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Inflation is hotter than expected and that should be concerning · The Financial Exchange Show

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Speaker 1: donation today. This is the Financial Exchange with Chuck Zada
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Speaker 1: and Mike Armstraw cour.
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Speaker 2: Two here on the financial exchange in exchange, pardon me,
1:14
Speaker 2: let's start over again, our two here on the financial exchange. Chuck,
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Speaker 2: Mike and Tucker with you, and we're with you. During
1:21
Speaker 2: another leg down in a market selloff. So the Dow
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Speaker 2: was off five hundred and sixty five points, the S
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Speaker 2: and P's down ninety one, Nasdaq down three ninety six,
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Speaker 2: so all three major US indices off between one point
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Speaker 2: three and two point three percent at the moment. This
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Speaker 2: on the back of the more I look at it,
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Speaker 2: a sneaky bad PCE report today. So the Personal Consumption
1:43
Speaker 2: Expenditures Report, we get a few different pieces that come
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Speaker 2: out in it. The one that everyone was focused on
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Speaker 2: going into today was the PCE Price Index, basically the
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Speaker 2: Fed's measure of inflation, and it came in hotter than
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Speaker 2: expected at point four percent versus point three percent on
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Speaker 2: the core number. Specifically, the headline number was in line
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Speaker 2: at point three. So you'd say, okay, you know, if
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Speaker 2: this is the case, Okay, stocks are selling off based
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Speaker 2: on inflation fears. That's not what's happening. And the reason
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Speaker 2: that I can tell you that's not what's happening is
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Speaker 2: that if it were inflation fears, Mike, what happened to
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Speaker 2: bonds during twenty twenty two when people were nervous about inflation,
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Speaker 2: interest rates shot up, they went off, boon sold off,
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Speaker 2: yields went up. Today, yields are down. The tenure Treasury
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Speaker 2: is down nine basis points to four point two eight percent,
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Speaker 2: twenty year Treasury down eight and a half basis points.
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Speaker 2: One year Treasury down three point nine basis points. Whole
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Speaker 2: yield curve is seeing money flowing into it. That doesn't
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Speaker 2: happen if people were nervous about inflation. And so here's
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Speaker 2: the second part of this report that I think is
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Speaker 2: actually the one that is spooking the market. We also
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Speaker 2: get personal income and personal spending. How much did you make?
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Speaker 2: How much did you spend? Incomes came in just fine
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Speaker 2: point eight percent for the month compared to point four
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Speaker 2: percent expected. Okay, that's good. Incomes are up. Personal spending
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Speaker 2: came in point four percent for the month compared to
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Speaker 2: expectations of point five and last month was negative point three.
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Speaker 2: So spending in January dropped point three percent and then
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Speaker 2: rebounded point four basically getting it back to the same
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Speaker 2: place that it was.
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Speaker 3: But here's the kicker.
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Speaker 2: Those numbers are reported in nominal terms, meaning they're not
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Speaker 2: factoring in inflation. And so if you actually factor in
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Speaker 2: the inflation that's reported in the very same report, the
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Speaker 2: past two months came in at real consumer spending of
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Speaker 2: negative point twenty six.
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Speaker 4: Nine point twenty six.
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Speaker 2: In real terms, people are buying less. And so if
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Speaker 2: you look at this, you say, okay, I got people
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Speaker 2: buying less. I got all kinds of sentiment data that's
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Speaker 2: suggesting people are nervous. And this is data from February,
3:56
Speaker 2: before the market started freaking out about the possibility of
3:59
Speaker 2: tariffs and such that we're implemented in March. So my
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Speaker 2: read on this is the market is a little bit
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Speaker 2: freaked that, hey, maybe growth isn't as strong as we expected.
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Speaker 2: And as a result of this, By the way, the
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Speaker 2: other piece, and again this is not the be all
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Speaker 2: end all of you know, economic research, but the Atlanta
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Speaker 2: Fed runs a now cast called GDP. Now we reference
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Speaker 2: it quite a bit on this show, and it's basically
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Speaker 2: their estimation of where US growth is for the quarter
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Speaker 2: at this point through the quarter. So it's not a
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Speaker 2: projection of where it's going to be. It's saying, based
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Speaker 2: on the data we have, here's how fast we think
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Speaker 2: GDP growth has been this quarter. Its skewed down this
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Speaker 2: quarter because of a kind of weird thing related to
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Speaker 2: gold imports. I'm not going to get into it. If
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Speaker 2: you really want to read about you can go to
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Speaker 2: the GDP Now web page and they have a whole
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Speaker 2: little segment on it, stripping out the gold issue. Okay,
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Speaker 2: they are still now projecting that GDP four Q one
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Speaker 2: at this point is running negative at minus point five percent. Now,
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Speaker 2: we covered earlier this week. I think it was maybe Monday,
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Speaker 2: maybe Tuesday, who knows. Connor, sent from Bloomberg Opinion, said, Hey,
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Speaker 2: a lot of the stuff that is in this quarter
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Speaker 2: may be caused by, you know, bad weather. Everyone was
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Speaker 2: sick in February, who knows. You know a lot of
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Speaker 2: different things that could be weighing on this, so you
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Speaker 2: might see a bounce back Q in Q two.
