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Jeff Bezos warns of an AI industrial bubble · The Financial Exchange Show

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Speaker 1: donation today. This is the Financial Exchange with Chuck Zada,
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Speaker 1: and Mike Armstrong.
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Speaker 2: Chuck, Mike and Ben with you. And as we take
1:13
Speaker 2: a look around the markets today, we've got equities continuing
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Speaker 2: to push indices two new all time highs. The Dow
1:22
Speaker 2: Jones Industrial Average up three hundred and seventy eight points
1:27
Speaker 2: about three quarters of a percent. SP five hundred up
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Speaker 2: twenty seven points about zero point four percent. NAZDAK actually
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Speaker 2: lagging a little bit today, only up point two percent
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Speaker 2: or forty five points, but overall, all three major US
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Speaker 2: indices in positive territory, and even the cute little Russell
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Speaker 2: two thousand getting in on the action up about one
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Speaker 2: and a half percent today. Also up today yields on bonds,
1:49
Speaker 2: which means prices on bonds are down. We've got the
1:53
Speaker 2: ten year Treasury right now. It is up two point
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Speaker 2: one basis points to four point one point one one percent.
2:01
Speaker 2: According to Mortgage News Daily, the national thirty year fixed
2:04
Speaker 2: rate mortgage stands at six point three six percent, down
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Speaker 2: one basis point since yesterday, in a little bit lower
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Speaker 2: than the six and a half range that it was
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Speaker 2: at throughout much of the early part of September before
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Speaker 2: it dipped into the low sixes later in the month.
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Speaker 2: Post FED meeting, taking a look at commodity markets. Oil
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Speaker 2: West Text Intermediate up sixty one cents an ounce, not
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Speaker 2: sixty one cents nounce sixty one cents a barrel, hope
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Speaker 2: not announce, but we're up per ounce. That'd be very expensive.
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Speaker 2: Oil six sixty one cents a barrel to sixty one
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Speaker 2: to oh nine on West textas Intermediate, and Gold is
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Speaker 2: up thirty five dollars announced to thirty nine oh three
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Speaker 2: and ten cents. Not a new all time high yet,
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Speaker 2: but knocking on the door again after getting north of
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Speaker 2: that thirty nine hundred mark for the first time ever
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Speaker 2: on Wednesday. So we'll see where gold ends up moving
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Speaker 2: and if it can close the week with another all
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Speaker 2: time high. Mike, anything catching your eye in markets at all?
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Speaker 3: Uh No, But I had one stat that I just
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Speaker 3: saw during the break that I thought was worth mentioning.
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Speaker 3: Nearly one in five US homeowners with a mortgage today
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Speaker 3: now has a rate of at least six percent. That's
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Speaker 3: the highest share since twenty fifteen, and it also now
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Speaker 3: exceeds the portion of mortgages that are under three percent.
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Speaker 2: Yeah, so you have a fewer people that are mortgage
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Speaker 2: locked into their homes it still, you know, does suggest
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Speaker 2: that the vast majority of people with mortgages do have
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Speaker 2: some you know, mortgage lock. That is probably you know,
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Speaker 2: creating a little bit of friction in the housing market.
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Speaker 2: But every month that you go that is going to
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Speaker 2: be improving because there still are people that say, well,
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Speaker 2: I don't want to give up my three percent mortgage,
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Speaker 2: but the job I'm taking is across the country, and
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Speaker 2: so I've got to sell the place, move and you know,
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Speaker 2: pay those higher mortgage rates. And so even though they
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Speaker 2: don't want to, there are people each month that are
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Speaker 2: making those decisions. And so you'll continue to see these
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Speaker 2: share of mortgages north of six percent growing overall, as
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Speaker 2: you know, at least as long as we continue to
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Speaker 2: see national mortgage rates in that ballpark.
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Speaker 3: Yeah maybe I know you get this question too, but
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Speaker 3: I get the question all the time. What's going to
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Speaker 3: fix the housing market? Where am I going to see
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Speaker 3: inventory tick up? And what I'm going to see mortgage
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Speaker 3: rates come down? My answer is, you would really not
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Speaker 3: like to see the economy that will cause that happen.
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Speaker 2: If you want mortgage rates back in mortgage rates in
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Speaker 2: the fives, you could probably get briefly with a mild recession,
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Speaker 2: mortgage rates in the fours, it's gotta be ugly. You
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Speaker 2: need something pretty ugly going on, because remember, mortgage rates
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Speaker 2: in the fours mean that you need the ten year
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Speaker 2: treasury probably in the mid twos, if not a little
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Speaker 2: bit lower. Long, long way to go to get there,
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Speaker 2: is what I'm saying. Peace from Bloomberg AI. Data centers
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Speaker 2: are sending power bills soaring. The subhetter wholesale electricity costs
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Speaker 2: as much as two hundred and sixty seven percent more
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Speaker 2: than it did five years ago in areas near data centers.
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Speaker 2: That is being passed on to customers. And yeah, this
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Speaker 2: is something that we've been talking about for quite a
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Speaker 2: while now, and it's just the data that you're getting
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Speaker 2: on It is very much suggesting that this is going
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Speaker 2: to get much worse because the scale of construction of
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Speaker 2: data centers is moving up exponentially over the next couple
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Speaker 2: of years from where it was in the last couple.
