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AI Spending Is Becoming Impossible to Budget · The Financial Exchange Show

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Speaker 1: is The Financial Exchange with Chuck Zotta and Mike Armstrong.
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Speaker 2: Chuck, Mike, and Tucker with you here. And as we
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Speaker 2: kick things off today, we've got markets mostly up, but
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Speaker 2: that cheeky little Dow just isn't moving in the right
1:27
Speaker 2: direction today. So we've got the Dow off 99 points.
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Speaker 2: Let me see what is dragging it there. Oh, it's
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Speaker 2: basically everything in the Dow, actually. Most of it. So
1:39
Speaker 2: there you go. That's the deal. Most of the Dow
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Speaker 2: not doing well. Whereas we have the S & P 500,
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Speaker 2: which is now up 31 points. The Nasdaq Composite up
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Speaker 2: 201 points. And even the Russell 2000 up about three points.
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Speaker 2: So you got a few of your major indices in
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Speaker 2: the green, one just lagging right now. 10-year Treasury, unfortunately,
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Speaker 2: continuing its sell-off at 5.324%, up 4.7 basis points. 30-year
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Speaker 2: Treasury closing in on 5.7%, which I believe we touched 5.7%.
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Speaker 2: last week very briefly, maybe, but actually, no, I'm not
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Speaker 2: seeing that we did. So the 30-year heading for potentially
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Speaker 2: a new year-to-date high. 10-year, remember, at this range, you've
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Speaker 2: got to go back 25 years, which is when you
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Speaker 2: start getting like five and a half percent We haven't
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Speaker 2: seen these kinds of rates on the 10-year in 25 years.
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Speaker 2: So it's been a minute since we've been north of
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Speaker 2: where we are today. Dollar index strengthening on the back
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Speaker 2: of higher rates, 101.96, up a quarter percent. So remember,
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Speaker 2: if you were actually seeing a fiscal panic in the
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Speaker 2: United States, it would be yields up, dollar down. We
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Speaker 2: are not seeing that. The interesting piece to me is
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Speaker 2: that even with yields up and the dollar up, gold
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Speaker 2: finding a bit of a bid today. Again, it's one day,
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Speaker 2: but you sit there and you say, okay, maybe gold
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Speaker 2: finally finding its footing after about a week or two
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Speaker 2: of suck. Maybe, maybe not. We'll just have to see
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Speaker 2: how it evolves from here. Crude oil, West Texas Intermediate,
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Speaker 2: down 68 cents a barrel to 90.90 and 45 cents.
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Speaker 2: AAA national average for gas prices down about a half
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Speaker 2: a cent to 4.36 and 5 tenths. So no major
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Speaker 2: movement there. The national average has dropped 11 cents in
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Speaker 2: the last week. Diesel also down about 23 cents. I'm sorry,
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Speaker 2: about 13 cents in the last week nationally. So the
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Speaker 2: edge coming off a little. But remember, diesel prior to this,
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Speaker 2: the last month or so, diesel's all time high was
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Speaker 2: 561 and now it's at 632. So still very elevated
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Speaker 2: pricing there. And gas prices comfortably or rather uncomfortably in
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Speaker 2: the fours. Peace in Bloomberg. NVIDIA's valuation. So AI rally
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Speaker 2: isn't a bubble, according to DBS Group chief investment officer.
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Speaker 2: And I just I don't really know that this says
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Speaker 2: what they think it does. So the only thing that
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Speaker 2: I can get to is that.
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Speaker 3: This could hypothetically prove that this AI rally isn't a
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Speaker 3: bubble that looks exactly like the dot com bubble. But
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Speaker 3: even then, I don't know how much Microsoft's valuation back
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Speaker 3: in those days was looking.
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Speaker 2: Well, Microsoft's was high on a trailing basis. But here's
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Speaker 2: the thing. You look at Intel, just as an example,
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Speaker 2: because again, if we're going to compare apples to apples,
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Speaker 2: let's do chipmaker to chipmaker. Intel's valuation in most of
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Speaker 2: the late 90s was like 16 to 21 times earnings.
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Speaker 2: Did it still fall when the tech bubble popped? Well,
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Speaker 2: it's funny that you should mention that, Michael, because interestingly enough,
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Speaker 2: Intel got up to, let's see, it's the purple line
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Speaker 2: on this one. Here we go. Intel got up to
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Speaker 2: a price of $ 74. 63 a share in August of 2000.
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Speaker 1: Right.
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Speaker 2: And then two years later, in October of 2002, it
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Speaker 2: was down to $ 14.
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Speaker 1: 67.
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Speaker 2: Oh, is that bad? Well, it's not really suggestive of
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Speaker 2: the PE ratio being a cushion. And by the way,
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Speaker 2: Intel's P.E. ratio, it had expanded by the time we
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Speaker 2: got to that part of the cycle. But remember, that
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Speaker 2: was because the profits were already stopping their growth. It's
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Speaker 2: just not something where you had... Here, let me get
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Speaker 2: the EPS up here. I've got to just change a
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Speaker 2: couple screens. Here we go. Intel, by that quarter, their
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Speaker 2: earnings had peaked and then fell 85% over the next year.
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Speaker 3: So just because your valuations are fine doesn't mean your
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Speaker 3: business model is going to hold up for the next.
