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Markets Rally as AI Keeps Driving the Economy · The Financial Exchange Show

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  Speaker 1: is The Financial Exchange with Mike Armstrong and Mark Vandetti.
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  Speaker 2: Good morning. Happy Tuesday. Welcome back here to The Financial Exchange.
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  Speaker 2: We've got equity markets rallying up to all-time highs ever.
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  Speaker 2: S & P 500 sitting at 7,000. 835 up. What
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  Speaker 2: do we got today? Three quarters of a percent thereabouts.
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  Speaker 2: NASDAQ up as well, having hit a new all time
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  Speaker 2: high yesterday. We've got oil prices down, yields down with
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  Speaker 2: them and all looking fairly optimistic in markets this morning, Mark.
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  Speaker 2: I think, again, every time we get some renewed optimism
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  Speaker 2: about energy flows through the Middle East and Investors seem
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  Speaker 2: to put that risk behind them pretty quickly. I don't
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  Speaker 2: see anything that would convince me that we are done
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  Speaker 2: with energy threats from the Middle East. But nonetheless, here
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  Speaker 2: we are with markets hitting new all time highs and again,
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  Speaker 2: assessing some reduced risk from there. And again, the reporting
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  Speaker 2: on this, by the way, seems to be that, yeah, 70,
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  Speaker 2: 80% of the oil that was flowing previously through the
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  Speaker 2: Strait of Hormuz is flowing again right now, albeit at
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  Speaker 2: a much higher cost to transport it.
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  Speaker 3: Absent really bad news, stocks tend to go up. They've
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  Speaker 3: gone up under every president. They've hit an all-time high
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  Speaker 3: under virtually every president in the modern era because the
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  Speaker 3: economy tends to grow. These are two very strong and
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  Speaker 3: highly related trends that, You have to try really hard
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  Speaker 3: to break, and thank goodness the exceptions have been few
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  Speaker 3: and far between. So if you had to guess on
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  Speaker 3: any given day, stocks up or down today, you would
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  Speaker 3: actually say up. And statistically, that's a– Do.
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  Speaker 2: You know off the top of your head what it is,
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  Speaker 2: like 60% on a day-to-day basis?
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  Speaker 3: Monthly, monthly. Day-to-day, it's only a little bit over 50%.
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  Speaker 3: But cumulatively, that's huge.
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  Speaker 2: Of course, yeah.
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  Speaker 3: Monthly, it's like 59% annual.
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  Speaker 2: I think annual is like 60 to 70, yeah.
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  Speaker 3: Yeah, yeah. And that's, again, just the S & P,
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  Speaker 3: but it's representative.
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  Speaker 2: Which, in my experience, people read too much into and
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  Speaker 2: focus too much on that because I can't tell you
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  Speaker 2: how many times people say, you know, I've got this
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  Speaker 2: money that I know I need to spend a year
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  Speaker 2: from now, but, you know, I want to juice it
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  Speaker 2: a little bit. Like, yeah, sounds good, but you... walk
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  Speaker 2: into traffic. If there was a one in three chance
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  Speaker 2: of you getting hit by a bus like that, that's.
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  Speaker 3: A basically what's on the other side.
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  Speaker 2: Slightly, a hundred dollars, slightly more money. Yeah.
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  Speaker 3: A hundred dollar bill in the middle of the street,
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  Speaker 3: would you run out and get it?
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  Speaker 2: Yeah.
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  Speaker 3: Well, a third of the time you're going to get crushed.
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  Speaker 4: Yeah.
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  Speaker 2: Those are roughly the odds of, uh, investing for a
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  Speaker 2: 12 month time period. So, you know, buyer beware when
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  Speaker 2: you're talking about short time horizons or a day to
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  Speaker 2: day time period, forget about it. Uh, Good news about
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  Speaker 2: incomes that no one seems to believe can confirm. Every
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  Speaker 2: time I bring up this statistic, people yell at me
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  Speaker 2: and call me an idiot. But incomes... They might just
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  Speaker 2: be doing that anyway, I'm not sure.
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  Speaker 3: That was before you made the point, though, Mike. Get
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  Speaker 3: off the radio, you idiot!
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  Speaker 2: Incomes are currently, and have been now for a few years,
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  Speaker 2: exceeding We might need to go to break here. I'm
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  Speaker 2: not sure. Get it together. Even after adjusting for inflation, U.S.
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  Speaker 2: incomes and wage growth have grown at a pace not
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  Speaker 2: seen in decades and have outpaced, again, the key statistic
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  Speaker 2: here is that in spite of all the inflation that
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  Speaker 2: we have seen since 2020, wages are outpacing that. And
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  Speaker 2: they have been really since, I think, 2023 or 2024.
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  Speaker 2: We've hit a soft patch, though, the past year, right?
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  Speaker 2: We have, yeah.
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  Speaker 3: In terms of average hourly earnings, you have to be
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  Speaker 3: careful which metric you use.
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  Speaker 2: Yeah, and there are a number of different ways to
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  Speaker 2: look at this. I personally like median household income, which
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  Speaker 2: we don't get as regularly. It can pull out some
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  Speaker 2: of the top-heavy or bottom-heavy statistics.
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  Speaker 3: Because it's a median.
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  Speaker 4: Yeah.
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  Speaker 2: The definition of using median, I suppose. But, you know, everyone,
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  Speaker 2: whenever somebody says average, they say, well, you know, yeah,
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  Speaker 2: but Elon Musk is a trillionaire, so that doesn't really
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  Speaker 2: help me much if you're using median household income.
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  Speaker 3: He's not an establishment survey, I don't think.
