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Did OpenAI Just Betray Nvidia for AMD? · The Financial Exchange Show

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Speaker 1: a donation today. This is the Financial Exchange with Chuck
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Speaker 1: Zutta and Mike Armstrong.
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Speaker 2: Chuck, Mike and Tucker with you here. And it's a Monday.
1:18
Speaker 2: Government's still closed, government's still closed. Earning season hasn't started,
1:23
Speaker 2: and so honestly, go out and enjoy the last real,
1:27
Speaker 2: you know, warm weather that we're gonna have for six months.
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Speaker 3: Maybe. I mean, I didn't think we're gonna get eighty
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Speaker 3: five in October on a Sunday, So.
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Speaker 2: You know what, You're not gonna get it in November. Yeah,
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Speaker 2: I can tell you that much. You can put that
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Speaker 2: one on the board, Tucker, No. Eighty five degree Sunday
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Speaker 2: in November in New England. All right, So I'm glad
1:48
Speaker 2: we got that out of the way. So what do
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Speaker 2: we have this week? We got a government shutdown that's
1:52
Speaker 2: going on, which means that we're not going to be
1:54
Speaker 2: assuming that it continues. We're not going to be getting
1:57
Speaker 2: Balance of Trade data tomorrow. We are not going to
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Speaker 2: be getting initial or continuing jobless claims on Thursday, and
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Speaker 2: quite honestly, that was all that was scheduled from the
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Speaker 2: federal government. So there's not much there. What are we
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Speaker 2: going to be getting this week? That's interesting. I guess
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Speaker 2: we'll get all hyped up for you know, FED minutes
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Speaker 2: on Wednesday, but honestly, I don't care because it's not
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Speaker 2: gonna tell us anything we don't already know. Can I
2:26
Speaker 2: get excited about consumer sentiment data on Friday? Not really,
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Speaker 2: since I've poo pooed the index basically saying hey, since
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Speaker 2: they changed their methodology, the readings have gotten more extreme
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Speaker 2: and not really correlated to what's going on in the
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Speaker 2: broader economy. From an earnings perspective, I guess on Thursday,
2:44
Speaker 2: I've got Pepsi Progressive in delta, so I can learn
2:47
Speaker 2: a little bit about what's going on from them. There's
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Speaker 2: a company on Wednesday called AS that's coming out with earnings.
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Speaker 2: I don't know what they do, but AS reports earnings
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Speaker 2: on Wednesday. So ultimately, I think this is gonna be
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Speaker 2: a pretty quiet week as far as economic data and earnings.
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Speaker 2: That much is clear. The question is do we get
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Speaker 2: something that is unexpected? And this is why, Gosh, I'm
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Speaker 2: just so happy to be alive today, because we always
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Speaker 2: get something unexpected. And today, Michael, we've got another another
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Speaker 2: snake in the Ora Boro's chain that we can you know, yeah,
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Speaker 2: because the snake eating its tail is the and so
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Speaker 2: what we have today, ladies and gentlemen, is nothing short
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Speaker 2: of just fantastic in terms of just pure, quite honestly grift.
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Speaker 3: I don't know if yeah, it partly comes across as
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Speaker 3: Game of Thrones, stab in the back, it partly comes
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Speaker 3: across as eating oneself, perhaps as collusion on the part
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Speaker 3: of Nvidia, and just all sorts of intrigue here.
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Speaker 2: A couple of weeks ago, in Vidia and open Ai
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Speaker 2: came to an agreement where in Vidia was going to
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Speaker 2: invest one hundred billion dollars in open Ai so that
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Speaker 2: open Ai could invest one hundred billion dollars in in
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Speaker 2: Vidia AI chips. Not explicitly, but yeah, but yes, it was, Yeah,
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Speaker 2: we're going to give you money so that you can
4:30
Speaker 2: buy our product. Historically this has been called vendor financing,
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Speaker 2: and back in the dot com bubble, it marked the
4:37
Speaker 2: end of the dot com bubble because it was indicative of, Hey,
4:40
Speaker 2: we need more people to buy our stuff. We'll give
4:42
Speaker 2: them our money to do so, and that'll keep the
4:45
Speaker 2: plates spinning for a little bit longer. So we looked
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Speaker 2: at this, and we noted this at the time, and
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Speaker 2: we were like, it's not really a great sign, but Okay,
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Speaker 2: everybody's doing it, YadA, YadA whatever. It's not fine, but
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Speaker 2: it's fine to day. This morning, it's seven fifteen am.
5:04
Speaker 2: Birds are chirping, Squirrels are getting you know, run over
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Speaker 2: by cars as they try to get the last nuts
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Speaker 2: you know, stored away for the winter. Yea, and open
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Speaker 2: ai announces, Hey, we've reached a deal with AMD, and
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Speaker 2: for what, We're gonna buy billions of dollars of AMD
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Speaker 2: chips and in turn, AMD is gonna give us some
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Speaker 2: basically free stock.
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Speaker 3: And to be clear, AMD and Nvidia directly compete in
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Speaker 3: this space. Obviously, yes, open ai is one purchasing, but
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Speaker 3: AMD and Nvidia compete explicitly and directly in the AI
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Speaker 3: semi connector space as well as the gaming industry, like
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Speaker 3: everywhere in their businesses, they compete.
