Latest / The Financial Exchange Show / The Nasdaq is mirroring the 90's. Does that mean its in a bubble?

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The Nasdaq is mirroring the 90's. Does that mean its in a bubble? · The Financial Exchange Show

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1:06
Speaker 1: Zada and Mark Vandebti, Chuck.
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Speaker 2: Mark and Tucker with you here.
1:15
Speaker 3: And as we wrap up the week, we got stocks
1:20
Speaker 3: selling off very very modestly, kind of similar to what
1:24
Speaker 3: we saw on the first day of the week, where
1:26
Speaker 3: the Dow was off two hundred and seventy four points,
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Speaker 3: which is about two thirds of a percent, the SMP
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Speaker 3: is off twenty four points, about a third of a percent,
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Speaker 3: and the NASDAK holding up better than both of those,
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Speaker 3: down thirty eight points or about a quarter percent. Bonds
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Speaker 3: in sell off mode as well. Tenure Treasury back up
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Speaker 3: above four point four percent, up six point one basis
1:46
Speaker 3: points to four point four oh seven. And we've got
1:50
Speaker 3: oil today also moving up a dollar fifty six a
1:52
Speaker 3: barrel on West Text Intermediate to sixty eight thirteen a barrel.
1:58
Speaker 3: And we've got gold on the move as well, moving up.
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Speaker 3: Let's see, come on, there we go. We got gold
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Speaker 3: moving up as well, now up forty seven to ninety
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Speaker 3: an ounce, or about one point four percent. So this
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Speaker 3: comes on the back of President Trump late yesterday indicating
2:17
Speaker 3: in a letter that he was set to raise the
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Speaker 3: rate of tariffs on Canadian imports that are not compliant
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Speaker 3: with USMCA from twenty five percent to thirty five percent
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Speaker 3: as of August first, And so we're once again in
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Speaker 3: this waiting game where it's like, is this going to
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Speaker 3: be imposed or is this going to get waved away,
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Speaker 3: you know, at the last minute or shortly after it
2:41
Speaker 3: was set to be imposed. Because this is kind of
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Speaker 3: what we've seen on quite honestly, like a monthly basis
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Speaker 3: since since early February, is this type of things. So
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Speaker 3: we'll see what ends up happening here. But what I
2:53
Speaker 3: can tell you, market's not really reacting too seriously to it,
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Speaker 3: just because I don't think they believe it's going to happen.
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Speaker 4: Yeah, I'll repeat myself if you'll allow it, Chuck from
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Speaker 4: the last hour, if I should pause there and make
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Speaker 4: sure that's okay, I'm gonna make that point.
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Speaker 2: Okay, move it along.
3:11
Speaker 4: Tucker's given me the hey, move it along.
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Speaker 2: Jack.
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Speaker 4: Look, if you think tariff should be used to raise revenue,
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Speaker 4: you're probably and I would put myself in this camp.
3:19
Speaker 4: Maybe replace the income tax eventually, which would be a
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Speaker 4: miracle and probably pro growth. But I'll stop proselytizing for now.
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Speaker 4: But if you're in that camp, you're a little disappointed.
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Speaker 4: You want to see tariffs put into place and do
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Speaker 4: their thing raising revenue. If you want to see tariffs
3:37
Speaker 4: encourage people to buy domestically produced goods, i e. Reshore manufacturing,
3:44
Speaker 4: restore the golden air of the economy that some people
3:47
Speaker 4: think happened in the fifties and sixties. Sixties. That's misguided,
3:50
Speaker 4: but honest people can disagree. You're also disappointed because you
3:53
Speaker 4: want to see tariffs put into place and have the
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Speaker 4: effect of getting people to substitute from foreign to domestic goods.
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Speaker 4: So I can't imagine who other than people in the
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Speaker 4: media who are given a lot of fodder content that is,
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Speaker 4: to infuse into their programs like we do here talking
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Speaker 4: about tariffs. I can't imagine who's happy about where we
4:13
Speaker 4: are today relative to where we were six months ago
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Speaker 4: or three months ago on Liberation Day. A lot of activity,
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Speaker 4: but nothing's actually changed.
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Speaker 3: Let's talk a little bit about this piece from Barons.
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Speaker 3: This one really caught my eye. The headline is the
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Speaker 3: Nasdaq is mirroring the nineteen nineties. It isn't a bubble
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Speaker 3: this time. How does one know whether one's in a
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Speaker 3: bubble or not?
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Speaker 4: You don't until after the fact. As your question implied,
4:41
Speaker 4: should we define bubble?
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Speaker 3: I was just gonna say, do we have a firm
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Speaker 3: definition for bubble?
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Speaker 4: It's unsatisfactory and vague as you'd expect. Generally speaking. It's
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Speaker 4: when prices in anything, it could be a house, it
4:52
Speaker 4: could be a stock, bond, whatever, depart from any reasonable
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Speaker 4: estimate of fundamental value. So what is that? Raises another question?
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Speaker 4: What is a reasonable estimate? That's usually some discounted cash
5:06
Speaker 4: flow model based estimate. That is to say, you take
5:09
Speaker 4: expected future dividends or rents if your own investment property,
5:13
Speaker 4: or whatever the asset is, and you bring them back
5:16
Speaker 4: to the present at some interest rate. The interest rate
5:19
Speaker 4: is itself a subject to a judgment, but within a
5:24
Speaker 4: range you can estimate what is a reasonable present value
5:27
Speaker 4: of an asset. And when things depart a lot from that,
5:30
Speaker 4: you could say markets have gone haywire.
