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Welcome to Trader Talk where we dish out the latest Wall Street buzz to keep your portfolio sizzling. I'm Kenny Polcari coming to you live from the Yahoo Finance headquarters in the heart of New York City, a global hub where deals are made, fortunes are built, and the next market.Move is always just around the corner. Coming up, I'll give you my big take on negotiating with China. Uh, we're gonna chat with Invesco chief market strategist Brian Levitt, and I'll share my classic Greek lemon chicken recipe. Now, let's jump into the big take.Let's not sugarcoat it. China is impossible to read and even harder to trust when it comes to global markets and trade policy. For years, every administration has tried to solve the China question with everything from summits to sanctions, but the reality is simple. China plays a long game, protects its own interests, and never tips its hand until the deal is done.And to Trump and his tariff negotiations. For all of the tough talk, threats, and headline grabbing moves, Trump isn't just negotiating with another country. He's facing off against a master tactician. Each tariff, each tweet, each 11th hour deal is just one move in a much bigger chess game. And if you think China's giving up leverage, you haven't been paying attention.Here's what most investors miss. China's negotiation style is all about patience, ambiguity, and leverage. Delays, fake breakthroughs, sudden walk backs and last minute pivots are not stumbles. They're part of the strategy. The Chinese government has weathered cycles of tariffs, restrictions, and blacklists, using them to fortify domestic companies and expand their influence across Asia and Africa.Every time the US thinks it has the upper hand, Beijing finds a new angle. It could be currency moves, or rare earth controls, or regulatory hurdles for American companies.That's why every round of Trump's tariff drama rattles the market. Not because tariffs are new, but because no one on Wall Street trusts that the resolution will stick. Investors know the risks, their supply chain headaches, surprise retaliation, and deals that unravel overnight. It's not just about steel or chips, or soybeans, it's about trusting a counterpart who views negotiation as a battlefield and not a handshake.Bottom line, China is the world's most important swing factor, and Trump's tariffs are just one battle in a never-ending trade war. If you're betting on a quick and clean resolution, you're ignoring decades of history and misreading the game entirely.In this environment, trust is just another word for risk. Joining us today is Brian Levitt, global market strategist at Invesco, a guy who's been in the trenches of the market for more than 20 years. Brian's the kind of voice you want in your corner when you're trying to make sense of the economy.The Fed, inflation, all of it. He's got a great way of breaking down the big picture without the jargon, helping investors connect the dots between what's happening out there and what it means for their portfolios. Let, let's give a warm welcome to Brian Levitt. Brian, welcome to the show. Thank you for joining me. It's, it's a pleasure uh for you to have me here on your show with me today. So listen, let's talk a little bit about first, tell the audience just a little bit about your role at Invesco. I
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workas a global market.Strategist at Invesco. My job is designed to try and help investors better understand how they should be thinking about their portfolios, but also I try to help ease concerns, calm their fears, help them to overcomeemotions.
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Oh, don't we all don't believe it, especially, especially what's going on in the last couple of months. Yeah,
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Ididn't know I needed a psychology degree also, but I, I figured I'd just go with economics.
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I ended up getting a psychology degree just because I have to deal with it. I never, so
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maybe, maybe you can help me.Give me some pointers.
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No, it's been, it's really been nuts, but, you know, that speaks to, that just speaks to the level of emotion at the moment, right? But yes, to your point, I think it's, it's our role is to try to help these long-term investors to kind of stay in the path and not make those emotional decisions. But let's talk, let's talk about a couple of things because there's so much going on, but I really want to start with, you know, US and China trade, where that, you know, where that, where it was and where we think it's gonna be now. So
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we werein a tough spot.Not that long ago when we were talking about the 145% reciprocal tariffs and the fear about a tit for tat trade war. So we've got a bit of a pause here. We have a potential framework agreement where tariffs will be higher than they otherwise would have been, but it seems as if, uh, Trump and Xi are incrementally moving closer to some type of framework agreement,
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right, but they're not gonna be nearly as high as when they when he first
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out. No, it'll be like 45% on China.goods, 10% on US imports going into China. Maybe that's just the starting point for negotiation here. Right.
