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The Collapse of First Brands need far more attention · The Financial Exchange Show

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  Speaker 1: Zada and Mike Armstrong.
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  Speaker 2: Chuck, Mike and Tucker with you here and kicking things off.
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  Speaker 3: Stocks has now shifted.
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  Speaker 2: Into negative territory across the three major indices. Dows off
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  Speaker 2: one hundred and four points, about a quarter percent, SMP
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  Speaker 2: is down fourteen points, about a quarter percent, Nasdaq down
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  Speaker 2: eight points about three hundredths of a percent, So tech
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  Speaker 2: continuing to hold up.
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  Speaker 3: Well. I'll tell you that.
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  Speaker 2: It's kind of interesting what we're seeing in markets right now,
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  Speaker 2: and I'm trying to wrap my head around it what
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  Speaker 2: it means, because I see a couple things that generally
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  Speaker 2: get my antenna perking up a little bit when they happen.
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  Speaker 2: The first started yesterday and what actually started earlier this week.
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  Speaker 2: Financial stocks have been puking, and specifically a lot of
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  Speaker 2: these like asset manager stocks have been puking, but it
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  Speaker 2: even spilled over into just like your broader banks yesterday
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  Speaker 2: and and you know, lenders like Capital One. And I'm
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  Speaker 2: just trying to make heads or tails of this because
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  Speaker 2: when I see financials down and the rest of the
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  Speaker 2: market is ripping, it kind of makes me look at
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  Speaker 2: things and be like, what's what's happening here? Like what
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  Speaker 2: do they know that we don't. It's just kind of
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  Speaker 2: something that I've gotten from experience. The other piece that's
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  Speaker 2: interesting to me is when stocks continue to make new
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  Speaker 2: all time highs, but the VIX, the volatility index, stays firm.
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  Speaker 2: You kind of sit out there and you're like, Okay,
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  Speaker 2: what's going on here? Like, who who is Who's making
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  Speaker 2: this bid that there's going to be increased volatility even
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  Speaker 2: as stocks are making all time highs. That doesn't really
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  Speaker 2: give me warm and fuzzies either. Now, this could all
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  Speaker 2: turn out to be nothing, and it most likely is,
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  Speaker 2: but it's just like a couple things where you look
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  Speaker 2: at and you're like, that's not really the kind of
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  Speaker 2: behavior that you love to see, and so you know,
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  Speaker 2: we'll see what we get there. Taking a look at
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  Speaker 2: the around other markets, though, tenure US Treasury right now
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  Speaker 2: is currently up four tenths of a basis point to
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  Speaker 2: four point one one percent. When we go and start
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  Speaker 2: digging through commodity markets, oil continuing to fall down seventy
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  Speaker 2: nine cents a barrel to sixty dollars and ninety nine
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  Speaker 2: cents on West Texas. Intermediate gas prices trip a national
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  Speaker 2: average haven't checked in a while because they haven't been moving.
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  Speaker 2: They still have not been moving. We're three fifteen and
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  Speaker 2: nine tenths. We've been between three ten and three twenty
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  Speaker 2: for almost this entire year. Gas prices just have not
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  Speaker 2: budged this year. They are still down from last year,
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  Speaker 2: but not by as much now because this time last
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  Speaker 2: year we were nineteen. So we've pretty much been in
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  Speaker 2: this range for about a full year now. After prices
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  Speaker 2: came down mid to late summer last year, we've been
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  Speaker 2: sitting three ten to three twenty a gallon nationally, and
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  Speaker 2: that's kind of what it suggests we're.
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  Speaker 3: Going to be at going forward.
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  Speaker 2: Gold down thirty five dollars anounced to thirty eight sixty
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  Speaker 2: two and fifty cents. I guess even gold has to
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  Speaker 2: take a break sometime for making new all time high.
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  Speaker 2: So it's gonna do that along with stocks today and
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  Speaker 2: we'll see how that continues as.
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  Speaker 3: We go through the day.
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  Speaker 2: Mike, last week I started we were covering a show
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  Speaker 2: I think Paul was on with me, and I mentioned
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  Speaker 2: that we were starting to see some.
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  Speaker 3: Ugly stuff bubbling up through the auto sector.
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  Speaker 4: Yeah, we had that Tricolor company that does a bunch
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  Speaker 4: of lending in the subprime auto lending space go chapter
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  Speaker 4: seven on us.
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  Speaker 3: Which maybe I was doing this with you, yeah, could.
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  Speaker 4: Have been, and basically sold off everything they have and
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  Speaker 4: then lo and behold.
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  Speaker 3: Earlier this week, we have another auto company, and.
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  Speaker 2: This one started popping up last week, First Brands. They
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  Speaker 2: are the makers of fram oil filters, autolite, sparkplugs, a
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  Speaker 2: bunch of car parts and things like that.
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  Speaker 3: And last week.
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  Speaker 2: Some of the peripheral businesses around them started, you know,
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  Speaker 2: declaring bankruptcy because they were like, we don't know if
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  Speaker 2: First Brands is going to be able to pay us,
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  Speaker 2: and so we're we're gonna call it first First Brands
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  Speaker 2: on Sunday declared bankruptcy themselves. And it's it's not anything
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  Speaker 2: where you look at this and say, okay, like this
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  Speaker 2: in and of itself is the problem, because First Brands
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  Speaker 2: has about twelve billion dollars in debt, which is big,
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  Speaker 2: but nothing.
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  Speaker 3: Like crazy crazy crazy.
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  Speaker 2: But it's the combination of that, with Tricolor going under,
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  Speaker 2: Andy had CarMax report some really bad earnings last week,
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  Speaker 2: you've got Ford's saying, hey, we need to start going
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  Speaker 2: down market with our lending standards. On f one fifties.
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  Speaker 2: And I made a comment last week that like, something
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  Speaker 2: stinks in the auto sector. I don't know like how
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  Speaker 2: big it is or what it means, but something stinks there.
