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Why the Housing Market Still Isn’t Fixing Itself · The Financial Exchange Show

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1:06
Speaker 1: Zada and Paul Lane.
1:11
Speaker 2: Chuck Paul and Chucker with you here, and we've got
1:15
Speaker 2: markets mixed, but it's quite honestly more of what we've
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Speaker 2: seen so far this year, where the NASDAK is taking
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Speaker 2: a back seat, down about two hundred and eighty two
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Speaker 2: points one to quarter percent. SMP is trying to tread water.
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Speaker 2: It's down twenty one points right now, about a third
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Speaker 2: of a percent, and the Dow, which doesn't have as
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Speaker 2: much tech exposure, holding up pretty darn ok at the moment,
1:39
Speaker 2: up about two thirds of a percent or three hundred points.
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Speaker 2: So overall you've got again kind of mixed markets, but
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Speaker 2: the NASDAK is the laggard to this point. Bond's tenure
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Speaker 2: Treasury saying, I don't really care about anything. It's at
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Speaker 2: four point two seven two percent, down one tenth of
1:56
Speaker 2: a basis point from yesterday. Not sure that that moves
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Speaker 2: the needle in any way, shape or form. Oil nineteen
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Speaker 2: cents a barrel to sixty three p forty on West
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Speaker 2: Texas Intermediate triple A national average four. Gas prices up
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Speaker 2: four tenths of a cent over night two eighty eight
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Speaker 2: and seven tenths. We're up about seven cents over the
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Speaker 2: last month or so, so nothing huge, but about a
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Speaker 2: three percent move up in gas prices since the start
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Speaker 2: of January. When we take a look at precious metals,
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Speaker 2: gold is up ten dollars and eighty cents no ounce.
2:29
Speaker 2: It's a little less than a quarter percent. Given all
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Speaker 2: the action in gold recently, I don't know why anyone
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Speaker 2: even gets out of bed for that. It doesn't really
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Speaker 2: seem worth it if you're asking me my honest opinion
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Speaker 2: on it. You know, it's a far cry from what
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Speaker 2: we were seeing over the last couple months. But look,
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Speaker 2: you've gone through a little bit of a correction in
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Speaker 2: gold and just trying to see a little bit of
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Speaker 2: stability ideally, and so maybe you start to build a
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Speaker 2: little bit more of a firm bottom here. We'll see
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Speaker 2: how things develop over the coming days and weeks. On
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Speaker 2: that front, Pa, I want to talk a little bit
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Speaker 2: about housing. We got a couple pieces here. There is
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Speaker 2: one from market Watch that we'll start with. These two
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Speaker 2: charts show why buying a house is the hardest it's
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Speaker 2: been in decades. What are the charts, Paul?
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Speaker 3: Basically, people are staying in their homes for a lot
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Speaker 3: longer than they used to the average US homeowner is
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Speaker 3: up to eight and a half years living in the home.
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Speaker 3: That was the longest tenure that we've seen in the
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Speaker 3: last twenty five years, and specific to areas like some
3:35
Speaker 3: of ours where we broadcast Massachusetts and Connecticut, you've seen
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Speaker 3: these average tenure for each homeowner to exceed thirteen years.
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Speaker 3: So obviously part of that is the low mortgage rates
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Speaker 3: that many of us were fortunate to lock in during
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Speaker 3: the twenty one twenty era of two and a half
3:53
Speaker 3: three percent mortgages. That is leading to a lot of
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Speaker 3: people staying in their homes for a longer period of time.
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Speaker 3: And then you also have a lot of people that
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Speaker 3: are inheriting homes and continuing to live in them. So
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Speaker 3: you're seeing less on the inventory side from those two phenomenas.
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Speaker 3: I don't want to put too much on the inheritance
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Speaker 3: piece side of things, you know, that's part of it.
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Speaker 3: But there's that limited inventory that we've talked about a lot,
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Speaker 3: and then just people living in their homes for a
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Speaker 3: lot longer period of time than previous.
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Speaker 2: What changes this in your opinion? Does it? Let me
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Speaker 2: ask you this first, is this as big of a
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Speaker 2: problem as it's made out to be.
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Speaker 3: From an affordability standpoint, I do think it is a
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Speaker 3: problem that and the concern around it is reasonable. I
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Speaker 3: would lean towards overall market forces trying to resolve this
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Speaker 3: rather than any specific policy being implemented, particularly the ones
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Speaker 3: that have been rumored to be implemented. I can understand
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Speaker 3: some of the changes maybe around legislation, but obviously a
4:56
Speaker 3: lot of that stuff is pretty localized, so it's going
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Speaker 3: to be hard to make sweeping changes there. So yes,
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Speaker 3: I think it's a problem that is worth discussing, and
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Speaker 3: it's worth all the attention that it gets. But I'd
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Speaker 3: be more inclined to kind of take the more patient
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Speaker 3: approach of let the market forces dictate resolving this problem
5:13
Speaker 3: going forward. From an affordability standpoint, if you look at
5:16
Speaker 3: the combination of the price increases plus the interest rates,
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Speaker 3: it is historically in a tougher spot. I know listeners
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Speaker 3: will say, geez, my first mortgage was you know, twelve
5:25
Speaker 3: percent interest, fifteen percent interest, but that coupled with the
5:28
Speaker 3: prices going up so much. I do think it's it's
5:31
Speaker 3: an issue that's worth talking about at least well.