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Speaker 2: No, I mean, guys, if you want to talk about
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Speaker 2: like low P.E. ratios don't always mean everything's fine. I'd
6:17
Speaker 2: like to introduce you to emerging markets investing for the
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Speaker 2: last 20 years where consistently I got to tell you.
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Speaker 2: I've stopped going to these just because I don't find
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Speaker 2: them useful anymore because every year at the beginning of
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Speaker 2: the year, you get all the big banks. They put
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Speaker 2: on all these investment conferences and they get their heads
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Speaker 2: of investing out and they say, hey, this is the
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Speaker 2: year for emerging markets. Valuations are cheap, blah, blah, blah, blah, blah, blah.
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Speaker 2: And everyone just nods their heads. And then the performance
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Speaker 2: in E.M., again, aside from the last couple of years
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Speaker 2: where it's been good, the performances generally sucked because those
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Speaker 2: companies were cheap for a reason. Like you didn't want
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Speaker 2: to pay up for them. So I think that ultimately
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Speaker 2: when you look at Nvidia and whether or not, you know,
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Speaker 2: the AI rally is a bubble, Valuations are not a
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Speaker 2: tool to determine whether or not something is a bubble.
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Speaker 2: And I'll say this on the upside also. One more thing.
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Speaker 2: For the last four to five years, the S &
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Speaker 2: P 500 has consistently been trading 18 to 22 times
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Speaker 2: forward earnings, which historically is in the top several percentiles
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Speaker 2: of where it's been. And Mike, has the performance in
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Speaker 2: the S & P 500 been pretty good for the
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Speaker 2: last five years? Sure has. It's been darn tootin'. It's
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Speaker 2: the technical term for it. Valuation is not something you
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Speaker 2: can use to time the market, nor is it something
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Speaker 2: to show whether or not something is a bubble or not.
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Speaker 3: Also, how about we talk valuations leading up to the
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Speaker 3: biggest market sell-off in modern history, the great financial crisis?
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Speaker 2: Oh, how are they? They are like... in terms of
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Speaker 2: how low they are in today's standards. Right?
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Speaker 3: I mean, like, you go take a look at P
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Speaker 3: ratios in 06 and 07, there was nothing alarming going
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Speaker 3: on there in spite of the fact that we were
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Speaker 3: about to lead into the worst recession in modern global history.
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Speaker 3: With a 55% market sell-off. 53, I think, is where
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Speaker 3: we got.
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Speaker 2: You cannot use valuations to tell me whether or not
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Speaker 2: something is a bubble. You can't. Yeah. Especially the valuations
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Speaker 2: of one company's stock. Yes, especially the valuations of one
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Speaker 2: company that may or may not be the center of
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Speaker 2: that bubble. Let's take a quick break. When we come back,
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Speaker 2: great piece that I want to talk about, maybe for
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Speaker 2: the entire rest of the show, because I think it's
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Speaker 2: so juicy and meaty. We won't actually do that, but
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Speaker 2: we're going to talk about it for a little bit.
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Speaker 2: Spending on AI is becoming almost impossible for businesses to budget.
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Speaker 2: We will discuss next.
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10:18
Speaker 2: All right, great piece in the Wall Street Journal because
10:20
Speaker 2: it dovetails with like three different conversations that I had
10:23
Speaker 2: with Mark Vandetti this morning. Okay. Which is my standard
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Speaker 2: for whether an article is good or not. Ooh. Thank you, Mark. Ooh. Oh, yes.
10:32
Speaker 2: It was very much like that. So, here's the deal.
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Speaker 2: Artificial intelligence use is measured in something called tokens.
10:39
Speaker 4: Yes.
10:40
Speaker 2: And if you're not sure what a token is... It's
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Speaker 2: confusing because it's basically anywhere between like a two and
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Speaker 2: five character chunk of text, but not necessarily a standard amount.
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Speaker 2: And also, it's something where the amount of tokens needed
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Speaker 2: to either input or output to you can vary dramatically
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Speaker 2: based on the task and exactly how you prompt the model.
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Speaker 3: Yeah, they give a great example of this using two
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Speaker 3: different Gemini models, asking it to do the same task.
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Speaker 2: And one of those more advanced models.
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Speaker 3: Used, what was it, effectively like a dollar worth of
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Speaker 3: tokens in order to accomplish the task. The other, again,
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Speaker 3: same company producing the model, spent like 15 bucks worth
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Speaker 3: of tokens and couldn't accomplish the task.
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Speaker 2: Yes. And so it raises the question of like, hey,
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Speaker 2: if you're an AI, if you're a company trying to
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Speaker 2: use AI... How do you budget this because you don't
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Speaker 2: know how much it's going to cost between models? And
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Speaker 2: they get updated so quick, like so often now, that
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Speaker 2: how do you know that what you used to be,
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Speaker 2: you were previously using, is still going to be the
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Speaker 2: same cost as a newer model trying to do the
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Speaker 2: same thing?
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Speaker 3: It does kind of better explain how Uber blew through
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Speaker 3: their annual AI budget over the course of three months
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Speaker 3: this year.