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Speaker 2: Yes, But now now, obviously open ai has said that
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Speaker 2: they will you know, buy these these chips, but it's
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Speaker 2: basically coming at the cost of the equity that open
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Speaker 2: ai is receiving in the event that they meet certain
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Speaker 2: milestones for purchase. So once again this is now we're
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Speaker 2: not even funding the purchase with real dollars, We're giving
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Speaker 2: you future equity maybe in order to buy these chips.
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Speaker 2: Because here's the thing, AMD, unlike in Vidio, doesn't just
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Speaker 2: have money floating around like this to do this, so
6:26
Speaker 2: they have to get creative and say, well, we can
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Speaker 2: give you one hundred and sixty million AMD shares if
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Speaker 2: you meet these milestones, which also means that basically what
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Speaker 2: ended up happening here is open Ai took in Vidia's
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Speaker 2: money and said let's go buy some AMD stuff with it.
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Speaker 3: Right, So the stab in the back part was in
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Speaker 3: Nvidia funding open Ai, who turned around and specifically bought
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Speaker 3: products from their direct competitor. They're really only major competitor
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Speaker 3: in this space. I guess Broadcom too, but really they're
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Speaker 3: major competitors in this space using in videos cash. So
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Speaker 3: there's the stab in the back part. The snake eating
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Speaker 3: itself part is most of this is not being actually
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Speaker 3: financed with cash. It's just all it's just all slashing
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Speaker 3: back and forth, shares going back and forth, and no
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Speaker 3: new value creation out of any of it. So that
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Speaker 3: part is concerning the part that I meant about collusion
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Speaker 3: and what's really going on here. I think this is
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Speaker 3: probably a little bit too conspiracy theory, so I shouldn't
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Speaker 3: really Yeah, I'll voice it anyway in video would never
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Speaker 3: be able to buy AMD. No, no way they would
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Speaker 3: get blocked. That would be too much of a monopoly concern.
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Speaker 2: Yeah, but no, Google has done all kinds of stuff
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Speaker 2: and all they got was, hey, don't do it again.
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Speaker 3: True, So what might be a roundabout way of doing so, Well,
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Speaker 3: let's buy one of our biggest customers and then maybe
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Speaker 3: they will take a stake in our large just competitor here.
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Speaker 3: It's not going to put them out of business, but
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Speaker 3: at least we have some We have some equity in
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Speaker 3: our biggest competitor here. Now, I don't really think that
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Speaker 3: was a big part of this story, but it is.
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Speaker 3: It's just who knows about the timing of any of this, right?
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Speaker 3: Who knows if this is you know, maybe we're right
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Speaker 3: on the cusp of artificial general intelligence and we're about
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Speaker 3: to see the breakthrough of all these profitable enterprises that
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Speaker 3: really increase productivity. But I will tell you the comparisons
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Speaker 3: to the dot com bubble have never been easier to
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Speaker 3: make than right now, never.
8:41
Speaker 2: No, And I gotta be honest, like it's kind of
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Speaker 2: getting into silly season on this stuff, and I say,
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Speaker 2: this is someone who. I think you can believe two
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Speaker 2: things at the same time, even three things if you want.
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Speaker 2: Number one. Years from now, there are going to be
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Speaker 2: way more people using artificial intelligence and way more people
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Speaker 2: paying to use artificial intelligence than there are today. Despite that,
9:12
Speaker 2: I think that the level of malinvestment that is out
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Speaker 2: there is going to be crippling for a lot of
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Speaker 2: the players in this space. And it certainly does appear
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Speaker 2: that this is going to be pretty close to winner
9:26
Speaker 2: takes all. And the problem there is, Okay, everyone else
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Speaker 2: is pouring all this money in, and when large language
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Speaker 2: models are commoditized and the costs come down and you've
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Speaker 2: still spent all this money because you've got to spend
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Speaker 2: the money on the chips, there's gonna be a lot
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Speaker 2: of pain felt when when that happens.
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Speaker 3: By the way, AMD today up twenty five percent of
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Speaker 3: this news, and on this news, and by the way, Nvidia,
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Speaker 3: who got at least on the surface screwed on this deal,
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Speaker 3: it's only down one percent.
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Speaker 2: Keep in mind, in market capture, that's the same as
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Speaker 2: true AMD being up twenty five percent. Yeah, you know,
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Speaker 2: AMD's a four trillion dollar company. They was one percent.
10:06
Speaker 2: They lose forty billion dollars. If you are AMD, they
10:10
Speaker 2: are a two hundred billion dollar company, you go up
10:12
Speaker 2: twenty five percent. You made fifty billions. So on a
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Speaker 2: market cap basis, it's saying, yeah, this is pretty much neutral,
10:17
Speaker 2: but somehow a creative I don't whatever, what's ten billion
10:22
Speaker 2: dollars amongst friends?
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Speaker 1: You know.
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Speaker 2: The third thing I was going to say about AI,
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Speaker 2: we may end up reaching artificial general intelligence, it will
10:31
Speaker 2: not be through large language models. That technology is just
10:38
Speaker 2: about maxed out, quite honestly from what I have seen.