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  Speaker 2: And I want to dig in more on this First
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  Speaker 2: Brands item, because the big thing with First Brands is
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  Speaker 2: they took a plate a page right out of.
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  Speaker 3: The freaking Lehman Brothers handbook.
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  Speaker 2: I gotta tell you, whenever I see this stuff, I
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  Speaker 2: keep coming back to it. There's only two things that
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  Speaker 2: blow you up in finance, and it's the same things
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  Speaker 2: every time. It's securitization and leverage. And usually it's the
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  Speaker 2: leverage that ends up blowing you up, because if you
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  Speaker 2: just securitize things that aren't leveraged, you're fine. But no
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  Speaker 2: one wants to do that because all the money's made
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  Speaker 2: with the leverage, and so people like.
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  Speaker 3: Borrow other people's money to make it more valuable. Exactly.
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  Speaker 2: So Lehman Brothers back in the run up to the
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  Speaker 2: financial crisis, before they went belly up, they used a
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  Speaker 2: program called REPO one oh five. And REPO one oh
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  Speaker 2: five was a fancy way of saying, hey, we're going
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  Speaker 2: to sign a short term repurchase agreement where we sell
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  Speaker 2: off a bunch of assets in this case, you know
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  Speaker 2: money that like things that we've lent, and we're going
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  Speaker 2: to take cash from this, and it makes our books
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  Speaker 2: look better because it doesn't look like we have a
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  Speaker 2: bunch of non performing loans on our books. It looks
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  Speaker 2: like we've got a bunch of cash on our books.
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  Speaker 2: And Leeman would do this at the end of quarters
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  Speaker 2: in order to make their books look better and lo
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  Speaker 2: and behold, this is basically what First Brands was doing.
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  Speaker 2: With a bunch of off balance sheet loans that they'd have.
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  Speaker 2: They just kind of like cycle through and oh, like,
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  Speaker 2: we'll sell this one off for a little bit and
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  Speaker 2: take cash back so we can borrow more. And this
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  Speaker 2: is how a company that, by the way, was not
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  Speaker 2: you know, as big anywhere near as big as the
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  Speaker 2: amount of debt that they had outstanding, ended up like
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  Speaker 2: taking on nine hundred million dollars in annual debt servicing
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  Speaker 2: costs on five billion dollars in revenue.
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  Speaker 4: So I agree that this spells some ugly stuff for
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  Speaker 4: the auto sector as a whole. They're already struggling with
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  Speaker 4: real business issues such as tariffs and lack of demand
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  Speaker 4: for the types of cars that they were building, a
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  Speaker 4: consumer that has weakened a number of auto loans that
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  Speaker 4: were connected to people who were already not in good shape,
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  Speaker 4: some of whom were recently deported. All sorts of issues
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  Speaker 4: that are coming to the forefront here for the auto industry.
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  Speaker 4: My question that I asked early on in this because
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  Speaker 4: on Monday we didn't really know how much actual debt
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  Speaker 4: was out there, and we seem to have a bit
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  Speaker 4: more clarity. The estimates that were out there on Monday
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  Speaker 4: were somewhere between ten and forty billion, without a real
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  Speaker 4: knowledge of where that was. We think it's twelve now,
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  Speaker 4: we think it's twelve now, which is we're still not sure.
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  Speaker 3: Yeah, less of an issue.
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  Speaker 4: My question at the time was, is this some sort
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  Speaker 4: of spark that you could have in the auto sector
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  Speaker 4: where the lenders here and you spoke about financials being
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  Speaker 4: under pressure start to take a good hard look at
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  Speaker 4: their books of private credit that's out there. And that's
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  Speaker 4: to me the more important question, because somebody's still going to.
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  Speaker 3: Make spark plugs. At the end of the day.
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  Speaker 4: If this company has to go through bankruptcy and sell
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  Speaker 4: off assets, somebody's still going to manufacture that stuff. I'm
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  Speaker 4: pretty sure we still want to buy them. If a
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  Speaker 4: bunch of financers start to realize that they are way
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  Speaker 4: over extended on the loans that they have been making,
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  Speaker 4: then you start to have questions about not just the
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  Speaker 4: auto sector, I guess would be my point.
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  Speaker 2: So this is basically where my head went over the
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  Speaker 2: last few days when I said, Okay, so you got
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  Speaker 2: these problems showing up in the auto sector and now financials,
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  Speaker 2: and in particular, like when we look at financials, there
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  Speaker 2: are all kinds of different companies that get classified as financials.
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  Speaker 2: You've got banks, you've got payment services, you've got asset managers,
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  Speaker 2: you've got insurance companies, you've got financial data providers. When
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  Speaker 2: you look at what is getting bludgeoned over the last.
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  Speaker 3: They call it weaker two.
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  Speaker 2: The ones that are getting hit hardest are the asset managers,
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  Speaker 2: specifically in that private space. Think you're kkrs of the world,
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  Speaker 2: your Apollo Global Management, Blackstone, Blue Owl. Those are the
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  Speaker 2: names where you're sitting there being like ew, why you
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  Speaker 2: off like fifteen percent?
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  Speaker 3: Like what what gives? Like what's what's happening?
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  Speaker 2: And so the place that this is going to come
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  Speaker 2: to a head in my opinion is in that.
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  Speaker 3: Private credit space because.
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  Speaker 2: Nobody has any idea what anyone else has borrowed and
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  Speaker 2: owes to anyone else, because I'm sure that First Brands
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  Speaker 2: was not the only company using these kinds of arrangements.
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  Speaker 2: And now everyone's out there looking at the loans they've
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  Speaker 2: made and they're like, well, what do.
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  Speaker 3: We think this is worth?
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  Speaker 2: Because if this company actually has the same problems First
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  Speaker 2: Brands did, then gosh, like, this doesn't really.
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  Speaker 3: Look like a performing loan anymore.
