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Are markets fundamentally broken? · The Financial Exchange Show

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Speaker 5: Our two kicking off on the Financial Exchange today, and
1:46
we got stocks doing a whole bunch of nothing overall.
1:49
Speaker 1: The Dow's off forty.
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Speaker 5: Six points a tenth of a percent, the S and
1:52
P's down nine points about point one five percent, Nazdack's
1:57
down thirty three points point one seven percent, so and
2:00
like mild little dip kind of what we've been seeing
2:04
for the last couple of days here, you know, after
2:06
all of the uh excitement in the second half of
2:09
last week, where the S and P five hundred intra
2:12
day touched north of six thousand. I believe that was
2:15
on actually I think it might have been on Friday
2:17
and on Monday of this week. We've just kind of slid,
2:21
you know, maybe two thirds of a percent from that
2:23
intra day high. Now not really a convincing downward move,
2:27
but not really anything that is a continuation either, and
2:32
so we're just kind of hanging out with a little
2:34
bit of downward drift. The tenure US Treasury down two
2:38
and a half basis points to four point four to
2:40
two six percent, and we've got oil today up thirty
2:45
seven cents a barrel to sixty eight eighty triple a
2:48
national average for gas prices that is flat today, no
2:54
change still at three oh eight and four tenths of
2:56
a cent, and we've got gold down another eleven and
3:00
fifty cents nownce to twenty five seventy five. Gold has
3:03
basically been I believe the official term is plummeting for
3:09
the last week or so. It's basically been doing the
3:14
uh well kind of the inverse of bitcoin, which is
3:17
interesting given that bitcoin is often referred to as digital gold.
3:20
Speaker 1: Did you see what I did there Michael, who refers
3:23
to bitcoin as digital gold. A bunch of people. I
3:27
don't know, like some some people do, Okay, I'll buy it.
3:30
Speaker 6: Yeah, i'll buy it.
3:31
Speaker 1: I'm not one of them.
3:32
Speaker 7: Not buy the cryptocurrency. I'll buy that. People actually say that, Yes,
3:38
just to clarify that.
3:40
Speaker 5: Yes, let's talk about something else that you might either
3:43
buy or not. David Einhorn, who runs green Light Capital.
3:46
They are a hedge fund, and I guess he's often
3:50
been clearly very you know, very.
3:55
Speaker 1: Into the Great Gatsby.
3:57
Speaker 5: That's where the hedge fund name comes from, not from hey,
3:59
green means oh, but you know the green Light of
4:01
Great Gatsby. Uh. He is uh saying, hey, look, I
4:07
think markets are still broken and quote it's going to
4:13
get worse. We are in a secular destruction of the
4:16
professional asset management community. The passive people point to get
4:20
people who just buy the index. They don't care what
4:23
the value is. Your thoughts, Mike, So some of.
4:29
Speaker 6: This is sour grapes. Let's just be really clear.
4:32
Speaker 7: I think a lot of it is that A good
4:34
chunk of this is sour grapes. Now, does he have
4:38
a point that investors today seemingly do not care about value,
4:45
meaning the price I'm paying compared to the profits that
4:49
are being generated by companies are investing based on other thesies. Yes,
4:53
My point though would be I'm not sure average investors
4:56
ever cared about value. They always care about returns. And
5:03
the evidence at least over the last few decades has
5:06
been very, very clear that if you want to produce
5:10
better returns, the best way possible to do that is
5:13
cutting costs, and thereby index funds have succeeded. And so
5:16
I don't think it's a conscious choice on the behalf
5:18
of investors saying I don't care about value anymore. I
5:21
think it is a logical move towards a different type
5:25
of product that doesn't care about value. And I think
5:30
I talk about this a lot, but ultimately, whenever anyone
5:34
is buying anything, whether it is an asset or a product,
5:40
and in this case, like owning stocks, is kind of both,
5:43
it's an asset and a product. Ultimately there is a
5:49
story that is getting you to make that decision, the
5:53
idea of value. Remember it until like Warren Buffett and
5:57
you know, Benjamin Graham and all those like, until all
5:59
those guys came mountain like made value investing.
