Latest / The Financial Exchange Show / AI Stocks Face Their Biggest Earnings Test Yet

Transcript

AI Stocks Face Their Biggest Earnings Test Yet · The Financial Exchange Show

0:00
Speaker 1: The Financial Exchange is produced by Money Matters Radio and
0:03
Speaker 1: is hosted by employees of the Armstrong Advisory Group, a
0:05
Speaker 1: registered investment advisor. All opinions expressed are solely those of
0:08
Speaker 1: the hosts. Do not reflect the opinions of Armstrong Advisory
0:11
Speaker 1: or anyone else. Investments can lose money. This program does
0:14
Speaker 1: not offer any specific financial or investment advice. Please consult
0:17
Speaker 1: your own financial, tax, and estate planning advisors before making
0:20
Speaker 1: any investment decisions. Armstrong Advisory and the advertisers heard on
0:23
Speaker 1: this program do not endorse each other or their services.
0:26
Speaker 1: Armstrong and Money Matters Radio do not compensate each other
0:28
Speaker 1: for referrals and are not affiliated. This is the Financial
0:34
Speaker 1: Exchange with Chuck Zada and Mark Fandetty, your exclusive look
0:39
Speaker 1: at business and financial news affecting your day, your city,
0:42
Speaker 1: your world. Stay informed and up to date about economic
0:46
Speaker 1: and market trends, plus breaking business news every day. The
0:50
Speaker 1: Financial Exchange is a proud partner of the Disabled American
0:53
Speaker 1: Veterans Department of Massachusetts. Help us support our great American
0:57
Speaker 1: heroes by visiting DAV five K Boston and making a
1:01
Speaker 1: donation today. This is the Financial Exchange with Chuck Zada
1:06
Speaker 1: and Mark Vandetti.
1:10
Speaker 2: It's Chuck, Mark and Tucker with you. And stocks are
1:15
Speaker 2: modestly rallying today. The Dow is up about a quarter percent,
1:17
Speaker 2: the S and P's up half percent, Nasdak is up,
1:21
Speaker 2: NASDAK can Posit up zero point six percent, So we again
1:25
Speaker 2: a nice modest rally taking place there. Russell two thousand
1:28
Speaker 2: continuing to move towards back towards all time highs, not
1:33
Speaker 2: there yet, but within about one one and a half
1:36
Speaker 2: percent at this point. So even the Russell getting in
1:39
Speaker 2: on the action today, Bond's varing a little bit better
1:41
Speaker 2: than yesterday as well. Ten yeared down point I'm sorry,
1:45
Speaker 2: one point six basis points to four point five to
1:48
Speaker 2: five to three percent. We've got the dollar index down
1:53
Speaker 2: point zero three percents, not really moving at all. One
1:56
Speaker 2: hundred point seventy three Gold rebounding after a couple tough
2:00
Speaker 2: days to forty one to thirty three, up about fifty
2:03
Speaker 2: dollars an ounce, and crude oil West Text Intermediate after
2:06
Speaker 2: rising meaningfully the last couple days, back down about dollars
2:10
Speaker 2: or so one and a half percent to seventy two
2:12
Speaker 2: to thirty four, triple a national average for gas prices
2:15
Speaker 2: though up an additional five cents a gallon overnight following
2:19
Speaker 2: the last couple of days of oil price increases to
2:23
Speaker 2: three eighty four and six tenths right now for the
2:27
Speaker 2: national average. Piece from Barons to kick things off today,
2:32
Speaker 2: This earning season is the stock market's biggest test. Well,
2:37
Speaker 2: isn't every earning season? What makes this earning season different
2:42
Speaker 2: from all others? Mark?
2:45
Speaker 3: I think it's more predictable than others because we know
2:48
Speaker 3: the deluge of data center spending is driving earnings at
2:53
Speaker 3: an unprecedented pace to unprecedented levels. So there's really no mystery.
2:58
Speaker 3: Is it going to be fifteen percent next quarter year
3:01
Speaker 3: every year, or twenty or twenty five? Okay, there's I
3:05
Speaker 3: suppose some uncertainty with respect to exactly how spectacular, but
3:07
Speaker 3: they're gonna be really really good for the next few
3:10
Speaker 3: quarters a year over year. The big question is always
3:14
Speaker 3: if you own a stock, not what earnings did or
3:16
Speaker 3: will do this quarter, it's what are they going to
3:18
Speaker 3: do over the next several years? Assuming you're not just
3:21
Speaker 3: a speculator looking to hand the back, do.
3:23
Speaker 2: You look into that next three to five year period.
3:25
Speaker 3: Yeah, So this isn't really geez, I hate to I'm
3:28
Speaker 3: not being dismissive. This is good work here.
3:30
Speaker 2: I'm dismissive of articles all the time.
3:33
Speaker 3: Well so was I, but I shouldn't be because work
3:36
Speaker 3: goes into this stuff and it also gives us a show.
3:39
Speaker 3: And we could talk for two hours, but sometimes people
3:41
Speaker 3: wouldn't listen.
3:42
Speaker 2: Okay, if we're not gonna poop poo this piece, then
3:45
Speaker 2: let's skip it. We could, we could, Well, I'm gonna
3:46
Speaker 2: poo poo the proposition. No, No, let's let's sellot of.
3:50
Speaker 3: It's a poo poo platter, if you will, a poo
3:51
Speaker 3: poo platter of plausible proposition of no work on it.
3:56
Speaker 3: You were working on the other day, Yeah, you get
3:58
Speaker 3: back to me.
3:59
Speaker 2: Let's talk about this one. The dot com crash was
4:04
Speaker 2: a five trillion dollar blip. It's a big blip. Why
4:09
Speaker 2: the next financial crisis could hit four times harder. So
4:15
Speaker 2: this is where we get into like just unadulterated crapuh,
4:19
Speaker 2: because I'm really sorry, but like this.
4:23
Speaker 3: Is just not well, the headline's crap.