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Speaker 5: Mike Santilli offered the same opinion. Just yes, it's not
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Speaker 5: just one person saying this.
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Speaker 4: He gave us that opinion directly that hey, you could
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Speaker 4: just be that, but this is.
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Speaker 2: The first sense that we've started to get on data
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Speaker 2: sets that matter that hey, maybe there is a little
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Speaker 2: bit of weakness that's starting to develop in some of
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Speaker 2: the hard data that's out there. It's still not pervasive,
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Speaker 2: it's not everywhere, but you're starting to see some stuff
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Speaker 2: developing where you're like, okay, like we prefer to not
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Speaker 2: see that continue. And as again Connor and Michael both discussed, hey,
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Speaker 2: there's a chance it doesn't. Q two could have a
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Speaker 2: very decent rebound if that stuff goes away. So this
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Speaker 2: is not a doom and gloom and you know this
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Speaker 2: is you know, imminent and there's no way out of it.
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Speaker 2: It's much more Okay, We're starting to see some stuff
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Speaker 2: and you need to see a recovery the next few months.
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Speaker 2: And this is why I'm pointing to Q two economic
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Speaker 2: data as some of the most important that we've seen
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Speaker 2: in the last you know, several years.
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Speaker 5: Here you can use this data to paint I think
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Speaker 5: one of two pictures. If you want to take the
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Speaker 5: pessimistic view, spending is dropping off. We're seeing that confirmed
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Speaker 5: in a few areas. Worries about the future are up.
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Speaker 5: People are telling you that they don't think they're going
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Speaker 5: to earn as much money. They're worried about losing their job,
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Speaker 5: they're worried about keeping up with prices. And the pessimistic
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Speaker 5: view would be that, combined with uncertainty from businesses around tariffs,
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Speaker 5: could lead to the recession that everybody's worried about, right
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Speaker 5: Whether it's sparked entirely by you know, tariff fears and
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Speaker 5: that on the business side, whether it's sparked more by
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Speaker 5: consumers pulling back spending. I would be more concerned about
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Speaker 5: the consumers pulling back spend, then you could have this
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Speaker 5: path towards recession. I think the other way what you
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Speaker 5: need to believe about this data to come to another
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Speaker 5: conclusion would be, Hey, we're getting a bunch of bad
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Speaker 5: data about January and February that's all based on illness
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Speaker 5: like Chuck talked about, and wildfires in California, and that
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Speaker 5: same data is going to bounce back when we start
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Speaker 5: getting the reads in March and April of this year,
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Speaker 5: and and the tariff stuff is being overblown. That's kind
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Speaker 5: of that's what you need to be processing in your
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Speaker 5: mind and believing fundamentally. If you're going to be kind
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Speaker 5: of bullish about this turnaround scenario right now, and I'm
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Speaker 5: here to say that like either as possible. You know,
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Speaker 5: I'm not convinced that the bad data that we got
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Speaker 5: in January and February is entirely.
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Speaker 4: Irreversible.
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Speaker 2: No, it's look, we've had bad runs of data for
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Speaker 2: a month or two previously, and you you know, the
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Speaker 2: economy gets itself back on the horse and says, Okay,
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Speaker 2: giddy up, let's go where we're going next. Like, we're
7:59
Speaker 2: gonna have to see what the data shows the next
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Speaker 2: few months, and we're gonna have more clarity by mid June,
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Speaker 2: fourth of July, somewhere in that range, we'll have a
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Speaker 2: pretty good sense of Hey, was this a one or
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Speaker 2: two month hiccup or is there something bigger afoot here.
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Speaker 5: In the meantime, you know, stocks are getting punished, as
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Speaker 5: we talked about, the SMP now with these losses today
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Speaker 5: is off about four and a half percent for the year.
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Speaker 5: That's from January one. The NASDAC, on the other hand,
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Speaker 5: off nearly ten percent from January one, and more if
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Speaker 5: you pick the highs on both of those indices.
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Speaker 2: Other things that are moving in markets we've talked about
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Speaker 2: stocks and bonds, oil prices falling half not half a percent,
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Speaker 2: fifty three cents today down to sixty nine thirty nine
8:38
Speaker 2: on West Texas Intermediate, the TRIPAA national average for gas
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Speaker 2: prices continuing to rise modestly as you get through that
8:46
Speaker 2: conversion over to summer blends up two tenths of ascent
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Speaker 2: overnight to three point fifteen and seven tenths. And we've
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Speaker 2: got gold today up fifteen dollars and twenty cents announce.
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Speaker 2: This is one area where I think you can look
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Speaker 2: at it and say, hey, the action in gold, combined
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Speaker 2: with stocks and bonds represents the potential for you know,
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Speaker 2: concern about stagflation where you've got stocks and bonds moving
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Speaker 2: in a way that is talking about the economy slowing,
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Speaker 2: gold moving the other direction, saying hey, if we don't
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Speaker 2: deal with this you know, inflation issue, you have the
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Speaker 2: potential for higher inflation during a time of you know,
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Speaker 2: economic weakening. I don't know that I entirely buy that
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Speaker 2: that's you know, a sustainable area that we end up in.
