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AI Bubble Fears Grow as Anthropic Prepares for an IPO · The Financial Exchange Show

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  Speaker 1: with Chuck Zotta and Mike Armstrong.
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  Speaker 2: Chuck, Mike, and Tucker with you here. And as we
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  Speaker 2: sit here right now, markets are moving rapidly. But as
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  Speaker 2: of this very particular moment in time, we've got mixed markets.
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  Speaker 2: We opened significantly down on Two of the three major indices.
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  Speaker 2: The NASDAQ was off about 1.5% at one point. The
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  Speaker 2: S & P was down more than 0.5%. The NASDAQ
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  Speaker 2: now down just 0.5%. S & P is actually up
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  Speaker 2: about 0.15%. And the Dow, which doesn't have a lot
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  Speaker 2: of tech in it, is currently up about 1%. So
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  Speaker 2: this happening against a backdrop of a hot CPI report yesterday...
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  Speaker 2: a hot producer price index report today. Yes, yes, thank you, Michael.
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  Speaker 2: And despite both of those, bond yields have actually come
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  Speaker 2: down with the 10-year, moving from 5.34% at one point
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  Speaker 2: early yesterday to 5.08% today. At one point today it
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  Speaker 2: was at 5.03%, but yields have sold off a little
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  Speaker 2: bit in the last hour or so. as we have
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  Speaker 2: gone through the trading days. So we'll see how things
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  Speaker 2: move over the course of the day here. But this
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  Speaker 2: is what we are seeing in these markets right now.
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  Speaker 3: It would seem to me, Chuck, there are two main
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  Speaker 3: stories that investors are latching onto. One has to do
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  Speaker 3: with inflation concerns that investors have. The second has to
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  Speaker 3: do with renewed AI bubble concerns that they have. And
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  Speaker 3: I don't think markets are moving convincingly in either direction.
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  Speaker 3: on those two stories because they would tend to drag
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  Speaker 3: things in opposite directions.
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  Speaker 2: Yeah, and so look, again, the other piece on this, remember,
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  Speaker 2: yields had just been screaming topside for the last month
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  Speaker 2: and a half. At some point, you just run out
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  Speaker 2: of short-term sellers, and so some of this could just
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  Speaker 2: be okay. Hedge funds were all in on that short trade,
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  Speaker 2: and now they had to unwind it, and so now
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  Speaker 2: you find a new equilibrium Now, you know, as you know,
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  Speaker 2: that that sorts itself out. So some of this was
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  Speaker 2: just like these markets were just crazy extended to the
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  Speaker 2: upside in the case of interest rates and the dollar
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  Speaker 2: in the short term. And so maybe this is just
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  Speaker 2: a little bit of a relief rally. And eventually the
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  Speaker 2: 10 year screams higher again to like five and a half.
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  Speaker 2: We don't know. But I think that the story in
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  Speaker 2: the last two days at least is, hey, AI concerns
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  Speaker 2: and what it means for the U.S. economy. overpowering short-term
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  Speaker 2: inflationary concerns because the market at least is saying, hey,
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  Speaker 2: if AI dies, the U.S. economy slows significantly too. You
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  Speaker 2: can forget about inflation. And that simply takes care of inflation.
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  Speaker 1: Yeah.
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  Speaker 2: Exactly. So the dollar is down 0.4% to 101.935. Gold,
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  Speaker 2: with that weak dollar, up 72 cents. I'm sorry, $ 72
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  Speaker 2: an ounce to 41.80, reversing all of yesterday's losses. Crude oil,
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  Speaker 2: which opened the day down. West Texas Intermediate now up $ 1. 66
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  Speaker 2: a barrel to $ 96.
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  Speaker 1: 75.
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  Speaker 2: You've also got Brent, which was off a couple bucks
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  Speaker 2: early in trading, now down only 70 cents. And so
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  Speaker 2: the AAA national average for gas prices is basically flat.
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  Speaker 2: It's up one-tenth of a cent to $ 4. 33 and four-tenths. Diesel, though,
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  Speaker 2: up a couple more cents to $ 6. 31 and seven-tenths. So
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  Speaker 2: diesel now about 20 cents away from all-time highs that
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  Speaker 2: we hit back in late September. Unclear that we're going
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  Speaker 2: to get there right now. I don't see enough in
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  Speaker 2: diesel futures that suggest that that is likely at the
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  Speaker 2: moment in the near future. But the diesel situation, we
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  Speaker 2: are very much week to week. And due to the
• 4:52
  Speaker 2: Columbus Day holiday earlier this week, we've not yet gotten
• 4:56
  Speaker 2: EIA data for the week of October 9th. That's going
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  Speaker 2: to be coming out at noon today instead of the
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  Speaker 2: regular 1030 Wednesday release. And so so still waiting to
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  Speaker 2: see what we get on that side of things. Piece
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  Speaker 2: of the Wall Street Journal, the AI boom is supercharging
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  Speaker 2: Wall Street's profits. Mike, I love when profits are supercharged. Yeah,
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  Speaker 2: those are fun.
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  Speaker 3: What was the earnings growth of 20?
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  Speaker 2: What is the expectation? Twenty nine percent for the third quarter. Yes. 27?
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  Speaker 2: Something like that. Yes. Remember that we're in just a
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  Speaker 2: crazy year for earnings growth right now where the full year,
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  Speaker 2: like it's not even a quarter, calendar year is projected
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  Speaker 2: at 32.7 right now. That's percentage growth over the previous year.
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  Speaker 1: Yes.
