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Oil Inventories, Market Volatility and the Inflation Problem · The Financial Exchange Show

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Speaker 2: It's Chuck, Mark and Tucker with you here. And we've got,
1:15
Speaker 2: honestly like, these are not healthy markets right now. I'm
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Speaker 2: not saying that they're going to crash. What I am
1:20
Speaker 2: saying is they're just very unstable and the rotation that's
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Speaker 2: been keeping them afloat is getting more and more violent,
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Speaker 2: and it's happening faster, and it's just a little gnarly
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Speaker 2: right now. So what we've got the S and P
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Speaker 2: as of this very moment in time is off forty
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Speaker 2: six points, this despite it at one point today being
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Speaker 2: down fifty but also being up ten and so we're
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Speaker 2: just seeing this huge intra day whipsaw, much like yesterday
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Speaker 2: where yesterday we opened rose eighty points from the day before,
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Speaker 2: then fell two hundred and thirty points from there, then
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Speaker 2: rose one hundred and fifty points from there, and ended
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Speaker 2: up closing down like nineteen. So there's there's just no
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Speaker 2: stability in these markets right now. And this is happening
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Speaker 2: as we are heading towards the SpaceX IPO on Friday.
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Speaker 2: So SMP right now is off about forty six points.
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Speaker 2: Actually now it's off fifty two just since I started
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Speaker 2: talking dows off about one hundred and fifty NASDAK composite
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Speaker 2: is off two hundred and forty four. Again, none of
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Speaker 2: this is to say that this is like some like
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Speaker 2: crazy downturn that we're seeing or anything like that. The
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Speaker 2: SMP right now it's seventy three thirty four, is off
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Speaker 2: three point eight percent from it's high. It's not really notable.
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Speaker 2: It's not worth writing home about. What I'm telling you
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Speaker 2: is this is like the action that you're seeing within
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Speaker 2: the market of individual names and sectors and things like that.
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Speaker 2: It's it's not healthy what you're seeing. And as the
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Speaker 2: potential to worsen. Now worson could be to a five
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Speaker 2: percent decline overall, it could be to a I'm not
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Speaker 2: saying that you're going to see like a bear market
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Speaker 2: or anything. I'm just saying, hey, we're not really seeing
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Speaker 2: the signs of stability that you like to see as
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Speaker 2: things start to improve, which is decreasing volatility, more stability,
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Speaker 2: things like that. That's not present right now. It's more
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Speaker 2: expanding volatility and hitting more parts of the market. The
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Speaker 2: Tenure Treasury not really seeing any volatility despite a hot
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Speaker 2: inflation report this morning that kicked the one year CPI
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Speaker 2: up to four point two percent. The ten uere is
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Speaker 2: down point four basis points four tenths of a basis
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Speaker 2: point to four point five two four percent, so almost
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Speaker 2: no movement there. Dollar index not moving either, down point
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Speaker 2: oh one percent to ninety nine eighty eight. Gold is
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Speaker 2: getting whacked today though, as it has been for the
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Speaker 2: last month or so, down one hundred and forty four
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Speaker 2: dollars and ounce to forty one forty one. Crude oil
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Speaker 2: getting bit up today, up to eighteen on West Text
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Speaker 2: Intermediate to ninety thirty eight. It's a little bit of
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Speaker 2: a bump there after, you know, a slide over the
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Speaker 2: last month or so, and that is what is moving
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Speaker 2: in markets. We're gonna talk a little bit about crude oil,
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Speaker 2: and before we get into the meat of it, which
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Speaker 2: is today's EIA report on inventories and flows and things
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Speaker 2: like that, we're gonna talk a little bit about the
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Speaker 2: US crude oil ecosystem because I think it's important just
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Speaker 2: to give a little context on this. So when we
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Speaker 2: look at US commercial inventories, which are what ultimately matter.
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Speaker 2: Thank you, Mark, I appreciate that when we look at
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Speaker 2: US commercial inventories there right now just in terms of
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Speaker 2: what the EIA is showing, there's about four hundred and
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Speaker 2: twenty six million barrels of US inventory, to which Americans
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Speaker 2: most of you listening probably say, great. That means like
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Speaker 2: there's tons of oil that's still available. And the answer is, no,
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Speaker 2: that's not really the case. And here's why. When you
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Speaker 2: actually read through how the EIA calculates all of this,
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Speaker 2: there are a few things you need to know. The
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Speaker 2: first is they include pipeline line fill in that number.
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Speaker 2: Now we don't have numbers from twenty twenty six, but
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Speaker 2: in twenty twenty four there were around one hundred and
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Speaker 2: forty million barrels of oil contained in pipelines in the
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Speaker 2: United States. And that's great, except the only way to
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Speaker 2: get stuff through a pipeline is to push more fluid
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Speaker 2: through one end of it, and so you can't actually
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Speaker 2: access all of that right now. You're not just gonna
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Speaker 2: drill a bunch of holes in the pipeline to get
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Speaker 2: the oil out. That would be kind of stupid. Then
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Speaker 2: you can't use the pipeline in the future. So right
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Speaker 2: off the top, you've got one hundred and forty million
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Speaker 2: barrels that is active line fill. That is not inventory
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Speaker 2: that you can actually use unless you pump more oil
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Speaker 2: through it, which you're limited in terms of supply.
