Latest / The Financial Exchange Show / Mortgage Rates Hit 6% — Is the Housing Market About to Explode?

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Mortgage Rates Hit 6% — Is the Housing Market About to Explode? · The Financial Exchange Show

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  Speaker 1: making a donation Today. Face is the Financial Exchange with
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  Speaker 1: Mike Armstrong and Mark Vandetti.
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  Speaker 2: Good morning, Happy Friday, Welcome back to the Financial Exchange.
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  Speaker 2: We've got a two day sell off going on here
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  Speaker 2: in Marcus, with the SMP down half a percent, NASDACK
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  Speaker 2: down three quarters, Dow Jones Industrial Average off a little
• 1:22
  Speaker 2: bit more than one percent. As we head into the
• 1:24
  Speaker 2: eleven o'clock hour, we received a reading on the Producer
• 1:27
  Speaker 2: Price Index this morning came in well hotter than expectations,
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  Speaker 2: especially on that core number, stripping out food and energy,
• 1:35
  Speaker 2: an eight tenths percent increase month over month mark. And
• 1:38
  Speaker 2: I discussed in the last hour of the show that honestly,
• 1:41
  Speaker 2: not a lot of economists and we.
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  Speaker 3: I shouldn't say not a lot, I'm just saying I
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  Speaker 3: don't find it helpful as a forecast.
• 1:47
  Speaker 2: I want to call, don't want to speak everybody else
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  Speaker 2: fair enough, but not a data point that we oftentimes
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  Speaker 2: look at and site on the program. But when it
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  Speaker 2: misses expectations by this degree, certainly worth mentioned. Here in
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  Speaker 2: the bond market, we've got the ten year Treasury down
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  Speaker 2: below four percent at three point nine seven four percent.
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  Speaker 2: You've got oil up a bit today, two point seven percent,
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  Speaker 2: up a buck sixty bucks seventy five per barrel to
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  Speaker 2: sixty seven dollars per barrel.
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  Speaker 4: And I did want to.
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  Speaker 2: Take a look at mortgage rates because we've had a
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  Speaker 2: few days now under that six percent level. According to
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  Speaker 2: Mortgage News Daily, yesterday we hit exactly six percent even
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  Speaker 2: on the average thirty year fixed rate mortgage. The search
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  Speaker 2: is over for who is going to win the bidding
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  Speaker 2: war over Warner Brothers Assets, which owns HBO, Max, CNN,
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  Speaker 2: DC Studios, Warner Brothers Pictures, Cartoon Network, Food Network TNT.
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  Speaker 2: All of those combined assets will now be moved into
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  Speaker 2: the Paramount group of assets, which includes Skydance, Nickelodeon, CBS, MTV.
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  Speaker 2: Lot of combination here but beating out the Netflix bid ultimately,
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  Speaker 2: which had initially been winning, but Netflix, which had the
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  Speaker 2: right to match the thirty one dollars per share offer
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  Speaker 2: from Paramount, has declined to do so seems to be
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  Speaker 2: and everybody's a winner today landscape in the media sector,
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  Speaker 2: with Paramount stock moving up twelve percent on the news
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  Speaker 2: of their win and Netflix stock moving up ten percent
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  Speaker 2: on their not needing to come up with the cash
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  Speaker 2: and receiving a big breakup fee. I guess would be
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  Speaker 2: the answer here. So Paramount's thirty one dollar per share
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  Speaker 2: included an increase seven billion dollar termination fee and a
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  Speaker 2: two point eight billion dollar breakup fee that they would
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  Speaker 2: be covering.
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  Speaker 4: This does need to.
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  Speaker 2: Get through regulatory scrutiny, but most at least the executives
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  Speaker 2: at Paramount have said that they don't see that as
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  Speaker 2: being an issue for them as they make their way through.
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  Speaker 2: So we will ultimately see here. But looks like this
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  Speaker 2: viewed is over and Paramount again we'll be walking away
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  Speaker 2: with the assets of Warner Brothers Discovery instead of the
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  Speaker 2: previous presumed winter Netflix.
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  Speaker 3: Yeah, we'll see if they can break the so called
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  Speaker 3: winner's curse, right have they? It's a title of a
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  Speaker 3: book written by a famous economist, and the explanation is straightforward.
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  Speaker 3: Winners tend to overpay. Yeah, can they squeeze enough out
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  Speaker 3: of those assets?
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  Speaker 1: Right?
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  Speaker 4: Can they squeeze enough out of a which?
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  Speaker 2: Again, you know, pretty compellingly interesting time to be a
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  Speaker 2: giant media company, you know, organizing and offering streaming assets
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  Speaker 2: combined with traditional media assets at a time when you
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  Speaker 2: don't think it's.
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  Speaker 3: No what do you do with both CBS and CNN?
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  Speaker 3: I mean, can you think of two other than that.
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  Speaker 3: One is network, one is cable. All their online assets,
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  Speaker 3: so to speak, compete for eyeballs. Yeah, they have totally
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  Speaker 3: separate I mean, they're totally separate news organized.
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  Speaker 2: Yeah, they they are, and so presumably there's a lot
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  Speaker 2: of layoff that can happen there, although you know, heavy
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  Speaker 2: unionized industry. We will see how they do with all that.
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  Speaker 2: And the more interesting piece to me is just you know,
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  Speaker 2: streaming is at a very fraught time right now. Prices
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  Speaker 2: have gone up, consumers seem to be cutting a little
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  Speaker 2: bit back, cutting back a little bit more frequently on
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  Speaker 2: some of these packages, and will they be able to
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  Speaker 2: put together something that's truly compelling and competitive with Netflix, Amazon,
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  Speaker 2: Disney certainly a lot of assets here to distribute, but
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  Speaker 2: they're going to face the same challenges that Disney has,
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  Speaker 2: which is they are continuing to erode their traditional cable
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  Speaker 2: business at the same time that they are trying to
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  Speaker 2: attract a whole bunch of new subscribers to their streaming business.
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  Speaker 4: That's all interesting stuff.
