikTok has been that turning point for buyers and it's prime day every day on TikTok, so to speak. And I, I worry a little bit, big picture that the sale of TikTok could cause some people to either lose faith in the the or engagement in the platform long term. But I don't think that the idea of social commerce and purchasing based off of trends or engagement with influencers, whatever it may be, I don't think that trend is going to go away even if it shifts off of sites like TikTok. And I, I am happy that Amazon has Amazon Web Services which is generating something like 60% of its operating profit because amaz opinion has been very slow to adjust to the social commerce trends. And I worry a little bit that as we start to age out of the demographic here for, for commerce that they're not going to do a great job of convincing younger shoppers that they need to have an Amazon prime membership.
- [16:16]
A
For me, the question as it goes with TikTok is going to be what do content producing influencers decide to do? Are they going to take the shift in ownership and treat that as a catalyst to make them consider alternatives? If they do that then that's going to be a shift and that will, the marketing will then follow the influencers. I don't think that it's going to be an external decision where external marketers tell influencers that they need to leave TikTok. I think that that's probably going to be an influencer judge decision and I'll be curious to see how it works out because if there is a big exodus among influencers from the platform, the question is going to be what platform do they go to? And then that becomes the next TikTok and then that becomes the next target of regulation. I mean what's, you know, where does it, where does that circle end?
- [17:07]
C
All roads lead to AI? AI is going to be doing our shopping for us in five years, guys.
- [17:12]
B
I dare to dream there, Jason. If it could take care of my shopping for me, I would definitely take it up on it listeners. Before we move on to our last story of the day, that is electric vehicles. I do have a Quick note David Gardner, the co founder of the Motley fool and chief rule breaker, just released his newest book, Rule Breaker Investing how to Pick the Best Stocks of the Future and Build Lasting Wealth. He'll be bringing his expertise in the role of strategic advisor for our newest portfolio service here at the Fool Supernova. The Supernova portfolios will only be open for a couple more days and listeners can go to supernovaisback.fool.com to get more information.
- [17:44]
E
Introducing your new Dell PC Powered by Intel Core Ultra processor, it helps you handle a lot even when your holiday to do list gets to be a lot because it's built with all day battery plus powerful AI features that help you do it all with ease. From editing images to drafting emails to summarizing large documents to multitasking. So you can organize your holiday shopping and make custom holiday decor and search for great holiday deals and respond to holiday requests and customer questions and customers requesting custom things. And plan that perfect holiday dinner for vegans and vegetarians and pescatarians and Uncle Mike's Carnivore diet. Luckily you can get a PC that helps you do it all faster so you can get it all done. That's the power of a Dell PC with Intel inside backed by Dell's price match guarantee. Get yours today@dell.com holiday terms and conditions apply. See dell.com for details.
- [18:42]
B
I hope everybody has already made their car purchases because September 30th was the last day for Americans to qualify for their federal age EV tax credits. Automakers have been dreading this drop off for months now, and it could have come at a worse time. Tesla has really struggled to maintain deliveries. Ford's CEO expects EV sales could drop by half and BYD just posted its first monthly year over year sales decline in more than a year and a half. Jason do electric vehicles need to shift in policies to drive adoption or is this just a temporary speed bump?
- [19:13]
C
I think we're about to find out. Emily I know that's not a direct answer here and I'm dancing around it a little bit, but I don't think we completely know a couple things. Cars writ large have continued to become more expensive. Car prices on average are up about 16. New car prices on average are up about 16% since March 2021, according to Kelley Blue Book. That's helping create a little more parity to the cost of an EV versus an internal combustion engine powered car. There's still cost pressures, but the EV industry is starting to benefit from some other things to bring costs down higher scale Manufacturing for batteries and then advanced battery technology, they are bringing battery costs down. That's a big thing. And I think those things might help over the longer term. We just don't really know how it's going to play out in the near term.
- [20:00]
A
Yeah, I just don't think that tax credits are necessarily the linchpin of what determines the success in the EV industry at this point. To me, the key to adoption is reliable infrastructure. And I'll just tell you, charging anywhere other than Tesla's Supercharger network, it's just a nightmare. I mean, I'm the target audience for this. I would love to drive an electric vehicle. And the electrical vehicles that I've driven, I love how they perform. It's just really good acceleration. It's just the handling is great. But I'll tell you, I went to Florida and the only rental car that they had left was an ev, a non Tesla ev. And I was just like, it changed the complexion of the entire trip because suddenly I had range anxiety. I couldn't just kind of up and go to the next city down the coast to go check out the beach there and not think about, okay, am I going to have enough charge to get back in time for dinner? Where am I going to go? What are the charging options going to be? And so they really need to get the infrastructure up to speed before EV adoption is really going to hit the mainstream. And unfortunately, I'm not sure that's going to happen because at the policy level, we used to have tailwinds that were inspiring companies to spend on improving infrastructure for electric vehicles. And that now in the current administration has turned into headwinds, not just on the tax credit side, but just on broader policy priorities and energy policy. And so with no real appetite for investment, I don't have nearly the expectation for improvement in EV infrastructure that I did a year ago.
- [21:41]
B
Yeah, the economic equation, especially as it applies to energy right now, in a more expensive world for energy, I think has gotten more expensive for electric vehicles. And without the incentives, at least for as the environment exists right now, it's really hard to make the math work. For new car purchases to move electric.
