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Why Big Tech Is Giving Away Billions to Keep the AI Boom Alive · The Financial Exchange Show

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  Speaker 1: is The Financial Exchange with Chuck Zotta and Paul Lane.
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  Speaker 2: It's Chuck, Paul and Tucker with you. And as we
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  Speaker 2: kick things off for the hour, we'll take a look
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  Speaker 2: around markets where at the moment, it's very much a
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  Speaker 2: tech led sell off in the NASDAQ with basically everything
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  Speaker 2: else moving up. I say basically because it's not really
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  Speaker 2: everything else. But Paul, how many stocks are in the
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  Speaker 2: S & P 500?
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  Speaker 3: 500, but technically with the share classes, it's 504 maybe.
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  Speaker 2: Thank you very much, Paul. I appreciate you correcting yourself.
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  Speaker 2: It's 503. You were off by one. I award you
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  Speaker 2: no points. May God have mercy on your soul. So
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  Speaker 2: in any case, 503 stocks. Today we have 250 more
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  Speaker 2: of them up than down. And so if you do
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  Speaker 2: the math out, you're like, okay, there's basically like, you know,
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  Speaker 2: somewhere in the ballpark of, you know, three, I'm sorry, uh,
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  Speaker 2: like 400 stocks, like 375 up, 125 down. So the
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  Speaker 2: majority of stocks are up today, but the index is
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  Speaker 2: still down. Why is the index down? Well, when you
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  Speaker 2: have big, heavily weighted components like Google down 12%, uh,
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  Speaker 2: or Amazon down three, uh, or Microsoft down one and
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  Speaker 2: a quarter, Hey, tiny little, uh, sounds kind of funny
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  Speaker 2: saying this, but like tiny little Ford doesn't really make
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  Speaker 2: much of a difference. Okay. Because Microsoft is, you know,
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  Speaker 2: a multi-trillion dollar company at this point. And Ford for
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  Speaker 2: as many F-150s as they sell is a $ 50 billion company.
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  Speaker 2: There are 20 builds, there are 20 Fords that fit
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  Speaker 2: into every trillion dollar valuation. And so, you know, Google
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  Speaker 2: moving down 12% from a, you know, $ 3. 5 trillion valuation, gee,
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  Speaker 2: Google's lost like 12 Fords today. So Ford being up
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  Speaker 2: 3% doesn't really do enough to offset that. And that's
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  Speaker 2: the math of why most stocks are up today, but
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  Speaker 2: the S & P is down. So S & P,
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  Speaker 2: as I noted, up just a little bit, third of
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  Speaker 2: a percent, down 28 points. Down, same story, down, you know,
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  Speaker 2: quarter percent, 121 points. NASDAQ composite, though, down 359%. about 1.3%
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  Speaker 2: because it's heavy in a lot of the tech names
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  Speaker 2: that are being sold. Ten-year treasury down 0.07%, seven basis
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  Speaker 2: points to 4.974%. Dollar index is falling in sympathy. It
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  Speaker 2: is currently down 0.14% to 101.89. Gold is off 12.79,
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  Speaker 2: so gold can't really find its footing here still. It's
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  Speaker 2: just been stuck around 4,000 and change for the last
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  Speaker 2: couple weeks now. And we've got crude oil. Down $ 2. 44
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  Speaker 2: a barrel to $ 134 cents. That is after moving up
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  Speaker 2: significantly yesterday, so it's basically reversed that gain. And so
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  Speaker 2: you've got gas prices down a touch overnight today, down
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  Speaker 2: to $ 4. 22 and half a cent. So again, moving down
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  Speaker 2: a little bit more. A week ago, we were at $ 4. 27,
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  Speaker 2: so about a $ 0. 05 drop in gas prices in the
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  Speaker 2: last week. Diesel, though, actually up $ 0. 03 a gallon in
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  Speaker 2: the last week from $ 6. 30 to $ 6. 33 nationally. according to AAA.
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  Speaker 2: The big reason why Google stocked down, they reported earnings yesterday.
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  Speaker 2: Market didn't like it. Microsoft, investors liked their earnings report initially,
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  Speaker 2: but subsequently sold it. And so this brings us to
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  Speaker 2: the big one that's coming out after earnings today, which
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  Speaker 2: is Amazon. What are we expecting to see, Paul?
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  Speaker 3: Really, the two biggest focuses of this earnings report, Chuck,
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  Speaker 3: is going to come down to their CapEx forecast. What
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  Speaker 3: are they going to be spending for the remainder of
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  Speaker 3: this year as well as into next year? It's estimated
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  Speaker 3: that Amazon will spend $ 222 billion in 2026 and as
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  Speaker 3: much as $ 290 billion in 2027. Very similar to Google's
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  Speaker 3: story in that sense in that they are spending a
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  Speaker 3: ton of money to invest in AI infrastructure. So there
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  Speaker 3: will be a tremendous amount of scrutiny on any of
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  Speaker 3: the forecasts on the CapEx side of things. The other
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  Speaker 3: point of emphasis to look for in Amazon's earnings after
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  Speaker 3: the bell today will be how their cloud services AWS
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  Speaker 3: division does. They had had a tremendous surge in their
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  Speaker 3: stock price the best day since 2012 back on July
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  Speaker 3: 31st when they did their last earnings report. where they
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  Speaker 3: reported a 40% revenue jump in their cloud services sales.
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  Speaker 3: They're anticipating about $ 46 billion for this upcoming quarter here.
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  Speaker 3: So any numbers that we get that are to beat
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  Speaker 3: those expectations of $ 46 billion would be really positive for
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  Speaker 3: Amazon stock. and their spending forecast. Those are really going
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  Speaker 3: to be the two things that are in greatest focus.
