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AI Spending Keeps the Economy Hot as Rates Rise · The Financial Exchange Show

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  Speaker 1: is The Financial Exchange with Mike Armstrong and Paul Lane.
• 1:15
  Speaker 2: Good morning.
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  Speaker 3: Welcome back here to The Financial Exchange. It's Mike, Paul,
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  Speaker 3: and Tucker with you on a Tuesday of a jobs week.
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  Speaker 3: We'll have a number of reports coming out, including the
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  Speaker 3: one that was released this morning at 10 a.m. on
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  Speaker 3: the Jolt's report, the job openings labor turnover survey, effectively
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  Speaker 3: telling us the same thing we've been hearing, which is
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  Speaker 3: a relatively low churn labor market, but a still relatively
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  Speaker 3: tight labor market with the unemployment rate last month at 4.1%.
• 1:42
  Speaker 3: We'll get a new read on that September unemployment rate
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  Speaker 3: on Friday of this week, weekly jobless claims, job creation
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  Speaker 3: as well. But the Jolt's report not signifying anything concerning. Yesterday,
• 1:54
  Speaker 3: we saw a very substantial surge in interest rates, the
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  Speaker 3: 10-year treasury reaching up over 5.25%. Moving a bit more today, too,
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  Speaker 3: up two basis points. As predicted yesterday, the 30-year fixed-rate mortgage,
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  Speaker 3: according to Mortgage News Daily, got up over to 7.5% yesterday. Again,
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  Speaker 3: that's the average 30-year fixed-rate mortgage, according to Mortgage News Daily.
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  Speaker 2: The real news, as far as I'm concerned, on the
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  Speaker 2: bond market... It is not so much the total level,
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  Speaker 2: which is concerning.
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  Speaker 3: We are seeing rates that we have not seen since
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  Speaker 3: the mid 2000s, some 20 odd years ago, right before
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  Speaker 3: the GFC. But the pace of increase has also been.
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  Speaker 2: Recently.
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  Speaker 3: The pace of increase, I think, is growing to a
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  Speaker 3: concerning level. A month ago, we were sitting at four
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  Speaker 3: and three quarters. We're now sitting at five and a
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  Speaker 3: quarter on that 30 year treasury. That is a very
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  Speaker 3: substantial move. in 30 days, I think is where I'll
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  Speaker 3: leave it. I don't think it signifies that things.
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  Speaker 2: Are about to blow up, although I would guess that.
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  Speaker 3: There are some hedge funds or others out there that
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  Speaker 3: are not positioned properly with their bond portfolio for a move.
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  Speaker 2: Of this magnitude.
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  Speaker 3: It also is just pretty confounding when you look at
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  Speaker 3: how low we got prior to the outbreak of war.
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  Speaker 3: On February 27th, the interest rate on the 10-year Treasury
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  Speaker 3: hit a low of 3.94%. So we are talking about
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  Speaker 3: more than a one and a quarter percent swing since
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  Speaker 3: the outbreak of war in Iran. And for that reason,
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  Speaker 3: it's tough to kind of give much reason to any
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  Speaker 3: of the other arguments for yields moving up. It does
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  Speaker 3: seem to very much coincide with the outbreak of war
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  Speaker 3: and the extensions over time of war.
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  Speaker 2: But ultimately, there are a.
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  Speaker 3: Inflation from the war is certainly one of them, but
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  Speaker 3: growth from the AI sector is another, and I think
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  Speaker 3: all of these things are keeping yields higher and making
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  Speaker 3: it so that the business environment and personal environment for
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  Speaker 3: borrowing money today is heavily restrictive for anyone that's operating
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  Speaker 3: outside of the artificial intelligence space. It's kind of where
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  Speaker 3: I've landed, right? I don't think there's two neutral interest rates.
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  Speaker 3: I don't like that concept, but the Fed was asked
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  Speaker 3: about this specifically of like, hey, your policy seems quite
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  Speaker 3: restrictive in some areas of the economy and not restrictive
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  Speaker 3: at all in others. And that's kind of where I've
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  Speaker 3: landed is, yeah, if you run a hardware store, if
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  Speaker 3: you're trying to buy a home, if you are a
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  Speaker 3: home builder trying to put a home in the ground,
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  Speaker 3: the current interest rate regimen is pretty darn restrictive for you.
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  Speaker 3: If you are selling chips to the AI industry, if
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  Speaker 3: you are building data centers, the expected return that you're
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  Speaker 3: going to see on the compute power that you're able
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  Speaker 3: to put together is so dramatically higher than the cost
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  Speaker 3: of capital and the cost of anything else that the
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  Speaker 3: higher interest rates, even by the magnitude that we're talking
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  Speaker 3: about here, has just not been impactful on your plans.
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  Speaker 3: And given the size of that investment now, which according
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  Speaker 3: to the government's own data now exceeds residential investment, It's
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  Speaker 3: just tough to picture an environment where this economy slows
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  Speaker 3: down until that narrative around AI build-out shifts.
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  Speaker 4: Yeah, it comes down to the biggest fundamental question that
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  Speaker 4: markets have beyond the inflation and the war is how
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  Speaker 4: long and how sustainable is this CapEx cycle build-out and
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  Speaker 4: the revenues that come from artificial intelligence. That is really
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  Speaker 4: the crux of... the whole investment world right now and
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  Speaker 4: the domestic markets, I think.
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  Speaker 2: Certainly seems to be. I mentioned it's a jobs week here.
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  Speaker 2: We've got a piece.
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  Speaker 3: From Bloomingburg this morning, all about the longer term unemployed.
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  Speaker 3: And we've mentioned this several times because every time we
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  Speaker 3: talk about how robust the labor market is right now,
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  Speaker 3: we get plenty of texts, justified texts from people. You
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  Speaker 3: can text the show at 617-362-1385. about for them it
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  Speaker 3: is not working out, or for their kid, or for
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  Speaker 3: their nephew, or their neighbor's kid, who are well-qualified individuals
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  Speaker 3: struggling to find work. And we do see that reflected
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  Speaker 3: in the data as well. There are nearly 2 million
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  Speaker 3: American workers searching for work who have been unemployed for
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  Speaker 3: 27 weeks or longer. That's the definition of long-term unemployed.
