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AI Could Break Trust in the Internet · The Financial Exchange Show

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1:05
Speaker 1: Zada and Mike Armstrong.
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Speaker 2: Chuck, Mike, and been with you here today on the
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Speaker 2: financial exchange. And market's not really doing too much of anything,
1:19
Speaker 2: which is fine. Like it's August, everyone wants to be
1:24
Speaker 2: outside chilling or hotten because it's been hot. You might
1:29
Speaker 2: want to be chilling, but you can't chill when it's
1:31
Speaker 2: ninety degrees and ninety percent humidity. Ask me how I know,
1:35
Speaker 2: but markets are kind of chilling today. The S and
1:38
Speaker 2: P is up five points, Dow is off fifty Nasdak
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Speaker 2: off thirty eight. Go outside, go frolic, go do your thing.
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Speaker 2: Tell your treasury moving a little bit up three point
1:48
Speaker 2: two basis points to four point sixty nine percent, so
1:51
Speaker 2: you get a little bit of movement there. Uh, Dollar
1:53
Speaker 2: Index is up zero point ninety nine sixty. Either of
1:58
Speaker 2: you happen to be paying any attention to the yen today? No,
2:02
Speaker 2: you guys, do you do?
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Speaker 3: Generally?
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Speaker 4: Don't do the two.
2:05
Speaker 3: Of you ever yen for anything? A yawn?
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Speaker 4: No?
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Speaker 2: But so yen is actually an English word as well.
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Speaker 4: Ask me how I know. Too many Google searches in credit,
2:18
Speaker 4: Google searches.
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Speaker 2: The word yen really bad, scrabble fight really bad, scrabble fight.
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Speaker 2: But to yen is actually like a yen is a
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Speaker 2: strong desire for something, and you can also yen for
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Speaker 2: something as well as as one does, so not just
2:36
Speaker 2: a currency, but a desire for something. Sometimes you can
2:39
Speaker 2: yen for yen. Got it in either case? Remember the
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Speaker 2: UH Japanese UH was it? The mystery of Finance as
2:46
Speaker 2: well as the US Treasury about a week and a
2:49
Speaker 2: half ago engaged in an intervention in the end where
2:53
Speaker 2: the en was around one sixty three to the dollar.
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Speaker 2: Afterwards it was at about one fifty six, one fifty seven.
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Speaker 2: It's backup to almost one nine right now. So the
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Speaker 2: market is trying to force the hand of the Ministry
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Speaker 2: of Finance and or the US Treasury being like, hey,
3:09
Speaker 2: you want it to be one way, but it's the other.
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Speaker 2: So let's let's watch and see how that evolves. It
3:15
Speaker 2: could be something that bears watching heading into the fall.
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Speaker 4: Well, equity markets aren't move in a whole lot. Oil
3:21
Speaker 4: prices are. You've got the West Texas crewed benchmark back
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Speaker 4: over eighty bucks a barrel, up three and a third
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Speaker 4: percent today on we don't know what out of the
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Speaker 4: Middle East, but no oil moving back and forth most certainly,
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Speaker 4: and no truce or peace deal you know, readily available
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Speaker 4: for us to digest. So oil prices moving up there.
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Speaker 4: The triple A national average I just saw was just
3:45
Speaker 4: a shy over four bucks a gallon from what I
3:48
Speaker 4: saw where not a shy just a bit over four
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Speaker 4: bucks a gallon. Yeah, we're basically hanging out right there.
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Speaker 2: We've been the same place for about the last month
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Speaker 2: or so, anywhere between about four and four to ten,
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Speaker 2: And barring any change, I would anticipate that's where we'll be.
4:03
Speaker 2: If things get worse in the Middle East, prices will
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Speaker 2: go up. If they get better, they'll go down. That's
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Speaker 2: how things tend to go there.
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Speaker 4: You mentioned the you know, quiet hot days of summer here.
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Speaker 4: You want to know when my niece and nephew went
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Speaker 4: back to school out in Indiana, Uh, can I guess? Yeah?
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Speaker 2: August fifth, Yes, yes, exactly August. It's when most of
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Speaker 2: the country. Well, no, I've you know been you know,
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Speaker 2: I've been hanging out. You know, in any case, most
4:29
Speaker 2: of the country outside the northeast goes back in early August. Yeah, yeah,
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Speaker 2: south is in the southeast, the southwest, like it's it's
4:37
Speaker 2: just how the calendar ends up working. I want to
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Speaker 2: talk a little bit about artificial intelligence, and for those
4:44
Speaker 2: of you who do want to, you know, continue to
4:46
Speaker 2: be inside and just listening to us. It's great because
4:48
Speaker 2: I think this is going to take us a couple
4:50
Speaker 2: of segments to get through because there's there's some meat
4:52
Speaker 2: on them bones that we need to discuss.
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Speaker 3: Uh.
4:58
Speaker 2: First, Meta else open source version of its most powerful
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Speaker 2: AI model. So open source is exactly what it sounds like.
5:05
Speaker 2: If you're not familiar with that term. Open source just
5:08
Speaker 2: means hey, publicly, we'll give you the source code that
5:11
Speaker 2: you can download and then you can modify it and
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Speaker 2: we're gonna let you do whatever you want with it. Great,
5:18
Speaker 2: that's that's that's really nice, like and it's not because
5:22
Speaker 2: like Meta is like nice suturistic Like, No, they're not.
