Latest / The Financial Exchange Show / Why Disney went from AI skeptic to OpenAI investor

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Why Disney went from AI skeptic to OpenAI investor · 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 Paul Lane.
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Speaker 2: Chuck Paul Tucker with you here, and as we kick
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Speaker 2: things off, things have gotten pretty gnarly out of there
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Speaker 2: in equity markets at least, the Dow off one hundred
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Speaker 2: and ninety seven points, not too bad, less than half percent,
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Speaker 2: but the S and P five hundred now down one
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Speaker 2: point one percent, about seventy six points. The Nasdaq is
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Speaker 2: off four hundred and seventy five points, down almost two
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Speaker 2: percent right now. This largely on the back of another
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Speaker 2: earnings report from an AI company, Broadcom, in this case yesterday,
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Speaker 2: where the quarter was totally fine for them, but just
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Speaker 2: some of the future guidance must have spooked markets a
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Speaker 2: little bit, and so broad Calm down eleven percent on
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Speaker 2: this news. Oracle, by the way, which was down ten
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Speaker 2: percent yesterday, falling through being down five percent today, so
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Speaker 2: has not been a good continuation for them as well.
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Speaker 2: Taking a look at the bondmark, the ten year US
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Speaker 2: Treasury up four point five basis points to four point
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Speaker 2: one to eighty six percent, Dollar Index up point one
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Speaker 2: one percent to ninety eight four fifty five, and we've
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Speaker 2: got gold up twelve forty announced to forty three twenty
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Speaker 2: five and forty cents crude oil West Texas Intermediate off
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Speaker 2: thirty four cents barrel down to fifty seven to twenty six.
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Speaker 2: And we've got gas prices sliding nationally again, down another
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Speaker 2: eight tenths of ascent to two ninety three and two
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Speaker 2: tenths of ascent. So gas price is continuing to fall
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Speaker 2: right as we are heading into the peak of the
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Speaker 2: holiday travel season. UH. Yesterday we covered the story that
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Speaker 2: Disney was going to be investing a billion dollars in
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Speaker 2: Open Ai and getting a three year licensing agreement from
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Speaker 2: open Ai UH in return for about two hundred and
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Speaker 2: so Disney characters to be able to be used in
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Speaker 2: video generation and on the platform. And we looked at
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Speaker 2: it and we were like, well, I looked at it
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Speaker 2: and I said, man, it sure feels like you're not
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Speaker 2: really protecting your intellectual property. There have been, you know,
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Speaker 2: a whole bunch of conversations about this over the last
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Speaker 2: day or so. But we've got a piece in the
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Speaker 2: Wall Street Journal. It's titled behind the Deal that took
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Speaker 2: Disney from AI Skeptic to Open Ai Investor. What does
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Speaker 2: it say about this deal, Well, basically what it talks.
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Speaker 3: About is Bob Iger, who is set to stay with
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Speaker 3: Disney through the end of twenty twenty six. Had developed
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Speaker 3: a relationship with Sam Altman from open Ai through an
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Speaker 3: introduction of Josh Kushner from Thrive Capital several years back,
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Speaker 3: and it seems like open Ai and Disney have been
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Speaker 3: having kind of ongoing chats as the years have progressed
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Speaker 3: on how to use some of this IP that Disney has,
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Speaker 3: And it appears as if Disney has sort of taken
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Speaker 3: its horse in the race in terms of our official
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Speaker 3: intelligence with a billion dollar equity investment, and conversely has
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Speaker 3: come out at Google pretty strong.
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Speaker 2: I do love this.
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Speaker 3: Yeah. I just say, we're gonna throw a billion bucks
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Speaker 3: into your biggest competitor, and then we're gonna make it
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Speaker 3: really hard on you and send our lawyers at you
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Speaker 3: to Google basically saying that you're using our copyright material
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Speaker 3: to train your AI systems and it violates copyrights. I mean,
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Speaker 3: there is going to be a slew of these lawsuits
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Speaker 3: over the course of the next few years across all IP,
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Speaker 3: whether it's Disney or any other studio that you can
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Speaker 3: think of, because these models are trained on this information
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Speaker 3: that's out there, and it's just going to be really
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Speaker 3: difficult if you're in the entertainment business to figure out
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Speaker 3: how to monetize your IP. I'm sure they'll get to it,
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Speaker 3: but there's gonna be a lot of lawsuits before.
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Speaker 2: We get there, can we all? I just want to
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Speaker 2: go through that timeline on this, just between Disney and Alphabet.
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Speaker 2: So like three weeks ago, Disney agrees to a deal
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Speaker 2: with Alphabet to get its channels back on YouTube TV.
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Speaker 2: Then they sign this licensing deal with Open AI, and
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Speaker 2: immediately after doing so sue Alphabet.
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Speaker 3: Shot across the ball.
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Speaker 2: It's just that you can see like exactly how they
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Speaker 2: were trying to play this, and I find it kind
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Speaker 2: of It's admirable in kind of a very distasteful sort
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Speaker 2: of way. But in any case, my continued problem here is, look,
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Speaker 2: Disney probably thinks it's trying to figure out some way
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Speaker 2: to ring, you know, some kind of money out of
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Speaker 2: its IP being used in all of these AI systems,
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Speaker 2: but ultimately, by participating voluntarily, they're still devaluing their own
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Speaker 2: IP in my in my opinion.
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Speaker 3: Because the SORO could create videos that may pick up
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Speaker 3: more traction than something Disney would create.