6:01
Speaker 1: A thing no one cared about it.
6:04
Speaker 5: Sure, it was like the reason people bought stocks in
6:08
the nineteen twenties before the Great Depression wasn't because there
6:14
were a bunch of people sitting around in three piece
6:16
suits and Fedora's going, well, Jimmy, you know what, we
6:21
got great value on steel companies these days, and look
6:24
at look at the value that we got on railroads.
6:27
I mean, golly, g Wilker is like Pennsylvania Railroad. Like sure,
6:31
like it exists in monopoly, but it also exists in
6:34
real life.
6:34
Speaker 1: Let's buy that.
6:36
Speaker 5: That's not how people bought stocks like for most of
6:40
the time that they've existed in human history. That's just
6:43
not what they did. It's always telling a story that
6:46
gets people to buy. And the fact that people aren't
6:50
paying attention to the value story right now again, this
6:54
is another case of Hey, what's permanent and what's temporary.
6:59
Do we think that this is a permanent shift where
7:01
people just are not going to care about the valuation
7:03
of stocks forever.
7:05
Speaker 7: No, No, I think we could be experiencing a longer
7:10
term shift towards index investing that could be more of
7:14
a longer term, permanent thing.
7:16
Speaker 6: And you know, I still don't really fully.
7:18
Speaker 7: Understand the impact of four oh one k is replacing
7:23
pensions where people pretty much blindly put money into index.
7:27
Speaker 6: Funds without really any consideration towards value.
7:30
Speaker 7: But that doesn't mean that there will never be any
7:35
return to value investing.
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Speaker 5: Well, I think that there's something else that's getting lost
7:40
here though, when we're talking about this, and that's that
7:44
when we look at the correlation amongst stocks in the
7:49
S and P five hundred right now, and I always
7:52
saw the statistic this morning, So this is the only
7:56
reason that this is even top of mind for me.
7:58
And if you want this site for it is a
8:03
It's a guy by the name of Dean Kernat who
8:05
runs a Twitter account called Alpha x llc. Like it's
8:09
publicly available account. He's no genius or anything, but again,
8:13
I follow a lot of people online who aren't geniuses,
8:16
and I'm just gonna quote something from him. There currently
8:20
one year realized correlation in the S and P five hundred,
8:24
basically like how are all of its members correlating? Like
8:27
how does one stock moving correlate to the others? Is
8:30
eleven point eight percent? Now, anyone listening is like Chuck,
8:33
what the heck does that mean? What is what does
8:35
one year realized correlation mean? The next sentence gets at
8:39
it basically a record low, and so what this means
8:46
Like as a comparison point, Mike, do you remember in
8:49
early twenty twenty one, like basically the one year coming
8:52
out of the pandemic dip where like everything went up? Yes,
8:57
I do realize correlation during that time was fifty percent,
9:01
basically saying everything's moving up, right, not everything, but like
9:05
things were moving up pretty consistently. Realize correlation right now
9:09
is eleven point eight percent, basically a record low, which
9:12
means yea, I'm gonna close the circle. It means that
9:17
stocks are not moving in line as if hey, this
9:21
is just passive flows moving everything in one direction at
9:25
the same time.
9:26
Speaker 6: People are choosing.
9:27
Speaker 5: In fact, this year twenty twenty four is probably one
9:32
of the best markets for stock pickers in history because
9:36
if you're good at it.
9:38
Speaker 1: I'm not saying that I am.
9:39
Speaker 5: I'm saying if you're good at it, man, there is
9:44
so much dispersion in how stocks are moving that you
9:47
have the opportunity to find different things moving in different
9:51
ways and build a portfolio that does exactly.
9:54
Speaker 1: What you want it to do.