- [22:02]
C
Versus traditional, well, that's on the, just on the purchaser side. If you look on the manufacturing side, Tesla's bottom line may be hit more because of the loss of some tax credits that they were able to sell to other automakers to offset some tax liability. That's billions of dollars a year in high margin revenue that just is going to completely go away. Part of the answer for that, Tesla, after we record this today, is supposed to be announcing a lower cost Model Y. So that I think as much as anything, that's an immediate evidence that the automakers are having to react quickly with cost cuts to, to, to be competitive. Let me just say this last thing. Besides Tesla and byd, find another mass market automaker. I mean, I mean I'm throwing Ferrari out here. That's a, that's a brand that they're selling, right? Find an automaker, EV or otherwise, that has has been a market beating investment over the past decade and you will not find them. Besides, again, Tesla and byd, most of the other EV stocks, they've wiped out tens of billions in investor value. This is just a tough, brutal industry. Even Tesla's future is less tied to cars and more to AI, autonomy, services, robotics and those sorts of things. They need to make profit from cars to pay for that stuff. But this is just a tough industry and if I were an investor looking in this space, I would immediately go find somewhere else where the tailwinds are tied to profits. Hey guys, maybe artificial intelligence. What do you say?
- [23:28]
A
I do have to say though, Jason, I think that Tesla does have the opportunity to extract even more money for supercharger access to the other automakers for exactly the reasons that you just mentioned and because of these policy headwinds. That could be a nice addition to Tesla's cash cow business there. That could help fund AI, robotics, automation, all those other priorities.
- [23:53]
B
Well, as always, I like to sign off here with the lightning rounds. Maybe you'll have some more hot takes for us. Jason, you know we discussed a lot of things today. Electric vehicles, online shopping, tariff policies. So I really want to put you both, and myself included on the spot to maybe give one of our favorite stocks that's likely to benefit from one of the broader trends we talked about. Dan, let me go to you first. Yeah.
- [24:13]
A
I'm going to mention Symbotic. This is ticker sym on the nasdaq and it's a company, it's been heavily involved in improving warehouse storage technology. Basically automating the warehouse with autonomous robots that help streamline movement of goods inside of those facilities, make the supply chain more efficient. I think that that company potentially benefits both from tariff related pushes to get more manufacturing and warehousing back onshore, as well as just the overall positive trends in E commerce over time.
- [24:51]
C
Well, I've mentioned AI a ton of times, so I might as well stick with that. Dan, you brought up robotics in warehouses and this just lines up perfectly let's talk about Amazon again. It's winning from AI with its own AI driven products, aws. A lot of compute to build artificial intelligence is happening at aws. We know that's the profit driver there. As you mentioned, Emily, it's starting to supercharge its Alexa products with AI. It's using AI to help shoppers. And also hat tip to Dan on this one. Like I said, guys, it's one of the largest robotics companies on Earth and people sometimes forget about that. I think it's later this year, if they haven't already passed it, Amazon will have actually deployed more robots in its warehouse than human workers. That's a big leg up in driving those costs down. Dan, like you said, that helps offset the impact of tariffs and also labor inflation on its bottom line. One last thing. I'll do a little love Steve Jobs here too. Let's not forget about Zoox. That's the autonomous ride hailing startup that Amazon bought back in 2020, largely. Guess what? They got a lot of great AI and robotics stuff that's part of that. Three decades later, Amazon's still right square in the middle of all of the innovations that are going to be changing the world for decades to come.
- [26:04]
B
Well, now I feel very insecure about the stock that I was going to go with because I feel, I feel sold. I had never heard of Symbotic before, Dan. Interesting. Of course I know Amazon and maybe my skepticism there on the commerce side is unwarranted, but I was actually going to go with byd. The ticker is BYD D. Yeah.
- [26:21]
C
One of the only winners in the EV space. This is a great choice.
- [26:24]
B
Yeah. Well, I will say I, I take to heart what you mentioned about the fact that cars have traditionally or automobile manufacturers have traditionally not been great investments. It's a pretty heavily commoditized space. They compete really heavily on price. But the reason why I like byd, I mean this is a battery company at its heart with the management team that has been incredibly focus on what I think is most important to win in this space, which is efficiency. And BYD is really the only low cost electric vehicle manufacturer that is managing to make vehicles worldwide at a rate that is, in my opinion, accessible to the average person. And when we talk about the economic decision making for car purchases being really against adoption of electric vehicles right now, that means the lowest cost model probably is the one that wins. And I'm disappointed that we don't have more updates out from Tesla on the day that we're taping this. We are owed it today hasn't come out by the time that we're finishing taping. Maybe Tesla will eventually come out with their low cost model, but byd in my opinion is just leaps and bounds ahead when it comes to the accessibility of low cost electric vehicles. And that's going, in my opinion, really underappreciated by American investors. Well, fools, we hope that that was a hopefully somewhat interesting and useful podcast. We discussed lots of different topics ending here with some of our favorite investments that hopefully everybody, everybody could consider potentially adding to their portfolios. Jason and Dan, thank you both so much for joining today.
- [27:47]
C
Thanks, Emily.
- [27:48]
A
Pleasure to be here. Let's do it again.
- [27:50]
B
As always, people on the program may have interest in the stocks they talk about, and the Motley fool may have formal recommendations for or against. So don't buy or sell stocks based solely on what you hear. All personal finance content follows the Motley fool editorial standards and is not approved by advertisers. Advertisements are sponsored content and are provided for informational purposes only. To see our full advertising disclosure, please check out our show notes for Jason Hall, Dan Kaplinger and the entire Motley fool money team. I'm Emily Flippin. We'll see you tomorrow.