Latest / The Financial Exchange Show / Is the worst of the trade war behind us? Wall Street thinks so.

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Is the worst of the trade war behind us? Wall Street thinks so. · The Financial Exchange Show

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Speaker 1: donation today. This is the Financial Exchange with Chuck Zada
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Speaker 1: and Paul Lane.
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Speaker 2: Kicking off our show today, It's Chuck, Paul and Tucker
1:16
Speaker 2: with you, and we got a piece from the Wall
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Speaker 2: Street Journal. It's titled Wall Street Bets the worst of
1:23
Speaker 2: Trump's trade wark is behind it. And this after the
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Speaker 2: SP five hundred add at about one hundred and eighteen
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Speaker 2: points yesterday, Dow was up seven hundred and forty. Nasdaq
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Speaker 2: was up who cares pretty big, And so overall the
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Speaker 2: tenor was not just a reversal of you know, the
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Speaker 2: thirty nine point loss that you saw on Friday and
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Speaker 2: in very light trading heading into Memorial Day weekend, but hey,
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Speaker 2: you had you know, gains on top of that, and
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Speaker 2: the S and P five hundred again kind of knocking
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Speaker 2: on the door of being, you know, four or five
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Speaker 2: percent away from new all time highs disc bite trade concerns,
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Speaker 2: and so I think that it look ultimately here, here's
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Speaker 2: where we are. I think the next three to four
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Speaker 2: months are going to tell the story. And I'll tell
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Speaker 2: you why I think that that time frame is important
2:16
Speaker 2: is ultimately, what we care about in markets and what
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Speaker 2: we care about in the economy is the rate of
2:24
Speaker 2: change of different metrics. And think about it, if if
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Speaker 2: you own or even work in a business, which is
2:31
Speaker 2: probably most people at some point in their life. Most
2:33
Speaker 2: people have worked in a business at least once. But
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Speaker 2: the thing that you are always kind of, the thing
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Speaker 2: that's always in the back of your mind, is hey,
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Speaker 2: how are things doing relative to last month, last week,
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Speaker 2: last year, how are those changing? And ultimately what you
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Speaker 2: get to is, regardless of you know, what's going on
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Speaker 2: from a policy perspective, you get to a certain point
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Speaker 2: where you're like, okay, like this is normal. This is
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Speaker 2: just how we have to operate, and we're going to
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Speaker 2: do whatever we do do with this good, bad or otherwise.
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Speaker 2: It's the reason why inflation did not permanently run, or
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Speaker 2: at least it's one of the reasons why inflation did
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Speaker 2: not permanently run at nine percent after twenty twenty two.
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Speaker 2: It's you know, the reason why unemployment didn't stay at
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Speaker 2: ten percent after two thousand and eight is eventually people
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Speaker 2: and companies decide, okay, you know what, we got to
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Speaker 2: take that chance, and we got to move on, and
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Speaker 2: it becomes easier to beat bad year over year marks
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Speaker 2: when you get to the next year and you say, okay,
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Speaker 2: all we need is a little incremental improvement and things
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Speaker 2: can get better. So I think, quite honestly, if you
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Speaker 2: get to next January February and you haven't seen any
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Speaker 2: real shift in where the economy is gone, it probably
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Speaker 2: starts to look pretty good at that point because businesses say, hey,
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Speaker 2: like things haven't fallen apart, Okay, we can take that
3:51
Speaker 2: additional risk now, and you have easier year over year
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Speaker 2: comps to beat because you're going up against you know,
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Speaker 2: the first imposition of tear and great, we can you know,
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Speaker 2: kind of take off from here. On the other hand,
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Speaker 2: if you look out the next few months or so
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Speaker 2: and you start to see things slowing down, that potentially
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Speaker 2: impacts business confidence heading into next year, and that's where
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Speaker 2: you start to get more of those decisions being made
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Speaker 2: about hey do I actually need to hire as many
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Speaker 2: people this and that. So I think ultimately buy somewhere
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Speaker 2: in that window of Labor Day to Thanksgiving is when
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Speaker 2: we're going to have clarity about where this economy is
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Speaker 2: going on. I know no one wants to hear that,
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Speaker 2: but it takes time for all of these you know,
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Speaker 2: different tariffs and policies to actually seep into the economy.
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Speaker 2: They don't just happen overnight, and so we're still in
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Speaker 2: a period where that effect is developing, just because most
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Speaker 2: of the stuff that's being sold today in stores or
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Speaker 2: wherever is still pre tariff merchandise in many cases.
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Speaker 3: That does assume, though, that all of these or many
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Speaker 3: of these negotiations are resolved with trade deals concluding in July,
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Speaker 3: or maybe it's extended even further, and you could see
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Speaker 3: this thing drag out longer than that, though.
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Speaker 2: I feel, you know, who's.
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Speaker 3: To say that there isn't frustration at the negotiating table
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Speaker 3: and that these tariffs, the reciprocal ones, are put it
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Speaker 3: back in place, or some sort of retaliatory tariffs are
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Speaker 3: put in perhaps not as high as the ones that
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Speaker 3: were suggested by the reciprole ones. I just feel as
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Speaker 3: if the landscapes could change from where it is today
5:28
Speaker 3: and then that kicks out are sort of it's not deadline,
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Speaker 3: but kicks out when we could have a clear view
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Speaker 3: on the economy. I just wouldn't put that past the
5:37
Speaker 3: current administration necessarily.
