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Is the US economy just a teetering Jenga Tower? · The Financial Exchange Show

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Speaker 1: donation today. This is the Financial Exchange with Chuck Zada
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Speaker 1: and Mike Armstraw, Chuck, Mike.
1:09
Speaker 2: And Tucker with you here.
1:10
Speaker 3: And as we kick things off, we've got stocks selling
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Speaker 3: off just a little bit, nothing huge, but sp is
1:16
Speaker 3: down fifty eight points, a little less than one percent.
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Speaker 3: The Dow was off three hundred and forty six points,
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Speaker 3: about three quarters of a percent, and the nasdak can
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Speaker 3: posit down three hundred and twenty nine points about one
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Speaker 3: and a half percent. So you do have some tech
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Speaker 3: stocks that are kind of feeling it today. And this
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Speaker 3: comes on the back of, quite honestly, like some comments
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Speaker 3: and things in the last week or so that has
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Speaker 3: me wondering, you know, if we look back on this
1:44
Speaker 3: week as the point where the tide turned, if things
1:48
Speaker 3: start to go against the you know what has been
1:51
Speaker 3: the prevailing AI story, the prevailing AI narrative. Obviously, look,
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Speaker 3: we could be sitting here a year from now and say, yeah, this,
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Speaker 3: you know, isn't the case. And these stocks have you know,
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Speaker 3: continued to move to all new all time highs. But
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Speaker 3: there's some stuff this week that just has me feeling
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Speaker 3: like maybe this is the moment where it starts to turn.
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Speaker 3: You had Satni Nadella come out over the weekend or
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Speaker 3: maybe it was late last week and say, hey, the
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Speaker 3: critical bottleneck isn't compute anymore getting you know chips, it's
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Speaker 3: getting enough electricity. Okay, that's not a great sign for
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Speaker 3: you know, the semiconductor manufacturers. Jensen Wang says yesterday to
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Speaker 3: the Financial Times, China is going to win the AI race.
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Speaker 3: He then tried to walk it back, and you know, say,
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Speaker 3: the US is running hand in hand. But remember, China
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Speaker 3: is not buying in vidio chips right now, at least
2:38
Speaker 3: they're not admitting to buying them if they're you know,
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Speaker 3: somehow making their way into their ecosystem. And so the
2:44
Speaker 3: question that you ask is, hey, if Jensen Wang says
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Speaker 3: China is gonna win the AI race, if they're gonna
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Speaker 3: win it without his chips, then why would you need
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Speaker 3: his chips?
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Speaker 2: Here?
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Speaker 3: Just the question that you would naturally follow up with
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Speaker 3: Open AI. Yesterday, their CFO at a Wall Street Journalist
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Speaker 3: investment conference said hey, we'd really like to, you know,
3:04
Speaker 3: find some more creative ways to finance this growth, including
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Speaker 3: maybe looking at, you know, a government backstop for loans
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Speaker 3: to the AI sector, to which I say, there is
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Speaker 3: absolutely no way I want to be involved. In backstopping
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Speaker 3: loans to AI companies with taxpayer dollars full stop, And
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Speaker 3: the question obviously then becomes, wait, I thought everything was fine.
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Speaker 3: Why do you need a government backstop on AI loans?
3:30
Speaker 3: I thought, I thought this sector was so robust, Like,
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Speaker 3: shouldn't everyone be lining up to loan the money?
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Speaker 2: Are you saying the loans are gonna go bad?
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Speaker 3: Like? It makes you wonder about that, and then like,
3:40
Speaker 3: you just look at some of the price action in
3:41
Speaker 3: some of these companies. Oracle is an example who about
3:45
Speaker 3: two months ago came out and said, hey, we've got
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Speaker 3: an extra like three hundred billion dollars in revenue commitments
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Speaker 3: compared to what we previously had. Well, their stock has
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Speaker 3: now retraced all of the gain since then. It went
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Speaker 3: from two forty up to three hundred and forty five
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Speaker 3: that day and now it's back down to two four.
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Speaker 3: Meta had earnings last week where they, you know, said
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Speaker 3: our capex is going to be heavier, and they issued
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Speaker 3: you know, twenty five billion dollars in bonds to help
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Speaker 3: with that capex, and their stock has promptly fallen almost
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Speaker 3: twenty five I'm sorry, almost twenty percent since then. And
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Speaker 3: so you just kind of look at the convergence here
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Speaker 3: and say, hey, are we going to look back at
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Speaker 3: this first week in November as a critical point in
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Speaker 3: time for the AI story and for these AI stocks?
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Speaker 2: And I think it's very possible.
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Speaker 3: That we do, because all of those stories are things
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Speaker 3: that we haven't heard in the last six months.
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Speaker 4: Michael, No, they aren't on the side of China and
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Speaker 4: in Vidia, just to play that one out a little
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Speaker 4: bit more. Obviously, in Vidia and now the largest company
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Speaker 4: in the world, largest company in the s and P
4:44
Speaker 4: five hundred, quite concentrated in there. And I do wonder though,
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Speaker 4: you know, for China to win the AI race, which
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Speaker 4: is just kind of a nonsense statement because it's something
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Speaker 4: that is constantly moving and evolving. But if they do
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Speaker 4: actually get to the point where they are successfully producing
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Speaker 4: chips that are as good or better than NVIDIAs and
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Speaker 4: then are pushing out generative AI and whatever AI tools
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Speaker 4: for the future that are as good or better than
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Speaker 4: US companies, I guess my question is who's going to
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Speaker 4: use them outside of China?
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Speaker 2: And so can China win?