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  Speaker 2: If you're using median household income, it takes out some
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  Speaker 2: of those different pieces. And even there, you're seeing wages
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  Speaker 2: outpace inflation. And so my only conclusion, I guess I
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  Speaker 2: have two of them. One, People hate inflation more than
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  Speaker 2: they hate just about any other economic phenomenon, such as
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  Speaker 2: unemployment or risk of recession or the stock market falling apart. Also,
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  Speaker 2: we might just have a problem with how we survey
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  Speaker 2: people's feelings these days.
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  Speaker 3: I don't believe that. Everybody becomes a Keynesian, i.e., stimulate
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  Speaker 3: the economy, do whatever you got to do, just allow
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  Speaker 3: me to keep my job, and people I care about,
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  Speaker 3: keep them employed. Everybody says that until, myself included, by
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  Speaker 3: the way. Until your own job is imperiled. Then your preferences,
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  Speaker 3: your weight quickly switches from inflation to unemployment. From an
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  Speaker 3: inflation hawk to inflation dove.
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  Speaker 2: So I personally am with you. I personally think that,
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  Speaker 2: you know.
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  Speaker 3: Me too, by the way. I'm not saying you, not everybody.
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  Speaker 2: Else but me. The increase in unemployment is far more
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  Speaker 2: damaging to society, I believe, than an increase in inflation.
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  Speaker 2: So long as we're not talking hyperinflation. We're not talking hyperinflation. Yeah.
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  Speaker 2: We're not talking about the end of Germany in the 1940s.
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  Speaker 2: But when did they deal with hyperinflation? Was it around that?
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  Speaker 3: Early 20s.
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  Speaker 2: Early 20s. Okay. So way off. We're not talking about
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  Speaker 2: that scenario. What we're talking about is- They did have
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  Speaker 2: hyperinflation in the 40s. Modestly higher unemployment versus modestly higher inflation.
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  Speaker 2: One of those- The difference so far as I can tell,
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  Speaker 2: and I don't remember which Fed Beige book talked about
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  Speaker 2: this phenomenon, but when you talk about higher unemployment, it
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  Speaker 2: affects a relatively small group of people. Most people aren't
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  Speaker 2: suddenly unemployed in the entire economy. And so if you
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  Speaker 2: are falling upon hard times, odds are pretty good that
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  Speaker 2: you might have a neighbor or a friend or a
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  Speaker 2: family member that still might be able to loan you
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  Speaker 2: a few bucks to get you by because they are
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  Speaker 2: still working. When you're experiencing abnormally high inflation, everyone across
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  Speaker 2: society experiences it. Not equally, but they all experience it
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  Speaker 2: to a pretty high degree. And so the Fed summarizes
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  Speaker 2: this in their Beige Book, I think pretty succinctly, about
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  Speaker 2: why people hate it so much is because it affects society.
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  Speaker 2: every single member of society and makes everybody feel more.
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  Speaker 3: It's viewed as unfair too. You're taking my purchasing power away.
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  Speaker 3: My dollar bought more last year. My dollar bought inflation
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  Speaker 3: cumulatively since COVID is about 30%. It takes me $ 1. 30
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  Speaker 3: now to buy what cost me a dollar. Now my
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  Speaker 3: salary's higher too. It's, I think, kept up with inflation,
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  Speaker 3: but some people's has not.
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  Speaker 2: It also does appear to me though, And I don't
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  Speaker 2: know if this is a problem with the way in
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  Speaker 2: which we conduct surveys today compared to 50 years ago,
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  Speaker 2: how political we all seem today compared to 50 years ago,
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  Speaker 2: societally more negative, I'm not sure. But I do also
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  Speaker 2: believe that our methods of taking statistics about sentiment are
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  Speaker 2: fundamentally broken and are not going to, even in a,
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  Speaker 2: you know, objectively low inflation, high employment, strong market economy,
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  Speaker 2: are maybe never going to return to where we were pre-GFC, sorry,
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  Speaker 2: pre-COVID recession.
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  Speaker 3: Not until we put social media to sleep and people stop,
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  Speaker 3: myself included. I only look at the Wall Street Journal
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  Speaker 3: and the Financial Times, which is UK's Wall Street Journal.
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  Speaker 2: Is that what you consider social media?
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  Speaker 3: Yeah, my Wall Street Journal feed. Yeah, I'm told there's
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  Speaker 3: more incendiary social media feeds out there than that. But
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  Speaker 3: you know like the type of people who follow their
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  Speaker 3: neighborhood social media feed?
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  Speaker 2: Yes, I do.
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  Speaker 3: And people jump on the high school principal or something
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  Speaker 3: like that. Oh, it's the worst. And all of a
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  Speaker 3: sudden it's a lynch mob.
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  Speaker 2: Yes.
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  Speaker 3: That type, that has permeated national politics too. There are
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  Speaker 3: people who think Republicans or Democrats or us crazy libertarians. Well, actually,
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  Speaker 3: we are crazy. and I'm not nearly as extreme as some,
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  Speaker 3: but there are people who think the opposite side, whatever
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  Speaker 3: you view the opposite side as, are evil. Like, oh,
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  Speaker 3: Democrats are all socialists, or Republicans are all whatever. And
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  Speaker 3: that is, I think, new.
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  Speaker 2: Yeah, I do too.
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  Speaker 3: And I blame that on social media. That's what I meant, Mike.
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  Speaker 2: Yeah, and I think that bleeds into all of the
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  Speaker 2: surveys that we do about sentiment. And so I think
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  Speaker 2: that this is why inflation is more, shows up more
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  Speaker 2: in surveys and makes people more unhappy than higher unemployment.
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  Speaker 2: But I don't know because I think the waters are
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  Speaker 2: so muddy from our current stage. I think you're right.
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  Speaker 3: And I think researchers who study these things more carefully,
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  Speaker 3: the survey methods, have made that point too.
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  Speaker 2: Let's take a quick break. When we return... I'll let
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  Speaker 2: you know what we're going to cover when we return.
