Freight, Tariffs, AI, and the Trade Nobody Is Talking About

Ray Micaletti of Ethos Financial Group called it. Andrew Tang of Turner Financial Group broke it down. Michelle Connell of Portia Capital Management connected the dots behind some of the biggest economic stories driving markets right now.

On this week's Wealth Transparency, the conversation went everywhere. The Strait of Hormuz and its impact on oil. The tariff debate and its impact on American companies. The AI infrastructure is being built out, which is lifting an entire economy in ways most people have never considered. The commodity trade that could define the next decade. And the individual stocks three of the sharpest minds in finance are watching right now.

You cannot trade GDP, but you can trade what they just told you.

Block your calendar. Grab a pen. Watch this with someone serious about their financial future, share it everywhere, like, subscribe, and tell us in the comments what changes next.

Chapwood Investments, LLC, is a partner of Ethos Financial Group, LLC, a Securities and Exchange Commission registered investment advisor. No mention, opinion, or omission of a particular security, index, derivative, or other instrument in this webcast or video constitutes an opinion on suitability of any security. The information and data in this video were obtained from sources deemed reliable. Their accuracy and completeness are not guaranteed. At any given time, principals at Chapwood Investments, LLC may or may not have a financial interest in any or all of the securities or instruments discussed in this webcast or video. The guests appearing on videos do not receive compensation or provide endorsements or testimonials. Past performance is not indicative of any future results.

All investing involves risk, including the possible loss of principal. Past performance is no guarantee of future results. 
No mention, opinion, or omission of a particular security, index, derivative, or other instrument in this webcast or video constitutes an opinion on suitability of any security. The information and data in this video were obtained from sources deemed reliable. Their accuracy and completeness are not guaranteed. The guests appearing on videos do not receive compensation or provide endorsements or testimonials. 
Securities are offered through Innovation Partners, LLC (member FINRA/SIPC). Ed Butowsky is a Registered Representative with Innovation Partners LLC. Ed Butowsky is licensed to business in: CA, FL, LA, TN, TX. 
Innovation Partners LLC and Chapwood Investments are not affiliated.

Transcript

SPEAKER_02 0:12

Hello, thank you for joining us today for another edition of our podcast, Wealth Transparency. We have on our usual Andrew Tang, who is the Chief Information Officer for Turner Financial Group, Michelle Connell, who is the president of Porsche Capital Management based in Fort Worth, and a first timer, Ray Mikeletti, who is the chief information officer for Ethos Financial Group. I'm Ed Gutowski, and what we do with Wealth Transparency is we take headlines that don't necessarily make it to the front page, but talk about what impact they're going to have on your portfolio. So to cut right to it, last week we talked about freight demand was weakening rather faster than retail sales. Andrew, will you kind of give us a little bit of your thoughts on the weakening of freight demand and what that impacts on financial markets?

SPEAKER_01 1:05

Yeah, that really has to do with the disruption of the Strays of Homo's. We see the disruption of goods trading between uh different nations on parts as well. But as a whole, we see manufacturing activities actually starts to creep up. But when you do the count of freight numbers, we did see a slight lowering number, but we believe that this is going to be a short-term scenario and not an indication to a recession, for example.

SPEAKER_02 1:38

Okay, and uh Ray, what are your thoughts on freight demand and retail sales?

SPEAKER_03 1:44

Well, I I do think that uh Andrew mentioned that he doesn't you know think this will lead to a recession. And today the the GDP number came out, it was about 1.6%. Growth seems to be kind of mediocre. Everyone expected it to kind of rebound after the Q4, which was surprisingly low, but they attributed that to the government shutdown. Q1 was supposed to rebound, it really hasn't rebounded, and you know, to his point about the straight of booze, that it has caused a lot of disruption. Um, and you know, we're really not out of the woods there yet. The price of oil has stayed low, primarily because we've been draining the strategic reserves around the world. And uh, from what I understand, there's only maybe a month or two more months that we can do that. So if this doesn't get resolved before then, then we could see even more freight demand destroyed if oil rises. But if we can resolve it in the next couple months and oil prices come down, then we probably see the economy uh rebound from there. I I think that you know, a lot of people have talked about this, that we have sort of a bifurcation in the consumer. You know, the top maybe 10% is doing very well carrying the economy, the bottom, you know, 80 or 90 percent is is struggling, and of course, you know, with the rise in prices and inflation increasing, that's not helping. And also the AI spend has really been, you know, carrying the economy. So if we don't get the freight situation or the oil situation uh you know fixed, and if the AI spending somehow kind of wanes a little bit given sort of the profit models of these AI companies, then we we might see additional slowing, but I don't think we're there yet. So I'll let uh someone else have the floor.

