Latest / The Financial Exchange Show / Nvidia investors grapple with China risks ahead of earnings

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Nvidia investors grapple with China risks ahead of earnings · The Financial Exchange Show

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Speaker 1: This is the Financial Exchange with Chuck Zada, and Mark Vandetti.
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Speaker 2: Chuck, Mark and Sucker with you here today, and markets
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Speaker 2: are modestly. The DAZZ up about one hundred and twenty
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Speaker 2: one points, the S and P is up ten NASDAC
1:21
Speaker 2: up twenty three, so anywhere from about a tenth of
1:24
Speaker 2: a percent to a quarter percent rise in the major
1:27
Speaker 2: US indices. Not much happening in the bond market right now.
1:31
Speaker 2: Tenure Treasury is up nine tenths of a basis point
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Speaker 2: to four points two six five percent. One thing that
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Speaker 2: we have seen over the last couple of weeks is
1:42
Speaker 2: a steepening in the yield curve where shorter yield shorter
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Speaker 2: term bonds are seeing their yields moving down a little bit,
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Speaker 2: whereas the long end of the curve, the thirty year,
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Speaker 2: is creeping back up towards five percent. Now. Could be
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Speaker 2: any one of a number of things. I often don't
1:56
Speaker 2: like to ascribe, you know, too much to what's going
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Speaker 2: on with short time treasury moves, because that's how you
2:02
Speaker 2: get into the problem where you say stuff last year
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Speaker 2: like oh like, yields must be moving up because of
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Speaker 2: concerns about the amount of debt that's out there, and
2:11
Speaker 2: then when yields come down, you're like, oh, did the
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Speaker 2: debt picture get fixed? And no, it did, and it's
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Speaker 2: still basically the same. So I think that when we
2:19
Speaker 2: look at what we're seeing here, at least on the
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Speaker 2: bond side, it's generally better just to say, hey, here's
2:24
Speaker 2: what's happening, and let's see what continues, not hey, this
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Speaker 2: is definitively any one particular thing. In commodity markets, Oil
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Speaker 2: West Texas Intermediate up fifty six cents of barrel to
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Speaker 2: sixty three point eighty one the trip a national average four.
2:43
Speaker 2: Gas prices, by the way, did finally get out of
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Speaker 2: that three ten to three twenty per gallon range on
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Speaker 2: a national basis, up two point two cents on the
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Speaker 2: day to day to three dollars twenty cents and eight
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Speaker 2: tenths of a cent. This largely on the back of
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Speaker 2: a refinery outage that is hitting the Midwest and pushing
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Speaker 2: gas prices up there at the moment. So, as an example,
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Speaker 2: in Michigan, right now, gas prices on average three point
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Speaker 2: thirty nine. Even a week ago they were three eighteen
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Speaker 2: and five tenths of a cent. So this is what
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Speaker 2: is causing this shift right now. It's not anything dramatic.
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Speaker 2: It's just, hey, there's a refinery adage that will end
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Speaker 2: up being you know, fixed, and things will get back
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Speaker 2: to normal. But the Midwest is facing some higher fuel
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Speaker 2: prices in the short term, to the tune of an
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Speaker 2: extra ten to fifteen cents per gallon. At the moment,
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Speaker 2: gold is up a dollar thirty and ounce to thirty
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Speaker 2: four thirty four and thirty cents. I'm sure if it
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Speaker 2: could trade, you know, on individual sense, I'd love to
3:46
Speaker 2: get thirty four to thirty four to thirty four, but
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Speaker 2: unfortunately it doesn't do that, and so we're stuck with
3:52
Speaker 2: thirty four to thirty four thirty big thing that's happening
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Speaker 2: at four thirty or not four thirty, but after the
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Speaker 2: close day, we don't know the exact time in video
4:01
Speaker 2: reports their earnings. And this obviously is a potential market
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Speaker 2: moving event given the fact that when you look at
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Speaker 2: the Standard and Pores five hundred, the S and P
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Speaker 2: five hundred as it's more commonly referred to in vidio
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Speaker 2: right now is the biggest holding in it at just
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Speaker 2: over eight percent of the overall index. So for every
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Speaker 2: dollar you put into the S and P five hundred
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Speaker 2: right now, eight cents of it goes into in Vidia,
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Speaker 2: another seven or so goes into Microsoft, six goes into Apple,
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Speaker 2: four goes into Amazon, three goes into Meta. But in
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Speaker 2: Vidia is the top dog, and so people pay attention
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Speaker 2: with their report earnings, which is always about a month
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Speaker 2: or so after everyone else does.
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Speaker 3: And they appear to be in Vidia's chip stew because
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Speaker 3: they power data centers. As the news articles in our
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Speaker 3: stack of articles talks about extensively today, there are very
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Speaker 3: serious people who think this phenomenon of data center building,
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Speaker 3: related of course to Nvidia and chip sales, is effectively
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Speaker 3: powering the investment component of economic growth. So this is
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Speaker 3: of great interest and of great importance to new term
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Speaker 3: growth in the sense that it is the investment in
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Speaker 3: data centers data centers, Excuse me, that is a not
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Speaker 3: insignificant part, how much I don't know. That's not quantified
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Speaker 3: here for the US. As far as I can tell,
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Speaker 3: it's powering investment in the short term, so keeping GDP
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Speaker 3: growing at a round or above trend rate, and in
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Speaker 3: the long run, of course, it'll be a determinant if
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Speaker 3: AI and this is a very big if, contributes to
5:40
Speaker 3: productivity to the extent that optimists think it could. It'll
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Speaker 3: be a big contributor to long term I don't share that,
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Speaker 3: by the way, but I'm just sort of reiterating the
5:50
Speaker 3: company line here, not our company, but the consensus. It's
5:55
Speaker 3: important for long term economic growth too. So lots of
5:57
Speaker 3: stake here.