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Speaker 2: Basically, I could go and not even more traction. It's
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Speaker 2: just replicate. If I want to make my own Star
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Speaker 2: Wars fan fiction where Luke's you know, x Wing gets
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Speaker 2: shot down in the desk star you know wins, I
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Speaker 2: can do that now. I don't need Disney to give
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Speaker 2: me Star Wars content anymore. And I also then had
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Speaker 2: the realization where, look, if all AI is going to
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Speaker 2: be able to do is if the best thing it
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Speaker 2: can do is just make Mickey Mouse videos. Is it
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Speaker 2: really as transformative a technology as we hope it'll be.
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Speaker 2: I don't know, but again, these are thoughts that just
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Speaker 2: passed through my head. Just take a quick break. When
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Speaker 2: we return, we're gonna be joined by Mary Burke. She
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Speaker 2: is the principal economist and policy advisor with the New
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Speaker 2: England Public Policy Center in the Federal Reserve Bank of Boston.
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Speaker 2: Mary joins us right after this.
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Speaker 2: All right. As promised, we are now joined by Mary Burke,
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Speaker 2: who is a principal economist and policy advisor with the
7:38
Speaker 2: New England Public Policy Center in the Federal Reserve Bank
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Speaker 2: of Boston. She's an applied economist studying the economics of
7:45
Speaker 2: health behaviors and health outcomes, education, social norms, and the
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Speaker 2: gig economy. And Mary earned a BA in mathematics from
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Speaker 2: Brown University and both an M and PhD in economics
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Speaker 2: from Johns Hopkins University. And she gives regular briefings on
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Speaker 2: the New England economy to senior leaders with the Federal
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Speaker 2: Reserve System and also two public audiences. And she joins
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Speaker 2: us live now on the Financial Exchange. Mary, thanks for
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Speaker 2: joining us today. We appreciate it.
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Speaker 4: Thank you very much. Chuck.
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Speaker 2: First off, let's talk a little bit about the Beige Book,
8:19
Speaker 2: because this is something that we reference on our program
8:22
Speaker 2: whenever it comes out, and I think some of our
8:24
Speaker 2: listeners might say, gee, what is that? So what is
8:28
Speaker 2: the Bage Book and how does it help to inform
8:31
Speaker 2: the Fed's monetary policy making.
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Speaker 4: So the Beige Book is a Federal Reserve publication. It
8:38
Speaker 4: is released eight times per year and it has mostly
8:42
Speaker 4: qualitative information about each FED district's economy. So we report
8:47
Speaker 4: on regional conditions in each FED district and I lead
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Speaker 4: the team at the Boston Fed that produces the Beige
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Speaker 4: Book for the Boston Fed District. The Boston FED District
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Speaker 4: covers most of New England, with the exception of Fairfield County, Connecticut,
9:00
Speaker 4: which is part of the New York FEDS District. Okay,
9:03
Speaker 4: And we speak directly with business and non business contacts
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Speaker 4: and they tell us what's been happening in their business
9:09
Speaker 4: in recent weeks and re report on that in the
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Speaker 4: bag Book.
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Speaker 2: And the most recent one was published in late November.
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Speaker 2: And broadly speaking, what does it tell us about the
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Speaker 2: state of the New England economy today?
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Speaker 4: So what happened recently, say between mid October and late November,
9:27
Speaker 4: was that there was very slow growth in the New
9:30
Speaker 4: England economy, just a slight amount of economic expansion. So
9:34
Speaker 4: that's good, it's you know, it's better than the opposite, Sure,
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Speaker 4: but it was sluggish when.
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Speaker 2: You look at that. Was that distributed, you know, equally
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Speaker 2: across different areas or were there certain areas that were
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Speaker 2: slower or faster in the growth?
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Speaker 4: Yeah, there was some mixed results. So the strongest piece
9:51
Speaker 4: was residential home sales, which were up by a decent
9:54
Speaker 4: margin from the year earlier. Consumer spending was flat, so
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Speaker 4: that was kind of the we piece. But then say
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Speaker 4: manufacturing and non financial services and the other industries also
10:05
Speaker 4: at least a little bit of growth in there in
10:06
Speaker 4: their revenues and activity.
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Speaker 2: Sure. One of the major stories that we've been covering
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Speaker 2: throughout the last i'd say eighteen months or so is
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Speaker 2: the impact of artificial intelligence on hiring, and we've seen
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Speaker 2: different studies that have shown that AI may be holding
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Speaker 2: back entry level hiring. Do you have any information on
10:29
Speaker 2: this trend and specifically how it might be impacting recent
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Speaker 2: graduates looking for those entry level jobs in New England.
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Speaker 4: Yeah, So our evidence is anecdotal because we speak with
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Speaker 4: individual contacts, so we don't have hard data on this,
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Speaker 4: but we did hear that for at least some firms,
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Speaker 4: entry level hiring is being held back by AI. Because
10:52
Speaker 4: of increases in productivity, firms are feeling they don't need
10:55
Speaker 4: as many entry level employees, so they're just our fewer
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Speaker 4: jobs and this means it's taking a lot longer for
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Speaker 4: new college graduates to find a job. In some cases
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Speaker 4: they might have to take a job outside of their
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Speaker 4: field of study or not the job they had hoped
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Speaker 4: to get. So this is a challenging situation right now
11:13
Speaker 4: for new college grads. We're not sure exactly how much
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Speaker 4: of the week labor market for new grads is related
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Speaker 4: to AI, but anecdotally we know that some of it
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Speaker 4: is driven by that.