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Speaker 4: I mean, like if you are a the German government
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Speaker 4: or if you are the French, if you are air
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Speaker 4: bus and you are looking to develop an in house
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Speaker 4: generative AI system. I would think that even with all
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Speaker 4: the ties to China, you're going to be pretty suspicious
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Speaker 4: about welcoming in to your ecosystem a generative AI system
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Speaker 4: developed by a Chinese company.
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Speaker 2: I disagree. Yeah, maybe not.
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Speaker 3: Because the Germans have basically said, hey, we like to
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Speaker 3: make we like to make cars, that's what we do.
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Speaker 3: Come in Chinese electric vehicle manufacturers and take our business.
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Speaker 2: Yeah yeah, it's so.
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Speaker 4: Maybe the facts aren't in evidence, but yeah, that's been
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Speaker 4: the thing that I've gone back on is who's going
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Speaker 4: to really allow these semiconductors into their market? I get,
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Speaker 4: I get that, you know, the Middle East might, and
6:11
Speaker 4: you know other nations that the Belton Roads Initiative has
6:15
Speaker 4: really gone deep into might. But I'm yeah, maybe maybe
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Speaker 4: we are on an island here where they won't come
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Speaker 4: into the US, but it doesn't really matter if they're
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Speaker 4: able to flood every other market with it.
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Speaker 3: The other piece that I like come back to is
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Speaker 3: isn't AI kind of going to be commoditized?
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Speaker 2: You know, like, go on, does anyone really look.
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Speaker 3: At like for the average person, which remember, the average
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Speaker 3: person is the person who's going to use this stuff
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Speaker 3: the most? Does the average person really care which model
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Speaker 3: they use?
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Speaker 1: No?
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Speaker 4: And in fact, when I attend conferences and they talk
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Speaker 4: about artificial intelligence and the tools that they're developing, it's
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Speaker 4: been pointed out that, hey, the crucial thing when you
7:02
Speaker 4: are using one of these tools for you know, a
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Speaker 4: corporate setting, is the ability to switch between systems in
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Speaker 4: the back end for generating this stuff, because who knows
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Speaker 4: which one's gonna be better five years from now.
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Speaker 3: So, like, how do you make money on that? Commoditized
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Speaker 3: products usually have really low margins. See grocery stores, see
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Speaker 3: every other semiconductor you know, like no one sitting has
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Speaker 3: anyone been sitting there for the last like twenty years
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Speaker 3: being like, you know what I want to do. I
7:34
Speaker 3: want to build a business getting into making memory chips. No,
7:38
Speaker 3: because the margins are horrible. The companies that do it
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Speaker 3: are like, yeah, well, well we'll do it because there's
7:42
Speaker 3: a business and it will help us, you know, get
7:45
Speaker 3: the capital that we need in order to do the
7:47
Speaker 3: other stuff that we really.
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Speaker 2: Like to do.
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Speaker 4: If it was a great margin business, the Chips Act
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Speaker 4: wouldn't have needed to exist.
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Speaker 3: More importantly, here's the thing that happens with any high
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Speaker 3: margin business. A bunch of people see it, a bunch
7:57
Speaker 3: of people get into it, and the margins go down.
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Speaker 3: This is what happened with semiconductors. They originally were a
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Speaker 3: high margin business, and look what happened. Same thing with
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Speaker 3: the personal computing revolution. Do you remember all of the
8:09
Speaker 3: uh PC makers back in the nineties. You had del
8:12
Speaker 3: you had HP, you had Compac, you had Gateway, you
8:15
Speaker 3: had like there were hundreds of them. They were like
8:18
Speaker 3: they were just everywhere, and you're basically left with like
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Speaker 3: three of them now. And it's because the margins went down.
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Speaker 3: They had to consolidate in order to you know, maintain
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Speaker 3: their businesses, and all that competition drove the profits out
8:33
Speaker 3: of those businesses. It's it's just what happened, and that's fine.
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Speaker 3: Like that, that's how you eventually, it's part of the
8:41
Speaker 3: way that you get things to be cheaper is when
8:43
Speaker 3: when profit margins go away, that helps to make things
8:47
Speaker 3: cheaper through economies of scale, and that's that's how these
8:49
Speaker 3: things get broadly distributed out to households. But if you're
8:54
Speaker 3: talking about this and the question of AI, like do
8:59
Speaker 3: we think that AI is going to have the margins
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Speaker 3: that you know, software traditionally has well, no, if it's
9:08
Speaker 3: cloud based and most people don't want to pay for it,
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Speaker 3: and you're talking about like okay, we're gonna use like
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Speaker 3: ad revenue or you know, revenue from transaction, the margins
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Speaker 3: aren't going to be that fat if people are willing
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Speaker 3: to hop between different areas, If if they have no
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Speaker 3: allegiance and they're just looking based on pricing, Ask Amazon
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Speaker 3: how well that works out as a pricing as a
9:30
Speaker 3: model for you. Yeah, like, yeah, you can grow, But
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Speaker 3: their core business is not why Amazon stock is where
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Speaker 3: it is. It's because of aws and all the other
9:37
Speaker 3: stuff that is sticky.
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Speaker 2: You know, talk to Walmart.
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Speaker 3: Yeah, they built a great business, but it's because they're
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Speaker 3: like freaking huge and they have those economies of scale. Ultimately,
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Speaker 3: it still is a business that runs in mid signal
9:49
Speaker 3: digit margins. You're not gonna have like fifty percent profit
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Speaker 3: margins on AI.
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Speaker 2: If that's the case.