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• 11:29
  Speaker 2: Mark, I have a lot of questions for you, and
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  Speaker 2: I don't know that you're going to know the answers
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  Speaker 2: to all of them, but there's a lot of context
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  Speaker 2: needed for this next piece.
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  Speaker 3: I will make it up.
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  Speaker 2: First, who's Ray Dalio? Why is he warning us that
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  Speaker 2: he believes China and Japan could pull back from buying
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  Speaker 2: and owning U.S. treasuries? What would it mean if they
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  Speaker 2: did so, and should we believe Mr. Dalio?
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  Speaker 3: He founded Bridgewater Associates, a renowned hedge fund. A renowned,
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  Speaker 3: I think. I don't know what I said. Hedge fund.
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  Speaker 2: You said renowned. You're good. Sorry.
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  Speaker 3: What's the next question?
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  Speaker 2: Why is he warning us about China and... Japan pulling
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  Speaker 2: back on treasuries.
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  Speaker 3: He's jumping on the find a favorite explanation for the
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  Speaker 3: rise in yield bandwagon. He's actually not jumping on, he's
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  Speaker 3: not looking for an explanation as to why they've risen.
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  Speaker 3: He's pointing out why they might continue to rise or
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  Speaker 3: why there is not that pressure pushing them down that
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  Speaker 3: there was. Maybe this is a better way to put it.
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  Speaker 3: In the past 40 years, we talked earlier about the
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  Speaker 3: secular decline, the long-term decline in interest rates. And one
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  Speaker 3: widely cited factor is the savings glut, Ben Bernanke's phrase.
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  Speaker 3: Asia was saving a lot, and they exported their capital
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  Speaker 3: to us, and we imported their goods in turn.
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  Speaker 2: This is kind of tough to think about because when
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  Speaker 2: I think about savings, I think about a Chinese household
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  Speaker 2: saving more money in their savings account, which might be happening.
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  Speaker 2: But what we're talking about is really the Chinese are
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  Speaker 2: selling a whole bunch of stuff to Americans. We're paying
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  Speaker 2: them in dollars. Japanese dollars. And the Japanese, too. And
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  Speaker 2: Japanese preceded the Chinese, of course.
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  Speaker 3: And central banks needed treasuries, too, because it's useful to
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  Speaker 3: have dollar highly liquid. Treasuries are liquid. They're generally trusted.
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  Speaker 3: They can be converted into dollars quickly. You can use
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  Speaker 3: them to intervene in currency markets and to pay for exports.
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  Speaker 2: But if you're an institution there, you're getting paid a
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  Speaker 2: bunch of dollars.
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  Speaker 3: Excuse me, exports.
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  Speaker 2: And you've got to figure out, what do I do
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  Speaker 2: with these dollars that I'm getting paid? And one of
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  Speaker 2: the solutions was, why don't we buy the debt of
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  Speaker 2: the country that's giving us the dollars?
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  Speaker 3: I mean, the way I look at what Dalio is saying,
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  Speaker 3: and he's right. If that savings glut goes down, gets smaller,
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  Speaker 3: if Asian countries start saving less, start consuming more, as
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  Speaker 3: everybody thinks they have to.
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  Speaker 2: Do, Because they are not growing as quickly. They're a
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  Speaker 2: more mature economy.
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  Speaker 3: I'm sorry.
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  Speaker 2: Thank you. Demographics are changing.
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  Speaker 3: China's been trying to do this for like 20 years.
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  Speaker 3: There'll be less savings to export, if you will. So
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  Speaker 3: less demand for treasuries. If China's trying to push people
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  Speaker 3: towards something other than the dollar as a reserve currency,
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  Speaker 3: the currency that they use to intervene when they want
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  Speaker 3: to change the value of their own currency, for example,
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  Speaker 3: there are other reasons why a central bank might want
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  Speaker 3: to own dollars. If the BRICs are shifting away from dollars,
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  Speaker 3: there'll be less demand for treasuries. The other point, and
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  Speaker 3: this is the one that the other reason, and this is,
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  Speaker 3: I think, Dalio's main point, is that people don't trust
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  Speaker 3: treasuries the way they used to. They're not viewed as
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  Speaker 3: the world's safe asset anymore. And there's empirical, there's like
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  Speaker 3: statistical evidence that this is actually the case. Treasuries were
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  Speaker 3: believed to be like nearly as good as gold. The
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  Speaker 3: full faith and credit of the U.S. government was unquestioned.
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  Speaker 3: That's absolutely no longer true. the case so for all
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  Speaker 3: of those reasons less savings moved over gradual movement very
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  Speaker 3: gradual i'm not a a dollar doomsday air but a
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  Speaker 3: gradual movement away from the dollar say by the brit
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  Speaker 3: countries and uh... the third reason which i've already forgotten
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  Speaker 3: though i'd just talked about.
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  Speaker 2: More mature demographics just causing a small that's not what
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  Speaker 2: i said uh.
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  Speaker 3: anyway out for a forever i have to do one
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  Speaker 3: of us was listening that's interesting So for a variety
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  Speaker 3: of reasons, it would be natural to expect the lack
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  Speaker 3: of faith in treasuries as the world's safe asset. So
• 15:29
  Speaker 3: it would make sense for yields to be higher.
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  Speaker 2: And we talked about this a lot back when we
• 15:33
  Speaker 2: were implementing tariffs all over the place. And, hey, what
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  Speaker 2: happens mechanically if we are buying fewer goods from abroad
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  Speaker 2: and that could change the willingness or even ability of
• 15:45
  Speaker 2: foreign countries to buy as much of our debt because
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  Speaker 2: mechanically that would just change. Maybe it wouldn't matter.
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  Speaker 3: Yeah, the current account and the capital account have to balance,
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  Speaker 3: if you will. Yeah, it's just the flip side.