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Speaker 2: Is that happening in certain industries more than others at
11:27
Speaker 2: this point.
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Speaker 4: Again, our best evidence says it's concentrated in the tech industry.
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Speaker 4: It jobs, professional and business services, more white collar jobs.
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Speaker 2: One of the other things that's been a major topic
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Speaker 2: of discussion throughout the year is tariffs and tariff related concerns.
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Speaker 2: Do you see in the latest Bease book tariff related
11:49
Speaker 2: concerns continuing to show up and in particular how might
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Speaker 2: they be affecting the New England economy today?
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Speaker 4: So tariffs are definitely mentioned. They were mentioned a lot
12:01
Speaker 4: by contacts they've been mentioned for you know, throughout the year,
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Speaker 4: some said that sort of uncertainty related to tariffs went
12:09
Speaker 4: down a bit, but they're still showing up in terms
12:12
Speaker 4: of price increases. So some firms are having to mark
12:15
Speaker 4: up their prices to you know, cover the cost of
12:18
Speaker 4: their tariffs. Some firms have been holding back on that
12:21
Speaker 4: because of price sensitivity among consumers, but then they have
12:25
Speaker 4: to absorb those costs somehow, so this means they have
12:28
Speaker 4: to cut costs elsewhere. This has led to more cautious hiring.
12:31
Speaker 4: So part of the week hiring the week labor market
12:34
Speaker 4: is because of costs. Tariffs have driven up costs and
12:37
Speaker 4: firms are finding other ways to cut their costs.
12:41
Speaker 2: When when we talk about how businesses may shift their
12:45
Speaker 2: pricing in response to these type of things, I know
12:48
Speaker 2: that one such business that was covered in this report
12:51
Speaker 2: was a grocery store chain that said, Hey, generally we
12:55
Speaker 2: have some fairly modest pricing creases that we're seeing, but
13:00
Speaker 2: price of beef, we've got a mark up. Price of coffee,
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Speaker 2: we've got a mark up, cocoa, we've got a markup.
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Speaker 2: Are those tariff related? Are they related to the specific products, Like,
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Speaker 2: how do we untangle what's driving this.
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Speaker 4: Yeah, so tariffs were a factor in all three of
13:16
Speaker 4: those price increases, but I would say probably not the
13:20
Speaker 4: largest factor. So there's interesting stories around each one of
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Speaker 4: those commodities. With beef, the domestic herd size is the
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Speaker 4: lowest it's been in seventy years. This has to do
13:30
Speaker 4: with some drought, This has to do with costs going up,
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Speaker 4: and so herd sizes have been dwindling. But now we
13:38
Speaker 4: have a situation of very small herd sizes, strong demand.
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Speaker 4: It turns out related to these keto diets and paleo
13:44
Speaker 4: diets sure combined with tariffs on imported beef, means that
13:49
Speaker 4: the domestic beef is still relatively less expensive. So you
13:53
Speaker 4: have weak supply and strong demand, and that's a recipe
13:56
Speaker 4: for very high prices.
13:58
Speaker 2: What about on the coffee said, I'm not a coffee
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Speaker 2: drinker myself. Tucker here is, you know, he's oh yeah,
14:04
Speaker 2: he's been screaming about it.
14:05
Speaker 1: A lot of coffee.
14:06
Speaker 2: What's been going on in the coffee side.
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Speaker 4: Yeah, So coffee is also a combination. So climate change
14:11
Speaker 4: has played a role, So unpredictable weather patterns in the
14:15
Speaker 4: places that grow coffee have again hurt their yields. So
14:18
Speaker 4: again you have low yields that puts pressure upward pressure
14:21
Speaker 4: on prices. But then there's also been tariffs on coffee,
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Speaker 4: especially from Brazil. There were very high tariffs on Brazilian coffee.
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Speaker 4: Now there's multiple sources of coffee, but I also buy
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Speaker 4: very nice coffee beans, and I've noticed the price has
14:34
Speaker 4: definitely gone up significantly, and it can be not easy
14:38
Speaker 4: for to for these prices to come down if they
14:42
Speaker 4: are facing sort of longer term changes in weather patterns.
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Speaker 2: Coco, I gotta tell you on the you know, Halloween
14:49
Speaker 2: just passed. We just went through the candy season there.
14:52
Speaker 2: Now my daughters, you know, oh we got to you know,
14:54
Speaker 2: big brownies and cookies for Christmas. What's the situation with coco, Well.
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Speaker 4: Those prices similar to the coffe story. It's also weather,
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Speaker 4: unpredictable weather patterns related to climate change, droughts and then
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Speaker 4: excessive rain. And then another factor turns out illegal gold
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Speaker 4: mining is hurting the land used for cocoa cultivation. So
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Speaker 4: just a lot of factors pressuring the supply, as well
15:18
Speaker 4: as tariffs on important cocoa, and there's very few. It's
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Speaker 4: mainly Ghana and Ivory Coast, so there aren't a lot
15:23
Speaker 4: of other places you can go for your cocoa, so
15:27
Speaker 4: you know that's leading to upward pressure on those prices.
15:29
Speaker 2: Let's talk a little bit about real estate. I know
15:32
Speaker 2: we're heading into the quiet season for real estate right
15:34
Speaker 2: now for the next you know, two and a half months,
15:37
Speaker 2: But in terms of what we've been seeing in general,
15:40
Speaker 2: property is staying on the market a little bit longer.
