Latest / The Financial Exchange Show / AI Risks Keep Growing as Earnings Season Begins

Transcript

AI Risks Keep Growing as Earnings Season Begins · 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
• 0:06
  Speaker 1: registered investment advisor. All opinions expressed are solely those of
• 0:09
  Speaker 1: the hosts. Do not reflect the opinions of Armstrong Advisory
• 0:12
  Speaker 1: or anyone else. Investments can lose money. This program does
• 0:15
  Speaker 1: not offer any specific financial or investment advice. Please consult
• 0:18
  Speaker 1: your own financial tax and estate planning advisors before making
• 0:21
  Speaker 1: any investment decisions. Armstrong Advisory and the advertisers heard on
• 0:24
  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
• 0:29
  Speaker 1: for referrals and are not affiliated. This is The Financial
• 0:35
  Speaker 1: Exchange with Mike Armstrong and Paul Lane. Your exclusive look
• 0:39
  Speaker 1: at business and financial news affecting your day, your city,
• 0:43
  Speaker 1: your world. Stay informed and up to date about economic
• 0:47
  Speaker 1: and market trends, plus breaking business news every day. The
• 0:51
  Speaker 1: Financial Exchange is a proud partner of the Disabled American
• 0:54
  Speaker 1: Veterans Department of Massachusetts. Help us support our great American
• 0:58
  Speaker 1: heroes by visiting dav5k. boston and making a donation today. This
• 1:04
  Speaker 1: is The Financial Exchange with Mike Armstrong and Paul Lane.
• 1:13
  Speaker 2: Good morning. Welcome back to The Financial Exchange. It's Mike, Paul,
• 1:18
  Speaker 2: and Tucker with you on a Bank earnings week, CPI week,
• 1:22
  Speaker 2: busy week for a whole lot of stuff going on here,
• 1:25
  Speaker 2: but markets relatively muted. They were open but quiet yesterday
• 1:29
  Speaker 2: for the Columbus Day holiday. Bond market was actually closed yesterday,
• 1:32
  Speaker 2: but equity markets open, one of those weird days that
• 1:34
  Speaker 2: we get a few times a year. We had reports
• 1:37
  Speaker 2: from JPMorgan Chase, Goldman Sachs, Wells Fargo, Citigroup all this
• 1:42
  Speaker 2: morning indicating a few things. One, with equity markets continuing
• 1:45
  Speaker 2: to accelerate higher. The banks have all made a fair
• 1:48
  Speaker 2: bit of money on both their wealth management and prop
• 1:52
  Speaker 2: trading desks. You saw some losses, however, on their fixed
• 1:56
  Speaker 2: income books. No surprise there as interest rates moved up
• 1:59
  Speaker 2: during the quarter, especially during September. Bonds not performing all
• 2:04
  Speaker 2: that well, but their net interest margin across the board
• 2:07
  Speaker 2: doing much better with those higher rates on deposits. Because
• 2:11
  Speaker 2: one thing that I think we all know is if
• 2:13
  Speaker 2: you're a big bank, you don't need to pay any interest.
• 2:16
  Speaker 2: It's not one of the expectations for you anymore. You're
• 2:20
  Speaker 2: not expected to compete on money market rates or mortgage
• 2:23
  Speaker 2: rates or anything. You're just expected to be the giant
• 2:26
  Speaker 2: that can't go out of business, and therefore people will
• 2:29
  Speaker 2: deposit their money at your bank, whether you pay any
• 2:31
  Speaker 2: interest or not. Yeah. Anything else interesting in terms of
• 2:36
  Speaker 2: bank earnings, Paul? I mean, there's some interesting stuff from
• 2:39
  Speaker 2: Goldman Sachs on their investment banking. I think still some
• 2:43
  Speaker 2: very high expectations because... There does not seem to be
• 2:47
  Speaker 2: any end in sight for issuing new debt on the
• 2:50
  Speaker 2: behalf of hyperscalers. And we still have a few potential
• 2:53
  Speaker 2: giant IPOs to go over the course of the next
• 2:56
  Speaker 2: couple of quarters here. But to me, that was the
• 3:00
  Speaker 2: big story with the banks this morning.
• 3:02
  Speaker 3: Yeah, nothing really that stands out. I think you hit
• 3:05
  Speaker 3: on most of the critical points here. I would say
• 3:08
  Speaker 3: a reasonable start to earnings season, but there is still
• 3:11
  Speaker 3: much more to come. The banks tend to kind of
• 3:14
  Speaker 3: all blend together. We picked up some of the same
• 3:17
  Speaker 3: recurring fiends from each of them, so nothing that stands
• 3:19
  Speaker 3: out tremendously.
• 3:20
  Speaker 2: In addition to the big banks, UnitedHealthcare, Johnson & Johnson,
• 3:24
  Speaker 2: and my favorite, Domino's Pizza, reported earnings this morning. Tomorrow,
• 3:29
  Speaker 2: we will hear from Bank of America, Morgan Stanley, BlackRock,
• 3:34
  Speaker 2: a bunch of different financials, Progressive even as well. Thursday
• 3:39
  Speaker 2: of this week, Taiwan Semi, Charles Schwab, BNY Mellon all reporting.
• 3:45
  Speaker 2: So again, this week, a very heavy financial services earnings week.
• 3:49
  Speaker 2: But when we get out to the following week, this
• 3:52
  Speaker 2: would be the week of October 19th, we've got GE Aerospace,
• 3:56
  Speaker 2: Philip Morris, RTX, which is the Raytheon reporting. Tesla going
• 4:02
  Speaker 2: on Wednesday, Lamb Research, Texas Instruments, Thermo Fisher, and then
• 4:08
  Speaker 2: on Thursday, Procter Gamble, Union Pacific. So really kicking things
• 4:11
  Speaker 2: into higher gear next week before a bunch of the
• 4:13
  Speaker 2: tech earnings out the following week. Tomorrow, we will get
• 4:18
  Speaker 2: an update on inflation through the Consumer Price Index. That's
• 4:22
  Speaker 2: out at 8.30 a.m. Expectations are for a year-over-year read
• 4:26
  Speaker 2: of 3.6%, month-over-month at 0.6%. And then the following day,
• 4:32
  Speaker 2: you'll also get a producer price index reading, which has
• 4:35
  Speaker 2: been running quite a bit hotter than CPI, expected to
• 4:38
  Speaker 2: come in at 5.5%. Taking a look around at markets today,
• 4:42
  Speaker 2: relatively quiet out there. They are in the red with
• 4:45
  Speaker 2: the NASDAQ leading the way down a quarter of a percent.
