Latest / The Financial Exchange Show / Who will be the winners and losers of the AI boom?

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Who will be the winners and losers of the AI boom? · The Financial Exchange Show

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Speaker 2: It is the Financial Exchange with Chuck Zada and Paul Lane.
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Speaker 2: chopping around, and I guess that's what we're doing right now,
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Speaker 2: so no conclusive movement in markets, but some choppiness out there.
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Speaker 2: What else is moving? Bond market back open today after
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Speaker 2: six nine percent. Dollar index, though moving up a touch
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Speaker 2: now to fifty eight ninety two, so continuing to spend
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Speaker 2: some time in the high fifties. Despite that, Gas prices
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Speaker 2: up another three tenths of ascent overnight to three oh
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Speaker 2: seven and five tenths, So no major movement there. Still
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Speaker 2: hanging out in the low threes, but can't quite get
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Speaker 2: that national average below three dollars a gallon right now,
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Speaker 2: Peace in Bloomberg. This is why you should treat the
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Speaker 2: stock rally with skepticism, Paul, Why should you treat the
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Speaker 2: stock rally with skepticism?
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Speaker 3: Well, Chuck, in this piece here it outlines the case
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Speaker 3: on a technical study. You know, I don't really typically
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Speaker 3: put too much creens into technicals.
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Speaker 2: I know, so you're saying that the article is a
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Speaker 2: load of crap. I wouldn't go that far.
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Speaker 3: I'm not saying that on the the perhaps the methodology
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Speaker 3: behind it, or the reason that they're citing.
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Speaker 2: I'm not sure if.
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Speaker 3: I quote me on that. I would quote me if
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Speaker 3: you I don't know.
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Speaker 2: If i'd quote me on that.
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Speaker 3: Being this negative divergence, which is a technical study that
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Speaker 3: they mentioned that the number of the stocks in the
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Speaker 3: S and P five hundred making a one year low
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Speaker 3: has been rising even as the market is rallying, that
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Speaker 3: this could create this potential falloff having those two kind
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Speaker 3: of contrary indicators. The bottom line is, it's the crux
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Speaker 3: of this piece is the same thing that we've talked
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Speaker 3: about before. Valuations are really high. However, you want to
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Speaker 3: look at a price to earnings, price to sales, price
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Speaker 3: to book, any ratio you throw out there, stocks are
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Speaker 3: overpriced on evaluation perspective, and so it is fair to
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Speaker 3: mention that we're trading at a premium. But I'm not
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Speaker 3: so sure if I'm going to buy what they're selling.
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Speaker 3: Here chuck on the technical analysis as to the reason
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Speaker 3: why the market will you know, fall off anytime soon.
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Speaker 2: And you know, along that, along that line of thinking, Paul,
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Speaker 2: back in twenty twenty three, you know, after the decline
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Speaker 2: of twenty twenty two, where valuation still high, yes they were,
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Speaker 2: And in twenty twenty four, after the growth of twenty
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Speaker 2: twenty three, where valuation still.
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Speaker 3: High, yes they were.
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Speaker 2: And at the beginning of this year, after the growth
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Speaker 2: of twenty twenty four, where valuation still high. All three
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Speaker 2: years and they've continued to go up. So again, stocks
5:25
Speaker 2: are not physics. They're not bound by the laws of physics.