4:26
Speaker 2: The headline is and well, here's the other thing this
4:29
Speaker 2: piece is talking about. Like okay, like you know, the
4:32
Speaker 2: stock market is bigger, and the you know, property market
4:35
Speaker 2: is bigger. Okay, well, yeah, of course they are, like, hey, like,
4:39
Speaker 2: there's been some inflation, so you know, let's let's factor
4:42
Speaker 2: that in. And b there's also more people, so on
4:44
Speaker 2: a per capita basis, now you also have to adjust
4:47
Speaker 2: for that. And by the time you, you know, finish up
4:50
Speaker 2: with all this stuff, you get to a point where
4:52
Speaker 2: you're like, okay, but you still haven't told us what's
4:56
Speaker 2: actually going to be the trigger for the next financial crisis,
5:00
Speaker 2: because and I did just say, because not all recessions
5:05
Speaker 2: are financial crisis.
5:07
Speaker 3: Oh no, very few, correct, Like, just because.
5:10
Speaker 2: We went through a financial crisis back in two thousand
5:13
Speaker 2: and seven to two thousand and nine doesn't mean that
5:16
Speaker 2: you're going to see a financial crisis as a result
5:20
Speaker 2: of any slowdown that may or may not happen in
5:24
Speaker 2: an economy. Really bad ones are, but sure, but it's
5:28
Speaker 2: important to note that a financial crisis is a fundamentally
5:31
Speaker 2: different thing than a recession. A financial crisis is a
5:38
Speaker 2: crisis in the financial system. I know that sounds circular,
5:41
Speaker 2: but it's important because words have meanings. It's the crisis
5:45
Speaker 2: back in two thousand and eight, was hey, there's so
5:49
Speaker 2: little value to this collateral that no and no one
5:52
Speaker 2: wants it. That our banks might not be solvent and
5:57
Speaker 2: or liquid, and that's bad.
6:00
Speaker 3: Yeah, banks bank failures or correct the imminent threat of
6:03
Speaker 3: bank failures and massive defaults because nobody trusts anybody.
6:07
Speaker 2: Like that's a financial crisis. A recession is a broad
6:12
Speaker 2: based slow down in economic activity. These are two different things.
6:15
Speaker 3: The recession always accompanies it, but the verse is not true.
6:20
Speaker 2: It's every square is a rectangle, but not every rectangle
6:23
Speaker 2: is a square. Every financial crisis produces a recession, but
6:28
Speaker 2: not every recession is a financial crisis.
6:30
Speaker 3: Thank god, because they're far.
6:32
Speaker 2: This was great. I think that was some really good because.
6:34
Speaker 3: Financial Yeah, I didn't even follow it. I'm still impressed.
6:37
Speaker 2: The Do you know how many triangles there are in square?
6:42
Speaker 2: I should, Well, it depends how small you make them.
6:44
Speaker 3: Yeah, I should know the answer.
6:45
Speaker 2: No, there's no there's no right answer. Oh you could
6:47
Speaker 2: just keep well, you can always just keep out of.
6:49
Speaker 3: The area is finite, yes, So whatever what am I
6:53
Speaker 3: talking about? Who cares? But you don't want to.
6:56
Speaker 2: I didn't end upth discussion about the area of a
6:58
Speaker 2: circle over the weekend.
7:01
Speaker 3: With one of your kids. I hope.
7:04
Speaker 2: No, like they're a little well. Actually I did talk
7:07
Speaker 2: about geometry with me. I was trying to teach my
7:10
Speaker 2: five year old the basics of geometry. It went pretty well,
7:13
Speaker 2: all things considered, given that it was the first time
7:15
Speaker 2: and she's five.
7:16
Speaker 3: We make kids not having kids. I shouldn't comment. But boy,
7:21
Speaker 3: in some Russia, for if you end up going to
7:24
Speaker 3: like college, there are Russian kids in your physics or
7:26
Speaker 3: econ class. These people were doing subjects. I'll just throw
7:30
Speaker 3: linear algebra. You don't have to know what that is.
7:32
Speaker 3: We don't get it till college. Oh yeah, for the
7:34
Speaker 3: most part, these guys were doing it in sixth grade.
7:37
Speaker 3: No word of lie, no exaggerating. It can be done.
7:41
Speaker 3: Why do we wait for stuff like that? Instead we
7:44
Speaker 3: bore kids with silly, redundant word. I'm not even gonna
7:48
Speaker 3: get into it. You don't want a financial crisis to
7:51
Speaker 3: a company recession. They're far far worse. Yes, They're far deeper,
7:55
Speaker 3: more prolonged, and their effects are more long lasting. They
7:58
Speaker 3: leave far deeper scar which is why the FED in
8:02
Speaker 3: the modern era has done everything possible to support the
8:05
Speaker 3: financial system, namely banks and more broadly financial markets.
8:10
Speaker 2: Let's take a quick break. When we return, we're going
8:13
Speaker 2: to be joined by Lukawa from Sherwood News. Next.
8:17
Speaker 1: The Financial Exchange streams every day live on YouTube. Subscribe
8:20
Speaker 1: to our page and follow the markets all morning longs
8:23
Speaker 1: only here on the Financial Exchange Radio Network. Here the
8:27
Speaker 1: Financial Exchange every day from eleven to noon non Serious
8:31
Speaker 1: XM's Business Radio Channel one thirty two. Keep it here
8:34
Speaker 1: for the latest business and financial news and the trends
8:37
Speaker 1: on Wall Street. The Financial Exchange is now life on
8:40
Speaker 1: Serious XM's Business Radio Channel one thirty two faces the
8:44
Speaker 1: Financial Exchange Radio Network.
9:01
Speaker 2: Already. As promised, we are now joined by the one
9:05
Speaker 2: and only Luke Kwa from Sherwood News here to talk
9:07
Speaker 2: a little bit about what is moving in markets. Luke,
9:11
Speaker 2: how you doing today?
9:13
Speaker 4: Doing great?
9:14
Speaker 2: Thanks for having me, absolutely so. Looking at markets in
9:18
Speaker 2: the last you know, couple of weeks, the interesting trend
9:22
Speaker 2: to me broadly is that you're not really seeing a
9:26
Speaker 2: ton of movement at the index level, but it's wild
9:31
Speaker 2: under the surface. Are you kind of picking up that
9:33
Speaker 2: vibe as well?
