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Are we headed for a repeat of the dot com era? · The Financial Exchange Show

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  Speaker 1: This is the Financial Exchange with Mike Armstrong and Fall.
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  Speaker 2: Lane, Good morning, Happy Friday, Welcome to the Financial Exchange.
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  Speaker 2: It's Mike, Paul and Tucker with you on a red
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  Speaker 2: day out there on Wall Street. We've got the Dow
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  Speaker 2: currently off over five hundred points, about one point two percent,
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  Speaker 2: and the SMP and NASDAC both down about six tenths
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  Speaker 2: of a percent on continued deterioration. I suppose in the
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  Speaker 2: optimism about the artificial intelligence trade will be diving in
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  Speaker 2: on that, as well as the government reopening and some
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  Speaker 2: new trade deals to be announced as well when it
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  Speaker 2: comes to especially items you might be seeing at the
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  Speaker 2: grocery store. But Paul, I want to hone in here
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  Speaker 2: on the last couple of weeks, really, I think is
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  Speaker 2: where the focus should be when we're talking about the
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  Speaker 2: deterioration of equity markets. And to be clear, you know,
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  Speaker 2: we're not talking about anything extremely severe, but it does
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  Speaker 2: just seem to me that over the course of the
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  Speaker 2: last few weeks, every time that you've made a possible
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  Speaker 2: uh what am I saying upswing in markets, it's been
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  Speaker 2: immediately followed by a downturn. And as of right now,
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  Speaker 2: you know, we're only off a few percentage points from
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  Speaker 2: the all time highs reached back at the end of October,
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  Speaker 2: but we've seen now two days of sell offs, and
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  Speaker 2: I really point to I guess the last two weeks
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  Speaker 2: focusing in on the commentary from Michael Burry and the
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  Speaker 2: commentary from some large bank CEOs, and now it seems
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  Speaker 2: to be all that anyone is talking about is the
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  Speaker 2: AI investment? Is it realistic? Is it going to come
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  Speaker 2: crashing down? Is it the dot com bubble all over again?
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  Speaker 2: That narrative can change again, But you do have to
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  Speaker 2: ask yourself at this point, Okay, if sentiment is shit,
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  Speaker 2: what is going to shift it back in the other direction?
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  Speaker 2: And That's kind of where I'm landing with this is
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  Speaker 2: it seems to me the sentiment has had at least
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  Speaker 2: a temporary shift in terms of what all this means
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  Speaker 2: for the stock market and the economy, and so is
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  Speaker 2: that overblown? Is it going to get shifted in the
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  Speaker 2: other direction? And what might be the cause of a
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  Speaker 2: shift back towards growth in the markets and the optimism
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  Speaker 2: for AI.
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  Speaker 3: Really where we would have to start, Mike, likely is
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  Speaker 3: earnings reports that have already surpassed but for the next
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  Speaker 3: quarter from some of the hyperscalers, where they report that
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  Speaker 3: particularly on the cloud capacity the cloud revenue, which is
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  Speaker 3: where you'd likely see most of this accrual of sort
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  Speaker 3: of revenue benefits from Microsoft from an Amazon basically stating
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  Speaker 3: that they have seen just tremendous demand and continued frenzy
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  Speaker 3: for uptick of the consumption of this cloud computing. That
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  Speaker 3: would translate to likely more developers in artificial intelligence just
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  Speaker 3: consuming more and more of it.
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  Speaker 4: On top of that.
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  Speaker 3: In Nvidia could be another for some reason that the
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  Speaker 3: demand that they see for their next version of the
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  Speaker 3: GPU that's gonna come out maybe later next year, or
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  Speaker 3: anything of that nature. Those would be the areas that
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  Speaker 3: I'd probably point to or some sort of revolutionary change
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  Speaker 3: with chat gipt where it just moves up, it has
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  Speaker 3: a breakthrough to another level in terms of the applications.
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  Speaker 3: I'm pulling its straws a little bit, but not so much.
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  Speaker 2: I mean, Nvidia is the largest company in the world
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  Speaker 2: now they're reporting earnings Wednesday of next week. That certainly
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  Speaker 2: I think has the ability to shift overall sentiment. I
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  Speaker 2: guess you know what, I started with a presupposition that
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  Speaker 2: you agree with me on this turn in the narrative.
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  Speaker 2: Do you do you see that same turn in the
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  Speaker 2: narrative that I am seeing or am I just being
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  Speaker 2: overly pessimistic about things right now.
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  Speaker 4: In terms of the coverage of artificial intelligence, Yeah, I.
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  Speaker 2: Mean it seems to me that over the course of
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  Speaker 2: the last two weeks, especially the coverage of AI, the
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  Speaker 2: skepticism about the payoffs and benefits, and maybe not so
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  Speaker 2: much the technology itself, but the massive spending and where
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  Speaker 2: it's coming from and how much longer it continue can continue,
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  Speaker 2: It seems to me to be called into question more
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  Speaker 2: of the last two weeks than any time in the
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  Speaker 2: last year.
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  Speaker 4: Definitely has picked up.
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  Speaker 3: I would more bifurcate it between call it the summer
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  Speaker 3: August sort of the fall is where I've felt September,
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  Speaker 3: October November that there has been much more discussion and
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  Speaker 3: scrutiny on the amount of money being spent by these companies.
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  Speaker 3: It always was, we were always aware that capital expenditures
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  Speaker 3: for Meta and some of these others were increasing, But
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  Speaker 3: it just seems like from a news media coverage standpoint
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  Speaker 3: that there has been a tremendous amount of more focus
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  Speaker 3: on cheefs. This is a lot of money. Are they
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  Speaker 3: going to get the revenue to justify. Obviously, when some
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  Speaker 3: of those announcements came out, that would probably be the
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  Speaker 3: first place that you want to go, But it just
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  Speaker 3: seems like that has been more prevalent recently. That's the
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  Speaker 3: way I would sort of divide it. You're right, then
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  Speaker 3: the last week or two it's picked up even more.
