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The day Amazon broke the internet · The Financial Exchange Show

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  Speaker 1: making a donation Today. Face is the Financial Exchange with
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  Speaker 1: Mike Armstrong and Mark Vandetti.
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  Speaker 2: You had more than happy Tuesday, and welcome back to
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  Speaker 2: the Financial Exchange. It's Mike Armstrong, Mark Fandetti and Tucker
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  Speaker 2: Silva with you here.
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  Speaker 3: As earning season heats up, we have eighty.
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  Speaker 2: Nine, eighty nine s and P five hundred companies yes,
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  Speaker 2: reporting earnings this week. That includes Tesla and Netflix, which
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  Speaker 2: will be going today after the bell. In the meantime,
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  Speaker 2: we heard from General Motors, Coca Cola, let's see, let
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  Speaker 2: me get the whole the whole shebang here, Gero Space,
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  Speaker 2: Philip Morris, Raytheon, Dana Hurst. So a whole bunch of
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  Speaker 2: companies have already gone ahead and report. I had to
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  Speaker 2: go look on page two for General Motors given how
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  Speaker 2: small their market cap is these days. But actually some
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  Speaker 2: glimpses of good news from the auto sector, which has
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  Speaker 2: been all bad news as of late. We're gonna trip
• 1:56
  Speaker 2: take a trip down to Argentina, where Mark's gonna give
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  Speaker 2: us some tango lessons and also hopefully figure out why
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  Speaker 2: the US is considering lending Argentina's government forty billion dollars
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  Speaker 2: and then later in the show will be joined by
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  Speaker 2: Andrew Ross Sorkin the author of nineteen twenty nine, as
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  Speaker 2: he joins us talk about his new book on the
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  Speaker 2: Great Depression. But I guess we'll start with earnings. Mark's
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  Speaker 2: if that's all right by you?
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  Speaker 4: Sure?
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  Speaker 2: So, we, like I said, we'll be rolling through a
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  Speaker 2: bunch of companies this week. Friday of this week, we'll
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  Speaker 2: get data on inflation as well. That's the consumer price
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  Speaker 2: index for the month of September, which will be used
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  Speaker 2: to determine cost of living adjustments on Social Security. But
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  Speaker 2: General Motors coming out and reporting fairly strong earnings and
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  Speaker 2: open in pre market trading, they were up a good
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  Speaker 2: nine percent. They're up fourteen wow, fourteen percent now nearly
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  Speaker 2: a General motorstock on better than expected demand and also
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  Speaker 2: better than expected tariff news. So just highlighting the top
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  Speaker 2: line information here. Adjusted earnings before interest in taxes estimated
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  Speaker 2: to be twelve to thirteen billion dollars in twenty twenty five.
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  Speaker 2: That's up from a previous range of ten to twelve
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  Speaker 2: and a half. They're citing strong truck demand. They're also
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  Speaker 2: thanking the Trump administration for some carve outs. When it
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  Speaker 2: comes to auto parts. They extended a twenty thirty tariff
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  Speaker 2: discount on imports for car makers that produce and sell
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  Speaker 2: completed automobiles in the United States, so GM basically reducing
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  Speaker 2: the expected impact of their overall sanctions piece. And I
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  Speaker 2: bring General Motors up in particular, not because they're a
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  Speaker 2: particularly large company, right this is these days a sixty
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  Speaker 2: two and a half billion dollar company, but big employer
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  Speaker 2: in the United States obviously, and also the auto industry
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  Speaker 2: as a whole has been in focus at least on
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  Speaker 2: our program over the course of the last month, given
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  Speaker 2: a few bankruptcies that we have seen in that space.
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  Speaker 2: I wonder, Mark, I haven't really talked to you a
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  Speaker 2: whole lot about the private credit and auto delinquency and
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  Speaker 2: bankruptcy space, but your take on the state of the
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  Speaker 2: automobile market and potential first spill over here if you
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  Speaker 2: have one. We've seen the bankruptcy of Tricolor, We've seen
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  Speaker 2: the bankruptcy of First Brands. Part of that I attribute
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  Speaker 2: to fraud and you know, potential problems with the companies themselves.
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  Speaker 2: But I've also been worried about you know what this
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  Speaker 2: exactly states about the consumer and the demand for automobiles
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  Speaker 2: right now.
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  Speaker 3: Yeah, that's a.
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  Speaker 5: Good question to tell you. The truth I we talked
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  Speaker 5: to a lot of In my day job, I talked
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  Speaker 5: to a lot of asset manage Sure, we run people's
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  Speaker 5: we manage people's money for them, but we don't do
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  Speaker 5: it directly. We hire managers to do it, so we
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  Speaker 5: talk to managers who specialize in these areas. So you
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  Speaker 5: asked about private credit and potential spillover effects there for demand,
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  Speaker 5: because if people can't get access to h there are
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  Speaker 5: spillovers from what happened to a tricolor. It's not a spillover,
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  Speaker 5: it's very direct. If there are more subprime lenders who
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  Speaker 5: are in trouble, and there probably are.
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  Speaker 2: What was the name of the other one that was
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  Speaker 2: being threatened with bankruptcy on Friday of last week?
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  Speaker 3: Did you send that one to me?
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  Speaker 4: I'm start at the p primal lend.
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  Speaker 2: I think it might have been I'll double check in
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  Speaker 2: that one, but another subprime lender being looked at pretty cautiously.
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  Speaker 5: So years and years of lax lending always culminate in
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  Speaker 5: a crunch. So the question is a wee in the
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  Speaker 5: early stages of a crunch? And I say always that
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  Speaker 5: sounds very confident, very definitive, but it's also it's also true,
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  Speaker 5: but you never really know until after the fact the
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  Speaker 5: times of it, yeah, or whether or not it's going
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  Speaker 5: to take down an appreciable part of the industry. And thus,
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  Speaker 5: to answer your question, SAP demand in her earnings.
