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Bond Yields Jump as AI Keeps Driving the Market · The Financial Exchange Show

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Speaker 1: is the Financial Exchange with Chuck Zada and Paul Lane.
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Speaker 2: It's Chuck, Paul, and Tucker with you here today. And Mark,
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Speaker 2: it's finding a little bit of choppy water here. Again,
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Speaker 2: let's not overreact into anything too big because the S
1:23
Speaker 2: & P is less than 2% away from all-time highs. Uh,
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Speaker 2: the NASDAQ, I believe, was at all-time highs yesterday, or
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Speaker 2: at least touched them intraday. I don't know if it
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Speaker 2: closed there. So, like, let's not make this into, like, ugh,
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Speaker 2: the sky is falling, because the sky's still pretty high
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Speaker 2: up there. Uh, but what I am going to say is,
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Speaker 2: the bond market's kind of gross. Now, equity markets, you
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Speaker 2: got a little bit of a sell-off happening. The bond
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Speaker 2: market is, uh.
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Speaker 2: You know, the, uh... Well... The bond market is just
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Speaker 2: vomiting everywhere. It's just a puke fest that you're seeing there.
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Speaker 2: The 10-year treasury is up 10 basis points to 5.069%.
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Speaker 2: This is likely going to push the average 30-year fixed
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Speaker 2: rate mortgage north of 7.25%. This, by the way, is
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Speaker 2: also the highest the 10-year yield has been in 19 years.
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Speaker 2: You've got to go back to 2007 to find the
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Speaker 2: last time that it was at this level. And just
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Speaker 2: in case, like, again... As long as we're looking at
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Speaker 2: long-term key levels for the 10-year, again, the last time
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Speaker 2: that you were above this was in 2007. And basically,
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Speaker 2: in 2007, we got as high as around 5.3%. Okay,
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Speaker 2: that's interesting. Tell me more, Chuck. Oh, I'd love to. Absolutely. Absolutely.
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Speaker 4: You're just taking my job and asking questions for yourself.
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Speaker 4: Just pushing me to the side. I'm just trying to
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Speaker 4: make your life easier, Paul.
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Speaker 2: Okay, thanks.
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Speaker 4: I already got the break with Todd.
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Speaker 2: I'm trying to give you a little bit of a
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Speaker 2: no-show job. You can just take it or leave it,
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Speaker 2: whatever you want to do. Prior to 2007, the last
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Speaker 2: time we were north of 5.32% was 2002. We haven't
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Speaker 2: been north of 5.5% since 2001. So if you're looking
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Speaker 2: at kind of these next markers out there, you're talking
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Speaker 2: 25 years since we've been north of 5.3% and 25
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Speaker 2: years since we've been north of 5.5%. Do I think
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Speaker 2: we're going to get there? Not necessarily, but I'm just
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Speaker 2: kind of laying these out here. Remember, not remember, I
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Speaker 2: don't know if you remember, back in 2000 at the
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Speaker 2: peak of the tech bubble, 10 years at 6.8%. Do
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Speaker 2: I think we're heading there? Not necessarily. Do I think
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Speaker 2: it's possible? I think it's possible in the wrong circumstances
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Speaker 2: that we end up there. But let's take this kind
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Speaker 2: of one step at a time. What I will say is, hey,
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Speaker 2: yields are reacting at this point, in my opinion, to
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Speaker 2: the fact that U.S. nominal growth is absolutely ripping right now.
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Speaker 2: And when I say nominal, what I mean by that
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Speaker 2: you've got GDP growth. If you don't remove inflation from it,
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Speaker 2: that is nominal growth. So the US economy right now
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Speaker 2: nominally is growing like six to 8%. The problem that
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Speaker 2: we have is at least for, you know, the quarter,
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Speaker 2: inflation's probably running somewhere in the ballpark of like four
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Speaker 2: to 5%. And so if you grow at seven, but
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Speaker 2: inflation's five, your real growth is two. And that's what
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Speaker 2: gets reported in the GDP report because nominal growth doesn't matter.
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Speaker 2: Like if you, If you grow your economy at 17%
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Speaker 2: but inflation is 30%, you don't get to be like, hey,
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Speaker 2: the economy grew 17%. Like, no, your economy sucked then
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Speaker 2: because inflation was twice the nominal growth rate. So I
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Speaker 2: think that when we look at this, the bond market
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Speaker 2: is waking up to the fact that nominal growth is
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Speaker 2: through the roof right now because of the combination of
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Speaker 2: there's a ton of spending on AI development and we're
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Speaker 2: running ginormous annual deficits at the federal level. And so
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Speaker 2: I don't understand the people that are calling for a recession.
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Speaker 2: I see people talking about, well, there's going to be
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Speaker 2: a recession because of high gas prices. I'm like, no,
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Speaker 2: you're missing the point. High gas prices are part of
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Speaker 2: the evidence that there is no recession right now. Demand
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Speaker 2: is remaining robust. Oh, the prices of flights are crazy. No,
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Speaker 2: the price of flights are crazy because there's people who
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Speaker 2: are paying for those. It might not be you listening,
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Speaker 2: but someone is paying those prices. Oh, Disney Plus just raised, Tucker,
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Speaker 2: what was it, 12%?
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Speaker 1: 13%?
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Speaker 2: 13%, yeah. Disney Plus just raised its price to $ 21
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Speaker 2: and change a month. Who's going to pay for that?
