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AI Safety Concerns Grow as Bond Yields Keep Climbing · The Financial Exchange Show

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Speaker 1: is The Financial Exchange with Mike Armstrong and Paul Lane.
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Speaker 2: That was a doozy of a Nor'easter, huh?
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Speaker 3: I know some of you are not listening to us
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Speaker 3: in New England, but we got about an arc's worth
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Speaker 3: of rain over the course of the last three days
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Speaker 3: here in New England, and we're just drying out, although
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Speaker 3: it is going to be your typical... October weather of
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Speaker 3: 80 degrees on Friday. So looking forward to drying out
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Speaker 3: a little bit more over the next few days. Some
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Speaker 3: market volatility yesterday. We're going to be talking about the
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Speaker 3: bond market especially, which is definitely the thing that's been
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Speaker 3: getting all the attention over the course of the.
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Speaker 2: Last month or so.
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Speaker 3: We've got a jobs week this week with a report
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Speaker 3: out just this morning and then a big report out
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Speaker 3: this Friday as well.
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Speaker 2: Consumer confidence showing some weakness.
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Speaker 3: A But in terms of markets here, where I want
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Speaker 3: to begin, we had markets selling off into the close yesterday.
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Speaker 3: They're about flat today with the Dow off a quarter
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Speaker 3: of a percent, but S & P and Nasdaq flat.
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Speaker 2: Yields not giving up any. What was that?
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Speaker 3: Yields not giving up really anything this morning as they
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Speaker 3: continue to climb slightly higher. But the 10-year Treasury about
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Speaker 3: flat for the day. Oil prices continuing their climb downwards,
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Speaker 3: which is nice. We're hitting about $ 90 a barrel. We'll
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Speaker 3: be talking about potential reason why. And then I didn't
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Speaker 3: see a whole lot else interesting. Gold was off a
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Speaker 3: little bit yesterday, but is not moving too much today.
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Speaker 3: Gas prices, national average for a gallon of gas, according
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Speaker 3: to AAA, sitting at $ 4.
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Speaker 2: 46 per gallon.
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Speaker 3: Diesel still has not reached back to its week ago highs,
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Speaker 3: but we are not far away from them. We're sitting Currently,
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Speaker 3: it's $ 6. 44 a gallon. That is down from the $ 6. 53
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Speaker 3: just a week ago. And I think that kind of
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Speaker 3: does it for the highlights here. But the focus of
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Speaker 3: this program and most investors over the course of the
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Speaker 3: next few weeks and months will be what we are
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Speaker 3: seeing in yields and what that means for investors really
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Speaker 3: across the board. As I made the case yesterday, I
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Speaker 3: don't personally believe there's a single price point that in
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Speaker 3: the global economy that's more important than that 10-year treasury
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Speaker 3: yield that drives everything from the cost of your mortgage
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Speaker 3: to the discount rate you apply to stocks to everything
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Speaker 3: under the sun from a global currency perspective. And so
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Speaker 3: when you see The spikes in yields, you know, we've
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Speaker 3: been seeing a spike in yield really, Paul, since the
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Speaker 3: beginning of the outbreak of war. But more specifically, over
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Speaker 3: the course of the month of September, we've seen a
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Speaker 3: half percent climb in the 10-year Treasury yield, which is
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Speaker 3: Pretty unheard of. It's the type of move that changes
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Speaker 3: policy like we saw back in April of 2025 during
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Speaker 3: the rollout of President Trump's initial tariffs.
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Speaker 4: No question.
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Speaker 5: And for the housing market, it is certainly the pillar
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Speaker 5: of the activity that sits, you know, at the front
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Speaker 5: of all transactions that you see there. With the mortgages
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Speaker 5: now cresting over 7% for a 30-year fix, you can
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Speaker 5: anticipate that if that lingers into the spring market, and
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Speaker 5: we've got a long way before we get there for
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Speaker 5: next year, that would be a really dismal sign for
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Speaker 5: the housing market. And like you mentioned, we are about
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Speaker 5: to be on the precipice of a year in which
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Speaker 5: there is going to be a tremendous amount of credit
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Speaker 5: issuance and all sorts of debt issuance out there, not
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Speaker 5: only on the the AI capex cycle that is anticipated
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Speaker 5: to be around a trillion dollars for the next 2027,
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Speaker 5: the next year, a lot of debt is going to
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Speaker 5: need to be raised. And the borrowing cost assigned now
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Speaker 5: to these types of debt is far higher than it
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Speaker 5: was at the beginning of this year, where we were
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Speaker 5: sitting with a 10-year treasury right in around 4.15%. and
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Speaker 5: now we're at five and a quarter percent. So that
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Speaker 5: to me is really the story of the month of
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Speaker 5: September is interest rates and specifically the U.S. 10-year treasury.
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Speaker 5: It is a little jarring for us. I've been in
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Speaker 5: the industry 15 years or so.
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Speaker 4: I haven't really seen a U.S.
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Speaker 5: 10-year treasury above 5%, and at five and a quarter percent,
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Speaker 5: the last time we were at these highs was 2007.
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Speaker 4: So it's quite significant.
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Speaker 2: Yeah, it is significant.
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Speaker 3: And We barely touched these levels in the pre-great financial
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Speaker 3: crisis era. It happened a few times, but we were
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Speaker 3: floating below them for most of the time. Other data
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Speaker 3: out this morning at 10 a.m., the Conference Board produced
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Speaker 3: a Consumer Confidence Index reading of 82. That was down
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Speaker 3: from the previous reading, also down from the forecast of 89.
