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Oil Prices Fall as Hormuz Risks Still Loom · The Financial Exchange Show

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Speaker 2: Chuck, Mark and Sucker with you here. And as we
1:16
Speaker 2: kick things off this hour, we got stocks making a rally.
1:22
Speaker 2: And if you like stocks going up, then you like
1:25
Speaker 2: today better than yesterday, because yesterday was not great. I
1:29
Speaker 2: prefer not to do that again today good. You've got
1:33
Speaker 2: the S and P up fifty three points. That's fun.
1:36
Speaker 2: You've got the Dow Jones Industrial Average up four hundred
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Speaker 2: and sixteen points, also fun, and the NASDAK Composits up
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Speaker 2: two hundred and fourteen points. That is fun too. Even
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Speaker 2: that cute little Russell two thousand. Yeah, who's a good boy.
1:48
Speaker 2: Yeah you are. Yeah, you're up twenty eight points, which
1:52
Speaker 2: again no one knows what that means for the Russell
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Speaker 2: two thousand, it's about one percent. So we've got stocks
1:57
Speaker 2: rallying across all major USN desease, great bonds also rallying.
2:02
Speaker 2: Tenure Treasury down eight point seven basis points to four
2:06
Speaker 2: point four h six percent. Again, not really seeing any
2:09
Speaker 2: news that's driving this today, but it is moving in
2:12
Speaker 2: that fashion. Dollar index despite rates down, dollar up. So
2:16
Speaker 2: you remember last spring when everyone was freaking out because
2:18
Speaker 2: it was rates up, dollar down. That's what you don't
2:20
Speaker 2: want to see with a currency. This is the opposite.
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Speaker 2: This is what you want to see, which is rates down.
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Speaker 2: Dollar up. That is fantastic, dollars up point three one
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Speaker 2: percent to one oh one four to eighty five. Let's
2:32
Speaker 2: see we got gold on that dollar strength. Gold is
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Speaker 2: continuing to get just bludgeoned. And again it's just been
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Speaker 2: like relentless for gold in the last couple months. Now
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Speaker 2: down another one twenty five and ounce to fourenty twenty three,
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Speaker 2: and we've got crude oil West Text intermediate sligning another
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Speaker 2: three twenty seven a barrel down below seventy a barrel
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Speaker 2: for the first time in almost four months. You're at
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Speaker 2: sixty nine to ninety four. Obviously still above the fifty
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Speaker 2: five to sixty range that we were at pre war,
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Speaker 2: but gotta be honest, it's come down a lot quicker
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Speaker 2: than I was anticipating. You do have these flows exiting
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Speaker 2: horror moves now that are trying to find buyers. I
3:13
Speaker 2: think the question still is, Okay, what does the back
3:15
Speaker 2: half of the summer look like after these ships escape
3:18
Speaker 2: horm moves that were preloaded, do you have enough flow
3:21
Speaker 2: coming back in to continue moving at this pace? We'll
3:25
Speaker 2: see what we get. But thus far things moving really
3:28
Speaker 2: well on the crude oil side. Triple a national average
3:31
Speaker 2: for gas prices stagnant overnight though up actually two tenths
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Speaker 2: of a cent to three ninety two and eight tenths
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Speaker 2: part of this. So we talk about gas prices, there's
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Speaker 2: two different factors. The first is, okay, what's the price
3:45
Speaker 2: of crude. The second is what's the demand for gasoline?
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Speaker 2: And then by virtue of that, what is what's called
3:52
Speaker 2: the crack spread that you get from refiners. Cracking is
3:55
Speaker 2: the process by which refiners basically turn crude oil into
4:02
Speaker 2: the various different products. The crackspread represents, hey, how much
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Speaker 2: of a premium are they able to charge for the
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Speaker 2: product versus the input price on the crude. And what's
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Speaker 2: been interesting to watch in the last couple of weeks,
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Speaker 2: as crewe prices have come down, crackspreads have moved up
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Speaker 2: top side again. Cracks are still very wide right now,
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Speaker 2: around fifty to fifty five dollars a barrel. Typical crackspread
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Speaker 2: usually is somewhere in the twenties, so you still have
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Speaker 2: those very much elevated right now, and at least for
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Speaker 2: you know this one day. Maybe that's a factor in
4:34
Speaker 2: keeping gas prices from falling further. But I still think
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Speaker 2: you have some room for gas prices to move down
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Speaker 2: into that three fifty to three sixty range. Not pre war,
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Speaker 2: remember we were at you know, two eighty eight, but
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Speaker 2: still a lot better than four fifty. We'll take three
4:47
Speaker 2: fifty over four to fifty any day of the week,
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Speaker 2: and maybe even twice on Sunday. That sounds lovely. So
4:54
Speaker 2: let's talk more about oil. You got a piece from Bloomberg.
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Speaker 2: Oil falls below says seventy five a barrel. We should
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Speaker 2: cross that out because it's below seventy. Now you've got
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Speaker 2: oil below seventy. And here's what you're seeing. There has
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Speaker 2: been an uptick in ships exiting the Gulf carrying oil.
