Latest / The Financial Exchange Show / AI Momentum Builds, Earnings Kick Off, and Why Markets Keep Climbing

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AI Momentum Builds, Earnings Kick Off, and Why Markets Keep Climbing · The Financial Exchange Show

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Speaker 1: Zada and Mike Armstrong.
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Speaker 2: Good morning, Happy Thursday, and welcome back to the Financial Exchange.
1:14
Speaker 2: I'm a little amped today for the program. I feel
1:18
Speaker 2: as though this is the first day that war in
1:20
Speaker 2: Iran is not the leading story. We've got a lot
1:23
Speaker 2: of breaking stuff to go through. It is the middle
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Speaker 2: of earning season, just the kick, not the middle rad
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Speaker 2: the beginning of earning season.
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Speaker 3: Here.
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Speaker 2: Bank earnings have largely come through. We have the largest
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Speaker 2: and really only important semiconductor manufacturer that reported earnings this morning,
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Speaker 2: so a little bit to say about the AI industry.
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Speaker 2: Netflix will go this afternoon. Pepsi Abbott Labs Charles schwab
1:44
Speaker 2: All reported this morning before the bell, we got weekly
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Speaker 2: jobless claims. We've got rumors of a major airline liquidation,
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Speaker 2: and probably my favorite story of the day, a blast
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Speaker 2: from the past foot where company bravely jumping into a
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Speaker 2: new business line. So let's kick things right off here
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Speaker 2: with the weekly jobless claims that were released this morning
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Speaker 2: at eight thirty. Didn't find much here to be concerned
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Speaker 2: about the advanced number of actual initial claims under the
2:16
Speaker 2: state program. So again, this is a weekly report that
2:19
Speaker 2: we get every state tallies up all of their initial
2:22
Speaker 2: claims for unemployment and they report them to the Bureau
2:25
Speaker 2: of Labor Statistics, who then puts them all together and
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Speaker 2: reports them out. We saw two hundred and thirteen thouy
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Speaker 2: eight seventy three for the week last weekending April eleventh.
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Speaker 2: That's an increase of about twelve thousand from the previous
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Speaker 2: week and not, in my mind, not rising enough to
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Speaker 2: the level that we need to be immensely concerned about
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Speaker 2: here and so, by and large, there are plenty of
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Speaker 2: concerns out there to be had about oil prices, about
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Speaker 2: you know, layoff announcements here and there. But the reality
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Speaker 2: is we continue to get data point after data point
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Speaker 2: indicating that not only is the labor market type because
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Speaker 2: of a general lack of supply, but that in the aggregate,
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Speaker 2: concerns over layoffs are probably overdone and we are not
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Speaker 2: seeing much in the way of concerning levels of unemployment.
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Speaker 2: So that's the main take there, and I don't think,
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Speaker 2: I don't think much more.
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Speaker 3: To add on that.
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Speaker 2: We will have obviously more data points coming out about
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Speaker 2: the labor market. We've got some FED talk as well
3:33
Speaker 2: as the Senate confirmation hearing for Kevin Walsh is going
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Speaker 2: to be taking place pretty soon, and so there will
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Speaker 2: be more talk about this because Kevin worsh has been
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Speaker 2: very vocal, at least when he was looking for the job,
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Speaker 2: of wanting lower interest rates once he gets into that role,
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Speaker 2: and citing concerns about the labor market. It's now been
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Speaker 2: several months since he's had to speak on the subject.
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Speaker 2: You've heard absolutely nothing from him since the oil price
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Speaker 2: shock of early March, and so hearing you know, some
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Speaker 2: back and forth on there. The majority of the questions
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Speaker 2: are and probably should be about fed and dependence that
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Speaker 2: he will be hearing. But there are some interesting questions
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Speaker 2: to ask about. Hey, your you know, your perspective at
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Speaker 2: the second half of last year was that rates need
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Speaker 2: to be dramatically lower. Can you still justify that opinion
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Speaker 2: as we head into the second quarter of twenty twenty six.
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Speaker 2: So initial jobless claims nothing to be worried about there.
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Speaker 3: The S and P.
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Speaker 2: Five hundred continues to this not this morning, but over
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Speaker 2: this week surge higher. We crossed that seven thousand threshold
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Speaker 2: earlier this week and on Tucker, was it Friday or
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Speaker 2: Monday that we surpassed the February twenty seventh high before
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Speaker 2: the on war, I thought it was yesterday, was the
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Speaker 2: all time high. All time high might have been yesterday,
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Speaker 2: but yet the surpassing the pre war level on the
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Speaker 2: S and P five hundred was some time before then.
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Speaker 2: But yeah, we are sitting very close now to all
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Speaker 2: time highs. And this is fascinating to me for a
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Speaker 2: few different reasons. One, you clearly have investors looking past
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Speaker 2: the events in Iran, the oil price shock and everything
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Speaker 2: else and focusing on what they believe to be good
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Speaker 2: news regarding the state of the American economy, the state
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Speaker 2: of the AI trade, and other.
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Speaker 3: But you know, we now have made.
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Speaker 2: Up and then some the losses in markets from the
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Speaker 2: oil price shock and seem to be just competing higher
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Speaker 2: as investors digest earnings. Chuck anything to add on just
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Speaker 2: state of markets. As we sit here in the middle
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Speaker 2: of April, they're high.