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Speaker 2: No, it's it's fair. But even then, let's say negotiations
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Speaker 2: go badly, isn't that the sign that, okay, things are
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Speaker 2: going to worse? And then like if tariffs, you know,
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Speaker 2: get ratcheted up further and actually stay in place, or
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Speaker 2: I guess even what I'm getting at is we're getting
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Speaker 2: to the point. I mean, look what we just saw
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Speaker 2: over the last five days was Friday, Hey, we're thinking
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Speaker 2: about doing a fifty percent tariff? Was it Monday or Sunday?
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Speaker 2: I don't even know, like when it was. It was
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Speaker 2: within like seventy two hours. Okay, we're not gonna do this. Actually,
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Speaker 2: And I guess what I'm getting at is that the
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Speaker 2: actual tariff rate is not what is going to be
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Speaker 2: the driver if this goes on long enough, because business
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Speaker 2: is just gonna say, look, I got to build this
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Speaker 2: into my models that I don't know where the tariff
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Speaker 2: frate's going to be and I have to operate with
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Speaker 2: that uncertainty. It does create a situation where businesses do
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Speaker 2: pull back on leveraging up because you don't want to
6:41
Speaker 2: be employing as much leverage in the event that you
6:44
Speaker 2: don't know what your cost structure looks like. But businesses
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Speaker 2: might just say, Okay, I won't leverage up as much,
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Speaker 2: and instead of planning to scale up by ten percent,
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Speaker 2: we're going to scale by five and we can do
6:53
Speaker 2: that with minimum leverage, and we'll go from there. And
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Speaker 2: maybe that's you know, kind of the new equilibrium that
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Speaker 2: we see. But I guess my point is just that
7:04
Speaker 2: nothing lasts forever as either an economic or market regime.
7:08
Speaker 2: Like these things are always evolving because you always get
7:11
Speaker 2: used to that new baseline. It's kind of like, hey,
7:15
Speaker 2: we've got you know, gas prices around, you know, three fifteen.
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Speaker 2: On the way up, it felt bad going from two
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Speaker 2: point fifty through three fifteen, but as you're coming back
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Speaker 2: down from you know, four dollars a gallon, you're like, yeah,
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Speaker 2: I can deal with three fifteen. I'll make that work
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Speaker 2: in my family budget. You know, It's it's not ideal,
7:31
Speaker 2: but I can. I can work that somehow. So I
7:34
Speaker 2: guess that's what I'm getting at is eventually, as humans,
7:39
Speaker 2: we just find that what's the word homeostasis, you know,
7:43
Speaker 2: the human body returns to ninety eight point six degrees
7:47
Speaker 2: and you get there. The only things that prevent you
7:50
Speaker 2: from doing that is, yeah, if you jump into like
7:52
Speaker 2: thirty degree water, which we did on April second, bad
7:56
Speaker 2: if you stay in the water for too long or likewise, hey,
8:00
Speaker 2: like we're in the middle of the desert. We don't
8:02
Speaker 2: have any water. Now that's kind of May of twenty
8:06
Speaker 2: twenty two when things were too hot. Yeah, you can't
8:09
Speaker 2: do either of those, you know, forever. But generally, if
8:12
Speaker 2: it's just hey, this is uncomfortable one way or another,
8:16
Speaker 2: humans kind of figure it out, I guess, is my point.
8:18
Speaker 2: And I know that's not, you know, the sexiest thing
8:21
Speaker 2: to say, because everyone wants markets to either go to
8:24
Speaker 2: the moon or you know, to we don't have a
8:27
Speaker 2: phrase for where markets go when they go down.
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Speaker 1: Do they crater?
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Speaker 3: But not like it's not a destination because you can go.
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Speaker 2: To the moon, or like when markets go down, you
8:37
Speaker 2: go into the Earth's core pit, the valley of despair,
8:43
Speaker 2: the what's the place, death valley, that's the one. You
8:47
Speaker 2: can either go to the moon or death valley. But
8:49
Speaker 2: sometimes markets just hang out on the great planes, munching
8:51
Speaker 2: along like a little buffalo. And that's fine too. It's
8:56
Speaker 2: fine to be the market buffalo. Let's take a quick break.
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Speaker 2: When we come back, talk a little bit. I want
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Speaker 2: to talk about this piece from Ernie Tedesky. It's on tariffs,
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Speaker 2: and this is some empirical data that backs up a
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Speaker 2: little bit I think what we're talking about here, so
9:11
Speaker 2: I want to talk about this piece, and then we'll
9:13
Speaker 2: do a little bit of an Nvidia earnings preview as well.
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Speaker 2: All right, So, Ernie Tedesky is someone who previously has
10:20
Speaker 2: worked on the White House Council of Economic Advisors. He
10:23
Speaker 2: also is the director of Economics at the Budget Lab
10:27
Speaker 2: at Yale. And as painful as it is for me
10:29
Speaker 2: to say good things about a Yale, Ernie kind of
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Speaker 2: knows his stuff when it comes to you know, macroeconomic data.
