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Will AI data cause your energy prices to skyrocket? · The Financial Exchange Show

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Speaker 2: Chuck Mike Tucker with you here, and we got stock
1:12
Speaker 2: staging a modest rally that's predominantly driven by tech at
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Speaker 2: this point. Reminds me, let me know if you've heard
1:20
Speaker 2: that story before. Right now, taking a look at your
1:23
Speaker 2: broad indsease, you've got the Dial up sixty five points,
1:26
Speaker 2: the S and P's up twenty two, Nasdaq up one
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Speaker 2: hundred and forty nine. So when you were about a
1:30
Speaker 2: quarter percent to a three quarters percent rally taking place
1:34
Speaker 2: across US equity markets right now, bonds not with a
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Speaker 2: ton of movement, but a little bit of movement towards
1:41
Speaker 2: lower yields, with the ten year Treasury down one point
1:44
Speaker 2: six basis points to four point four three nine percent.
1:49
Speaker 2: We've got oil today up fifty three cents a barrel,
1:52
Speaker 2: and that puts West Texas Intermedia at sixty six ninety
1:55
Speaker 2: one a barrel. And we've got gold today moving back
2:00
Speaker 2: down a bit after rallying yesterday off nineteen dollars and
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Speaker 2: ten cents no ounce to thirty three forty even. Gold
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Speaker 2: has been in a pretty darn tight range over the
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Speaker 2: last three months now, I'll say, I mean basically since
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Speaker 2: mid April, it's been anywhere between about two ninety I'm sorry,
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Speaker 2: twenty nine hundred and actually no, sorry, that was the
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Speaker 2: wrong number that I was just looking at. Gold still
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Speaker 2: is a tight range, but just I was not looking
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Speaker 2: at the right chart been in a tight range between
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Speaker 2: about thirty two hundred on the low end and about
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Speaker 2: thirty four to seventy on the high end, So not
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Speaker 2: much movement in either direction. Is kind of coiling up
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Speaker 2: at this point, waiting for what comes next. Obviously, yesterday
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Speaker 2: we saw quite a bit of movements in markets throughout
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Speaker 2: the morning as the will Trump fire Jerome Powell or
2:54
Speaker 2: will Trump not fired Jerome Powell battle played out in
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Speaker 2: the eleven o'clock hour. To this point, I haven't seen
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Speaker 2: anything today. It was kind of put to bed yesterday.
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Speaker 2: But I continue to think Mike, like you, there there
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Speaker 2: are two possibilities here in my opinion, either this is
3:12
Speaker 2: gonna happen in the near future or it's not happening
3:14
Speaker 2: at all. And the reason that I say that is
3:17
Speaker 2: the stuff that you're seeing right now just from you know,
3:21
Speaker 2: kind of a why are these stories being published now
3:25
Speaker 2: perspective is either you're publishing them because you want to
3:28
Speaker 2: do something, or you're just publishing them to make life
3:31
Speaker 2: as miserable for j Powell as possible in the hope
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Speaker 2: that he resigns, and you're not gonna do anything like
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Speaker 2: it's you wouldn't start publishing all these stories now and then,
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Speaker 2: you know, six months from now, like two months before
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Speaker 2: he's gonna move on, be like, well let's fire him now, right,
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Speaker 2: I mean personally, I kind of look at it and
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Speaker 2: I'm like, it's only another nine months anyways, just second,
3:54
Speaker 2: deal with it. It's like another six FED meetings, you know,
3:57
Speaker 2: I mean to outlive him, right, Yeah, you're gonna be
4:00
Speaker 2: there and he won't either way. So I don't know.
4:03
Speaker 2: We'll see where this goes. But yesterday was interesting.
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Speaker 3: The other just to stay on this for a moment.
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Speaker 3: The other piece of this that I feel like is
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Speaker 3: also being ignored is the architecture, I guess, of how
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Speaker 3: the Federal Reserve actually governs.
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Speaker 2: I mean, Ja Powell doesn't just set the interest right now.
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Speaker 3: He's not the interest rate God, and I feel like
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Speaker 3: everything's ignoring that, and.
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Speaker 2: We need to have T shirts made mic it's Jay
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Speaker 2: Powell is not the interest. No, just interest rate God,
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Speaker 2: that's all I wanted to say.
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Speaker 3: There are a number of voting members out there, and
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Speaker 3: this hasn't gotten a whole lot of talk about. But
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Speaker 3: if the President did end up removing Jay Powell, I'm
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Speaker 3: still unsure that he would get the outcome that he
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Speaker 3: would want because there are a bunch of voting members
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Speaker 3: on the FED who would say, look out, our independence
4:54
Speaker 3: is being threatened. We have to do the exact opposite
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Speaker 3: of what the president.
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Speaker 2: Rights now, which then raises the ques. Okay, does he
5:00
Speaker 2: try to find ways to get rid of all that?
5:02
Speaker 1: Right?
5:02
Speaker 2: Yeah?
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Speaker 3: Maybe, but it is a really messy process here, and
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Speaker 3: I think that that fact is pretty important. And it's
5:10
Speaker 3: also why I tend to think that this is going
5:13
Speaker 3: to blow over, because smart people are going to realize
5:17
Speaker 3: that even if we chop off the head, they're still
5:20
Speaker 3: not going to do what the president wants in all likelihood.