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  Speaker 3: And that number of people, anyway, or that percentage of
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  Speaker 3: the labor force that is sitting in that position.
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  Speaker 2: It's so strange to say this, but it's a figure
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  Speaker 2: that we haven't seen since the mid-2010s. Yeah.
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  Speaker 4: To have six months or more be the average time
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  Speaker 4: to take to find a job, it's significant.
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  Speaker 3: At the same time, though, so I excluded, by the way,
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  Speaker 3: the period around COVID when Yeah, it was for a
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  Speaker 3: lot of people a really long time. That period was
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  Speaker 3: so weird, I just take it out of any data
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  Speaker 3: sets that we mention. At the same time, though, the
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  Speaker 3: unemployment rate, the number of those people that are unemployed
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  Speaker 3: and looking for work actively is at 4.1%. If we
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  Speaker 3: go compare that number to the mid-2010s, we are talking
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  Speaker 3: about numbers that are 1.5% to 2% lower than where
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  Speaker 3: we were at that point in time.
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  Speaker 5: Right.
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  Speaker 2: And so... it's not easy to conclude this.
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  Speaker 3: And I think certainly there are areas of the labor
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  Speaker 3: market that are tougher to find jobs than others. But ultimately,
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  Speaker 3: this is a labor market that is indicative of a
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  Speaker 3: inflationary high growth environment. It might not be because there's
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  Speaker 3: a lot of demand for labor, but you can bet
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  Speaker 3: that the supply of labor is very constrained right now.
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  Speaker 3: And in the aggregate, It doesn't really matter that, yeah,
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  Speaker 3: the majority of the demand for jobs is coming from
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  Speaker 3: areas like construction, landscaping and nursing and not high tech
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  Speaker 3: ad sales and marketing. It'd be nice to have consistent
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  Speaker 3: growth across all those sectors, but we are seeing a
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  Speaker 3: lot of demand for labor. We're not seeing enough supply
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  Speaker 3: to it. Wages are rising, especially for that lower income demographic.
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  Speaker 3: And it really spells one thing and one thing only,
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  Speaker 3: which is the Fed probably needs to keep on hiking
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  Speaker 3: and there's nothing in the labor market, I think, that's
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  Speaker 3: going to show this week that would contradict that.
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  Speaker 4: I don't think so. There are really no forces at
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  Speaker 4: play that at this moment have appeared that would weaken
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  Speaker 4: the labor market substantially. There are some of those sectors
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  Speaker 4: that have just been red hot. Construction, you mentioned, health
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  Speaker 4: care with nurses and landscape as well. All these physical
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  Speaker 4: jobs that are less likely... to be replaced by technology
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  Speaker 4: seem to have a lot of momentum behind them. And
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  Speaker 4: what we've heard overwhelmingly is that new college grads having
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  Speaker 4: a lot of difficulty finding gigs, those seem to be
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  Speaker 4: a lot of the percentage of those people in that
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  Speaker 4: camp waiting 27 weeks or more to find gigs.
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  Speaker 2: What I'm not hearing about is the Ph.D. who's delivering pizzas.
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  Speaker 3: And I can point you to the article interviewing the Ph.D.
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  Speaker 3: who was delivering pizzas in 2011.
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  Speaker 2: That's the difference, folks. I hear you. I know that
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  Speaker 2: there are areas of the labor market.
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  Speaker 3: That are challenging. I very much hear the concerns about
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  Speaker 3: which jobs AI could replace. In fact, there is a
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  Speaker 3: piece just today from Bloomberg about how AI could force
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  Speaker 3: some 11 million workers into new jobs, according to McKinsey.
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  Speaker 3: But in the aggregate, we have very recently lived through
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  Speaker 3: labor markets that are so much worse than the one
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  Speaker 3: we're dealing with now.
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  Speaker 2: And I just have to reiterate that.
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  Speaker 3: Because if we complain about a labor market that's actually
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  Speaker 3: pretty good, then we're going to be in such desperation
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  Speaker 3: when it turns into even an average.
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  Speaker 2: Labor market, right? This is a better.
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  Speaker 3: Than average labor market by pretty much every way you
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  Speaker 3: can define it. And if you, yeah, if you're depressed now,
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  Speaker 3: like I don't know what to say other than it
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  Speaker 3: can get a hell of a lot worse than it
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  Speaker 3: is looking right now. Um, speaking of which that McKinsey piece, uh,
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  Speaker 3: Estimates that some 7% of the current workforce and 11
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  Speaker 3: million Americans would need to change jobs by 2035.
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  Speaker 2: And I got to.
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  Speaker 3: Say, if we have until 2035, I'm not all that
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  Speaker 3: concerned about this.
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  Speaker 4: I don't know what to do with this. You know,
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  Speaker 4: McKinsey gets beaten up. Consulting firms have a poor reputation
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  Speaker 4: in some walks of life in terms of what they'll
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  Speaker 4: do in... terms of coming into companies and revamping their strategies.
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  Speaker 4: And I'm sure they've done plenty of good things as well.
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  Speaker 4: But when you talk about projections, Mike, for 2035, I
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  Speaker 4: just have trouble putting any stock in them because we've
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  Speaker 4: seen how quickly technology has evolved. Just go back four
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  Speaker 4: years to the release of ChatGPT to where we are today.
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  Speaker 4: who knows what four years from now looks like now they're,
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  Speaker 4: they're going out nine. I just, I have trouble putting
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  Speaker 4: too much weight in these projections when it's hard to
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  Speaker 4: project a year or two out, let alone nine.
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  Speaker 3: I guess two things that I find difficult to, to,
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  Speaker 3: to weigh out and, and justify, uh, if McKinsey's right
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  Speaker 3: and it's 7% of the labor force by 2035, then
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  Speaker 3: the ROI for these AI buildouts are screwed.
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  Speaker 2: Because it's not enough disruption to justify the price.
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  Speaker 4: Right.