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  Speaker 2: The stuff that I'm seeing in the auto industry, to me,
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  Speaker 2: indicates that there is this continued, real problemroblem with subprime
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  Speaker 2: and I think that feeds into a story that we've
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  Speaker 2: been talking about a lot, right, whether it's Marriott's earnings
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  Speaker 2: and their real success in the premium brands, whether it's
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  Speaker 2: Delta speaking about their success and selling high priced tickets
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  Speaker 2: versus coach cabin tickets. The story of GM versus these
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  Speaker 2: subprime lenders, I think tells a similar story. GM is
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  Speaker 2: seeing a real surgeon profitability by selling sixty, seventy and
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  Speaker 2: eighty thousand dollars pickup trucks, And if you are borrowing
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  Speaker 2: money from the likes of Primal Lend or Tricolor, you're
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  Speaker 2: probably not buying an eighty thousand dollars pickup truck to
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  Speaker 2: begin with.
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  Speaker 5: Yeah, I think one of the challenges that analysts like me,
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  Speaker 5: I'm not a stocky analyst, but sort of an economic
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  Speaker 5: h and an investment researcher type analyst. One of the
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  Speaker 5: challenges we're going to run into, Mike, is that the
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  Speaker 5: health of big companies is no longer indicative necessarily of
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  Speaker 5: the health of the average consumer. Those two things have decoupled.
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  Speaker 5: I don't know how tightly coupled they've ever been. It
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  Speaker 5: may have just been a miss. Sure, I do know,
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  Speaker 5: and you and Chuck and Paul Lane have talked a
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  Speaker 5: lot about the fact that nearly the majority of spending,
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  Speaker 5: maybe now the majority is being driven by the top percentiles.
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  Speaker 5: Whether it's whether it's top five or top ten percent
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  Speaker 5: doesn't really matter. But the growth in spending is being
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  Speaker 5: driven by the wealthiest households, and that's in turn driving earnings,
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  Speaker 5: which is in turn propelling stocks, which is in turn
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  Speaker 5: abetting the so called wealth effect. How much of people's
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  Speaker 5: stock gains they tend to spend on stuff, so you
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  Speaker 5: get this. I'll call it a virtuous cycle, even though
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  Speaker 5: it's probably not sustainable because you can sense the circularity
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  Speaker 5: and what I'm describing stocks co ops, so people spend more.
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  Speaker 5: That's that in turn pushes stocks up. Raises the question,
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  Speaker 5: what if the economy consisted just of a stock market
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  Speaker 5: and nothing else would people just keep spending. Of course
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  Speaker 5: not that's absurd. But the point is, Mike, I don't know.
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  Speaker 5: It's great that that you and Chuck and Paul talk
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  Speaker 5: about corporate earnings, but I'm not sure how much light
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  Speaker 5: that sheds on the health of the typical consumer or
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  Speaker 5: the typical list to the show.
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  Speaker 2: Yeah, it's difficult for me to look at, say, the
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  Speaker 2: top ten companies in the S and P five hundred, Yeah,
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  Speaker 2: and reminder that that makes up what forty six percent
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  Speaker 2: of the total index now and point to any of
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  Speaker 2: them and say, oh, yeah, that is a company whose
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  Speaker 2: profits are really driven by a broad spectrum of the
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  Speaker 2: US consumer. Yeah, But I think what we're starting to
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  Speaker 2: see here and there is companies that do serve that
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  Speaker 2: lower income consumer. Primal Lend and Tricolor or you know,
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  Speaker 2: two of them who we didn't know their names prior
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  Speaker 2: to this, and they don't have a big impact on
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  Speaker 2: the stock market. We're seeing real cracks in the foundation
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  Speaker 2: of those companies. And the question that I have is, Okay,
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  Speaker 2: you know, these are two relatively unknown companies. What are
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  Speaker 2: the other ones that are out there that I'm not
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  Speaker 2: really thinking of that also serve a lower income, consumer
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  Speaker 2: and derive.
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  Speaker 5: This is what Jamie Diamond meant when he when he
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  Speaker 5: cost it's a perfect anal. I mean, if anybody should know,
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  Speaker 5: he should know, Jamie. If you don't know where the
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  Speaker 5: cockroaches are, you're going to go talk to your underwriters
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  Speaker 5: for Pete's sake.
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  Speaker 2: But yeah, and so what we'll continue to draw that
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  Speaker 2: out as the you know, as the week goes on. Right,
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  Speaker 2: we've got eighty nine different companies who are reporting earnings.
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  Speaker 2: But when I take a look at them, you know,
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  Speaker 2: you go down the list here, right, Netflix, g E R, Space,
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  Speaker 2: Coca Cola, Philip Morris, Raytheon. I suppose a couple of them,
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  Speaker 2: ye right, Like you know, when I think about which
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  Speaker 2: ones could I measure the overall health of the US consumer?
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  Speaker 2: Netflix might be one, yep, Coca Cola could be another.
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  Speaker 2: Philip Morris might be another. Where okay, correct, well, but
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  Speaker 2: those aren't going to be big drive. Those aren't to
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  Speaker 2: be big drives of the stock market. But I do
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  Speaker 2: think they are really useful indicators for hey, will these
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  Speaker 2: companies be able to continue to drive growth? Will they
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  Speaker 2: be able to see the same sales that they have
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  Speaker 2: been become accustomed to and have been priced into given
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  Speaker 2: what we're seeing in the weakening of the bottom half
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  Speaker 2: as you so, this is.
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  Speaker 5: Why, and you'll talk about this with Andrew Ross Sorkin
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  Speaker 5: in the next hour. Does a market crash Did the
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  Speaker 5: twenty nine market crash instigate or contribute to the factors
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  Speaker 5: that led to the depression? Most economists would say yes,
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  Speaker 5: but it wasn't the proximate cause well, you'll get his
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  Speaker 5: take on that in the next hour. The point I
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  Speaker 5: want to make is the changing complexion of the stock
• 10:19
  Speaker 5: market and the structure of the economy make forecasting, make
• 10:24
  Speaker 5: answering the really interesting questions on everybody's mind to wit,
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  Speaker 5: Are we gonna have recession? Is the stock market going
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  Speaker 5: to crash? Is it too pricey? Is spending going to slow?