5:33
Speaker 2: And the other piece, look, we subsidize the housing industry
5:37
Speaker 2: a ton like if you are a homeowner and you
5:41
Speaker 2: receive the mortgage interest deduction, like your purchase is being subsidized.
5:46
Speaker 2: It's I'm not saying this is inherently bad or good.
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Speaker 2: What I'm just saying is that this is something that
5:53
Speaker 2: exists and so ultimately, like we're talking about you know,
5:57
Speaker 2: tens of billions of dollars a year that we are
6:00
Speaker 2: already pushing out in order to you know, increase demand
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Speaker 2: in housing. And as we've talked about, when you give
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Speaker 2: people money for something but you don't increase the supply
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Speaker 2: of it, you're not actually helping the problem.
6:16
Speaker 1: Right.
6:16
Speaker 2: We see this with higher education, where it's oh, the
6:19
Speaker 2: cost of college has gotten too expensive. What do we do, Hey,
6:21
Speaker 2: here's some more you know, student loan money. Does that
6:24
Speaker 2: actually make college cheaper? No, college is just raise the
6:27
Speaker 2: cost of it. We see it in healthcare. Hey, you
6:30
Speaker 2: know what we're gonna do. We're going to expand access
6:33
Speaker 2: to healthcare. Well, great, are you gonna increase the number
6:35
Speaker 2: of doctors and hospitals and things like that? No, why
6:38
Speaker 2: would we go and do something like that? And look
6:40
Speaker 2: what's happened to the cost of health care housing? We
6:43
Speaker 2: talked about this last year during the two years ago.
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Speaker 2: I guess now, during the presidential campaign, the Harris campaign
6:50
Speaker 2: said that they were going to try to I forget
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Speaker 2: if it was ten twenty five thousand dollars that they
6:55
Speaker 2: were going to try to offer for first time home buyers.
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Speaker 2: And I made the point at the time. I'm like, look,
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Speaker 2: if I'm a home seller and I know that you're
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Speaker 2: getting an extra ten to twenty five thousand dollars to
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Speaker 2: by a house, come on my listing price. Hey, I'm
7:08
Speaker 2: gonna raise my price ten to twenty five thousand dollars
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Speaker 2: because you gotta extra money right now. And what do
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Speaker 2: you do five years from now? You just keep doing
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Speaker 2: this in perpetuity, and pretty soon we're just like throwing
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Speaker 2: more at the problem. So this gets to the piece
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Speaker 2: than from the Wall Street Journal. Home builders turned to
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Speaker 2: White House for help on inventory glots. So here here's
7:29
Speaker 2: the deal. There is in the monthly housing data that
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Speaker 2: the Census Bureau puts out, one of the things they
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Speaker 2: track is homes that are completed but not sold. Okay,
7:45
Speaker 2: right now, the latest day that we have because the
7:48
Speaker 2: governments shut down and everything, not the three day one,
7:50
Speaker 2: but like the forty or fifty day one that we
7:52
Speaker 2: had in the end of the year. Right now, the
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Speaker 2: most recent data we have is for October, which showed
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Speaker 2: one hundred and twenty two thousand homes that were completed
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Speaker 2: but for sale. That is the highest level since July
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Speaker 2: of two thousand and nine, so we haven't had this
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Speaker 2: many homes for sale that are completed since that time.
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Speaker 2: The only times that we've seen higher levels than this
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Speaker 2: are March of two thousand and six through July of
8:22
Speaker 2: two thousand and nine. So basically the housing bubble. So
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Speaker 2: what this is telling you is that builders are sitting
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Speaker 2: on a ton of inventory that they finished but can't sell.
8:33
Speaker 2: Why is this my problem? Did anyone force you to
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Speaker 2: build the house? That's the risth that you take? Uh,
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Speaker 2: I'm sorry. Like this is what people got all all
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Speaker 2: upset about during the financial crisis was banks that went
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Speaker 2: out and did a ton of lending and said, oh,
8:51
Speaker 2: we're gonna get the gains when times are good, capitalism
8:54
Speaker 2: for me. But when everything goes bad, hey, we actually
8:57
Speaker 2: want the socialism and subsidize our losses too, And you
9:01
Speaker 2: guys get screwed the little guy. So now we got
9:04
Speaker 2: homebuilders and again homebuilders are of all different shapes and sizes.
9:09
Speaker 2: You've got your giant ones that build, you know, fifty
9:12
Speaker 2: sixty thousand units a year, you know, you're lenars of
9:15
Speaker 2: the world.
9:16
Speaker 4: D R.
9:16
Speaker 2: Horton those guys. You've got your small guys that build
9:19
Speaker 2: three homes a year. And my guess is that when
9:23
Speaker 2: we look at this, the vast majority of the problems
9:26
Speaker 2: are the big ones. But I'm sympathetic to the idea
9:29
Speaker 2: that hey, someone who built, you know, two homes last
9:31
Speaker 2: year might be having trouble selling one. I get that,
9:35
Speaker 2: But every business goes through these booms and busts, and
9:38
Speaker 2: you have to be able to manage it. If all
9:40
Speaker 2: we do is like every time something goes wrong, be like, uh, well,
9:45
Speaker 2: I guess we got to bail you out. Well, then
9:46
Speaker 2: what are we actually doing here? Right? Like, we're just
9:49
Speaker 2: going to continue to allow for the misallocation of capital.
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Speaker 2: And in this case, homebuilders clearly built homes that are
9:56
Speaker 2: too big, too expensive for people to buy. And now
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Speaker 2: it's oh, well, we want to, you know, move to
10:02
Speaker 2: some kind of new federalized rent to own program so
10:06
Speaker 2: that we can clear this inventory. No price your stuff lower,
10:10
Speaker 2: clear the inventory and move on right, you made bad decisions.