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  Speaker 3: And again, to give you a sense for how outrageous
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  Speaker 3: that is, for the entirety of the 2010s decade, we
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  Speaker 3: averaged around 11% annual earnings growth. And granted, the 2010s
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  Speaker 3: decade was not fantastic to write home about, but you
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  Speaker 3: were coming off... From an earnings perspective, it was. Historically,
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  Speaker 3: long-term earnings growth is like 7%. Right, and it was
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  Speaker 3: coming off a very low point. And so to see
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  Speaker 3: three quarters in a row now of greater than 25%
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  Speaker 3: earnings growth is fairly unheard of.
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  Speaker 2: Yes. It's pretty wild in terms of what we're seeing here.
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  Speaker 2: So I think the... Look, the whole ballgame is just,
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  Speaker 2: can this continue?
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  Speaker 1: Yeah.
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  Speaker 2: I mean, that's the deal, because Wall Street makes a
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  Speaker 2: ton of money from all of these AI-related deals, whether
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  Speaker 2: you're talking about new IPOs, whether you're talking about potential mergers,
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  Speaker 2: things like that. There's a ton of different stuff that's
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  Speaker 2: out there. All the new underwriting, new listings from foreign
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  Speaker 2: companies and this and that. There are all kinds of
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  Speaker 2: different ways that Wall Street can make money. The question is,
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  Speaker 2: at what point does Wall Street make the judgment? Does
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  Speaker 2: Wall Street make the judgment, hey, this is no longer
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  Speaker 2: worth underwriting? And if so, when does that happen? I
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  Speaker 2: sometimes think that.
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  Speaker 3: The words that we use to describe markets are just
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  Speaker 3: too flashy and exaggerational.
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  Speaker 2: But the ones that come to mind right now... I
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  Speaker 2: like exaggerational.
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  Speaker 3: Exaggerational is the term I'm using for it. Hyperscalers are
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  Speaker 3: effectively supercharging Wall Street profits. Those actually seem to accurately
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  Speaker 3: describe what's going on right now to me. The term
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  Speaker 3: hyperscaler does seem to accurately describe it. And I don't
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  Speaker 3: think there's a better word to describe what's happening to
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  Speaker 3: profits other than them being supercharged.
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  Speaker 2: Yeah, I mean, look, typically the only time that you
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  Speaker 2: normally see earnings growth rates like this are like the
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  Speaker 2: first year coming out of a recession. Yeah. A couple
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  Speaker 2: of just interesting things just to point out. Just again,
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  Speaker 2: like what we're talking about. Again, just what we're seeing
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  Speaker 2: in markets right now. And again, you can't set your
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  Speaker 2: clock by this stuff, but it's just things that make
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  Speaker 2: you go, hmm, I think is how I would describe it.
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  Speaker 2: Number one. Yes, exactly. Number one, did you happen to
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  Speaker 2: catch the cover of The Economist late last week?
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  Speaker 1: No, I didn't.
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  Speaker 2: Everyone on Twitter did.
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  Speaker 1: Okay.
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  Speaker 2: Because the cover, it's a big red cover. with a
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  Speaker 2: percentage sign on a dial and the four words above
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  Speaker 2: it just say, will bonds blow up? And there's a
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  Speaker 2: long history of The Economist having covers that are great contraindicators.
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  Speaker 2: And it would be wild if this actually ends up
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  Speaker 2: being the peak in yields here. So that's number one.
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  Speaker 2: Number two, did you happen to catch the interview with
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  Speaker 2: Mark Zuckerberg and Alexander Wang earlier this week?
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  Speaker 4: The one where you almost threw up drinking a Guinness?
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  Speaker 2: Yes.
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  Speaker 1: Yeah, that one.
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  Speaker 2: Wouldn't it be wild if... Did he try to split
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  Speaker 2: the G and just... No, he didn't even get that far. Oh, Mike,
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  Speaker 2: you got to look this up because he could barely
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  Speaker 2: get in it. Like, his brain just short circuits. But, like,
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  Speaker 2: wouldn't it be wild if Zuckerberg failing to drink a
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  Speaker 2: Guinness marks the AI top? That'd be pretty fun. I mean, like,
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  Speaker 2: you don't want to say there were signs, but maybe
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  Speaker 2: there were signs. Zuckerberg doesn't like stouts. Can't compute. I'm
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  Speaker 2: watching it again right now, but you can literally see.
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  Speaker 1: Mike, look it up. It's like really.
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  Speaker 2: You can see the moment in time where it's just like,
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  Speaker 2: how many times can I slosh this around my mouth? Oh,
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  Speaker 2: I've got to look away. Okay, let me look back
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  Speaker 2: now and fake a smile. Was this part of an
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  Speaker 2: Ireland expansion? Why was this part of the interview?
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  Speaker 4: No, I'm sure Guinness had a sponsorship or something.
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  Speaker 1: Is my guess.
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  Speaker 2: Zuckerberg doesn't need a sponsor. No, so the podcast they
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  Speaker 2: were on is called Cheeky Pint. And it's, I think,
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  Speaker 2: one of the co-founders of Stripe hosted, who happens to
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  Speaker 2: be Irish. And so I don't know if it's actually
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  Speaker 2: in like, an Irish pub or if it's just, like,
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  Speaker 2: a set they made to look kind of like an
• 10:03
  Speaker 2: Irish pub. Yeah, I see the wallpaper. I see the yellowing. So, like,
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  Speaker 2: the whole bit, it's kind of like when... What's the...
• 10:11
  Speaker 2: What's the podcast with the hot sauce? Hot Ones. That's
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  Speaker 2: the one. It's like that. It's kind of the shtick.
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  Speaker 2: Sit down, have a Guinness, talk about your business. That's
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  Speaker 2: what it is. Fry your AI circuitry. But you can
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  Speaker 2: watch him, and you're just like, oh, he's not enjoying
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  Speaker 2: that at all. He's just not.
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  Speaker 1: You know?