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But do you ultimately think that those, do you think that's where they stay? 45%? Do you think they potentially come down?
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I think theypotentially come down. And, and my, my biggest thing about tariffs all along has been that they, they're gonna lead to a less optimal outcome because somebody's got to pay for it, right? It's either a lower profit margin or the consumer pays for it. Um, but they may make sense if you want to defend national security. The most important thing to this market.clarity. Let us know where it is and things will adjust accordingly, right, because the,
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the one beautiful thing about the market is the market can function as long as it's clear. It could be bad news or good news, but as long as it's clear, then the market can function. It's, it's the lack of clarity, I think that causes clearly all the chaos.
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Well, that was the challenge with the Liberation Day. Liberation Day, the hope was tariffs would be lower than we had expected, and at least we can move on to it, move on from him. People want to talk about now the tax cuts or dereg.As long as there's uncertainty around tariffs that persists. So we're getting closer to to perhaps better clarity on all this, and the market just wants to see signs that things aregetting better.
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100%. Now let us a question. Do you think that this latest conversation that took place in London between Scott Besant and and and the Chinese representatives, um, is as solid as they're making it sound like, OK, we have the framework, we're ready to go because a month ago we had the same thing, and then suddenly it wasn't.
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Yeah, I mean, we'll, we'll probably have fits and starts on these types of things, but I think we ultimately know where this is heading. And I, I like to alert people to 2018. We had trade conflict between the US and China. We had a 20% downturn in the fourth quarter. We got a 90 day pause. We did not get a trade deal with China until the beginning of 2020, and yet 2019 was a great year for markets, um, because again, the market is forward.Looking and the market was believing a better outcome than had previously been expected.
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And I actually think the market today is still believing a better outcome. I, I, it feels like, you know, OK, you could say that a month ago when the, you know, when we had traded way off down 20%, that, you know, the end was near and oh my God, it's gonna be over. But in fact, you know, once there's clarity and the market wants to be positive, the market wants to be bullish. And I actually think that the robust, that the economicData in this country remains fairly robust. The hard data, I think, continues to point to better times. The soft data is soft data, soft data is survey data, so you have to kind of take that with a grain of salt. Who are they surveying and I do think that that this falls along party lines, at least now. The Democrats are, you know, screaming and yelling about it's horrible, and the Republicans are screaming and yelling that it's great. So clearly depends on who you're asking. Yeah,
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and then you haveto.The setup coming into this year was quite good. If you go back and you read 2025 outlooks, most were positive because growth was strong and inflation was stable. And there were some animal spirits that were picking up around deregulation. So that's really what the market is still attuned to is that we just came through a good first quarter earnings. Things may slow, but it's an economy that continues to hang in there.
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That's right. And Atlanta GDP now hasUh, second quarter growth at 3.8%, I think, right? The first quarter we were, OK, -3%, I think it ended up being right. Now we've gone back to 3.8%, so there's no sense to me.Uh, that there's this pending recession
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coming. No, it doesn't look like a pending recession. And if there was going to be a pending recession, one of the first things you would see is corporate bond spreads going up. And that's actually just the opposite. Corporate bond spreads have been coming in, which is really a testament to two things. One, the resilience of the economy, but also the fundamental strength of corporate America, which is again why it comes back to this original thought of, you might get a less optimal outcome, but let's set the tariff rates and moveon.
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100%.Listen, let's talk about just one other, you know, very recent event that caused all kinds of angst. But I, in the end, I don't think it's going to cause a lot of angst because while geopolitical chaos causes short-term chaos, I think actually in the long term investors in the markets look right throughthat.
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I always tell investors to think of a couple of questions when something happens in the world. Number one, does it change the trajectory of the large economies of the world? Number 2, does it change what their central bankers are gonna.do. So US and China are fairly insulated from what is going on between Iran and Israel. Now, could you get there with some type of meaningful impact to the oil market? You could, but we also have to remember the United States is now producing a record number of barrels of oil per day. So regional events tend to not end business and market cycles, and I think that's a great way for investors to think about it. But
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Ithink it creates opportunity, right?Because you, it gets emotional and stocks sell off for no other reason than people are emotional, not because the thesis changed, not because the story in Nvidia changed, just because people go, I want my money and what's the first thing they do? They hit the big name stocks because those are the ones that move the most, right? Uh, but so for the long-term investor, it becomes an opportunity if, you know, if you can look through it.