5:29
Speaker 2: They're not bound by any rules at all other than
5:32
Speaker 2: what you need to do in order to be a
5:34
Speaker 2: publicly traded company, and you know, the regulations that you
5:37
Speaker 2: need to follow so that you don't you know, defraud
5:39
Speaker 2: investors and do all of that bad stuff. But in general,
5:42
Speaker 2: like stocks can do whatever they want. This is how
5:44
Speaker 2: you get wacky quantum computing companies that have no revenue
5:48
Speaker 2: going parabolic, until you get wacky nuclear power companies that
5:52
Speaker 2: have never made a single reactor going parabolic worth tens
5:56
Speaker 2: of billions of dollars. I'm not saying any of this
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Speaker 2: is bad, but I have parts of markets where I
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Speaker 2: kind of get old fogy and like I certainly can
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Speaker 2: be like, hey, this looks a little bubbly. I'm a
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Speaker 2: little skeptical on like this particular thing. You heard it
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Speaker 2: from me back about you know, all the ev SPACs
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Speaker 2: in twenty twenty one and twenty two. Even now I
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Speaker 2: look at, you know, some of the stuff that's going
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Speaker 2: on in parts of the market, and I'm like, okay,
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Speaker 2: like this is just a little bit, you know, to
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Speaker 2: out there. But ultimately, like you can do any of
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Speaker 2: this stuff so long as it's it's legal. And the
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Speaker 2: idea that valuation is this like north Star that everything
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Speaker 2: comes back to. Quite honestly, like that's a really short
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Speaker 2: story in the time of in like the broad history
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Speaker 2: of markets, valuations only become an important driving story in
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Speaker 2: like the last seventy eighty years. Before that, it it
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Speaker 2: wasn't a thing like that's just not how people thought
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Speaker 2: about this stuff, you know, It's just not how it
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Speaker 2: was done. So ultimately, asset prices of all kinds, whether
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Speaker 2: it's stocks, real estate, collectibles, beanie babies, la boo boos,
7:15
Speaker 2: Did I say that right?
7:16
Speaker 4: I think so?
7:17
Speaker 2: Are you a big latle boo boo fan?
7:19
Speaker 3: Mike had to tell me what it was. My kids
7:21
Speaker 3: aren't at that age range yet. I now am aware
7:24
Speaker 3: of what it is. But tucker you into the.
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Speaker 2: Latle boo boos.
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Speaker 4: Oh, I don't even know.
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Speaker 5: What the hell it is.
7:28
Speaker 3: You don't know what a boie baby.
7:31
Speaker 2: They look like gremlins. It will not enter my house.
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Speaker 4: We'll see about that, No, it won't.
7:38
Speaker 2: I'm getting you away Christmas. I'm getting you a boo
7:42
Speaker 2: boo for Christmas.
7:45
Speaker 3: Your kids are gonna be.
7:46
Speaker 2: It's gonna be a La boo boo from Lechoo Choo
7:49
Speaker 2: and you're gonna love it. You're gonna love your la
7:52
Speaker 2: boo boo. Anyways, Ascid pricing of all kinds, it's it's
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Speaker 2: determined by stories like the guy who wants to buy
8:00
Speaker 2: a property on the coast of Florida and says, I'm
8:05
Speaker 2: willing to pay two million dollars for that, when if
8:08
Speaker 2: you go a mile inland you can pay a third
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Speaker 2: of that. It's because the story he tells himself is wow,
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Speaker 2: I can't wait to look at that sunset out there.
8:17
Speaker 2: And also, hey, someone else is gonna want to pay
8:21
Speaker 2: for that after I'm gone, and so this is a
8:23
Speaker 2: good investment. The person who buys the rundown, you know,
8:30
Speaker 2: dilapidated home in Detroit two, you know, a decade ago
8:34
Speaker 2: for eight grand who says, hey, Detroit's not always gonna
8:39
Speaker 2: be like this. He's telling himself a story about what
8:42
Speaker 2: that can be. The person that buys the rolex, partly
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Speaker 2: because they're like, hey, this looks cool, and I can
8:49
Speaker 2: you know, you know, tell people how cool I am.
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Speaker 2: They're doing that because they're telling themselves a story too.
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Speaker 2: And so just because assets are over priced doesn't mean
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Speaker 2: that they fall immediately. Is where I'm going with all
9:03
Speaker 2: the lab Boo Boo talk. Take a quick break. When
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Speaker 2: we come back, Luchuchu is going to be joined by
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Speaker 2: La Lulu lu Kawa from Sherwood News joins us right
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Speaker 2: after this. Not talking to La Boo Boo's, We're talking
9:16
Speaker 2: AI and other things with Luke.
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Speaker 2: As promised. We're now joined by Lukawa from Sherwood News. Luke,
11:00
Speaker 2: how you doing today?
11:02
Speaker 4: Not too bad?
11:03
Speaker 7: Congrats on the five three beat down yesterday of my leaf.