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Speaker 4: I'll make the statement that I have been highly skeptical
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Speaker 4: of the frothiness of this market and move of the
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Speaker 4: AI trade generally. I'm also fairly skeptical that right now
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Speaker 4: happens to be the turning point of that overall narrative,
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Speaker 4: But I take your point there there are some new
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Speaker 4: comments that are being made from leadership in the AI
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Speaker 4: space that we I agree, find surprising today the.
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Speaker 2: Most, like not the most.
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Speaker 3: If like, if there is a concept of you know,
10:24
Speaker 3: momentum in markets and things like that, then there's a
10:28
Speaker 3: pretty good chance that what I said is not like right,
10:31
Speaker 3: you know, like it's okay. These these are people that
10:34
Speaker 3: are you know, smarter than me, that'll they're building all
10:36
Speaker 3: this stuff, you know, And and I get how the
10:38
Speaker 3: financial incentives are aligned, because look, if you are any
10:41
Speaker 3: of these companies building these things, I totally get why
10:44
Speaker 3: you would spend two hundred and fifty billion dollars in capex.
10:47
Speaker 3: Sure Zuck's basically he's laid it out. He's like, yeah,
10:50
Speaker 3: the upside's too great, and if it doesn't work, we'll
10:52
Speaker 3: figure it out. And he's not wrong about that. Like,
10:55
Speaker 3: I don't think anyone looks at Meta's business or Google's
10:58
Speaker 3: business or Microsoft and said, as hey, if this fails,
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Speaker 3: you're gonna go on. They're like, no, that's not the case.
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Speaker 3: But it is one where you look at and say, hey,
11:06
Speaker 3: if this fails, yeah, all that upside that's being priced
11:09
Speaker 3: in isn't there. But that's just a question of the
11:11
Speaker 3: stock price not Does the company still exist Open Ai
11:13
Speaker 3: on the other hand, and the reason I think they're
11:15
Speaker 3: trying to sign all these partnerships is right now. If
11:19
Speaker 3: it doesn't work out for them, then they do cease
11:21
Speaker 3: to exist. Yeah, they don't have anything else to fall
11:24
Speaker 3: back on. They're not Open Excel, they're Open AI. Quick
11:28
Speaker 3: break here when we return, We've got trivia and then
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Speaker 3: we'll talk about Jenga when we come back.
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13:27
Speaker 2: Chuck, just a bit.
13:28
Speaker 4: Of breaking news on a story that we've given a
13:29
Speaker 4: lot of coverage over the last few months. Out sure
13:32
Speaker 4: Financial Times reporting that UBS is going to liquidate the
13:35
Speaker 4: funds with substantial First Brands exposure. If you recall there
13:39
Speaker 4: was do you remember the name of the UBS fund
13:42
Speaker 4: group that had.
13:43
Speaker 2: The UBS one, the one that Jeffreys was Point Bonita. Yeah.
13:47
Speaker 4: So in any case, just a bit of an additional
13:50
Speaker 4: story on that front, where one of the major holders
13:53
Speaker 4: here and had a fair bit of concentration in this
13:56
Speaker 4: First Brands probably forced now to go and liquidate that
14:02
Speaker 4: fund as a result.
14:03
Speaker 3: The Swiss banks, for better for worse, tend to be
14:06
Speaker 3: the canary and the coal mine on this stuff. You know,
14:09
Speaker 3: it used to be Credit Sweet before they were forced
14:11
Speaker 3: to be bought before that force to be acquired by UBS.
14:15
Speaker 3: So you don't get quite as pure of a signal
14:16
Speaker 3: because it used to be like you'd see the name
14:18
Speaker 3: Credit Sweet in the headline just to be like, oh no,
14:21
Speaker 3: what is it now? Tell me what'd you do? And
14:25
Speaker 3: you know now it's it's watered down a little bit,
14:28
Speaker 3: but the legend lives on with UBS. Let's see piece
14:34
Speaker 3: from Bloomberg here Jenga Tower. US economy teeters as middle
14:38
Speaker 3: class pulls back spending.
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Speaker 2: This is I gotta tell you. For the last week
14:44
Speaker 2: and a half, this is.
14:44
Speaker 3: All that my friends want to talk about because I
14:46
Speaker 3: feel like it's making its way into mainstream discourse now,
14:50
Speaker 3: the seda of this K shaped economy. I feel like
14:53
Speaker 3: it's everywhere that you're seeing this chatter now. And it's
14:57
Speaker 3: very simple. The household the high end of the income
15:00
Speaker 3: spectrum are spending like crazy still. And you know, we
15:04
Speaker 3: see this in earnings reports, we see this with you know,
15:07
Speaker 3: basically all the economic data that's out there. The households
15:10
Speaker 3: that are in the bottom fifty to seventy percent of
15:12
Speaker 3: income are really really struggling. And it's a you know
15:19
Speaker 3: situation where you know, McDonald said, lower income households are
15:21
Speaker 3: continuing to pull back at almost a double digit pace.
15:25
Speaker 3: You've got Delta saying, you know, main cabin bookings are
15:29
Speaker 3: down six percent, Marriott's saying that, you know, their cheaper
15:33
Speaker 3: selection of hotels is down low single digits.
15:36
Speaker 2: Year over year.
15:37
Speaker 3: So like you're, you're, you're seeing this across the board.
15:40
Speaker 3: And so the question that's being asked is how long
15:42
Speaker 3: can this continue? And because here's the big thing is
15:48
Speaker 3: broadly in the aggregate consumer spending remains fine. It's running
15:52
Speaker 3: four to six percent growth year over year. Inflation's at
15:54
Speaker 3: three so it's like one to three percent real growth.