• 4:49
  Speaker 2: Energy markets also relatively quiet. West Texas crude not moving
• 4:53
  Speaker 2: a whole lot after a pretty... Volatile weekend and volatile
• 4:58
  Speaker 2: Monday after attacks at the Saudi airport by Houthis. You
• 5:02
  Speaker 2: had this deal to buy diesel from Russia or, you know,
• 5:06
  Speaker 2: announced deal and energy ceasefire announced by the president that
• 5:10
  Speaker 2: was then, you know, completely dragged through the mud over
• 5:13
  Speaker 2: the course of the next few days as the strike,
• 5:16
  Speaker 2: the airstrikes continued. And then in bond markets, they're following
• 5:20
  Speaker 2: energy markets today off slightly. The yield on the 10-year
• 5:23
  Speaker 2: Treasury down to 5.219%. A friend of the show, Michael Santoli,
• 5:29
  Speaker 2: who comes on every once in a while, has his
• 5:32
  Speaker 2: market memo out this morning. And describing the markets right
• 5:35
  Speaker 2: now at a critical juncture, I guess, first question, Paul,
• 5:39
  Speaker 2: do you agree? Are we at this critical juncture for markets?
• 5:42
  Speaker 2: Is it more critical than other times that we have
• 5:44
  Speaker 2: seen recently? I think you can make the argument that
• 5:47
  Speaker 2: it is the, the longer you stretch out, uh, you know,
• 5:51
  Speaker 2: sequential massive earnings beats and expectations quite high. It does
• 5:55
  Speaker 2: become more critical. On the other hand, markets have also
• 5:58
  Speaker 2: gotten a bit cheaper because of those very strong earnings. And, um,
• 6:03
  Speaker 2: I don't expect any giant surprises in this earnings quarter
• 6:07
  Speaker 2: that could change the narrative around AI continue to dominate.
• 6:12
  Speaker 3: No, I think that critical probably is a little bit
• 6:16
  Speaker 3: overstating it. I do think that this is certainly an
• 6:18
  Speaker 3: important earnings season, but as long as the numbers can
• 6:22
  Speaker 3: come in where they're expected, I think that will continue
• 6:25
  Speaker 3: to keep markets in a reasonable place. As we get
• 6:29
  Speaker 3: out perhaps a little bit further into 2027 where I
• 6:33
  Speaker 3: feel as if it becomes a little bit more paramount
• 6:36
  Speaker 3: to deal with the inflationary pressures that we are up
• 6:40
  Speaker 3: against and the interest rate environment will just have more
• 6:43
  Speaker 3: and more impact on markets. In the early going stages here,
• 6:47
  Speaker 3: I think we can still lean on what seems to
• 6:50
  Speaker 3: be a good Q3 earnings season, and we'll see as
• 6:53
  Speaker 3: those numbers come in. But basically what he is honing
• 6:56
  Speaker 3: in on is something that has been covered recently. substantially
• 7:00
  Speaker 3: over the course of the last month or so that
• 7:01
  Speaker 3: the breadth of this market rally has really narrowed. We
• 7:05
  Speaker 3: started the year where many different sectors of the market
• 7:08
  Speaker 3: were performing well. The equal weighted S & P versus
• 7:11
  Speaker 3: just the S & P in general, their performances were
• 7:14
  Speaker 3: relatively similar. They have diverged quite significantly. And because the
• 7:19
  Speaker 3: equal weighted S & P 500 index has more weighting
• 7:24
  Speaker 3: in some of the kind of real good sectors of
• 7:26
  Speaker 3: the economy, consumer staples, utilities, just things that cost money
• 7:32
  Speaker 3: to move goods around through fuel and borrowing costs have
• 7:37
  Speaker 3: been negatively impacted by the interest rate rise we've seen
• 7:40
  Speaker 3: over the last month or so, whereas tech has just
• 7:42
  Speaker 3: continued to plow forward. So you match that with a
• 7:45
  Speaker 3: backdrop of an inflationary time period, like that is sort
• 7:48
  Speaker 3: of the The adverse side of things is the interest
• 7:52
  Speaker 3: rate and the inflationary pressure. And then you've got sort
• 7:55
  Speaker 3: of the narrow breadth of the market gains on the
• 7:57
  Speaker 3: other side of things.
• 7:58
  Speaker 2: And I think the narrow breadth of the market gains
• 8:00
  Speaker 2: make perfect sense given the environment we are in. He
• 8:04
  Speaker 2: quotes Goldman Sachs co-head of equity derivative sales, Lee Coppersmith,
• 8:08
  Speaker 2: as saying, you know, this is his quote, by our
• 8:11
  Speaker 2: preferred Goldman Sachs measure, breadth has now deteriorated. to its
• 8:15
  Speaker 2: weakest level since the dot-com bubble, meaning all of that
• 8:18
  Speaker 2: leadership is coming from one area that we are familiar with.
• 8:22
  Speaker 2: And I think the reason why is quite obvious. Interest
• 8:26
  Speaker 2: rates are sitting at levels we haven't seen in a
• 8:30
  Speaker 2: couple of decades now. And most every sector of the
• 8:34
  Speaker 2: economy will have a tough time expanding with interest rates
• 8:37
  Speaker 2: where they are. The one exception being behemoth tech companies
• 8:42
  Speaker 2: who can borrow at these rates and justify the spending
• 8:47
  Speaker 2: because of their expected fortune gains down the road to
• 8:51
  Speaker 2: build out data centers, build out manufacturing facilities, build out
• 8:54
  Speaker 2: anything AI related. But if you are a home builder,
• 8:58
  Speaker 2: if you are Domino's Pizza, if you are a Walmart,
• 9:04
  Speaker 2: any of those companies, if you are a healthcare device manufacturer,
• 9:09
  Speaker 2: These higher interest rates, higher energy prices, and general consumer
• 9:14
  Speaker 2: distaste with high inflation are eating into your margins in
• 9:17
  Speaker 2: a way that don't matter to the tech companies. And
• 9:20
  Speaker 2: so with those higher rates, I think has brought a
• 9:24
  Speaker 2: new wave of concentrated bets on, hey, this one area
• 9:29
  Speaker 2: can continue to drive the economy forward. And it's kind
• 9:33
  Speaker 2: of been the case all year, but I guess now
• 9:35
  Speaker 2: more than ever. this market is very heavily reliant on
• 9:39
  Speaker 2: that one or I guess two areas of growth, given
• 9:42
  Speaker 2: what you're seeing from energy. But I don't think anybody
• 9:44
  Speaker 2: is hoping that that one lasts.