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Speaker 2: And basically what he points out is, look, the average
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Speaker 2: effective tariff rate of like of stated tariffs is about
10:45
Speaker 2: eighteen percent on US imports based on you know, what
10:48
Speaker 2: goods are imported from what countries and what percentage of
10:51
Speaker 2: our you know, imports they make up. And i'll quote
10:54
Speaker 2: here from this Bloomberg opinion piece from him, based on
10:56
Speaker 2: actual federal tariff revenue, the average effective rate in April
11:00
Speaker 2: around four and a half, and preliminary data for May
11:02
Speaker 2: suggests it was around six and a half. In other words,
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Speaker 2: tariffs weren't biting at full strength in April or May,
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Speaker 2: which means it'll still likely be hard to see signs
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Speaker 2: of the effect of tariffs in the May economic data.
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Speaker 2: And basically what this means is same thing that we
11:16
Speaker 2: talked about. Companies paused shipments of you know, highly tariffed
11:20
Speaker 2: goods during these time or reduce them. And so yes,
11:23
Speaker 2: there is additional tariff revenue coming in, but it's not
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Speaker 2: indicative of importers bringing stuff in at full speed, and
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Speaker 2: as such, you're not going to be seeing price increases
11:34
Speaker 2: reflected immediately. It takes a little bit of time for
11:37
Speaker 2: these to build up. For the very simple reason companies
11:41
Speaker 2: tried to front run tariffs for, you know, so they
11:43
Speaker 2: don't have to pay as much and they're gonna work
11:46
Speaker 2: through that inventory before re ordering, and even after they
11:49
Speaker 2: re order, it still takes you know, a couple of
11:52
Speaker 2: weeks for the factory in China to make it, a
11:54
Speaker 2: week or so for it to get to the boat,
11:56
Speaker 2: a few weeks for the boat to go, and then
11:57
Speaker 2: they finally pay the tariff. So it's like a five
11:59
Speaker 2: or six week delay before that tariff is even paid.
12:03
Speaker 2: So what Ernie gets at here is, look, you're going
12:07
Speaker 2: to finally start to see the impact of these tariffs
12:11
Speaker 2: probably June July, August as you know, actually get those
12:15
Speaker 2: that new wave of imports coming through, and we don't
12:19
Speaker 2: know exactly how that's going to at that point impact
12:24
Speaker 2: buying behavior, selling prices, margins, and all those different items,
12:27
Speaker 2: because we've just never seen a magnitude an increase of
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Speaker 2: this magnitude in the last.
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Speaker 1: One hundred years.
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Speaker 3: Yeah, what I liked in particular with this piece, Chuck,
12:37
Speaker 3: is that he cited an example from twenty eighteen that
12:40
Speaker 3: gave good context to what type of lag we could
12:43
Speaker 3: expect in terms of tariff impact. So back in January
12:46
Speaker 3: of twenty eighteen, when President Trump got into his first
12:49
Speaker 3: term in office, he instituted anywhere from a twenty to
12:52
Speaker 3: fifty percent tariff on imported washing machines. It really wasn't
12:57
Speaker 3: until April of twenty eighteen that you actually saw the
13:00
Speaker 3: CPI for laundry equipment surge substantially. So basically, just like
13:05
Speaker 3: you were alluding to, there about a three month lag
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Speaker 3: from when the tariff was announced on imported washing machines
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Speaker 3: to the point three to four month lag to where
13:14
Speaker 3: you actually see it saw it come up in the
13:16
Speaker 3: CPI data. When you look at durable goods in general, Really,
13:20
Speaker 3: what's been happening here for the most part, if you're
13:23
Speaker 3: looking at electronics equipment or watching drivers, things of this nature,
13:28
Speaker 3: companies have been burning through a lot of their pre
13:30
Speaker 3: tariff inventory. So perhaps could take you know, a little
13:33
Speaker 3: bit longer for electronics and furniture. For that CPI data
13:37
Speaker 3: to reflect, and that's that's the point we've been hammering
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Speaker 3: home really for the last couple of weeks. Is unfortunately
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Speaker 3: continues to be wait and see on the full impact
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Speaker 3: of the tariffs.
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Speaker 2: Yes, so you can. You can listen to the financial
13:51
Speaker 2: Exchange in May and then go away and in like
13:56
Speaker 2: August you can turn us back on and it'll all
13:59
Speaker 2: be good. You obviously listened in the meantime. I mean, look,
14:01
Speaker 2: we all need, you know, stuff to do during the day,
14:03
Speaker 2: and we love having you listening to us.
14:05
Speaker 4: H watch us on YouTube. You can do that too, Yeah, Twitter, YouTube,
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Speaker 4: you name it.
14:10
Speaker 2: We're out there, baby, it's amazing. It's amazing stuff. Let's
14:13
Speaker 2: talk a little bit about in video. Speaking of amazing stuff,
14:18
Speaker 2: they've got earnings coming out later today, and I think
14:21
Speaker 2: the question that there are a few questions that people
14:24
Speaker 2: want to see. The first is, hey, tell me how
14:27
Speaker 2: much you beat your earnings estimates by, because if there's
14:29
Speaker 2: one thing that in Vidia has been really good at,
14:31
Speaker 2: it's beating their earnings estimates. Obviously, if they don't, that,
14:35
Speaker 2: you know, means something very bad. Number Two, tell us
14:37
Speaker 2: about your pipeline that's looking you know, that's out there.