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Speaker 2: But I think that's what the market is saying today
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Speaker 2: is it's kind of nervous about everything, but mostly recession,
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Speaker 2: but mostly recession. Let's talk about egg price is something
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Speaker 2: that we can be less worried about right now. According
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Speaker 2: to the website Trading Economics, the price of eggs per
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Speaker 2: dozen is down to two ninety two right now, down
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Speaker 2: from five eighty one at the beginning of the year,
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Speaker 2: and so egg price is starting to come back. A
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Speaker 2: recent us DA egg marker report didn't know that existed.
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Speaker 2: You ever follow the egg marker report, Mike, Nope?
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Speaker 3: What about you? You follow on Twitter?
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Speaker 5: Sure?
10:12
Speaker 6: Yeah, Instagram?
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Speaker 3: Absolutely, they're on the gram.
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Speaker 4: Oh, I didn't know that.
10:16
Speaker 3: I didn't know that.
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Speaker 2: I bet, I bet egg Snapchat is wonderful these days.
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Speaker 2: Egg TikTok's even better, to.
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Speaker 5: Be honest, if you had told me that there was
10:25
Speaker 5: a thing called an egg marker, I probably wouldn't have
10:28
Speaker 5: guessed that it was a report from an.
10:31
Speaker 2: Okay this, I feel like this is probably a typo
10:35
Speaker 2: in this piece, and it's supposed to be egg market report.
10:38
Speaker 4: Ah, yeah, that makes more sense.
10:40
Speaker 3: It's probably a typo.
10:42
Speaker 4: Yeah, okay.
10:43
Speaker 5: Uh.
10:44
Speaker 2: The lack of editors in newsrooms these days is really
10:47
Speaker 2: a problem. I'll just take the time to say that
10:49
Speaker 2: because it's probably.
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Speaker 3: The egg market report, not a mark report. In any case.
10:55
Speaker 2: A recent us DA egg something report uh said that
10:59
Speaker 2: egg inventories have a increased and demands have eased slightly.
11:02
Speaker 2: And with no additional outbreaks of bird flu reported in March,
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Speaker 2: You've got flocks doing their flocking thing and just not dying.
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Speaker 2: They're just egging out right now. So that's going on there,
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Speaker 2: So good news on the egg front. Let's take a
11:21
Speaker 2: quick break. When we come back, we'll do trivia and
11:24
Speaker 2: then we'll ask the very polite question, how has how
11:28
Speaker 2: have you not lost.
11:28
Speaker 3: Your job to AI yet? It's coming up right after this.
11:32
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12:03
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12:54
Speaker 2: Mike, during the last segment, we asked the question, Hey,
12:58
Speaker 2: how come you haven't lost your job to AI? And
13:01
Speaker 2: the answer is because a I can't do. AI is
13:05
Speaker 2: really good at single tasking. Hey, write me a story
13:09
Speaker 2: about tacos. Mm hmm, okay, great, it's it's gonna do that.
13:14
Speaker 2: And however much detail you wanted to put in and
13:16
Speaker 2: indicate it can do that.
13:18
Speaker 5: It's not great at editing a news story to make
13:21
Speaker 5: sure that you get the USDA USDA Egg Market report
13:25
Speaker 5: instead of the egg Marker report, because it doesn't really
13:28
Speaker 5: have the context to know.
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Speaker 2: But the other thing is, like you know, anything that's
13:31
Speaker 2: kind of messy where you have to jump between different
13:34
Speaker 2: systems and different data streams.
13:35
Speaker 3: It can't really handle that right now. Yeah, and you know.
13:38
Speaker 2: Again we're still in the early days of this, so
13:40
Speaker 2: maybe that's something that happens. But how many of us
13:43
Speaker 2: have a job where it's just, hey, I'm gonna go
13:47
Speaker 2: and I do one thing all day and that's all
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Speaker 2: I do and I never have to, you know, do
13:52
Speaker 2: anything else. When I say one thing, I'm not saying,
13:55
Speaker 2: you know, oh, you're just you know, working at Starbucks
13:58
Speaker 2: making coffee, or you're just us processing insurance claims. I'm
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Speaker 2: saying when you go to process those insurance claims, you
14:05
Speaker 2: probably have phone conversations that you need to have with people.
14:09
Speaker 2: Then you also need to be able to read documents,
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Speaker 2: You need to be able to input data into a
14:15
Speaker 2: third system. You might have, you know, supervisors that you're
14:18
Speaker 2: talking to at the same time, and reports.
14:20
Speaker 3: That you need to produce.
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Speaker 2: Being able to pull all of that together is not
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Speaker 2: something that AI is capable of doing today.
14:28
Speaker 3: And so what we see is things.