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Speaker 2: Well, especially because most of them, like the companies that
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Speaker 2: were using AI heavily initially this year, a lot of
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Speaker 2: them were doing what were called token maxing, where they
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Speaker 2: were like, hey... We're going to reward our engineers who
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Speaker 2: use the most tokens. And OK, like in what business
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Speaker 2: do you pay your employees for using the most input
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Speaker 2: like that? That would be like Chuck is the most
12:14
Speaker 2: staples this month. He gets a raise. Right. Like, oh,
12:17
Speaker 2: like Jimmy burned the most fuel as a pilot. And
12:20
Speaker 2: so we're going to promote him. Like, no, that's stupid. Like,
12:25
Speaker 2: what are we doing here? He zigzagged across the Midwest. Yeah, see,
12:29
Speaker 2: there's now a picture of, like, his mother etched in
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Speaker 2: the clouds, but it's, like... Not how we... It just
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Speaker 2: doesn't make sense. But this is even before you get
12:39
Speaker 2: to the other thing, which I was thinking, and I
12:41
Speaker 2: thought of this over the last week. So I was
12:43
Speaker 2: out for a few days last week. I went down
12:47
Speaker 2: and had a nice little trip to Charleston, South Carolina,
12:50
Speaker 2: which was lovely. Great town. Always love going there. And
12:53
Speaker 2: it's about a two-hour flight down there. And what do
12:57
Speaker 2: you guys typically do on flights? I haven't flown in years,
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Speaker 2: so I couldn't tell you. But when you used to fly,
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Speaker 2: what do you do on flights? Watch something. Mike, what
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Speaker 2: about you? I play gin rummy and listen to music.
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Speaker 2: I play stupid video games because I never get the
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Speaker 2: chance to otherwise. Yeah, I'll do that too. All the
13:16
Speaker 2: dumb iPhone and iPad games, I just sit there and
13:19
Speaker 2: I'm popping balloons with darts all the time. I'm infecting
13:25
Speaker 2: everyone with the plague until it was not cool to
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Speaker 2: do so six years ago. But all this stuff, all
13:30
Speaker 2: those dumb games, that's what I play. And so I
13:34
Speaker 2: was sitting around on Tuesday before I left last week,
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Speaker 2: and I had an interesting thought. I'm like... hey, I
13:40
Speaker 2: want AI to make me a game to play because
13:43
Speaker 2: I don't want to buy a new game. I want
13:46
Speaker 2: AI to make me a game. And so like any
13:50
Speaker 2: enterprising young person in the financial industry, I don't have
13:55
Speaker 2: it make me a game where it's like, hey, let
13:57
Speaker 2: me shoot zombies or this and that. I had it
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Speaker 2: make me a game where I was an aircraft manufacturer
14:02
Speaker 2: heading into World War II. Of course you did. And
14:05
Speaker 2: I had to build a realistic economic model. I had
14:08
Speaker 2: to do all kinds of stuff. And it's great. Honestly,
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Speaker 2: it's fantastic. I played it on both flights. But I
14:15
Speaker 2: didn't have to pay a dime for this. And here's
14:18
Speaker 2: the thing. Hold on, explain why you didn't have to
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Speaker 2: pay a dime for this, because this might be confusing
14:23
Speaker 2: to the people that just listened to our token conversation.
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Speaker 2: I used 35% of my weekly tokens in building this
14:56
Speaker 2: whole thing out. And here's the place that I get
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Speaker 2: to is most businesses, like what I was doing is
15:03
Speaker 2: not particularly advanced. Most businesses don't need to do anything
15:06
Speaker 2: more advanced than what I just did. Like they might
15:09
Speaker 2: need to build like a dashboard to integrate a few
15:12
Speaker 2: things of data, maybe automate a few things here and there, like, okay,
15:15
Speaker 2: respond to these emails. But like I had to build
15:17
Speaker 2: like something crazy complex but like enough and i didn't
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Speaker 2: even use half of the tokens i was supposed to
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Speaker 2: use so the place that i got to that's kind
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Speaker 2: of interesting because i i had never used ai to
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Speaker 2: build anything sure before it was a lot of queries
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Speaker 2: it was a lot of you know like yes like
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Speaker 2: i might use it for like hey like walk me
15:41
Speaker 2: through how this happens but i didn't use to like
15:43
Speaker 2: physically build anything This time I did, and it didn't
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Speaker 2: use anything beyond what I'm already paying, which is a
15:50
Speaker 2: pretty low cost. Most businesses don't need anything more complicated
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Speaker 2: than that. Probably not. And so what is the justification
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Speaker 2: for businesses spending any meaningful amount of money on AI
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Speaker 2: when fairly middle-of-the-road models today can do this stuff, and
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Speaker 2: a year from now... The base level models that are
16:15
Speaker 2: going to be available or open source ones that you
16:17
Speaker 2: can just host internally on a computer are going to
16:21
Speaker 2: be able to do everything a business needs to do
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Speaker 2: at no cost. I guess the.
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Speaker 3: Two options that I can think of would be massive
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Speaker 3: problem for the industry in terms of its profits or
16:36
Speaker 3: that subscription that you have is gone a year from now.
16:40
Speaker 2: You're saying that they won't offer it.
16:42
Speaker 3: Either they will continue to offer it and it'll be
16:44
Speaker 3: flooded with ads, which Anthropica said they won't do.
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Speaker 2: But this is my point. Businesses will just pick an
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Speaker 2: open source one that they can host locally. You don't
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Speaker 2: need the most advanced model. You get an open source
16:55
Speaker 2: one that's available that doesn't cost you anything except whatever
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Speaker 2: your computing costs are, just running the thing on whatever
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Speaker 2: your local server is or even in the cloud, whatever
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Speaker 2: it might be. Okay, great. I don't have to pay
17:10
Speaker 2: anyone beyond that cost then.