14:40
Speaker 2: Are you seeing any degradation in that pipeline. Are some
14:45
Speaker 2: of these new deals from the Middle East starting to
14:48
Speaker 2: bear fruit? As far as you know where you think
14:50
Speaker 2: you're going to be sending shipments over the next twelve
14:53
Speaker 2: to twenty four months, you know, what does it look
14:56
Speaker 2: like for you in terms of what you're seeing and
15:00
Speaker 2: from a margin perspective, there's more competition in the chip
15:03
Speaker 2: space now as companies are trying to find, you know,
15:05
Speaker 2: alternatives at lower cost. Are you seeing any kind of
15:09
Speaker 2: margin pressure as well? So these are the things that
15:13
Speaker 2: I think we want to you know, look for. And
15:16
Speaker 2: obviously this is going to be a huge driver of
15:18
Speaker 2: where this market goes over the next week or two
15:21
Speaker 2: simply because it's a massive company with a huge waiting
15:24
Speaker 2: in US indices, and either a success or failure on
15:28
Speaker 2: this earnings report today is going to have some implications
15:32
Speaker 2: for where this puppy goes from here.
15:33
Speaker 3: Yeah, we had seen Nvidia drop significantly through the first
15:38
Speaker 3: three or four months of the year and then rally
15:40
Speaker 3: back forty percent from its April low that it reached.
15:43
Speaker 3: It's now nine percent off of its January high. Obviously,
15:47
Speaker 3: what was announced recently that governments in the Middle East
15:49
Speaker 3: committed to spend purchasing in Vidia chips, and then you
15:53
Speaker 3: also had sort of on the negative side of things,
15:56
Speaker 3: and Vidia had to write off five and a half
15:57
Speaker 3: billion of inventory last month explicitly to comply with US
16:02
Speaker 3: restrictions on chip exports to China. So that will be
16:08
Speaker 3: in focus as well. As you mentioned, you know, the
16:10
Speaker 3: gross margin piece of things. There were some manufacturing hiccups
16:13
Speaker 3: in a recent quarter with Blackwell their newest chips, so
16:18
Speaker 3: scrutinizing where they come in on the gross margin perspective.
16:21
Speaker 3: Hopefully somewhere in the seventy percent range is what they're anticipating.
16:25
Speaker 3: That's what's going to be in focus today. In Video
16:28
Speaker 3: is now trading at about twenty nine times projective profits
16:32
Speaker 3: projected profits over the next twelve months, a little bit
16:35
Speaker 3: lower than their five year average. I mean, that's it's
16:38
Speaker 3: been trading rich for a while, so I'm not saying
16:41
Speaker 3: this is some huge discount, but that really will be
16:44
Speaker 3: in focus today. From all the other earnings reports we've
16:46
Speaker 3: got in the tech sector, and they are the last
16:50
Speaker 3: really to go here, Microsoft, Meta and others, it does
16:54
Speaker 3: look like some of the biggest hyperscalers that really are
16:57
Speaker 3: some of Nvidia's largest customers. They did not offer any
17:00
Speaker 3: sort of mentioning of weakening capital expenditures you know, going
17:05
Speaker 3: forward here, So it does appear to be you know,
17:08
Speaker 3: demand is still running on all front. So I would
17:10
Speaker 3: be surprised, you know, offs outside of a real manufacturing issue,
17:15
Speaker 3: if they came in under their numbers, I would imagine
17:18
Speaker 3: that this quarter fared pretty well. But we'll see more
17:20
Speaker 3: at the close of the market today from what they
17:23
Speaker 3: come out with.
17:24
Speaker 2: Yeah, and I think the big one, the big one
17:28
Speaker 2: for me is just look how how quickly is both
17:32
Speaker 2: revenue and profit growth slowing. I mean, ultimately, that's what
17:37
Speaker 2: is going to matter. And here's what I mean by that.
17:39
Speaker 2: In video, revenue growth peaked in January of twenty four,
17:44
Speaker 2: where it was running two hundred and sixty five percent
17:47
Speaker 2: year over year revenue growth, which obviously you can't do forever.
17:51
Speaker 2: Even in the second quarter that year came in at
17:52
Speaker 2: two hundred and sixty two. The last three it's printed one,
17:56
Speaker 2: twenty two, ninety three, and seventy eight, and expectations are
18:00
Speaker 2: for sixty six percent year over year revenue growth. Now,
18:04
Speaker 2: so again you kind of extrapolate this out and you're
18:07
Speaker 2: sitting there and you're going, okay, you know, where do
18:10
Speaker 2: you get to a point where that growth is no
18:14
Speaker 2: longer fast enough to justify the multiples that are being
18:17
Speaker 2: put on the stock. And part of this is I
18:20
Speaker 2: think you mentioned this a little bit. Hey, those multiples
18:22
Speaker 2: have been coming in somewhat but are still steep. You
18:26
Speaker 2: take a look at forward pe ratios in videos thirty
18:30
Speaker 2: two times, it's it's forward earnings estimates right now. But
18:34
Speaker 2: this is a lot cheaper than it was. You know,
18:38
Speaker 2: you go back, I don't know, through most of last
18:41
Speaker 2: summer and it was you know, trading forty times, you know,
18:43
Speaker 2: forward earnings. There still is a path where hey, maybe
18:46
Speaker 2: it needs to come into you know, twenty five or so.
