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Nvidia’s AI Financing Plan Raises New Risks · The Financial Exchange Show

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Speaker 2: Lane, Chuck Paul Tucker with you here on a day
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Speaker 2: Dow's down thirty six points. Kind of not fun, but honestly,
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Speaker 2: it's not even a tenth of a percent, so whatever,
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Speaker 2: And the NASDAG is up about a half percent, one
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Speaker 2: hundred twenty nine points on the NASDAK composite tenure. US
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Speaker 2: Treasury not really moving a whole lot. It is down
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Speaker 2: six tenths of a basis point to four point six
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Speaker 2: seven eight percent. The Dollar Index not moving either, down
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Speaker 2: point to one percent to ninety nine to seventy one.
2:15
Speaker 2: Gold catching a bit of a bid today. It's been
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Speaker 2: on a nice run in the last couple weeks. Up
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Speaker 2: another thirty nine dollars announced to forty four eighty and
2:21
Speaker 2: you got crude oil West Text Intermediate holding steady at
2:24
Speaker 2: eighty three to ZHO two triple a national averagur Gas
2:27
Speaker 2: prices back up a couple more cents, about two and
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Speaker 2: a half cents up to four oh three and six tenths.
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Speaker 2: This after prices had dropped from around four OHO eight
2:36
Speaker 2: a week ago down to four OHO one. Now we're
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Speaker 2: moving back up as the price of crude has risen
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Speaker 2: and crack spreads have risen a little bit as well,
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Speaker 2: so gas struggling to find its way below four for
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Speaker 2: any extended period of time. Top story for this hour
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Speaker 2: here is this in Nvidia announcement from uh was it Monday?
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Speaker 1: When?
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Speaker 2: So it was? And this is interesting to me in
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Speaker 2: a few different respects. So it's let's talk first about
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Speaker 2: what the announcement is. And Nvidia announced that they signed
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Speaker 2: memorandums of understanding. Mommy if we've heard that term before.
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Speaker 2: With six major financial institutions, Poll Global Management, black Rock, Blackstone, Brookfield, Goldman, Sachs,
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Speaker 2: and KKR and they are trying to build what they
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Speaker 2: are calling compute financing platforms UH to get more than
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Speaker 2: five hundred billion dollars in third party capital allocated to
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Speaker 2: building out AI infrastructure. So couple things like the first
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Speaker 2: question is okay, that's nice, but what is it?
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Speaker 1: What is it?
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Speaker 2: What does it mean? What does it mean? And and
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Speaker 2: here's what it means. It means that they are trying
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Speaker 2: to effectively securitize the build out of data centers using
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Speaker 2: computer chips and the compute power supplied by them as collateral.
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Speaker 2: I'm not saying this is the same thing. I'm not
4:10
Speaker 2: saying this is the same thing. But back in the
4:14
Speaker 2: two thousand run up to the financial crisis, we all
4:17
Speaker 2: became or actually was after the financial crisis, we all
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Speaker 2: became familiar with the idea of mortgage backed securities. These
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Speaker 2: are compute backed securities. The idea is, okay, I can
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Speaker 2: buy a billion dollars of this and that will you know,
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Speaker 2: let that'll let someone then have the compute capacity for
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Speaker 2: that billion dollars, and if it goes bad, then I'm
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Speaker 2: going to have a claim on those chips and on
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Speaker 2: that compute power going forward. Got it? That's cool? Fine,
4:47
Speaker 2: next question, why are they doing this? In Vidio for
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Speaker 2: the last year to year and a half has been
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Speaker 2: doing a lot of these circular financing deals where it's Okay,
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Speaker 2: we're going to take apply, we're gonna supply you with
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Speaker 2: ten billion dollars in chips, and in response, we're gonna
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Speaker 2: get ten billion dollars in inequity. So you don't actually,
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Speaker 2: you know, see any money changing hands. It's this vendor
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Speaker 2: financing thing, and there are limits to how far that
5:17
Speaker 2: can go, obviously, So I think the reason why this
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Speaker 2: is happening is that Nvidio was getting close to those
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Speaker 2: limits in terms of how creative they could get with
5:25
Speaker 2: financing using their own assets and balance sheet and things
5:28
Speaker 2: along those lines, and it was getting to a point
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Speaker 2: where they're like, okay, we got to come up with
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Speaker 2: something else. So here are my thoughts on this. First
5:39
Speaker 2: of all, these are not binding agreements in any way,
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Speaker 2: shape or form, so there's nothing signed. These are memorandums
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Speaker 2: of understanding. It's not a contract to provide X and y,
5:50
Speaker 2: and so these could fall apart without any dollars being allocated.
5:54
Speaker 2: I don't think that's going to be the case. Number two,
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Speaker 2: I do find it interesting that for the last couple
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Speaker 2: of years, anytime in video announced like oh, we're taking
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Speaker 2: a stake in this or we've expanded financing for that,
6:07
Speaker 2: what direction do the stock go up? Went down almost
6:11
Speaker 2: three percent after this announcement. So this one, yeah, yeah,
6:14
Speaker 2: after this one. So I find that interesting. The other
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Speaker 2: piece is whenever companies start getting into the game of
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Speaker 2: not just oh we can just the problem is like
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Speaker 2: making enough product, but now it becomes hey, now we
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Speaker 2: need to figure out how to finance it. I get
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Speaker 2: a little bit nervous. Yeah, And sometimes that nervousness is warranted,
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Speaker 2: sometimes it's not. But it it gives me, you know,
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Speaker 2: kind of some flashbacks to what we saw with GE
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Speaker 2: towards the end of Jack Welch's tenure, when financialization became
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Speaker 2: the main way that they would grow earnings as opposed
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Speaker 2: to you know, growing earnings or products. It reminds me
6:53
Speaker 2: again a little bit of the whole mortgage backed security situation.