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Speaker 3: One thing I don't fully understand about this is just
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Speaker 3: how hyper localized these markets are. Like I don't know
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Speaker 3: of a lot of businesses that are really excited about
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Speaker 3: building data centers here in New England, so I'm curious
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Speaker 3: if we're going to be more insulated to the price
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Speaker 3: hikes on electricity than say Wisconsin. That I chose Wisconsin
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Speaker 3: because I know of at least one data center going
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Speaker 3: in there, But I'm sure that there are other markets
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Speaker 3: that are more attract Dave Hawaii. They're not going to
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Speaker 3: build a ton of data centers in Hawaii, would be
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Speaker 3: my guess. And so are those markets there for more
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Speaker 3: insulated to price hike?
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Speaker 4: Say, I'm just not sure.
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Speaker 2: Yeah, And and and the question that goes along with this,
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Speaker 2: like what's going to matter is it's two pieces. Really,
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Speaker 2: It's can you in those areas keep up with construction
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Speaker 2: of power plants to supply the additional generation that you need.
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Speaker 2: The answer to this point has been no, but maybe
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Speaker 2: you start to see, you know, some improvements on the
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Speaker 2: permitting process that can speed that up. But the other
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Speaker 2: piece then is, Okay, it's not just the power generation
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Speaker 2: that you need, it's the fuel for the power generation.
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Speaker 2: Does that shift things when it comes to cost of fuel?
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Speaker 2: And not just on that side, but remember the other
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Speaker 2: piece that we've largely enjoyed in the Northeast, that again,
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Speaker 2: even though we've we've always had kind of a higher
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Speaker 2: we've we've had higher electricity prices because of how we
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Speaker 2: get net gas to the Northeast, but ultimately cheapernt gas
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Speaker 2: in the United States still allows us to have, you know,
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Speaker 2: cheaper fuel than we otherwise would, even though it's no
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Speaker 2: more expensive because we've taken on a big ship and
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Speaker 2: make it really cold and ship it around in everything.
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Speaker 2: If you start seeing that gas prices moving up on
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Speaker 2: a consistent basis, which the reason why that could happen
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Speaker 2: is because of a decline in fracking activity in the US,
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Speaker 2: which is where the vast majority of nat gas is
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Speaker 2: produced in the US, and the US is by far
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Speaker 2: the largest producer of gnat gas in the world. If
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Speaker 2: that declines at the same time that you're building more
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Speaker 2: gnat gas plants to power new data center construction, look.
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Speaker 3: Out, Yeah, I do wonder about this. Forget about this
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Speaker 3: from an artificial intelligence perspective, even from an electricity cost perspective. Sure,
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Speaker 3: for those cities that are attracting these data centers, is
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Speaker 3: this an attractive development opportunity?
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Speaker 2: Right?
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Speaker 3: Like if you are I don't know anywhere in the
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Speaker 3: Ross Belt. Really, some of these areas that have just
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Speaker 3: been decimated over the course of the last few decades,
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Speaker 3: Detroit comes to mind, where you have very cheap land,
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Speaker 3: relatively cheap electricity.
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Speaker 4: Is this the I guess, what does this.
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Speaker 3: Do for long term development for your area? Because it's
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Speaker 3: not as though these are going to be long term
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Speaker 3: jobs that are coming to your area.
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Speaker 2: Right.
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Speaker 3: If you build a data center, you're going to need
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Speaker 3: to house the workers that are building it. If you
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Speaker 3: build electricity generation plants to support those data centers, you're
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Speaker 3: going to need those.
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Speaker 4: Construction costs as well.
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Speaker 3: But are you actually adding anything long term to your
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Speaker 3: economy if they're just data centers that pay a little
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Speaker 3: bit of property taxes and suck up a whole lot
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Speaker 3: of electricity and don't actually hire anybody.
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Speaker 2: So let's talk about the benefits, because there are some
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Speaker 2: that I do think are out there. The first is
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Speaker 2: you do still need people to maintain the data center. Yep,
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Speaker 2: these things don't just happen in a vacuum. There are
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Speaker 2: things that break on a regular basis. You need to
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Speaker 2: make sure they're functioning properly. I don't know exactly how
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Speaker 2: many people you necessarily need per you know, you know
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Speaker 2: semiconductor that you're using, or you know, per server racker
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Speaker 2: you know, however you want to measure it, but you
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Speaker 2: do need people to maintain these, so there is you know,
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Speaker 2: some job growth that does happen as a result of that.
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Speaker 2: The other piece, if you are saying, hey, this is
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Speaker 2: going to be a hub for data center construction in
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Speaker 2: the future, then it's very possible that suppliers and related
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Speaker 2: businesses move closer to have shorter supply lines to supply
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Speaker 2: future growth, and you get the people that work in
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Speaker 2: those businesses.
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Speaker 3: So if I want to have be a data center hub,
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Speaker 3: I may also have semiconductor manufacturers in the area.
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Speaker 4: As the argument, not even manufacturing.
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Speaker 2: You could have you know, companies that make server racks,
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Speaker 2: companies that make cooling fans, companies that make uh, you
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Speaker 2: know whatever else goes into these things that I can't
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Speaker 2: think of right now, all those other you know, supplemental pieces.
