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Don't trust Americans when they say they'll reign in spending · The Financial Exchange Show

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  Speaker 1: and fall Lane.
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  Speaker 2: Good morning, happy Tuesday before Thanksgiving here on the Financial Exchange.
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  Speaker 2: We've got the government reopens, so data starting to flow again.
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  Speaker 2: We've got some information on retail sales to go through.
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  Speaker 2: We're gonna be talking Google and semiconductors, sorry, Alphabet and
• 1:25
  Speaker 2: their semiconductor business and what seems to be getting some attention.
• 1:31
  Speaker 2: And then we're also going to be talking about the
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  Speaker 2: tried and true method of controlling prices, which would be
• 1:38
  Speaker 2: or bringing down prices, which would be rent control, because
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  Speaker 2: we know how well that one works and apparently need
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  Speaker 2: to retest that here in Massachusetts. So first things first, though, Mike,
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  Speaker 2: Paul and Tucker with you here on the Tuesday ahead
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  Speaker 2: of the holiday. Markets mixed as we open up here,
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  Speaker 2: Dow in positive territory, SMP and Nasdaq in negative territory.
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  Speaker 2: We've had a vault few weeks here, and so I
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  Speaker 2: think investors are a bit on edge here even as
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  Speaker 2: we head into the holidays, wondering about this AI trade,
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  Speaker 2: and we'll be talking about that some more later in
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  Speaker 2: the program. But I want to start off with retail sales.
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  Speaker 2: They have been well paused, the data for it for
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  Speaker 2: a while, and the data that we're getting Now again
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  Speaker 2: we have to just acknowledge here and stress that this
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  Speaker 2: is data for September.
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  Speaker 3: It is two months old. Now.
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  Speaker 2: It is not the most useful statistic that we can
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  Speaker 2: use to try and garner what people how people are
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  Speaker 2: feeling about the economy.
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  Speaker 3: But one thing you can say is that.
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  Speaker 2: Trends oftentimes continue themselves, and so what we saw in
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  Speaker 2: September could continue through October and November.
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  Speaker 3: Perhaps.
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  Speaker 2: But taking a look at this report here again, this
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  Speaker 2: tries to measure how much people are spending and what
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  Speaker 2: they are spending it on. We did see a modest,
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  Speaker 2: a very modest increase for retail sales in the month
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  Speaker 2: of September. They increased on a month over month basis
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  Speaker 2: zero point one six percent. That comes off the heels
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  Speaker 2: of an August increase of zero point six percent, and
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  Speaker 2: July was about the same, so pretty significant slow down.
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  Speaker 2: We did see a lot of that coming from gas stations,
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  Speaker 2: personal care stores, miscellaneous retailers as well. Motor vehicle sales
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  Speaker 2: fell for the first time in four months, which maybe
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  Speaker 2: somewhat notable here. Maybe that's going to peak back up
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  Speaker 2: though in the holiday car shopping season. What else did
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  Speaker 2: you take away from this report, Paul, in terms of
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  Speaker 2: American spending activity.
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  Speaker 4: It's hard Mike, going back to September, and I've spent
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  Speaker 4: the last thirty seconds just thinking about the Earth Wind
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  Speaker 4: and Fire song. Do you remember, Yeah, twenty September. That's
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  Speaker 4: it's been bouncing around in my mind. I'm just not
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  Speaker 4: sure how much weight we should put into this, like
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  Speaker 4: you said, just because it is so backward looking. The
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  Speaker 4: numbers pale in comparison to some of the prior months.
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  Speaker 4: But we sit really in the holiday shopping season right now,
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  Speaker 4: and this is data that goes back, like we said,
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  Speaker 4: to even pass the back to school season. Here some
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  Speaker 4: of the areas that stuck out to me. You know,
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  Speaker 4: you did see a little bit of drop on the
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  Speaker 4: appliance and electronics side of things, about a half percent
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  Speaker 4: drop there. Clothing dropped, and you saw some declines as
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  Speaker 4: well in sporting goods, hobby, musical instruments, and bookstores. But
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  Speaker 4: overall as a whole, it's it is sort of just
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  Speaker 4: yesterday's news. Really, we now turn our focus much more
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  Speaker 4: and we'll get into this in just a second here.
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  Speaker 4: In terms of inflation in the labor market, those really
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  Speaker 4: are the two primary concerns. Obviously, the consumer has been
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  Speaker 4: holding up its end of the bargain for years now,
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  Speaker 4: so it's not like we shouldn't cover this type of data.
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  Speaker 4: But the problem with this government shutdown is it is
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  Speaker 4: so backward looking that I'm not going to put too
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  Speaker 4: much stock into it just yet.
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  Speaker 2: Yeah, thank you to all you retirees who are feeling
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  Speaker 2: extra wealthy and paying for first class plane tickets and
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  Speaker 2: family vacationations and new cars because you are keeping this
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  Speaker 2: economy afloat here. I think it's worth mentioning. Right when
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  Speaker 2: you strip out we tend to strip out things like gasoline.
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  Speaker 2: Gas prices fluctuate a lot, and so you strip it
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  Speaker 2: out of the numbers. You tend to strip out things
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  Speaker 2: like motor vehicle and parts because those are very big
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  Speaker 2: ticket items that people are not purchasing every single month.
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  Speaker 2: You know, you purchase one every five years or so,
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  Speaker 2: and for me maybe closer to ten to fifteen, but
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  Speaker 2: I'm sure nonetheless it's a rare purchase. That's a big
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  Speaker 2: ticket item. So when you strip all those items out,
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  Speaker 2: retail sales barely budged in September, So you know that's
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  Speaker 2: the piece to take away here is we saw a
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  Speaker 2: slow down from the last several months. Is that because
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  Speaker 2: sentiment worsened? Is it because there I doubt it's because
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  Speaker 2: there was a fear of a government shut down?
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  Speaker 3: But is there some reason behind that?
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  Speaker 2: Or is this just a trend in the data that's
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  Speaker 2: going to reverse itself, Because you know, you don't have
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  Speaker 2: to go terribly far back to see a similar in
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  Speaker 2: the data. Back in what was it back in May
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  Speaker 2: of this year? We saw an eight tens of percent
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  Speaker 2: drop At that point in time, we were blaming it
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  Speaker 2: mainly on tariff fears. Is there something similar to blame
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  Speaker 2: it on now? Doesn't really come to mind for me,
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  Speaker 2: but you know, could this Here's who cares about this?