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  Speaker 3: But there's the Oracle Cloud deal is probably a good
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  Speaker 3: example of when was that announced. That was when we
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  Speaker 3: saw that might be a couple a month or two.
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  Speaker 2: Back, we saw that that was the one with open
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  Speaker 2: Ai and the miracle three hundred billion dollars.
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  Speaker 3: I believe that they were projecting of, you know, future
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  Speaker 3: revenue growth and the stock went up thirty percent in
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  Speaker 3: one day, and since then it's sold off to levels
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  Speaker 3: lower than it was there. That feels like to me
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  Speaker 3: trying to see if I can get a pinpoint on
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  Speaker 3: when that happened where there was a bit of shift
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  Speaker 3: because they have to finance that with a lot of debt,
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  Speaker 3: and that's where we've had more of these conversations that
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  Speaker 3: you and I were having off eras geez, how much
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  Speaker 3: how much debt is being taken on.
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  Speaker 4: For this build out?
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  Speaker 3: And that was September tenth, so that that kind of
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  Speaker 3: moves in lockstep with what I was thinking there.
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  Speaker 2: Here's here's where I keep landing with all of this stuff.
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  Speaker 2: And you know, the more I read and the more
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  Speaker 2: I look into it, I don't think there's much debate
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  Speaker 2: that AI is going to be a truly transformative technology,
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  Speaker 2: the scale of which is maybe similar to the Internet,
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  Speaker 2: if not greater. I think there's surprisingly like general agreement
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  Speaker 2: on that. I don't hear a lot of people. I
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  Speaker 2: hear a lot of people saying it's going to be
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  Speaker 2: a terrible transformation and detriment there, and detrimental to labor
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  Speaker 2: and to all sorts of negatives. But even there I
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  Speaker 2: see them acknowledging that it will be transformative. So I
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  Speaker 2: don't hear much debate there. Where I start to get
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  Speaker 2: when when you start to ask the companies, you know,
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  Speaker 2: where's the payoff going to come from? That's where I
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  Speaker 2: start struggling. And because they don't know the answer, right,
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  Speaker 2: they're building all this out with the idea that you know, hey,
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  Speaker 2: build it and they will come. And I've heard comments like, oh, well,
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  Speaker 2: we're just waiting on the uber of AI to come around.
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  Speaker 2: The Facebook of artificial intelligence to come and exist, and
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  Speaker 2: then we're going to have this massive customer for all
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  Speaker 2: this build out that we're doing. And then you dive
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  Speaker 2: in a little bit more about you know, what AI
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  Speaker 2: can do, and they're focusing on the business customers that
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  Speaker 2: are going to pay for these services, and AI, you know, honestly,
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  Speaker 2: is really good at some very boring things. You know,
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  Speaker 2: like if you're dealing with I'm trying to think of
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  Speaker 2: a really a really boring but you know, good use
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  Speaker 2: case of artificial intelligence. You're dealing with a couple of
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  Speaker 2: files that have you know, naming conventions that are a
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  Speaker 2: little bit different. AI would be really good at going
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  Speaker 2: through that, which a human being probably does now, and
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  Speaker 2: you know, removing the extra digits on the ZIP code
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  Speaker 2: or something like that to be able to match the
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  Speaker 2: files together. It's not sexy, but you pay somebody to
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  Speaker 2: do that right now, and AI can do it faster, cheaper,
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  Speaker 2: and better. The problem then becomes when you ask these
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  Speaker 2: companies a little bit more like, okay, but what's somebody
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  Speaker 2: going to be willing to pay for that? They then
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  Speaker 2: kind of shift their story over to well, you know,
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  Speaker 2: that's stage one, but then really what we're getting to
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  Speaker 2: is artificial general intelligence. And when they talk about artificial
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  Speaker 2: general intelligence, AGI if you will, I'm I don't know,
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  Speaker 2: I'm getting it's almost people talking about a religious experience.
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  Speaker 2: And that's where I started to get really concerned. It's like, hey,
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  Speaker 2: you know, we have this, we have this thing that
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  Speaker 2: can do some really practical things for businesses and reduce
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  Speaker 2: headcount and make people more efficient. But someday, you know,
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  Speaker 2: what you're really betting on is this idea that you know,
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  Speaker 2: computers are going to get to artificial general intelligence and
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  Speaker 2: then you know it's infinite from there. And I don't know,
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  Speaker 2: I struggle when people make that type of argument to me.
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  Speaker 4: I can't go yeah, I can't go there.
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  Speaker 3: It was something that I dove into at first, but
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  Speaker 3: I can't really go that far with it. But let's
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  Speaker 3: fin back to maybe the more elementary version of it is,
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  Speaker 3: you know, if it's going to be a truly transformed technology.
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  Speaker 3: It does seem like most people are on board with
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  Speaker 3: and the parallels to the Internet maybe are too easy
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  Speaker 3: and maybe we lean on them too much, But it
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  Speaker 3: seems the place I always come back to where there
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  Speaker 3: was a bubble that was created in the late nineties.
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  Speaker 3: There was reason for that bubble, though if you look
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  Speaker 3: out the next decade into where our lives are today,
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  Speaker 3: the vision behind it was accurate. It's just the valuations
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  Speaker 3: on the companies got out of whack. And also there
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  Speaker 3: were some companies that benefited from that tremendously, and no
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  Speaker 3: one could have projected how big they were going to
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  Speaker 3: get Google, Amazon, eBay, PayPal, et cetera. And probably the
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  Speaker 3: same happens here in some extent is that there are
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  Speaker 3: going to be some huge winners, but there also will
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  Speaker 3: be some huge losers. And also we may be overbuilding
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  Speaker 3: infrastructure that to this point we don't know where the
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  Speaker 3: revenue or where the innovation is going to come from.
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  Speaker 3: Yet that's what makes it so hard, and that's what
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  Speaker 3: I think made it so difficult with the Internet is
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  Speaker 3: you just you didn't know what it was going to
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  Speaker 3: look like, and that's where you can get valuations out
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  Speaker 3: of whack.