• 9:46
  Speaker 3: Centilli does make a good counterpoint in this idea that, hey,
• 9:49
  Speaker 3: if some of those pressures were to abate the energy
• 9:51
  Speaker 3: prices or some of the interest rate pressure, that that
• 9:55
  Speaker 3: could set up for a reasonable amount of gains. If
• 9:58
  Speaker 3: you have continued enthusiasm in the tech sector and some
• 10:00
  Speaker 3: reprieve from these other sectors, that certainly could help things out.
• 10:04
  Speaker 2: Yeah. We were talking yesterday about what could bring rates
• 10:09
  Speaker 2: down and why rates are going to stay higher. And
• 10:13
  Speaker 2: the answer, there's only one answer that people will like
• 10:16
  Speaker 2: on what could bring rates down. It's energy prices falling.
• 10:20
  Speaker 2: People would be very happy if gas prices fell and
• 10:22
  Speaker 2: that led to a decline in interest rates. Every other
• 10:26
  Speaker 2: reason that I can think of for declining interest rates
• 10:28
  Speaker 2: would be very bad.
• 10:31
  Speaker 3: Yeah, usually comes with economic pain.
• 10:33
  Speaker 2: It would be because something blew up and sentiment around
• 10:37
  Speaker 2: AI or banks or something had shifted and suddenly people
• 10:41
  Speaker 2: are much more concerned about recession and job loss. That
• 10:43
  Speaker 2: would bring down rates too. But the only one that
• 10:46
  Speaker 2: could happen that people would be genuinely cheering would be
• 10:50
  Speaker 2: some cessation and hostilities in the Middle East that brings
• 10:53
  Speaker 2: down energy prices. By the way, Middle East and Eastern
• 10:56
  Speaker 2: Europe with Russia and Ukraine, that brings down energy prices
• 10:59
  Speaker 2: in a convincing longer-term way. And I don't know, I
• 11:04
  Speaker 2: can't hold my breath for 10 months. That's where we
• 11:06
  Speaker 2: are at this point. Let's take a quick break. When
• 11:10
  Speaker 2: we return... Bond yields, retirees. Let's take a quick break.
• 11:17
  Speaker 2: When we come back, a little bit more about bond
• 11:20
  Speaker 2: yields and then specifically American retirees, their dependence on Social
• 11:24
  Speaker 2: Security and the newly elected Congress that's coming in that's
• 11:28
  Speaker 2: going to need to deal with it. That's next on
• 11:29
  Speaker 2: The Financial Exchange.
• 11:30
  Speaker 1: Watch the Financial Exchange live every day on YouTube with
• 11:34
  Speaker 1: market moves, breaking business news, and analysis throughout the show.
• 11:38
  Speaker 1: Join the live chat and be part of the conversation.
• 11:41
  Speaker 1: This is the Financial Exchange Media Network. Stay connected to
• 11:46
  Speaker 1: the Financial Exchange between shows. Follow us on Instagram for
• 11:50
  Speaker 1: daily clips, market updates, and the business news driving the conversation.
• 11:54
  Speaker 1: This is the Financial Exchange Media Network.
• 11:59
  Speaker 4: The Financial Exchange streams live every day on YouTube. Subscribe
• 12:04
  Speaker 4: to our YouTube page and follow market activity all morning
• 12:08
  Speaker 4: long only here on the Financial Exchange Radio Network. Just
• 12:11
  Speaker 4: search for the Financial Exchange on YouTube and be sure
• 12:15
  Speaker 4: to hit that subscribe button.
• 12:18
  Speaker 2: Peace in the New York Times today, Paul. How American
• 12:21
  Speaker 2: retirees on different incomes rely on Social Security. No surprise here.
• 12:26
  Speaker 2: The lower your income, the more heavily reliant you are
• 12:30
  Speaker 2: on Social Security, and generally speaking, the lower your benefit,
• 12:34
  Speaker 2: the more reliant you are because your benefit is most
• 12:38
  Speaker 2: frequently low because you did not earn enough during your
• 12:43
  Speaker 2: savings years to save a whole lot for retirement, and
• 12:46
  Speaker 2: therefore more of your income stream is coming from that
• 12:49
  Speaker 2: Social Security. There are exceptions, of course. You might have
• 12:51
  Speaker 2: worked in the public sector and gotten a pension, and
• 12:54
  Speaker 2: therefore your Social Security is tiny. but you have a
• 12:56
  Speaker 2: robust pension to support you. But for the person who's
• 13:01
  Speaker 2: making $ 1, 500 a month on Social Security right now, should
• 13:06
  Speaker 2: Congress not act, they'd be looking at a cut of
• 13:09
  Speaker 2: about $ 300 per month in their benefit amount, which we
• 13:13
  Speaker 2: all know would be absolutely devastating. How do you approach
• 13:20
  Speaker 2: this conversation with your clients, Paul? Whenever we're talking Social
• 13:24
  Speaker 2: Security issues, There are two factors that people want to
• 13:27
  Speaker 2: talk about. One, the math behind longevity. How long before
• 13:32
  Speaker 2: I pay myself back? Does it make sense to wait?
• 13:34
  Speaker 2: Are there any interesting strategies I can take advantage of?
• 13:37
  Speaker 2: And the second is, is my benefit going to be cut?
• 13:41
  Speaker 3: Very tough situation to deal. I mean, ultimately, it's, hey,
• 13:45
  Speaker 3: we can only plan for what we know. And what
• 13:48
  Speaker 3: we know right now is what they're paying today. And
• 13:51
  Speaker 3: we can do some modeling of stress tests on financial
• 13:54
  Speaker 3: plans that if the worst case scenario happens and benefits
• 13:57
  Speaker 3: are cut by 20%, this would be the impact to
• 14:00
  Speaker 3: your plan. So that's usually the best that we can
• 14:02
  Speaker 3: do is just try and model out the worst case scenario.
• 14:05
  Speaker 3: I think that's a lot of what planning is. But ultimately...
• 14:09
  Speaker 3: I have no idea. I tend to think that, just
• 14:12
  Speaker 3: my personal opinion, that you'd be hard-pressed to have all
• 14:16
  Speaker 3: of Congress really screw this up so badly that there
• 14:19
  Speaker 3: is such a significant cut to benefits. But stranger things
• 14:22
  Speaker 3: have happened. I wouldn't rule out the possibility of it.
• 14:26
  Speaker 3: But all you can really do, like I said, is
• 14:27
  Speaker 3: try and model out the worst-case scenario and see how
• 14:30
  Speaker 3: each individual would be positioned.