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Speaker 2: I think you're right. The most likely outcome is that
5:29
Speaker 2: nothing happens. Yeah, but the probability that something happens here
5:35
Speaker 2: it's not zero, while still low is not zero, and
5:39
Speaker 2: zero is where it's been the entire time I've been alive. Yeah, yep,
5:44
Speaker 2: So it's worth talking about. So that's different. Yep. Let's
5:47
Speaker 2: talk about this piece from Bloomberg Opinion, because this is
5:50
Speaker 2: a meaty one with a few different, few different routes.
5:54
Speaker 2: We can go down. Pump prices aren't the problem for Americans.
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Speaker 2: Plug prices are sure, aren't.
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Speaker 3: Gas price is sitting at three sixteen a gallon nationally
6:04
Speaker 3: place all year lower.
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Speaker 2: Like, yeah, gas prices are cheap. No, it won't go
6:09
Speaker 2: so far as cheap, but there's they're calling them cheap.
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Speaker 2: You're calling them cheap. Yeah. Oh hit first, Mike Armstrong
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Speaker 2: calling guess I'm paying in the twos for gas? It's cheap. Okay,
6:19
Speaker 2: there you go. Now the electricity side of things, this
6:24
Speaker 2: is kind of wild. Uh So, what you're seeing here
6:28
Speaker 2: a bunch of different utilities of about this year and
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Speaker 2: basically either for electricity or for net gas, prices for
6:36
Speaker 2: heat have pushed through huge price increases throughout the country.
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Speaker 2: We're talking, you know, twenty percent plus uh in terms
6:45
Speaker 2: of the price increases nationally. Because of how electricity prices
6:49
Speaker 2: are calculated in CPI, it's not moving up that much
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Speaker 2: right now. Year over year, electricity prices up five point
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Speaker 2: eight percent in CPI. That's going to continue to rise.
6:59
Speaker 2: It's going to end up moving faster here. But the
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Speaker 2: couple things that you are seeing on this that that
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Speaker 2: are driving this, I don't think we have great answers for.
7:13
Speaker 2: And so let's start with we know for culprits like, well,
7:15
Speaker 2: hang on, there's two things afoot here. So the first
7:19
Speaker 2: one is kind of unexpected because we've talked about how
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Speaker 2: oil prices and gas prices are in a pretty good spot.
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Speaker 2: They haven't really budged very much. Net gas prices, on
7:27
Speaker 2: the other hand, have budged quite a bit. Closing price
7:31
Speaker 2: yesterday for the contract that continuous contract on the Chicago
7:35
Speaker 2: Mercantal Exchange was three dollars and fifty six cents per
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Speaker 2: million BTUs or whatever the heck it is. At this
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Speaker 2: time last year, we were heading towards a dollar eighty
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Speaker 2: six per million BTUs. So net gas prices have doubled
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Speaker 2: in the last year. That gas makes up generally depending
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Speaker 2: on you know, the statistics that you look at anywhere
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Speaker 2: from like thirty to forty percent of our electricity production nationally,
8:00
Speaker 2: but it can vary quite a bit regionally. So you've
8:03
Speaker 2: got net gas prices going up. And the reason why
8:06
Speaker 2: GN gas prices are going up is largely due to
8:10
Speaker 2: the fact that you have new drilling in the US
8:14
Speaker 2: that is slowing down at this point. And the reason
8:17
Speaker 2: why it's slowing down is because oil prices we talked
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Speaker 2: about are in a pretty good spot and oil companies
8:21
Speaker 2: are not going to go out and risk, you know, overproduction,
8:26
Speaker 2: given what happened to them in the twenty tens. And
8:28
Speaker 2: the reason why this matters is that, by and large, uh,
8:31
Speaker 2: if you look at the largest countries for gnat gas production,
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Speaker 2: the United States puts out nine hundred and sixty seven
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Speaker 2: three hundred million cubic meters of gas per year. That much. Yes,
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Speaker 2: I'm told that's a lot. And the reason I'm told
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Speaker 2: that's a lot. Russia is a distant second behind by
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Speaker 2: about thirty percent. The next closest country is Iran at
8:58
Speaker 2: about a quarter of US production. So the United States
9:01
Speaker 2: produces like, when you actually do the numbers out, it's
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Speaker 2: it's freaking huge. It's it's like almost half of worldwide
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Speaker 2: net gas production. I'm sorry, almost a third of worldwide
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Speaker 2: net gas production. So it's huge. And the reason why
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Speaker 2: is because we frack a lot of our oil and
9:18
Speaker 2: gnat gas is a byproduct of the fracking. Process in
9:21
Speaker 2: most cases, and so because of that, we get a
9:24
Speaker 2: ton of it, whereas Saudi Arabia, who produces a lot
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Speaker 2: of oil, only produces about twelve percent of the gnat
9:29
Speaker 2: gas that we do because they do through more conventional
9:31
Speaker 2: deposits and methods. So if you have less new production
9:36
Speaker 2: coming online in the United States, most gnat gas production
9:40
Speaker 2: comes from those early stages of fracking, and so you
9:44
Speaker 2: don't have as much gnatgas being produced. And so this
9:47
Speaker 2: means that gnat gas prices move up even as oil
9:49
Speaker 2: prices stay flatish. So you've got a problem on the
9:53
Speaker 2: supply side there the other piece, and this is gonna
9:57
Speaker 2: be really interesting to see how it plays out in
9:58
Speaker 2: the next couple of years. In my opinion, is this
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Speaker 2: what you were gonna say, Mike, The data centers for AI.