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  Speaker 2: Let's take a quick break. I want to organize our
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  Speaker 2: thoughts on this AI conversation. It's going to permeate the
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  Speaker 2: show throughout today and throughout the next several weeks. Let's
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  Speaker 2: say a quick break and just final thoughts on where
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  Speaker 2: we've come over the last couple weeks on the AI trade, markets,
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  Speaker 2: optimism for pessimism about it. That's next year on the
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  Speaker 2: Financial Exchange.
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  Speaker 2: So before the break, we were wrapping up some conversations
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  Speaker 2: about the the AI trade and.
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  Speaker 4: We've got to figure it out.
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  Speaker 2: Yeah, yeah, we have all the answers here at the
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  Speaker 2: Financial Exchange, as you know. But there has been increased
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  Speaker 2: pressure on markets. At least, I don't think there's be
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  Speaker 2: any particularly tough questions of the companies involved. There hasn't
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  Speaker 2: really been the opportunity to ask those questions. But I
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  Speaker 2: think generally speaking, there's been increased scrutiny over the levels
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  Speaker 2: of spending. And again to highlight a few of these
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  Speaker 2: spending items, Open Ai, for example, has pledged to spend
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  Speaker 2: one point four trillion dollars over the course of the
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  Speaker 2: next decade on artificial intelligence build out. And they're a
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  Speaker 2: company that I think at last last look, they're going
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  Speaker 2: to do between fourteen billion and twenty billion dollars of
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  Speaker 2: revenue this year.
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  Speaker 3: And reported a Q three loss of twelve point six
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  Speaker 3: billion according to micro Sure.
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  Speaker 2: So, like, you know, these are big, big promises, I think,
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  Speaker 2: is the point that I am making here. And so
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  Speaker 2: the question that I continue to ask myself is are
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  Speaker 2: we headed for a repeat of the dot com era?
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  Speaker 2: And my guess would be not. History rarely repeats itself.
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  Speaker 2: Rhymes in certain ways, it looks similar in certain ways,
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  Speaker 2: but history never exactly repeats itself. But the problem during
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  Speaker 2: the dot com stage was a massive amount of build
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  Speaker 2: out and a bunch of bets on companies that you know,
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  Speaker 2: didn't really have the business models that people thought that
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  Speaker 2: they did. And so the question this time around is
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  Speaker 2: how long does it take for I mean, I don't
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  Speaker 2: think people are wrong to point to the Ubers and
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  Speaker 2: facebooks as those companies that revolutionized the world on top
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  Speaker 2: of the Internet infrastructure. But my question is how long
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  Speaker 2: does it take for that to come about? I don't
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  Speaker 2: you know, I don't supposed to have an answer on
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  Speaker 2: all this, but maybe the maybe the Internet and AI
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  Speaker 2: are completely different and you're going to have those massively
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  Speaker 2: revolutionary new tools rolled out in the next six to
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  Speaker 2: twelve months. And it's not quite the concern that the
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  Speaker 2: dot com bubble was because again, when when did Facebook
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  Speaker 2: go public? Like twelve twenty twelve.
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  Speaker 4: I created in two thousand and four, sure, but.
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  Speaker 2: You know years after the you know, the hype of oh.
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  Speaker 3: Totally I was going to go that with Google. I mean,
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  Speaker 3: Google's probably the best example, like acting as basically.
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  Speaker 4: The front door for the Internet.
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  Speaker 3: They were probably early two thousands in terms of when
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  Speaker 3: they really picked up significant momentum. I believe their IPO
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  Speaker 3: is maybe oh four you can you can quote me
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  Speaker 3: on that.
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  Speaker 2: Wow, August nineteenth of four at eighty five bucks.
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  Speaker 3: On that, So that's five years removed. I drive a
• 14:48
  Speaker 3: lot in for this job, listen to podcasts in the car,
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  Speaker 3: but that's far removed from probably the peak valuations that
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  Speaker 3: you saw, and my point, I think that you could
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  Speaker 3: just see a lag between the valuations that some companies
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  Speaker 3: have received today to the actual optimal benefit that you
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  Speaker 3: get from the technology. You're right, maybe it doesn't happen
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  Speaker 3: the same way, but it is reasonable. I feel like
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  Speaker 3: to say that the market perhaps gets ahead of the
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  Speaker 3: true growth of a technology. And maybe that's what we
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  Speaker 3: see is that five years from now businesses operate far differently.
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  Speaker 3: But today the valuations are sort of accounting as if
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  Speaker 3: it's going to happen the next six to twelve months.
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  Speaker 2: What do I do as the everyday person about this
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  Speaker 2: hold steady?
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  Speaker 3: No ma with the Google thing or Amazon, you never
• 15:38
  Speaker 3: want to known, but just the technology did deemed it
• 15:43
  Speaker 3: ended up being extremely beneficial and changes the way that
• 15:46
  Speaker 3: we operate our business today.
• 15:47
  Speaker 2: It turned out to be worth it.
• 15:49
  Speaker 3: I was talking to a client the other day and
• 15:50
  Speaker 3: just crystallized it for me very simply. And when they
• 15:52
  Speaker 3: saw a computer on the desk, like what is this box?
• 15:54
  Speaker 3: And what are we going to do with it? And
• 15:56
  Speaker 3: now it's on everyone's desk and you know what you're
• 15:59
  Speaker 3: gonna do with it?
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  Speaker 2: It's all you don't know what you can do without it?
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  Speaker 2: The other piece that could be different this again. I
• 16:05
  Speaker 2: don't really buy the arguments that it's different this time.