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Speaker 3: How do you measure that? What do you mean by
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Speaker 3: their high?
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Speaker 2: Because you know, honestly, they are, you know, at pretty
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Speaker 2: high levels. They also haven't really gone much of anywhere
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Speaker 2: since you know, October November of last year. In the aggreate,
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Speaker 2: I think they're probably up a couple percentage points from
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Speaker 2: that point in time.
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Speaker 4: Well, I think the interesting way to look at it
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Speaker 4: and the interesting way to frame it is look for
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Speaker 4: basically the six months of you know, early October through
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Speaker 4: late March early April, you basically saw a lot of
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Speaker 4: the stocks that have been driving things in the post
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Speaker 4: liberation day pere in the AI trade, they couldn't get
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Speaker 4: out of their own way. They were trying to figure out,
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Speaker 4: you know, where to go. And we've talked about this
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Speaker 4: before where when market leadership faltered and tried to you know,
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Speaker 4: broaden out to new companies, it hasn't worked very well
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Speaker 4: the last few years. This was another example of that.
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Speaker 4: The run that you've seen for the last two weeks. Now,
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Speaker 4: like you take a look at it, the S Andp's
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Speaker 4: rallied about ten percent, maybe eleven percent from it's low
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Speaker 4: at the end of March. If you take a look
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Speaker 4: at where Tech has gone over that time, Tech has
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Speaker 4: rallied about twenty percent. So it's that that former leadership
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Speaker 4: is now kind of picking up the mantle. And so
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Speaker 4: the question is is very much going to be Hey,
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Speaker 4: is that something where there's another leg to this where
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Speaker 4: it can continue to move, or is it going to
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Speaker 4: be something where you know, this runs out of steam
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Speaker 4: because there's just not enough juice there still. So I
7:18
Speaker 4: think if you're looking at this from the context of, hey,
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Speaker 4: you know, what does this mean for the broader market. Look,
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Speaker 4: markets can run on narrow participation. But there have been
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Speaker 4: questions about that AI trade for the last six months.
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Speaker 4: I'm not sure they've like been definitively answered. In the
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Speaker 4: last couple of weeks, I'm not sure anything's been answered there.
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Speaker 4: But in theory, you know, you've got a situation where
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Speaker 4: you've got some potential now for this market to move
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Speaker 4: based on that. And the other thing that is interesting,
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Speaker 4: Remember I talked about this yesterday, Because you've gone six
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Speaker 4: months with these stocks basically treading water. They're earnings for
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Speaker 4: the next twelve months have moved up for two reasons.
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Speaker 4: The first is that next twelve months is now six
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Speaker 4: months further ahead, and so if earnings growth is you know,
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Speaker 4: projected over any you know, just sequential quarterly periods, you
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Speaker 4: now have higher earnings projected than you did six months ago.
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Speaker 4: For the S and P just broadly, you've gone from
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Speaker 4: next twelve months earnings projections from about three hundred and
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Speaker 4: five dollars to about three thirty nine. This according to
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Speaker 4: your Denni research. So even though stocks are at the
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Speaker 4: same place they were at six months ago, the multiple
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Speaker 4: on the S and P five hundred has gone from
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Speaker 4: twenty two x down to around twenty point five x,
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Speaker 4: So stocks have gotten cheaper in relative terms through higher
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Speaker 4: projected future earnings. So this is what Mark Fandetti and
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Speaker 4: I were kind of talking about yesterday, which is if
8:47
Speaker 4: you believe there's a lot of ifs, but like this
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Speaker 4: is the path to stocks continuing to go up. If
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Speaker 4: you believe that there is going to be improvement in
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Speaker 4: the strait of horror moves in the next fourteen into
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Speaker 4: twenty one days, and if you believe that last year's
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Speaker 4: multiple of twenty two x on the index is an
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Speaker 4: appropriate multiple in today's market conditions, then you've got another
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Speaker 4: seven to eight percent upside in the S and P
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Speaker 4: five hundred from that. Sure, the downside risk is if
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Speaker 4: the straight upform moves does not show meaningful improvement, and
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Speaker 4: as a result of that plus other factors, if that
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Speaker 4: twenty two x multiple is too high and projected earnings
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Speaker 4: are too high because of that, then you've got some
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Speaker 4: significant downside that still needs to be repriced. But like
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Speaker 4: this is kind of always the case with markets, it's
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Speaker 4: just a more acute, like easily point doubtable situation that
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Speaker 4: we have now. And so I think those are your
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Speaker 4: two cases that you have for this market right now.
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Speaker 4: Which is number one, you can return to last year's
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Speaker 4: multiples and the straight clears and you've got a path
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Speaker 4: into mid seven thousands on the S and P five hundred.
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Speaker 4: If not, then you've got some downside that markets are
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Speaker 4: going to need to sort out based on supply disruptions
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Speaker 4: leading to production disruptions leading to earnings disruptions.
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Speaker 2: Yeah, there are multiple pass ended. As we've said from
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Speaker 2: the beginning, with the events in a run. I guess
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Speaker 2: what we've been saying from the beginning is that what
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Speaker 2: matters is the flow.
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Speaker 3: Of traffic through the straight ofform moves.
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Speaker 2: But being such a binary set of events controlled by
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Speaker 2: such a limited group of people, it is particularly difficult
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Speaker 2: to put a value on just where things go from here.