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Speaker 2: Someone is. And so this is what I mean by, like,
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Speaker 2: nominal growth is ripping. A lot of it's being eaten
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Speaker 2: up by inflation right now. Is because the price of
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Speaker 2: a flight going up doesn't mean the economy expanded. Now,
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Speaker 2: at some point, we're going to get to a point,
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Speaker 2: I don't know when it's going to be, Maybe it'll
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Speaker 2: be in the next month. Maybe it'll be in three months.
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Speaker 2: Maybe it'll be in six. We're going to get to
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Speaker 2: a point where the energy situation taps out to the upside.
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Speaker 2: Maybe it's at 570 and maybe it's at 670 for diesel.
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Speaker 2: Maybe it's at 870 for diesel. Like, I don't know.
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Speaker 2: But at some point, that inflationary headwind is going to
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Speaker 2: become a deflationary tailwind. Because just like for the last,
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Speaker 2: you know, back in 2025, we said, look, Inflation was,
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Speaker 2: you know, coming down over the course of 2025. A
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Speaker 2: big part of that was energy prices were coming down.
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Speaker 2: And we said, hey, if this reverses, you've got a
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Speaker 2: problem here because core inflation never really got to 2%.
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Speaker 2: And lo and behold, hey, it reversed this year and
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Speaker 2: you're moving up. Okay, so again, energy prices aren't going
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Speaker 2: to go up forever. How long they're going to go
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Speaker 2: up for? Like, I don't know. And we're still in
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Speaker 2: a very, very dangerous spot as it relates to inventories on.
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Speaker 2: Diesel's the highest priority. Gas is second. Crude oil is third,
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Speaker 2: if you're kind of looking at the board out there.
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Speaker 2: So this is what's going on in the bond market.
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Speaker 2: The bond market's woken up to the fact that, hey,
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Speaker 2: nominal growth is strong, and if you have strong nominal growth...
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Speaker 2: It's not people being upset about the U.S. having too
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Speaker 2: much debt. It's just, hey, if there's other places that
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Speaker 2: you can make more money, bond yields are going to
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Speaker 2: go up. That's how it works.
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Speaker 4: Yeah, really reminiscent to kind of what we saw in
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Speaker 4: 22 and 23, an inflationary cycle picking up again. And
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Speaker 4: as a result of that, you're seeing rates rising and
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Speaker 4: sectors that are impacted by either higher fuel costs or
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Speaker 4: borrowing costs being negatively impacted at the moment.
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Speaker 2: The piece that's interesting to me, and again, I've been
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Speaker 2: watching this over the last couple of weeks here, is
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Speaker 2: if you look since, let's see, let me get the
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Speaker 2: date right. Here we go, September 10th. 10-year treasury was
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Speaker 2: at 4.9 then, so it's up 16 basis points since then.
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Speaker 2: The dollar index was at 99, it's at 101 today.
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Speaker 2: So rates up, dollar up 2% in a span of
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Speaker 2: two weeks. Gold was at 43.55 then, it's at 43
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Speaker 2: and change now. Basically hasn't moved a ton. which I
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Speaker 2: find interesting just in the context of all this. I
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Speaker 2: don't know that there's anything huge there, but it's interesting
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Speaker 2: when you see, okay, yields have been moving crazily up,
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Speaker 2: and gold, really, since the beginning of September, gold has
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Speaker 2: moved down like 1%, even as the 10-year has gone
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Speaker 2: from 477 up to 506. And gold's holding steady, which
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Speaker 2: is kind of interesting to me, just in the conversation of,
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Speaker 2: nominal growth and inflation and all that stuff. I pay
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Speaker 2: attention to that. We do have oil today, West Texas
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Speaker 2: Intermediate up 68 cents a barrel to 91.20. That 91.20
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Speaker 2: sounds lower than it did yesterday. It's because we just
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Speaker 2: moved over from the October to the November contract. So
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Speaker 2: it's not that the price of oil went down like
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Speaker 2: $ 6 overnight. It's just that the benchmark contract, we move
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Speaker 2: one month forward and With how heavily backwardated the curve is,
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Speaker 2: this is just what it looks like there. So you've
9:06
Speaker 2: got gas prices holding steady today at $ 4. 47 a gallon nationally.
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Speaker 2: Diesel steady at $ 6. 52 as well. Both of those should
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Speaker 2: come off a touch. Gas probably can come down $ 0. 05
9:17
Speaker 2: to $ 0. 06 over the next week or so based on
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Speaker 2: some Midwest refineries coming back online. Diesel probably coming down $ 0. 15
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Speaker 2: to $ 0. 20 a gallon in the next week as well.
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Speaker 2: So a little bit of relief, but still high prices obviously.
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Speaker 2: Let's take a quick break. When we come back, we'll
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Speaker 2: talk about the U.S. and China and whether they can
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Speaker 2: work together on AI security. Hint, they probably can't.
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10:43
Speaker 2: Paul, we've got a piece here in The Financial Times
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Speaker 2: from the editorial board, how the U.S. and China can
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Speaker 2: work together on AI security. It lays out a really
10:52
Speaker 2: nice way that they could work together on AI security.
10:56
Speaker 2: Not really sure any of it will come to fruition.
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Speaker 2: What does the piece outline? What are your thoughts?
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Speaker 4: Basically what it outlines is this idea that the U.S.