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  Speaker 2: And so I gotta tell you, the scale probably smaller,
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  Speaker 2: but we don't know because no one knows how big
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  Speaker 2: the private credit industry actually is. Like the estimates that
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  Speaker 2: I've seen are anywhere between one and a half trillion
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  Speaker 2: and four trillion dollars. That's a big range for how
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  Speaker 2: big private credit could be.
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  Speaker 4: Yeah, the main thing we do know is that it
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  Speaker 4: makes up a boatload more of the total debt out
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  Speaker 4: there that's below investment grade than it did back in
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  Speaker 4: the early two thousands.
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  Speaker 2: Which also means that debt is not on public markets,
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  Speaker 2: so it does not get traded daily, and you don't
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  Speaker 2: know how much it's actually worth according to the market.
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  Speaker 2: You can't market to market. Let's take a quick break.
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  Speaker 2: When we come back, we're gonna be joined by Luke
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  Speaker 2: Cowa from Sherwood News. We're also gonna talk more about this.
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  Speaker 2: I'm sure Luke can talk a little bit about it
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  Speaker 2: as well. But let's take a quick break and then
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  Speaker 2: Luke joins us right after this.
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  Speaker 1: The Financial Extreme is now available every day from eleven
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  Speaker 2: All right, as promised, we're joined now by Luke Kawa
• 12:42
  Speaker 2: from Sherwood News, here to take us through what's going
• 12:44
  Speaker 2: on in markets.
• 12:45
  Speaker 3: Luke, how you doing today? Doing great?
• 12:48
  Speaker 5: How about yourself?
• 12:49
  Speaker 3: We are doing well.
• 12:50
  Speaker 2: I know the S and P five hundred is off
• 12:53
  Speaker 2: very modestly today, but for the purposes of this conversation,
• 12:57
  Speaker 2: we got stocks basically at all time highs. Luke's been
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  Speaker 2: driving the rally the last couple of weeks.
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  Speaker 5: Yeah, no, hey, like I'll whenever we're within two percent,
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  Speaker 5: let's just call it all time highs.
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  Speaker 3: There we go.
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  Speaker 5: Yeah, I'm on board with that. I think a lot
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  Speaker 5: of the rally in the past few weeks, well, you
• 13:15
  Speaker 5: can't ignore the the AI part of the story. It
• 13:17
  Speaker 5: seems like we don't get effectively a day or a
• 13:20
  Speaker 5: week that goes by without a one to ten to
• 13:24
  Speaker 5: three hundred million, three hundred billion rather dollar announcement related
• 13:29
  Speaker 5: to just the continued build out that's expected to play
• 13:32
  Speaker 5: out over the coming months, years, and you know, half
• 13:35
  Speaker 5: decade supposedly, you know, it all goes according to plan.
• 13:38
  Speaker 5: So I think that is a kind of a big
• 13:40
  Speaker 5: source of shoring up confidence and at the very least
• 13:44
  Speaker 5: the bottom line outlook for a lot of these companies
• 13:47
  Speaker 5: that are very heavily invested in the theme for the
• 13:50
  Speaker 5: next year. You know, after that you start to look
• 13:54
  Speaker 5: at you know, purchase obligations or kind of non binding
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  Speaker 5: agreements and maybe water down the element somewhat, but it
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  Speaker 5: keeps the floor looking pretty firm. I would say the
• 14:06
  Speaker 5: second big, big part is of course, the Federal Reserve
• 14:09
  Speaker 5: delivered its rate cut as expected, and you know that
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  Speaker 5: was a lot of it is priced in ahead of time.
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  Speaker 5: But one thing you definitely have seen, and this is
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  Speaker 5: outside of the S and P five hundred, mainly, I
• 14:20
  Speaker 5: would say it's mainly in the Russell two thousand. I
• 14:23
  Speaker 5: think a lot of people like to look at that
• 14:25
  Speaker 5: index as kind of a better gauge of the US economy.
• 14:29
  Speaker 5: I don't share that view. I think the Russell is
• 14:32
  Speaker 5: full of a lot of speculative growth stocks, a lot
• 14:35
  Speaker 5: of companies that have a higher embedded risk of default
• 14:39
  Speaker 5: than a lot of the bigger names, and a lot
• 14:41
  Speaker 5: of companies that have higher floating rate debts. So when
• 14:44
  Speaker 5: short term rates come down, those companies benefit, their embedded
• 14:47
  Speaker 5: risk of default goes down. And if we look at
• 14:50
  Speaker 5: some of the pockets of the market that have just
• 14:52
  Speaker 5: performed extremely well, you know quantum computing, you've seen satellite companies,
• 14:56
  Speaker 5: these kind of names go absolutely gangbusters, and that's you know,
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  Speaker 5: associated with I would say, a kind of renewed about
• 15:04
  Speaker 5: of speculation and willingness to buy into these companies' long
• 15:08
  Speaker 5: term growth potential.
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  Speaker 3: Looke. When we look at the S and P. Five hundred.
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  Speaker 2: One of the things that we have seen is a
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  Speaker 2: clear divergence between anything AI related as far as the
• 15:19
  Speaker 2: earnings projections and the rest of the S and P.
• 15:21
  Speaker 3: What about looking at the rest of the S and P.
• 15:23
  Speaker 2: Five hundred as the proxy for the US economy, because
• 15:27
  Speaker 2: when you look there, it does seem like we're seeing
• 15:30
  Speaker 2: some kind of nasty things. When you strip out those
• 15:32
  Speaker 2: AI companies from the S and P.
• 15:34
  Speaker 3: Five hundred, I would.