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Speaker 2: And so it's just like there trying to get creative
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Speaker 2: and figuring out how to grow this. But the other
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Speaker 2: piece that makes me a lot nervous is the interest
7:08
Speaker 2: rates that are reportedly going to need like just from
7:11
Speaker 2: what people are talking about the interest rates that are
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Speaker 2: going to need to be offered in order to make
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Speaker 2: this attractive to investors. Reportedly, they're talking about yields of
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Speaker 2: like eleven to seventeen percent, which doesn't suggest a whole
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Speaker 2: lot of confidence that there's going to be really valuable
7:28
Speaker 2: collateral that you can hold on to in this. And
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Speaker 2: the reason why is, look, who's to say that, like
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Speaker 2: China or someone else doesn't come in and say, Okay,
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Speaker 2: here's a bunch of cheap computing capacity, and now the
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Speaker 2: stuff that you own isn't worth as much.
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Speaker 3: That to me is the biggest hole that you could
7:44
Speaker 3: poke in this this whole thing. There was a great
7:46
Speaker 3: quote in this Wall Street Journal piece by Jack Abelin,
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Speaker 3: who is a founding partner in a family office that
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Speaker 3: manages two hundred and sixty billion in assets using compute
7:56
Speaker 3: power as collateral. So think about when you take a
7:59
Speaker 3: home ECHU line of credit against your home. We can
8:01
Speaker 3: all kind of understand that conceptually, what is backing that
8:03
Speaker 3: line of credit. Well, if you don't pay, the bank
8:06
Speaker 3: is going to foreclose and take your house. But they
8:08
Speaker 3: have a house that they can do something that they
8:09
Speaker 3: can sell it. They can rent it. There's the flexibility
8:12
Speaker 3: there when.
8:13
Speaker 2: You have an aside from two thousand and eight, they
8:15
Speaker 2: have a decent sense of what that is.
8:17
Speaker 3: Worse right, there is demand for that. There's always going
8:20
Speaker 3: to be people who need shelter, particularly now I mean
8:23
Speaker 3: in a way it's a different story, but anyway, now
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Speaker 3: you have compute that is backing as the collateral, an
8:30
Speaker 3: industry that is notorious for having deflationary pressure just hit
8:36
Speaker 3: it at all times. And to our benefit, to be clear,
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Speaker 3: we're surrounded by technology that we have benefited from. Look
8:43
Speaker 3: in your pocket, yeah, exactly, the decreasing costs on year
8:47
Speaker 3: over year over year. It is an area of the
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Speaker 3: market that innovates very quickly and rapidly. So there is
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Speaker 3: this huge fear. And to bring back to what is
8:56
Speaker 3: quote was that computing power has typically had the shelf
8:59
Speaker 3: life of lettuce, which even though I don't go to
9:02
Speaker 3: the grocery store that much, I do know that let
9:04
Speaker 3: us goes bad really quickly, and is a great analogy
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Speaker 3: to make here on the computing front, that this computing
9:09
Speaker 3: capacity can go bad really quick. So if you're doing
9:14
Speaker 3: a loan off of this collateral, then there are significant
9:19
Speaker 3: risks as to you pointing out by the interest rates
9:21
Speaker 3: yields that are going to need to be commanded here
9:24
Speaker 3: that there's some sort of development in the chip infrastructure space.
9:28
Speaker 3: You better believe there's a lot of companies coming after
9:30
Speaker 3: in Video's margins. We've talked about that, a lot that
9:32
Speaker 3: could make this technology obsolete. Not to mention, this is
9:37
Speaker 3: being talked about as perhaps being levied against some older
9:40
Speaker 3: versions of the chips, and Video is constantly iterating and
9:42
Speaker 3: coming out with new chicks that could almost undercut some
9:47
Speaker 3: of these loans. That again, this is all metamorandum of understanding.
9:50
Speaker 3: You know, nothing has been done yet but could undercut
9:53
Speaker 3: these loans. There's just a lot of risks that could
9:55
Speaker 3: in li here with this debt that would make me
9:58
Speaker 3: very queasy as any of debt investor out there.