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Speaker 1: Of course.
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Speaker 2: The second piece is every oil tank in the United
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Speaker 2: States has a called, you know, spigot, a tap that's
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Speaker 2: attached to it in order to actually get oil in
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Speaker 2: and out of it. That's it is not at the bottom,
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Speaker 2: and there's a really good reason for that. Mark you like.
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Speaker 3: Soup, Love soup?
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Speaker 2: Yeah, stew care why not cereal?
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Speaker 3: Almost every day?
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Speaker 2: There you go. What happens when you get to the
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Speaker 2: bottom of a bowl of any of those? Is it
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Speaker 2: as good as what was at the top? Oh?
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Speaker 3: Is it as good when you're.
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Speaker 2: Getting down to like the last little bites of it,
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Speaker 2: like you're eating beef stew? Is it the same as
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Speaker 2: the first bites?
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Speaker 3: I haven't had it in a while? I think you
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Speaker 3: want when.
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Speaker 2: You're eating the first tucker? What's the what's the tough question?
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Speaker 2: What's the what's the best bite of soup? The first? First, second, third?
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Speaker 2: Because that's like all the meats at the top, all
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Speaker 2: the stuff is maybe the fourth because the first is
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Speaker 2: too hot. But when you get down to the bottom,
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Speaker 2: it's all this stuff that's just left over. It's it's
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Speaker 2: the same with the oil tanks. You get a bunch
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Speaker 2: of sediment that collects. There a bunch of things that collect,
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Speaker 2: and so, through years of actual experience, oil companies said, hey,
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Speaker 2: we're not gonna put the spiggott at the absolute bottom
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Speaker 2: of the tank, because then we're just gonna get all
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Speaker 2: the crap that comes out of it. They put it
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Speaker 2: a little bit above the bottom, and so about six
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Speaker 2: to eight percent of all tank storage capacity is not
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Speaker 2: available for pumping because it's crap, quite honestly, and you
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Speaker 2: wouldn't be able to do anything with it anyways. That
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Speaker 2: works out to about another sixty to eighty million barrels.
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Speaker 2: So now we are at somewhere between two hundred and
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Speaker 2: two hundred and twenty million barrels of inventory that's not usable.
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Speaker 2: Finally working inventory mark. You're familiar with this idea. If
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Speaker 2: you're working in a factory, you don't just go to
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Speaker 2: your supplier that morning and say, hey, here's what I
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Speaker 2: need for today, because if they're out of it, well,
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Speaker 2: you've already brought your people and you got to pay them,
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Speaker 2: you've already turned the lights on. You get all these
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Speaker 2: expenses then, and you're not going to be able to
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Speaker 2: produce anything, so you keep some working inventory in order
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Speaker 2: to be able to keep your factory running. Oil refineries
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Speaker 2: are the exact same way. And in the US, the
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Speaker 2: estimates that we have from the EIA are that somewhere
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Speaker 2: in the range of again we don't know this exactly,
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Speaker 2: but somewhere in the ballpark of one hundred and fifty
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Speaker 2: to one hundred and seventy million barrels is working inventory.
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Speaker 2: And the reason why that's the case is in the
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Speaker 2: US we use through you know, our different you know,
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Speaker 2: products and crude and everything, about twenty million barrels a
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Speaker 2: day needs to go through the system. So you talk
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Speaker 2: about this and you're basically again, oil refineries are pretty efficient.
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Speaker 2: Now they have to be like that. They try to
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Speaker 2: wring every bit of efficiency out of these. They've got
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Speaker 2: like seven to eight days of inventory on hand because
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Speaker 2: if you run out, then you're kind of in a pickle.
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Speaker 2: Maybe you can compress that a little bit. But where
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Speaker 2: we get to is that minimum operating inventory levels in
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Speaker 2: the US commercial crude system are somewhere between three hundred
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Speaker 2: and fifty and three hundred and ninety million barrels, which
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Speaker 2: means you need that in the system in order for
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Speaker 2: it to actually work. It's kind of like I'm trying
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Speaker 2: to think of the comparison that I would make for
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Speaker 2: you're if you you guys have bank accounts money hopefully yes,
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Speaker 2: money right.
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Speaker 3: Sure, yeah, you're filling it down.
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Speaker 2: You don't just take your bank account down to zero,
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Speaker 2: because then you get into things like overdrafts and debits
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Speaker 2: and things like that's where you run into the gnarly problems.
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Speaker 2: You have to maintain some working capital in there. It's
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Speaker 2: the same with the US oil system, and the estimates
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Speaker 2: are somewhere between three hundred and fifty and three hundred
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Speaker 2: and ninety million barrels are needed in order to maintain
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Speaker 2: the system's operating integrity. We're now at four hundred and
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Speaker 2: twenty six million barrels and the latest draw was seven
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Speaker 2: point two million barrels, and we are seeing a if
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Speaker 2: you look at the last four weeks, about a six
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Speaker 2: point six million barrel per week draw down. Let's take
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Speaker 2: a quick break. When we return, we'll talk about what
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Speaker 2: happens if that draw down continues, which hint it's going
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Speaker 2: to for at least several weeks, and when we start
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Speaker 2: running into problems based on the most recent data quick break.