• 15:36
  Speaker 5: Say, less nasty. And then I think you'd have to
• 15:38
  Speaker 5: do a kind of further division within that between the
• 15:42
  Speaker 5: cyclical parts of the market and the kind of more
• 15:45
  Speaker 5: defensive pockets of the market. I would say the more
• 15:48
  Speaker 5: defensive pockets of the market also look to be the
• 15:51
  Speaker 5: ones that are showing worse earnings trends, or at least
• 15:54
  Speaker 5: the least supportive earnings trends. And kind of the areas
• 15:59
  Speaker 5: like staples, healthcare, etc. Are you know that things are
• 16:02
  Speaker 5: going to need no matter what, no matter how good
• 16:03
  Speaker 5: or bad the economy is, those have been I would say,
• 16:07
  Speaker 5: the most underwhelming parts of the stock market.
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  Speaker 3: And on the other hand, you.
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  Speaker 5: Have seen you know, financials at a you know, a
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  Speaker 5: pretty darn good past earning season. We'll see what what
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  Speaker 5: this one brings. But you've even seen equal right retail,
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  Speaker 5: do you know? Pretty darn well? Which is you know,
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  Speaker 5: if you had told me, you know, in early April
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  Speaker 5: that equal weight retail would be doing as well as
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  Speaker 5: it has, I would have said, Terriss would have completely
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  Speaker 5: gone away. Noah, just turns out that the the idea
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  Speaker 5: I'm leaning in hard is to explain this is just
• 16:36
  Speaker 5: the we have severely underestimated the degree of the quote
• 16:41
  Speaker 5: unquote K shaped economy. The idea that we already know
• 16:45
  Speaker 5: that the top forty percent of earners drives more than
• 16:48
  Speaker 5: sixty percent of spending in the US economy, and they
• 16:51
  Speaker 5: they are really kind of doing a number in kind
• 16:54
  Speaker 5: of keeping that aggregate number afloat, even as we know
• 16:57
  Speaker 5: that there's you know, not everyone's enjoying the rising tide,
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  Speaker 5: so to speak.
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  Speaker 2: You mentioned financials in there. One of the things we've
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  Speaker 2: seen during this last week or so run two all
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  Speaker 2: time highs is financials breaking down a little bit, particularly
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  Speaker 2: the asset managers. And this comes on the back of,
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  Speaker 2: you know, a few kind of surprising stories out of
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  Speaker 2: the auto industry between Tricolor and First Brands, and Mike
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  Speaker 2: and I were talking the last segment, like what does
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  Speaker 2: this mean for like that whole private credit space and
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  Speaker 2: is there something to worry about there? Are we getting
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  Speaker 2: any signals on that front.
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  Speaker 5: I think the signal that you're getting is coming straight
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  Speaker 5: from the stock market, right like this is the private
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  Speaker 5: credit pe space has been I would say a bit
• 17:41
  Speaker 5: of a slow burn this entire cycle in terms of
• 17:45
  Speaker 5: kind of the lack of ability to find attractive opportunities
• 17:52
  Speaker 5: or to necessarily find the returns for investors and searching
• 17:56
  Speaker 5: for a new investor base.
• 17:57
  Speaker 3: I e.
• 17:58
  Speaker 5: Now retail to try to you know, shift a lot
• 18:01
  Speaker 5: of this exposure to and the kind of the more
• 18:04
  Speaker 5: and more that happens. It just seems like you once
• 18:07
  Speaker 5: every three to six to nine months, you have a
• 18:12
  Speaker 5: an episodic event that causes and you know, in this case,
• 18:15
  Speaker 5: you've highlighted well what it is to kind of those
• 18:19
  Speaker 5: lending troubles that causes people to exit that asset class
• 18:24
  Speaker 5: pretty abruptly.
• 18:25
  Speaker 3: So it just seems to me.
• 18:27
  Speaker 5: At least that that private credit has been the slow
• 18:30
  Speaker 5: burn of people have been worrying about it for a
• 18:33
  Speaker 5: long time. It's by the nature of the business. Something
• 18:36
  Speaker 5: that's a little tougher to get your head around. And
• 18:39
  Speaker 5: you know, the the entire private space it doesn't have
• 18:41
  Speaker 5: public marks, but the companies that operate the most in
• 18:45
  Speaker 5: the space, they certainly do. And people do vote in
• 18:48
  Speaker 5: with their feet when they see signs of worry in
• 18:50
  Speaker 5: that sector, and it has been very prone to sharper
• 18:54
  Speaker 5: draw downs whenever you see kind of signs of struggling
• 18:57
  Speaker 5: in one pocket of the industry or concerns about the economy.
• 19:00
  Speaker 2: Rit large, Luke, appreciate you joining us. Hope you have
• 19:03
  Speaker 2: a great rest of the day and we'll catch up
• 19:05
  Speaker 2: with you soon.
• 19:06
  Speaker 5: Hey, last thing, go Yanks go oh.
• 19:09
  Speaker 2: Boy, whoa yikes from a Canadian yikes.
• 19:15
  Speaker 3: Well, I'm glad we got that out of the way.
• 19:17
  Speaker 3: It was good.
• 19:18
  Speaker 2: So in any case, big thanks to Luke for joining
• 19:21
  Speaker 2: us again. He's always great. He always has some really
• 19:23
  Speaker 2: good insights into what's going on in markets.
• 19:27
  Speaker 4: There.
• 19:27
  Speaker 2: Let's take a quick break. When we come back, we
• 19:29
  Speaker 2: got trivia. We got Wall Street Watch after.
• 19:31
  Speaker 1: This, bringing the latest financial news straight to your radio.
• 19:43
  Speaker 1: Every day. It's the Financial Exchange on the Financial Exchange
• 19:47
  Speaker 1: Radio Network. Time Now for Wall Street Watch, a complete
• 19:53
  Speaker 1: look at what's moving markets so far today Right here
• 19:56
  Speaker 1: on the Financial Exchange Radio Network, we.
• 20:00
  Speaker 6: Are mixed on day two of the government shutdown as
• 20:02
  Speaker 6: investors are left wondering about the state of the labor market,
• 20:05
  Speaker 6: with the shutdown pausing economic data releases, including the September
• 20:10
  Speaker 6: job support that was slated to be published tomorrow morning.