11:06
Speaker 7: So I'm recovering from that, hopefully better than Austin Matthews
11:10
Speaker 7: I was.
11:10
Speaker 2: I was told we're going to answer the age old question.
11:13
Speaker 2: Is Fraser Minton the next Patrice bergeron during this show?
11:18
Speaker 2: Your thoughts?
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Speaker 7: I uh, we're just hoping this trade doesn't go down
11:23
Speaker 7: as bad as the two karasque one.
11:25
Speaker 4: But you know, hey, he looks great.
11:28
Speaker 7: Cheering for him, but cheering for him less than I
11:31
Speaker 7: would be if he were wearing different colors.
11:32
Speaker 4: I'll put it that way.
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Speaker 2: I appreciate that, Luke. Let's talk a little bit about
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Speaker 2: artificial intelligence here. Last couple of weeks, it seems like
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Speaker 2: the idea of valuations on AI companies has at least
11:46
Speaker 2: entered the chat. And this is something that just hasn't
11:48
Speaker 2: really been present for the last couple of years. It's
11:51
Speaker 2: just been Hey, every time you increase CAPEX, your stock
11:54
Speaker 2: has gone up, and so like, why wouldn't you keep
11:58
Speaker 2: pushing that button? Like I under stand all of the
12:01
Speaker 2: financial incentives driving this, But the last couple of weeks
12:04
Speaker 2: it seems like there's been a different tenor to the conversations,
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Speaker 2: and I'm wondering if you can give a little bit
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Speaker 2: of color to that and some idea as to whether
12:13
Speaker 2: or not this does matter, will matter, or will continue
12:16
Speaker 2: to not matter.
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Speaker 7: Yeah, it's it's very interesting to me. I think it
12:22
Speaker 7: mainly came about, you know, somewhat last week, I would
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Speaker 7: say early last week, when there was an investment conference
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Speaker 7: in Hong Kong and a couple of big Wall Street
12:31
Speaker 7: head haun shows, including at Goldman Sachs.
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Speaker 4: Basically, Warren give a generic.
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Speaker 7: Loud warning about you know, high valuations, the risk of
12:38
Speaker 7: a market kind of pull back in the ten to
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Speaker 7: fifteen percent range at some vague, indiscriminate point in the future.
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Speaker 4: As sort of a catalyst for that, you know.
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Speaker 7: Along that, you also have Michael Berry raising some alarms
12:53
Speaker 7: about the space, which does tend to generate a lot
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Speaker 7: of newsflow. But when I think of the the AI
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Speaker 7: boom in aessing whether it's a bubble or not, I
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Speaker 7: have to go to Okay, let's look at SMB five
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Speaker 7: hundred major company valuations right now. Companies with a higher
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Speaker 7: forward price to earnings ratio than Nvidia include Costco, Walmart,
13:15
Speaker 7: and Starbucks. I think, inasmuch as there is a valuation,
13:21
Speaker 7: or inasmuch as there are bubble concerns within AI, it
13:25
Speaker 7: should lay much more on the idea of an earnings bubble,
13:29
Speaker 7: the idea that, hey, the very outsize returns that are
13:32
Speaker 7: going to be generated in a boom obviously aren't going
13:35
Speaker 7: to last forever this degree of growth, and what does
13:38
Speaker 7: growth look like on the other side of that, That,
13:40
Speaker 7: to me is where the biggest idea of an AI
13:44
Speaker 7: bubble looks.
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Speaker 4: It doesn't look as much in the valuations.
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Speaker 7: In other words, I'm saying, if we're going to be
13:50
Speaker 7: worried about an AI bubble even more, it's probably going
13:54
Speaker 7: to have to come with a lot more work on
13:57
Speaker 7: the valuation side, and those alarm bells getting a lot
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Speaker 7: louder and a lot more blaring. Bank of America, for instance,
14:04
Speaker 7: yesterday basically said they had their global option strategists come
14:08
Speaker 7: out and say that, you know, single stock volatility is rising,
14:12
Speaker 7: but not really as high as the dot com bubble,
14:14
Speaker 7: and we think we're going there. Therefore valuations and volatility
14:19
Speaker 7: should be rising. So that's actually a part of the
14:22
Speaker 7: leg that I would presume as long as the earning
14:26
Speaker 7: side cooperates gets worse rather than gets better in terms
14:30
Speaker 7: of the kind of cries and concerns, it's eliciting.