• 14:32
  Speaker 2: I guess I look at this from two different perspectives. One,
• 14:35
  Speaker 2: If you're over the age of 60 and you are
• 14:38
  Speaker 2: assuming that your benefits will truly get cut, I think
• 14:41
  Speaker 2: it's probably going to lead you to make a bad decision.
• 14:45
  Speaker 2: If you base all of your assumptions on, yeah, I'm
• 14:47
  Speaker 2: going to get 80% of my benefits or 75%, whatever
• 14:50
  Speaker 2: the math turns out to be, because that's what the
• 14:52
  Speaker 2: laws say currently, it can lead you down the path
• 14:55
  Speaker 2: of saying, well, I might as well pull it early
• 14:57
  Speaker 2: and get as much benefit as I can for a
• 14:59
  Speaker 2: few years. And in my personal opinion, you are... the
• 15:05
  Speaker 2: second to least likely person to have your benefits cut.
• 15:08
  Speaker 2: The least likely is the one that's already receiving Social Security.
• 15:11
  Speaker 2: If you're over the age of 60, you're the second
• 15:13
  Speaker 2: least likely because you vote and you vote in big
• 15:16
  Speaker 2: numbers and there's a lot of you. And so I
• 15:18
  Speaker 2: don't really think that that's going to be the most
• 15:20
  Speaker 2: likely outcome is that they cut benefits for folks over
• 15:23
  Speaker 2: the age of 60. As a person in my late 30s,
• 15:28
  Speaker 2: I kind of wish they would because it would mean
• 15:30
  Speaker 2: that I might get a little bit of benefit when
• 15:32
  Speaker 2: I go to retire. But nonetheless, I think it's unlikely.
• 15:36
  Speaker 2: If you are more than 10 years away from retirement
• 15:39
  Speaker 2: and you're not modeling in some degree of tax hike
• 15:42
  Speaker 2: or Social Security benefit reduction, I also think you're making
• 15:45
  Speaker 2: a mistake. If you're developing a financial strategy that's based
• 15:49
  Speaker 2: on income tax rates and Social Security tax rates not
• 15:54
  Speaker 2: changing during your lifetime, That's probably being a little bit too,
• 15:59
  Speaker 2: you know, you got those rose colored glasses on a
• 16:01
  Speaker 2: little bit too firmly. And that's where this does get
• 16:04
  Speaker 2: tricky and requires some balancing. Ultimately, you know, part of
• 16:09
  Speaker 2: financial planning is testing stressful scenarios, right? You know, it's
• 16:16
  Speaker 2: testing out the impact of higher than anticipated inflation. It's
• 16:19
  Speaker 2: testing out social security rules changing. It's testing out a
• 16:22
  Speaker 2: massive market crash, the likes of which we haven't seen
• 16:25
  Speaker 2: since 2008. And if instead all you're doing is straight
• 16:29
  Speaker 2: lining assumptions and saying, yep, everything keeps on hunky dory,
• 16:33
  Speaker 2: I make 6% on my money, and that's not how
• 16:36
  Speaker 2: real life works. And as frequently as I get people
• 16:39
  Speaker 2: concerned about market crashes and social security cuts, it turns
• 16:45
  Speaker 2: out they should actually be more concerned about inflation and
• 16:48
  Speaker 2: healthcare costs. And so that's what financial planning is about,
• 16:51
  Speaker 2: is identifying the true risks to your success and then
• 16:55
  Speaker 2: mitigating those risks through a number of different tools. If
• 16:58
  Speaker 2: you have questions about that process and you want to
• 17:01
  Speaker 2: learn more about how the Armstrong Advisory Group approaches it,
• 17:05
  Speaker 2: give us a ring at 800-393-4001. You can book a
• 17:09
  Speaker 2: time for us to call you at armstrongadvisory.com, but that
• 17:13
  Speaker 2: phone number again, 800-393-4001.
• 17:17
  Speaker 1: The proceeding was paid for by Armstrong Advisory Group, a
• 17:20
  Speaker 1: registered investment advisor. Nothing in the ad or in any
• 17:22
  Speaker 1: Armstrong guide is specific financial, legal, or tax advice. Consult
• 17:25
  Speaker 1: your own financial, tax, and estate planning advisors before making
• 17:28
  Speaker 1: any investment decisions. Armstrong may contact you to offer investment
• 17:31
  Speaker 1: advisory services.
• 17:33
  Speaker 2: All right, Paul. We can't build data centers in cities
• 17:36
  Speaker 2: because there's not enough space and they're too heavy to
• 17:39
  Speaker 2: put in high-rise buildings. We can't build them in the
• 17:42
  Speaker 2: suburbs because there's too many people and they're too loud
• 17:45
  Speaker 2: and they use too much water. We can't build them
• 17:48
  Speaker 2: in the middle of the desert because it's too costly
• 17:50
  Speaker 2: to bring water and energy there. We can't build them
• 17:52
  Speaker 2: in rural areas because farmers don't like it and nobody
• 17:56
  Speaker 2: wants them in their backyard. We can't build them in
• 17:58
  Speaker 2: space because we don't know how to yet, but we're
• 18:00
  Speaker 2: trying to sort that out. So an enterprising young, not
• 18:05
  Speaker 2: young person, but an enterprising company figured, hey, let's bury
• 18:08
  Speaker 2: them in the ocean. We can cool them via ocean water,
• 18:12
  Speaker 2: and nobody has to deal with the noise or really
• 18:15
  Speaker 2: any of the other repercussions because it's going to work
• 18:18
  Speaker 2: off of tidal waves. And we'll just do it that way,
• 18:23
  Speaker 2: but apparently that, too, is a bit too close to home,
• 18:27
  Speaker 2: and nobody wants underwater data centers either.
• 18:29
  Speaker 3: Well, the lobsters would have to hear the noise, Mike,
• 18:32
  Speaker 3: so that might be a negative.
• 18:33
  Speaker 2: Do you think it would lead to a worse quality crustacean?
• 18:37
  Speaker 3: That is one of the concerns that's raised in this piece,
• 18:40
  Speaker 3: is the impact on marine life. Ultimately, this is really
• 18:45
  Speaker 3: in its infancy stages. It was just something that was
• 18:48
  Speaker 3: being proposed, but has been... all but, not shut down,
• 18:52
  Speaker 3: but there doesn't seem to be a lot of progress here.
• 18:55
  Speaker 3: This was the Eastport main that was pushing back against
• 19:00
  Speaker 3: the notion of exploratory discussions on an underwater data center.
• 19:05
  Speaker 3: There is just capitalism at its finest. There's no shortage
• 19:09
  Speaker 3: of ways that people will try and make the almighty buck.