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Speaker 2: We'll discuss that, and we've got trivia next.
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11:53
Speaker 2: So we talked in the last segment about how the
11:55
Speaker 2: fact is that again we don't know exactly where it is,
11:59
Speaker 2: but the US US oil production ecosystem likely needs somewhere
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Speaker 2: between three hundred and fifty and three hundred and ninety
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Speaker 2: million barrels of crude oil in it as minimum operational
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Speaker 2: inventory levels. Here's what we're seeing right now in terms
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Speaker 2: of the draw downs. In the last six weeks, drawdowns
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Speaker 2: have averaged five point five million barrels a week, in
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Speaker 2: the last four six point six million barrels a week,
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Speaker 2: and in the last two seven point six million barrels
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Speaker 2: a week. So we've got an accelerating draw down that
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Speaker 2: is happening, which is expected because the rest of the
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Speaker 2: world doesn't have any surplus oil and so ours is
12:36
Speaker 2: basically filling the gap right now. So here's the deal.
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Speaker 2: If we take the most conservative of those, the six
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Speaker 2: week average, you're looking at the best case scenario being
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Speaker 2: that we hit that three hundred and fifty million barrel
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Speaker 2: draw down limit somewhere in the range of September tenth.
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Speaker 2: That's what we're looking at in terms of best case.
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Speaker 2: If three hundred and fifty million barrels is the minimum
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Speaker 2: we can draw to, and we're drawing at that five
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Speaker 2: point five million barrels a week, if we use the
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Speaker 2: two week average seven point six million barrels a week,
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Speaker 2: the worst case scenario is that we hit that three
13:21
Speaker 2: hundred and ninety million barrel limit. If if that's what
13:25
Speaker 2: it is, again, like I don't know, like no one
13:27
Speaker 2: really does. We've never actually gotten there. Because here's the thing. Normally,
13:32
Speaker 2: when you get down towards these levels, you say, like
13:36
Speaker 2: basically what happens is price rises in order to not
13:40
Speaker 2: go to you know, tank bottoms pretty much. And with that,
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Speaker 2: US producers also say, Okay, we can't get stocks from
13:48
Speaker 2: commercial inventories anymore. We can't get any more from US producers, Great,
13:52
Speaker 2: let's import from somewhere else. Well, you can't import from
13:55
Speaker 2: somewhere else right now, like that that valve is not
13:57
Speaker 2: available to you. So the worst case scenario that run
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Speaker 2: into is that we hit that three hundred and ninety
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Speaker 2: million barrel you know line on July fifth day, after
14:08
Speaker 2: fourth of July, which would not be like a great
14:10
Speaker 2: time to do so.
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Speaker 1: Uh.
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Speaker 2: I don't know like where we're actually going to be.
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Speaker 2: But this is why I continue to say, Look, it's
14:17
Speaker 2: it's great that oil prices have come down in the
14:20
Speaker 2: short term. I'm a little nervous about what the second
14:23
Speaker 2: half of the summer looks like. I'm hopeful that we'll
14:26
Speaker 2: all just be able to laugh this off and be like, Okay,
14:28
Speaker 2: Chuck was wrong because of reasons X, Y, and Z.
14:31
Speaker 2: I'll take the l on it if if that's the case.
14:34
Speaker 2: But like, this isn't entirely a theoretical discourse that we're having.
14:40
Speaker 2: Like we're seeing the draw downs happening in US, not
14:44
Speaker 2: strategic reserves, commercial stockpiles. We're seeing them every week now.
14:49
Speaker 2: It's it's happening. The EIA is reporting on it every
14:54
Speaker 2: single week, and it's it's just simple subtraction, like this
14:59
Speaker 2: isn't multiple ca there's no exponents. It's just okay, if
15:02
Speaker 2: you continue linearly at this pace, this is what happens.
15:06
Speaker 2: And so I'm a little nervous about what the second
15:08
Speaker 2: half of July looks like and onward. The other thing.
15:12
Speaker 2: Even if Horor Moves opens today, which I gotta tell you,
15:15
Speaker 2: I don't think it's going to open today. Even if
15:18
Speaker 2: the Straight of Horror moves like opens and traffic returns
15:20
Speaker 2: to normal today, it takes a while for all this
15:24
Speaker 2: stuff to move. You still have all these ships that
15:26
Speaker 2: are heading to the US to Louisiana and Texas to
15:30
Speaker 2: fill up in everything. Like, it's not going to change
15:34
Speaker 2: this for the next four to six weeks anyways. So
15:37
Speaker 2: I think we're in a pretty dangerous spot here. I
15:40
Speaker 2: hope there's something I'm missing and I'm just being dumb.
15:45
Speaker 2: I don't usually root for that, but I kind of
15:47
Speaker 2: am in this case. But this is this is what
15:49
Speaker 2: I see as things getting a little bit gnarly in
15:52
Speaker 2: terms of where pricing has to go to balance the
15:54
Speaker 2: system in the second half of the summer. So we'll see.