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Speaker 2: Now. What Nvidia is saying is, look, this is not
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Speaker 2: just a commoditized business. They have a set of software
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Speaker 2: called KUDA, which stands for Compute Unified Device Architecture that
10:13
Speaker 2: allows them to say, okay, like we can build a
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Speaker 2: little bit of a moat around this because that software
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Speaker 2: architecture helps to basically lock people into our developer ecosystem,
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Speaker 2: and you can't just transfer compute between us in someone
10:30
Speaker 2: else's competing product. Maybe that's the case. Maybe it's not,
10:33
Speaker 2: like we'll have to see this over a full cycle
10:35
Speaker 2: to see whether, you know, businesses actually believe that. But
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Speaker 2: there are obviously some risks here and that look, normally,
10:42
Speaker 2: computing power is fungible, and that with a house, as
10:45
Speaker 2: you mentioned, Okay, the reason that a house has value,
10:49
Speaker 2: there's a few. The first is obviously the location. The
10:52
Speaker 2: second is replacement cost if you need to build a
10:54
Speaker 2: new one. The reason why China can't just come in
10:56
Speaker 2: and build a whole bunch of houses, Number one, you
10:58
Speaker 2: got zoning problems, You've got you know, all kinds of
11:01
Speaker 2: permitting costs, You've got the actual you know, cost of
11:05
Speaker 2: paying people to do the building, and this and that. Like,
11:08
Speaker 2: you can't just come in and build a bunch of
11:09
Speaker 2: cheap houses in the US. You can build a bunch
11:12
Speaker 2: of cheap houses in China, but that doesn't depress prices
11:15
Speaker 2: in the United States or in a specific market. In
11:18
Speaker 2: this case, if China says, hey, we built a bunch
11:20
Speaker 2: of data centers and the cost is twenty percent of
11:22
Speaker 2: what you guys do, well, yeah, I might say, look
11:25
Speaker 2: I don't want to send my data center but my
11:27
Speaker 2: computing power to China, but someone else might say, well,
11:31
Speaker 2: eighty percent discounts good enough that I might have to.
11:34
Speaker 2: So this is the These are some of the questions
11:36
Speaker 2: that are out there. And I don't know if this
11:40
Speaker 2: is going to end up working well or and badly.
11:44
Speaker 2: But these are the things that you think about in
11:45
Speaker 2: terms of potential problems, and they need to be overcome
11:48
Speaker 2: and maybe they can and maybe they can't.
11:50
Speaker 3: From an Nvidia's standpoint, though I can get behind it
11:53
Speaker 3: from a strategic standpoint for them, or takes away a
11:56
Speaker 3: ton of the risks. Yeah, it takes away a lot
11:58
Speaker 3: of the risk. And we are continuing to see these
12:01
Speaker 3: deals that they are hyper focused on not getting too
12:05
Speaker 3: sucked in to have in customer concentration, which they already
12:08
Speaker 3: are pretty concentrated in terms of the hyper skills buying
12:11
Speaker 3: their chips. They're trying everything that they can with a
12:13
Speaker 3: fortress balance sheet that they've amassed over the last few
12:15
Speaker 3: years with all this success, to ensure that they have
12:17
Speaker 3: customers in the future.
12:19
Speaker 2: Let's take a quick break. When we return, let's talk
12:23
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13:44
Speaker 2: Peace and Bloomberg Opinion Today it's titled college grads struggle
13:47
Speaker 2: to find jobs. Non grads are giving up? What are
13:50
Speaker 2: we seeing, Paul, What we're.
13:52
Speaker 3: Seeing from the labor marketing in general is a just
13:56
Speaker 3: fascinating phenomenon. Where we have talked for a long period
14:00
Speaker 3: of time about the baby boomers being the biggest demographic
14:04
Speaker 3: in the US. What we're now starting to see in
14:06
Speaker 3: the labor market is really they're transitioning to retirement, sort
14:10
Speaker 3: of play out in the numbers in the job participation
14:13
Speaker 3: numbers in the labor force. What we've seen on the
14:17
Speaker 3: labor participation market in general, we're down about one percent
14:22
Speaker 3: over the course of the past year. For the whole
14:25
Speaker 3: labor population. The participation rates only about sixty one point
14:29
Speaker 3: four percent. And so to segue into this story here
14:32
Speaker 3: about college grabs startling to find jobs, what we're finding
14:37
Speaker 3: here is there is just not a lot of demand
14:40
Speaker 3: to hire new workers. There has been a significant exodus
14:43
Speaker 3: of those people who are in the baby boomer generation
14:47
Speaker 3: to step away from work. But at the same point
14:49
Speaker 3: in time, we haven't had the influx of immigration for
14:54
Speaker 3: new worker supply being added there and the new college
14:57
Speaker 3: grabs that theoretically would be the labor supp that would
15:00
Speaker 3: replace those stepping away. There's been some hesitancy for a
15:04
Speaker 3: lot of these employers to hire new workers. You could
15:06
Speaker 3: maybe chalk that up to AI, or you could just
15:08
Speaker 3: talk it up to perhaps the skill set that employers
15:12
Speaker 3: are looking for isn't found with new workers. They're kind
15:15
Speaker 3: of continuing to stay pat with what they have in place.
15:19
Speaker 2: I have a hard time just reconciling this with the
15:22
Speaker 2: other data that we're getting in the job market, in that,
15:29
Speaker 2: on one hand, the job market seems to be tightening
15:32
Speaker 2: just because it seems to be more labor supply issues.