9:35
Speaker 5: Oh man, it's absolutely crazy. I was just like, you know,
9:39
Speaker 5: doing some maximum draw down. Look after the closed yesterday
9:42
Speaker 5: I'm like, heck, it seems like we're talking about very
9:45
Speaker 5: important socks that are down twenty twenty five percent from
9:48
Speaker 5: their peaks, and I've got the S and P five hundred.
9:50
Speaker 5: Let's send one point eight percent off a record closing high.
9:54
Speaker 5: What's been really interesting to me throughout that is, I think,
9:57
Speaker 5: you know, if we look since the June two I
9:59
Speaker 5: believe peak for the S and P five hundred on
10:01
Speaker 5: the closing basis, we've made a couple like lower closing highs.
10:06
Speaker 4: In that process.
10:07
Speaker 5: You've had about two hundred and fifteen nearly half of
10:10
Speaker 5: the S and P five hundred be consistently setting higher
10:13
Speaker 5: highs throughout this. So it's a lot of the healthcare,
10:17
Speaker 5: financials and some industrials that the many stocks in the
10:21
Speaker 5: market have started to slowly improve their technicals as the
10:25
Speaker 5: most important part of the market. The momentum semiconductors and
10:28
Speaker 5: the hyperscalers have seen their momentum absolutely obliterated. So it's
10:32
Speaker 5: it's been very amusing to see the net effect of
10:34
Speaker 5: that at the next level is next to nothing.
10:38
Speaker 2: It feels kind of like a chicken and egg question
10:40
Speaker 2: to me in terms of, hey, are are people who
10:44
Speaker 2: are selling things. Are they not pulling their money out
10:47
Speaker 2: of the market because the market's not going down, or
10:51
Speaker 2: is the market not going down like just because they're
10:53
Speaker 2: they're rotating into other things. But doesn't it feel like
10:58
Speaker 2: just psychologically and I know that none of us know
11:01
Speaker 2: any of this for sure, like it's all you know
11:03
Speaker 2: kind of theory, but it feels like no one wants
11:06
Speaker 2: to be out of equity markets because of what happened
11:08
Speaker 2: in twenty five when as soon as people bailed out
11:11
Speaker 2: of equity markets, the tide turned and no one wanted
11:14
Speaker 2: to get left behind. Ever again, is that an accurate assessment.
11:18
Speaker 4: That's a very accurate assessment.
11:20
Speaker 5: And you know, hey, the puzzle and the mystery is
11:22
Speaker 5: what keeps us coming back, right, And so one thing
11:25
Speaker 5: I think that's kind of important to think about or
11:27
Speaker 5: consider here is I do think that it's mainly been
11:29
Speaker 5: a rotation of money rather than an exodus. And I think,
11:32
Speaker 5: you know, you could talk about.
11:34
Speaker 4: There being some fundamental reasons behind that.
11:36
Speaker 5: For instance, no self respecting long short manager just wants
11:40
Speaker 5: to say that, hey, like I'm just very long tech.
11:43
Speaker 4: They're fine having big big tilts within that tech.
11:46
Speaker 5: Bet say, you know, very very long semiconductors short software.
11:50
Speaker 5: So I think a lot of times what happens is
11:52
Speaker 5: it's somewhat of a very mechanical process when you have money.
11:56
Speaker 5: That is, when you have any negative news affecting semiconductors
12:01
Speaker 5: after an extremely hot run, when you're closing that trade,
12:05
Speaker 5: you're also adding to and closing up the short leg
12:07
Speaker 5: of the software trade. So I think a lot of
12:09
Speaker 5: the explosive activity is you have to just net this up.
12:12
Speaker 5: You have explosive movement in earnings revisions for semiconductors, that
12:17
Speaker 5: creates a lot of explosive price momentum, and when that
12:19
Speaker 5: turns kind of the net effect is the is the
12:22
Speaker 5: mirror on the other side as you have some kind
12:24
Speaker 5: of violent flows into software because it's been an unloved sector.
12:29
Speaker 2: So talking about semiconductors and the recent you know, struggles
12:35
Speaker 2: the last week or two, this is a sector that historically,
12:41
Speaker 2: again as long as you know we have like a
12:43
Speaker 2: history of the semiconductor sector, which isn't that long, it's
12:45
Speaker 2: you know, twenty five thirty years, historically, like profits in
12:50
Speaker 2: that sector have trended towards zero over time. But investors
12:54
Speaker 2: now we're betting that this time is different. How are
12:57
Speaker 2: we going to know what like when one of these
13:00
Speaker 2: ideas is going to actually win out, Like, what's what
13:04
Speaker 2: what do we look for to figure out what's actually
13:06
Speaker 2: happening there?
13:08
Speaker 5: I would say an important thing to look forward. It's
13:12
Speaker 5: always going to be about the end user demand, the
13:16
Speaker 5: end user need, the the commodity of you know, of
13:20
Speaker 5: what ships are. It's it is becoming more specialized. You
13:23
Speaker 5: can definitely make that argument. A lot of the chipneels
13:25
Speaker 5: are doing that now. That's you know, becoming more tailored
13:28
Speaker 5: to meet specific performance needs and even more so at
13:32
Speaker 5: the company level.
13:33
Speaker 4: But you know, at the end of the day, it.
13:34
Speaker 5: Will come down to if this thing is important to
13:38
Speaker 5: other people making money, it will be more used.
13:42
Speaker 4: It will be having more consistent floor of demand.
13:45
Speaker 5: You can expand capacity without that leading to as big
13:48
Speaker 5: of a bust as in past cycles.
13:51
Speaker 4: And you know, I think that's what you do.
13:54
Speaker 5: Hear a lot of talk about and it's one thing
13:56
Speaker 5: that obviously the semiconductor management teams are very cognizant of
13:59
Speaker 5: because if you go through any conference call, whether it's
14:03
Speaker 5: in Nvidia to the semi CAAP equipment companies or Micron,
14:08
Speaker 5: all of them are talking about how they are planning out,
14:11
Speaker 5: both from their customers and from their suppliers, what the
14:14
Speaker 5: supply chain will look like, and they're trying to estimate
14:17
Speaker 5: that over a period of years. Of course, the counterpoint
14:20
Speaker 5: to that is this is impossible to do. It requires
14:24
Speaker 5: the end customer to have a lot of knowledge of
14:26
Speaker 5: what final demand is going to be and for that
14:29
Speaker 5: to be there, successful and growing. And that's Hey, if
14:31
Speaker 5: we could count on that future always being the case,
14:33
Speaker 5: that would be easy. Would be sunshine and rainbows and
14:36
Speaker 5: lollipops every day.