9:55
Speaker 5: So for Einhorn to come out and say, hey, passive
9:59
is ruining it because no one cares about price this year,
10:03
the actual market statistics are saying the exact opposite of that,
10:09
and that's what's important to me.
10:11
Speaker 7: Yeah, passive isn't causing Passive investing isn't causing this. In fact,
10:17
what's what's causing the market this year is investor is
10:20
making choice. They just appear to not be making choice
10:23
based on the beliefs of value investing, where hey, you
10:27
should be looking at cheap companies that have growth potential
10:31
or undervalued companies. No, they've been actively choosing some of
10:35
the most expensive companies in history.
10:37
Speaker 5: And it's because the value story isn't working right now.
10:41
And when we talk about stories in investing twenty twenty two,
10:46
the story of SPACs and EV companies, Remember how they
10:50
were just rocketing through the roof. I do people were
10:54
buying that story. What happened, Hey, those companies eventually figured
10:58
out we can't make money on this stuff. And how
11:01
many of those SPACs and EV companies went completely belly
11:04
up many a ton and the story broke. Same thing
11:08
with streaming companies. You remember all the hype about all
11:10
the streamers and everyone wanted to launch a streaming business,
11:13
like Walmart was talking about launching one. Well, you know what,
11:17
the streaming businesses are broken right now. You got companies
11:20
talking about spinning off streaming units. Disney's finally figuring out
11:24
how to make some money from theirs, but it's taken
11:26
five years to get to that point, even with their catalog.
11:30
Speaker 1: That story broke.
11:32
Speaker 5: The story that's been driving markets, not markets as a whole,
11:35
but that that was a key driver for the last
11:37
two years has been AI. Will the AI story break
11:41
at some point? Every story always does. The value one
11:46
did for for decades, value investing outperformed growth, and that
11:50
story broke. Now figuring out when investor preferences are going
11:55
to change and when the story breaks, well that's the
11:58
job of an investment man like that. That is the
12:02
job is figuring out when you're at turning points and
12:04
you need to do something, something new. But ultimately, the
12:09
AI story is gonna break at some point, because we're
12:12
not at the end of History.
12:16
Speaker 7: Doesn't just end with any well, it's been there's been
12:19
a few science fiction movies that actually indicate that that
12:23
AI is the end of the history, but there's been no.
12:25
Speaker 1: Science fact movies.
12:27
Speaker 6: True.
12:27
Speaker 1: Yeah, I just I point that out.
12:30
Speaker 5: So look, I'm not I'm not professing to have any
12:34
you know, unique knowledge about this. But ultimately, the reason
12:38
that anyone invests in anything is because there's a story
12:41
that's propelling it higher. But at some point that story
12:44
breaks on everything, and it might break for a week,
12:48
a month, a year, or forever. You know, the tech bubble,
12:51
there were plenty of companies that broken and they couldn't
12:54
get out of it because they went bankrupt. Amazon just
12:57
lost ninety eight percent, and hey managed to come back
13:01
and be one of like the five most valuable companies
13:03
on Earth. But even the Amazon tech bubble story broke,
13:06
and somehow Jeff Bezo's got it back to you know,
13:08
even higher heights. So this, I think from Einhorn, it's
13:13
a lot of sour grapes, quite honestly, And I'm not
13:16
saying that I know better than him, but I am saying, hey,
13:20
just because the story isn't working today.
13:23
Speaker 1: Doesn't mean it what worked tomorrow.
13:24
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14:19
Speaker 1: Mike. Let's talk a little bit about Disney. Well.
14:23
Speaker 5: Disney Company stock is up seven percent today after reporting
14:28
earnings this morning, and where the earnings just that good?
14:32
Speaker 1: I mean, what did we see from them?
14:33
Speaker 7: Well, I think you finally saw a turnaround which has
14:36
been a few quarters in the making now of their
14:39
direct to consumer business i e.
14:41
Speaker 6: Streaming.