• 20:13
  Speaker 6: Right now, the Dow is down by about a quarter
• 20:15
  Speaker 6: percent or one hundred and ten points lower. SMP five
• 20:18
  Speaker 6: hundred is down nearly two tenths of one percent, Nasdaq
• 20:22
  Speaker 6: actually up by about a tenth of a percent or
• 20:25
  Speaker 6: twenty points higher. Russell two thousand down about a tenth
• 20:28
  Speaker 6: of a percent. Ten year Treasure reeled flat at four
• 20:31
  Speaker 6: point one zero two percent. In crude oil down one
• 20:35
  Speaker 6: and a quarter percent, right at sixty one dollars a barrel.
• 20:39
  Speaker 6: Following media reports from earlier this week, Warren Buffett's Berkshire
• 20:42
  Speaker 6: Hathaway officially announced it reached a deal to buy Occidental
• 20:46
  Speaker 6: Petroleum Is petro chemical unit OXYCIM for nine point seven
• 20:50
  Speaker 6: billion dollars in cash. Berkshire stock is dipping, while Oxy
• 20:54
  Speaker 6: shares are down by six percent. Meanwhile, Tesla reported third
• 20:58
  Speaker 6: corter deliveries of north of four hundred and ninety seven
• 21:01
  Speaker 6: thousand vehicles, above street expectations and seven percent higher over
• 21:06
  Speaker 6: the year prior. Deliveries in the period got a boost
• 21:09
  Speaker 6: as some customers rushed to buy cars ahead of the
• 21:12
  Speaker 6: expiration of a key federal tax credit. Tesla stock is
• 21:15
  Speaker 6: down nearly two percent. Elsewhere, fair ISAAC shares are surging
• 21:20
  Speaker 6: twenty two percent after the credit analytics company unveiled the
• 21:25
  Speaker 6: system that allows mortgage lenders direct access to Fiico scores,
• 21:29
  Speaker 6: allowing resellers to bypass credit bureaus. TransUnion and Equifact shares
• 21:34
  Speaker 6: are down on that news, and after yesterday's near nine
• 21:38
  Speaker 6: percent leap, shares in Western Digital retreating about half a percent. Today,
• 21:43
  Speaker 6: Nick reported, citing CEO Irving Tan, that the data storage
• 21:46
  Speaker 6: company will invest one billion dollars in Japan over the
• 21:50
  Speaker 6: next half decade. I'm Tucker Silva and that is Wall
• 21:53
  Speaker 6: Street watch in. We still have to do trivia here,
• 21:55
  Speaker 6: so let's go. Last night, the New York Yankees beat
• 21:57
  Speaker 6: the Boston Red Sox in Game two of the Wildcard
• 22:00
  Speaker 6: Series and didn't frustrate me whatsoever. The Red Sox and
• 22:04
  Speaker 6: Yankees have met in the playoffs five times before this series,
• 22:07
  Speaker 6: with the most recent coming in twenty twenty one. So
• 22:11
  Speaker 6: our trivia question today, how many times have the Red
• 22:14
  Speaker 6: Sox beat the Yankees in a playoff series? Once again?
• 22:17
  Speaker 6: How many times have the Red Sox beat the Yankees
• 22:21
  Speaker 6: in a playoff series? Be the fourth person today to
• 22:24
  Speaker 6: text us at six one seven three six to two
• 22:27
  Speaker 6: thirteen eighty five with the correct answer, and you win
• 22:29
  Speaker 6: a Financial Exchange Show T shirt once again. The fourth
• 22:32
  Speaker 6: correct response to text us to the number six one
• 22:36
  Speaker 6: seven three, six to two thirteen eighty five will win
• 22:38
  Speaker 6: that T shirt. See complete contest rules at Financial Exchange
• 22:42
  Speaker 6: Show dot com.
• 22:44
  Speaker 2: Mike, we got a pc it from CNBC. Taiwan rejects
• 22:47
  Speaker 2: the US proposal for fifty to fifty chip production, says
• 22:50
  Speaker 2: trade talks focused on tariffs effectively, uh, the United States
• 22:55
  Speaker 2: was pushing for Taiwan's semiconductor to make half of the
• 23:00
  Speaker 2: chips the US needs in the United States, and Taiwan
• 23:05
  Speaker 2: basically said, no, we're not interested in that, which I
• 23:09
  Speaker 2: understand from their perspective.
• 23:11
  Speaker 4: Yeah, from a geopolitical perspective, I mean they refer to
• 23:16
  Speaker 4: it has been referred to as the Silicon shield. The
• 23:18
  Speaker 4: idea that Taiwan is so strategically important to the global
• 23:22
  Speaker 4: supply of semiconductors that China can't invade and retake the
• 23:29
  Speaker 4: territory out of fear for what that would do to
• 23:32
  Speaker 4: global supply. I am sure that Taiwan could be convinced
• 23:36
  Speaker 4: of this, but the trade off would probably be some
• 23:39
  Speaker 4: form of long term defense commitment, security guarantee, security guarantee
• 23:44
  Speaker 4: from the United States that is far and away more
• 23:47
  Speaker 4: than what we do currently, which is what's the official
• 23:51
  Speaker 4: stance on Taiwan, that we officially do not support Taiwan independence,
• 23:57
  Speaker 4: Taiwanese independence from China. I don't know the exact framing
• 24:01
  Speaker 4: of it, but I know the Chinese are pushing for
• 24:03
  Speaker 4: something more structured on that more dedicated from the White
• 24:07
  Speaker 4: House on the status of Taiwan, and from their perspective, right,
• 24:11
  Speaker 4: the only thing that is keeping us safe here is
• 24:14
  Speaker 4: the inability of the United States, or a large part
• 24:16
  Speaker 4: of it is the inability of the United States to
• 24:18
  Speaker 4: successfully manufacture these semiconductors. So until you get that, I
• 24:23
  Speaker 4: don't know that they're going to be willing to move on.