15:43
Speaker 2: And even though the New England region still has seen
15:46
Speaker 2: price appreciation where other parts of the country have seen
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Speaker 2: falling prices, are we starting to get a sense that
15:53
Speaker 2: maybe there's a change of foot in the New England
15:56
Speaker 2: housing market and maybe it's starting to tilt more towards
15:58
Speaker 2: buyers or am I reading too much into that?
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Speaker 4: I think I think it's accurate that buyers are feeling
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Speaker 4: a little bit more like maybe have a little bit
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Speaker 4: more bargaining power right now. What we've been seeing for
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Speaker 4: the past several page book reports is that the inventory
16:14
Speaker 4: of homes up for sale has been growing, and that's
16:16
Speaker 4: been really important because the inventories have been historically low
16:20
Speaker 4: and that was part of the story of why prices
16:22
Speaker 4: were rising so fast in the region. So maybe buyers
16:26
Speaker 4: feel like they can hold out. They see more choice
16:29
Speaker 4: out there, and so they're holding out for a better deal. Also,
16:33
Speaker 4: mortgage rates came down a little bit, which helped with
16:36
Speaker 4: residential sales activity in the recent period. So prices i'd say,
16:41
Speaker 4: are kind of leveling out. But it's again going to
16:43
Speaker 4: be very market specific. I don't expect a huge change
16:48
Speaker 4: right now, but I you know, I think what you
16:50
Speaker 4: said is accurate in terms of a little bit more
16:52
Speaker 4: bargaining power for the buyers.
16:54
Speaker 2: And in terms of the impact on the regional economies.
16:58
Speaker 2: Is it safe to say that the New New England
17:00
Speaker 2: region is less dependent on new construction than other areas
17:05
Speaker 2: of the country for its growth.
17:08
Speaker 4: I would say we tend to have less construction than
17:10
Speaker 4: other areas, partly because of stricter zoning regulations and maybe
17:14
Speaker 4: less available new land left to develop than in say
17:18
Speaker 4: the West and the South. Construction is still a decent
17:23
Speaker 4: part of our economy, but yes, because we engage in
17:26
Speaker 4: less construction, that's been a smaller share than in some
17:30
Speaker 4: other parts. But if you ask people in the housing market,
17:33
Speaker 4: they'd say they would love to see like a construction
17:35
Speaker 4: boom because there's just hasn't been enough construction.
17:39
Speaker 2: Finally, last question, we've got about two minutes, the Beige Book.
17:43
Speaker 2: Everyone wants to know, is there a recession coming? It
17:47
Speaker 2: seems like people want to ask that question all the time.
17:49
Speaker 2: Can the Beige Book help predict when a recession's coming?
17:53
Speaker 4: So basically the answer to that is yes, no one can,
17:58
Speaker 4: but no one can predict a recession with certainty, so
18:00
Speaker 4: it's important to keep that mind, keep that in mind.
18:04
Speaker 4: I conducted some research together when Nathaniel Nelson, my colleague,
18:08
Speaker 4: and we were building on some research from the Cleveland
18:10
Speaker 4: Fad that basically fed Beige Book texts into a large
18:13
Speaker 4: language model to produce sentiment indexes. So like, you know,
18:17
Speaker 4: how are people feeling? You know, if you summarize the
18:19
Speaker 4: Beage Book, is it positive? Is it negative? And you
18:21
Speaker 4: can use those indexes quantitatively and relate them to recession probabilities.
18:27
Speaker 4: And it turns out that the Beage Book does a
18:29
Speaker 4: decent job. It's not one hundred percent accurate, but historically,
18:32
Speaker 4: if you look back, when sentiment is higher, the chance
18:35
Speaker 4: of a recession is lower. When sentiment is lower, the
18:38
Speaker 4: chance of a recession goes up. We've also related this
18:42
Speaker 4: to you know, a lot of people use financial indicators
18:45
Speaker 4: like a yield curve to predict recessions, and that's still
18:48
Speaker 4: really valid. But we did find the bage book can
18:50
Speaker 4: add a little bit more or slightly different type of
18:53
Speaker 4: information than you get from those financial indicators. I would
18:56
Speaker 4: add that these forecasts are very near term, so related
18:59
Speaker 4: to are we in a session right now or will
19:02
Speaker 4: we be in a recession the next three months, but
19:05
Speaker 4: any farther out from that, and then the basebook becomes
19:07
Speaker 4: less useful.
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Speaker 2: Very good, well, Mary, we appreciate you joining us today.
19:11
Speaker 2: Thank you so much for taking the time to chat
19:13
Speaker 2: with us.
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Speaker 4: Thank you, Chuck, it's been a pleasure again.
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Speaker 2: That is Mary Burke. She's a principal economist and policy
19:19
Speaker 2: advisor with the New England Public Policy Center in the
19:21
Speaker 2: Federal Reserve Bank of Boston. We're going to take a
19:25
Speaker 2: quick break right now, but when we return, we are
19:27
Speaker 2: Talking Ford and Lulu Lemon.
19:40
Speaker 1: Bringing the latest financial news straight to your radio. Every day.
19:44
Speaker 1: It's the Financial Exchange on the Financial Exchange Radio Network.
19:50
Speaker 1: Time now for Wall Street. Watch a complete look at
19:53
Speaker 1: what's moving market so far today right here on the
19:56
Speaker 1: Financial Exchange Radio Network.