• 10:36
  Speaker 2: We're going to have to upgrade to the Zuck 6.0
• 10:38
  Speaker 2: that can drink Guinness, you know, roll out the new
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  Speaker 2: model next week. So let's take a quick break. When
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  Speaker 2: we come back, we're talking anthropic right after this.
• 10:47
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• 11:28
  Speaker 2: Mike, we got a piece in the Wall Street Journal.
• 11:31
  Speaker 2: It's titled, Anthropics Quarterly Revenue Jumped 45% to Nearly $ 17 Billion.
• 11:36
  Speaker 3: The reason we're hearing about it now is they're trying
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  Speaker 3: to go IPO.
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  Speaker 2: It was delayed for October. They're hoping November.
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  Speaker 3: And so they're getting out some of the deets that
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  Speaker 3: are presumably inside all of their filings that they are
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  Speaker 3: putting together to market this thing.
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  Speaker 2: So here's the deal. This is the whole ballgame for
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  Speaker 2: these companies trying to IPO. Their revenue in Q1, and
• 12:04
  Speaker 2: this is, again, according to the data from, they said
• 12:08
  Speaker 2: sources close to it. The Financial Times has confirmed some
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  Speaker 2: of this as well. They had just under $ 5 billion
• 12:14
  Speaker 2: in revenue in Q1, $ 11. 6 billion in Q2, and $ 16. 8
• 12:17
  Speaker 2: billion in Q3. Pretty good clip. Well, yes, but it's
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  Speaker 2: slowing in two different ways. If you look at $ 11. 6 billion,
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  Speaker 2: and I did the math so that you don't have to, $ 11. 6
• 12:37
  Speaker 2: billion compared to $ 5 billion is a $ 6. 6 billion growth.
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  Speaker 2: Got it. The other piece is it is 132%. That's
• 12:48
  Speaker 2: the growth rate of the revenue quarter over quarter, sequential
• 12:52
  Speaker 2: growth rate. which is wild. So you're going from 132%
• 12:58
  Speaker 2: growth down to 45%. If I am trying to invest
• 13:06
  Speaker 2: in this company, what's it going to look like next quarter?
• 13:10
  Speaker 2: Because the other piece is, it's not just that your
• 13:12
  Speaker 2: growth rate slowed, it's that the actual amount of revenue
• 13:17
  Speaker 2: growth slowed as well. You went from adding $ 6. 6 billion
• 13:21
  Speaker 2: in a quarter in revenue to adding 5.2. Yep. What
• 13:27
  Speaker 2: if you only add 3.6 next quarter, just as an example?
• 13:32
  Speaker 2: Now you're talking about a 21% sequential growth rate. All right.
• 13:37
  Speaker 3: Prediction wall. Is this IPO happening in 2026? Because if
• 13:43
  Speaker 3: it doesn't happen before Thanksgiving, it's not happening at all.
• 13:45
  Speaker 2: Here's the thing. They really want to pull this off,
• 13:49
  Speaker 2: which scares the heck out of me, I'll add. I
• 13:53
  Speaker 2: think it happens. It's such a narrow window, and how
• 14:01
  Speaker 2: do you price it right now?
• 14:04
  Speaker 3: Yeah, this week was not great for it. You need
• 14:08
  Speaker 3: a sentiment turnaround before November if you're going to go
• 14:11
  Speaker 3: with it.
• 14:11
  Speaker 2: Give me an example. The people most likely to end
• 14:15
  Speaker 2: up owning this in an IPO, they're probably the ones
• 14:18
  Speaker 2: that have bought previous tech IPOs in the last couple
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  Speaker 2: of years.
• 14:21
  Speaker 1: Sure.
• 14:22
  Speaker 2: Because, number one, they're familiar with them. Number two, it's
• 14:26
  Speaker 2: who the investment bankers go to, and they're like, okay,
• 14:29
  Speaker 2: how much can you sell to your clients? There's a
• 14:32
  Speaker 2: reason why most IPOs don't end up just being offered
• 14:35
  Speaker 2: to Robinhood accounts. It's because it's like, oh, it's one
• 14:37
  Speaker 2: of those perks of being a high net worth investor
• 14:40
  Speaker 2: is that your broker brings you the hot new IPO.
• 14:43
  Speaker 2: I got a question, though, before we even go further.
• 14:46
  Speaker 3: If you are one of the high net worth customers
• 14:48
  Speaker 3: of those giant investment banks, you probably already own Anthropic.
• 14:53
  Speaker 3: They've done so many fundraising rounds at this point. Probably
• 14:56
  Speaker 3: through a private arm investment in there.
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  Speaker 2: Probably. Probably. But so, like, let's say that I am,
• 15:05
  Speaker 2: what would be the name of, like, a very wealthy investor?
• 15:09
  Speaker 2: What was the guy whose head fund blew up?
• 15:14
  Speaker 3: Oh.
• 15:15
  Speaker 2: Archon Bold or something like that? There's rumors, by the way.
• 15:19
  Speaker 2: Leopold Aschenbrenner. Yeah. There are rumors out there that he
• 15:22
  Speaker 2: may have had another blow up this week. Which would
• 15:25
  Speaker 2: be two and three months, in which case it's like
• 15:28
  Speaker 2: my guy. Again, all of us have times in the
• 15:32
  Speaker 2: investment business where stuff goes up and down and the
• 15:34
  Speaker 2: market goes against you. It doesn't always work out the
• 15:37
  Speaker 2: way that you want. But if it ends up being true,
• 15:40
  Speaker 2: you can't blow up twice in three months. I mean,
• 15:44
  Speaker 2: you can, but you shouldn't have a third in six months,
• 15:47
  Speaker 2: is what I'm saying, I guess. The question that I
• 15:50
  Speaker 2: have is, let's say that you are... You know, very wealthy, well-to-do.