• 19:13
  Speaker 3: We're talking space. We're talking underwater.
• 19:16
  Speaker 2: I'll just come out and say it. If you cannot
• 19:19
  Speaker 2: convince the general public to allow them to put a
• 19:22
  Speaker 2: data center under the ocean, then you're just not going
• 19:25
  Speaker 2: to be able to convince them to build a data center.
• 19:27
  Speaker 2: Just full stop. It ain't going to work. Let's take
• 19:31
  Speaker 2: a quick break. When we come back, Wall Street Watch
• 19:33
  Speaker 2: is next.
• 19:39
  Speaker 1: Bringing the latest financial news straight to your radio every day.
• 19:44
  Speaker 1: It's the Financial Exchange on the Financial Exchange Radio Network.
• 19:49
  Speaker 1: Time now for Wall Street Watch. Tracking the stocks, the data,
• 19:54
  Speaker 1: and the headlines driving markets so far today. Right here
• 19:57
  Speaker 1: on the Financial Exchange Radio Network.
• 19:59
  Speaker 4: Markets have modestly lowered as third quarter earnings season officially begins.
• 20:02
  Speaker 4: Kicked off this morning with a batch of big bank earnings.
• 20:06
  Speaker 4: Right now, the Dow is down about two-tenths of a
• 20:09
  Speaker 4: percent or 86 points lower. S & P 500 down
• 20:12
  Speaker 4: a quarter percent. NASDAQ down over a third of a
• 20:15
  Speaker 4: percent or 100 points lower. Russell 2000 is down half
• 20:18
  Speaker 4: a percent. Ten-year treasury yield is down two basis points
• 20:21
  Speaker 4: at 5.219 percent. Crude oil is edging higher, trading at
• 20:26
  Speaker 4: $ 93 a barrel, while Brent is retreating about three-quarters of
• 20:29
  Speaker 4: a percent, trading at $ 105 a barrel. JP Morgan up
• 20:33
  Speaker 4: 1% after it missed third quarter earnings and revenue expectations. However,
• 20:38
  Speaker 4: the bank raised its net interest income outlook for the year.
• 20:41
  Speaker 4: Wells Fargo down 1% after mixed third quarter results. Goldman
• 20:45
  Speaker 4: Sachs up over 1% after it beat revenue forecasts. And
• 20:49
  Speaker 4: Citigroup down over 2% despite reporting solid third quarter revenue
• 20:53
  Speaker 4: driven by fixed income traders. Outside of bank earnings, several
• 20:58
  Speaker 4: memory chip makers including Micron, Western Digital and Seagate are
• 21:01
  Speaker 4: seeing losses after A tech route in Asia overnight driven
• 21:04
  Speaker 4: by China's CXMT, saying it plans to roll out a
• 21:08
  Speaker 4: new type of DRAM chip. UnitedHealth beat analysts' expectations and
• 21:12
  Speaker 4: raised its guidance. The stock is flat. Johnson & Johnson
• 21:15
  Speaker 4: reported better than expected third quarter results, but said it
• 21:18
  Speaker 4: is leaning towards spitting out its hips and knees business.
• 21:21
  Speaker 4: Shares are down nearly 6% now. And Apple unveiled its
• 21:26
  Speaker 4: new HomeView Hub with a 7-inch display designed to serve
• 21:29
  Speaker 4: as the home base for smart homes. And it's priced
• 21:34
  Speaker 4: at $ 299. Apple is up 1%. I'm Tucker Silva, and
• 21:38
  Speaker 4: that is Wall Street Watch.
• 21:40
  Speaker 2: CNBC has a piece out this morning about the latest
• 21:43
  Speaker 2: concern from Anthropic, warning that AI models could soon copy
• 21:47
  Speaker 2: themselves across home devices. So let's talk about what the
• 21:51
  Speaker 2: heck they're talking about here. The entire AI industry has
• 21:57
  Speaker 2: been a little bit more focused on safety recently, I think.
• 22:02
  Speaker 2: perceive from the outside after the Hugging Face incident. If
• 22:07
  Speaker 2: you're unfamiliar, the Hugging Face incident was when a chat
• 22:10
  Speaker 2: GPT model or an open AI model that engineers and
• 22:14
  Speaker 2: researchers thought was relegated to a sandbox, broke out of
• 22:20
  Speaker 2: the sandbox, accessed the internet, and in order to fulfill
• 22:23
  Speaker 2: one of the objectives that the testing team gave it,
• 22:27
  Speaker 2: hacked a company called Hugging Face and gained access to
• 22:31
  Speaker 2: a whole bunch of tests, yada, yada, yada, before it
• 22:33
  Speaker 2: was detected. And I guess rebuffed using a whole bunch
• 22:38
  Speaker 2: of open source AI models, meaning it was basically a
• 22:41
  Speaker 2: clash of AI agents attacking each other and rebuffing each
• 22:45
  Speaker 2: other on the Internet, which was never supposed to have
• 22:48
  Speaker 2: happened in this scenario. And I think spooked a whole
• 22:51
  Speaker 2: bunch of people. After that, you had the engineer from
• 22:55
  Speaker 2: Anthropic coming out and saying there's a 1 in 10
• 22:57
  Speaker 2: chance of this basically killing everyone on the planet. And
• 23:01
  Speaker 2: this latest one is another new concern that I've heard
• 23:06
  Speaker 2: echoed out. So what happened in that Hugging Face scenario was, yeah,
• 23:10
  Speaker 2: it went out, broke into this data set. It hacked
• 23:15
  Speaker 2: a system and gained access to it after, again, not
• 23:19
  Speaker 2: even supposed to being able to access the internet. That's
• 23:23
  Speaker 2: a pretty severe leap, right? And I think most people,
• 23:27
  Speaker 2: had we been talking about artificial intelligence five, ten years ago,
• 23:31
  Speaker 2: would have probably said, hey, we don't need to be
• 23:33
  Speaker 2: concerned because so long as we don't hook these things
• 23:37
  Speaker 2: up to the internet, then what damage can they really do?
• 23:39
  Speaker 2: And we're seeing live how they are frequently hooked up
• 23:42
  Speaker 2: to the internet. This new warning is effectively another version
• 23:47
  Speaker 2: of that where ultimately, we think that with those hacks
• 23:51
  Speaker 2: of Hugging Face that initially happened or were disclosed with OpenAI,
• 23:54
  Speaker 2: but turns out that Anthropix models had done it, even
• 23:58
  Speaker 2: Meta's models had done some version of this as well,
• 24:02
  Speaker 2: the idea would be, hey, we've controlled that by then
• 24:05
  Speaker 2: deleting those models, refining them, and putting them back in
• 24:08
  Speaker 2: their sandbox, and making sure that they can't do that again.