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Speaker 2: So is that kind of the My view where I've
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Speaker 2: kind of evolved to is like most technology, I believe
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Speaker 2: that we're going to use way more AI over the
14:43
Speaker 2: next five to ten years than we're using today. But
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Speaker 2: it's also like most technology going to become commoditized, because
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Speaker 2: that's kind of what generally happens with most technologies, see
14:55
Speaker 2: the personal computer, smartphones aside from Apple, that the margins
15:00
Speaker 2: shrink into you know, oblivion, and you say, okay, we
15:03
Speaker 2: have to have a bunch of M and A in
15:05
Speaker 2: order to you know, save whatever's out there. But is
15:08
Speaker 2: this you know, kind of where we end up going,
15:11
Speaker 2: which is, yeah, we can use a lot more AI
15:14
Speaker 2: in the future, but in doing so, does it become
15:17
Speaker 2: commoditized and the margins get hit on that.
15:21
Speaker 7: Oh man, you're you're speaking my language completely here. Yeah,
15:24
Speaker 7: the time where you have the most pricing power and
15:27
Speaker 7: in theory have the best margins is during the boom.
15:30
Speaker 7: It's now so when you when you look at you know,
15:33
Speaker 7: for instance, the core weaves and the Nebuises of the world,
15:37
Speaker 7: which are saying, hey, like, we're even right now able
15:40
Speaker 7: to lease old versions of chips like the H one hundreds,
15:44
Speaker 7: for instance, in Vidia's chips at rates that aren't too
15:48
Speaker 7: far off what we booked the initial contracts at. You see, Hey,
15:51
Speaker 7: that's that sounds great, right, This sounds like longer useful life,
15:55
Speaker 7: some decent pricing power. And then you kind of have
15:58
Speaker 7: to remember that this is probably as good as it
16:01
Speaker 7: ever gets in terms of the demand outstripping supply providing
16:05
Speaker 7: for that pricing power. So yeah, I'm totally on board
16:09
Speaker 7: with that idea and that kind of loops in what
16:12
Speaker 7: Jensen Wong talked about recently, and I think was really
16:15
Speaker 7: a point of emphasis for him at GtC speaking in DC,
16:19
Speaker 7: he was talking a lot about the efficiency improvements that
16:23
Speaker 7: are going to be a part of every generation of
16:26
Speaker 7: Nvidia chips going forward and so effectively, what he's saying
16:29
Speaker 7: is like, Hey, this isn't just about giving better AI compute.
16:33
Speaker 7: We're also trying to drive costs lower and try and
16:37
Speaker 7: provide that ongoing protection over time. Whether or not that's
16:41
Speaker 7: enough to offset kind of the more generalized loss of
16:45
Speaker 7: pricing power that you would expect to see as supply
16:48
Speaker 7: continue to get built built out, built out, and we
16:50
Speaker 7: get a better handle in terms of right sizing that
16:52
Speaker 7: to demand.
16:53
Speaker 4: I think that's a very open question.
16:55
Speaker 7: But in terms of your view, is basically saying, is
16:59
Speaker 7: Core we eve more like a high growing software firm
17:03
Speaker 7: or is it more like say a classic US utility company.
17:08
Speaker 7: Probably over time it starts to look and act a
17:11
Speaker 7: lot more like the latter than like than like the former,
17:14
Speaker 7: And you know it's it's definitely more lumped in, I
17:16
Speaker 7: would say, with the former in terms of how it's priced.
17:19
Speaker 2: So when we talk about kind of bucketing winners and losers,
17:23
Speaker 2: the question that I have outstanding and I haven't looked
17:25
Speaker 2: at this, So I'm gonna ask I'm gonna ask you
17:27
Speaker 2: to look at this, Luke, And maybe you have already.