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Speaker 2: You can need those other things that this does. Hey,
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Speaker 2: if you have you know, a big data center, doesn't
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Speaker 2: it kind of send a big signal to the world, Hey,
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Speaker 2: we're you know, a high tech hub, and maybe you
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Speaker 2: get tech companies you know that may be on the
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Speaker 2: software side of things that say, yeah, we want to
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Speaker 2: locate in an area that is, you know, you know,
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Speaker 2: trying to develop technologies of the future.
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Speaker 3: You could get some of that that goes on. Yeah,
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Speaker 3: I'm not sure about that part, or maybe think so.
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Speaker 3: I don't think of a data center as the innovation hub.
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Speaker 2: Let's think of it not not in terms of data center,
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Speaker 2: but let's think of it this way. If I tell people, hey,
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Speaker 2: open eye, Open AI is building in our town, do
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Speaker 2: other AI related businesses say, yeah, we want to be
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Speaker 2: close to that because this is a city that is
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Speaker 2: committed to help AI companies build, right like that kind
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Speaker 2: of thing, you know, like those things.
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Speaker 4: I definitely don't think it's a net negative.
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Speaker 3: I'm just wondering how much of a positive is it
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Speaker 3: for these areas that are promoting this development.
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Speaker 4: It's tough for me to read.
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Speaker 2: Another thing that I'd be curious about. And I don't
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Speaker 2: think we're at this point yet. But what if you
11:23
Speaker 2: have something that's kind of the reverse of what we
11:25
Speaker 2: normally see for you know how, when when sports teams
11:29
Speaker 2: go to try to build new stadiums, they basically try
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Speaker 2: to suck up a bunch of tax revenue to do it,
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Speaker 2: and it's generally a horrible investment for localities. What if
11:38
Speaker 2: you can actually but like, what if we've turned so
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Speaker 2: much against data center construction now because we've talked about
11:45
Speaker 2: this a lot on our show, Like they're huge, you know,
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Speaker 2: costs in terms of resources, whether you're talking water, electricity.
11:52
Speaker 2: You know, we've had, you know, a couple of new
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Speaker 2: data center projects that have been voted down in recent
11:56
Speaker 2: months nationwide. What if it gets to the point where hey,
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Speaker 2: open Ay says, yeah, we want to build a new
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Speaker 2: data center near your town and we're gonna throw in
12:07
Speaker 2: a billion dollars for local infrastructure improvement.
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Speaker 3: Then I've got a great idea for the Muzzy Forward
12:14
Speaker 3: site right down the road here.
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Speaker 2: Right like it's you say, oh, like this is interesting. Now,
12:18
Speaker 2: I don't think I've seen much along those lines to
12:22
Speaker 2: this point, but maybe that's where this goes and and
12:25
Speaker 2: and that could be you know, another positive for localities.
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Speaker 2: So we'll have to see how it evolves from here.
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Speaker 2: But ultimately, electricity costs are gonna be one of the
12:34
Speaker 2: things that we reckon with on this because we're not
12:37
Speaker 2: prepared to uh to build out that kind of capacity
12:39
Speaker 2: on such short notice. Let's take a quick break here.
12:42
Speaker 2: When we come back let's do a little bit of trivia,
12:47
Speaker 2: and then we're also talking a little bit about Jeff
12:49
Speaker 2: Bezos' comments on the AI boom right after this.
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Speaker 5: Now for a little trivia here on the Financial Exchange,
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13:38
Speaker 5: related trivia questions here. So today's trivia question is, over
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Speaker 5: the past twenty five years, how often did the S
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13:51
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14:11
Speaker 2: Jeff Bezos is out in Italian Tech Week right now
14:17
Speaker 2: in tour in Italy and gave a speech talking about
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Speaker 2: what he's seeing in artificial intelligence right now, and I'll
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Speaker 2: just give you his quotes just so they can speak
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Speaker 2: for themselves. This is kind of an industrial bubble. The
14:31
Speaker 2: first thing that happens is that stock prices get disconnected
14:34
Speaker 2: from the fundamentals of a business. The second thing that
14:36
Speaker 2: happens is people get very excited, like they like they're
14:39
Speaker 2: taught today about artificial intelligence. And during bubbles, every experiment
14:43
Speaker 2: or idea gets funded, the good ideas and the bad ideas,
14:46
Speaker 2: and investors have a hard time in the middle of
14:48
Speaker 2: this excitement distinguishing between the good ideas and the bad ideas.
14:52
Speaker 2: And that's also probably happening today. But that doesn't mean
14:55
Speaker 2: that anything that is happening isn't real. AI is real,
14:59
Speaker 2: and it's going to change every industry.
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Speaker 3: I don't always agree with Bezos, but I feel as
15:05
Speaker 3: though he does sum up my views on what we're
15:07
Speaker 3: seeing right now pre succinctly.
15:08
Speaker 2: Yeah, two things can be true. Number One, there is
15:11
Speaker 2: going to be massive change that we can not even
15:13
Speaker 2: comprehend right now because of AI, and we're also probably
15:16
Speaker 2: wasting a whole bunch of money doing it.
15:19
Speaker 4: By the way, Italian Tech Week, what about it? Can
15:23
Speaker 4: you name an Italian tech company?
15:26
Speaker 3: Maybe that's why they're having Italian Tech Week, Michael, Maybe
15:29
Speaker 3: I had Google's Gemini tell me who are the big
15:34
Speaker 3: tech players? They named a few, including Bending Spoons and
15:38
Speaker 3: companies like NETSI and sc Scallop.