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  Speaker 3: You would think that there's momentum on the AWS side
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  Speaker 3: of things for the cloud computing. As much as Google
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  Speaker 3: is selling off today on some of the numbers that
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  Speaker 3: were largely tied to heavier increase in expenditures and weakening
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  Speaker 3: search revenue, their cloud division, Google's, did quite well printing
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  Speaker 3: 100% year-over-year growth. Granted, they're smaller as a player compared
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  Speaker 3: to AWS, but there continues to be demand there. You
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  Speaker 3: would think that that would rub off on Amazon as well.
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  Speaker 3: Microsoft had reported some pretty strong cloud computing numbers there too.
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  Speaker 3: So that's really what's of most focus is how does
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  Speaker 3: the cloud computing size do for Amazon?
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  Speaker 2: Can we talk about something just that's been bothering me?
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  Speaker 2: I've just been thinking about this since we've been talking
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  Speaker 2: about the financing side of this for the last... Last
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  Speaker 2: couple weeks, especially this week, you had, what was it,
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  Speaker 2: Meta announced their equity raise. You've got OpenA, I'm sorry, Anthropic,
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  Speaker 2: who's going to be doing an IPO.
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  Speaker 1: Yep.
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  Speaker 2: Paul, when someone wants to buy something from you, what
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  Speaker 2: does that tell you about how they value it?
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  Speaker 3: They have demand, high demand.
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  Speaker 2: They want it. They think it's worth more, right?
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  Speaker 1: Mm-hmm.
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  Speaker 2: So when, I'm not saying these are good or bad,
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  Speaker 2: but when... When companies engage in stock buybacks, that means
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  Speaker 2: that they think that their stock is going to be
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  Speaker 2: worth more in the future than it is today, and
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  Speaker 2: so it makes sense for them to buy it. What
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  Speaker 2: does it tell you, then, when all of these big
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  Speaker 2: AI companies... Remember, if you own a company, Paul, is
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  Speaker 2: there anything more precious than your equity?
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  Speaker 1: No.
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  Speaker 3: There is not.
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  Speaker 2: That is the whole game. We've all watched Shark Tank.
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  Speaker 2: We've all watched Shark Tank. Yep. We've all watched everyone
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  Speaker 2: haggle over, well, are you going to give up 7%
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  Speaker 2: of your company or 10 or 5? Every percentage point counts. Right.
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  Speaker 2: And now you've got Meta just being like, hey, here's
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  Speaker 2: $ 95 billion in stock. What does that tell you about
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  Speaker 2: how they're valuing it? It tells you one of two things. Okay.
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  Speaker 2: It tells you either number one, hey, this AI thing
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  Speaker 2: is going to be so valuable in the future that
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  Speaker 2: we can give this up and it won't matter because
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  Speaker 2: we'll make so much money. Right. That's the bull version
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  Speaker 2: of it. The bear version of it is, well, we
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  Speaker 2: got to finance this and who knows if this is
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  Speaker 2: going to work. So take the equity because if it
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  Speaker 2: doesn't work, well, then the losses are on you. I
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  Speaker 2: don't like when companies are giving away their equity. It's
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  Speaker 2: something that every company protects that. Think about it. If
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  Speaker 2: you normally hear, hey, so-and-so has to issue more shares
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  Speaker 2: in order to fund this, normally you're hearing that from
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  Speaker 2: the crappy companies of the world. It's like, oh, AMC
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  Speaker 2: is issuing a billion dollars in shares to pay off
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  Speaker 2: debt so they can continue operations. GameStop, etc., yeah. Exactly.
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  Speaker 2: It's like the meme stocks are normally the ones who
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  Speaker 2: do that. So I've just been thinking about this over
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  Speaker 2: the last week or so because the whole premise for
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  Speaker 2: the last decade has been, hey, companies are buying back
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  Speaker 2: their stock, they're buying their stock back, and that helps
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  Speaker 2: to set a floor under the market because they're buying
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  Speaker 2: it back, they're buying it back. And now in the
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  Speaker 2: last week or two, it's like, hey, do you want
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  Speaker 2: some equity? Because we've got it for you.
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  Speaker 1: Yeah.
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  Speaker 3: I mean, ultimately it comes down to this exhausting all
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  Speaker 3: the other capital sources to a degree. You have to
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  Speaker 3: balance not issuing too much debt and that's the other
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  Speaker 3: place to turn to. So their argument would be the
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  Speaker 3: bull case that you outlined earlier is that this opportunity
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  Speaker 3: is so great. And if we miss it, it is
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  Speaker 3: going to be just a catastrophe for our business if
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  Speaker 3: we're unable to get hold of this new technological wave
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  Speaker 3: and we can't afford.
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  Speaker 1: To be cheap on this.
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  Speaker 3: We really need to commit and go all in. That
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  Speaker 3: would be the argument, but that's the problem is that
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  Speaker 3: if expectations don't deliver from a revenue perspective, you've done
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  Speaker 3: a disservice to all those people who just took your
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  Speaker 3: equity issuance because there's going to be a correction in
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  Speaker 3: your stock.
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  Speaker 2: Let's take a quick break here. When we return, let's
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  Speaker 2: talk a little bit about Dollar General and why their
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  Speaker 2: price tags are catching a lot of eyeballs these days.
• 10:48
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• 11:25
  Speaker 2: Paul, we got a piece in the New York Times.
• 11:27
  Speaker 2: The FTC is suing Dollar General over pricing. Why?
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  Speaker 3: There are some concerns that have been raised by 20
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  Speaker 3: different states on Dollar General's pricing tactics. This is not
• 11:40
  Speaker 3: the story of the digital pricing issues, which we'll get
• 11:43
  Speaker 3: to in conjunction with the news that is being covered here.
• 11:47
  Speaker 3: But this one is Back to the old school style
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  Speaker 3: of the stickering pricing where Dollar General has been accused
• 11:53
  Speaker 3: in numerous instances over the course of the years of
• 11:57
  Speaker 3: failing to update their first, the weekly circulars, basically the
• 12:02
  Speaker 3: promotional materials that they send out regarding their prices don't
• 12:04
  Speaker 3: match what ultimately customers are paying at the cash register.