5:12
Speaker 2: The two things that you want to watch are what
5:15
Speaker 2: ships are exiting and what's the flow coming back in
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Speaker 2: of empty tankers known as ballast tankers. Here's the couple
5:24
Speaker 2: of things that we're seeing. Number One, to this point,
5:27
Speaker 2: the heaviest volume of crewde tankers coming out has been
5:31
Speaker 2: Iranian affiliated, and so that is I think something that
5:35
Speaker 2: is worth watching, just because it's clear that Iran is,
5:40
Speaker 2: you know, managing the flow right now to get their
5:42
Speaker 2: tankers out. Do you see a suitable uptick of non
5:46
Speaker 2: Iranian affiliated tankers in the near future. The other piece
5:50
Speaker 2: is you need a suitable flow coming back in of
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Speaker 2: other new tankers. And this is being held up in
5:56
Speaker 2: a couple of different areas in terms of Okay, again
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Speaker 2: you know which ships are able to get through. But
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Speaker 2: the other one, the other issue that is coming into
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Speaker 2: focus on this is price. Where again i've seen, you know,
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Speaker 2: the various numbers on this tanker costs in order to
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Speaker 2: go back into horror moves are running anywhere from four
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Speaker 2: to nine x their pre war costs, simply because the
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Speaker 2: fleets that are willing to go back in right now
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Speaker 2: they don't want to get stuck there, and if they
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Speaker 2: are going to get stuck there, they want to get paid.
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Speaker 2: So when you talk about this in terms of dollar value,
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Speaker 2: normally the transport of oil from the Middle East to
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Speaker 2: anywhere else adds about a dollar to a dollar fifty
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Speaker 2: a barrel onto the cost of it, Like when you
6:39
Speaker 2: look at like the cost of buying that barrel, that's
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Speaker 2: what it works out to. When you're talking about you know,
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Speaker 2: four to nine x. Now you're talking like five to
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Speaker 2: ten dollars per barrel. Is the added cost with that
6:51
Speaker 2: type of price attached to it. Hey, eventually, if enough
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Speaker 2: companies you know, say okay, like we're going to go
6:58
Speaker 2: back in, then you get competition in a drive those
7:00
Speaker 2: costs down. Right now, the only companies that are willing
7:03
Speaker 2: to go back in are the ones that are you know,
7:05
Speaker 2: willing to take on higher risk. Marisk has said, hey,
7:08
Speaker 2: they're not making any changes to operations right now, just
7:10
Speaker 2: as an example. Marisk is more on the container ship
7:13
Speaker 2: side of things. But you know, just to be representative
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Speaker 2: of what's going on, not every company is comfortable taking
7:19
Speaker 2: the same level of risk. And the way that I
7:21
Speaker 2: had it explained yesterday, which I think you know, really
7:24
Speaker 2: gets at it is, Hey, before the straight of Horror
7:27
Speaker 2: Moves was closed, it was this theoretical risk that yeah,
7:30
Speaker 2: you had to consider it, but you never had to
7:32
Speaker 2: really price. Now that you know what can happen, it
7:35
Speaker 2: is something that you want to build into your pricing structure,
7:38
Speaker 2: and so that should be reflected in you know, basically
7:41
Speaker 2: a risk premium for the cost of transiting horror Moves
7:45
Speaker 2: going forward. So I find it all interesting in terms
7:48
Speaker 2: of where we are, but still there's enough oil coming
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Speaker 2: out at the moment that short term prices are moving down.
7:53
Speaker 2: The question is still going to be what if things
7:55
Speaker 2: look like over the remainder of the summer, because you
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Speaker 2: can't continue at this pace of exits if you don't
8:03
Speaker 2: have entries coming in in suitable quantities, and right now
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Speaker 2: there still is a mismatch on that side.
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Speaker 3: Yeah, the key point you've already made it is that
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Speaker 3: oil prices will be somewhat higher globally going forward because
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Speaker 3: of this period.
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Speaker 2: It not one hundred dollars or one hundred and twenty
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Speaker 2: like if everything goes fine, like you won't get there.
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Speaker 3: I think so, But it's like once there's a oh,
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Speaker 3: I don't know, once a government defaults, it's stigmatized. Yes,
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Speaker 3: they're borrowing, costs are higher in perpetuity. Similarly, Iran is
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Speaker 3: proven they can do this when pushed. That risk has
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Speaker 3: to be priced into oil. I don't know if it's one, three,
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Speaker 3: five or ten percent. I don't know if we'll ever
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Speaker 3: be able to tease that out empirically. I'm sure researchers
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Speaker 3: are already working on it, but they're going to be higher.
8:44
Speaker 3: As you've pointed out.
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Speaker 2: So this I think the place that I land is
8:49
Speaker 2: based on the flows coming out right now. Oil prices
8:52
Speaker 2: should stay in a pretty good spot over the next
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Speaker 2: six to eight weeks as long as there's no further disruption.
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Speaker 2: The question is going to be again back half of
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Speaker 2: the summer, Now, what do things look like, And that's
9:03
Speaker 2: going to be dependent on the flows coming in of
9:05
Speaker 2: empty tankers over that same time period and what kind
9:09
Speaker 2: of production can get spooled up. We've gone from around
9:12
Speaker 2: twelve million barrels a day of production being offline to
9:14
Speaker 2: around eight million being offline. That still represents a real
9:19
Speaker 2: problem if you can't get that back online, but we
9:22
Speaker 2: don't know that that's going to be the case. So
9:24
Speaker 2: we'll see how things move. My expectation prices down, maybe
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Speaker 2: prices up a little bit, and then again after this. Look,
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Speaker 2: those of you who've listened to our so long enough,
9:34
Speaker 2: we don't predict oil prices like long term. I don't
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Speaker 2: know what the right number is. It's probably higher than
9:41
Speaker 2: what it was in January and February of this year,
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Speaker 2: just because there's going to be more demand from countries
9:47
Speaker 2: that want to rebuild strategic reserves and countries that need
9:51
Speaker 2: to build them for the first time. But does that
9:54
Speaker 2: push oil prices to like one hundred or something? Probably not. So,
9:59
Speaker 2: you know, what's a reasonable range to land in higher
10:02
Speaker 2: than fifty five, lower than one hundred. I know it's
10:04
Speaker 2: a broad range, but like I don't know. Like I
10:07
Speaker 2: I'm not going to pretend to be, you know, an
10:10
Speaker 2: energy analyst who will predict like that exact pricing there.