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Speaker 4: It is, and I think ultimately it's going to be
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Speaker 4: one where the market right now is pricing in yep.
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Speaker 4: This is going to get sorted out. And even though
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Speaker 4: there's this air pocket and energy markets, Okay, that air
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Speaker 4: pocket will be there for a couple months and then
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Speaker 4: there won't be any lasting repercussions. That's what the market's
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Speaker 4: pricing in now. And as I said yesterday, look, the
10:55
Speaker 4: great thing about markets, if you disagree with that, you
10:59
Speaker 4: can go and put you can go and put your
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Speaker 4: money where your mouth is. If you agree with it,
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Speaker 4: you can do that too. So it's not to say
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Speaker 4: one is right or wrong. I mean eventually one will
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Speaker 4: be proven wrong. Like those two views will not exist
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Speaker 4: at the same time. Like you're there, there is no
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Speaker 4: path for hormones to remain closed for six months and
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Speaker 4: have no disruption to S and P five hundred earnings.
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Speaker 3: Agreed, that's not possible.
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Speaker 4: Uh, there is a path where if things resolve, you know,
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Speaker 4: in the next few weeks. Yeah, especially with so much
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Speaker 4: of S and P five hundred earnings being driven by technology. Now, yeah,
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Speaker 4: like you you can get there. But it's also okay,
11:38
Speaker 4: is that AI trade going to be disrupted? Will the
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Speaker 4: questions that it's been facing for the last you know,
11:44
Speaker 4: six months return? Those are you know, other variables out there,
11:48
Speaker 4: but they're all secondary right now to how how long
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Speaker 4: does hormone stay closed? Because right now you're at the
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Speaker 4: point the best case scenario we've now gotten to, there's
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Speaker 4: gonna be somewhere around a billion to a billion point
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Speaker 4: two barrels of production that ends up offline because of this,
12:05
Speaker 4: and it's being felt now. I mean, like I'll put
12:09
Speaker 4: it this way. The Australian I forget who it was,
12:12
Speaker 4: but a senior Australian politician just announced that they had
12:16
Speaker 4: secured ten million leaders of diesel. To put it in perspective,
12:21
Speaker 4: that's basically one day of Australia's diesel usage. When they're
12:25
Speaker 4: making announcements like that, it tells you that things are
12:28
Speaker 4: getting tight in other parts of the world. It's not
12:30
Speaker 4: tight here right now, I understand that, but there are
12:33
Speaker 4: other parts of the world that are starting to get
12:35
Speaker 4: a little bit tight, and that's going to become more
12:38
Speaker 4: apparent over the next several weeks.
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Speaker 3: As we go here, let's take a quick break.
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Speaker 2: When we come back, continue discussion on earnings, in particular
12:47
Speaker 2: TSMC Taiwan Semi reporting earnings and giving a quite bullish
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Speaker 2: outlook on the AI industry.
12:53
Speaker 3: That's next on the financial exchange.
12:55
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13:43
Speaker 3: Chuck.
13:43
Speaker 2: One of the largest companies in the world and arguably
13:47
Speaker 2: most strategically important to the AI buildout industry, Taiwan Semi
13:51
Speaker 2: reported earnings this morning, and I'm trying to think of,
13:54
Speaker 2: like where you place their earnings in terms of order
13:59
Speaker 2: of important for the direction of the A industry.
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Speaker 3: I can't.
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Speaker 2: I can't imagine that would consider them a leading indicator
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Speaker 2: of anything. But without their successful production, you have no
14:10
Speaker 2: data center build out, so obviously a critical component of everything.
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Speaker 3: What did we hear from them? That was a note
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Speaker 3: to you?
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Speaker 4: Well, I think that when you look at it again,
14:20
Speaker 4: earnings were really good. They guided towards the high end
14:24
Speaker 4: of you know, their guidance going forward. Their gross profit
14:28
Speaker 4: margin was the highest level in twenty years. So basically,
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Speaker 4: like what they're telling you is, hey, we're getting these
14:35
Speaker 4: crazy levels of orders still and a lot of it
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Speaker 4: is driven by ai AI you know demand. Sure, as
14:42
Speaker 4: an example, their smartphone business was down eleven percent year
14:46
Speaker 4: a sequentially quarter over quarter actually, and so it's something
14:50
Speaker 4: where they're telling you, yes, these orders are still coming in. Ultimately,
14:55
Speaker 4: I think there are two levels removed from where you
14:57
Speaker 4: would see the question show up in that it's going
15:01
Speaker 4: to be okay, big hyper scalers, your Microsoft or Amazons
15:06
Speaker 4: or Googles of the world. They say that they're going
15:09
Speaker 4: to cut back on spending, and Video says we're going
15:12
Speaker 4: to cut back on orders, and Taiwan Semi, you know,
15:15
Speaker 4: cuts back on production. That's where like it would actually flow.
15:20
Speaker 4: So I don't think you're going to get anything early there.
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Speaker 4: But what it is telling you, and this is not
15:26
Speaker 4: surprising based on all of the kapex guides for this year,
15:29
Speaker 4: is yeah, there's still selling as many chips as they can.
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Speaker 4: They still have plenty of demand and there's no change there.
15:35
Speaker 4: But I don't think any of us were expecting there
15:36
Speaker 4: to be a change, you know, Q one of this year,
15:40
Speaker 4: based on you know what we've heard from the ai companies.