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  Speaker 3: Target?
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  Speaker 2: Walmart, a bunch of other companies do care about this.
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  Speaker 2: They probably have better data on what their consumers are
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  Speaker 2: doing than we do. But you know they're probably looking
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  Speaker 2: at this and saying, Okay, this is where people cut
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  Speaker 2: back in September. Are we going to see this stuff
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  Speaker 2: surge again for the holiday shopping season? Or for instance,
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  Speaker 2: our sporting goods store is going to be in tough
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  Speaker 2: shape because of this pullback that we are seeing here.
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  Speaker 2: One you know, glimmer of hope here of good news.
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  Speaker 2: Spending on food services and drinking places and increase seven
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  Speaker 2: tenths of percent.
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  Speaker 1: Yep.
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  Speaker 2: It's not big ticket items, but you know, people are
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  Speaker 2: treating themselves a little bit in the month of September.
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  Speaker 2: I do like to see that spending on that type
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  Speaker 2: of service and that that does go a long way
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  Speaker 2: for things.
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  Speaker 3: So I think that that's a good indication of it. Yeah.
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  Speaker 4: Yeah, it's hard on the retailers that you mentioned their
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  Speaker 4: quarterly earnings, which would encompass, you know, even more data
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  Speaker 4: than this September retails report was kind of mixed. You
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  Speaker 4: saw Walmart had a pretty strong success, Target has continued
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  Speaker 4: to struggle that business has really been muddling along for
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  Speaker 4: the last year or so, and others. It was just
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  Speaker 4: hard to point through as a clear through picture. Home
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  Speaker 4: Depot did see you decline in same source sales, mentioning
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  Speaker 4: just a weakening market for the real estate sector. So
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  Speaker 4: we'll continue to digest more information as it comes out,
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  Speaker 4: but just one data point. We don't want to go
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  Speaker 4: too far ahead of ourselves here.
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  Speaker 2: Yeah, I will, you know, I'll bring a story that
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  Speaker 2: we're going to cover later to the front though the
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  Speaker 2: Boston Globes reporting that US consumers plan to cut their
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  Speaker 2: Black Friday spending for the first time since twenty twenty one.
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  Speaker 2: I just don't believe them. I think that they are
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  Speaker 2: lying both to the reporters and to themselves. I think
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  Speaker 2: that that's genuine I'm not tell that. I'm not telling
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  Speaker 2: folks out there that they genuinely don't think they're going
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  Speaker 2: to cut back on their spending. But we see this
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  Speaker 2: every year where you go out and you survey consumers
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  Speaker 2: on the street and they say, oh, you know, that
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  Speaker 2: credit card bill last year was way too much. I'm
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  Speaker 2: going to cut it back, And unless they literally lose
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  Speaker 2: their job, they don't cut back.
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  Speaker 3: So I'm just not buying it.
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  Speaker 4: The only argument I could see is that it feels
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  Speaker 4: like Black Friday is not a Black Friday creep. It's
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  Speaker 4: not as special as it as it once was. Because
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  Speaker 4: these companies spread it out over such an extended period
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  Speaker 4: of time. It seems like that perhaps that one day
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  Speaker 4: isn't as significant as it used to be.
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  Speaker 3: Yeah, I will, I will admit that that.
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  Speaker 2: You know, perhaps there's been enough Black Friday creep that
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  Speaker 2: it's just going to But that doesn't.
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  Speaker 3: Ano Cyber Monday.
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  Speaker 4: You know, it's just it becomes more of a extended
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  Speaker 4: period of sales.
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  Speaker 2: While I agree, I don't think it's significantly different from
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  Speaker 2: last year.
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  Speaker 3: And so true.
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  Speaker 2: You know, we had Black Friday creep last year. I
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  Speaker 2: doubt we're going to see sales drop. And yeah, I
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  Speaker 2: don't know. I tend to think that whenever you survey consumers.
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  Speaker 2: So the Deloitte survey that they did, they survey twelve
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  Speaker 2: hundred Americans. They found that the shoppers planned to spend
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  Speaker 2: an average of six hundred and twenty two dollars between
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  Speaker 2: Black Friday and Cyber Monday.
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  Speaker 3: God, that's a lot of money. That would be down
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  Speaker 3: four percent from last year. It's just not how it works.
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  Speaker 4: It would be like asking anybody you're going to try
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  Speaker 4: and lose some weight this year's I'm gonna put on a.
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  Speaker 2: Bunch of muscle mass and lose weight and U and
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  Speaker 2: my hair is gonna grow. No, that's not how it works.
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  Speaker 2: And uh yeah, I'm gonna be six foot by the
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  Speaker 2: end of twenty twenty six. Paul, It's gonna be great.
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  Speaker 2: We're all gonna be really happy about it, and my
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  Speaker 2: financial house will be in order. Let's take a quick
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  Speaker 2: break when we come back a little bit of FED talk.
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  Speaker 2: When we head into this December meeting, investors seem to
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  Speaker 2: be quite split on what the FED is going to
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  Speaker 2: end up doing. So to hint at what we were
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  Speaker 2: referring to earlier, Right now, when you take a look
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  Speaker 2: at the Chicago Work and Tile Exchange, Uh, there is
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  Speaker 2: right now an eighty five percent chance of a rate
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  Speaker 2: cut at that next December meeting, in spite of j
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  Speaker 2: Powell coming out and very publicly saying and then a
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  Speaker 2: bunch of his governor's coming out and saying that it
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  Speaker 2: is not a foregone conclusion. Where was that a few
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  Speaker 2: weeks ago? And will they actually end up cutting next year?
• 10:24
  Speaker 2: On the Financial Exchange Nice this.