10:14
Speaker 2: Just eat it. It happens to all of us. We
10:16
Speaker 2: don't always all win all the time. Sometimes we have
10:19
Speaker 2: to lose, and we just got to deal with it
10:21
Speaker 2: because ultimately, the problem that these that we have here
10:25
Speaker 2: is not too many units available. No, it's too many
10:29
Speaker 2: units available, too high a price. And so if you
10:32
Speaker 2: just sell the things for less, yes, I know that
10:35
Speaker 2: makes your margin suck. Yes, I know that that hurts.
10:38
Speaker 2: But ultimately, it's not my responsibility to deal with the
10:43
Speaker 2: housing glut.
10:45
Speaker 3: No putting some policies and procedures that could make it easier.
10:48
Speaker 2: Which isn't even a glut, by the way, it's the
10:49
Speaker 2: worst thing. Like technically there's a housing shortage.
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Speaker 3: Right, oh yeah, the decade plus housing shortage. If and
10:58
Speaker 3: none of none of the proposals that I've heard from
11:00
Speaker 3: a policy perspective makes sense, other than if you could
11:03
Speaker 3: drill down and try and ease some of the zone conversations.
11:07
Speaker 3: But like we've seen it locally here, it's just it's
11:09
Speaker 3: not gonna have. It's a hard, really hard hill to
11:13
Speaker 3: climb to get more inventory out there and change zoning
11:17
Speaker 3: and get more people out there building. But these proposals
11:23
Speaker 3: on rent to own or a stimulus of a one
11:26
Speaker 3: time payment. It just doesn't solve the problem. You know,
11:30
Speaker 3: rent control that was talked about locally in the Boston
11:33
Speaker 3: are like, these are not things that are going to
11:35
Speaker 3: lead to fixes.
11:36
Speaker 2: You want to know something that I think would be
11:38
Speaker 2: interesting as a as a potential answer the problem that
11:42
Speaker 2: we have is we got all these home sitting out there,
11:44
Speaker 2: but no one can buy them right now because they're
11:46
Speaker 2: too expensive. Right the one place that I think you
11:49
Speaker 2: could get interesting with it potentially, And again I say
11:52
Speaker 2: this despite the fact that I don't like the idea
11:55
Speaker 2: of trying to subsidize housing more than we already do.
11:59
Speaker 2: If you had some kind of program for the next
12:02
Speaker 2: two years, call it for mortgage rate buydowns, that is
12:07
Speaker 2: some kind of federal backing for it during that time,
12:09
Speaker 2: where you say, look, you buy a home in this
12:12
Speaker 2: program this year, here the qualifications you need to have,
12:14
Speaker 2: you know, whatever it is. You get a mortgage rate
12:17
Speaker 2: of the national average minus two percent this year, Next
12:20
Speaker 2: year it's minus one percent, so you're gradually stepping up,
12:23
Speaker 2: and by twenty twenty eight you are back to the
12:26
Speaker 2: full normal mortgage payment. Okay, like we can maybe get somewhere,
12:31
Speaker 2: because then you give people the ability to buy homes
12:34
Speaker 2: today with a gradual step up into that higher payment
12:38
Speaker 2: over time and.
12:39
Speaker 3: Allow for their incomes.
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Speaker 2: To theory, you would need to have pretty steep qualifications
12:44
Speaker 2: for this. This is not something that you do with
12:46
Speaker 2: you know, low credit quality, because then you're just basically saying, Okay,
12:50
Speaker 2: we're going to buy the homes now just so we
12:51
Speaker 2: can foreclose on them in two years. That doesn't do
12:53
Speaker 2: anyone any good. But hey, let's let's get things moving.
12:58
Speaker 2: Maybe you can get there. Even that I really still
13:01
Speaker 2: I'm kind of like, okay, like this is not like,
13:04
Speaker 2: this is not what we should be doing, but I
13:06
Speaker 2: can get there. Maybe quick break here when we come back,
13:09
Speaker 2: we got uh, what do we got? We got trivia
13:12
Speaker 2: and then we're talking Walmart after.
13:13
Speaker 1: This text US six one, seven, three, six, two, thirteen
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14:12
Speaker 1: On this day.
14:12
Speaker 4: In two thousand and four, Mark Zuckerberg launched Facebook from
14:16
Speaker 4: his Harvard dorm room. The story of Facebook's rise was
14:21
Speaker 4: brilliantly chronicled in the twenty ten movie The Social Network.
14:25
Speaker 4: Well later this year, the sequel to The Social Network,
14:29
Speaker 4: The Social Reckoning, will make its way to theaters. So
14:33
Speaker 4: our trivia question today, which actor portrays Mark Zuckerberg in
14:38
Speaker 4: the upcoming Social Network sequel? Once again, which actor portrays
14:43
Speaker 4: Mark Zuckerberg in the upcoming Social Network sequel? Be the
14:48
Speaker 4: fifth person today to text us at six one seven three, six,
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Speaker 4: two thirteen eighty five with the correct answer along with
14:54
Speaker 4: the keyword trivia, and you win a Financial Exchange show
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Speaker 4: t shirt once again. The fifth correct response to text
15:00
Speaker 4: us to the number six one, seven thirty six, two
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Speaker 4: thirteen eighty five with the correct answer along with the
15:06
Speaker 4: keyword trivia will win that T shirt. See complete contest
15:09
Speaker 4: rules at Financial chainshow dot Com.