• 15:56
  Speaker 3: I had Gemini create some for us. So we got
• 15:58
  Speaker 3: Cornelius Chip Whitmore. Constance Muffy Ashford. Thatcher Radcliffe Barclay. Yes,
• 16:07
  Speaker 3: if you're Tad Barclay, okay?
• 16:11
  Speaker 2: Again, you've never met a Tad in your life that
• 16:13
  Speaker 2: didn't have some kind of argyle on, right? It's just
• 16:16
  Speaker 2: how it is. Tad comes with a side of argyle.
• 16:20
  Speaker 2: Prescott Salstonstall III. Yes, if Prescott, you know, if his
• 16:26
  Speaker 2: investment banker says, oh, dear Prescott, the IPO is out again.
• 16:31
  Speaker 2: Would you like any Anthropic? The question that Prescott is
• 16:34
  Speaker 2: asking is, hey, broker guy, you sold me this core
• 16:39
  Speaker 2: weave stuff a couple of years ago, you know, beginning
• 16:42
  Speaker 2: of last year. It's right back to where I bought it.
• 16:46
  Speaker 2: Why do I want this one? That's the part that's tough,
• 16:51
  Speaker 2: is you look at it, and on April 2nd, 2025,
• 16:54
  Speaker 2: Corweave was trading at $ 64 a share. It's at $ 63 today.
• 16:59
  Speaker 2: This is what makes it hard to offload this stuff.
• 17:03
  Speaker 2: And so, again, I think that there are real questions
• 17:07
  Speaker 2: as to whether this IPO will go off. I'm going
• 17:10
  Speaker 2: to go with, for the prediction wall, Tucker, I'm going
• 17:13
  Speaker 2: to go with a yes. Okay. Just because I think
• 17:15
  Speaker 2: there's so much behind it where... Honestly, if it doesn't
• 17:20
  Speaker 2: go off, I don't know how the market reacts to that.
• 17:23
  Speaker 1: Yeah.
• 17:23
  Speaker 2: The counter to that is if it does go off,
• 17:25
  Speaker 2: I don't know how the market reacts to that.
• 17:28
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  Speaker 1: God.
• 18:54
  Speaker 2: Taryn Cross. How do you spell that? Taryn? Yeah. T-A-R-I-N?
• 18:59
  Speaker 2: Not with a Y? Nope. Nope. That would probably be
• 19:02
  Speaker 2: the feminine version, right? Yeah. These are good. I like these.
• 19:06
  Speaker 2: Good job, Gemini.
• 19:07
  Speaker 3: We got Julian Vance Lowe also in Lyra Thorn in
• 19:11
  Speaker 3: the Silicon Valley.
• 19:12
  Speaker 2: I feel like I've met a Lyra Thorn at one point.
• 19:16
  Speaker 2: That's just too spot on, I feel. Good stuff. Markets
• 19:20
  Speaker 2: remain mixed at the moment as we head towards the
• 19:22
  Speaker 2: bottom of the hour. NASDAQ still in negative territory, but
• 19:26
  Speaker 2: trying to figure out some way to some gains. Let's
• 19:30
  Speaker 2: take a quick break here. When we come back, we're
• 19:33
  Speaker 2: talking NVIDIA next.
• 19:39
  Speaker 1: Bringing the latest financial news straight to your radio every day.
• 19:44
  Speaker 1: It's the Financial Exchange on the Financial Exchange Radio Network.
• 19:49
  Speaker 1: Time now for Wall Street Watch. Tracking the stocks, the data,
• 19:53
  Speaker 1: and the headlines driving markets so far today. Right here
• 19:57
  Speaker 1: on the Financial Exchange Radio Network.
• 19:58
  Speaker 4: Markets are choppy and mixed following another hotter than expected
• 20:02
  Speaker 4: inflation reading with a Producer price index showed wholesale prices
• 20:05
  Speaker 4: jumped 6.3% on an annual basis last month, marking its
• 20:09
  Speaker 4: biggest gain since 2022. Right now, the Dow is up
• 20:13
  Speaker 4: about 1% or 493 points up. S & P 500
• 20:14
  Speaker 4: is edging only three points higher. NASDAQ is down over
• 20:16
  Speaker 4: four-tenths of a percent to 111 points lower. Russell 2000
• 20:19
  Speaker 4: is up over 1%. Ten-year Treasury yield is down 10
• 20:22
  Speaker 4: basis points at 5.089%. And crude oil is up over 2.5%
• 20:34
  Speaker 4: trading at $ 97 a barrel. CoreWeave continues to tumble, with
• 20:38
  Speaker 4: traders concerned about the cloud computing company's financing around its
• 20:41
  Speaker 4: data center buildouts with huge amounts of debt. After its
• 20:46
  Speaker 4: 15% stumble yesterday, CoreWeave's stock is down 4% today. Meanwhile,
• 20:51
  Speaker 4: Anthropic told prospective investors its third quarter revenue hit $ 16. 8
• 20:55
  Speaker 4: billion as the AI company pushes ahead with plans for
• 20:59
  Speaker 4: its IPO. Elsewhere, Rocket Lab dropping 10% after the aerospace
• 21:04
  Speaker 4: firm delayed its maiden launch of its Neutron rocket to
• 21:07
  Speaker 4: next year. Walmart upgraded by Deutsche Bank, citing a positive
• 21:11
  Speaker 4: 2027 outlook. Walmart is up over 2%. And Crocs was
• 21:16
  Speaker 4: upgraded by Barclays, noting the footwear company's progress on product
• 21:20
  Speaker 4: innovation and category expansion. Crocs is now up over 6%.
• 21:24
  Speaker 4: I'm Tucker Silva and that.
• 21:27
  Speaker 1: Is Wall Street Watch.
• 21:29
  Speaker 2: Mike, we got a piece in CNBC or on CNBC.