15:57
Speaker 3: It's just that growth is basically all happening from the
16:00
Speaker 3: top ten to twenty percent of spenders.
16:02
Speaker 4: Yeah, I was gonna say the entire economy is balancing
16:05
Speaker 4: on that one jenga brick of the high income consumer.
16:11
Speaker 2: You can measure this in other ways too.
16:12
Speaker 4: We've talked about the earnings FIKO is reporting now that
16:16
Speaker 4: increasingly consumers are scoring either in the very highest or
16:19
Speaker 4: the very lowest score ranges instead of a normal distribution.
16:23
Speaker 4: You're basically seeing the K shaped economy in the actual
16:27
Speaker 4: numbers of credit scores as well.
16:30
Speaker 3: So you know, the question is how long can this continue?
16:32
Speaker 3: And the answer is, look, we're in kind of an
16:34
Speaker 3: unprecedented situation from a number of different respects. The first is, hey,
16:40
Speaker 3: we've talked about the US population getting older for a while.
16:44
Speaker 3: Older populations don't rely on earned income. They rely on
16:48
Speaker 3: social security, pensions and portfolio income. And so even if,
16:53
Speaker 3: like the economy you know, has more job losses, is
16:57
Speaker 3: the US economy more resilient to those because a higher
16:59
Speaker 3: percentage of our spending is coming from people that are
17:01
Speaker 3: not in the workforce because they're retired. Maybe, like maybe
17:06
Speaker 3: that can continue. The Also, the level of wealth disparity
17:10
Speaker 3: has gotten pretty darn big. And so you look at
17:14
Speaker 3: that and you say, okay, even if you see more
17:16
Speaker 3: job losses in that top ten percent, if Jeff Bezos
17:20
Speaker 3: needs new yacht that makes them you know, that's that's
17:23
Speaker 3: a big purchase. You know, like how much activity does
17:25
Speaker 3: that create. It's not really a good way to build
17:29
Speaker 3: an economy for a number of ways. And this is
17:31
Speaker 3: before you even get into, you know, the societal impacts
17:34
Speaker 3: and things like that, where you're like, gee, generally having
17:37
Speaker 3: large concentrations of wealth in the hands of a small
17:39
Speaker 3: number of people while everyone else is trying to figure
17:41
Speaker 3: out how to pay for groceries.
17:43
Speaker 2: Is kind of a bad thing.
17:46
Speaker 3: Like, it's before you even get to those impacts. Yeah,
17:48
Speaker 3: so there's definitely a shelf life to what's going on here.
17:52
Speaker 3: But the counter on this is, look, you're still not
17:55
Speaker 3: really seeing it showing up in any major shift in
17:58
Speaker 3: the labor market. The labor mark continues to weaken, but
18:01
Speaker 3: there hasn't been you know, the falling off a cliff
18:04
Speaker 3: that you normally see in recessions. Housing's been a dumpster
18:09
Speaker 3: fire for the last couple of years, and there's just
18:10
Speaker 3: no change there. It's just still bad. The things that
18:14
Speaker 3: are keeping this economy afoot right now are high income
18:18
Speaker 3: spenders and artificial intelligence. And the problem is if one
18:22
Speaker 3: of those goes, I don't know what picks up the baton.
18:24
Speaker 3: It's not housing, it's not housing, it's not the labor
18:29
Speaker 3: market right away. It's like you can be hundreds of
18:32
Speaker 3: billions of dollars of terraces getting refunded.
18:33
Speaker 2: I guess I don't know if that's really something to
18:38
Speaker 2: root for.
18:39
Speaker 4: No, no, yeah, Look, when you have a bifurcation in
18:43
Speaker 4: society like we have now, there are all sorts of
18:46
Speaker 4: unpredictable results. I mean, we just saw a whole bunch
18:48
Speaker 4: of elections over the course of the last few nights
18:50
Speaker 4: and a big SUITEP for Democrats on that front. I mean,
18:54
Speaker 4: there's all sorts of potential implications here and more and
18:58
Speaker 4: more we are talking about that bifurcation of consumer spending,
19:03
Speaker 4: and that is very purely a symptom of where we
19:07
Speaker 4: are right now in terms of income and wealth differences
19:12
Speaker 4: between Americans.
19:13
Speaker 2: Stocks continue to struggle.
19:14
Speaker 3: The S and P now down about seventy points a
19:16
Speaker 3: little over one percent. NASDAK composite down three hundred and
19:20
Speaker 3: ninety five points, closing in on one and three quarters
19:24
Speaker 3: percent in negative territory. We're going to take a quick break.
19:27
Speaker 2: When we come back. We got the trivia answer. We
19:29
Speaker 2: got Wall Street Watch after.
19:30
Speaker 1: This, bringing the latest financial news straight to your radio.
19:43
Speaker 1: Every day. It's the Financial Exchange on the Financial Exchange
19:46
Speaker 1: Radio Network. Time now for Wall Street Watch a complete
19:52
Speaker 1: look at what's moving market so far today right here
19:55
Speaker 1: on the Financial Exchange Radio Network.
19:58
Speaker 5: Let me see an acceler creation of today's sell off
20:01
Speaker 5: as traders continue to keep a close eye on AI stocks,
20:04
Speaker 5: which have seen some volatility this week over high evaluation concerns.