17:14
Speaker 3: Is there a way that that even gets expensive? I
17:16
Speaker 3: know it's open source, so today it's free. The game
17:19
Speaker 3: that I built had full financial management. I got quarterly
17:22
Speaker 3: earnings reports.
17:23
Speaker 2: Again, I kind of nerded out on this thing. But
17:28
Speaker 2: that game could probably manage inventory and stuff like that.
17:33
Speaker 2: You don't need anything complicated when you're just doing that.
17:37
Speaker 2: I don't, businesses don't need to pay a ton for
17:40
Speaker 2: AI and they're going to realize this eventually. It's the
17:45
Speaker 2: same reason why like you don't pay, like you mentioned
17:48
Speaker 2: staples earlier.
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Speaker 1: Yeah.
17:50
Speaker 2: Do businesses pay a lot for staples? They do not. Why?
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Speaker 2: Because the basic staple does a pretty darn good job.
17:57
Speaker 2: Do businesses pay like a lot for like the best paper? No,
18:00
Speaker 2: they don't, because the regular white paper's fine. You don't
18:03
Speaker 2: need the ultra-bright, super-duper bleached, like... It's fine. Now, if
18:09
Speaker 2: you are a printer... okay, you need those better quality materials.
18:14
Speaker 2: Because once in a blue moon it happens. But otherwise,
18:17
Speaker 2: for the rest of businesses, you don't. And AI is
18:20
Speaker 2: going to be the exact same. I've never built anything before.
18:24
Speaker 2: And again, I know no coding. I don't know how
18:27
Speaker 2: to do anything. I literally just started typing. I'm like,
18:30
Speaker 2: ask me like 30 or 40 questions for what I
18:32
Speaker 2: want in this and then go build it. And it
18:34
Speaker 2: did it. And granted, I had to modify it, but
18:36
Speaker 2: it didn't cost me anything and it took me no time.
18:40
Speaker 1: So.
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Speaker 2: I came away from this convinced that most businesses do
18:45
Speaker 2: not need to spend a lot on AI in order
18:48
Speaker 2: to get good results from AI. And that's going to
18:52
Speaker 2: be a problem when you're spending $ 5 trillion on data
18:55
Speaker 2: center build-outs. Right.
18:57
Speaker 3: And the temptation here would be to say, oh, those
18:59
Speaker 3: game designers and software designers are the ones in trouble.
19:04
Speaker 3: They might also be, but I think the real ones
19:05
Speaker 3: that are in problem are those that are building out
19:08
Speaker 3: this extraordinarily costly compute system.
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Speaker 2: For a commodity. For, yeah, what could be a commoditized product.
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Speaker 2: For a commodity, because what advanced models are now, this
19:19
Speaker 2: is what base models will do a year from now.
19:22
Speaker 2: And that's what most businesses are going to need. Quick break.
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Speaker 2: We got Wall Street Watch next.
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Speaker 1: Time now for Wall Street Watch. Tracking the stocks, the data,
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Speaker 1: and the headlines driving markets so far today. Right here
19:57
Speaker 1: on the Financial Exchange Radio Network.
19:59
Speaker 4: Markets in mixed territory as the bond market continues to
20:03
Speaker 4: remain in focus where treasury yields remain at multi-year highs.
20:06
Speaker 4: Right now the Dow is only down 42 points, about
20:11
Speaker 4: a tenth of a percent. S & P 500 is
20:14
Speaker 4: up about half a percent or 37 points higher. NASDAQ
20:18
Speaker 4: up nearly three quarters of a percent or 190 points higher.
20:22
Speaker 4: Russell 2000 is up two tenths of one percent. Ten-year
20:25
Speaker 4: Treasury yield now up four basis points at 5.324 percent.
20:28
Speaker 2: Crude oil is now flat, trading at $ 91 a barrel,
20:30
Speaker 2: while Brent.
20:31
Speaker 4: Is is edging higher, trading at $ 102 a barrel. France's
20:39
Speaker 4: Schneider Electric agreed to buy U.S. industrial software maker PTC
20:43
Speaker 4: in an all-cash deal that values PTC at $ 22. 6 billion.
20:49
Speaker 4: PTC stock is surging 34%. Meanwhile, Intel is down about 2%.
20:55
Speaker 4: After Elon Musk posted that his chip venture TerraLab was
20:58
Speaker 4: in talks to work with Intel rival Taiwan Semiconductor. Bank
21:03
Speaker 4: of America upgraded DraftKings to buy from neutral, saying the
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Speaker 4: company's prediction markets are a win-win. DraftKings shares are up
21:11
Speaker 4: by 8%. Barclays upgraded Estee Lauder to overweight, saying it
21:15
Speaker 4: was bullish on its growth and earnings profile over the
21:18
Speaker 4: next several years. Estee Lauder stock is up about 2%.
21:22
Speaker 4: And later this week, we'll see third quarter earnings start
21:25
Speaker 4: to trickle in from Delta. Pepsi and Levi Strauss earnings
21:29
Speaker 4: season next week. It picks up some steam where major banks,
21:33
Speaker 4: including JPMorgan Chase, Bank of America, and others, report their
21:37
Speaker 4: third quarter results. I'm Tucker Silva, and that is Wall
21:40
Speaker 4: Street Watch.