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  Speaker 3: Uh, If they're wrong and it's 10% of the workforce
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  Speaker 3: by 2029, then.
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  Speaker 2: The stock prices might be justified, but we're all screwed. Right.
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  Speaker 4: It's probably somewhere in the middle is what these.
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  Speaker 2: Things always come down to. I sure hope so.
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  Speaker 3: Because if it's either of those two scenarios, then we're
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  Speaker 3: in for either a stock market crash or a really
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  Speaker 3: bad labor market defined by a lot of upheaval.
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  Speaker 2: We've got to take a quick break.
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  Speaker 3: When we come back, The story I wanted to cover
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  Speaker 3: was about four big unfixable IRA mistakes. That's next here
• 12:09
  Speaker 3: on The Financial Exchange.
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• 12:52
  Speaker 3: Paul, in the investment and financial world there are very
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  Speaker 3: few mistakes that you really truly can't undo right people
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  Speaker 3: get really nervous about their tax returns but honestly like
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  Speaker 3: i've made a mistake on my tax return the irs
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  Speaker 3: writes you a letter saying you screwed this up you
• 13:07
  Speaker 3: owe us money or we owe you money and there
• 13:10
  Speaker 3: could be some small issues at hand but um generally
• 13:13
  Speaker 3: speaking it's not the end of the world the journal
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  Speaker 3: has a piece today four big ira mistakes that you
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  Speaker 3: can't undo and these ones um Well, these are real
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  Speaker 3: mistakes that people can make and genuinely screw up pretty
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  Speaker 3: hard and really have very little recourse. And I think
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  Speaker 3: that it is one of the areas that people are
• 13:34
  Speaker 3: generally aware of that they can't make mistakes on. But
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  Speaker 3: there are a few areas here where you can really
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  Speaker 3: step in it, if you know what I mean.
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  Speaker 5: And.
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  Speaker 3: Some of them are pretty common ways to screw up.
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  Speaker 3: Others are things that people never do anyway, so it's
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  Speaker 3: not likely to happen. What does the journal outline as
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  Speaker 3: some of the more common ones that you've seen?
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  Speaker 4: I've seen this once or twice before. If you pass away,
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  Speaker 4: your spouse has the option of taking over your IRA
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  Speaker 4: under their own ownership structure. That's the way it should
• 14:08
  Speaker 4: go from a required minimum distribution perspective. That is a
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  Speaker 4: far easier way to transfer ownership from my IRA just
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  Speaker 4: to become my wife's if something were to happen to me. However,
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  Speaker 4: there have been instances in the past where I've seen
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  Speaker 4: that someone would open up an inherited IRA for my
• 14:25
  Speaker 4: spouse to take my IRA proceeds. And that schedule of
• 14:30
  Speaker 4: required minimum distributions is far more punishing in terms of
• 14:34
  Speaker 4: how expedient they make you take it out. And there
• 14:36
  Speaker 4: just aren't the same provisions that an IRA offers. And
• 14:40
  Speaker 4: so that one I have seen once or twice that
• 14:42
  Speaker 4: you can't really correct.
• 14:44
  Speaker 3: The one counterpoint to that where I have seen somebody
• 14:47
  Speaker 3: intentionally choose the non-spouse beneficiary option was... a scenario where
• 14:55
  Speaker 3: husband was older, wife was.
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  Speaker 2: Under 59 and a half, and needed the money. Right.
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  Speaker 3: And so this isn't a hard-set rule. It is a
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  Speaker 3: decision for a reason that the IRS allows you to make.
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  Speaker 3: But to your point, if you make the wrong one,
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  Speaker 3: you're going to face RMDs, you're going to face all
• 15:10
  Speaker 3: sorts of things earlier than you would have anticipated. And
• 15:14
  Speaker 3: so I think the key thing there is if you are,
• 15:17
  Speaker 3: especially talking about the loss of a loved one early
• 15:19
  Speaker 3: in life, like before the average age of death, That
• 15:24
  Speaker 3: is an important one to really ask a lot of
• 15:27
  Speaker 3: questions about your options because an expert needs to work
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  Speaker 3: with you on that.
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  Speaker 4: I'll add another one that's not mentioned here that I
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  Speaker 4: was just talking about with a client yesterday. There are
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  Speaker 4: different provisions in terms of when you can access, and
• 15:40
  Speaker 4: it ties into what you were speaking about on the
• 15:42
  Speaker 4: 59 1⁄2 rule. There are different provisions in terms of
• 15:44
  Speaker 4: when you can access your IRA money versus your 401k money.
• 15:47
  Speaker 4: If you separate from service and you're over the age
• 15:51
  Speaker 4: of 55 but leave your 401k where it is at
• 15:54
  Speaker 4: your employer, you have ability, and it varies based on
• 15:58
  Speaker 4: plan in terms of what the cadence of withdrawals can be.
• 16:01
  Speaker 4: So that's specific to plan provider, whether it's annual or
• 16:04
  Speaker 4: monthly from this old 401k, but you are able to
• 16:07
  Speaker 4: take money from your old 401k. If you're over 55,
• 16:10
  Speaker 4: no longer working there and not have to pay that
• 16:12
  Speaker 4: 10% early withdrawal penalty versus if you do roll those
• 16:16
  Speaker 4: 401k funds into an IRA and and you want to
• 16:19
  Speaker 4: take funds from that IRA, you would be subject, and
• 16:23
  Speaker 4: you're under the age of 59 and a half, you
• 16:24
  Speaker 4: are subject to that 10% early withdrawal penalty.
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  Speaker 3: Which is seemingly so dumb, right? Like, hey, it's the
• 16:29
  Speaker 3: same bucket of money, it's the same tax status. I
• 16:32
  Speaker 3: just want to control it myself.
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  Speaker 2: Too bad.