20:09
Speaker 5: Wall Street's also awaiting developments from the Supreme Courts hearing
20:12
Speaker 5: on tariffs right now. The Dow is now down just
20:15
Speaker 5: over nine tenths of one percent, or four hundred and
20:18
Speaker 5: thirty four points. SMP five hundred down about one percent
20:22
Speaker 5: or sixty six points lower, Nasdaq selling off one point
20:26
Speaker 5: six percent or three hundred and eighty four points. Rusted
20:30
Speaker 5: two thousand down by just over one and a half percent.
20:33
Speaker 5: Ten Your Treasure reeled down seven basis points at four
20:37
Speaker 5: point zero eighty five percent. Ankreude Oil down about half
20:40
Speaker 5: a percent lower, trading a fifty nine dollars and twenty
20:43
Speaker 5: eight cents a barrel. Qualcom down four percent after the
20:47
Speaker 5: semiconductor maker reported stronger than projected earnings. However, the company
20:51
Speaker 5: took a five point seven billion dollar non cash charge
20:55
Speaker 5: linked to the one Big Beautiful Bill. Sticking with the
20:58
Speaker 5: tip chip sett excuse me where Marvel Technology shares a
21:03
Speaker 5: jumping one percent after Bloomberg reported that Japan's SoftBank has
21:07
Speaker 5: explored a potential takeover of the chip maker. Meanwhile, CarMax
21:11
Speaker 5: down by eighteen percent after the used car retailer announced
21:15
Speaker 5: a weak preliminary outlook for its current fiscal quarter and
21:19
Speaker 5: also said CEO Bill Nash would be unexpectedly unexpectedly stepping
21:24
Speaker 5: down Elsewhere, Door Dash posted mixed third quarter results. The
21:28
Speaker 5: food delivery company also said it expects to send several
21:31
Speaker 5: hundred million dollars on new initiatives in development in twenty
21:36
Speaker 5: twenty six. Door Dashed down by fifteen percent. App Leven
21:40
Speaker 5: up by three percent after the ad platform posted stronger
21:43
Speaker 5: than expected quarterly results and issued an optimistic outlook for
21:47
Speaker 5: the fourth quarter, and shares a snap jumping by ten
21:50
Speaker 5: percent after it posted strong third quarter results. Snap also
21:54
Speaker 5: announced a four hundred million dollars deal with Perplexity AI.
21:58
Speaker 5: The social media company said it specs to start seeing
22:01
Speaker 5: revenue from that deal in twenty twenty six. I'm Tucker Silvan.
22:06
Speaker 5: That is Wallstreet Watching. In the previous segment, we asked
22:08
Speaker 5: you the trivia question what was key for Sutherland's character's
22:11
Speaker 5: name on the show twenty four? That would be Jack Bauer.
22:15
Speaker 5: Jason from Kingston, New Hampshire is our winner today taking
22:18
Speaker 5: home the Financial Exchange Show T shirt and we play
22:21
Speaker 5: trivia every day here in the Financial Exchange See complete
22:24
Speaker 5: contest rules at Financial Exchange Show dot com.
22:28
Speaker 3: Couple things I've actually been rewatching twenty four with my
22:31
Speaker 3: wife over the last couple months.
22:33
Speaker 2: Really hold on, Yeah, never saw it holds up.
22:36
Speaker 3: Okay, It's there's definitely parts that like given like the
22:42
Speaker 3: landscape of TV and what we've gotten since then, that
22:45
Speaker 3: you kind of watch and you're like, okay, this is
22:47
Speaker 3: kind of and look, you have to suspend disbelief that
22:50
Speaker 3: you know, Jack's always gonna go into everything you know
22:53
Speaker 3: with you know, no body armor, no helmet, no nothing
22:56
Speaker 3: in like comes out on scathes. But even before like
22:59
Speaker 3: getting into that. It's just like, okay, like this has
23:00
Speaker 3: been done better by you know, other other things since
23:04
Speaker 3: so it's it holds up. Okay, the peaks are still
23:07
Speaker 3: really high, but a lot of it's just kind of like, Okay,
23:09
Speaker 3: this is fine.
23:10
Speaker 2: You know, it's it's fine.
23:12
Speaker 3: The other thing that I do think is quite funny
23:15
Speaker 3: either you guys, Chuck, you still a baseball fan kind
23:18
Speaker 3: of core?
23:19
Speaker 2: Yeah?
23:19
Speaker 5: Yeah.
23:20
Speaker 3: There was a Major League Baseball draft prospect this year
23:23
Speaker 3: with the name Jack Bauer, which means like you think
23:26
Speaker 3: about it and it's it's basically his parents were watching
23:30
Speaker 3: twenty four in the mid two thousands had the last
23:34
Speaker 3: name Bower, and we're like, we're gonna name him Jack
23:37
Speaker 3: because it was it was like right in line with it.
23:40
Speaker 2: Kind of like.
23:40
Speaker 3: It's sometimes you're like, oh, like how could this be
23:43
Speaker 3: a thing, But it's kind of like how there are
23:45
Speaker 3: a bunch of like shacks that were born after Shaquille
23:47
Speaker 3: O'Neal went to the NBA.
23:49
Speaker 2: A ton of elsa's running around right now.
23:51
Speaker 3: Well, the ones that you feel bad for are all
23:53
Speaker 3: of the dinarises, you know, from like twenty seventeen, twenty eighteen,
23:57
Speaker 3: because by twenty nineteen twenty twenty, you couldn't have Adannaris.
24:00
Speaker 2: Yeah you know, but what are you gonna do?