14:38
Speaker 2: When do investors start to demand some kind of return
14:43
Speaker 2: on the investment by hyperscalers Because to this point it's
14:49
Speaker 2: just been like this nosedive of free cash flow, you know,
14:53
Speaker 2: kind of across the board there, which the idea, Look,
14:57
Speaker 2: I get it in any business, Hey, you got to
14:59
Speaker 2: spend money to make but you got to show me
15:01
Speaker 2: you're eventually going to make money. It feels like the
15:04
Speaker 2: next like eighteen months is kind of going to be
15:06
Speaker 2: put up a shut up time. Otherwise, how do you
15:09
Speaker 2: justify spending more? Is that reasonable or not reasonable?
15:14
Speaker 1: Yeah?
15:15
Speaker 5: I would say, hey, this year is a story of
15:18
Speaker 5: people demanding are a returron invested capital and not being
15:21
Speaker 5: happy what they've been getting if you look at the
15:23
Speaker 5: hyperscaler so I could say, okay, we have already, Yeah,
15:25
Speaker 5: we've already definitely entered the phase where markets are demanding
15:30
Speaker 5: more than what they're getting, or at the very least
15:32
Speaker 5: they're not confident in these in these earning streams. So yeah,
15:36
Speaker 5: I would look at that time frame as being fairly
15:38
Speaker 5: important because I also think it feeds into kind of
15:41
Speaker 5: the larger question of we've been in an environment where
15:46
Speaker 5: it's everyone's kind of more or less over the past year,
15:50
Speaker 5: as enterprises have more and more adopted or at least
15:53
Speaker 5: on some pilot.
15:53
Speaker 4: Programs of AI. Hey everyone's dipped their toe in the water,
15:56
Speaker 4: But who's actually going to use this to swim and
15:59
Speaker 4: to swim without without life jackets and really build up
16:02
Speaker 4: whether that's on prem or or kind of more depth
16:05
Speaker 4: or a more kind of strategic codified AI strategy. We
16:10
Speaker 4: don't really know that yet. We're still very much in
16:12
Speaker 4: the testing phase.
16:12
Speaker 5: So difficult to say a timeframe, But hey, twelve to
16:15
Speaker 5: eighteen month sounds good to me.
16:16
Speaker 2: Perfect. Let's take I'm sorry not let's take Luke. I
16:20
Speaker 2: appreciate you joining us today and always good to catch
16:23
Speaker 2: up with you and we'll talk to you again soon,
16:25
Speaker 2: my pleasure.
16:25
Speaker 4: I have a good one, sir.
16:27
Speaker 6: All right, time for trivia here on the Financial Exchange
16:30
Speaker 6: and today is Tom hanks seventieth birthday. Hanks has been
16:34
Speaker 6: a dominant force as the box office, as we all know,
16:37
Speaker 6: mostly due to his role in the Toy Story Movie.
16:40
Speaker 6: So our trivia question today, what is the highest grossing
16:45
Speaker 6: non toy story movie of Tom Hanks's career? Once again,
16:49
Speaker 6: what is the highest grossing non Toy story movie of
16:53
Speaker 6: Tom Hanks's career? Be the sixth person today to texts
16:57
Speaker 6: us at six one seven two thirteen eighty five with
17:01
Speaker 6: the correct answer along with keyword trivia, and you want
17:05
Speaker 6: a Financial Exchange Show T shirt Once again the six
17:08
Speaker 6: correct response to Texas to the number six one seven
17:11
Speaker 6: three six two thirteen eighty five with the correct answer
17:15
Speaker 6: along with keyword trivia, We'll win that T shirt. See
17:18
Speaker 6: complete contest rules at Financial Exchange Show dot com.
17:23
Speaker 2: I think I know the answer on this. I'm between
17:27
Speaker 2: two movies, but I think I know the answer on this.
17:31
Speaker 2: Is this inflation adjusted or no? No, Okay, I'm pretty
17:34
Speaker 2: sure I know the answer. Still Uh, let's see, Meta
17:39
Speaker 2: is going to be putting uh this, I want to
17:41
Speaker 2: cover the story. Meta is going to be putting an
17:43
Speaker 2: AI chip into production in September as it looks to
17:46
Speaker 2: double computing capacity. Memo shows that's the headline from Reuters.
17:50
Speaker 2: And you know, we were just talking with Luke about semiconductors. Listen,
17:55
Speaker 2: whenever there are profits anywhere in any business, those profits
17:59
Speaker 2: serve as a sig for other businesses to get into
18:02
Speaker 2: that business. Hey, I want some of that. Like it's
18:05
Speaker 2: it's you know, it's the classic you know move that
18:08
Speaker 2: we see. So you've obviously got you know, in video
18:11
Speaker 2: making a ton of money, AMD, Broadcom, all these companies,
18:15
Speaker 2: and so it's not surprising that other companies are trying
18:18
Speaker 2: to spool up production for these things. The big thing, though,
18:23
Speaker 2: most of them don't actually have any facilities at which
18:27
Speaker 2: they can make their own semiconductors. Meta just as an example,
18:31
Speaker 2: it's designing their chips in house. But Meta doesn't have
18:35
Speaker 2: any fabs that they run or anything like that. Like
18:38
Speaker 2: Mark Zuckerberg's not good at doing that. That's not what
18:40
Speaker 2: they do. It's not their business. So it's still you know,
18:44
Speaker 2: is a question of okay, you're going to want to
18:47
Speaker 2: make your own chips. There still are only so many
18:50
Speaker 2: companies that actually can produce those chips, and I don't
18:54
Speaker 2: really think there's anyone who has like the capital to
18:56
Speaker 2: get into wanting to build fabs for for chips now,
19:00
Speaker 2: So you still have a bottlenook there in the actual
19:02
Speaker 2: production of the chips, even though new companies are designing them.
19:06
Speaker 3: Why would you want to to design them? No, I'm sorry,
19:09
Speaker 3: not design, but manufacture.