• 21:34
  Speaker 2: NVIDIA CEO Jensen Huang urges U.S.-China dialogue on, quote, potentially
• 21:38
  Speaker 2: dangerous AI. This seems like a flip from Jensen. It does.
• 21:42
  Speaker 2: I was going to say, this seems like the first
• 21:44
  Speaker 2: time that he's even really acknowledged that something along these
• 21:49
  Speaker 2: lines exists, in my opinion. Here's what I think is
• 21:51
  Speaker 2: going on, Chuck.
• 21:53
  Speaker 3: I think that the Hugging Face incident was a wake-up
• 21:56
  Speaker 3: call for people that pay attention to AI. I don't
• 21:59
  Speaker 3: think it was enough of a wake up call for
• 22:02
  Speaker 3: any of these guys to slow down what they're doing
• 22:04
  Speaker 3: on their own because they are just too greedy. And yeah,
• 22:10
  Speaker 3: I don't think there's enough there to make them slow
• 22:13
  Speaker 3: down when their competitors aren't going to. But I do
• 22:16
  Speaker 3: think there's a genuine shift after the hugging face scenario
• 22:20
  Speaker 3: that spooked enough people that pay attention to this stuff. Unfortunately,
• 22:24
  Speaker 3: I don't think it's done anything to spook lawmakers or,
• 22:27
  Speaker 3: you know, enough to change behavior in any meaningful way.
• 22:30
  Speaker 3: But I think that that was the turning point here.
• 22:36
  Speaker 2: Yeah, I think you're probably right. The other thing, like,
• 22:39
  Speaker 2: have you watched, like, the news flow on, like, the
• 22:41
  Speaker 2: risks over the last week? It's getting worse. Like, not
• 22:46
  Speaker 2: that anything has happened necessarily, but, like, Anthropic was out.
• 22:49
  Speaker 2: And this is something I've heard from people other than
• 22:51
  Speaker 2: them as well. They were out and they were basically like, hey,
• 22:54
  Speaker 2: the internet might just end up with roaming swarms of
• 22:58
  Speaker 2: AI bots that aren't living anywhere necessarily, but they just
• 23:03
  Speaker 2: migrate from place to place. Yeah, I did see. It's
• 23:06
  Speaker 2: basically just like feral AI, basically.
• 23:10
  Speaker 3: Yeah, there was a warning out there that they could
• 23:13
  Speaker 3: attach themselves and copy themselves onto home devices that are
• 23:15
  Speaker 3: all internet connected. We had the story out of France
• 23:18
  Speaker 3: where which was more than just France, but a number
• 23:22
  Speaker 3: of refrigeration systems across grocery stores there were hacked into, well,
• 23:29
  Speaker 3: probably using AI and shut down, and millions of euros
• 23:33
  Speaker 3: worth of.
• 23:34
  Speaker 2: Food went spoiled.
• 23:36
  Speaker 3: It does seem to be getting enormously worse. The concerning
• 23:40
  Speaker 3: warnings seem to be getting more frequent.
• 23:42
  Speaker 2: And yet, like, I.
• 23:49
  Speaker 3: Definitely come around to your bafflement on this. In spite
• 23:52
  Speaker 3: of all that, no one in any of these companies is...
• 23:55
  Speaker 3: A normal human being would hit the stop button, and
• 23:58
  Speaker 3: it's just nothing. There's no sign of that anywhere.
• 24:02
  Speaker 2: No, there really isn't. So it's... Again, it doesn't make
• 24:07
  Speaker 2: you feel good about any of this, but the fact
• 24:10
  Speaker 2: that Jensen's talking about it, I think, is... notable because
• 24:14
  Speaker 2: I can't recall him saying anything like this previous.
• 24:17
  Speaker 3: All of his statements for the last nine months have
• 24:19
  Speaker 3: been about how do I get myself in a position
• 24:22
  Speaker 3: where I can sell my chips to China I think
• 24:24
  Speaker 3: he still wants to but this is the first time
• 24:26
  Speaker 3: he's saying yeah there's some safety stuff that we need
• 24:28
  Speaker 3: to be talking about with our strategic ally because.
• 24:30
  Speaker 2: Arguably The reason the U.S.
• 24:32
  Speaker 3: Won't slow down in development is because they don't think
• 24:34
  Speaker 3: China will slow down in development.
• 24:36
  Speaker 2: It's a cold war again. It's also just like, again,
• 24:40
  Speaker 2: I feel like he's just hand-waved away a lot of
• 24:42
  Speaker 2: potential problems. Did you see the interview a couple weeks
• 24:44
  Speaker 2: ago when he was talking about, someone asked him, like, hey,
• 24:51
  Speaker 2: what are your thoughts on kids and using AI? Because
• 24:53
  Speaker 2: they're not going to know how to do multiplication and
• 24:56
  Speaker 2: division and blah, blah, blah. And he's like, Well, that's fine.
• 25:00
  Speaker 2: I don't even know my phone number or my address.
• 25:03
  Speaker 2: It's like, I don't think that means what you think
• 25:07
  Speaker 2: it does.
• 25:09
  Speaker 3: There's an interview with an MIT professor that I was
• 25:11
  Speaker 3: listening to the other day. I think he's a mathematics professor,
• 25:15
  Speaker 3: but I could be wrong. And he said the new
• 25:17
  Speaker 3: phenomenon they're dealing with is that students will get almost
• 25:22
  Speaker 3: universally 100% on any homework assignments. and, uh, yeah, test
• 25:28
  Speaker 3: grades substantially worse than previous, uh, you know, previous classes.
• 25:34
  Speaker 2: Um, which is very obvious what's happening there. They're feeding
• 25:37
  Speaker 2: their answer.