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Speaker 4: and China could come together and put together some sort
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Speaker 4: of hotline idea in which if there were significant risks
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Speaker 4: to security on either front, that they would alert the
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Speaker 4: other party for any serious incident happening. that would raise
11:21
Speaker 4: national security concerns, very similar to the idea that was
11:24
Speaker 4: put in place with the nuclear hotline back between Washington
11:28
Speaker 4: and Moscow after the Cuban Missile Crisis. Ultimately, this is
11:34
Speaker 4: a nice idea in practice, but implementing something like this,
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Speaker 4: I just feel like is far more difficult in nature,
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Speaker 4: first of all. With nuclear warnings, it's a lot easier
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Speaker 4: to sort of track the threats there because if you're
11:51
Speaker 4: building nuclear capacity and there's any activity, it's far easier
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Speaker 4: to see than anything that goes on in the web
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Speaker 4: with artificial intelligence or agents breaking out from a testing group.
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Speaker 4: Not to say that the issues couldn't be discovered eventually,
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Speaker 4: but it just feels like it's a much harder sort
12:08
Speaker 4: of way to communicate and track where some of these
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Speaker 4: threats are coming from. Not to mention you have Just
12:15
Speaker 4: the geopolitical tensions in place that I just find it
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Speaker 4: hard to believe that both parties were going to be
12:22
Speaker 4: on board with this because it seems like such a
12:25
Speaker 4: significant initiative for both countries to try and take supremacy
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Speaker 4: here that the cooperation aspect, while I like the sound
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Speaker 4: of it, I just don't know if that actually does
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Speaker 4: come to fruition.
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Speaker 2: Yeah, I just... Look, what have the U.S. and China
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Speaker 2: cooperated on in any meaningful depth in the last decade?
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Speaker 2: that we could deem like a large success. Trying to
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Speaker 2: find them. Like the relationship is not in a good place. Uh,
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Speaker 2: and I'm not saying that like it, it should be
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Speaker 2: given like the vast differences that, uh, exist and the
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Speaker 2: significant problems caused by how China has approached trade and
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Speaker 2: a number of other issues during that time. But look, if,
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Speaker 2: if we can't solve like some of the smaller things, uh,
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Speaker 2: You think we're just going to be like, hey, we
13:17
Speaker 2: can solve AI security together. I'm just not buying it.
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Speaker 4: Not buying it.
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Speaker 2: I don't. I want to get to these two pieces here. Actually,
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Speaker 2: I guess it's two.
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Speaker 1: Really, one.
13:32
Speaker 2: This piece here, why the stock market's breadth isn't that bad.
13:36
Speaker 2: And what this piece talks about is that.
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Speaker 2: Basically, for the last four years, it's been a very
13:43
Speaker 2: narrow set of the market that has been driving the
13:46
Speaker 2: market higher. AI and AI-adjacent companies. We know this. We've
13:50
Speaker 2: talked about it not every day for the last four years,
13:52
Speaker 2: but I'd say at least 83% of the days. Five
13:56
Speaker 2: out of six. So when we look at this, it
14:01
Speaker 2: is true that if you look at the last four years,
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Speaker 2: the safest that this market has been has been when
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Speaker 2: AI stuff is surging. Any time that we have seen
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Speaker 2: a broadening out, which normally, historically, you look at it
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Speaker 2: and you're like, oh, good, broadening out more participation from
14:16
Speaker 2: other parts of the market. Any time it's tried to
14:18
Speaker 2: in the last four years, this market has absolutely fallen
14:22
Speaker 2: on its face. Like, you can go and basically look
14:25
Speaker 2: at it, like, going back to the start of 2023,
14:29
Speaker 2: and it's like clockwork. Summer of 2024. You remember in
14:33
Speaker 2: July of 2024? Remember, 23, we had the Silicon Valley
14:37
Speaker 2: bank scares. There was some stuff going on there that
14:39
Speaker 2: kind of spooked markets. But summer of 24, things were surging,
14:43
Speaker 2: and we get to, like, mid-late July, and all of
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Speaker 2: a sudden, like, the Russell 2000 breaks out, and, like,
14:48
Speaker 2: the S & P 500 equal weight's going crazy. And
14:51
Speaker 2: then in August of that year, you remember we had Yenmageddon,
14:54
Speaker 2: where we all came in on Monday, and the VIX
14:56
Speaker 2: went up to 60, and the Yen fell. Carry trade. And, like,
14:58
Speaker 2: the carry trade blew up, and we're like, what happened? Well,
15:02
Speaker 2: it happened right after this broadening out. In the spring
15:05
Speaker 2: of 2025, I know that everyone likes to point to
15:09
Speaker 2: tariffs and Liberation Day and this and that for why
15:11
Speaker 2: we had the volatility that we did, but the fact
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Speaker 2: is that for three months before that, we had this
15:16
Speaker 2: broadening out where the AI trade was lagging and the
15:20
Speaker 2: market fell flat on its face. This happened again at
15:25
Speaker 2: the end of 2025. Remember the private credit concerns last year? Well,
15:30
Speaker 2: those can maybe be something that's going on, but the
15:32
Speaker 2: market tried to broaden out fell flat on its face. Again,
15:37
Speaker 2: earlier this year, the first quarter of this year, this
15:40
Speaker 2: broadening out that was happening, AI was lagging. Granted, again,
15:43
Speaker 2: I know that you ended up then having the start
15:45
Speaker 2: of the Iran conflict, but markets fell flat on their
15:49
Speaker 2: face yet again. The best market for, you know, the
15:53
Speaker 2: best composition for this market for the last four years
15:56
Speaker 2: has been narrow leadership. Now, it's been the best thing
16:01
Speaker 2: because every time we've gotten one of those dips... We've
16:04
Speaker 2: gone right back up. There has not been any sustained
16:08
Speaker 2: dip in this market since 2022. That's the last time
16:12
Speaker 2: we had a sustained dip in the market. It was
16:13
Speaker 2: basically the whole year. It was December of 21 through
16:17
Speaker 2: October of 22. Even that wasn't crazy long in terms
16:21
Speaker 2: of bear markets or anything like that. It wasn't the
16:24
Speaker 2: tech bubble bursting and it takes a few years to
16:26
Speaker 2: bottom out. It was nine, 10-month bear markets. So the
16:32
Speaker 2: problem that you do have here is the mechanics that
16:35
Speaker 2: have made this market work for the last four years,
16:38
Speaker 2: eventually they're going to break. Because you can't just V-shape
16:42
Speaker 2: bottom every time you go down like 10 or 15%.