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  Speaker 5: Am I gonna be able to sell my house when
• 10:36
  Speaker 5: I have to start selling stocks? When I retire? Are
• 10:38
  Speaker 5: they going to be down relative where they are? Those
• 10:40
  Speaker 5: are the big questions on most people's minds. It's hard
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  Speaker 5: to answer those questions using traditional forecasting methods. Speaking just
• 10:47
  Speaker 5: as an analyst here, when the structure of the economy
• 10:51
  Speaker 5: is changing, and when the composition of the market is
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  Speaker 5: changing as it has over the past several years.
• 10:57
  Speaker 3: Especially let's take a quick break yesterday.
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  Speaker 2: If you happen to notice many websites weren't working terribly well,
• 11:04
  Speaker 2: it's been more than twenty four hours now. We've got
• 11:06
  Speaker 2: a little bit more information on the crash yesterday. We'll
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  Speaker 2: talk about that next on the Financial Exchange.
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  Speaker 1: Thanks to us six one, seven, three, six two thirteen
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• 12:13
  Speaker 3: Well Mark.
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  Speaker 2: This time yesterday Chuck and I were discussing the outages
• 12:17
  Speaker 2: caused by Amazon Web Service is probably the bigger story
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  Speaker 2: of yesterday and likely the biggest disruption to the Internet
• 12:26
  Speaker 2: since what was it a few years ago CrowdStrike that
• 12:29
  Speaker 2: took down you know, billions of dollars worth of business
• 12:33
  Speaker 2: when they took down Microsoft servers based on a screw
• 12:37
  Speaker 2: up that they made. Still not exactly clear what happened,
• 12:41
  Speaker 2: but apparently, according to reporting, the trouble started right after
• 12:48
  Speaker 2: midnight along the East coast and it was involving an
• 12:52
  Speaker 2: update to the domain name system. To make a long
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  Speaker 2: story short, Amazon web Services today about thirty percent market
• 13:01
  Speaker 2: share for all sorts of web service hosting. All sorts
• 13:04
  Speaker 2: of big and small companies rely upon them to host
• 13:08
  Speaker 2: everything that they do at their companies that are digital
• 13:11
  Speaker 2: and on either an Internet or intranet service, and when
• 13:16
  Speaker 2: a little screw up like this happens, it compounds very quickly.
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  Speaker 2: It was apparent to me that some companies were better
• 13:24
  Speaker 2: at getting themselves back up and running than others. And
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  Speaker 2: I don't think any of that had to do with
• 13:30
  Speaker 2: their relationship with Amazon or anything along those lines. I
• 13:34
  Speaker 2: think it mainly had to do with some companies had
• 13:37
  Speaker 2: better backups in place. But in speaking to somebody with
• 13:41
  Speaker 2: a major you know, with a major company yesterday, the
• 13:45
  Speaker 2: answer was, yes, we've got backups in place that we
• 13:49
  Speaker 2: can switch to. But it's not this automatic, quick thing
• 13:52
  Speaker 2: that happens right. You have to physically switch over to
• 13:56
  Speaker 2: a different server farm or to a different backup that
• 13:59
  Speaker 2: you use, and it just RUPs all sorts of things
• 14:01
  Speaker 2: for a long time.
• 14:02
  Speaker 5: So forgive me. I don't know a thing about this.
• 14:05
  Speaker 5: I do know that as you say companies store their
• 14:08
  Speaker 5: data off site, I'll just say off site, you should
• 14:10
  Speaker 5: say it's in the cloud. So when the cloud goes down,
• 14:12
  Speaker 5: I go into my network drive. A lot of most
• 14:15
  Speaker 5: people know what that means. I'll just use the language.
• 14:17
  Speaker 5: I'm not, again, not an expert.
• 14:18
  Speaker 3: I just know that's what it's called.
• 14:19
  Speaker 5: I want to access something I looked at six months ago.
• 14:21
  Speaker 5: It's not saved locally, it's saved in the so called cloud. Yes,
• 14:24
  Speaker 5: there were people who because they use AWS yesterday, couldn't
• 14:27
  Speaker 5: do that. So you want to pull up a spreadsheet
• 14:29
  Speaker 5: for last quarter to updateat you couldn't get it because or.
• 14:32
  Speaker 2: If you wanted to access your payment system that's available
• 14:35
  Speaker 2: on your website that might be hosted on Amazon's cloud. Again,
• 14:39
  Speaker 2: you might not be able to accept a payment for
• 14:40
  Speaker 2: your customer. You might not be able to print a
• 14:42
  Speaker 2: shipping label to your printer. By the end of the day,
• 14:46
  Speaker 2: one hundred and forty two different Amazon Web service products
• 14:49
  Speaker 2: were affected because there was just kind of a ripple
• 14:53
  Speaker 2: effect and chain effect of you know, switch over to here,
• 14:55
  Speaker 2: switch over to there, and then that system gets taken
• 14:58
  Speaker 2: down as well. So, uh, I don't I can't claim
• 15:02
  Speaker 2: to be an expert on any of this stuff either, Mark,
• 15:04
  Speaker 2: But I think what we're learning through events like this
• 15:07
  Speaker 2: is that those systems are quite a concentrated and be fragile,
• 15:13
  Speaker 2: more fragile than I think most people previously.
• 15:15
  Speaker 5: But now that we know about this, do businesses have
• 15:17
  Speaker 5: an obligation to back there? What is the point of
• 15:21
  Speaker 5: backing up your data if it's already backed up on
• 15:22
  Speaker 5: the So it's been it's backed up. When you say
• 15:24
  Speaker 5: something it's I know it's backed up on your your
• 15:26
  Speaker 5: seed drive. Most people have a computer know what that means.
• 15:28
  Speaker 5: It's on your eye drive. But after thirty days it
• 15:31
  Speaker 5: effectively goes off your sea drive and ends up in
• 15:33
  Speaker 5: the cloud. Do businesses now have a duty to back up?
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  Speaker 1: What?
• 15:37
  Speaker 5: I thought the whole point of the cloud was it
• 15:39
  Speaker 5: is the backup.
• 15:40
  Speaker 3: So here would be my takeaway.
• 15:44
  Speaker 2: This event seems like it's primarily behind us at this stage,
• 15:48
  Speaker 2: and companies in Amazon has fully recovered from it. Do
• 15:52
  Speaker 2: businesses have an obligation to back things up?
• 15:56
  Speaker 3: No? I guess it depends on what business you are.