5:32
Speaker 2: Can we talk about.
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Speaker 3: Like good real examples of things that were bubbles that
5:38
Speaker 3: that quite honestly we called out as bubbles at the time.
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Speaker 4: Well, a lot of people in nineteen ninety eight ninety nine.
5:43
Speaker 4: They were early of course, some of them even went
5:45
Speaker 4: out of business. Most of them lost money, They lost
5:47
Speaker 4: investors called the tech what we now call the tech bubble.
5:51
Speaker 4: We take it for granted. That's it wasn't called well,
5:54
Speaker 4: some people called it the tech bubble at the time,
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Speaker 4: but now everybody agrees that it was a tech bubble.
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Speaker 4: Florida real estate in the twenties, and just about every
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Speaker 4: decade from the twenties to the present has in pockets
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Speaker 4: experienced bubbles that then collapsed.
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Speaker 3: I was gonna be the one I was gonna give
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Speaker 3: was ev Manufacturers in twenty twenty one, and all these
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Speaker 3: startups that were being valued tens of billions of dollars,
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Speaker 3: they hadn't made one car, and a lot of them
6:17
Speaker 3: still haven't made one car.
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Speaker 2: Yeah, you have gone out a bit like it was.
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Speaker 4: Yeah.
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Speaker 3: Clear, And we said at the time, like this the
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Speaker 3: auto business, you don't just throw like ten billion dollars
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Speaker 3: at it and make ten billion dollars. It's kind of
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Speaker 3: a hard thing to get into. And that's what we've seen.
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Speaker 3: The question on on you know, the the Nasdaq right now,
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Speaker 3: it's it's a one. There's one question that you need
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Speaker 3: to ask, will capex spending on semiconductors continue?
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Speaker 2: It's the whole ballgame. It's the whole ball game.
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Speaker 3: And if Microsoft continues to spend eighty billion dollars this
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Speaker 3: year and then one hundred billion dollars next year and
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Speaker 3: one hundred and twenty of the year after, the party
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Speaker 3: can keep going. If at some point it becomes untenable
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Speaker 3: for them to do so, party.
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Speaker 2: Has to stop. Which one are we gonna get?
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Speaker 3: I have no idea, But that's that's the whole ballgame,
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Speaker 3: and not just Microsoft.
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Speaker 2: But you know, Microsoft spending.
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Speaker 3: Eighty billion, metas spending fifty billion, Like if if these
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Speaker 3: companies can keep spending that money on in Vidia semiconductors,
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Speaker 3: the party's gonna keep going. If they don't, it won't.
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Speaker 3: And so this is the whole question here. Is this
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Speaker 3: just another Capex cycle or is this how it's gonna be?
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Speaker 3: M I don't have the answer on it, but it's
7:39
Speaker 3: you know, earlier earlier this year, even before April second,
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Speaker 3: when the tariffs were announced, Since mid July of last year,
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Speaker 3: from like July first or July fifteenth through April one,
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Speaker 3: magnificent seven stocks were getting nowhere. You know, you had
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Speaker 3: in Nvidia, Microsoft stuck in neutral, Tesla was kind of
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Speaker 3: off doing its own thing just because of you know,
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Speaker 3: Elon Musk obviously, but Amazon was kind of in the toilet.
8:09
Speaker 3: Apple was just floating around, not really doing too much.
8:13
Speaker 3: It was just kind of sitting there because there was
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Speaker 3: this idea, Hey, things are gonna kind of you know,
8:17
Speaker 3: roll over. We're not gonna see this increase in spending.
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Speaker 3: And this was even through Q one. And the big
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Speaker 3: thing that's happened in the last couple of months in
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Speaker 3: particular is specifically with regards to Nvidia, the Trump Administration's
8:32
Speaker 3: talking about all kinds of loosening of semiconductor export restrictions,
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Speaker 3: potentially opening up new markets for you know, sovereign countries
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Speaker 3: to go and buy a bunch of Nvidia chips and
8:41
Speaker 3: stuff like that. And again the question is like how
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Speaker 3: long does this go on? Because you know, you just
8:49
Speaker 3: sit there and wonder, Okay, is this something that can
8:52
Speaker 3: go in perpetuity? And and beyond that, Hey, and Vidio's
8:56
Speaker 3: got fat margins right now. But if there's one thing
8:58
Speaker 3: we know about the computer hardware business, fat margins.
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Speaker 2: Usually don't last very long.
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Speaker 3: You know, We've we've seen this before with like the
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Speaker 3: dominant semiconductor companies. Look at Intel just as an example.
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Speaker 3: Intel was an absolute monster through the nineteen nineties and
9:13
Speaker 3: early two thousands. It wasn't vapor where they were a
9:16
Speaker 3: hugely profitable company with fat margins, a bunch of profit,
9:20
Speaker 3: and a greatness that they were selling. Eventually the margins
9:24
Speaker 3: came down and growth stabilized and you know, plateaued, and
9:28
Speaker 3: that was kind of in an Intel is still a
9:31
Speaker 3: major semiconductor company now.
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Speaker 2: But does anyone like.
9:34
Speaker 3: When's the last time Mark that you woke up and
9:36
Speaker 3: like had a big smile on your face and were like.
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Speaker 4: Every morning, every morning. Oh, I'm sorry, there was more
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Speaker 4: to that.