19:11
Speaker 2: You've got to spend billions of dollars and five years
19:15
Speaker 2: in order to bring the thing to market, and you
19:17
Speaker 2: don't know what the market's actually going to look like then,
19:21
Speaker 2: Like you, if you've got to if you've got to
19:22
Speaker 2: start a company and spend thirty billion dollars in order
19:25
Speaker 2: to build these, you just don't know if you're going
19:28
Speaker 2: to get it to payoff. Quick Break, Prive Answer and
19:31
Speaker 2: Wall Street Watching.
19:31
Speaker 1: Next, bringing the latest financial news straight to your radio.
19:41
Speaker 1: Every day. It's the Financial Exchange on the Financial Exchange
19:45
Speaker 1: Radio Network, till out fom whoa Street Watch trecking the stocks,
19:51
Speaker 1: the data, and the headlines driving markets so far today
19:55
Speaker 1: right here on the Financial Exchange Radio Network.
20:00
Speaker 6: Oh and now seeing a nice little rally in tech
20:02
Speaker 6: as traders continue to monitor developments out of the Middle
20:06
Speaker 6: East after the US and Iran exchanged attacks. Right now,
20:10
Speaker 6: the Dow is up about a quarter percent, SMP five hundred,
20:13
Speaker 6: up over half a percent, NASDAC up over seven tents
20:17
Speaker 6: of one percent or one hundred and eighty four points higher,
20:20
Speaker 6: RUSS two thousand and now up one point one percent.
20:23
Speaker 6: Ten youre, treasurreeled down one basis point at four point
20:26
Speaker 6: five to five percent, and Oil down nearly two percent lower,
20:30
Speaker 6: trading right around seventy two dollars a barrel. Micron said
20:34
Speaker 6: it's raising its plan spending on new plants in the
20:37
Speaker 6: US to two hundred and fifty billion dollars to help
20:39
Speaker 6: meet unprecedented demand for its chips driven by the fast
20:43
Speaker 6: growth of AI infrastructure. Micron shares a rallying seven percent. Meanwhile,
20:48
Speaker 6: Meta unveiled a version of its AI model use Spark
20:51
Speaker 6: one point one, that includes a new paid tier for developers,
20:55
Speaker 6: marking the first time Meta has charged businesses for access
20:59
Speaker 6: to its models. Meta shares are edging higher elsewhere. Pepsi
21:04
Speaker 6: reported mixed quarterly results ahead of the open, citing consumer
21:08
Speaker 6: budgets were tightening due to rising inflationary pressures. However, PEPSI
21:12
Speaker 6: saw solid international demand. PEPSI down by three percent and
21:17
Speaker 6: AstraZeneca scher is sinking six percent after the biopharmaceutical company's
21:21
Speaker 6: heart disease drug failed to meet its target in late
21:26
Speaker 6: stage clinical trials. I'm Tucker Silva and that is Wall
21:29
Speaker 6: Street Watch. On the previous segment, we asked you the
21:32
Speaker 6: trivia question, what is the highest grossing non toy story
21:38
Speaker 6: movie of Tom Hanks's career. That would be It would
21:43
Speaker 6: not be Forrest Gump, it would not be Castaway, it
21:46
Speaker 6: was not Sleepless in Seattle. Those were all guesses. The
21:50
Speaker 6: correct answer was the Da Vinci Code and Liz and
21:54
Speaker 6: Grotton was our winner today taking on a Financial Exchange
21:57
Speaker 6: Show t shirt.
21:57
Speaker 2: Congrats to Liz. We played every day here.
22:01
Speaker 6: On the Financial Exchange. See complete contest rules at Financial
22:05
Speaker 6: Exchange Show dot com.
22:07
Speaker 2: Peace in the in CNBC, Delaying social security reform raises
22:12
Speaker 2: risk for bond markets and the economy research finds We've
22:16
Speaker 2: talked at length about how as of right now, the
22:21
Speaker 2: estimates are that the Social Security Trust Fund will be
22:25
Speaker 2: depleted by the end of twenty thirty two, which I
22:29
Speaker 2: did the math mark that's six years away, so it's
22:32
Speaker 2: pretty close. When I first started in this business, it was,
22:35
Speaker 2: you know, twenty five years away, and that date keeps
22:38
Speaker 2: moving closer, and we keep moving, you know, further along,
22:41
Speaker 2: and so it's getting shorter. Do you buy that there
22:48
Speaker 2: is a material risk to bond markets as a result
22:52
Speaker 2: of this? And the reason that I ask is, you know,
22:55
Speaker 2: we always hear, you know, whenever we start talking about
22:58
Speaker 2: the deficit, well, this is going to cause X, y
23:00
Speaker 2: and z in the bond market. And to this point
23:04
Speaker 2: it really hasn't been clear that there's been any influence
23:08
Speaker 2: on yields by the amount of debt outstanding or this
23:12
Speaker 2: happening or that happening. But rather it's more just, hey,
23:16
Speaker 2: here's where we expect you know, growth and inflation to
23:18
Speaker 2: be for the US. So I guess, after being in
23:22
Speaker 2: this business for almost twenty years and seeing how bonds
23:25
Speaker 2: have reacted to a number of different things, I am
23:29
Speaker 2: going to say that the US may occupy such a
23:32
Speaker 2: unique position that it's unclear to me that the bond
23:36
Speaker 2: market would react in any particular way based on social
23:39
Speaker 2: security not being reformed in time.
23:41
Speaker 3: It's one factor interest rates trended down from the Vulgar disinflation,
23:46
Speaker 3: which is what researchers call that nineteen seventy nine to
23:51
Speaker 3: nineteen eighty three or so period during which the FED
23:54
Speaker 3: tightened the money supply and inflation came down, and it's
23:58
Speaker 3: consequently called Vulkar disinflation because he was fed share Interest
24:03
Speaker 3: rates came down from that point roughly through COVID, and
24:08
Speaker 3: since then they've been trending back up. So there does
24:09
Speaker 3: appear to have been a change in the trend. It's
24:12
Speaker 3: probably not a coincidence. There was an explosion of debt
24:14
Speaker 3: and deficits both here and around the world. It actually
24:18
Speaker 3: started during the Great Recession. We had to run some
24:23
Speaker 3: would argue, big deficits then and thereafter to support the
24:27
Speaker 3: jobs market, which was languid for several years anyway, So
24:31
Speaker 3: for the past fifteen years we've been really tempting fate.