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Speaker 2: So everyone's all on this AI train right now. Like, oh,
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Speaker 2: chat GPT gives me life guidance and this and that,
10:11
Speaker 2: and like it helps me be friends and now Elon
10:14
Speaker 2: has you know, chatbots that helped me feel fulfilled in
10:16
Speaker 2: life and this and that, and it's great, like it's fine,
10:19
Speaker 2: like whatever, but man, the amount of electricity that these
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Speaker 2: data centers need is astronomical, And I'm just curious how
10:29
Speaker 2: we're all going to feel as we continue to see
10:31
Speaker 2: our electricity prices going up because of more and more
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Speaker 2: data centers being constructed. And I actually I know how
10:40
Speaker 2: we're gonna feel. We're gonna feel bad about it. And
10:42
Speaker 2: this is going to become the next hot button issue
10:45
Speaker 2: for state politicians is, Hey, we want to enable you know,
10:49
Speaker 2: AI to operate in our state because it gives us
10:52
Speaker 2: a ton of investment into our state, not so much
10:55
Speaker 2: in jobs, but in you know, money flowing in for
10:57
Speaker 2: construction and things like that that you know, once the
10:59
Speaker 2: can structions done, you don't need many jobs to run
11:01
Speaker 2: the AI data center. But man, this is causing some
11:04
Speaker 2: headaches for me as far as you know, all of
11:07
Speaker 2: my constituents, their utility prices are roofing. Yeah.
11:11
Speaker 3: I don't know if we already see this, but we're
11:13
Speaker 3: going to start to see proposals of corporate versus household
11:17
Speaker 3: electricity rates, kind of like you do with you know,
11:21
Speaker 3: tax rates on buildings and cities. I think that's probably
11:25
Speaker 3: going to be a solution there. These will be good
11:27
Speaker 3: at doing that. Oh yeah, we'n be terrible at it.
11:29
Speaker 3: Government setting electricity rates good, good luck, that's good. It's
11:33
Speaker 3: gonna be good. It's going to be pretty bad. But
11:35
Speaker 3: this is the reality. Yeah, the price increases from demand,
11:39
Speaker 3: The price increases from all the deferred maintenance on all
11:42
Speaker 3: of these things that you need to get updated so
11:44
Speaker 3: that we can have those centers. It's this massive investment.
11:49
Speaker 3: And the one thing I know about electricity supply is
11:52
Speaker 3: it doesn't appear overnight.
11:54
Speaker 2: It takes decades. We're so we're so slow with like
11:59
Speaker 2: reviews on I have a body who works in like
12:03
Speaker 2: developing new electricity projects. I'm like, how long does it
12:06
Speaker 2: take start to finish to do it? He's like ten years.
12:10
Speaker 2: You got to get approval on the project, then you
12:11
Speaker 2: got to get approval on the interconnection, then you got
12:13
Speaker 2: to go through He's like, it's a ten year process
12:16
Speaker 2: to get any new power to the grid. And that's
12:20
Speaker 2: in like a good scenario. So this is going to
12:23
Speaker 2: be a flashpoint because housing's already struggling because of rising
12:28
Speaker 2: insurance cost rising, You've got high interest rates, you got
12:34
Speaker 2: all this stuff that's already there, and now you throw
12:37
Speaker 2: in utility rates that are rising rapidly on top of it.
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Speaker 2: It's not great. Bob, let's take a quick break. When
12:44
Speaker 2: we come back, let's do a little bit of trivia,
12:49
Speaker 2: and then we'll talk the job market for new college grads.
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Speaker 4: All right, Sam for trivia here on the Financial Exchange.
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Speaker 4: In and Kiss you didn't hear it. Coca Cola will
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Speaker 4: what is the top corn producing state in the US.
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Speaker 4: Once again, what is the top corn producing state in
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Speaker 4: the US? Be the seventh person today to text us
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Speaker 4: at six one seven three six two thirteen eighty five
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Speaker 4: showed T shirt.
14:18
Speaker 2: Once again.
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Speaker 4: The seventh correct response to text us to the number
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14:30
Speaker 2: Mike, we made a piece in Bloomberg. It's titled what
14:33
Speaker 2: the Job Market? What the tough job market for a
14:35
Speaker 2: new college grad says about the economy, And it's kind
14:40
Speaker 2: of something we've been talking about for a while now,
14:41
Speaker 2: which is, look, if you've got a job, we're not
14:43
Speaker 2: really seeing any problems from a layoff perspective. You're pretty
14:47
Speaker 2: safe at this point generally. But if you don't have
14:51
Speaker 2: a job, companies are hiring at a pretty low rate
14:54
Speaker 2: that was last seen during an economy with closer to
14:57
Speaker 2: six percent unemployment. And and it's not surprising that unemployment
15:03
Speaker 2: for people in their early twenties is running hotter than
15:07
Speaker 2: the broader economy right now. Because they're not coming from
15:10
Speaker 2: a job already. They're coming into the workforce and not
15:12
Speaker 2: able to find jobs as readily.
15:14
Speaker 3: Yeah. The point that's made in this article, citing a
15:16
Speaker 3: bunch of data from the federal government, is that the
15:19
Speaker 3: employment situation for young college grads looks a lot like
15:23
Speaker 3: it did in the second half, probably early second half
15:26
Speaker 3: of the twenty.
15:26
Speaker 2: Tens, twenty fifteen year.