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  Speaker 2: Relief for US homeowners as mortgage rates hit their lowest
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  Speaker 2: levels since twenty twenty two. You heard me them a
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  Speaker 2: few minutes ago. But according to Mortgage News Daily. We
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  Speaker 2: are sitting right at six percent on the thirty year
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  Speaker 2: mortgage rate and perhaps moving down a little bit. More
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  Speaker 2: will know that next week, but interest rates on ten
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  Speaker 2: year treasuries are down a bit. The big question to
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  Speaker 2: me is will it be enough if you are entering
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  Speaker 2: this housing market right now you've been discouraged by interest
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  Speaker 2: rates that were nearly a full percentage point higher this
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  Speaker 2: time last year. We are heading into that critical home
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  Speaker 2: buying season. There are more homes for sale nationally. In fact,
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  Speaker 2: we are seeing inventory levels that are almost exactly where
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  Speaker 2: we were in January of twenty twenty before the COVID pandemic,
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  Speaker 2: and so inventory levels look similar. Interest rates obviously quite
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  Speaker 2: a bit higher, prices on homes quite a bit higher,
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  Speaker 2: and I don't know, there is some sense of nervousness
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  Speaker 2: I think among potential home buyers here with the whole
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  Speaker 2: narrative around potential job loss and uncertainty we related to a.
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  Speaker 2: I will see if these lower mortgage rates are enough
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  Speaker 2: to really heat up the housing market this spring.
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  Speaker 3: Obviously, lower rates could push up home prices and the
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  Speaker 3: net effect on payments for a new buyer could be zero.
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  Speaker 4: Yeah, this does not affix affordability.
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  Speaker 3: But yeah, that's that I think is the question on
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  Speaker 3: most people's minds, right, Like the fact that rates are
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  Speaker 3: falling in isolation doesn't really mean much, but the extent
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  Speaker 3: to which it affects, like you said, affordability, and that
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  Speaker 3: can mean different things. That's that's that captures a lot
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  Speaker 3: of different moving parts, if you will.
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  Speaker 2: Yeah, I don't know what the psychological breakpoint is, right,
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  Speaker 2: I mean, is a five figure in front of that
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  Speaker 2: mortgage enough to really bring the buyers back in droves?
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  Speaker 2: It might be, you know, it might be enough to say, yeah,
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  Speaker 2: it's been a long time since people were getting those
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  Speaker 2: four percent and below mortgages, and so yeah, five eight
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  Speaker 2: of five nine might get the average person there, might
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  Speaker 2: get them back to the open houses.
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  Speaker 4: And if that does happen, I mean maybe, yeah, I don't,
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  Speaker 4: I don't know.
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  Speaker 3: To your point, psychologically, it's there's a there's a story
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  Speaker 3: mounting out there, which is.
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  Speaker 4: There's a reason you always price things the fact.
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  Speaker 3: Time to buy now this spring, that is in a year, sorry, Michael.
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  Speaker 2: There's a reason you uys price things at five nine
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  Speaker 2: to nine instead of six dollars. Yeah, that's kind of
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  Speaker 2: where we are right.
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  Speaker 3: Yeah, Yeah, we just don't know what the net effect is.
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  Speaker 3: Much like the discussion about AI, it's hard to generalize
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  Speaker 3: unless you have a specific model in mind, and even
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  Speaker 3: then the model may yield ambiguous conclusions. The effect on
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  Speaker 3: home prices or affordability, which it's harder to quantify, but
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  Speaker 3: I suspect like housing economists have done so the effect
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  Speaker 3: of following rates on affordability is probably ambiguous.
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  Speaker 2: The things that I like to see, like I said,
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  Speaker 2: inventory levels are now at least what we saw in January,
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  Speaker 2: where the approximately the same level that we saw in
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  Speaker 2: January of twenty twenty. You know, again, regionally this is
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  Speaker 2: very different because Connecticut still sees less than a third
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  Speaker 2: of what they saw back in the beginning of twenty twenty.
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  Speaker 4: So big regional differences here.
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  Speaker 2: But I like to see the inventory ticking up and
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  Speaker 2: on the margins, I would think that lower mortgage rates
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  Speaker 2: bring more buyers in potentially incentivize more transaction volume, and
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  Speaker 2: more transaction volume is a economic potential driver.
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  Speaker 4: Right when you have those depends on why rates are falling. Yeah,
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  Speaker 4: when rates fall like.
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  Speaker 3: They're falling, there are markets been flat. There's a wealth
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  Speaker 3: effect associated with that. Meaning spending should be negatively impacted.
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  Speaker 3: All l's equal a lot of all lse equals here,
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  Speaker 3: So take this for what it's worth. If rates are
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  Speaker 3: falling in response to the same forces that are putting
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  Speaker 3: pressure on stocks, and that's partly growth concerns, I think
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  Speaker 3: after the slow growth in the fourth quarter, rates falling
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  Speaker 3: is no cure for lackluster demand because that's in turn
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  Speaker 3: driven by larger economic forces. That's I didn't say that
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  Speaker 3: very well, but I think you know what I mean.
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  Speaker 4: Let's take a quick break.
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  Speaker 2: When we come back, Michael sand Totally from CNBC join
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  Speaker 2: us next to talk about this moment in markets we
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  Speaker 2: are seeing. That's right next, that's right when we come
• 10:09
  Speaker 2: back on the Financial Exchange.
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  Speaker 2: Joining us now is CNBC's Michael sand Totally talk about
• 10:58
  Speaker 2: where markets have gone over the US the last couple
• 11:01
  Speaker 2: of months.
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  Speaker 4: Here, Michael, thanks for coming back. I appreciate it.
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  Speaker 5: Oh, glad to do it. Good morning.
• 11:05
  Speaker 4: So you joined us back in January.
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  Speaker 2: We were talking about a dominant thing that everybody was
• 11:09
  Speaker 2: talking about before your end, this this rotation and stocks
• 11:12
  Speaker 2: and the broadening out that we might see in markets,
• 11:14
  Speaker 2: and hard to argue we haven't seen that. We've got
• 11:17
  Speaker 2: Microsoft stock down double digits and Video getting punished yesterday
• 11:20
  Speaker 2: after their earnings. What do you make of this renewed
• 11:24
  Speaker 2: pressure on giant tech companies? Is there a different feeling
• 11:29
  Speaker 2: to you in investor sentiment towards AI today than there
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  Speaker 2: was a few months ago.