• 25:38
  Speaker 3: Even if they're doing the work on their own, they're
• 25:40
  Speaker 3: feeding the questions and answers into, uh, you know, Claude
• 25:43
  Speaker 3: or whatever it might be in order to check their
• 25:45
  Speaker 3: own work and then not truly understanding what it is
• 25:48
  Speaker 3: that they're learning.
• 25:50
  Speaker 1: Yeah.
• 25:51
  Speaker 2: It's, uh, Again, there are a lot of things that
• 25:54
  Speaker 2: are potentially problematic. And again, I say this as someone
• 25:56
  Speaker 2: who does think that there are really good uses for
• 25:59
  Speaker 2: it as well. They can improve productivity, but you've got
• 26:05
  Speaker 2: to address the bad stuff too. If we were live
• 26:11
  Speaker 2: during the Manhattan Project and these guys were running it, Like,
• 26:15
  Speaker 2: you don't just say, like, well, there's some problems here,
• 26:19
  Speaker 2: but we're going to hopefully address those as we go. Like, no, like,
• 26:23
  Speaker 2: you guys are building nuclear bombs. You can't just address
• 26:26
  Speaker 2: them as you go.
• 26:26
  Speaker 3: Imagine Boeing's head of engineering saying, you know, I think
• 26:30
  Speaker 3: there's a 1 in 10 chance that this next model
• 26:32
  Speaker 3: kills everybody on board.
• 26:34
  Speaker 2: Not ideal. Not ideal. That's literally what some of these
• 26:38
  Speaker 2: engineers are telling us. And they're engineers, right? Peace and
• 26:41
  Speaker 2: Bloomberg opinion. Young Americans aren't doing nearly enough job hopping.
• 26:44
  Speaker 2: I thought they were doing too much job hopping, Chuck.
• 26:46
  Speaker 2: I can't keep up, Michael. Like, how much is the
• 26:50
  Speaker 2: right amount to hop? I don't know.
• 26:53
  Speaker 3: Okay, so here's the deal. You make money by hopping jobs.
• 26:56
  Speaker 3: You run the risk of being the last person in
• 26:59
  Speaker 3: the door at the job that you hop to. And
• 27:01
  Speaker 3: if you happen to be at the time when the
• 27:03
  Speaker 3: company needs to do a bunch of layoffs because the
• 27:05
  Speaker 3: economy falls apart, your job's more at risk than the
• 27:07
  Speaker 3: person that's been there for seven years.
• 27:09
  Speaker 2: Safe to say? Yes.
• 27:11
  Speaker 3: In the day of pensions, there's no real incentive for
• 27:14
  Speaker 3: you to hold on to a job. There are some
• 27:16
  Speaker 3: companies that do a better job of this than others, right?
• 27:18
  Speaker 3: I know companies that match a robust amount into your 401k,
• 27:23
  Speaker 3: but they make sure that it vests over a period
• 27:26
  Speaker 3: of time. Others will offer bonuses or stock incentives after
• 27:31
  Speaker 3: you are there for a certain number of years. So
• 27:33
  Speaker 3: you've got those kind of golden handcuffs on you. And
• 27:35
  Speaker 3: if companies want to retain employees, then they'll do those
• 27:38
  Speaker 3: sorts of things. But otherwise, You can make a whole
• 27:40
  Speaker 3: bunch of money by job hopping more frequently than previous
• 27:46
  Speaker 3: generations did. And there's been plenty of, by the way,
• 27:48
  Speaker 3: economic studies on this phenomenon of, yeah, while you do
• 27:51
  Speaker 3: lose expertise and seniority, it's the main way that employees
• 27:56
  Speaker 3: can take advantage of the labor market and improve their
• 27:59
  Speaker 3: own economic well-being.
• 28:01
  Speaker 2: So I want to look at the data on this,
• 28:03
  Speaker 2: specifically the age 25 to 34 data, because I think
• 28:04
  Speaker 2: in general my view is There's an age 16 to
• 28:10
  Speaker 2: 24 bracket, but I think that can be skewed just
• 28:13
  Speaker 2: by how many teenagers are even working summer jobs and
• 28:16
  Speaker 2: stuff like that. 25 to 34, I think, is the
• 28:19
  Speaker 2: time where you kind of build yourself towards peak earnings.
• 28:23
  Speaker 2: 35 to 54, I think, that encapsulates the period where
• 28:26
  Speaker 2: you're basically already there. So if you look at the
• 28:29
  Speaker 2: data in the 70s and 80s, you generally saw in
• 28:32
  Speaker 2: any given year, somewhere between on the low end, about 15%,
• 28:36
  Speaker 2: on the high end, about 20%. of 25 to 34
• 28:42
  Speaker 2: year olds with two or more sequential employers in the
• 28:44
  Speaker 2: last year. Okay. So again, 15 to 20%. If we
• 28:49
  Speaker 2: look since the great recession, cause this is really where
• 28:52
  Speaker 2: the data turned down and it hasn't changed. It's between
• 28:56
  Speaker 2: about 11, 12% on the low end and 15 on
• 29:00
  Speaker 2: the high end. So there has been a shift there,
• 29:05
  Speaker 2: but it's, it's, it doesn't seem meaningful. I'm not sure
• 29:09
  Speaker 2: that it's actually a meaningful shift, exactly. You know, like,
• 29:13
  Speaker 2: I have years, like, just as an example, 1983 was 15.3%
• 29:17
  Speaker 2: in that category. 2022, 15.2%, and it was pretty similar
• 29:22
  Speaker 2: in 23 and 24 as well. So I think there's
• 29:27
  Speaker 2: something here. Like, yes, like at the margins, there's probably
• 29:30
  Speaker 2: 3% to 4% of Americans that aren't job hopping in
• 29:34
  Speaker 2: any given year as much as they used to. I
• 29:36
  Speaker 2: could see how in the long term like that, that,
• 29:39
  Speaker 2: you know, again, just like the law of compounding, I
• 29:41
  Speaker 2: could see how over a career that that matters. But
• 29:45
  Speaker 2: I'm also just not sure that, you know, over a
• 29:48
  Speaker 2: short period of time, there's enough signal there to be
• 29:51
  Speaker 2: able to say that there's something really happening here.