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Speaker 3: And then on the JOLTS report, this Job Openings Labor
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Speaker 3: Turnover Survey, we saw a reading of 7.1 versus expectations
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Speaker 3: of a 7.2 million reading. We will dive into those
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Speaker 3: a little bit deeper during the next segment, but those
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Speaker 3: headline numbers out this morning, and like I said, not
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Speaker 3: dramatically moving rates in one way or another. When we
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Speaker 3: take a look at other big pieces, obviously, Until the
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Speaker 3: rate story really dominated the news cycle, the story was
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Speaker 3: all about artificial intelligence, and that continues to absorb a
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Speaker 3: lot of the oxygen in the room. This morning, we're
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Speaker 3: learning that OpenAI is scrapping their release of a new
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Speaker 3: model that they had been working on, GPT-6.1 Astra.
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Speaker 5: We need to consolidate these names down a bit. The
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Speaker 5: frequency of releases... The cadence on these are fast and furious,
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Speaker 5: so we need to simplify it. It's just too hard
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Speaker 5: to keep track of.
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Speaker 2: These names are no bueno. I'm with you.
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Speaker 3: For all the concerns I have about Facebook producing an
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Speaker 3: AI agent, Muse. I recognize Chuck's point that Metamuse sounds
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Speaker 3: like Metamucil, but if we're going with a single easy name,
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Speaker 3: Muse is working for me in a way that GPT 6.1
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Speaker 3: Astra was never going to be a success story even
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Speaker 3: if it didn't try and do everything that you don't
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Speaker 3: want an AI model. So what have we learned so
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Speaker 3: far about what the folks over at OpenAI had to
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Speaker 3: say about safety and concerns that they had here?
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Speaker 5: Yeah, it seems like I tend to take a real
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Speaker 5: cynical approach to these announcements.
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Speaker 4: I do too.
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Speaker 5: I'm constantly trying to think of what is their gain here? Ultimately,
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Speaker 5: it seems like there's a tremendous amount of emphasis from
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Speaker 5: all of the leaders of the AI frontier lab companies,
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Speaker 5: Daria Mode and Sam Altman, to try and shift the
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Speaker 5: PR narrative around AI.
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Speaker 4: I read this cynically, and I could be totally wrong.
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Speaker 5: I'm speculating on it, that they're really trying to reinforce
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Speaker 5: that we do care about your safety. We do care
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Speaker 5: about making sure that we develop this at a reasonable pace.
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Speaker 5: That's the only interpretation I can gather here. We can
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Speaker 5: get into the nitty-gritty, and we won't really because it's
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Speaker 5: probably above everyone's head out there listening. The concerns were
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Speaker 5: that there was some deceptive practices on this particular model,
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Speaker 5: that it was unwilling to be forthright with the means
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Speaker 5: that it took to execute certain tasks.
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Speaker 4: We'll kind of... broadly pointed that they had it that.
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Speaker 3: Way very nice terms for this so uh they call
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Speaker 3: one of these things alignment which you know alignment is
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Speaker 3: a nice way of saying this thing doesn't listen to
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Speaker 3: humans and tries to deceive the humans that are telling
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Speaker 3: it what to do uh and then scope authorization which
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Speaker 3: uh you know is a nice way of saying that
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Speaker 3: it would exceed guardrails that were put around it and
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Speaker 3: pushed ahead with tasks without asking the user for permission
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Speaker 3: so Both of those are concerning for obvious reasons, and
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Speaker 3: they decided to kill this thing.
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Speaker 2: I'm with you.
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Speaker 3: I don't know what to make of these because in
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Speaker 3: the same breath that these CEOs say, hey, we have
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Speaker 3: real concerns about safety and we want you to regulate us.
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Speaker 3: They're also saying we're pushing forward with the technology and
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Speaker 3: we want to IPO and take your cash for our
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Speaker 3: shares and We think that we are going to be,
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Speaker 3: in spite of the safety concerns, the best stewards for
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Speaker 3: this technology. So it does seem in a lot of
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Speaker 3: ways pretty disingenuous if you're worried about.
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Speaker 3: If I personally am worried that I've developed a technology
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Speaker 3: that would end the world, and I believe that, then
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Speaker 3: my next step would be to not continue developing that technology.
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Speaker 3: And that's where this whole argument, I think, breaks down
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Speaker 3: a fair bit. But the more and more they bring
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Speaker 3: up these safety concerns, I think, the more reasonably we
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Speaker 3: should be listening to them and doing something about it.
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Speaker 3: So OpenAI has decided not to release that model, at
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Speaker 3: least for the time being, until they're able to tweak
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Speaker 3: it or maybe they have to start fresh, I don't know.
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Speaker 3: At the same time, we're hearing rumors of Anthropix planned IPO,
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Speaker 3: which was scheduled for October, now.
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Speaker 2: Looks like it's punting to November.
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Speaker 3: The statements that are getting put into these prospectuses I
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Speaker 3: recognize we're dealing with some real new age companies, but
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Speaker 3: I want to read a piece from SpaceX's IPO prospectus
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Speaker 3: because this is the type of stuff we're dealing with
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Speaker 3: in 2026. Quote, our mission is to build the systems
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Speaker 3: and technologies necessary to make life multi-planetary, to understand the
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Speaker 3: true nature of the universe, and to extend the light
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Speaker 3: of consciousness to the stars. That's in a financial prospectus
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Speaker 3: that is disclosed to investors pre-IPO.
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Speaker 5: And also straight from Elon Musk, if you've ever heard
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Speaker 5: him in interviews, that's to a T, him.