15:35
Speaker 2: There's just not enough workers to fill the openings that
15:38
Speaker 2: are out there. The other thing is we've seen an
15:43
Speaker 2: uptick in job openings in a few areas that are
15:47
Speaker 2: suggestive of like more entry level jobs starting to you know,
15:52
Speaker 2: kind of percolate through. So I'm trying to reconcile all
15:56
Speaker 2: of this, but I think the only way that I
15:58
Speaker 2: can is just that, hey, the job market for the
16:01
Speaker 2: last year and a half, two years, and actually you're
16:04
Speaker 2: probably going on, yeah, about two years now, that we've
16:06
Speaker 2: been kind of in this type of job market where
16:12
Speaker 2: there aren't very many layoffs, but the hiring rates remain
16:16
Speaker 2: depressed and more consistent with an unemployment rate that's close
16:19
Speaker 2: to like five and a half to six percent. And
16:22
Speaker 2: so given that, I can understand why people might feel
16:26
Speaker 2: frustrated that they can't you get a job simply because
16:30
Speaker 2: the hiring rates are still running like twenty to thirty
16:33
Speaker 2: percent below where they typically have been in stronger, more
16:38
Speaker 2: sustainable labor markets. I'm throwing out like twenty twenty one
16:42
Speaker 2: in twenty two because those were unsustainably hot. You're not
16:45
Speaker 2: going to get back to those kinds of labor markets,
16:48
Speaker 2: nor do I think that you should aim to get
16:50
Speaker 2: back to those kinds of labor markets. But hey, can
16:54
Speaker 2: you find like, just as an example, the hiring rate
16:57
Speaker 2: back in twenty twenty one, and this was on a
16:59
Speaker 2: monthly basis September twenty one was four and a half percent,
17:02
Speaker 2: which means that, like again, like you think about what
17:04
Speaker 2: that means actually, and it's basically telling you that, like
17:10
Speaker 2: companies are seeing like almost fifty percent turnover in terms
17:14
Speaker 2: of new hires in a given year, which is just
17:17
Speaker 2: like insane. The quits rate was two point nine percent,
17:21
Speaker 2: which is like thirty six percent of your employees are
17:23
Speaker 2: quitting in a given to you. Remember that was when
17:25
Speaker 2: everyone was turning over. Today, hiring rates at three point
17:29
Speaker 2: four percent and quits is it two? So that means, okay,
17:32
Speaker 2: about a quarter of your employees turnover, which is you know,
17:34
Speaker 2: much closer to like the historical norm. It's actually again
17:37
Speaker 2: low back during you know, twenty eighteen, we're like two three.
17:41
Speaker 2: Hiring right now is at three four. In twenty eighteen
17:44
Speaker 2: it was at four percent. So, like you, you look
17:46
Speaker 2: at this and there's that middle ground that you want
17:48
Speaker 2: to get to, and we just haven't seen any movement
17:51
Speaker 2: to get there. In the last couple of years now,
17:53
Speaker 2: hiring rates have been in this range. I'm trying to
17:57
Speaker 2: see the last time that we were meaningfully above You
17:59
Speaker 2: got to go back to February of twenty four so
18:01
Speaker 2: it's been two and a half years now that hiring
18:04
Speaker 2: rates have been pretty depressed. And I think what you
18:08
Speaker 2: can say is, hey, we've had some green shoots in
18:11
Speaker 2: the labor market, but it just hasn't translated into consistently
18:15
Speaker 2: hotter hiring and you know, it's just not showing up
18:20
Speaker 2: in that fashion absolutely, So I get it. It's not
18:25
Speaker 2: a great labor market right now. It's a frustrating one
18:31
Speaker 2: for a lot of perspective employees because they see the
18:36
Speaker 2: low one employment right and they're like, oh, this should
18:38
Speaker 2: be easy to get a job. It's not. It's a
18:40
Speaker 2: deceptive labor market, I think, is how I.
18:43
Speaker 3: Low fire has been really the characteristics of the labor market.
18:47
Speaker 3: Of the course the last year plus.
18:48
Speaker 2: Or so, it has been taking a look at markets
18:50
Speaker 2: as we head towards the bottom of the hour. We've
18:53
Speaker 2: got stocks continuing just to trade in mixed fashion right now.
18:57
Speaker 2: The S and P as of right now is up
19:00
Speaker 2: thirteen points, the DOWS off twenty six, the Nasdaq up
19:03
Speaker 2: one twelve, so again just a mixed market there. Ten
19:06
Speaker 2: year catching a bit of a bid now down one
19:08
Speaker 2: point six basis points, so a little bit of movement
19:11
Speaker 2: in that direction. Oil though catching a bid unfortunately as well,
19:14
Speaker 2: now up seven cents, so about a twenty five cent reversal.
19:18
Speaker 2: On West Text Intermedia now at eighty three to twenty seven.
19:22
Speaker 2: Take a quick break right now. When we come back,
19:25
Speaker 2: we got Wall Street Watch next.
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19:57
Speaker 4: Markets are mixed after the consumer price revealed no surprises,
20:01
Speaker 4: where the annual inflation rate pullback slightly to three point
20:05
Speaker 4: four percent. Right now, the Dow is off twenty five points.
20:10
Speaker 4: SMP five hundred is up about a tenth percent or
20:13
Speaker 4: eleven points higher, NASDAC up a third of a percent
20:16
Speaker 4: or eighty eight points higher. Rust two thousands up two
20:19
Speaker 4: tenths of one percent ten Your Treasure reeled down one
20:22
Speaker 4: basis point at four point sixty seven percent. In oil,
20:26
Speaker 4: mostly flat trading at eighty three dollars a barrel. Core
20:31
Speaker 4: Weave is rallying eighteen percent after posting second quarter revenue
20:34
Speaker 4: that doubled as the a cloud Giant saw increased demand
20:38
Speaker 4: for its AI compute capacity. Meanwhile, shares in super micro
20:42
Speaker 4: Computer jumping twelve percent after the data center infrastructure company
20:46
Speaker 4: offered encouraging guidance for earnings and revenue. Elsewhere, the Financial
20:51
Speaker 4: Times is reporting that Tree End Fund Management is laying
20:54
Speaker 4: the groundwork for a takeover private bid for fast food
20:57
Speaker 4: chain Wendy's. Wendy's is now surging fifteen percent.