9:41
Speaker 2: Yes, So.
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Speaker 3: I'm not saying that in Vidia becomes Intel, but I'm
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Speaker 3: just saying it's one path that they could take.
9:49
Speaker 2: There's another path.
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Speaker 4: Check I'll go. Can I go a little farther and
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Speaker 4: say that is very likely?
9:54
Speaker 2: It is?
9:55
Speaker 3: But historically speaking, what matters is the timing on it. Well,
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Speaker 3: and this is the part that because if a video
10:02
Speaker 3: keeps rocking and rolling for the next five years, I
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Speaker 3: don't think you really like call this a bubble like that.
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Speaker 3: If something like goes on for a while with it,
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Speaker 3: it's not a bubble. It's just like, okay, that was
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Speaker 3: you know the economic cycle.
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Speaker 4: And can we say too, not every bubble is bad.
10:17
Speaker 4: Railroad bubble left behind a lot of good infrastructure. The
10:19
Speaker 4: internet bubble left behind some good fiber optic infrastructure, and
10:23
Speaker 4: it was resulted in a lot of necessary trial and
10:26
Speaker 4: error experimentation with different business models product lines. Some worked,
10:31
Speaker 4: some didn't. I think you could say a bubble maybe
10:33
Speaker 4: is bad when it is the result of the Federal Reserve,
10:36
Speaker 4: which every ill in the world comes back to for
10:40
Speaker 4: a fanatic about monetary policy like me, when the Federal
10:43
Speaker 4: Reserve aids and A bets it and it becomes unnaturally frothy.
10:47
Speaker 4: So now we're getting into degrees of bubbliness, degrees of
10:50
Speaker 4: bubble frothiness. When policy is.
10:53
Speaker 3: When does the bubble become Champagne? Right, that has to
10:56
Speaker 3: be made in the Champagne region of Maybe maybe a.
10:58
Speaker 4: Better way to say it is when they're are yes,
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Speaker 4: important important technicality there are. When bubble is when bubbles
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Speaker 4: are the result of policy, And if the Fed is
11:09
Speaker 4: wrong that rates are restrictive right now, it is keeping
11:12
Speaker 4: certain bubbly pockets of the economy overinflated, and government policy
11:17
Speaker 4: is to blame, Like some people think government policy was
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Speaker 4: to blame for the bubble in the late nineteen nineties. Unfortunately, again,
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Speaker 4: we don't know. These distinctions don't make much of a
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Speaker 4: difference after a bubble pops. If there's real economic damage,
11:30
Speaker 4: we don't know until after the fact.
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Speaker 3: I think where I kind of land at this point,
11:34
Speaker 3: just with regards to the monetary policy piece here, I'll
11:38
Speaker 3: be honest, I think you can make a case that
11:40
Speaker 3: FED policy is probably in the right spot just because
11:44
Speaker 3: you've got parts of the economy that are clearly being
11:46
Speaker 3: hurt by it housing, namely, you got other parts that
11:50
Speaker 3: aren't being bothered by it, financial investments.
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Speaker 4: Well, you know it's yeah, I think. Okay, So the
11:56
Speaker 4: FED is trying to balance the forces of inflation and unemployment.
11:59
Speaker 4: Unemployment is changed in the past twelve months, Inflation has
12:02
Speaker 4: been pretty stable in the past twelve months.
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Speaker 3: But we were talking about you were talking about the
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Speaker 3: FED and its impact on asset price.
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Speaker 4: Yes, I'm gonna take it, That's what I was saying. Yeah, yeah, yeah.
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Speaker 4: And if that doesn't look at the FED says they don't.
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Speaker 3: Know, But I'm talking about it in the context of
12:14
Speaker 3: is the FED aiding and abetting this bubble? Yeah, okay,
12:16
Speaker 3: I would I would say no, because I think they're
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Speaker 3: having a restrictive impact on housing prices right now and
12:22
Speaker 3: a neutral to positive impact on asset prices. And I
12:25
Speaker 3: think that comes out in the wash when we're looking
12:27
Speaker 3: at it in terms of, you know, is the FED
12:29
Speaker 3: aiding and a betting a bubble in that cost.
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Speaker 4: So maybe my point complemented yours if you look at
12:35
Speaker 4: it from a macroeconomic aggregate fancy way of saying what
12:39
Speaker 4: the economy is doing as we measure it. If you
12:41
Speaker 4: if you look at it from a macroeconomic aggregate point
12:44
Speaker 4: of view inflation and unemployment, which are the tool the
12:47
Speaker 4: two parts of the FED dual mandate, it also suggests
12:49
Speaker 4: that policy might be in the right place. Problem is,
12:52
Speaker 4: you don't know how this structure the economy is changing.
12:55
Speaker 4: So the FED kind of has to guess not just
12:57
Speaker 4: whether it's policy is right today, but right for thenomy
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Speaker 4: as it will be evolving over the next three, six,
13:03
Speaker 4: et cetera.
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15:11
Speaker 3: Mark, do you want to talk about social security or
15:14
Speaker 3: Jamie Diamond calling out Europe?
15:17
Speaker 4: We can do the Europe story right.
15:20
Speaker 2: Piece from CNBC.