15:12
Speaker 2: Walmart becoming the first trillion dollar retailer, at least conventional retailer.
15:18
Speaker 2: I know they do a lot of e commerce, but
15:19
Speaker 2: they still have you know, pretty massive brick and mortar presence,
15:23
Speaker 2: first trillion dollar retailer with the big move up that
15:26
Speaker 2: they've made in the last couple of months, and a
15:32
Speaker 2: couple things going on here, in my opinion, Paul. The
15:35
Speaker 2: first is Walmart as always runs you know, pretty good,
15:40
Speaker 2: pretty clean, pretty efficient business where revenue is growing about
15:43
Speaker 2: five percent a year, which is pretty good for a
15:45
Speaker 2: business of that type. Their earnings are growing by about
15:48
Speaker 2: seven percent a year, which is again, you know, pretty
15:51
Speaker 2: good for business of that type. But there's nothing that
15:55
Speaker 2: really suggests that they should be up you know, twenty
15:57
Speaker 2: five percent in the last few months. And so ultimately,
16:02
Speaker 2: what I think is partly going on here is, Look,
16:05
Speaker 2: you've got investors that are you know, moving money out
16:08
Speaker 2: of these big tech names that have been struggling for
16:10
Speaker 2: the last three to four months now. They're not necessarily
16:14
Speaker 2: wanting to sell equities as a whole. And so when
16:17
Speaker 2: you get money that moves out of big tech with
16:19
Speaker 2: all the weight that's behind it, it has to go
16:22
Speaker 2: somewhere and ends up going into these other names and
16:24
Speaker 2: making these companies rally. I'm not sure how sustainable that
16:28
Speaker 2: is long term, which is why I again, the last
16:31
Speaker 2: few times that you've had these other companies try to
16:34
Speaker 2: become market leadership, it hasn't really worked. Is it different
16:38
Speaker 2: this time? Maybe? But this is what I think is
16:41
Speaker 2: really driving Walmart over the last couple of months. Not
16:44
Speaker 2: that you know investors suddenly looked at it and are like, wow, Walmart,
16:47
Speaker 2: what a company? Have you guys heard of this? Like no,
16:49
Speaker 2: like everyone's heard of Walmart. Gim it's it's fine.
16:52
Speaker 3: Yeah, it's a couple of different things kind of come
16:54
Speaker 3: of lesson together. Like you mentioned, there is some appeal.
16:58
Speaker 3: I feel like Costco Stock hasn't form the same way,
17:00
Speaker 3: but there is. These two brands within retail have a
17:04
Speaker 3: reputation that leads for investors to be more willing to
17:08
Speaker 3: pay a higher premium just because they're such great operators
17:11
Speaker 3: and executors. And with Walmart, the story has been for
17:15
Speaker 3: the Street that they have invested significantly in building out
17:18
Speaker 3: their e commerce sales and finally have gotten to that
17:22
Speaker 3: division to operate as a profitable division, so sort of
17:26
Speaker 3: inching and eroding on Amazon's advantage within retail. The thing
17:30
Speaker 3: that differentiates Amazon obviously compared to Walmart is they have
17:34
Speaker 3: a bunch of other businesses that are incredibly profitable and
17:37
Speaker 3: sophisticated that Walmart lacks in that department. But ultimately it's
17:43
Speaker 3: been a tremendous turnaround story for Walmart, not in the
17:46
Speaker 3: sense of that their business was ever in jeopardy, but
17:48
Speaker 3: this e commerce transition they had fallen behind to Amazon,
17:52
Speaker 3: but really over the course of the last decade have
17:54
Speaker 3: made significant inroads with you know, buying online pickup at stores,
17:58
Speaker 3: and now ninety five percent households can get same day
18:01
Speaker 3: delivery from Walmart. So that's the story behind the But
18:04
Speaker 3: you're right, from this isn't the situation like within Vidia's
18:09
Speaker 3: meteoric rise that we've chronicled on the show the last
18:11
Speaker 3: few years that came with revenue growth of you know,
18:14
Speaker 3: sixty seven percent year over year. This isn't that story.
18:18
Speaker 3: It's more about just Walmart's transition. Maybe people gravitaty something
18:23
Speaker 3: safer crazy that it's in the It's a Nasdaq stock
18:28
Speaker 3: now and part of some of the the ETFs that
18:31
Speaker 3: are more tech focused out there.
18:34
Speaker 2: Canada to claim that Stalantis and GM oh hundreds of
18:36
Speaker 2: millions of dollars to their government. What's happening here.
18:41
Speaker 3: Stalantis has received a billion dollars to reconfigure its Blampton
18:48
Speaker 3: Brampton plant, while GM had received two hundred and sixty million.
18:52
Speaker 3: This is in Canadian dollars for its Ingersol factory, and
18:56
Speaker 3: so they are looking to get that money back Canada
18:59
Speaker 3: because us the scaled back production of these two car
19:04
Speaker 3: manufacturers within Canada, likely a result of some of the
19:09
Speaker 3: tariffs that are in place, are just pivoting to other areas.
19:12
Speaker 3: The auto production in Canada has declined by twenty three
19:16
Speaker 3: percent between Stillantis, GM, and Ford last year from fifty
19:23
Speaker 3: six percent in twenty sixteen.
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Speaker 2: What's interesting here governments usually don't seek to recoup this
19:28
Speaker 2: money because generally it is a disincentive for other companies
19:32
Speaker 2: to want to expand there. So this is kind of
19:34
Speaker 2: an interesting one. Quick break Trivia Answer and Wall Street Watcher.