17:30
Speaker 2: Right now, you've got the providers of picks and shovels
17:34
Speaker 2: that are being projected as winners, the suppliers of the
17:39
Speaker 2: actual AI are being projected as winners, and the users
17:44
Speaker 2: of AI are being projected as winners. Basically, if you
17:48
Speaker 2: make the chips, if you make the models, or if
17:50
Speaker 2: you use the models, your stock has generally gone up
17:53
Speaker 2: shortly after announcements relating to those things. When this shakeout
17:57
Speaker 2: eventually occurs, which could be whatever I mean, I have
18:01
Speaker 2: no clue who typically ends up coming out in the
18:04
Speaker 2: best shape from those three groups, because right now they're
18:07
Speaker 2: all projected to win.
18:11
Speaker 7: I would say, if we look at it from a
18:13
Speaker 7: kind of holistic historical perspective, I would say the the
18:17
Speaker 7: end users are or the most downstream that can apply
18:21
Speaker 7: the technology consistently after the boom are generally the ones
18:26
Speaker 7: that you would expect to be kind of having more
18:28
Speaker 7: benefits accrue to them over time, whereas just the the
18:32
Speaker 7: one off boost or the kind of more tempor temporarily
18:35
Speaker 7: limited boost comes from the picks and shovel space. I
18:38
Speaker 7: would say, though that speaking kind of more recently to
18:42
Speaker 7: recent price action there has been I would say a
18:45
Speaker 7: degree of more nuance in the space.
18:47
Speaker 4: I think the best example is meta Meta.
18:50
Speaker 7: Is the kind of biggest of the publicly traded hyperscalers,
18:54
Speaker 7: the biggest one that doesn't really have a cloud business.
18:58
Speaker 7: So it's gotten to the point of META is in
19:00
Speaker 7: a place where it's much more downstream, I would say,
19:04
Speaker 7: in the AI game than others, And because of that,
19:07
Speaker 7: I would say, it's kind of prove it on the spend.
19:10
Speaker 7: The expery on that option is a lot closer than
19:14
Speaker 7: it is for you know, a Google or an Amazon,
19:17
Speaker 7: so to speak, because they have to effectively show that,
19:20
Speaker 7: you know, we have ways of making money off this
19:22
Speaker 7: quickly and directly, whereas you know, Amazon, the Googles they
19:26
Speaker 7: can say, what, we just need somebody else to look
19:29
Speaker 7: at this and say we might be able to make
19:30
Speaker 7: money off of this.
19:31
Speaker 4: So I would say that's.
19:32
Speaker 7: Been one kind of interesting part of nuance in the
19:36
Speaker 7: AI space lately is that I point to kind of
19:39
Speaker 7: meta as a kind of chief cause of worries downstream,
19:43
Speaker 7: and hey, if you're worried about downstream, eventually you probably
19:47
Speaker 7: get worried about upstream. Not saying that time is now,
19:50
Speaker 7: especially with you know, Nvidia and Jensen.
19:53
Speaker 4: Pointing to five hundred billion in.
19:55
Speaker 7: Sales in the pipeline for Flagship Chips, A good one
19:59
Speaker 7: to watch, Gotta run, Luke appreciate the time We'll catch
20:02
Speaker 7: up with this year.
20:02
Speaker 2: And Luke Cowa from Sherwood.
20:03
Speaker 1: News bringing the latest financial news straight to your radio
20:12
Speaker 1: every day. It's the Financial Exchange on the Financial Exchange
20:16
Speaker 1: Radio Network. Time now for Wall Street. Watch a complete
20:22
Speaker 1: look at what's moving markets so far today. Right here
20:25
Speaker 1: on the Financial Exchange Radio Network.
20:27
Speaker 6: Markets are mixed, with the Dow well into positive territory
20:31
Speaker 6: as Wall Street readies for a vote and the likely
20:33
Speaker 6: end to the government shutdown later this evening. Right now,
20:37
Speaker 6: the Dow is up by about three quarters of a percent,
20:39
Speaker 6: or three hundred and forty six points higher, SMP five
20:43
Speaker 6: hundred completely flat, Nasdaq down by four tenths of a percenter,
20:48
Speaker 6: ninety five points lower, Russell thousands down about a tenth
20:51
Speaker 6: of a percent, ten year Treasure Reel down four basis
20:54
Speaker 6: points at four point zero six five percent, and crude
20:58
Speaker 6: oil down over three and a half percent lower, trading
21:00
Speaker 6: at fifty eight dollars in eighty two cents a barrel.