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Speaker 2: The only reason we were talking about oil prices and
10:16
Speaker 2: talking about risk to the upside previously was we could
10:19
Speaker 2: count barrels in the US the same way the President
10:22
Speaker 2: and his team could, and they said last week, yep,
10:24
Speaker 2: we were about four weeks away from running out of
10:27
Speaker 2: you know, commercial reserves in the US. This is the
10:30
Speaker 2: thing that we were seeing and talking about when it
10:32
Speaker 2: comes to pricing oil in a non emergency environment. I
10:37
Speaker 2: got no clue, same as the rest of us. You know.
10:40
Speaker 2: Let's take a quick break. When we return. We've got
10:45
Speaker 2: a trivia question that we're going to do. And then
10:49
Speaker 2: the investor who scored a nine hundred percent win in
10:53
Speaker 2: the two thousand and eight crisis has a new big
10:55
Speaker 2: short bet. We'll talk to you about this piece and
11:00
Speaker 2: what it means next.
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12:58
Speaker 2: Bloomberg with this headline. Investor who scored nine hundred win
13:05
Speaker 2: in two thousand eight crisis has a new big short bet.
13:10
Speaker 2: So this a guy by the name of Lee Robinson.
13:13
Speaker 2: He's a hedge fund manager, and he's decided that he
13:17
Speaker 2: is taking positions in credit default swaps on insurance companies
13:23
Speaker 2: because he's nervous about private credit UH and apparently back
13:27
Speaker 2: in the financial crisis he turned a twenty million dollar
13:30
Speaker 2: position into two hundred million with quote timely bets against
13:34
Speaker 2: the US subprime sector. So this piece in terms of
13:40
Speaker 2: you know it being published and being newsworthy. This This
13:46
Speaker 2: piece sucks. And here's the problem is, most people aren't
13:52
Speaker 2: actually going to read the piece. They're gonna look at
13:57
Speaker 2: the headline and be like ooh, like that guy must
13:59
Speaker 2: know something thing, and then like blah blah blah, let
14:01
Speaker 2: me figure out what I can do. Number two, most
14:04
Speaker 2: people don't have the ability or the authorization from their
14:12
Speaker 2: broker to buy credit default swaps and trade them. The
14:15
Speaker 2: reason why is because, if we're being entirely honest, most
14:19
Speaker 2: of us are too dumb to trade credit default swaps,
14:21
Speaker 2: Like I am, Like, I realize that I've never even
14:25
Speaker 2: touched one, because I know I'm not smart enough to
14:28
Speaker 2: play in that ballgame. The third reason why I dislike
14:31
Speaker 2: this piece is because, Okay, so you're telling us that
14:35
Speaker 2: you know Lee Robinson is getting into these credit default swaps.
14:40
Speaker 2: Are you gonna publish the piece like before Lee tells us, Hey,
14:44
Speaker 2: now I'm getting out of them. No, you're not, so, Like,
14:47
Speaker 2: we don't know if he's getting into them for a
14:49
Speaker 2: week because he sees like a short term pricing thing.
14:52
Speaker 2: We don't know if he wants to just ride this
14:54
Speaker 2: until you know, credit private credit just melts down entirely
14:58
Speaker 2: we have none of this content text at all. And
15:02
Speaker 2: so I think that broadly when whenever I see a
15:07
Speaker 2: piece like this that's like, oh, this investor who made
15:10
Speaker 2: money doing this is now doing that, I can't stand
15:15
Speaker 2: it because a it assumes that just because they made
15:16
Speaker 2: one good investment decision before that, they're going to make
15:19
Speaker 2: another one. Second, it doesn't tell you anything about the
15:22
Speaker 2: timeline or what they're like how they're actually trading it.
15:25
Speaker 2: And third, in this case, it's talking about an instrument
15:27
Speaker 2: that is completely inappropriate for ninety nine point nine percent
15:30
Speaker 2: of investors to trade, and most can't even trade it
15:33
Speaker 2: because their broker won't allow them to Anyways.
15:35
Speaker 3: Yeah, I think most people agree that there are problems
15:38
Speaker 3: and will continue to be in private credit. Like that's
15:40
Speaker 3: proposition number one. I think we can all accept that.
15:42
Speaker 3: Sure proposition number two.
15:43
Speaker 2: Which by the way, still might be wrong, Like.
15:45
Speaker 3: That could be you know, like you know, it could
15:47
Speaker 3: be that that seems to be the conventional wisdom. Sure,
15:51
Speaker 3: we know insurers because they have to hold a lot
15:53
Speaker 3: of fixed income unlike you and I and long term investors,
15:57
Speaker 3: we can hold a lot of equities relative to bonds.
15:59
Speaker 3: Bonds for us or mostly insurance, not for everybody, but
16:02
Speaker 3: for a long term investor. Insurance companies think about their
16:04
Speaker 3: liabilities totally differently. They need fixed income to fund their
16:08
Speaker 3: liabilities because they're pretty predictable, so they might be seventy
16:12
Speaker 3: percent fixed income, the rest in real estate and sure equity.
16:15
Speaker 3: So insurance companies hold a lot of this stuff. Does
16:19
Speaker 3: it make sense to bet against if you if you're
16:21
Speaker 3: bearish on private credit, If and it makes sense to
16:24
Speaker 3: bet against certain insurance companies, well that might follow. I
16:28
Speaker 3: don't know how he's doing it isn't entirely clear. I
16:31
Speaker 3: don't know if he's using traded credit default swaps or
16:35
Speaker 3: if he's asking investment banks to make them for him.