19:38
Speaker 1: Next, bringing the latest financial news straight to your radio.
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Speaker 1: Every day. It's the Financial Exchange on the Financial Exchange
19:49
Speaker 1: Radio Network. Time now for Wall Street Watch a complete
19:55
Speaker 1: look at what's moving markets so far today right here
19:58
Speaker 1: on the Financial Exchange Radio Network.
20:01
Speaker 4: After yesterday's AI driven sell off, Marcus today our mixed
20:04
Speaker 4: territory as traders sift through a new flurry of fourth
20:08
Speaker 4: quarter earnings. Right now, the Dow is up three quarters
20:11
Speaker 4: of a percent or two or three hundred and sixty
20:14
Speaker 4: five points higher. SMP five hundred, down a third of
20:17
Speaker 4: a percent, nasdack down one point two percent or two
20:21
Speaker 4: hundred and eighty four points so selling off again today.
20:24
Speaker 4: Russell two thousand now down over eight tenths of a
20:26
Speaker 4: percent ten your treasure Reeld currently flat at four point
20:30
Speaker 4: two seven six percent, and crude oil down about a
20:34
Speaker 4: quarter percent, rating just above sixty three dollars barrel. Well.
20:38
Speaker 4: AMD shares are sinking fifteen percent, despite the chip maker
20:41
Speaker 4: notching at thirty four percent jump in fourth quarter sales
20:45
Speaker 4: driven by its its data center business. AMD also said
20:50
Speaker 4: its data center revenue could grow over sixty percent in
20:53
Speaker 4: the coming years as demand for AI hyperscalers grows, sticking
20:58
Speaker 4: with the AI sector, where super Mario or Computer shares
21:01
Speaker 4: are rallying thirteen percent after the company b core to
21:04
Speaker 4: the earnings and revenue expectations as super Micro saw a
21:09
Speaker 4: strong demand for its AI optimized servers. The company also
21:13
Speaker 4: raised its annual revenue forecast. Meanwhile, Texas Instruments agreed to
21:18
Speaker 4: purchase chip designer Silicon Laboratories for seven and a half
21:21
Speaker 4: billion dollars. Silicon stock surging forty eight percent on that news,
21:25
Speaker 4: while Texas Instruments is down by over half a percent. Elsewhere,
21:29
Speaker 4: Eli Lilly jumping nine percent higher after the drug maker
21:33
Speaker 4: posted higher than expected results for the fourth quarter. While
21:36
Speaker 4: its revenue forecast also impressed. Uber saw its quarterly profit
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Speaker 4: decline and offered a conservative guidance. Uber shares down by
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Speaker 4: three percent. More big tech earnings on the way after
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Speaker 4: today's closing bell were Google parent company Alphabet will post
21:51
Speaker 4: their results. I'm Tucker Silva and that is Wall Street Watch.
21:55
Speaker 4: And in the previous segment, we asked you the trivia
21:57
Speaker 4: question which actor portrays Mark Zuckerberg in the upcoming Social
22:01
Speaker 4: network sequel. Nope, it's not Jesse Eisenberg again. It's gonna
22:05
Speaker 4: be Jeremy Strong. Yeah, that's right. Edward from Bill Recker
22:09
Speaker 4: Mass is our winner today taking on a Financial Exchange
22:12
Speaker 4: Show t shirt. Congrats to Edward and we play trivia
22:15
Speaker 4: every day here in the Financial Exchange See complete contest
22:18
Speaker 4: rules at Financial Exchange Show dot com.
22:21
Speaker 2: And what is the best drama since the last season
22:24
Speaker 2: of The Bachelor? In video? AI chip sales to China
22:28
Speaker 2: stalled by US security review. I just I can't keep
22:33
Speaker 2: up with this at this point, I sarcasm on the drama, right, No,
22:38
Speaker 2: this is pretty dramatic. It's the most dramatic season of
22:40
Speaker 2: semiconductors ever. I mean it's wild. It's will they buy them?
22:45
Speaker 2: Won't they buy them? They want them? They don't want them?
22:47
Speaker 2: Will sell them to you? We can't sell them to you.
22:49
Speaker 2: We will sell them to you. We can't sell them
22:52
Speaker 2: to you.
22:52
Speaker 3: Like ready to throw I'm ready to throw in the
22:54
Speaker 3: towel on it. It's a little exhausting.
22:57
Speaker 2: So here's the deal, and I'll quote the Financial Times
23:01
Speaker 2: here in video, sales of two hundred AI trips to
23:04
Speaker 2: China are still waiting final approval from Washington. Nearly two
23:07
Speaker 2: months after Donald Trump, Greenwood exports as the US government
23:10
Speaker 2: conducts a national security review before granting licenses to Chinese customers.
23:17
Speaker 2: Chinese customers are not placing h two hundred chip orders
23:19
Speaker 2: with Nvidia until it becomes clear whether they will be
23:21
Speaker 2: able to secure the licenses or what conditions will be attached.
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Speaker 2: People familiar with the discussions told the Financial Times, Okay,
23:29
Speaker 2: so we've authorized the sales, but we haven't authorized the sales,
23:34
Speaker 2: and China wants to buy them, but they're not buying them.
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Speaker 3: And they have an authorized who could potentially buy them.