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  Speaker 2: I guess the other point would be, maybe you don't
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  Speaker 2: buy that, hey, the Chinese and Japanese are going to
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  Speaker 2: intentionally move away from the dollar because they don't have
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  Speaker 2: the ability to do so and there's nothing else to trust.
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  Speaker 2: And I've made that argument myself and I could buy it.
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  Speaker 2: Even if you don't buy that piece... If the Chinese
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  Speaker 2: savings rate or savings capacity just stayed the same and
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  Speaker 2: the U.S. deficits just continued to climb at even faster paces,
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  Speaker 2: then you wouldn't necessarily even need the Chinese or the
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  Speaker 2: Japanese to say, hey, we're intentionally buying fewer treasuries. It's
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  Speaker 2: just we can't keep pace with the massive pace of
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  Speaker 2: spending increases that are happening.
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  Speaker 3: Yeah, if their holdings stay the same as they are today,
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  Speaker 3: but the economy, debt continues to grow, the global GDP
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  Speaker 3: continues to grow, yeah, there's not going to be. On
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  Speaker 3: the margin, you'll have to pay whoever's buying treasuries more
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  Speaker 3: to accept the risk.
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  Speaker 2: Yep. Mechanically, I don't know what all this does, I guess. Well,
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  Speaker 2: higher rates. It's higher rates.
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  Speaker 3: That's all you have to conclude from all those forces
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  Speaker 3: I mentioned. You don't have to believe that the world's
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  Speaker 3: going to move away from the dollar as its so-called
• 17:05
  Speaker 3: reserve currency, the currency that central banks and individuals and
• 17:10
  Speaker 3: businesses use to settle, to make payments and hedge funds.
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  Speaker 3: You don't have to believe that. There are lots of
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  Speaker 3: reasons that are perfectly, what's the word I'm looking for?
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  Speaker 3: Not like hysterical.
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  Speaker 2: Sure. Sound, logical, and reasonable reasons for higher rates. Yeah,
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  Speaker 2: I don't know what the right adjective is.
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  Speaker 3: But anyway, you don't have to be a doomsdayer to
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  Speaker 3: conclude that rates will be higher for the foreseeable future.
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  Speaker 3: It actually makes perfect sense.
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  Speaker 1: Yeah.
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  Speaker 2: The only real argument I can come up with for
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  Speaker 2: countering that would be, you know, austerity or fiscal discipline.
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  Speaker 3: Well there's a secular stagnation argument the secular stagnation argument
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  Speaker 3: is basically growth is going to be slower so therefore
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  Speaker 3: it comes out of like it comes out of there
• 17:58
  Speaker 3: was this belief during the great depression that the reason
• 18:00
  Speaker 3: for the depression is that we can't expand westward anymore
• 18:03
  Speaker 3: um united states just can't it was alvin hansen this
• 18:06
  Speaker 3: guy at harvard at the time uh as we all
• 18:08
  Speaker 3: remember from the 1930s yeah he came up with the
• 18:10
  Speaker 3: term how do you keep larry summers because it's such
• 18:13
  Speaker 3: a great alvin hansen al alvin alvin yeah like the chipmunk.
• 18:16
  Speaker 2: Guy Just sitting right in the back of that brain
• 18:18
  Speaker 2: of yours. That's incredible.
• 18:19
  Speaker 3: Somewhere, yeah, somewhere. And Larry Summers, the Harvard economist, revived
• 18:24
  Speaker 3: the idea in the 20-teens. We've hit this patch of
• 18:32
  Speaker 3: low growth, and we're effectively trapped in it.
• 18:34
  Speaker 2: I heard the same argument after the great financial crisis
• 18:37
  Speaker 2: as well.
• 18:37
  Speaker 3: Hey, we're going to see rates permanently lower because of
• 18:41
  Speaker 3: the demographics. Secular stagnation argument. Now, AI could change that.
• 18:47
  Speaker 3: But there are some who think rates will come back
• 18:49
  Speaker 3: down again because we're going to be mired in this
• 18:52
  Speaker 3: secular stagnation. The jury's obviously out.
• 18:57
  Speaker 2: Markets continuing to rip as we close in on the
• 19:01
  Speaker 2: bottom of the hour here. We've got the Dow Jones
• 19:03
  Speaker 2: Industrial Average up 392 points, S & P up 69 points,
• 19:04
  Speaker 2: and the NASDAQ up 239 points, all on the heels
• 19:06
  Speaker 2: of oil prices moving down. Yields moving a bit lower
• 19:15
  Speaker 2: in early trading as well. We are going to take
• 19:18
  Speaker 2: a quick break here. When we return, Tucker's going to
• 19:21
  Speaker 2: cover a full Wall Street update here with Wall Street Watch.
• 19:24
  Speaker 2: That's next.
• 19:40
  Speaker 1: Bringing the latest financial news straight to your radio every day.
• 19:44
  Speaker 1: It's the Financial Exchange on the Financial Exchange Radio Network.
• 19:50
  Speaker 2: Time now for.
• 19:51
  Speaker 1: Wall Street Watch. Tracking the stocks, the data, and the
• 19:54
  Speaker 1: headlines driving markets so far today. Right here on the
• 19:57
  Speaker 1: Financial Exchange Radio Network.