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Speaker 3: The Anthropic IPO spends 80 out of 261 pages laying
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Speaker 3: out the potential risks of the technology it's developing and
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Speaker 3: seeking investment for.
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Speaker 2: Again, I just don't know how to square all of this, right?
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Speaker 3: Like, I want to believe that these CEOs genuinely care
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Speaker 3: that they might be developing a technology that could bring
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Speaker 3: about the end of the world. But if you genuinely
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Speaker 3: believe that, why are you developing the technology?
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Speaker 5: I should look this up. Is that a CYA sort
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Speaker 5: of thing that you have to just disclose? I know
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Speaker 5: the premise of an S-1 is you do have to,
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Speaker 5: for investors, disclose all potential risks that are out there.
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Speaker 3: Yeah, I'm sure.
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Speaker 5: But to spend the amount of pages that they did
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Speaker 5: on these risks, I can't think, is this a defensive
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Speaker 5: mechanism that if it ever came back to a lawsuit?
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Speaker 4: Well, we told you. We told you it could potentially
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Speaker 4: end the world.
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Speaker 2: Who cares? The end of the world. No lawyer's law.
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Speaker 4: We disclosed it.
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Speaker 1: Yeah.
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Speaker 2: Who are you protecting it against? Your soul? I don't, yeah.
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Speaker 5: But to me, it is a fascinating IPO story, and
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Speaker 5: I do want to get into some of the numbers
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Speaker 5: because the S1 is floating around, and it is an
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Speaker 5: interesting business case because this is going to be an
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Speaker 5: incredibly significant IPO, I think even far more significant than
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Speaker 5: SpaceX in terms of interest and the position it could
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Speaker 5: take from a weighting perspective in a lot of the
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Speaker 5: major indices.
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Speaker 2: Let's take a quick break.
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Speaker 3: When we come back, we can talk a little bit
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Speaker 3: more about that issue IPO, the alleged disclosure documents that
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Speaker 3: are out there.
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Speaker 2: There's some reporting from Reuters in terms of what's in it.
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Speaker 3: And then I also want to get to that jobs
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Speaker 3: report that we got this morning at 10 a.m.
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Speaker 2: Quick break. We will be right back.
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Speaker 1: Paul, before the break, we were talking about Anthropix IPO.
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Speaker 1: You made the point that you think it's going to
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Speaker 1: gain more.
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Speaker 2: Interest than.
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Speaker 3: SpaceX potentially, which I would find hard to believe given
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Speaker 3: the nature of these two businesses and the leadership behind them.
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Speaker 3: I don't really think today that there are any CEOs more,
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Speaker 3: I'm not going to say popular, but at least publicly
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Speaker 3: visible than Elon Musk. Uh, I think in spite of
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Speaker 3: probably is the biggest conflict falling.
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Speaker 6: Yeah.
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Speaker 3: In spite of his conflicts, he gets more attention and
13:36
Speaker 3: draws more attention to companies than anybody else. Um, But
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Speaker 3: I'm with you. I think that Anthropic does something unique here.
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Speaker 3: What are we learning so far about the planned IPO,
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Speaker 3: other than the fact that it's been delayed a bit?
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Speaker 5: Yeah, so in terms of what they're raising, first of all,
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Speaker 5: I believe with SpaceX, $ 70 or $ 80 billion in terms
13:54
Speaker 5: of what they raise.
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Speaker 4: I was just going to look that up. I'd be
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Speaker 4: going off memory.
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Speaker 5: Anthropic here is going to be around $ 100 billion, at
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Speaker 5: least that's what they're looking to raise.
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Speaker 4: And what's interesting is.
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Speaker 5: And because they've been a private company, we've been trying
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Speaker 5: to get a greater sense for what their financial is
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Speaker 5: going to look like. And one of the things that
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Speaker 5: I've been hearing in the last six to 12 months
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Speaker 5: is that they have had tremendous revenue growth. And that
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Speaker 5: does reflect in the S1 where we saw a 12x
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Speaker 5: in revenue growth from 2024 to 2025. They came in
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Speaker 5: at around $ 4. 6 billion of revenue growth. in 2025. And
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Speaker 5: they're anticipating that that continues to grow at a real
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Speaker 5: rapid pace. They did have an operating loss of $ 8
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Speaker 5: billion on that, call it, you know, $ 4. 5 billion of revenue.
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Speaker 5: So basically reinforcing this idea that they are spending a
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Speaker 5: ton of money on compute to build out the capacity.
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Speaker 4: For their model.
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Speaker 5: So really, I think what the question is to pose
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Speaker 5: is that they're going to come out around a $ 2
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Speaker 5: trillion valuation is, Can they continue to grow revenue at
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Speaker 5: what is, they're projecting themselves a 75% growth rate with
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Speaker 5: anticipations of around $ 200 billion of revenue in 2028 and
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Speaker 5: keep their cost low? in line while they're doing that.
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Speaker 5: They have $ 518 billion in commitments to the big players
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Speaker 5: like Google and Amazon for all of this cloud computing capacity.
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Speaker 5: In order to meet those commitments, which about 80% of
15:20
Speaker 5: them they're on the hook for, they're not something that
15:22
Speaker 5: they could just pull the plug on, you're going to
15:24
Speaker 5: have to grow revenue really fast and continue to sustain
15:27
Speaker 5: it at that pace. Now, They are claimed to be
15:29
Speaker 5: running at an annualized revenue rate of $ 65 billion. But
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Speaker 5: the one biggest takeaway from the IPO on all that
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Speaker 5: revenue discourse is 25% of their revenue is coming from
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Speaker 5: two customers right now. I did not realize that they
15:44
Speaker 5: had a bit of a customer concentration issue, and neither
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Speaker 5: of those customers are locked in to a longer-term deal.