24:04
Speaker 3: Let's see, so we talked about K shaped economy. Oh,
24:08
Speaker 3: let's talk about this because I've been seeing this making
24:10
Speaker 3: the roundsday. US companies announce the most job cuts for
24:14
Speaker 3: any October more than two decades, according to data from
24:17
Speaker 3: outplacement firm Challenger Gray in Christmas. So it's not to
24:21
Speaker 3: say the Challenger Gray and Christmas is wrong, but this
24:25
Speaker 3: report typically has absolutely no signal value in terms of
24:30
Speaker 3: what it means for the next month, quarter, or year.
24:33
Speaker 3: Uh And so as such, I don't think this is
24:37
Speaker 3: a valuable signal in any way, shape or form. They
24:40
Speaker 3: can be useful in hindsight, but hindsight is not something
24:44
Speaker 3: that you can make investment decisions based on. So I
24:48
Speaker 3: know that like, this has been getting a lot of
24:49
Speaker 3: chatter today since it was released, but I'm just not
24:52
Speaker 3: sure there's much meat on this bone. I'm not saying
24:55
Speaker 3: that this is good Like, no, this is still a
24:58
Speaker 3: bad number. You don't want to see this, but it's
25:00
Speaker 3: not indicative of where the US economy may or may
25:03
Speaker 3: not be heading, right.
25:04
Speaker 4: I mean, if you think about it for a moment.
25:05
Speaker 4: It's not as though layoffs only occur in October. So
25:08
Speaker 4: first things first, what use is there in comparing single
25:12
Speaker 4: month layoff announcements across multiple years. I don't find much
25:17
Speaker 4: value in that. If you have data on the full year,
25:20
Speaker 4: and they do and it is still elevated, I get that, But.
25:25
Speaker 2: There's just better.
25:26
Speaker 4: Data points for us to look at, right Like, you know,
25:28
Speaker 4: how many people are actually filing for unemployment? Great number
25:32
Speaker 4: to look at to try and confirm are we seeing
25:34
Speaker 4: an elevated firing market right now? Are we seeing elevated
25:37
Speaker 4: problems at this moment. We don't get that data compiled
25:40
Speaker 4: right now because the government shut down. But I'm just
25:43
Speaker 4: not finding this to be terribly useful information. All of
25:47
Speaker 4: that haven't been said. The economy and the markets have
25:52
Speaker 4: been on a direct upswing really since the return out
25:59
Speaker 4: of COVID recepsion back in twenty twenty, with very few
26:02
Speaker 4: blips on the radar, right I mean, I mean, realistically,
26:05
Speaker 4: you had a inflation fuel downturn back in twenty twenty two,
26:10
Speaker 4: a tariff fuel downturn back in April of this year,
26:14
Speaker 4: but other than that, you haven't had much and quite Frankly,
26:18
Speaker 4: if I look beyond the COVID recession, which if you blinked,
26:22
Speaker 4: you missed it, we have not had any sort of
26:25
Speaker 4: prolonged economic and market downturn since the Great Recession? Am
26:30
Speaker 4: I stretching the truth by saying something like that, Chuck?
26:33
Speaker 2: In any meaningful way?
26:34
Speaker 4: I mean prolonged. There hasn't been a recession since then, right,
26:39
Speaker 4: I mean twenty twenty twenty twenty Desidator recession. But in
26:43
Speaker 4: terms of any sort of prolonged economic effects, there weren't any.
26:48
Speaker 2: Well, there were, but they weren't recessionary ones.
26:50
Speaker 3: We just threw a bunch of money at the thing,
26:52
Speaker 3: and okay, like within a year, it was like wow,
26:54
Speaker 3: Like now the big problem we have is we have
26:56
Speaker 3: too much money chasing too few goods inflation, you know, Like, yeah,
27:00
Speaker 3: it's we haven't had a recession in seventeen years.
27:04
Speaker 4: And what's wild about that is it means that the
27:07
Speaker 4: entire population under the age of forty has really.
27:09
Speaker 2: Never invested through a real recession. No, they haven't.
27:14
Speaker 4: And look, plenty of folks that are listening right now
27:16
Speaker 4: in seventy years old know what that's like and have
27:19
Speaker 4: been through it. But for those who are working today
27:23
Speaker 4: and funding their future and looking ahead. You have to
27:27
Speaker 4: acknowledge that for the vast majority of people, right, everybody
27:31
Speaker 4: under the age of forty, have never truly worked and
27:35
Speaker 4: invested through a prolonged economic downturn like we've seen.
27:41
Speaker 2: On many occasions.
27:42
Speaker 3: Sucks, by the way, It's like recessions are not fun
27:47
Speaker 3: in any way, shape or form.
27:49
Speaker 4: The question to be asking yourself if you find yourself
27:52
Speaker 4: in that position, or even if you have lived through
27:55
Speaker 4: them and invested through them before, is how prepared do
27:57
Speaker 4: you feel? Because they aren't predictable in terms of they come.
28:00
Speaker 4: But I can tell you that one of the best
28:02
Speaker 4: times to be preparing for them is when the economy
28:04
Speaker 4: is still chugging along and markets are near all time highs. Right,
28:08
Speaker 4: that is the time to do the prep work, not
28:10
Speaker 4: when the market's already fallen by thirty percent and you're
28:13
Speaker 4: threatening to lose your job.
28:15
Speaker 2: If you aren't feeling as.
28:18
Speaker 4: Prepared as you could be for the possibility of a downturn,
28:22
Speaker 4: please give the folks at Armstrong Advisory Group a call.
28:25
Speaker 4: It's not that we have any idea when one is coming,
28:27
Speaker 4: but we sure do have the tools and knowledge to
28:30
Speaker 4: help you build a plan to address a future downturn.