15:28
Speaker 3: Yeah, yeah, it just you know, when you look at
15:30
Speaker 3: unemployment rate, hiring rate, all those things, the data is
15:32
Speaker 3: coming in in that type of environment. What they pointed
15:35
Speaker 3: out that I hadn't really seen much analysis on yet though,
15:38
Speaker 3: was the dispersion I guess, of those jobs. And the
15:42
Speaker 3: point is made that the unemployment rate is so low
15:47
Speaker 3: and the demand for labor so high in the healthcare
15:49
Speaker 3: industry that you know, if you have a job in
15:53
Speaker 3: computer science or financial services, you might look a lot
15:56
Speaker 3: worse off than somebody did in twenty fifteen. It's just
15:58
Speaker 3: that the hiring rate is so high in things like
16:02
Speaker 3: medical care, adult care, you know, the aging boober population
16:06
Speaker 3: and all the demand for healthcare needs that are there.
16:10
Speaker 3: That's where a lot of these jobs are going. And
16:12
Speaker 3: keeping that overall unemployment rate low which I would buy.
16:15
Speaker 3: What I didn't buy was a story we covered a
16:18
Speaker 3: couple of days ago that some company that I'd never
16:22
Speaker 3: heard of did a survey that basically found the portion
16:26
Speaker 3: of college grads who couldn't find a job in their
16:29
Speaker 3: field was something like double what millennials experience. And I just, well,
16:35
Speaker 3: I had never heard of the surveyor and two, that
16:38
Speaker 3: just doesn't really coincide with any other data we have seen.
16:42
Speaker 3: It is tough to find a new job if you're
16:43
Speaker 3: a young college grad, especially a white collar one, but
16:47
Speaker 3: it's not great recession hard.
16:51
Speaker 2: Yeah, I mean do you think that that might have
16:53
Speaker 2: been just comparing millennials over like a fifteen year period,
16:55
Speaker 2: because not all millennials graduated in two thousand and nine. Yeah,
16:59
Speaker 2: I mean maybe that could.
17:00
Speaker 3: Be doing That could be, But it was a tough
17:04
Speaker 3: tough one for me to buy into when I read
17:07
Speaker 3: that study.
17:08
Speaker 2: What generation comes after gen Z? What's the next one?
17:11
Speaker 2: I don't know. I mean, these are all like artificial
17:15
Speaker 2: construct anyways, Okay, here we go. This is from Wikipedia,
17:18
Speaker 2: so take it for what it's worth. Yeah, it's this
17:20
Speaker 2: generation Alpha. I think we've gotten a little little lame
17:24
Speaker 2: on these names quite honestly. Yeah, you know, like why
17:28
Speaker 2: does it have to be like a letter? You know,
17:31
Speaker 2: like the old the old generations had cool names. Hey
17:34
Speaker 2: we were the baby boomers was a good name.
17:37
Speaker 3: The millennials exactly? You know, it's I do like like
17:41
Speaker 3: the ones that mark an occasion? Can we name a
17:44
Speaker 3: generation after the first American pope?
17:48
Speaker 2: What do we call that? Too controversial? Probably? I think.
17:52
Speaker 2: I mean, look, anyone listening from Chicago would be like, yeah,
17:55
Speaker 2: like line it up, like let's do it, you.
17:57
Speaker 3: Know, like but all the Chicago athletics are all about
18:01
Speaker 3: this idea.
18:03
Speaker 2: I'll tell you this. Everyone that I know from the
18:07
Speaker 2: Chicago area is making connections, claims they know the pope,
18:11
Speaker 2: like to ice cream shop in nineteen sixty three. No, no,
18:15
Speaker 2: to beyond that. It's like, yeah, we used to have
18:17
Speaker 2: dinner with this family, Like no you didn't.
18:19
Speaker 4: Good guy, good guy, Yeah, let me tell you.
18:24
Speaker 2: But uh, like at least gen Z. The alternative name
18:27
Speaker 2: that I have for people say is Zoomers, because like
18:29
Speaker 2: it kind of coincides with like people starting to use
18:31
Speaker 2: zoom like okay, like I I get that, and maybe
18:35
Speaker 2: Jen alpha Itz just too early to name them because
18:37
Speaker 2: the earliest ones were only born twelve years ago, and
18:41
Speaker 2: we're still in the midst of them being born, so
18:42
Speaker 2: we don't know what like the defining characteristic of their
18:46
Speaker 2: generation is yet.
18:47
Speaker 3: Let's do this if you have a good idea for
18:49
Speaker 3: better than Jen Alpha for this youngest generation of children
18:52
Speaker 3: to market an event in America.
18:55
Speaker 2: These are people born since twenty thirteen.
18:57
Speaker 3: Six, one, seven, three six, two thirteen eighty five is
19:00
Speaker 3: the text line. So we're looking for some ideas. My
19:03
Speaker 3: idea is to come up with something creative to do
19:05
Speaker 3: with our new pope, even though I'm not Catholic, but
19:08
Speaker 3: we can divert from that if need be.
19:10
Speaker 2: What about instead of Generation Alpha, Generation AI? Does that
19:17
Speaker 2: have to have the word generation in there? Though like
19:18
Speaker 2: baby Boomers didn't, Millennials didn't. It's not at all, you know,
19:23
Speaker 2: zoomers doesn't.
19:24
Speaker 3: So no, I don't think it does.
19:26
Speaker 2: Something about like robots and AI. I got a workshop
19:29
Speaker 2: it during the break, let's take a quick break here.
19:31
Speaker 2: When we come back, we've got the Trivia Answer and
19:34
Speaker 2: Wall Street Watch.