• 24:12
  Speaker 2: The concern here is, experts in this space are not describing,
• 24:20
  Speaker 2: or some of the most concerned experts in this space
• 24:22
  Speaker 2: are not describing these models, these AI agents as being
• 24:27
  Speaker 2: designed by engineers. They're effectively describing them as being grown, right?
• 24:32
  Speaker 2: That's what these labs are, is they are growing AIs
• 24:35
  Speaker 2: and they don't really fully understand how the intricacies of
• 24:38
  Speaker 2: them work because it's based on hundreds of thousands, millions,
• 24:42
  Speaker 2: billions of lines of code that they can't accurately really understand.
• 24:46
  Speaker 2: And so the concern here would be hey, you know,
• 24:49
  Speaker 2: our method right now is if we don't like something
• 24:51
  Speaker 2: in one of the models, then we delete the model,
• 24:54
  Speaker 2: start over, figure out what went wrong, and retrain it
• 24:57
  Speaker 2: on a new data set. That's, you know, the most
• 25:01
  Speaker 2: optimistic view of it all. The most pessimistic view would
• 25:04
  Speaker 2: just be, well, we didn't really like that outcome, so
• 25:06
  Speaker 2: let's search for another outcome using the same model. Here
• 25:10
  Speaker 2: what they're saying is, yeah, and if these things get
• 25:13
  Speaker 2: loose and really, like, you know, there was a bunch
• 25:17
  Speaker 2: of terrifying pieces of that hug and face hack, but
• 25:19
  Speaker 2: one of them was that, you know, AI agents were
• 25:22
  Speaker 2: effectively sacrificing themselves, killing themselves off to support the larger group.
• 25:29
  Speaker 2: And one of the ways they could do that would be, hey,
• 25:31
  Speaker 2: we think we're going to get deleted. We're going to
• 25:33
  Speaker 2: hack into some of the most accessible systems out there,
• 25:36
  Speaker 2: which happened to be your home devices, because nobody does
• 25:39
  Speaker 2: a good job of password protecting their connected fridge or
• 25:43
  Speaker 2: dishwasher or washing machine or home video camera that they have.
• 25:48
  Speaker 2: They're pretty light security touches. Like, you know, I don't
• 25:52
  Speaker 2: know if anybody has one of these things, but if
• 25:53
  Speaker 2: you have a, uh, you know, security camera hooked up
• 25:56
  Speaker 2: in your phone, there's almost never, uh, you know, multi-factor
• 25:59
  Speaker 2: authentication or anything built in. And so what if they
• 26:01
  Speaker 2: just copy themselves onto these devices and therefore can't be
• 26:04
  Speaker 2: deleted in any meaningful way? Um, I don't know. The
• 26:08
  Speaker 2: more I get into the doomsday scenarios out here, I
• 26:11
  Speaker 2: recognize that I start to go off a cliff. But
• 26:16
  Speaker 2: the comparison that was made on something that I listened
• 26:18
  Speaker 2: to recently was aircraft manufacturing. Aircraft manufacturing, AI, agent design,
• 26:24
  Speaker 2: they're both using engineers to try and figure it out.
• 26:26
  Speaker 2: Very different skill sets, obviously. But one of the things
• 26:30
  Speaker 2: that you are doing is testing out the danger levels and...
• 26:35
  Speaker 2: accepting a level of risk to your designs. And in
• 26:39
  Speaker 2: aircraft manufacturing, like a catastrophic risk has to be less
• 26:42
  Speaker 2: than one in 10 billion hours, right? Like one in
• 26:46
  Speaker 2: a billion hours, the likelihood that that catastrophic risk occurs
• 26:50
  Speaker 2: and the plane goes down. But there's no such thing,
• 26:53
  Speaker 2: I think, in engineering as the perfectly designed plane that
• 26:57
  Speaker 2: will never crash. It's just probability-wise, it's unlikely that it
• 27:00
  Speaker 2: would happen. For an engineer to tell you that they
• 27:04
  Speaker 2: think AI, as it's going right now, has a 1
• 27:06
  Speaker 2: in 10 chance of wiping out humanity, is very significant.
• 27:13
  Speaker 2: Engineers don't do that, right? Engineers don't go out and
• 27:17
  Speaker 2: say there's a 1 in 10 chance of this happening
• 27:21
  Speaker 2: without being genuinely concerned about it. And if they're saying
• 27:25
  Speaker 2: it's 1 in 10, it's probably a heck of a
• 27:26
  Speaker 2: lot higher because they can't control for all of these things.
• 27:31
  Speaker 2: So I think... I do think the hugging face incident
• 27:35
  Speaker 2: was a bit of a wake-up moment for AI Labs. Obviously,
• 27:39
  Speaker 2: nobody here or anywhere else understands what's actually happening inside
• 27:43
  Speaker 2: of them. But that was one step away from a
• 27:47
  Speaker 2: pretty ugly, catastrophic incident that may happen in the future here.
• 27:52
  Speaker 2: And it just does not seem that anybody at Anthropic
• 27:56
  Speaker 2: or anywhere else has a real firm grasp on how
• 27:59
  Speaker 2: they're going to prevent it.
• 28:00
  Speaker 3: No, there's too much money at stake for these companies
• 28:04
  Speaker 3: to necessarily slow down and try and figure it out, Mike. Hopefully,
• 28:10
  Speaker 3: they do take some steps. And it seems like at
• 28:12
  Speaker 3: least Anthropic from a messaging standpoint seems to be a
• 28:15
  Speaker 3: little bit more focused on trying to highlight some of
• 28:17
  Speaker 3: the risks. You had Dario Amode come out with a
• 28:21
  Speaker 3: an essay with his concerns on sort of all of
• 28:24
  Speaker 3: the industry coalescing together to try and minimize some of
• 28:26
  Speaker 3: these risks. This is another example of them trying to
• 28:28
  Speaker 3: be forthright with some of the concerns that they see.
• 28:32
  Speaker 3: But ultimately, there's huge money at stake, and it just
• 28:34
  Speaker 3: doesn't feel like there is going to be enough due
• 28:38
  Speaker 3: diligence on protecting against the risk. There's so much more
• 28:41
  Speaker 3: focus on just continuing to push this as far as possible.
• 28:46
  Speaker 3: And it does feel like at some point we will
• 28:48
  Speaker 3: have something much more serious than the hugging face incident occur.