21:03
Speaker 6: AMDs jumping nine percent after CEO Lisa Sue said during
21:08
Speaker 6: its investor Day that the company anticipates the total market
21:11
Speaker 6: for AI data center parts and systems will reach one
21:15
Speaker 6: trillion dollars by twenty thirty. So Who also said that
21:18
Speaker 6: AMD should see revenue growth accelerate in the coming years
21:22
Speaker 6: due to strong data center demand. Meanwhile, shares in Swiss
21:25
Speaker 6: sneaker maker on Holding surging twenty percent after the company
21:29
Speaker 6: raise its guidance for the third time in a row
21:32
Speaker 6: after beach street expectations on the top and bottom lines. Elsewhere,
21:37
Speaker 6: nuclear energy startup Auclow saw its loss wide and last
21:40
Speaker 6: quarter as the company spent more on research and development
21:44
Speaker 6: to advance its plans to launch a commercial plants shares
21:47
Speaker 6: are up five percent in after today's close, we'll see
21:51
Speaker 6: earnings from Cisco Systems and gambling operator Flutter Entertainment. I'm
21:55
Speaker 6: Tucker Silva and that is Wall Street Watch and we
21:57
Speaker 6: haven't done trivial yet, so let's get to it. Today
22:01
Speaker 6: is Ryan Gosling's forty fifth birthday. Gosling got his start
22:04
Speaker 6: in acting when he was cast on The Mickey Mouse
22:07
Speaker 6: Club alongside future stars Britney Spears, Christina Aguilera, Kerrie Russell,
22:12
Speaker 6: among others. So are our trivia question today, which boy
22:16
Speaker 6: band legend was Ryan Gosling's castmate on The Mickey mouse Club?
22:20
Speaker 6: Once again, which boy band legend was Ryan Gosling's castmate
22:26
Speaker 6: on The Mickey mouse Club. Be the seventh person today
22:29
Speaker 6: to text us at six one seven three six two
22:32
Speaker 6: thirteen eighty five with the correct answer and win a
22:35
Speaker 6: Financial Exchange Show T shirt.
22:37
Speaker 2: Once again.
22:37
Speaker 6: The seventh correct response to text us to the number
22:40
Speaker 6: six one seven three six two thirteen eighty five will
22:44
Speaker 6: win that T shirt. See complete contest rules at Financial
22:47
Speaker 6: Exchange Show dot com.
22:48
Speaker 2: Let's talk a little bit about subprime auto delinquencies, Paul,
22:52
Speaker 2: what are we seeing on that side of things?
22:54
Speaker 3: We've seen a pretty significant uptick here. Obviously, subprime moto
22:58
Speaker 3: got into the major focus of the investment world back
23:03
Speaker 3: when First Brands and some of these other companies defaulted
23:08
Speaker 3: or bank you know, filed for bankruptcy here. And so
23:11
Speaker 3: what we've seen is the share of sub barers who
23:14
Speaker 3: are at least sixty days past due on their auto
23:16
Speaker 3: loans has risen to six point sixty five percent in October.
23:21
Speaker 3: There are various factors for this one. They cite the
23:25
Speaker 3: return of student loan bills causing some car owners to
23:28
Speaker 3: have difficulty getting to their monthly payment number. The other
23:32
Speaker 3: is just we've seen average prices for a new car
23:35
Speaker 3: recently top fifty thousand bucks for the first time. And
23:38
Speaker 3: you have some other trade ins out there that were
23:41
Speaker 3: bought back in you know, twenty one, twenty two that
23:45
Speaker 3: are being turned in with negative equity. So there's just
23:48
Speaker 3: a bunch of different factors out here that's leading to it.
23:51
Speaker 3: The prices are very expensive, and you've got just an
23:54
Speaker 3: area of the market that is under relative stress at
23:58
Speaker 3: this point.