28:36
Speaker 4: We work with clients across the country. We have offices
28:39
Speaker 4: located throughout New England and we offer free consultations on
28:41
Speaker 4: this very subject. If you would like to book one,
28:44
Speaker 4: call us at eight hundred three nine three for zero
28:46
Speaker 4: zero one. You can book time for us to call
28:48
Speaker 4: you back at Armstrong Advisory dot com. But that number
28:51
Speaker 4: once again eight hundred three nine three for zero zero one.
28:55
Speaker 1: The proceeding was paid for by Armstrong Advisory Group, a
28:57
Speaker 1: registered investment advisor. Nothing in the ad or any Armstrong
29:00
Speaker 1: guide to specific financial, legal or tax advice. Consult your
29:03
Speaker 1: own financial, tax into state planning advisors before making any
29:06
Speaker 1: investment decisions. Armstrong may contact you to offer investment advisory services.
29:10
Speaker 3: Mike wall Street journalized the list of airports that may
29:15
Speaker 3: start to see flight cancelations as of tomorrow.
29:17
Speaker 2: Oh, I hadn't seen that. It's forty of them, so
29:20
Speaker 2: just bear with me.
29:21
Speaker 3: Should just try to go through All of them are
29:23
Speaker 3: just like the big anyones we need to be aware of.
29:26
Speaker 2: Phoenix Sky Harbor.
29:27
Speaker 4: Just list every airport in the country and tell us
29:29
Speaker 4: whether or not there will be a shutdown.
29:31
Speaker 3: Phoenix Sky Harbor, Lax, San Diego International, San Francisco, Denver,
29:36
Speaker 3: Fort Lauderdale, Hollywood, Orlando, Miami, Tampa, Atlanta, Honolulu, Chicago, Midway
29:42
Speaker 3: and O'Hare, Indianapolis, Cincinnati, Louisville, Logan, BWI, Detroit, Minneapolis, Saint Paul, Charlotte, Newark, JFK, LaGuardia, mccaren, Portland, Philadelphia, Memphis, Dallas,
29:59
Speaker 3: Love And and Fort Worth, Houston, Hobby, Houston, Bush, Salt
30:04
Speaker 3: Lake City, Reagan, Dulles, and Seattle, Tacoma. So all of them,
30:08
Speaker 3: it's your biggest airports in the country. And hear Boston, Uh, Logan, h.
30:13
Speaker 2: Boston Logan Did you say Logan?
30:15
Speaker 4: I said Logan. Yeah, for those in the logan is Boston.
30:19
Speaker 4: He announced the cities of every other airport.
30:21
Speaker 2: That's not true.
30:22
Speaker 3: You mixed because if I saw b w Y, the
30:24
Speaker 3: Baltimore people are like, yeah, you see us, And I'm like,
30:27
Speaker 3: of course, I do. You know the people that are
30:30
Speaker 3: out in Uh you know what else did we do?
30:34
Speaker 2: Yeah? We did.
30:35
Speaker 3: I did a little lax like people know that. You
30:38
Speaker 3: know it's lax. So you know, you gotta you gotta
30:41
Speaker 3: give the people what they want. That's what this is
30:43
Speaker 3: all about it's a you know, give and take. And
30:46
Speaker 3: with that in mind, let's take a quick break and
30:48
Speaker 3: then we are going to have Paul A Monica from
30:50
Speaker 3: Barons on after this and uh, we'll chat with him.
30:55
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31:23
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31:39
Speaker 3: As promised, we're now joined by the one and only
31:43
Speaker 3: Paul Monica from Barons. We're gonna be talking a little
31:46
Speaker 3: bit about prediction markets and brokerage firms.
31:51
Speaker 2: Paul, How you doing today? Good?
31:54
Speaker 6: Thanks?
31:54
Speaker 2: How you guys doing good?
31:56
Speaker 3: So, I think one of the things that a lot
31:57
Speaker 3: of people don't realize about prediction markets. They are regulated
32:01
Speaker 3: futures contracts correct, correct.
32:04
Speaker 6: Yes, the ones that you're seeing all places like robin
32:07
Speaker 6: Hood which have really you know, increased their presence in
32:12
Speaker 6: this market over the past couple of months. They are
32:15
Speaker 6: regulated by the CFTC, so you have to be careful
32:20
Speaker 6: and make sure that you if you're on any platform
32:23
Speaker 6: that doesn't have the blessing of the CFTC, you gotta
32:26
Speaker 6: be careful.
32:28
Speaker 3: So I naturally get my old fogy hat on, and
32:31
Speaker 3: when I see brokerages trying to offer you know, futures
32:35
Speaker 3: bets on their platforms, immediately I say, well, this is
32:39
Speaker 3: boring the line between gambling and investing, and this isn't
32:42
Speaker 3: gonna end well, I mean, right, like, that's that's kind
32:46
Speaker 3: of how I feel. But obviously these companies think they
32:48
Speaker 3: can make a bunch of money on it, and I
32:50
Speaker 3: understand the financial incentives from their perspective.
32:53
Speaker 6: Yeah, it's any investor that is doing this does have
32:58
Speaker 6: to be very careful because it is increasingly blurring the
33:03
Speaker 6: line between investing for the long term and making short
33:09
Speaker 6: term trades that might be considered by some to be gambling,
33:14
Speaker 6: legalized gambling. I mean there's a reason that uh, you know,
33:18
Speaker 6: one of the companies that is stepping up in prediction markets,
33:23
Speaker 6: uh the you know, the the CME there. They have
33:26
Speaker 6: a partnership with FanDuel with you know, the company that
33:31
Speaker 6: owns that popular sports betting site. So it's hard not
33:35
Speaker 6: to think of these as uh, you know, kind of gambling.