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It does. And, and think about on October 7th, 2023, when the conflict between Israel and Hamas started. I mean, the stock market's up a lot since the broad market. And even if you, um,Even if you think about where we were on April 8th, I mean, the market started to pricing going from a trade conflict to maybe even concerns about a recession or some type of financial crisis. Investors were pulling money out of the markets left and right, and that was the bottom because tends to be when volatility peaks. That's when you get a policy response. We got a 90 day but look,
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ifyou, if you were somebody who did nothing.On April 2nd or April 5th, whenever the whenever that the sell-off started, if you did nothing today, you are back. You're probably you're probably in a better position today than you were on April 2nd in terms of portfolio value, right, because most portfolios have rocketed back. They've
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rocketed back. I mean, you're, we're the February 19th high we're getting close to.
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We're gettingclose to that, but I'm talking about the April April 2nd.
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I, I,
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I think, I think a lot of portfolios are better actually today than they were on April 2nd, right? So, so, um, that just speaks to the point about not making emotional. Yeah,
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I mean, we all have an action bias. I mean, if you go back and you read the behavioral finance stuff, everyone has an action bias. I mean if something happens, you want to do something. I can't just sit here, right, but the reality.is when it comes to investing, just, just waiting it out tends to be a better, um, way to go about it. I've actually done a study, Ken, where if you look at all the major conflicts in history going all the way back, you know, most of the century, if you had added money on the day the conflict started rather than pulled money, you'd be a lot betteroff.
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Yeah, I think that's true, and I think we can go back and and verify that. But I think what's interesting, uh, is thatIf, now let's talk about long-term investors, not, not short-term traders, because short-term traders want nothing but chaos, because they, that's how they make their money. But as a long-term investor, if you've got a well designed and disciplined portfolio, then sitting tight and not necessarily panicking, you may want to take advantage and add money.But the last thing you want to do is, you know, sell money because you're panicking because unless the story is fundamentally changed, and this story didn't really fundamentally change what's happening here in this. No,
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and I always go back to an op ed that Warren Buffett wrote in The New York Times during the 2008 global financial crisis where he was talking about the Dow in the 20th century having to deal with two world wars, a dozen recessions, a Great Depression, on and on. The Dow went from like 40 to 110.Right, right, so the 20th century was a pretty challengingperiod. Yeah,
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no, it was, and, and yet Fox did fine, stocks did
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more than fine,
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which I think, you know, that goes and speaks to, uh, uh, you know, being in the game, right? It's, it's time in the market, not trying to
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time the game and volatility is the cost. I mean, it's the cost of, it's the price ofadmission.
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That's right. And so, and so let me ask you a question about where you, where you.volatility and maybe how investors should, should think about volatility in their portfolio.
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Well, volatilityis almost always the result of policy uncertainty. It's funny in good times, like back to back 25% up years, people will ask, well, when do the bad times come? When does the volatility come? When does the drawdown come? It's almost always the result of policy uncertainty. And this time was no different. We saw, um, a VC so.Chicago board Options Exchange volatility index spiked to 56%. That is way greater than a 2 standard deviation move. People remember a normal distribution curve. Those are the things that happen less than 5% of the time. So make no mistake, that was a big move. The challenge investors have is they want to pull out on those moves, whereas the policymakers realize we better do something, again, a 90-day trade pause orSometimes the Fed comes in and so investors tend to pull their money out of the market right when the policymakers are trying to calm things down,
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right? But then when and then when they do calm things down, then they try to run back in the market and, you know, they become buyers and then they force the market up.