21:01
Speaker 2: On that report.
21:02
Speaker 4: Home Depot CEO Ted Decker is taking a temporary medical
21:07
Speaker 4: leave of absence and is expected to return in the
21:10
Speaker 4: next few months. Home Depot shares are down by two percent.
21:14
Speaker 4: And in the world of sports, the Los Angeles Lakers
21:17
Speaker 4: are being sold to Joshua Kushner and Bob Iger for
21:21
Speaker 4: a record breaking price of twelve point five billion dollars.
21:25
Speaker 4: Mark Walter merely bought the Lakers last year at a
21:29
Speaker 4: price tag of ten billion dollars. I'm Tucker Silva, and
21:33
Speaker 4: that is Wall Street Watch.
21:37
Speaker 2: It's got to be kind of cool to buy something
21:40
Speaker 2: and sell it for two and a half billion dollars
21:42
Speaker 2: more a year later. Not too bad. I wish I
21:46
Speaker 2: could know what that feels like. I never will, but
21:53
Speaker 2: like it's got to be just like you just wake
21:56
Speaker 2: up and hey, here's an extra two and a half
21:58
Speaker 2: billion dollars. Not too bad, right, Like, it's not bad
22:02
Speaker 2: for a year's work if you can get it. Be okay.
22:06
Speaker 2: Wealth Management has a three trillion dollar problem. Uh oh,
22:10
Speaker 2: let's let's see what the problem is. Investors are keeping
22:13
Speaker 2: too much cash. Well, how is this a problem?
22:17
Speaker 3: Paul Chuck?
22:18
Speaker 2: Cash?
22:19
Speaker 3: Is king really What the issue is here for a
22:23
Speaker 3: lot of wealth management firms is that a unique, not phenomena,
22:28
Speaker 3: but a neique situation occurred in twenty twenty two where
22:30
Speaker 3: you had the stock market declining in around you know,
22:34
Speaker 3: eighteen percent or so, but you also had the bond
22:38
Speaker 3: market decline double digits as well as interest rates soared
22:41
Speaker 3: as we were combating inflation that we hadn't seen for
22:45
Speaker 3: thirty plus years. And so as a result of that,
22:48
Speaker 3: when the Fed hiked interest rates, you've had money market
22:51
Speaker 3: funds yields significantly rise to the tune of encroaching on
22:56
Speaker 3: five percent, and twenty twenty two they now sit probably
22:58
Speaker 3: around you know, three and a half percent, depending on
23:00
Speaker 3: which one you're looking at. So there are a lot
23:02
Speaker 3: of money market funds that clients have been very comfortable
23:06
Speaker 3: continuing to pocket that interest that comes from these money
23:10
Speaker 3: market instruments at three and a half percent and less
23:13
Speaker 3: likely to deviate from that cash. Some of it could
23:17
Speaker 3: be blowback from what they felt in twenty twenty two,
23:20
Speaker 3: where like I said, stocks and bonds both fell, but
23:23
Speaker 3: also the hesitancy to go and buy longer term bonds
23:28
Speaker 3: when they're perfectly satisfied to collect three and a half
23:31
Speaker 3: percent for something that is very short term in nature.
23:35
Speaker 3: You can be in and out of these money market
23:36
Speaker 3: funds in just one business day. So that is really
23:40
Speaker 3: the issue. These wealth management firms are trying to sell
23:43
Speaker 3: them other products, and people are very keen to continue
23:48
Speaker 3: to hold on to this cash slug that has amassed
23:52
Speaker 3: in these money market funds of three trillion dollars, like
23:55
Speaker 3: you mentioned. Is this a problem? Not really, No, it's not.
24:00
Speaker 3: Maybe for the wealth management ferns who are trying to
24:03
Speaker 3: make money, you know, selling products, but no issue really
24:07
Speaker 3: here of concern.
24:08
Speaker 1: No.
24:09
Speaker 2: Ultimately, look, every single thing that you can put your
24:12
Speaker 2: money in, whether it's a bank account, a money market fund,
24:15
Speaker 2: a bond, a stock, a cryptocurrency, UH Dodgers investment, the
24:22
Speaker 2: Los Angeles Dodgers, you know, AI backed securities, like every
24:27
Speaker 2: single possible investment, they all have pros and cons to them.
24:31
Speaker 2: The downside of sitting in a money market fund, Hey,
24:33
Speaker 2: if inflation picks up, yeah, you're probably not gonna do
24:36
Speaker 2: too well. And by the way, your earnings are just
24:38
Speaker 2: going to be fairly muted relative to other asset classes. Anyways,
24:43
Speaker 2: that's the deal. But here's here's the secret. If it
24:46
Speaker 2: helps you sleep at night, and if you can stick
24:49
Speaker 2: with that strategy, it's probably the right one for you.
24:52
Speaker 2: If you will get equities. The obvious downside is, hey,
24:55
Speaker 2: you could wake up and within you know, a few
24:58
Speaker 2: weeks if you have just like a broad Mark a portfolio,
25:00
Speaker 2: you can be down twenty percent. Like that can happen.