SPEAKER_02 3:17

So, Michelle, do you see a global recession coming as a result of the Strait of Hermooth and the slowing down of freight demand?

SPEAKER_00 3:24

On the other side of the slowing of the freight demand, you're also seeing some capacity work its way out of the system from from what I've read. We had some excess capacity, and so that is decreasing. At the same time, demand seems to be uneven. On the trucking side, you have less people or less individuals that want to participate in that. So there's some choppiness that's being added to the capacity situation in terms of rate, some exterior demand and supply that is weighing on the system. But regarding your question on recession, I don't think we're uh approaching a recession, but I think what is happening, you're continuing to see the GDP numbers from around the world get compressed in terms of expectations, especially in Europe and Asia, because they're more affected by what's going on in the Middle East than than we are. We're very fortunate. But we may have eventually some lower expectations for for our gross domestic product as well if this continues in the long term.

SPEAKER_02 4:36

So, from an investment standpoint, for those watching, I would be looking at Zim, Zim, which is an Israeli freight company, uh Starbuck or or Star Bulk is another one that I really like. Are there any uh Andrew, Ray, or Michelle that jump out at you as really good investments as a result of the freight demand weakening, but the idea that we're six to nine months ahead of earnings and economic data, so right now they might be in the low point of their cycle.

SPEAKER_00 5:08

I don't really have any ideas, ideas in the freight or storage area, but I think you're going to see some players enter the field, like uh I'm trying to think. I think it's called Grub Market that has an IPO coming on board this year. And what they do is they use because there's such a dispersion or a lack of communication between all the truckers and the the freight and the railroad in our country, they're using AI to kind of have some connectivity between all these separate parts. And I know they're looking at going public, I think, in the third quarter of this year. So I think they're gonna be interesting because we just don't have a way for all the trucking and especially on the restaurant and on the food side to speak to each other, and so Grub Market will allow there to be some connectivity and again using AI to do that, and logistics companies like the former I2 technology that now is, I think Blue Wanderer bought J Day JDA, I think logistics companies are gonna be uh goodbyes.

SPEAKER_02 6:21

So, so Andrew, let's talk about tariff revenue. There's always this discussion about tariffs coming into the United States, but the majority of the money on tariffs come from companies that are in the United States. So if Samsung brought in a washing machine from Mexico, the government of Mexico doesn't pay that tariff. Samsung in the United States would pay for it or Weston House. So the idea that we're getting all this money from these other countries just is not factually supported by reality, isn't it?

SPEAKER_01 6:54

Yeah, no, so far from what we have seen is that the middlemen in here are absorbing the cost. And so you see distributors as well as resellers, you know, they have been flipping the bill and they have been absorbing these costs so far because ultimately the consumption market, it's really dictated and controlled by consumers. Consumers will tell the sellers or the manufacturers how much they will pay for the goods through sales demand, for example. And so far, what most people were expecting is a jump in inflation due to the tariffs that were imposed. But we so far haven't really seen that yet. However, when the situation got worse with the conflict of Iran, and then you all of a sudden have supply shipment shortages and the manufacturers are not getting their goods, for example, then they took this opportunity to collectively increase the prices. So you're we're starting to see the price are creeping up on the consumer end. And if the conflict continues longer, it's gonna give more of a reason for the suppliers and the middlemen businesses to continue to inflate the prices. And so, yeah, that is uh that's not a good move.

SPEAKER_02 8:16

So, so Ray, what's your observation about the tariffs and how much money is being brought in? And is this a real boondoggle for the United States?

SPEAKER_03 8:25

Well, uh, if we are generating $200 billion in tariff revenue against $40 trillion in debt, it's somewhat of a drop in the bucket, although around the edges, you know, it's $200 billion less of bonds that you have to issue. So I guess it's it's good in that sense, but I think it's also just this very intractable problem where we essentially hollered out our manufacturing base, and it was a very it's a national security issue. Like we don't even produce our own defense equipment. Uh all that supply chain runs through China. So, how can you have a conflict with China if they can just shut off you know what they make for our weapons and and systems? So I think we it's a national security problem where you have to bring the manufacturing back, and tariffs are one probably crude toll to try to subsidize bringing manufacturing back. But if you know our companies are paying it, it's not really a smooth, clean issue, but it's something that we have to deal with um you know, at some point. So we let it go to a point where now it's difficult to reverse. But uh because we are trying to reverse it, that we'll probably argue for a weaker dollar. Inflation is is likely going to be here to stay at least the next five to ten years. So, yeah, the tariff revenue it's kind of a drop in the bucket, but it's probably a necessary step that we have to take.