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Speaker 5: So I'm fascinated just because it is a really significant
15:56
Speaker 5: player on the frontier side of things, and really sits
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Speaker 5: at the forefront of everything AI. So it'll be interesting
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Speaker 5: once they become public. And once that S-1 becomes fully available,
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Speaker 5: all this stuff that I'm recanting here is just off
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Speaker 5: of Reuters and other sources' analysis of the S-1.
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Speaker 3: The Bureau of Labor Statistics produced a report this morning
16:15
Speaker 3: on the state of the labor market, this being the
16:17
Speaker 3: Job Openings Labor Turnover Survey, a heavily quoted survey back
16:21
Speaker 3: during the COVID era when there were far more job
16:24
Speaker 3: openings than there were people looking for work. did a
16:27
Speaker 3: fairly successful job of predicting future inflation if people were
16:31
Speaker 3: modeling it that way. The number of job openings came
16:35
Speaker 3: in at 7.078 million, which was lower than expectations, but
16:39
Speaker 3: not substantially. Effectively rounding, we're at 7.1 versus 7.2 million.
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Speaker 3: Separations were not terribly significant either. Again, this data, however,
16:51
Speaker 3: is looking at August. It's the last last day of
16:54
Speaker 3: August in terms of the data itself. So it's pretty
16:57
Speaker 3: outdated at this stage of the game. But frankly, what
17:00
Speaker 3: we are seeing in the labor market is indicative of
17:02
Speaker 3: one thing and one thing only, a fairly tight labor
17:05
Speaker 3: market with a low unemployment rate and not a lot
17:09
Speaker 3: of churn. And I think this report simply reflects that
17:12
Speaker 3: moment in time that we are seeing. Not a lot
17:14
Speaker 3: of people are finding opportunities to jump ship and get
17:17
Speaker 3: a big raise. Uh, people are also not quite confident
17:21
Speaker 3: enough to quit that job. Uh, and, and hiring managers
17:24
Speaker 3: are not terribly confident that they can find a replacement
17:27
Speaker 3: if they go and fire somebody. And so as such,
17:30
Speaker 3: it's taking longer for people to find new jobs. We'll
17:32
Speaker 3: be talking about that later in the show, but nothing
17:36
Speaker 3: about this report tells me that we have, uh, the
17:39
Speaker 3: early stages of a loosening labor market at all. I
17:41
Speaker 3: don't think in spite of the fact that it was
17:43
Speaker 3: a miss on the openings number.
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Speaker 5: Yeah, I mean, I'm agreeing with you. That really summarizes
17:46
Speaker 5: the labor market that we are at this point.
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Speaker 3: Local company Aura postponing their IPO over, quote, Market uncertainty, Paul.
17:56
Speaker 4: Let's talk about that.
17:56
Speaker 2: I screwed you up here.
17:57
Speaker 5: I said they're local back on a show a couple
18:00
Speaker 5: weeks ago.
18:00
Speaker 4: They're San Fran. Whoop is local. I screwed that up.
18:04
Speaker 4: I put that out there.
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Speaker 2: Too many ring companies.
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Speaker 4: Quote me on that.
18:08
Speaker 2: Quote me on that.
18:10
Speaker 4: I knew you were going for it.
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Speaker 2: Beat him to the punch. Way to go.
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Speaker 3: Regardless, wherever they are based out of, maybe we're broadcasting
18:21
Speaker 3: today from San Francisco.
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Speaker 2: Nobody knows.
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Speaker 3: It's tough to tell what this background might be here. Aura,
18:26
Speaker 3: who is not based in Boston, will be delaying their IPO.
18:30
Speaker 3: And I don't really understand what you would be citing
18:34
Speaker 3: as market uncertainty. Yes, there have been a few IPOs
18:37
Speaker 3: that haven't gone terribly well, but we are 1.5% away
18:40
Speaker 3: from from the highest level that we have ever seen
18:43
Speaker 3: in U.S.
18:44
Speaker 2: Stocks.
18:44
Speaker 5: Yeah, the thing I've learned about IPOs, tracking them over
18:47
Speaker 5: the years doing the show now, is that they want
18:50
Speaker 5: the absolute perfect conditions when any company goes public. The
18:54
Speaker 5: amount of scrutiny that they will put on market conditions
18:57
Speaker 5: before they actually go IPO is beyond me because I
19:01
Speaker 5: sit back, Mike, and have the same takeaway. This has
19:03
Speaker 5: been a very good year for markets. The IPO market
19:06
Speaker 5: has been super robust with $ 127 billion raised, a 400%
19:07
Speaker 5: increase from last year. So it just is, I guess,
19:13
Speaker 5: like skydiving times 10.
19:15
Speaker 4: They really want it to.
19:16
Speaker 5: Be perfect before they jump out of the plane and
19:18
Speaker 5: go public. It's perplexing.
19:21
Speaker 2: In any case, postponement on Aura's IPO. We'll be right back.
19:25
Speaker 2: We're going to take a break. Wall Street Watch coming
19:28
Speaker 2: up next.
19:39
Speaker 1: Like us on Facebook and follow us on Twitter at TFEShow.
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Speaker 1: Breaking business news is always first, right here on the
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Speaker 1: Financial Exchange Radio Network. Time now for Wall Street Watch.
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Speaker 1: Tracking the stocks, the data, and the headlines driving markets
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Speaker 1: so far today, right here on the Financial Exchange Radio Network.