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  Speaker 2: Over the course of the last month, with some market volatility,
• 11:32
  Speaker 2: there's been two main things that have been pointed to
• 11:36
  Speaker 2: as contributing factors, and I would tell you that really
• 11:39
  Speaker 2: only one of them matters. But one has been new
• 11:42
  Speaker 2: suspicions about the AI trade, how much it's going to cost,
• 11:45
  Speaker 2: whether the payoff will come. Second, has been changing narrative
• 11:48
  Speaker 2: around where interest rates are going. FED has cut interest
• 11:50
  Speaker 2: rates twice this fall. They were widely expected to do
• 11:54
  Speaker 2: so again at the upcoming December meeting. There was a
• 11:58
  Speaker 2: month ago, back in October, there's a ninety two two
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  Speaker 2: percent likelihood that they were going to cut. No, sorry,
• 12:03
  Speaker 2: there was a ninety five percent chance that they were
• 12:06
  Speaker 2: going to cut at that next meeting. A week ago
• 12:10
  Speaker 2: it was a fifty to fifty chance, And so I
• 12:13
  Speaker 2: don't know how much that contributed to sentiment about markets.
• 12:16
  Speaker 2: But higher interest rates make some investors nervous. They discount
• 12:19
  Speaker 2: their future cash flows when it comes to a company
• 12:23
  Speaker 2: at a higher interest rate, and so it changes valuations.
• 12:26
  Speaker 2: I suspect that the nervousness about the AI trade was
• 12:29
  Speaker 2: a larger contributing factor than interest rates. But I don't
• 12:32
  Speaker 2: think we can minimize the impact of what the FED
• 12:35
  Speaker 2: has to say about the economy because they have provided
• 12:38
  Speaker 2: a lifeline on several occasions when things have gotten messy.
• 12:43
  Speaker 2: What has been happening to cause this kind of shift
• 12:46
  Speaker 2: in thinking?
• 12:47
  Speaker 3: One, you did have J.
• 12:49
  Speaker 2: Powell at the last meeting come out and say it
• 12:51
  Speaker 2: is far from a foregone conclusion that we will be
• 12:54
  Speaker 2: cutting interest rates at the next meeting. Following that, you
• 12:56
  Speaker 2: had several other FED members that pretty much said the
• 12:59
  Speaker 2: same thing. Right since then, though, since the last week
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  Speaker 2: or so. Again, now you've had more FED speeches and
• 13:07
  Speaker 2: they have come out and left the door open for
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  Speaker 2: that additional rate cut.
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  Speaker 3: I myself, you know, sitting here looking at everything, if
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  Speaker 3: we are.
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  Speaker 2: Not going to have any new government data on the
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  Speaker 2: state of the labor market, on the state of inflation,
• 13:21
  Speaker 2: really on the state of a whole slew of different things,
• 13:24
  Speaker 2: and you've been cutting interest rates into this economy based
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  Speaker 2: on the previous data you had. I have a tough
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  Speaker 2: time justifying why you would pause now by any account, right,
• 13:34
  Speaker 2: you've got some fragility and markets very clearly, you've got
• 13:37
  Speaker 2: some nervousness about private credit that's relatively new, and so
• 13:41
  Speaker 2: were I in those shoes today. You know, again, based
• 13:45
  Speaker 2: on the day that we have to day, based on
• 13:47
  Speaker 2: the narrative that we are looking at today, I would
• 13:49
  Speaker 2: probably continue with another twenty five basis point rate cut.
• 13:53
  Speaker 2: I don't see how you know the changing narrative has
• 13:56
  Speaker 2: driven you away from that standpoint. But clearly there are
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  Speaker 2: at least some FED members, and there were some FED
• 14:02
  Speaker 2: members at the last meeting who said, no, that's really
• 14:04
  Speaker 2: not justified based on three percent inflation where we are
• 14:07
  Speaker 2: right now, and the labor market hasn't weakened yet, so
• 14:10
  Speaker 2: you know why go lower.
• 14:11
  Speaker 4: Yeah, there's two paths that they could take here. One
• 14:13
  Speaker 4: of them is the one that you were just sort
• 14:14
  Speaker 4: of alluding to that you cut rates of the December
• 14:16
  Speaker 4: tenth meeting and then just sort of posture your sentiment
• 14:21
  Speaker 4: to say that the bar going for is going to
• 14:24
  Speaker 4: be very high for future cuts, that you're really going
• 14:26
  Speaker 4: to need to see a lot of indications that would
• 14:30
  Speaker 4: substantiate more cuts, because this is sort of what you
• 14:32
  Speaker 4: had telegraphed before as to be the policy is to
• 14:35
  Speaker 4: continue with these rate cuts. The areas of concern out
• 14:40
  Speaker 4: there for people perhaps in the dissenting party that you
• 14:43
  Speaker 4: mentioned on the FED governor side is that we're in
• 14:46
  Speaker 4: a bit of a difficult situation for the FED where
• 14:49
  Speaker 4: there is elevated inflation. We're sitting at that three percent
• 14:52
  Speaker 4: level the Fed's target is too, So that's typically an
• 14:56
  Speaker 4: area where you would not be too behind the idea
• 15:00
  Speaker 4: of cutting rates into a more inflationary environment. But two
• 15:04
  Speaker 4: percent isn't a hard and fast rule. Three percent is
• 15:07
  Speaker 4: higher than a ten And also on the job growth
• 15:09
  Speaker 4: side of things, to in favor of the idea of
• 15:12
  Speaker 4: cutting rates. You had a September job support that came
• 15:15
  Speaker 4: out that did see the unemployment rate tick up to
• 15:18
  Speaker 4: four point four percent. The number of jobs at in
• 15:21
  Speaker 4: the month was relatively high, but we know that that
• 15:23
  Speaker 4: can be revised down further. So it seems as if
• 15:27
  Speaker 4: all these indicarriors lead to steady as she goes. It's interesting.
• 15:31
  Speaker 4: I believe, like you had mentioned, it had got down
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  Speaker 4: to a fifty to fifty shot. Then the New York
• 15:36
  Speaker 4: Fed President John Williams spoke on Friday basically reiterating their
• 15:40
  Speaker 4: prior stances. We're going to move policy down more towards
• 15:43
  Speaker 4: the neutral rate. So that's sort of where we sit
• 15:47
  Speaker 4: on this front. The other alternative would be to not
• 15:50
  Speaker 4: cutting rates, would be, hey, leave them as they are
• 15:52
  Speaker 4: and revisit in January under the premise that, hey, we're
• 15:56
  Speaker 4: going to get some more data. But the problem that
• 15:58
  Speaker 4: you run there is over that seven week span, if
• 16:01
  Speaker 4: you don't get any conclusive data that points in one
• 16:04
  Speaker 4: direction or another, you've effectually you wasted time.