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  Speaker 5: There's definitely a different sentiment toward AI where there's much
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  Speaker 5: more focus and attempts to kind of price the potential
• 11:40
  Speaker 5: downside from disruption than there is celebration that you know,
• 11:43
  Speaker 5: everyone's going to win in this whole thing, and the
• 11:46
  Speaker 5: massive investments are going to pay off quickly. But what's
• 11:49
  Speaker 5: interesting about it is the way to me, the overall
• 11:52
  Speaker 5: market has absorbed that. Yeah, it's like this is what
• 11:55
  Speaker 5: a broadening market feels like. It's this uneasy equilibrium. The
• 11:59
  Speaker 5: S and P just about flat year to date. The
• 12:01
  Speaker 5: mag seven's down six and a half percent. The average
• 12:04
  Speaker 5: stock inside the S and P five hundred, the median
• 12:07
  Speaker 5: is up seven percent year to date. Now, how much
• 12:09
  Speaker 5: can we actually continue with that in that way? I
• 12:12
  Speaker 5: don't think very far. I don't think that these other
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  Speaker 5: parts of the market can sustain us, especially if we
• 12:18
  Speaker 5: mostly consider AI to be, you know, to be kind
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  Speaker 5: of not so much a not a negative sum game,
• 12:24
  Speaker 5: but certainly closer to zero some than we were betting before.
• 12:28
  Speaker 2: My take on teriffs was that by mid to late
• 12:32
  Speaker 2: summer it was kind of fading to background noise. Obviously
• 12:35
  Speaker 2: we got that backfront and center last Friday, and the President,
• 12:39
  Speaker 2: the White House has all been reacting to it. Do
• 12:43
  Speaker 2: does the Supreme Court action and what the President does
• 12:47
  Speaker 2: next on tariffs genuinely matter for markets right now or
• 12:50
  Speaker 2: should it be treated as background noise?
• 12:52
  Speaker 5: I think the latter. I don't think it's a major
• 12:54
  Speaker 5: swing factor. You know. Look, I think there was a
• 12:56
  Speaker 5: sense in which we were coming into twenty twenty six,
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  Speaker 5: and as you say, we felt it if we kind
• 13:00
  Speaker 5: of absorbed a lot of the cost. We felt that,
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  Speaker 5: if nothing else, we're going to anniversary the effects this year,
• 13:06
  Speaker 5: and you had kind of a clean policy year ahead
• 13:09
  Speaker 5: with some fiscal tailwinds kicking in and tariffs, if nothing else,
• 13:13
  Speaker 5: not getting worse. Now, what's interesting about the Supreme Court
• 13:16
  Speaker 5: decision is that at least leaves an opening for the
• 13:19
  Speaker 5: administration as they try to replace a lot of those tariffs,
• 13:22
  Speaker 5: to opportunistically kind of not replace all of them and
• 13:26
  Speaker 5: essentially be a little more selective and on a net basis,
• 13:29
  Speaker 5: maybe have a lower burden. But of course, what that
• 13:31
  Speaker 5: does too is increases uncertainty and you have companies lining
• 13:34
  Speaker 5: up for refunds. I don't think the money matters that
• 13:37
  Speaker 5: much to the federal budget, but I do think it
• 13:39
  Speaker 5: creates this kind of friction and anything that gives CEOs
• 13:42
  Speaker 5: one more reason to say, hey, let's wait and see,
• 13:44
  Speaker 5: let's defer a decision. It's not great, but I don't
• 13:47
  Speaker 5: think it's going to necessarily sink the economy.
• 13:50
  Speaker 2: When it comes to that AI trade. What I heard
• 13:53
  Speaker 2: permeating through markets in the fourth quarter of last year
• 13:56
  Speaker 2: was a lot about the giant investments and some skepticism
• 14:00
  Speaker 2: there about depreciation and how is this going to pay
• 14:02
  Speaker 2: for itself. Nonetheless, the giant tech companies have renewed their
• 14:06
  Speaker 2: pledges six hundred and fifty billion dollars pledge from the
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  Speaker 2: four giant tech companies on Capex for twenty twenty six.
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  Speaker 2: This year, though, it's been less of the doubt about
• 14:16
  Speaker 2: AI as a whole and more of a concentrated questioning
• 14:19
  Speaker 2: of what will AI disrupt given how impressive the technology is?
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  Speaker 4: Is that overdone in your mind?
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  Speaker 2: I mean, we've gone from software as a service to
• 14:31
  Speaker 2: financial services to logistics companies, and I'm wondering. I think
• 14:35
  Speaker 2: a lot of investors are wondering what comes next here
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  Speaker 2: I am.
• 14:39
  Speaker 5: I am willing to say that it's most likely overdone
• 14:42
  Speaker 5: in certain isolated pockets. For sure, the market rushes to
• 14:45
  Speaker 5: a point of kind of pricing and panic. Don't let
• 14:48
  Speaker 5: me kind of be holding the bag on some of
• 14:50
  Speaker 5: these names. What I do think, though, is is it's
• 14:54
  Speaker 5: really an outgrowth of the volume of the spend and
• 14:56
  Speaker 5: how fast the models are developing and the applications of proliferating.
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  Speaker 5: It's almost forcing people to say, if we're spending seven
• 15:03
  Speaker 5: hundred billion dollars a year this year, and the companies
• 15:05
  Speaker 5: basically say no, letup. After that, they're spending all their
• 15:09
  Speaker 5: cash flow giving it to Nvidia and other hardware companies
• 15:12
  Speaker 5: to build this stuff. There's no reason to do it
• 15:15
  Speaker 5: unless we're killing things, unless we're actually disrupting profit streams.