14:42
Speaker 7: They swung to a profit of three hundred and twenty
14:44
one million dollars in the September quarter from the loss
14:47
of three eighty seven million a year ago. But beyond that,
14:51
you also had some pretty solid box office wins. You
14:55
had the Deadpool movie Deadpool and Wolverine, which highest grossing
15:01
ever ARE rated movie. You also had the Pixar movie
15:07
which I watched with my inside Out two very good,
15:10
which was was that the highest grossing.
15:14
Speaker 6: PG movie as well? I think it may have been.
15:16
Speaker 7: And so, you know, we talked about Disney's dominance of
15:21
the box office and the twenty ten's and how they've
15:24
just fallen really flat on their face since the kind
15:27
of end of the Marvel hits, and they are I
15:31
don't know, back in there and having some success again
15:33
in the box office, which is helping to do.
15:35
Speaker 5: You know that Disney Studios actually hold the record for
15:40
every rating, the highest grossing film of every rating except
15:45
for NC seventeen.
15:47
Speaker 6: That makes sense.
15:48
Speaker 5: So what is that PGG thirteen in our yep so
15:52
G is Toy Story four PG is Inside Out two.
15:56
PG thirteen is Star Wars Episode seven, The Fourth awakens
15:59
and are is Deadpool and Wolverine.
16:02
Speaker 7: I wonder if any of them hold the inflation adjusted title.
16:06
Un don't go there right now. That it's gonna take
16:09
a little no dump. I'll have to see what give
16:12
me a second, but we can work on it. I
16:14
think the interesting thing with Disney Plus, because remember this
16:18
was the thing that investors were all excited about four
16:21
or five years ago. Was great, like, you know, they're
16:24
gonna have this you know, huge you know, tailwind from
16:26
Disney Plus, and it took them five years to figure
16:30
out how to make money on the thing. The piece
16:32
that is interesting is that the way that they've made
16:34
money has been by removing content from it, which is counterintuitive.
16:39
Speaker 6: Yeah, yeah, you stop paying those licensing fees.
16:41
Speaker 7: You get ready, you get the it's kind of intuitive, right,
16:44
You get the customers with all of the content and
16:47
then get them to start paying, and then you start
16:49
killing this stuff and people will be like, well, look,
16:52
why does what why does Disney have to pay for
16:55
its own content?
16:57
Speaker 5: Like they own the stuff that they're putting on it.
17:00
What's what's the deal? And the reason why is because
17:04
it's not just that it's not something where Disney says, great,
17:11
like we made the Lion King, we can just put
17:13
it on here and we don't have to pay anything.
17:16
There still are residual rates that you have to pay
17:20
out to the people that were in the movie, the
17:23
people that made the move, like, there's all of that
17:26
that you still have to pay h And so it's
17:29
something that unless you can get critical mass of people,
17:34
it's kind of a problem. So this is why you've
17:36
got across the streaming ecosystem now, Disney, Paramount, Warner Brothers, Discovery.
17:42
You're like, hey, I used to be able to see
17:44
all their content on here.
17:45
Speaker 1: Now I can't. What gives This is how they're getting
17:48
to profitability.
17:49
Speaker 7: And this is not unique to Disney, by the way, right,
17:52
Like you go take a look at Netflix or Prime.
17:55
Any of these streaming services are constantly rotating their content
17:59
to attract customers and retain customers, saying hey, this is
18:02
the new stuff that's coming to Netflix, that's the new
18:05
stuff coming to Prime. They don't advertise the stuff that
18:09
they're killing, but they all do the same thing in
18:11
one way, shape or form, And so it kind of
18:14
just shocked me how ugly and how long it took
18:17
for Disney to get to profitability on this product. It
18:21
was rolled out of the time when streaming was the
18:23
end all be all, and it took them five years.
18:26
But now that they're here, I don't know Disney falls
18:31
into that category for me, at least of the uncancellable
18:34
streaming service.
18:36
Speaker 1: Mike, you want.