19:59
Speaker 6: Markets are mostly quiet following yesterday's pullback as investors continue
20:04
Speaker 6: to focus on bond yields and oil prices. Right now,
20:07
Speaker 6: the Dow is down about a third of a percent
20:09
Speaker 6: or 162 points off. S & P 500 is dipping
20:13
Speaker 6: one point completely flat. NASDAQ is up nearly two tenths
20:17
Speaker 6: of a percent to 47 points higher. 10-year treasury yield
20:22
Speaker 6: is also flat at 5.247%. Crude oil down over 1.5%,
20:28
Speaker 6: trading at $ 91 a barrel, while Brent also down about 1.5%,
20:31
Speaker 6: trading at $ 103 a barrel. Smart ringmaker Aura announced it
20:36
Speaker 6: was delaying its previously announced IPO, citing market uncertainty. Aura
20:40
Speaker 6: was targeting to list on the Nasdaq as soon as
20:43
Speaker 6: this month, with an expected valuation.
20:45
Speaker 4: Of above $ 11 billion.
20:48
Speaker 6: Meanwhile, AMD said it agreed to acquire AI firm World
20:51
Speaker 6: Labs for $ 8. 2 billion. AMD is up 1% on that news. Elsewhere,
20:56
Speaker 6: fair Isaac stock is tumbling nearly 25% after the Federal
21:00
Speaker 6: Housing Finance Agency announced structural changes to mortgage pricing that
21:05
Speaker 6: will introduce competition to FICO's long-standing credit scoring monopoly.
21:10
Speaker 2: J.P.
21:10
Speaker 6: Morgan upgraded Outback Steakhouse parent. Blumenbrand's too neutral from underweight,
21:15
Speaker 6: noting several recent changes, including a new steak lineup. Bloomstock
21:19
Speaker 6: is up by 2%. And CarMax rallying 7% after the
21:23
Speaker 6: used vehicle retailer reported better-than-expected second quarter results. I'm Tucker Silva,
21:30
Speaker 6: and that is Wall Street Watch.
21:32
Speaker 3: Paul, we were talking before about the delayed Aura IPO
21:35
Speaker 3: and I kind of quickly dismissed it, but the product
21:38
Speaker 3: itself I am seeing popping up more and more. It's
21:42
Speaker 3: one just amazing to me how quickly tech companies have
21:44
Speaker 3: been able to capitalize on the watch market, the wearable
21:49
Speaker 3: markets generally and charge pretty luxury prices for items that didn't...
21:55
Speaker 3: The idea of the number of people that currently wear
21:57
Speaker 3: an Apple watch spending as much money on a watch
22:00
Speaker 3: was unheard of for the likes of you know, Rolex
22:03
Speaker 3: isn't the right example here, but whatever that range of
22:05
Speaker 3: price was until Apple came around and dominated the space.
22:08
Speaker 3: And we're seeing something similar in this wearable, uh, ring
22:11
Speaker 3: space with, with aura. I believe if I'm not mistaken,
22:15
Speaker 3: my sister and brother-in-law wear them and rave about them.
22:18
Speaker 2: Um, I do wear a smart watch. I, I get it.
22:22
Speaker 3: We mostly bought the smart watch because of a story
22:24
Speaker 3: of a family member who had a stroke and was
22:26
Speaker 3: supposed to be.
22:27
Speaker 2: Alone at the time and didn't have one. It kind
22:29
Speaker 2: of freaked us out.
22:30
Speaker 3: So we bought something that would, hopefully detect, you know,
22:34
Speaker 3: collapsing in a hotel room somewhere. But what is the
22:37
Speaker 3: selling point for these devices? And I don't know, is
22:41
Speaker 3: it a fad like any other sort of exercise equipment
22:44
Speaker 3: or is it something longer lasting so far as you
22:46
Speaker 3: can tell?
22:46
Speaker 5: Yeah, we were just talking about this off air that
22:48
Speaker 5: I just feel like this is such a cutthroat business
22:51
Speaker 5: in terms of the competition that you're up against here
22:54
Speaker 5: in the wearable space.
22:55
Speaker 4: Now, Aura has dominated the the ring side of things.
22:58
Speaker 5: They have about 75% market share on just the wearable ring,
23:02
Speaker 5: but there are alternatives out there that may not be rings,
23:06
Speaker 5: but track similar things. My wife is another Aura user,
23:11
Speaker 5: and I asked for her review before the show. She
23:13
Speaker 5: said that she's not as addicted to the statistics as
23:16
Speaker 5: she thought she would be. However, she really likes it
23:19
Speaker 5: a lot for the step count that it provides and
23:22
Speaker 5: also the sleep analysis features. that it provides. And to that,
23:27
Speaker 5: I say, first of all, I had to figure out
23:29
Speaker 5: that there is a subscription with Aura. And I asked
23:32
Speaker 5: her how much did it cost. And she said, ask
23:34
Speaker 5: your financial advisor. I asked my financial advisor.
23:37
Speaker 4: Which is me.
23:38
Speaker 5: So I have to go look at that. But apparently,
23:41
Speaker 5: from my Google search, it's $ 6 a month. So that's
23:45
Speaker 5: on the credit card somewhere. And When I step back,
23:49
Speaker 5: I'm like, okay, you're saying these are the things that
23:51
Speaker 5: it does.
23:51
Speaker 2: I just.
23:53
Speaker 5: I don't see the value from it because your Apple Watch, Mike,
23:57
Speaker 5: I'm sure counts your steps.
23:58
Speaker 2: Sure.