15:57
Speaker 2: I don't know. I'm hopeful that that's not what actually
15:59
Speaker 2: happen weapons and I hope I'm wrong and it's just oh,
16:02
Speaker 2: like Chuck, you missed this and that, and that solves
16:05
Speaker 2: the equation for us. That would be great. I'd be
16:08
Speaker 2: happy to take the l on this. And we're just
16:10
Speaker 2: gonna have to see what the summer looks like, because
16:12
Speaker 2: thus far the late spring into the early part of
16:15
Speaker 2: the summer is continuing. And I will take the w
16:19
Speaker 2: on this. Exactly what we talked about would happened. Starting
16:22
Speaker 2: in late April. The last month and a half has
16:25
Speaker 2: been exactly what we talked about on this show that
16:28
Speaker 2: we thought would happen. And hopefully we're just wrong now
16:32
Speaker 2: into the future. I don't think we are, but we'll see.
16:35
Speaker 2: So there's that social Security now expects a shortfall earlier
16:39
Speaker 2: in late twenty thirty two. Your thoughts, Mark, I don't.
16:43
Speaker 3: Have any original thoughts on this. Everybody knows the problem,
16:46
Speaker 3: the solutions have been fleshed out. I mean, what is
16:50
Speaker 3: there to say. I don't I'm sorry, I'm mean to
16:53
Speaker 3: be defeatist or flip, but.
16:55
Speaker 2: No, it's we've talked like you know, you don't hear
16:57
Speaker 2: anyone campaigning on you know, so secure. No one wants
17:01
Speaker 2: to talk about it because the only solutions no one
17:03
Speaker 2: actually likes. It's either raised taxes or cut benefits or
17:07
Speaker 2: some combination thereof the other thing that you could do. Remember,
17:10
Speaker 2: having babies today doesn't do anything to solve Social Security
17:13
Speaker 2: because they can't pay into the system at age five,
17:16
Speaker 2: you know, in twenty thirty two six rather, so that
17:21
Speaker 2: doesn't solve it. The only the lever that you could
17:23
Speaker 2: pull is massively increase legal immigration of people aged like
17:28
Speaker 2: twenty to forty in order to get more payroll taxes
17:30
Speaker 2: being paid in from them. Don't really get the sense
17:33
Speaker 2: that's where we're going, So like, this is kind of
17:37
Speaker 2: what it is. So folks, if you are trying to
17:41
Speaker 2: figure out what your Social Security plan looks like in retirement.
17:46
Speaker 2: The good news the Armstrong Advisory Group has a seminar
17:49
Speaker 2: that is happening on June twenty fifth, just two weeks
17:53
Speaker 2: and one day out. It's at five pm at the
17:56
Speaker 2: Marriott in Quincy, Massachusetts, and it's the continuation of a
18:00
Speaker 2: set of seminars that the Armstrong Advisory Group has been
18:03
Speaker 2: putting on over the course of the spring and early
18:05
Speaker 2: summer to help inform you as to some of the
18:08
Speaker 2: considerations for social Security and Medicare. Planning space is limited
18:14
Speaker 2: there it is starting to fill up again. That date
18:18
Speaker 2: is Thursday, June twenty fifth, at five pm at the
18:21
Speaker 2: Marriott in Quincy, Massachusetts. You can sign up for it
18:24
Speaker 2: by going to Armstrong Advisory dot com slash events. You
18:29
Speaker 2: can also call eight hundred three nine three for zero
18:33
Speaker 2: zero one. Again. That website is Armstrong Advisory dot com
18:36
Speaker 2: slash events, or call eight hundred three nine three for
18:42
Speaker 2: zero zero one.
18:43
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18:59
Speaker 2: Equities remain broadly negative today, with the Dow off about
19:04
Speaker 2: one percent, SMP down three quarters of percent, NASDAC down
19:07
Speaker 2: about one percent as well. So we got a modest
19:10
Speaker 2: selloff continuing in equity markets at this point, and we'll
19:16
Speaker 2: continue to track and see how things move there quick break.
19:21
Speaker 2: When we come back, we get the trivia answer we
19:23
Speaker 2: got Wall Street Watch and We're talking airlines after.
19:25
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Speaker 1: right here on the Financial Exchange Radio.
19:57
Speaker 4: Now we got some more shop on Wall Street as
19:59
Speaker 4: invest react to the consumer price index posted earlier this morning,
20:03
Speaker 4: which climbed half a percent in May.
20:05
Speaker 2: With that, the annual rate of.