• 16:08
  Speaker 2: I never do. But the other piece that is fair
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  Speaker 2: bit different than it was back then. The large companies
• 16:15
  Speaker 2: that are dominating the story today, that are you know,
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  Speaker 2: really placing a lot of this, have much deeper motes
• 16:22
  Speaker 2: in much deeper pockets than they did back in nineteen
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  Speaker 2: ninety nine. Right, I don't think they should, right Like
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  Speaker 2: I don't love the idea that Google was deemed a
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  Speaker 2: monopoly and then not broken up. I don't love the
• 16:36
  Speaker 2: fact that Amazon has been able to avoid any sort
• 16:38
  Speaker 2: of monopolistic concerns. But these companies are operating on a
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  Speaker 2: scale that's far different than where they were back when
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  Speaker 2: the you know, the similar or comparable tech companies of
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  Speaker 2: the late nineties were, And so again, maybe that makes
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  Speaker 2: it different this time. Maybe it makes it so that
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  Speaker 2: there can't be some new Mark Zuckerberg star like startup
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  Speaker 2: that comes along five years after the in and really
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  Speaker 2: revolutionizes things, because they'll just get bought.
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  Speaker 4: I don't know that's fair. That's fair.
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  Speaker 2: Again, history does not repeat itself, But you cannot avoid
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  Speaker 2: anymore the comparisons to the dot com bubble, They are
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  Speaker 2: unavoidable if you if you look at this market today,
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  Speaker 2: you know, based on any valuation metric, the only time
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  Speaker 2: is more expensive was pre dot com bubble, And when
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  Speaker 2: you talk to any serious investor, they are certainly aware
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  Speaker 2: of the comparisons of that point in time. The other
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  Speaker 2: piece of the narrative that I think has shifted a
• 17:37
  Speaker 2: little bit over the course the last few weeks has
• 17:39
  Speaker 2: been around interest rates. A few months ago, the idea
• 17:42
  Speaker 2: of a December rate cut was pretty much baked in.
• 17:45
  Speaker 2: Over the course of the last several weeks, you've had
• 17:47
  Speaker 2: FED chair or voting FED member after voting FED member
• 17:51
  Speaker 2: come out and refute the idea that that is baked in.
• 17:54
  Speaker 2: At this stage, we are now looking at a fifty
• 17:57
  Speaker 2: to fifty shot a coin toss of a rate cut
• 18:00
  Speaker 2: at that December tenth meeting. What do you suppose could
• 18:05
  Speaker 2: change could shift that? Again? If I think about things
• 18:08
  Speaker 2: that have changed in markets, this is definitely one of them.
• 18:10
  Speaker 2: The idea that, hey, rates are not going to come
• 18:12
  Speaker 2: down as quickly as some had been supposing. We've had
• 18:15
  Speaker 2: a government shut down for the last month and a half.
• 18:19
  Speaker 2: I would imagine there could be some data that could
• 18:20
  Speaker 2: change their minds on this.
• 18:21
  Speaker 3: It's going to have to be the November CPI report
• 18:25
  Speaker 3: if they're able to get that together, which I think
• 18:28
  Speaker 3: would be released before this tenth meeting. I think it
• 18:30
  Speaker 3: would come out around the eighth of the ninth if
• 18:32
  Speaker 3: that was hotter than anticipated, assuming that they were able
• 18:35
  Speaker 3: to get that out. Plus, the tricky thing will be, Mike,
• 18:40
  Speaker 3: is if we have some poor labor reports come out
• 18:42
  Speaker 3: from October or what was it, the September one was
• 18:44
  Speaker 3: already put together right October, where you don't really have
• 18:47
  Speaker 3: a chance of getting.
• 18:47
  Speaker 2: Made so October, from what I understand, we are going
• 18:50
  Speaker 2: to get the business side of the survey and not
• 18:53
  Speaker 2: the household side of the survey, so you'll no job creation,
• 18:56
  Speaker 2: you won't know unemployment rate in October.
• 18:58
  Speaker 4: This to me is going to ship a lot.
• 19:00
  Speaker 3: Really simply to put it is because we have a
• 19:02
  Speaker 3: lot of economic data reports to go through over the
• 19:05
  Speaker 3: course of the next few weeks. So this fifty to
• 19:06
  Speaker 3: fifty day is meaningless in a sense, or rather reflects
• 19:09
  Speaker 3: the uncertainty on where they're going to go, because you
• 19:12
  Speaker 3: need to have called three to five economic reports come
• 19:15
  Speaker 3: out before this meetia occurs.
• 19:16
  Speaker 2: Let's take a quick break. When we come back mention
• 19:19
  Speaker 2: equity markets under pressure, We're gonna have a full recap
• 19:21
  Speaker 2: for you next with Wall Street Watch.
• 19:40
  Speaker 1: Like us on Facebook and follow us on Twitter at
• 19:43
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• 19:47
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• 19:51
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• 20:22
  Speaker 1: Time now for Wall Street. Watch a complete look at
• 20:25
  Speaker 1: what's moving markets so far today right here on the
• 20:29
  Speaker 1: Financial Exchange Radio Net.
• 20:30
  Speaker 5: Market's in the red again today after yesterday's sell off,
• 20:34
  Speaker 5: driven by high valuation, concerns in the tech sector, and
• 20:37
  Speaker 5: uncertainty about interest rates. At the fed's upcoming December meeting. However,
• 20:42
  Speaker 5: we are seeing some dip.
• 20:43
  Speaker 4: Buying right now.
• 20:45
  Speaker 5: The Dow is down by over eight tenths of a
• 20:47
  Speaker 5: percent or four hundred and three points. SMP five hundred
• 20:51
  Speaker 5: now down three tenths of one percent or twenty points.
• 20:55
  Speaker 5: NASDAC now down only a tenth of a percent or
• 20:59
  Speaker 5: thirty eight points. It's lower. Russell two thousands down about
• 21:03
  Speaker 5: half a percent. Ten year treasurevealed is flat at four
• 21:06
  Speaker 5: point one point one nine percent. In crude oil up
• 21:09
  Speaker 5: over two percent higher, trading just above sixty dollars. A
• 21:13
  Speaker 5: barrel breaking news from Walmart this morning after the retail
• 21:16
  Speaker 5: giants said CEO Doug McMillan is retiring early next year.
• 21:20
  Speaker 5: McMillan has served as Walmart's CEO since twenty fourteen. John
• 21:26
  Speaker 5: Ferner will take over the role and has been the
• 21:28
  Speaker 5: CEO of Walmart's US business since twenty nineteen. Ferner started
• 21:32
  Speaker 5: with Walmart in nineteen ninety three as an hourly associate.