25:03
Speaker 2: You can go through decades where the returns are you know,
25:06
Speaker 2: next to nothing. If it's a bear market, got it,
25:08
Speaker 2: that's fine. But if you understand those risks and you're
25:12
Speaker 2: willing to you know, ride with it in the good
25:13
Speaker 2: times and bad okay, like that, that's fine for you.
25:17
Speaker 2: There is no perfect portfolio. It's whatever works for any
25:22
Speaker 2: individual person. And if you're finding that you're like being
25:28
Speaker 2: pushed in a certain direction that you're not comfortable with,
25:30
Speaker 2: well it's probably not gonna work very well. It's it's
25:33
Speaker 2: no different from any other relationship. Like the best it
25:36
Speaker 2: will ever be is at the beginning, and then from
25:39
Speaker 2: there you start to be like, oh, there's a flaw here,
25:40
Speaker 2: there's a flaw there. If you're not comfortable with your
25:43
Speaker 2: portfolio at the beginning when things are okay, you're probably
25:47
Speaker 2: not going to be when it inevitably faces whatever challenges
25:50
Speaker 2: it faces based on the composition of it. Like, you're
25:53
Speaker 2: not gonna get more comfortable with it through that. Like,
25:55
Speaker 2: it's just not how it works. Yeah, it's like dating, right,
25:58
Speaker 2: It's like being like, well, we're not doing so great,
26:01
Speaker 2: but we thought maybe we would have a kid and
26:02
Speaker 2: see if it made it better. I'm just not sure
26:04
Speaker 2: that's how it works. No, but I digress. The Armstrong
26:08
Speaker 2: Advisory Group is having an event next Thursday, August twentieth
26:13
Speaker 2: I did the math. It's eight days away now. It's
26:16
Speaker 2: at five pm, and it's at the Renaissance Framingham Hotel
26:21
Speaker 2: and it's hosted by Susan Powers and Effie Vessulis, and
26:24
Speaker 2: they're gonna be talking about social Security and medicare planning
26:28
Speaker 2: and so whether you are already retired and just trying
26:32
Speaker 2: to make sure that, hey, you're on the right track
26:35
Speaker 2: for those decisions that you may be actively making right now,
26:38
Speaker 2: whether you are looking towards retirement in the next couple
26:41
Speaker 2: of years, or hey, maybe you just want to learn
26:44
Speaker 2: a little bit more about these programs and how they work.
26:46
Speaker 2: This is the place to go. It's at August twentieth again,
26:51
Speaker 2: at five pm and it's at the Renaissance Framingham Hotel.
26:55
Speaker 2: There is limited space, so in order to sign up,
26:58
Speaker 2: you go to Armstrong Advice dot com slash events and
27:03
Speaker 2: you can sign up for it right there. That website
27:05
Speaker 2: again is Armstrong Advisory Slash Events. Again, it's a retirement
27:09
Speaker 2: planning seminar with Susan Powers and Fie visulis Thursday August
27:13
Speaker 2: twentieth at five pm at the Renaissance Framingham Hotel. Again,
27:18
Speaker 2: go to Armstrong Advisory dot com slash events to sign up.
27:22
Speaker 1: The proceeding was paid for by Armstrong Advisory Group, a
27:25
Speaker 1: registered investment advisor. Nothing in the ad or in any
27:27
Speaker 1: Armstrong guide a specific financial, legal, or tax advice. Consult
27:31
Speaker 1: your own financial, tax and to state planning advisors before
27:33
Speaker 1: making any investment decisions. Armstrong may contact you to offer
27:36
Speaker 1: investment advisory services.
27:38
Speaker 2: So prediction markets, I know where you're going. I can't
27:45
Speaker 2: stand them. I can't stand them. I think that they
27:49
Speaker 2: are just bad, they're bad news. I don't like them.
27:55
Speaker 2: That's fine. Like my personal view doesn't have to be
27:58
Speaker 2: the view of everyone. It's okay if you have a
28:00
Speaker 2: different opinion and you're entitled to that. It's it's fine
28:03
Speaker 2: despite not liking them. I look at you know, how
28:07
Speaker 2: some of the different potential regulators are trying to handle them,
28:11
Speaker 2: and I'm like, I'm not sure that's the answer either.
28:15
Speaker 2: So you've got New York City they are launching an
28:18
Speaker 2: investigation into Polymarket and Calshi and they are looking into
28:23
Speaker 2: deceptive marketing practices and targeting minors, which, again, if these
28:29
Speaker 2: are actually happening, I think it would be you know,
28:31
Speaker 2: a real problem. And I think that when you look at,
28:36
Speaker 2: you know, whether there's any meat on these bones, I
28:39
Speaker 2: have no idea because these investigations are in the early
28:41
Speaker 2: stages and I don't know if there's you know, a
28:43
Speaker 2: real problem.
28:44
Speaker 1: There.
28:45
Speaker 2: Another one, You've got flight Aware, which is an app
28:50
Speaker 2: that tracks different flights on your phone, and they are
28:54
Speaker 2: suing Calshi over over flight cancelation predictions because basically what
29:02
Speaker 2: you could have is like, if someone makes a big
29:05
Speaker 2: bet that there's going to be a certain number of
29:06
Speaker 2: cancelations from an airport, they could then go and cause
29:09
Speaker 2: a bunch of cancelations at that airport and make a
29:12
Speaker 2: bunch of money, which raises the question like, why do
29:16
Speaker 2: I need the ability to bet on the percentage of
29:20
Speaker 2: flights canceled at an airport on any particular day. Oh,
29:27
Speaker 2: there you go, you were going to do it.