• 15:58
  Speaker 2: If you're Bank of America, then probably If you are
• 16:02
  Speaker 2: what was it said I was trying to get on
• 16:04
  Speaker 2: yesterday r V Trader, which is a company that buys
• 16:07
  Speaker 2: and sells used RVs.
• 16:08
  Speaker 3: Yeah, probably not.
• 16:09
  Speaker 2: I don't know that any regulator is going to come
• 16:12
  Speaker 2: after you and say, hey, r V Trader, you're pretty
• 16:15
  Speaker 2: integral to the financial system. You have to make sure
• 16:17
  Speaker 2: that your website has backups. I think the bigger question, right, like,
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  Speaker 2: let's say that this was out for a week, would
• 16:26
  Speaker 2: companies that have the ability to get back up and
• 16:28
  Speaker 2: running with their backups within twenty four hours, like those are.
• 16:32
  Speaker 5: The questions about pick up the cloud with another cloud server.
• 16:35
  Speaker 3: Provide the cloud server provider.
• 16:39
  Speaker 4: Cloud that's what I would want.
• 16:40
  Speaker 3: Then you're screwed. They both go down. Then forget about it.
• 16:44
  Speaker 2: I don't I don't have an answer for you, but
• 16:46
  Speaker 2: I think the answer clearly is it depends on how
• 16:49
  Speaker 2: important and big of an institution you are. It depends
• 16:52
  Speaker 2: on what sort of stuff is relied upon in your network.
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  Speaker 5: We're gonna end up bringing all these service back on
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  Speaker 5: site at some point. I hate to say it, but
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  Speaker 5: if somebody finds a way to split this vulnerability, or
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  Speaker 5: if these things just become unreliable at a certain scale,
• 17:03
  Speaker 5: you're going to almost have to have your own servers.
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  Speaker 2: I think many of these places do. I think that's
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  Speaker 2: the answer, as many of these places do. And in
• 17:11
  Speaker 2: some cases, you know, like the cloud is the backup.
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  Speaker 2: But I mean that doesn't fix the problem either, Mark,
• 17:18
  Speaker 2: because ten years ago, when we were evaluating this stuff internally, yeah,
• 17:23
  Speaker 2: the question was, okay, well what happens if you're building
• 17:25
  Speaker 2: burns down. Really great that you've got that backup location
• 17:28
  Speaker 2: you can work from. But if you're building burns down,
• 17:30
  Speaker 2: then you don't have a website you don't have an intranet,
• 17:32
  Speaker 2: you don't have any of.
• 17:32
  Speaker 3: The files that were stored to that local server.
• 17:35
  Speaker 2: And so what's the bigger risk Amazon being out for
• 17:38
  Speaker 2: a day or week or a month, or you're building
• 17:40
  Speaker 2: burning down, or thieves walking away with your physical server.
• 17:44
  Speaker 2: And generally the answer was the risk is bigger that
• 17:46
  Speaker 2: you're building burns down, and so you better go to
• 17:48
  Speaker 2: the cloud. And you're probably right. Maybe the pendulum starts
• 17:51
  Speaker 2: to swing in the other direction here. The more of
• 17:54
  Speaker 2: these that happen, we don't seem to have any insinuation,
• 17:57
  Speaker 2: by the way, that this was a attempted hack or
• 18:00
  Speaker 2: denial of service that could come out at a later
• 18:02
  Speaker 2: point in time. I would just say, you know, based
• 18:05
  Speaker 2: on previous events like this, I would consider it equally
• 18:08
  Speaker 2: likely that somebody punched the wrong number into the keyboard
• 18:11
  Speaker 2: into a series of code and took down entire string
• 18:13
  Speaker 2: of systems, similar to what happened in previous events. So
• 18:17
  Speaker 2: we will we will see what.
• 18:20
  Speaker 4: We Apparently it was a minor update from a domain
• 18:24
  Speaker 4: name system or a DNS or something, and one number
• 18:27
  Speaker 4: was in reading another number, and it just that's the
• 18:30
  Speaker 4: ripple effect that happened afterwards, Yeah, just a minor update.
• 18:33
  Speaker 2: Yeah, and again I think that speaks to I mean
• 18:37
  Speaker 2: two concerns that I have. One, why can one can
• 18:41
  Speaker 2: one bozo like me really screw up a massive update
• 18:45
  Speaker 2: like that and take down a third of the Internet.
• 18:49
  Speaker 2: That's pretty concerning if you are Amazon, because I would
• 18:52
  Speaker 2: assume you're going to be paying some money out to
• 18:54
  Speaker 2: your customers to take account for the screw up that
• 18:57
  Speaker 2: you had here. Two, why are we so concentrated with
• 19:02
  Speaker 2: three companies between Amazon, Microsoft and Google that accounts for
• 19:07
  Speaker 2: seventy percent of the cloud infrastructure that's out there?
• 19:10
  Speaker 5: Again, but we won't let Spirit it's a scale business.
• 19:13
  Speaker 2: We won't let Spirit Airlines and Jet Blue merge, but
• 19:15
  Speaker 2: we will allow these three to control the entirety of
• 19:18
  Speaker 2: the Internet. There's there's some fair questions to be answered
• 19:22
  Speaker 2: there quick break. When we come back, we'll be talking Argentina.
• 19:25
  Speaker 2: But first Wall Street Watches Next.
• 19:41
  Speaker 1: Like us on Facebook and follow us on Twitter at
• 19:44
  Speaker 1: TFE show. Breaking business news is always first right here
• 19:48
  Speaker 1: on the Financial Exchange Radio Network. Time now for Wall
• 19:53
  Speaker 1: Street Watch a complete look at what's moving market so
• 19:56
  Speaker 1: far today right here on the Financial Exchange Radio Network.