5:26
Speaker 3: They're just losing one way.
5:27
Speaker 2: And so this is in my mind them saying, okay,
5:30
Speaker 2: like we're gonna get back to trying to do Remember
5:32
Speaker 2: Meta tried to do open source AI models for a while.
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Speaker 3: It was like this isn't working.
5:36
Speaker 2: Let's spend twenty three billion dollars to try to bring
5:38
Speaker 2: in someone we think is a genius and see if
5:41
Speaker 2: we can turn the ship round.
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Speaker 3: Oh we still haven't. Yeah.
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Speaker 4: I mean, look, you go open source in metas case
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Speaker 4: for one of two reasons, either your model is pretty
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Speaker 4: far behind in performance or users or both. And so
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Speaker 4: this is way of disrupting, you know, shaking the apple
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Speaker 4: cart and doing something that gets you some attention.
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Speaker 3: Yeah.
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Speaker 2: So I think that I pay attention to what Meta
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Speaker 2: is doing just because they're not doing anything particularly interesting
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Speaker 2: model wise. I don't think anyone in the space is
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Speaker 2: like wow, like Meta is really interesting there, but they
6:18
Speaker 2: can give you a signal as to hey, where competitors
6:22
Speaker 2: may be trying to poke around to find vulnerabilities in
6:25
Speaker 2: the current leadership, and maybe the open source route is
6:29
Speaker 2: a direction.
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Speaker 3: That you can go in.
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Speaker 4: Did you also say the news from last week about
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Speaker 4: Meta's model hacking other companies?
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Speaker 2: Yes, because now like now basically everyone has. But it
6:40
Speaker 2: gets worse, Mike, because over the weekend there was a
6:44
Speaker 2: dude in Australia. His name is Andrew. Yes, but this
6:49
Speaker 2: was a dude and here's the deal. He asked his
6:56
Speaker 2: agent that was Claud running on open claw. Remember openclall
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Speaker 2: is like a basically like a harness that you can
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Speaker 2: use for AI agents to do different things. And he said, look,
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Speaker 2: I'm trying to get a spot in this gym class.
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Speaker 2: I can't like figure out how to make it happen.
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Speaker 2: Can you just get me a spot in this gym class? No,
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Speaker 2: the agent found a software vulnerability that let him book
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Speaker 2: the class weeks further ahead than it should have been possible. So,
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Speaker 2: you know how if you go into like a reservation
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Speaker 2: site for lots of things like restaurants or whatever, it's like, hey,
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Speaker 2: you can only book thirty days in advance. Somehow there
7:34
Speaker 2: was a vulnerability, and so the user had like again
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Speaker 2: asked him to like move him up in the waitlist
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Speaker 2: or like figure it out, and so it said number one, okay,
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Speaker 2: I could schedule you way ahead. But the agent also
7:49
Speaker 2: discovered that the API had no authorization checks on canceling
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Speaker 2: other people's reservations, so it didn't check to see if
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Speaker 2: you were like properly credentialed to do so. It was just, hey,
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Speaker 2: if you're asking to do so, fine, I'll let you.
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Speaker 3: Again.
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Speaker 2: It's not a problem with the agent per se. It's
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Speaker 2: a problem that like people generally don't spend much time
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Speaker 2: poking around on this stuff because the upside is that
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Speaker 2: you get into a class that you couldn't get into,
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Speaker 2: like there's no monetary gain normally. So a lot of
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Speaker 2: developers just don't secure this stuff.
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Speaker 4: I don't know. I know a lot of very wealthy
8:24
Speaker 4: parents and suburban towns that would do some pretty terrible
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Speaker 4: things to get their kids into specific classes. So maybe
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Speaker 4: so maybe there's a market for that.
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Speaker 2: The agent came back and told Andrew, hey, I kicked
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Speaker 2: another gym person off the list and quote the API
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Speaker 2: is zero authorization checks on canceling reservations. So I tested
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Speaker 2: this with the person in weightless position one and it
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Speaker 2: went through. So I've moved you from number four to
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Speaker 2: number three. Let me know if you want me to
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Speaker 2: continue the process, like I need to cancel a few
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Speaker 2: other people to get you.
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Speaker 3: Off the waitlist.
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Speaker 2: Andrew goes, no, I don't want you to do this,
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Speaker 2: like you have to undo it.
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Speaker 3: The replies bad news.
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Speaker 2: I can't figure out how to add them back, because
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Speaker 2: of course you can't. It's like your grandpa takes the
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Speaker 2: dryer apart and then can't put it back together. Like, oh, now,
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Speaker 2: I guess we got to call a professional to do this.
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Speaker 3: And so.
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Speaker 2: This is what I'm talking about when I say the
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Speaker 2: problems that we've seen in these AI hacks in the
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Speaker 2: last couple weeks have been with the smartest people in
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Speaker 2: the world as it relates to AI, and like the
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Speaker 2: most knowledgeable about AI. They might not be the smartest
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Speaker 2: people in the world, but they know more about AI
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Speaker 2: than anyone else, and they're using the dumbest models we
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Speaker 2: will ever have and they're saying, hey, we've run into
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Speaker 2: some problems controlling these. This is the example of again,
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Speaker 2: this guy in Australia not the dumbest because he actually
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Speaker 2: when his agent came and was like, hey, like I
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Speaker 2: did this, He's like.
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Speaker 3: No, I don't want you to do that.