SPEAKER_02 9:41

So, so that kind of brings me to the global growth forecast that falls in line a little bit with what you were saying, Ray, about you know, we're seeing forecasts drift a little lower, which makes sense because you're seeing the world economy slow down, maybe not a global recession. But what do you see, you know, because I know I've read a lot of your stuff and I follow you quite a bit, and I think that there's not a doomsday scenario, but you're not very positive on the world growth market.

SPEAKER_03 10:10

Well, I would say that uh if we're if we're talking about markets and sort of what's going to happen with markets, because ultimately knowing what growth does or what any economic data does is only a means to kind of understanding what the market's going to do. That's the end point because you can't trade GDP, you know, you have to trade the market. So I think that we were seeing uh earnings were very strong, and we also had people that were positioned very sort of bearishly because they thought the Iran war was going to have very negative outcomes, so everyone was hedged to the downside. We've got a ceasefire, everyone unwound their hedges, it drove the market straight up, and earnings were spectacular. So we kind of had this vertical move, but you know, vertical moves aren't sustainable. At some point it will retrace. Now, I don't know when it will retrace, it could be next month, it could be next year, but we should expect at least the rate of ascent to uh to calm down. And if it doesn't, that would be a little bit scary because then we it would say that we're really in a mania, and uh we could have a violent reversal at any time. So I think that uh you know, where things are priced, the next decade could be lost for the US, probably better for international, probably exceptional for commodities given the global competition for resources in order to win the AI race, in order to develop the latest weapons. They all require rare earth, silver, copper, etc. So, yeah, I would say that am I bearish? I'm not really bearish tactically now, but you know, look out five or ten years. I don't think U.S. equity returns are going to be that impressive relative to non-U.S. equities as well as commodities.

SPEAKER_02 11:47

So, Michelle, uh, the International Monetary Fund continues cutting its outlook. How viable and how influential is the IMF? And do you agree, uh, as Ray was saying, that we're gonna see a slowdown in the US on GDP?

SPEAKER_00 12:02

I don't know how viable it is. I I know that people pay attention to it. I think it's just it's a data point, but I think what they're seeing seeing bears some evaluation because we have seen a slowdown in in Europe because they do have much higher inflation due to what's going on in in the Strait of Harmuz. The Middle East is probably going to have much lower growth, especially in the near term. Even if the Strait of Hormuz was to open up immediately, it's gonna take six months to a year for them to really get up and going. So I think the Middle East will also have lower growth and and Asia as well, because they've been dependent upon what goes through this Strait of Hamoose, as we've talked about in past podcasts. So in the near term, I think the United States is still the place to invest. I think the AI boom, because I had to write on it recently, is in front of us for probably it needs at least another five years and change if you look at past industrial revolutions. But then, yeah, we'll probably have some stagnation in terms of growth after that build-out uh is complete.

SPEAKER_02 13:18

So so Andrew, you're very much into uh the technology side of things. Do you think technology is gonna help the United States stave off some of the pending negativities of global growth?

SPEAKER_01 13:32

Yeah, I strongly believe that. And um, you know, echoing what Ray said, I think it's really important to reassess the uh the macro environment and the spending patterns and also our capital markets and also the valuation of the current investments with stocks and bonds and so on. So that is absolutely we need to we need to review that, especially with the balloon debt that we had. We're very close to $40 trillion. And so, yes, we can grow our way out of debt situation, but in terms of your question, where is the opportunity when it comes to investing? And I also have to agree with Michelle, is that it's not Europe, it's not Asia. Europe is still, again, very much tied down by their over-regulation policies. They're regulated, you know, they're regulating themselves out of any other growth opportunities. On top of all that, you don't have a good capital market, and you can't really foster and nurture any growth in there, and that's why they all come to the United States. They all come to Silicon Valley. And so, where's what about Asia? Well, Asia, uh especially in China, they're still they're they're still not recovered, okay, from the monstrous real estate bubble that busted. They depended way too much on real estate investments, and that really fed that balloon to be so big that when it did pop, the whole country is devastated. They're still suffering through a spiral of deflation, nobody really wanted to invest, all the foreign investment companies left, and then now what do you have? You have a consumption market that is not sustainable by itself. And that's why uh Asia right now, they still are going through this crisis. And so if Europe is not the destination, Asia is not the destination, at least not yet, you really have to believe that the United States is the place to invest right now. And when it comes to this AI infrastructure build out, I have to honestly say we are still very early into this, you know, build-out, and there are multi-layers that are involved. It's not just chips. We're talking about the energy layer, we're talking about construction layer. You know, within the last two years, we have used so much more cement, okay, than the last previous five years. And so, because of this build-out, you also have electricians that are putting systems together, cooling as well. So, this whole AI infrastructure build out is lifting the entire economy because it has multiple layers that are benefiting, you know, the country as a whole.