15:44
Speaker 2: The obvious question they were asked during earnings was about
15:48
Speaker 2: the straight up Hormuz and supply of all sorts of
15:52
Speaker 2: different raw materials. They made the point of calling out
15:55
Speaker 2: that they, you know, have a diverse procurement channel for
15:59
Speaker 2: helium and hydrogen and nat gas in order to continue
16:05
Speaker 2: production regardless of the situation in the Strait. But what
16:09
Speaker 2: seemed to be acknowledged but uncomfortable subject was just electricity
16:16
Speaker 2: on the island of Taiwan, and you know how much
16:19
Speaker 2: gnat gas supply the government actually has, and what would happen?
16:24
Speaker 2: How I guess the question would be how long can
16:27
Speaker 2: Taiwan continue to operate given the closure of the Strait
16:31
Speaker 2: of Horne moves. I'd willing, I'd be willing to guess
16:34
Speaker 2: that very few importers would be willing to pay more
16:37
Speaker 2: for energy supplies, and so from that perspective, they might
16:40
Speaker 2: be able to lock in something some from somewhere, But
16:44
Speaker 2: they're not China. They do not have six months worth
16:46
Speaker 2: of energy reserves sitting in a strategic petroleum reserve somewhere.
16:52
Speaker 4: No, and this this is why again, if if you
16:56
Speaker 4: look at the market, why it's kind of doing what
16:58
Speaker 4: it's doing. It's basically saying, look is as long as
17:00
Speaker 4: you can, you know, get the straight of horror moves
17:03
Speaker 4: reopened shortly, We're willing to look past any kind of
17:08
Speaker 4: short term blips that are there as you know, dangerous
17:11
Speaker 4: as that can be. But over a longer time horizon
17:14
Speaker 4: it becomes more and more challenging when you're talking about
17:18
Speaker 4: again just like the overall scale of energy disruption that
17:22
Speaker 4: you have. I mean to again just to put it
17:25
Speaker 4: in perspective what we're looking at here, just from a
17:29
Speaker 4: production standpoint. So remember it's been We're gonna be seven
17:33
Speaker 4: weeks this this Friday, right, h So yeah, So here's
17:39
Speaker 4: here's how the math works if you are looking at
17:43
Speaker 4: this from the perspective of like yearly annual energy supply,
17:48
Speaker 4: because I think this is an interesting way to look
17:49
Speaker 4: at it. Every two weeks we lose about five hundred
17:55
Speaker 4: and seventy five thousand barrels a day from full year
17:58
Speaker 4: energy production of around one hundred million. Ye so over
18:03
Speaker 4: an eight week period. If you if you get there,
18:06
Speaker 4: you're talking somewhere in the ballpark of around two point
18:09
Speaker 4: four million barrels a day reduction just from that. You're saying,
18:13
Speaker 4: even if everything gets back to normal immediately after, you've
18:16
Speaker 4: already reduced production by two percent for the year, no
18:19
Speaker 4: matter what. And so this is why, like every week
18:23
Speaker 4: this goes on like it's it's just backbuilding towards bigger problems.
18:26
Speaker 4: And again they're showing up sporadically on the edges right now,
18:31
Speaker 4: but places like Taiwan are very much going to have
18:34
Speaker 4: questions about, hey, how do we get you know, the
18:37
Speaker 4: fuel for electricity and for you know, normal you know,
18:40
Speaker 4: shipping and transportation operations. The longer this goes, it's it's
18:45
Speaker 4: going to become a problem. At some point. I suspect,
18:49
Speaker 4: not even does time on Semiconductor, that I have the
18:52
Speaker 4: money and the wherewithal to figure this out. I do
18:55
Speaker 4: suspect that the Taiwanese government knows where it's bread is
18:58
Speaker 4: buttered also, and when basically they say, look, in the
19:01
Speaker 4: absence of the amount of fuel that we need, we're
19:04
Speaker 4: going to try to curtail all other output on the
19:07
Speaker 4: island before we say Taiwan semi can't run at full
19:10
Speaker 4: speed because if that goes, that's such a huge portion
19:13
Speaker 4: of the economy that it would create problems.
19:15
Speaker 2: Not to mention, you know, anyone, even quasi allied to Taiwan,
19:20
Speaker 2: has a vested interest in making sure that the country
19:24
Speaker 2: can continue to operate. We've got to take quick break
19:26
Speaker 2: full market update when we return with Wall Street Watch.
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19:51
Speaker 3: Time out full Wall.
19:52
Speaker 1: Street Watch tracking the stocks, the dato and the headlines
19:56
Speaker 1: driving markets so far today right here on the Financial
19:59
Speaker 1: Exchange Rate Network.