16:44
Speaker 2: Eventually you get into a situation where things get dodgy.
16:49
Speaker 2: But I do maintain, look, we've talked about this, the
16:52
Speaker 2: economy in nominal terms is absolutely ripping right now, even
16:55
Speaker 2: if most of that growth is being eaten up by
16:57
Speaker 2: inflation this quarter. And given that that's the case, like,
17:03
Speaker 2: It's tough to see many major issues that could lead
17:08
Speaker 2: to a prolonged downturn unless the bloom really comes off
17:13
Speaker 2: the AI capex rose. Right.
17:15
Speaker 4: You've got a trillion dollars set aside by all the
17:17
Speaker 4: hyperscalers projected to be spent next year. Any dent to
17:20
Speaker 4: that would be detrimental to markets, but that's unlikely, I
17:25
Speaker 4: would think, to occur in terms of what we've seen
17:27
Speaker 4: on the AI front. And even though you mentioned that
17:31
Speaker 4: there's a lot of emphasis this quarter on the weaknesses
17:33
Speaker 4: of some of these other sectors... In general, we've seen
17:37
Speaker 4: in other areas of the market besides tech some pretty
17:39
Speaker 4: strong earnings growth in prior quarters to your point of
17:42
Speaker 4: this idea that the economy is still ripping. I mean,
17:44
Speaker 4: look at companies that you wouldn't think of that are
17:48
Speaker 4: industrial companies like Caterpillar and GE and others that, again,
17:52
Speaker 4: they're benefiting from the AI trade in general, but they're
17:54
Speaker 4: in sectors of business that... are outside of the tech realm. Obviously,
17:59
Speaker 4: the energy sector has done tremendous also from a profitability standpoint.
18:02
Speaker 4: So the S & P 500 equal weight for a
18:06
Speaker 4: lot of the year was pretty neck and neck with
18:08
Speaker 4: the S & P 500. That gap has started to
18:10
Speaker 4: diverge over the course of this last quarter, where the
18:13
Speaker 4: S & P 500, which is heavily weighted to those
18:16
Speaker 4: big tech names that have carried water for the markets
18:18
Speaker 4: over the last three or four years... has started to
18:21
Speaker 4: split a bit. I believe it's about a 1.5% difference.
18:24
Speaker 4: We were up close to 14% on the S &
18:27
Speaker 4: P versus about 12.5% on the equal weight, which smooths
18:31
Speaker 4: out some of that impact of all the money going to,
18:34
Speaker 4: not all the money, a third of the money going
18:36
Speaker 4: to the hyperscalers. So it's become an issue over the
18:40
Speaker 4: course of the last few months or become a point
18:42
Speaker 4: of emphasis. But in general, like you said, this is
18:45
Speaker 4: the way the market has gone for the last three
18:48
Speaker 4: or four years. And it could continue on for longer.
18:52
Speaker 4: Just because it is being mentioned at this point in
18:56
Speaker 4: time doesn't mean the rally is going to run out
18:59
Speaker 4: anytime soon. We'll have to see.
19:01
Speaker 2: Yeah. So let's take a quick break here, and when
19:05
Speaker 2: we return, we've got Wall Street Watch, and then.
19:09
Speaker 4: Can we rip on an awful housing idea?
19:11
Speaker 2: Yeah, let's do that. I want to rip on the
19:13
Speaker 2: awful housing idea, and then we'll talk a little bit
19:14
Speaker 2: more about Metamuse next. Yeah, we're going to do that next.
19:39
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19:44
Speaker 1: It's the Financial Exchange on the Financial Exchange Radio Network.
19:50
Speaker 1: time now for wall street watch tracking the stocks the
19:53
Speaker 1: data and the headlines driving markets so far today right
19:57
Speaker 1: here on the financial exchange radio network all the.
19:59
Speaker 3: Bond market raising eyebrows again after the 10-year treasury yield
20:03
Speaker 3: crossed five percent again Right now, markets in negative territory.
20:08
Speaker 3: The Dow is down over half a percent or 277
20:11
Speaker 3: points lower. S & P 500 down nearly six-tenths of
20:14
Speaker 3: one percent or 44 points off. NASDAQ selling off over
20:18
Speaker 3: nine-tenths of a percent or 250 points lower. Russell 2000
20:22
Speaker 3: down by one percent. Ten-year Treasury yield is now up
20:25
Speaker 3: 11 basis points at 5.079 percent. Crude oil up one
20:30
Speaker 3: and a half percent, trading at $ 91, while Brent is
20:31
Speaker 3: at $ 101 a barrel. Ahead of its investor event today,
20:39
Speaker 3: McDonald's this morning announced plans to invest billions of dollars
20:42
Speaker 3: to help franchisees use AI tools and upgrade their kitchens
20:46
Speaker 3: and menus to better compete with rivals. However, the stock
20:50
Speaker 3: is down by 5%. Meanwhile, shares in homebuilder KB Home
20:55
Speaker 3: are now up modestly despite the company lowering its profit
20:58
Speaker 3: outlook amid worsening housing market conditions elsewhere. The Wall Street
21:02
Speaker 3: Journal reported that activist investor Jana Partners was pushing theme
21:05
Speaker 3: flag company six flags toward a sale. Six flags is
21:11
Speaker 3: down by, actually they're flat now, shares are flat. IonQ
21:15
Speaker 3: jumping 5% after the quantum computing company said it demonstrated
21:19
Speaker 3: the industry's first end-to-end real-time quantum error decoder. And Bloomberg
21:25
Speaker 3: reported last hour that the price for Disney Plus will
21:29
Speaker 3: increase 13%. to $ 21. 49 per month. Well, kids, I hope
21:36
Speaker 3: you enjoyed Bluey.