SPEAKER_02 16:15

It's funny, I I just got back from Italy and I asked people who spoke English in Italy, what was the last invention from Italy? And no one could tell me anything because money isn't rewarded by going there. Just like it isn't rewarded by going to Spain or France, it's punished. I actually Googled and found out that orthopaedic hearts limbs are being made in Italy, and but that's not an invention there, they just improved on it. But money does go to where it's rewarded. Uh, the Abraham Accord, I would think, Michelle, going back to what you were saying, that the Middle East is going to be suffering. Wouldn't the Abraham Accord uh kind of catapult some of the trading in the Middle East?

SPEAKER_00 16:58

I'm going to plead ignorance because I don't know anything about that yet.

SPEAKER_02 17:02

Okay. So Ray Maybe some maybe somebody else does, but Ray, any thoughts on the Abraham Accord and what it might do for uh prosperity in the Middle East?

SPEAKER_03 17:11

Well, I think if it can materialize, it probably would lead to uh higher prosperity. I'm kind of dubious that it will be enacted simply because from what I understand, whenever Trump brought it up on a call with various you know Gulf state leaders the other day, they were kind of silent because it's just not politically feasible for them to sign on to that, given sort of what's happening in Gaza and Lebanon. So I would be surprised if uh that actually comes to pass. But if it were, I think that would be you know a positive development.

SPEAKER_02 17:43

All right, well, let's switch over to layoffs in different industries because the job market is something that we track very strongly here, and it has a lot to do with where interest rates are going. If we have a strong employment market, you know, then interest rates will remain relatively high. But we're seeing layoffs in banking and airlines, consumer retail. Where do you see the biggest pitfalls, Ray, in the employment industry? Or in employment of what industry do you see them coming apart?

SPEAKER_03 18:14

Well, to be honest with you, I don't have any like industries top of mind that you know would be disrupted. But I I will have to say that I can see why there are layoffs just from you know how AI has increased in its power and its usefulness. I've used it since say 2023, used it for very low-level tasks. I tried to use it for coding a few years ago. It was okay. Sometimes it would waste my time, sometimes it actually did what I wanted. But in the last six weeks, I feel like it's just been unbelievable in terms of the productivity boost it's given me. And so I can totally see how Ken Griffin, the CEO of Citadel, flashed back a year. He was like, you know, you scratch the surface on AI and it's garbage underneath. Now he's saying that it's completely automating jobs that very, you know, elite quantitative researchers would take months to do. It's doing in minutes, hours, days. And so I do think that we're probably going to have continued layoffs in banking, logistics, airlines, manufacturing, consumer retail, etc. Uh, just because of sort of the increasing power of AI.

SPEAKER_02 19:17

It'd be interesting to see what kind of cost savings each industry should expect to get, because that goes to the bottom line for earnings. Andrew, any thoughts on how that's going to impact technology?

SPEAKER_01 19:28

Well, it's uh it's it's greatly impacted, you know, the sectors that Ray just mentioned before. Keep in mind that a dollar save is a dollar earned, and this trend it's going to be continuing for the next several quarters to come, even though AI may or may not be helping all the companies to grow the top line revenue. But for the next few quarters, it's all about productivity gain and in maximizing efficiency by the use of the tech stack that are available. And as they improve, it's gonna get even better. So, banking, you know, the banks have overhired, you know, since 2020 for COVID. They're just letting go the excess capacity now. Then the software adaption with automation. For example, the risk officers, you know, people who do research, analysts, a lot of them are being let go. Ken Griffin said it himself, you know, a team of five can be reduced down to a team of two or three, right? I mean, Ray can absolutely, you know, uh talk about that for sure. Logistics-wise, we have less and less people there are doing the planning, we have less and less people doing the heavy lifting because of machineries and robots and so on. Then soon down the road, you're gonna see autonomous technology that's going to also reduce the number of drivers out there. And then manufacturing, of course, you're gonna have more and more automation, hardware and software side of things. And then the digitalization for consumption has also reduced. Look at many of the retail stores that are closing. You're gonna start to see more and more people are buying different things that they would have bought at street level. They're doing it at Amazon as well. From car parts to groceries, these are the things that people are normalizing to buy stuff from online, you know, that we never imagined that would happen five, ten years ago. And so this whole AI-enhanced digitalization consumption market is really uh uh helped kickstart this continuation of layoffs. So we see it across the board.