20:00
Speaker 5: One day after both the SMP five hundred and Nasdaq
20:04
Speaker 5: notched all time highs, propelled by the tech sector, Marcus
20:07
Speaker 5: today are dipping into negative territory right now, the Dow
20:11
Speaker 5: is down two tenths of a percent or one hundred
20:13
Speaker 5: and six points, SMP five hundred down only six points,
20:17
Speaker 5: NASDAK down nearly two tenths of a percent, Russell two
20:20
Speaker 5: thousand down over a quarter of a percent. Tenure Treasure
20:23
Speaker 5: wheeled up one basis point at four point two to
20:26
Speaker 5: eighty nine percent. In oil up two and a half
20:29
Speaker 5: percent trading and ninety three dollars a barrel chairs in
20:32
Speaker 5: Taiwan Semiconductor down over two percent, despite the chip maker
20:36
Speaker 5: reporting better than expected first quarter earnings in revenue. The
20:39
Speaker 5: company also raised its revenue outlook for the year due
20:42
Speaker 5: to strong demand for AI chips. Meanwhile, several media outlets
20:46
Speaker 5: reporting that Spirit Airlines could liquidate as early as this week,
20:49
Speaker 5: as the budget carrier has been attempting to climb out
20:52
Speaker 5: of bankruptcy but has been impacted by rising fuel costs elsewhere.
20:56
Speaker 5: Beverage and snack giant Pepsi reported solid first quarter to
21:00
Speaker 5: profit and revenue after the company cut prices by as
21:03
Speaker 5: much as fifteen percent on its signature snacks earlier this
21:07
Speaker 5: year in a bid to lure cost conscious consumers. Pepsi
21:11
Speaker 5: stock is up nearly three percent. Avid Laboratories cut it's
21:15
Speaker 5: full year earnings outlook, sending shares down by four percent.
21:18
Speaker 5: Fandual parent company Flutter Entertainment downgraded by City sending shares
21:23
Speaker 5: in the online gambling platform down by three percent, and
21:27
Speaker 5: after today's closing bell, Netflix will post their first quarter results.
21:33
Speaker 5: I'm Tucker Silvan.
21:34
Speaker 4: That is Wall Street Watch Mike's talking a little bit
21:38
Speaker 4: about a story that broke yesterday. All Birds, the shoe
21:41
Speaker 4: company that wanted to be more than a shoe company,
21:45
Speaker 4: originally announced, Hey, we are going to be more than
21:48
Speaker 4: a shoe company because we're selling off our shoes business
21:52
Speaker 4: and we're raising fifty million dollars to get into renting
21:56
Speaker 4: out AI computer chip.
22:00
Speaker 2: If fifty million dollars seems impressive to you, it's impressive
22:04
Speaker 2: to me too. But I would ask you to keep
22:05
Speaker 2: in mind that at one point this company was valued
22:08
Speaker 2: at some four billion with a B dollars. So if
22:13
Speaker 2: you're not familiar with All Birds, they were the slip
22:16
Speaker 2: on woven sneaker company that every tech bro in San
22:19
Speaker 2: Francisco needed to own during the twenty tens. Few missteps
22:25
Speaker 2: here and there, they really failed to broaden out by
22:28
Speaker 2: any by any general range.
22:30
Speaker 3: They didn't sell via Amazon.
22:32
Speaker 2: I'm trying to remember, like what other mistakes they made
22:35
Speaker 2: that you know, really led them to this to this point.
22:40
Speaker 2: But boy, it's tough to look at the story and
22:45
Speaker 2: think about it in a way that doesn't indicate some
22:47
Speaker 2: sort of concerning top For ah.
22:50
Speaker 4: Well, I don't think it's necessarily a concerning top because again,
22:54
Speaker 4: like you see this like along the way, but it
22:56
Speaker 4: is it is a sign that like there's a frenzy there. Yeah,
22:59
Speaker 4: that is going to result in a lot of capital
23:01
Speaker 4: being destroyed because as I said yesterday, like what does
23:06
Speaker 4: all Birds do better at renting out data centers than
23:12
Speaker 4: anyone else who's bigger and already in that space? Like
23:15
Speaker 4: what why are you going to go to all Birds
23:17
Speaker 4: over four week or nebious or oracle? Like what what's
23:22
Speaker 4: the thing that all Birds is going to give you
23:24
Speaker 4: aside from a pair of shoes?
23:27
Speaker 2: Yeah, so I'm sure your mind went to the exact
23:30
Speaker 2: same place as mine did. But let's let's can you
23:33
Speaker 2: fire up the time machine, Tucker?
23:35
Speaker 3: Is that not that? Do today? Not today? All right?
23:40
Speaker 2: So there you go, height of the crypto craze.
23:47
Speaker 4: Uh.
23:47
Speaker 3: There was a alcohol.
23:50
Speaker 2: Company called Long Island Iced Tea, if you recall, and
23:55
Speaker 2: what did they decide to do, Chuck, to pivot their
23:57
Speaker 2: business model to become more in vogue.
24:00
Speaker 4: They changed their name to Long Island Blockchain. Yes, and
24:04
Speaker 4: you know they were going to produce the freshest, most
24:08
Speaker 4: drunkiest bitcoin they could.
24:12
Speaker 2: As far as I recall, it didn't really go much
24:14
Speaker 2: of anywhere, and I suspect that that will be the
24:18
Speaker 2: result of this move too. And you're right, this doesn't.
24:23
Speaker 2: This doesn't speak to the top of anything. But when
24:27
Speaker 2: you have a shoe company telling you that they have
24:30
Speaker 2: the expertise to pivot into artificial intelligence, buying GPUs and
24:35
Speaker 2: then renting them out on the cloud, if it doesn't
24:38
Speaker 2: cause you to pause, scratch your head and wonder what
24:41
Speaker 2: we are talking about, then there's something there's something going
24:46
Speaker 2: on in your head that just doesn't add up. This
24:49
Speaker 2: does not, as Chuck mentioned, a shoe manufacturer does not
24:56
Speaker 2: have any pre existing expertise in data centers of any sort,
25:01
Speaker 2: and so this just does not click to me. No
25:04
Speaker 2: strategic advantage in the space, and with a fifty million
25:08
Speaker 2: dollar head start, does not even really put you in
25:10
Speaker 2: a place where you can have a splash in the industry.