20:07
Speaker 4: Inflation now sits at four point two percent, the highest
20:10
Speaker 4: level in three years. Right now, the Dow is down
20:14
Speaker 4: over one percent, or five hundred and sixty five points,
20:17
Speaker 4: SMP five hundred down over eight tenths of a percent,
20:20
Speaker 4: NASDAK down one point two percent or three hundred and
20:23
Speaker 4: eight points lower. Rust two thousand, off about four tenths
20:27
Speaker 4: of one percent. Tenure treasure reeled is flat at four
20:30
Speaker 4: point five two percent. In oil up nearly two percent higher,
20:34
Speaker 4: trading right around eighty nine dollars at barrel. Super Microcomputer
20:39
Speaker 4: stock is tumbling over seventeen percent now after the company
20:42
Speaker 4: announced plans to raise seven billion dollars in equity related
20:46
Speaker 4: deals to help cover the costs of hardware component purchases. Meanwhile,
20:51
Speaker 4: shares of Cracker Barrel rallying twenty eight percent after the
20:54
Speaker 4: restaurant chain posted a surprise quarterly profit and lifted its
20:58
Speaker 4: outlook for the year, signaling its turnaround effort is showing progress. Elsewhere,
21:04
Speaker 4: RBC downgraded Nike two sector perform from outperform, saying Nike's
21:08
Speaker 4: turnaround is slower and narrower than they were anticipating. Nike
21:13
Speaker 4: stock is down by about a half a percent. And
21:16
Speaker 4: more tech earnings on the way this afternoon, where Oracle
21:20
Speaker 4: will report their results after the closing bell. I'm Tucker Silvan.
21:27
Speaker 4: That is Wall Street Watch, and in the previous segment,
21:29
Speaker 4: we ask you the trivia question how many World Cup
21:33
Speaker 4: tournaments has the US men's team participated in?
21:36
Speaker 2: It'll be twelve and Mike and.
21:38
Speaker 4: West Yarmouth, Mass is our winner today taking on the
21:41
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21:44
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21:48
Speaker 4: complete contest rules at Financial Exchange Show dot com.
21:53
Speaker 2: All right, let's talk about this piece from the Financial Times.
21:57
Speaker 2: Quote you can't fly planes that are empty. Airlines draw
22:01
Speaker 2: up cuts for ugly winter. I'll quote here airlines are
22:05
Speaker 2: preparing to slash their winter flight schedules, with the potential
22:08
Speaker 2: for planes to be grounded in tens of thousands of
22:11
Speaker 2: flights canceled if jet fuel prices remain elevated. Executives will
22:15
Speaker 2: decide within weeks how to steer their airlines through the
22:18
Speaker 2: final months of a tumultuous year that has led to
22:20
Speaker 2: soaring fuel prices after the Iran War up ended global travel.
22:24
Speaker 2: So we've already seen airlines throughout Europe and Asia go
22:30
Speaker 2: through cuts of on average, anywhere from like two to
22:34
Speaker 2: five percent of capacity for the second half of the summer.
22:41
Speaker 2: This is one of the things that is helping to
22:44
Speaker 2: keep you know, kind of a lid on, you know,
22:48
Speaker 2: jet fuel prices and keep jet fuel from going crazy
22:51
Speaker 2: because you know, you're seeing these flight cuts. The question
22:55
Speaker 2: is that I think they're asking, is okay if this continues.
22:58
Speaker 2: They see where the jet fuel market is going, and
23:00
Speaker 2: they know which routes are profitable and which aren't, and
23:04
Speaker 2: you likely have more route cuts coming in order to
23:08
Speaker 2: prevent problems from happening. This is exactly what we talk
23:11
Speaker 2: about when we talk about demand destruction occurring.
23:14
Speaker 3: Yeah, I guess it's the way it's supposed to work.
23:16
Speaker 3: You can't cut prices. Normally you would to fill airplanes,
23:18
Speaker 3: but it's not profitable to do so you can't cover
23:20
Speaker 3: your costs right because of rising fuel prices, and that
23:24
Speaker 3: leads to only one solution.
23:26
Speaker 2: So again, I think we'll have to see how this
23:29
Speaker 2: develops over the next couple of months. Here. I don't
23:33
Speaker 2: know exactly where it is going to go, but these
23:37
Speaker 2: are the things that are being talked about at this
23:40
Speaker 2: particular point in time within the airlines in order to
23:44
Speaker 2: try to make things work in the second half of
23:48
Speaker 2: the year into the winter. Anthropic the company behind the
23:54
Speaker 2: Claud series of AI models. They this morning released Claud
24:00
Speaker 2: Fable five, which is based on the Mythos model that
24:05
Speaker 2: they have not released to the broad public because of
24:09
Speaker 2: cybersecurity concerns, and they've pretty much said, look, Fable five
24:13
Speaker 2: is just about the same as Mythos. We just built
24:17
Speaker 2: in a bunch of additional safety guard rails to keep
24:20
Speaker 2: people from using it in fashions that could be destructive.
24:24
Speaker 2: And if you try to go down that road, it's
24:26
Speaker 2: going to revert to older models in order to prevent
24:29
Speaker 2: you from doing so.
24:32
Speaker 3: So what's the downside of the guardrails slower processing. What
24:37
Speaker 3: do you mean, why wouldn't they just erect? Why is
24:41
Speaker 3: this even like a discussion?
24:44
Speaker 2: What question are you asking? I guess.
24:49
Speaker 3: Why would they not impose guardrails on so the on
24:53
Speaker 3: forbidden topics.