• 12:08
  Speaker 3: And secondly, the prices on their shelves by the old
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  Speaker 3: sticker method don't match with what they're paying up again
• 12:16
  Speaker 3: at the register because they're understaffed and not doing enough
• 12:19
  Speaker 3: to rotate around the prices, price stickers that are in
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  Speaker 3: the store. So this is, like I said, been brought
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  Speaker 3: to the FTC's attention by, uh, different states, including Tennessee,
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  Speaker 3: where dollar general is based. But it does pick up
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  Speaker 3: on a larger trend that consumers in general are more
• 12:40
  Speaker 3: and more wary of retailers and their pricing tactics. To
• 12:44
  Speaker 3: shift a bit to the digital story, this has been
• 12:46
  Speaker 3: a concern that Walmart has answered to because the CEO
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  Speaker 3: of Walmart, John Furner, had wrote a letter to customers
• 12:54
  Speaker 3: when he tried to convince them that they could trust
• 12:56
  Speaker 3: digital price tags because there is a lot of uneasiness
• 12:59
  Speaker 3: about the use of digital price tags in stores.
• 13:04
  Speaker 2: It feels like if you want to look out over
• 13:07
  Speaker 2: the next year or two, remember how like a year,
• 13:10
  Speaker 2: year and a half ago, we were like, Hey, data
• 13:12
  Speaker 2: centers are going to be like the next big battle
• 13:15
  Speaker 2: that everyone pays attention to. Sure enough, that's what's happened.
• 13:20
  Speaker 2: This is the one where like, no one's really talking
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  Speaker 2: about this right now. Like everyone like kind of jokes
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  Speaker 2: about it, but like, No one's really talking about it.
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  Speaker 2: This and the potential for more heavily AI-assisted, personalized, algorithmic
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  Speaker 2: pricing feels like it's going to be one of the
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  Speaker 2: big battles of the next two to three years. Because
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  Speaker 2: here's the reason why people hate it. The whole idea
• 13:49
  Speaker 2: behind why anyone buys any product is because at some level,
• 13:55
  Speaker 2: it fills a need and makes them feel good. We
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  Speaker 2: call that feeling in economics consumer surplus. It's the feeling that, hey,
• 14:02
  Speaker 2: I got a little extra. Yes, you had to pay
• 14:06
  Speaker 2: 99 cents for your coffee, but hey, it's better than
• 14:09
  Speaker 2: paying six at Starbucks. And so you're like, yeah, it's
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  Speaker 2: that feeling of I got more. If the coffee place
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  Speaker 2: now sees your license plate pull up and they've got
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  Speaker 2: data on you that says, well, you make this income
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  Speaker 2: and you can afford to spend this, and now your
• 14:26
  Speaker 2: 99-cent cup of coffee goes to $ 2. 99, not because the
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  Speaker 2: coffee's better, but just because you are you, that makes
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  Speaker 2: you feel like crap. Your surplus has been eaten into.
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  Speaker 2: And it's just like... This, I feel, is just what
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  Speaker 2: we're seeing in general. Everyone feels like they're being taken
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  Speaker 2: advantage of on everything. And I don't think everyone is
• 14:51
  Speaker 2: being taken advantage of on everything. Certainly on some things.
• 14:54
  Speaker 2: Don't get me wrong... But it's just, we see the
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  Speaker 2: prices of everything going up. Again, I have a buddy
• 15:00
  Speaker 2: of mine who, his dentist office just got taken over
• 15:04
  Speaker 2: by a private equity firm. And the cost of his
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  Speaker 2: cleaning went from like $ 100 to $ 350. It's the same person.
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  Speaker 2: It's the same building. It's the same service. And the
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  Speaker 2: price went up 3.5x. And he's like, this sucks. And
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  Speaker 2: he's not wrong, by the way.
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  Speaker 1: Right.
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  Speaker 2: And so it's we're just at a point where so
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  Speaker 2: much of this is just financialized. And it's a bunch
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  Speaker 2: of nerds looking at spreadsheets being like, oh, how can I,
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  Speaker 2: you know, eke out like an extra like IRR if
• 15:39
  Speaker 2: I buy this company with debt? And all you end
• 15:42
  Speaker 2: up with that is, well, price has got to go up.
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  Speaker 3: And a poor customer experience.
• 15:46
  Speaker 2: Yes. Yeah. Yes.
• 15:48
  Speaker 3: It is something that we've all experienced it to a degree.
• 15:52
  Speaker 3: I remember when I first discovered that on airline pricing
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  Speaker 3: that they have access to your cookies and your IP
• 15:59
  Speaker 3: data that you could look at one flight and then
• 16:01
  Speaker 3: come back three weeks later. And guess what? It's more
• 16:04
  Speaker 3: expensive when you look at it. And that really upset me.
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  Speaker 3: And it's the same phenomenon that's playing out here on
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  Speaker 3: a broader basis for other items that could be impacted
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  Speaker 3: by this type of pricing. Yeah, policies here.
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  Speaker 2: So I suspect we're going to be seeing a lot
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  Speaker 2: more about, you know, it's not right just to call
• 16:26
  Speaker 2: it algorithmic pricing because algorithmic is anything that, you know,
• 16:30
  Speaker 2: uses an algorithm to set a price. It's not necessarily personalized.
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  Speaker 2: What we're really talking about here is like personalized algorithmic
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  Speaker 2: pricing where, hey, the seller knows who you are and
• 16:41
  Speaker 2: changes the price specifically because they know that you'll pay X, Y,
• 16:45
  Speaker 2: or Z for it. And they're not making the product better.