SPEAKER_02 21:32

So, Michelle, um, supply chain strategy is also another way of using technology to become more efficient. Do you see certain industries kind of leaning on supply chain management more than others?

SPEAKER_00 21:45

Interesting because when I taught at UT Dallas, that was an up-and-coming major was supply chain. And I think I think it still is. I haven't taught for a couple of years because there is a need, no matter what industry. industry for logistics and there's hasn't been as much an emphasis on it. But there is now obviously because there are inefficiencies there, as I was talking about earlier with the food and farming. And also with things like oil and energy, you in general commodities especially need to have more supply chain logistics involved. So yes, I think that will continue to be a good industry. But I I will say I was on a call today with uh a seed capital company, venture capital company that I've invested in for probably almost 10 years. And they said the only place that they you're seeing anybody willing to give any funding is if it it's AI related. So very hard area right now in terms of continuing to get funding at a private level and unless you use those initials. So I think it's that's why even with it if it's logistics oriented you're having to say okay I'm using AI in it and then maybe you'll get some funding allocated to it.

SPEAKER_02 23:14

Well as we conclude here as we do each week Andrew and then Ray and Michelle I want to see what stocks based on this conversation would you be allocating money to today. So Andrew why don't you start us off?

SPEAKER_01 23:27

Yeah on a couple of positions I would add to I think Amazon it's uh it's on its way to to showcase its uh its uh giant muscles you know they are the largest employer of robots and also some of the infrastructure play that uh will also benefit from this AI infrastructure build out companies like Siena C I N and also uh LITE you know that uh they also provide lasers you know in the communications and then there's another company a new core they make steel this commodity side of things you know we're using a lot of steel in terms of you know the infrastructure build out and I think uh you know with SpaceX you know going IPO steel is going to be one commodity that they're gonna use quite a bit and so that's all I have.

SPEAKER_02 24:17

Ray I'm catching you off guard there a little bit but do you have an individual stock?

SPEAKER_03 24:21

To be honest with you I find it painful to follow individual companies I tend to be purely macro broad equity indices sectors commodities currencies bonds but I'd I would like to kind of highlight this thread that was on X uh about two weeks ago by Jeff Curry former head of commodities at Goldman Sachs who was pointing out the incredible relative pricing differential between what AI is trading at and what resource companies are trading at given the demand for those resources given the AI build out that we've all talked about here Andrew and Michelle you know it's if it's going to last multiple years there's going to be an enormous demand for that for those resources and we really if you go back to the 2010s resources were in a secular bear market and there was really no investment in capacity everyone was buying the megacap tech companies and and still are and we really have it increased capacity there so I think that there's going to be a sort of a catch up trade where the resource companies you know their prices will rise maybe AI kind of goes sideways after this enormous run. So I would be looking to you know very you know at resource companies.

SPEAKER_02 25:30

Can you give me an example of a resource company?

SPEAKER_03 25:32

Energy materials gold miners silver miners copper miners uh other rare earth companies um you know it looks like the Trump administration might be putting price floors for minerals to kind of incentivize more capacity because if the prices are suppressed because you want low prices as inputs well then there's no incentive to build capacity and then we'll have shortages. So I think you know you might start seeing price floors for minerals and metals etc and you you want to be able to you know have those resources because you know China has leverage on us with rare earths we might have some leverage on China with oil it's just this big strategic game but uh it all comes down to resources if you want to win the AI race and and the other races that we're competing in. So so yeah I I think resource companies will be where it's at the next five to ten years.

SPEAKER_02 26:22

Great. And Michelle based on this conversation what individual stocks do you recommend for our viewers?

SPEAKER_00 26:28

I think the AI trade uh will continue for technology companies as well. Dell reports today I think that will be interesting. Okta reports today a lot of these companies are announcing partnerships with the semiconductor plays like uh Dell is working very closely with Nvidia and that's why that stock has done very well year to date snowflake came back quite a bit after they reported yesterday so SaaS companies some of them may not be dead and a lot of them are down 35% so do your homework I think there's some technology companies that still have some room to run and are not overly expensive.

SPEAKER_02 27:13

Well thank you very much I everyone watching please reach out to Andrew Tang at Turner Financial Group Michelle Connell at Porsche Capital Management in Fort Worth and uh Ray, I don't know if you want people reaching out to you but if you okay so you can reach out to Ray at uh ethos financial group uh I'm Ed Buchowski and please share this uh link with your friends and co-workers and we look forward to seeing you next week thank you thank you I'd like to add that what we have just gone through it's really fun but they're not investment advice so thank you again Ed thank you think if you think if you can think if you can think if you think