• 21:36
  Speaker 5: Walmart stock is down by two percent. Meanwhile, Applying Materials
• 21:40
  Speaker 5: reported better than expected quarterly results were driven by the
• 21:44
  Speaker 5: AI boom. However, the semiconductor maker gave a disappointing outlook
• 21:49
  Speaker 5: for next year, including modest full year revenue guidance, shares
• 21:52
  Speaker 5: are down about two percent. Elsewhere, ticket vendor stub Hub
• 21:56
  Speaker 5: reported a third quarter net loss of about one point
• 21:59
  Speaker 5: three billion dollars. The company blamed a one time stock
• 22:02
  Speaker 5: based compensation charge. StubHub also said it would not provide
• 22:06
  Speaker 5: guidance for the current quarter. StubHub share sinking twenty four percent,
• 22:11
  Speaker 5: shares of Sidera Therapeutic surging one hundred and five percent
• 22:16
  Speaker 5: after Murk agreed to buy the company for about nine
• 22:19
  Speaker 5: two billion dollars, and according to the Wall Street Journal, Paramount,
• 22:23
  Speaker 5: Comcast and Netflix are preparing bids for Warner Brothers Discovery.
• 22:28
  Speaker 5: The report also said Warner Brothers Discovery has an initial
• 22:31
  Speaker 5: deadline for first round bids of November twentieth. Warner up
• 22:37
  Speaker 5: by over two percent. I'm Tucker Silla, and that is
• 22:40
  Speaker 5: Wall Street Watch.
• 22:41
  Speaker 2: It wasn't planning to go there. But can we talk
• 22:43
  Speaker 2: about Walmart for a moment here? Sure, I feel like
• 22:46
  Speaker 2: they've been getting dragged a little bit during the government
• 22:48
  Speaker 2: shutdown on the Snap benefit conversation. I've just seen them
• 22:52
  Speaker 2: in social media mentioned as like, hey, you know, why
• 22:56
  Speaker 2: are there so many people on Snap benefits? It's because
• 22:58
  Speaker 2: companies like Walmart don't pay their employees enough. And you know,
• 23:02
  Speaker 2: there's been rumors that as part of the like onboarding
• 23:06
  Speaker 2: stuff with Walmart, as an employee, you learn how to
• 23:09
  Speaker 2: file for food stamps because you're eligible for them based
• 23:11
  Speaker 2: on the hourly wages. I don't know if there's any
• 23:13
  Speaker 2: truth to those rumors, but I feel like they've been
• 23:15
  Speaker 2: getting dragged a little bit. I want to mention for
• 23:18
  Speaker 2: a moment here that Doug McMillan, the current CEO of Walmart,
• 23:22
  Speaker 2: worked for Walmart throughout his entire career. He started took
• 23:25
  Speaker 2: his first role for the company as a teenager in
• 23:28
  Speaker 2: nineteen eighty four. Moved on to be a buyer, but
• 23:31
  Speaker 2: you know, he was a teenager working at Walmart as
• 23:34
  Speaker 2: a summer associate and worked his way up through the
• 23:36
  Speaker 2: corporate ladder. They funded part of his college education and
• 23:39
  Speaker 2: his MBA. His replacement that was just named John Ferner,
• 23:43
  Speaker 2: who I didn't know anything about, but Tucker mentioned this
• 23:47
  Speaker 2: as well, began his career in ninety three as an
• 23:50
  Speaker 2: hourly store associate. That is kind of unheard of in
• 23:54
  Speaker 2: the world. That's all business.
• 23:55
  Speaker 4: It is really cool.
• 23:56
  Speaker 2: Yeah, like founders, sure yep. But when when you're talking
• 24:00
  Speaker 2: about two CEOs in a row who came up from
• 24:06
  Speaker 2: starting as hourly employees the lowest level of a company
• 24:10
  Speaker 2: as large as Walmart, and are now running that company,
• 24:15
  Speaker 2: you gott applaud that for a moment, definitely, right, Like
• 24:17
  Speaker 2: that is very impressive to be able to state something
• 24:21
  Speaker 2: like that to your employees. Like everybody knows Walmart wages
• 24:26
  Speaker 2: kind of suck. A lot of people look at it
• 24:28
  Speaker 2: as a job for, you know, an entry level person
• 24:32
  Speaker 2: to start their career at. But to be able to
• 24:33
  Speaker 2: say that two of your last CEOs started in that
• 24:37
  Speaker 2: hourly role and were supported throughout their career to become
• 24:41
  Speaker 2: CEO of one of the largest employers in the world,
• 24:45
  Speaker 2: that's pretty damn impressive.
• 24:46
  Speaker 3: And they have a lot of examples of managers taking
• 24:50
  Speaker 3: over that position starting at the lowest level two Like,
• 24:53
  Speaker 3: we're focusing on the CEO, but this is not uncommon.
• 24:55
  Speaker 3: They do know that ethos of promoting from within. If
• 24:58
  Speaker 3: you look at the stock price and that's what you know.
• 25:00
  Speaker 3: Sam Walden, who's who's passed but in his sort of
• 25:04
  Speaker 3: you know, dying days, was really proud of just how
• 25:06
  Speaker 3: much wealth he had created for those employees who were
• 25:09
  Speaker 3: shareholders in the company over that span of time.
• 25:12
  Speaker 2: Again, company's got plenty of faults. I'd been saying that
• 25:14
  Speaker 2: they're the holy grail of everything, but man, that that
• 25:19
  Speaker 2: one piece, not to mention like everything else that they
• 25:21
  Speaker 2: have managed to sidestep. And you know, go look at
• 25:25
  Speaker 2: Target versus Walmart right now and look at that case study.
• 25:27
  Speaker 2: It's it's pretty it's pretty uh interesting. But yeah, I
• 25:32
  Speaker 2: just found that piece to be pretty unheard of in
• 25:35
  Speaker 2: the world of CEOs and business.