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Speaker 2: And I think the big questions with in video for tonight,
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Speaker 2: and by the way, these are questions that generally in
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Speaker 2: the last three years they've answered successfully. It's not to
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Speaker 2: say that they will tonight or in subsequent quarters, but
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Speaker 2: you know, we've talked about this a lot where oh
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Speaker 2: and you know, in Vidia's got some questions about, you know,
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Speaker 2: can they continue to do this or will this happen?
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Speaker 2: And they've pretty much had answers for all of those
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Speaker 2: over the last couple of years. The two big ones
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Speaker 2: that are going to be out there. The first is China. Hey,
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Speaker 2: in your previous quarter earnings, you indicated that you missed
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Speaker 2: out on billions of dollars in revenue because you weren't
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Speaker 2: able to sell to China. What's the situation with China now?
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Speaker 2: Because the Trump administration has granted the export licenses for
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Speaker 2: in Nvidia to export their H twenty chips, but the
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Speaker 2: Chinese government has pretty much said, hey, Chinese companies, stop
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Speaker 2: buying this stuff. And so what is the reality in
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Speaker 2: terms of the revenue that you're seeing, the demand that
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Speaker 2: you're seeing. Talk to us about this, because just reading
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Speaker 2: between the lines, it seems like things aren't going the
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Speaker 2: way you would have liked them to. But headlines can
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Speaker 2: be misleading. We know this, So I think that's part
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Speaker 2: of it. The other piece is, hey, what are you
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Speaker 2: seeing in terms of additional demand from non traditional sources?
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Speaker 2: And what I mean by that is the last three years,
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Speaker 2: you can count on one hand the number of companies
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Speaker 2: that really have been driving the needle for Nvidia purchases.
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Speaker 2: It's Microsoft, it's open Ai, it's Meta, it's Google. Like
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Speaker 2: those are the names that have been the driving forces.
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Speaker 2: One of the things that we saw earlier this year,
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Speaker 2: the Trump administration relaxed export controls of chips to a
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Speaker 2: number of other countries, most notably to a lot of
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Speaker 2: the Gulf states. You're talking Saudi Arabia, Oman Uae, you know,
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Speaker 2: places like that. And so I think that the question
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Speaker 2: that is out there in my mind is, hey, these
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Speaker 2: are countries that said that they were going to be
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Speaker 2: big buyers of this stuff.
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Speaker 1: Is any that.
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Speaker 2: Starting to show up now where you still supply you know,
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Speaker 2: supply constraints, so those are pushed out a couple more years.
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Speaker 2: But what's in the pipeline because in terms of the
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Speaker 2: growth from those mag seven companies, hey, it's it's still
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Speaker 2: projected right now. But we've talked about how the economics
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Speaker 2: of the data center construction might not support the same
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Speaker 2: rate of increase that we've been seeing the last couple
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Speaker 2: of years. And if that comes under pressure, do you
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Speaker 2: have other companies to sell this stuff to.
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Speaker 3: Well, we know they can't become the whole economy, so
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Speaker 3: there's an upper limit.
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Speaker 2: Right, We've talked about we are not going to be
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Speaker 2: the United States of Nvidia.
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Speaker 3: Like data centers. But yeah, that oh, that's that's that's
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Speaker 3: that's an excellent shorthand way of putting it.
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Speaker 2: You know, it's like, probably not, We're not all gone.
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Speaker 3: I don't know, have they made Trump an offer? I
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Speaker 3: mean the rebranding, Yeah, I'm just talking about rebranding.
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Speaker 2: I'm not talking about Yeah. I think would be a
8:58
Speaker 2: tough putt. You'd have a better you'd have better luck
9:02
Speaker 2: with the United States of Amazon, just because you don't
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Speaker 2: have to change the initials. Then I don't think either
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Speaker 2: one's really gonna fly. Quite honestly, I think we're we're
9:09
Speaker 2: in a pretty good spot with the USA and the
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Speaker 2: branding there. So I think in looking at this, it's
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Speaker 2: it's one where there are questions that need to be answered,
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Speaker 2: and video in the last few years has done a
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Speaker 2: really good job of answering them. But the questions being
9:25
Speaker 2: asked now are different than the ones from the last
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Speaker 2: couple of years, and that raises a little bit of
9:31
Speaker 2: intrigue here. So we'll see what we end up getting
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Speaker 2: on this. But again, in Nvidia, earnings are going to
9:36
Speaker 2: be after the bell today at the close, let's take
9:39
Speaker 2: a quick break here. When we return, Yeah, let's do
9:45
Speaker 2: a little bit of trivia, and then let's talk a
9:48
Speaker 2: little bit about just overall market performance this year so
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Speaker 2: far and kind of what it means, what it doesn't mean.
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Speaker 2: Right after this.