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Speaker 2: That are really like single task and in particular, I
14:34
Speaker 2: think the places that are most threatened right now are
14:36
Speaker 2: the places that don't involve the places that are you know,
14:41
Speaker 2: focused on writing and or anything text related. That doesn't
14:45
Speaker 2: need a human touch to it, that you know, that
14:49
Speaker 2: talks about like emotions and how we feel and stuff
14:52
Speaker 2: that's like what it is to be human. Technical writing
14:54
Speaker 2: is an example if you're not familiar with what a
14:56
Speaker 2: technical writer is. They're the people who take what you're
15:00
Speaker 2: supposed to do in Microsoft Word and make it into
15:03
Speaker 2: the manual for what you're supposed to do. That kind
15:06
Speaker 2: of stuff can absolutely be done by AI right now.
15:10
Speaker 2: And if you're in basically what I'll say is like
15:14
Speaker 2: an unemotional form of writing job, probably not a great
15:21
Speaker 2: place to be.
15:21
Speaker 3: For the next five years.
15:22
Speaker 5: Let me give an example from our own industry, Chuck.
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Speaker 5: So sure, this is not a technology that I use
15:29
Speaker 5: or my company uses in our day to day work.
15:32
Speaker 5: But one of my first jobs working for a financial
15:36
Speaker 5: advisory firm, which is what I do or I'm not,
15:39
Speaker 5: you know, doing the radio show right now, was going
15:41
Speaker 5: around to meetings with people and taking notes for people
15:44
Speaker 5: that knew stuff better than I did. Right I was
15:47
Speaker 5: like twenty something years old and my job was to
15:50
Speaker 5: sit there, shut up, and take notes.
15:53
Speaker 3: Yes, that was all.
15:55
Speaker 5: Today, many financial advisors are using AI technology of one
15:59
Speaker 5: sort or another, where either it's joining a Zoom meeting
16:04
Speaker 5: as a virtual AI agent because a lot of meetings
16:08
Speaker 5: are obviously conducted via Zoom or it's a you know,
16:11
Speaker 5: it's a device that's actually listening in on a meeting
16:13
Speaker 5: that you are conducting in person, and it's transcribing the
16:17
Speaker 5: entire meeting as well as taking organized notes on this
16:21
Speaker 5: is what I need to do as a follow up,
16:23
Speaker 5: this is what I need to do a week from now,
16:26
Speaker 5: a month from now, a year from now, when it
16:27
Speaker 5: involves my relationship with that individual and the advice that
16:30
Speaker 5: I am providing them. It then takes that transcription, stores
16:34
Speaker 5: it for you, loads it right into your client relationship
16:37
Speaker 5: management system, sets you reminders for what you need to do,
16:41
Speaker 5: and like I said, that was kind of an entry
16:43
Speaker 5: level job that I personally performed twelve years ago in
16:47
Speaker 5: my career. That's where I think you are potentially, I'm
16:51
Speaker 5: not convinced yet, but potentially starting to see some of
16:53
Speaker 5: the effects of this, and go talk to you know,
16:56
Speaker 5: any of your friends or family that are graduating senior
17:00
Speaker 5: in college right now and looking to enter into the
17:03
Speaker 5: areas of investment, banking, insurance, commercial, real estate, financial planning,
17:07
Speaker 5: all of these types.
17:08
Speaker 4: Of career paths have a job like I just described.
17:11
Speaker 5: In them, and they're having a really tough time getting
17:13
Speaker 5: those jobs right now.
17:15
Speaker 4: Is that AI related?
17:16
Speaker 5: Is it something else related? Recession worries and just hiring
17:19
Speaker 5: freeze related. I don't have a perfect answer, but that's
17:22
Speaker 5: where I think you're starting to see it first.
17:25
Speaker 2: Yeah, I totally agree, And so we'll have to see
17:29
Speaker 2: how AI's abilities evolve over time. Because remember the stuff
17:35
Speaker 2: that's out today is built on the chips from a
17:38
Speaker 2: year or two ago. The new chips, the stuff from Nvidia,
17:42
Speaker 2: the Blackwell chips that they started delivering in Q four.
17:46
Speaker 2: The actual product from that is probably not showing up
17:49
Speaker 2: until I don't know, second half of this year. You know,
17:54
Speaker 2: it takes some time to actually know that you can
17:56
Speaker 2: do what you want to do with the capacity that
17:59
Speaker 2: you now have. So I think that this is something
18:01
Speaker 2: where again I admit that we may see, you know,
18:06
Speaker 2: some important evolutions here as we go. I mean, look
18:10
Speaker 2: just look at how computer's evolved over the last thirty
18:12
Speaker 2: forty years and what they can do now compared to
18:14
Speaker 2: what they used to be able to do in the eighties, right,
18:17
Speaker 2: But it takes time to get there and we're going
18:21
Speaker 2: to have.
18:21
Speaker 3: To see what the evolution is.
18:23
Speaker 2: And the other piece on this that I think we
18:25
Speaker 2: do have to be aware of is, you know, the
18:28
Speaker 2: this is something that is now non native technology to
18:33
Speaker 2: probably eighty percent of the workforce. I would say, if
18:36
Speaker 2: you're over thirty years old, this is something that is
18:41
Speaker 2: you know, kinda what It's what computers were to people
18:47
Speaker 2: in that demographic in the nineties, because it's a completely
18:50
Speaker 2: different way of potentially handling your workflow and doing things
18:54
Speaker 2: and understanding how to go about it. And so, you know,
18:57
Speaker 2: as someone who's not in that younger demo anymore, I
19:01
Speaker 2: also realized, Hey, there might be kids coming out who
19:03
Speaker 2: are twenty three, twenty four to twenty five that can
19:06
Speaker 2: use this stuff way better than I can. And being
19:09
Speaker 2: able to understand that and be humble enough to say, yeah,
19:12
Speaker 2: can you, you know, take the lead on this and.