25:15
Speaker 4: No, I don't know who. I just don't know who's
25:19
Speaker 4: gonna call these guys. First of all, even before that,
25:23
Speaker 4: we know that all of these chips are like back ordered,
25:26
Speaker 4: Like you can't just like go to Nvidio and be like, hey,
25:29
Speaker 4: you got an these fair you know, Blackwells lying around
25:32
Speaker 4: like you don't answers no, they don't. They're all being delivered.
25:34
Speaker 4: So my first question is where where are you gonna
25:38
Speaker 4: get your supply from to begin with? The second one, then, is, Okay,
25:43
Speaker 4: who's the person that calls these guys instead of anyone
25:49
Speaker 4: else who's been doing this for the last four years
25:53
Speaker 4: and actually knows what they're doing.
25:55
Speaker 3: Why?
25:56
Speaker 2: Like so many other questions too, Let's let's say you
25:58
Speaker 2: are the owner here and you are trying to make
26:00
Speaker 2: this pivot. Why are you even leveraging the brand? Take
26:05
Speaker 2: your money, walk away and go start a new company
26:08
Speaker 2: that has nothing to do with all birds to try
26:11
Speaker 2: and do this, and maybe we won't be making such
26:14
Speaker 2: a big deal of it. But here's the most damning
26:17
Speaker 2: part of all this. The news of all this sent
26:21
Speaker 2: the shares in the company up five hundred and eighty
26:23
Speaker 2: two percent.
26:27
Speaker 3: Let that sink in for a moment.
26:29
Speaker 2: Here, a company that has no expertise in this whatsoever
26:33
Speaker 2: is taking fifty million dollars to try and completely pivot
26:35
Speaker 2: their business to an entirely new segment from shoe manufacturing
26:40
Speaker 2: to AI data centers, and their shares skyrocketed five hundred
26:47
Speaker 2: eighty two percent on the news.
26:50
Speaker 4: As I said yesterday, look It's okay to be a
26:52
Speaker 4: little frustrated on this. You can spend like years studying
26:55
Speaker 4: markets and building an investment strategy and then someone slaps
26:59
Speaker 4: an ai at the end of you know a name
27:01
Speaker 4: and it goes up six hundred percent in a day. Yeah,
27:04
Speaker 4: Like okay, like you know, what's it all for? Man?
27:07
Speaker 4: What's it all for?
27:09
Speaker 2: It is moving down twenty four percent today? But yeah,
27:12
Speaker 2: the the uh the five day return according to my
27:16
Speaker 2: information here has the stock up four hundred percent over
27:21
Speaker 2: the last five days, with all of that coming during
27:23
Speaker 2: the day yesterday.
27:25
Speaker 4: So I want to know the wild thing though, despite
27:28
Speaker 4: all of that movement, the stock is at the same
27:30
Speaker 4: place it was at last June. Like, it just tells
27:34
Speaker 4: you how bad I mean, again, this is a stock
27:36
Speaker 4: that was down. This was a stock that was down
27:38
Speaker 4: ninety nine and a half percent from its peak. Even
27:41
Speaker 4: with this move it's still down like ninety seven percent
27:44
Speaker 4: from its peak.
27:44
Speaker 3: Yeah, so it's.
27:48
Speaker 4: Again I think some context and bigger picture is important
27:52
Speaker 4: on these things, and this is one where again I
27:59
Speaker 4: would be skeptical that we're sitting here five years from now,
28:02
Speaker 4: being like, man, those all birds guys were right, they
28:06
Speaker 4: could do it now. Their job is to prove me wrong. Okay,
28:11
Speaker 4: Like again, they get a vote in this thing. They're
28:13
Speaker 4: gonna see how they do. But there's there's really no
28:18
Speaker 4: There are no skills that translate from running a shoe
28:21
Speaker 4: company to running a data center company.
28:23
Speaker 2: No, none that I can think of. The interesting question
28:26
Speaker 2: to me now is what other publicly traded company that
28:29
Speaker 2: has nothing to do with technology, A Chips, GPUs or
28:33
Speaker 2: anything else, is going to see this and now pivot
28:36
Speaker 2: over to AI data center build out because you know
28:39
Speaker 2: somebody's gonna I.
28:41
Speaker 4: Mean, even just within the footwear space, you've got a few,
28:45
Speaker 4: you know under Armour's been in trouble for a while,
28:49
Speaker 4: or you know at Theser Apparel. Let's talk a little
28:52
Speaker 4: bit about Nike. Nike stock is down almost fifty percent
28:56
Speaker 4: from its peak last year. You know, do they change
28:58
Speaker 4: their name to an Aike? No, something like that.
29:04
Speaker 2: I've got the perfect one. Stock price follows almost the
29:08
Speaker 2: exact same pattern. Beyond Meat, Peloton Interactive. Take all that
29:14
Speaker 2: excellence you have in manufacturing really expensive stationary bikes, you
29:19
Speaker 2: build out data centers.