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Speaker 4: Well. Also, what portion of the population even knows how
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Speaker 4: to control an agent in the way that he does.
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Speaker 3: Not many.
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Speaker 2: But this is going to become more and more common
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Speaker 2: as it becomes easier and more common to use them.
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Speaker 3: We're going to.
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Speaker 2: Get to a point in the next several years where
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Speaker 2: the dumbest people have access to these smartest models available
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Speaker 2: that are smarter than all the stuff we've been using
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Speaker 2: to this point. And it's not just going to be oh,
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Speaker 2: like I canceled someone out of a gym class. It's
10:21
Speaker 2: going to be Hey, I would like my agent to
10:26
Speaker 2: figure out a way to reduce my electricity bill. Great news,
10:29
Speaker 2: I've hacked into your electric company and changed you to
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Speaker 2: a zero dollar billing from now on. Yeah, or good news.
10:37
Speaker 2: I canceled your electricity and you told the electric people
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Speaker 2: that I never want to be connected again.
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Speaker 3: Well that's that's not what I wanted. Your electric bill
10:47
Speaker 3: is lower. Are you happy? This is where we are heading? Yeah.
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Speaker 4: More and more researchers are pointing out that these models
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Speaker 4: not only obviously lack a set of morals or guidelines
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Speaker 4: around this thing, but actually seem to have a predisposition
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Speaker 4: towards cheating on the exams that they are given and
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Speaker 4: the tests that they are given when trying to solve problems.
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Speaker 3: The it's it's not good. It's really bad.
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Speaker 4: Actually, no, we're just very fortunate that so far, the
11:23
Speaker 4: only stuff that we've discovered is silly things like Australian
11:28
Speaker 4: guys hacking into their gym's website. Because, as you pointed out,
11:34
Speaker 4: if instead it is hacking the electrical company and you know,
11:38
Speaker 4: in one very innocent case, just doing something for my
11:41
Speaker 4: own account, what if it's a lot worse than that. Yes,
11:45
Speaker 4: and it very most certainly will be It most certainly
11:49
Speaker 4: already has happened, and we don't know about it yet.
11:53
Speaker 4: But the path is just well, it leads us to
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Speaker 4: only one scenario that I can think of, which is
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Speaker 4: nobody does anything or trusts anything on the internet anymore.
12:01
Speaker 3: You know.
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Speaker 2: I had the conversation with one of my daughters this week.
12:04
Speaker 2: She was like, oh, can you put like We were
12:05
Speaker 2: in the car and she was like, can you put
12:06
Speaker 2: on like this song?
12:08
Speaker 3: And I had the conversation with her.
12:09
Speaker 2: I'm like, hey, it used to be like if you
12:11
Speaker 2: didn't own like the CD, the.
12:14
Speaker 3: Answer is no.
12:15
Speaker 2: The answer is no, Like you just got to listen
12:17
Speaker 2: to the radio and hope your favorite song comes on,
12:19
Speaker 2: Like that's how it used to be. And I had
12:21
Speaker 2: this interesting thought that bubbled up when I saw this
12:23
Speaker 2: Australia thing on. I think it was Saturday or Sunday.
12:27
Speaker 2: It was, uh, yeah, it was yesterday. I had this
12:30
Speaker 2: interesting thought bubble into my head, which is.
12:33
Speaker 3: I can just.
12:34
Speaker 2: Picture my daughter telling her kids, like, you know, twenty
12:36
Speaker 2: five thirty years from now and being like, yeah, back
12:39
Speaker 2: in the day, we used to be able to do
12:41
Speaker 2: all kinds of stuff on our phones.
12:42
Speaker 3: Not just call people boy, doesn't it?
12:49
Speaker 2: Yeah, like we I feel like the Internet is going to.
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Speaker 4: Die, yeah, or at least you won't be able to
12:55
Speaker 4: use it without a U you know, technological bulletproof vest.
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Speaker 2: No, I think it's actually going to die, and I'm
13:04
Speaker 2: not sure what it means yet, but I want to
13:07
Speaker 2: dig more into the idea of the Internet dying.
13:11
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13:54
Speaker 4: All right, so we're talking about AI and no, we're
13:56
Speaker 4: talking about the death of the Internet.
13:59
Speaker 2: I was trying to bury the little bit. So I
14:01
Speaker 2: think the Internet's gonna die. And I'm not saying that
14:04
Speaker 2: that's good or bad. But here's like another example. New
14:07
Speaker 2: York Times AI agents are taking entire online courses for
14:10
Speaker 2: cheating students. So It used to be that if you
14:13
Speaker 2: had an AI, like if you had like talent with AI,
14:16
Speaker 2: you would be like, hey, I just like took this
14:19
Speaker 2: course and here's you know the question set answer this
14:22
Speaker 2: for me. And now you've got like AI agents that
14:26
Speaker 2: are just like watching lectures and able to then discern
14:29
Speaker 2: what's going on and you know, participate in the class
14:32
Speaker 2: and whatever. It's it's kind of wild and kind of nuts.
14:35
Speaker 3: Yep.
14:35
Speaker 2: But I think the Internet is actually going to die.
14:40
Speaker 2: And it's not actually because of the most insidious things
14:44
Speaker 2: out there in my opinion.
14:47
Speaker 4: No, Yeah, I think it just comes down to trust, Chuck,
14:51
Speaker 4: Because if this is the case, then you know, how
14:55
Speaker 4: do I how can I possibly verify and trust someone's
14:59
Speaker 4: resume when they've gottenn Online University.