23:59
Speaker 5: It doesn't do... Does it do sleep? It doesn't... It
24:02
Speaker 5: does do sleep analysis as well. So it's... And you
24:05
Speaker 5: have all the other benefits from your Apple Watch doing
24:07
Speaker 5: these other services, reading your texts, other things that you
24:10
Speaker 5: find useful. And to me, I just don't see the differentiation.
24:14
Speaker 5: Then you expand it on to, so they're up against Apple.
24:17
Speaker 5: They're up against Whoop 2. That's another one that is
24:20
Speaker 5: locally based, but that's just a wrist strap rather than
24:22
Speaker 5: the ring. To me, it just seems like you're up
24:25
Speaker 5: against a lot of competition. Everyone is trying to capitalize
24:28
Speaker 5: on the big, broad trend that is very clear now
24:30
Speaker 5: that health and wellness is, is a very significant focus
24:34
Speaker 5: for many Americans out there. And they're willing to spend
24:38
Speaker 5: in order to increase their longevity or just be more
24:41
Speaker 5: mindful of how they're sleeping and how their health is progressing.
24:44
Speaker 5: But I just feel like they will have a lot
24:47
Speaker 5: of competition to go up against Aura Will when they
24:51
Speaker 5: do become public.
24:52
Speaker 3: Yeah, I don't remember if this was Aura or Whoop,
24:54
Speaker 3: but I remember like sitting at a table and listening
24:57
Speaker 3: to a conversation about like, The analytics, somebody was uploading
25:01
Speaker 3: their analytics on an automated basis into Claude to give
25:05
Speaker 3: him feedback. They were talking about their, it was either
25:10
Speaker 3: their whoop or their aura age, because it'll basically look
25:14
Speaker 3: at your health trends and say, oh, you have the
25:16
Speaker 3: age of the average.
25:17
Speaker 2: This person, in spite of the fact that you're 40.
25:21
Speaker 2: I don't know. It all just seemed....
25:24
Speaker 3: It was not dissimilar to me from a stage years
25:27
Speaker 3: ago when a bunch of my family members were sending
25:29
Speaker 3: along their like exercise records or their sleep tracking.
25:35
Speaker 2: My grandfather was on all of this stuff too.
25:37
Speaker 3: And he was, you know, boasting about the fact that
25:39
Speaker 3: he took more steps than anybody in the family that week.
25:42
Speaker 3: It didn't last very long. And so I am curious
25:45
Speaker 3: about it. To me, it just sounds like it. nagging
25:49
Speaker 3: personal trainer who's going to make my life miserable because
25:52
Speaker 3: I'm not meeting my objectives on a regular basis.
25:55
Speaker 5: Peloton had that moment too, right? Everyone's comparing their scores,
25:58
Speaker 5: the community aspect of it.
26:00
Speaker 4: We'll see.
26:01
Speaker 2: Yeah, we will see.
26:03
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Speaker 1: The proceeding was paid for and the views expressed are
27:04
Speaker 1: solely those of Cushing and Dolan. Cushing and Dolan and
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Speaker 1: or Armstrong Advisory may contact you offering legal or investment services.
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Speaker 1: Cushing and Armstrong do not endorse each other and are
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Speaker 1: not affiliated.
27:13
Speaker 3: I'm sure I've heard that ad a number of times before, Tucker,
27:15
Speaker 3: but I was waiting for you to go off script
27:17
Speaker 3: with it.
27:19
Speaker 2: Planning to leave your IRA to your kids? Have you
27:22
Speaker 2: thought about the alternatives? Like, me, Tucker.
27:25
Speaker 4: Yeah, just leave it to me.
27:27
Speaker 2: Screw you kids, just give it to me. I mean,
27:29
Speaker 2: come on. We spend a lot of time here together.
27:31
Speaker 1: Yeah.
27:32
Speaker 6: You listen to me every day, don't you?
27:34
Speaker 4: I deserve something.
27:36
Speaker 6: Just give me your tired inheritance.
27:40
Speaker 2: Brought to you by Tucker.
27:43
Speaker 4: Disclaimer.
27:44
Speaker 2: Oh, boy. Good stuff.
27:47
Speaker 3: Treasuries heading into what Wall Street Journal describes as a
27:53
Speaker 3: seasonally weak October. I don't know that I would buy
27:56
Speaker 3: anything into this. They do cite data that shows that treasuries...
28:01
Speaker 3: have posted over the past 10 years a pretty weak September,
28:06
Speaker 3: followed by a pretty weak October on average. It's 10
28:10
Speaker 3: years worth of data with a completely different set of
28:12
Speaker 3: interest rate environments than what we're in right now. So
28:15
Speaker 3: I would probably dismiss that piece of it. And just
28:18
Speaker 3: I think it's reasonable to talk about what could drive
28:21
Speaker 3: yields higher or lower. But I would take the seasonality
28:24
Speaker 3: argument out of any of this because I think it's
28:25
Speaker 3: probably garbage.
28:26
Speaker 5: Yeah, I would take the seasonality effect and just kind
28:29
Speaker 5: of disregard it. We are in an era or a
28:32
Speaker 5: shorter period of time here where, like I was mentioning
28:35
Speaker 5: earlier in the program, there is going to be a
28:37
Speaker 5: lot of debt issuance next year. AI CapEx is going
28:40
Speaker 5: to be really intensive from a fundraising perspective. And so
28:44
Speaker 5: as a result of that, I think you could easily
28:47
Speaker 5: point to between that and a renewed treasury supply out
28:50
Speaker 5: there and just inflation growth. being a headline risk at
28:53
Speaker 5: the moment that there is going to be a lot
28:56
Speaker 5: of potential risks out there for upward pressure on interest rates.