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Speaker 2: And my evidence for that is a all of the additional
10:47
Speaker 2: money that's pouring in is generating like very incremental improvements
10:52
Speaker 2: at this point at tremendous additional costs, so you can't
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Speaker 2: get through that hump. And you're also now getting to
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Speaker 2: the point where you're seeing much cheaper models coming out,
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Speaker 2: but they can do like ninety five percent of it,
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Speaker 2: and it's like, Okay, you're not gonna be able to
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Speaker 2: make any money off of this because it's gonna just
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Speaker 2: become commoditized and no one's gonna make any money selling
11:09
Speaker 2: a commodity because no one ever makes any money selling
11:11
Speaker 2: a commodity. Like if you don't want to own a
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Speaker 2: copper minor like and operate it, right, then you probably
11:19
Speaker 2: don't want to own and operate a large language model
11:22
Speaker 2: because they're gonna get it's gonna be the same thing.
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Speaker 2: Like words from a large language model are gonna be
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Speaker 2: unrefined copper ore for the Internet. How's that for, you know,
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Speaker 2: a comparison. So where we stand right now, we're kind
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Speaker 2: of getting into silly season on some of the AI stuff,
11:41
Speaker 2: and this is all also happening across a backdrop of
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Speaker 2: an American economy that really, for I think a larger
11:47
Speaker 2: number of people feels like it's not working for them,
11:49
Speaker 2: and so I think there's a lot of people right
11:51
Speaker 2: now that are just like, hey, what gives here? Man?
11:57
Speaker 3: I know you're excited about this tool that's to replace me,
12:01
Speaker 3: but I don't have a job, and I haven't for
12:03
Speaker 3: quite some time.
12:04
Speaker 2: But you know, to quote Monty Python, I'm not dead yet.
12:11
Speaker 2: Let's take a quick break when we return. Let's see
12:14
Speaker 2: that's enough AI talk for now. I want to talk
12:16
Speaker 2: nuclear power though, because this is something that I do
12:19
Speaker 2: think is a great topic. So let's do that when
12:22
Speaker 2: we come back.
12:23
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Speaker 2: Nuclear in my backyard more of America, and the market
13:32
Speaker 2: seems okay with it. This piece published yesterday on CMBC.
13:37
Speaker 3: I mean your literal backyard or in my general vicinity.
13:41
Speaker 2: I've said before, if you wanted to pay me in
13:43
Speaker 2: a like an exorbitant amount of money, to put a
13:46
Speaker 2: small nuclear reactor in my basement. Yeah, like one of
13:52
Speaker 2: the ones they have on the submarines. Uh huh, you know,
13:54
Speaker 2: like you could power I don't know, like my street,
13:57
Speaker 2: my town, something like, you know, nothing huge, Just like, again,
14:00
Speaker 2: a small nuclear reactor. I would be happy to have
14:04
Speaker 2: it in my basement.
14:05
Speaker 3: I have a stream or water source for cooling in
14:09
Speaker 3: your general property well water yeah, okay, yeah.
14:12
Speaker 2: You know, we'd probably have to expand the well, I
14:15
Speaker 2: would imagine. I don't know that we get quite the
14:17
Speaker 2: gallons permitted that you need to operate a nuclear reactor.
14:20
Speaker 2: No wrre do I know what you do with the
14:22
Speaker 2: water afterwards.
14:23
Speaker 3: I'm right on a river. I might just look into this, okay,
14:26
Speaker 3: out of garden. But what is being talked about is,
14:28
Speaker 3: you know, slightly larger nuclear power plants.
14:31
Speaker 2: They're still called small modular reactors. Yeah, small as relative
14:35
Speaker 2: in that they're about a third of the size of
14:37
Speaker 2: conventional nuclear power plants. Yes, in terms of generation and footprint.
14:41
Speaker 3: Quite honestly, so, haven't been to your house, but probably
14:43
Speaker 3: not fitting in your.
14:44
Speaker 2: Basement, Probably not fitting there. It's something where there's still
14:47
Speaker 2: you know, you're talking three hundred megawatt units instead of
14:50
Speaker 2: you know, one gigawatt units. But these are things that
14:54
Speaker 2: you are starting to see, you know, some real push
14:57
Speaker 2: towards for a couple of reasons. The first be, hey, look,
15:01
Speaker 2: with all this data center build out that we've talked about,
15:04
Speaker 2: you need heavy capacity, high base load. And yes, you're
15:08
Speaker 2: seeing a lot of that done initially right now with
15:11
Speaker 2: new net gas facilities that are being built. But the
15:14
Speaker 2: problem that you have there is, hey, if oil prices
15:17
Speaker 2: remain low, you have less fracking that goes on in
15:19
Speaker 2: the US, and that gas prices go up, just became
15:21
Speaker 2: a whole lot more expensive to provide electricity, either to
15:24
Speaker 2: your data center or to everyone else.
15:27
Speaker 3: So I'm going to oversimplify this a little bit, but
15:29
Speaker 3: what's the attractiveness of these things. It's similar to what
15:32
Speaker 3: you would get from a modular home. You can manufacture
15:35
Speaker 3: it in one centralized place, have a team of experts
15:37
Speaker 3: that are building them out, shipping, ship them to location,
15:41
Speaker 3: finish on site, rather than a custom built solution for
15:45
Speaker 3: each nuclear power plant that you manufacture supposed to be faster, cheaper,
15:49
Speaker 3: And that's all you really care about right now when
15:53
Speaker 3: you're talking about nukes. Well, now, also safeas cheap safe
15:58
Speaker 3: would be good.