• 20:00
  Speaker 4: Now the rally's accelerating with a new record for the
• 20:02
  Speaker 4: S & P 500 led by gains in AI as
• 20:06
  Speaker 4: both treasury yields and oil retreats. Right now, the Dow
• 20:09
  Speaker 4: is up nearly three quarters of a percent or 361
• 20:12
  Speaker 4: points up. S & P 500 is up 67 points
• 20:16
  Speaker 4: or over eight tenths of a percent. NASDAQ over up
• 20:20
  Speaker 4: over eight tenths of a percent as well or 229
• 20:22
  Speaker 4: points higher. Russell 2000 is edging higher. Ten-year treasury yield
• 20:26
  Speaker 4: now down five basis points at 5.256 percent and crude
• 20:31
  Speaker 4: oil down one and a half percent, trading at $ 88
• 20:32
  Speaker 4: a barrel. With the rotation back into AI, Nvidia shares
• 20:37
  Speaker 4: are up another 1% today, now inching closer to becoming
• 20:41
  Speaker 4: the first company valued at $ 6 trillion. Meanwhile, SpaceX shares
• 20:46
  Speaker 4: are up nearly 2% today. Over the past five trading sessions,
• 20:50
  Speaker 4: shares have jumped 16% higher ahead of today's open. Elsewhere,
• 20:55
  Speaker 4: Google parent Alphabet agreed to a 20-year deal to buy
• 20:57
  Speaker 4: nuclear power from Constellation Energy. Alphabet is flat, while Constellation
• 21:02
  Speaker 4: shares are jumping nearly 14% higher. French fry maker Lamb
• 21:06
  Speaker 4: Weston reported better than expected quarterly results and hiked its
• 21:09
  Speaker 4: outlook for the full year. The stock is up nearly
• 21:13
  Speaker 4: 11% today, and Uber agreed to acquire catering and workplace
• 21:18
  Speaker 4: meals platform and Boston-based Easy Cater in a deal valued
• 21:23
  Speaker 4: at $ 2. 3 billion. Uber shares are off modestly. I'm Tucker Silva,
• 21:29
  Speaker 4: and that is Wall Street Watch.
• 21:30
  Speaker 2: Mark, I would like to talk about something we almost
• 21:33
  Speaker 2: never talk about, which is France. And I would like
• 21:35
  Speaker 2: to do it for the next five minutes entirely in
• 21:37
  Speaker 2: an offensively bad French accent, if you don't mind. Let's
• 21:41
  Speaker 2: not do that.
• 21:41
  Speaker 3: I'm going to step out.
• 21:43
  Speaker 2: But we have been seeing something economically in France that
• 21:46
  Speaker 2: is fairly unique, hopefully just unique to the Eurozone in
• 21:53
  Speaker 2: terms of its potential, but I doubt it. But Here's
• 21:57
  Speaker 2: what we've been seeing. So the Eurozone all work on
• 22:02
  Speaker 2: the same currency. Every country individually issues its own debt.
• 22:06
  Speaker 2: It's all, I believe, all paid back in euros. Are
• 22:08
  Speaker 2: there any exceptions to the issuance of debt? Oh, do
• 22:11
  Speaker 2: they denominate?
• 22:12
  Speaker 3: Are there like Yankee bonds?
• 22:14
  Speaker 2: Yeah, I guess they would do those too. Dollar-denominated. Yeah,
• 22:16
  Speaker 2: dollar-denominated bonds.
• 22:16
  Speaker 3: I don't think that.
• 22:18
  Speaker 2: I don't know.
• 22:18
  Speaker 3: I don't think it's appreciable.
• 22:20
  Speaker 2: In either case, the yield on French debt has climbed
• 22:24
  Speaker 2: to the point now where it is around one and
• 22:28
  Speaker 2: a third to one and a half percent more expensive, no,
• 22:33
  Speaker 2: not more expensive, higher yielding than the similar German debt
• 22:36
  Speaker 2: of the same duration. And when you see something like
• 22:39
  Speaker 2: that happen, it's usually a question of credibility and the
• 22:43
  Speaker 2: French government's ability to pay you back. And that's what's
• 22:46
  Speaker 2: being tossed into question right now because France is, for
• 22:50
  Speaker 2: all the problems that Germany has politically, France is a
• 22:53
  Speaker 2: far worse. They, they are, uh, talking about really bad
• 22:57
  Speaker 2: fiscal problems. Uh, they're far right. Uh, candidate for president
• 23:01
  Speaker 2: wants to lower the retirement age and, you know, make
• 23:05
  Speaker 2: the situation pretty far worse. The far left candidate wants to, uh,
• 23:10
  Speaker 2: negotiate with the ECB to wipe out half a trillion
• 23:13
  Speaker 2: dollars worth of debt. No realistic conversations.
• 23:17
  Speaker 3: About- Yeah, they're more clueless than we are, if you
• 23:19
  Speaker 3: can believe that.
• 23:20
  Speaker 2: Seemingly, yeah. At least we know the issue and then
• 23:22
  Speaker 2: just ignore the issue. They seemingly- They're embracing it. Embracing
• 23:25
  Speaker 2: the problem and making it worse. The stuff here is, again,
• 23:32
  Speaker 2: the exact opposite thing that you would want to be
• 23:34
  Speaker 2: doing if you're trying to control the country's fiscal situation
• 23:37
  Speaker 2: and make it so that borrowing isn't problematic going forward.
• 23:43
  Speaker 2: I guess, are there lessons here for the US? Because
• 23:46
  Speaker 2: what makes France very different is that they cannot print
• 23:50
  Speaker 2: their own currency to pay off this debt. They don't
• 23:53
  Speaker 2: have that ability. They can borrow more, but they can't
• 23:58
  Speaker 2: go to the ECB and demand more euros to pay
• 24:01
  Speaker 2: back that debt and inflate their way out of it
• 24:03
  Speaker 2: like we can.
• 24:04
  Speaker 3: Well, the ECB will buy their debt like they've been
• 24:08
  Speaker 3: doing for Greece and Italy. The ECB has been criticized
• 24:14
  Speaker 3: for keeping weak sovereigns afloat effectively and stalling effectively the
• 24:24
  Speaker 3: reforms that are necessary. Now, Greece has made strides sure
• 24:28
  Speaker 3: italy's more precarious as i understand it not my area
• 24:32
  Speaker 3: you know just from what i read yeah yeah i
• 24:33
  Speaker 3: understand we're just reading the whatever uh yeah i mean
• 24:37
  Speaker 3: are there lessons i guess the the one takeaway for
• 24:40
  Speaker 3: us is that there are limits to what markets will
• 24:43
  Speaker 3: tolerate if you look at the dramatic rise in yields
• 24:46
  Speaker 3: in france and elsewhere and that they're tied to demographics.