• 20:00
  Speaker 4: Markets Our mixed territory after yesterday's positive session as investors
• 20:05
  Speaker 4: sift through a fresh batch of third quarter earnings from
• 20:08
  Speaker 4: major names including General Motors, GE Aerospace, Coca Cola, and
• 20:13
  Speaker 4: many more, and now the Dow is up by three
• 20:16
  Speaker 4: tenths of one percent, or one hundred and forty four
• 20:18
  Speaker 4: points higher. SMP five hundred is down about a tenth
• 20:22
  Speaker 4: of a percent only six points, Nasdaq down by about
• 20:25
  Speaker 4: a third of a percent or seventy eight points lower,
• 20:28
  Speaker 4: Rustled two thousand down by half a percent, ten year
• 20:31
  Speaker 4: Treasure Reel down three basis points now and is at
• 20:35
  Speaker 4: three point nine five three percent, and crude oil is
• 20:39
  Speaker 4: mostly flat, edging higher training a fifty seven dollars and
• 20:42
  Speaker 4: fifty five cents a barrel. Before we get into earnings,
• 20:45
  Speaker 4: some breaking news in the media space this morning, after
• 20:48
  Speaker 4: several outlets are reporting that Warner Brothers Discovery initiated a
• 20:52
  Speaker 4: review of strategic alternatives in response to acquisition interest it
• 20:57
  Speaker 4: has received from multiple PARTIESBC is reporting that Netflix and
• 21:02
  Speaker 4: Comcast are among the interested parties. Warner Brothers stock is
• 21:06
  Speaker 4: jumping over nine percent on that news. Meanwhile, shares and
• 21:10
  Speaker 4: GM surging fourteen percent after the automaker posted a third
• 21:15
  Speaker 4: quarter earnings in revenue beat and raised its full year guidance.
• 21:19
  Speaker 4: The company's three point four billion dollars in operating income
• 21:22
  Speaker 4: adjusted for certain items, exceeded analyst estimates of two point
• 21:27
  Speaker 4: seven billion dollars. Meanwhile, Jet engine Company GE Aerospace handily
• 21:32
  Speaker 4: beat third quarter earnings in revenue forecast and also hiked
• 21:35
  Speaker 4: its full year outlook. Shares are currently up modestly. Elsewhere,
• 21:39
  Speaker 4: Coca Cola shares edging higher after the beverage and snack
• 21:42
  Speaker 4: Giant reported better than expected quarterly results as higher prices
• 21:46
  Speaker 4: helped lift sales. Regional bag Zion Bancorp reported higher quarterly
• 21:51
  Speaker 4: earnings despite the fifty million dollars charge off it disclosed
• 21:55
  Speaker 4: last week. Shares are up by about two percent. Philip
• 21:59
  Speaker 4: Morris lifted it's annual guidance as smokeless tobacco products continue
• 22:03
  Speaker 4: to drive growth. However, shares it down by over eight percent.
• 22:06
  Speaker 4: Now and after today's closing bell, we'll see more earnings
• 22:09
  Speaker 4: from Netflix, Capital One, Mattel, and Texas Instruments. I'm Tucker Silvan.
• 22:15
  Speaker 4: That is Wall Street watch Mark.
• 22:18
  Speaker 2: We have a couple stories about the deal with Argentina
• 22:22
  Speaker 2: that the United States is currently brokering and negotiating and
• 22:25
  Speaker 2: working with banks on and for folks that haven't been
• 22:30
  Speaker 2: following this closely, I feel like we should take a
• 22:32
  Speaker 2: pretty big step back here and talk about what's happened here.
• 22:36
  Speaker 2: So Javier Malay has been in charge of the President
• 22:39
  Speaker 2: of Argentina now for a year and a half two years,
• 22:43
  Speaker 2: and has enacted sweeping reforms to the country, slashing budgets
• 22:50
  Speaker 2: and really trying to get inflation under control. And initially
• 22:56
  Speaker 2: I think you did have some success on the inflation front,
• 22:59
  Speaker 2: but at the cost a lot of success, at the
• 23:01
  Speaker 2: cost of spending a lot of US dollars to maintain
• 23:04
  Speaker 2: the currency. So that's right, take a step back, I guess,
• 23:07
  Speaker 2: and you know, in relatively terms, describe to me what's
• 23:13
  Speaker 2: been happening over the course of the last couple of
• 23:16
  Speaker 2: years to the best your ability.
• 23:20
  Speaker 5: Currencies trade like any other asset. Sure dollars trade dollars
• 23:26
  Speaker 5: trade for euros and vice versa. The ratio of the
• 23:28
  Speaker 5: two prices is called the exchange rate. Uh So, in
• 23:33
  Speaker 5: the case of Argentina, they have a lot of debts
• 23:37
  Speaker 5: that are denominated that are record captain in dollars, so
• 23:41
  Speaker 5: they need dollars they get throws. They get those through exports. Uh,
• 23:45
  Speaker 5: this is due a lot of countries. We don't need dollars.
• 23:47
  Speaker 5: Of course, we can print them, Thank god, the dollars
• 23:50
  Speaker 5: the world's reserve currency. We can print what we need.
• 23:52
  Speaker 5: We can manipulate exchange rates, do what we need to.
• 23:55
  Speaker 3: Do to get them.
• 23:56
  Speaker 2: Argentina needs to get an export beef, yes, export, yeah,
• 23:59
  Speaker 2: it's really or you could get help from the US government,
• 24:02
  Speaker 2: which we've recently given them.
• 24:04
  Speaker 5: Their currency. By most currency trader and other analysts, reckoning
• 24:12
  Speaker 5: is overvalued to severely overvalued. It takes too few Argentine
• 24:17
  Speaker 5: pesos to buy a dollar. The reason for that is
• 24:20
  Speaker 5: that inflation has been running out of control in Argentina
• 24:23
  Speaker 5: for years. It's down rot yeah, yeah, for the last
• 24:27
  Speaker 5: roughly the last hundred years. Argentina is a sad case.
• 24:30
  Speaker 5: By the way, it went from having the same per
• 24:32
  Speaker 5: head income as the US about one hundred and twenty
• 24:35
  Speaker 5: years ago.
• 24:37
  Speaker 3: I e.
• 24:37
  Speaker 5: It was a rich country and it still is. It's
• 24:39
  Speaker 5: not a poor country, but it's not among the world's
• 24:43
  Speaker 5: leading countries in terms of per capita, that is, per
• 24:45
  Speaker 5: head income. So the bottom line just kind of cutting
• 24:48
  Speaker 5: to the chase here, in the interest of time. And
• 24:50
  Speaker 5: like you said, brevity, Argentina needs dollars so it can
• 24:54
  Speaker 5: maintain the value of the payso on foreign exchange market.