• 25:37
  Speaker 3: Is it wrong that I was kind of happy that
• 25:39
  Speaker 3: stub hub was down twenty five percent just because I
• 25:41
  Speaker 3: don't like the company and the online ticketing and.
• 25:43
  Speaker 4: Yeah, take that. I think that they're based out of
• 25:46
  Speaker 4: Boston though, right, so.
• 25:47
  Speaker 3: I should maybe maybe I should hold that back a
• 25:51
  Speaker 3: little bit.
• 25:51
  Speaker 4: But just concerts have gotten too expensive, come on, yeah,
• 25:54
  Speaker 4: the fees.
• 25:55
  Speaker 5: It's crazy.
• 25:55
  Speaker 2: It's we got off track there, Sorry about everybody. Back
• 26:00
  Speaker 2: in September, the White House shoreshadowed by issuing executive order
• 26:04
  Speaker 2: the President did saying it would consider reduction in tariffs
• 26:08
  Speaker 2: on some items that are not produced in the United
• 26:10
  Speaker 2: States so long as those foreign nations agree to trade
• 26:13
  Speaker 2: deals with Washington. We're getting a bit of a taste
• 26:16
  Speaker 2: of that at the grocery stores this morning. The US
• 26:18
  Speaker 2: plans to eliminate tariffs on bananas, coffee, beef, and certain
• 26:21
  Speaker 2: apparel and textile products under framework agreements with four Latin
• 26:26
  Speaker 2: American nations. Senior Administration official told reporters on Thursday. The
• 26:32
  Speaker 2: move expected to apply to goods from Ecuador, Argentina, l Salvador,
• 26:35
  Speaker 2: and Guatemala. Part of a pretty big shift here, especially
• 26:38
  Speaker 2: when it comes to grocery prices. And I don't look
• 26:42
  Speaker 2: at this as much other than a targeted approach to
• 26:44
  Speaker 2: trying to find ways to bring down grocery prices, and
• 26:48
  Speaker 2: frankly makes a fair bit of sense to me. I mean,
• 26:51
  Speaker 2: we are you can tear iff bananas by seventy percent.
• 26:54
  Speaker 2: We are not going to have a big banana industry
• 26:56
  Speaker 2: or coffee industry in the United States unless there's sort
• 27:00
  Speaker 2: of technological revolution around how you grow this stuff.
• 27:02
  Speaker 3: No, the climate's just not therefore it so this to
• 27:05
  Speaker 3: me seems like really aimed and focused at any inflationary
• 27:09
  Speaker 3: concerns that may come over the course of the next
• 27:12
  Speaker 3: couple months. This is from a policy standpoint, the best
• 27:14
  Speaker 3: that you can do to attack this issue.
• 27:18
  Speaker 2: The more interesting side of the terriff. I mean, frankly,
• 27:21
  Speaker 2: since like June, tariffs have taken a big back seat.
• 27:24
  Speaker 3: It's been nice, It's a radio has been nice to
• 27:28
  Speaker 3: not much.
• 27:29
  Speaker 2: And I'll continue to say that we really shouldn't report
• 27:32
  Speaker 2: on tariffs until we have actual news to report rather
• 27:35
  Speaker 2: than rumors.
• 27:36
  Speaker 4: The Supreme Court.
• 27:36
  Speaker 2: Ye, yeah, I mean this piece is an actual announcement
• 27:40
  Speaker 2: from the White House, so I think it's worth reporting on.
• 27:42
  Speaker 2: But you know, all of this to me is very
• 27:45
  Speaker 2: much in question right now as to a whether the
• 27:49
  Speaker 2: Supreme Court is going to alter what the Trump administration
• 27:52
  Speaker 2: is able to do on tariffs. That could run anything
• 27:55
  Speaker 2: from throwing it out and refunding everything that was paid
• 27:58
  Speaker 2: to some sort of restrictions on what can be used
• 28:02
  Speaker 2: going forward. And then the follow on question to me
• 28:05
  Speaker 2: is if that happens. I know the Trump administration is
• 28:09
  Speaker 2: promised and rumored to look at other strategies to implement
• 28:13
  Speaker 2: tariffs again, but will they actually do so. It's turned
• 28:16
  Speaker 2: out to not be an immensely popular policy decision when
• 28:20
  Speaker 2: it comes to tariffs. It has you know, sparked anger
• 28:22
  Speaker 2: amongst some donors, and it may you know, if the
• 28:25
  Speaker 2: Supreme Court does rule it out, I wouldn't be shocked
• 28:28
  Speaker 2: to see the Trump administration take a step back and say,
• 28:30
  Speaker 2: you know what, sorry, hands are tied. Unless Congress will
• 28:34
  Speaker 2: is willing to do something on this, we're just gonna
• 28:36
  Speaker 2: have to walk away from tariffs.
• 28:38
  Speaker 3: Really, you don't think they'll try and pivot and find
• 28:40
  Speaker 3: because I've read that there's other ways that they could
• 28:42
  Speaker 3: get there.
• 28:43
  Speaker 2: Are they take longer, they'd be you know, more dragged
• 28:49
  Speaker 2: around by processes, but there are other laws that they
• 28:51
  Speaker 2: can use to implement tariffs. And a few months ago
• 28:54
  Speaker 2: I would have told you like, yeah, that's definitely what
• 28:56
  Speaker 2: we'll see today. I'm just unsure, you know, we we
• 29:00
  Speaker 2: have gotten so far away from the April announcements. We
• 29:03
  Speaker 2: keep getting more and more of these negotiations when it
• 29:06
  Speaker 2: comes to these items, and so I do just openly
• 29:08
  Speaker 2: wonder if you have, you know, a much more refined
• 29:13
  Speaker 2: view on tariffs come twenty twenty six. If the Supreme
• 29:16
  Speaker 2: Court does in fact throw it out. Those are all
• 29:18
  Speaker 2: a bunch of big ifs, and it's all conjecture at
• 29:20
  Speaker 2: this stage, but we're just not hearing about it.