9:56
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Speaker 4: Time for trivia here on the Financial Exchange. In our
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Speaker 2: Ah good a nice piece from CNBC S and P
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Speaker 2: five hundred Index investors have been rewarded so far in
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Speaker 2: twenty twenty five. Why experts say it may be time
11:41
Speaker 2: to diversify. There's nothing like trying to market time based
11:45
Speaker 2: on how the index has done over the first eight
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Speaker 2: months of the year. That's obviously gotta be really reliable.
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Speaker 1: Here.
11:54
Speaker 2: I'll just quote here just because this is just again
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Speaker 2: kind of garbage, horrific. Experts say investors would be wise
12:02
Speaker 2: to watch the risk before pursuing an investment strategy concentrated
12:05
Speaker 2: in the large cap company focused S and P five
12:07
Speaker 2: hundred index, which represents about eighty percent of market capitalization. Okay,
12:10
Speaker 2: there's nothing crazy there so far. We've talked about not
12:13
Speaker 2: having all eggs in one basket. I got it. Our
12:16
Speaker 2: advice for people who are looking at their performance on
12:17
Speaker 2: a one or three year horizon is no, we don't
12:19
Speaker 2: think the set it and forget it S and P
12:21
Speaker 2: five hundred strategies. The only is the is the right strategy? Okay,
12:25
Speaker 2: even that's you know, kind of reasonable here when you
12:29
Speaker 2: talk about like, yeah, you don't know that this thing
12:31
Speaker 2: is always going to go up or not. I've talked
12:35
Speaker 2: at length about how if you pulled investors from like
12:39
Speaker 2: nineteen ninety through two thousand and five, they'd say, why
12:43
Speaker 2: am I even invested in the S and P five
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Speaker 2: hundred emerging markets is where it's at. I've got to
12:47
Speaker 2: have more inn em and in the subsequent twenty years
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Speaker 2: that has just not been the case. But then you
12:54
Speaker 2: get into this kind of stuff here, which is, you know,
12:57
Speaker 2: the S and P five hundred ad a good second
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Speaker 2: quarter where profits and margins and the aggregate expanded, but
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Speaker 2: the remaining three hundred ninety three companies outside of the
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Speaker 2: mag seven only had three percent market three percent profit growth. Quote.
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Speaker 2: That's not a healthy market. That's a very narrow market.
13:15
Speaker 2: And when looking at the S and P today, it's
13:17
Speaker 2: important to realize that what you're buying now versus what
13:19
Speaker 2: you're buying ten years ago is changed. And it's basically saying, look,
13:24
Speaker 2: you're you're buying you know AI today, which is true.
13:28
Speaker 2: But who's to say that the AI bubble or who's
13:31
Speaker 2: to say it's even a bubble. Who's to say it
13:33
Speaker 2: doesn't have another two, three, four or five years to run?
13:36
Speaker 2: And that this is the exact moment to what would
13:40
Speaker 2: you not do that?
13:41
Speaker 4: What?
13:41
Speaker 1: What?
13:42
Speaker 2: What was that?
13:44
Speaker 4: Is this completely blew into the microphones out there?
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Speaker 3: You know what it was? What was there was an
13:51
Speaker 3: air pocket on one side of my mouth. It was
13:53
Speaker 3: contained though.
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Speaker 2: If you were going to stop talking, just let me know,
13:57
Speaker 2: And then I could not have been more direct in
13:59
Speaker 2: some Then I pushed on the other side and it
14:02
Speaker 2: came out an unexpected part of the orifice.
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Speaker 3: Tucker. I'm not a radio professional, Tucker. Maybe I need
14:08
Speaker 3: retraining on where the.
14:10
Speaker 2: Square the headphones and everything solved well.
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Speaker 3: But then I'd have to hear that.
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Speaker 1: Though.
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Speaker 3: Who wants to hear that?
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Speaker 1: Not me?
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Speaker 2: In any case. I guess what I'm getting at here
14:20
Speaker 2: is why is now the time to exercise caution around
14:23
Speaker 2: the S and P five hundred as opposed to a
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Speaker 2: year ago or two years or three and the other pieces. Hey,
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Speaker 2: if you do make a change right now, are you
14:33
Speaker 2: content with the idea that you could be wrong because
14:35
Speaker 2: this thing could still keep going up and be the
14:36
Speaker 2: dominant you know, market index for the next two, three, four, five,
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Speaker 2: ten years. We have no idea.
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Speaker 3: Yeah, the market cap weighted by that, I mean the
14:46
Speaker 3: method that weights stocks according to the value of all
14:51
Speaker 3: their shares. And Video is the biggest holding in the
14:53
Speaker 3: S and P, bigger than Microsoft, Apple and some of
14:55
Speaker 3: the other giants because it shares are worth more. I
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Speaker 3: know everybody knows that, and It sounds like common sense,
15:00
Speaker 3: but it was not obvious before the nineteen seventies, when
15:06
Speaker 3: theory and technology came together and allowed investment banks. They
15:11
Speaker 3: weren't known as investment banks then, but allowed a bank
15:14
Speaker 3: to put together at S and P five hundred portfolio
15:17
Speaker 3: that was based on a theory that had been developed
15:20
Speaker 3: about a decade before. Maybe you know the name Bill Sharp,
15:23
Speaker 3: you won a Nobel prize. May have heard Sharp ratio.
15:25
Speaker 2: Here's a ratio named after.