19:15
Speaker 3: Go with it.
19:16
Speaker 2: That's something that I think we need to understand too.
19:18
Speaker 2: And I may be missing the boat on it just
19:20
Speaker 2: because I'm not plugged in enough to be able to
19:22
Speaker 2: know just how good these things can be. Let's take
19:25
Speaker 2: a quick break. Markets remain in negative territory. When we
19:28
Speaker 2: come back, we have the trivia answer and then we'll
19:33
Speaker 2: talk a little more AI right after this.
19:41
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19:46
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19:52
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20:04
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20:38
Speaker 6: Trivia question today was who are the other two presidents
20:41
Speaker 6: that previously served as General of the Army. That would
20:45
Speaker 6: be Washington and Grant. Eisenhower of course, was the other
20:49
Speaker 6: winner today of the brand new Financial Exchange Show t
20:52
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20:55
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20:59
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21:03
Speaker 2: Let's talk a little bit about AI and its impact
21:06
Speaker 2: on the job market. There's a great piece here from Bloomberg.
21:09
Speaker 2: It's titled Everyone's Gaming the job market with AI, and
21:14
Speaker 2: it's pretty much, uh so, whether you're talking about people
21:19
Speaker 2: building their you know, customized resumes for every opening based
21:23
Speaker 2: on AI, basically saying, hey.
21:24
Speaker 3: Here are the requirements.
21:25
Speaker 2: Build me, you know, a resume that uses my skills
21:28
Speaker 2: and makes them presentable for this employer to then maybe
21:32
Speaker 2: be selected by an artificial intelligence on the you know,
21:36
Speaker 2: employer side of things, because hey, we're getting so many
21:40
Speaker 2: resumes that we can't wead through them all manually, so
21:42
Speaker 2: we had to you know, go out and get an
21:44
Speaker 2: AI vendor to go figure out, you know, who we
21:46
Speaker 2: should actually interview. Everyone seems to be using AI to
21:50
Speaker 2: do this, and I think the question is are we
21:51
Speaker 2: actually ending up with better outcomes or not?
21:54
Speaker 5: Uh yeah, And specifically, one of the examples that was
21:57
Speaker 5: given more around the cheating converse was a test that
22:03
Speaker 5: many employers are seemingly giving out to people interviewing for
22:06
Speaker 5: coding jobs and it's basically you just have to go
22:10
Speaker 5: memorize how to code something. And you know, one Columbia
22:13
Speaker 5: student was just kind of annoyed with this whole thing, like,
22:16
Speaker 5: why would I have to memorize something in my real job?
22:18
Speaker 4: This seems this seems silly. So what he did was
22:20
Speaker 4: he built a bot.
22:21
Speaker 5: He built an AI bot that allows you to while
22:25
Speaker 5: you know, these things require you to be sharing your
22:27
Speaker 5: screen at the same time that the interview is being conducted,
22:29
Speaker 5: so you can't cheat. Well, he built a work around
22:32
Speaker 5: that allows you to use chat, GPT, search for the code,
22:36
Speaker 5: create the code, copy and paste it into the into
22:39
Speaker 5: the screen that you are, you know, being monitored on,
22:43
Speaker 5: and basically pass the tests very easily without actually the
22:48
Speaker 5: employer knowing. And so this individual says he now faces
22:52
Speaker 5: expulsion from Columbia, but has received multiple job offers from
22:56
Speaker 5: executives at tech firms looking to hire them based on
22:58
Speaker 5: the impressive code that he really So it comes back
23:02
Speaker 5: to a thing that we talked about Chuck a few
23:04
Speaker 5: weeks ago, I think when it came to students using
23:08
Speaker 5: AI for test taking and things along those lines, which
23:11
Speaker 5: is nobody's going to trust anything conducted over the internet anymore.
23:17
Speaker 5: You're going to get back to in person closed book
23:20
Speaker 5: tests written on Scantron's. You're going to get back to
23:24
Speaker 5: in person interviews, right, Like, if I am a tech
23:27
Speaker 5: executive hiring somebody for an interview for a high power job. Rather,
23:33
Speaker 5: I might be willing to use some of these tools
23:35
Speaker 5: like Zoom to conduct meetings initially, but I'm probably gonna
23:38
Speaker 5: fly the person out and conduct an interview in person
23:41
Speaker 5: to check the actual skill sets and personality of this
23:44
Speaker 5: person that could have been masked by AI.
23:47
Speaker 2: Right, it's going to be wild that one of the
23:49
Speaker 2: potential things that we get out of this is people
23:52
Speaker 2: becoming less reliant on computers because they need to have
23:55
Speaker 2: that personal trust again. Yeah, it's kind of one of
23:59
Speaker 2: these things that could go the opposite way of how
24:02
Speaker 2: people think it will.