• 29:24
  Speaker 3: My head would spin as to what that would mean
• 29:27
  Speaker 3: if they had to be all refunded the tariffs or
• 29:29
  Speaker 3: if they threw it out. I just can't even go
• 29:31
  Speaker 3: there on a Friday.
• 29:32
  Speaker 2: Hundreds of billions of dollars that you need to figure
• 29:34
  Speaker 2: out how to refund to individual companies that are sometimes
• 29:37
  Speaker 2: the size of five employees. Good luck. Yeah, that would
• 29:40
  Speaker 2: be pretty messy. Let's take a quick break here when
• 29:43
  Speaker 2: we come back, nine hundred thousand new homeowners underwater on
• 29:48
  Speaker 2: their homes. Does that signal a problem with the housing market.
• 29:52
  Speaker 2: We'll be covering next on the Financial Exchange.
• 29:54
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• 29:58
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• 30:04
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• 30:06
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• 30:11
  Speaker 2: Network, Chucker. Have you noticed that the more I like
• 30:23
  Speaker 2: a song, the longer I let it play?
• 30:26
  Speaker 4: Let a Brad Baby?
• 30:28
  Speaker 2: A couple of nearly nine hundred thousand new homeowners are
• 30:33
  Speaker 2: underwater on their mortgages. According to market Watch, this is
• 30:37
  Speaker 2: signaling a troubling sign for the economy. Paul, are you
• 30:42
  Speaker 2: troubled by the nine hundred thousand homeowners under If I
• 30:47
  Speaker 2: were one of the nine hundred thousand homeowners. Don't get
• 30:50
  Speaker 2: me wrong, I would be rather troubled by the.
• 30:52
  Speaker 4: Feel for them.
• 30:53
  Speaker 3: But when you have what three hundred and thirty million
• 30:56
  Speaker 3: people in this country and maybe one hundred million households, No,
• 31:00
  Speaker 3: from a macro economic perspective, not troubled. This is in
• 31:04
  Speaker 3: different pockets of the country that you could probably guess
• 31:07
  Speaker 3: where they are Texas, Florida, many homes that have been
• 31:10
  Speaker 3: purchased in the last three or four years, and many
• 31:14
  Speaker 3: loans that were the is it faha that yeah faha,
• 31:20
  Speaker 3: and VA loans where you're basically only putting three and
• 31:22
  Speaker 3: a half to five percent down as a down payment,
• 31:24
  Speaker 3: so there's very little equity room to work with in
• 31:27
  Speaker 3: the first place, unlike your traditional twenty percent down where
• 31:30
  Speaker 3: there's much more of a buffer if the home value
• 31:32
  Speaker 3: is to decline.
• 31:33
  Speaker 4: So not concerned.
• 31:34
  Speaker 2: I was looking for some comparisons of when you do
• 31:37
  Speaker 2: the math in that nine hundred thousand, it estimates that
• 31:39
  Speaker 2: about one point six percent of all mortgage holders are
• 31:43
  Speaker 2: underwater in the United States currently. I was looking for
• 31:47
  Speaker 2: some sources on this, and according to the Brookings Institute
• 31:52
  Speaker 2: back in twenty eleven, there were approximately eleven million homes
• 31:57
  Speaker 2: underwater twenty two to twenty three percent of all mortgage
• 32:00
  Speaker 2: properties in the country. Obvious concentrations Florida, Nevada, Arizona. I
• 32:05
  Speaker 2: think Nevada is something like half of all properties we're
• 32:08
  Speaker 2: underwater at one point in time. We are nowhere near
• 32:13
  Speaker 2: a problem on this issue, from either a numbers perspective
• 32:17
  Speaker 2: or a percentage perspective, and I suspect we are not
• 32:20
  Speaker 2: going to get there.
• 32:22
  Speaker 1: No.
• 32:23
  Speaker 2: Like again, I cannot emphasize enough how much this is
• 32:26
  Speaker 2: not an issue that we need to worry about right now.
• 32:28
  Speaker 2: Plenty of other ones out there, Like, if you want
• 32:31
  Speaker 2: something to scare you, there's plenty out there for you
• 32:34
  Speaker 2: to be scared about. I really don't think underwater homes
• 32:38
  Speaker 2: is going to be the issue that sinks this economy.
• 32:41
  Speaker 2: I do think that this speaks volumes about the state
• 32:43
  Speaker 2: of the housing market. I do think we are an
• 32:45
  Speaker 2: uptick here. I think a year from now, I'd be
• 32:47
  Speaker 2: willing to bet that there are more homes underwater than
• 32:49
  Speaker 2: there are today. I think it's a drag on the
• 32:54
  Speaker 2: economy because there's not going to be as much housing
• 32:56
  Speaker 2: construction spending that you know that has clearly reversed its
• 33:00
  Speaker 2: because guess what, These homes are underwater in the exact
• 33:02
  Speaker 2: places that home builders like to build. But again, back
• 33:06
  Speaker 2: in the early twenty tens and post Great Financial Crisis,
• 33:10
  Speaker 2: there was such an immense amount of pressure on the
• 33:13
  Speaker 2: housing market that we basically didn't build a third as
• 33:17
  Speaker 2: many homes as we normally would for the course of
• 33:19
  Speaker 2: a decade. I just don't think we're going to get there.
• 33:22
  Speaker 2: I just don't see a possibility that we get there.
• 33:25
  Speaker 2: But nonetheless, inventory is going to continue to tick up
• 33:28
  Speaker 2: in some of these municipalities and some of these states
• 33:30
  Speaker 2: there there are under pressure. There could be some deals
• 33:33
  Speaker 2: to be had. There will be some individuals who are
• 33:37
  Speaker 2: forced to sell, that have their homes, you know, repossessed
• 33:39
  Speaker 2: if they lose their job, like all sorts of real
• 33:42
  Speaker 2: serious issues that will come of this. But I think
• 33:45
  Speaker 2: what I keep in mind is one point six percent
• 33:48
  Speaker 2: of all mortgages compared to one in five back in
• 33:51
  Speaker 2: the early twenty tens. It's just not an issue.