18:49
Speaker 2: But does it do that through the stock price just
18:53
Speaker 2: chopping around one thirty five for the next you know,
18:55
Speaker 2: six to twelve months, or does it do it through
18:58
Speaker 2: the stock losing you know, fifteen to twenty and then
19:01
Speaker 2: just hanging out around you know one hundred or something
19:04
Speaker 2: like that. There are multiple paths. There's also one where hey,
19:07
Speaker 2: this is a regular capex cycle and we start see
19:11
Speaker 2: companies pulling back on capex and so that growth, you know,
19:13
Speaker 2: goes away quickly, and in video's got a you know
19:16
Speaker 2: reprice there. There's also a path where we start seeing
19:19
Speaker 2: more and more success from companies actually selling AI stuff,
19:23
Speaker 2: and in video's got more upside here. So just I
19:27
Speaker 2: say this a lot be open to, you know, things
19:29
Speaker 2: that might not fit your preconceived notion of how you
19:32
Speaker 2: think they need to behave. Let's take a quick break.
19:35
Speaker 2: When we come back, we got Wall Street Watch right
19:37
Speaker 2: after this.
19:41
Speaker 1: Like us on Facebook and follow us on Twitter at
19:43
Speaker 1: TFE show. Breaking business news is always first right here
19:48
Speaker 1: on the Financial Exchange Radio Network. Time now for Wall
19:54
Speaker 1: Street Watch a complete look at what's moving markets so
19:57
Speaker 1: far today right here on the Financial liks Change Radio Network.
20:01
Speaker 4: Following yesterday's rally driven by the delay of tariffs on
20:05
Speaker 4: the EU, markets today are hitting the brakes, dipping into
20:08
Speaker 4: negative territory as Wall Street eagerly awaits in Nvidia's earnings
20:13
Speaker 4: after today's closing bell. At the moment, the Dow is
20:16
Speaker 4: down by only fifty three points, about a tenth of
20:19
Speaker 4: a percent, SMP five hundred down only nine points, and
20:23
Speaker 4: the Nasdaq is off by about thirty two points, about
20:27
Speaker 4: two tenths of a percent. Russell two thousand is down
20:30
Speaker 4: about half a percent, or ten points. Tenure Treasure reeled
20:33
Speaker 4: up four basis points this morning, now at four point
20:36
Speaker 4: four to seven percent, and crude oil is up one
20:42
Speaker 4: point six percent, trading just below sixty two dollars a barrel,
20:46
Speaker 4: and Video shares currently flat ahead of its earnings, as
20:50
Speaker 4: I mentioned after today's closing bell. Meanwhile, investors are digesting
20:54
Speaker 4: more retailer earnings from Macy's, Abercrommine, Fitch, and Dick's Sporting Goods.
20:58
Speaker 2: This morning.
20:59
Speaker 4: Macy's up by about a third of a percent after
21:01
Speaker 4: the department store chain posted first quarter earnings that beat estimates.
21:06
Speaker 4: The company did, however, cut its annual earnings guidance to
21:09
Speaker 4: count four tariffs and moderating consumer spending. Abercrommine Fit share
21:14
Speaker 4: shares are surging twenty six percent after the retailer saw
21:18
Speaker 4: its quarterly sales jump eight percent and lifted its full
21:22
Speaker 4: year sales forecast. Abercrombie also said and anticipates a fifty
21:27
Speaker 4: million dollars hit from terrorists this year, even after taking
21:31
Speaker 4: action to offset their effects. As for Dick's Sporting Goods,
21:35
Speaker 4: that stock is up over one percent after the retailer
21:38
Speaker 4: posted better than expected earnings and revenue. Dix also reaffirmed
21:42
Speaker 4: its full year outlook. Elsewhere, OCTA shares down by over
21:47
Speaker 4: twelve percent after the digital verification provider swung to a
21:51
Speaker 4: profit and posted better than expected quarterly revenue. Wherever, the
21:55
Speaker 4: company said it would maintain a prudent approach to guidance,
21:59
Speaker 4: citing economic uncertainty. After surging twenty four percent yesterday on
22:04
Speaker 4: the heels of a strong Memorial Day weekend at the
22:07
Speaker 4: box office, AMC Entertainment shares are retreating by about eleven
22:12
Speaker 4: percent today and also after today's closing belt, we'll see
22:15
Speaker 4: earnings from Salesforce. I'm Tucker Silvan. That's Wall Street Watch.
22:20
Speaker 2: We have a pcre from Axios. It's a study they did,
22:24
Speaker 2: not a study, a survey. They did basically asking Americans, Hey,
22:29
Speaker 2: what do you think about AI? And you know, how
22:33
Speaker 2: do you want companies to go about it? And first
22:37
Speaker 2: question that I'll ask Paul before I even get to
22:39
Speaker 2: the results, is this survey useful in any way, shape
22:43
Speaker 2: or form. No, Okay, now that we've said that I
22:47
Speaker 2: should I.
22:48
Speaker 3: Could extrapolate too, I guess, but no, No.
22:50
Speaker 2: That was great. I think that was fantastic, Like I
22:53
Speaker 2: love you one more to answer. So basically what we
22:57
Speaker 2: see is through the twenty one hundred and twenty three
23:01
Speaker 2: adults surveyed by Axios, about seventy seven percent of them
23:09
Speaker 2: want companies to quote create AI slowly and get it
23:12
Speaker 2: right the first time. Who cares like that's I'm not
23:19
Speaker 2: saying this because I want AI to like rush through
23:21
Speaker 2: and end up like killing us all. I'm saying this
23:24
Speaker 2: because why does the opinion Why does public opinion matter
23:29
Speaker 2: for what individual companies are going to do with their
23:33
Speaker 2: business decisions? And do we have evidence that if companies
23:38
Speaker 2: move quickly and don't get AI right the first time,
23:41
Speaker 2: are people going to change their buying or spending habits.