15:59
Speaker 2: Now, the question on this is going to be, hey,
16:02
Speaker 2: when the rubber meets the road, can you actually get
16:05
Speaker 2: them built? Because that's long been the problem in the US.
16:10
Speaker 3: And I think that encompasses two things, right, Like one,
16:12
Speaker 3: can you actually physically build them safely, cost effectively? But
16:17
Speaker 3: then there is yes. I think I think the answer
16:19
Speaker 3: is pretty clearly yes. But can you actually get the
16:21
Speaker 3: approval and site locations approved to do it? That has
16:25
Speaker 3: historically been the number one problem with these and so
16:30
Speaker 3: therein lies my question. Yeah, great, if you can build them, excellent,
16:34
Speaker 3: if you can ship them to location. But if we
16:37
Speaker 3: want one built, pick your location, you know, along one
16:43
Speaker 3: of the rivers in Vermont. Are they actually going to vote,
16:48
Speaker 3: you know, give it the thumbs up and say yes,
16:51
Speaker 3: we are comfortable with this being built in our town,
16:54
Speaker 3: in our county and our general area here to power
16:58
Speaker 3: these homes.
16:59
Speaker 2: Yeah, Bass, it seems like a hard maybe. And I
17:03
Speaker 2: think there's a uh, there's a great quote in here, uh,
17:08
Speaker 2: you know, talking about just kind of why we're even
17:11
Speaker 2: you know, talking about new quite honestly, we should have
17:13
Speaker 2: been talking about nuclear for a while. It's just we
17:17
Speaker 2: got scared off of it for a number of different reasons.
17:20
Speaker 2: But there's a great quote here from UH. I don't
17:23
Speaker 2: know who this guy is. It doesn't specify who is
17:26
Speaker 2: Morris in this piece. It never gave a first name
17:29
Speaker 2: or any information about Morris. I just trust him anyways,
17:34
Speaker 2: Morris I interviewed for this. I looked through all the
17:37
Speaker 2: pages and I couldn't find it. Maybe just got cut
17:39
Speaker 2: off in the print. I love him, UH. To illustrate
17:44
Speaker 2: how much of the world of power generation has been
17:46
Speaker 2: up at it in short order, Morris offered a stark comparison.
17:49
Speaker 2: Five years ago, we were worried about how we were
17:51
Speaker 2: going to put up with demand from a twenty megawatt
17:53
Speaker 2: marijuana farm. Hell, yeah, that's a fraction of what the
17:56
Speaker 2: data centers are asking for. Yes, you've got you know,
17:58
Speaker 2: open AI saying hey, we want to build a six
18:00
Speaker 2: gigawatts of capacity with AMD. It's a little bit more
18:04
Speaker 2: than a small marijuana point.
18:05
Speaker 3: Tucker, you weren't joking. His name's actually Zach Morris.
18:08
Speaker 2: Yeah, also known from U Saved by the Bell.
18:10
Speaker 3: He's the director of market Ie, a local association of
18:13
Speaker 3: business and government leaders that promotes economic growth and cass
18:16
Speaker 3: in Van Buren Countony's Counties, Michigan.
18:18
Speaker 2: There you go. In any case, I think that if
18:21
Speaker 2: you are serious about solving America's energy problem, you need
18:26
Speaker 2: to be talking about nuclear as a portion of that,
18:28
Speaker 2: not all of it. And I think that the fact
18:31
Speaker 2: that we're at least having these conversations now is great.
18:36
Speaker 2: But when push comes to shove, will communities actually allow
18:39
Speaker 2: for them to be placed near them?
18:41
Speaker 3: Well, if you want to, you need to put together
18:45
Speaker 3: very clear economic benefits for that area. Like I don't
18:49
Speaker 3: think that there is a good name.
18:52
Speaker 2: If I'm a nuclear power plant, I'll be like anyone
18:54
Speaker 2: who lives within five miles you get free power for life.
18:57
Speaker 3: Or like like property taxes permanently cut in half, Like
19:00
Speaker 3: whatever you want to do, Yes, but like make it
19:03
Speaker 3: really clear to those who are allowing it to be
19:05
Speaker 3: built in their area what the benefit's going to be. Yes,
19:08
Speaker 3: because it's going to hurt property values at least in
19:10
Speaker 3: the short term. Yes, So make it really obvious this
19:14
Speaker 3: is what you're going to benefit from this. We don't
19:16
Speaker 3: know how much downside is. Yeah, this is hellister is
19:20
Speaker 3: going to be. That's what you need to do to
19:22
Speaker 3: get these things built. It's got to be compelling.
19:24
Speaker 2: Quick break here. Wall Street Watch is next.
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20:01
Speaker 4: Investors have turned the page to a new week as
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Speaker 4: ai and AMD. Right now, markets are mixed. The Dow
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20:39
Speaker 4: quarter percent, rating at sixty one dollars and sixty four
20:42
Speaker 4: cents a barrel. Open AI and AMD agreed to a
20:45
Speaker 4: multi billion dollar partnership to collaborate on AI data centers
20:51
Speaker 4: that will run on AMD processors, AMD surging twenty seven percent,
20:57
Speaker 4: while competitor in Vidia seeing its stock fall one percent.