15:21
Speaker 3: The headline is Jamie Diamond has a blunt message for Europe,
15:24
Speaker 3: quote You're losing. Basically, what he says is that, look,
15:29
Speaker 3: USGDP over the last fifteen years has grown dramatically faster
15:33
Speaker 3: than what we've seen in Europe. And so obviously this
15:39
Speaker 3: is something that has impacted a whole bunch of investment
15:41
Speaker 3: decisions and capital flows and this and that, And I
15:45
Speaker 3: think the question that is out there in my mind is, look,
15:50
Speaker 3: it's it's the one that's out there all the time.
15:52
Speaker 2: In investing. Is this temporary or is it a permanent shift?
15:56
Speaker 3: And I think where I land and on this is
16:04
Speaker 3: the US likely has structural factors that allow for greater
16:07
Speaker 3: GDP growth than the EU over long periods of time,
16:13
Speaker 3: but probably not as consistently and as to this magnitude
16:16
Speaker 3: for an extended period of time.
16:18
Speaker 2: What are your thoughts there?
16:19
Speaker 4: Well, we know it's not I can tell you what
16:20
Speaker 4: researchers have found. You'll find this in like chapter one
16:23
Speaker 4: of any economics book macrobook. It's not differences in capital levels.
16:27
Speaker 4: It's not that we have more factories and machines. They
16:29
Speaker 4: don't generally account for most When you do growth accounting,
16:32
Speaker 4: as the researchers like to do, that's not where it lies.
16:35
Speaker 4: So it's not that we have more factories or anything
16:37
Speaker 4: like that. It generally comes down to productivity growth. And
16:41
Speaker 4: we talk about this from time to time. The determinants
16:43
Speaker 4: of long run economic growth differences in productivity growth, which
16:46
Speaker 4: are complicated to explain. There's no consensus there. And productivity
16:50
Speaker 4: is just output per hour, doing more year after year
16:54
Speaker 4: with the same amount of stuff, and some of that
16:56
Speaker 4: is technology driven, and then some of it is labor
16:58
Speaker 4: force growth to which is attributable partly to immigration and
17:02
Speaker 4: some of it is organic. We have grown about a
17:05
Speaker 4: percentage point faster per year on average than Europe since
17:09
Speaker 4: nineteen ninety five, which is the longest data series I
17:11
Speaker 4: could find. That may not sound like a lot, just
17:13
Speaker 4: a percentage point more. But in the twenty five year span,
17:18
Speaker 4: a thirty year span, excuse me that I looked at. Yeah, cumulatively,
17:21
Speaker 4: the difference is like thirty five percent. To put that
17:25
Speaker 4: in perspective, imagine if we were twenty five percent. Because
17:29
Speaker 4: of the way the math works out, it's not thirty
17:31
Speaker 4: five but twenty five percent less wealthier than we are
17:33
Speaker 4: today in terms of GDP. That's not per capita, that's overall,
17:37
Speaker 4: but it works out to about the same thing. So yeah,
17:39
Speaker 4: it's a dramatic difference and standard of living. My rebuttal
17:42
Speaker 4: to buy a diamond, if I may, would be, hey, hey, Jamie,
17:46
Speaker 4: Europeans don't care. They are worth They like to trade
17:50
Speaker 4: off more leisure for consumption than we do. We're fanatics
17:54
Speaker 4: here about working and consuming. Europeans are totally different.
17:59
Speaker 2: I don't know that I would say they don't care.
18:02
Speaker 4: I don't think they care too much. About the growth difference, Chuck,
18:05
Speaker 4: you ask your average European. Okay, I'm going out on
18:07
Speaker 4: a limb.
18:07
Speaker 3: I haven't done this, but I think I think what
18:11
Speaker 3: I would say, like, yes, from just you know, an overall,
18:13
Speaker 3: you know, work life balanced type perspective. I get what
18:16
Speaker 3: you're saying, but I think a lot of the problems
18:19
Speaker 3: that Europe is facing from a social unrest perspective in
18:24
Speaker 3: the last several years relates to the fact that the
18:27
Speaker 3: pie isn't growing rapidly enough to you know, basically provide
18:31
Speaker 3: the level of growth that people want to see.
18:34
Speaker 4: Yeah, that could be. I'm not this is I'm out
18:37
Speaker 4: of my depth here. All I can tell you is
18:38
Speaker 4: that I know the pace of life is slower there.
18:40
Speaker 4: When Europeans come here, they're shocked at how frantic we are.
18:43
Speaker 2: All oh, you go to Europe in August and no
18:45
Speaker 2: one's working there's Yeah, they seem to like that you
18:47
Speaker 2: can't do anything in August.
18:49
Speaker 3: If you go to Europe, it's basically like, well this
18:50
Speaker 3: is closed, Well that's closed, but you know, it's everything's
18:53
Speaker 3: just kind of shut down, which we can kind of
18:55
Speaker 3: kind of nice, but it depends they're there's different approaches everywhere,
19:01
Speaker 3: and it certainly is something where Yeah, the whole European
19:05
Speaker 3: summer vacation mode. It's it's a thing, and I've not
19:10
Speaker 3: seen anything like it in the United States.
19:13
Speaker 4: But Europe's not losing. That's the wrong way to frame it.
19:15
Speaker 4: I have no idea what Jamie Diamond's talking about. Economies
19:17
Speaker 4: don't compete in that sense, assuming Europeans even care about
19:21
Speaker 4: the differential.
19:22
Speaker 2: Sure sure.
19:23
Speaker 3: Taking a look at markets, DAWs off three point thirty
19:25
Speaker 3: one s ANDP down twenty six, Nasdaq down forty four.
19:28
Speaker 2: Quick break, We've got the trivia answer. Next.