29:22
Speaker 4: Do you could do it with beyond Meat? You've got Hey,
29:25
Speaker 4: you know what we're beyond AI. Uh huh, what's next
29:29
Speaker 4: after AI?
29:30
Speaker 2: We're bi You know, I would argue that beyond meat
29:34
Speaker 2: is even further away from AI data centers than all
29:37
Speaker 2: birds are pelotons, So that would be the ultimate I
29:39
Speaker 2: guess I don't.
29:40
Speaker 4: Think it is. I actually think beyond meat if like
29:43
Speaker 4: you think about what they have to do, they at
29:44
Speaker 4: least have to do like some chemistry or.
29:46
Speaker 3: Something something in a lab. Yeah, I guess.
29:48
Speaker 4: So, you know, like there's something in a lab somewhere.
29:51
Speaker 4: It's not just you know, shearing sheep and stuff like that.
29:55
Speaker 5: One of those Spirit Airlines Spirit AI.
29:57
Speaker 4: There you go, Spirit Airlines, you know, and you actually
30:01
Speaker 4: know you've got it right in airlines? Yeah, you're right,
30:04
Speaker 4: talk Yeah, yeah, they could don't delete them, Tucker. Flying
30:10
Speaker 4: data centers, you know, yep, the way to go. Yeah,
30:18
Speaker 4: you could walk in your all birds on a flying
30:21
Speaker 4: data center. That's the future. This is where we are
30:27
Speaker 4: in twenty twenty six. Yeah, let's take a quick break
30:30
Speaker 4: here and when we come back. I know we're supposed
30:35
Speaker 4: to talk about the FED.
30:36
Speaker 3: Do we have to, No, we don't have to. Let
30:39
Speaker 3: let's say the FED. The FED talk is important.
30:43
Speaker 2: Can we talk about you know, my favorite my favorite
30:46
Speaker 2: discount airline. Next, when we come back from the Financial Exchange,
30:49
Speaker 2: I'd love to spirit is up Next, We'll be right back.
30:52
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31:51
Speaker 3: Well.
31:52
Speaker 2: Potential bad news for those of you flying over the
31:56
Speaker 2: course of the next few weeks on Spirit Airlines. Bloomberg
32:00
Speaker 2: seemingly got the hint of this first. But reports all
32:04
Speaker 2: over the place now that Spirit Airlines, which is currently
32:07
Speaker 2: in bankruptcy for the second time in a couple of years,
32:11
Speaker 2: could begin liquidation as soon as this week. Now these
32:15
Speaker 2: are you know, Spirit Airlines comments is we don't comment
32:18
Speaker 2: on market rumors and speculation, and these are all you know,
32:23
Speaker 2: These reports are all you know on the condition, you know,
32:25
Speaker 2: spoken on the condition of anonymity. But the airline itself
32:30
Speaker 2: was a target of acquisition for Jet Blue.
32:33
Speaker 3: Was that Chuck? Was that last years ago?
32:35
Speaker 4: I know this was like five years ago when they
32:38
Speaker 4: first started the bid. I think it failed two years ago,
32:42
Speaker 4: and it's basically been downhill for them since.
32:45
Speaker 2: So this was this was actually the warning that Spirit
32:49
Speaker 2: Airlines gave to the judge and the Justice Department in
32:53
Speaker 2: the case is, look, we don't think we can survive
32:56
Speaker 2: on our own, and we may re enter bankruptcy if
32:59
Speaker 2: we're not able to combine with another airline. Justice Department
33:02
Speaker 2: or the judge or somebody seemingly didn't buy that argument,
33:05
Speaker 2: and they re entered bankruptcy Chapter eleven bankruptcy last August,
33:10
Speaker 2: and I think what's happening here is pretty plain. You know,
33:13
Speaker 2: this is a company that was already financially struggling figuring
33:16
Speaker 2: out how to make deals with their creditors and probably
33:21
Speaker 2: didn't have a whole lot of cash in order to
33:23
Speaker 2: hedge against really high jet fuel prices. Most airlines have dramatically,
33:28
Speaker 2: you know, walked away from a lot of their jet
33:31
Speaker 2: fuel price hedges, and now suddenly Spirit Airlines is sitting
33:35
Speaker 2: here saying okay, as is the case with my mother
33:39
Speaker 2: in law who has a seat on a booked flight
33:42
Speaker 2: this coming Saturday that I booked for, so that could
33:45
Speaker 2: be an awkward Thanksgiving conversation. You know, hey, this person
33:50
Speaker 2: booked their ticket for whatever, two hundred dollars. Can we
33:53
Speaker 2: actually profitably operate this flight and flights for the next
33:57
Speaker 2: few weeks.
33:58
Speaker 3: On the margins that we have here, so we will see.
34:03
Speaker 2: This is all rumors at this stage, but pretty much
34:06
Speaker 2: every major news outlet reporting it at this point, and
34:10
Speaker 2: I just on a personal level. Mayor, mayor, if you're
34:13
Speaker 2: hearing about this for the first time from listening to
34:15
Speaker 2: the Financial Exchange, sorry, well we'll get that one sorted
34:19
Speaker 2: if they If you show up to the airport and
34:21
Speaker 2: happen to liquidate right in front of you. I'm just
34:23
Speaker 2: picturing a vision in my mind where she's on the
34:25
Speaker 2: tarmac and the lights just go out and the pilot
34:28
Speaker 2: goes on the cockpit, you know, pilot goes on the microphone,
34:31
Speaker 2: just says, hey, sorry, company's belly up, we're out of here.