18:36
Speaker 5: Top ten movies all time by box office gross sure
18:40
inflation adjusted. Yeah, Gone with the Wind, The Original Star Wars,
18:45
Sound of Music Et, Titanic, Ten Commandments, Jaws, Doctor Zavago,
18:50
The Exorcist, Snow White. The most recent movie is Titanic.
18:54
Other than that, nothing after nineteen seventy seven. It tells
18:58
you a little bit just about how going the movies
19:00
has changed, no doubt, you know, in the last forty
19:02
fifty years, with giant TVs and things like that.
19:05
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19:35
Speaker 5: Mike, Let's talk a little bit about this PCA from
19:38
the Financial Times titled China arms itself for a potential
19:41
trade war with Donald Trump. What kinds of countermeasures could
19:47
we expect from China in the event that the incoming
19:49
Trump administration decides to move forward with broad based tariffs
19:53
against either China or a number of countries as a whole.
19:56
Speaker 6: One would be currency manipulation.
20:00
Speaker 7: They pretty proactively do this and peg their currency to
20:03
the dollar frequently, and so you could see them taking
20:08
steps to manipulate their currency and make it cheaper than
20:12
it otherwise would be in order to again favor exports
20:16
even with in the face of tariffs, and that I
20:19
think is a real if it is a real threat
20:24
and a real pretty successful strategy historically. The counterpoint to
20:29
all this would be that you kind of have China
20:31
on the ropes for the first time in a couple decades.
20:33
And I keep making this point and maybe it will
20:38
turn out to be the case, maybe it will not.
20:40
But the Trump administration clearly wants to impose tariffs on China,
20:44
but they also seemingly want to I mean again campaign pledges.
20:48
Who knows, but there's been this discussion of ten to
20:51
twenty percent universal tariffs on all imports. And my point
20:55
would be here, the only way you are going to
20:57
successfully penalize China for the behavior, if that's what you're
21:01
trying to do, is to avoid the tariffs on the
21:04
other countries. Get a bunch of nations on board with
21:06
the same strategy towards China. Convince Europe that they need
21:09
to stop vetoing these you know, anti stop vetoing these
21:14
bills that would otherwise impose tariffs on China, and get
21:17
everybody on the same page about it. But I don't
21:20
know what else would you imagine that China might be
21:22
able to do to combat with trumpet imposes in terms
21:25
of sanctions.
21:26
Speaker 5: Well, I'll answer that, and then I want to get
21:29
into kind of the the other part of what you
21:31
were just talking about there, And I think that Look,
21:34
the other things that you're probably going to see is okay, fine,
21:37
you're gonna add tariffs on you know, anything coming out
21:41
of China. Great, good luck getting access to our markets
21:44
for your US companies, right, you know, have fun trying
21:48
to sell into our markets. And what happens when Apple,
21:54
you know, is placed on a restricted list in China?
21:56
And can't sell iPhones in China.
21:58
Speaker 7: Or you know, more immediately right like we saw this
22:01
back in the late twenty ten's as well. US farmers
22:05
immediately taking a hit here. And that's the difference in China,
22:08
right when you don't have this free market, when instead
22:11
you have Hi jinping with the wave of a wand
22:12
being able to change policy, they can very quickly say yeah,
22:15
no more soy being imported from the United States. It's
22:17
not a terriff, it's just nothing's coming in anymore.
22:20
Speaker 1: So I think that's something to watch.
22:22
Speaker 5: The other piece that I think we need to try
22:26
to figure out, and again, we're going to know this
22:29
soon enough. We're gonna know in the next two and
22:33
a half months how the Trump administration plans to proceed.
22:37
Speaker 1: But I spent.
22:38
Speaker 5: The last week or so basically pouring through Robert Leitthheiser's
22:45
book from last year.
22:46
Speaker 1: Robert Leittheiser.
22:46
Speaker 5: If you're not familiar with him, he was the US
22:48
Trade Representative under Trump for his first term. There were
22:53
unconfirmed reports that he was gonna take the same role
22:56
in this administration last week. Those have still not been confirmed.