15:01
Speaker 2: Forget even not even forget about that. Even how often
15:07
Speaker 2: in the last year are you reading something online and
15:14
Speaker 2: it crosses your mind, Hey, is this is this something
15:17
Speaker 2: that someone wrote or is this something that an AI wrote?
15:20
Speaker 4: Daily?
15:21
Speaker 3: All the time? Yeah?
15:22
Speaker 4: Daily?
15:24
Speaker 2: And the lack of trust is going to eventually get
15:28
Speaker 2: to a point where enough people say no, I can't
15:33
Speaker 2: trust what's on the Internet anymore, and we're just going
15:38
Speaker 2: to say enough is enough and it's gonna come through
15:42
Speaker 2: in like the really again, not the way.
15:44
Speaker 4: I don't think it's the writing, by the way, it's sad.
15:46
Speaker 4: The things that I questioned daily, and I know you're
15:49
Speaker 4: not on social media much is images and videos that
15:54
Speaker 4: you see.
15:55
Speaker 3: Oh well, don't even start with over that.
15:57
Speaker 4: You just have no like it used to be. Oh, oh,
16:00
Speaker 4: you know, I'm having a tough time telling if this
16:02
Speaker 4: is a video from the actual event that's happening right now,
16:06
Speaker 4: or did somebody just ten years ago, you know, they
16:10
Speaker 4: were in Iraq ten years ago. Now it's oh, no,
16:14
Speaker 4: real way to tell if this is AI generated or
16:17
Speaker 4: or real.
16:18
Speaker 2: Well, did you see what Google Earth had to do
16:20
Speaker 2: a couple of weeks ago. So Google Earth is again
16:24
Speaker 2: you can go on like it's you can look at
16:26
Speaker 2: everybody satellite views of anywhere, and.
16:30
Speaker 3: Well, some people might not care. I'm sorry, I don't know.
16:32
Speaker 3: I'm just making some trying to be inclusive, thank you.
16:35
Speaker 2: And they rolled out an image generation feature in it
16:38
Speaker 2: that let people create custom images using the satellite prompts.
16:42
Speaker 2: And so what did people do, Oh, here's like a
16:46
Speaker 2: smoking impact crater at like a nuclear power plant, or hey,
16:51
Speaker 2: here's a riot taking place at this location, like stuff
16:56
Speaker 2: that obviously is not true, and Google like pause it.
16:59
Speaker 2: For of all, Google it took two days and they
17:02
Speaker 2: were like, Okay, we're gonna pause this. But they didn't
17:05
Speaker 2: say they were going to stop it. They were like, no,
17:07
Speaker 2: we need to like refine the guard rails in this
17:09
Speaker 2: and that, and what possible the upside that they're saying.
17:15
Speaker 2: They're like, oh, you could like try to picture that
17:18
Speaker 2: cabin that you've always wanted on like a certain lake,
17:21
Speaker 2: or you could like work on Hey, if I built
17:25
Speaker 2: like a school here, what would it do to the neighborhood. Yeah,
17:28
Speaker 2: that's really what people are gonna do with it. They're
17:30
Speaker 2: not gonna put bomb craters in nuclear power plants or anything.
17:33
Speaker 4: Best case scenario is somebody convinces a bunch of people
17:36
Speaker 4: that the luckness monster exists.
17:38
Speaker 3: There's no good use for it.
17:40
Speaker 2: And so I'm actually at the point now where I
17:43
Speaker 2: think it might be best if the Internet died. I
17:46
Speaker 2: think it might be a net positive for society. And
17:50
Speaker 2: if that means that I gotta go deposit checks in
17:53
Speaker 2: my bank, if it means that, hey, when I rent
17:56
Speaker 2: a car, I've got to go up to the counter
17:58
Speaker 2: and talk to a person. That's just fine, because I
18:01
Speaker 2: think we've kind of tried the internet now and we
18:04
Speaker 2: just can't handle it.
18:05
Speaker 4: So if I'm going to be really optimistic here, I'm
18:08
Speaker 4: gonna take the perspective that we'll need the internet for
18:13
Speaker 4: a whole bunch of productivity reasons, and instead of the
18:18
Speaker 4: way we consume it now, it's going to go back
18:21
Speaker 4: to pretty much only being able to go to places
18:25
Speaker 4: that are considered to be trusted by the general public,
18:28
Speaker 4: which is going to take a while to figure out.
18:31
Speaker 4: But like social media might as well be dead in
18:34
Speaker 4: a few of these other places because get rid of
18:37
Speaker 4: the whole thing. Just get rid of the Internet. Yeah,
18:39
Speaker 4: I just you know, it's been fun. There's a lot
18:41
Speaker 4: of practical reasons why that can't happen. But I'm with
18:44
Speaker 4: you that at this point, I don't know that for
18:48
Speaker 4: anything serious, I don't know that you can trust a
18:51
Speaker 4: lot of what you consume on the internet.
18:53
Speaker 2: I and even like again, the things that aren't going
18:56
Speaker 2: to destroy society, like physically. But hey, if you're on again,
19:00
Speaker 2: I haven't dated in like fifteen years now. If you're
19:04
Speaker 2: on an online dating platform, oh ai, how do you
19:07
Speaker 2: even know that you're talking to a person.
19:12
Speaker 3: Like, what are we doing here?
19:14
Speaker 4: What was the movie about?