21:41
Speaker 2: Mike, we had a piece in the Wall Street Journal.
21:43
Speaker 2: It's titled, How to Keep Your Estate Plan from Tearing
21:46
Speaker 2: Your Family Apart. How?
21:50
Speaker 3: You know, I feel like when people read this headline,
21:53
Speaker 3: they tend to think of, I don't know, a state
21:57
Speaker 3: the size of the Kennedys and, you know, the ability
22:00
Speaker 3: for something like that to disrupt families, which, let's be honest,
22:03
Speaker 3: nobody in all likelihood listening right now is going to
22:06
Speaker 3: be facing an estate the size of the Kennedys.
22:09
Speaker 2: You don't think any of the Kennedys are listening? Well,
22:12
Speaker 2: it depends. Maybe. A lot of them. Here's the reality.
22:18
Speaker 3: You can tear your family apart with an estate worth
22:22
Speaker 3: half a million dollars just as easily as you can
22:25
Speaker 3: with one worth.
22:26
Speaker 2: $ 500 million. You could make an argument more easily. Yeah,
22:31
Speaker 2: you really could.
22:33
Speaker 3: And so this piece is actually pretty interesting. It has
22:36
Speaker 3: a bunch of different tips for how to handle things.
22:39
Speaker 3: But I think most importantly, if you want to prevent
22:43
Speaker 3: your estate plan from tearing your family apart, then tell
22:46
Speaker 3: them about your estate plan.
22:48
Speaker 2: Yes. That can be difficult. It can start conflict when
22:53
Speaker 2: you don't want to deal with it.
22:54
Speaker 3: But If you want to prevent your estate plan from
22:57
Speaker 3: tearing people apart after you are dead, then tell them
23:00
Speaker 3: about the estate plan now so that you can explain
23:02
Speaker 3: it to them while you are living.
23:03
Speaker 2: Well, and here's the thing. If you're worried that it's
23:06
Speaker 2: going to start conflict now, it's going to start conflict
23:10
Speaker 2: when you're not there and can't explain it. And look,
23:14
Speaker 2: I know that everyone wants a level of privacy around
23:18
Speaker 2: this stuff. Sure. I get that. But here's the thing.
23:21
Speaker 2: If you've made plans for assets to end up in
23:24
Speaker 2: the hands of certain people after you die, what's the point, honestly,
23:30
Speaker 2: in not telling them until you die? Yeah, I mean,
23:33
Speaker 2: if you're really going to insist on the privacy... It's
23:35
Speaker 2: going to be theirs. Right.
23:37
Speaker 3: You know, I suppose if you're going to say, hey, no,
23:39
Speaker 3: I want this private and it's forever going to be private,
23:42
Speaker 3: then you have to pay an attorney a whole bunch
23:44
Speaker 3: of money to manage that in the way that nobody's
23:46
Speaker 3: ever going to find out.
23:47
Speaker 2: Correct. Right. Like you can do that. Right.
23:50
Speaker 3: If you really want to make it so that Johnny
23:52
Speaker 3: doesn't know what Susie got, then you have to build
23:54
Speaker 3: a whole estate plan with a professional third party trustee
23:57
Speaker 3: after you're gone that distributes everything and make sure that
24:00
Speaker 3: nobody ever finds out what Johnny and Susie got, which
24:04
Speaker 3: is doable, but expensive for most families. The more practical
24:08
Speaker 3: thing is having an honest conversation with the family. And
24:12
Speaker 3: that doesn't mean that, you know, Johnny and Susie shouldn't
24:15
Speaker 3: get the same amount, but if they're not going to,
24:17
Speaker 3: explaining why. Or other practical things that don't make you
24:22
Speaker 3: do those things. One thing that I almost never see
24:25
Speaker 3: people do, but makes all the sense in the world,
24:27
Speaker 3: is if you have a family member who is providing
24:30
Speaker 3: you care or letting you live in their home, pay them.
24:36
Speaker 3: That person's going to make a sacrifice to either their
24:39
Speaker 3: career aspirations or other ability to work in order to
24:42
Speaker 3: do that, rather than trying to figure it out in
24:44
Speaker 3: your estate plan and maybe forgetting to change the beneficiary
24:47
Speaker 3: on the IRA later, just pay that person.
24:50
Speaker 1: Yes.
24:50
Speaker 2: It gets the money out of your estate.
24:52
Speaker 3: If you do have a bigger problem down the road,
24:54
Speaker 3: like a nursing home, that money that you've already paid
24:56
Speaker 3: them is off the table, like totally reasonable way to
24:59
Speaker 3: do it that nobody ever chooses.
25:01
Speaker 2: To do because you know what? Paying family members is awkward. Yeah,
25:06
Speaker 2: it's just something where, again, you can end up with
25:10
Speaker 2: a lot of complexity, whether it's talking about like different
25:12
Speaker 2: account types, whether you are talking about, look, a lot
25:17
Speaker 2: of families have one or more children that might not
25:22
Speaker 2: be good with money for various reasons. Sure. How do
25:25
Speaker 2: you structure an inheritance so that they are still receiving
25:28
Speaker 2: what they are, you know, what you want to give them?
25:32
Speaker 2: but not in such a way that you're necessarily putting
25:34
Speaker 2: them into a situation that's ripe for failure.
25:37
Speaker 3: Chuck, people listening might know that outside of our radio program,
25:41
Speaker 3: we here at Armstrong are financial advisors and might be
25:44
Speaker 3: scratching their head wondering why are financial advisors talking about this?