• 24:52
  Speaker 2: Demographics and policy. We saw this in Great Britain, too.
• 24:55
  Speaker 3: Yeah, go ahead, sorry.
• 24:58
  Speaker 2: When under, what was her name? Oh, Liz Truss. Liz Truss, yeah.
• 25:02
  Speaker 2: Her policies were quite bad, perceived as quite bad by
• 25:06
  Speaker 2: financial markets especially, and yields basically drove her out of town,
• 25:11
  Speaker 2: and we seem to be having a similar situation in France.
• 25:14
  Speaker 2: The difference being there doesn't seem to be any centrist
• 25:17
  Speaker 2: uh fiscally no uh center candidate to uh vote in.
• 25:21
  Speaker 3: Their current president was and he since threw caution to
• 25:25
  Speaker 3: the wind when he realized it was.
• 25:26
  Speaker 2: A politically untenable yeah basically he was trying to raise
• 25:31
  Speaker 2: the retirement rate he was in.
• 25:32
  Speaker 3: A losing fight yep and he basically abandoned it so.
• 25:35
  Speaker 2: Sorry you tried to raise the retirement age not the
• 25:37
  Speaker 2: retirement rate And all of those things failed spectacularly.
• 25:41
  Speaker 3: At least one party here, the Republicans, tend to pay
• 25:44
  Speaker 3: lip service to being fiscally responsible. When the other guy's
• 25:46
  Speaker 3: in office, they do. When they're in office, they run
• 25:49
  Speaker 3: up bigger deficits than the Democrats. I've learned, and I
• 25:51
  Speaker 3: used to vote for these people, so I guess I'm
• 25:54
  Speaker 3: to blame, too. Then I realized that they don't care
• 25:57
  Speaker 3: about deficits and debt. It took me 20 years, but
• 26:00
  Speaker 3: I finally realized that. So at least we have one
• 26:03
  Speaker 3: party that pays lip service to it. France... They're both
• 26:08
  Speaker 3: competing for who can be more fiscally reckless. They're betting
• 26:11
  Speaker 3: on an ECB bailout. They've got to be because they've
• 26:13
  Speaker 3: done it elsewhere. They know the French economy is too
• 26:16
  Speaker 3: important to the EU, the European Union. It's too big
• 26:20
  Speaker 3: to fail. They know this.
• 26:22
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• 27:18
  Speaker 1: The proceeding was paid for and the views expressed are
• 27:20
  Speaker 1: solely those of Cushing and Dolan. Cushing and Dolan and
• 27:22
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• 27:25
  Speaker 1: Cushing and Armstrong do not endorse each other and are
• 27:27
  Speaker 1: not affiliated.
• 27:28
  Speaker 2: Mark, we're all familiar with personalized pricing, I think. Anybody
• 27:34
  Speaker 2: that has ever taken an Uber, has bought an airline
• 27:38
  Speaker 2: ticket or booked a hotel online, are used to the
• 27:42
  Speaker 2: fact that these prices change pretty rapidly. There's all sorts
• 27:45
  Speaker 2: of algorithms that they use based on their reading of
• 27:49
  Speaker 2: current demand to raise or lower prices. And more and more,
• 27:54
  Speaker 2: it's more personalized based on what they do. think they
• 27:58
  Speaker 2: know about you and your willingness to pay for that product.
• 28:03
  Speaker 2: Lawmakers across the country now are starting to enact different
• 28:07
  Speaker 2: types of warnings or bans when it comes to categories
• 28:11
  Speaker 2: of goods that are not currently delivered via this type
• 28:16
  Speaker 2: of pricing mechanism. Think grocery stores where New York, for example,
• 28:21
  Speaker 2: is putting a disclosure requirement, quote, this price was set
• 28:25
  Speaker 2: by an algorithm using your personal data if you are
• 28:29
  Speaker 2: going somewhere where that's the case. So envision a scenario,
• 28:32
  Speaker 2: for example. I think what the lawmakers in these states
• 28:34
  Speaker 2: are most concerned about would be you walking into a
• 28:38
  Speaker 2: grocery store and through some ability to recognize your personal identity,
• 28:46
  Speaker 2: maybe it is from the cell phone in your pocket
• 28:49
  Speaker 2: or facial recognition, they say, okay, Mark Fandetti, we know
• 28:53
  Speaker 2: he earns X and therefore is probably more willing to
• 28:56
  Speaker 2: pay for this good and changing the digital price aisle
• 29:00
  Speaker 2: at the grocery store. We're not there right now, but
• 29:03
  Speaker 2: I think that's what lawmakers are concerned about. I guess
• 29:06
  Speaker 2: the question is, A, do any companies actually want to
• 29:10
  Speaker 2: roll this out? I know everybody's freaked out when they
• 29:12
  Speaker 2: started rolling out digital price tags. They do all sorts
• 29:16
  Speaker 2: of algorithmic-based price changes today anyway, right? I mean, if
• 29:21
  Speaker 2: it's hot out, they might jack up the price of popsicles,
• 29:24
  Speaker 2: or if it's cold out, they might You know, increase
• 29:27
  Speaker 2: the price of other goods. But is this something that
• 29:30
  Speaker 2: we actually need to be concerned about? It seems pretty
• 29:32
  Speaker 2: dystopian to me, you know, going to a retail outlet
• 29:36
  Speaker 2: and having prices change automatically because I'm walking in the store.