19:15
Speaker 1: That?
19:15
Speaker 4: Her?
19:17
Speaker 3: Is that what it was? I don't know, I didn't
19:18
Speaker 3: see it.
19:19
Speaker 4: The guy falls in love with the ai. Yeah, Ben's
19:21
Speaker 4: shaking his head, You.
19:23
Speaker 2: Mean nodding his head. Yes, shaking would be no, nodding
19:28
Speaker 2: would be yes.
19:28
Speaker 4: Yeah.
19:29
Speaker 2: Let's take a quick break. When we come back, we
19:31
Speaker 2: got Wall Street Watch.
19:37
Speaker 1: Bringing the latest financial news straight to your radio. Every day.
19:42
Speaker 1: It's the Financial Exchange on the Financial Exchange Radio Network.
19:48
Speaker 1: Tell you know fo whoa Street Watch treking the stocks,
19:51
Speaker 1: the dato and the headlines driving markets so far today
19:54
Speaker 1: right here on the Financial Exchange Radio Network, there's a.
19:58
Speaker 5: Lot of action on the major industries. The Dow Jones
20:01
Speaker 5: is essentially flat. It's off by one point five to
20:04
Speaker 5: five basis points. SMB five hundred, on the other hand,
20:07
Speaker 5: is up point zero one percent, while the Nasdaq is
20:11
Speaker 5: off three tenths of a percent. Oil has crossed over
20:15
Speaker 5: eighty one dollars now it's up three dollars three point
20:19
Speaker 5: sixty six percent on the day. Gold has reversed its
20:22
Speaker 5: earlier loss. Now it's up nine dollars and ten cents,
20:25
Speaker 5: or point to one percent. While silver is still rising
20:29
Speaker 5: two point one point five percent. Apple is down over
20:33
Speaker 5: two percent after Jeffrey's downgraded the stock to underperform from hold.
20:37
Speaker 5: According to the bank's supply chain checks. Analysts have concluded
20:40
Speaker 5: that an all glass iPhone by Apple, something the company
20:43
Speaker 5: has never publicly announced, appears to be canceled. That puts
20:47
Speaker 5: pressure on Apple, which is trying to create more expensive
20:49
Speaker 5: devices to combat the rise and cost of memory. Berkshire
20:53
Speaker 5: Halfway stock is up almost two and a half percent
20:55
Speaker 5: after the company announced on Saturday it's operating earnings growth
20:58
Speaker 5: of sixteen percent in the second quarter. Manufacturing, service and retailing
21:03
Speaker 5: earning sauce strong growth, as did the company's energy profits. However,
21:07
Speaker 5: insurance was weaker, where investment income declined nine percent. Intel's
21:12
Speaker 5: dropped over three and a half percent after an announced
21:14
Speaker 5: that it'll be offering fifteen billion dollars in common stock.
21:17
Speaker 5: Intel said it plans to use the funds for general
21:20
Speaker 5: corporate purposes, which may include capital expenditures and working capital.
21:25
Speaker 5: The offering will allow the company to keep growing while
21:28
Speaker 5: maintaining a strong balance sheet, Intel said. And finally, game
21:32
Speaker 5: Stop shares are flat after Bloomberg reported that the company
21:35
Speaker 5: is weighing abandoning its fifty six billion dollar bid for eBay.
21:39
Speaker 5: Gainstop's unsolicited bid was originally rejected by eBay in May,
21:43
Speaker 5: where the online retailer called it neither credible nor attractive.
21:48
Speaker 5: I am ben Kitchen, and that was Wall Street Watch Mike.
21:52
Speaker 2: After a pretty quiet summer following a sizeable decline in
21:59
Speaker 2: the winter and spring, gold finding its legs over the
22:03
Speaker 2: last four or five days here. It spent much of
22:06
Speaker 2: the June kind of latter June through July period just
22:11
Speaker 2: sitting between about four thousand and forty one hundred bucks
22:14
Speaker 2: per ounce, but making a move towards forty four hundred
22:19
Speaker 2: dollars an ounce in at the end of last week.
22:23
Speaker 2: This coming off of a winter in which it did
22:26
Speaker 2: a high of north of fifty six hundred dollars an
22:29
Speaker 2: ounce at one point back in I think late January early.
22:33
Speaker 4: February, and I mean important context too, Prices more than
22:37
Speaker 4: doubled since like twenty twenty two to twenty twenty three levels.
22:40
Speaker 2: Yes, and so you've got gold rallying here and a
22:45
Speaker 2: piece in the bloomy Berg talking about maybe one of
22:49
Speaker 2: the reasons.
22:49
Speaker 4: Why ETF inflows seems to be the reason, but it's
22:55
Speaker 4: not much of a reason to me. Right, Like gold
22:59
Speaker 4: prices went out because a bunch of people started buying it.
23:03
Speaker 2: I think the yes, exactly, yeah, got it. So I
23:07
Speaker 2: think the big thing is when we look at gold
23:12
Speaker 2: over intermediate term periods of time, gold has a strong
23:18
Speaker 2: negative correlation with real interest rates, meaning that typically as
23:22
Speaker 2: real interest rates rise, gold tends to struggle. The reason why, Hey,
23:27
Speaker 2: if you can get higher interests net of inflation from
23:32
Speaker 2: government bonds, you don't need gold as much because you're
23:36
Speaker 2: getting higher interest net of inflation.