• 15:18
  Speaker 5: So I think what's happened is it's gone to target
• 15:21
  Speaker 5: a lot of areas of complacency among investors that thought
• 15:25
  Speaker 5: that software had this magical model that long term, you know,
• 15:29
  Speaker 5: it just sort of printed money. The other problem with
• 15:31
  Speaker 5: it is software needs to grow because you're a lot
• 15:35
  Speaker 5: of the value is based on, you know, a multi
• 15:37
  Speaker 5: decade length of cash flows, and so if you feel
• 15:41
  Speaker 5: like it's going to peter out at some point, kind
• 15:43
  Speaker 5: of doesn't matter what they're reporting today. But financial services,
• 15:46
  Speaker 5: all the rest feels very familiar to nineteen ninety nine
• 15:49
  Speaker 5: when people thought that E trade was going to kill
• 15:51
  Speaker 5: Merrill Lynch, you know, and and in fact, you know,
• 15:54
  Speaker 5: many retailers did not go away. What I do focus
• 15:58
  Speaker 5: on though, is though chain retail didn't go away because
• 16:02
  Speaker 5: Amazon showed up, they never really got the valuations back
• 16:05
  Speaker 5: they always were kind of trading at a discount. There
• 16:08
  Speaker 5: was always a little skepticism aside from the anointed winners
• 16:11
  Speaker 5: like Walmart, Costco.
• 16:13
  Speaker 2: Michael and Nvidia reported earnings on Wednesday afternoon. Really tough
• 16:17
  Speaker 2: to look at anything in those earnings as anything but
• 16:19
  Speaker 2: good news. Nonetheless, investors have been selling it off for
• 16:22
  Speaker 2: the last two days. What is the next piece of
• 16:26
  Speaker 2: information we might learn or next scheduled release that you're
• 16:28
  Speaker 2: looking at that could allow markets to climb this wall
• 16:31
  Speaker 2: of worry because clearly it wasn't in Vidia blowing earnings.
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  Speaker 4: Off out of the park here this week.
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  Speaker 5: No, it was not, and honestly, in Vidia hasn't really
• 16:42
  Speaker 5: served that purpose for a few quarters now. I think
• 16:45
  Speaker 5: the first thing people are looking to it, believe it
• 16:46
  Speaker 5: or not, is also in Vidia. It's AI conference in
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  Speaker 5: like three weeks. I do think people wonder if they've
• 16:52
  Speaker 5: reserved a few things to kind of dazzle you at
• 16:55
  Speaker 5: that point. I do think at some point the macro
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  Speaker 5: has to kind of move back in here, and you know, say,
• 17:01
  Speaker 5: whether this cyclical trade is going to be validated by
• 17:04
  Speaker 5: what the you know, what the economy does, or we're
• 17:06
  Speaker 5: going to reaccelerate, and we're going to have room for
• 17:08
  Speaker 5: a FED rate cut. You know, those are questions that
• 17:10
  Speaker 5: are going to matter here when it comes to in video.
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  Speaker 5: I kind of think of it the way Apple traded
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  Speaker 5: after the first bonanza iPhone cycle in the late twenty
• 17:21
  Speaker 5: you know, like around twenty ten. Let's say the stock
• 17:24
  Speaker 5: just got cheaper and cheaper because you know, earnings went
• 17:26
  Speaker 5: up by seven hundred percent, but the market was unwilling
• 17:29
  Speaker 5: to say that's going to continue long term into the future.
• 17:31
  Speaker 5: It did. It slowed down, but it did, but for
• 17:33
  Speaker 5: a while. You know, Apple is one of the cheapest
• 17:35
  Speaker 5: stocks in the markets. I don't know that the video
• 17:37
  Speaker 5: has to get back down there, but it's a similar
• 17:39
  Speaker 5: dynamic where investors are like, look, you got to show
• 17:41
  Speaker 5: me that twenty twenty seven and twenty twenty eight order
• 17:44
  Speaker 5: books are reliably full before we pay up for it.
• 17:47
  Speaker 2: Excellent Michael Santoli from CNBC joining us this Friday, talk
• 17:51
  Speaker 2: about the state of markets in twenty twenty six as
• 17:53
  Speaker 2: we see this reshaping and rejiggering of the leaders.
• 17:57
  Speaker 4: Michael, thanks so much for joining us. Appreciate it. Have
• 17:58
  Speaker 4: a great weekend. We'll talk to you. Gay U you too,
• 18:00
  Speaker 4: Thank you all right.
• 18:02
  Speaker 6: Time for trivia here on the Financial Exchange and Burger
• 18:05
  Speaker 6: King announced new changes coming to its flagship product, the Whopper.
• 18:10
  Speaker 6: Among the changes are a new bun, new mayo in
• 18:13
  Speaker 6: putting the burger in a box instead of a wrapper.
• 18:17
  Speaker 1: Yay.
• 18:18
  Speaker 6: Trivia question today, which came first? The Whopper or the
• 18:22
  Speaker 6: Big Mac? Once again? Which came first? The Whopper or
• 18:26
  Speaker 6: the Big Mac? Be the sixth person today to textas
• 18:30
  Speaker 6: at six one seven three six two thirteen eighty five
• 18:33
  Speaker 6: with the correct answer along with the keyword trivia, and
• 18:36
  Speaker 6: you win a Financial Exchange Show T shirt once again.
• 18:38
  Speaker 6: The sixth correct response to Texas to the number six
• 18:42
  Speaker 6: one seven three six two thirteen eighty five with the
• 18:45
  Speaker 6: correct answer along with keyword trivia, will win.
• 18:48
  Speaker 4: That T shirt.
• 18:49
  Speaker 6: See complete contest rules at Financial Exchange Show dot com.
• 18:53
  Speaker 2: Multiple Choice there, I like that fifty fifty show. You
• 18:56
  Speaker 2: gotta be quick on that one. Yeah, it's not gonna
• 18:58
  Speaker 2: be enough to just.
• 18:59
  Speaker 4: Go look at it up. I like it.
• 19:02
  Speaker 2: As we close in on the bottom of the hour
• 19:05
  Speaker 2: here in video, stock down about two percent to day
• 19:08
  Speaker 2: over the course of the last five days, losing five
• 19:11
  Speaker 2: percent of its value. Market's overall flashing red across the
• 19:15
  Speaker 2: board here, Nasdaq down nine tens of percent, SMP down
• 19:19
  Speaker 2: six tens and percent, Dow Jones Industrial Average off a
• 19:22
  Speaker 2: full percentage point. We will be right back with a
• 19:24
  Speaker 2: full market recap with Wall Street Watch next here on
• 19:27
  Speaker 2: the Financial Exchange.