19:59
Speaker 5: It looks like the tech selloff is accelerating right around
20:03
Speaker 5: midday here as traders react to more earnings from tech,
20:07
Speaker 5: including from Broadcom. We're actually impressed on their quarterly results.
20:10
Speaker 5: We also have major news coming out of the retail
20:13
Speaker 5: world right now. The Dow is down over half a percent,
20:16
Speaker 5: or two hundred and sixty one points, SMP five hundred
20:19
Speaker 5: now down one point three percent or eighty nine points lower,
20:24
Speaker 5: and the tech heavy Nasdaq selling off nearly two percent
20:27
Speaker 5: now or four hundred and fifty six points. RUSTED two
20:30
Speaker 5: thousands down one point two percent, and Oil is down
20:36
Speaker 5: about half a percent, rating a fifty seven dollars and
20:38
Speaker 5: thirty three cents a barrel. Broadcom dropping ten percent despite
20:42
Speaker 5: the chip maker beating earnings and revenue expectations driven by
20:46
Speaker 5: AI sales. The company also issued a strong forecast for
20:50
Speaker 5: the current quarter, expecting AI chip sales to double from
20:53
Speaker 5: a year earlier as AI demand remained strong. Meanwhile, IF Leisure,
20:57
Speaker 5: where retailer Lulu Lemon, announced CEO Calvin McDonald will step
21:01
Speaker 5: down in January. Lulu said its board is focus on
21:04
Speaker 5: identifying a leader with the track record of driving companies
21:08
Speaker 5: through periods of growth and transformation. To that guy, the
21:11
Speaker 5: company's next chapter of success, and several cannabis stocks are
21:16
Speaker 5: rallying following reports that President Trump is expected direct to
21:20
Speaker 5: direct his administration to move to reclassify marijuana as a
21:24
Speaker 5: less dangerous drug. Shares in both till Rey Brands and
21:28
Speaker 5: Canopy Growth are surging anywhere between thirty and thirty five
21:32
Speaker 5: percent at the moment. I'm Tucker Silva and that is
21:35
Speaker 5: Wall Street Watch, and we haven't done trivia yet, so
21:38
Speaker 5: let's get to it. On this day, nineteen eighty, Apple
21:41
Speaker 5: made its IPO on the stock market with shares priced
21:44
Speaker 5: at twenty two dollars. Many years after Apple's IPO, it
21:49
Speaker 5: was the first company to hit the one trillion dollar
21:52
Speaker 5: valuation mark. So triviy question today, what year did Apple
21:56
Speaker 5: become the first trillion dollar company? Once again? What year
22:00
Speaker 5: did Apple become the first trillion dollar company? Be the
22:04
Speaker 5: fourth person today at textas at six one seven three
22:06
Speaker 5: six two thirteen eighty five with the correct answer along
22:10
Speaker 5: with the keyword trivia, and you win a Financial Exchange
22:13
Speaker 5: Show t shirt once again. The fourth correct response to
22:16
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22:19
Speaker 5: thirteen eighty five with the correct answer and the keyword
22:21
Speaker 5: trivia will win that T shirt. See complete contest rules
22:25
Speaker 5: at Financial Exchange Show dot com.
22:27
Speaker 3: Pab you like skunks, yes, sir, No, you know not
22:31
Speaker 3: a Pepela pew fan. I like the throwback to Lockheed
22:35
Speaker 3: Martin there that they're thrown around here.
22:37
Speaker 2: It is so Ford, it has got there. They've got
22:41
Speaker 2: a secret team working at the Ford skunk Works. Do
22:45
Speaker 2: you know where that Lockheed Martin name came from? By
22:47
Speaker 2: the way, Oh jeez, I I do, but I've forgot.
22:52
Speaker 2: So nineteen forties, the US is trying to develop its
22:55
Speaker 2: first ever jet fighter. Yep, Lockheed Martin is working on this,
23:00
Speaker 2: and the factory that they were trying to build the
23:02
Speaker 2: thing in stunk like something, right, and so they called
23:07
Speaker 2: it the skunk Works because it smelled really bad there.
23:10
Speaker 2: So now everyone uses that whenever they have some secretive
23:13
Speaker 2: thing that they're designing. So Ford is trying to build
23:17
Speaker 2: like basically a new EV that's going to leapfrog everything
23:20
Speaker 2: that American automakers have done, and they're doing it in
23:24
Speaker 2: a secretive skunk works type of way. And the question
23:28
Speaker 2: is posed here by the New York Times, you know,
23:31
Speaker 2: is it too late? And I think the answer is, well,
23:34
Speaker 2: It depends what you guys.
23:36
Speaker 1: Make sure.
23:38
Speaker 3: It's an interesting story and very interesting how Ford can't
23:42
Speaker 3: even walk in the doors here, Chuck. Initially when I
23:44
Speaker 3: saw this piece, I was like, Oh, geez, Ford is
23:46
Speaker 3: gonna stumble and get in the way of this. But no,
23:48
Speaker 3: to the Skunkworks point, they are totally isolated off from
23:52
Speaker 3: any Ford leadership stepping in front of their doors. Internationally,
23:56
Speaker 3: it's going to be a tremendous uphill climb in order
23:59
Speaker 3: for them to get market share. As alluded to in
24:02
Speaker 3: the piece here in the New York Times, they are
24:04
Speaker 3: very concerned about the Chinese who have taken a significant
24:07
Speaker 3: market share internationally. Obviously, we don't have access here domestically
24:11
Speaker 3: to Chinese electric vehicles. So the opportunity in lies here
24:15
Speaker 3: and is really it seems to be a tremendous focus
24:19
Speaker 3: of the company and the Ford CEO, Jim Farley, mentions
24:23
Speaker 3: it several times here. But there is an opportunity here
24:27
Speaker 3: in the United States domestically. I just wonder how you're
24:30
Speaker 3: going to compete internationally, just because of how the Chinese
24:33
Speaker 3: government has subsidized that ev industry so much.