23:44
Speaker 2: I don't think so, unless it actually kills us all.
23:48
Speaker 3: No, there, If you just look back at any type
23:51
Speaker 3: of new technology, there's always going to be resistance to it.
23:54
Speaker 3: There's always going to be skepticism as to how integral
23:58
Speaker 3: becomes a part of data life. Whether you're looking back
24:01
Speaker 3: at computers and the Internet in the nineties, the mobile phone,
24:06
Speaker 3: all the iterations that we've seen in the technology front.
24:08
Speaker 3: I'm sure there was a lot of resistance from many
24:13
Speaker 3: people in terms of those development, but if you look
24:15
Speaker 3: at just the competition and how businesses progress over time,
24:19
Speaker 3: it's particularly in the technology sector, move fast and break things,
24:22
Speaker 3: and that's what they're going to continue to do. They're
24:24
Speaker 3: going to spend exorbitant amounts of money to try and
24:28
Speaker 3: become the pre eminent player in this space. However that takes,
24:32
Speaker 3: you know, way, shape or form, We're not sure. So
24:36
Speaker 3: this polling is it's not going to change anything in
24:41
Speaker 3: terms of the way businesses act or conduct themselves. So
24:46
Speaker 3: it is something that it really you don't need to
24:50
Speaker 3: even take it with any grains so solid. It's just
24:52
Speaker 3: it's just noise.
24:54
Speaker 2: I guess, like the piece that I come back to
24:57
Speaker 2: on this is, I'm sure all of you guys remember
25:04
Speaker 2: all of the problems that Facebook went through with like
25:06
Speaker 2: data sharing and privacy. I forget all the different things
25:10
Speaker 2: that happened or you know, continue to happen in this
25:12
Speaker 2: and that. And there were multiple polls of you know,
25:16
Speaker 2: Americans like, oh, like, you know what you know? Do
25:21
Speaker 2: you think that it's you know, good that you know
25:23
Speaker 2: your data is being shared this way or that way.
25:25
Speaker 2: There's even when I found from Pew back in twenty eighteen,
25:31
Speaker 2: forty two percent of Facebook users have taken a break
25:33
Speaker 2: from the site in the past year. Fifty four percent
25:35
Speaker 2: adjusted their privacy settings, which I will call bull loney on.
25:39
Speaker 2: Twenty six percent have deleted the app from their phone.
25:45
Speaker 2: Has any of that made any dents in Facebook's actual
25:50
Speaker 2: business over the last seven years?
25:52
Speaker 1: Now? No?
25:53
Speaker 2: No, And so there are two possibilities. The first is
25:57
Speaker 2: that the people who are responding to these poles are lying,
26:01
Speaker 2: which I don't think is true. The second is that
26:05
Speaker 2: despite you know, having very negative views about in this case,
26:10
Speaker 2: you know, we don't want AI to move too quickly,
26:13
Speaker 2: people aren't actually going to change their behavior as a
26:15
Speaker 2: result of it. And that's what it is like. It's
26:17
Speaker 2: hard for people to change their behavior. This is also
26:20
Speaker 2: why it's hard for the United States to have a recession.
26:22
Speaker 2: Is usually you just keep on doing what you're doing.
26:24
Speaker 2: Even if you voice your displeasure about something, you generally
26:27
Speaker 2: keep doing the same thing over and over because and
26:31
Speaker 2: this is true of just about anyone. The unfortunate psychological
26:35
Speaker 2: reality for humans it's usually more comfortable to fail in
26:39
Speaker 2: familiar ways than to, you know, go and try something
26:42
Speaker 2: new and fail that way, because it just feels safer
26:45
Speaker 2: to keep doing the same thing over and over, right,
26:47
Speaker 2: and quite honestly most of the time, like it is
26:49
Speaker 2: safer to keep doing the same thing over and over.
26:51
Speaker 2: This is what you know, thousands of years of evolution
26:53
Speaker 2: have taught us, which is yes, like go and you know,
26:58
Speaker 2: hunt over by that stream, but don't go like when
27:00
Speaker 2: you see a tiger there, because if it looks different,
27:03
Speaker 2: it's probably not safe. And so like we do the
27:07
Speaker 2: same thing with social media now. Is it's so nice
27:10
Speaker 2: just scrolling through my Instagram feed. This feels safe and
27:15
Speaker 2: meanwhile you're just being bombarded with you know, images of oh,
27:19
Speaker 2: your life should be better than it is, like you
27:21
Speaker 2: should feel bad about yourself. Buy more, buy more, buy more.
27:25
Speaker 2: And that's why I don't have Instagram.
27:28
Speaker 3: That was a lot to chew on, but I'm with you.
27:32
Speaker 2: I've been talking a lot, Paul, What do you want
27:34
Speaker 2: to say? It's uh.
27:36
Speaker 3: I think that the point that you didn't made that
27:38
Speaker 3: that is interesting is that it is it's easier to
27:41
Speaker 3: be content with sort of what is known out there,
27:44
Speaker 3: and there is going to be a version two new technologies.
27:48
Speaker 3: But ultimately, if you want to make a dominant business,
27:52
Speaker 3: then creating you know, the first of something can really
27:56
Speaker 3: lead to Just look at Facebook or Apple with their eyes.