• 24:25
  Speaker 2: That, which makes total sense from their perspective, right, it's like, Okay,
• 24:30
  Speaker 2: what's in it for us?
• 24:31
  Speaker 4: If you get to fifty to fifty, then it is
• 24:34
  Speaker 4: very easy for the United States to then get to
• 24:36
  Speaker 4: one hundred if we need to, which therefore directly hits
• 24:41
  Speaker 4: at Taiwanese security.
• 24:44
  Speaker 3: Yeah, it's kind of a big deal. Yeah, so we'll
• 24:47
  Speaker 3: see where this goes.
• 24:47
  Speaker 4: But I don't know that that other scenarios trade off
• 24:50
  Speaker 4: the United States would be willing to make to say, yeah,
• 24:53
  Speaker 4: we're going to run in the face of everything that
• 24:54
  Speaker 4: we're trying to accomplish with China in order to provide
• 24:57
  Speaker 4: Taiwan a long term security guarantee.
• 25:00
  Speaker 6: The US Virgin Islands aren't just stunning, they're thriving and
• 25:04
  Speaker 6: continue to be one of the hottest spots for vacationers
• 25:07
  Speaker 6: in the Caribbean. New cruise port upgrades, better air connections,
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  Speaker 6: and a sharper focus on cultural experiences have put the
• 25:14
  Speaker 6: islands back on the map for travelers seeking something special.
• 25:18
  Speaker 6: Saint Thomas is your cruise hub, known for duty free
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  Speaker 6: shopping in the world famous Magan's Bay. Saint John is
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• 26:01
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• 26:07
  Speaker 2: The incredibly shrinking pool of publicly traded companies, peace from barons,
• 26:15
  Speaker 2: and look what we have right now. There are just
• 26:19
  Speaker 2: over four thousand publicly traded companies available on US markets
• 26:24
  Speaker 2: right now. If you go back to nineteen ninety six,
• 26:26
  Speaker 2: thirty years ago, there were about eighty one hundred, So
• 26:29
  Speaker 2: there are about half as many companies that are publicly
• 26:32
  Speaker 2: traded in the US today as there were thirty years ago.
• 26:37
  Speaker 2: Is this few different things? The first is the reasons
• 26:41
  Speaker 2: for doing so. Why would companies generally? There are two
• 26:45
  Speaker 2: reasons why this can happen companies staying private.
• 26:48
  Speaker 3: Longer or permanently.
• 26:52
  Speaker 2: Number two more consolidation within publicly traded markets. They are
• 26:56
  Speaker 2: good reasons for both of those things to have happened
• 26:58
  Speaker 2: in the last thirty years.
• 26:59
  Speaker 4: Yeah, so you're saying that the existing companies on public
• 27:02
  Speaker 4: traded markets are bigger and more consolidated, checks out economies
• 27:06
  Speaker 4: of scale pay. And we're also saying that something structurally
• 27:11
  Speaker 4: has changed since the nineteen nineties to allow big companies
• 27:15
  Speaker 4: to stay private and fund themselves longer than they could previously.
• 27:19
  Speaker 3: That piece, I know exists.
• 27:21
  Speaker 4: I don't really understand why it exists in a way
• 27:23
  Speaker 4: that it didn't in the nineties, but I do know
• 27:25
  Speaker 4: that the prevalence of private equity and the ability for
• 27:27
  Speaker 4: these companies to fund themselves is far beyond what they
• 27:30
  Speaker 4: could do back then.
• 27:31
  Speaker 2: This then brings us to I think what the really
• 27:33
  Speaker 2: interesting question is, which is is.
• 27:36
  Speaker 3: This good, bad, or neutral? Probably all the above for
• 27:40
  Speaker 3: different parties. Who's it good for?
• 27:45
  Speaker 4: It may be good for the companies themselves to not
• 27:48
  Speaker 4: have to focus quite as much on quarter to quarter
• 27:51
  Speaker 4: guidance and publicly traded things. I think being private may
• 27:54
  Speaker 4: allow if you're staying private, if you're staying private longer term.
• 27:57
  Speaker 4: I think of big is an example of a big
• 28:01
  Speaker 4: company who very much lives and breeze by the idea
• 28:04
  Speaker 4: that they are privately held and they don't need to
• 28:06
  Speaker 4: respond to shareholders in the same way, and they consider
• 28:08
  Speaker 4: that to be a competitive advantage. Sure, So I think
• 28:11
  Speaker 4: for companies themselves, you can make an argument, Yeah, not
• 28:13
  Speaker 4: being beholden to public shareholders and public reports, reporting requirements
• 28:18
  Speaker 4: makes us more competitive maybe in some cases, yes, in
• 28:21
  Speaker 4: some cases.
• 28:22
  Speaker 3: Now for the public.
• 28:22
  Speaker 2: Companies, you could say the greater consolidation is helped with
• 28:25
  Speaker 2: margins and you know, greater stability and things along those lines.
• 28:29
  Speaker 3: So I think you can make that case.
• 28:32
  Speaker 2: I think then you can also make the case that
• 28:36
  Speaker 2: in general for the average investor this has resulted in
• 28:43
  Speaker 2: better outcomes as well. Where I'll go on that is
• 28:48
  Speaker 2: again the returns that private markets offer to people that
• 28:51
  Speaker 2: can get in early with you know, good managers are robust.
• 28:54
  Speaker 2: Like there's a reason why ultra high net worth people
• 28:57
  Speaker 2: look for you know, whether it's VC private dec there's
• 29:01
  Speaker 2: a reason why they're attracted to that. Likewise, if you
• 29:03
  Speaker 2: look at how consolidation has impacted public markets, corporate profit
• 29:08
  Speaker 2: margins have risen dramatically in the last thirty years from
• 29:11
  Speaker 2: about seven percent of GDP to around twelve percent of GDP,
• 29:16
  Speaker 2: even if you look within specific industries. As much as
• 29:19
  Speaker 2: I like to rip on the airlines, the reason why
• 29:22
  Speaker 2: they're finally investable for the last fifteen years is because
• 29:25
  Speaker 2: we allowed a tremendous amount of consolidation and got rid
• 29:28
  Speaker 2: of a bunch of competition, which allows them to be
• 29:30
  Speaker 2: more profitable. I'm not saying that's good for you and
• 29:33
  Speaker 2: me flying on them, but for investors it is correct.