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And what happens, which is unfortunate, is you miss the best days in the market. You
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missed it completely. That was the point. Yeah,
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everyone sees those charts. If you miss the 10 best days in the market, you get half the return, but what people never.Remember, or maybe weren't taught is that those best days always happen in the worst moments. The worst moments. So we just had the third best day in the S&P 500 since 1957. I believe that was April 9th, 9.5%. It, it just overtook over the third spot from March 24th, 2020, which was up 9.4% when we're all sitting in our homes during COVID. So
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hold on one second. We'll take a quick break and we'll be right back.All right, so let's just move on to the Fed now because this is a big week, right? We've got the June Fed meeting, we've got, you know, all kinds of all kinds of, well, you got all kinds of speculation. I'm in the camp, but we're getting a rate cut. I think the market is in the camp, we're not getting a rate cut. But yet there are people screaming for a rate cut, starting with the president, right? Uh, I'm in the camp that the feds should do nothing.
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Yeah, I mean, all presidents want rate cuts, right? So, um, yeah, I don't think that this is a Fed that's going to be jaw boned by the president. They're very, they're very committed to their credibility and so far so good. If you look at long-term inflation break even, so inflation expectations, the mom market very stable. So no, the Fed's not going to cut rates.Here, what you're starting to see a little bit is jobless claims pick up. You're gonna see prices up too. So the Fed's gonna be in a little bit of a rock and a hard place, but I think they're gonna respond more to some cracks in the labor market than to perhaps a price shock from tariffs.
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So do you, do you see a Fed rate cut this year?
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I'm starting to think that may be the case. I, I was moving into the camp that it wouldn't happen, but I'm starting to see what's happening with continuous, continuing jobless claims. They're, they're getting up to that couple of million level. And when you've got a flat yield curve, it means the Fed's too tight. So it's probably time to start bringingrates lower.
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Well, but let me ask you a question. The, theIf inflation is a problem, do you think inflation is gonna be a problem in the second half of the year?
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I think you're gonna have a price shock, but not inflation. So what do I mean by a one-time shock. No different than a war or a drought, right? That's what happened in 2018. The, the.Price of your washing machine went up once, and then it stayed and then stayed there. So that's not and and the way you would want to look at it, I mean, even the 3-year inflation break even, which you think might think would be rocketing highers back down to 2.5% right in the comfort zone, in my opinion.
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And so where do you think 10-year bond yields end the year?
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Ithink actually maybe a bit lower. And, and the reason for that is, I mean, for all our talk about a resilient economy, things are gonna slow perhaps a bit.Um, and, and so I don't think that we're in a place now where the bond market is questioning US fiscal sustainability of the bond market's going to trade on what the growth prospects are.
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Areyou worried about the amount of money thatNow Scotty Besson has to bring to the market to finance the debt.
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So far, the bond auctions have been just fine, right? So any reports that people are listening to saying the bond auctions are bad, it's the, the, it's, it's fine.
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I, I agree. I don't necessarily think they're oversubscribed, but they also have not been a disaster.
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The bidto cover ratio is pretty much right in balance. And, and if you think of a 10 year, what should the 10 year rate be?Inflation expectations plus real GDP 4.5% seems fine, right? And if the economy slows a little, then you're gonna be below 4.5%. So no, I'm not one of these people who is overly concerned about the US debt or the big deficits that we face. I don't worry about those from a funding perspective. One thing I, I say to myself to keep it contextualized is that household net worth in this country is over $160 trillion compared to a debt that's gonna be $40.1 trillion. So 40 trillion is a scary number. It is larger than what we produce every year, but compared to the actual wealth of this country, not as large as I think people suspectit is.
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Right. But they don't, you know, that's a narrative that, that you don't hear a lot.
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No, I mean, politicians want us to be worried about the debt because they have agendas, right? If you're in the Freedom Caucus, you want to cut spending. If, if you're, um, in the Democratic Party, you want to increase tax.or you want to increase, so they, um, they give us reasons to worry about it, but Ken, I, I've been doing this long enough that I remember when I was being told 5 trillion was a bad number. And now we're close to 40 trillion. Meanwhile, the, the for the last 20 years, the dollar's been very strong and rates have been historically low.
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It's funny that you said you were worried about $5 trillion. You know, I've been in long enough to that $1 trillion
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1 trillion. Oh my
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God, right now we're talking 40 trillion
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dollars. Yeah, people are pulling it up now to see how old we are.
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I'm older than you.