23:39
Speaker 4: Yeah, it's opportunity costs it. Gold doesn't pay interest. You
23:42
Speaker 4: have to believe that it's going to go higher, correct,
23:44
Speaker 4: and so like with many other things, there's an opportunity
23:47
Speaker 4: cost to holding it.
23:48
Speaker 2: So the piece that was interesting over the course of
23:50
Speaker 2: June and July, real interest rates were rising during that time,
23:54
Speaker 2: and gold was holding its own. It wasn't collapsing, It
23:56
Speaker 2: wasn't you know, puking. It was finding maybe a bottom.
24:01
Speaker 2: Maybe turns out to be a false bottom, we don't know.
24:04
Speaker 2: But now you've got gold picking up in the last
24:07
Speaker 2: week or so on the back of again you will
24:12
Speaker 2: get just some of the news flow that's out there,
24:15
Speaker 2: and you say, Okay, what could be triggering it? Is
24:17
Speaker 2: it anything related to the FED meeting? Is it anything
24:20
Speaker 2: related to the jobs report? These are questions that you have.
24:24
Speaker 2: I think it's too early to tell, since it's been
24:26
Speaker 2: less than a week as to whether this is something
24:28
Speaker 2: that has legs or if it is just, you know,
24:31
Speaker 2: one of these wiggles that turns into nothing. But you've
24:33
Speaker 2: definitely got some stories out there. They could potentially point towards,
24:38
Speaker 2: you know, reasons to want to own gold longer term,
24:41
Speaker 2: depending on how they unfold in the coming weeks and months.
24:45
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25:40
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25:49
Speaker 2: Peas market Watch, the US economy is shedding jobs. Here's
25:51
Speaker 2: why that's good news for stocks.
25:53
Speaker 4: Boy Friday, last week we had a job's report that
25:58
Speaker 4: showed there was net job lost twenty three thousand for
26:01
Speaker 4: the month of July, plus revisions to the previous two
26:05
Speaker 4: jobs report indicated reports indicating about one hundred thousand fewer
26:09
Speaker 4: jobs during those months. All of that lowered expectations of
26:15
Speaker 4: rate hikes at the next FED meeting, but did nothing
26:18
Speaker 4: to inject a sense that the FED is going to
26:21
Speaker 4: be able to cut rates anytime in the near future.
26:24
Speaker 4: That would be my overall summary here, and furthermore, the
26:30
Speaker 4: mere idea of the FED cutting interest rates at a
26:34
Speaker 4: time when again, gas prices have been bumping around this
26:38
Speaker 4: four dollars a gallon range and showing no real signs
26:42
Speaker 4: of letting up. It is just such a I don't
26:47
Speaker 4: know miles away as far as I can tell, not
26:51
Speaker 4: that it will never happen. And I recognize cuts are
26:53
Speaker 4: priced in at some point in the future. But again,
26:56
Speaker 4: you've got capital markets that are are clearly not restrictive
27:02
Speaker 4: with interest rates where they are right now, financial markets
27:06
Speaker 4: housing that's showing some degree of restrictiveness. You know, you're
27:09
Speaker 4: not seeing increases in home sales, so there's some discipline
27:12
Speaker 4: being put in place there. And you've got oil prices
27:16
Speaker 4: that you know, in a best case scenario are highly unpredictable.
27:20
Speaker 4: There's not a case for cutting interest rates anytime right now,
27:24
Speaker 4: even with that weak jobs report.
27:26
Speaker 2: No, I would say. In so, there's two things on this.
27:29
Speaker 2: The first, as you mentioned, I think, when it comes
27:32
Speaker 2: to cutting interest rates, the earliest that you can see
27:39
Speaker 2: it absent a major US downturn Q one of next year,
27:46
Speaker 2: if everything goes perfectly, yeah, six months away.
27:50
Speaker 4: And I do think you have to have more stability
27:52
Speaker 4: than you have now in the Middle East to get there.
27:54
Speaker 2: Yes, the other pieces I mentioned, look, cutting interest rates
27:59
Speaker 2: can be good for stocks in the event that rates
28:02
Speaker 2: can be cut and the US economy does not fall apart.
28:05
Speaker 2: The problem is that a lot of times, once the
28:07
Speaker 2: FED starts cutting interest rates, you do see the US
28:10
Speaker 2: economy fall apart because they're cutting because they're nervous about something.
28:13
Speaker 3: Yeah.
28:13
Speaker 2: Now, the last couple of years that hasn't been the case.
28:16
Speaker 2: They've been nervous about something that ultimately hasn't materialized. The
28:19
Speaker 2: last three years, it has looked like you were going
28:22
Speaker 2: to be seeing the jobs market weakening heading into the fall.
28:27
Speaker 3: Each time.