16:39
Speaker 3: Sure like special contracts that nobody.
16:42
Speaker 2: Right, which they will do like if enough customer like,
16:45
Speaker 2: they'll do it.
16:45
Speaker 3: During the financial crisis, that's how some of the more
16:47
Speaker 3: famous hedge fund managers made money. They didn't go out
16:50
Speaker 3: and buy something that somebody else, some other vehicle managed
16:54
Speaker 3: by somebody else. They asked an investment bank like Goldman
16:57
Speaker 3: to make one for them. They wanted to insure against
17:00
Speaker 3: very specific events. So it's not clear where he believes
17:04
Speaker 3: the weaknesses are and how precise his rifle shots are.
17:09
Speaker 2: I also just I gotta read some of this other
17:10
Speaker 2: stuff just because it gets it like you're just not
17:13
Speaker 2: playing in the same ballpark as these guys, not even
17:15
Speaker 2: the same neighborhood, not even the same like planet elsewhere.
17:18
Speaker 2: Robinson lost a digital currency fund in twenty fourteen that's
17:21
Speaker 2: gained significantly exception and made winning wagers on Lebanese sovereign debt,
17:25
Speaker 2: and Fanny made junior preferred securities.
17:27
Speaker 3: Those are real rifle shots.
17:28
Speaker 2: That's what I mean, right, Like, this is someone who
17:31
Speaker 2: is plugged into everything he's doing. I don't know if
17:34
Speaker 2: this trade is or isn't going to work for him,
17:36
Speaker 2: but if you can't tell me what the Lebanese currency is,
17:41
Speaker 2: then you shouldn't be playing around with anything else that
17:43
Speaker 2: he's doing. Is kind of where I land mark. I
17:47
Speaker 2: don't know what the Lebanese currency is now.
17:48
Speaker 3: I'm not gonna look it up. I don't want to cheat,
17:50
Speaker 3: but I mean, can we make a gain? Give me?
17:52
Speaker 3: But who cares?
17:55
Speaker 2: Well?
17:55
Speaker 3: Nothing?
17:56
Speaker 2: Now?
17:57
Speaker 3: If I were Lebanese, I suppose I might.
18:01
Speaker 2: Is it?
18:01
Speaker 1: Is it?
18:02
Speaker 2: I was gonna guess something like that, just given you
18:04
Speaker 2: know early twentieth century, you know, British involvement in the region.
18:08
Speaker 3: Excellent point, but nobody cares because it's not nobody transacts
18:12
Speaker 3: in it.
18:12
Speaker 2: There's either that or the franc, you know, like it's
18:14
Speaker 2: gonna be one of those two. I think Algeria still
18:16
Speaker 2: uses like the Algerian franc or whatever it is. So uh,
18:20
Speaker 2: I don't know. But in any case, if you see
18:24
Speaker 2: a piece about hey, really smart guy or really random
18:28
Speaker 2: anyone person in finance had this good trade and here's
18:30
Speaker 2: their new one, you don't have to do what it's
18:35
Speaker 2: saying in there.
18:35
Speaker 3: Sometimes they're I don't I don't think he is. But
18:38
Speaker 3: sometimes they're they're they're they're so to speak, talking up
18:43
Speaker 3: their book to boost the vall. I mean, managers are
18:46
Speaker 3: famous for doing this. They go on TV. Of course,
18:48
Speaker 3: they talk something up. They Sloomberg exists pretty much. Yeah,
18:52
Speaker 3: WI else would you write? Yeah, I'm sorry, but it's
18:55
Speaker 3: you can't be too cynical about finance. That's absolutely true.
18:57
Speaker 2: No, I mean c NBC more than bloom I think
19:00
Speaker 2: like CNBC half it's just like an infomercial for whatever,
19:03
Speaker 2: like heads Fund Manager, which is it's fine, but you
19:06
Speaker 2: just got to realize what it is. Let's take a
19:10
Speaker 2: quick break here and when we return, we've got a
19:12
Speaker 2: few things. Number one, we have an answer to the
19:15
Speaker 2: trivia question. Number two, we've got Wall Street Watch, and
19:19
Speaker 2: number three we're talking about artificial intelligence and power. How
19:24
Speaker 2: are we gonna pay for it? How are we gonna
19:25
Speaker 2: build it? We'll discuss after this.
19:39
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,
19:49
Speaker 1: telling out for Wall Street Watch, tracking the stocks, the
19:53
Speaker 1: dato and the headlines driving markets. So far today right
19:56
Speaker 1: here on the Financial Exchange Radio Network.
20:00
Speaker 4: I was seeing more of a bounce back in tech
20:03
Speaker 4: after its recent pullback. Right now, the Dow is up
20:06
Speaker 4: over one percent, SMP five hundred and now up over
20:09
Speaker 4: three quarters of a percent, Nasdaq also up three quarters
20:12
Speaker 4: of a percent, Russell two thousand up one point three percent.
20:16
Speaker 4: Ten Your Treasurreel down eight basis points at four point
20:20
Speaker 4: four zero percent, and Oiled down over four and a
20:22
Speaker 4: half percent, trading at sixty nine dollars a barrel, in
20:26
Speaker 4: its first earning support since it went public in May.