• 16:35
  Speaker 3: You move it, you're going to lose access to those
• 16:38
  Speaker 3: funds before 59 and a half. There's all sorts of
• 16:42
  Speaker 3: stuff out here about the indirect rollover. And suffice to say,
• 16:48
  Speaker 3: most people don't do it. If you do do it,
• 16:50
  Speaker 3: there's really strict rules about how you do it, when
• 16:53
  Speaker 3: you pay the money back, how much money and what
• 16:56
  Speaker 3: kind of money you pay back. And if you screw
• 16:58
  Speaker 3: up any of those rules, there's really no way to
• 17:00
  Speaker 3: fix it. The last one that I think bears mentioning,
• 17:04
  Speaker 3: but I've been doing this for the better part of
• 17:09
  Speaker 3: 13 or 14 years, and I've never seen a single
• 17:11
  Speaker 3: person actually execute, which is a 72T plan.
• 17:16
  Speaker 2: Suffice to say, there are options for you if you need.
• 17:18
  Speaker 3: To access your IRA funds before the age of 59
• 17:21
  Speaker 3: and a half, but you have to be really intentional
• 17:24
  Speaker 3: and work with professionals about how to do it. If
• 17:28
  Speaker 3: you have questions about your IRA, your 401k, These special
• 17:32
  Speaker 3: tax treatment vehicles that have very strict rules around them
• 17:35
  Speaker 3: about when you start taking distributions, when you stop, when
• 17:38
  Speaker 3: you have to because you have no choice, and the
• 17:41
  Speaker 3: penalties that come along with screwing those things up. They
• 17:44
  Speaker 3: can be significant, and I encourage you to make the
• 17:47
  Speaker 3: phone call. You can call the Armstrong Advisory Group at
• 17:50
  Speaker 3: 800-393-4001 for your questions about your own retirement plan and
• 17:55
  Speaker 3: how it fits into your larger financial scenario.
• 17:58
  Speaker 4: 800-393-4001.
• 17:59
  Speaker 3: 393-4001 or check us out at armstrongadvisory.com.
• 18:04
  Speaker 1: The proceeding was paid for by Armstrong Advisory Group, a
• 18:06
  Speaker 1: registered investment advisor. Nothing in the ad or in any
• 18:09
  Speaker 1: Armstrong guide is specific financial, legal, or tax advice. Consult
• 18:12
  Speaker 1: your own financial, tax, and estate planning advisors before making
• 18:15
  Speaker 1: any investment decisions. Armstrong may contact you to offer investment
• 18:18
  Speaker 1: advisory services.
• 18:19
  Speaker 3: Vail Resorts is not selling any ski passes. Vail Resorts,
• 18:25
  Speaker 3: in addition to, you know, Managing Vale Resort also handles,
• 18:29
  Speaker 3: I think, five or six others in the Colorado area.
• 18:33
  Speaker 2: A few out here as well.
• 18:34
  Speaker 3: In any case, they are seeing their sales down some
• 18:39
  Speaker 3: 12% compared to last year for the coming North American
• 18:42
  Speaker 3: ski season. I was out in Colorado this summer, Paul,
• 18:45
  Speaker 3: talking to friends of mine from college. We stayed with
• 18:49
  Speaker 3: them for a few days. This was, according to them
• 18:52
  Speaker 3: at least, the lowest snowfall on record ever for Colorado
• 18:57
  Speaker 3: ski resorts.
• 18:58
  Speaker 4: Was this past winter? Was this past winter.
• 18:59
  Speaker 2: Yeah.
• 19:00
  Speaker 4: Meanwhile, because it's counterintuitive, we got dumped on in the
• 19:03
  Speaker 4: northeastern area.
• 19:05
  Speaker 3: Worst ski season that they've ever seen, and like I said,
• 19:08
  Speaker 3: worst recorded snowfall ever out in Colorado. I am not
• 19:12
  Speaker 3: shocked to hear that Vail is struggling to sell season
• 19:16
  Speaker 3: passes ahead of this season. I believe they're still in
• 19:19
  Speaker 3: pretty severe drought out there, and I suspect that they
• 19:24
  Speaker 3: will be just fine so long as they get a
• 19:26
  Speaker 3: decent snow season with regular people buying passes during the season.
• 19:31
  Speaker 2: We've got to take a quick break. Wall Street Watch
• 19:32
  Speaker 2: coming up next.
• 19:40
  Speaker 1: Bringing the latest financial news straight to your radio every day.
• 19:44
  Speaker 1: It's the Financial Exchange on the Financial Exchange Radio Network.
• 19:50
  Speaker 2: Time now for.
• 19:51
  Speaker 1: Wall Street Watch. Tracking the stocks, the data, and the
• 19:54
  Speaker 1: headlines driving markets so far today. Right here on the
• 19:57
  Speaker 1: Financial Exchange Radio Network.
• 20:00
  Speaker 5: Mark, it's slightly in negative territory after yesterday's modesty. Pullback
• 20:05
  Speaker 5: as investors continue to focus on bond yields, where the
• 20:08
  Speaker 5: 30-year rate crossed 5.59% this morning, the highest level since 2002.
• 20:15
  Speaker 5: Right now, the Dow is down over half a percent
• 20:17
  Speaker 5: to 274 points lower. S & P 500 is off
• 20:20
  Speaker 5: about two-tenths of a percent to 16 points lower. NASDAQ
• 20:24
  Speaker 5: is dipping by 12 points. Russell 2000 is down about
• 20:28
  Speaker 5: two-thirds of a percent. Ten-year Treasury yield now up three
• 20:31
  Speaker 5: basis points at 5.2%. 5.272%, and crude oil is down 1%,
• 20:38
  Speaker 5: trading at $ 91 a barrel. Brent is at $ 104 a barrel.
• 20:43
  Speaker 5: Smart ringmaker Aura announced it was delaying its previously announced IPO,
• 20:47
  Speaker 5: citing market uncertainty. Meanwhile, AMD said it agreed to acquire
• 20:53
  Speaker 5: AI firm World Labs for $ 8.
• 20:55
  Speaker 4: 2 billion.
• 20:56
  Speaker 5: AMD shares are up 1%. Elsewhere, Fair Isaac now sinking
• 21:01
  Speaker 5: 30% after the Federal Housing Finance Agency announced structural changes
• 21:06
  Speaker 5: to mortgage pricing that will introduce competition to FICO's long-standing
• 21:10
  Speaker 5: credit scoring monopoly. JP Morgan upgraded Outback parent Bloomin' Brands
• 21:16
  Speaker 5: to neutral, noting several recent changes, including a new stake lineup.