21:01
Speaker 4: Traders will continue to watch for more developments from open
21:04
Speaker 4: Ai this afternoon during its annual Dev Day event, which
21:08
Speaker 4: will feature announcements, keynotes from executives in a chat between
21:12
Speaker 4: CEO Sam Altman and longtime Apple designer Jony Ive. Meanwhile,
21:17
Speaker 4: Pallinteer shares rebounding nearly four percent after its stumble on Friday,
21:22
Speaker 4: the data analysis company pushed back against the Reuters report
21:26
Speaker 4: about security flaws and a communications platform designed for the
21:29
Speaker 4: US Army. Elsewhere, Fifth Third ban Corp. Announced a ten
21:33
Speaker 4: point nine billion dollar all stock deal to buy regional
21:37
Speaker 4: Bank America. Fifth third shares are down by one percent,
21:41
Speaker 4: while k America stock is jumping fourteen percent and Tesla
21:45
Speaker 4: shares up over three percent after the electric car maker
21:48
Speaker 4: teased a product launch announcement on X with tomorrow's date,
21:52
Speaker 4: leading to increasing speculation about the release of a new car.
21:57
Speaker 4: I'm Tucker Silva, and that is Wall Street watch.
22:00
Speaker 2: Mike, what do we think Tesla's gonna come out with tomorrow?
22:04
Speaker 3: What you're gonna start with dancing robots?
22:07
Speaker 2: You have to give one real answer and one fake
22:10
Speaker 2: answer that might end up being the real answer. Here's
22:15
Speaker 2: my real answer. Guess the low cost model. Why you know,
22:20
Speaker 2: the bargain basement version that they think they can maybe
22:23
Speaker 2: get to like thirty five thousand or thirty three thousand.
22:26
Speaker 3: I think it's seem to be even less exciting. I
22:27
Speaker 3: think it's gonna be a revamped version of self driving.
22:32
Speaker 2: Okay, and now what about your joke prediction that still
22:35
Speaker 2: might actually be something they announced tomorrow?
22:38
Speaker 3: Uh, robots driving the self driving cars.
22:43
Speaker 2: Helicopters or drones like, so, you know, some kind of
22:47
Speaker 2: flying car type thing. We'll see what we get a
22:52
Speaker 2: piece here in the bloomy Berg or nope, it's in
22:56
Speaker 2: the Wall Street journal Berg. Why delaying your Social Security
23:00
Speaker 2: benefits may not make sense? So a lot of people
23:01
Speaker 2: talk about, hey, I want to delay as long as
23:03
Speaker 2: possible to maximize that benefit, which, again, if you have
23:07
Speaker 2: you know, good longevity and YadA YadA like that can
23:09
Speaker 2: obviously make sense. The place where it stops making sense
23:14
Speaker 2: is where you actively harm other parts of your retirement
23:18
Speaker 2: plan in order to basically make this happen. Where okay,
23:24
Speaker 2: you could be you know, pulling from other assets that
23:26
Speaker 2: might rise at a rate that's faster than what soil
23:29
Speaker 2: security rises at. Maybe when you look at the inflation
23:33
Speaker 2: assumptions that you're using for Social Security, you're not looking
23:36
Speaker 2: at them accurately, and so there are cases where waiting
23:40
Speaker 2: till age seventy may not make the most sense. It
23:43
Speaker 2: may actually hurt your retirement planning. Yeah.
23:45
Speaker 3: I mean the easiest one that I think most people
23:47
Speaker 3: know about is if you're have some health conditions this
23:50
Speaker 3: if you die, you get nothing, nothing soial security or
23:53
Speaker 3: a tiny little check for your spouse. But you know,
23:56
Speaker 3: there's all sorts of other considerations. I was working with
23:59
Speaker 3: somebody recently who, for instance, has a minor child and
24:02
Speaker 3: will have a minor child while he's on Social Security.
24:05
Speaker 3: There's a whole bunch of extra benefits you get for
24:07
Speaker 3: your minor child in terms of cash payments to you
24:11
Speaker 3: for having a minor child while on Social Security. Like,
24:15
Speaker 3: why would you want to delay your Social Security in
24:17
Speaker 3: that case? The piece that Wall Street Journal makes is,
24:20
Speaker 3: you know, oftentimes people make these decisions in a vacuum,
24:23
Speaker 3: and that is a fair point, Like, oh, I'm comparing
24:26
Speaker 3: the increase on my Social Security to my buying power today. Yep, Well,
24:31
Speaker 3: four years from now, your cash that you have today
24:34
Speaker 3: is not going to buy you as much stuff. And so, yes,
24:36
Speaker 3: you need to assume the increases on social security, but
24:39
Speaker 3: you also need to assume the increases on the basket
24:41
Speaker 3: of goods that you are purchasing. Okay, but frankly, if
24:44
Speaker 3: somebody's doing all the math on soci security, I think
24:46
Speaker 3: they're probably factoring that piece in would be my guess.
24:50
Speaker 3: I think the point that you made earlier is a
24:53
Speaker 3: good one, Chuck, Like, if I don't have Social Security,
24:57
Speaker 3: how am I going to pay my bills?
25:02
Speaker 1: Like?
25:02
Speaker 3: Do I have to take a loan to pay my
25:04
Speaker 3: bills if I'm not on so security? Probably a good
25:06
Speaker 3: reason to pull so security at that stage. There's other
25:08
Speaker 3: stuff too. I mean, ultimately, the decision on social security,
25:12
Speaker 3: I say this over and over again, like you have
25:14
Speaker 3: to make it within the confines of your overall plan.