24:03
Speaker 5: AI is not the only thing pushing us in this direction, right,
24:06
Speaker 5: it's AI. It's the number of financial scams that are
24:10
Speaker 5: just conducted on a day to day basis that I
24:12
Speaker 5: think is all of it to me at least, And
24:14
Speaker 5: I could be completely misreading this, maybe I'm wrong, but
24:17
Speaker 5: it seems to me that it's pushing people more and
24:20
Speaker 5: more to say I can't trust what I'm finding on
24:23
Speaker 5: my phone, in my email, over the internet. I need
24:27
Speaker 5: to conduct important types of tasks in person, with sources
24:33
Speaker 5: that I can see in front of my face.
24:35
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25:42
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25:51
Speaker 3: Mike, do you want to talk about Tim Cook going
25:53
Speaker 3: to China snacking.
25:55
Speaker 2: Or something else entirely or young Americans losing confidence in
25:59
Speaker 2: the economy.
26:00
Speaker 5: I have to choose from one of those. I want
26:03
Speaker 5: to go off the grid you did earlier. Mayor Wu
26:06
Speaker 5: in Boston is talking about expanding office to residential conversion
26:09
Speaker 5: and she wants to build dorm rooms, which, okay, this
26:14
Speaker 5: might sound crazy, This seems to me like a good idea.
26:17
Speaker 5: The problem with one of the problems, one of the
26:19
Speaker 5: many problems with office to residential conversion is that you
26:23
Speaker 5: need entirely way more plumbing. If you're going to build,
26:26
Speaker 5: you know, a thousand apartments in a big commercial office building, sure,
26:31
Speaker 5: and put in bathrooms in each of them.
26:33
Speaker 4: A dorm doesn't need that.
26:34
Speaker 5: It needs a few common area bathrooms and does not
26:38
Speaker 5: necessarily need a kitchen and bathroom in every single area,
26:41
Speaker 5: And so I think this could be a good idea.
26:44
Speaker 5: The problem that I see is who wants to buy
26:46
Speaker 5: dorm rooms?
26:48
Speaker 3: Well, what do you mean by dorm room.
26:50
Speaker 5: Let's say that a developer goes and builds this and
26:53
Speaker 5: goes and converts it from an office building and converts
26:56
Speaker 5: it into a dorm room. The obvious potential buyer of
26:59
Speaker 5: that problem pretty would be a university who doesn't pay taxes.
27:05
Speaker 5: And so I view that as a bit of a
27:07
Speaker 5: problem in this whole idea of Hey, these commercial office
27:11
Speaker 5: buildings aren't bringing in as much tax revenue as we
27:13
Speaker 5: need to.
27:14
Speaker 4: Hey, we're gonna convert them to dorms, which could.
27:17
Speaker 5: Be owned by universities who, as nonprofit entities, don't pay
27:20
Speaker 5: property taxes.
27:23
Speaker 2: I'm trying to just think think through this just to
27:26
Speaker 2: see how it sorts through. So one option is they
27:31
Speaker 2: could lease the space back to the university. Yep, university
27:34
Speaker 2: doesn't have to buy it, right, great, they don't have
27:36
Speaker 2: to do like a big capital campaign or something like that.
27:38
Speaker 3: So that's one option. Option two is.
27:45
Speaker 2: Kind of dystopian, which is like, hey, are you ready
27:49
Speaker 2: for communal living? You know, not really, I don't think
27:55
Speaker 2: that would go very well. No, no, but you know
27:59
Speaker 2: not college students living in areas with like centralized bathrooms
28:04
Speaker 2: probably strikes me as something that there's not a lot
28:06
Speaker 2: of demand for. So that's probably a dumb idea. I'm
28:08
Speaker 2: just hashing this out like as we're talking.
28:10
Speaker 4: So get the flip flops again.
28:12
Speaker 5: You know, Northeastern University does not own most of the
28:15
Speaker 5: apartments that their students rent to live in, so like
28:18
Speaker 5: that that's not a problem. But again, I feel like
28:21
Speaker 5: if you do convert it to dorms, then the natural
28:24
Speaker 5: progress there is that the university wants to own it.
28:26
Speaker 5: So unless you're going to say university is not allowed
28:29
Speaker 5: to own these dorms, then I think you're just going
28:32
Speaker 5: to kind of create a tax problem that you already have.
28:37
Speaker 2: Yeah, is, well, here's the question. There's two problems out there.
28:40
Speaker 2: One of them is related to tax revenue, the other
28:43
Speaker 2: is related to housing availability. Yeah, this can potentially help
28:46
Speaker 2: with the second one because even if like let's say
28:49
Speaker 2: that the college buys this and okay, they're not paying
28:52
Speaker 2: property tax on it. If that's the case, it still
28:56
Speaker 2: is moving college students who would otherwise take up other
28:59
Speaker 2: available housing inventory into new inventory that wasn't there before.
29:03
Speaker 4: Agreed, it's helping on that front.
29:05
Speaker 3: It solves that problem, but not the other.
29:07
Speaker 4: It might balloon. The other problem is part of my issue.