• 21:20
  Speaker 5: Bloomin' stock is now up 3%. And CarMax rallying over
• 21:25
  Speaker 5: 6% after the U.S. car retailer reported better than expected
• 21:30
  Speaker 5: second quarter results. I'm Tucker Silva and that is Wall
• 21:34
  Speaker 5: Street Watch.
• 21:36
  Speaker 3: Paul Tucker, while everyone in this room is doing their job,
• 21:40
  Speaker 3: nationally we are seeing birth rates pretty low.
• 21:44
  Speaker 2: The U.S.
• 21:45
  Speaker 3: Fertility rate back in the mid-2000s was right around 2
• 21:50
  Speaker 3: to 2.1. Back in the 1960s, we were coming down
• 21:52
  Speaker 3: from post-World War II era, baby boomer era, when we
• 21:59
  Speaker 3: were talking about like three and a half. Since the
• 22:03
  Speaker 3: COVID era and really throughout the 2010s, that birth rate
• 22:07
  Speaker 3: just continued to decline from around two, the fertility rate
• 22:11
  Speaker 3: from around two to where we are now, which is 1.63.
• 22:13
  Speaker 3: And the New York Times has a piece out this
• 22:17
  Speaker 3: morning on a study of researchers looking at the baby
• 22:21
  Speaker 3: boom era and what were the causes behind that burst
• 22:26
  Speaker 3: in the fertility rate and identifying housing and homeownership as
• 22:31
  Speaker 3: the potential to reverse the decline in birth rates. What
• 22:35
  Speaker 3: did they, I don't know how you really separate these things,
• 22:40
  Speaker 3: but certainly there was a massive surge in homeownership post-World
• 22:45
  Speaker 3: War II. It coincided with a surge in birth rates,
• 22:49
  Speaker 3: but I don't know how you separate those two.
• 22:52
  Speaker 4: Yeah, the big statistic that they were able to discover
• 22:56
  Speaker 4: is that the Federal Reserve had a trove of data
• 22:58
  Speaker 4: that was thousands of pages of mortgage records. And when
• 23:02
  Speaker 4: they cut through the data, what they found was for
• 23:04
  Speaker 4: every 1,000 new mortgages that were issued through government programs,
• 23:08
  Speaker 4: that there were about 300 additional births in the following year.
• 23:12
  Speaker 4: So basically, if you build it, then the babies will come.
• 23:16
  Speaker 4: If you give them the mortgage, the babies will come afterwards.
• 23:20
  Speaker 4: This is one of... One of the things that they
• 23:22
  Speaker 4: attribute to the boost, I think I can get behind it,
• 23:26
  Speaker 4: and this New York Times piece seems to say that
• 23:28
  Speaker 4: for people who have looked at this empirical work, that
• 23:32
  Speaker 4: it seems to be pretty strong. That's according to Philip Levine,
• 23:36
  Speaker 4: an econ professor from Wellesley College. If you think about it,
• 23:41
  Speaker 4: in general, we talk about the five Ds of housing
• 23:44
  Speaker 4: all the time on the show. Diapers is one of them.
• 23:46
  Speaker 4: So if you If you get a house or if
• 23:49
  Speaker 4: you are looking to move to the next house, that
• 23:51
  Speaker 4: often comes with a focus on creating more space. Or
• 23:56
  Speaker 4: if you have more space, you tend to fill up
• 23:58
  Speaker 4: the bedroom. So I can get behind the notion. And
• 24:02
  Speaker 4: housing is extremely unaffordable at this moment in time. Is
• 24:06
  Speaker 4: it the only reason? Is that why we're not having
• 24:09
  Speaker 4: as many births?
• 24:09
  Speaker 2: No.
• 24:10
  Speaker 4: I do think that societally there is far more of a...
• 24:16
  Speaker 4: sort of view that you can have children or not
• 24:20
  Speaker 4: have children. It's up to the person where I feel
• 24:22
  Speaker 4: like that was much more underlying sort of pressure, whether
• 24:25
  Speaker 4: religious or societal in nature.
• 24:27
  Speaker 3: So you're saying we need more shame to increase the
• 24:29
  Speaker 3: birth rate in today's society.
• 24:31
  Speaker 4: I'm not saying shame.
• 24:32
  Speaker 2: How dare you not have children and live in this neighborhood?
• 24:35
  Speaker 4: I think that's fair to say that most people were
• 24:39
  Speaker 4: under an earlier time frame to get married and have
• 24:42
  Speaker 4: a family. That's definitely true.
• 24:44
  Speaker 3: I just have a really tough time separating, okay, was
• 24:47
  Speaker 3: this a baby boom brought on by return from war
• 24:52
  Speaker 3: and concerns about my mortality because of what I saw?
• 24:56
  Speaker 3: Was it a burst in the birth rate because I
• 24:58
  Speaker 3: got a home or I got an education or my
• 25:02
  Speaker 3: wealth was increasing?
• 25:03
  Speaker 2: I have a tough time with all that.
• 25:06
  Speaker 3: And, you know, there's been recent studies here in the
• 25:09
  Speaker 3: United States too that have shown that, you know, birth
• 25:13
  Speaker 3: rates are negatively correlated to income, right? So wealth effect
• 25:18
  Speaker 3: is not, you know, people constantly cite, I don't have
• 25:20
  Speaker 3: enough money to have a kid. And yet, you know,
• 25:24
  Speaker 3: people on average who are poorer are having more children
• 25:27
  Speaker 3: than those who are wealthy. And so I guess what
• 25:30
  Speaker 3: I would say about it is I don't doubt the research.