29:30
Speaker 3: So I was trying to recall, does George doesn't Kramer
29:34
Speaker 3: call in a favor? Is like similar to this with
29:36
Speaker 3: George to try and win a bet, because the famous
29:39
Speaker 3: Sinful episode is that he gets into a betting contest
29:43
Speaker 3: sitting in one of the airport lounge with.
29:45
Speaker 4: Some text wealth Texan.
29:47
Speaker 2: Does he make a phone call to George to like
29:49
Speaker 2: do something? Remember trying to figure out.
29:52
Speaker 3: I know that yeah?
29:55
Speaker 1: Or no?
29:55
Speaker 3: Did he have Newman come down? I forget what the
29:57
Speaker 3: deal is. But anyway, very early reminiscent to that Seinfeld
30:01
Speaker 3: episode in season three, episode nineteen, just looked it up
30:04
Speaker 3: here where Kramer hops in and does this exact thing
30:08
Speaker 3: and gambles on flight arrival times at the airport. The
30:13
Speaker 3: way these prediction markets work just for listeners out there,
30:17
Speaker 3: the way they're kind of able to circumvent. You might
30:20
Speaker 3: hear this and say, isn't this just gambling? They pose themselves.
30:24
Speaker 2: As not posed.
30:25
Speaker 3: They are contract faces contract exactly, and so that's why
30:30
Speaker 3: they've been able to circumvent that. The gambling legislations which
30:34
Speaker 3: is not state by state. Not all states have approved gambling,
30:38
Speaker 3: so that's how they operate. But clearly they are willing
30:42
Speaker 3: to let you predict anything out there.
30:46
Speaker 2: Like I'm just looking at like some of the stuff
30:48
Speaker 2: that you can bet on there, and like they have
30:50
Speaker 2: a whole section for mentions, and it's like, what will
30:55
Speaker 2: YETI say during their next earnings call and you can
30:58
Speaker 2: bet if you know, yeah, he will say NFL TikTok
31:03
Speaker 2: ceramic ai ranger iran tailwind, like not all at once,
31:11
Speaker 2: because that would be that'd be a big sentence. But
31:15
Speaker 2: why do you need the ability to bet on this?
31:18
Speaker 2: Like what purpose does that serve? And people say, oh, well,
31:23
Speaker 2: like it's it's entertainment, okay, Like I get that. Then
31:27
Speaker 2: if you're going to make it just gambling and entertainment,
31:29
Speaker 2: then regulated as gambling, right, because it's not like no
31:35
Speaker 2: one needs to trade futures on whether YETI is going
31:38
Speaker 2: to mention the word tailwind during their earnings call. That's
31:43
Speaker 2: just stupid, like you, there's no there's no case for
31:47
Speaker 2: that's so easy to like rig that too. Of course,
31:50
Speaker 2: of course it is, like I'll give you an example,
31:53
Speaker 2: like just as an example, I have a couple buddies
31:56
Speaker 2: from college who occasionally come into town, and one they
32:01
Speaker 2: were texting me at like nine thirty and they were like, hey, like,
32:03
Speaker 2: can you like come hang out this morning? And I
32:05
Speaker 2: was like, no, I can't, Like I got a show.
32:07
Speaker 2: I got to do it ten And they were like, oh, like,
32:09
Speaker 2: how do we listen to your show? And so I
32:11
Speaker 2: sent them the Lincoln whatever and they said this this
32:14
Speaker 2: this one guy. He's this one guy. His nickname in
32:19
Speaker 2: college was was battle Axe, or at least he wanted
32:23
Speaker 2: his nickname to be battle Axe. We called him butter
32:25
Speaker 2: knife because we we didn't think he was, you know,
32:27
Speaker 2: particularly battle axe. But he said, he said, look, can
32:31
Speaker 2: you say the word acts four times in the first segment?
32:34
Speaker 2: I was like, of course I can, Like, no problem. Now,
32:37
Speaker 2: this wasn't a betting thing. This was like ten years ago,
32:39
Speaker 2: and he just thought it would be funny if I
32:41
Speaker 2: did it. But obviously, like I could do that, and
32:44
Speaker 2: in today's world, if I did that, who knows if
32:47
Speaker 2: there's like a Calshi like bet that's going on, for like,
32:51
Speaker 2: will Chuck say the word acts four times in the segment?
32:55
Speaker 2: So I just don't think this is is good. And
33:00
Speaker 2: I think it's very bad. And the statistics say that
33:04
Speaker 2: basically no one makes money on these platforms. There's like
33:07
Speaker 2: ten percent of users that do, and everyone else loses it.
33:10
Speaker 2: And I just don't know why this is a good
33:14
Speaker 2: thing to have this in your pocket. I say this,
33:17
Speaker 2: by the way, as someone who does go to casinos
33:20
Speaker 2: and gambles there, and I don't think it's hypocritical to
33:23
Speaker 2: be able to say. I think that if you want
33:25
Speaker 2: to go somewhere and bet on these things, I think
33:28
Speaker 2: that's totally fine. If you regulate it as gambling and
33:30
Speaker 2: make someone go there, Having the ability to make all
33:33
Speaker 2: of these bets in your pocket all throughout the day
33:36
Speaker 2: is incredibly destructive and I don't think that that should
33:40
Speaker 2: be happening here here. But that's just me. If you
33:43
Speaker 2: have different opinions, that's fine too. Like it's a free
33:46
Speaker 2: country and we're able to do that, it's a good thing.