• 16:49
  Speaker 2: They're not making the experience better. They're just saying, well,
• 16:54
  Speaker 2: now that we know more about you, we're going to
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  Speaker 2: charge you more for it. And that's not great. Let's see.
• 17:03
  Speaker 2: I want to talk about... Tucker, I don't want to
• 17:07
  Speaker 2: go back to France today. Can we go back to
• 17:09
  Speaker 2: France tomorrow?
• 17:11
  Speaker 1: Sure.
• 17:11
  Speaker 2: Okay, we'll go to France tomorrow. I can't France on
• 17:15
  Speaker 2: a Thursday. It's one of my hard and fast rules.
• 17:18
  Speaker 2: But we can absolutely French Friday. I think that will
• 17:22
  Speaker 2: be really good for us. Let's talk about the SaaSpocalypse.
• 17:26
  Speaker 2: If you're listening and you're like, Chuck, did you just misspeak?
• 17:29
  Speaker 2: The answer is no. SaaSpocalypse, software as a service, commonly
• 17:34
  Speaker 2: referred to as SaaS, S-A-A-S, all these businesses... where you've
• 17:40
  Speaker 2: got these recurring software subscriptions that businesses pay for each month.
• 17:45
  Speaker 2: And back earlier this spring, when AI agents became a
• 17:53
  Speaker 2: thing really for the first time and got kind of
• 17:55
  Speaker 2: broadly disseminated out into the world, a bunch of software
• 17:58
  Speaker 2: names got sold and people said, hey, are AI agents
• 18:02
  Speaker 2: going to eat software? It's the SaaSpocalypse. You have all
• 18:05
  Speaker 2: software names down like 50%. And it turns out that
• 18:08
  Speaker 2: not everyone canceled their Salesforce subscription overnight, and so they've
• 18:12
  Speaker 2: bounced back. But some are still down, you know, anywhere
• 18:14
  Speaker 2: from like 15% to 30%. But you've got a piece
• 18:17
  Speaker 2: in Axios today, it's titled, A Sign the SaaSpocalypse Isn't Over. Paul,
• 18:21
  Speaker 2: what's that sign?
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  Speaker 3: Basically, this gets back to the debt markets here, that
• 18:25
  Speaker 3: similar to what you're talking about with the dentist practice story,
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  Speaker 3: private equity had invested or borrowed heavily to invest in
• 18:32
  Speaker 3: software companies that have Sticky businesses with really high margins,
• 18:36
  Speaker 3: but now you have a point where they're reaching a
• 18:40
  Speaker 3: significant amount of these loans in the software sector being
• 18:43
  Speaker 3: in distressed territory, 32%. of distressed loans just in the
• 18:49
  Speaker 3: sector in general and some of the distressed loan volume
• 18:52
  Speaker 3: are attributable to the software sector. So that is something
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  Speaker 3: that is a looming concern as more of that debt
• 18:58
  Speaker 3: comes due. You're borrowing at higher rates of interest into
• 19:02
  Speaker 3: businesses that could be on the brink of bankruptcy and
• 19:07
  Speaker 3: could exacerbate just the sell-off that we've seen in the
• 19:10
  Speaker 3: software sector that has been really pummeled this year.
• 19:15
  Speaker 2: Taking a look at markets as we head towards the
• 19:19
  Speaker 2: bottom of the hour. We've got the Dow Jones down
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  Speaker 2: about a quarter percent. Same with the same with the
• 19:25
  Speaker 2: S & P. NASDAQ, though, down one and a quarter percent.
• 19:29
  Speaker 2: And we'll be back with more after this.
• 19:39
  Speaker 1: Bringing the latest financial news straight to your radio every day.
• 19:44
  Speaker 1: It's the Financial Exchange on the Financial Exchange Radio Network.
• 19:49
  Speaker 1: Time now for Wall Street Watch. Tracking the stocks, the data,
• 19:54
  Speaker 1: and the headlines driving markets so far today. Right here
• 19:57
  Speaker 1: on the Financial Exchange Radio Network.
• 19:59
  Speaker 4: A lot going on on Wall Street today with Google's Alphabet.
• 20:03
  Speaker 4: Disappointing with their third quarter earnings report while Microsoft impressed.
• 20:08
  Speaker 4: Investors are also reacting to a new batch of economic
• 20:11
  Speaker 4: data points, including a better-than-expected third quarter GDP reading. Right now,
• 20:16
  Speaker 4: the Dow is down 0.2% or 100 points lower. S
• 20:18
  Speaker 4: & P 500 down over 0.1% or 12 points off.
• 20:18
  Speaker 2: NASDAQ down 1% or 265 points. Russell 2000 is up 1.25%.
• 20:19
  Speaker 4: 10-year Treasury yield is down 6 basis points at 4.984%.
• 20:21
  Speaker 4: Crude oil down 2.5% at $ 100. a barrel, while Brent
• 20:39
  Speaker 4: is at $ 113 a barrel. Alphabet down over 11%. After
• 20:44
  Speaker 4: the Google parent saw its third quarter search, advertising revenue
• 20:47
  Speaker 4: growth slow, weighing on the company's free cash flow. Microsoft
• 20:51
  Speaker 4: has turned negative, down over 1%, even after the tech
• 20:55
  Speaker 4: giant saw its Azure cloud business climb 48% in the
• 20:59
  Speaker 4: previous quarter. More tech earnings on the way after the
• 21:01
  Speaker 4: bell today when Amazon reports. Meanwhile, service now tanking 25%.
• 21:07
  Speaker 4: After the enterprise software company missed third-quarter earnings estimates while
• 21:11
  Speaker 4: its fourth-quarter guidance disappointed, Eli Lilly reported better-than-expected earnings and
• 21:16
  Speaker 4: revenue that handily beat expectations and upped its full-year sales outlook.