• 29:39
  Speaker 3: You know let him try it and uh we'll shop
• 29:42
  Speaker 3: elsewhere if we i personally don't like the idea because
• 29:45
  Speaker 3: there's uh it strikes me as a little bit unfair
• 29:48
  Speaker 3: i don't know why it's just my gut reaction i
• 29:50
  Speaker 3: know economically it makes sense to extract as much surplus
• 29:53
  Speaker 3: from the consumer technically speaking If you're willing to pay
• 29:56
  Speaker 3: more for a banana because you've got a raging banana habit,
• 30:00
  Speaker 3: then good. You charge Mike more for a banana.
• 30:05
  Speaker 2: I should hypothetically get it for cheaper in that case.
• 30:07
  Speaker 2: You should hypothetically get it for cheaper in that case
• 30:10
  Speaker 2: if you.
• 30:10
  Speaker 3: Still have extra bananas to sell. Yeah, and then you
• 30:11
  Speaker 3: and I outside the supermarket, I'm going to give you
• 30:13
  Speaker 3: a couple bananas, and I should probably rephrase that.
• 30:15
  Speaker 2: Yeah. Probably.
• 30:17
  Speaker 3: And then we're going to start, you know, like you'll
• 30:18
  Speaker 3: hire like a personal shopper who makes less money than
• 30:21
  Speaker 3: you or something. There are ways around it. If you
• 30:24
  Speaker 3: consider it to be intrusive or dystopian, as you put it,
• 30:26
  Speaker 3: you don't shop there. Let X supermarket chain try it
• 30:30
  Speaker 3: and we'll all just go to Y and they will
• 30:32
  Speaker 3: quickly reverse course.
• 30:33
  Speaker 2: So disclosure is the path then rather than prohibition. I
• 30:36
  Speaker 2: think so.
• 30:36
  Speaker 3: Some people might prefer it. I don't know why it
• 30:38
  Speaker 3: seems intrusive. I mean, there's one place we don't want
• 30:40
  Speaker 3: to stress out more than we have to and it's
• 30:42
  Speaker 3: the damn supermarket now i've got to be weary i
• 30:45
  Speaker 3: gotta wear like a nose and glasses in my case
• 30:48
  Speaker 3: i guess a smaller nose if they make such a
• 30:49
  Speaker 3: thing but you know i gotta wear a disguise when
• 30:52
  Speaker 3: i go into the supermarket so they don't they don't
• 30:55
  Speaker 3: screw me on.
• 30:55
  Speaker 2: Zucchini yeah i this is um it is dystopian i
• 31:01
  Speaker 2: don't again my problem with you going after grocery stores
• 31:05
  Speaker 2: for this is like.
• 31:07
  Speaker 3: Yeah, others do it.
• 31:08
  Speaker 2: You know, other.
• 31:09
  Speaker 3: Volume discounts. Senior discounts.
• 31:12
  Speaker 2: Yeah.
• 31:12
  Speaker 3: I mean, it's called price discrimination.
• 31:15
  Speaker 2: All sorts of places do it. And arguably in areas
• 31:19
  Speaker 2: that are far more financially impactful than groceries do they
• 31:22
  Speaker 2: do it. But yeah, the idea of walking down an
• 31:25
  Speaker 2: aisle and watching the price change in front of my
• 31:27
  Speaker 2: eyes because of my ability or willingness to pay seems...
• 31:30
  Speaker 2: far more concerning and dystopian than, than, uh, you.
• 31:33
  Speaker 3: Just send some of your underlings to you who make
• 31:35
  Speaker 3: less than you do to shop for you and problem solved.
• 31:38
  Speaker 3: But I think transparency will fix this. Some may prefer it.
• 31:43
  Speaker 3: Most people, my guess is it just feels a little
• 31:45
  Speaker 3: bit too.
• 31:46
  Speaker 2: Well, the counterpoint to it is it would probably mean
• 31:49
  Speaker 2: that on the margin, if you were a deal hunter,
• 31:51
  Speaker 2: you could find better deals because you know, the goal
• 31:54
  Speaker 2: will obviously be to chart, to gain a higher margin and,
• 31:58
  Speaker 2: For these businesses, but, you know, here and there, there's
• 32:00
  Speaker 2: going to be people that are finding better deals, too.
• 32:02
  Speaker 3: I've got to spend all morning shopping for carrots.
• 32:03
  Speaker 2: Yeah, yeah, that's what you've got to do. Correct. Let's
• 32:06
  Speaker 2: take a quick break. When we come back, Stack Roulette
• 32:08
  Speaker 2: is next.
• 32:11
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• 32:14
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• 32:18
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• 32:26
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• 33:12
  Speaker 2: I would like to return back to a subject we
• 33:15
  Speaker 2: touched on at the very beginning of the show very briefly. Meta,
• 33:18
  Speaker 2: Facebook's parent company, released a new AI tool called Muse.