24:00
Speaker 2: And yet it still doesn't mean anything for the broader economy.
24:03
Speaker 4: No, it doesn't.
24:04
Speaker 3: It's such a small subset of the lending that you'd
24:07
Speaker 3: see in the mortgage market. And if you the companies
24:09
Speaker 3: that we talk about every single day, even if you
24:12
Speaker 3: want to drill down just to the financials, the Goldman Sachs,
24:15
Speaker 3: the JP Morgans, the Bank of America very little if
24:18
Speaker 3: any exposure to this sector. You get down to some
24:22
Speaker 3: of the regional banks, you see some impact, but not
24:25
Speaker 3: in terms of the typical S and P five hundred
24:28
Speaker 3: companies that we're used to speaking about so frequently.
24:30
Speaker 2: Yeah, it's just kind of kind of I mean, look,
24:35
Speaker 2: this is a story we've been talking about, you know,
24:37
Speaker 2: not this one specifically, but how many different parts of
24:40
Speaker 2: the economy were like, eh, this doesn't seem great, but
24:42
Speaker 2: like none of it matters. Yeah, the overall economic data
24:46
Speaker 2: continues to chug along. Even though you can point to,
24:50
Speaker 2: you know, some of these different areas and be like
24:51
Speaker 2: that's a little concerning. It hasn't mattered to the broader economy,
24:57
Speaker 2: and you know, it kind of has you wonder like, okay,
25:00
Speaker 2: like what would it take for something to matter? Because
25:03
Speaker 2: it's just not showing up in the broader data right now,
25:06
Speaker 2: even though there are pockets under the surface that are,
25:09
Speaker 2: you know, not great folks. The Armstrong Advisory Group has
25:12
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26:41
Speaker 2: The House of Representative is going to be voting at
26:43
Speaker 2: seven pm tonight or approximately seven pm to reopen the government.
26:47
Speaker 2: My assumption is that that vote will not fail, but
26:49
Speaker 2: you never know. Airlines indicating that, hey, even if the
26:54
Speaker 2: shutdown ends today, it still is going to take them
26:57
Speaker 2: a little bit of time to get things spooled back up,
27:00
Speaker 2: because when you've been changing flight schedules for the last
27:02
Speaker 2: week or so to reduce the number of flights, you
27:06
Speaker 2: don't just push a button and have every crew exactly
27:08
Speaker 2: where they need to be in order to get back
27:10
Speaker 2: up to full speed. So they're indicating it might be
27:12
Speaker 2: seven to ten days to get there, which means next
27:14
Speaker 2: week might still be a little bit bumpy, but you
27:17
Speaker 2: should be back towards full speed by the week of
27:20
Speaker 2: Thanksgiving for the heaviest of the holiday travel.
27:23
Speaker 3: Really important obviously for the Thanksgiving holiday travel. I read
27:26
Speaker 3: somewhere that in the ten day period in and around Thanksgiving,
27:30
Speaker 3: thirty one million Americans are set to get that out
27:33
Speaker 3: there and travel, so really important that that gets resolved.
27:35
Speaker 3: We saw the disruption peak in terms of flight cancelations
27:38
Speaker 3: this past Sunday, when about one to ten scheduled flights
27:42
Speaker 3: did not take off. That meet at the fourth worst
27:44
Speaker 3: day of the year for flight for fight cancelations, according
27:49
Speaker 3: to the New York Times here, So hopefully that gets
27:52
Speaker 3: resolved when everyone is heading to home or wherever they're
27:56
Speaker 3: going for the Thanksgiving season.
27:57
Speaker 2: Here other things. We still have this problem where we
28:01
Speaker 2: just don't have enough air traffic controllers. Yeah, the estimate
28:04
Speaker 2: is that we're about three thousand short. There are fourteen
28:07
Speaker 2: thousand employed nationwide, so we're about twenty percent short of
28:10
Speaker 2: where we'd like to be. Here. Here's the deal in
28:13
Speaker 2: terms of, you know, what it takes to be an
28:16
Speaker 2: air traffic controler. Just in terms of like basic requirements.