28:00
Speaker 3: I phone tremendous profits and a substantial market share for
28:03
Speaker 3: a long period of time. And that's what everyone's chasing here.
28:07
Speaker 3: Whether who is successful or not, we don't know. And
28:10
Speaker 3: what success looks like when it comes to AI still uncertain.
28:13
Speaker 3: But that's what's gonna happen, regardless of how people feel
28:16
Speaker 3: about it.
28:16
Speaker 2: Do you think Meta should change their name again? Because
28:18
Speaker 2: they they change the name to meta trying to make
28:20
Speaker 2: the metaverse happen. They're still doing it by the way
28:22
Speaker 2: they spend. They're spending like forty billion dollars a year
28:26
Speaker 2: trying to make the metaverse happen on what I don't know,
28:29
Speaker 2: because if no one's using it, how could you be
28:32
Speaker 2: spending the money. But that's neither here nor there. Do
28:36
Speaker 2: you think they should change their name again because now
28:39
Speaker 2: they're like going more in on ai, Like should they
28:41
Speaker 2: change their name to like.
28:42
Speaker 3: Artistic rama Lama instead of metal Lama.
28:45
Speaker 2: What about Metaalama?
28:47
Speaker 3: Not bad?
28:48
Speaker 4: I mean the easy one is meta ai. Yeah, something
28:52
Speaker 4: dumb like that.
28:53
Speaker 2: No, that's not a big enough change. Meta I kind
28:57
Speaker 2: of like Metaalama.
28:58
Speaker 3: If they go metai it's it's like all the Max
29:00
Speaker 3: and plus stuff. I feel like they're ripping off because
29:02
Speaker 3: you have XSAI. It just seems like everyone is just
29:04
Speaker 3: throwing metamax, metamax, metamucil.
29:09
Speaker 2: Let's take you a quick break and when we come back,
29:12
Speaker 2: let's talk a little bit about the housing market.
29:14
Speaker 1: After this text us at six one seven three, six
29:17
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29:20
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29:22
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29:25
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29:42
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29:54
Speaker 2: Paul, we got a piece from NPR. It's on the
29:59
Speaker 2: housing market. The headline is quote, we're in a holding
30:01
Speaker 2: pattern home sales and building slump in the face of uncertainty.
30:05
Speaker 2: What's to talk about here?
30:06
Speaker 3: A couple pieces that it hits on here, sales of
30:09
Speaker 3: existing homes are still seventy five percent off their pre
30:12
Speaker 3: pandemic levels. Multiple different reasons for this, one certainly being
30:18
Speaker 3: that you have interest rates on the thirty year fixed
30:21
Speaker 3: mortgage hovering around six point eight or six point nine
30:24
Speaker 3: percent compared to where we were in twenty twenty or
30:27
Speaker 3: twenty twenty one, where the thirty year fixed mortgage was
30:30
Speaker 3: anywhere from two seven five to three and a quarter
30:33
Speaker 3: in that range. So that's been part of the reason
30:35
Speaker 3: we saw in the month of April the slowest April
30:39
Speaker 3: for existing home sales in sixteen years, and we do
30:42
Speaker 3: have home builder sentiment dropping to levels that we haven't
30:45
Speaker 3: seen since November of twenty twenty three. You know, some
30:50
Speaker 3: of that is potentially concerns about tariffs in the direction
30:55
Speaker 3: that they'll take. However, the MPR piece does point out here,
30:58
Speaker 3: while in reports from Canada on the lumber side, about
31:02
Speaker 3: one quarter of a softwood lumber is used in construction
31:07
Speaker 3: of many homes, even with that fourteen and a half
31:10
Speaker 3: percent duty that is assessed on lumber for imports from
31:15
Speaker 3: Canada into the United States, it's still the lumber costs
31:19
Speaker 3: doesn't account for a significant cost of a new home build,
31:22
Speaker 3: so that necessarily isn't the entire reason, but perhaps some
31:26
Speaker 3: of the increased inventory levels that we're seeing here on
31:30
Speaker 3: the existing home sales side. Things, you know, inventory being
31:34
Speaker 3: posted has led to a little bit lessening demand for
31:39
Speaker 3: new homes out there. It's just a lot of factors
31:43
Speaker 3: going on in the housing market at this point, Chuck.
31:45
Speaker 3: But it doesn't seem like there's tremendous direction momentum in
31:49
Speaker 3: one direction or another, Paul.
31:51
Speaker 2: Do you know what the difference between hardwood and softwood is?
31:54
Speaker 3: Idea? When I was reading the piece this morning, I'm like,
31:57
Speaker 3: I should know what softwood lumber is, and I have
31:59
Speaker 3: no clue.
32:00
Speaker 2: Good examples. Most pines and spruces and stuff like that
32:03
Speaker 2: softwood hardwoods or are things you know, ash maple, stuff
32:10
Speaker 2: like that, those types of you know, woods are hardwood. Interestingly,
32:18
Speaker 2: one thing that I did learn in my research this morning,
32:21
Speaker 2: it's based on the type of tree and kind of
32:27
Speaker 2: it's it's not based on how hard the wood is,
32:29
Speaker 2: which is what's interesting. It's based on soft woods. They
32:34
Speaker 2: don't have vessels that help them transport water up and
32:37
Speaker 2: down the trunk. And so interestingly, balsa wood, which is
32:43
Speaker 2: like generally regarded as like the softest wood out there,
32:47
Speaker 2: is technically a hardwood because of the formation of the tree,
32:53
Speaker 2: which is wild to me. So that's my contribution.