24:54
Speaker 2: So for the actual Mythos release, it's not that they
24:58
Speaker 2: originally didn't post guardrails. It's that the product was so
25:02
Speaker 2: strong that it that it like users could get around
25:05
Speaker 2: it basically, and this is I guess an additional level
25:10
Speaker 2: of protection they've built in because the Meatos platform is
25:12
Speaker 2: still rolled out to a number of financial institutions, cybersecurity institutions,
25:17
Speaker 2: so that they can you know, work on their systems
25:20
Speaker 2: to harden them against potential attacks from you know, either
25:26
Speaker 2: directly from AI models or from you know, concepts that
25:31
Speaker 2: are developed by advanced AI models. And so this is
25:36
Speaker 2: not a toned down version of it. It's just something
25:38
Speaker 2: where they've I don't know how they do it, apparently
25:41
Speaker 2: been able to build better guard rails in so that
25:44
Speaker 2: you can't do some of the things that would be
25:47
Speaker 2: so destructive.
25:50
Speaker 3: Good. Yeah, I don't know without having insight on how
25:53
Speaker 3: hard it is to code that. I mean, obviously it
25:55
Speaker 3: it makes the code less efficient. Now that's that's good. Yeah.
26:00
Speaker 2: The other thing that's interesting on this they're rolling it
26:02
Speaker 2: out to paid users of claud for a two week period.
26:09
Speaker 2: After that, if you want access to it, you're gonna
26:11
Speaker 2: have to pay more. So this is where I will say,
26:16
Speaker 2: I do think what they're doing in terms of this
26:18
Speaker 2: rollout is absolutely something to try to juice things up
26:23
Speaker 2: for the IPO.
26:25
Speaker 1: I do.
26:25
Speaker 2: I hold two thoughts in my head at the same
26:27
Speaker 2: time on this. Number one, I do think there was
26:30
Speaker 2: something to meet those being you know, significantly more powerful,
26:34
Speaker 2: uh and efficient and able to do more things than
26:38
Speaker 2: previous models. Basically anyone who has come close to touching
26:41
Speaker 2: it has been like, yeah, there's there's there's a problem here,
26:44
Speaker 2: Like we need to be really careful with this. But
26:49
Speaker 2: Anthropics filed for an IPO that's probably gonna happen somewhere
26:52
Speaker 2: in the July August range. They also now they're rolling
26:56
Speaker 2: this out saying Okay, you can use this for two weeks,
26:58
Speaker 2: And the reason why they've said to two weeks is
27:00
Speaker 2: that they can't commit to having enough compute power for
27:04
Speaker 2: it afterwards. But if you want to get people excited
27:08
Speaker 2: about the IPO, you roll something out for a couple
27:11
Speaker 2: of weeks, get people hooked on it, then get them
27:13
Speaker 2: paying more for it, and it really juices things up
27:17
Speaker 2: heading into the IPO. So I think that that might
27:20
Speaker 2: be a part of the actual rollout strategy on this.
27:25
Speaker 2: I still think that there's you know, there's a reason
27:27
Speaker 2: why they're not releasing the Meathos platform to everyone. It's because, again,
27:32
Speaker 2: pretty much anyone who touches it's like, yep, there's there's
27:35
Speaker 2: something wild here. And I know a couple guys who
27:38
Speaker 2: have tried out the Fable platform this morning, and again
27:42
Speaker 2: they're way more like I don't even know half the
27:44
Speaker 2: stuff they're talking about, but I asked them like, what
27:47
Speaker 2: are you seeing on this and they're like, yeah, this
27:49
Speaker 2: is a notable improvement from you know, previous versions in
27:54
Speaker 2: what they're using it for. So take that for what
27:56
Speaker 2: it's worth. Let's take a quick break here and when
28:00
Speaker 2: we return, we'll do a little bit of stack roulettes.
28:03
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29:11
Speaker 4: mark what do you got for me?
29:12
Speaker 2: For stack roulettes?
29:13
Speaker 3: Well Street General reports that Fidelity will be introducing annuities
29:19
Speaker 3: into their target date funds that are increasingly adopted by
29:27
Speaker 3: employer plant sponsors in forour one K plans. This is
29:30
Speaker 3: not a new thing, but the fact that the big,
29:33
Speaker 3: the biggest of the record keepers, the folks that administer
29:37
Speaker 3: for one K plans, that being Fidelity is going to
29:42
Speaker 3: be offering this to plan sponsors apparently of all sizes
29:46
Speaker 3: is I think it effectively effectively allows smaller employers to
29:54
Speaker 3: feel comfortable with the idea. So again, this has been
29:57
Speaker 3: around for a long time, this notion you could put
30:00
Speaker 3: your money in a sort of set it and forget
30:02
Speaker 3: it target date fund. It gets more conservative over time automatically,
30:06
Speaker 3: and then once you're in retirement, it gives you the
30:07
Speaker 3: option of buying an immediate annuity. So expect others like
30:11
Speaker 3: Vanguard and t ro Price and other big some of
30:14
Speaker 3: them are to an extent, expect them to follow soup
30:17
Speaker 3: and automatic pension like income to become increasingly available. Probably
30:23
Speaker 3: a good development.
30:24
Speaker 2: Tucker, what just happened in markets? Why would you just
30:26
Speaker 2: fall half a percent in the last three minutes?
30:28
Speaker 4: I am seeing that President Trump said will be attacking
30:33
Speaker 4: Iran Hard Okay speaking, I just saw the S and
30:38
Speaker 4: p FO fall thirty five points as Mark was talking Twitter.