15:41
Speaker 2: Hey, what about Ferrari.
15:44
Speaker 4: Yeah, I don't think that counts.
15:45
Speaker 2: It's technology, yeah, very fast technology.
15:49
Speaker 3: So but yeah, I mean, yeah, two things that once
15:52
Speaker 3: can be true. We could be in a bubble and
15:55
Speaker 3: it can still be the most innovative technology since the Internet.
15:58
Speaker 4: See the Internet, the.
16:00
Speaker 2: Internet was a bubble. It still is amazing, you know.
16:06
Speaker 2: It's it's you can still have a whole bunch of
16:09
Speaker 2: good come out of a bubble afterwards, even if there's
16:12
Speaker 2: a lot of wealth that ends up being destroyed, because
16:16
Speaker 2: not all the investment ends up going to you know,
16:18
Speaker 2: worthwhile sources. It's just kind of how it is.
16:20
Speaker 3: If the if AI is the most innovative technology since
16:25
Speaker 3: the Internet, what was the previous most innovative technology before
16:29
Speaker 3: the Internet.
16:30
Speaker 2: Oh, good question. So I don't think so, because I
16:35
Speaker 2: don't think nuclear power changed the world.
16:38
Speaker 4: Nuclear weapons did, yes.
16:42
Speaker 2: But no nuclear power. I don't think was that I'm
16:46
Speaker 2: going to go with. I mean, given like just how
16:53
Speaker 2: the Internet did change things, I think you probably have
16:57
Speaker 2: to look at either traveler, the internal combustion engine that
17:03
Speaker 2: far back.
17:03
Speaker 3: Huh when did the mainframe computer come out late fifties,
17:07
Speaker 3: early sixties. I mean that led to eventually interconnected Internet.
17:12
Speaker 2: That's like saying that the alphabet led to the typewriter.
17:15
Speaker 4: Yeah, you know, yeah, I.
17:19
Speaker 2: Might go airplane or internal combustion engine.
17:22
Speaker 4: Yeah.
17:23
Speaker 2: I mean you got to remember think about how much
17:25
Speaker 2: the Internet changed things, right, yeah.
17:27
Speaker 4: Yeah, no, no, you're right. Air travel might be it.
17:31
Speaker 2: I was talking to someone yesterday about this. But when
17:36
Speaker 2: when you were a kid and there was no Internet,
17:38
Speaker 2: if you're trying to like plan a family vacation, you
17:41
Speaker 2: kind of had three ways that you could go about it.
17:44
Speaker 2: You could find a travel agent, you could buy, you know,
17:48
Speaker 2: a travel guide, or you could go to Triple A
17:51
Speaker 2: and they'd have like these books that they would give
17:53
Speaker 2: you about like different things. Except the Triple A books
17:56
Speaker 2: weren't just like hey, here are the hotels to stay in.
17:59
Speaker 2: It's like take a left of this house, and the
18:02
Speaker 2: farm next to it loves to take people in for
18:05
Speaker 2: you know, vacations.
18:06
Speaker 3: If you have a more innovative technology. Again, this is
18:09
Speaker 3: pre internet post either internal combustion engine or flight textas
18:16
Speaker 3: show at six one, seven three, six, two thirteen eighty five.
18:19
Speaker 3: I'm just curious what we're missing in between there, because
18:22
Speaker 3: there's gotta be something.
18:25
Speaker 4: Yeah, it's.
18:28
Speaker 2: It's so you're looking for something from like the sixties. Yeah, yeah,
18:34
Speaker 2: I mean, look, if if you want to go this direction,
18:37
Speaker 2: you could talk about like polio vaccine or something like that.
18:41
Speaker 2: It's not the sixties. That was I want to say, No,
18:43
Speaker 2: I think that was like forty one. Yeah, yeah, let
18:47
Speaker 2: me see when it was? Yeah was Sulk was the
18:52
Speaker 2: guy who did it? History? Here we go, let's see, uh,
18:57
Speaker 2: yeah it was. It was it forty eight. Let's go
19:03
Speaker 2: fifty two, fifty two like that. That that might be
19:07
Speaker 2: up there.
19:08
Speaker 3: First nuclear bomb was tested in forty five. Yeah, we're
19:12
Speaker 3: in that ballpark.
19:13
Speaker 2: Yeah think Okay, So anyways, Mike, what's the text number again?
19:16
Speaker 4: Six one, seven, three, six, two, thirteen eighty five.
19:19
Speaker 3: You can text us with what you think was the
19:20
Speaker 3: most innovative technology prior to the Internet.
19:23
Speaker 2: Let's take a quick break. When we come back, we
19:25
Speaker 2: got Wall Street Watch, we got the trivia answer, and
19:27
Speaker 2: we're talking about why job seekers and hiring managers hate
19:30
Speaker 2: using AI for the process.
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Speaker 1: Financial Exchange Radio Network.