32:58
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34:13
Speaker 2: We'll talk a little bit about what's going on in
34:15
Speaker 2: the auto market. According to data from Cox Automotive, auto
34:19
Speaker 2: dealers now have just a forty three day supply of
34:22
Speaker 2: used cars on their lots. That is the lowest level
34:26
Speaker 2: for this time of year since twenty twenty one, and
34:30
Speaker 2: this is due to people racing out to try to
34:34
Speaker 2: buy used cars before more used cars come from cars
34:40
Speaker 2: that previously were sold as new cars with new tariffs.
34:45
Speaker 2: So it's people basically trying to buy used cars before
34:48
Speaker 2: new cars become used cars.
34:52
Speaker 3: I know, it's wild buy used cars instead of new cars.
34:56
Speaker 2: No, it's people trying to buy used cars before new
34:59
Speaker 2: new cars but come used cars.
35:02
Speaker 3: I mean, yeah, I guess say.
35:04
Speaker 2: Like that's what it is. Though, It's it's people trying
35:05
Speaker 2: to front run tariffs on something that is not tariffed,
35:09
Speaker 2: which which is wild, right. It's because like the only
35:12
Speaker 2: thing that's tariff are new cars that are produced outside
35:15
Speaker 2: the United States, and so it's people trying to buy
35:18
Speaker 2: new car used cars. Before new cars that are sold
35:21
Speaker 2: today become sold as used cars in the future, right,
35:25
Speaker 2: which is kind of weird because like, it doesn't just
35:27
Speaker 2: happen right away. Like that, I can understand wanting to
35:29
Speaker 2: buy a new car before tariffs hit, but wanting to
35:34
Speaker 2: buy a used car is effectively creating the pricing pressure
35:39
Speaker 2: that you would otherwise seek to avoid. Because here's what's
35:41
Speaker 2: happened is the average price of the fifty best selling
35:45
Speaker 2: used cars in the US has gone up each week
35:48
Speaker 2: over the past two months to nearly twenty nine thousand
35:50
Speaker 2: dollars now according to Cock's Automotive. So those prices have
35:54
Speaker 2: been going up because of demand for used vehicles. Again, remember,
35:59
Speaker 2: used cars are not tariff because they're already in the
36:02
Speaker 2: United States, and unless someone is buying a new car
36:05
Speaker 2: today and then selling it tomorrow, the tariff on that
36:09
Speaker 2: new car is not making it into the broader ecosystem.
36:12
Speaker 2: So this is I think a great example of Hey,
36:15
Speaker 2: even on goods that are not subject to tariffs, we're
36:18
Speaker 2: seeing changes in buying patterns that are affecting pricing to
36:21
Speaker 2: the upside.
36:22
Speaker 3: Here, Yeah, you have a new car coming in at
36:25
Speaker 3: forty eight thousand average price, and like you mentioned up
36:28
Speaker 3: to twenty nine thousand on the fifty best selling used
36:31
Speaker 3: cars there and as a result, just on the new
36:33
Speaker 3: car side of things, North American factories produced eight percent
36:37
Speaker 3: less fewer cars rather in the month of April, so
36:41
Speaker 3: a chain reaction there where North American factories sort of
36:46
Speaker 3: peeling back the production that they need on the new
36:50
Speaker 3: car side of things. On the used car the tricky
36:53
Speaker 3: piece is that there's not a tremendous amount of inventory
36:56
Speaker 3: becoming available. Rental cars have rental car companies have tried
37:00
Speaker 3: their fleets and you've got not many leases coming from
37:03
Speaker 3: the pandemic era. There just wasn't a lot of leasing
37:07
Speaker 3: during that period. So not a lot of used car
37:09
Speaker 3: invatory coming out on the market just yet.
37:11
Speaker 2: And apparently this means that you're going to have this
37:14
Speaker 2: is unquoting just from the source here, that these prices
37:17
Speaker 2: are probably going to remain elevated for the coming months.
37:20
Speaker 2: There's there's nothing that is, you know, resolving that, as
37:23
Speaker 2: you noted there. So I think again you factor this
37:27
Speaker 2: into what does it mean from an inflation perspective, and
37:31
Speaker 2: these car prices all go into it. Beyond that, then
37:34
Speaker 2: ensuring these vehicles is getting more expensive. So there's there's
37:37
Speaker 2: a bunch that is, you know, it's not yet printing
37:41
Speaker 2: in the inflation data, but the more real time data
37:44
Speaker 2: that we are getting out there indicates that you're starting
37:47
Speaker 2: to see some pricing pressures that are you know, bubbling
37:50
Speaker 2: under the surface, and probably in the next couple months
37:53
Speaker 2: they start to pop up and make themselves a little
37:57
Speaker 2: bit more apparent. Let's take a quick break here, but
38:01
Speaker 2: our two we're gonna be talking Apple. We're also gonna
38:05
Speaker 2: be talking a few more companies reporting earnings. And then
38:09
Speaker 2: also we got another data breach. It's been a while
38:12
Speaker 2: since we've covered one, but our data breach of the week,
38:15
Speaker 2: we've got that today as well. We'll fill you in
38:18
Speaker 2: on that in hour two.