• 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 1: Time now for Wall Street Watch. A complete look at
• 19:53
  Speaker 1: what's moving markets so far today right here on the
• 19:56
  Speaker 1: Financial Exchange Radio Network.
• 19:59
  Speaker 6: The market sending their losses off yesterday's sell off as
• 20:02
  Speaker 6: investors react to a hotter than expected PPI index, where
• 20:06
  Speaker 6: producer prices climb two point nine percent year over year,
• 20:11
  Speaker 6: higher than estimates of two point six percent. Right now,
• 20:14
  Speaker 6: the Dow is down about one percent, or four hundred
• 20:17
  Speaker 6: and sixty nine points. SMP five hundred is pulling back
• 20:21
  Speaker 6: about half a percent, nasdack down by three quarters of
• 20:24
  Speaker 6: a percent. Russell two thousand is down one and two
• 20:27
  Speaker 6: thirds of a percent. Ten You're treas reeled down four
• 20:30
  Speaker 6: basis points at three point nine seven to four percent.
• 20:35
  Speaker 6: An crude oil jumping two percent higher today, treading its
• 20:38
  Speaker 6: sixty six dollars and fifty seven cents a barrel, well
• 20:42
  Speaker 6: after shedding more than five percent yesterday despite its solid
• 20:46
  Speaker 6: fourth quarter results in Video stock down another two percent today.
• 20:51
  Speaker 6: Breaking news from open Ai this morning after the chat
• 20:54
  Speaker 6: GPT maker announced it his finalized a record breaking one
• 20:57
  Speaker 6: hundred and ten billion dollar funding round at a set
• 21:00
  Speaker 6: seven one hundred and thirty billion dollar valuation, Amazon investing
• 21:04
  Speaker 6: fifty billion dollars, while soft Bank and Nvidia or each
• 21:07
  Speaker 6: investing thirty billion dollars. Meanwhile, Block announced that it is
• 21:11
  Speaker 6: laying off more than forty percent of its workforce, or
• 21:14
  Speaker 6: about four thousand employees, and a bet that AI tools
• 21:17
  Speaker 6: can fill the gap. Shares in the parent company to
• 21:20
  Speaker 6: Square and cash app are surging about thirteen percent. Elsewhere,
• 21:25
  Speaker 6: Paramount was crowned the winner for Warner's movie and TV
• 21:30
  Speaker 6: studios as well as Hbomax streaming service after Netflix pulled
• 21:35
  Speaker 6: out of their initial deal. Shares and Warner Brothers are
• 21:38
  Speaker 6: down two percent. Paramount stock is now jumping sixteen percent,
• 21:42
  Speaker 6: and Netflix is up by ten percent and two Its
• 21:45
  Speaker 6: shares are up over one percent. After the TurboTax owners
• 21:48
  Speaker 6: quarterly profit guidance missed expectations, and Dell shares rallying twenty
• 21:52
  Speaker 6: percent now after the tech company posted a thirty nine
• 21:55
  Speaker 6: percent leap in quarterly sales, boosted by its AI server business.
• 22:01
  Speaker 6: I'm Tucker Silvan. That is Wall Street Watch, And in
• 22:03
  Speaker 6: the previous segment, we asked you the trivia question which
• 22:06
  Speaker 6: came first, the Whopper or the Big Mac. Well, it
• 22:09
  Speaker 6: will be the Whopper. The Whopper was introduced in nineteen
• 22:12
  Speaker 6: fifty seven. Well, the Big Mac debuted ten years later.
• 22:15
  Speaker 6: Ed from Norfolk, Mass is our winner today taking on
• 22:18
  Speaker 6: the Financial Exchange Show T shirt. Congrats to Ed. We
• 22:22
  Speaker 6: played trivia every day here on the Financial Exchange. See
• 22:25
  Speaker 6: complete contest rules at Financial Exchange Show dot com.
• 22:28
  Speaker 4: Dell has an AI server business. Huh, who knew? Didn't
• 22:33
  Speaker 4: know that?
• 22:34
  Speaker 2: Uh? President Trump announced during the State of the Union
• 22:37
  Speaker 2: address on Tuesday that half of American workers with our
• 22:41
  Speaker 2: access to an employer sponsored retirement plan will get access
• 22:45
  Speaker 2: to the same type of plan offered to federal workers,
• 22:48
  Speaker 2: and that the government will match worker contributions of up
• 22:52
  Speaker 2: to one thousand bucks a year.
• 22:53
  Speaker 4: So here's the story.
• 22:54
  Speaker 2: Nearly fifty four million American workers do not have access
• 22:57
  Speaker 2: to retirement benefits at work. If you don't have access
• 23:01
  Speaker 2: to that, then your only option is can to contribute
• 23:03
  Speaker 2: to an IRA. The contribution limits that IRA are woefully
• 23:08
  Speaker 2: lower than the traditional retirement plan contribution limits, which quite honestly,
• 23:13
  Speaker 2: if you're a low income worker, probably doesn't matter to
• 23:15
  Speaker 2: you because coming up with twenty thousand dollars might not
• 23:18
  Speaker 2: be any easier to come up with seven thousand dollars.
• 23:21
  Speaker 2: But nonetheless it is a focus and I think just
• 23:26
  Speaker 2: a criticism that we have brought up of the rules
• 23:30
  Speaker 2: around all of this for quite some time now.
• 23:32
  Speaker 4: You've heard it repeated by us before.
• 23:34
  Speaker 2: But it makes absolutely no sense to me that you
• 23:37
  Speaker 2: can contribute something like seven thousand dollars to an IRA
• 23:41
  Speaker 2: if your employer refuses to set up a plan, but
• 23:44
  Speaker 2: if they happen to then you get to put twenty
• 23:46
  Speaker 2: plus thousand dollars into It just doesn't ring reasonable to me.