• 25:00
  Speaker 5: It's why does it want to do that, Because a
• 25:03
  Speaker 5: cheaper pays a payso which is worthless relative to the
• 25:08
  Speaker 5: dollar or whatever, imports inflation. So they're controlling the currency
• 25:12
  Speaker 5: to help control inflation. All these things are related. Currencies, inflation,
• 25:15
  Speaker 5: interest rates. You can't you can only control two of
• 25:18
  Speaker 5: those three things. It's it's the trilemma of international economics.
• 25:22
  Speaker 2: Now, Malay's party lost a big election stor This happens,
• 25:26
  Speaker 2: by the way, five every few years in Argentina.
• 25:28
  Speaker 5: A center right government like Malaise, who I personally like,
• 25:32
  Speaker 5: so I'm trying not to be by. He's a libertarian.
• 25:33
  Speaker 5: He wants to shrink government, he wants to cut taxes.
• 25:35
  Speaker 5: He's brought inflation down. He's been successful in many ways. Unfortunately,
• 25:40
  Speaker 5: successful Argentine center right governments are always up against the
• 25:44
  Speaker 5: clock because their reforms inflict pain on the economy.
• 25:49
  Speaker 2: This movie fire a bunch of government employees and tell
• 25:51
  Speaker 2: others that they can't work as much.
• 25:53
  Speaker 5: Yeah, and people get pissed off. Forgive me, but that's
• 25:56
  Speaker 5: what's happening there. And when they do, they vote the
• 25:59
  Speaker 5: center right government, whether it's Macri, his predecessor, center right
• 26:03
  Speaker 5: predecessor or him. I can't even think of the other guys.
• 26:06
  Speaker 5: But the history of Argentina is a museum of failed
• 26:10
  Speaker 5: center right governments that tried to do what Malay is doing,
• 26:13
  Speaker 5: but they ran out of time. Because voters tire of
• 26:17
  Speaker 5: the sacrifices, they vote in a left wing what they
• 26:19
  Speaker 5: call a paranist government. It's like us saying he's governing
• 26:23
  Speaker 5: like a Reaganite, or he's governing like a New Deal person.
• 26:26
  Speaker 5: They call their left wing populist government's peranist because of Parone.
• 26:31
  Speaker 5: Most people know Vita Parone. It's her husband that was
• 26:34
  Speaker 5: the authoritarian, progressive type.
• 26:37
  Speaker 3: Anyway, So here we stand right wrong.
• 26:39
  Speaker 5: We're in the investis a worry now that they're gonna
• 26:40
  Speaker 5: start printing money again, spending it like crazy, back to
• 26:43
  Speaker 5: the bad old days. That's why we gave them, effectively
• 26:46
  Speaker 5: loaned them, but we may not get it back. Twenty
• 26:48
  Speaker 5: billion dollars to prop up what's with currency. The United
• 26:50
  Speaker 5: States of America said to it, said to Argentina, we
• 26:54
  Speaker 5: will swap dollars for pay you need dollars, we'll take
• 26:57
  Speaker 5: some pesos. You can have twenty billion in you US dollars.
• 27:00
  Speaker 5: Give us the equivalent in paysos that's you know, like
• 27:03
  Speaker 5: fourteen hundred paysos two dollar. So we've got all these
• 27:06
  Speaker 5: paysos now in exchange for dollars. Argentina is going to
• 27:08
  Speaker 5: spend those dollars trying to defend its currency. They've got
• 27:11
  Speaker 5: an election coming up on the twenty sixth. If Malay's
• 27:15
  Speaker 5: coalition can perform better than expected, I think it's a
• 27:18
  Speaker 5: regional election, but it's a bell weather. If they can
• 27:20
  Speaker 5: perform better than expected, that may reassure investors Mike and
• 27:23
  Speaker 5: stop the run sure by speculators on the Payso but.
• 27:27
  Speaker 2: It seems pretty clear to me that there's some questions
• 27:29
  Speaker 2: as to whether the twenty billion dollars would get the
• 27:31
  Speaker 2: job done, because why else would the US Treasury be
• 27:36
  Speaker 2: getting all the big banks together to see if they
• 27:38
  Speaker 2: might be willing to come up with another twenty billings.
• 27:40
  Speaker 5: I mean, no, we're throwing good. This is going down
• 27:42
  Speaker 5: a hole here. Just the history again of Argentina is
• 27:45
  Speaker 5: one attempt at reform followed by a currency crisis followed
• 27:49
  Speaker 5: by a left wing parentist government coming to power. It's
• 27:52
  Speaker 5: one cycle after another. It's tragic, but it's probably inevitable.
• 27:59
  Speaker 5: To hope is we've given them enough to beat off
• 28:02
  Speaker 5: speculators until these elections on the twenty sixth, and then
• 28:05
  Speaker 5: if Malaise coalition to alt call it his coalition. These
• 28:08
  Speaker 5: people are somehow allied with them. I don't fully understand it.
• 28:11
  Speaker 5: Their parties down there are crazier than ours are. If
• 28:14
  Speaker 5: they do better than expected, that might reassure investors and
• 28:16
  Speaker 5: staunch the bleeding. But past couple of weeks PESO has
• 28:20
  Speaker 5: been under severe pressure again despite US assurances.
• 28:23
  Speaker 2: And look, I think the obvious question here mark beyond
• 28:28
  Speaker 2: all the will this be successful?
• 28:29
  Speaker 3: Will it not?
• 28:30
  Speaker 2: It's the why the hell is the United States involved
• 28:34
  Speaker 2: in loaning Argentina twenty billion dollars when realistically we have
• 28:39
  Speaker 2: very little in the way of geopolitical, economic, or other times.
• 28:42
  Speaker 5: So we did this for Mexico thirty years ago, and
• 28:44
  Speaker 5: it worked. Mexico absorbed at the time and does today
• 28:48
  Speaker 5: even more, ten percent of our imports of our exports.
• 28:51
  Speaker 5: So we had a direct economic interest in this stax ago.