23:01
But the premise of Lightheiser's book and I think it's
23:08
worth reading just from the perspective of, Hey, look, any
23:11
time that you have anyone like coming into office in
23:14
the US, if they've written a book, you should read it,
23:19
not because it's a great book, but because it helps
23:22
you to understand how they're thinking. It's the same reason
23:25
why I like read through old Jijingping's speeches, because hey,
23:30
you want to know how China is going to think
23:32
about things. So ultimately, Lightheiser's book is somewhat about China,
23:40
but it's more about the idea that, hey, trade as
23:45
a whole could be favoring the United States more than
23:51
it currently is, where we've been disproportionately hurt by our
23:55
commitment to free trade and keeping tariffs as low as possible.
24:00
I'm not gonna like say whether or not his approach
24:02
is right or wrong, because we've never seen this actually
24:05
implemented in the US, at least not in my lifetime,
24:07
Like tariffs have been on a steady downward trend for
24:11
the last eighty years, basically since World War Two. So
24:14
I'm not going to say whether or not what he's
24:16
doing works or doesn't because there aren't any facts and evidence, Like,
24:20
we just don't know but the premise is not, hey,
24:25
we just need to go after China. It's hey, our
24:29
manufacturing base has been hollowed out because of free trade
24:33
promises that were not kept by a number of countries,
24:36
not just China, and the way to bring back that
24:40
manufacturing is through the use of tariffs, not just against China.
24:45
Certainly there there's whole sections of his book that are
24:47
about China, but on a broader basis, because this is
24:52
not about trying to create a world in which US
24:57
allies benefit from it, but rather that he wants to
25:00
benefit the working class.
25:03
Speaker 6: Of the United States specifically.
25:05
Speaker 1: Correct.
25:06
Speaker 5: Ye, it's not the working class of France that he
25:08
cares about here. Yeah, So that's Leithheiser's book. I just
25:10
saved you, you know, seventeen dollars or ten hours of
25:13
an audiobook whenever you want to, you know, however you
25:15
want to phrase it. Whether it's going to work or not,
25:18
I don't know. But I'm a big believer that when
25:22
someone writes a whole book on a topic and then
25:26
is you know, generally thought of as a pretty close
25:28
advisor to an incoming president, you should pay attention to
25:32
said book. And I think it matters so I think
25:39
the idea that the US is only going to go
25:42
after China and try to build consensus against them unlikely
25:46
doesn't mesh with what I'm seeing and hearing as we're
25:52
going through this transition period. This time, I think there's
25:56
a fundamentally different goal. Whether it can be achieved, I
26:00
don't know, but I think that that is the direction
26:04
the incoming Trump administration is going to go.
26:08
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27:28
Speaker 5: Mike, why does one economists think that Elon Musk has
27:32
the key to lower mortgage rates?
27:33
Speaker 6: I don't think he actually does.
27:35
Speaker 1: I don't either.
27:36
Speaker 7: I think from Lawrence Youwn for the National Association of Realtors,
27:40
who we speak to regularly on the program, in fact,
27:42
and his point is that rates are high at seven
27:45
percent based on what he's reading through of Trump's policy proposals,
27:52
you could have more growth, more deficits, which might keep
27:55
those rates higher. And so therefore, if you want to
27:58
fight the deficit piece, Elon Musk could better be really
28:01
successful at cutting budgets. And I think it's tongue in
28:06
cheek or setting or setting somebody.
28:08
Speaker 6: Up for failure.
28:09
Speaker 1: If we want to talk about tongue in cheek, can
28:11
we actually just talk about this? I I I don't know.
28:13
Did you guys cover this the last couple of days?
28:16
H this specific? Yes? The Department of Government Efficiency? Yea, yep?
28:23
What kind of feedback?
28:24
Speaker 9: Mostly negative?
28:25
Speaker 5: Can we just talk about how the Department of Government
28:27
Efficiency is going to be headed by two people?