25:47
Speaker 3: And the answer to me is this is precisely what
25:51
Speaker 3: a good financial planner is supposed.
25:53
Speaker 2: To do, right?
25:54
Speaker 3: It's supposed to be the person that is the day-to-day
25:58
Speaker 3: contact with you that might not also be a lawyer,
26:01
Speaker 3: they might not also be a CPA, they might not
26:03
Speaker 3: have that degree of expertise, but would know enough about
26:08
Speaker 3: you and your family to be able to prompt you
26:09
Speaker 3: to say, hey, you need to go meet with these professionals,
26:12
Speaker 3: an insurance professional, a tax professional, a legal professional, because
26:15
Speaker 3: you need to have this type of work done. And
26:17
Speaker 3: then when you get that incredibly complex proposal from that person,
26:22
Speaker 3: that's practically written in Greek, that same person is with
26:25
Speaker 3: you there to help digest it, understand it, and apply
26:28
Speaker 3: it to your specific situation, because that's what good financial
26:32
Speaker 3: planners and advisors do.
26:34
Speaker 2: If you have.
26:34
Speaker 3: Questions along those lines, maybe you're sitting on this, what
26:38
Speaker 3: seems like a really insurmountably complicated recommendation from somebody about
26:42
Speaker 3: trusts and insurance policies and tax proposals, like, These things, admittedly,
26:48
Speaker 3: are very difficult to understand if you are not doing
26:50
Speaker 3: it literally every day of your career. And sometimes the
26:55
Speaker 3: best professionals out there aren't the best at explaining it
26:58
Speaker 3: in plain English. That is the work of a good
27:01
Speaker 3: financial advisor. And if you have questions along those lines
27:04
Speaker 3: or you want to kick the tires, give the folks
27:06
Speaker 3: at Armstrong a call. The phone number is 800-393-4001. We
27:11
Speaker 3: provide our clients with the coordination among their professionals that's
27:14
Speaker 3: needed to to ensure that their plans actually get put
27:19
Speaker 3: into place. Again, the number for Armstrong, 800-393-4001, or you
27:24
Speaker 3: can check us out online at armstrongadvisory.com.
27:27
Speaker 1: The proceeding was paid for by Armstrong Advisory Group, a
27:30
Speaker 1: registered investment advisor. Nothing in the ad or in any
27:32
Speaker 1: Armstrong guide is specific financial, legal, or tax advice. Consult
27:36
Speaker 1: your own financial, tax, and estate planning advisors before making
27:38
Speaker 1: any investment decisions. Armstrong may contact you to offer investment
27:41
Speaker 1: advisory services. Oh, let's see.
27:45
Speaker 2: I want to talk... Oh, yeah, let's do this piece
27:47
Speaker 2: from the New York Times. Sales of hulking pickups and
27:49
Speaker 2: SUVs sag as fuel prices soar. This is one that
27:53
Speaker 2: I always find just interesting. We just have the dumbest
27:57
Speaker 2: car buying habits as Americans. So short-term thinking. Well, it's
28:00
Speaker 2: not just Americans. Like, everyone does this. Okay. We make
28:03
Speaker 2: long-term purchase decisions based on where gas prices are today. Yeah. Now,
28:08
Speaker 2: I'm not saying this because I think gas prices are
28:10
Speaker 2: going to be, like, definitely cheaper, like, two, three years
28:12
Speaker 2: from now. They probably... Probably will be, because I can't
28:16
Speaker 2: imagine we're in the same situation we are with Hormuz then.
28:19
Speaker 2: But you never know.
28:20
Speaker 3: I'm a bit more critical of the decision-making a couple
28:22
Speaker 3: years ago when gas prices were a fair bit lower
28:26
Speaker 3: and all that any American wanted to buy was a
28:28
Speaker 3: pickup truck or large SUV.
28:29
Speaker 2: Yes. So just as an example, General Motors said Thursday
28:34
Speaker 2: that sales of the Silverado's flagship truck were up 3%
28:37
Speaker 2: in the third quarter from a year earlier. But the
28:39
Speaker 2: growth came from a light-duty version of the truck. Sales
28:42
Speaker 2: of the heavy-duty Silverado slumped. The story was similar at Stellantis. Sorry,
28:47
Speaker 2: I just got over my case. Sales of light-duty Ram
28:50
Speaker 2: pickups rose 73%, while heavy-duty trucks fell six. So, again,
28:56
Speaker 2: it's just interesting that, again, we make these buying decisions where, look,
29:02
Speaker 2: most people own a car for more than six months.
29:05
Speaker 2: Not everyone. Some people are just serial trader-inners. That's the
29:09
Speaker 2: technical term.
29:10
Speaker 1: But.
29:11
Speaker 2: Lots of us own cars for, again, we see the
29:13
Speaker 2: average age of a vehicle on the road is, I think,
29:16
Speaker 2: up to almost 11 years now. And so.
29:19
Speaker 3: It's not very often we're making these decisions, yeah.
29:21
Speaker 2: No, these are not short-term decisions in most cases.
29:24
Speaker 3: And I'm just putting myself in the position of the
29:25
Speaker 3: person buying the light-duty Silverado pickup truck. Now, hopefully you
29:30
Speaker 3: are the finance bro who uses their pickup truck once
29:35
Speaker 3: a quarter to haul a small boat or something like that.