29:10
Speaker 2: Yeah, it definitely could. It's a real possibility. Just take
29:13
Speaker 2: a quick break when we come back.
29:15
Speaker 3: Paul Lamonica from Baron's joins us right after.
29:18
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29:51
Speaker 1: Ladies and gentlemen, the weekend.
29:59
Speaker 2: All right, I promise We're now joined by Paul Monica
30:02
Speaker 2: from Barons and we're going to talk about the terrific
30:07
Speaker 2: ten today.
30:08
Speaker 3: Paul, how are you im good?
30:10
Speaker 7: Thanks? How you doing?
30:11
Speaker 3: I'm doing well, Paul.
30:12
Speaker 2: Everyone's been all about the Magnificent seven for the last
30:15
Speaker 2: couple of years.
30:17
Speaker 3: What are the Terrific ten.
30:19
Speaker 7: Yeah, the Terrific ten are a group of Chinese tech
30:23
Speaker 7: stocks that might be better bargains and growth plays right
30:28
Speaker 7: now in light of what's happening in China's economy. Your
30:32
Speaker 7: Y Boone, a strategist at Newburger Berman in Hong Kong I,
30:38
Speaker 7: spoke to him about this group. He kind of coined
30:41
Speaker 7: the phrase, So you've got Ali Baba ten said by
30:47
Speaker 7: Do b whe E the electric car company. Those are
30:50
Speaker 7: some of the companies Shaomi, the electric car and phone company.
30:56
Speaker 7: Those are some of the companies that are part of
30:58
Speaker 7: this group that he's dubbed the Terrific ten that he
31:00
Speaker 7: thinks could benefit from the fact that there's you know,
31:04
Speaker 7: more bullish sentiment for Chinese tech in light of some
31:07
Speaker 7: of the stimulus that's coming from Beijing and also the
31:10
Speaker 7: Deep Seek phenomenon. Deep Seek really, I think reminded everyone
31:16
Speaker 7: that China is trying to innovate with some cheaper AI
31:19
Speaker 7: technology that could be you know, a competition to you know,
31:24
Speaker 7: chat ebt and a problem for Nvidia. So that's the
31:28
Speaker 7: kind of the thesis there.
31:30
Speaker 2: Well, two potential issues that come to mind when looking
31:34
Speaker 2: at this. The first is that Chinese markets as a
31:37
Speaker 2: whole have not generated really any kind of meaningful price
31:43
Speaker 2: return for investors in twenty years if you look at
31:47
Speaker 2: just like the big Chinese indices. Obviously this is a
31:50
Speaker 2: much smaller subset of companies. But how does one get
31:53
Speaker 2: past the fact that Chinese stocks in general haven't really
31:56
Speaker 2: performed very well for US investors for a couple decades.
31:59
Speaker 7: Now, Yeah, that's a great question, and I think that
32:03
Speaker 7: what an investor needs to consider here is that this
32:06
Speaker 7: is not necessarily a bet writ large on the Chinese
32:12
Speaker 7: economy and Chinese consumers, and that you may not necessarily
32:16
Speaker 7: want to be buying any ETFs that mirror say Hong
32:21
Speaker 7: Kong's Hang Sang Index or the Shanghai Composite. But if
32:25
Speaker 7: you look for pockets, there's you know, a Crane Shares
32:28
Speaker 7: CSI China Internet ETF for example, that holds many of
32:33
Speaker 7: the companies that I've been talking about. If you focus
32:37
Speaker 7: more on the China tech stocks that have been doing
32:41
Speaker 7: well this year, that's potentially where you know, investor could
32:45
Speaker 7: find some value as opposed to making a full blown
32:50
Speaker 7: wholesale bet on the Chinese economy and Chinese stock market.
32:54
Speaker 3: Second piece is okay, So let's say that we.
32:57
Speaker 2: Get past that and say, yeah, this is an airwor'
32:59
Speaker 2: sub set of companies. There still is the potential for
33:03
Speaker 2: significant disruption to business activity because of you know, different
33:08
Speaker 2: trade policies and so on and so forth.
33:11
Speaker 3: How does one navigate what that looks like on these.
33:14
Speaker 7: Yeah, another great question. Obviously you're referring to the tariffs
33:19
Speaker 7: that are likely kicking in barring some last minute change
33:24
Speaker 7: up your next week. China already subject to some tariffs,
33:28
Speaker 7: and you know, potentially more. I think what you really
33:32
Speaker 7: need to do is to try and find some of
33:36
Speaker 7: those companies that maybe don't have as much exposure to
33:41
Speaker 7: the US markets, that are not big exporters. So Ali
33:45
Speaker 7: Baba for example, you know, yes, that is a company
33:49
Speaker 7: that has some US presence, you know, primarily with its
33:53
Speaker 7: e commerce and cloud offerings, but by and large it's
33:56
Speaker 7: really more of a Chinese focused company. And you look also,
34:02
Speaker 7: you know BYD Group for the electric car company. Chinese
34:06
Speaker 7: electric cars aren't going to be coming to the US
34:09
Speaker 7: anytime soon, if ever. But I don't think you necessarily
34:14
Speaker 7: need for BYD to be a competitor with Tesla in
34:17
Speaker 7: America for it to be a solid investment as long
34:21
Speaker 7: as they continue to generate strong sales growth from the
34:26
Speaker 7: Chinese consumer, who may be more inclined to buy a
34:29
Speaker 7: domestic Chinese car over Elon Musk's Tesla, especially if there
34:34
Speaker 7: are retaliatory tariffs they'd come into place from Beijing, you know,
34:38
Speaker 7: in response to the US Trump tarifs.