• 25:33
  Speaker 3: I'm sure it was done well. I don't know how well, like,
• 25:36
  Speaker 3: you know, I don't know how accurately they were able
• 25:38
  Speaker 3: to study you know, the birth rates for a non-homeowner
• 25:42
  Speaker 3: back in the 1960s compared to a homeowner. I think
• 25:45
  Speaker 3: they mainly just said the birth rate increased as this
• 25:48
  Speaker 3: was happening, but a lot of other things were happening
• 25:50
  Speaker 3: too at the same time. And one thing I would
• 25:52
  Speaker 3: be certain of is if we wanted to test this out,
• 25:55
  Speaker 3: it sure would be an expensive science experiment.
• 25:57
  Speaker 1: Yes. Yeah.
• 25:59
  Speaker 3: Because there's, you know, the way that you do this,
• 26:02
  Speaker 3: is you develop a program to subsidize the cost of
• 26:06
  Speaker 3: home ownership in some way, shape, or form.
• 26:09
  Speaker 4: Yeah, we've all agreed that that is not the right
• 26:11
  Speaker 4: way to attack this problem. You want to get on
• 26:13
  Speaker 4: the supply side of things. And this, to me, just
• 26:16
  Speaker 4: boosts up demand and I don't think would do anything
• 26:20
  Speaker 4: to create more supply.
• 26:23
  Speaker 3: So Paul is much more in favor of the style
• 26:25
  Speaker 3: of Catholic guilt for not having kids rather than increasing
• 26:29
  Speaker 3: the housing supply.
• 26:30
  Speaker 2: You heard it here first.
• 26:32
  Speaker 3: Paul wants more 2026 Catholic guilt.
• 26:38
  Speaker 2: In society going forward in order to fix this problem.
• 26:41
  Speaker 4: Teach their own, Mike. Teach their own.
• 26:43
  Speaker 3: I mean, we both have three kids, so I don't know.
• 26:46
  Speaker 3: There's something in the water there. A company tried to
• 26:49
  Speaker 3: make a 100% made in America monopoly game and failed
• 26:56
  Speaker 3: pretty miserably at doing so.
• 26:59
  Speaker 2: They didn't fail.
• 26:59
  Speaker 3: They were able to get it done. But they ran
• 27:02
  Speaker 3: into all sorts of issues, and it's outlined in this
• 27:05
  Speaker 3: piece today about the effort, trying to make this kind
• 27:09
  Speaker 3: of collectible made-in-America monopoly game.
• 27:13
  Speaker 4: Why?
• 27:14
  Speaker 3: Yeah, there were two ways to read this, right? At
• 27:17
  Speaker 3: first I read it, and my initial gut response was, God,
• 27:21
  Speaker 3: this is embarrassing.
• 27:22
  Speaker 2: Right.
• 27:22
  Speaker 3: We as a society have gotten to the point where
• 27:27
  Speaker 3: our manufacturing is so hollowed out and so bad that
• 27:30
  Speaker 3: we can't put together something as simple as a cardboard
• 27:34
  Speaker 3: Monopoly game without the pieces falling apart and completely unreliable.
• 27:40
  Speaker 3: I am fairly certain that I could ask Claude on
• 27:44
  Speaker 3: its own to go develop a relationship with a Chinese
• 27:46
  Speaker 3: supplier and have this thing built and shipped in 90 days.
• 27:49
  Speaker 2: So kind of embarrassing.
• 27:52
  Speaker 3: The other way of looking at it, which I kind
• 27:54
  Speaker 3: of came around to instead, is how wonderful is it
• 27:58
  Speaker 3: that our labor force is so skilled that we have
• 28:01
  Speaker 3: no need to assemble board games in the United States,
• 28:05
  Speaker 3: that we can focus on higher value manufacturing and medical
• 28:09
  Speaker 3: devices and pharmaceutical research.
• 28:11
  Speaker 2: And things that are arguably moving the needle a.
• 28:16
  Speaker 3: Heck of a lot more than putting together a Monopoly board.
• 28:18
  Speaker 3: And I do not mean to cast shame or dismiss
• 28:22
  Speaker 3: the pride that people do and should take in their
• 28:24
  Speaker 3: work for working with their hands and, you know, developing things.
• 28:28
  Speaker 3: I would love to see a more robust industry for
• 28:31
  Speaker 3: all sorts of manufacturing in the United States. But I'm
• 28:34
  Speaker 3: not sure that we should look at Hasbro having a
• 28:37
  Speaker 3: tough time.
• 28:38
  Speaker 2: I don't know if Hasbro makes Monopoly. I think they do.
• 28:41
  Speaker 3: Manufacturing a Monopoly board here in the U.S. as a
• 28:44
  Speaker 3: real detrimental view on the state of American society.
• 28:47
  Speaker 2: Confirmed.
• 28:49
  Speaker 4: Confirmed on Hasbro?
• 28:50
  Speaker 2: Yes.
• 28:51
  Speaker 4: Yeah, I think that the critical metals issue that came
• 28:54
  Speaker 4: up earlier this year in semiconductor manufacturing are bigger problems
• 28:57
  Speaker 4: to tackle.
• 28:58
  Speaker 3: Yeah, I just, you know, again, would love to see
• 29:01
  Speaker 3: a return of the furniture industry in the Carolinas.
• 29:05
  Speaker 2: That'd be great.
• 29:06
  Speaker 3: But if instead we're seeing 4.1% unemployment because we're seeing
• 29:11
  Speaker 3: a surge in construction needs and healthcare needs for an
• 29:15
  Speaker 3: aging population... I don't think we need to write that
• 29:18
  Speaker 3: off as the demise of American society. So, yeah, a
• 29:23
  Speaker 3: few different ways to read this one. But it, on
• 29:25
  Speaker 3: the surface, did come across as a little bit embarrassing
• 29:27
  Speaker 3: that we couldn't even put together a darn monopoly board.
• 29:29
  Speaker 2: Quick break. Stack Roulette is next. break sacroulette is next.
• 29:32
  Speaker 1: Hear the financial exchange every day from 11 to noon
• 29:35
  Speaker 1: on sirius xm's business radio channel 132 keep it here
• 29:39
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• 29:42
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• 29:50
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• 30:04
  Speaker 1: This is the Financial Exchange Radio Network.
• 30:12
  Speaker 5: The 2026 DAV 5K Boston is officially sold out. The
• 30:18
  Speaker 5: race is set for Saturday, November 7th at Fort Independence Stadium.