• 23:51
  Speaker 2: And the Trump administration says they've come up with a
• 23:53
  Speaker 2: plan here to fix it to some degree. So what
• 23:56
  Speaker 2: do we think we know so far about this, Because
• 24:00
  Speaker 2: it looks like they're going to try and give them
• 24:02
  Speaker 2: access to what's referred to as the TSP.
• 24:05
  Speaker 3: Yeah Thrift Savings Plan is a great plan. It consists
• 24:09
  Speaker 3: of diversified index funds, very very low cost. The more
• 24:12
  Speaker 3: participants that's US investors you put in a plan, the
• 24:16
  Speaker 3: lower the costs. So this is an it's a great idea.
• 24:19
  Speaker 3: It's He's not the first one to come up with it,
• 24:22
  Speaker 3: but people have wanted to do it for decades, so
• 24:25
  Speaker 3: long overdue. I hope Congress acts, and I hope they
• 24:28
  Speaker 3: model it on the Thrift Savings Plan, which is available
• 24:30
  Speaker 3: to federal employees. As to matching it, you know, we're
• 24:34
  Speaker 3: out of money as it is. We you know, I'm
• 24:37
  Speaker 3: not going to get into that. That part of it.
• 24:39
  Speaker 3: I could do without. In Congress could change it.
• 24:41
  Speaker 4: How about we.
• 24:41
  Speaker 2: Sure up some funds into Social Security because that is
• 24:44
  Speaker 2: going to be a much sooner problem.
• 24:45
  Speaker 3: Yeah, let's yeah, right, We've those are those are outstanding
• 24:49
  Speaker 3: promises that we know we can't keep. But making something
• 24:53
  Speaker 3: TSP like available now, I don't know who's going to
• 24:55
  Speaker 3: administer it.
• 24:58
  Speaker 1: Or what.
• 24:59
  Speaker 4: I don't know what the mechanism will be, right.
• 25:01
  Speaker 3: By administrator, I mean, this is what Fidelity, Vanguard, a
• 25:04
  Speaker 3: tiro Price or ADP or whoever does for your company
• 25:06
  Speaker 3: for O and K. Your company hires a four O
• 25:08
  Speaker 3: and K plane record keeper and they're usually also the
• 25:11
  Speaker 3: investment manager, or they pick your options. Maybe your employer
• 25:14
  Speaker 3: does that, maybe they outsource that because are there a
• 25:17
  Speaker 3: few different moving parts. And of course your own payroll
• 25:19
  Speaker 3: at your employer has to be involved in that, because
• 25:23
  Speaker 3: you've got to interface with that provider.
• 25:24
  Speaker 4: Right.
• 25:24
  Speaker 2: That's kind of what I was thinking, is if you
• 25:26
  Speaker 2: if you put the TSP into there, you have to
• 25:28
  Speaker 2: create a Mechican.
• 25:29
  Speaker 3: It's not going to be you can't do that, right,
• 25:31
  Speaker 3: That's that's that's that's a trust for the benefit of
• 25:33
  Speaker 3: federal employees. So it's going to be TSP mirrord on TSPSP, like, yeah,
• 25:38
  Speaker 3: just TSP for you and me or something. They'll come
• 25:40
  Speaker 3: up with a better slogan than the hell but that's no.
• 25:43
  Speaker 4: No, you gotta coin that now. But that's that's.
• 25:45
  Speaker 3: What it should be. And the the reason I'm enthusiastic
• 25:48
  Speaker 3: about it is that TSP is very well structured. It's
• 25:52
  Speaker 3: got a bunch of local index funds in it, as
• 25:54
  Speaker 3: well as diversified balanced funds so called target date funds.
• 25:57
  Speaker 3: If you want to kind of set it and forget,
• 25:59
  Speaker 3: even though a provider would never say set it and
• 26:01
  Speaker 3: forget it, you should be reviewing it. But it's very
• 26:04
  Speaker 3: very well structured, and it's nice and cheap because four
• 26:06
  Speaker 3: one K administration is a scale business. The more people
• 26:09
  Speaker 3: you get on your platform, that cheaper you can offer
• 26:12
  Speaker 3: your service.
• 26:12
  Speaker 4: You happen to offer it to every single federal worker. Yeah,
• 26:15
  Speaker 4: you can. You can scale it pretty quickly.
• 26:16
  Speaker 3: So it'll be interesting to see the bidding process because
• 26:18
  Speaker 3: investment managers are gonna have to run the options, and
• 26:22
  Speaker 3: so they'll put out a so called RFP. We want
• 26:24
  Speaker 3: someone who can run an S and P five hundred index.
• 26:27
  Speaker 3: It'll be called the Uncle Sam Large Cap Fund or
• 26:29
  Speaker 3: something corny like that. They'll white label it and it
• 26:32
  Speaker 3: should be free. Honestly, it shouldn't carry an investment management expense.
• 26:36
  Speaker 3: I won't get into the reasons why, but this is
• 26:39
  Speaker 3: for those who don't happen. By the way, those who
• 26:41
  Speaker 3: don't have the option today, they might have a penchant sure,
• 26:44
  Speaker 3: or they might be saving as you said, through an IRA,
• 26:46
  Speaker 3: but the contribution limits in the TSP for you and
• 26:49
  Speaker 3: me might be higher. We don't know a lot of
• 26:51
  Speaker 3: details to be worked.
• 26:52
  Speaker 2: Out, Yeah, lots to be worked out, but it would
• 26:53
  Speaker 2: be a big positive step in the right direction.
• 26:56
  Speaker 4: I believe folks.
• 26:57
  Speaker 2: It is the end of February, last show off, everyry,
• 27:00
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• 27:02
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• 28:54
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• 29:04
  Speaker 2: We've got to go and take a quick break. When
• 29:06
  Speaker 2: we come back, Paul Lamonica from Barons joining us next
• 29:09
  Speaker 2: to talk about Berkshire Hathaway and their latest bet.
• 29:12
  Speaker 4: That's next right here.
• 29:14
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• 29:18
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• 29:23
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• 29:26
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• 29:32
  Speaker 1: missed right here on the Financial Exchange. Ladies and gentlemen
• 29:37
  Speaker 1: the Weekend.