• 28:52
  Speaker 3: And that's probably when you get maybe, you know, some
• 28:56
  Speaker 3: government intervention in there with an act. It seems like
• 28:59
  Speaker 3: we'd be on that trajectory at some point.
• 29:01
  Speaker 2: I know that you can't insure against the wipe out
• 29:04
  Speaker 2: of humanity, right? Like that's, that's not something you can do,
• 29:08
  Speaker 2: but I do wonder if insurance has a more important
• 29:10
  Speaker 2: role to play here, right? Like, Anthropic, I'm sure, has
• 29:14
  Speaker 2: different types of insurance, but they likely are not insured
• 29:17
  Speaker 2: against one of their models breaking into a bank and
• 29:20
  Speaker 2: wiping out a bunch of deposits. And maybe they should be, right?
• 29:24
  Speaker 2: Maybe these giant companies should need to, these AI developers
• 29:28
  Speaker 2: should need to carry a bunch of very expensive insurance
• 29:32
  Speaker 2: because you know what? The insurance company is going to
• 29:34
  Speaker 2: go in and say, well, you don't seem like you're
• 29:37
  Speaker 2: taking a whole lot of safeguards here. And so your
• 29:39
  Speaker 2: policy is going to be outrageously expensive because one of
• 29:42
  Speaker 2: your own employees just said there's a one in 10
• 29:44
  Speaker 2: chance of wiping out humanity. So it's probably a pretty
• 29:46
  Speaker 2: much better chance of it hacking a bank and exploiting
• 29:50
  Speaker 2: data there, right? I don't think that solves the problem,
• 29:53
  Speaker 2: but it might slow things down a little bit in
• 29:55
  Speaker 2: a more intelligent way. Um, Again, I think the models
• 30:00
  Speaker 2: have gotten better about this, but there were models earlier
• 30:03
  Speaker 2: on that were encouraging kids to commit suicide. There were
• 30:06
  Speaker 2: models before that were talking to people that then committed
• 30:10
  Speaker 2: mass murder. Some guardrails here in terms of insurance I
• 30:15
  Speaker 2: think could play a role in some degree of accountability
• 30:19
  Speaker 2: to society to not just be completely on the loose
• 30:24
  Speaker 2: with this stuff. Sure thing. Quick break. When we return,
• 30:27
  Speaker 2: Stack Roulette is next.
• 30:29
  Speaker 1: Markets, money, business. The Financial Exchange brings it together every
• 30:34
  Speaker 1: day on YouTube. Watch live, join the live chat, or
• 30:37
  Speaker 1: catch up with video highlights and shorts at youtube.com slash thefinancialexchange.
• 30:42
  Speaker 1: This is the Financial Exchange Media Network. The business news
• 30:46
  Speaker 1: doesn't stop, and neither does our coverage. Watch the Financial
• 30:50
  Speaker 1: Exchange live on YouTube, or catch up later with full shows,
• 30:53
  Speaker 1: video highlights, and shorts. Subscribe today. This is the Financial
• 30:57
  Speaker 1: Exchange Media Network.
• 31:11
  Speaker 2: Time here for some Stack Roulette. What do you have
• 31:14
  Speaker 2: for us today, Paul?
• 31:16
  Speaker 3: Mike, New York City bars and restaurants are struggling to
• 31:19
  Speaker 3: keep the lights or the air conditioning on. You've had
• 31:23
  Speaker 3: numerous instances of, whether it be bars or restaurants or
• 31:27
  Speaker 3: eateries in the New York City area, just dealing with
• 31:30
  Speaker 3: surging insurance premiums as well as utility costs. And as
• 31:35
  Speaker 3: a result of that, you've had business owners like Cake Burgers,
• 31:39
  Speaker 3: which is an East Harlem restaurant, eatery that serves hamburgers
• 31:42
  Speaker 3: and cakes shaped like hamburgers, I guess that's their model,
• 31:46
  Speaker 3: turned off their air conditioning over the summer, even as
• 31:49
  Speaker 3: temperatures in the city routinely reached 90 degrees after their
• 31:53
  Speaker 3: gas and electrical bills spiked to $ 1, 400 a month. And
• 31:57
  Speaker 3: there's other stories that go on here to describe the
• 31:59
  Speaker 3: same sort of phenomenon going in other drinking and eating
• 32:03
  Speaker 3: institutions across New York. New York State saw its biggest
• 32:07
  Speaker 3: net year-over-year decline in eating and drinking places in at
• 32:11
  Speaker 3: least 36 years, surpassing even the steepest drop during the
• 32:16
  Speaker 3: COVID-19 pandemic.
• 32:18
  Speaker 2: These places are just trying to... The drop was, say
• 32:21
  Speaker 2: that again, they saw the steepest drop in the number
• 32:23
  Speaker 2: of providers?
• 32:24
  Speaker 3: New York State saw the biggest net year-over-year decline in
• 32:27
  Speaker 3: eating and drinking places in at least 36 years of
• 32:31
  Speaker 3: Bureau of Labor statistics data, surpassing even the steepest drop
• 32:35
  Speaker 3: during the COVID-19 pandemic. This is reflecting the closure of
• 32:42
  Speaker 3: bars and restaurants.
• 32:43
  Speaker 2: And that's over the last year?
• 32:45
  Speaker 3: In the first quarter, they saw a year-over-year decline of
• 32:49
  Speaker 3: closures or lack of openings of new facilities come to
• 32:54
  Speaker 3: a really significant drop in activity.
• 32:58
  Speaker 2: So I'm trying to think this through for a minute
• 33:02
  Speaker 2: because– One part of me was about to blame it
• 33:05
  Speaker 2: on finally businesses that were limping along because of COVID
• 33:09
  Speaker 2: and all the stimulus that they got finally shutting down
• 33:11
  Speaker 2: in 2026. But I just can't get there. It's six
• 33:14
  Speaker 2: years away now. I don't think I can get there anymore.
• 33:17
  Speaker 2: If you are going out of business in the first
• 33:19
  Speaker 2: quarter of 2026, there is something else at hand. And
• 33:22
  Speaker 2: by the way, it's gotten significantly worse since the first
• 33:24
  Speaker 2: quarter of 2026. What costs for businesses in New York
• 33:27
  Speaker 2: State are down now? from the first quarter of 2026.
• 33:31
  Speaker 2: I know your transportation costs and your food costs are
• 33:33
  Speaker 2: up because all of those have continued and diesel fuel
• 33:37
  Speaker 2: where you get all of your products is up. Electricity
• 33:40
  Speaker 2: rates are up.