21:37
Speaker 4: While it lasted.
21:38
Speaker 3: I'm Tucker Silva, and that is Wall Street Watch.
21:41
Speaker 4: $ 21.
21:41
Speaker 2: 49.
21:42
Speaker 4: Get out of here with that. It just seems like
21:45
Speaker 4: yesterday they were bundling it with cable packages free to
21:48
Speaker 4: lure everyone on for this inevitable price hike that would
21:52
Speaker 4: be where it is today. You knew that was the strategy,
21:55
Speaker 4: but it seems like it's come so fast. And, like.
22:00
Speaker 2: Here's the worst part of it. You allude to it, Tucker.
22:03
Speaker 2: If I want to cut Netflix, my kids aren't watching Netflix.
22:08
Speaker 2: If I want to cut Apple TV, my kids aren't
22:10
Speaker 2: watching Apple TV. They're not huge Cape Fear fans these days. Honestly,
22:18
Speaker 2: we walk past the... I don't think anybody's a Cape
22:20
Speaker 2: Fear fan from the sounds of it. I've watched it.
22:23
Speaker 1: It's not bad.
22:24
Speaker 2: I've heard it's garbage. It's not like high end, but
22:28
Speaker 2: it's fine to pass the time if you're just kind
22:31
Speaker 2: of looking for something fun over the summer or whatever.
22:34
Speaker 2: It's a good summer crap watch. That's the technical term
22:38
Speaker 2: for it.
22:41
Speaker 4: Netflix is investing heavily in that same space.
22:44
Speaker 2: Disney, you can't get rid of it because you can't
22:47
Speaker 2: explain to your six-year-old... hey, there's no more Bluey. Or hey, like,
22:53
Speaker 2: it's just... Yeah, there's no way I'm getting rid of that.
22:55
Speaker 4: The IP is too valuable.
22:56
Speaker 2: And look, for what it is, it's like, okay, I
22:58
Speaker 2: can just get rid of something that I want and
23:00
Speaker 2: save the money there instead. But it's like, I mentioned
23:03
Speaker 2: to you in the break, Tucker, that the streaming ecosystem
23:05
Speaker 2: has gotten to the point where, and I said this
23:07
Speaker 2: would happen, like, you go back 10, 15 years ago, okay,
23:10
Speaker 2: the golden age of streaming has ended, and now it's basically, okay,
23:13
Speaker 2: how can we bring this back to the bundle so
23:15
Speaker 2: that we can get it all more cheaply? Because that's
23:17
Speaker 2: what the bundle does. People are like, Well, I only
23:19
Speaker 2: watch four channels on my cable, so why do I
23:21
Speaker 2: have to pay all this? It's because it all gets
23:24
Speaker 2: subsidized by everyone buying the same stuff.
23:27
Speaker 4: Right.
23:28
Speaker 2: That's why it happens. Like, the reason why your ESPN is,
23:33
Speaker 2: you know, $ 8 per subscriber on cable, but if you
23:37
Speaker 2: want ESPN, whatever the heck it's called these days, it's
23:40
Speaker 2: like 15 or 20 bucks, is because if everyone gets it,
23:44
Speaker 2: then we all subsidize each other. The crap channels that
23:47
Speaker 2: are like one cent, okay, when you're distributing to 200
23:50
Speaker 2: million households, great, you can throw that channel on there
23:53
Speaker 2: and it still makes financial sense.
23:55
Speaker 4: Yeah, ESPN commands even higher, I think, on the cable
23:58
Speaker 4: package there.
23:59
Speaker 2: I forget what it is now.
24:00
Speaker 4: No, it's a significant sum of a cable package deal.
24:05
Speaker 4: But ultimately, it's just interesting how Disney's business has had
24:09
Speaker 4: to evolve over time, where you think about the heyday
24:13
Speaker 4: of the 90s, where they had just VCR tapes that
24:16
Speaker 4: they were printing money with old IP from Snow White
24:21
Speaker 4: and other movies that they had put together now to
24:23
Speaker 4: competing in the streaming space where as much as they
24:26
Speaker 4: do have a collective hold over all the kids and
24:29
Speaker 4: the fact that they like the product so much, it's
24:32
Speaker 4: just a really tough business where you can be cut
24:35
Speaker 4: out very quickly. The amount of churn in the subscription
24:38
Speaker 4: streaming business for all these other competitors out there, it's
24:42
Speaker 4: a really tough business to be in.