• 16:07
  Speaker 2: Yeah, yeah, you know more, I guess ammunition for the
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  Speaker 2: FED two cut rates. The Conference Board came out this
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  Speaker 2: morning with their consumer confidence reading, not something that Fed
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  Speaker 2: genuinely takes into consideration with their decisions. But you know, again,
• 16:22
  Speaker 2: in the absence of other data, you look for anything,
• 16:24
  Speaker 2: you get your fingers on. The gauge for consumer confidence
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  Speaker 2: decreased six point eight points, down to eighty eight point seven.
• 16:32
  Speaker 2: I've said before I don't think that these readings on
• 16:35
  Speaker 2: consumer confidence are terribly useful, especially not when comparing them
• 16:39
  Speaker 2: to previous decades. We've talked about how it just didn't
• 16:42
  Speaker 2: make a lot of sense to me that consumer confidence
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  Speaker 2: in twenty twenty four was worse than what we were
• 16:48
  Speaker 2: seeing in twenty ten, right, Like, just on the surface,
• 16:52
  Speaker 2: tough to make sense of those numbers. But what I
• 16:55
  Speaker 2: think is notable about this one. The consumer confidence level
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  Speaker 2: dropped the lowest level since April.
• 17:01
  Speaker 3: What was going on in April? Well, everyone and their
• 17:03
  Speaker 3: mother was terrified of terrorists.
• 17:04
  Speaker 2: How many calls were you getting about, Oh, should I
• 17:06
  Speaker 2: buy that car that I was thinking about because I'm
• 17:08
  Speaker 2: worried that superup prices are going to go through the
• 17:10
  Speaker 2: roots time. This is an interesting turn because again it's
• 17:14
  Speaker 2: weakening in the face of an absence of from what
• 17:19
  Speaker 2: I can tell, really bad news.
• 17:21
  Speaker 4: No, I don't know what you would point to as
• 17:23
  Speaker 4: to why it would be so much as weak as
• 17:26
  Speaker 4: it was in April.
• 17:27
  Speaker 2: That was understandable, which is interesting to me because it's
• 17:30
  Speaker 2: the exact same thing we saw out of the markets, right.
• 17:33
  Speaker 2: You saw a turn for the worst over the corporate
• 17:34
  Speaker 2: of course, the last few weeks that was not set
• 17:38
  Speaker 2: off by a big news story that we were able
• 17:41
  Speaker 2: to point to, right, I mean, the biggest news story
• 17:44
  Speaker 2: that you could point to for setting off markets were
• 17:47
  Speaker 2: comments from the likes of Sunder Pachai, Michael and others
• 17:52
  Speaker 2: to say, oh, we're pretty suspicious of.
• 17:54
  Speaker 3: This Ai trade and where it's going to go.
• 17:57
  Speaker 2: Whereas you took a look at offs in April, for example,
• 18:02
  Speaker 2: it was because we literally proposed forty percent average tariffs
• 18:05
  Speaker 2: on every country in the world, and so it completely
• 18:08
  Speaker 2: reshifted the narrative. So I find this reading to be interesting.
• 18:11
  Speaker 2: The other data point that came out just this morning
• 18:13
  Speaker 2: the Producer Price Index, again not the most heavily looked
• 18:17
  Speaker 2: at item.
• 18:18
  Speaker 3: Only if it were.
• 18:19
  Speaker 2: To surge through uncomfortable levels do I think the FED
• 18:22
  Speaker 2: would really pay attention to this number? Excluding food and energy,
• 18:25
  Speaker 2: the PPI rose slightly less than forecasts from August climb
• 18:29
  Speaker 2: two point six percent from a year ago, smallest gain
• 18:32
  Speaker 2: since July twenty twenty four.
• 18:34
  Speaker 3: I think this is a nothing story.
• 18:35
  Speaker 2: You shuffle it to the back of the deck and say, Okay,
• 18:37
  Speaker 2: PPI doesn't indicate any problems on inflation.
• 18:40
  Speaker 4: Yeah, just for listeners. Producer price index is what is
• 18:42
  Speaker 4: the producer paying for a set of goods that they
• 18:44
  Speaker 4: will eventually sell to you, the end consumer. So it
• 18:47
  Speaker 4: often can be sometimes paired with the CPI, the consumer
• 18:51
  Speaker 4: price index data, but that is the one that is
• 18:53
  Speaker 4: far more significant. What are the consumers paying, not the producers.
• 18:57
  Speaker 3: We have got to take a quick break.
• 18:59
  Speaker 2: When we come back, we're gonna have a full market
• 19:01
  Speaker 2: update with Wallstreet Watch, and then we are talking Google.
• 19:23
  Speaker 1: Like us on Facebook and follow us on Twitter at
• 19:26
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• 19:30
  Speaker 1: on the Financial Exchange Radio Network.
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• 20:01
  Speaker 1: For all you've done. Time now for Wall Street. Watch
• 20:11
  Speaker 1: a complete look at what's moving markets so far today
• 20:14
  Speaker 1: right here on the Financial Exchange Radio Network.
• 20:18
  Speaker 5: Well after yesterday's rally, markets today are mixed as investors
• 20:22
  Speaker 5: react to more economic data points from September. The Producer
• 20:26
  Speaker 5: Price Index mostly came in line with expectations, while retail
• 20:30
  Speaker 5: sales for September climbed zero point two percent, softer than
• 20:34
  Speaker 5: estimates of zero point four percent. Right now, the Dow
• 20:37
  Speaker 5: is up nearly six tenths of a percent, or two
• 20:39
  Speaker 5: hundred and sixty four points. SMP five hundred is edging
• 20:43
  Speaker 5: five points higher, NASDAC retreating over a third of a
• 20:46
  Speaker 5: percent or eighty two points lower. Russell two thousand is
• 20:49
  Speaker 5: up nearly nine tenths of one percent, Tenure Treasure reeled
• 20:52
  Speaker 5: down two basis points at four point zero one one percent.