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I got the sense.When you said 1
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trillion, yeah, that gave it away.Alright, so let's, let's just tighten this up and, and finish off with.If you think the Fed, if you're now in the camp that you think the Fed is going to potentially cut rates.In September I guess because you're not getting it in June. I don't think you're getting it in July and then there's no August meeting right now unless there's an emergency because they can cut into meetings.
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It doesn'tseem like there'll be something that's an emergency at where we are right now.
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Yeah, I don't think there is. Uh, I'm still in the camp funny that I don't think we're getting a rate cut. I could see that's gonna hold steady, I could see that, right? And you got people screaming and yelling about the housing market, quite honestly, I think the housing market got inflated.Because they kept rates so low for so long. I actually think if he keeps rates where they are and mortgages stay at 6.8% and housing prices are gonna have to, people that really want to sell the house are gonna have to are gonna have to come down a little bit, and that's, I think that's gonna be helpful.
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Well, certainly would be helpful for a for a younger
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generation home buyer, people that can'tbuy a house right now.
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The problem is the supply issue right now. I mean, this country needs to buildmore homes. Well, agreed.
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OK, I'm not disagreeing with that, but I think that the current, you know, there are, and I, I live in Florida, right.Um, now I happen to live along the coast, so I think there's probably less pull back along the water. Uh, but if you move inland a little bit like Port Saint Lucie, which they really they, they built, they built up like crazy, but now there's almost an oversupply in Port Saint Lucie, and so you can start to see prices come down, you know, and they're coming down a fair amount.Which I actually am not so worried about. I actually think that's good for first-time home buyers that want to come
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in and buy a house, want to come in and buy a house. I mean, it's a little bit different in my area in northern Jersey where, you know, you have probably a baby boomer generation that can't leave because of the mortgage rate and then anything that comes on the market, you still get bids for it, um, even at today's mortgage rates. But, but it's all local as we know it's all regional parts
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of the house. I gotta tell you, I'm still surprised at the strength of the of the real estate market in the city, yes.Surprised of the strength of the market in the city. People
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want to be here. People want to be.
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Theydo want to be here. They do want to be here, which I think is great because I love New York. I just, I'm just,
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we'renot building any more islands like this one building
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any more islands like
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for better or worse. Yeah,
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yeah. Well, listen, I, I really appreciate you coming in and having this conversation. I want to circle back with you in 5 or 6 months and see how this conversation I would love to see how, you know, in fact, where we are in, you know, November, December of, of this year, and then.What it looks like going forward into uh into 2026, but I remain really bullish on the outlook, so I think we're gonna end the year. I think we're gonna end the year just fine. We're not gonna end up 20%, I don't think. But just fine. I agree with you just fine. If we return to historical norms, I think it's great. I agree with you anyway, thank you very much my pleasure. Thank you. Always a pleasure. Now, as you know, I end every podcast with a recipe, and today I'm giving you the classic Greek lemon chicken. Now, the history of Greek lemon chicken.is a rustic dish deeply rooted in the peasant cooking traditions of mainland Greece. It represents the very essence of Hellenic cuisine, simple, honest ingredients elevated by bold Mediterranean flavors. Lemon trees have flourished.Greece since antiquity brought over from the Middle East during ancient trade routes by the Byzantine era, lemons were a common flavoring agent in meat dishes prized not just for their taste but also for their preserving and tenderizing quality combined with oregano, garlic, olive oil, the holy trinity of Greek cooking, lemon brought brightness and depth to an otherwise simple meal.Historically, chicken was not eaten as frequently as lamb or goat because it was more valuable for the eggs they produced. When it was prepared, it was often for very special occasions. The lemonado style braised or roasted meat in a lemon-based sauce became a beloved household staple over time, especially as chicken became more widely available in the 20th century.Today, Greek lemon chicken is a comfort food across generations, often served with potatoes that soak up the pan juices. You can scan the QR code on the screen for the full recipe, and you can thank me later. Well, that's a wrap for today's tater Talk, but the conversation keeps going. Subscribe on Apple Podcast, Spotify, Amazon Music, or wherever you get your podcasts.You've got questions or topics you want covered? Email us attradertalk@yahoo Inc.com because we're always listening. Until next time, stay sharp, stay disciplined, stay in touch and take good care.
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This content was not intended to be financial advice and should not be used as a substitute for professional financial services.