• 21:20
  Speaker 4: Demand for its obesity drug Zepbound and diabetes treatment Monjaro
• 21:24
  Speaker 4: surged again in the quarter. Eli Lilly's stock is up
• 21:28
  Speaker 4: by 6% and DoorDash officially announced it is acquiring Instacart
• 21:33
  Speaker 4: in a cash-in-stock deal. that values its food delivery rival
• 21:37
  Speaker 4: at about $ 17 billion. I'm Tucker Silva, and that is
• 21:41
  Speaker 4: Wall Street Watch.
• 21:42
  Speaker 2: Paul, we got a piece in Market Watch. It's titled,
• 21:45
  Speaker 2: This Five-Year Window is Essential for Retirees. Mess that up
• 21:49
  Speaker 2: and you can do permanent damage. Well, I wouldn't want
• 21:51
  Speaker 2: to do that. What five-year window are we talking about?
• 21:53
  Speaker 3: This is referring to, Chuck, the first five years of
• 21:57
  Speaker 3: retirement where there is a sequence of return risk that
• 22:00
  Speaker 3: looms for retirees out there. For years, they've been amassing
• 22:04
  Speaker 3: a portfolio nest egg, whether it be through a 401k
• 22:08
  Speaker 3: or other means of saving. And when they do retire, ultimately,
• 22:12
  Speaker 3: that usually is the first time that they begin accessing
• 22:15
  Speaker 3: those savings. What can occur is if the market is
• 22:18
  Speaker 3: in a really bad place, think 2008 there for listeners,
• 22:22
  Speaker 3: to have to draw from your portfolio during a time
• 22:25
  Speaker 3: where it's down significantly and exacerbates the withdrawal impacts where
• 22:29
  Speaker 3: if your portfolio has dropped 30 or 40% and you
• 22:32
  Speaker 3: begin to take out your 5% or so, it can
• 22:35
  Speaker 3: create a negative impact for your future retirement likelihood of
• 22:39
  Speaker 3: success because you're drawing from your nest egg when it's
• 22:42
  Speaker 3: down significantly. So what this piece outlines is some strategies
• 22:46
  Speaker 3: that financial planners like ourselves can sort of discuss with
• 22:50
  Speaker 3: clients to try and plan around that risk that looms
• 22:55
  Speaker 3: out there. A common one is this idea of a
• 22:58
  Speaker 3: bucket approach where you want to have some money that
• 23:01
  Speaker 3: you can utilize in the here and now, whether that
• 23:03
  Speaker 3: be in CDs or other cash savings vehicles that you
• 23:07
  Speaker 3: could spend down from in the first year or two
• 23:10
  Speaker 3: of retirement if the market went against you and not
• 23:13
  Speaker 3: have to risk disrupting your portfolio. The other strategies built
• 23:18
  Speaker 3: in here are kind of unconventional going the other direction
• 23:23
  Speaker 3: rather than actually utilizing some of the safe money buckets.
• 23:27
  Speaker 3: There's a tax preparation strategy that you could utilize if
• 23:30
  Speaker 3: the markets were to go down and you find yourself
• 23:33
  Speaker 3: in an early retirement window where your income has dropped
• 23:36
  Speaker 3: because you're no longer getting a paycheck, exploring the idea
• 23:40
  Speaker 3: of Roth conversions. All of these things come into play
• 23:43
  Speaker 3: when you're trying to plan for retirement.
• 23:46
  Speaker 2: Folks, the Armstrong Advisory Group has a guide available this
• 23:49
  Speaker 2: month titled Building and Sizing Your Emergency Fund. It's all
• 23:53
  Speaker 2: about kind of that initial building block to make sure
• 23:57
  Speaker 2: that you've got the good foundation you need for a stable,
• 24:01
  Speaker 2: long-term financial plan. The guide is available two different ways.
• 24:06
  Speaker 2: The first is by calling 800-393. The second is by
• 24:12
  Speaker 2: going to armstrongadvisory.com. Again, the guide is titled Building and
• 24:16
  Speaker 2: Sizing Your Emergency Fund, and you can request it online
• 24:20
  Speaker 2: at armstrongadvisory.com or by calling 800-393-4001.
• 24:28
  Speaker 1: The proceeding was paid for by Armstrong Advisory Group, a
• 24:30
  Speaker 1: registered investment advisor. Nothing in the ad or in any
• 24:33
  Speaker 1: Armstrong guide is specific financial, legal, or tax advice. Consult
• 24:36
  Speaker 1: your own financial, tax, and estate planning advisors before making
• 24:39
  Speaker 1: any investment decisions. Armstrong may contact you to offer investment
• 24:42
  Speaker 1: advisory services.
• 24:43
  Speaker 2: Paul, we got quite the piece here from the New
• 24:45
  Speaker 2: York Times. I counted just to make sure. It is
• 24:48
  Speaker 2: a six byline piece. So you've got six different reporters
• 24:52
  Speaker 2: working on this. And the headline is NVIDIA chief seen
• 24:56
  Speaker 2: as target of Chinese spy plot. The subheader is a
• 25:01
  Speaker 2: Chinese businesswoman who had a close relationship with Jensen Huang
• 25:04
  Speaker 2: was found to be passing intelligence to Beijing. President Trump
• 25:08
  Speaker 2: was briefed and took no action. And basically it outlines
• 25:12
  Speaker 2: exactly that. I'll quote here. roughly a year ago, Mr.