• 30:22
  Speaker 4: On Castle Island.
• 30:23
  Speaker 5: But even if you can't participate, you can still help
• 30:26
  Speaker 5: our great American heroes by making a donation. Your gifts
• 30:29
  Speaker 5: help fund free rides to medical appointments for veterans in
• 30:32
  Speaker 5: the nation's first DAV-led housing initiative, providing homes for single
• 30:36
  Speaker 5: veterans and veteran families. Go to DAV5K. Boston and make your
• 30:41
  Speaker 5: donation today. Once again, DAV5K. Boston.
• 30:49
  Speaker 3: I personally never really make it down to the Cape,
• 30:52
  Speaker 3: but even I know this restaurant. Fox 25 Boston reporting
• 30:57
  Speaker 3: that Cape Cod's Arnold's Lobster and Clam Bar.
• 31:01
  Speaker 2: On Route 6 will be closing after their 50th year.
• 31:03
  Speaker 3: Owner announcing that he is selling the business and moving on.
• 31:08
  Speaker 4: We did a broadcast from there.
• 31:10
  Speaker 3: I believe we have done a broadcast there. I think
• 31:13
  Speaker 3: my father somehow graded a Was it a clam chowder contest?
• 31:18
  Speaker 5: Yeah, it was a chowder contest, yeah.
• 31:21
  Speaker 3: Lois is shaking her head. She knows more about my
• 31:23
  Speaker 3: family history than I do. What's my second uncle's name again?
• 31:28
  Speaker 3: What do you have for snack roulette, Paul?
• 31:30
  Speaker 4: I want to talk a little bit about Muse. There's
• 31:32
  Speaker 4: a piece here in the Wall Street Journal.
• 31:34
  Speaker 2: Metamuse?
• 31:36
  Speaker 4: Metamuse, exactly. The AI agent that is helpful and scary
• 31:39
  Speaker 4: at the same time. On the way into work, I
• 31:41
  Speaker 4: was listening to a podcast that his company is mentioned
• 31:44
  Speaker 4: in this piece as well. Basically, it's just all around
• 31:46
  Speaker 4: the whole idea of AI agents and having a personal
• 31:50
  Speaker 4: assistant from more and more companies. Of what I listened
• 31:52
  Speaker 4: to about the subjects around AI, this seems like a
• 31:55
  Speaker 4: common refrain that's coming out of Silicon Valley that we're
• 31:58
  Speaker 4: all going to have our own personal assistant. This one
• 32:01
  Speaker 4: is instinct here that is referred to in this piece
• 32:03
  Speaker 4: that also has an AI agent that is not an app.
• 32:08
  Speaker 4: like metas, but it is the same premise that it's
• 32:11
  Speaker 4: built within your device to be able to be your
• 32:16
  Speaker 4: AI agent. And it listed out a couple instances of
• 32:19
  Speaker 4: what it could do as an agent, because I think
• 32:20
  Speaker 4: that is harder to put framework around. Okay, what is
• 32:23
  Speaker 4: it going to do for me? And Chuck has beaten
• 32:24
  Speaker 4: up the AI agents before saying, I could plan a trip.
• 32:28
  Speaker 4: I could book a hotel reservation. I like doing these things.
• 32:32
  Speaker 4: I think generally that's what he said is that I'm
• 32:35
  Speaker 4: not sure how much value add these agents have. So
• 32:37
  Speaker 4: I've been trying to focus on, okay, what can they
• 32:38
  Speaker 4: actually do that's productive or interesting? And one of the
• 32:41
  Speaker 4: things that was mentioned here in the podcast I was
• 32:43
  Speaker 4: listening to on Instinct was that they had users scan
• 32:46
  Speaker 4: in all the items from their wardrobe and it would
• 32:49
  Speaker 4: actually put together photos of what you would wear on
• 32:52
  Speaker 4: a week-to-week basis, putting together based on all of your
• 32:55
  Speaker 4: existing wardrobe. Here's what you should wear for this week
• 32:58
  Speaker 4: and next week based on all of your existing wardrobe items.
• 33:01
  Speaker 4: And then To further that from a shopping perspective, and again,
• 33:04
  Speaker 4: this is not going to be for me because I
• 33:06
  Speaker 4: wear the same clothes for 10 years and just keep
• 33:09
  Speaker 4: cycling through them. But my wife, I could see absolutely
• 33:12
  Speaker 4: going crazy on this. If you have all the wardrobe
• 33:14
  Speaker 4: items scanned in, it will scan through all shopping options
• 33:18
  Speaker 4: and build out thousands of different outfits for the consumer.
• 33:21
  Speaker 2: Speaking of which, I can see your big toe through
• 33:23
  Speaker 2: your shoe.
• 33:25
  Speaker 4: But not just lay out the options, just saying with photos,
• 33:29
  Speaker 4: but actually pictures of you wearing these different wardrobe items.
• 33:32
  Speaker 4: And all you'd have to do is click shop now
• 33:35
  Speaker 4: and buy the particular good. That was one example. Another
• 33:38
  Speaker 4: one is integrating with your inbox, calling you and actually saying, Hey,
• 33:43
  Speaker 4: it's two 55. You have some deadline that you need
• 33:46
  Speaker 4: to hit by three o'clock to sign this piece of paperwork. Like,
• 33:49
  Speaker 4: can you go execute it right now? So anyway, it's
• 33:51
  Speaker 4: just interesting to me. I'm not saying that It's transformative, yeah,
• 33:54
  Speaker 4: but it seems like it will trend this way because
• 33:57
  Speaker 4: people are always going to want less friction. And I
• 33:59
  Speaker 4: can think of things in my world, and you probably
• 34:01
  Speaker 4: can too, with bills or stuff that you do in
• 34:03
  Speaker 4: the morning at the office that it would be great
• 34:06
  Speaker 4: not to have to spend as much time on or
• 34:08
  Speaker 4: at night.
• 34:09
  Speaker 2: This all comes down to trust and security. Yeah.
• 34:11
  Speaker 1: Right?