19:40
Speaker 1: Bringing the latest financial news straight to your radio. Every day.
19:45
Speaker 1: It's the Financial Exchange on the Financial Exchange Radio Network.
19:51
Speaker 1: Time Now for Wall Street Watch, a complete look at
19:54
Speaker 1: what's moving market so far today Right here on the
19:57
Speaker 1: Financial Exchange Radio Network.
20:00
Speaker 4: Our kits are in positive territory, with a modest tech
20:02
Speaker 4: rally occurring after yesterday's choppy ride due to uncertainty around
20:07
Speaker 4: the potential firing of FED chairman Jerome Pile. Trader is
20:10
Speaker 4: also digesting a new batch of second quarter earnings in
20:13
Speaker 4: addition to better than next expected June retail sales data.
20:19
Speaker 4: Right now, the Dow is up by third of a percent,
20:21
Speaker 4: or one hundred and forty eight points. SMP five hundred
20:24
Speaker 4: is up nearly four tenths of one percent, or twenty
20:27
Speaker 4: four points. Nasdaq is up nearly seven tenths of one percent,
20:31
Speaker 4: or one hundred and thirty nine points. Ruster two thousand
20:33
Speaker 4: is up nearly nine tenths one percent, nineteen points higher.
20:37
Speaker 4: Ten year Treasure reeled up one or to me down
20:39
Speaker 4: one basis point at four point four to four percent,
20:42
Speaker 4: and crude oil is up just over one percent higher,
20:46
Speaker 4: trading just above sixty seven dollars a barrel. Big news
20:49
Speaker 4: from Uber this morning after the ride hailing company announced
20:52
Speaker 4: a partnership with EV maker Lucid and self driving tech
20:56
Speaker 4: startup Neuro to launch more than twenty thousand robo tax
21:00
Speaker 4: over the next six years.
21:02
Speaker 2: As part of the deal.
21:03
Speaker 4: Uber will invest three hundred million dollars in Lucid. Lucid
21:07
Speaker 4: shares are surging forty three percent at the moment, while
21:10
Speaker 4: Uber stock is off by about a quarter of a percent. Meanwhile,
21:14
Speaker 4: shares in high fructose sirah producer Archer Daniels Midland are
21:18
Speaker 4: sinking nearly three percent after President Trump yesterday announced that
21:22
Speaker 4: he had persuaded Coca Cola to use real cane sugar
21:26
Speaker 4: in its drinks in the US, Coke stock is up
21:28
Speaker 4: nearly one percent. Sticking with the beverage space, where Pepsi
21:32
Speaker 4: posted better than expected second quarter earnings and revenue this
21:36
Speaker 4: morning despite weaker demand for its food in drinks in
21:39
Speaker 4: North America. Pepsi also reiterated its full yer outlook, sending
21:44
Speaker 4: that stock up six percent higher. Elsewhere, ge Aerospace raised
21:48
Speaker 4: its annual earnings outlook after the aircraft engine maker posted
21:52
Speaker 4: sales and profit that beat expectations. That stock is off modestly.
21:57
Speaker 4: United Airlines posted better than expected quarterly, but it's annual
22:01
Speaker 4: outlook did disappoint. Share however, up over one seventy three
22:05
Speaker 4: percent now and after today's close, all eyes will turn
22:08
Speaker 4: to Netflix, who will post their second quarter results on
22:12
Speaker 4: Tucker Silva and that is Wall Street Watch. And in
22:15
Speaker 4: the previous segment we asked the question what is the
22:17
Speaker 4: top corn producing state in the US. That would be Iowa.
22:22
Speaker 4: Matt and East Boston is our winner today taking home
22:24
Speaker 4: a Financial Exchange Show t shirt and we play trivia
22:27
Speaker 4: every day here in the Financial Exchange See complete contest
22:30
Speaker 4: rules at Financial Exshange Show dot com.
22:33
Speaker 3: Chuck, we got a text from Sean earlier during the show.
22:39
Speaker 3: It unfortunately does not have to do with the new
22:41
Speaker 3: name for the Gen Alpha. It has it with the FED.
22:43
Speaker 2: Did we get any text on that, Tucker, I'll look,
22:45
Speaker 2: he'll get back to us.
22:47
Speaker 3: But Seawan asked a good question in particular talking when
22:51
Speaker 3: we talk about the FED, they're in this pause mode
22:53
Speaker 3: because of the threat of tariffs, and I think in
22:58
Speaker 3: some ways that gets a bit miscategorized because my own
23:02
Speaker 3: views on you know, if we do end up in
23:05
Speaker 3: a very high tariff environment, higher than the ten to
23:08
Speaker 3: fifteen percent that's now being talked about, is I'm less
23:12
Speaker 3: concerned about the price increases that will be incurred and
23:17
Speaker 3: more concerned about recession because you're likely to have reciprocation
23:21
Speaker 3: and retaliation by other countries and we potentially end up
23:24
Speaker 3: in a trade war. And a trade war to me
23:26
Speaker 3: doesn't seem like a very high inflation environment. It seems
23:29
Speaker 3: like a pretty low growth environment, which the FED eventually
23:32
Speaker 3: cuts into. But the question that Sean's asking here is,
23:36
Speaker 3: you know, why is the FED pausing? Shouldn't there be
23:41
Speaker 3: isn't there some pretty fair certainty like Scott Besson has
23:44
Speaker 3: talked about, where yeah, you get tariffs, you get a
23:47
Speaker 3: one time price increase, but it doesn't actually affect things,
23:51
Speaker 3: you know, six twelve months down the road in terms
23:53
Speaker 3: of prices. You just see those terriffs going into place,
23:56
Speaker 3: There's a one time increase in terms of pricing, and
23:58
Speaker 3: then boom done. Why wouldn't rates still move lower? And
24:04
Speaker 3: I'm mentioned in your answer to that question too, Chuck,
24:06
Speaker 3: But my personal view would be the Fed's point about
24:11
Speaker 3: all this is about the uncertainty around tariffs rather than
24:17
Speaker 3: the idea of tariffs themselves.