20:29
Speaker 4: Sarah Bras said it expects its operating margins to remain
20:33
Speaker 4: negative and under pressure through the end of the year,
20:36
Speaker 4: sending the stock down by sixteen percent. Meanwhile, FedEx logged
20:40
Speaker 4: higher revenue in the previous quarter, but the shipping company's
20:42
Speaker 4: profit ticked lower. FedEx now down by one percent. Elsewhere,
20:47
Speaker 4: fast food burger chain Wendy's seeing its stock serge twenty
20:51
Speaker 4: five percent, driven by meme stock retail investors after the
20:55
Speaker 4: company disclosed new management changes. Trading was actually halted in
20:59
Speaker 4: early trading. Open Ai unveiled its first custom AI chip
21:03
Speaker 4: called Hatapino, developed in partnership with Broadcom. Broadcom is up
21:08
Speaker 4: by one percent and after today's close, we'll see more
21:12
Speaker 4: tech earnings when chipmaker Micron Technology reports yesterday, the stock
21:16
Speaker 4: plunged thirteen percent ahead of its earnings. It is currently
21:20
Speaker 4: down by over one percent. I'm Tucker Silva and that
21:24
Speaker 4: is Wall Street Watch and the previous segment we asked
21:27
Speaker 4: you the trivia question which Midwest city is the corporate
21:30
Speaker 4: home of Target? That would be Minneapolis and Dale in Bedford,
21:35
Speaker 4: mass is our winner today taking on the Financial Exchange
21:38
Speaker 4: Show T shirt. Congrats to Dale. We play trivia every
21:42
Speaker 4: day here on the Financial Exchange. See complete contest rules
21:46
Speaker 4: at Financial Exchange Show dot com.
21:49
Speaker 2: A couple different pieces related to AI and power. One
21:54
Speaker 2: from CNBC titled tech companies would have to pay AI
21:58
Speaker 2: data energy costs under bill moving in Congress. Another one
22:02
Speaker 2: in the New York Times a solution to AI's growing
22:05
Speaker 2: power demand homes and so I just I really enjoy Mark.
22:12
Speaker 2: How so here here's the common thread in this. The
22:14
Speaker 2: CNBC piece is talking about how the House Energy and
22:17
Speaker 2: Commerce Committee is debating a bill that will force data
22:22
Speaker 2: centers to basically account for extra costs related to building
22:27
Speaker 2: out transmission lines and stuff like that. This piece in
22:31
Speaker 2: the New York Times is talking about, Hey, we want
22:34
Speaker 2: to you know, use you know, home energy solutions like
22:40
Speaker 2: you know, solar and batteries, and you know, the ability
22:43
Speaker 2: for you know, utilities to you know, adjust your thermostat
22:47
Speaker 2: to you know, to manage the energy situation better. And
22:51
Speaker 2: I gotta tell you, it seems like we want to
22:55
Speaker 2: do everything possible to make to come up with a
23:01
Speaker 2: solution for this except the one thing that you actually
23:03
Speaker 2: need to do, which is make it easier to build
23:07
Speaker 2: additional capacity to produce power. The reason why we're in
23:13
Speaker 2: the situation that we are in, and those of us
23:16
Speaker 2: who those of you who listen to our show for
23:18
Speaker 2: a while. You know that we're based in the Northeast.
23:20
Speaker 2: The Northeast has had problems with high electricity costs since
23:24
Speaker 2: I've been alive in general, Like, if you look at
23:27
Speaker 2: electricity costs in the Northeast, they're anywhere from like double
23:30
Speaker 2: to like two hundred and fifty percent of what the
23:32
Speaker 2: rest of the country pays, aside from Hawaii and maybe California.
23:39
Speaker 2: The reason why is we don't allow for new facilities
23:44
Speaker 2: to be built, and we don't allow for easy transmission
23:47
Speaker 2: of either the fuels or the electricity into our region,
23:49
Speaker 2: and so we have really high electricity costs. It's a
23:51
Speaker 2: supply and demand issue. There is plenty of cheap natural
23:55
Speaker 2: gas all around the United States, but we don't allow
23:57
Speaker 2: the pipelines to be built to get it up to
23:59
Speaker 2: the New England region. Likewise, the lovely folks in Canada
24:04
Speaker 2: decided a few years back, maybe fifteen years ago, Hey,
24:07
Speaker 2: we'd love to send like some hydropower down through New Hampshire.
24:11
Speaker 2: Let's let's do it. And we basically said, no, thank you,
24:14
Speaker 2: we don't want the transmission lines because of you know,
24:17
Speaker 2: YadA YadA, YadA. So where I get to is you
24:22
Speaker 2: can talk about you know, oh, these data centers are
24:24
Speaker 2: gonna have to pay for their power. Oh, you're gonna
24:26
Speaker 2: have guys, the problem stems from supply and demand. We're
24:29
Speaker 2: building data centers faster than we can build the infrastructure
24:33
Speaker 2: to support them. Because if you talk to anyone who
24:36
Speaker 2: works in the electricity business, they'll tell you it takes
24:40
Speaker 2: anywhere from six to ten years to go from start
24:42
Speaker 2: to finish on a project. And yet these data centers
24:45
Speaker 2: spool up in a year because the permitting is completely different.
24:48
Speaker 2: And if we would only deal with the root cause
24:52
Speaker 2: of the problem, which is that we don't build electric
24:56
Speaker 2: electrical capacity nearly quickly enough to deal with this, we
25:00
Speaker 2: could skip all this stuff about well, you know, data
25:03
Speaker 2: centers are gonna have to pay for this and that,
25:05
Speaker 2: and just build the capacity that's needed and call it
25:07
Speaker 2: a day.
25:08
Speaker 3: How shall I put this? All this AI crap better
25:11
Speaker 3: be worth it?