• 29:36
  Speaker 2: So I think you can make a case that this
• 29:38
  Speaker 2: has generally been pretty good for the average investor.
• 29:42
  Speaker 3: Who has it been bad for?
• 29:46
  Speaker 2: I think you can make a case that for the
• 29:48
  Speaker 2: person that is like looking for that needle in a
• 29:51
  Speaker 2: haystack that you know is you know, hey, this is
• 29:54
  Speaker 2: going to be the next big thing. Those companies are
• 29:57
  Speaker 2: coming to market later without the same growth opportunities. We
• 30:00
  Speaker 2: talked about Amazon a lot. Amazon iPod was like one
• 30:03
  Speaker 2: hundred million dollar company. No, no good tech company? Does
• 30:07
  Speaker 2: that open? AI is five hundred billion dollars in private
• 30:10
  Speaker 2: and not even thinking about going public.
• 30:13
  Speaker 3: So I'm wondering.
• 30:16
  Speaker 4: I don't know how to determine who that hurts, but
• 30:20
  Speaker 4: we will probably hear fewer of those stories of the
• 30:23
  Speaker 4: average person hitting an absolute grand slam on stock investing
• 30:28
  Speaker 4: by investing in whatever the next version of Apple was
• 30:31
  Speaker 4: in nineteen ninety.
• 30:32
  Speaker 2: The counter to that and why it may not matter.
• 30:35
  Speaker 2: There are different markets now where you can do that
• 30:37
  Speaker 2: if you want to go and yolo on crypto and
• 30:39
  Speaker 2: that's your thing. Sure they're not securities, but hey, the
• 30:44
  Speaker 2: SEC's basically said, have at it.
• 30:45
  Speaker 3: We won't have your back.
• 30:47
  Speaker 2: Yep, But go for it and do whatever you want
• 30:50
  Speaker 2: there and buy your fart coin and you know whatever
• 30:52
  Speaker 2: it is that you you know, your meme of the
• 30:54
  Speaker 2: week and whatever the heck it is.
• 30:57
  Speaker 3: I don't know, it's not far off. Okay, there was
• 31:02
  Speaker 3: a poop coin at one point, wasn't park hilarious?
• 31:06
  Speaker 4: Like?
• 31:08
  Speaker 3: Is there a fart coin? Probably? Yeah, I mean, can.
• 31:11
  Speaker 2: You research this and just find out if there's one,
• 31:13
  Speaker 2: I will google fark coin.
• 31:16
  Speaker 3: Please block it, Please block it our our systems. There
• 31:19
  Speaker 3: is a pretty good chance. Yeah, the firewall might catch
• 31:21
  Speaker 3: it before you even get that immediate. Yes there is one.
• 31:25
  Speaker 4: Yeah, it's training at sixty six sense.
• 31:29
  Speaker 3: How many shrewd bucks is that? Don't don't know. So
• 31:34
  Speaker 3: not much volume on what a world do you.
• 31:36
  Speaker 2: There actually exists something that you can buy called fart coin.
• 31:40
  Speaker 4: You know how I know the crypto market is dominated
• 31:42
  Speaker 4: by teenage boys.
• 31:44
  Speaker 3: What's the market cap? Pot a tucker, I don't know,
• 31:48
  Speaker 3: let's look it up.
• 31:51
  Speaker 2: This is just insanely amusing to me that it actually exists.
• 31:55
  Speaker 4: Sixty eight cents. That can't be right, that's the price.
• 31:58
  Speaker 4: I think it's sitting at a mark cap around two
• 32:00
  Speaker 4: hundred million bucks.
• 32:01
  Speaker 3: Chuck, two hundred million.
• 32:02
  Speaker 2: I mean that people have put that much money into
• 32:04
  Speaker 2: something called fart coins.
• 32:05
  Speaker 3: It's a lot of fark coins. I could be looking
• 32:09
  Speaker 3: at this wrong.
• 32:10
  Speaker 4: I don't frequently look up uh cryptos, but that was
• 32:14
  Speaker 4: what I was seeing here.
• 32:19
  Speaker 2: Is there a broader flatulence index out there?
• 32:22
  Speaker 3: Okay?
• 32:24
  Speaker 2: I mean, my goodness, there's something called fart coin with
• 32:27
  Speaker 2: a two hundred million dollar market cap out there?
• 32:29
  Speaker 3: Like, what do I do? What do I do with that?
• 32:31
  Speaker 3: What am I doing with my life? What are we
• 32:36
  Speaker 3: doing here?
• 32:36
  Speaker 4: According to coin market cap, which I've never used as
• 32:39
  Speaker 4: a source before, actually it's calling it a six hundred
• 32:42
  Speaker 4: and sixty seven million.
• 32:43
  Speaker 3: Dollar market cap.
• 32:44
  Speaker 4: Even worse, I don't I wouldn't use that as a
• 32:47
  Speaker 4: source normally, as the first result that came up. Maybe
• 32:51
  Speaker 4: Forbes would be more reliable in this in this source, but.
• 32:55
  Speaker 3: Peace from CNBC.
• 32:56
  Speaker 2: Next in our stack tokenization of real world assets. This
• 33:00
  Speaker 2: is an unstoppable freight train coming to major markets. Robinhood, CEO,
• 33:04
  Speaker 2: Let's go to break stack room.
• 33:05
  Speaker 3: That is next.