30:42
Speaker 3: Right now.
30:43
Speaker 2: Yep, there we go. There's the chiron on the bloomy Berg. Now,
30:46
Speaker 2: So okay, sorry, I got distracted, Mark, walk me through
30:51
Speaker 2: the mechanics of what you're explaining there. I just want
30:53
Speaker 2: to make sure that I understand it.
30:54
Speaker 3: Sure we know is we know target date funds work
30:57
Speaker 3: their mixes of stocks and bonds.
30:58
Speaker 2: No, But what I want to you said that it
31:00
Speaker 2: would include annuities inside target date tests. That doesn't That
31:04
Speaker 2: doesn't mean that, like Fidelity target date fund X is
31:08
Speaker 2: going to have an annuity as a portion of it,
31:10
Speaker 2: does it?
31:11
Speaker 3: A portion of your bond money, your more conservative money
31:14
Speaker 3: starting in your late fifties will be allocated to what
31:18
Speaker 3: they call insurance contracts. They really just give the account
31:21
Speaker 3: owner the option to convert that portion of their plan
31:25
Speaker 3: to an immediate annuity at a future date.
31:28
Speaker 2: Is that going to be Are there going to be
31:30
Speaker 2: non annuity target date fund options from.
31:32
Speaker 3: Fidel presumably like they have an index suite today in
31:34
Speaker 3: an active suite today. Sure, yeah, oh yeah. Plan sponsor
31:38
Speaker 3: won't be compelled they'll do this. They probably want to
31:40
Speaker 3: do their own due diligence because if Fidelity turns out
31:44
Speaker 3: to have not done their homework, the sponsor, the employer
31:47
Speaker 3: could be sure liable. So but the fact that Fidelity
31:50
Speaker 3: is comfortable enough to put this on their uh, their
31:53
Speaker 3: their large corporate plan platform UH suggests that they're confident
31:58
Speaker 3: that it would pass. Must you know how.
32:01
Speaker 2: Earlier in the show, we were saying that, you know, okay,
32:05
Speaker 2: a bunch of data. We see a bunch of numbers
32:07
Speaker 2: on the screen, and then a story comes out saying, oh,
32:10
Speaker 2: this is why you saw all of those numbers on
32:12
Speaker 2: the screen. This piece from MarketWatch is classic as it
32:16
Speaker 2: relates to that sales of million dollar homes suggest inflation
32:21
Speaker 2: is spurring the wealthy to buy. Now, okay, let's hold
32:25
Speaker 2: that thought for a minute. I got a quote from
32:27
Speaker 2: the piece. New data suggests rich buyers are fueling arise
32:32
Speaker 2: in home sales, while lower income Americans are finding it
32:35
Speaker 2: harder to get on the property ladder. Sales of existing
32:38
Speaker 2: homes accelerated to their fastest pace in a year in May,
32:41
Speaker 2: led by sales of homes priced over a million dollars,
32:44
Speaker 2: according to the National Association of Realtors. The data could
32:47
Speaker 2: be assigned that the wave of inflation caused by tariffs
32:50
Speaker 2: in the Iran Wars beginning to ripple through the economy,
32:52
Speaker 2: influencing the decisions of households in unpredictable ways. Sorry, I
32:58
Speaker 2: just threw my pen because this is ridiculous. There is
33:02
Speaker 2: no wealthy American who sits there and says, hey, you
33:07
Speaker 2: know what inflation's gone up in the last few months,
33:11
Speaker 2: I should buy a house. I'm sorry, but that like
33:15
Speaker 2: there is no one that does that. That's stupid what
33:18
Speaker 2: I will say. And yes, I realize that I'm just
33:21
Speaker 2: offering the you know, another story, but I think it's
33:25
Speaker 2: a more believable one because none of us know what's happening.
33:27
Speaker 2: But this idea is dumb, quite honestly. Here's what I
33:30
Speaker 2: know is that the stock market has gone nutty. There's
33:33
Speaker 2: a ton of private money from these upcoming IPOs that
33:38
Speaker 2: is gonna be unleashed into markets. Everyone like you look
33:42
Speaker 2: at like what's going on with tech stocks, and anyone
33:44
Speaker 2: who's anywhere close to tech has just a ton of
33:47
Speaker 2: money floating around right now. And so specifically, and I'll
33:51
Speaker 2: say this because if you look at the San Francisco
33:53
Speaker 2: real estate market right now, do you guys remember how
33:55
Speaker 2: everyone left San Francisco for dead a few years ago? Yeah, yep,
34:00
Speaker 2: you are now seeing like eight million dollar listings going
34:03
Speaker 2: for fifteen million dollars because there's just so much tech money.
34:06
Speaker 2: The city's just a wash in it again. And so
34:09
Speaker 2: this is why I can, I think more convincingly say no,
34:12
Speaker 2: this isn't because a bunch of wealthy people are sitting
34:15
Speaker 2: around going, hey, inflation's picking up. Do you think we
34:18
Speaker 2: should buy a house?
34:19
Speaker 1: No like that.