• 20:56
  Speaker 5: In crude oil down nearly three percent lower, trading just
• 21:00
  Speaker 5: above fifty seven dollars a barrel According to the information,
• 21:04
  Speaker 5: Meta is in talks to spend billions on Google's AI chips.
• 21:08
  Speaker 5: As Google steps up steps up its efforts to compete
• 21:12
  Speaker 5: directly with Nvidia. Shares in Alphabet are up again today
• 21:16
  Speaker 5: another two and a half percent higher, while in Video
• 21:18
  Speaker 5: shares of falling over six percent. On the heels of
• 21:22
  Speaker 5: that report. Other chip makers, including AMD, are seeing sympathy losses. Meanwhile,
• 21:27
  Speaker 5: Best Buy shares a rising four percent after the consumer
• 21:30
  Speaker 5: electronics retailer hiked its full year sales in earning's outlook
• 21:34
  Speaker 5: after beating earnings expectations during the previous quarter. The retailer
• 21:38
  Speaker 5: saw customers upgrade tech devices and splurge on new computers,
• 21:43
  Speaker 5: gaming consoles, and smartphones elsewhere. After naming a new CEO, yesterday,
• 21:48
  Speaker 5: Coles reported better than expected third quarter results with a
• 21:51
  Speaker 5: surprise profit. Coles also upped its annual guidance, sending shares
• 21:56
  Speaker 5: in the struggling retailer surging thirty one percent. It's more
• 22:00
  Speaker 5: retailer earnings after Dick Sporting Goods beat street expectations for
• 22:04
  Speaker 5: the previous quarter. However, the company announced it will shutter
• 22:07
  Speaker 5: some footlocker stores as part of a larger restructuring so
• 22:11
  Speaker 5: that the sneaker company doesn't weigh on Dick's profits. That
• 22:15
  Speaker 5: stock is down by three percent and Zoom jumping eleven
• 22:19
  Speaker 5: percent after the video conferencing company beat earnings forecast, while
• 22:22
  Speaker 5: it's fourth quarter earnings guidance was also better than expected.
• 22:27
  Speaker 5: I'm Tucker Silva and that is Wall Street Watch. And
• 22:28
  Speaker 5: if you missed any of our shows this week, you
• 22:30
  Speaker 5: can find them on our YouTube page. We stream the
• 22:33
  Speaker 5: show live every day, but also archive every hour and
• 22:37
  Speaker 5: all of our most newsworthy interviews. Just go to YouTube,
• 22:41
  Speaker 5: search the Financial Exchange and hit that subscribe button.
• 22:46
  Speaker 2: I got some tips for you on that YouTube thing, Tucker.
• 22:48
  Speaker 2: What I feel like you could use AI to make
• 22:51
  Speaker 2: all of your hosts a lot handsomer.
• 22:54
  Speaker 5: We could do that.
• 22:55
  Speaker 2: We could have you know, might wave thestud if you
• 22:58
  Speaker 2: matter quite as much for the audio format. But you know,
• 23:01
  Speaker 2: if you're trying to push us out on YouTube, sure
• 23:03
  Speaker 2: you know, six inches taller, stronger chin, I think you'd,
• 23:09
  Speaker 2: I think you'd really clear clear things out there.
• 23:11
  Speaker 4: Just called Tom Brady's plastic surgeon.
• 23:13
  Speaker 3: Yeah, you know again we don't need to AI, right surgery.
• 23:20
  Speaker 2: Speaking of artificial intelligence, I want to try and frame
• 23:24
  Speaker 2: this conversation properly, and to start it off, here's what
• 23:27
  Speaker 2: you should know. In Vidia's stock over the course of
• 23:29
  Speaker 2: the last thirty days is down a little bit over
• 23:31
  Speaker 2: ten percent. Now it's down five percent six percent today alone.
• 23:36
  Speaker 2: Alphabet stock, on the other hand, over the last thirty
• 23:39
  Speaker 2: days up twenty one percent.
• 23:42
  Speaker 3: What again, The narrative that's been dominating markets over.
• 23:45
  Speaker 2: The last thirty days is what if this AI trade
• 23:48
  Speaker 2: doesn't work out the way we think it does, doesn't
• 23:51
  Speaker 2: really explain why Google is shooting up by twenty percent
• 23:54
  Speaker 2: if the people are worried about the AI trade as
• 23:56
  Speaker 2: a whole. So what is Google benefiting from right now.
• 23:59
  Speaker 4: To try and simplify best as possible, is investors have realized,
• 24:04
  Speaker 4: particularly with some of the recent announcements that came out
• 24:07
  Speaker 4: today with Meta potentially buying Google's chips, as well as
• 24:11
  Speaker 4: Anthropic another company out there committing to buy a million
• 24:14
  Speaker 4: of Google's chips, that Google is the best vertically integrated
• 24:19
  Speaker 4: business out there within the artificial intelligence space. And let
• 24:22
  Speaker 4: me try and explain that a little bit. So there
• 24:25
  Speaker 4: are different parts of all this artificial intelligence trade. Why
• 24:29
  Speaker 4: we've talked about in video so much on the show,
• 24:31
  Speaker 4: for the last two or three years is that if
• 24:33
  Speaker 4: you wanted to create a large language model like chat
• 24:36
  Speaker 4: gipt that many of us have probably used or messed
• 24:38
  Speaker 4: around with, and videos chips are the have been the
• 24:40
  Speaker 4: best game in town to do that by far and away, and.
• 24:43
  Speaker 2: There was really no evidence that anybody else could compete with.
• 24:46
  Speaker 2: We had one story in February or March of this
• 24:48
  Speaker 2: year with deep Seek, a Chinese made AI tool coming
• 24:51
  Speaker 2: out where we suspect that it might have been trained
• 24:54
  Speaker 2: without using in video chips, But then there was also
• 24:57
  Speaker 2: cross stories that well, no, they probably just imported them
• 24:59
  Speaker 2: I legally and trained at using them anyway. And videous
• 25:03
  Speaker 2: chips have been the only game in town.
• 25:04
  Speaker 4: Seventy percent gross margins that they command on these, they
• 25:07
  Speaker 4: really had a I won't say a monopoly, but they
• 25:10
  Speaker 4: had significant market share.
• 25:12
  Speaker 3: Yeah.