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Speaker 3: Yeah, that's right. It's very straightforward. So it's so simple,
15:32
Speaker 3: it's brilliant. But anyway, I don't want to get sidetracked
15:35
Speaker 3: on Sharp and all of his contributions to finance. The
15:37
Speaker 3: point is he pointed out that the market cap weighted
15:41
Speaker 3: portfolio should be every investor's starting point for theoretical reasons
15:46
Speaker 3: that aren't entirely obvious, but once you learn a little
15:49
Speaker 3: bit about them, they make perfect sense. So you by
15:52
Speaker 3: default you start with the S and P five hundred
15:54
Speaker 3: or the Russell one thousand, which is more purely market
15:56
Speaker 3: cap weighted in a little better diversified, and almost by definition,
16:00
Speaker 3: when a sector has a big run up, the index
16:02
Speaker 3: is going to be driven by that sector. In the
16:04
Speaker 3: past generation or two, it's been technology. There were times
16:07
Speaker 3: when it was other sectors like industrials and whatever whatever.
16:14
Speaker 3: The sector that embodied chemical companies would have been generations ago. Anyway,
16:20
Speaker 3: my point is the S and P after a big
16:22
Speaker 3: run up always looks overvalued, and it's epically overvalued in
16:27
Speaker 3: historical terms right now slightly different matter, and the sector
16:30
Speaker 3: that has propelled that run up always raises concerns about overconcentration.
16:39
Speaker 3: So all these arguments to me sound a lot like
16:42
Speaker 3: arguments that have been made in past eras about the
16:46
Speaker 3: technology and other sectors. Sometimes they've turned out to be
16:51
Speaker 3: good warnings that stocks were indeed overvalued, got ahead of themselves.
16:55
Speaker 3: But like you said, Chuck, you never know until after
16:57
Speaker 3: the fact, and I'll just reiterate you should always aren't
17:00
Speaker 3: as a default. You may tilt away from it if
17:03
Speaker 3: you think that your conviction about another segment of the
17:08
Speaker 3: market is compelling enough, But start by default with a
17:11
Speaker 3: market cap weighted index and go from there. And this
17:14
Speaker 3: is why four or one gay plans typically default you
17:16
Speaker 3: into something that waits by market cap, because that's viewed
17:19
Speaker 3: as the most prudent way to invest.
17:22
Speaker 2: And look the whole idea of you know again valuation
17:26
Speaker 2: is you know, a tool to know when to move
17:28
Speaker 2: into one thing or another. All I got to tell you. Look,
17:31
Speaker 2: you take a look at emerging markets and European equities.
17:34
Speaker 2: For the last fifteen years, they've been cheap relative to
17:37
Speaker 2: their US counterparts. They've also been cheap for a reason.
17:40
Speaker 2: There has not been very much growth in the equity
17:44
Speaker 2: markets in Europe or in emerging markets in the aggregate.
17:48
Speaker 3: Yeah, and EM, emerging markets are riskier. They should go ahead.
17:52
Speaker 2: Yeah, EM like you also get into then things like
17:55
Speaker 2: you know, jurisdictional risk, which is, hey, does the ruling
17:59
Speaker 2: person in country XYZ on the other side of the
18:02
Speaker 2: world suddenly decide they don't like the laws and they
18:05
Speaker 2: change the rules, and now your investment is worthless because
18:08
Speaker 2: you know, the lights were turned off one day and
18:11
Speaker 2: the guy didn't like it, or something like that.
18:13
Speaker 3: This is why it's so curious that markets are so
18:15
Speaker 3: far responding with complacency to threats to FED independence. One
18:21
Speaker 3: of the problems with emerging markets historically, and the reason
18:23
Speaker 3: they get a lower risk premium a lower valuation, is
18:28
Speaker 3: that their policy is less soundly conducted than ours, and
18:32
Speaker 3: that includes monetary policy, if we're going to be reverting
18:36
Speaker 3: to some sort of third world like monetary policy, and
18:40
Speaker 3: that's what you get when you put it all in
18:41
Speaker 3: the hands of one guy. You could say you like
18:43
Speaker 3: that arrangement or don't, but you can't have both that
18:46
Speaker 3: and very high valuations reflective of institutional stability at the
18:50
Speaker 3: same time.
18:51
Speaker 2: Techno look at markets as we head towards the bottom
18:53
Speaker 2: of the hour. The Dow is currently up one hundred
18:56
Speaker 2: and thirty five points, the S and P is up eleven,
19:00
Speaker 2: the Nasdaq is up twenty two, So kind of like
19:03
Speaker 2: what we've seen all day, just a holding pattern as
19:05
Speaker 2: we wait for Nvidia earnings after the bell. Bond market
19:09
Speaker 2: with not much movement either. Tenure Treasury is up three
19:13
Speaker 2: tenths of a basis point. Again, the bond traders are
19:17
Speaker 2: just sitting there saying, like, why did I wake up
19:19
Speaker 2: in the morning for this? There's nothing for me to
19:21
Speaker 2: do right now. It's given the last week and August,
19:24
Speaker 2: a lot of people away and stuff like that. It's
19:27
Speaker 2: a quiet.
19:28
Speaker 1: Week in general.
19:29
Speaker 2: Quick break here, we've got the trivia answer in Wall
19:32
Speaker 2: Street Watch. When we returned.
19:41
Speaker 1: Bringing the latest financial news straight to your radio. Every
19:45
Speaker 1: day it's the Financial Exchange on the Financial Exchange Radio Network.