24:21
Speaker 2: I agree, and especially when we have threatened additional tariffs
24:24
Speaker 2: that could come into play two weeks from today or
24:29
Speaker 2: two weeks from tomorrow, that's something that you need to
24:33
Speaker 2: be aware of because if you have a sequence of
24:36
Speaker 2: tariffs that come online over time, that's not necessarily a
24:40
Speaker 2: one time price adjustment. It's a series of one time
24:43
Speaker 2: which is you know, multiple ones that they can continue.
24:47
Speaker 2: The other piece, you know, in talking about this, if
24:52
Speaker 2: you know, about a month month and a half ago,
24:55
Speaker 2: I had started to say, look, if it weren't for tariffs,
24:58
Speaker 2: you can probably make the case that may the FED
25:00
Speaker 2: should be cutting right now. And the reason why I
25:02
Speaker 2: said that, and I probably said it on a few
25:04
Speaker 2: different shows, was Hey, you've got a labor market that's
25:08
Speaker 2: starting to show some signs of struggling. You've got you know,
25:11
Speaker 2: continuing claims that are ratcheting up a little bit. You've
25:14
Speaker 2: got a housing market that's struggling, and you know, you've
25:18
Speaker 2: got signs from all these different you know, surveys in
25:21
Speaker 2: this and that that things aren't great. Yeah, you could
25:23
Speaker 2: probably make a convincing case to start cutting rates. Now.
25:27
Speaker 2: The data over the last few weeks has evolved to
25:30
Speaker 2: the point where you kind of look at and you go,
25:32
Speaker 2: the continuing claims issue appears to be mitigated, at least,
25:34
Speaker 2: you know, for now, We'll have to see how it evolves,
25:37
Speaker 2: but it doesn't seem like it's it's really a thing.
25:39
Speaker 2: And housing continues to be quite bad, Like, let's let's
25:45
Speaker 2: make no bones about it, there's some real problems in
25:47
Speaker 2: the housing industry that could become a bigger drag on
25:51
Speaker 2: the economy in the second half of the year. So
25:52
Speaker 2: I still think that that's real. A lot of the
25:54
Speaker 2: survey stuff has started to bounce back and look better there,
25:57
Speaker 2: So I think, most of the time, quite honestly, and
26:01
Speaker 2: we've seen this from the FED a couple times in
26:03
Speaker 2: the last few years, most of the time the Fed
26:07
Speaker 2: is best served by doing nothing when inflation. Do you
26:11
Speaker 2: remember back in Q one of last year when we
26:13
Speaker 2: got some high inflation numbers and people were like, hey,
26:16
Speaker 2: maybe the FED needs to be raising rates again because
26:18
Speaker 2: inflation's coming back, And Jay Powell came out and explicitly said,
26:22
Speaker 2: we are going to look through this because we don't
26:24
Speaker 2: think there's any meat on that bone that dog won't hunt,
26:28
Speaker 2: and they were right, yep. And the year before in
26:31
Speaker 2: late twenty three, people were starting to bark a little
26:33
Speaker 2: bit about the labor market and probably didn't explicitly say anything,
26:37
Speaker 2: but the FED didn't cut in late twenty three, they
26:39
Speaker 2: basically were just like, no, this is fine, we don't
26:41
Speaker 2: need to do anything right now. The only time that
26:44
Speaker 2: they have done anything, remember the third, late third, early
26:47
Speaker 2: fourth quarter of last year, they did cut interest rates
26:50
Speaker 2: by a total of one hundred bases points, and ultimately,
26:54
Speaker 2: I think that's been proven to be the right move,
26:57
Speaker 2: just because inflation has not you know, it did not
27:00
Speaker 2: bounce back in the first half of this year, and
27:04
Speaker 2: I think you can point to the labor market and
27:06
Speaker 2: housing and say, yeah, like you probably needed you know,
27:09
Speaker 2: a little bit of help on that front there, even
27:11
Speaker 2: if it didn't move long term rates very much. But
27:14
Speaker 2: this is why when I look at the whole talk
27:17
Speaker 2: about the FED, you can point very easily to late
27:21
Speaker 2: twenty one, all of twenty two, in the first half
27:23
Speaker 2: of twenty three and be like, yeah, they did a
27:26
Speaker 2: poor job then, But in the last two years, Like
27:30
Speaker 2: if if you're looking at it, if you want to
27:33
Speaker 2: tell me Jay Powell's done a bad job in the
27:35
Speaker 2: last two years, like since the middle of twenty three,
27:39
Speaker 2: I want you to point to the specific decisions he
27:41
Speaker 2: made and tell me why you think he did a
27:43
Speaker 2: bad job. Then yeah, because I roughly a struggle in
27:46
Speaker 2: that in that time period to be like there was
27:49
Speaker 2: a big mistake there. I don't see it. In my
27:52
Speaker 2: personal opinion, interest rates obviously seep their way into every
27:57
Speaker 2: aspect of most people's financialise. They're very few of us
28:00
Speaker 2: that don't save, don't borrow anything, and just live life
28:03
Speaker 2: without being affected by interest rates. Whether it's your credit card,
28:06
Speaker 2: whether it's your home loan, your car loan, or the
28:11
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28:13
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29:26
Speaker 2: Mike, I want to I wanted to talk about Netflix earnings,
29:30
Speaker 2: but honestly, what's there to say about Netflix at this point?