• 29:53
  Speaker 3: It is fascinating to me that it's been that significant
• 29:56
  Speaker 3: of a. I just expect this to increase over time. Yeah.
• 30:01
  Speaker 2: And it's not. Let's take a quick break. When we
• 30:04
  Speaker 2: come back, we'll do a little bit of Stack Roulette.
• 30:22
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• 30:34
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• 31:09
  Speaker 2: Mike, what do you got for Stack Roulette? I would
• 31:11
  Speaker 2: like to talk about Compass Realty.
• 31:14
  Speaker 3: So a few years ago, they went out and purchased
• 31:18
  Speaker 3: the company Anywhere Real Estate, which you've probably never heard of,
• 31:20
  Speaker 3: but they happen to own Caldwell Banker, Corcoran, Century 21,
• 31:25
  Speaker 3: and Sotheby's International Realtor. So when they did that, they
• 31:30
  Speaker 3: put these all together and created a much larger brokerage.
• 31:33
  Speaker 3: And what they've started to do much more frequently is,
• 31:36
  Speaker 3: is offer their clients, their customers, to do what's referred
• 31:40
  Speaker 3: to as off-listing or off-market listings. And these have existed forever, right?
• 31:48
  Speaker 3: Celebrities don't want open houses. There's a number of reasons
• 31:51
  Speaker 3: people choose to do this sort of thing, but it's
• 31:53
  Speaker 3: existed forever. But here's the problem. For example, in Manhattan,
• 31:59
  Speaker 3: Compass and its affiliates now handle more than 80% of
• 32:02
  Speaker 3: residential sales by dollar volume. They do more than 30%
• 32:07
  Speaker 3: of listings in other major markets. But think about Manhattan
• 32:10
  Speaker 3: for a moment. Now you have a place, you have
• 32:13
  Speaker 3: a ton of listings, you own 80% of those listings.
• 32:16
  Speaker 3: And what you're telling me is that a large portion
• 32:18
  Speaker 3: of them never make it to market. Explain exactly how
• 32:22
  Speaker 3: that is not monopolistic harm to the consumer, right? Because
• 32:25
  Speaker 3: if you don't happen to be a client of compass,
• 32:28
  Speaker 3: there are a whole bunch of listings that you may
• 32:29
  Speaker 3: never see, never get to bid on. Um, I'm also
• 32:34
  Speaker 3: worried about the impact to the person who's selling their home,
• 32:38
  Speaker 3: who becomes convinced that this is the right path for them.
• 32:41
  Speaker 3: But at least they're given some degree of choice in
• 32:44
  Speaker 3: all of this, albeit maybe a misguided choice. But the
• 32:50
  Speaker 3: people who are trying to buy a home on the
• 32:52
  Speaker 3: island of Manhattan and don't choose to work with Compass
• 32:55
  Speaker 3: are getting screwed in this scenario. And I think it
• 32:58
  Speaker 3: is again, I don't debate whether or not a company
• 33:02
  Speaker 3: can have off-market listings, but you've become a monopoly and
• 33:07
  Speaker 3: it was a mistake that it didn't get broken up
• 33:08
  Speaker 3: when it was attempted and needs to be broken up now.
• 33:12
  Speaker 2: I guess the question that I have on this is
• 33:20
  Speaker 2: you can't do this for one market. I don't think
• 33:27
  Speaker 2: you can. There's Is there any legislation at the state
• 33:31
  Speaker 2: or city level for antitrust? Antitrust? Yeah, I don't know.
• 33:36
  Speaker 3: Because, like, what's the case? Like, oh, you have too
• 33:39
  Speaker 3: much market share in Manhattan? I suppose New York City
• 33:42
  Speaker 3: could ban off-market listings. I don't think that would be.
• 33:48
  Speaker 2: I don't think that would be a constructive move for them. No,
• 33:51
  Speaker 2: I don't think so either, but they could. Then you
• 33:54
  Speaker 2: just wouldn't have the listings. Also, like.
• 33:58
  Speaker 3: think about the incentives here for a moment. Like I'm
• 34:01
  Speaker 3: sure that the compass realtors give all sorts of reasons
• 34:03
  Speaker 3: why it's best for you to do a off market listing,
• 34:07
  Speaker 3: but let's be honest about it. The reason that they
• 34:09
  Speaker 3: do it is because they want to match you up
• 34:11
  Speaker 3: with another custom broker. So that compass gets a cut
• 34:14
  Speaker 3: of both sides of the sale.
• 34:16
  Speaker 2: Sure. Like you can see the obvious incentives for it, right?
• 34:19
  Speaker 3: Like even if that's just a part of it, that's
• 34:22
  Speaker 3: clearly an incentive here is, Hey, if we do this
• 34:25
  Speaker 3: off market, and I find another Compass buyer, then our.
• 34:29
  Speaker 2: Well, no, you're going to need to have another Compass
• 34:31
  Speaker 2: one in order to find it. Right, you can only
• 34:32
  Speaker 2: access it.
• 34:33
  Speaker 3: But if I can convince the seller to sell their
• 34:35
  Speaker 3: home under this guise, then I can avoid all the
• 34:39
  Speaker 3: marketing costs of going to MLS and get this extra incentive.
• 34:44
  Speaker 3: I mean, heck, Compass was paying their realtors bonuses for
• 34:48
  Speaker 3: getting their clients to pull their listings off of MLS.