24:44
Speaker 2: So we like to talk about bad economic ideas sometimes
24:48
Speaker 2: on the show. Again, they can be like anything from,
24:52
Speaker 2: we've talked about the potential for a diesel export ban
24:55
Speaker 2: and how it's not really a good economic idea. Like, yes,
24:57
Speaker 2: it might lower prices in the U.S. for a month
24:59
Speaker 2: or two, but it has all kinds of unintended or
25:03
Speaker 2: intended long-term and intermediate-term consequences that are quite honestly very,
25:07
Speaker 2: very not good. Here today, we have a new bad
25:12
Speaker 2: economic idea. Tucker, can we get some kind of theme
25:16
Speaker 2: song for this? Like the bad economic idea of the day?
25:19
Speaker 2: Not today now, Tucker, but just in the future. Something
25:24
Speaker 2: custom that gets worked up. It's today's bad economic idea
25:28
Speaker 2: of the day. Whatever it is. We can brand it better.
25:32
Speaker 2: You're smarter than I am on that stuff. So, Senator
25:35
Speaker 2: Jeff Merkley and Ron Wyden from Oregon are sponsoring... a
25:40
Speaker 2: bill that would allow for first-time homebuyers to get as
25:43
Speaker 2: much as $ 50, 000 for a down payment on a house. Wow,
25:49
Speaker 2: doesn't that sound great? Like a free $ 50, 000. Well, let
25:51
Speaker 2: me tell you, Paul, if I happen to be selling
25:55
Speaker 2: my house, this is, and here's how it would actually work,
25:59
Speaker 2: it would be for every dollar a person saves, the
26:02
Speaker 2: federal government would contribute five up to a total limit
26:04
Speaker 2: of $ 50, 000. So if you save $ 10, 000, you actually have
26:05
Speaker 2: a $ 60, 000 down payment. So here's why this is a
26:11
Speaker 2: dumb idea. Paul, if I knew that every new first-time
26:16
Speaker 2: homebuyer had an extra $ 50, 000 to spend, well, the home
26:20
Speaker 2: that I've listed for $ 300, 000, I'm now listing for $ 350, 000
26:25
Speaker 2: because there's a bunch more free money and no more
26:28
Speaker 2: housing that's being built.
26:30
Speaker 3: Right.
26:31
Speaker 2: Right.
26:33
Speaker 4: This is such an atrocious idea. There are so many
26:36
Speaker 4: flaws in it. I mean, first of all, you have
26:39
Speaker 4: that aspect of it where immediately the seller is just
26:41
Speaker 4: going to mark up prices. And then you have the
26:43
Speaker 4: prevailing issue that really looms as a drag on the
26:47
Speaker 4: whole U.S. housing market where there's just not enough inventory
26:50
Speaker 4: to even keep downside pricing pressure on those people listing
26:54
Speaker 4: their homes for sale. Second aspect of this is this
26:58
Speaker 4: does nothing to solve the root of the problem. Because
27:01
Speaker 4: if you do this now, first of all, let's forget
27:03
Speaker 4: how fiscally irresponsible it is to just give people $ 50, 000
27:07
Speaker 4: and all the issues that come with that. Second of all,
27:12
Speaker 4: what happens five years from now or 10 years from
27:15
Speaker 4: now when your kids want to buy a house or
27:18
Speaker 4: your cousin wants to buy a house? This is This
27:21
Speaker 4: would just create an ever-running tally of money just being
27:25
Speaker 4: given out. Just because you did this once would force
27:29
Speaker 4: you to do it in the future. It's just absolutely
27:32
Speaker 4: crazy to think of this idea and so fiscally irresponsible.
27:36
Speaker 4: You want to attack the supply side. No one ever
27:39
Speaker 4: comes up with ideas to fix that. Let's just give
27:41
Speaker 4: away money is not the way to do this.
27:44
Speaker 2: The there's also something in this piece that I had
27:46
Speaker 2: forgotten about. It says, quote, flashback, a first time buyer
27:49
Speaker 2: tax credit. Eight thousand dollars was one of the most
27:52
Speaker 2: popular things the federal government did in the wake of
27:54
Speaker 2: the financial crisis amid the amid the meltdown in housing.
27:58
Speaker 2: And I had forgotten about that, that that was something
28:00
Speaker 2: that was in place for I think was only two years,
28:02
Speaker 2: maybe I think was 2010 and 2011 or maybe 2011
28:03
Speaker 2: and 2012. But here's the thing. When you have a
28:10
Speaker 2: demand problem, meaning that home prices are falling and there's
28:14
Speaker 2: no one to buy houses, yes, if you want to
28:17
Speaker 2: stabilize the housing market, you induce demand through policy, and
28:20
Speaker 2: that's what a tax credit did there.
28:23
Speaker 4: We have the reverse problem.
28:25
Speaker 2: If the problem you have now is that there's too
28:27
Speaker 2: much money chasing too few houses, which make no mistake,
28:30
Speaker 2: that's why home prices are high, is because there is
28:33
Speaker 2: too much money chasing too few houses... You don't say...
28:37
Speaker 2: Let's throw more money at it. Hey, the solution is
28:39
Speaker 2: more money. Where else have we seen this? Let me
28:42
Speaker 2: introduce you to college. You know why the cost of
28:45
Speaker 2: college is, you know, continuing to go up and up
28:47
Speaker 2: and up? Oh, because, hey, there's no incentive for college
28:50
Speaker 2: costs to come down because every time they raise prices, okay,
28:52
Speaker 2: the size of the available subsidized student loan package goes
28:56
Speaker 2: up for the next year, and you just throw more
28:58
Speaker 2: money at the problem without any accountability or building any
29:01
Speaker 2: additional supply.
29:02
Speaker 1: So.
29:05
Speaker 2: We're not really solving anything here. This is bad policy.