23:43
Speaker 2: Look, here's the deal, quite honestly, if you need to
23:46
Speaker 2: conduct a national security review in order to sell something
23:50
Speaker 2: to China, you shouldn't sell it to them. It's kind
23:55
Speaker 2: of how it is.
23:57
Speaker 3: Yet, in particularly, they're highlighting some pieces here of these
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Speaker 3: regulations or these reviews as to what the chip will
24:05
Speaker 3: be used for at its end form, like when it
24:07
Speaker 3: gets and it's like once you've let the horse out
24:11
Speaker 3: of the barn, or the chip out of the barn
24:13
Speaker 3: in this case, like you're done, like said, what are
24:17
Speaker 3: you gonna do? You have atract that it's either you
24:20
Speaker 3: sell them and you recognize that they're gonna be used
24:24
Speaker 3: for whatever they deem necessary or you don't sell them. Yeah,
24:29
Speaker 3: I just there's only so much due diligenies you can
24:32
Speaker 3: do ahead of it, but then ultimately you gotta let
24:34
Speaker 3: it go.
24:35
Speaker 2: The Commerce Department has completed its analysis, according to one
24:38
Speaker 2: person familiar with the situation, but several people with knowledge
24:41
Speaker 2: of the interagency discussions, so the State Department was pushing
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Speaker 2: for tougher restrictions to make it harder for China to
24:47
Speaker 2: use H two hundred chips in ways that would undermine
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Speaker 2: US national security. One person said the State department stance
24:53
Speaker 2: was frustrating in video. Quote, State is making it very difficult,
24:57
Speaker 2: said the person. So a couple things here. The first is, look,
25:04
Speaker 2: these things are always going on between different government agencies.
25:08
Speaker 2: There's always you know, turf battles over you know who,
25:11
Speaker 2: as you know, final say in this and that and whatever. Ultimately,
25:16
Speaker 2: where you land on this is the President said that
25:21
Speaker 2: they were going to authorize the sale of these chips,
25:23
Speaker 2: and whether you believe it's a good idea or a
25:24
Speaker 2: bad idea, that should be happening at some point now
25:29
Speaker 2: with this national security review. If the State Department can't
25:32
Speaker 2: get comfortable with it, then I think you kind of
25:35
Speaker 2: get back to the first place, which is, hey, should
25:38
Speaker 2: this sale have been authorized to begin with? You know,
25:42
Speaker 2: there's a reason why we don't sell Tomahawk missiles to China.
25:47
Speaker 2: And the reason why is even if China says, hey,
25:50
Speaker 2: well we won't use them against you, like okay, but
25:53
Speaker 2: you know that doesn't really do us any good once
25:55
Speaker 2: we've sold them to you. Yeah, once a missile has
25:58
Speaker 2: been five. Yeah, there's a reason why when the US
26:01
Speaker 2: was running not was, but during the early days of
26:04
Speaker 2: the F thirty five program, when Turkey decided to buy
26:08
Speaker 2: a bunch of Russian missile systems, why the US said, hey,
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Speaker 2: we're gonna cut you out of the program because you're
26:13
Speaker 2: no longer trustworthy on this. They didn't go to who
26:17
Speaker 2: builds the F thirty five Is it Boeing or locky Key.
26:21
Speaker 2: They didn't go to Lockkeed and we're like, hey, like,
26:23
Speaker 2: can you make these planes? So that they know it
26:26
Speaker 2: was like, hey, you're not going to be involved in
26:28
Speaker 2: the manufacturing any more, Turkey, and you can't buy these
26:31
Speaker 2: any more, Turkey because you bought a bunch of Russian
26:34
Speaker 2: missile systems and we don't want data from our planes
26:38
Speaker 2: being you know, fed into Russian radars and stuff that
26:42
Speaker 2: can you know, end up giving them a better profile
26:45
Speaker 2: of how these things actually work in combat. So I'm sorry,
26:50
Speaker 2: like to a certain extent, if the State Department comes
26:52
Speaker 2: out and is like, hey, we can't figure out how
26:55
Speaker 2: to make this work in a way that alleviates our
26:57
Speaker 2: national security concerns, maybe that's the answer, and sorry, Jensen Wang,
27:03
Speaker 2: but you just can't sell to China. Like maybe that's
27:06
Speaker 2: where you end up.
27:09
Speaker 1: Now.
27:09
Speaker 2: The counterpoint is that, okay, if you can sell to
27:12
Speaker 2: you know, any of the Gulf States, they can, then
27:15
Speaker 2: you know, sell to China anyways, because the UA and
27:17
Speaker 2: the Kataris are just basically brokers of this stuff and
27:19
Speaker 2: it'll be like okay, like here you go. Yeah, So
27:23
Speaker 2: I don't know, I kind of get to if the
27:26
Speaker 2: national security people say no, we don't want to send
27:30
Speaker 2: this to this potentially adversarial country, maybe that's the answer.
27:35
Speaker 2: But that's just kind of me.
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28:45
Speaker 2: Piece in the Wall Street Journal, Microsoft's Pivotal AI product
28:48
Speaker 2: is running into big problems. Well quote here. Microsoft's copilot
28:52
Speaker 2: chatbot has become central to its artificial intelligence strategy. As
28:56
Speaker 2: the company's coost partnership with open Ai diminishes, but the
28:58
Speaker 2: effort to build it up is a chat g alternative
29:01
Speaker 2: has been tough going. Confusing, brand positioning and interoperability problems
29:06
Speaker 2: have frustrated users. Current and former employees have worked on
29:10
Speaker 2: Microsoft's AI products said only a small proportion of subscribers
29:13
Speaker 2: to Microsoft Enterprise Suite use Copilot, and it percentage you
29:17
Speaker 2: favorite over Google's Gemini or other tools has decreased in
29:20
Speaker 2: recent months. So I spent a little bit of time,
29:26
Speaker 2: maybe a year or so ago, trying to play around
29:29
Speaker 2: with Copilot. I spent a little bit more time earlier,
29:33
Speaker 2: I guess maybe a couple months ago as well, just
29:35
Speaker 2: being like, hey, what can it actually do and what
29:37
Speaker 2: can it not? And I found it incredibly frustrating because
29:41
Speaker 2: it basically sucked at everything I asked it to do.