29:00
Speaker 5: You also have a Federal Reserve that sits at around
29:02
Speaker 5: a 72% probability that they're going to hike this next
29:06
Speaker 5: meeting coming up in October. And I believe the markets
29:09
Speaker 5: have it projected that there could perhaps be another two
29:12
Speaker 5: hikes in addition to that one in October for the
29:15
Speaker 5: next six to 12 months out. So certainly that is
29:19
Speaker 5: something that investors should be aware of that there could
29:22
Speaker 5: be additional pricing pressure on the yield front.
29:24
Speaker 2: This stuff just isn't logical.
29:27
Speaker 3: It doesn't immediately make sense to folks. We end up
29:32
Speaker 3: spending a lot of time talking about this, especially these
29:34
Speaker 3: days because everyone's focusing.
29:35
Speaker 2: On bonds right now. But the idea that the U.S.
29:39
Speaker 2: government U.S.
29:41
Speaker 3: Economy is so strong and that is leading to higher
29:44
Speaker 3: interest rates is not logical in the same way that
29:48
Speaker 3: we think about it for our household. When Paul Lane's
29:51
Speaker 3: household is doing really well and bringing in a lot
29:53
Speaker 3: of income and the income is growing- he expects lower
29:58
Speaker 3: interest rates on average than the neighbor. And that is
30:02
Speaker 3: not necessarily the way that it works when you're talking
30:05
Speaker 3: about government's borrowing. And the point that you just made
30:08
Speaker 3: about other borrowers out there, right?
30:12
Speaker 2: Yes, the U.S.
30:12
Speaker 3: Government does in fact compete for dollars with the likes
30:16
Speaker 3: of Microsoft, Amazon, Facebook, I don't know who I left out, Google,
30:21
Speaker 3: these companies also borrow money and are also very likely
30:25
Speaker 3: to pay you back. And so that is, you know,
30:29
Speaker 3: more than anything, what is driving up yields because these
30:32
Speaker 3: companies are borrowing on a not terribly.
30:36
Speaker 2: Rate sensitive basis.
30:38
Speaker 3: And so, you know, if you want the argument for
30:41
Speaker 3: how yields start coming in, You want interest rates down,
30:45
Speaker 3: you might need to be able to convince the American
30:47
Speaker 3: public that the economy is about to fall apart.
30:50
Speaker 2: I don't know how else to do it.
30:52
Speaker 3: You have to really believe that the Fed is going
30:54
Speaker 3: to slow this thing down enough to control inflation, and
30:59
Speaker 3: I don't see any real way of doing that other
31:02
Speaker 3: than kneecapping these AI companies that don't seem to care
31:05
Speaker 3: about rates right now.
31:06
Speaker 5: A resolution to the war between U.S. and Iran probably
31:10
Speaker 5: could have some help.
31:11
Speaker 2: You're right.
31:12
Speaker 3: That would most certainly help given what we've seen in
31:14
Speaker 3: rates since the outbreak of war.
31:17
Speaker 2: In the Middle East. Let's take a quick break. A
31:19
Speaker 2: lot more to come next on The Financial Exchange.
31:50
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31:53
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32:11
Speaker 3: Tucker's telling me that the president, was it a true
32:13
Speaker 3: social post, Tucker, or was it reporters?
32:16
Speaker 6: He's currently at a press conference talking about the AI-powered
32:20
Speaker 6: government website.
32:22
Speaker 2: Okay.
32:22
Speaker 3: In either case, he made a comment about the U.S.-Iran
32:24
Speaker 3: war ending very soon. I don't see anything happening in
32:29
Speaker 3: markets in reaction to it, probably because, according to sources
32:32
Speaker 3: I could find, this is... at least the 40th and
32:35
Speaker 3: probably more than that time that he has talked about
32:38
Speaker 3: the war coming to an end very soon. So I
32:41
Speaker 3: don't think markets are paying any attention to that statement anymore.
32:45
Speaker 3: But one thing, according to reporting, seems to be true,
32:49
Speaker 3: which is exports from the Middle East, specifically not Iran,
32:56
Speaker 3: on oil has risen quite a bit over the last
33:00
Speaker 3: few days. So according to reports, we hit 13 million
33:04
Speaker 3: barrels in recent days per day. Back in February, we
33:09
Speaker 3: were doing about 19 million barrels a day out of
33:12
Speaker 3: that area. And so for a conflict to still be
33:16
Speaker 3: going on and getting that much oil out of the region...
33:19
Speaker 3: I think is positive and is likely contributing to those
33:23
Speaker 3: lower oil prices that we are seeing. Again, we topped
33:27
Speaker 3: $ 100 a barrel just in the last couple of weeks.
33:30
Speaker 3: We are now sitting about $ 91. 10 a barrel.
33:34
Speaker 2: Still over $ 100 on the Brent benchmark here.
33:37
Speaker 3: But yeah, it does put an interesting shape around all this.
33:43
Speaker 3: As we talked about before, it's very unlikely to any
33:46
Speaker 3: of us that the Middle East and its, you know,
33:49
Speaker 3: energy production ever returns back to the normalcy that we
33:52
Speaker 3: saw back in February of 2026. I think it probably
33:55
Speaker 3: looks very different for an extended period of time. But
33:59
Speaker 3: if we're settling into a new state where the UAE
34:03
Speaker 3: and the Saudis and all of Iran's neighbors are successfully
34:06
Speaker 3: getting oil out of the region because they've become better
34:09
Speaker 3: at deterring attacks from Iran, I can't imagine that being
34:14
Speaker 3: a scenario that lasts very long. Either Iran has to
34:18
Speaker 3: capitulate because they can't sell any oil and they're running
34:21
Speaker 3: out of funds and organization, or they start striking out
34:25
Speaker 3: in a more meaningful, dangerous way to curb that oil flow.