29:08
Speaker 2: It makes no sense. And we call everyone out equally
29:13
Speaker 2: for policies that try to violate the laws of economics
29:17
Speaker 2: by saying that they're smarter than them. This does not
29:21
Speaker 2: make sense. It's no different from trying to set the
29:23
Speaker 2: prices for groceries, for gas, for homes, for whatever, for cars. Guys,
29:29
Speaker 2: you've got to let the market do its work. If
29:31
Speaker 2: you break the market through bad policy like this... You
29:34
Speaker 2: break it, you buy it, you own it, but it's
29:37
Speaker 2: it's increasingly feeling like our answers to this stuff is
29:41
Speaker 2: just well we got to give people more money or
29:43
Speaker 2: we got a mandate that the price for this comes
29:45
Speaker 2: down guys don't be surprised when it like the the
29:48
Speaker 2: whole thing just breaks then like it's kind of how
29:51
Speaker 2: we ended up where we are let's take a quick
29:53
Speaker 2: break when we come back let's do a little bit
29:55
Speaker 2: of stack.
29:56
Speaker 1: Roulette Smart financial talk whenever you want. Find the Financial
30:01
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30:04
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30:11
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30:32
Speaker 2: Paul, what do you got for me for Stack Roulette?
30:35
Speaker 4: Let's talk about your favorite subject, drones in the sky,
30:38
Speaker 4: and Amazon. This is something that is going on quite
30:43
Speaker 4: heavily in terms of flight volume in Richardson, Texas, just
30:46
Speaker 4: north of Dallas, where there is a piece here from
30:50
Speaker 4: the New York Times where there is a Amazon fulfillment center,
30:55
Speaker 4: distribution center, about a mile away from this backyard pool
30:59
Speaker 4: that is being referenced in this piece in the New
31:01
Speaker 4: York Times, where Drones are consistently buzzing from basically 7 a.m. to,
31:06
Speaker 4: I believe, around 6 p.m. in terms of traffic volume
31:11
Speaker 4: to deliver packages in a seven-mile radius. The drone is
31:14
Speaker 4: about 83 pounds. It can carry packages up to about
31:17
Speaker 4: five pounds. And the residents are not happy about the
31:23
Speaker 4: volume of drones flying around in their neighborhood. They... claim
31:28
Speaker 4: Amazon does that just one of these drones is equivalent to,
31:31
Speaker 4: from a sound perspective, a fan. But the problem here
31:35
Speaker 4: is that there are numerous drones constantly being launched from
31:38
Speaker 4: this distribution center, making it so that in Richardson, Texas,
31:42
Speaker 4: these residents claim that even if they're watching their TV inside,
31:45
Speaker 4: that they can still hear the drone activity. So while
31:49
Speaker 4: many people may think it is cool to have the
31:52
Speaker 4: package dropped off on your front log from a A drone,
31:54
Speaker 4: you've got some folks here in Richmond, Texas that are
31:58
Speaker 4: not thrilled with the amount of volume that they're seeing
32:01
Speaker 4: coming out of these distribution centers. It seems like this
32:03
Speaker 4: has been talked about for years. Amazon wants to expand,
32:06
Speaker 4: I believe, to another 500 cities and towns throughout the country.
32:10
Speaker 4: I definitely know my co-host's view on this subject. So
32:14
Speaker 4: I think part of the reason I bring it up
32:16
Speaker 4: is to hear him tee off on it. So without
32:19
Speaker 4: further ado, Chuck, your thoughts?
32:22
Speaker 2: I think this is awesome. Oh!
32:24
Speaker 4: Hey!
32:24
Speaker 2: This is just great. Okay. I just, I don't know
32:31
Speaker 2: why we allow this, if I'm being honest. I don't
32:35
Speaker 2: know why we allow it. It's the only person that
32:39
Speaker 2: this benefits is Jeff Bezos. Maybe not the only person, but,
32:44
Speaker 2: you know, that ecosystem. And it absolutely ruins quality of
32:48
Speaker 2: life for a whole bunch of people that weren't expecting
32:50
Speaker 2: to have drones flying over their house all the time.
32:53
Speaker 2: And by the way, it's not like this is not
32:56
Speaker 2: like an airport where it's OK, there's a runway and
33:02
Speaker 2: the flight line is in that direction. And OK, here's,
33:05
Speaker 2: you know, where you need to be paying attention. No,
33:09
Speaker 2: it goes in every direction because there's homes in every direction.
33:12
Speaker 2: And so I just don't understand why we think that
33:16
Speaker 2: this is. a a good thing that we're so needing
33:22
Speaker 2: to get the neck the thing that we ordered so
33:25
Speaker 2: quickly that we just want all these drones buzzing over
33:28
Speaker 2: our heads all day like it's bad enough that we
33:31
Speaker 2: already have you know plenty of traffic like on streets
33:34
Speaker 2: and everything but now it's oh like it's it's gonna
33:36
Speaker 2: save amazon like three cents on delivery in order to
33:39
Speaker 2: put the package in the air and so sure let's
33:42
Speaker 2: just let him you know be flying drones all over
33:44
Speaker 2: the place that's that's great and remember This is just
33:47
Speaker 2: basically Amazon doing this now. Once everyone starts doing it everywhere,
33:52
Speaker 2: then it's just going to get only more crowded. And
33:55
Speaker 2: I just don't know why we think that this is
33:57
Speaker 2: a good thing. And I'm just kind of sick of it,
34:03
Speaker 2: to be honest. It's just enough is enough on this stuff.