• 29:46
  Speaker 2: Joining us now is Paul Lamonica from Barons to talk
• 29:49
  Speaker 2: about Berkshire in their latest success story. Quite honestly, not
• 29:54
  Speaker 2: that it's going to completely move the needle for Berkshire Hathaway,
• 29:57
  Speaker 2: but may for The New York Times.
• 29:59
  Speaker 4: Paul, thanks for joining us, appreciate it.
• 30:01
  Speaker 7: Thank you appreciated as well.
• 30:02
  Speaker 2: So talk to us about the investment that they made
• 30:05
  Speaker 2: and I guess the success they've had so far in
• 30:09
  Speaker 2: the stock price of The New York Times.
• 30:11
  Speaker 7: Yeah, Berkshire Hathaway disclosed in its latest quarterly filing of
• 30:15
  Speaker 7: holdings that New York Times is a new position for
• 30:20
  Speaker 7: the company as of the fourth quarter, and New York
• 30:23
  Speaker 7: Times stock has continued to rally even before that news
• 30:28
  Speaker 7: was disclosed. The stock is at an all time high,
• 30:31
  Speaker 7: having a very solid year. And I think you know
• 30:35
  Speaker 7: it may come as a bit of a surprise to
• 30:37
  Speaker 7: some Berkshire watchers because you know Berkshire had trimmed its
• 30:42
  Speaker 7: own stake in you know, it sold off its own
• 30:46
  Speaker 7: publishing business, you know, about a decade ago, and it
• 30:50
  Speaker 7: had used to own the owner of The Washington Post
• 30:55
  Speaker 7: before that paper was sold to Jeff Bezos. So Berkshire
• 30:59
  Speaker 7: has had an a few in the past for the
• 31:01
  Speaker 7: newspaper business, but not as of late. So now getting
• 31:04
  Speaker 7: into New York Times, you know, it's kind of a
• 31:07
  Speaker 7: fascinating to see, especially since the stock isn't a classic
• 31:11
  Speaker 7: value play. It trades at a big premium to other
• 31:14
  Speaker 7: media arrivals, but it's probably worth it given the growth.
• 31:19
  Speaker 2: It certainly looks like an interesting time in the media landscape.
• 31:23
  Speaker 2: Right we had the Washington Post layoffs from what was
• 31:26
  Speaker 2: that a month ago or so, maybe even less. You've
• 31:28
  Speaker 2: got the new announced deal with Paramount Now and Warner
• 31:31
  Speaker 2: Brothers Netflix stepping aside, What does the upside look like
• 31:35
  Speaker 2: for New York Times here? I mean, are they a
• 31:38
  Speaker 2: takeover target for somebody? Probably not at these prices, I guess,
• 31:41
  Speaker 2: But are they big enough to survive on their own?
• 31:44
  Speaker 7: Yeah? I doubt that they would be a takeover target.
• 31:46
  Speaker 7: It's spin a company that's you know, being independent for
• 31:49
  Speaker 7: a very very long time, and I suspect we'd want
• 31:52
  Speaker 7: to stay that way. You have to give credit to
• 31:55
  Speaker 7: the New York Times. I think what they have done
• 31:57
  Speaker 7: that has helped them versus maybe some other media companies
• 32:02
  Speaker 7: is really diversification that has helped boost their digital subscription
• 32:08
  Speaker 7: and ad revenue. You think of the New York Times
• 32:10
  Speaker 7: and obviously it's you know, all the news that's fit
• 32:13
  Speaker 7: to print, the great Lady, the great news coverage. But
• 32:16
  Speaker 7: it goes beyond that. You know, they bought you know,
• 32:19
  Speaker 7: Wordle a few years ago, and they have now a
• 32:23
  Speaker 7: very successful game subscription business with games beyond word you know,
• 32:29
  Speaker 7: I'm I'm addicted to connections and strands as well as Wordle.
• 32:33
  Speaker 7: I do that every morning when I'm having my coffee
• 32:35
  Speaker 7: and breakfast. But they also have a cooking app. They've
• 32:41
  Speaker 7: got obviously Wirecutter for tech, gadget reviews and news. The
• 32:45
  Speaker 7: Athletic for sports. At a time where The Washington Post
• 32:48
  Speaker 7: decimated it's sports staff, New York Times still has a vibrant,
• 32:53
  Speaker 7: you know, sports news through the Athletics. So these are
• 32:56
  Speaker 7: all standalone subscription products that people can you know, buy
• 33:01
  Speaker 7: as they see fit, but also can be part of
• 33:03
  Speaker 7: a broader New York Times subscription as well, So I
• 33:06
  Speaker 7: think that's really helping them with that digital growth.
• 33:09
  Speaker 2: Yeah, I will say that before I make a purchase
• 33:12
  Speaker 2: of you know, one hundred dollars more, I usually do
• 33:15
  Speaker 2: consult Wirecutter to see what their reviews of the product are.
• 33:18
  Speaker 2: So that clearly has some staying power. The other piece
• 33:22
  Speaker 2: of this, though, that I am curious about. I know,
• 33:24
  Speaker 2: on the early days with chat GPT, there are some
• 33:26
  Speaker 2: lawsuits going on between New York Times and hey, did
• 33:29
  Speaker 2: these did these AI systems use publications like The New
• 33:33
  Speaker 2: York Times to train their AI systems? What is the
• 33:36
  Speaker 2: status that or do you know the status of some
• 33:38
  Speaker 2: of those some of those arguments and where they've led
• 33:41
  Speaker 2: to or is that largely behind companies like open Ai
• 33:44
  Speaker 2: and The New York Times.
• 33:46
  Speaker 7: Yeah, I haven't looked recently at where any of those
• 33:49
  Speaker 7: legal challenges stand right now. I mean, clearly Open Ai,
• 33:54
  Speaker 7: probably Anthropic and Claude. I think they recognize that they
• 33:58
  Speaker 7: need partnership with big media firms like New York Times,
• 34:03
  Speaker 7: like my parent company, News Corp. You know, obviously, you know,
• 34:08
  Speaker 7: legacy media is not going to sit by idly and
• 34:12
  Speaker 7: let the Chat Gypts of the world, you know, take
• 34:16
  Speaker 7: their content unfairly without compensation. Uh, you know, so I
• 34:20
  Speaker 7: think New York Times still holds up well in a
• 34:24
  Speaker 7: world where people are increasingly moving to you know, chat,
• 34:27
  Speaker 7: GPT and other ai you know, applications for sources of news.