33:49
Speaker 2: Let's take a quick break. When we return, we got
33:52
Speaker 2: stack Roulette.
33:54
Speaker 1: Here the Financial Exchange every day from eleven to noon,
33:57
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34:01
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34:37
Speaker 2: Hi, Paul, what do you got for snack rue?
34:40
Speaker 3: One of the largest buildings in the New England area
34:44
Speaker 3: is now being talked about to be converted into housing.
34:48
Speaker 3: This is something that had been kicked around over the
34:51
Speaker 3: last few years as office buildings down in the Boston
34:55
Speaker 3: area were not, as you know, significantly occupied as they
34:59
Speaker 3: were pre cod So this one here in particular, is
35:03
Speaker 3: the Park Square building, which is an eleven story, five
35:07
Speaker 3: hundred and forty thousand square foot property that a group
35:10
Speaker 3: out of New York is looking to potentially apply to
35:15
Speaker 3: have four hundred and ninety apartments at thirty one Saint
35:17
Speaker 3: James Avenue. This would be an expensive undertaking to convert
35:23
Speaker 3: this property into all these different apartments. They would keep
35:27
Speaker 3: about thirty thousand square feet in retail space right now.
35:31
Speaker 3: Fire and Ice the restaurant is in there along with
35:33
Speaker 3: a French furniture retailer. This has been something that has
35:37
Speaker 3: been talked about in a lot of different cities out there.
35:40
Speaker 3: I think they're looking for ways to try and combat
35:45
Speaker 3: what we've seen a significant decline in office space being
35:48
Speaker 3: leased in the Boston area. Is probably the biggest one
35:52
Speaker 3: that's on the hook for they generate a lot of
35:53
Speaker 3: their property tax revenue from the businesses that had leased
35:57
Speaker 3: out office space. My sister works in commercial real estate,
36:01
Speaker 3: has always explained to me when this idea comes up
36:04
Speaker 3: that the cost to do this kind of conversion are
36:08
Speaker 3: really significant and has a lot of commercial real estate
36:11
Speaker 3: developers hesitant to undertake this type of work. But it
36:15
Speaker 3: could cost up to four hundred and ten million if
36:17
Speaker 3: they were to go ahead, and would be the largest
36:20
Speaker 3: conversion that Boston has seen to date.
36:23
Speaker 2: Pretty wild.
36:24
Speaker 3: Yeah, that, I mean, there's a need for more housing
36:27
Speaker 3: there in the Boston area. You can't argue that. But
36:30
Speaker 3: from a business perspective, certainly a lot of costs to
36:34
Speaker 3: make that conversion, but a good area in the city.
36:36
Speaker 2: I want to talk a little bit about ticket resellers either.
36:40
Speaker 2: If you ever have a bad experience with stub hub
36:43
Speaker 2: once Jad and I bought on the subjects. Dad and
36:46
Speaker 2: I bought Celtics tickets and showed up. You know, did
36:49
Speaker 2: not work.
36:50
Speaker 3: Luckily, sub hub is right on the corner of the garden,
36:54
Speaker 3: like right by the garden, and we were able to
36:56
Speaker 3: kind of get situated. But yeah, that was kind of
36:58
Speaker 3: a scary experience to come through and then the barcode
37:01
Speaker 3: does not work on the tickets, Tucker, what about you?
37:03
Speaker 2: Nothing I can think of I had won. I was
37:07
Speaker 2: fears probably like ten years back now, had bought some
37:11
Speaker 2: tickets to way a Red Sox game, and the day
37:15
Speaker 2: of like stuff up was just like, oh, we can't
37:18
Speaker 2: provide you these tickets, and I'm like, okay, well, you know,
37:21
Speaker 2: like I bought them, what do you gonna do? They
37:24
Speaker 2: ended up basically they had to give us much better seats,
37:26
Speaker 2: so it ended up working out fine, and it was
37:28
Speaker 2: still kind of like, oh, like that's you know, that's
37:32
Speaker 2: not really great here. The big thing on like a
37:36
Speaker 2: lot of these markets in particular like stuff up, like
37:38
Speaker 2: they never take inventory of tickets themselves, and like this
37:42
Speaker 2: is a key problem in my opinion, in that you're
37:47
Speaker 2: never buying the ticket from stub hub. It's you buy
37:50
Speaker 2: them and like, if you've ever sold a ticket on
37:52
Speaker 2: any of these platforms, all you do is you say, Okay,
37:55
Speaker 2: I need to send this ticket to like this person
37:57
Speaker 2: via like their email address or their phone. Now there's
38:01
Speaker 2: no verification from stub Hub in a lot of cases
38:03
Speaker 2: that the tickets they have are legit because they don't
38:05
Speaker 2: receive the tickets. So this is becoming a bigger problem.
38:09
Speaker 2: Apparently the World Cup had quite a few upset people,
38:12
Speaker 2: which I could understand. Let's take a quick break for
38:15
Speaker 2: the whole rest of the day. We're gonna be back
38:17
Speaker 2: at it tomorrow. It's Thursday, and it should be really fun.