24:37
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24:40
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24:43
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24:46
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24:49
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25:45
Speaker 2: Today is that day each year where we cover Lululemon
25:49
Speaker 2: in a story and I go to their website and
25:51
Speaker 2: tell you how expensive all of their stuff is. And
25:54
Speaker 2: I found a seventy eight dollars T shirt in my.
25:58
Speaker 5: Travels seems reasonable.
26:00
Speaker 2: The other thing that I found. I'm on their site
26:03
Speaker 2: and I literally just clicked on like the men button
26:05
Speaker 2: and shirts. And I don't know how they did it,
26:09
Speaker 2: but like they've made all of their models look like mannequins,
26:13
Speaker 2: despite me being pretty sure that they're not, but like
26:16
Speaker 2: none none of them look alive for some reason. And
26:19
Speaker 2: I just feel like when you're an athleisure brand, you
26:23
Speaker 2: don't want to look like you're not alive when you're
26:26
Speaker 2: modeling the stuff. But somehow they've they've they've done it,
26:30
Speaker 2: and I don't really know what to make of that.
26:32
Speaker 2: But there's this piece in Bloomberg Opinion. It's titled making
26:34
Speaker 2: lolu Lemon cool Again will be a stretch, And yes,
26:37
Speaker 2: I do see what you did there, Bloomberg, But pretty
26:42
Speaker 2: much the problem here is twofold lou Lemon is built
26:47
Speaker 2: on the idea that the brand is cool, and they're
26:51
Speaker 2: built on the idea that because they're cool, they can
26:54
Speaker 2: command premium pricing. Thus, if you are not cool, you
26:58
Speaker 2: can't command premium ricing, and that becomes a problem for you.
27:03
Speaker 3: It it just shows how difficult of a business this
27:06
Speaker 3: is to execute and be successful in for a long
27:09
Speaker 3: period of time, because it's so hard. It's it's just
27:12
Speaker 3: it's got to be one of the most difficult businesses
27:15
Speaker 3: to start and scale. Well, beverages are probably up there too,
27:21
Speaker 3: But it's just something funny about that.
27:23
Speaker 5: No, No, I'm just browsing their website.
27:26
Speaker 2: Okay, don't don't there people not look real.
27:30
Speaker 5: It's not even that. It's just like, say, obviously it's
27:33
Speaker 5: you know what, customized for the holiday season. And there's
27:36
Speaker 5: a tab that says gifts under fifty dollars, and it's
27:40
Speaker 5: it's a single boxer brief for thirty eight dollars, three
27:44
Speaker 5: pack of socks for thirty eight dollars, a beanie for
27:47
Speaker 5: forty eight dollars, again under fifty dollars, and a freaking mug.
27:52
Speaker 2: That's it.
27:53
Speaker 5: Those are the get oh excuse me, and a belt
27:55
Speaker 5: bag if you need that, a belt bag. What So,
27:59
Speaker 5: these are the gimes you can fifty dollars from lulul
28:01
Speaker 5: You need a bag to carry your belts, that's right.
28:05
Speaker 3: They also have a dual poet.
28:07
Speaker 2: No, no, no, they.
28:07
Speaker 5: Also have a dual pouch wristlet. It's a fanny pack.
28:11
Speaker 5: They call it an everywhere belt bag.
28:13
Speaker 2: Oh okay, so it's not a bag that holds it.
28:15
Speaker 2: Should just call it a fanny pack. That's not fashionable.
28:18
Speaker 5: An everywhere belt bag a belt bag. But it's just like,
28:21
Speaker 5: that's the that's the problem with this company. Gifts under
28:24
Speaker 5: fifty dollars and it's like barely anything like that's the
28:27
Speaker 5: problem with the company.
28:28
Speaker 3: Well, I think it is. It does go makes too much.
28:30
Speaker 3: It goes back to checks point. It's too much if
28:33
Speaker 3: you're not the coolest brand out there. And the competitors
28:35
Speaker 3: have really made significant inroads against them are Viory and
28:40
Speaker 3: I guess Skims. With the Nike launch, it is probably
28:42
Speaker 3: an alo yoga alo yoga. I feel like I see
28:45
Speaker 3: everywhere now. I feel like that and Viory have sort
28:47
Speaker 3: of taken lu Lemon's place. It just, uh, retail and
28:52
Speaker 3: fashion is a is a tough game. And uh they
28:55
Speaker 3: were the king of Hill for a while.
28:57
Speaker 2: But uh, I mean they're still making like they're problems.
28:59
Speaker 2: Is it's like their sales and profits are just kind
29:02
Speaker 2: of flattening out. It's not like the company's collapsing. So
29:05
Speaker 2: I don't want to make it sound like nobody buys
29:07
Speaker 2: their stuff anymore, but the growth rate is just kind
29:11
Speaker 2: of tapping out. And I think it's also just look,
29:14
Speaker 2: there's a limited pool that you can captured that can
29:19
Speaker 2: afford to buy this stuff when you're talking about a
29:23
Speaker 2: seventy eight dollars T shirt, And.