25:18
Speaker 3: And so if one of your key goals, for example,
25:20
Speaker 3: is to wash as much money out of your IRA
25:24
Speaker 3: and get into a roth as possible because you're terrified
25:26
Speaker 3: about your personal tax rate going up, then you know
25:30
Speaker 3: that should play into account on your social security strategy,
25:33
Speaker 3: because that can help pay your bills while you wash
25:35
Speaker 3: those taxes out. There's a lot that goes into all
25:38
Speaker 3: of this. I think would be my main point when
25:41
Speaker 3: it comes to that social security discussion. You have anything
25:44
Speaker 3: else to add on it? Chuck, No, I think that's
25:45
Speaker 3: kind of the big too often people look at it
25:48
Speaker 3: as this like holy grail, like, so security is just
25:50
Speaker 3: another asset for you, right, exactly right? And just how
25:54
Speaker 3: do I use it? If I have a pension, if
25:56
Speaker 3: I have social Security, if I have a four to
25:57
Speaker 3: oh one K I have all these assets, what's the
25:59
Speaker 3: best one for me to tap at what point in time?
26:01
Speaker 2: Yeah, it has its pros and cons, just like anything else.
26:04
Speaker 2: For a lot of people, it is their only source
26:08
Speaker 2: of retirement income. I think we're still around a third
26:10
Speaker 2: of people. That's the only thing that they have when
26:13
Speaker 2: they get to retirement. But you still have to figure
26:16
Speaker 2: out what makes the most sense and what works for
26:18
Speaker 2: you best along these lines. According to a Baron's piece,
26:24
Speaker 2: eighty percent of workers say they're making little or no
26:26
Speaker 2: progress saving for retirement. So this was a survey that
26:31
Speaker 2: was done by Goldman Sachs and they surveyed thirty five
26:37
Speaker 2: hundred and eighty eight workers in fifteen hundred and fourteen retirees,
26:40
Speaker 2: so about five thousand people. And I guess, like I'm
26:46
Speaker 2: just trying to understand, like this is where we get
26:50
Speaker 2: into some of the terminology here and trying to understand
26:52
Speaker 2: what it means. So it says forty percent of working
26:55
Speaker 2: Americans are now living paycheck to paycheck according to the report,
26:58
Speaker 2: which quite honestly doesn't match up with some of the
27:01
Speaker 2: other data that we get where it says that like
27:03
Speaker 2: eighty percent of Americans have at least four hundred dollars
27:07
Speaker 2: saved up for an emergency, which means you're not living
27:09
Speaker 2: paycheck to paycheck.
27:10
Speaker 3: Right, people. I think we've talked about that at length,
27:13
Speaker 3: that people miscategorize whether or not they are living paycheck
27:17
Speaker 3: to paycheck. If you are living paycheck to paycheck, it
27:19
Speaker 3: means that you are not saving anything into your four
27:21
Speaker 3: h one K or any other You're not saving any
27:25
Speaker 3: money on a monthly basis, and in all likelihood you
27:27
Speaker 3: are also running up some debt. If that is the case,
27:30
Speaker 3: then you are probably living paycheck to paycheck correct.
27:32
Speaker 2: Which I still think is probably like and again this
27:35
Speaker 2: is god feel so like I've pulled no one. So
27:38
Speaker 2: it's probably worse than useless. I bet it's probably about
27:41
Speaker 2: a quarter of Americans are truly in that situation. So
27:46
Speaker 2: as an additional two fifth say they aren't making meaningful
27:48
Speaker 2: progress on their retirement goals, what does meaningful progress mean?
27:56
Speaker 2: How does one define what is meaningful versus not meaningful progress?
28:01
Speaker 2: Because the data that we do get from the big
28:04
Speaker 2: retirement providers show that account balances continue to grow at
28:07
Speaker 2: a pretty you know good clip obviously helped buy markets,
28:10
Speaker 2: and so I think I struggle with this piece because
28:16
Speaker 2: I think I can hold two thoughts in my heads
28:18
Speaker 2: at the same time. The first is there is a
28:21
Speaker 2: large portion of America where the economy is not working
28:24
Speaker 2: for them right now, but the surrounding data is often
28:29
Speaker 2: very conflictatory, if not downright, you know, pointing in completely
28:35
Speaker 2: opposite directions. And so I kind of struggle to understand
28:41
Speaker 2: where the biggest pain is other than I think certainly
28:46
Speaker 2: we see young people right now just struggling to even
28:49
Speaker 2: get into the workforce in a way that we haven't
28:52
Speaker 2: in quite some time. I think we see a situation
28:56
Speaker 2: where for people close to retirement, because of a number
29:01
Speaker 2: of different situations, people are still having to work longer
29:04
Speaker 2: in order to get to retirement. But I don't really know.
29:09
Speaker 2: I don't have a great handle on kind of that
29:11
Speaker 2: middle age demographic and what we're seeing there, other than
29:14
Speaker 2: it's probably pretty uncomfortable for you know, a number of them,
29:17
Speaker 2: just because they're taking care of kids and taking care
29:19
Speaker 2: of parents who now you know, might be dealing with
29:22
Speaker 2: health problems.
29:23
Speaker 3: Yeah, and I can look, this story does fit very
29:26
Speaker 3: well into others that we've covered about the economy, which
29:29
Speaker 3: is a vast number of people feeling like they're falling behind.