• 25:12
  Speaker 4: What has happened more recently is this idea that there
• 25:17
  Speaker 4: could be room for another competitor. Google and the story
• 25:19
  Speaker 4: that Tucker mentioned on Wall Street Watch and its chips
• 25:23
  Speaker 4: have been pretty similar in terms of performance, and also
• 25:27
  Speaker 4: the large language model that Google has Gemini three came
• 25:32
  Speaker 4: out recently that is built upon Google's chips performed equally
• 25:36
  Speaker 4: as well, or some people have argued better than Chat GPT.
• 25:40
  Speaker 2: So frankly, you know there's been this debate, Hey, is
• 25:43
  Speaker 2: Gemini three better than Chat GPT five point one.
• 25:46
  Speaker 3: I don't have an answer for you.
• 25:47
  Speaker 2: Yeah, I mean, you know, there's been a lot of
• 25:49
  Speaker 2: people that have been testing the two and trying to
• 25:51
  Speaker 2: get some comparable answers and see which one's better. Frankly,
• 25:55
  Speaker 2: even if it is remotely competitive with GPT five point one,
• 26:00
  Speaker 2: that's probably enough for investors to get excited.
• 26:01
  Speaker 4: It's a really big deal. And so clearly is when
• 26:04
  Speaker 4: I go further along this vertical integration is okay. And
• 26:07
  Speaker 4: Video's got the chips, it's got the data setter, but
• 26:09
  Speaker 4: in video doesn't have a large language model at all.
• 26:11
  Speaker 4: It doesn't have Chat GPT. Google has Gemini the large
• 26:14
  Speaker 4: language model. It has the chips we just spoke about.
• 26:18
  Speaker 4: They also have the data centers and all of the
• 26:21
  Speaker 4: cloud infrastructure. They also have a bunch of users on
• 26:24
  Speaker 4: their platform. They still have ninety percent market share in
• 26:26
  Speaker 4: the search space. Oh, by the way, they have three
• 26:28
  Speaker 4: billion users on Android, and they have another three billion
• 26:31
  Speaker 4: users who use Docs and Gmail and Maps and other
• 26:35
  Speaker 4: interfaces out there that they could integrate some of this
• 26:38
  Speaker 4: artificial intelligence, and they're just well positioned compared to some
• 26:41
  Speaker 4: of its competitors.
• 26:43
  Speaker 3: If this ends up being a bubble that bursts, as
• 26:45
  Speaker 3: Alphabet's own CEO soonder pitch, I put it Google out.
• 26:50
  Speaker 3: Can we just call them Google? Yeah, I'm so frustrated
• 26:52
  Speaker 3: by this. Google will not.
• 26:55
  Speaker 2: Avoid problems if this is an AI bubble that ends
• 26:58
  Speaker 2: up popping. But I think people find really attractive about
• 27:02
  Speaker 2: this business is like you mentioned, they're fully integrated within
• 27:05
  Speaker 2: the AI space. They have a massively profitable non AI
• 27:09
  Speaker 2: business to fund all of these endeavors.
• 27:12
  Speaker 4: Research any five billion revenue a year.
• 27:15
  Speaker 2: They also have this you know, this solid business by
• 27:17
  Speaker 2: the way, that continue that can continue to partner with
• 27:20
  Speaker 2: Apple and get paid massive amounts of money by Apple.
• 27:25
  Speaker 2: They might have the best AI general of AI tool
• 27:28
  Speaker 2: out there.
• 27:29
  Speaker 3: And by the.
• 27:30
  Speaker 2: Way, on top of all that, if you are really
• 27:32
  Speaker 2: excited about automation and robotics, they also happen to own
• 27:36
  Speaker 2: the you know, far and away best US self driving
• 27:39
  Speaker 2: car business out there. Right, I'm not saying you should
• 27:42
  Speaker 2: be excited about that. Like, I think there's some serious
• 27:44
  Speaker 2: questions as to how that ends up working. But they
• 27:46
  Speaker 2: are the leader in the clubhouse there too. And so
• 27:49
  Speaker 2: I think what's been happening is if you are an
• 27:51
  Speaker 2: investor that's been getting nervous about the pure play, what
• 27:54
  Speaker 2: happens if you know, in Nvidia is commoditized, you've turned
• 27:59
  Speaker 2: around and said, oh, well, let's check out this other
• 28:01
  Speaker 2: business that. You know what, even if AI ends up
• 28:04
  Speaker 2: being you know, commoditized business that is not that valuable,
• 28:09
  Speaker 2: Alphabet still exists. They still got a massively profitable business elsewhere.
• 28:12
  Speaker 4: And there are guys are of cash flow, you know
• 28:14
  Speaker 4: they are in terms of their competitors. They're still spending,
• 28:18
  Speaker 4: don't get me wrong, ninety one billion to ninety three
• 28:20
  Speaker 4: billion in terms of capital expense this year, but their
• 28:23
  Speaker 4: debt load relative to some of their peers out there
• 28:26
  Speaker 4: is lower just because they're able to spin out so
• 28:28
  Speaker 4: much cash.
• 28:29
  Speaker 3: Remember like sixty days ago when they argued in court
• 28:31
  Speaker 3: that their business.
• 28:32
  Speaker 4: So I want to cover that too, because it's hard
• 28:35
  Speaker 4: not to mention that after this recent decision that we had,
• 28:39
  Speaker 4: what was that late September that that decision came out.
• 28:42
  Speaker 2: Explain, there's a monopoly case brought against Alphabet that attempted
• 28:46
  Speaker 2: to break them up, and they were declared to monopoly
• 28:49
  Speaker 2: by the judge. But in their defense, they argued that
• 28:53
  Speaker 2: AI was going to ruin their search business and really
• 28:58
  Speaker 2: take a big chunk out of their or way of
• 29:01
  Speaker 2: doing business.
• 29:01
  Speaker 4: Right, the Department of Justice says, your monopoly. They come
• 29:04
  Speaker 4: out with a decision that basically the judge that ru
• 29:08
  Speaker 4: and the judge too, and they come out and basically
• 29:10
  Speaker 4: give what is a very light slap on the wrist
• 29:13
  Speaker 4: in terms of any sort of punishments to Google at all.