20:00
Speaker 5: Well, market are in positive territory as they look to
20:02
Speaker 5: close out the week on a positive note. The Dow
20:06
Speaker 5: Jones is up three hundred and forty one points, or
20:09
Speaker 5: zero point seventy five percent. The S and P five
20:11
Speaker 5: hundred is up over twenty six points or four tenths
20:14
Speaker 5: of a percent, The Nasdaq's up over fifty six points
20:17
Speaker 5: or one quarter of a percent, and the Russell two
20:20
Speaker 5: thousand is up over one point three four percent as
20:24
Speaker 5: Day three of the government's shutdown rolls on. Right now,
20:27
Speaker 5: Rare Earth Minor USA Rare Earth is up seventeen percent
20:31
Speaker 5: after CEO Barbara Humpton told CNBC that the company is
20:34
Speaker 5: in quote close communication with the White House. Game Stop
20:38
Speaker 5: shares are off one point eight percent after the company
20:41
Speaker 5: said in a filing it's selling a combination of assets
20:44
Speaker 5: ranging from common stock to debt for an undisclosed amount.
20:47
Speaker 5: Applied Material shares are down two point three percent after
20:50
Speaker 5: the company acknowledged in a regulatory filing that new US
20:54
Speaker 5: export restrictions will hurt revenue. Applied Materials said the restrictions
20:58
Speaker 5: will lower fourth quarter revenue by about one hundred and
21:00
Speaker 5: ten million dollars and its fiscal year twenty twenty six
21:03
Speaker 5: revenue by around six hundred million dollars. Uranium Energy is
21:08
Speaker 5: down two point eight percent after planning a secondary offering
21:11
Speaker 5: of fifteen point five million shares. Goldman Sachs is the
21:14
Speaker 5: sole underwriter. Entergy shares are up two point seven percent
21:18
Speaker 5: after announcing plans to provide power for Google's plan technology
21:22
Speaker 5: investment worth around four billion dollars in Arkansas. As part
21:25
Speaker 5: of the investment, Google will develop a new data center
21:28
Speaker 5: in West Memphis, Arkansas. The companies first in the state,
21:31
Speaker 5: and finally, Gordon Hasket Research Advisors upgraded Zillo to buy
21:35
Speaker 5: from hold sending the real estate platform up over three
21:38
Speaker 5: and a half percent. The Wall Street researcher said the
21:40
Speaker 5: recent sell off is overdone, creating an attractive buying opportunity.
21:44
Speaker 5: Zillo has declined seventeen percent over the past two weeks
21:47
Speaker 5: on concerns regarding competitive encroachment and legal woes. I'm Ben Kitchen,
21:52
Speaker 5: and that is Wall Street Watch, and we still don't
21:55
Speaker 5: have a winner for the trivia question. So let me
21:58
Speaker 5: throw that at you one more time.
21:59
Speaker 2: Here.
22:00
Speaker 5: Over the past twenty five years, how often did the
22:03
Speaker 5: S and P five hundred have a down year? It's
22:06
Speaker 5: more than five and less than ten. That should be
22:09
Speaker 5: enough of a hint.
22:10
Speaker 4: For you, Ben.
22:12
Speaker 3: I mean, if nobody got the answer yet, I think
22:14
Speaker 3: there's no winner. We had some text responses to our
22:19
Speaker 3: question about the biggest innovations in the world since prior
22:24
Speaker 3: to the Internet.
22:24
Speaker 4: Yes, what do we got, Ben?
22:27
Speaker 5: We've got mostly cell phones that seems to be the
22:29
Speaker 5: popular one. We've got television, refrigeration, interchangeable parts for the
22:34
Speaker 5: steam engine, wireless telephones. But I think the one here
22:37
Speaker 5: that was the most interesting that I saw that came
22:39
Speaker 5: from the two six to two area code is the
22:41
Speaker 5: introduction of plastics in the nineteen thirties completely changed consumer
22:45
Speaker 5: products and many other things.
22:48
Speaker 2: Yep, yeah it did.
22:50
Speaker 3: Cell Phones is an interesting one, but I can't say
22:53
Speaker 3: that it revolutionized things quite as much as the Internet
22:55
Speaker 3: did nearly as much. Rather, no plastics did. Oh, plastics
23:01
Speaker 3: absolutely did. I mean it's you don't get the Internet
23:04
Speaker 3: without plastics. It literally could not exist. Yeah, those are
23:10
Speaker 3: some good ones.
23:11
Speaker 4: Yeah, thank you for those.
23:14
Speaker 2: Bike mechanic James Peregrine applied online for a job at
23:17
Speaker 2: ARII last year and was pleased to get an email
23:20
Speaker 2: inviting him to an interview, but the interview turned out
23:23
Speaker 2: to be a series of recorded questions from ARII managers
23:26
Speaker 2: asked by an artificial intelligent app that video recorded his answers.