• 33:54
  Speaker 5: The US Virgin Islands isn't just a postcard. It's alive
• 33:58
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• 34:03
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• 34:06
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• 35:00
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• 35:03
  Speaker 2: Wall Street Journal Exclusive, Amazon and Microsoft are backing efforts
• 35:07
  Speaker 2: that would restrict and video's exports over to China. I
• 35:10
  Speaker 2: assume Paul that this comes from a driving sense of
• 35:13
  Speaker 2: patriotism that these two companies share in the need to
• 35:17
  Speaker 2: beat China in the AI race, Right.
• 35:19
  Speaker 3: Mike, This would be like if you and I were
• 35:21
  Speaker 3: doing a forty yard dash and there was some proposition
• 35:24
  Speaker 3: out there for you to have your legs tied together,
• 35:25
  Speaker 3: and I would be like, Yes, I think that's a
• 35:28
  Speaker 3: good idea.
• 35:29
  Speaker 4: Man, Mike schev his legs together.
• 35:30
  Speaker 3: In this race for big money between the two of us,
• 35:33
  Speaker 3: that seems very fair to be in something that clearly
• 35:36
  Speaker 3: the two of them are jumping on the same notion
• 35:38
  Speaker 3: that can we hamstering our competitor.
• 35:40
  Speaker 4: Sure, yeah, we're all for that. That sounds great.
• 35:43
  Speaker 2: So Congress is considering this legislation that would further restrict
• 35:47
  Speaker 2: the sale of chips to China. There's been some reporting
• 35:51
  Speaker 2: that we'll get into over the course the last few
• 35:52
  Speaker 2: weeks about how China has been getting around the import
• 35:56
  Speaker 2: restrictions of Nvidia chips, or the export restrictions rather of
• 35:58
  Speaker 2: Nvidia chips. But very obviously the only reason Amazon and
• 36:03
  Speaker 2: Microsoft care about this is because it means that they
• 36:05
  Speaker 2: can get the access to chips over Chinese customers, and
• 36:08
  Speaker 2: they can get them at a cheaper price, Right, supply
• 36:10
  Speaker 2: and demand. Baby, if there is, If there are fewer
• 36:13
  Speaker 2: buyers of these semiconductors, then you know, even if you
• 36:17
  Speaker 2: have really deep ties with the company that you are
• 36:19
  Speaker 2: buying from, you are going to support a restriction of
• 36:22
  Speaker 2: these chips elsewhere, and you're going to get a better
• 36:24
  Speaker 2: price and more of them than if you have to
• 36:26
  Speaker 2: compete with Yeah. Sure, I was trying to come up
• 36:31
  Speaker 2: with one of the names. Thank you for filling me
• 36:32
  Speaker 2: in there. The ways in which China has been getting
• 36:36
  Speaker 2: around these restrictions, though, have been pretty interesting. I think
• 36:39
  Speaker 2: it was actually the Journal Too that published a piece
• 36:42
  Speaker 2: on this of how they do so, and ultimately and
• 36:45
  Speaker 2: Video cannot and does not seemingly sell large numbers of
• 36:48
  Speaker 2: chips directly to Chinese entities. There'd been a lot of
• 36:51
  Speaker 2: hot water if they did, and so they don't. They
• 36:53
  Speaker 2: really don't do it. But you have to remember what
• 36:57
  Speaker 2: we're talking about here, which is they want to have
• 37:01
  Speaker 2: access to these chips to be able to run computer programs.
• 37:03
  Speaker 2: They don't necessarily need to physically have a semiconductor. It's
• 37:09
  Speaker 2: not a magnet that you need to put into a
• 37:13
  Speaker 2: device that you run. You just need to have the
• 37:15
  Speaker 2: computing power and so what the Wall Street Journal alleges
• 37:18
  Speaker 2: has been happening is, for instance, a company in Indonesia
• 37:23
  Speaker 2: will buy a bunch of Nvidia chips. They will sell
• 37:26
  Speaker 2: them to a data company, a data center company in
• 37:28
  Speaker 2: Indonesia that again is not Chinese owned, but that data
• 37:32
  Speaker 2: center company that is now running these Nvidia chips will
• 37:35
  Speaker 2: have a contract with a major Chinese tech company to
• 37:37
  Speaker 2: run all of their computer programs on this data center
• 37:40
  Speaker 2: that is, you know, geographically pretty close to China and
• 37:43
  Speaker 2: has some politically close ties. And when asked about this
• 37:48
  Speaker 2: type of arrangement, even government officials here in the US
• 37:50
  Speaker 2: have made the point that it's not terribly clear that
• 37:53
  Speaker 2: that sort of arrangement is illegal under these terms. And
• 37:57
  Speaker 2: so there are all these backdoor ways of accessing this stuf.
• 38:00
  Speaker 2: And it's why Congress is looking at it again, because
• 38:04
  Speaker 2: this is not your traditional product. It's not a weapon,
• 38:08
  Speaker 2: it's not a gun that you can easily just restrict
• 38:11
  Speaker 2: access to. It is this device that is accessed in
• 38:14
  Speaker 2: the cloud across the Internet, and where it's geographically located
• 38:20
  Speaker 2: is not necessarily the most important factor to consider.
• 38:23
  Speaker 3: The other thing I wonder is just how much enthusiasm
• 38:25
  Speaker 3: there still remains from China to buy these chips because
• 38:28
  Speaker 3: there's been a lot of big push to go domestic
• 38:31
  Speaker 3: in terms of those chips.
• 38:32
  Speaker 2: Yep, there has been, and that's been pressuring the market
• 38:35
  Speaker 2: as well. We've got to take a quick break, but
• 38:38
  Speaker 2: a lot more to cover. On the Financial exchange, one
• 38:41
  Speaker 2: of the three major indices has reversed itself into the
• 38:43
  Speaker 2: positive for the day. We'll be covering that and more
• 38:45
  Speaker 2: next