19:42
Speaker 1: Bringing the latest financial news straight to your radio. Every day,
19:47
Speaker 1: It's the Financial Exchange on the Financial Exchange Radio Network.
19:53
Speaker 1: Time now for Wall Street. Watch a complete look and
19:57
Speaker 1: what's moving markets so far today right here the Financial
20:00
Speaker 1: Exchange Radio Network.
20:02
Speaker 5: More tariff developments to report today after President Trump threatened
20:06
Speaker 5: a thirty five percent levy on Canadian imports to begin
20:09
Speaker 5: on August first, up from the current twenty five percent rate.
20:14
Speaker 5: Right now, Dow is off by nearly seven tenths of
20:17
Speaker 5: one percent, or three hundred points s and P five
20:21
Speaker 5: hundred is off three tenths of one percent or twenty
20:24
Speaker 5: three points. Nasdaq is down a tenth of a percent
20:27
Speaker 5: or thirty one points. Russell two thousand now down over
20:29
Speaker 5: one percent lower or twenty four points. Tenure Treasure reeled
20:33
Speaker 5: up five basis points, now at four point four zero percent.
20:37
Speaker 5: In crude oil up nearly three percent higher on the day,
20:40
Speaker 5: trading at sixty eight dollars and forty seven cents a barrel.
20:44
Speaker 5: Levi Straussher is up over ten percent after the genes
20:48
Speaker 5: maker reported strong results for the first half of the year.
20:51
Speaker 5: The company also increased its dividend and raise its full
20:55
Speaker 5: year guidance on several key metrics. Levi's said it was
20:59
Speaker 5: still able to raise guidance despite tariffs because consumers, especially women,
21:04
Speaker 5: are buying more directly with the company. Meanwhile, Energy Giant
21:08
Speaker 5: BP said it anticipates up to one and a half
21:10
Speaker 5: billion dollars in after tax impairment charges and said lower
21:15
Speaker 5: oil and gas prices will drag on its quarterly results. However,
21:19
Speaker 5: that stock is up by three percent. Elsewhere, robotics company
21:23
Speaker 5: real Sense completed its spinoff from Intel, closing a fifty
21:27
Speaker 5: million dollar funding round. Intel stock is retreating two percent today,
21:32
Speaker 5: and shares in movie theater chain AMC Entertainment, jumping ten
21:36
Speaker 5: percent higher after Wedbush upgraded the stock to outperform from neutral,
21:41
Speaker 5: saying AMC is poised to benefit from a more consistent
21:45
Speaker 5: release slate over the next several quarters. I'm Tucker Silva
21:50
Speaker 5: and that is Wall Street Watch. And the trivia question
21:52
Speaker 5: we asked in the prior segment was which US president
21:55
Speaker 5: was the first to serve non consecutive terms as US president?
22:00
Speaker 2: Answer?
22:01
Speaker 5: Grover Cleveland, Rob from Summers, Connecticut is our winner today
22:05
Speaker 5: taking home a Financial Exchange Show T shirt. Congrats to Rob,
22:08
Speaker 5: and we played trivia every day here on the Financial
22:11
Speaker 5: Exchange See complete contest rules at Financial Exchange Show dot com.
22:16
Speaker 2: You don't see many Grovers these days.
22:19
Speaker 5: I actually know a Grover. Do you doesn't go by Grover?
22:22
Speaker 1: Though?
22:22
Speaker 2: What's you go by? JJ?
22:26
Speaker 3: Naturally totally fine, not gg JJ, totally fine. Let's talk
22:33
Speaker 3: about something historic that we just saw. Through the first
22:38
Speaker 3: six months of the year, Ford Motor Company has issued
22:43
Speaker 3: eighty eight different safety recalls, which is now an all
22:47
Speaker 3: time high for a single car company for a full year.
22:49
Speaker 3: In just six months. It's kind of impressive. Now, Ford,
22:55
Speaker 3: I'll quote here from their chief operating officer, the increase
22:59
Speaker 3: in recall reflects our intensive strategy to quickly find and
23:02
Speaker 3: fix any hardware and software issues and go the extra
23:05
Speaker 3: mile to protect customers. Okay, so this is this is
23:10
Speaker 3: a new strategy to have more recalls. Is that what
23:13
Speaker 3: I'm what I'm gathering, Mark, That's.
23:15
Speaker 4: Yeah, that is quite the spin. That's the one I
23:17
Speaker 4: would have given to it. What else can you say
23:20
Speaker 4: other than that we're proactively, We're identifying proactively and addressing
23:25
Speaker 4: aggressively flaws as long as none is so serious as
23:30
Speaker 4: to cry out for a deeper explanation, I guess.
23:33
Speaker 3: But most of the things are minors. So overall, last
23:36
Speaker 3: year you had a thousand recalls across different automakers, and
23:40
Speaker 3: a lot of them are I'm just reading it from
23:41
Speaker 3: the Wall Street Journal, faulty interiorites, a sun visor that
23:45
Speaker 3: might break off or something like that. Those type of things.
23:49
Speaker 3: The vast majority of them are not you know, Takata
23:52
Speaker 3: airbags that might kill you, or you know, the GM
23:55
Speaker 3: ignition switch problem and things like that. So it is
24:00
Speaker 3: safe to say that, look, a lot of these are
24:01
Speaker 3: not necessarily you know, hugely you know, important things, And okay,
24:06
Speaker 3: I can I can buy some of that but I
24:08
Speaker 3: think the question is, look, why are you seeing so many?