19:51
Speaker 1: Time now for Wall Street. Watch a complete look at
19:55
Speaker 1: what's moving market so far today right here on the
19:58
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20:00
Speaker 4: Well, we are only a few hours away from a
20:02
Speaker 4: significant earnings report from chip maker in AI giant Nvidia
20:07
Speaker 4: after today's closing bell, and markets are narrowly higher right now.
20:11
Speaker 4: The Dow is up by three tenths of one percent,
20:13
Speaker 4: or one hundred and twenty eight points higher. SP five
20:17
Speaker 4: hundred is up nearly two tenths of one percent, NASDAC
20:20
Speaker 4: up a tenth of a percent or twenty one points higher,
20:22
Speaker 4: Russell two thousand up over half a percent. Ten year
20:26
Speaker 4: Treasure reeled up one basis point now at four point
20:29
Speaker 4: two six nine percent, and crude oil up about half
20:32
Speaker 4: a percent higher, trading at sixty three dollars and fifty
20:36
Speaker 4: eight cents a barrel. Cole's jumping nearly eighteen percent after
20:40
Speaker 4: the retailer surpassed street earnings and revenue expectations despite its
20:44
Speaker 4: sales declining and its ongoing search for a new CEO.
20:48
Speaker 4: Coals also reported a better than anticipated full year sales guidance.
20:53
Speaker 4: Another retailer and Abercrombine Fitch also reported second quarter results
20:57
Speaker 4: where it's sales growth slowed. During the quarter, Abercrombie sales
21:01
Speaker 4: slumped five percent, while comparable sales dropped eleven percent. However,
21:06
Speaker 4: sales from its Hollister brand grew nineteen percent in the quarter,
21:10
Speaker 4: Abercrombie up over one percent. Meanwhile, CNBC reported that controlling
21:15
Speaker 4: shareholder of Canada Goose Bain Capital received bids to take
21:20
Speaker 4: the company private, valuing the retailer at about one point
21:23
Speaker 4: three five billion dollars. Canada Goose shares are jumping about
21:27
Speaker 4: fifteen percent hire Elsewhere Octa shares climbing three percent after
21:32
Speaker 4: the identity security company posted higher quarterly results and raised
21:36
Speaker 4: its annual guidance. Database platform developer Mango dB surging thirty
21:42
Speaker 4: three percent after it beat analysts estimates and raised its
21:46
Speaker 4: annual outlook, and after controversy surrounding its new logo Cracker
21:50
Speaker 4: Barrel reverted back to its original old timer logo. That
21:54
Speaker 4: stock rebounding eight percent. Today, I'm Tucker Silva and that
21:58
Speaker 4: is Wall Street Watch. And in the previous segment, we
22:01
Speaker 4: asked you the trivia question which Boston Red Sox Legend
22:04
Speaker 4: serve three years in World War Two as a naval aviator.
22:08
Speaker 4: That would of course be Ted. Williams Joseph from Yarmouthport,
22:12
Speaker 4: Mass is our winner today taking home the Financial Exchange
22:15
Speaker 4: Show t shirt, and we played trivia every day here
22:18
Speaker 4: in the Financial Exchange See complete contest rules at Financial
22:22
Speaker 4: Exchange Show dot com.
22:23
Speaker 2: Mark. We got a piece here from Bloomberg Opinion. It's
22:26
Speaker 2: titled why boomers have more money than everyone else? Well,
22:31
Speaker 2: why do they?
22:32
Speaker 1: Mark?
22:33
Speaker 3: It's probably what you would expect, Chuck. We joked a
22:36
Speaker 3: little bit about it during the break. They own homes.
22:40
Speaker 3: They bought their homes at relatively cheap prices, and I
22:44
Speaker 3: know they're scout. If you're in that age group, you're
22:47
Speaker 3: scowling when you hear this. You earned it. And the
22:51
Speaker 3: fact that homes have gotten a lot more expensive relative
22:53
Speaker 3: to incomes in every other measure is not because you
22:56
Speaker 3: drove the price up, of course, It's just the nature
23:00
Speaker 3: of a growing economy bumping up against natural limits on
23:05
Speaker 3: some things like like housing supply when we zone the
23:09
Speaker 3: way that we do, etc. So you bought a house
23:11
Speaker 3: at two times median income, now it's four or five times.
23:14
Speaker 3: You bought stocks for most of your career at a PE.
23:17
Speaker 3: We were talking about this in the last segment, and
23:20
Speaker 3: that by PE I just mean evaluation specifically priced to earnings.
23:24
Speaker 3: In this example, though you could insert other variables in
23:27
Speaker 3: there and come to the same conclusion. You bought stocks
23:29
Speaker 3: relatively cheaply and they've run up by a lot. So
23:32
Speaker 3: baby boomers and older gen xers to an extent, have
23:35
Speaker 3: been the beneficiaries of rapidly appreciating asset prices. And maybe
23:40
Speaker 3: there are some cultural factors there too, maybe they were
23:43
Speaker 3: better savers didn't have as much student debt, for example,
23:46
Speaker 3: though there we researchers I think who conducted the study
23:48
Speaker 3: referred to in this article did not find that student
23:51
Speaker 3: debt if memory serves, It's been a couple of weeks
23:53
Speaker 3: since I looked at this. But if memory serves, student
23:54
Speaker 3: debt was not a big factor. But there may be
23:56
Speaker 3: other little factors explaining the relative different since say net
24:00
Speaker 3: worth at this point in their lives of boomers versus
24:03
Speaker 3: other generations.