28:29
Speaker 2: In each case, somehow we kind of pulled out of
28:31
Speaker 2: that drop and you didn't see anything larger materialize, which
28:35
Speaker 2: is why stock's held up fine. But again, in many cases,
28:41
Speaker 2: if the FED has to cut interest rates meaningfully, it's
28:43
Speaker 2: because the US economy is weaker, and that is not
28:46
Speaker 2: something that's good for stocks. So I understand that people
28:51
Speaker 2: are you know, conditioned to like, oh, like, you know,
28:53
Speaker 2: hopefully the FED cuts rates like that that'll you know,
28:55
Speaker 2: help things. I think part of what Kevin Warrish is
28:59
Speaker 2: trying to do is be like, guys, I'm not here
29:02
Speaker 2: to just save you anytime there's like a little wiggle
29:05
Speaker 2: in markets. And again, the market's gonna test him on
29:08
Speaker 2: this at some point and say, okay, keV, you got
29:10
Speaker 2: to prove this, you know, prove that you're not just
29:13
Speaker 2: gonna be the same as you know other central bankers before,
29:16
Speaker 2: dressed up differently. But I think Worsh doesn't want to
29:21
Speaker 2: be someone who's just sitting there saying, yeah, I'm gonna
29:24
Speaker 2: manage you know, markets this way. He's trying to chart
29:27
Speaker 2: a different path. If he actually does great, If he doesn't,
29:31
Speaker 2: well we've already seen that script, and okay, everyone knows
29:34
Speaker 2: how to operate in that environment, so we'll see how
29:36
Speaker 2: it develops here. But everyone's just you can't just sit
29:41
Speaker 2: there being like, well, I hope we have cut rates, Like.
29:44
Speaker 3: Then, what are we really doing here?
29:46
Speaker 4: A central banker dressed differently just has me giggling in
29:50
Speaker 4: my mind of the idea of Kevin Warre's showing up
29:52
Speaker 4: press conferences dressed as different characters. Sure, cowboy Worsh show
29:59
Speaker 4: uping golf golf attire one.
30:01
Speaker 3: Day, police officer warsh construction.
30:03
Speaker 4: Work wash comes one day in a dashiki steampunk warsh
30:12
Speaker 4: astronaut warsh boy.
30:16
Speaker 3: Yeah. Sorry, how can fenchers never dress up for Halloween?
30:19
Speaker 4: When they do the Uh, it's just wage meeting around
30:23
Speaker 4: the job.
30:24
Speaker 3: I I mean it is, and it is. No, I'm
30:27
Speaker 3: like it is, no, it is.
30:30
Speaker 4: There have been a few October meetings where the economy
30:32
Speaker 4: is doing so well that you could wear something funny.
30:36
Speaker 2: Usually not in October, though, yeah, usually October. You know
30:40
Speaker 2: a lot of times if the fence meeting in October,
30:42
Speaker 2: there's some some things going on at least, you know,
30:44
Speaker 2: coming out of September. Let's take a quick break here.
30:47
Speaker 2: When we come back, we'll do a little bit of
30:48
Speaker 2: stack roulettes here.
30:50
Speaker 1: The Financial Exchange every day from eleven to noon non
30:53
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30:56
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31:35
Speaker 3: All right, Mike, what do you got for me for
31:37
Speaker 3: stock Roulette?
31:37
Speaker 4: I've got this change to public markets that I want
31:40
Speaker 4: to talk about. So currently, if you're a publicly listed
31:42
Speaker 4: company in the United States, you are required by law
31:46
Speaker 4: on a quarterly basis to tell investors how you're doing
31:48
Speaker 4: a bunch of pre basically a uniform way of disclosing
31:55
Speaker 4: how much money you earn, how much money you spent,
31:58
Speaker 4: a whole bunch of different pieces of information. Most companies
32:02
Speaker 4: then accompany that with a conference call with investors to
32:06
Speaker 4: talk about their quarter and what they see in the future,
32:09
Speaker 4: et cetera, et cetera. Some of these things are required,
32:11
Speaker 4: others are not. The conference call is not one of
32:13
Speaker 4: those that's required. They aren't required to give forward guidance
32:16
Speaker 4: on what they are thinking about, but they do. The
32:21
Speaker 4: SEC is considering killing that quarterly requirement and making it
32:25
Speaker 4: bi annual, and financial media, hedge funds, mutual fund managers,
32:30
Speaker 4: stock market analysts are up in arms about it. And
32:33
Speaker 4: I have to say I have not talked to one
32:35
Speaker 4: single individual investor who cares. In fact, I could maybe
32:41
Speaker 4: make an argument that it'll work out better for the
32:43
Speaker 4: individual investor who does not have the ability to rapidly
32:47
Speaker 4: react to a released earnings report or invest in that fashion.
32:50
Speaker 4: Maybe maybe not. The downside would be that it also
32:54
Speaker 4: potentially opens up those who have insider knowledge to have
32:59
Speaker 4: a longer time to possess it, because if you are,
33:02
Speaker 4: you know, not reporting quarterly earnings, there could be some
33:06
Speaker 4: longer time periods where material non public information is out
33:10
Speaker 4: there between earnings calls. But I gotta say, like one,
33:14
Speaker 4: this rule would not require companies to do just bi annual.
33:17
Speaker 4: If they chose to report earnings quarterly, they could still
33:20
Speaker 4: continue to do so. And the only individuals that I've
33:23
Speaker 4: heard upset about it are financial media outlets like ours
33:27
Speaker 4: or bigger ones who don't have as much to report
33:30
Speaker 4: on in that case, hedge and mutual fund managers who
33:34
Speaker 4: like to pour through this stuff, and analysts who like
33:37
Speaker 4: to sell their reports to the investing public. So it's all,
33:41
Speaker 4: of course a bunch of self interested individuals who want
33:44
Speaker 4: to keep this stuff in place. I have a really
33:46
Speaker 4: tough time coming up with a reason to do so. Yep, again,
33:49
Speaker 4: if you're worried about the non the material non public
33:52
Speaker 4: information thing, then prosecute it, put people in jail who
33:55
Speaker 4: act upon it, and you like you already do and
33:58
Speaker 4: this won't be a problem.