29:34
Speaker 3: What it actually leads to in terms of economic growth
29:39
Speaker 3: and stock market moves. We've talked about this at length,
29:42
Speaker 3: but I just I hate to say this, but I
29:44
Speaker 3: don't know how much it matters. I think at some
29:47
Speaker 3: point it does, Right, when when you get to a
29:48
Speaker 3: certain point where a large group of people in your
29:51
Speaker 3: society are struggling to keep pace and feel as though
29:56
Speaker 3: they're falling behind, it can lead to all sorts of
29:58
Speaker 3: really ugly stuff. But when that breaking point hits and
30:03
Speaker 3: what the impact is on markets to the economy, I
30:05
Speaker 3: don't know.
30:07
Speaker 2: And this is no and this is before we even
30:10
Speaker 2: get to know all of the chatter about hey, how
30:14
Speaker 2: could AI impact employment prospects and wages over the next decade.
30:18
Speaker 2: Right once again, don't know quick break here. When we
30:22
Speaker 2: come back, we're gonna be talking about why twenty twenty
30:25
Speaker 2: six will be the year of the used ev.
30:27
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30:30
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31:10
Speaker 2: Peace for market Watch. Are we in recession? Yes if
31:13
Speaker 2: you live in one of these twenty two states, so
31:14
Speaker 2: obviously you can't really have in my opinion, how small
31:20
Speaker 2: you're gonna go on this. If you're gonna say that
31:21
Speaker 2: you have a state level recession, well then can you
31:23
Speaker 2: have a city level? Can I personally be recessing while
31:26
Speaker 2: Mike is, you know, obsessing, like you know, it's just
31:31
Speaker 2: at a certain point it gets too granular and it
31:33
Speaker 2: doesn't mean anything.
31:34
Speaker 3: I agree, Well, I will say that if you are
31:38
Speaker 3: listening to this show on terrestrial radio, then you probably
31:43
Speaker 3: live in a place that's in you know, their definition
31:45
Speaker 3: of recession right now, which is compelling, right, Like, pretty
31:49
Speaker 3: much all of New England meets this category at the moment. Yes, Now,
31:55
Speaker 3: I know I'm excluding a few of our listeners out
31:58
Speaker 3: in I'm gonna fail to name the city, so I'm
32:01
Speaker 3: just gonna not do it. But Portland, like you know,
32:04
Speaker 3: there's a few places where that's not the case. But yeah,
32:09
Speaker 3: there is a significant portion. And we've talked about this
32:11
Speaker 3: how unemployment rates, for example, in Massachusetts have climbed substantially
32:15
Speaker 3: faster than the national average.
32:17
Speaker 2: Now what I would love to see is show me
32:22
Speaker 2: this chart and how it evolves, you know, kind of
32:24
Speaker 2: over time. Yeah, because what I can tell you is
32:28
Speaker 2: this doesn't mean anything good. Sure, Like this is not
32:32
Speaker 2: so as much as I believe, Yes, Like, I don't
32:34
Speaker 2: think that you can have a state level recession because
32:38
Speaker 2: that's just not what that word means.
32:41
Speaker 1: Right.
32:41
Speaker 3: We have a pretty strict definition of recession in this I.
32:44
Speaker 2: Do think you can say, hey, if you're hitting these
32:47
Speaker 2: metrics in a certain you know, in a growing number
32:50
Speaker 2: of states, it doesn't necessarily mean anything good. So that's
32:55
Speaker 2: I think where where I kind of end up landing
32:57
Speaker 2: on this, you know, when it's all said and done.
33:00
Speaker 2: The big thing is that when you are talking about,
33:05
Speaker 2: you know, the states that are seeing these problems right now,
33:09
Speaker 2: it's predominantly the northeast and northwest, and then kind of
33:13
Speaker 2: a smattering of Midwest states. And in the southeast you
33:17
Speaker 2: basically have Texas and Arkansas that I'm sorry at Texas
33:22
Speaker 2: in Alabama.
33:23
Speaker 3: That fit the bill. I'm coming around to agree with
33:25
Speaker 3: you that this doesn't matter, Chuck. If you have twenty
33:28
Speaker 3: two states in recession, but none of them are New York, Florida, Texas,
33:32
Speaker 3: or California, then it doesn't matter.
33:33
Speaker 2: Right, it doesn't matter. I say this with all the
33:36
Speaker 2: love in the world for the state of Vermont, which
33:39
Speaker 2: I believe is the second smallest in the Union. It's
33:42
Speaker 2: just don't have a big enough impact economically. It's just
33:47
Speaker 2: not Likewise, if Texas, you know, goes into a quote
33:52
Speaker 2: unquote recession, man like that, that's a whole lot of
33:57
Speaker 2: economy that you got to figure out how to turn around.
34:01
Speaker 3: And it's not as though we're looking at a map
34:03
Speaker 3: here that says, oh, yeah, these twenty two states are
34:05
Speaker 3: in recession, and then most of the rest are just
34:07
Speaker 3: barely keeping along. Like no, Texas and Florida and Louisiana
34:11
Speaker 3: and big parts of the country Arizona are actively expanding place.
34:16
Speaker 2: Data center growth and things like that. And yes, even
34:19
Speaker 2: though we talk about Texas and Florida in the real
34:21
Speaker 2: estate markets there and like, hey, it's really bad from
34:23
Speaker 2: a real estate perspective, at.