• 29:16
  Speaker 4: And the only reason that Google was basically able to
• 29:19
  Speaker 4: dodge a more stiffer ruling, I feel, is because of
• 29:23
  Speaker 4: the threat of our official intelligt to a source business.
• 29:25
  Speaker 4: And here we sit three months later, me giving this
• 29:28
  Speaker 4: whole diet tribe as to how they're so well positioned
• 29:31
  Speaker 4: to potentially take the biggest market share of our official
• 29:35
  Speaker 4: intelligence because they're so well vertically integrated that's allowed to
• 29:39
  Speaker 4: stay intact because of this ruling a mere two months ago.
• 29:43
  Speaker 3: Let's take quick break.
• 29:44
  Speaker 2: When we come back, we're going to turn to a
• 29:47
  Speaker 2: completely different subject because according to a recent poll, a
• 29:49
  Speaker 2: majority of Massachusetts voters say the support ballot ballot measures
• 29:53
  Speaker 2: re establishing rent control in Massachusetts. We're talking rent control
• 29:57
  Speaker 2: next on The Financial Exchange.
• 30:00
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• 30:34
  Speaker 5: This segment of The Financial Exchange is powered by circle
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  Speaker 5: K Convenience Stores. CIRCLEK is now the official convenience store
• 30:42
  Speaker 5: of the dav Department of Massachusetts. On behalf of circle K.
• 30:46
  Speaker 5: Thank you veterans for all you've done.
• 30:50
  Speaker 2: We talk a lot about on the show how it
• 30:52
  Speaker 2: seems like we just need to have these moments every
• 30:55
  Speaker 2: once every twenty thirty, forty fifty years where we retest
• 31:00
  Speaker 2: things that were pretty dumb and proven to be stupid,
• 31:04
  Speaker 2: and you know, we'd say, it's been a little while,
• 31:06
  Speaker 2: everybody that had tried that was dead now, so let's
• 31:08
  Speaker 2: try it again and see if it works this time.
• 31:11
  Speaker 2: A poll of five hundred likely Massachusetts voters found that
• 31:14
  Speaker 2: more than sixty percent of those indicated they would back
• 31:19
  Speaker 2: measures that would re establish rent control in the Commonwealth
• 31:23
  Speaker 2: of Massachusetts. Back in nineteen ninety four, rent control was
• 31:27
  Speaker 2: banned across the state at a time when only Boston, Brookline,
• 31:31
  Speaker 2: and Cambridge had it in place, and it appears that
• 31:36
  Speaker 2: the ballot initiative at least got enough signatures in Massachusetts
• 31:40
  Speaker 2: to put rent control back into place, or at least
• 31:44
  Speaker 2: allow cities to push rent control. I don't know if
• 31:48
  Speaker 2: this would mandate rent control across the entire state, but
• 31:51
  Speaker 2: I think it actually would based on the language that
• 31:53
  Speaker 2: I read in the ballot.
• 31:55
  Speaker 3: It's a ballot.
• 31:56
  Speaker 2: There's a lot of questions about the legality of the ballot,
• 31:58
  Speaker 2: of the signatures, and obviously the advertising that would be
• 32:01
  Speaker 2: run against or for the ballot leading into it, But
• 32:04
  Speaker 2: here is what I have read about this ballot initiative.
• 32:08
  Speaker 2: The ballot would cap annual rent increases at five percent
• 32:13
  Speaker 2: per year or CPI.
• 32:16
  Speaker 3: Okay, higher of the two higher of the.
• 32:18
  Speaker 2: Two newly built apartments would be exempt from rent control
• 32:25
  Speaker 2: for the first decade after construction, and if you were
• 32:30
  Speaker 2: in an owner occupied building with fewer than four units,
• 32:34
  Speaker 2: you would also be exempted from this. So basically nobody's
• 32:37
  Speaker 2: exempt there are very few exemptions out there. If you
• 32:40
  Speaker 2: own one apartment on this ballot initiative and it's not
• 32:44
  Speaker 2: new construction, you are going to be subject to rent.
• 32:46
  Speaker 4: Control of those less than four units.
• 32:50
  Speaker 3: If you're living in an owner occupied Oh, if you live.
• 32:53
  Speaker 4: In it, yes, ah, okay, yeah, goddess.
• 32:56
  Speaker 2: So if you live in your building and then you
• 32:57
  Speaker 2: rent out two other units in the building, execs.
• 33:00
  Speaker 3: If you do, you have a.
• 33:01
  Speaker 4: Three family Nope, this is such a bad This is
• 33:05
  Speaker 4: such a bad idea.
• 33:07
  Speaker 3: Why it's a bad idea? First things First, there are
• 33:11
  Speaker 3: no sorts of exemptions for buildings that are completely rehabbed. Right.
• 33:16
  Speaker 2: So I go in and I'm looking at my place
• 33:19
  Speaker 2: in Summerville that I've rented out for thirty years, and
• 33:21
  Speaker 2: I want to go pour half million dollars into it
• 33:24
  Speaker 2: to modernize it, because you know, what was a pretty
• 33:27
  Speaker 2: rough area thirty years ago is now a growing area
• 33:31
  Speaker 2: with new shopping available and all sorts of you know,
• 33:34
  Speaker 2: gentrification going on. There's no way I'm doing that because
• 33:37
  Speaker 2: I can only raise my rent from one thousand dollars
• 33:41
  Speaker 2: a month to one thousand.
• 33:44
  Speaker 3: Help me do the math on thousand and fifty.
• 33:47
  Speaker 2: No, not going to cover that the other thing I'm
• 33:49
  Speaker 2: going to do if I'm worried that, you know, even
• 33:52
  Speaker 2: if I don't think that rent should go up by
• 33:54
  Speaker 2: five percent, if I'm worried that I can never raise
• 33:57
  Speaker 2: it more than five percent every year. Every year, it's
• 33:59
  Speaker 2: going up five percent. Yeah, furthermore. Okay, so we just
• 34:03
  Speaker 2: talked about. Okay, there's now a very small incentive built
• 34:07
  Speaker 2: in for you to maintain your places and improve upon them. So,
• 34:11
  Speaker 2: like you've seen in other places that have rent control,
• 34:13
  Speaker 2: you're going to have a stock of housing that is new,
• 34:16
  Speaker 2: an exempt from rent control and nice and pretty. You're
• 34:19
  Speaker 2: gonna have another stock of housing where getting your landlord
• 34:22
  Speaker 2: to do anything is going to be fighting tooth and
• 34:25
  Speaker 2: nail because they can't charge you market rent. It's also
• 34:31
  Speaker 2: going to prevent areas of the state that might develop
• 34:34
  Speaker 2: into you know, there's been a big push into Worcester,
• 34:37
  Speaker 2: for example, you know, bringing Worcester, more people commuting from
• 34:41
  Speaker 2: Worcester to Boston, and more people relocating there because the
• 34:43
  Speaker 2: cheaper cost of housing. It's going to pause development in
• 34:47
  Speaker 2: cities like that because developers aren't going to go in.