23:30
Speaker 2: The thirty four year old Malden resident tried twice but
23:32
Speaker 2: said he couldn't bear talking to the app. And basically,
23:35
Speaker 2: what you're getting here, and this is not just happening
23:38
Speaker 2: in job hunting, but what you have there is hiring
23:42
Speaker 2: managers saying Okay, we can interview more people if we
23:47
Speaker 2: use AI to interview them. You have people not writing
23:51
Speaker 2: their own resume but having AI write their resume for them,
23:54
Speaker 2: and then you basically end up with like the extension
23:57
Speaker 2: of this is then hey, do you get one AI
23:59
Speaker 2: talking to the and then you need another AI to
24:01
Speaker 2: tell you what they were saying to each other. This
24:04
Speaker 2: is not just happening here the other place. And look,
24:06
Speaker 2: I'm not plugged into this world at this point just
24:09
Speaker 2: because like I'm married, but apparently online dating is gone
24:12
Speaker 2: this way as well. Oh good. Where it's just like
24:15
Speaker 2: profiles are just all AI generated and you know, people
24:19
Speaker 2: are not writing their own text messages to each other,
24:22
Speaker 2: They're just using AI to write like what they think
24:24
Speaker 2: they should. But like, so this is where we're running
24:29
Speaker 2: into a problem that I think the ultimate resolution is
24:31
Speaker 2: going to end up, unfortunately for AI, being we're gonna
24:35
Speaker 2: stop trusting each other online even like more than we
24:38
Speaker 2: already do, and it's just gonna be a return to hey,
24:42
Speaker 2: let's do this in person, because that's the only way
24:45
Speaker 2: that I know that you're you.
24:46
Speaker 3: I was talking to some people at a conference recently
24:49
Speaker 3: which is all about AI and his financial services, But
24:52
Speaker 3: the interesting conversations I was having was about other people
24:56
Speaker 3: with teenage kids, and they were kind of explaining like
25:00
Speaker 3: the use cases that their kids are using for AI,
25:03
Speaker 3: and I just found it, I guess, weird but unsurprising.
25:08
Speaker 3: It was almost like remember Magic eight Balls, Yes, it
25:12
Speaker 3: was like that, by using AI for it? What should
25:14
Speaker 3: I do today? Do you think it's a good idea
25:17
Speaker 3: for me to apply to this school?
25:19
Speaker 2: Like? What bad?
25:20
Speaker 4: What terrible?
25:21
Speaker 3: Uses for artificial intelligence? But I guess unsurprising as a
25:25
Speaker 3: you know, easily influenced teenager that you would be using
25:27
Speaker 3: for that sort of thing.
25:28
Speaker 4: But many of the people I.
25:31
Speaker 3: Was sitting with with teenage children were like, oh, yeah,
25:34
Speaker 3: this is the type of thing they're using for. And therefore, yeah,
25:36
Speaker 3: I'm sure while you don't tell your parents about how
25:39
Speaker 3: you write text to a potential, uh, somebody that you're
25:43
Speaker 3: looking to go on a date with, I am sure
25:44
Speaker 3: that it's all over that too. And yeah, what just
25:48
Speaker 3: a strange dystopian future we're looking at.
25:51
Speaker 2: And the thing is, ultimately, in any of this, what
25:54
Speaker 2: you're trying to find is a person who brings certain
25:57
Speaker 2: traits to the table, whether it is, you know, hiring
25:59
Speaker 2: for a job or in a relationship or whatever it
26:02
Speaker 2: may be. And so if it gets to the point
26:06
Speaker 2: where hey, everything's just being so aiified to the point
26:11
Speaker 2: where you don't know what's real, you're gonna say, Okay,
26:14
Speaker 2: I'm not gonna do this anymore. You got to come
26:17
Speaker 2: in and sit down for the interview. Yeah, it's gonna
26:21
Speaker 2: be wild when all of this technological innovation ends in
26:24
Speaker 2: us not using it.
26:27
Speaker 3: Yeah, and look, we've seen some of that with the
26:31
Speaker 3: Internet too.
26:33
Speaker 2: Totally totally, but it could be where this thing goes.
26:37
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27:31
Speaker 1: The proceeding was paid for and the views express are
27:32
Speaker 1: solely those of Cushing and Dolan. Cushing and Dolan and
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Speaker 1: or Armstrong Advisory may contact you offering legal or investment services.
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27:42
Speaker 2: Boeing's seven seven seven X is now slated to fly
27:46
Speaker 2: commercially for the first time in early twenty twenty seven
27:51
Speaker 2: instead of next year. This according to Bloomberg and people
27:55
Speaker 2: familiar with the matter. The launch customer for the plane
28:01
Speaker 2: is Luftanza, and they are reportedly already making plans for
28:05
Speaker 2: these delays. This obviously is going to result in some
28:09
Speaker 2: charges to Boeing because of you know, revenue they can't
28:13
Speaker 2: book and additional costs related to the development. The estimates
28:17
Speaker 2: are somewhere between two and a half and four billion
28:19
Speaker 2: dollars in charges that they'll need to take. The plane
28:22
Speaker 2: is also, by the way, already six years late, as
28:25
Speaker 2: Bone has been kind of busy dealing with the seven
28:27
Speaker 2: thirty seven Max and issues related to that aircraft for
28:32
Speaker 2: you know, pretty much that whole time. And so it
28:36
Speaker 2: does seem that you know, Boeing is still in the
28:40
Speaker 2: process of trying to you know, turn the ship when
28:43
Speaker 2: it comes to getting everything in order there and this
28:46
Speaker 2: kind of the latest in additional issues for the aircraft manufacturer.
28:51
Speaker 3: Here's one thing I will say, it's kind of the
28:54
Speaker 3: the first piece of really bad news we've had on
28:58
Speaker 3: Boeing in some time. When's the last time we talked
29:01
Speaker 3: about Boeing on this program in a negative light.
29:03
Speaker 2: It's been a while.
29:04
Speaker 3: Alaska Airlines situation and that was the beginning of last year.
29:07
Speaker 2: Yeah, a year and a half ago, almost two years ago.