34:24
Speaker 3: Least they were building real estate of the last few years.
34:26
Speaker 3: And also real estate is not everything. There's other stuff
34:29
Speaker 3: going on there.
34:31
Speaker 2: So I think that overall, yes, this has some concerning signs.
34:35
Speaker 2: It's not what you want to see, but just counting
34:39
Speaker 2: states without noting the magnitude of those states does a
34:42
Speaker 2: disservice to what this means.
34:44
Speaker 3: It is a good transition, though, and a good reason
34:45
Speaker 3: to attend one of our up to upcoming events. We
34:50
Speaker 3: have won this Thursday, and there are a few still
34:52
Speaker 3: a few spots left. It's at the Margaritaville Resort in
34:55
Speaker 3: Cape Cod October ninth. This Thursday, We're gonna be doing
34:59
Speaker 3: a live broadcast this hy show, followed by a presentation.
35:01
Speaker 3: Chuck and myself will be hosting lunch is free. The
35:04
Speaker 3: whole seminar, the whole live broadcast is free. We're gonna
35:07
Speaker 3: be talking about the state of this economy right now,
35:09
Speaker 3: what it means for young people trying to enter the
35:13
Speaker 3: labor market, what it means for folks that are on
35:15
Speaker 3: the cusp of retirement, this infatuation that every investor seems
35:19
Speaker 3: to have with artificial intelligence. We're covering all of it
35:22
Speaker 3: at this live broadcast and live post broadcast event. We
35:26
Speaker 3: would love for you to join us, so you can
35:27
Speaker 3: check it out at Armstrong Advisory dot com. In addition
35:30
Speaker 3: to the one this Thursday, we have one next Thursday
35:32
Speaker 3: as well, and again a few spots left at both
35:35
Speaker 3: Showcase super Lucks and Chestnut Hill on October sixteenth, Margaritaville
35:39
Speaker 3: Resort in Cape Cod October ninth. You can register at
35:43
Speaker 3: Armstrong Advisory dot com, but again space is limited and
35:46
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35:49
Speaker 3: four zero zero one really fun events. We've done them
35:53
Speaker 3: in the past. They're always a good time. You can
35:55
Speaker 3: come sit with us and you know, join us for
35:57
Speaker 3: part all of it. But please do join us and
36:00
Speaker 3: call or go online to register eight hundred three nine
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36:07
Speaker 1: The proceeding was paid for by Armstrong Advisory Group, a
36:10
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36:12
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36:15
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36:18
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36:21
Speaker 1: advisory services.
36:23
Speaker 2: Twenty twenty six will be the year of the used EV.
36:26
Speaker 2: Analyst says here's why, and basically what they are saying is, hey,
36:32
Speaker 2: in a lot of cases, you're starting to get closer
36:34
Speaker 2: and closer to cost parity between evs and gas cars.
36:38
Speaker 2: There still is a price premium for used EV's relative
36:43
Speaker 2: to used vehicles of about nine hundred dollars, so there
36:46
Speaker 2: is still something there. The piece that I struggle with
36:50
Speaker 2: on this though, is that when you look at new vehicles,
36:52
Speaker 2: it's a wider gap, which means if you're buying a
36:54
Speaker 2: new EV, you're expecting much more rapid depreciation on your car,
37:00
Speaker 2: which then leads to the question why would I ever
37:03
Speaker 2: buy a new one if I could just buy a
37:05
Speaker 2: used one, which then starts to push the price of
37:09
Speaker 2: used ones up because all the people looking at new
37:10
Speaker 2: ones say, I'm gonna look at the used ones, which
37:13
Speaker 2: then in turn makes this not look as attractive.
37:15
Speaker 3: Yeah, I guess part of the weird economics of EVS
37:20
Speaker 3: is just the battery degradation fear.
37:23
Speaker 2: I think it's much more spear. It's a real thing.
37:25
Speaker 3: It's a real thing. But I think it's also a
37:27
Speaker 3: very new and unknown formula that people have to account for. Like,
37:32
Speaker 3: you know, when you're buying an internal combustion engine, you
37:34
Speaker 3: kind of have a sense, right, Okay, it's three years old,
37:36
Speaker 3: it's got twenty thousand miles, it's this brand. What can
37:39
Speaker 3: I generally expect based on my experience. You just don't
37:42
Speaker 3: have that with EVS, And so I think that there's
37:44
Speaker 3: some extra discount built in there. And then the least
37:47
Speaker 3: factor here too, right, Like over the last few years,
37:50
Speaker 3: a ton of these vehicles have been leased rather than
37:52
Speaker 3: purchased for a few reasons. One would be some of
37:54
Speaker 3: the tax incentives that are available for leased cars. Two
37:57
Speaker 3: would just be the I'm not sure about ev I
38:00
Speaker 3: want to test it out in the least rather than
38:01
Speaker 3: an ownership plan. And so those are going to be
38:03
Speaker 3: hitting the market over the course of the next few
38:06
Speaker 3: years as well.
38:07
Speaker 2: Take a quick break for just a little bit here,
38:11
Speaker 2: but when we come back, we got some housing market chatter.
38:14
Speaker 2: We're talking Amazon's new Prime event, and then we're gonna
38:18
Speaker 2: be talking about some air travel data as well. Stick around,