29:27
Speaker 3: I will say I have some of the dress pants.
29:28
Speaker 3: They they are they are good quality, and they're a
29:32
Speaker 3: lot better than wearing the.
29:33
Speaker 5: Typical slash what's at the ABC pant or something, what's
29:36
Speaker 5: the popular one?
29:37
Speaker 2: Yes, is that it that is correct.
29:39
Speaker 3: But those were bought for me as gifts, just so
29:41
Speaker 3: that no one starts thrus shading.
29:43
Speaker 2: Sure they were stuffed with garlic for it was literally
29:47
Speaker 2: about to say it, let's take it coronious. Let's take
29:54
Speaker 2: a quick break here when we come back. Paul A
29:57
Speaker 2: Monica from Barons joins us after this.
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30:34
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30:50
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30:51
Speaker 3: We are joined by Paul Lamonica from Barons to talk
30:54
Speaker 3: a little bit about the housing market. Paul, thanks so
30:57
Speaker 3: much for joining us.
30:58
Speaker 2: Thank you, Paul.
30:59
Speaker 3: I love a great zag and I got to say
31:01
Speaker 3: here this piece falls into that category. Someone out there
31:05
Speaker 3: and you are that person, is saying that, hey, maybe
31:08
Speaker 3: housing could bounce back in twenty twenty six. Whatever commentary
31:12
Speaker 3: you look at out there, whether it was the Toll
31:14
Speaker 3: Brothers recent earnings reports that they're going to deliver less
31:17
Speaker 3: homes this year, there's just been a lot of negative sentiments.
31:19
Speaker 3: So give us some good news, some posmive sentiment on
31:22
Speaker 3: a Friday. What could turn this around?
31:24
Speaker 6: Yeah, I think we've had obviously the Federal Reserve cutting,
31:29
Speaker 6: interest rates and mortgage rates have come down, which in theories,
31:33
Speaker 6: should make your homes a little bit more affordable. Obviously,
31:36
Speaker 6: there are still concerns about you know, prices, but you know,
31:41
Speaker 6: you might have what redfinn is calling a normalization of
31:46
Speaker 6: prices going forward. So they're saying that next year could
31:48
Speaker 6: be the beginning of the great housing reset, which you know, again,
31:53
Speaker 6: this is not going to be a gangbuster's recovery like
31:58
Speaker 6: we saw you know, in the you know, mid two thousands,
32:02
Speaker 6: you know, and the earlier this decade when housing was
32:04
Speaker 6: in a much better shape. But it could be, as
32:07
Speaker 6: they call it, a year's long period of gradual increases
32:12
Speaker 6: in home sales, which wouldn't be the worst thing in
32:14
Speaker 6: the world to have a gradual, steady rebound. And I
32:19
Speaker 6: think that you know, the home builder stocks have been
32:21
Speaker 6: you know, beaten up enough that you could argue that
32:25
Speaker 6: they are you know, priced for that modest rebound and
32:29
Speaker 6: could do well next year.
32:30
Speaker 3: You mentioned that interest rates was one lever that could
32:33
Speaker 3: be pulled on to perhaps increase demand. What are some
32:36
Speaker 3: of the other levels that Washington, d C. Or or
32:39
Speaker 3: other areas of the housing market is looking to be
32:42
Speaker 3: pulled upon to perhaps kind of turn it around in
32:44
Speaker 3: twenty twenty six.
32:45
Speaker 6: Paul, Yeah, I think some of the stimulus that we
32:49
Speaker 6: already have coming into place, you know, from the you know,
32:54
Speaker 6: the one big beautiful bill, is you know, potential boost
33:00
Speaker 6: you know, there's talk of, you know, maybe tax credits
33:02
Speaker 6: for first time buyers, more incentives for home builders to
33:07
Speaker 6: try and build more and boost supply. I think that
33:12
Speaker 6: the President and the administration are you know, keen on
33:17
Speaker 6: trying to get housing back on track ahead of the
33:19
Speaker 6: mid term elections. Whether or not that works obviously remains
33:23
Speaker 6: to be seen, but you have to think that they
33:25
Speaker 6: are going to, as one of my sources said, throw
33:27
Speaker 6: the kitchen sink at the problem, because it's you know,
33:31
Speaker 6: not the worst thing in the world politically to have
33:33
Speaker 6: a stronger housing market heading into some key elections next novetter.
33:37
Speaker 3: In your research for this piece, Paul, what do you
33:39
Speaker 3: think would be the mortgage interest rate that would really
33:42
Speaker 3: get a lot of buyers back on the market. Is
33:45
Speaker 3: it breaking that five percent threshold? Even if it was
33:48
Speaker 3: in the high fives, that would potentially turn it around
33:51
Speaker 3: or maybe increase a little bit of activity. Obviously, there's
33:54
Speaker 3: still so many people out there, like myself luckily sitting
33:57
Speaker 3: in a position where you're three or sub three on
33:59
Speaker 3: a al you'r fix, and it just makes it hard
34:01
Speaker 3: for us to get up and move exactly.
34:05
Speaker 6: No, I think that is another part of the equation
34:09
Speaker 6: that doesn't get discussed as much is that there is
34:12
Speaker 6: less incentive for people that have a home already in
34:16
Speaker 6: are paying those lower mortgage rates to try and move
34:20
Speaker 6: and find a new house that they might want to
34:23
Speaker 6: purchase because those mortgage rates are going to be higher.