29:45
Speaker 2: I would give it a word document and PowerPoint and
29:47
Speaker 2: say make me a ten slide presentation of this word document.
29:52
Speaker 2: And the first problem was it giving me twenty to
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Speaker 2: thirty slides and I'm like, no, shorten it, and it
29:58
Speaker 2: didn't understand how to do that. I could not make
30:01
Speaker 2: it give me the list of slides that I just
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Speaker 2: the number of slides I wanted, not even good or bad,
30:05
Speaker 2: just the number. So then I was like, okay, maybe
30:08
Speaker 2: powerpoints not its thing. Maybe maybe let's do Excel YEP.
30:12
Speaker 2: And I got you know, a whole bunch of things,
30:13
Speaker 2: and I was like, find me all of the duple
30:15
Speaker 2: kits in this list, and it couldn't do it. And
30:18
Speaker 2: it's like, well, if I can't do basic stuff like that,
30:21
Speaker 2: why am I going to trust it doing anything more complicated?
30:24
Speaker 2: And so I gave up on it because the user
30:27
Speaker 2: experience sucked. It was just like banging my head against
30:30
Speaker 2: the wall over and over. And if very basic things
30:33
Speaker 2: weren't going to work, then I like, I don't want
30:37
Speaker 2: to need to be like taught how to use it,
30:40
Speaker 2: Like no one taught me how to use Google. I
30:42
Speaker 2: just you know, Googled one day like giant you know,
30:46
Speaker 2: squid pictures and it was like, oh, here's the giant squid,
30:49
Speaker 2: Like great, you can see it. I don't need to
30:51
Speaker 2: be like, well, you're asking it the wrong way. Try
30:54
Speaker 2: using a prompt this way. No, like, either it works
30:57
Speaker 2: and it's good or it doesn't and it sucks.
30:59
Speaker 3: Yeah, you have to lower the barriers to entry as
31:02
Speaker 3: the user, Like you can't make the user have to
31:04
Speaker 3: go through a sophisticated process and understand it because they
31:06
Speaker 3: have a significant amount of competition in the space. And
31:08
Speaker 3: that's what this article is getting at, and that's the
31:11
Speaker 3: feedback that I've heard from other people who have used it.
31:13
Speaker 3: It's just putting together powerpoints. Microsoft has the greatest strategic
31:18
Speaker 3: advantage of being able to potentially deploy successful artificial intelligence
31:23
Speaker 3: youth because of its dominance in the enterprise space. They
31:27
Speaker 3: have all of the seats at the table of the
31:31
Speaker 3: suite of Microsoft products, yes, so that they have the
31:33
Speaker 3: best audience for it, but so far the execution on
31:37
Speaker 3: that has been really weak. They have the advantage that
31:41
Speaker 3: they can rest on the laurels of the tremendous amount
31:45
Speaker 3: of enterprise exposure that they have that they can continue
31:49
Speaker 3: to work shop this and try to make it better.
31:51
Speaker 3: But I didn't even realize, Chuck, that they have an
31:53
Speaker 3: AI chatbot. I mean, that's another thing that we were
31:55
Speaker 3: talking about off air. It's like, it just seems like
31:57
Speaker 3: that game is the worst game to be in with
32:00
Speaker 3: a large language model chatbot space. It seems like the
32:04
Speaker 3: enterprise tool that would be the space to go, But
32:06
Speaker 3: they're losing ground there so far, they're not making significant
32:10
Speaker 3: inroads on all its Microsoft Office customers.
32:13
Speaker 2: I think part of this, also, like where I continue
32:15
Speaker 2: to get to, is these companies are just in this
32:19
Speaker 2: this like gold Rust, trying to build this stuff as
32:22
Speaker 2: quickly as possible. Anyone who's listening, who's like ever worked
32:26
Speaker 2: in a large company knows that it takes forever to
32:29
Speaker 2: make decisions, like in particular, AI is being pitched to
32:33
Speaker 2: all these like hospitals and healthcare companies. If you've ever
32:37
Speaker 2: seen how a hospital makes their IT decisions, these are
32:41
Speaker 2: things that take like years to play out at best.
32:45
Speaker 2: And then, by the way, once you finally make those decisions,
32:48
Speaker 2: you get all of your doctors yelling at your chief
32:50
Speaker 2: technology officer for like three years because you didn't train
32:53
Speaker 2: your people well enough on what to actually do with it.
32:56
Speaker 2: So I continue to get very nervous that companies are
33:01
Speaker 2: building out all this capacity. And I'm not saying we're
33:04
Speaker 2: not gonna use more AI. I think we are, but
33:06
Speaker 2: I don't know that we're gonna use exponentially more every
33:10
Speaker 2: week and every month, And it feels like that's what's
33:13
Speaker 2: being built. Let's take a quick break. When we come back,
33:16
Speaker 2: we'll do a little bit of stack root lets.