24:05
Speaker 2: Now, the other thing is that I come back to
24:10
Speaker 2: this quite often. If you looked at all the literature
24:13
Speaker 2: written on millennials ten years ago, you know, twenty fifteen,
24:18
Speaker 2: it was you know, millennials will never amount to anything financially.
24:22
Speaker 2: They're well behind their parents and Gen X in terms
24:25
Speaker 2: of where they are at the same point in time.
24:27
Speaker 2: They're not buying houses, they're not doing anything. They're just
24:31
Speaker 2: you know, millennials who are avocado toasting their way through life.
24:36
Speaker 2: And in the last ten years then equity markets went nuts,
24:39
Speaker 2: housing markets went nuts. Incomes for millennials, you know, moved
24:43
Speaker 2: up pretty significantly. And now you get the pieces talking about, hey,
24:46
Speaker 2: millennials actually have you know, a higher rate of home
24:48
Speaker 2: ownership at the same age than their parents did, and
24:52
Speaker 2: millennial wealth is caught up in this and that, and gosh,
24:56
Speaker 2: like what a difference ten years makes on this stuff.
24:59
Speaker 2: And so I think that all we get at, you know,
25:03
Speaker 2: when we look at these these studies and these pieces
25:05
Speaker 2: like that, there's snapshots in time. They don't say anything
25:08
Speaker 2: about you know, what got you here, which you've outlined
25:11
Speaker 2: a little bit. But they also don't say anything about
25:13
Speaker 2: where you're going and whether or not the trends that
25:15
Speaker 2: got you there are going to continue. And you know,
25:20
Speaker 2: I think that ultimately, when when we look at this
25:23
Speaker 2: and look the other thing to point out here, even
25:26
Speaker 2: amongst the baby boomers, there are vast disparities in wealth.
25:30
Speaker 2: Guarantee you there are plenty of baby boomers that are
25:32
Speaker 2: listening to our show right now saying Chuck, I'm, you know,
25:35
Speaker 2: a boomer, I'm not comfortable financially, like I'm struggling to
25:37
Speaker 2: make ends meet. That there are plenty that fall into
25:40
Speaker 2: that category as well. So I think that when we
25:44
Speaker 2: look at this in the aggregate, we also, you know,
25:46
Speaker 2: kind of lose some things here in terms of the
25:48
Speaker 2: actual meaning of this. But I don't know, I caution
25:53
Speaker 2: people to read too much into this because, you know,
25:55
Speaker 2: if just to use the boomers as an example, if
25:58
Speaker 2: you ask the boomers back in you know, nineteen seventy nine, Hey,
26:01
Speaker 2: how have things gone for you financially, you know, in adulthood,
26:05
Speaker 2: most of them are probably like, Yeah, this whole economics
26:08
Speaker 2: thing kind of sucks. Inflation's been high, jobs have been
26:11
Speaker 2: hard to get, gas prices have been high. You know,
26:14
Speaker 2: like the first ten years that boomers were in the
26:17
Speaker 2: workforce were not exactly like an easy time for them.
26:22
Speaker 2: Were the subsequent forty a nice tail wind that they
26:24
Speaker 2: could ride? Absolutely, But again, these are just snapshots in time.
26:30
Speaker 2: It doesn't mean that those trends are going to continue.
26:32
Speaker 3: Yeah, and if our institutions continue to deteriorate and change
26:37
Speaker 3: is a better word, maybe you like these changes. We
26:39
Speaker 3: talk a lot about fed independence, and I keep bringing
26:42
Speaker 3: it up because it's critical to the growth of to
26:46
Speaker 3: the volatility and therefore the growth of the economy. These
26:48
Speaker 3: old trends that we like to extrapolate from. Those trends
26:52
Speaker 3: are the product of the conditions that prevailed since the
26:55
Speaker 3: end of the Second World War, trade liberalization, fed independence, stability,
27:01
Speaker 3: rule of law prevailing generally, if we're switching to more
27:04
Speaker 3: of a personalist type approach to being governed, and maybe
27:08
Speaker 3: you like that, maybe you don't. I don't think you
27:10
Speaker 3: can assert if we make fundamental changes to the rules
27:13
Speaker 3: governing the operation of our economy that it will grow
27:16
Speaker 3: at the same rate. And I don't think, based on
27:19
Speaker 3: the experience of other countries, you can credibly make the
27:21
Speaker 3: argument that it will grow faster, because that's not happened
27:24
Speaker 3: historically when, for example, a politician controls the money supply.
27:28
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28:28
Speaker 2: Mark. I am a lazy, avocado toast eating millennial, so
28:34
Speaker 2: I was too young to be gainfully employed during the
28:40
Speaker 2: tech bubble when that was going on. But I've read
28:43
Speaker 2: this piece here in the Wall Street Journal, and I
28:46
Speaker 2: wanted to get your opinion on it because it talks
28:48
Speaker 2: about how you have these you know, people in their
28:50
Speaker 2: early twenties that have effectively, you know, kind of come
28:54
Speaker 2: of age with generative AI, and they are you know,
28:58
Speaker 2: getting these big job not for you know, programming generative
29:02
Speaker 2: AI platforms and things like that, but just because they
29:06
Speaker 2: know how to use AI and are able to use
29:09
Speaker 2: it in a job. And it becomes almost you know,
29:10
Speaker 2: a specialist role that they have, you know, AI specialist
29:14
Speaker 2: working for a bank or something like that. Did you
29:17
Speaker 2: see something similar popping up during the tech bubble where
29:20
Speaker 2: you had like search engines specialists or you know, things
29:24
Speaker 2: like that that popped up at companies, Because I'm just
29:28
Speaker 2: wondering if this happens in every technological cycle, if you know,
29:34
Speaker 2: in the sixties, was.