• 34:33
  Speaker 7: But again, I think, you know, again with New York Times,
• 34:35
  Speaker 7: another area that I didn't mention. Podcasting is huge, and
• 34:39
  Speaker 7: their audio business is another subscription product that I think,
• 34:43
  Speaker 7: you know, does really well for them. It's you know,
• 34:46
  Speaker 7: it's probably a reason why you know, a company like
• 34:48
  Speaker 7: Spotify has done so well. Also, I mean, clearly people
• 34:51
  Speaker 7: still want to listen to expert takes in long form audio.
• 34:57
  Speaker 2: Paul A Monica from Baron's joining us today on Friday
• 35:00
  Speaker 2: to talk about Berkshire, Hathway and their latest big investment
• 35:03
  Speaker 2: in The New York Times.
• 35:05
  Speaker 4: Paul, thanks so much for joining us. Appreciate it. We'll
• 35:06
  Speaker 4: talk to you again next week.
• 35:08
  Speaker 7: Yep, have a good weekend, guys.
• 35:09
  Speaker 4: Thank you. Mark.
• 35:11
  Speaker 2: We had another blow up in quasi private credit space.
• 35:16
  Speaker 2: It looks like a new credit blow up in London
• 35:18
  Speaker 2: has Wall Street chasing billions of dollars.
• 35:21
  Speaker 4: Market Financial Solutions Limited, which I'm guessing you haven't heard
• 35:25
  Speaker 4: of before today.
• 35:27
  Speaker 3: I wasn't aware of.
• 35:27
  Speaker 2: That follows similar trends from other color companies that we
• 35:31
  Speaker 2: hadn't heard of, like Tricolor, like First Brand.
• 35:33
  Speaker 3: Are they the manager or were they the firm to
• 35:36
  Speaker 3: which money was lent?
• 35:37
  Speaker 2: It seems to me that they are the manager and
• 35:39
  Speaker 2: issuer of a whole bunch of loans that they then
• 35:42
  Speaker 2: sold off in package to other companies, and some irregularities
• 35:46
  Speaker 2: it looks like in some of their numbers and data
• 35:50
  Speaker 2: has led to a blow up over there too. Again,
• 35:54
  Speaker 2: we talked about this last year when it came to
• 35:56
  Speaker 2: these private credit blow ups and it was this going
• 36:00
  Speaker 2: to be an indication of more to come. I can't
• 36:03
  Speaker 2: say that this is specifically more of that type of issue,
• 36:09
  Speaker 2: but other issues that have been raised in the private
• 36:11
  Speaker 2: credit space. One they turns out they seem to have
• 36:15
  Speaker 2: a lot of exposure to software as a subscription service
• 36:18
  Speaker 2: companies loaning a lot of money to those once booming
• 36:22
  Speaker 2: now under pressure businesses as we grow further concentration there.
• 36:27
  Speaker 2: And again, to bring this home to why you should
• 36:29
  Speaker 2: care even if you don't touch private credit in your
• 36:32
  Speaker 2: own portfolio, which most retail investors do not right. This
• 36:36
  Speaker 2: is a type of asset that is concentrated in a
• 36:40
  Speaker 2: lot of institutional portfolios.
• 36:43
  Speaker 4: But where I keep.
• 36:44
  Speaker 2: Going back to, and I'm not saying that we know
• 36:46
  Speaker 2: that there will be a giant blow up in private credit.
• 36:48
  Speaker 2: There is not evidence to support that that is what
• 36:50
  Speaker 2: we are facing down. But if there is, your insurance
• 36:54
  Speaker 2: company has.
• 36:54
  Speaker 4: A lot of exposure here.
• 36:56
  Speaker 2: There have been a few downgrades of made your insurance
• 37:00
  Speaker 2: companies because of their exposure to private credit. Not any
• 37:04
  Speaker 2: giant ones that I can think of, but there have
• 37:06
  Speaker 2: been a few downgrades in the insurance space because of
• 37:08
  Speaker 2: their portfolios and their exposure to private credit.
• 37:11
  Speaker 4: And the more time goes on.
• 37:13
  Speaker 2: If we see more of these types of issues of hey,
• 37:17
  Speaker 2: what was supposed to be this fantastic underwriting might have
• 37:20
  Speaker 2: loosened over the last few years, it could spell a
• 37:23
  Speaker 2: major issue, not only for you know, pension funds endowments
• 37:27
  Speaker 2: from major universities, but something that could affect you directly,
• 37:30
  Speaker 2: which is your insurance I.
• 37:31
  Speaker 4: Guess it could.
• 37:32
  Speaker 3: I mean insurance companies, as you know, are backed by
• 37:34
  Speaker 3: state guarantee funds.
• 37:35
  Speaker 4: At the end of the day.
• 37:37
  Speaker 3: That's not to say they couldn't come under pressure all
• 37:39
  Speaker 3: at once. Secondly, insurance companies generally don't loan to some
• 37:41
  Speaker 3: of these more vulnerable industries. They're more likely to loan
• 37:45
  Speaker 3: to real estate related borrowers and asset backed security. And
• 37:51
  Speaker 3: in the asset back security part of the industry. Again,
• 37:54
  Speaker 3: I'm not suggesting there couldn't be knock on effects.
• 37:57
  Speaker 2: Markets remain in negative territory as we close out the
• 38:00
  Speaker 2: week here the S and P five hundred off half percent,
• 38:03
  Speaker 2: Nasdaq off eight tenths, and the Dow Jones Industrial Average
• 38:06
  Speaker 2: off five hundred and seventy five points or one point
• 38:08
  Speaker 2: one six percent. We will be back at it next week.
• 38:11
  Speaker 2: Have a nice, warm and safe weekend, everybody. We'll catch
• 38:17
  Speaker 2: you back here on Monday.