29:10
Speaker 3: It feels like it's been a couple years of just
29:13
Speaker 3: exactly what you want out of an airplane manufacturer, which
29:16
Speaker 3: is silence.
29:17
Speaker 2: Yeah, which is good, like silent companies. So give them
29:21
Speaker 2: credit on that front. And look if the biggest problem is, hey,
29:24
Speaker 2: they're delays because we need to get this just right, fine,
29:28
Speaker 2: you can deal with that. Yep, you can deal with that.
29:31
Speaker 2: Just take a quick break. When we return, we're going
29:34
Speaker 2: to be joined by Paul Almonica from Barons right after this.
29:39
Speaker 1: The Financial Exchange streams live on YouTube. Subscribe to our
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29:46
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29:51
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30:15
Speaker 1: Ladies and gentlemen the weekend.
30:20
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30:52
Speaker 5: and let's play off our trivia here. The question was
30:54
Speaker 5: over the past twenty five years, how often did the
30:57
Speaker 5: S and P five hundred have a down year? Winzer
31:00
Speaker 5: was eight and that includes twenty eleven when it was
31:03
Speaker 5: down by two one thousandths of a percent. Corey in
31:06
Speaker 5: Westport is our winner and he will be taking home
31:09
Speaker 5: a Financial exchangeow T shirt as promised.
31:12
Speaker 2: We're now joined by paul A Monica from Baron's here
31:16
Speaker 2: to talk a little bit about Rollin's Incorporated stock. Paul,
31:21
Speaker 2: how are you doing today?
31:22
Speaker 6: I'm good?
31:23
Speaker 2: Thanks, How are you doing well? So? Rollins is up
31:26
Speaker 2: twenty six percent today. They are the company that owns
31:29
Speaker 2: this year, yes, this year, not today. They're the company
31:33
Speaker 2: that owns Orcin, Critic control a bunch of other exterminator brands.
31:38
Speaker 2: Are there just more pest this year or what's going
31:40
Speaker 2: on with them? Paul?
31:42
Speaker 6: Yeah, there's an analyst report from JP Morgan that I
31:46
Speaker 6: wrote about where they initiated coverage and had a pretty
31:49
Speaker 6: lofty price target of seventy you know, you know, significant
31:53
Speaker 6: upside from current levels, and they were talking about how
31:56
Speaker 6: this is really in somewhat of an AI proof stock. Yes,
32:01
Speaker 6: it's true. You could probably go to Gemini or chat
32:05
Speaker 6: GPT and ask hey, I saw some mouse droppings or
32:09
Speaker 6: I've got bugs in the kitchen, how do I get
32:12
Speaker 6: rid of them? But at the end of the day,
32:14
Speaker 6: are you going to actually try and do that yourself
32:17
Speaker 6: or are you going to spend for a professional and
32:21
Speaker 6: exterminator to come and take care of those, you know,
32:25
Speaker 6: rodents and insects. So that the bowl case on Rollins
32:29
Speaker 6: is that this is a somewhat ai proof business and
32:35
Speaker 6: you know, sales and earnings growth are pretty solid and steady,
32:39
Speaker 6: and I don't think it's because there are more pests
32:41
Speaker 6: out there. It's just that consumers want to get rid
32:44
Speaker 6: of them.
32:45
Speaker 2: And is there a lot of consolidation in this space
32:49
Speaker 2: that allows them to have pricing power as well? Or
32:52
Speaker 2: is this you know, pretty well diversified when you look
32:56
Speaker 2: at it.
32:57
Speaker 6: Yeah, no, that's a great point. I mean this is
32:59
Speaker 6: still I think a fragmented business. A lot of mom
33:03
Speaker 6: and pop, you know, local exterminators out there. But you know,
33:08
Speaker 6: Rollins is by far, you know, the market leader. There
33:11
Speaker 6: are some competitors, you know, Eco Lab, and then you've
33:15
Speaker 6: got a publicly traded company called Rent to Kill, which
33:20
Speaker 6: has you know, it owns Terminix and other big exterminator
33:25
Speaker 6: brand but I think in the case of Rollins, with
33:29
Speaker 6: Working and a lot of the other brands that it owns,
33:32
Speaker 6: you know, it really does have that market power. So
33:35
Speaker 6: I think that does help with regards to pricing and
33:38
Speaker 6: sales growth.
33:39
Speaker 2: Well, we talked about the company as a whole. They
33:42
Speaker 2: do about three and a half billion dollars in revenue
33:44
Speaker 2: over the last twelve months. Margins are around twenty percent,
33:47
Speaker 2: so it's it's a good business. Like, there's clearly money
33:50
Speaker 2: that's that's being made there by the company. It's a
33:54
Speaker 2: pest control company that's trading fifty times forward earnings. Help
33:58
Speaker 2: me work through that, though, Paul, that.