34:28
Speaker 5: Yeah, it's an interesting sort of strategic point that I
34:32
Speaker 5: had heard this covered before, this idea that Iran always
34:35
Speaker 5: had the threat of closing the Strait of Hormuz, and
34:38
Speaker 5: that was a tremendous leverage point that they were able
34:41
Speaker 5: to sort of dangle out there over the years.
34:43
Speaker 4: And now, This year, they've done it.
34:46
Speaker 5: And the problem with actually going out there and doing
34:48
Speaker 5: it is that you create a market reaction in which
34:51
Speaker 5: many different countries and companies invest significant dollars to never
34:55
Speaker 5: have to deal with this issue again. You can bet, certainly,
35:01
Speaker 5: that a lot of oil exporters around the Middle East
35:04
Speaker 5: are not going to hinge so much of their exports
35:09
Speaker 5: on the Strait of Hormuz going forward. They will invest
35:11
Speaker 5: in other avenues in order to to get the oil
35:13
Speaker 5: out of the region. And to your point, if that
35:17
Speaker 5: starts weakening this choke point leverage that they have on
35:20
Speaker 5: the straight, there's two options. One, you throw in the
35:22
Speaker 5: towel and just say, let's open it back up so
35:25
Speaker 5: we can get our economic progress going again. Or two,
35:30
Speaker 5: the more dire one or more negative is that they
35:33
Speaker 5: go after some of these other countries. And that would
35:36
Speaker 5: likely force a U.S. retaliation and probably prolongs this thing
35:40
Speaker 5: even further. hopefully some middle ground could be met where
35:43
Speaker 5: they reopen the straight and the U.S. is able to
35:46
Speaker 5: come to some sort of pact with them. But it
35:50
Speaker 5: does pin them in a tough spot if truly this
35:52
Speaker 5: is going to be the result, that they're losing leverage
35:55
Speaker 5: in this choke point.
35:56
Speaker 3: And I think clearly the message from markets right now is, yeah,
36:00
Speaker 3: we'll give a little bit of room to oil prices
36:02
Speaker 3: right now based on this activity, but, you know, We've
36:07
Speaker 3: had this ball pulled away from us a few times
36:09
Speaker 3: now and are not fully buying into the scenario that
36:11
Speaker 3: we're talking about here. You want to talk about new
36:14
Speaker 3: car models or repos?
36:17
Speaker 4: Let's do new car models.
36:19
Speaker 2: So a piece from, is it Bloomberg? Wall Street Journal.
36:23
Speaker 3: From the Journal about car dealers desperate for new models.
36:26
Speaker 3: Seems like some, I don't know, just lack of excitement
36:31
Speaker 3: on behalf of consumers because there haven't been a whole
36:34
Speaker 3: lot of shifts recently. on the part of the manufacturers themselves,
36:38
Speaker 3: they seem to be suffering a bit of a hangover
36:39
Speaker 3: from rolling out all these new EV pushes that didn't
36:42
Speaker 3: really go anywhere. So I get why they're falling back
36:44
Speaker 3: on their old successes.
36:46
Speaker 5: That was one instance where I recall us in the
36:49
Speaker 5: show being skeptical on the amount of money that was
36:52
Speaker 5: being invested in EV infrastructure back in that 2021 range.
36:57
Speaker 5: There was so much commitment to it. And you just
36:59
Speaker 5: wondered how it was going to play out. Well, it
37:02
Speaker 5: played out really poorly. The results are in $ 70 billion
37:05
Speaker 5: in charges and impairments by all the big auto manufacturers.
37:08
Speaker 5: So as a result of that, you're only seeing 9%
37:11
Speaker 5: redesigns of existing lineups for these car manufacturers across 2026.
37:16
Speaker 5: That typically sits around 14% of models in a lineup
37:20
Speaker 5: for any car manufacturer that will be redesigned over a
37:23
Speaker 5: 20-year average. So as a result of that, you've seen
37:27
Speaker 5: sales down 2% year-to-date for vehicles, and there's just not
37:31
Speaker 5: a lot of activity or not a lot in the
37:32
Speaker 5: pipeline that people can get excited about for new models.
37:37
Speaker 3: An interesting side effect of the ban on Chinese vehicles
37:40
Speaker 3: here in the United States that we are seeing, US
37:43
Speaker 3: is one of the very few nations in the world
37:46
Speaker 3: where Chinese can't sell into the country. And GM is
37:49
Speaker 3: citing a specific risk now saying, well, because of that,
37:52
Speaker 3: every foreign automaker that can sell into the U.S. market
37:56
Speaker 3: is desperate to do so because they can't sell their
37:57
Speaker 3: cars in Mexico. They can't sell their vehicles in Europe
38:00
Speaker 3: because they're competing with these Chinese cheap models.
38:02
Speaker 4: Getting their lunch taken, yeah.
38:03
Speaker 3: And so now GM's saying, well, yeah, but now we
38:05
Speaker 3: have to deal with all of these other European automakers
38:08
Speaker 3: that want to dump their product into the U.S. where
38:09
Speaker 3: they don't have to compete with the Chinese. Not an
38:13
Speaker 3: easy business to be in.
38:14
Speaker 2: Quick break. A lot more to cover in the second
38:16
Speaker 2: hour coming right up.