24:13
Speaker 3: And I get to two different answers, and I'm curious
24:15
Speaker 3: just to get your thoughts, because neither of us know
24:17
Speaker 3: for certain. The first is carmakers are using a ton
24:21
Speaker 3: of new technology and it might just be not fully
24:26
Speaker 3: up to snuff because they're you know, trying a whole
24:28
Speaker 3: bunch of new stuff right now and it hasn't gone
24:30
Speaker 3: through you know, the length of testing, and so it
24:33
Speaker 3: might just be new stuff breaks because we've got new
24:36
Speaker 3: stuff in cars that hasn't been in them before. The
24:39
Speaker 3: second piece, and this I actually think is the bigger one,
24:42
Speaker 3: just because again, like when you hear about like sunvisor's
24:44
Speaker 3: breaking off, that's not a new technology. There's one thing
24:47
Speaker 3: you know about the car business. It's a low margin,
24:49
Speaker 3: high volume business. It's the only way you survive there.
24:53
Speaker 3: And in the last few years, car companies have faced
24:57
Speaker 3: huge cost pressures because of you know, general inflation in
25:02
Speaker 3: this and that, and I suspect many of them finding
25:05
Speaker 3: any way that they can in order to get cost down,
25:08
Speaker 3: whether it's hey, we made the material that attaches the
25:11
Speaker 3: sun visor, you know, a millimeter thinner, and we think
25:14
Speaker 3: that'll work and that'll save US eight cents per vehicle,
25:18
Speaker 3: which ends up saving US you know, eight million dollars
25:21
Speaker 3: over the next decade. Like you know, stuff like that
25:25
Speaker 3: is what I could absolutely buy. As you know the
25:28
Speaker 3: issue just because any way that you can get the
25:31
Speaker 3: cost down on cars right now you have to do
25:34
Speaker 3: because it's so competitive out there and costs have been
25:37
Speaker 3: pushed so high by the inflation of the last few years.
25:41
Speaker 4: Yeah, I certainly don't have the answer, but I suspect
25:43
Speaker 4: auto manufacturers as they examine, as they look back at
25:47
Speaker 4: the end of the year on recalls and what those
25:49
Speaker 4: recalls costs versus what they thought they were saving, they
25:52
Speaker 4: that may they may tweak their their cost saving strategy.
25:58
Speaker 4: Of this doesn't sound doesn't sound like, if any this
26:00
Speaker 4: is attributable to cost savings, that it was well thought out,
26:04
Speaker 4: because the opposite appears to be happening. But again, I
26:07
Speaker 4: don't know you'd need the data.
26:10
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27:06
Speaker 3: Tucker, you're a big fan of the Nintendo Switch console.
27:11
Speaker 5: Correct, A big fan is pushing it, but yeah, I
27:16
Speaker 5: been who was? I owned the first console?
27:18
Speaker 2: Yep.
27:19
Speaker 3: So the Switch to UH is out now and they've
27:25
Speaker 3: sold three and a half million units in the four
27:27
Speaker 3: days that since they released. It's been out more than
27:30
Speaker 3: four days now, but the first four days they had
27:32
Speaker 3: three and a half million sales.
27:33
Speaker 5: They're crushing it from one I hear, yeah, which is
27:35
Speaker 5: is quite good.
27:37
Speaker 2: Uh. But the thing that is interesting is that apparently.
27:42
Speaker 3: Uh there is a uh neo dimium based magnet that
27:48
Speaker 3: holds the controllers in place. And neodymium is a rare
27:53
Speaker 3: earth material that obviously with rare earth materials typically they're
27:57
Speaker 3: you know, made and refined in China right now. And
28:01
Speaker 3: so despite the switch you know, not really being something
28:04
Speaker 3: that you know, you would think of as far as
28:07
Speaker 3: you know, having some kind of dependence on rare earth materials,
28:10
Speaker 3: might actually have a problem if China continues to kind
28:13
Speaker 3: of weaponize the export of them in order to gain
28:16
Speaker 3: concessions from trading partners and other companies and things like that.
28:20
Speaker 3: And this is just kind of wild to me that
28:22
Speaker 3: this is, you know, a video game console that we're
28:24
Speaker 3: talking about here that potentially has a rare earth problem.
28:28
Speaker 2: It's kind of wild.
28:29
Speaker 4: So what are you saying that Tucker's hobby could be
28:32
Speaker 4: impacted by this and he needs to find a new
28:35
Speaker 4: way to to wile away the time?
28:37
Speaker 5: I barely play the thing?
28:39
Speaker 4: Why'd you buy it?
28:41
Speaker 2: Kids?
28:42
Speaker 4: Oh?
28:42
Speaker 5: Yeah, we play a lot of Mario in the house. Well,
28:44
Speaker 5: I mean not a lot Can you buy the new one?
28:46
Speaker 2: Did you? No?
28:47
Speaker 5: No, I didn't. I just I literally just bought the
28:49
Speaker 5: first edition in a couple months, you know, in the
28:54
Speaker 5: holiday season or whatever. But yeah, no, I mean this
28:57
Speaker 5: price points a little too high for you know, a
28:59
Speaker 5: younger kids. But yeah, it's four hundred and fifty bucks
29:03
Speaker 5: forget that.
29:04
Speaker 2: Whoa.
29:06
Speaker 5: But yeah, it's wildly popular. It's a great technology for
29:09
Speaker 5: video game consoles. It's a tablet that can separate from
29:12
Speaker 5: a doc and it's really innovative.