34:01
Speaker 6: Is I think the biggest knock on the stock and
34:04
Speaker 6: JP Morgan, their analysts are willing to give that a
34:09
Speaker 6: pass and say that this is a company that has
34:13
Speaker 6: outperformed its peers and deserves its valuation. But the rest
34:17
Speaker 6: of the street is I think, you know understandably more
34:21
Speaker 6: concerned like you are about that. You know, dare I
34:24
Speaker 6: say exorbitant valuation for a company that you know, let's
34:29
Speaker 6: face it is not in Nvidia. So that's why when
34:32
Speaker 6: you look at the stock, this is not one that's
34:34
Speaker 6: universally loved about almost you know, forty seven percent I
34:38
Speaker 6: believe have a buy, forty seven percent have a hole,
34:42
Speaker 6: and that remaining six if I'm doing my math correctly,
34:44
Speaker 6: that adds up to one hundred. They actually have a
34:47
Speaker 6: sell on the stock. So sometimes, you know, there are
34:51
Speaker 6: cases where stocks that aren't universally loved by Wall Street
34:55
Speaker 6: can actually be better values, you know, for investors, because
34:59
Speaker 6: you have more side, more potential room for an analysts
35:03
Speaker 6: to change their mind and say, hey, I'm going to
35:05
Speaker 6: upgrade this stock because it's actually performing really well. But
35:08
Speaker 6: that is I think a risk that investors need to
35:11
Speaker 6: be aware of that this is a company that has
35:14
Speaker 6: a stretched valuation. To put it mildly, the performance is great,
35:18
Speaker 6: but you know, you can't go up and extend your
35:21
Speaker 6: you know, multiple forever, especially in you know, a business
35:26
Speaker 6: that again solidly growing. But we're not talking about you know.
35:31
Speaker 2: Ai, Paul, do you know if they're local branches? Are
35:35
Speaker 2: they all owned corporately or are they franchised out to
35:38
Speaker 2: local owners.
35:39
Speaker 6: That's I don't I don't know that that's a good
35:42
Speaker 6: question that you know, I can look into for any
35:45
Speaker 6: potential follow ups. And I'm not sure if this is
35:47
Speaker 6: like a franchise model or if it's you know that
35:50
Speaker 6: the corporation that rollins itself owns all of those you
35:54
Speaker 6: know particular you know Exterminator, you know brands, you know
35:58
Speaker 6: in them, you know the people that work for them.
36:01
Speaker 6: But you know that's that is a great question.
36:03
Speaker 2: Very good, Paul. We appreciate you joining us today. Thank
36:06
Speaker 2: you so much for the time. And a big congratulations
36:09
Speaker 2: to the New York Yankees who had a nice little
36:11
Speaker 2: night last night and uh put our our Red Sox
36:15
Speaker 2: to bed in uh pretty impressive fashion actually when it
36:18
Speaker 2: comes to what they did. So hope you enjoyed that night, Paul,
36:22
Speaker 2: I did.
36:23
Speaker 6: I wasn't gonna bring it up, but that's very gracious
36:25
Speaker 6: of you. We'll see if we can, you know, take
36:27
Speaker 6: out the Blue Jays next. But uh, yeah, I mean
36:31
Speaker 6: it was a it was a heck of a series.
36:33
Speaker 2: I was.
36:34
Speaker 6: I was worried last night, even though we apparently had
36:37
Speaker 6: the better rookie pitcher on the mound. So that's nice.
36:40
Speaker 2: The thing about sports rivalries, Paul, you always got to
36:42
Speaker 2: come meet in the middle at the end. It's just sports.
36:44
Speaker 2: You gotta have fun with it. So yeah, you know,
36:46
Speaker 2: I'll call you some names in the middle. You know,
36:48
Speaker 2: we'll go at it, but uh yeah, when it's over, hey,
36:51
Speaker 2: like we're we're just trying to enjoy the night. So
36:53
Speaker 2: I appreciate you joining us today and have a great weekend.
36:56
Speaker 6: All right, thanks Sam, You guys appreciate it.
36:58
Speaker 2: That is Paul lamon Good talking about Rollins Incorporated. Mike,
37:03
Speaker 2: what do you got for me?
37:04
Speaker 4: Do you think all nine of the Blue Jays fans
37:06
Speaker 4: are gonna be at that game?
37:10
Speaker 2: Honestly, here's the thing he has ever been to a game. So, Mike,
37:14
Speaker 2: you say that not Jase popular? Untrue. They're not popular
37:19
Speaker 2: when they're not good. Yeah, the last time the Blue
37:22
Speaker 2: Jays went on a real run might have the most
37:25
Speaker 2: Ben probably knows exactly what I'm referencing, might have the
37:28
Speaker 2: most impressive single play that like I've ever seen in
37:31
Speaker 2: a in a in a playoff series, including just the
37:34
Speaker 2: fans going nuts. Ben, you know what I'm referencing, Yes, sir, flip.
37:39
Speaker 2: Oh my goodness, I still have dreams about that bat
37:42
Speaker 2: flip it like it's It's one of my favorite sports
37:47
Speaker 2: clips to watch, just because, first of all, that was
37:49
Speaker 2: the series against the Texas Rangers where all these calls
37:52
Speaker 2: were just all over the place from the umps and
37:54
Speaker 2: Batista hits that home run, and just like the eight
37:57
Speaker 2: different emotions that go through his face in the second
38:00
Speaker 2: that he did, You're just like, oh whatstic Oh my goodness,
38:04
Speaker 2: it's great. We are done for the day, done for
38:06
Speaker 2: the week. Stocks broadly up still. We'll see if we
38:09
Speaker 2: get any kind of shutdown resolution over the weekend. Either way,
38:14
Speaker 2: the Financial Exchange is not shut down. We'll be back
38:17
Speaker 2: on Monday and we will see you then.