34:42
Speaker 2: Very good, Paul, appreciate you joining us today. Thank you
34:45
Speaker 2: for the time, and I hope you have a great
34:48
Speaker 2: weekend watching a little college basketball.
34:51
Speaker 7: Yeah, definitely, it's been a fun tournament despite what my
34:54
Speaker 7: bracket would say, you and me both.
34:57
Speaker 2: That is Paul Lamanga talking a little bit about out
35:00
Speaker 2: the terrific ten Chinese stocks. And again, thank you Paul
35:06
Speaker 2: for the time. Mike, what do you got for me
35:08
Speaker 2: for stack Roulette?
35:09
Speaker 3: Here?
35:10
Speaker 5: What I have is new and inventive recession indicators. Young
35:15
Speaker 5: Americans are posting about them in kind of a joking
35:18
Speaker 5: fashion online of ones that we don't typically look at.
35:22
Speaker 5: There's been several that they've pointed to. One was price
35:25
Speaker 5: drops on used clothing on a platform called deep pop,
35:31
Speaker 5: which I am not at all familiar with. Others point
35:35
Speaker 5: to people learning to play harmonica or wearing brown clothing.
35:39
Speaker 5: I hadn't not familiar with those ones. I can see
35:42
Speaker 5: how used clothing prices going down would be a recession indicator.
35:46
Speaker 5: I don't know why playing the harmonica would be, but
35:49
Speaker 5: every generation has had these types of things. Warren Buffett
35:52
Speaker 5: famously has a recession indicator of men's underwear sales.
35:56
Speaker 4: Yes, one of my favorite out there.
35:58
Speaker 5: And his thesis here is like nobody can see it,
36:02
Speaker 5: and when men fall on hard times, they just don't
36:05
Speaker 5: buy new underwear. They just stick with the old, you
36:08
Speaker 5: know stuff where the elastic is starting to go. And
36:10
Speaker 5: so interestingly, have no idea what's caused the sell off.
36:14
Speaker 5: But I was taking a look at Haynes Brand's stock
36:17
Speaker 5: ticker symbol HBI, whose shares are down twenty eight percent
36:21
Speaker 5: this year. Can't tell you for of the Loom because
36:24
Speaker 5: Warren Buffett owns for of the Looms, so don't we
36:27
Speaker 5: don't get disclosed quarterly details on their sales.
36:30
Speaker 2: But yeah, wait, so you're telling me that Warren Buffett
36:35
Speaker 2: owns one of his indicators.
36:37
Speaker 5: Yes, yeah, he saw the proprietary He wants to go
36:41
Speaker 5: right to the source. Yeah, Yeah, he doesn't want anybody
36:44
Speaker 5: else getting those details on those men's underwear sales.
36:46
Speaker 2: Yeah, Buffett just he walks down to the Loom and
36:48
Speaker 2: he's like, guys, what are we looming today?
36:52
Speaker 5: Doesn't even really care how their sales are doing, whether
36:54
Speaker 5: or not they make any money. He's just very focused
36:57
Speaker 5: on whether or not we're in a recession today.
36:59
Speaker 2: I want to be the own only one who has
37:00
Speaker 2: access to the data from the Loom, send the Loom
37:04
Speaker 2: data to my office hour by hour.
37:07
Speaker 3: I could see that.
37:08
Speaker 2: Taking a look at markets as we had towards the
37:09
Speaker 2: bottom of the hour, no real movement from where we
37:13
Speaker 2: were at the top of the last hour. An hour ago,
37:19
Speaker 2: the DOW was off five hundred and thirty nine points,
37:21
Speaker 2: the SMP is down eighty seven, NASDAC down three eighty eight.
37:25
Speaker 2: So again, about a one and a quarter to two
37:27
Speaker 2: and a quarter percent sell off that is taking place
37:30
Speaker 2: across US equity markets and not really confined to any
37:36
Speaker 2: one particular area. You do have the most pain being
37:39
Speaker 2: experienced in tech, and yeah, I guess you could make
37:44
Speaker 2: a case. Look, healthcare and utilities are holding up better
37:46
Speaker 2: than the rest of the market. So again, kind of
37:49
Speaker 2: this defensive you know, recessionary posture that this market is
37:52
Speaker 2: taking today. But you've got an awful lot of stocks
37:56
Speaker 2: that are in the red. It is not concentrated in tech.
38:00
Speaker 2: Financials taking a hit, industrials taken a hit, energy, It's
38:07
Speaker 2: pretty widespread here. We are done for the day and
38:10
Speaker 2: for the week. I hope we all have a great
38:13
Speaker 2: weekend and we will see you back here on Monday
38:17
Speaker 2: for a busy, busy first week of April.