34:26
Speaker 6: I think though for time new first time buyers, below
34:30
Speaker 6: six probably is psychologically something that could seem a little
34:36
Speaker 6: more doable, coupled with the fact that you might see
34:42
Speaker 6: perspective sellers needing to cut prices, you know, going forward,
34:46
Speaker 6: and you know that might make homes more affordable as well.
34:50
Speaker 6: I mean, I think a lot of home buyers homeowners
34:54
Speaker 6: excuse me, are sitting on pretty decent gains, so that's
34:58
Speaker 6: helpful if they are looking to But you're right, you know,
35:02
Speaker 6: but then the question becomes, where do you move to,
35:05
Speaker 6: you know, and if you are looking to buy again,
35:07
Speaker 6: you're you're gonna have to have a higher mortgage than
35:09
Speaker 6: the one you're probably locked into right now.
35:12
Speaker 3: Paul Amonica from Baron's joining us to talk about the
35:15
Speaker 3: housing market. Paul, thanks so much for the time, and
35:17
Speaker 3: have a fantastic weekend.
35:18
Speaker 6: Thanks in to you guys.
35:20
Speaker 1: All right.
35:20
Speaker 5: Our trivia question in the previous segment was what year
35:23
Speaker 5: did Apple become the first trillion dollar company? Well, that
35:26
Speaker 5: would be twenty eighteen. Bill from Natick Mass is our
35:29
Speaker 5: winner today, taking home a Financial Exchange Show t shirt.
35:33
Speaker 5: Congrats to Bill and we play trivia every day here
35:35
Speaker 5: in the Financial Exchange See complete contest rules at Financial
35:39
Speaker 5: Exchange Show dot com.
35:41
Speaker 2: Okay, let's see what else do I want to cover
35:43
Speaker 2: before we finish up today. Don't want to talk about
35:47
Speaker 2: the Financial Times Person of the Year.
35:48
Speaker 5: Just what the market's doing right now.
35:51
Speaker 2: It's not doing anything good that great. It's bad. It's
35:55
Speaker 2: quite bad. So look, I gotta tell you stuff like
35:59
Speaker 2: this is is what gives me a little bit of
36:04
Speaker 2: Ajeta from time to time, and that you think about
36:07
Speaker 2: the last you know, few weeks. And in the tech space,
36:11
Speaker 2: in Vidia reported earnings, the earnings were good. Company got sold.
36:15
Speaker 2: The next day. Oracle reported earnings, earnings were good. Company
36:20
Speaker 2: got sold the next day. Broadcom reported earnings, earnings were good.
36:26
Speaker 2: Company got sold the next day. When companies report good
36:29
Speaker 2: news and they can't rally, it makes me perk up
36:32
Speaker 2: because that can potentially be a turning point in markets.
36:37
Speaker 2: And I don't know if this will or won't be again.
36:39
Speaker 2: This market's had a number of wobbles of you know,
36:42
Speaker 2: three to five percent this year and hasn't really moved
36:44
Speaker 2: anywhere negatively since early April. But I do pay attention
36:50
Speaker 2: in particular when market leadership starts having those wobbles, because
36:55
Speaker 2: I just don't know that you can have this thing,
36:57
Speaker 2: you know, be strong next year on the backs of
37:01
Speaker 2: like regional banks and industrial companies.
37:05
Speaker 3: No, it's it's kind of a one trick pony the
37:08
Speaker 3: market spend, so it's gonna have to be. It feels
37:10
Speaker 3: like technological advancements or strong earnings growth from companies using
37:16
Speaker 3: artificial intelligence that would kind of get it to turn around.
37:20
Speaker 3: Because it seems like Nvidia's blowing the cover off the
37:22
Speaker 3: ball in terms of its core dilemmas, and it's yeah,
37:24
Speaker 3: it's not enough to do it.
37:25
Speaker 2: So I think that again, this is setting up for
37:28
Speaker 2: in my opinion, twenty twenty six and twenty seven they
37:31
Speaker 2: are going to be the prove it years for AI. Hey,
37:34
Speaker 2: you've done the build out, you've spent all the money.
37:37
Speaker 2: Now are you gonna actually get the revenue and figure
37:40
Speaker 2: out how to make that revenue profitable? And if you can't,
37:43
Speaker 2: then we're gonna have to start canceling orders for all
37:45
Speaker 2: those in vidio chips and all that capex that we've
37:47
Speaker 2: planned for future years. If you can, great, the party
37:51
Speaker 2: can keep going. I don't I don't have a dog
37:53
Speaker 2: in the fight. I don't know which way it's gonna go.
37:55
Speaker 2: We had these questions heading into this year, and they
37:58
Speaker 2: answered it with Okay, we can all to all these
38:00
Speaker 2: Middle Eastern customers, and we can, you know, do this.
38:04
Speaker 2: How are you gonna answer those questions next year? I
38:06
Speaker 2: don't know, but this is the setup. So markets remain
38:10
Speaker 2: sharply negative now, dowz off about three quarters of a percent,
38:13
Speaker 2: SMP down one and a third, Nasdaq off more than
38:15
Speaker 2: two percent. Hope you all have a great weekend. We're
38:19
Speaker 2: gonna see you on Monday. We got a jobs report Tuesday.
38:22
Speaker 2: Get excited for it. We'll see you a day before then.