34:19
Speaker 2: That's stupid. No one does that. Okay. What people are
34:23
Speaker 2: absolutely doing is saying, hey, we've got a bunch of
34:28
Speaker 2: money because our tech stocks are up, let's go buy
34:31
Speaker 2: a house with it. I'm not saying that inflation doesn't
34:36
Speaker 2: influence some of these decisions. I can tell you from
34:38
Speaker 2: a personal perspective. You know, back in twenty twenty one
34:41
Speaker 2: and twenty twenty two, I was looking around, like trying
34:44
Speaker 2: to find a new house, and one of the things
34:47
Speaker 2: I was going with was again, I was trying to
34:49
Speaker 2: find it, not because of inflation, but I saw where
34:52
Speaker 2: the inflation picture was going, and I said, I'm going
34:54
Speaker 2: to borrow as much money as cheaply as possible because
34:57
Speaker 2: inflation will allow me to deal with that more easily.
35:01
Speaker 2: But I wasn't buying the house because of inflation. I
35:04
Speaker 2: was buying the house because I needed a place to live.
35:07
Speaker 2: And I said, okay, let me do X, Y or Z.
35:10
Speaker 2: So I don't think that rich buyers are sitting there going, hey,
35:14
Speaker 2: inflation just hit four point two percent we need to
35:17
Speaker 2: buy a house. What I do think they're doing is
35:19
Speaker 2: they're saying, Hey, our tech stocks are up, let's use
35:23
Speaker 2: that money to buy a house. I think that is
35:26
Speaker 2: very plausible. What else you got from me, Mark, You're
35:31
Speaker 2: fascinated by this chiron on the screen?
35:33
Speaker 1: Yeah, I am.
35:35
Speaker 3: Okay, So stocks are down. Look, the you talked about
35:38
Speaker 3: the the volatility and lack of any kind of trend
35:45
Speaker 3: in markets.
35:46
Speaker 1: That's my.
35:48
Speaker 3: Interpretation. That's not what you said, and it's sort of understandable.
35:53
Speaker 3: I mean, we don't know will we be at war
35:56
Speaker 3: or not in three months, six months, or even or
36:00
Speaker 3: term investors, whatever your short term right. We don't know consequently,
36:03
Speaker 3: whether or not oil will come back down and therefore
36:05
Speaker 3: inflation will come back down. We don't know whether the
36:09
Speaker 3: US government will have to borrow two trillion next year
36:11
Speaker 3: or two and a half trillion to make up for
36:15
Speaker 3: some of these war costs. There is an unusual it's
36:19
Speaker 3: it's a it's sort of trite to say, well, markets
36:22
Speaker 3: are on edge or there's a lot of uncertainty out there.
36:26
Speaker 3: That's that's always the case. That's why we have markets
36:28
Speaker 3: in the first place. We have perfect certainty. We just
36:30
Speaker 3: have contracts. If that makes sense. The gyrations are understandable
36:39
Speaker 3: in light of the fluidity, shall we say, of policy.
36:43
Speaker 3: And I think I'm being kind there. You could call
36:45
Speaker 3: it lots of other I don't think this is.
36:48
Speaker 2: The market saying there's too much uncertainty out there. I
36:51
Speaker 2: think it's again. I think that sometimes we make up
36:55
Speaker 2: stories about markets to be like, oh, like this is
36:58
Speaker 2: journalists have to do that. They have to guys, it's
37:01
Speaker 2: really simple. The market ran a ton in the last month.
37:05
Speaker 2: They know that, and it's just like, you can't do
37:07
Speaker 2: that forever. And I know that's like kind of a
37:10
Speaker 2: boring story to write, like, oh, markets went up because
37:13
Speaker 2: people really wanted to own stocks, and then markets went
37:15
Speaker 2: down because some people sold the games. But sometimes that's
37:18
Speaker 2: all that's going on. Yeah, And you know, again, you
37:21
Speaker 2: can have this rotation under the surface as people try
37:24
Speaker 2: to find a place to go. It's been getting more
37:27
Speaker 2: and more violent the last couple of weeks, and it
37:28
Speaker 2: looks like it that the mechanics just might be breaking
37:31
Speaker 2: under the surface a little bit. Does that mean that we,
37:33
Speaker 2: you know, fall twenty percent from here? I don't know,
37:36
Speaker 2: this thing could be over tomorrow. As far as any
37:38
Speaker 2: market volatility, like you never know until after the fact.
37:41
Speaker 2: Did anyone at the time think that March thirty first
37:45
Speaker 2: was gonna be the last day that markets went down,
37:48
Speaker 2: you know, for like three weeks after, no, like, no
37:52
Speaker 2: one knew that. It just it ended up turning out
37:55
Speaker 2: to be. But I think the big thing is, you've
37:59
Speaker 2: got a market that has some instability in it now,
38:01
Speaker 2: and you got to see some stability in it before
38:04
Speaker 2: we can you know, start to feel a little better
38:07
Speaker 2: about you know, this being over. Let's take a quick
38:10
Speaker 2: break for the rest of the day. Markets remain negative,
38:12
Speaker 2: with the S and P off about seventy points, Dows
38:14
Speaker 2: off six hundred, NASDAG off about three forty five. We'll
38:18
Speaker 2: see you tomorrow.