• 25:15
  Speaker 2: Trump was briefed about the intelligence findings, which have not
• 25:17
  Speaker 2: been previously reported, and chose not to do anything with
• 25:20
  Speaker 2: the information. Mr. Trump has been wary of disrupting NVIDIA's
• 25:23
  Speaker 2: chip sales, which are helping to drive the economy and
• 25:25
  Speaker 2: the stock market, and of further complicating the trading relationship
• 25:29
  Speaker 2: with China. This account is based on interviews with people
• 25:33
  Speaker 2: briefed on the surveillance, who spoke on the condition of
• 25:36
  Speaker 2: anonymity because the findings are drawn from classified intelligence, as
• 25:39
  Speaker 2: well as other officials and industry executives and analysts. So
• 25:46
  Speaker 2: there are two things that I always think of whenever,
• 25:50
  Speaker 2: you know, you see a piece like this. The first is, okay, like,
• 25:54
  Speaker 2: why am I reading this now? Because again, this, you know,
• 25:57
  Speaker 2: apparently happened a year ago. Some of this, you know,
• 26:00
  Speaker 2: it can take time to, you know, leak out and
• 26:02
  Speaker 2: things like that. Like we, we understand that, but think
• 26:06
  Speaker 2: about it in the context of, you know, just the
• 26:09
  Speaker 2: broader AI ecosystem and trying to figure out, okay, like,
• 26:13
  Speaker 2: Why is this coming out, you know, at this particular
• 26:17
  Speaker 2: point in time? Because, again, for most people, this is
• 26:21
  Speaker 2: the first they're reading of this, even if the intelligence
• 26:23
  Speaker 2: community has known about this for a little while right now.
• 26:28
  Speaker 2: And the piece goes on to say, look, there are
• 26:29
  Speaker 2: a whole bunch of different questions that we still don't
• 26:32
  Speaker 2: know the answer to on this. So, you know, I
• 26:35
  Speaker 2: don't I don't pretend to have all the answers or
• 26:37
  Speaker 2: understand exactly what is going on here. But I think
• 26:43
  Speaker 2: that this is something that bears watching as AI is
• 26:47
  Speaker 2: so critical to the growth that is going on in
• 26:51
  Speaker 2: the U.S. economy right now. And obviously, NVIDIA, very important
• 26:55
  Speaker 2: to that overall growth. And so there very much is
• 26:59
  Speaker 2: a tie up here in terms of how this could
• 27:01
  Speaker 2: potentially impact the U.S. and world economies, depending on what
• 27:05
  Speaker 2: ends up coming out of this, if there are any
• 27:08
  Speaker 2: negative repercussions. Yeah.
• 27:09
  Speaker 3: And the national security concerns that go hand in hand
• 27:13
  Speaker 3: with AI and the development of these chips, that's been
• 27:15
  Speaker 3: at the forefront of many people's minds for the last
• 27:18
  Speaker 3: several years. The US had been restricting the most advanced
• 27:21
  Speaker 3: chips going to China. There has always been reports or
• 27:25
  Speaker 3: rumors that there were vehicles set in place to circumvent
• 27:30
  Speaker 3: that export restriction with some chips going to one country
• 27:34
  Speaker 3: and then ultimately ending up in China. And this just
• 27:38
  Speaker 3: adds more fuel to that. Again, I don't know enough
• 27:41
  Speaker 3: about the story or the details on it to really
• 27:43
  Speaker 3: speculate to the validity of it, but certainly is something
• 27:46
  Speaker 3: that is a concerning development and is worth following here,
• 27:50
  Speaker 3: as it's clear that the New York Times put a
• 27:52
  Speaker 3: lot of resource and time into this type of report.
• 27:55
  Speaker 2: Speaking of China, we got a piece from CNBC, why
• 27:58
  Speaker 2: China is desperate to ship cars out of the country.
• 28:02
  Speaker 2: And the big reason why is because, well, they have
• 28:06
  Speaker 2: too many that are accumulating there.
• 28:09
  Speaker 3: Yes, this has been a huge issue for European auto manufacturers.
• 28:14
  Speaker 3: They have really struggled because... of the competition that China
• 28:17
  Speaker 3: has presented in those markets. Obviously, domestically here, we don't
• 28:21
  Speaker 3: have the ability to buy Chinese vehicles, but in Europe
• 28:26
  Speaker 3: and in South America, there has just been a flood
• 28:29
  Speaker 3: of inventory of vehicles from the Chinese that have really
• 28:32
  Speaker 3: hurt some of these domestic producers in Germany and these
• 28:36
  Speaker 3: other countries in Europe, having to compete with what our
• 28:40
  Speaker 3: very clearly subsidized vehicle production from China. And as a
• 28:44
  Speaker 3: result of that, because China doesn't have enough domestic demand
• 28:48
  Speaker 3: to service, the cars get flooded into other markets, bringing
• 28:53
  Speaker 3: down prices and making it really hard for competitors to
• 28:56
  Speaker 3: keep up with the prices that the Chinese are charging
• 29:00
  Speaker 3: for these vehicles.
• 29:01
  Speaker 2: Let's take a quick break here. When we return, we'll
• 29:04
  Speaker 2: do a little bit of Stack Roulette next.
• 29:06
  Speaker 1: Your daily dose of The Financial Exchange is on Instagram.
• 29:10
  Speaker 1: Follow us for show highlights, video clips, and quick takes
• 29:13
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• 29:21
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• 29:24
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• 29:38
  Speaker 2: The 2026 DAV.
• 29:40
  Speaker 4: 5K Boston is sold out and the race is next weekend, Saturday,
• 29:45
  Speaker 4: November 7th at Fort Independence on Castle Island. Even if
• 29:50
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• 29:53
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• 29:53
  Speaker 2: Making a donation.
• 29:55
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• 29:59
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• 30:03
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• 30:07
  Speaker 4: your donation today. That's DAV5K. Boston.
• 30:11
  Speaker 2: Paul, what do you got for me for Stack Roulette?
• 30:14
  Speaker 3: The baby bust is forcing a reckoning at public schools.
• 30:18
  Speaker 3: Falling birth rates are squeezing school budgets. So this is
• 30:21
  Speaker 3: something that we've talked about a lot on the show,
• 30:24
  Speaker 3: the idea that people are having less kids than they
• 30:26
  Speaker 3: did previously. If you look at data from students enrolled
• 30:31
  Speaker 3: K-12 across the country, that number sits at about 49 million.