• 34:50
  Speaker 2: It doesn't matter that there's a ten year exemption from
• 34:52
  Speaker 2: this because at the end of the day, you're still
• 34:55
  Speaker 2: facing that cliff where at the end of ten years
• 34:57
  Speaker 2: you are subject to rent control again. I'll continue to
• 35:02
  Speaker 2: lay out my arguments concisely as to why I think
• 35:04
  Speaker 2: this is a stupid idea, but frankly, I think voters
• 35:08
  Speaker 2: in Massachusetts are feeling probably a bit empowered after the
• 35:12
  Speaker 2: millionaire's tax that passed and quite honestly, had less of
• 35:16
  Speaker 2: an impact on business and the state of things in
• 35:21
  Speaker 2: the Commonwealth than I would have anticipated. You know, I
• 35:23
  Speaker 2: talked about publicly that hey, you know, pretty small state here.
• 35:27
  Speaker 2: If I'm a small business owner and I want to
• 35:29
  Speaker 2: relocate to New Hampshire, I can do that fairly easily.
• 35:32
  Speaker 2: Quite honestly, the millionaires tax has brought in way more
• 35:34
  Speaker 2: revenue than even the lawmakers estimated it would, and so
• 35:39
  Speaker 2: we have not seen that impact yet. What I think
• 35:42
  Speaker 2: voters are missing here is that it takes decades for
• 35:46
  Speaker 2: these policies to be fully felt, and we are creating
• 35:50
  Speaker 2: an environment in Massachusetts that is well less and less
• 35:55
  Speaker 2: business friendly, I guess, is how I would put it.
• 35:58
  Speaker 4: The rent control used to suspend back to that. No,
• 36:04
  Speaker 4: these voters, whoever on the side of this are not
• 36:06
  Speaker 4: anticipating the unattended consequence that this is going to have.
• 36:09
  Speaker 4: It's just get it just sounds like a free launch.
• 36:13
  Speaker 4: It sounds like this great deal. Oh you'll have to
• 36:15
  Speaker 4: pay lower costs. This is going to work on your
• 36:18
  Speaker 4: favorite but doesn't recognize the economic realities with real estate development.
• 36:22
  Speaker 4: And ultimately this is going to lead a shrinking supply.
• 36:25
  Speaker 4: And by the way, the vacancy rate in the Boston
• 36:28
  Speaker 4: area is one of the lowest in the nations. If
• 36:30
  Speaker 4: you're looking for an apartment, this is not going This
• 36:32
  Speaker 4: does not help that at all. This does not encourage
• 36:34
  Speaker 4: people to build more multi family units and to build
• 36:37
  Speaker 4: more options out there forgetting Yeah, okay, you can argue
• 36:41
  Speaker 4: ten year exception, but that's just not going to do it. It
• 36:43
  Speaker 4: won't justify the long term time horizon of real estate investors,
• 36:47
  Speaker 4: whether they're a conglomerate you know, a bigger institutional investor
• 36:51
  Speaker 4: or not. It's just frustrating.
• 36:52
  Speaker 2: Yeah, when you try to cap prices. I I know
• 36:58
  Speaker 2: that not everybody studies em it's not everybody studies this,
• 37:01
  Speaker 2: but when.
• 37:02
  Speaker 3: You cap prices, the result is shortages.
• 37:06
  Speaker 4: And lows you options too. It's what's gonna happen, You're
• 37:09
  Speaker 4: gonna have these dilapidated buildings that people aren't gonna want
• 37:11
  Speaker 4: to invest to make nicer.
• 37:13
  Speaker 2: Yeah, I genuinely so. I don't own rental property anywhere.
• 37:17
  Speaker 2: I genuinely would be taking a very if I did,
• 37:20
  Speaker 2: I would be genuinely taking a very hard look at
• 37:22
  Speaker 2: this and saying I'm out.
• 37:25
  Speaker 3: You know, is this a market that I.
• 37:26
  Speaker 2: Can still rely upon for for you know, predictable income
• 37:32
  Speaker 2: and future growth if something like this passes. And I
• 37:36
  Speaker 2: don't really know how to assess the likelihood of the
• 37:38
  Speaker 2: passing at this point. We're still a year away from
• 37:40
  Speaker 2: this election and this happening, and we've seen how you know.
• 37:45
  Speaker 3: Public can shift it on this stuff. But I don't know.
• 37:49
  Speaker 2: I mean, doesn't this kind of feel a little bit
• 37:53
  Speaker 2: like the sentiment around the millionaire's tax, like it won't
• 37:56
  Speaker 2: affect me? And I get you know, I get it.
• 37:58
  Speaker 2: We could use the uh, we could use the help
• 38:01
  Speaker 2: with prices.
• 38:01
  Speaker 3: I don't know. Maybe I don't feel like this should
• 38:04
  Speaker 3: play as well as the millionaires tax did with voters,
• 38:07
  Speaker 3: but you.
• 38:08
  Speaker 4: Can grab some low hanging fruit of people who aren't informed.
• 38:10
  Speaker 2: You're right, Yeah, we still see but yeah, it looks
• 38:13
  Speaker 2: like rent control back on the ballot for the first time,
• 38:17
  Speaker 2: probably the first time ever, but back in consideration for
• 38:20
  Speaker 2: the first time in a few decades in the state
• 38:21
  Speaker 2: of Massachusetts.
• 38:22
  Speaker 3: Quick break, A lot more to cover in the second hour.
• 38:24
  Speaker 3: Will be right back