• 28:54
  Speaker 5: We shareborder. You don't want lots of distressed people fleeing
• 28:59
  Speaker 5: Mexico if it comes a failed state or something that
• 29:01
  Speaker 5: was a real concern in nineteen ninety four. So we
• 29:04
  Speaker 5: use the so called exchange Stabilization Fund, the same fund
• 29:06
  Speaker 5: we're using today to help Mexico defend its currency, and
• 29:09
  Speaker 5: everything worked out. Europeans have done the same. They did
• 29:13
  Speaker 5: the same for the Greeks in twenty twelve. European Central
• 29:16
  Speaker 5: Bank famously did well, not the same, something very similar though.
• 29:19
  Speaker 5: The argument for Argentina, though Mike, is far weaker. They
• 29:22
  Speaker 5: absorb only a half a percent of our of our exports,
• 29:26
  Speaker 5: so we're hardly economically dependent on them, and obviously we
• 29:29
  Speaker 5: don't share a border with them.
• 29:31
  Speaker 2: Let's take a quick break when we come back. Another
• 29:35
  Speaker 2: piece this week about the economy apparently is great, yet
• 29:40
  Speaker 2: Americans feel like everything's falling apart.
• 29:42
  Speaker 3: We'll cover that next year.
• 29:43
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• 29:46
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• 29:49
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• 29:52
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• 30:03
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• 30:11
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• 30:23
  Speaker 3: Mark market Watch has that piece today.
• 30:24
  Speaker 2: If the economy's good, why do some Americans still feel
• 30:28
  Speaker 2: like everything is quote falling apart? I guess my answer
• 30:35
  Speaker 2: to that is because we are not, you know, some
• 30:39
  Speaker 2: homogeneous society where everybody is doing the exact same And obviously,
• 30:44
  Speaker 2: in any economy any time in history, there are those
• 30:47
  Speaker 2: that are doing extraordinarily well and those who are doing
• 30:50
  Speaker 2: extraordinarily poorly. Yep, and there's always going to be the case.
• 30:54
  Speaker 2: But I guess more importantly I want to ask the question,
• 30:58
  Speaker 2: is is there something here that's unique in twenty twenty
• 31:02
  Speaker 2: five that a larger share of Americans feel like things
• 31:06
  Speaker 2: are falling apart?
• 31:07
  Speaker 3: Is there evidence that.
• 31:11
  Speaker 2: More and more Americans are actually pessimistic about the state
• 31:14
  Speaker 2: of things today than at other times in the past.
• 31:18
  Speaker 2: I mean, I know I can point to things like
• 31:19
  Speaker 2: you Michigan and other surveys, but how would you answer that?
• 31:24
  Speaker 3: Go about answering that question? And that second question would
• 31:26
  Speaker 3: be does it matter?
• 31:28
  Speaker 5: So the first question is is their evidence.
• 31:30
  Speaker 3: Is that it is uniquely bad? Right now?
• 31:33
  Speaker 5: In terms of uniquely bad, it's tough to compare survey
• 31:36
  Speaker 5: responses to pass survey ressurances, so uniquely hard to say
• 31:41
  Speaker 5: bad for some cohorts for some groups. If you just
• 31:44
  Speaker 5: look at the survey data, which you've already said is weak,
• 31:48
  Speaker 5: some are reporting financial distress. Yeah, I'll take them at
• 31:52
  Speaker 5: their word. It is Is it different than it used
• 31:56
  Speaker 5: to be? Probably because in equality, no matter how you
• 31:59
  Speaker 5: want to measure that has grown. We've all seen the
• 32:01
  Speaker 5: famous I think Beave did the original chart on the
• 32:05
  Speaker 5: share of spending attributable to top earners. How it's grown
• 32:10
  Speaker 5: steadily over the past couple of decades. The wealth effect
• 32:13
  Speaker 5: of the stock market may have something to do with that,
• 32:16
  Speaker 5: and the FED. The Fed's obsession with keeping equity prices
• 32:20
  Speaker 5: up it is because it believes in the wealth effect,
• 32:21
  Speaker 5: and it believes it can use the stock market to
• 32:24
  Speaker 5: influence demand. The FED is probably partly to blame for that.
• 32:26
  Speaker 5: Do I have a better idea? Not necessarily. If the
• 32:28
  Speaker 5: alternatives letting the economy grow more slowly, maybe we all
• 32:32
  Speaker 5: be worse off. I have a gut response to that,
• 32:34
  Speaker 5: I don't like it, but I don't necessarily have a
• 32:36
  Speaker 5: better idea.
• 32:36
  Speaker 2: Let's assum I buy the premise that a larger share
• 32:39
  Speaker 2: of Americans in economy that, by all measurable effects that
• 32:44
  Speaker 2: we use at the FED and elsewhere, is a good
• 32:47
  Speaker 2: economy right, low unemployment, relatively low inflation. I think the
• 32:50
  Speaker 2: misery indexes around where we were in twenty sixteen. If
• 32:53
  Speaker 2: I buy the premise that more Americans are falling behind, though,
• 32:58
  Speaker 2: I have to assume it does eventually matter, but I
• 33:02
  Speaker 2: certainly don't see it showing up in any earnings or
• 33:05
  Speaker 2: stock market data.
• 33:08
  Speaker 5: I mean, maybe we're looking if your main concern is
• 33:11
  Speaker 5: how is the average earner doing? You wouldn't cite GDP.
• 33:14
  Speaker 5: We get data on median income, which is close to
• 33:18
  Speaker 5: the average, but not quite the same thing. Use that.
• 33:20
  Speaker 5: I mean, no one is forcing people who lament and
• 33:25
  Speaker 5: and criticize the widespread use of things like GDP and
• 33:31
  Speaker 5: other broad averages. They're just not using them for the
• 33:34
  Speaker 5: r It's like saying, my damn thermometer didn't tell me
• 33:36
  Speaker 5: I had cancer. Well, that's not really what it's for, dude.
• 33:40
  Speaker 5: I I guess at some point you would start running
• 33:43
  Speaker 5: a fever as your immune system win and overdrive. But
• 33:44
  Speaker 5: maybe so, maybe a bad example. I don't know, not
• 33:46
  Speaker 5: my area, but you know what I mean, we're using
• 33:48
  Speaker 5: these tools to solve the wrong problem. There are plenty
• 33:52
  Speaker 5: of measures out there, including some of those cited in
• 33:54
  Speaker 5: this article, that you can cite if your concern is
• 33:57
  Speaker 5: how does the sort of average wage earner or middling
• 34:01
  Speaker 5: net worth, which is most of us, feel about the economy.