29:15
Speaker 2: Just take a quick break here.
29:16
Speaker 3: When we return, we're going to be joined by Paul
29:19
Speaker 3: Amonica from Barons and we're talking copper after this.
29:23
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29:26
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29:30
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29:57
Speaker 6: Ladies and gentlemen, weekend.
30:06
Speaker 3: Alrighty, as promised, We're now joined by Paul A Monica
30:11
Speaker 3: from Barons and we're gonna be talking a little bit
30:15
Speaker 3: of copper with Paul.
30:16
Speaker 2: Paul, How you doing today?
30:18
Speaker 1: Oh?
30:18
Speaker 6: Good?
30:19
Speaker 2: Thanks? How you guys doing? We're doing well.
30:21
Speaker 3: So copper's obviously been in the news this week with
30:24
Speaker 3: the potential fifty percent tariff going into effect. What kind
30:30
Speaker 3: of stuff are we seeing people looking at? Because I
30:32
Speaker 3: feel like, you know, everyone loves to talk about investing,
30:35
Speaker 3: you know, in copper somehow, but I feel like most
30:38
Speaker 3: people are kind of like, well, how does any of
30:41
Speaker 3: this work? And like, what are you know, some ways
30:43
Speaker 3: for me to actually do this? And beyond that, there's
30:46
Speaker 3: always the question, hey, is this even a good idea?
30:49
Speaker 3: And do I have any idea what I'm doing here?
30:51
Speaker 1: Right?
30:51
Speaker 6: No, these are all great questions. There's not a lot
30:55
Speaker 6: of ways to directly invest in, say copper, the metal itself,
30:59
Speaker 6: and I guess you could try and buy copper's futures.
31:03
Speaker 6: You could buy physical copper, but you know, that's sort
31:06
Speaker 6: of a cumbersome, complicated way of investing. There is an
31:09
Speaker 6: ETF called the United States Copper Index ticker CPER that
31:14
Speaker 6: gives you probably your best pure play a way to
31:19
Speaker 6: kind of leverage what's going on with copper prices. But
31:22
Speaker 6: there are several copper miners that are publicly traded and
31:27
Speaker 6: ETFs that own those miners that are probably a better
31:31
Speaker 6: way to invest in copper, and Freeport Macmaran is by
31:35
Speaker 6: far the most prominent in the US and probably the
31:40
Speaker 6: one that could benefit the most from any tariffs from
31:44
Speaker 6: President Trump because it is a company that is based
31:47
Speaker 6: in Phoenix in Arizona and has a lot of its
31:51
Speaker 6: mining exposure to the US market, so it should benefit
31:55
Speaker 6: directly from any tariffs. If you know, people look to
31:59
Speaker 6: buy and copper is supposed to copper from say Chile, Peru, Mexico,
32:04
Speaker 6: et cetera.
32:06
Speaker 3: How complicated is it in terms of figuring out, you know,
32:09
Speaker 3: how the price of copper is going to even move
32:12
Speaker 3: and how it may be impacted by this, simply because
32:15
Speaker 3: it's a global market still and obviously you've got big
32:17
Speaker 3: demand drivers in Asia. You know, historically, it seems like
32:22
Speaker 3: it's a very a very complex equilibrium that you're getting into,
32:27
Speaker 3: and there's just a lot to consider and it might
32:29
Speaker 3: not be as straightforward as a lot of people think, though.
32:32
Speaker 1: No exactly.
32:33
Speaker 6: I mean, what's been, you know, very difficult I think
32:37
Speaker 6: for a lot of people to kind of reconcile is
32:41
Speaker 6: that you do have copper that trades on the nine
32:45
Speaker 6: x as a commodity in the United States, but then
32:48
Speaker 6: also copper trading in London, and right now there's a
32:51
Speaker 6: pretty big gap because of the expectation of tariffs. There's
32:55
Speaker 6: this huge premium that the US copper price is trading
32:59
Speaker 6: at to where copper is in London. Usually there's not
33:03
Speaker 6: that big of a difference between the two prices, but
33:08
Speaker 6: right now investors are betting that there's going to be
33:11
Speaker 6: some tariff. Even if it's not fifty percent, say it's
33:14
Speaker 6: twenty five or you know, somewhere between twenty five and fifty,
33:18
Speaker 6: that's still higher them where it is now, so that
33:21
Speaker 6: there will likely be a premium on US copper prices.
33:25
Speaker 6: But again, the way to play that is probably more
33:28
Speaker 6: through these mining companies or minor ETFs and less through
33:33
Speaker 6: the metal itself.
33:35
Speaker 3: Paul, one of the things I've noticed historically is that
33:39
Speaker 3: when dealing with minors of any any kind, it feels
33:43
Speaker 3: like you just kind of get bludgeoned over the head.
33:45
Speaker 3: A few different times like it's it's just a hard
33:48
Speaker 3: business to invest in. It's kind of like how airlines
33:51
Speaker 3: were historically or automakers, like it just seems messy, like
33:56
Speaker 3: it's such capital that needs to get used. How do
33:59
Speaker 3: you have any trust that, even in an era of
34:01
Speaker 3: higher prices, if it materializes that these companies can figure
34:05
Speaker 3: out how to make money off of it.