28:30
Speaker 1: Sure? Talk talk away.
28:32
Speaker 5: That's that's the like. Isn't that like kind of counterintuitive?
28:36
Shouldn't it be just be headed by one person? Yes,
28:39
you're trying to build an efficient government and you've got
28:41
two people running it.
28:44
Speaker 6: You can't even have an odd number of votes on this, right?
28:48
Speaker 1: What do you do if they're deadlocked? Hey, I think
28:51
we should do this.
28:52
Speaker 6: No, I think we should do that.
28:55
Speaker 5: Let's add a committee to oversee the Department of Government
28:59
Efficiency and see how that goes.
29:01
Speaker 3: Uh.
29:02
Speaker 5: Look, in terms of the overall approach, it's very clear
29:06
that the Trump administration is going to try to cut
29:09
government spending any way they can. The problem is, and
29:12
we've covered this quite a bit, unless you want to
29:14
go after Social Security and Medicare and DoD. There's not
29:19
that much meat there. Actually, most of the spending is
29:23
those areas and interest. Everything else is like fifteen to
29:27
twenty percent.
29:28
Speaker 7: Yeah, they'll do interesting things because you know, what you're
29:30
going to have, in my estimation, is a bunch of
29:32
headlines of look at this government waste and we cut it.
29:36
But it's gonna be like, yeah, we cut twenty million
29:38
dollars in government waste.
29:39
Speaker 6: And I'm not saying that.
29:40
Speaker 7: That's unimportant work, but it's unimpactful work.
29:44
Speaker 5: Yeah, it's not going to result in meaningful deficit improvement.
29:50
You if you want to meaningfully improve the deficit, there
29:55
are basically three things that you can do. You can
29:59
raise taxes, you can go after social Security and Medicare,
30:02
or you can go after DoD. Other than that, the
30:05
rest is kind of shuffling the deck chairs on the Titanic.
30:09
So we'll see what ends up happening. But I just
30:13
found it wild that, Hey, we're gonna have this Department
30:15
of Government Efficiency.
30:16
Speaker 1: Oh good, who's running it? Two people? What what are
30:20
we doing here?
30:21
Speaker 5: I'll also say one other thing, just on the topic
30:24
of efficiency, because this is something that I've thought about
30:28
quite a bit. There are certain things that we need
30:34
to be okay with not necessarily being efficient, but being effective.
30:38
Speaker 1: And there's a key difference there.
30:40
Speaker 5: The US military, as an example, is not efficient in
30:45
the context of hey, there's no wasted movement, and like,
30:49
we don't spend money to do this and that, But
30:53
the US military is effective in accomplishing its mission that
30:58
you want it to accomplish. We don't grade the US
31:02
military based on how efficiently they spend dollars, right, We
31:06
grade it based on how effectively they protect us. And
31:11
so I do want to point out that when it
31:13
comes to some government spending, effectiveness is more important than efficiency.
31:19
I know that's not always the case, but I do
31:22
think it's important to make that point because if all
31:25
you focus on is efficiency, you could become very efficient
31:29
but less effective in actually accomplishing what you need to do.
31:33
And so I think that's a key point to bring up.
31:35
Quick break here when we return, we've got some stack.
31:39
Speaker 4: Roulette find daily interviews and full shows of the Financial
31:42
Exchange on how are YouTube page get cut up on
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32:45
Speaker 1: Mike, what do you got for stack Roulette?
32:47
Speaker 7: What I have for stack roulette is about social security.