25:13
Speaker 2: Well, so this is the other piece, okay, is yes,
25:16
Speaker 2: all the AI crap better be worth it. And because
25:19
Speaker 2: otherwise I will say, like, if you're going through all
25:21
Speaker 2: this stuff like you, here's the thing. The problems with
25:24
Speaker 2: our power grid predate AI and they will continue beyond
25:28
Speaker 2: AI because like.
25:30
Speaker 3: But there they bring it all to a head really quick.
25:33
Speaker 3: They're bringing them all to a head really quick.
25:34
Speaker 2: Right, That's fine, Like, maybe we'll actually deal with it then,
25:38
Speaker 2: you know, maybe we'll actually invest in our grid instead
25:40
Speaker 2: of just ignoring it. Sometimes you got to break a
25:44
Speaker 2: few eggs to make an omelet mark.
25:46
Speaker 3: Yeah, but I need those eggs to I don't know
25:49
Speaker 3: live you do, but you know have heat.
25:53
Speaker 2: So I'm very much of two minds on this, which is, look,
25:58
Speaker 2: I I don't know if AI is going to be
26:02
Speaker 2: worth it. But the reason why we're having this conversation
26:06
Speaker 2: isn't because of AI. The reason why we're having this
26:09
Speaker 2: conversation is because we don't do enough spending on our
26:12
Speaker 2: grid to begin with. And there are a number of
26:15
Speaker 2: different reasons for that. It's it's not sexy, it's not interesting.
26:20
Speaker 2: The way that regulated utilities work incentivize the local boards
26:23
Speaker 2: to keep those costs as low as possible and not
26:26
Speaker 2: invest in resilience or maintenance of those grids because hey,
26:30
Speaker 2: the lower the cost, great, rate payers are happy then,
26:32
Speaker 2: But then when you know, in the Northeast, big winter
26:34
Speaker 2: storms come and we're out of power for three days,
26:37
Speaker 2: we complain, Oh, like what well, do you want to
26:39
Speaker 2: pay more for you know, electricity? No, well then how
26:41
Speaker 2: are you gonna, you know, build more resilience in the grid.
26:44
Speaker 2: So I just think it's just like property taxes. Everyone says, well,
26:50
Speaker 2: you can't raise my property taxes, but don't build anything
26:53
Speaker 2: new in my town either, And you can't have it
26:55
Speaker 2: both ways.
26:56
Speaker 3: This isn't a constructive comment. I'm sorry. I'm not full
26:58
Speaker 3: of any insight in this segment.
27:00
Speaker 2: No, sometimes we can just vent markets, okay?
27:02
Speaker 3: Is that okay? Thanks?
27:03
Speaker 2: Yes, Tucker? Can we get like a drop V game music,
27:07
Speaker 2: Mark's vents or something like that? Not now, nop, just
27:11
Speaker 2: for the future, not like I don't expect you to
27:13
Speaker 2: make it now, but like we need a better better.
27:17
Speaker 3: National debt has increased by fourteenfold in the past generation,
27:21
Speaker 3: yes to to twenty eight or thirty trillion fourteen fifteenfold? Sure,
27:27
Speaker 3: in the last ten years alone, it's more than doubled
27:30
Speaker 3: in the past few months. We've spent a half a
27:34
Speaker 3: trillion dollars when properly, when costs are properly accounted for,
27:38
Speaker 3: on a fruitless conflict with a ran. What the hell
27:42
Speaker 3: are we doing as a society?
27:44
Speaker 2: Should we talk about social security next.
27:45
Speaker 3: No, no, because I'm not sure i'd make it through
27:49
Speaker 3: that segment a short sightedness. Go ahead, I'm sorry this
27:53
Speaker 3: is not constructive, but no, no, no.
27:55
Speaker 2: I've had the same conversation multiple times in the last.
27:57
Speaker 3: History is going to say about US, Gee, they ran
27:59
Speaker 3: up twenty eight trillion in debt. Must have been to
28:01
Speaker 3: win a big war and advance the cause of liberty.
28:04
Speaker 2: Nope.
28:06
Speaker 3: So the good news, okay I'm listening, is that we're
28:11
Speaker 3: still here.
28:13
Speaker 2: Oh okay, I don't know, Mark. No, here's the deal.
28:18
Speaker 2: I've talked about this before. Look, you've got midterm elections
28:21
Speaker 2: coming up in four months now. No one's talking about
28:24
Speaker 2: social security. The system is gonna break in sixty years
28:28
Speaker 2: unless we do anything about it. Even as it is,
28:30
Speaker 2: we'll probably get the six years out and just say, hey,
28:32
Speaker 2: you know what the solution is, authorize more debts so
28:35
Speaker 2: we don't have to change anything, so we can the
28:38
Speaker 2: only things that we do to social security right now,
28:41
Speaker 2: if you look at the last like two big changes
28:43
Speaker 2: to social security, it's basically been, hey, we want to
28:45
Speaker 2: pay more money out to people. Oh, well, that means
28:47
Speaker 2: you're gonna collect more too, right, No, we're not gonna
28:52
Speaker 2: do that. It's the exact opposite of I've said this
28:55
Speaker 2: for a while, for better or for worse. In the
28:57
Speaker 2: nineteen eighties and nineties, you could break with party dogma
29:02
Speaker 2: on anything economic because you had to people. I was
29:06
Speaker 2: Reagan raised taxes, I think twice actually, Clinton cut spending,
29:12
Speaker 2: Bush raised taxes. These are not like, these are opposite of,
29:15
Speaker 2: you know, party dogma. But they did it because they said, Hey,
29:18
Speaker 2: we had to do this because it was the best
29:19
Speaker 2: thing for the country, and we'll get it done because
29:22
Speaker 2: we need to. If you look at how we've moved
29:25
Speaker 2: basically since the tech bubble burst, it's been the opposite.