24:34
Speaker 3: Hard to say whether it hasn't affected these big deficits
24:37
Speaker 3: and debt have not affected interest rates. They might be
24:40
Speaker 3: lower without it. We just don't know. It's very hard
24:41
Speaker 3: to control for that, is there. So the big quote, Look,
24:45
Speaker 3: we're headed for a fiscal disaster that will threaten the
24:49
Speaker 3: reserve currency status of the dollar. That will push interest
24:52
Speaker 3: rates higher, That will reduce our standard of living, not
24:55
Speaker 3: right away, but gradually over time. The only question is
24:58
Speaker 3: does it happen abruptly? Could suddenly wake up and get
25:02
Speaker 3: jolted out of their sleep with a start and decide,
25:04
Speaker 3: oh my god, we need two percentage points more to
25:08
Speaker 3: loan the government money for ten years than we were previously,
25:11
Speaker 3: or does it happen? Is it happening gradually? I don't
25:14
Speaker 3: know the answer to that. The point of the article
25:16
Speaker 3: is we're going to need to borrow a lot more
25:18
Speaker 3: to fund benefits. If benefits are not changed is of course,
25:22
Speaker 3: anybody with a brain knows they should be. I don't
25:24
Speaker 3: mean reduced for people getting them. I mean reduced for
25:27
Speaker 3: people like me. I should get less than I was promised.
25:30
Speaker 3: I should be retiring at seventy, not sixty seven. I'll
25:33
Speaker 3: live with that. Maybe other gen actors don't feel the
25:36
Speaker 3: same way, but I do, because it's just fiscal reality.
25:40
Speaker 3: If we don't face the music on that, yeah, interest
25:42
Speaker 3: rates will be higher. I don't know if it's going
25:44
Speaker 3: to be gradual or abrupt.
25:46
Speaker 2: I mean, here's the thing, there's no free launch, one
25:49
Speaker 2: way or another. They're going to need to be sacrifices
25:54
Speaker 2: that are made. It's just a case of what form
25:56
Speaker 2: do you want those sacrifices to to manifest in. It's okay,
26:03
Speaker 2: do you want you know, potentially higher interest rates and
26:05
Speaker 2: structurally higher inflation because of you know, less demand for
26:09
Speaker 2: the dollar or something like that. It could be in
26:13
Speaker 2: the form of, you know, increased solid security taxes, it
26:15
Speaker 2: could be in the form of reduced benefits. It could
26:17
Speaker 2: be in the form of you know, benefits being paid
26:20
Speaker 2: out later. There's no free lunch on any of this.
26:24
Speaker 2: And I just find that the the hubris that's out
26:28
Speaker 2: there that oh, like, you know, like we can just
26:32
Speaker 2: keep you know, doing what we're doing and nothing will
26:33
Speaker 2: ever go wrong is kind of ridiculous. Yeah, But the
26:37
Speaker 2: point that I do struggle with is, Look, I've seen
26:40
Speaker 2: so many things in the last fifteen years where people
26:42
Speaker 2: have said, oh, like this is going to cause interest
26:45
Speaker 2: rates to spike, and it hasn't.
26:49
Speaker 3: You know, Like, I don't know why you make that call.
26:51
Speaker 3: It's too much else going on in the account, I know.
26:53
Speaker 2: But like people love to talk, they do.
26:55
Speaker 3: I mean, it's not hubris, is kind it's it's wilful, unmitigated,
26:59
Speaker 3: unforgivable stupid on the part of our leaders.
27:01
Speaker 2: It can be both.
27:03
Speaker 3: Yeah, it could be yeah in the sense of, hey,
27:05
Speaker 3: AI is going to fix all this. Don't worry, We'll
27:07
Speaker 3: have higher productivity. That's the new sort of fanciful escape clause.
27:15
Speaker 3: You know, history's going to judge us, just like we
27:17
Speaker 3: judge the pre Civil War generation very unkindly. It seems
27:20
Speaker 3: obvious in retrospect. You read books, the chapter is the
27:23
Speaker 3: Brute the coming storm, like you didn't know it at
27:25
Speaker 3: the time. You can't read history about you know this.
27:27
Speaker 3: You're a history scholar. You can't read history backwards in
27:30
Speaker 3: this case, though you can. We know it's coming. It's
27:33
Speaker 3: been widely publicized. To do nothing about it is malpractice.
27:38
Speaker 3: Future generations will not live as well as we did.
27:41
Speaker 3: That's a certainty, absent a productivity miracle, which you can't
27:45
Speaker 3: rule out, but is unlikely. It's said, folks.
27:49
Speaker 2: The Armstrong Advisory Group has a guide available this month.
27:52
Speaker 2: It's titled Talking to your Kids about Inheritance, and I
27:57
Speaker 2: actually think it's it's one of the more more important
28:00
Speaker 2: ones that we've put out there, because look, it's anytime
28:06
Speaker 2: that someone passes away. It is a hugely stressful emotional situation.
28:12
Speaker 2: You're going through a ton at that time. And the
28:15
Speaker 2: time to talk to you know, children about in inheritance
28:19
Speaker 2: is when everything's fine and those emotions aren't high and
28:22
Speaker 2: everyone's not on edge because you know, listen, once you've
28:26
Speaker 2: gotten to the point where someone in your family's passed
28:28
Speaker 2: away number one, again, everyone is just on edge number two.
28:33
Speaker 2: Half the time, no one even knows where like the
28:35
Speaker 2: stuff is and like what you're trying to account for.
28:38
Speaker 2: And so this guide helps you to put together some
28:42
Speaker 2: thoughts as to how you can talk to your family
28:44
Speaker 2: about what you might be leaving your heirs. It doesn't
28:47
Speaker 2: mean you have to tell them every dollar that you have.