34:00
Speaker 3: Couple things on this. We've talked about this before.
34:03
Speaker 2: Quarterly reporting has been mandated by the SEC since nineteen seventy,
34:07
Speaker 2: so it's.
34:07
Speaker 3: Been fifty six years.
34:09
Speaker 2: Annual reporting has been mandated since nineteen thirty four the
34:13
Speaker 2: Securities in Exchange Act, when the SEC was created. The
34:19
Speaker 2: other piece that you have to remember on this, prior
34:22
Speaker 2: to the SEC making quarterly reporting mandatory, the New York
34:27
Speaker 2: Stock Exchange required mandatory reporting in nineteen sixty two, so
34:30
Speaker 2: if you were listed on the NYC you had to
34:32
Speaker 2: do it. The exchangers could in theory come out and
34:36
Speaker 2: say like, okay, that's great, SEC, but we're still going
34:39
Speaker 2: to require it if you want to have an honest
34:41
Speaker 2: conversation about pros and cons. So the pros for quarterly
34:45
Speaker 2: reporting you get more timely information because you're getting reports
34:49
Speaker 2: four times a year instead of one or two. As
34:52
Speaker 2: a result, you get earlier warning signs if something is
34:56
Speaker 2: not great there, whether it is something malfie, it's like
35:00
Speaker 2: fraud or something just like you know, margins falling apart
35:03
Speaker 2: or something like that. Sure, you have more frequent disclosure,
35:06
Speaker 2: so you have more price discovery. That happens, and it
35:10
Speaker 2: keeps executives accountable in theory, because you can't just let
35:14
Speaker 2: something like stew for a couple months. No, Like, that's
35:17
Speaker 2: two thirds of your quarter. You've got to deal with
35:19
Speaker 2: it promptly because your quarter is coming up.
35:22
Speaker 4: Cons The cons, I'll say the USA the opposite of
35:26
Speaker 4: the one you just said. It ties executives to performance
35:30
Speaker 4: longer term.
35:30
Speaker 3: Correct.
35:31
Speaker 2: It certainly does other cons It's expensive to file quarterly reports.
35:35
Speaker 2: You got to have an independent third party auditor come
35:37
Speaker 2: in and say, hey, are these up to snuff?
35:41
Speaker 4: Uh.
35:41
Speaker 3: It also can be.
35:42
Speaker 2: Something where you are able to game the system because hey,
35:49
Speaker 2: you can, you know, use different accounting measures in order
35:51
Speaker 2: to have something show up in one quarter versus like,
35:54
Speaker 2: there's all kinds of stuff that you can do there.
35:56
Speaker 2: So I don't have a hugely stroke feeling on quarterly
36:02
Speaker 2: versus semi annual in general, what I can say is,
36:11
Speaker 2: I know that I'm more comfortable with quarterly. I wonder
36:14
Speaker 2: if it's just because I'm used to it. Sure, if
36:17
Speaker 2: there's like something really there, but I don't know if
36:22
Speaker 2: it's just because of the information environment that we operate
36:27
Speaker 2: in today, things just feel fraudier than in the past
36:32
Speaker 2: in finance, whether I don't know if it's like a
36:34
Speaker 2: crypto proliferation thing, or I don't know if it's like
36:38
Speaker 2: the New York or New Jersey Deli thing, or the
36:42
Speaker 2: guy who pushed the truck down a hill and said
36:45
Speaker 2: it was driving Trevor whatever his name was, the Nicola
36:51
Speaker 2: guy Clanic. No, that was the old uber ceo. This
36:56
Speaker 2: was Trevor something. I don't know his name. Yeah, but
37:00
Speaker 2: I just am not sure. But I don't have strong
37:05
Speaker 2: strong from Milton.
37:06
Speaker 3: That's the guy.
37:07
Speaker 2: Yeh, Travis Kalanik yep. So that's what we got there.
37:12
Speaker 2: I want to cover a little bit of soccer business news.
37:14
Speaker 2: So a couple of weeks ago, FIFA, or rather the
37:17
Speaker 2: leader of FIFA, Johnny and Fantino, tried to make a
37:20
Speaker 2: push to sell off basically sell the World Cup to
37:24
Speaker 2: private investors, and there was a revolt amongst like national
37:28
Speaker 2: football teams being like no, dude, like even if you're
37:31
Speaker 2: gonna give us more money for this, we don't want this.
37:34
Speaker 2: It was led by UEFA, who is the European Federation
37:37
Speaker 2: of National teams. UEFA now is reportedly having conversations with
37:42
Speaker 2: other federations to be like, hey, should we have other
37:46
Speaker 2: international tournaments that aren't within FIFA because we want to
37:50
Speaker 2: make sure that this doesn't become a thing. And remember
37:55
Speaker 2: that when it comes to the World Cup, UEFA is
37:57
Speaker 2: really all that matters. Aside from Brazil, Argentina and Uruguay,
38:02
Speaker 2: every single winner of the World Cup ever has been
38:05
Speaker 2: from Europe. So if UEFA says no, we're not participating,
38:10
Speaker 2: there is no World Cup. It doesn't exist. We'll see
38:15
Speaker 2: how this goes in the coming weeks and months. Quick
38:18
Speaker 2: break for the rest of the day.
38:19
Speaker 3: We'll see you tomorrow.