• 30:35
  Speaker 3: That's down about 3.7%. from where it was in 2017, 2018.
• 30:40
  Speaker 3: And in particular, this Wall Street Journal piece focuses on
• 30:44
  Speaker 3: a community nearby, our broadcast location, Methuen Mass, which has
• 30:48
  Speaker 3: just faced the dilemma that many school systems are facing
• 30:52
  Speaker 3: where the number of students being enrolled is down, but
• 30:57
  Speaker 3: at the same point in time, they face higher fixed costs,
• 30:59
  Speaker 3: whether that be in salaries or or just coverage on
• 31:03
  Speaker 3: their existing school locations. And as a result of that,
• 31:07
  Speaker 3: they're having to make a lot of difficult decisions as
• 31:09
  Speaker 3: to what programs are cut, how they consolidate down some schools.
• 31:14
  Speaker 3: And it leads to a lot of pressure on the
• 31:17
  Speaker 3: administration and just these towns in general to meet a
• 31:21
  Speaker 3: falling amount of students. But at the same time, a
• 31:24
  Speaker 3: lot of the same fixed demands that were in place previously,
• 31:28
  Speaker 3: trying to get teachers to be able to teach a
• 31:31
  Speaker 3: class that doesn't balloon to 28 in size versus where
• 31:36
  Speaker 3: it was previously, where it averaged more like 20 to 24.
• 31:39
  Speaker 3: But what has been recently happening is more like 16
• 31:42
  Speaker 3: to 18 for these kindergarten classes, just because there are
• 31:45
  Speaker 3: less kids in them, but you still have the same
• 31:48
  Speaker 3: amount of schools open in a specific town.
• 31:51
  Speaker 2: Yeah. It's a problem that we don't have a good
• 31:55
  Speaker 2: answer for, given how municipal finances work.
• 31:57
  Speaker 1: Right.
• 31:58
  Speaker 2: It is... It's a mess. Speaking of mess, do either
• 32:04
  Speaker 2: of you watch any eSports?
• 32:10
  Speaker 1: No.
• 32:11
  Speaker 4: No.
• 32:11
  Speaker 2: I don't either. There's a guy by the name of
• 32:15
  Speaker 2: Nick Fosco who goes by the online name Lacey. I'm
• 32:20
  Speaker 2: not familiar with him. I don't know him.
• 32:22
  Speaker 4: Oh, you know, I saw this headline.
• 32:23
  Speaker 2: I was like, who the hell is Lacey? Did you
• 32:26
  Speaker 2: watch the video? I didn't know. So this is fantastic.
• 32:29
  Speaker 2: A lot of these big esports guys, what they do
• 32:32
  Speaker 2: is they basically live stream most of their life. So
• 32:38
  Speaker 2: this guy went out to a restaurant. I don't know
• 32:41
  Speaker 2: where it is. It's some kind of Asian cuisine. I'm
• 32:44
  Speaker 2: not sure if he's in Asia or not. I can't
• 32:48
  Speaker 2: really tell from the surrounding video as to where he is.
• 32:52
  Speaker 2: But basically, he was ordering food while streaming himself. And
• 32:57
  Speaker 2: the back of the menu had a QR code on it.
• 33:00
  Speaker 2: And just to, again, give you a little idea about
• 33:02
  Speaker 2: this guy, he's got three and a half million followers
• 33:06
  Speaker 2: on Instagram. Okay. So, like, none of us listening have
• 33:10
  Speaker 2: heard of him before this, but three and a half
• 33:12
  Speaker 2: million people follow him on Instagram. So he's kind of
• 33:16
  Speaker 2: a big deal in the streaming community. So he's holding
• 33:18
  Speaker 2: up the menu at one point while he's streaming, and
• 33:20
  Speaker 2: I guess a bunch of the people watching... decide that
• 33:24
  Speaker 2: based on that they scan that qr code and they
• 33:28
  Speaker 2: start ordering a bunch of food to his table the
• 33:32
  Speaker 2: poor guy say poor again he can probably cover this
• 33:34
  Speaker 2: because it sounds like he's made quite a bit of
• 33:36
  Speaker 2: money doing esports but still like you never like to
• 33:38
  Speaker 2: spend this if you don't have to gets hit with
• 33:40
  Speaker 2: a twelve thousand dollar bill at the restaurant so because
• 33:45
  Speaker 2: a bunch of people watching were able to order food
• 33:47
  Speaker 2: to his table So I'm confused.
• 33:50
  Speaker 4: The QR code's on the back of the menu, so
• 33:53
  Speaker 4: if you were watching it on the live stream and
• 33:55
  Speaker 4: you would scan the QR code and then order it,
• 33:58
  Speaker 4: how would they know to deliver it to his table?
• 34:01
  Speaker 4: Was it customized specifically to the table? It's probably a
• 34:03
  Speaker 4: per-table code, yes. Okay, interesting.
• 34:06
  Speaker 2: I haven't seen that. I haven't seen it in the U.S.,
• 34:09
  Speaker 2: which makes me, again, suspect that this is... This is
• 34:11
  Speaker 2: in Japan, by the way. It's in Japan, so yeah, again,
• 34:14
  Speaker 2: the technology and the service setup is different, but... Again,
• 34:19
  Speaker 2: the poor guy gets hit with a $ 12, 000 bill for
• 34:22
  Speaker 2: food that a bunch of people watching were ordering to
• 34:24
  Speaker 2: his table. Got to say, I've never seen that one before.