• 34:11
  Speaker 3: So I read the same piece, Paul, and it outlined
• 34:15
  Speaker 3: a bunch of different tasks that this thing was capable
• 34:18
  Speaker 3: of doing, right? I don't find it useful... for an
• 34:22
  Speaker 3: AI agent to find me a poncho for my bicycle.
• 34:27
  Speaker 2: I can do that.
• 34:28
  Speaker 1: Yeah.
• 34:28
  Speaker 3: I don't find it useful to find me a, uh,
• 34:31
  Speaker 3: you know, a toy for my kid on Facebook marketplace.
• 34:33
  Speaker 3: I'm sure it's good at that. I can handle that myself.
• 34:36
  Speaker 3: It's not going to add any value.
• 34:37
  Speaker 4: The Facebook ad feeds you recommendations to.
• 34:40
  Speaker 2: Anyway, be fine.
• 34:41
  Speaker 1: Right.
• 34:41
  Speaker 3: Uh, if it can fill out my application for global entry, uh,
• 34:47
  Speaker 3: by searching through my inbox and finding my last five
• 34:50
  Speaker 3: years of travel history and knowing my social and date
• 34:53
  Speaker 3: of birth and pre-filling the entire application for me, that's
• 34:56
  Speaker 3: sure convenient, but how much information does it need about
• 35:00
  Speaker 3: me in order to do that, right? To answer the question,
• 35:04
  Speaker 3: you have to fill out your travel history for the
• 35:06
  Speaker 3: last five years.
• 35:07
  Speaker 2: How many times did you leave the country?
• 35:09
  Speaker 3: That AI agent is going to know the answer to
• 35:11
  Speaker 3: those questions and tailor its responses to you based on
• 35:15
  Speaker 3: the answers to those questions that it discovered. The only
• 35:17
  Speaker 3: way it's going to do it is by reading through
• 35:19
  Speaker 3: the 5,000 unread emails sitting in your inbox that it
• 35:23
  Speaker 3: can go through and digest very rapidly. So I won't
• 35:27
  Speaker 3: deny that is a very useful application for an AI
• 35:31
  Speaker 3: tool is to pre-fill a government form for me.
• 35:36
  Speaker 4: But you're giving them the keys to the castle, right?
• 35:37
  Speaker 4: That's what it comes down to is that The way
• 35:40
  Speaker 4: AI works, the more data it's fed, the more effective
• 35:43
  Speaker 4: and better it can be. So for it to be
• 35:45
  Speaker 4: the most optimal AI assistant for you, unfortunately or fortunately,
• 35:50
  Speaker 4: that means you have to give it a lot of information.
• 35:53
  Speaker 4: And it's scary in a world where already your information,
• 35:58
  Speaker 4: it seems like, can get hacked on a daily basis
• 36:01
  Speaker 4: that the person or the company behind all the information
• 36:05
  Speaker 4: that's being held in your name You know, it's a
• 36:09
  Speaker 4: lot to put out there.
• 36:11
  Speaker 3: Yeah, you know, and I don't think the average person possesses,
• 36:15
  Speaker 3: I certainly don't possess the cyber security knowledge to understand
• 36:21
  Speaker 3: what the.
• 36:24
  Speaker 4: Risks are here.
• 36:26
  Speaker 2: Right?
• 36:26
  Speaker 3: Like Meta says that later this year it's going to
• 36:29
  Speaker 3: offer a confidential virtual machine that encrypts the data so
• 36:34
  Speaker 3: that the company itself can't access these chats. You know,
• 36:38
  Speaker 3: any information you share with Muse today, though, can technically
• 36:41
  Speaker 3: be shared with Meta. They say they won't be used
• 36:44
  Speaker 3: to serve ads, but that could change. It can be
• 36:48
  Speaker 3: used to train their AI models, however. So, you know,
• 36:51
  Speaker 3: Paul's social security number, while confidential, can be used to train, like, again,
• 36:56
  Speaker 3: I don't know what they're going to do with that,
• 36:57
  Speaker 3: but your travel history can be used to train, you know,
• 37:00
  Speaker 3: future AI models. You can opt out, but nobody's going to.
• 37:05
  Speaker 2: And so... I don't know. I have a very tough
• 37:08
  Speaker 2: time getting.
• 37:09
  Speaker 3: Over the hump on any of these companies, doing what
• 37:13
  Speaker 3: they say they're going to do in the future, and
• 37:15
  Speaker 3: then me understanding what, even if they do hold true
• 37:19
  Speaker 3: to what they are saying, my ability to interpret it
• 37:22
  Speaker 3: in plain English is very limited. And then we've seen
• 37:26
  Speaker 3: time after time where they might have disclosed the right thing,
• 37:29
  Speaker 3: but they didn't really.
• 37:31
  Speaker 2: understand what it meant.
• 37:32
  Speaker 3: ChatGPT, for example, accidentally leaking a whole bunch of chats
• 37:36
  Speaker 3: onto Google and making them publicly searchable was technically well
• 37:40
  Speaker 3: within their right to do so, but nobody thought that
• 37:42
  Speaker 3: they ever would, even though their terms of use said
• 37:44
  Speaker 3: they could. So, yeah, kind of crazy stuff.
• 37:50
  Speaker 2: The U.S. government, who announced this specifically, Tucker? Came across Bloomberg.
• 37:55
  Speaker 3: U.S. is offering up to 40 million barrels of from
• 37:59
  Speaker 3: our strategic oil reserve. I didn't know there were 40
• 38:01
  Speaker 3: million barrels left. I'm joking. There obviously were, but not
• 38:06
  Speaker 3: indicative of a White House that thinks there's an immediate
• 38:09
  Speaker 3: end to this conflict coming very quickly. In any case,
• 38:12
  Speaker 3: we've got oil off 1%. U.S. market, its equity is
• 38:15
  Speaker 3: off a little bit today, about a third to two
• 38:18
  Speaker 3: thirds of a percent. We'll be right back at it tomorrow, folks.
• 38:21
  Speaker 3: Have a great rest of your day. We'll talk to
• 38:22
  Speaker 3: you then.