29:35
Speaker 3: There you know, Okay, now you're insulting me.
29:38
Speaker 2: I know I'm insulting you, but I but here we go.
29:43
Speaker 2: But I'm going to continue, you know, like it's hey,
29:45
Speaker 2: did we have you know, vacuum tube you know special
29:49
Speaker 2: I know you did then because that was like the
29:50
Speaker 2: only job. But I guess that when it comes to this,
29:54
Speaker 2: is this unique to this cycle? Do you think?
29:56
Speaker 3: Or if it's parallel. First of all, it's to statement
30:00
Speaker 3: to how much companies are fumbling with integrating AI into
30:05
Speaker 3: existing workflows, and actually they don't get it, and very
30:08
Speaker 3: few are making money. We talked about Mike Armstrong and
30:11
Speaker 3: I talked about a study done by researchers at MIT yesterday.
30:14
Speaker 3: They concluded that fewer than five percent of companies that
30:17
Speaker 3: have spent a lot of money and time on AI
30:19
Speaker 3: have actually been able to use it profitably. The rest
30:23
Speaker 3: are just kind of screwing around with it, finding applications
30:27
Speaker 3: that might be interesting, but they're having trouble integrating them
30:29
Speaker 3: into their software and workflow. And that's understandable. We've all
30:32
Speaker 3: encountered this. So the only to answer your question, The
30:36
Speaker 3: only parallel that comes to mind is Microsoft Excel skills
30:39
Speaker 3: were at one time toubtable skills, and they would be
30:43
Speaker 3: part of solicitations, would include them as a qualification that
30:47
Speaker 3: we're being looked for. You see that sometimes now, and
30:49
Speaker 3: it seems quaint because you don't have to code in
30:53
Speaker 3: Microsoft Excel or any Microsoft application. Of course, that's the
30:56
Speaker 3: whole point. It's all wrapped for you. Sure, that's the
31:00
Speaker 3: only analog I can think of to that period, Chuck,
31:03
Speaker 3: I'm sure there were jobs for which I was not
31:05
Speaker 3: applying or interested in. Jobs for example outside of finance,
31:09
Speaker 3: where coding skills in Fortran or C plus plus or
31:14
Speaker 3: whatever language you were proficient in at the time were
31:16
Speaker 3: more highly prized. But no, this seems odd because this
31:20
Speaker 3: is just looking for power users of chat GPT. Help
31:24
Speaker 3: us because we have no idea what we're doing. We're
31:26
Speaker 3: all in our fifties like me, and are getting staler
31:31
Speaker 3: and more demented by the day. No offense to my
31:34
Speaker 3: fellow millennials, but we are gen actress, but we are.
31:39
Speaker 3: I need to hire a kid who actually gets this stuff.
31:41
Speaker 3: This smacks of that to me. It's a little pathetic,
31:43
Speaker 3: you know, like in.
31:44
Speaker 2: The nineteen seventies, did you have you know, hey, we
31:47
Speaker 2: need a photo copy or expert to come.
31:49
Speaker 3: Yeah, right, you know, like something like somebody who can
31:52
Speaker 3: work at xerox machine with all the buttons.
31:54
Speaker 2: Here's the thing that's wild. Actually, there have been a
31:56
Speaker 2: bunch of studies done of companies and like the problems
31:58
Speaker 2: that they have with gen z ers. And part of
32:00
Speaker 2: the problem is, hey, they might be really skilled at
32:02
Speaker 2: the new tech, but they can't use things like photocopiers.
32:06
Speaker 2: They walk into the room with it and they're like,
32:08
Speaker 2: what do you want me to do with this, Yes,
32:10
Speaker 2: very man, which I get. I understand. Like, there's always
32:14
Speaker 2: so much knowledge that you can pick up as a kid.
32:17
Speaker 2: It would be like if you ask someone from the
32:21
Speaker 2: nineteen sixties, Hey, can you drive the horse and buggy
32:23
Speaker 2: for me? No? Like, I what do you mean drive
32:27
Speaker 2: the horse and buggies? It's sticker? Is it automatic? You know?
32:31
Speaker 2: Like it's just yeah, you didn't use it, you know,
32:34
Speaker 2: it was just it's just a different thing. Let's take
32:37
Speaker 2: a quick break here and when we return, we'll do
32:41
Speaker 2: a little bit of stack roulette.
32:43
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33:25
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33:29
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34:00
Speaker 2: All right, mark, what do you got from me for
34:02
Speaker 2: stack roulette today?
34:04
Speaker 3: The Chicago Fed every week calculates a national Financial Conditions Index.
34:09
Speaker 3: It's a pretty comprehensive It covers equity markets, debt markets,
34:15
Speaker 3: the banking system, money markets, so a pretty comprehensive index.
34:20
Speaker 3: So a single number that gives you a sense of
34:22
Speaker 3: how conducive overall capital market and broader economic conditions are
34:28
Speaker 3: for say, businesses who want to borrow money to expand.