29:29
Speaker 2: We just spend and we just cut taxes, and we
29:33
Speaker 2: don't care.
29:34
Speaker 3: About the the tragedy something I'll never be able to
29:37
Speaker 3: get over or forgive myself and others who voted during
29:40
Speaker 3: this period for because I'm complicit. We're all complicit. I
29:43
Speaker 3: guess I've been voting, uh and I voted for George
29:47
Speaker 3: W for example.
29:47
Speaker 2: And I don't believe in individuals being complicit in the acts.
29:51
Speaker 3: Of their somebody.
29:52
Speaker 2: Look, it's a democracy for everything that they do on
29:55
Speaker 2: a daily basis.
29:56
Speaker 3: Yes, I'm being a little maybe generous here because okay, fine,
30:00
Speaker 3: it's it's their fault, not ours. We have nothing to
30:04
Speaker 3: show for it, and that's a tragedy. History will judge us.
30:07
Speaker 3: I assume pretty harshly, nothing to show for the big deficits.
30:11
Speaker 2: I mean, on a more uplifting note. Okay, though, let's
30:13
Speaker 2: move on. The Armstrong Advisory Group tomorrow is hosting a
30:16
Speaker 2: retirement planning seminar. Are talking about Social Security and Medicare,
30:19
Speaker 2: so as much as we can complain about it right
30:21
Speaker 2: now in the state of the programs, the fact is
30:24
Speaker 2: that when you retire, you still very likely rely on
30:28
Speaker 2: these programs for a portion of your income and for
30:31
Speaker 2: your healthcare, and so you want to have the right
30:33
Speaker 2: information available. Still a couple spots available. The seminar is
30:38
Speaker 2: taking place at the Marriot in Quincy, Massachusetts tomorrow at
30:41
Speaker 2: five pm, and you can sign up by going to
30:44
Speaker 2: Armstrong Advisory dot com slash events, or you can call
30:48
Speaker 2: eight hundred three nine three for zero zero one. Again,
30:52
Speaker 2: still a couple spaces available there Tomorrow five pm at
30:56
Speaker 2: the Quincy Marriott eight hundred three nine three four Z
31:00
Speaker 2: zero zero one.
31:01
Speaker 1: The proceeding was paid for by Armstrong Advisory Group a
31:03
Speaker 1: registered investment advisor. Nothing in the ad or in any
31:06
Speaker 1: Armstrong guide a specific financial, legal, or tax advice. Consult
31:09
Speaker 1: your own financial, tax, and estate planning advisors before making
31:12
Speaker 1: any investment decisions. Armstrong may contact you to offer investment
31:15
Speaker 1: advisory services.
31:16
Speaker 2: To take a quick break here. When we return, we'll
31:19
Speaker 2: do a little bit of stack roulettes.
31:21
Speaker 1: Stay informed and prepared for market changes and breaking business news.
31:25
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31:58
Speaker 4: Remember you can watch the show live every day on
32:01
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32:04
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32:07
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32:21
Speaker 2: I'm gonna kick things off for stack Roulette with this
32:23
Speaker 2: piece from the New York Times. It's actually a Times exclusive.
32:29
Speaker 2: Mark Zuckerberg directed Meta to create a prediction markets app.
32:34
Speaker 2: So I gotta tell you, the folks at Meta seem
32:38
Speaker 2: to be kind of flailing right now. And what's really again,
32:45
Speaker 2: here's the piece that I think is interesting to me.
32:48
Speaker 2: They've killed off the metaverse now because they said, okay, like,
32:50
Speaker 2: there's nothing we can do with this. They've tried a
32:54
Speaker 2: couple different iterations of AI so far, the market's not
32:57
Speaker 2: really biting on what they're doing. Whow. Mark Zuckerberg is
33:01
Speaker 2: apparently personally ordered the creation of a prediction markets app
33:07
Speaker 2: because I guess the only thing Americans want to do
33:09
Speaker 2: is gamble on stuff, which is not really a great
33:12
Speaker 2: sign about us. But I appreciate Mark for at least
33:15
Speaker 2: recognizing which way the wind is blowing, which is towards
33:19
Speaker 2: like more dopamine. It's not really a good thing, but
33:22
Speaker 2: it is a thing, and so like it is, it
33:24
Speaker 2: is what it is. The problem like, Meta has never
33:29
Speaker 2: figured out how to make money doing anything but selling ads,
33:32
Speaker 2: so I'm not sure they'll figure out how to make
33:34
Speaker 2: money doing this. But again, with Americans and gambling, you
33:36
Speaker 2: can generally figure out how to make money. The problem
33:40
Speaker 2: is this has nothing to do with like their core
33:42
Speaker 2: business or anything. I'm not sure that they would be
33:44
Speaker 2: any good at it. And the piece that I do
33:46
Speaker 2: keep coming back to on meta is, hey, if you
33:48
Speaker 2: get rid of all these weird things that they're trying
33:51
Speaker 2: to do, they actually still have a really good core
33:54
Speaker 2: business that is fundamentally sound, strong and just printing money
33:59
Speaker 2: hand over. It's just that they spend money, like you know,
34:03
Speaker 2: just like they're like just on like a shopping spree,
34:07
Speaker 2: trying to do all these different things, and none of
34:09
Speaker 2: them are really panning out for them in any way.
34:11
Speaker 2: And I'm not convinced this would be different.
34:13
Speaker 3: Now, you don't hold him in particularly high esteem, so
34:15
Speaker 3: ch is that fair?