• 34:04
  Speaker 2: Yeah, My main takeaway is that we might not be
• 34:07
  Speaker 2: able to see this showing up in any of the
• 34:10
  Speaker 2: immediate stock marketer spending data because of how well that
• 34:14
  Speaker 2: top level consumer is doing.
• 34:15
  Speaker 3: No nobody, but you don't really long.
• 34:18
  Speaker 2: For a society where wealth and income inequality is growing
• 34:24
  Speaker 2: to uncomfortable levels. That seems like it's unlikely to produce
• 34:27
  Speaker 2: stock market problems and very likely to produce societal problems
• 34:32
  Speaker 2: like wild swings in voting, popularly different voting groups, and all.
• 34:37
  Speaker 3: Sorts of No.
• 34:37
  Speaker 5: It's good, look, Mike, we're having societal problems. I mean,
• 34:41
  Speaker 5: we've had a populist revolution in this country in the
• 34:43
  Speaker 5: past ten years. You may love or hate what the
• 34:46
  Speaker 5: Trump or Biden administrations have done, but you cannot deny
• 34:48
  Speaker 5: that they're exercising, especially the Trump administration, unprecedented power in
• 34:53
  Speaker 5: the executive He's setting tariffs on a whim. He's shifting
• 34:56
  Speaker 5: spending around without and Congress hasn't been in session for
• 34:59
  Speaker 5: like Gouy knows how long he's allocating spending around. He's
• 35:02
  Speaker 5: building ballrooms in the White House. He's just sort of
• 35:04
  Speaker 5: governing like someone with all the power. You could say
• 35:07
  Speaker 5: you like that, you trust a judgment, or you don't.
• 35:09
  Speaker 5: But there has been a political revolution. It is the
• 35:12
  Speaker 5: result of probably probably is the result of growing inequality.
• 35:15
  Speaker 5: Things like free trade, although I would defend it have
• 35:18
  Speaker 5: played a role. We haven't managed the consequences of it,
• 35:20
  Speaker 5: probably very well. That is evident in the populist revolution,
• 35:24
  Speaker 5: and a rising stock market is not going to play
• 35:26
  Speaker 5: kate anybody.
• 35:28
  Speaker 4: The US Virgin Islands aren't just stunning, they're thriving and
• 35:31
  Speaker 4: continue to be one of the hottest spots for vacationers
• 35:34
  Speaker 4: in the Caribbean. New cruise port upgrades, better air connections,
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  Speaker 4: and a sharper focus on cultural experiences have put the
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  Speaker 4: Saint Thomas is your cruise hub known for duty free
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  Speaker 4: shopping in the world famous Megan's Bay. Saint John is
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  Speaker 4: pure escape with National Park hike, secluded beaches in tropical tranquility.
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  Speaker 4: Saint Croix brings the history with colonial archet texture, old
• 36:00
  Speaker 4: sugar mills and vibrant coral reefs. Visit one island or
• 36:05
  Speaker 4: all three and get plenty of pampering, undisturbed nature in
• 36:09
  Speaker 4: a vibe like no other, all jammed into one vacation
• 36:14
  Speaker 4: with easy travel from New England, no passport required and
• 36:17
  Speaker 4: no money to exchange. Paradise is closer than you think
• 36:22
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• 36:25
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• 36:29
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• 36:36
  Speaker 2: A bit of a big market, no, not a bit
• 36:39
  Speaker 2: of a big market move in commodities, likes which we
• 36:42
  Speaker 2: haven't seen quite some time. Silver currently off over seven
• 36:45
  Speaker 2: and a half percent, Gold off five and a half percent.
• 36:48
  Speaker 2: At one point, the silver drop was the biggest that
• 36:50
  Speaker 2: we've seen since twenty twenty one. I guess briefly here Mark,
• 36:56
  Speaker 2: what have most experts attributed the rise in commodities to
• 36:59
  Speaker 2: and what, if anything, does this rapid drop in a
• 37:02
  Speaker 2: single day insinuate about a reversal in that trend if
• 37:05
  Speaker 2: you can point to anything.
• 37:07
  Speaker 5: Well, focusing just on gold for a moment, because it
• 37:10
  Speaker 5: ties into some of the other macroeconomic and geo economic
• 37:16
  Speaker 5: I don't even know that that's a word, but any way, issues.
• 37:18
  Speaker 5: We've been talking about the explanations provided for gold, and
• 37:21
  Speaker 5: you should always question these because they always come after
• 37:22
  Speaker 5: the fact. People are worried about big deficits in developed
• 37:26
  Speaker 5: countries high debt. They're going to have to inflate that
• 37:29
  Speaker 5: debt away. That's the way it's always been resolved. This
• 37:32
  Speaker 5: is not good for the dollar or other traditional safe
• 37:35
  Speaker 5: assets or safe assets denominated record kept in US dollars
• 37:39
  Speaker 5: like US treasuries, So investors are looking for other safe
• 37:43
  Speaker 5: haven assets. Gold fits the bill, maybe some other precious metals,
• 37:47
  Speaker 5: a subset of the commodities group fits the bill, and
• 37:50
  Speaker 5: maybe that's helped pull up the entire commodities complex. That's
• 37:54
  Speaker 5: one explanation. Why is that all unraveling over the last
• 37:57
  Speaker 5: couple of days when none of the underlying factors have change.
• 38:00
  Speaker 2: Well, because clearly every developed nation has gotten much more
• 38:02
  Speaker 2: fiscally responsible today.
• 38:04
  Speaker 5: Yeah. None of the fundamentals, of course, changed.
• 38:06
  Speaker 2: Yeah, everything is the same on the ground, and yet
• 38:08
  Speaker 2: we're seeing some big price swings here quick break, A
• 38:11
  Speaker 2: lot more to cover in the second hour of the
• 38:14
  Speaker 2: Financial Exchange.
• 38:15
  Speaker 3: We will be right back, folks,