29:38
Speaker 2: But if you are genuinely.
29:40
Speaker 3: buying it and you're like a contractor, it's probably not
29:42
Speaker 3: going to get the job done for you. And you're
29:44
Speaker 3: going to trade it in two years ago once gas
29:45
Speaker 3: prices are lower. That seems like a bad long-term decision.
29:49
Speaker 2: So it's just interesting how we see these trends play
29:53
Speaker 2: out here. And Look, I don't know, none of us
29:58
Speaker 2: know what gas prices are going to be a year
30:01
Speaker 2: or two from now, but it's just wild that we
30:03
Speaker 2: continue to see people making long-term decisions based on the
30:07
Speaker 2: price of one of the most volatile commodities on the planet.
30:11
Speaker 2: Let's take a quick break. When we return, we got
30:13
Speaker 2: Stack Roulette.
30:15
Speaker 1: Miss any of the show? The Financial Exchange Show podcast
30:18
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30:26
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30:56
Speaker 2: Mike, what do you got for me for Stack Roulette?
30:57
Speaker 3: I want to talk about Americans and our social habits
31:02
Speaker 3: because there's a piece in Bloomberg by Alison Trager, Why
31:07
Speaker 3: Bold Together.
31:08
Speaker 2: When You Can Scroll Alone. And I guess two pieces
31:12
Speaker 2: to this.
31:13
Speaker 3: One, there are a number of big companies out there
31:16
Speaker 3: that specialize in human in-person entertainment, Lucky Strike Entertainment, the
31:22
Speaker 3: largest bowling alley operator. as well as Dave and Buster's,
31:26
Speaker 3: a very large... What category would you put that? I mean,
31:29
Speaker 3: it's a restaurant, but it's an arcade-restaurant combo.
31:33
Speaker 2: An indoor carnival for your senses. Yeah. Heaven is what
31:37
Speaker 2: I call it. Both of which... I'm more of a
31:41
Speaker 2: Buster fan than Dave, personally. Dave's always kind of buttoned up,
31:45
Speaker 2: and Buster's just.
31:47
Speaker 2: Having a blast.
31:49
Speaker 3: So first things first, I don't think necessarily what's going
31:52
Speaker 3: on at Lucky Strike and Dave & Buster's is indicative
31:55
Speaker 3: alone of a total change in behavior. But these stories,
31:59
Speaker 3: along with several others, make it pretty clear to me
32:02
Speaker 3: that we as a society, especially seemingly younger generations, are
32:09
Speaker 3: just not interacting with each other in the same ways
32:11
Speaker 3: that they did before. And I personally don't think it's
32:14
Speaker 3: terribly healthy. There was a recent study done that one
32:17
Speaker 3: of my clients pointed out to me by researchers at
32:20
Speaker 3: the University of Missouri, Kansas and U of A that
32:24
Speaker 3: found that the daily spoken word count dropped by roughly
32:30
Speaker 3: 28% even before COVID and presumably quite a bit more
32:36
Speaker 3: after COVID. And so what that indicates to me is
32:39
Speaker 3: that people are just not communicating in the way that
32:41
Speaker 3: they previously did. They are not calling each other on
32:44
Speaker 3: the phone. They are not communicating with each other in person.
32:47
Speaker 3: They are texting each other, communicating online in different ways.
32:50
Speaker 3: But places like this are struggling, I think, in part
32:53
Speaker 3: due to that social norm change.
32:56
Speaker 2: So there are a couple different things that are happening,
32:59
Speaker 2: in my opinion. I think everything that you mentioned is
33:02
Speaker 2: 100% true. But what a lot of you listening might
33:05
Speaker 2: not know is I happen to be a pretty big bowler.
33:08
Speaker 1: Hmm.
33:09
Speaker 4: Big ball or candle pen?
33:11
Speaker 2: Big ball.
33:11
Speaker 4: Okay.
33:12
Speaker 2: Used to be a big bowler. That's why I said
33:15
Speaker 2: he was a big bowler. Honestly, since the pandemic, I
33:19
Speaker 2: haven't really done as much, mostly just because having very
33:21
Speaker 2: little kids with big, heavy bowling balls, it's just not great.
33:27
Speaker 3: By the way, I have no way of verifying this,
33:28
Speaker 3: but one of my friend's fathers has forever claimed that
33:31
Speaker 3: he went to college on a candle pen bowling scholarship.
33:34
Speaker 2: I buy it. Which is the most New England thing
33:36
Speaker 2: I've ever heard.
33:37
Speaker 1: Totally.
33:37
Speaker 2: Totally. So, but I used to bowl usually once or
33:41
Speaker 2: twice a week. And here's the thing that's actually happened
33:44
Speaker 2: in the last 20 years that makes me think that
33:46
Speaker 2: this is not a good statistical measure for.
33:52
Speaker 1: Bowling.
33:53
Speaker 2: Human interaction. Human interaction. They have like a chart here
33:57
Speaker 2: that shows the share of population that bowls in any
34:00
Speaker 2: particular day has gone from north of 0.3% in 2003
34:06
Speaker 2: to about 0.05% today. Bowling alleys for most of the
34:14
Speaker 2: 20th century didn't make very much money. And in fact,
34:18
Speaker 2: as property taxes and other costs started going up, most
34:21
Speaker 2: of them started losing money in the second half of
34:23
Speaker 2: the 20th century because you need a ton of space.