29:34
Speaker 2: They keep being the only media company to figure out
29:37
Speaker 2: ways to print money left and right.
29:39
Speaker 3: Yeah, the main thing that I'm interested in is how
29:41
Speaker 3: good at advertising are they?
29:42
Speaker 2: Getting?
29:43
Speaker 3: It was a new It was a new trade to them.
29:45
Speaker 3: They had to build it in house. Are you any
29:48
Speaker 3: good at it? How well are you monetizing it? Honestly,
29:51
Speaker 3: my guess is probably.
29:53
Speaker 2: They're probably pretty good at it. And I don't even
29:57
Speaker 2: really care. Like all the all they keep doing this
30:00
Speaker 2: is a company who's revenue in the last ten years
30:02
Speaker 2: went from six billion to forty billion. Their net income
30:06
Speaker 2: in the last ten years went from one hundred and
30:10
Speaker 2: sixty two million to nine billion. Their free cash flow
30:14
Speaker 2: in the last ten years went from negative seven hundred
30:17
Speaker 2: million to seven point four billion positive, Like what what
30:24
Speaker 2: can you look at with this company and have honest
30:26
Speaker 2: questions about, like this, how are you gonna continue to
30:30
Speaker 2: grow it?
30:31
Speaker 1: There?
30:31
Speaker 2: On this question? There's this article in Bloomberg Netflix is
30:35
Speaker 2: at risk of earnings letdown after two hundred and fifty
30:37
Speaker 2: billion dollar rally.
30:38
Speaker 3: But it was after a two hundred and fifty billion
30:40
Speaker 3: dollar rally, right like that?
30:41
Speaker 2: That's like being like, hey, Amazon's at risk of slowing
30:45
Speaker 2: sales growth after growing their sales to four hundred billion dollars. Well, okay,
30:50
Speaker 2: there's only so much money to go around, you know,
30:53
Speaker 2: Like I, I just don't look at this and look
30:57
Speaker 2: how the stock performs can be very different from how
30:59
Speaker 2: the company does because obviously, you know, expectations are a
31:03
Speaker 2: big thing. But I don't know how many questions has
31:07
Speaker 2: this company answered to the to the positive in the
31:11
Speaker 2: last twenty years, most of them, Like I'll make a
31:14
Speaker 2: case every single one, and even the ones where like
31:18
Speaker 2: they've been like, oh, we made a mistake. They realize
31:21
Speaker 2: it really quickly. Yeah, look, no further than Quickster. You
31:26
Speaker 2: remember that that was the spin off they were gonna
31:28
Speaker 2: do for their DVD business, and finally they were just like, no,
31:31
Speaker 2: this is dumb, We're just gonna kill it. So's take
31:35
Speaker 2: a quick break. When we return. Paul Amonica from Baron's
31:38
Speaker 2: joined us. After this.
31:41
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32:46
Speaker 2: As promise for now. Joined by Paul Monica from Bearens. Paul,
32:51
Speaker 2: how you doing today?
32:53
Speaker 5: I'm good?
32:53
Speaker 1: Thanks?
32:53
Speaker 5: How you guys don't.
32:54
Speaker 2: We're doing well? You got a piece that's out this week.
32:57
Speaker 2: It's titled Tesla, circland six other Stocks to Short. According
33:00
Speaker 2: to JP Morgan, I didn't realize, Jp Morgan, I was
33:03
Speaker 2: in the business of publishing lists of stocks to short. Normally,
33:07
Speaker 2: analyst reports, you typically get just the bullish stuff coming out.
33:11
Speaker 5: Yeah, there's a joke that, yeah, one of George Carlin's
33:15
Speaker 5: four dirty words should be sell at least on Wall Street.
33:18
Speaker 5: But no, this is a fascinating report. There were forty
33:22
Speaker 5: companies overall that JP Morgan highlighted. I chose eight of
33:28
Speaker 5: that forty to look at, and you know, and Tesla
33:31
Speaker 5: jumped out as one because obviously it's a very polarizing stock.
33:37
Speaker 5: A lot of people love e La, musk a lot
33:39
Speaker 5: of people not so much. And the stock is down,
33:41
Speaker 5: you know, more than twenty percent this year already, So
33:44
Speaker 5: you could argue, why short something that's already fallen this much,
33:47
Speaker 5: but there, you know ev analyst, he noted that the
33:52
Speaker 5: stock still has what do you call the sky high valuation.
33:55
Speaker 5: It's at one hundred and seventy five times or so,
33:57
Speaker 5: you know, earnings estimates for this year, you've got, you know,
34:02
Speaker 5: the possibility of more earnings declines because of reduced TV subsidies,
34:06
Speaker 5: which could hurt Rivan as well, which was another stock
34:09
Speaker 5: that they said to short, and that they also think that,
34:13
Speaker 5: you know, the robotaxi initiative that has been widely touted
34:18
Speaker 5: is likely to disappoint, So you know, all those things,
34:21
Speaker 5: you know, potentially could be a drag on the stock.