33:18
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34:28
Speaker 2: Paul, what do you got for stack Roulette? Chuck?
34:30
Speaker 3: The NFL as it approaches its pinnacle event to the
34:34
Speaker 3: Super Bowl this Sunday is eyeing new TV deals. AKA,
34:38
Speaker 3: they've got their hands out. They want more money, more
34:41
Speaker 3: money from all of its partners. Viewership this season has
34:45
Speaker 3: reached record levels that they haven't seen since nineteen eighty nine.
34:48
Speaker 3: The revenue for the league is on track to do
34:50
Speaker 3: about twenty five billion. They are just running on all
34:54
Speaker 3: cylinders and so they ink their media deal back in
34:57
Speaker 3: twenty twenty one. With many of its partners, they've pretty
35:01
Speaker 3: much tried to sell every TV package out there. They've
35:04
Speaker 3: sold off their NFL Network and Red Zone. They've sold
35:08
Speaker 3: off individual games to Netflix and other streaming providers out there.
35:12
Speaker 3: But basically what they're looking at is the NBA had
35:15
Speaker 3: struck a deal I believe that was twenty twenty four
35:18
Speaker 3: for eleven year seventy six billion dollars for its media rights.
35:22
Speaker 3: Some of its partners, the NBA one are paying more
35:26
Speaker 3: for the NBA than they are for the NFL on
35:29
Speaker 3: an annual basis. That includes NBC in prime video. So
35:33
Speaker 3: what the NFL is looking to do is put the
35:35
Speaker 3: screws down to its partners. Because it's got some partners
35:38
Speaker 3: like CBS and Fox that if they don't have the NFL,
35:41
Speaker 3: check what are they left with? What do they really have?
35:45
Speaker 3: So even though these deals are set to go through
35:47
Speaker 3: twenty thirty, it looks like they're going to start pinning
35:50
Speaker 3: them down and threatening potentially again. This is all alleged
35:54
Speaker 3: that three years prior to the deal ending in the
35:58
Speaker 3: twenty thirties that they'll cut them out of the picture.
36:02
Speaker 3: And this is off the backs of the NFL also
36:04
Speaker 3: announcing they're gonna have potentially there's been the rumors about
36:07
Speaker 3: going to eighteen games that's been kicked around, though that
36:10
Speaker 3: hasn't been talked about with the players union. And they're
36:12
Speaker 3: gonna have nine international games next year, and in fact,
36:15
Speaker 3: I don't know if this is for certain, but there's
36:18
Speaker 3: one in Australia. Some of these games domestically are gonna
36:22
Speaker 3: be Australia, Yes, Melbourne next year, like a regular season game.
36:26
Speaker 3: A regular season game.
36:28
Speaker 2: Oh my god, that's the dumbest thing I've ever heard.
36:29
Speaker 3: So I think I had read and I could be
36:32
Speaker 3: correct on this, and Tuck you might have to check
36:34
Speaker 3: me on that.
36:34
Speaker 2: This would be like three am here, I'm not I
36:38
Speaker 2: don't know how you can fly NFL players literally around
36:43
Speaker 2: the world. And I know that they'll like try to
36:45
Speaker 2: do it with the bye week and everything like that.
36:49
Speaker 2: Will you will not recover from that travel for the
36:52
Speaker 2: whole season.
36:53
Speaker 3: They're gonna do ten or eleven am on the the
36:56
Speaker 3: United there so that they align with primetime here.
37:00
Speaker 2: If a flight is insane, you're gonna make someone play
37:03
Speaker 2: a football game after doing that?
37:05
Speaker 3: Well, you know they care about their players so much.
37:07
Speaker 4: Oh, it's gonna be the most luxurious flight though, let's
37:13
Speaker 4: you know it will be.
37:14
Speaker 2: But Tucker, it's still a twenty hours flight, yea.
37:17
Speaker 4: You know, like if they go to eighteen games, teams
37:20
Speaker 4: are gonna get two bye weeks.
37:21
Speaker 2: There's no way or why not put them on a boat.
37:24
Speaker 2: Put them on a boat, you know, like really get
37:28
Speaker 2: like some luxury just like hang out there. How does
37:30
Speaker 2: it take to get a boat from like LA and Australia.
37:34
Speaker 2: It's got to be a couple three weeks. I mean
37:38
Speaker 2: you that flight is insane for anyone who's ever twenty right,
37:42
Speaker 2: it's like a twenty hour flight. What is it from
37:45
Speaker 2: LA Probably like fifteen to seventeen. Oh, that's not that bad.
37:51
Speaker 2: I mean that to try to do that fight and
37:53
Speaker 2: then deal with the jet lag and then play a
37:54
Speaker 2: game like football.
37:56
Speaker 4: You'd have to sandwich the week with also, like.
37:58
Speaker 3: The swelling and stuff flying back under you know, after
38:01
Speaker 3: you get beat up in small car crashes of playing
38:04
Speaker 3: football game like is not great.
38:05
Speaker 2: For your money either. That's like it. This might be
38:10
Speaker 2: one of the dumber things I've heard. It's it's not
38:13
Speaker 2: your fault, you're the message.
38:14
Speaker 3: Your fault.
38:14
Speaker 2: You didn't schedule, but do better next time. I will
38:19
Speaker 2: take a quick break for the rest of the day.
38:21
Speaker 2: We'll be back tomorrow with more financial exchange, including we
38:24
Speaker 2: have Google earnings tonight. We'll have all those for it
38:27
Speaker 2: and more tomorrow