• 33:24
  Speaker 2: Chuck's teased it a couple times as being a bad
• 33:28
  Speaker 2: name for a product because it sounds like Metamucil because
• 33:30
  Speaker 2: Meta is Muse. In any case, the thing has gotten
• 33:34
  Speaker 2: over 5 million total downloads. It's got 3 million weekly
• 33:37
  Speaker 2: active users right now and was briefly the most downloaded
• 33:42
  Speaker 2: app in the Apple store. I'm seeing their advertisements all
• 33:48
  Speaker 2: over the place, not just when using Facebook or other
• 33:51
  Speaker 2: social media. I saw two different billboards when driving around
• 33:55
  Speaker 2: Boston over the course of the last few weeks for
• 33:57
  Speaker 2: this AI agent. And I finally took a look at
• 34:02
  Speaker 2: what it does. So in a, you know, you've probably,
• 34:04
  Speaker 2: maybe you've used generative AI where you've done a Google
• 34:07
  Speaker 2: search and gotten return, you know, things back. An AI
• 34:10
  Speaker 2: agent is designed, you know, designed differently. Think of it
• 34:13
  Speaker 2: effectively as, you know, a generative AI that can affect,
• 34:19
  Speaker 2: it almost has its own workstation, right? You can give
• 34:22
  Speaker 2: it a computer of its own where it can literally
• 34:24
  Speaker 2: scroll and click across the internet and, or place phone calls,
• 34:29
  Speaker 2: and do more stuff than we are used to when
• 34:32
  Speaker 2: we're talking about just chat GPT or something like that. One,
• 34:35
  Speaker 2: I am surprised that Meta was able to kind of
• 34:38
  Speaker 2: leapfrog a bunch of other companies in putting out a
• 34:40
  Speaker 2: very usable product this quickly. They were, in my mind,
• 34:45
  Speaker 2: behind Anthropic, Google, and OpenAI in terms of their AI
• 34:52
  Speaker 2: investment in resources here domestically, and very quickly are being
• 34:55
  Speaker 2: talked about a lot more. So I think that is
• 34:58
  Speaker 2: admittedly impressive. What this tool actually does, though, it's designed
• 35:02
  Speaker 2: to be a personal assistant for seemingly anybody. But the
• 35:09
  Speaker 2: way in which it gets good at it is, you know,
• 35:12
  Speaker 2: a personal assistant, if they're going to be any good
• 35:13
  Speaker 2: at the job, needs to know a lot about you.
• 35:16
  Speaker 2: They need to know how you spend money. They need
• 35:18
  Speaker 2: to know what kind of food you like. They need
• 35:20
  Speaker 2: to know when your appointments are. They need to know
• 35:22
  Speaker 2: all sorts of really critical stuff. And so a New
• 35:27
  Speaker 2: did just that. He, you know, went in and provided
• 35:30
  Speaker 2: it access to just about everything that I can think
• 35:34
  Speaker 2: of other than his work email. Cause he was worried about,
• 35:37
  Speaker 2: you know, getting fired for accidentally releasing a source or
• 35:40
  Speaker 2: something like that. Uh, but his own personal email, his
• 35:43
  Speaker 2: credit card information, his bank accounts, his Venmo, uh, his
• 35:47
  Speaker 2: personal information like social security and, and all of those
• 35:50
  Speaker 2: things in his entire, uh, email archive, everything that he'd
• 35:53
  Speaker 2: ever written in his personal email, uh, his personal address,
• 35:56
  Speaker 2: his work address, his girlfriend's address, everything under the sun
• 36:00
  Speaker 2: he provided to this AI agent. And it did some
• 36:04
  Speaker 2: pretty damn impressive stuff. It was able to call his
• 36:08
  Speaker 2: health insurer, his dental insurer actually, and get to the
• 36:12
  Speaker 2: bottom of a billing issue that they were having, called
• 36:15
  Speaker 2: the dental insurer, seemingly sat on hold for 10 plus minutes,
• 36:21
  Speaker 2: was able to answer security questions about the reporter, And
• 36:24
  Speaker 2: then when they needed to talk to him, called him
• 36:27
  Speaker 2: on his personal cell phone and said, hey, I've got
• 36:29
  Speaker 2: the right person at your dental insurance office to get
• 36:33
  Speaker 2: to the bottom of this thing. And conference called him
• 36:36
  Speaker 2: into the call to solve it. It ordered lunch for
• 36:43
  Speaker 2: him just by saying, hey, find me a delivery for
• 36:46
  Speaker 2: some sort of bowl to be delivered to my office
• 36:50
  Speaker 2: at 1230. It bought movie tickets for him. It did all.
• 36:54
  Speaker 3: What did he do that day?
• 36:55
  Speaker 2: Reminded him of his father's upcoming birthday. And, you know,
• 36:58
  Speaker 2: did you buy a present for him yet? Yeah, that's nice.
• 37:02
  Speaker 2: So again, he was not doing this because he's a
• 37:03
  Speaker 2: fan of the product. He was doing it for journalistic purposes.
• 37:06
  Speaker 2: And his main takeaway was this is genuinely impressive and
• 37:10
  Speaker 2: is also kind of scary at how quickly it is
• 37:14
  Speaker 2: taking away every enjoyable human task that I'm doing.
• 37:17
  Speaker 3: Yeah, those little things. I think a mental health professional
• 37:20
  Speaker 3: might tell you that there's value in mindless little things. Distractions.
• 37:24
  Speaker 3: Not the frustrating ones. I like my iPhone hold feature.
• 37:29
  Speaker 3: It tells me when the person I'm about to argue
• 37:32
  Speaker 3: with for 30 minutes is ready to throttle me verbally.
• 37:37
  Speaker 4: Yeah.
• 37:37
  Speaker 3: I like that, but I don't know, Mike. I think
• 37:39
  Speaker 3: there's value in some of those little things. Maybe my
• 37:41
  Speaker 3: time's not valuable enough.
• 37:42
  Speaker 2: A particularly dystopian one is using AI to draft your
• 37:49
  Speaker 2: fantasy league. Isn't fantasy, I don't play, but isn't it
• 37:54
  Speaker 2: supposed to be like, hey, I'm getting away from my
• 37:57
  Speaker 2: personal life. It's right in the word, fantasy league.
• 37:59
  Speaker 4: It drafts the best part of the year.
• 38:02
  Speaker 2: I just feel as though we are heading to some
• 38:05
  Speaker 2: very impressive technology. That removes every remaining human task that
• 38:10
  Speaker 2: we perform.
• 38:11
  Speaker 3: Some, don't get me wrong, some of it will be welcome.
• 38:14
  Speaker 2: Quick break for the next 22 hours. Have a great
• 38:17
  Speaker 2: rest of your day. Markets at all-time highs. We'll be
• 38:19
  Speaker 2: back at it tomorrow. Have a great day, folks.