34:34
Speaker 2: Figure out your next flight on your own.
34:36
Speaker 4: Pilots off, everyone else is still strapped in there.
34:38
Speaker 2: Yeah, I'm just thinking about that scenario where like the
34:41
Speaker 2: pilots and the flight attendants just you know, blow out
34:43
Speaker 2: the door and slip down the slide and leave all
34:45
Speaker 2: the passengers stuck on the tarmac with no idea what
34:48
Speaker 2: to do. That's not how liquidations actually work. But when
34:52
Speaker 2: they do happen, they can happen really quickly, and I
34:57
Speaker 2: would imagine you've got to you know, I would imagine
34:59
Speaker 2: you got a on the plane, right, you don't just
35:01
Speaker 2: bail out mid flight, I would think. But yeah, this
35:06
Speaker 2: is not horribly surprising given where Spirit Airlines has been
35:10
Speaker 2: over the last few years. But I have to say
35:12
Speaker 2: kind of disappointing. Yeah, I'm generally not in favor of
35:16
Speaker 2: big companies combining, but when we talked about the Jet
35:18
Speaker 2: Blue Spirit merger. Right, these were what was it like,
35:22
Speaker 2: five and eight in terms of passenger volume, combining here
35:26
Speaker 2: to make an airline that still would have been smaller
35:29
Speaker 2: than even Southwest.
35:31
Speaker 3: I mean, yeah.
35:32
Speaker 4: The big problem is that in the previous decade, you
35:35
Speaker 4: would allow the Delta Northwest merger, you would allow the
35:38
Speaker 4: United Continental merger, you allowed the American us Air merger,
35:42
Speaker 4: and so once those happened and the economics changed, the
35:46
Speaker 4: smaller guys couldn't compete anymore. And so ultimately, if you
35:51
Speaker 4: were going to allow those ones previously, you don't suddenly
35:53
Speaker 4: get to turn around and be like, well, now we're
35:55
Speaker 4: gonna be serious about anti trust. Well, okay, are you
35:57
Speaker 4: gonna unwind those other ones? No? Oh you're not. And
36:00
Speaker 4: so this is the problem. And now you've got the
36:03
Speaker 4: uh so I have a theory on that.
36:10
Speaker 3: Hit me.
36:11
Speaker 4: Not gonna happen.
36:13
Speaker 3: I hope not. I mean, it would make it would be.
36:17
Speaker 4: Trust problem. It would be you're talking about forty of
36:20
Speaker 4: all domestic air travel being held in one company. I
36:23
Speaker 4: don't think there's the appetite for that. But I do
36:27
Speaker 4: want to take you back about five or six years.
36:29
Speaker 4: We're coming out of the pandemic. United and Jet Blue
36:33
Speaker 4: had a little partnership allowing each other. It wasn't a
36:36
Speaker 4: it wasn't a merger, but they allowed each other's frequent
36:39
Speaker 4: flyer people to you know, exchange points across platforms and
36:42
Speaker 4: buy flights on each other's networks and things.
36:45
Speaker 3: They called it marketing each other's flights.
36:48
Speaker 4: Yes, I wouldn't be surprised if the company that failed
36:52
Speaker 4: to buy Spirit is being looked at by United and
36:58
Speaker 4: you know United saying oh, like, you know, we want
37:00
Speaker 4: to buy American. Think about it from a negotiating perspective, Okay,
37:03
Speaker 4: you make this big, outlandish you know, push it first,
37:06
Speaker 4: and then it's well, actually, we really just want jet
37:09
Speaker 4: Blue because they like they already have that relationship from
37:11
Speaker 4: the past. And I wonder if it's just hey, we'll
37:14
Speaker 4: make the ridiculous ask it first, so that us buying
37:17
Speaker 4: jet Blue seems more realistic when we finally say that's.
37:21
Speaker 3: What we want to do again.
37:22
Speaker 2: It just seems to me that we focus all of
37:24
Speaker 2: our anti trust cases on the wrong problems.
37:28
Speaker 3: Yeah, we'll talk.
37:29
Speaker 4: About lures or office supply stores.
37:32
Speaker 2: You know, like, okay, yeah, jet Blue and Spirit you
37:34
Speaker 2: can't merge, but Google you can have ninety percent of
37:38
Speaker 2: search traffic and we're not going to do really anything
37:41
Speaker 2: about it other than tell you you're a monopoly. Right, well,
37:44
Speaker 2: we'll find that you're a monopoly, but we won't do anything.
37:47
Speaker 4: We just won't impose any penalties or cost because you
37:50
Speaker 4: promise that you'll be better in the future.
37:54
Speaker 2: So I hope Spirit does not go out of business.
37:57
Speaker 2: They occupy an important spot. You consiststantly offering flights below
38:02
Speaker 2: mainstream carrier prices.
38:03
Speaker 3: But it's not looking good at the moment.
38:06
Speaker 2: We've got to take a quick break, but a lot
38:08
Speaker 2: more to cover in the second hour of the Financial Exchange.
38:10
Speaker 3: We'll be right back. Stay tuned.