32:50
The House just passed a bill pretty substantially in terms
32:55
of the vote count as well, that would do away
32:58
with two important provisions that effect a lot of Americans,
33:02
specifically those who have worked for the government in some way,
33:06
shape or form. If you're not familiar to them, we
33:09
call them the WEB and the GPO, the Windfall Elimination Provision,
33:12
as well as the Government Pension Offset. This bill now
33:14
heads to the Senate, and to be clear, what they
33:16
voted on here was doing away with these rules that
33:20
reduce social security for some beneficiaries who also worked in
33:25
government for a portion of their careers, thereby increasing social
33:28
security benefits for I think it's a few hundred thousand
33:31
workers across the country. The other obvious thing that this
33:34
would do is hasten the demise of Social Security, which
33:38
is rapidly running out of money. So it would benefit
33:41
a number of workers. Specifically, if you worked as a
33:43
teacher or you know, anywhere in the state of Massachusetts
33:47
for the Commonwealth, then you are subject to this exactly,
33:52
and it would do away with these rules and really
33:54
reshape a lot of that system in terms of who
33:57
receives benefits and how much they receive.
34:00
Speaker 5: The estimate from the CBO is that it would add
34:02
one hundred and ninety six billion dollars to deficits over
34:05
the next decade. It also would speed up the depletion
34:09
of the Trust Fund by six months, according to the
34:11
Committee for a Responsible Federal Budget. So yes, it's something
34:17
where ultimately you might look at this and say, hey,
34:21
this is the right thing to do, But it's also
34:24
from the perspective of great like here we're gonna we're
34:29
gonna give you additional money because you know, we want
34:34
you to have full Social Security benefits.
34:36
Speaker 1: The problem is that bucket's running out soon.
34:39
Speaker 5: The bucket's gonna be exhausted sooner, so we've got to
34:42
do the right thing there as well. And there's there
34:44
are no facts and evidence that we are credibly dealing
34:47
with the problem.
34:48
Speaker 7: Talk about reorganized reshuffling chairs and the Titanic man.
34:52
Speaker 5: Who, yeah, it's it's it's really, it's really not good.
35:00
Speaker 1: What's what we're doing with social Security right now?
35:03
Speaker 5: And this is before look the Trump administration coming in,
35:06
they've talked about, hey, are we going to you know,
35:08
get rid of taxes on Social Security? That would be
35:12
something that speeds that process up even further.
35:14
Speaker 1: So there's just.
35:19
Speaker 5: There's just not really any sense that anyone is serious
35:22
about dealing with the funding problem for Social Security.
35:25
Speaker 7: Correct, But good news, if you're one of those people
35:28
that's subject to this thing, you might get a big
35:31
old raise in the next year.
35:33
Speaker 6: If if if this moves forward.
35:36
Speaker 5: So uh, yeah, there's there's that going on at uh
35:40
at the moment here. Uh, let's see, Ben Affleck was
35:44
speaking at the uh the CNBC conference that is going
35:47
on right now, and uh, basically Ben said that there
35:52
is no way that AI replaces actors or you know,
35:56
directors are basically anyone making movies in the near future.
35:59
And look, you can say what you want about you know,
36:02
Ben Affleck and everything I whatever, I agree with him.
36:07
And the reason that I agree with him, Mike is
36:09
how long have we had generative AI available to us?
36:12
Speaker 1: Now? About two years?
36:14
Speaker 6: Yeah, I suppose widely available two years.
36:17
Speaker 1: Mike.
36:18
Speaker 5: Is there a single meme or single image generated by
36:23
AI that stands out to you?
36:26
Speaker 6: No?
36:27
Speaker 5: No, like that, there's no AI image that is captured
36:31
you know, the hearts of American and and what I'm
36:34
getting at here is something that's really interesting to me
36:38
in that, you know, when when we go out, Tucker,
36:42
you're a big sports fan. Oh yeah, if I say
36:44
the words crying Jordan's face, what do you think of, like,
36:47
you know that meme? It's it's the idea that hey,
36:49
like you know, Michael Jordan crying. Oh, this is so
36:52
sad that even like the greatest person sports person in
36:54
the world, you know, cried Bubble, we all have these
36:57
different memes and are different niches. Is it possible that AI,
37:02
through its inability to make memeable things, has actually proven
37:06
the existence of the human soul? It's deep man for
37:11
eleven fifty six. We'll touch on that tomorrow on the
37:14
financial exchange,