34:23
Speaker 5: And the analysts JP Morgan didn't even get into the
34:27
Speaker 5: well publicized spat with the president as well, which might
34:31
Speaker 5: be another issue that could hurt Tesla.
34:33
Speaker 2: What about Circle. They're kind of a new entry to
34:36
Speaker 2: the market, not kind of, they are a very new entry.
34:38
Speaker 2: I think they've only been publicly traded for maybe six
34:40
Speaker 2: weeks or so. But they're yeah, they're they're up about
34:44
Speaker 2: one hundred and eighty percent since they iPod. What what
34:48
Speaker 2: do the analysts have to say about the company that
34:51
Speaker 2: makes dollars in stable points.
34:54
Speaker 5: For stable coins? Yeah, USDC. Yeah, this one's a really
34:57
Speaker 5: interesting one because Circle one of the lead underwriters with
35:02
Speaker 5: JP Morgan, and usually, you know, underwriters come out after
35:06
Speaker 5: a company goes public and they're kind of very glowingly bullish,
35:10
Speaker 5: but that's not the case here. But what's interesting is
35:13
Speaker 5: it just goes to show that even when a company
35:16
Speaker 5: like JP Morgan is going to bring a firm like
35:19
Speaker 5: Circle public, you have to be cognizant of price and valuation.
35:24
Speaker 5: So the analyst noted and his quote is Circle is
35:28
Speaker 5: a market leader in stable coins with amazing technology. So
35:32
Speaker 5: it's not that they think that it's a bad company,
35:34
Speaker 5: but there's more competition, and they said the current valuation
35:38
Speaker 5: is excessive. So you know, you got to give credit
35:41
Speaker 5: to JP Morgan for this particular analyst for you know,
35:44
Speaker 5: taking a shot at the company's valuation after it's gone
35:47
Speaker 5: up like five hundred percent or so from the Ibo price.
35:50
Speaker 2: Any other ones particularly stand out to you?
35:54
Speaker 5: Yeah, some of the ones that stood out, you know,
35:57
Speaker 5: Snapchat and bumble to social media companies, pubblic dating app.
36:02
Speaker 5: You know, they've fallen this year, but you know they
36:04
Speaker 5: see more downside there. You know, Intel, which is rebounded
36:10
Speaker 5: a bit but still has a lot of concerns about
36:13
Speaker 5: where that company's gonna be going forward. AMD kind of
36:16
Speaker 5: really emerged as a tough competitor in the PC server business,
36:19
Speaker 5: but then of course in Nvidia and everything that that
36:22
Speaker 5: four trillion dollar company has done with AI chips. And
36:25
Speaker 5: then two that I thought were interesting too, we're Shakeshack
36:28
Speaker 5: and Cheesecake Factory two, you know, consumer restaurant stocks that
36:33
Speaker 5: have done well this year, but the analysts there and
36:37
Speaker 5: one of the analysts follows Shakeshack, said they were concerned
36:40
Speaker 5: about all the marketing that needs to be done to
36:42
Speaker 5: support same source sales growth and traffic growth. And the
36:46
Speaker 5: Cheesecake Factory it's just maybe a little too richly valued,
36:50
Speaker 5: like some of the food that they serve as well.
36:53
Speaker 2: Fantastic Paul, appreciate you joining us today and hope you
36:56
Speaker 2: have a great rest of the week.
36:59
Speaker 5: Thank you very much, appreciate it. Talk to you guys
37:01
Speaker 5: in a couple of weeks.
37:02
Speaker 2: That is Paul Monica from Barons, Mike anything that you
37:05
Speaker 2: want to touch on.
37:06
Speaker 1: I do.
37:06
Speaker 3: Billy McFarland, the founder of Fire Festival, has sold the
37:10
Speaker 3: rights on eBay for a whopping two hundred and forty
37:13
Speaker 3: five thousand dollars.
37:15
Speaker 2: That on eBay.
37:16
Speaker 3: On eBay, he sold the rights to the Fire Festival.
37:19
Speaker 3: The proceeds will be going towards restitution. Unfortunately he owes
37:22
Speaker 3: twenty six million dollars, so it's not going to make
37:25
Speaker 3: a huge dent. I did ask chat gpt though, to
37:28
Speaker 3: create me five new ideas of frauds that Billy McFarland
37:34
Speaker 3: could go and invent, and it gave me a warning
37:37
Speaker 3: about conducting fraud and then did it anyway.
37:40
Speaker 2: The one that I.
37:41
Speaker 3: Like best is NF Tapwater, the first blockchain certified luxury
37:46
Speaker 3: water brand. Each sip is tracked on the Ethereum network
37:49
Speaker 3: to prove you drank it. Water is sold in invisible
37:52
Speaker 3: biodegradable bottles. You just get tap water. Liquid Authenticity is
37:56
Speaker 3: the slogan, and Ashton Kutcher invest for some reason. Interesting,
38:02
Speaker 3: so thank you chat g ept. He sold it on eBay.
38:04
Speaker 2: He sold it on You couldn't get like Sotheby's interested
38:07
Speaker 2: in like selling the thing.
38:09
Speaker 3: Not at that price and not. With that background, I
38:13
Speaker 3: gotta spend more time on eBay.
38:15
Speaker 2: I guess let's take a break for the rest of
38:19
Speaker 2: the day. We're back at it tomorrow to finish up
38:22
Speaker 2: the week. A bunch more economic data coming. We'll have
38:24
Speaker 2: all of it for you then