• 34:52
  Speaker 2: The incentives here are just, again... I don't necessarily.
• 34:55
  Speaker 3: Have a problem with it if we're talking about a
• 34:57
  Speaker 3: realtor that makes up 10% market share, but that's not
• 34:59
  Speaker 3: what we're talking about here.
• 35:04
  Speaker 2: It's also wild to me that this is happening in
• 35:06
  Speaker 2: a world where, in theory, there should be more information
• 35:10
  Speaker 2: than ever out there about what's listed. And somehow this
• 35:16
  Speaker 2: is happening. I'm still trying to digest it and figure
• 35:21
  Speaker 2: out what you do with this. And I don't have
• 35:25
  Speaker 2: a good answer on it.
• 35:27
  Speaker 3: Again, we talk about monopolies all the time, and sometimes
• 35:30
  Speaker 3: they're really difficult to prove harm to the consumer.
• 35:33
  Speaker 2: This one is just not that difficult.
• 35:36
  Speaker 1: Yeah.
• 35:36
  Speaker 2: This one's pretty cool. Pretty low-hanging fruit. You know what
• 35:39
  Speaker 2: they're doing.
• 35:40
  Speaker 3: In certain markets, it's causing significant harm to people who
• 35:43
  Speaker 3: choose not to work with Compass Realtors.
• 35:45
  Speaker 2: It's a monopoly. It needs to be broken up.
• 35:47
  Speaker 1: Yeah.
• 35:48
  Speaker 2: I want to talk a little bit about this fun
• 35:50
  Speaker 2: little piece that... Tucker forwarded over on, well, this gas
• 35:56
  Speaker 2: station war between two stations.
• 35:59
  Speaker 4: So do you want to talk about it, or we
• 36:01
  Speaker 4: don't have time to play the audio?
• 36:04
  Speaker 2: So I guess we're going to talk about it. I
• 36:06
  Speaker 2: guess we'll talk about it. Or we could play it tomorrow.
• 36:08
  Speaker 2: Should we do it tomorrow? I would do it tomorrow.
• 36:11
  Speaker 4: We can't give it 90 seconds.
• 36:14
  Speaker 2: Okay, fair. Let's give that some more time tomorrow. I
• 36:20
  Speaker 2: want to talk a little bit about this piece from
• 36:21
  Speaker 2: the Wall Street Journal, then. America needs more capital. Well, okay.
• 36:28
  Speaker 4: Can I have more capital?
• 36:29
  Speaker 2: Basically, it's saying, hey, in order to finance all of
• 36:31
  Speaker 2: this AI development, we need more money coming in, to
• 36:35
  Speaker 2: which I say, okay, where are you going to get
• 36:37
  Speaker 2: it from? If you look at where money from external
• 36:40
  Speaker 2: sources has come from historically, number one, China. China. Mike,
• 36:46
  Speaker 2: do you think it would be a good idea or
• 36:48
  Speaker 2: a bad idea to have a bunch of Chinese capital
• 36:50
  Speaker 2: flood in to invest in U.S. data centers?
• 36:52
  Speaker 1: Ah, fine.
• 36:52
  Speaker 2: What's the worst that could happen? Seems bad. Okay, great.
• 36:55
  Speaker 2: We've crossed that off. Number two, the Middle East. Mike,
• 36:59
  Speaker 2: do they seem to have a lot of extra money
• 37:00
  Speaker 2: floating around right now? All got blown up recently. No,
• 37:03
  Speaker 2: the interesting thing is that they really don't because, A,
• 37:07
  Speaker 2: if you look at the Saudis just as an example,
• 37:09
  Speaker 2: they're basically trying to tread water because... A bunch of
• 37:13
  Speaker 2: their revenue got disrupted earlier this year. Their exports are
• 37:15
  Speaker 2: still down, and now they're trying to pay for a
• 37:17
  Speaker 2: war against the Houthis, so they don't really have a
• 37:19
  Speaker 2: bunch of money sloshing around, as evidenced by them killing
• 37:24
  Speaker 2: live golf and things along those lines. If you want
• 37:26
  Speaker 2: more capital, decrease U.S.
• 37:28
  Speaker 3: Government debt issuance by controlling deficits, and therefore some of
• 37:31
  Speaker 3: the buyers of U.S. government debt will be incentivized instead
• 37:35
  Speaker 3: to buy corporate debt. They'll move their capital there, and
• 37:38
  Speaker 3: you fix this problem.
• 37:39
  Speaker 2: But guess what? Haven't seen any administrations.
• 37:42
  Speaker 3: In the last.
• 37:43
  Speaker 2: Quarter century who are interested in that solution.
• 37:45
  Speaker 1: Yes.
• 37:45
  Speaker 2: Do we do we want to raise like an additional
• 37:48
  Speaker 2: trillion dollars in taxes this year? Doesn't seem like it.
• 37:51
  Speaker 2: Do we want to cut a trillion dollars in spending
• 37:53
  Speaker 2: this year? Sure. Doesn't seem like it. Thus, we have
• 37:57
  Speaker 2: no answers for you. There is no more capital. It's
• 38:00
  Speaker 2: it's just what it is. Taking a look at markets
• 38:03
  Speaker 2: as we head towards the top of the hour. S
• 38:05
  Speaker 2: & P still clinging to gains, up three points. NASDAQ
• 38:07
  Speaker 2: off two-thirds of a percent. Dow is up five-sixths of
• 38:11
  Speaker 2: a percent. When's the last time you heard five-sixths as
• 38:14
  Speaker 2: a percentage for the Dow? The answer's never until today.
• 38:20
  Speaker 2: Quick break for the rest of the day. We're going
• 38:21
  Speaker 2: to be back tomorrow. We'll wrap up the week on
• 38:24
  Speaker 2: the Financial Exchange.