34:17
Speaker 2: I just don't think he's a very Look here, here's
34:21
Speaker 2: the thing about any of these people, I don't actually like,
34:23
Speaker 2: none of us actually know them. I don't know anything
34:25
Speaker 2: about Mark Zuckerberg, but I do know that the company
34:27
Speaker 2: that he operates tends to be predatory, generally unethical, and
34:31
Speaker 2: kind of like a mess. From that perspective, so I
34:34
Speaker 2: assume because he's running it that he's okay with these things.
34:38
Speaker 2: Otherwise he would have done things differently. That's kind of
34:41
Speaker 2: how I feel. None of us actually know any of
34:44
Speaker 2: these CEOs, Like we don't know if any of them
34:45
Speaker 2: are actually good, bad, or you know, neutral people. But
34:48
Speaker 2: you can infer a lot though I try to infer it,
34:50
Speaker 2: and generally I don't love how his company approaches things
34:55
Speaker 2: from like an ethical and moral perspective when it comes
34:59
Speaker 2: to the safety and security of their products. That's where
35:04
Speaker 2: I land.
35:04
Speaker 3: Okay, thanks.
35:05
Speaker 2: I do also like to make fun of him sometimes
35:09
Speaker 2: because it makes me feel better.
35:11
Speaker 3: His behavior has been a little bizarre, his opportunistic political
35:14
Speaker 3: change of stripes.
35:16
Speaker 2: He's way smarter than I'll ever be.
35:18
Speaker 3: You know, well, he's a good coder.
35:21
Speaker 2: I mean in one doin again. You don't get to
35:23
Speaker 2: build a company like Meta by being dumb, like you
35:26
Speaker 2: have to be. He's very smart. And also he knows
35:30
Speaker 2: how to play the game like he knows how to
35:32
Speaker 2: play the game like he's very good at what he does.
35:36
Speaker 2: I just I just happen to find like his company
35:40
Speaker 2: kind of objectionable in a number of different reasons. Areas things,
35:45
Speaker 2: what do you.
35:45
Speaker 3: Got, things, speaking of gambling, Wendy's, the restaurant chain in
35:49
Speaker 3: the middle of a big turnaround, pretty well publicized share
35:53
Speaker 3: prices or as of yesterday, down seventy percent. Over the
35:57
Speaker 3: past a few years, stock's been really beaten up, including
36:01
Speaker 3: this year. Today, at one point it was up nearly
36:03
Speaker 3: fifty Wendy's. You may ask why, what what happened? Did
36:07
Speaker 3: they introduce some spectacular new variation on.
36:10
Speaker 2: The would they do data a new pickle, a.
36:14
Speaker 3: Square pickle?
36:15
Speaker 2: Yeah?
36:16
Speaker 3: Yeah, no, somebody postal somebody posted, well you.
36:21
Speaker 2: You left a squiggle.
36:24
Speaker 3: That's not as stupid as what happened today. What happened
36:27
Speaker 3: to that concept? Stock was up nearly fifty percent at
36:30
Speaker 3: one point today off, of course very deep lows, because
36:35
Speaker 3: somebody went on Reddit and posted, like a single sentence
36:38
Speaker 3: on one of these meme stock boards, Yeah, by Wendy's
36:42
Speaker 3: before it's too late, or save Wendy's before it's too late.
36:46
Speaker 3: I guess there's a difference that drove all of these
36:49
Speaker 3: meme traders into the stock push it up nearly fifty percent.
36:52
Speaker 3: It's still up about thirty percent on the day. Speaking
36:55
Speaker 3: of gambling, the subject you raised and a commentary on
37:00
Speaker 3: how crazy and inefficient. In the very short term, markets
37:04
Speaker 3: can be often moves mean nothing, you know.
37:06
Speaker 2: I always have a soft spot for Wendy's because my
37:08
Speaker 2: first business was Wendy's based when I was in high school.
37:13
Speaker 2: I went to for three years of high school, I
37:15
Speaker 2: went to a boarding school that happened to live near
37:18
Speaker 2: so I did not live there actually, and no one
37:21
Speaker 2: was allowed to go to and from campus unless you
37:24
Speaker 2: didn't live there. And one day I found a couple
37:28
Speaker 2: of my friends wanted like some burgers, so I went
37:29
Speaker 2: to Wendy's and I brought him back the next day.
37:32
Speaker 2: A few more kids asked, and it got to the
37:33
Speaker 2: point where on like the fifth or sixth day, I
37:36
Speaker 2: would send someone to each of the dorms to take
37:39
Speaker 2: the orders from them. They'd bring the orders to me.
37:41
Speaker 2: I'd call it into Wendy's an hour in advance, because
37:43
Speaker 2: it'd be like one hundred and fifty cheese burgers, like
37:46
Speaker 2: seventy Frosty's, like you know, all this stuff, and then
37:49
Speaker 2: I would bring it back to campus, drop it off,
37:52
Speaker 2: pay all of my delivery people twenty dollars, so I
37:55
Speaker 2: didn't even have to leave the car, and I charged
37:57
Speaker 2: like three x markup. The school got wind of it
38:00
Speaker 2: after you know, the fifth or sixth day, because it
38:03
Speaker 2: got pretty big, pretty quickly shut me down, saying that
38:06
Speaker 2: I was profiteering. But I was just filling a niche.
38:10
Speaker 2: It was perfectly willing buyers of my goods at at
38:13
Speaker 2: a price that I set. I didn't see the problem.
38:16
Speaker 3: I don't see the problem at all.
38:17
Speaker 2: They did. Let's take a quick break for the rest
38:19
Speaker 2: of the day. We'll see you back here tomorrow. On
38:21
Speaker 2: the Financial Exchange