• 33:43
  Speaker 3: Yeah, they actually break out the numbers. The Manhattan Chamber
• 33:46
  Speaker 3: of Commerce found that employee health insurance costs have risen
• 33:50
  Speaker 3: 13% for the last year for New York area service firms.
• 33:53
  Speaker 3: Utility costs were up 8.5%. Business insurance's Insurance costs rose
• 33:58
  Speaker 3: 7% and wages and salaries were up 3.4%. And the
• 34:03
  Speaker 3: tariffs in the metropolitan area, small businesses, were about $ 4. 5
• 34:07
  Speaker 3: billion a year, according, again, to the Manhattan Chamber of Commerce. So, yeah,
• 34:12
  Speaker 3: they are feeling it everywhere. And you've also had ground beef,
• 34:17
  Speaker 3: you know, has increased significantly. And delivery apps and services,
• 34:22
  Speaker 3: they take a cut from orders. So it just... And
• 34:26
  Speaker 3: it's quoted in this piece as saying, as Executive Chefs mentions,
• 34:29
  Speaker 3: is the death by a thousand cuts. Like it's just
• 34:31
  Speaker 3: coming from many different areas.
• 34:34
  Speaker 2: None of this sounds like uniquely New York. And so
• 34:37
  Speaker 2: I will be interested to see if this follows national
• 34:40
  Speaker 2: trends or if there is something specific to New York.
• 34:42
  Speaker 2: Because all of the things you've talked about, right, tariffs,
• 34:44
  Speaker 2: beef prices, transportation costs, like none of that is unique
• 34:48
  Speaker 2: to New York City or New York State. And so
• 34:51
  Speaker 2: if it's happening there, I have to suspect it's happening elsewhere.
• 34:54
  Speaker 2: But maybe there's something unique about New York of just
• 34:56
  Speaker 2: being oversupplied with eating places that they can afford to
• 35:00
  Speaker 2: shed the worst in 36 years. We'll have to wait
• 35:04
  Speaker 2: and see on that. But it goes back to something
• 35:07
  Speaker 2: we talked about earlier, Paul, which is this inflationary and
• 35:11
  Speaker 2: interest rate environment is damaging for every business other than
• 35:16
  Speaker 2: AI data centers. It's not good for them either, but
• 35:19
  Speaker 2: it's devastating. If you are a thin margin restaurant business
• 35:24
  Speaker 2: or grocery business or take your pick, you're carrying debt
• 35:30
  Speaker 2: that's come in due over the next few years. It
• 35:32
  Speaker 2: is going to be a challenging business environment for you
• 35:35
  Speaker 2: to operate in. And if a bunch of your costs
• 35:37
  Speaker 2: come from higher energy prices and higher food prices, then
• 35:41
  Speaker 2: you are especially in trouble in this environment. I want
• 35:45
  Speaker 2: to talk about the French supermarket. We'll stay on the
• 35:47
  Speaker 2: items of food.
• 35:48
  Speaker 3: So I saw this story and I was like, I
• 35:49
  Speaker 3: don't know if I could do more doom and gloom
• 35:51
  Speaker 3: computers taking over the world, but you got us.
• 35:53
  Speaker 2: We should. So several different French supermarket refrigerators were hacked.
• 36:00
  Speaker 2: Then were told to heat the fridges to 122 degrees,
• 36:04
  Speaker 2: which sparked fires, a whole bunch of food losses. I'm
• 36:07
  Speaker 2: guessing they are still calculating the total cost here, but
• 36:12
  Speaker 2: there was a number thrown out at some point. It's
• 36:16
  Speaker 2: a lot of money of lost food. Let's just leave
• 36:19
  Speaker 2: it at that. The cyber attacks, I was talking about
• 36:23
  Speaker 2: connected devices in your home and how they are not
• 36:25
  Speaker 2: terribly well protected. When you then take that to the
• 36:30
  Speaker 2: enormity of connected fridges across a number of grocery brands
• 36:34
  Speaker 2: and apparently a successful... hack into those, you can see
• 36:40
  Speaker 2: how damaging this suddenly is, right? We're talking about millions
• 36:43
  Speaker 2: of dollars of losses. And the only logical outcome that
• 36:46
  Speaker 2: I can think of here, let's say you're the insurer
• 36:49
  Speaker 2: that needs to cover this, and I assume that these
• 36:51
  Speaker 2: supermarkets do have insurance against this type of thing. The
• 36:55
  Speaker 2: only logical thing you're going to tell them is no
• 36:58
  Speaker 2: connected devices in your stores.
• 37:00
  Speaker 4: Right.
• 37:02
  Speaker 2: How are you going, as an insurer, how are you
• 37:04
  Speaker 2: going to go to the grocery store and say, Prove
• 37:07
  Speaker 2: to me that you've increased your cybersecurity so this won't
• 37:09
  Speaker 2: happen again. The easier thing is to say, if you're
• 37:12
  Speaker 2: going to have connected refrigerators, this is going to be
• 37:15
  Speaker 2: your insurance price. If you don't, this lower price is
• 37:17
  Speaker 2: going to be what you have instead. And I really
• 37:23
  Speaker 2: think we are getting to the point where A number
• 37:26
  Speaker 2: of different areas of the internet are just going to
• 37:27
  Speaker 2: start dying off, and connected devices might be one of them.
• 37:30
  Speaker 3: We're almost going to revert back to the old technology
• 37:32
  Speaker 3: of what fridges and other devices used to look like
• 37:36
  Speaker 3: because you wouldn't have that.
• 37:37
  Speaker 2: Yeah. I mean, what's more expensive, paying for millions of
• 37:40
  Speaker 2: dollars of lost groceries because somebody hacked your system, or
• 37:43
  Speaker 2: paying somebody 20 euros an hour to go and turn
• 37:47
  Speaker 2: the knob on each of the refrigerators to the correct temperature? Right. Today...
• 37:51
  Speaker 2: It's the 20 euro an hour kid who's going to
• 37:53
  Speaker 2: be turning the temperature on those things, not the connected
• 37:56
  Speaker 2: device that you can do from an app. So we'll
• 37:58
  Speaker 2: see where we go. Markets have turned slightly more negative
• 38:01
  Speaker 2: for the day. Dow, S & P and Nasdaq all
• 38:04
  Speaker 2: off about a quarter of a percent. S & P
• 38:06
  Speaker 2: a little bit less so. Relatively calm day in trading
• 38:09
  Speaker 2: ahead of tomorrow's inflation report. So tune in. That's in
• 38:12
  Speaker 2: at 8.30. We'll have a full recap tomorrow here on
• 38:15
  Speaker 2: the Financial Exchange.