28:49
Speaker 2: It doesn't mean that you have to, you know, say
28:51
Speaker 2: this is exactly you know what happens, but some general
28:54
Speaker 2: ideas about, hey, what to communicate and how to communicate
28:58
Speaker 2: so you can start that conversation because I do know
29:00
Speaker 2: that it's not easy to do that. It's a hard
29:03
Speaker 2: conversation to have too, it's easier to do it sooner,
29:06
Speaker 2: and so that's why we put together this guide. Again
29:09
Speaker 2: it's titled talking to your Kids about Inheritance and There
29:12
Speaker 2: are two ways to request it. Number one you can
29:14
Speaker 2: call eight hundred three nine three for zero zero one.
29:18
Speaker 2: Number two, you can go to Armstrong Advisory dot com,
29:21
Speaker 2: click the monthly Guide button and then you can request
29:24
Speaker 2: it there. That phone number again is eight hundred three
29:27
Speaker 2: nine three for zero zero one, or go to Armstrong
29:31
Speaker 2: Advisory dot com.
29:33
Speaker 1: The proceeding was paid for by Armstrong Advisory Group, a
29:35
Speaker 1: registered investment advisor. Nothing in the ad or in any
29:38
Speaker 1: Armstrong Guide a specific financial, legal or tax advice. Consult
29:41
Speaker 1: your own financial, tax, and estate planning advisors before making
29:44
Speaker 1: any investment decisions. Armstrong may contact you to offer investment
29:47
Speaker 1: advisory services.
29:48
Speaker 2: Take a quick break. When we return, we got stack roulettes.
29:52
Speaker 1: Subscribe now to our YouTube page, where you'll find daily
29:55
Speaker 1: interviews and full shows of the Financial Exchange. We'll get
29:58
Speaker 1: you cut up on anything and everything you might have
30:01
Speaker 1: missed right here on the Financial Exchange, from FED decisions
30:06
Speaker 1: to market moves. Watch the Financial Exchange live on x face.
30:10
Speaker 1: He's the Financial Exchange.
30:20
Speaker 6: If you missed any of our shows from this week,
30:23
Speaker 6: you can find them on our YouTube page. We stream
30:26
Speaker 6: the show live every day, but also archive every hour
30:30
Speaker 6: and all of our interviews as well, So simply go
30:34
Speaker 6: to YouTube search for the Financial Exchange and be sure
30:38
Speaker 6: to hit that subscribe button.
30:41
Speaker 2: Mark what do you got for stack?
30:42
Speaker 3: Roulette Talker already touched on this lightly about twenty minutes ago,
30:46
Speaker 3: but I want to emphasize something in the PEPSI release.
30:49
Speaker 3: PEPSI warn the Financial Times and other outlets reporting that
30:52
Speaker 3: elevated fuel prices will intensify inflationary pressure over the rest
30:56
Speaker 3: of the year as the nascent recovering US sales blah
30:59
Speaker 3: blah blah blh. Okay, so sales have thought, Sorry, I
31:02
Speaker 3: lost interest.
31:03
Speaker 2: No, no, it's fine.
31:04
Speaker 3: So when I'm losing interest in this, I guess I
31:06
Speaker 3: can't expect you to exhibit anything. But listen, Yeah, please
31:10
Speaker 3: listen carefully to what I'm about to lose interest in.
31:13
Speaker 3: They're citing, this is not a surprise that higher input
31:15
Speaker 3: cost inflation will put upward either upward pressure on their
31:19
Speaker 3: prices or downward pressure on their margins. It's going to
31:22
Speaker 3: be one or the other. And it's really not clear
31:23
Speaker 3: to me where things are going to fall out. Because
31:26
Speaker 3: they also go on to say that productivity savings, which
31:28
Speaker 3: I guess means firing people and asking others to do
31:31
Speaker 3: more work. I don't know what else that could mean,
31:33
Speaker 3: and refund claims for tariffs will mitigate a good portion
31:36
Speaker 3: of those higher costs, So not clear that they're going
31:39
Speaker 3: to be passing these costs through. I guess either way
31:41
Speaker 3: it would be bad because their economics are similar to
31:44
Speaker 3: other consumer staples companies. I think either we're talking about
31:48
Speaker 3: reduced margins because they can't pass the costs along, or inflation.
31:52
Speaker 3: Relatively speaking, it doesn't mean overall inflation is going to
31:55
Speaker 3: go upward, that trend inflation will rise. Sure, either way,
31:57
Speaker 3: it's not good news, and it's probably baked in did
32:00
Speaker 3: the cake at this point, no matter what happens to
32:02
Speaker 3: oil prices from here on in.
32:04
Speaker 2: I want to talk a little bit about a piece
32:08
Speaker 2: from the Philadelphia Inquirer today. The two of you are
32:15
Speaker 2: familiar with the idea of sports gambling, yes, where you
32:18
Speaker 2: decide to make a wager on the outcome of a
32:22
Speaker 2: game or something or other. Sure, yes, so. One of
32:26
Speaker 2: the major sports betting platforms in the United States is FanDuel,
32:31
Speaker 2: and this piece from the Inquirer details this story. I'll
32:36
Speaker 2: quote here as the twenty twenty season. NFL season kicked off,
32:39
Speaker 2: Terry Thompson picked up his phone and placed a wager
32:41
Speaker 2: with FanDuel Sportsbook on his favorite team, the Philadelphia Eagles.
32:45
Speaker 2: It was his first time gambling through an app, and
32:47
Speaker 2: he soon started placing micro bets, which are small in
32:50
Speaker 2: game wagers on something as small as whether the next
32:52
Speaker 2: play would be a pass or a run. He grew
32:55
Speaker 2: addicted to the effortless, rapid fire action every game, every quarter,
32:58
Speaker 2: every play, click click click, Thompson would eventually wager. Would
33:03
Speaker 2: ultimately wager eighteen point five million dollars with FanDuel, earning
33:08
Speaker 2: him VIP status with the company. It then goes to
33:12
Speaker 2: the on to say that he basically ended up losing
33:15
Speaker 2: like two million dollars. So the eighteen and a half
33:16
Speaker 2: was like the total accumulation of bets, but he lost
33:19
Speaker 2: two million dollars. The part that is most disturbing about this,
33:24
Speaker 2: there's two number one. Sometime around Thanksgiving in twenty twenty four,
33:34
Speaker 2: FanDuel sent him an email with a personalized video from
33:40
Speaker 2: Philadelphia Phillies player Bryce Harper, just basically saying hey, like
33:45
Speaker 2: you're you know, like a great guy, like you know,
33:47
Speaker 2: good luck, you know, blah blah blah, like nothing about gambling,
33:50
Speaker 2: but just you know, this encouraging message from a former
33:56
Speaker 2: MVP of Major League Baseball who's still playing.