34:34
Speaker 3: This index and the number itself minus point five to
34:37
Speaker 3: six is not really meaningful other than it might be
34:41
Speaker 3: helpful to know that negative numbers are actually good. The
34:44
Speaker 3: more negative, the better. The more it's very counterintuitive, it
34:47
Speaker 3: means it means financial conditions are closer again easier for
34:50
Speaker 3: businesses that need it to get their hands on capital.
34:54
Speaker 3: This index as you would expect because other markets, because
34:59
Speaker 3: markets the that underli it that we do talk about
35:01
Speaker 3: a lot, stock and bond markets are more or less
35:03
Speaker 3: giving the same signal. This index is at its most
35:07
Speaker 3: is that its most accommodative, if you will, so loosest
35:11
Speaker 3: in terms of financial conditions reading of this whole business cycle. Now,
35:15
Speaker 3: part of that is because markets expect the Fed to
35:18
Speaker 3: cut short term interest rates when it meets next month.
35:21
Speaker 3: Market prices obviously reflect that, but it's been low for
35:25
Speaker 3: quite some time, so not clear that beyond a modest
35:30
Speaker 3: cut to maybe act as insurance against potential softening of
35:33
Speaker 3: the labor market, that the Fed's going to need to
35:35
Speaker 3: do much more than that that is easemodestly next month.
35:38
Speaker 3: Whether they actually do more, as obviously now more a
35:41
Speaker 3: function of political considerations and pressure than the state of
35:45
Speaker 3: the real economy.
35:47
Speaker 2: I want to talk a little bit about this piece
35:49
Speaker 2: that Tucker put in the stack today. It's called splot
35:52
Speaker 2: goes the slop bowl. The sell better is why fast
35:56
Speaker 2: casual chains like Chipotle and Cava are losing out to
35:59
Speaker 2: sit down spots like Chili's. And we've talked a little
36:02
Speaker 2: bit about this. Just the value is not there when
36:05
Speaker 2: it comes to Chipotle versus a Chili's or apple Bee's.
36:09
Speaker 2: It's hey, I can sit down at a Chili's or
36:11
Speaker 2: Applebee's and get a meal that is the same cost
36:14
Speaker 2: or cheaper than Chipotle. And I've got you know, a
36:16
Speaker 2: waiter a waitress bringing me water, and you know, I'm
36:19
Speaker 2: sitting down and not having to just you know, stand
36:21
Speaker 2: at this big industrial counter and this and that. We've
36:25
Speaker 2: talked about that. I want to talk about this. Uh,
36:28
Speaker 2: this phrasing here though, that goes into it. Tucker, before
36:31
Speaker 2: the last like month or so, had you heard the
36:33
Speaker 2: term slop bowl? I've you have.
36:37
Speaker 4: Yeah, it's a pile of slop you just throw down
36:40
Speaker 4: in ten minutes.
36:41
Speaker 2: Yeah, just because it's all the stuff like mixed together
36:44
Speaker 2: in a little bowls is kind of where it comes from. Yep, exactly.
36:49
Speaker 2: I guess what I'm trying to figure out is like
36:51
Speaker 2: when this became kind of a thing in terms of
36:55
Speaker 2: the terminology, because.
36:56
Speaker 4: You know, heard of the past year.
36:58
Speaker 2: I'd say, so, you think it's kind of coincides with
37:01
Speaker 2: this since people getting fed up with like, hey, I'm
37:03
Speaker 2: paying twenty dollars for slop? Is the good deal? Yeah?
37:09
Speaker 2: I struggle with it. I still think that the value
37:11
Speaker 2: thing is better. But I'm just curious how language evolves
37:14
Speaker 2: on this stuff because before this, you know, you go
37:17
Speaker 2: back like a few years and this stuff was being
37:20
Speaker 2: talked about. It's like, oh, like it's higher quality than
37:23
Speaker 2: what you get it, you know, a fast food dice.
37:26
Speaker 2: And now we're just referring to it as slop, which
37:28
Speaker 2: I think is interesting to me. And it's kind of
37:31
Speaker 2: a what came first, the slopp or the egg, you know,
37:35
Speaker 2: and in this case they're kind of coincidental. But I
37:39
Speaker 2: just find it interesting how the language evolves on this
37:41
Speaker 2: stuff because.
37:43
Speaker 4: I have no problem with the terminology. I still get
37:46
Speaker 4: a slop bowl probably once a week, but like that
37:49
Speaker 4: your mouth water.
37:50
Speaker 3: No.
37:50
Speaker 2: But the counter to this is if you said, hey, Chuck,
37:53
Speaker 2: you want a sloppy joe right now, I'd say, you
37:55
Speaker 2: darn right, I do. Yeah, I'll take a sloppy joe
37:59
Speaker 2: right now, thank.
37:59
Speaker 4: You for I don't know who serves a sloppy joe around.
38:02
Speaker 2: Not many people anymore. It's kind of sad. It's the
38:05
Speaker 2: demise of a great American legend. In my opinion. Dal
38:08
Speaker 2: Jones up one hundred and three points. S and P's
38:10
Speaker 2: up thirteen, NASDAC UP forty one. All is still focused
38:13
Speaker 2: on in Vidio. This afternoon, we're done for the day.
38:17
Speaker 2: We'll see you tomorrow. Recapping in Vidio earnings