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• 34:26
  Speaker 3: Mike, what do you got for me? For Stackroo? I
• 34:29
  Speaker 3: want to talk about Amazon's ring video doorbells. You have one?
• 34:32
  Speaker 4: Uh no, Tucker, I got the the Google one there.
• 34:36
  Speaker 4: So I've got a ring video doorbell and I do
• 34:39
  Speaker 4: like it. I find it convenient. Every once in a
• 34:41
  Speaker 4: while I'm not home and somebody's ringing the doorbell. I
• 34:43
  Speaker 4: get to check out my kids maybe when they get back,
• 34:45
  Speaker 4: et cetera. Started very convenient. They're rolling out a new
• 34:48
  Speaker 4: real friendly feature to help you find your lost dog.
• 34:51
  Speaker 4: So here's how it works. Your dog runs away, you
• 34:54
  Speaker 4: make an alert on your ring. It will then, using
• 34:59
  Speaker 4: artific intelligence of some sort, automatically identify the same looking
• 35:04
  Speaker 4: dog on your neighbor's radio video doorbells in the general
• 35:08
  Speaker 4: area and send an alert to their phone saying, hey,
• 35:10
  Speaker 4: your neighbor lost their dog and based on this video
• 35:13
  Speaker 4: on your on your doorbell, it might be the dog.
• 35:16
  Speaker 4: Would you mind if we shared it with that neighbor?
• 35:19
  Speaker 4: And you know, you guys can connect and find this dog,
• 35:22
  Speaker 4: which is nice and cheery and friendly.
• 35:25
  Speaker 3: Hate it and also hate it.
• 35:27
  Speaker 4: Is really close to our dystopian future where a crime
• 35:30
  Speaker 4: gets committed, the police go to Amazon say, handover all
• 35:34
  Speaker 4: of the AI generation of this looking person across the
• 35:37
  Speaker 4: video doorbells in your network, which they're apparently already pretty
• 35:41
  Speaker 4: close to doing. Amazon has some pretty close relationships with
• 35:45
  Speaker 4: some local police forces. And yeah, I don't know that
• 35:50
  Speaker 4: this is avoidable, and we're already kind of here given
• 35:53
  Speaker 4: the level of you know, closed circuit and open circuit
• 35:57
  Speaker 4: cameras that are in major cities. But this is again
• 36:01
  Speaker 4: just kind of naturally where we're headed, right It is. Yes,
• 36:05
  Speaker 4: hopefully there would be required to have a court order
• 36:08
  Speaker 4: and all sorts of things, but we're getting to the
• 36:10
  Speaker 4: point where there's not many spaces in public today that
• 36:14
  Speaker 4: you can go find that are not in some way covered.
• 36:18
  Speaker 3: By video capture. Hate it. Yeah, it's pretty dystopian.
• 36:23
  Speaker 2: Speaking of dystopian, door Dash unveils Dot, the delivery robot
• 36:28
  Speaker 2: powered by its autonomous delivery platform to accelerate local commerce.
• 36:32
  Speaker 3: Oh but she is cute. It's a rolling tomato is
• 36:36
  Speaker 3: basically what it looks like. Assim Dot is female. It's
• 36:40
  Speaker 3: a robot.
• 36:41
  Speaker 2: Yeah, I don't think there's gender when it comes to robots.
• 36:45
  Speaker 2: I think, you know, they don't. Disney would beg to differ.
• 36:48
  Speaker 2: They don't procreate the way you think. Let's talk a
• 36:51
  Speaker 2: little bit about the problems with this first. It can
• 36:54
  Speaker 2: travel up to twenty miles an hour. So the good
• 36:56
  Speaker 2: news is that it can outrun someone who's trying to
• 36:59
  Speaker 2: steal your food. The bad news, I'm not sure if
• 37:03
  Speaker 2: this thing is baseball bat resistant, because you better believe
• 37:07
  Speaker 2: that people are going to be trying to break into
• 37:09
  Speaker 2: these things. It's specifically is designed for, you know, close
• 37:13
  Speaker 2: quarters urban areas, and as someone you know who lived
• 37:17
  Speaker 2: in Somerville for quite some time, porch pirates were really
• 37:20
  Speaker 2: a thing where people would try to steal your packages.
• 37:22
  Speaker 2: You think they're not going to try to take food
• 37:24
  Speaker 2: out of a door Dot robot. Now you'll then say, oh, well,
• 37:28
  Speaker 2: they'd have cameras on it, and you think that they
• 37:30
  Speaker 2: haven't thought of that. So on one hand, I just
• 37:34
  Speaker 2: look at this and I'm like, Okay, this is just
• 37:35
  Speaker 2: opening up more opportunities for theft.
• 37:37
  Speaker 3: Yeah.
• 37:37
  Speaker 2: The other piece is, hey all you people that have
• 37:41
  Speaker 2: you know, bought into that whole side hustle thing the
• 37:43
  Speaker 2: last decade.
• 37:44
  Speaker 3: See Elena, You're getting screwed by the very company that
• 37:47
  Speaker 3: brought you that side hustle. Yeah.
• 37:50
  Speaker 4: I find this also dystopian and less concerning than the
• 37:53
  Speaker 4: Amazon ring doorbell bot. Agree, same boat, But yeah, this one,
• 37:57
  Speaker 4: I'm not as much concerned about the privacy concerns.
• 37:59
  Speaker 3: As I am about it's going to replace a lot
• 38:02
  Speaker 3: of guys. Here's the thing.
• 38:05
  Speaker 2: The next fifteen to twenty years, a lot of us
• 38:08
  Speaker 2: are going to be replaced. It might be me, it
• 38:12
  Speaker 2: might be Mike, it might be like, I don't know
• 38:15
  Speaker 2: that anyone's one hundred percent safe on this, So take
• 38:20
  Speaker 2: it for what it is. Quick break for the rest
• 38:21
  Speaker 2: of the day. We'll see you tomorrow for a not
• 38:23
  Speaker 2: jobs report.