34:08
Speaker 2: And I think people are just sick of tech companies
34:10
Speaker 2: doing basically anything that they want anywhere. And I wouldn't
34:14
Speaker 2: be surprised if this gets similar pushback to what we're
34:16
Speaker 2: seeing on the data center side of things, because I
34:18
Speaker 2: think the fundamental problem in both of them is that
34:20
Speaker 2: we don't trust tech companies. We don't really like them.
34:23
Speaker 2: And so, yeah, I'd prefer that this is not something
34:27
Speaker 2: that becomes a thing. I suspect it will become a thing,
34:30
Speaker 2: and I'll be the old guy yelling at the drone
34:31
Speaker 2: in the cloud, but... hey, if that's my role in life,
34:34
Speaker 2: then that's my role in life. That's fine.
34:36
Speaker 4: Yeah. This one on the data center front, I continue
34:40
Speaker 4: to try to dive into that issue more to better
34:42
Speaker 4: understand it because I think that there's a lot of
34:44
Speaker 4: misinformation or conflicting information out there in terms of what
34:48
Speaker 4: the impact to surrounding areas are in form of utility costs.
34:51
Speaker 4: They've evolved over time in terms of who's willing to
34:54
Speaker 4: shoulder the burden of the increased cost. This one is
34:57
Speaker 4: more black and white in that Ultimately, what's the benefit
35:00
Speaker 4: that people would argue or Amazon would argue to consumers?
35:03
Speaker 4: Faster delivery of their goods. On the con side, we
35:06
Speaker 4: know very clearly what it is. You just outlined it there.
35:09
Speaker 4: It's just more air traffic coming through your quiet neighborhood. Ultimately,
35:14
Speaker 4: you're right. I think that convenience is going to win
35:17
Speaker 4: out and that this probably becomes a little more prevalent. Hopefully,
35:21
Speaker 4: it doesn't get out of control, but we will just
35:24
Speaker 4: have to keep our eyes on the sky.
35:26
Speaker 2: Yeah, look, it is what it is. I don't really
35:30
Speaker 2: like it.
35:32
Speaker 4: I loved how in the piece, one of the residents
35:36
Speaker 4: asked Amazon to slow down the amount of volume of
35:39
Speaker 4: packages leaving from the distribution center. Like, oh yeah, that's
35:42
Speaker 4: going to stop them. Have you followed their history at
35:44
Speaker 4: all for the last 20 years? They aren't stopping for you.
35:47
Speaker 2: Totally going to work.
35:49
Speaker 1: Totally.
35:51
Speaker 2: Again, I feel like I'm just yelling into the void
35:55
Speaker 2: on this and you know it's it's going to be
35:57
Speaker 2: what it's going to be uh let's see i want
36:00
Speaker 2: to talk about uh oh did you see the news
36:03
Speaker 2: was it yesterday or the day before uh we have
36:07
Speaker 2: a calci story in here yes here we go it
36:10
Speaker 2: was uh yesterday did you see the calci asked the
36:13
Speaker 2: uh cftc to approve margin trades yes prediction markets i
36:15
Speaker 2: did see that We think this is a good idea, huh?
36:18
Speaker 4: They are just going into everything that involves risk. I
36:22
Speaker 4: just shook my head when I saw it come over
36:24
Speaker 4: the headlines on the TV. They are just trying to
36:28
Speaker 4: do everything as risky as possible. They are literally, whether
36:32
Speaker 4: it's prediction markets, they're just all about everything risk. I
36:36
Speaker 4: just don't know how this doesn't blow up in their
36:38
Speaker 4: face or the regulatory bodies have to step in here
36:41
Speaker 4: and slow these guys roll down because it's insane.
36:44
Speaker 2: Again, we're going to look back. When we get out
36:47
Speaker 2: to like 2040, we're going to look back on this
36:51
Speaker 2: period and just be like, how did we let this happen?
36:56
Speaker 4: Yeah, the regulation pendulum has probably swung too far to
37:00
Speaker 4: the being too easy side of things.
37:03
Speaker 2: I mean, like, I can go on to Kalsi right now.
37:06
Speaker 2: And again, forget about, like, again, like, if you want
37:10
Speaker 2: to look at something dumb, you can. Like, what does
37:14
Speaker 2: this bet even mean? Where will it rain today? Ask
37:18
Speaker 2: me this weekend. What the hell do I do with that?
37:21
Speaker 2: Where will it rain today? Columbus, Denver, Lexington, or Austin?
37:27
Speaker 2: Highest temperature in New York City. You have a range of, like,
37:31
Speaker 2: so you can bet on 64 below, 65 to 66. Like,
37:37
Speaker 2: what are you going to get with that? Didn't we
37:39
Speaker 2: have the case where there was one, I forget where
37:42
Speaker 2: it was, but the guy who figured out that the
37:46
Speaker 2: temperature reading that Kalshi used or that Polymark used was
37:49
Speaker 2: by the airport and he used, like, a hairdryer to
37:51
Speaker 2: warm it up? Yeah.
37:52
Speaker 4: It's like the old trick to get out of school
37:54
Speaker 4: in the morning.
37:54
Speaker 2: Yeah, just put the thermometer into the light bulb, man.
37:57
Speaker 2: But I don't understand how we think that betting on
38:01
Speaker 2: the highest temperature in New York City with borrowed money
38:05
Speaker 2: is a good thing. Or, hey, betting on who gets
38:12
Speaker 2: eliminated on this episode of Big Brother using borrowed money,
38:16
Speaker 2: that's going to be useful to society? I think there's
38:20
Speaker 2: a reckoning coming on this. Let's take a quick break
38:23
Speaker 2: for the rest of the day. We're back tomorrow with more.