34:06
Speaker 6: Yeah, No, it's a great question. I mean, when you
34:08
Speaker 6: have a company in a very capital intensive business that
34:13
Speaker 6: is also subject to the whims of you know, global
34:17
Speaker 6: commodity prices, that does make it inherently riskier. I think
34:22
Speaker 6: where analysts are a little more upbeat about copper now
34:27
Speaker 6: is that if you are able to toss aside all
34:32
Speaker 6: of the drama about tariffs and there's you know, considerable
34:35
Speaker 6: noise with all of the headlines there, demand for copper
34:40
Speaker 6: is pretty healthy right now and should continue as well.
34:44
Speaker 6: Data centers need copper, and they are building out aggressively
34:49
Speaker 6: because data centers are you know, a big part of
34:52
Speaker 6: the AI story. You have electric vehicles that need copper.
34:56
Speaker 6: You know, you're upgrading the electrical grid. Smart Phones also
35:01
Speaker 6: you know, require copper. So there's a lot of good
35:04
Speaker 6: consumer and industrial demand right now for copper as well.
35:08
Speaker 6: That should keep prices higher, even though they may pull
35:12
Speaker 6: back in the near term from the inflated levels they're
35:15
Speaker 6: at because of all the tariff talk. But you know,
35:17
Speaker 6: analysts that I know cided in my piece today, you know,
35:20
Speaker 6: we're of the mindset that any big dip that comes
35:24
Speaker 6: in copper prices is probably a good buying opportunity for
35:27
Speaker 6: the mining stocks that may get hit, including Freeport.
35:31
Speaker 3: Fantastic Paul, appreciate you joining us today and we'll catch
35:35
Speaker 3: up with you soon.
35:35
Speaker 2: I hope you have a fantastic weekend.
35:37
Speaker 6: YEP, send you guys.
35:38
Speaker 5: Thanks a lot.
35:40
Speaker 3: That is Paul Monica from Barons talking about copper. Mark
35:45
Speaker 3: what else we got that we haven't gotten to today.
35:47
Speaker 4: Oh, I wanted to follow up on copper if if
35:49
Speaker 4: I could, but absolutely because the one of the President's
35:52
Speaker 4: stated reasons for imposing the tariff, if they actually go through,
35:55
Speaker 4: is that he wants to make a copper US that
35:58
Speaker 4: is a dominant copper producer, or maybe at least independent.
36:02
Speaker 4: But the Wall Street Journal points out today that permitting,
36:06
Speaker 4: building and permitting a copper smelter can take more than
36:10
Speaker 4: five years, and then developing a new mind takes on
36:13
Speaker 4: average thirty years. So this policy, if that's what it is,
36:17
Speaker 4: would have to be followed through on by several administrations
36:21
Speaker 4: to be realized. The country's really got to be prepped
36:24
Speaker 4: for this commitment. And maybe that's why the mining stocks
36:27
Speaker 4: over the past five days, after popping initially on the news,
36:30
Speaker 4: they're down on average two or three percentage points. I'm
36:33
Speaker 4: looking just at the ETFs of companies like Freeport mcwell
36:36
Speaker 4: Ran MCMA.
36:37
Speaker 2: I just boched the name. I'm not even to bother.
36:39
Speaker 4: It's fine, but you know what I mean. So it's
36:43
Speaker 4: not clear to me that the intended objectives can be
36:47
Speaker 4: achieved here in the amount of time that people are
36:48
Speaker 4: likely to have patients with no it.
36:50
Speaker 3: Takes quite a while to get these things spooled up.
36:53
Speaker 3: And the other piece, it's pooled up, and yeah, I'm
36:57
Speaker 3: glad you appreciate that. The other thing that I come
37:00
Speaker 3: back to and look, this is neither good nor bad.
37:02
Speaker 3: I'm just saying that it is. Open pit mining is generally,
37:07
Speaker 3: especially when you're talking about for stuff like copper, it's
37:11
Speaker 3: generally horrible for the regional vicinity in terms of the
37:16
Speaker 3: health impacts and stuff like that. The largest copper mine
37:20
Speaker 3: in uh the United States at one point was a
37:23
Speaker 3: mine in Butte, Montana called the Berkeley Pit. And the
37:27
Speaker 3: Berkeley Pit is about a mile long and about half
37:32
Speaker 3: a mile wide, and it got to a third of
37:34
Speaker 3: a mile deep by the time they finally stopped mining there,
37:38
Speaker 3: and it was active for about thirty years or so
37:41
Speaker 3: from the mid nineteen fifties until the mid nineteen eighties.
37:44
Speaker 3: And at this point it basically has become like a
37:47
Speaker 3: super fun site just because, like the water is incredibly acidic.
37:53
Speaker 3: If birds land there and drink from it, like half
37:55
Speaker 3: of them die pretty much Like it's pretty nasty stuff
37:58
Speaker 3: that you get when you talk about the effects of this. Now,
38:02
Speaker 3: I'm not saying this means don't do this here, but
38:04
Speaker 3: I'm simply saying there are very real environmental costs to
38:09
Speaker 3: mining materials in the US, and it's part of the
38:11
Speaker 3: reason why we've pushed this stuff overseas is just so
38:13
Speaker 3: we don't have to see it. There's clearly a demand
38:17
Speaker 3: for domestic production, but it comes with some costs too,
38:20
Speaker 3: and we just need to be aware of that. We're
38:22
Speaker 3: done for the day, done for the week. Next week
38:24
Speaker 3: is a huge week of data in earnings. We'll see
38:27
Speaker 3: you on Monday.