34:27
Speaker 2: And if you look at how basically property taxes work
34:30
Speaker 2: in most places... it tends to be based on, you know,
34:33
Speaker 2: square footage and okay, that's kind of your proxy and
34:35
Speaker 2: there might be some small adjustments, but you need a
34:37
Speaker 2: lot of, you need a lot more space for a
34:39
Speaker 2: bowling alley than you do for a bar.
34:41
Speaker 1: True.
34:42
Speaker 2: So what most bowling alleys did in order to survive
34:47
Speaker 2: or what lucky strike actually figured out was, Hey, you've
34:50
Speaker 2: got to kill off league night because here's what league
34:54
Speaker 2: night is. It's your regulars that come in once a week,
34:58
Speaker 2: And they pay you next to nothing, they drink your
35:01
Speaker 2: cheapest drinks, and they take up most of your space.
35:04
Speaker 2: And you get different leagues on different nights, and that's
35:06
Speaker 2: how you filled the space. Right, but then if you
35:08
Speaker 2: kill League Night, you're not going to have any kids
35:10
Speaker 2: that like to bowl. It might be short-sighted, but here's
35:13
Speaker 2: the thing. You don't need as many bowlers if they
35:17
Speaker 2: are buying $ 20 margaritas and paying you hourly for the
35:21
Speaker 2: use of those lanes. And that's why bowling now is
35:24
Speaker 2: all about bright lights and, you know... Food and drink.
35:27
Speaker 2: Food and drink and this and that. That's how bowling
35:30
Speaker 2: survived because otherwise it would have died already. So part
35:35
Speaker 2: of this, like in terms of why fewer people bowl,
35:37
Speaker 2: it's become less accessible because that was the only way
35:40
Speaker 2: that it could survive. Mm-hmm. I say this as someone
35:44
Speaker 2: who like back when I was bowling a lot, I
35:46
Speaker 2: would get up at 7 a.m. on Saturday and Sunday
35:49
Speaker 2: mornings to go bowl. The kids leagues were playing then
35:53
Speaker 2: because that's like still when you had them. But I
35:54
Speaker 2: was like the only adult in the place because no
35:56
Speaker 2: one else wanted to be there. And I could pay
35:58
Speaker 2: like six bucks an hour because no one else is awake.
36:00
Speaker 2: It's fine. But the rest is tough to drink that
36:04
Speaker 2: much that early, too. Well, you can't drink all day
36:06
Speaker 2: if you don't start in the morning. Late start, you know.
36:10
Speaker 2: Here's the thing. The other hours of the day, like
36:12
Speaker 2: those primetime afternoon hours, you don't want your league guys
36:15
Speaker 2: coming through. You don't want like Thursday nights to be
36:18
Speaker 2: like your league filling up six to eight. You want
36:20
Speaker 2: more people coming in that'll pay you for the expensive stuff.
36:24
Speaker 2: And so that's that's the bowling story. It's a digression
36:27
Speaker 2: from the fact that, yeah, we aren't socializing, you know,
36:30
Speaker 2: the way that we used to. And I do think
36:32
Speaker 2: it's a real problem that no one hangs out anymore.
36:35
Speaker 2: And I think it's actually most of the problem that
36:38
Speaker 2: we have today is that we've replaced one-on-one communication with
36:44
Speaker 2: screaming into the void on our phones because anytime that
36:48
Speaker 2: you say anything on social media, it is performative by nature.
36:51
Speaker 2: You might be like, no, I'm expressing my true self,
36:53
Speaker 2: but you're expressing it in a way that tries to
36:55
Speaker 2: get you the most likes. Like no one ever actually posts, man,
37:00
Speaker 2: what an average ride to work today. It's either that
37:04
Speaker 2: was awful and, like, you're looking for someone to give
37:06
Speaker 2: you sympathy or, hey, no traffic today, wonder what's up. And, like,
37:10
Speaker 2: people be like, lucky. Like, that's what people do. One-on-one conversations. Like,
37:16
Speaker 2: when Mike and I actually talk, you can express things
37:20
Speaker 2: that you wouldn't out in the public because... Not because
37:23
Speaker 2: they're wrong or anything, but you're just not performing for someone.
37:26
Speaker 2: It's a fundamentally different form of communication that is more
37:29
Speaker 2: authentic and true, and you just can't get that when
37:32
Speaker 2: you're performing on social media. And so I think the
37:36
Speaker 2: fact that we don't hang out anymore sucks, because it's actually, like,
37:41
Speaker 2: ruining society, in my opinion. Yeah, I really think so.
37:44
Speaker 1: This.
37:45
Speaker 3: same person, a professor, was like, teaching is miserable because
37:50
Speaker 3: these kids don't know, either don't want to or don't
37:54
Speaker 3: know how to speak to each other and to me
37:56
Speaker 3: and make, you know, therefore teaching a class is not
38:00
Speaker 3: enjoyable anymore.
38:01
Speaker 2: You gotta hang out. Nobody hangs out anymore. You don't
38:06
Speaker 2: have to drink. You just have to hang out. Like,
38:08
Speaker 2: go just like hang out. Sit somewhere and talk to people.
38:12
Speaker 2: That's all you gotta do. Let's take a quick break
38:16
Speaker 2: for the rest of the day. We'll see you tomorrow
38:17
Speaker 2: on the Financial Exchange.