33:58
Speaker 6: I'm sorry, when did they say? At what point did
34:00
Speaker 6: they send this message from.
34:02
Speaker 2: Harper November of twenty twenty four and why did they
34:05
Speaker 2: send this video? Because because he had just lost like
34:08
Speaker 2: a bunch of money in the NFL season, so they
34:10
Speaker 2: sent him at a boy video. Yes, using a professional
34:14
Speaker 2: athlete who's currently active. Oh boy. Beyond that, this also
34:19
Speaker 2: details and against a number of a lot of this
34:21
Speaker 2: is claims that the video like happened, happened, happened. But
34:25
Speaker 2: also apparently when you're in this VIP you know program
34:29
Speaker 2: with Fandel which requires you to bet at least one
34:31
Speaker 2: hundred and twenty thousand dollars a year with them, which
34:34
Speaker 2: is just wild to me. Uh, you get assigned a
34:38
Speaker 2: VIP manager who then like basically texts you and talks
34:42
Speaker 2: to you about like, oh, like, how's your life going,
34:45
Speaker 2: blah blah blah, here's this and that, and again apparently
34:48
Speaker 2: there are some tickets to a suite. Apparently one year
34:51
Speaker 2: he had lost a bunch of money and his rep
34:53
Speaker 2: was like, hey, you know, I get that you're like
34:56
Speaker 2: taking it easy right now, but maybe try for a
34:58
Speaker 2: fresh start in you know, the new year in January
35:01
Speaker 2: or February. January, February comes around, FanDuel sends him to
35:05
Speaker 2: the Super Bowl on their dime with a bunch of
35:07
Speaker 2: tickets and stuff. And I again, I've I've evolved this
35:12
Speaker 2: view over the last five or six years since sports
35:15
Speaker 2: betting has been legalized. If you want to have sports
35:18
Speaker 2: betting legalized, that's fine. It can't be on the phones.
35:21
Speaker 2: It's it's too dangerous. The amount that Americans lost in
35:26
Speaker 2: sports betting wagers last year rose to two hundred and
35:29
Speaker 2: fifty billion dollars cumulatively, cumulatively, and that's that's lost. Like,
35:38
Speaker 2: I don't know how we can think this is a
35:40
Speaker 2: good thing when this is where we're going, and it's
35:46
Speaker 2: it's not that some people can't use it responsibly. I
35:49
Speaker 2: know some people can, but I gotta tell you, I
35:52
Speaker 2: keep hearing more and more stories about twenty four year
35:55
Speaker 2: olds that are indebted to online sports books, and it's
35:59
Speaker 2: pretty clear that we just can't handle this in the aggregate.
36:02
Speaker 3: I think we need to give this back to the mob.
36:05
Speaker 3: There were there were incentives. I don't mean the the
36:08
Speaker 3: broad populace.
36:09
Speaker 2: I mean no, I.
36:11
Speaker 3: No, I get back into the underground economy. They were,
36:15
Speaker 3: this is gonna sound no. I'm only half kidding though
36:18
Speaker 3: I know, I know, but I think we can't wait.
36:21
Speaker 3: Italian American, I think they excuse me. They handled it
36:25
Speaker 3: pretty well. There were serious repercussions to trying to right
36:30
Speaker 3: to getting yourself over her extended.
36:32
Speaker 2: Number one, it was like you couldn't find it to
36:34
Speaker 2: begin with, Like.
36:35
Speaker 3: The nowhere to go.
36:36
Speaker 2: You had to like you go to this bakery, you
36:38
Speaker 2: go in the back. It wasn't just you had to
36:39
Speaker 2: know where to go, That's what I mean. It wasn't
36:42
Speaker 2: just that, like you had to like be able to
36:43
Speaker 2: convince like, oh, like sure, I'm like worthy of that same.
36:47
Speaker 3: That's not a shed you know, you see the little
36:49
Speaker 3: wire going to it that it.
36:51
Speaker 2: Was hard to find.
36:52
Speaker 3: Yeah, that's what I mean. Push it back to where
36:54
Speaker 3: it belongs. People who really well, people who are qualified
36:58
Speaker 3: will find it.
36:59
Speaker 2: And I know you're not like vouching for the mafia.
37:03
Speaker 3: But it's like there's no such thing anyway.
37:05
Speaker 2: I just don't know that like this is good for anyone.
37:12
Speaker 2: I just don't know this is good for anyone.
37:15
Speaker 6: I mean, the only pushback I would say on that
37:17
Speaker 6: is like even the black market betting still has access
37:22
Speaker 6: on phones for betting, but.
37:24
Speaker 2: You have to look like you have to do some
37:26
Speaker 2: work to get there. And even then again this is
37:29
Speaker 2: not really really I don't I don't gamble on sports,
37:33
Speaker 2: so I don't know. But I have friends who have
37:35
Speaker 2: like done some of like the offshore stuff his sporic
37:39
Speaker 2: and like no, but they've been like locked out of
37:42
Speaker 2: their accounts and money's been taken because there's not like
37:44
Speaker 2: it's not their money anymore once it's outside the US
37:47
Speaker 2: Monday morning text. So so this stuff is real. Oh yeah,
37:53
Speaker 2: So I don't know, Like I just I really am
37:58
Speaker 2: just not sure that cut out for this. The play
38:01
Speaker 2: by play betting needs to go away. I agree with that.
38:04
Speaker 6: You know, is this gonna be a ball or a
38:06
Speaker 6: strike here that now, like that needs to go.
38:09
Speaker 2: So, I don't know, it just it doesn't feel good.
38:12
Speaker 2: Let's take a quick break for the rest of the day.
38:15
Speaker 2: We're gonna be back tomorrow. World Cup quarterfinals kickoff at
38:19
Speaker 2: for Eastern today with France Morocco. We'll see you tomorrow. Hi,