• 34:29
  Speaker 3: Technology backfiring. I have a quick story on technology backfiring,
• 34:32
  Speaker 3: which is not part of the stack, but more a
• 34:34
  Speaker 3: personal frustration that I was dealing with. Obviously, we cover
• 34:37
  Speaker 3: a lot on this show, this idea that AI is
• 34:39
  Speaker 3: going to take over the world and everyone's going to
• 34:42
  Speaker 3: lose their jobs. And we at least cover those stories,
• 34:44
  Speaker 3: not to say that we believe any of that, but
• 34:46
  Speaker 3: it certainly is talked about quite frequently. I had an
• 34:49
  Speaker 3: experience trying to use AI yesterday where perfect task for AI,
• 34:53
  Speaker 3: trying to upload a statement that's 120 pages to try
• 34:57
  Speaker 3: and get the holdings of a specific investment portfolio into
• 35:00
  Speaker 3: a system that at our company and here it is
• 35:03
  Speaker 3: supposed to take our jobs and everything. And it whiffs
• 35:06
  Speaker 3: on two of the five accounts, just doesn't pick up holdings.
• 35:10
  Speaker 3: And I know that I'm not at the cutting edge
• 35:12
  Speaker 3: of the frontier labs in terms of the technology that
• 35:14
  Speaker 3: they have, but how does it mess up a task
• 35:18
  Speaker 3: like that? And there's more and more instances of this
• 35:21
  Speaker 3: where you're searching information online and whether it's ChatGPT or
• 35:24
  Speaker 3: others out there, that you just have to be wary
• 35:27
  Speaker 3: to double check their work. And I hear this refrain
• 35:29
  Speaker 3: a lot from people who are even in like the
• 35:32
  Speaker 3: code writing space, like more on the ground, kind of
• 35:35
  Speaker 3: like actually experiencing this every single day.
• 35:37
  Speaker 2: It's like, yeah, it's great.
• 35:38
  Speaker 3: It can generate a lot of code that would take
• 35:41
  Speaker 3: us a long time to do. But the problem is
• 35:43
  Speaker 3: I have to go back and double check it to
• 35:45
  Speaker 3: make sure it's right. And the same thing applies here
• 35:47
  Speaker 3: in this instance. Yeah, it got me most of the
• 35:49
  Speaker 3: way there, but if it doesn't get me all the
• 35:51
  Speaker 3: way there, there's not too much of a time save
• 35:53
  Speaker 3: if I have to go back in and double check
• 35:56
  Speaker 3: all the work. And so I ended up spending more
• 35:58
  Speaker 3: time fixing it than maybe doing it mainly myself, or
• 36:02
  Speaker 3: there wasn't as much of a difference than I would
• 36:04
  Speaker 3: have anticipated. And so just frustrating when it's supposed to
• 36:08
  Speaker 3: take over everything and it can't handle it. a very
• 36:11
  Speaker 3: simple task or give you the right information.
• 36:13
  Speaker 2: I very much go, you know, I'm of two opinions
• 36:16
  Speaker 2: on this. Like I've had things where like I got
• 36:19
  Speaker 2: fed up with like, you know, Zillow used to have
• 36:22
  Speaker 2: like a mortgage payment calculator.
• 36:24
  Speaker 3: Yes.
• 36:25
  Speaker 2: I got fed up. They keep moving it around. It's
• 36:27
  Speaker 2: like not on their app anymore. And I'm not trying
• 36:29
  Speaker 2: to buy a place or anything, but sometimes people ask
• 36:32
  Speaker 2: me like, Hey, like what's it cost like to buy this?
• 36:34
  Speaker 2: Like what's the payment look like? Or you're just like
• 36:36
  Speaker 2: curious yourself. You're like, Oh, I wonder how much like
• 36:38
  Speaker 2: that house would cost. And so I had AI build
• 36:42
  Speaker 2: me a calculator just so that I don't have to
• 36:44
  Speaker 2: go anywhere for it, and it's great for that. As
• 36:47
  Speaker 2: another one, I had it build me a coin flip
• 36:51
  Speaker 2: Monte Carlo simulator just so that I could see how
• 36:54
  Speaker 2: to play with different odds and projected returns. And I
• 36:59
  Speaker 2: had to do a little bit of tweaking at first,
• 37:01
  Speaker 2: but now it's something where I fixed it to exactly
• 37:03
  Speaker 2: how it's supposed to operate. And now I have these
• 37:07
  Speaker 2: things that I can just use in perpetuity with no
• 37:10
  Speaker 2: additional work needed, which is great. So I think that
• 37:15
  Speaker 2: it's something where the place I've kind of come around
• 37:18
  Speaker 2: to is if there are things that you are going
• 37:21
  Speaker 2: to use repeatedly, it's worth the initial investment to get
• 37:25
  Speaker 2: them set up how you want because you'll use them
• 37:28
  Speaker 2: over and over and then save a bunch of time
• 37:30
  Speaker 2: and effort. If it's something that you're doing once... The
• 37:34
  Speaker 2: fact that you often have to proof, not often, but
• 37:36
  Speaker 2: you always have to proof it and then like look
• 37:38
  Speaker 2: to see if it actually gave you the right thing
• 37:41
  Speaker 2: means that there are times when it'll save you time
• 37:43
  Speaker 2: and money. There are times when it won't.
• 37:46
  Speaker 1: Sure.
• 37:47
  Speaker 2: And so I think for like things that are like
• 37:49
  Speaker 2: repeated that you can just like stabilize the process and
• 37:52
  Speaker 2: get it into like, okay, this is what it needs
• 37:54
  Speaker 2: to do. It's great. Otherwise, it very much is trial
• 37:58
  Speaker 2: and error and kind of hit or miss sometimes. Looking
• 38:01
  Speaker 2: at markets as we head towards the top of the hour.
• 38:04
  Speaker 2: We've got the S & P down 23. Dow is
• 38:07
  Speaker 2: down 183. NASDAQ down 315. So still a sell-off happening
• 38:11
  Speaker 2: that's concentrated in tech. We're done for the day. We'll
• 38:14
  Speaker 2: finish up the week tomorrow on the Financial Exchange.