33:39
Speaker 6: But what you're doing with poly Market and call She
33:42
Speaker 6: you call she is uh, you know, partnering with Robinhood,
33:45
Speaker 6: You're you're getting the ability to make these binary calls
33:50
Speaker 6: on certain events. And some of them are important, uh
33:57
Speaker 6: you know, financial and economic indicators, like what's going to
34:02
Speaker 6: happen with fed raid cuts, But you know there are
34:04
Speaker 6: some that are sports related and pop culture related, and
34:09
Speaker 6: you know that I think, you know that may be
34:11
Speaker 6: a little bit less about hardcore investing, but I think
34:14
Speaker 6: you're right. Robin Hood Interactive Brokers another firm that is
34:19
Speaker 6: stepping up its presence in this market. They do see
34:23
Speaker 6: it as potentially a new lucrative revenue stream, particularly from
34:28
Speaker 6: younger users. And then you have other companies like Schwab
34:31
Speaker 6: that are taking a lot more of a careful and
34:35
Speaker 6: cautious approach to this business that have not yet stepped
34:38
Speaker 6: their dip their toe in it.
34:40
Speaker 3: Paul, I'm old enough at this point now that I
34:42
Speaker 3: no longer fall into you know that twenty five you
34:46
Speaker 3: know to thirty five demo and you know, I'm not
34:49
Speaker 3: the lazy millennial anymore. Now, I'm the mature you know,
34:53
Speaker 3: the mature millennial who you know knows what's going on.
34:57
Speaker 6: Obviously, Yeah, the geriatric millennial.
35:00
Speaker 2: I believe exactly exactly that that's me.
35:03
Speaker 3: So what I do know is, you know, from the
35:06
Speaker 3: twenty five twenty seven year olds that I interact with,
35:10
Speaker 3: I would say a significant majority of men in that
35:15
Speaker 3: demo have a sports gambling problem at this point. And
35:20
Speaker 3: I'm just trying to look at this and figure out
35:23
Speaker 3: how this, like adding this stuff into brokerage accounts can
35:26
Speaker 3: be in any way a positive, because we're seeing that
35:29
Speaker 3: when you have access to this just in your pocket,
35:32
Speaker 3: it becomes a problem in a way where if you
35:34
Speaker 3: have to go to a casino to place a bet,
35:36
Speaker 3: it's it's just it's different. You don't have the same accessibility.
35:39
Speaker 3: I just am I wrong in that this just feels
35:43
Speaker 3: like it's going to create additional societal problems? Or am
35:46
Speaker 3: I just old fogying way too hard on this?
35:50
Speaker 6: I mean maybe it's it's a.
35:53
Speaker 2: Little bit in between. I mean, I think you.
35:55
Speaker 6: Are on right that the brokerage firms that decided to
36:01
Speaker 6: get involved in this business they need to do a
36:06
Speaker 6: very good job of educating their consumers about how this
36:10
Speaker 6: is different from investing, how you don't want to get
36:14
Speaker 6: out of control. But I don't think that's any different
36:16
Speaker 6: than obviously what anyone that's uh you know already you know,
36:20
Speaker 6: using DraftKings or FanDuel to to bend on sports need
36:26
Speaker 6: to be doing as well. And bottom line, I mean,
36:31
Speaker 6: there are risky types of investments even in the stock
36:36
Speaker 6: market that you know, you know, anyone can get out
36:40
Speaker 6: of hand if they go overboard, whether or not it's
36:44
Speaker 6: buying something like Apple or Microsoft or a you know
36:48
Speaker 6: other mature magnificent seven company, or you know, betting on
36:52
Speaker 6: meme stocks. I think, you know, the the issue isn't
36:56
Speaker 6: necessarily that the practice is bad. It's just that people
36:59
Speaker 6: have to obviously keep in mind that you know that
37:03
Speaker 6: they have to show good digital hygiene if you will,
37:09
Speaker 6: and not go overboard with these types of speculative bets,
37:13
Speaker 6: whether or not it's on you know, the next NBA
37:17
Speaker 6: game or you know, the next fed raid cut.
37:21
Speaker 3: Very good, Paul, appreciate the time and have a great
37:25
Speaker 3: rest of the day in a great weekend.
37:26
Speaker 6: Great thanks a lot. YouTube Chuck appreciate it.
37:29
Speaker 3: That is Paul Monica from Barons taking a quick look
37:32
Speaker 3: at markets as we head towards the top of the hour.
37:34
Speaker 3: Dow is now off four hundred and sixty five points
37:37
Speaker 3: almost one percent, the S and P's off seventy nine
37:39
Speaker 3: points almost one a quarter percent, and the nasdak can
37:42
Speaker 3: Posite down four hundred and fifty points about one point
37:45
Speaker 3: nine percent.
37:46
Speaker 2: So still continuing to.
37:47
Speaker 3: See some growing red through equity markets right now. We
37:51
Speaker 3: do have the ten year treasury coming back in a
37:53
Speaker 3: little bit, down seven point six basis points to four
37:56
Speaker 3: point eight one percent, so that has the potential to
38:01
Speaker 3: help mortgage rates a little bit heading into the weekend,
38:04
Speaker 3: but equities struggling so far this week just has not
38:07
Speaker 3: been their best showing to this point. We are done
38:11
Speaker 3: for the day, but don't worry. Smorrows Friday, we're gonna
38:15
Speaker 3: be back, so you can hang out with us then
38:17
Speaker 3: and we'll see you on tomorrow's show.