28:20
Speaker 2: Number one, you got to be a US citizen. Number two,
28:22
Speaker 2: you have to be younger than thirty one years old.
28:25
Speaker 2: FAA doesn't want to train you as a forty year
28:28
Speaker 2: old just to have you retire in twenty years. Interesting,
28:32
Speaker 2: we got to be younger than thirty one. Obviously, you
28:35
Speaker 2: have to be fluent in English when you know talking
28:37
Speaker 2: about you know, communication skills and things like that. You
28:40
Speaker 2: need to have either a bachelor's degree or three years
28:44
Speaker 2: of progressively more responsible work experience or a combination you
28:49
Speaker 2: know thereof that equates to it. Uh And basically like
28:53
Speaker 2: those are the basic things that you need. Then you
28:57
Speaker 2: have to go through the FA Air Traffic Skills Assessment Program,
29:02
Speaker 2: pass a background check and medical exam. Pass a psych
29:06
Speaker 2: eval as well, and then go into the FAA Academy,
29:10
Speaker 2: which means you're gonna spend about three months living in
29:12
Speaker 2: Oklahoma City and then you get to go and do
29:17
Speaker 2: a bunch of on the job training under supervision for
29:20
Speaker 2: you know, usually it's like two to four years. Think
29:22
Speaker 2: of it as basically the equivalent of residency for becoming
29:26
Speaker 2: a doctor, like you want to be, you know, working
29:29
Speaker 2: under a senior air traffic controller for those two to
29:32
Speaker 2: four years and then you get to actually be an
29:35
Speaker 2: air traffic controller. So it's a pretty arduous process. And
29:39
Speaker 2: this is before you even get into the long hours,
29:41
Speaker 2: the high stress and all that, which is why despite
29:44
Speaker 2: having three hundred and thirty million people in the United States,
29:46
Speaker 2: we can't find another three thousand who want to be
29:50
Speaker 2: air traffic controllers at the moment.
29:52
Speaker 3: Yeah, looking up the compensation here, it looks like the
29:54
Speaker 3: start compensation is good, but not once you get it.
29:57
Speaker 3: So it's like once you get there, you know, and
29:58
Speaker 3: you just alluded to how long it takes to get there,
30:00
Speaker 3: that in training you're making forty one to fifty K.
30:03
Speaker 3: After certification, you get between seventy and ninety once you
30:07
Speaker 3: get experience you're making more than one hundred and fifty
30:09
Speaker 3: k annually. But to your point, what was that three
30:11
Speaker 3: four years, five years before? You're kind of up and
30:14
Speaker 3: running long process to get there. Quite honestly, you got
30:17
Speaker 3: to pay them more, right, you got to pay them more.
30:20
Speaker 3: Think about the jobs that you are competing against for
30:23
Speaker 3: these people, Honestly, you gotta bump those pay ranges up
30:28
Speaker 3: by twenty five to thirty percent. Yeah, particularly the seventy
30:30
Speaker 3: to ninety after you get the certification. It's just it's
30:33
Speaker 3: just not enough for the stress of the job.
30:35
Speaker 2: You can make. You can make seventy to ninety grand
30:37
Speaker 2: as like an associate manager at this like a fast
30:41
Speaker 2: food restaurant, right, you know, like and you don't have
30:45
Speaker 2: the stress of being an air traffic controller. Sure, you know,
30:49
Speaker 2: think about what you're comparing this to if you're working
30:51
Speaker 2: at an Amazon warehouse, just as an example, you're getting
30:54
Speaker 2: out of there with like forty grand a year if
30:57
Speaker 2: you're doing full time, maybe fifty depending on the market
30:59
Speaker 2: that you're in. Granted, it's like highly physical work and everything.
31:03
Speaker 2: But you sit there and you say, okay, or I
31:05
Speaker 2: can go be an air traffic controller, and for the
31:08
Speaker 2: first you know year or so I'm basically gonna make
31:10
Speaker 2: the same amount with all this stress that i'm and
31:12
Speaker 2: then I've got this path to making more. But you've
31:14
Speaker 2: got paths to making more doing other stuff too. So look,
31:18
Speaker 2: quite honestly, they're going to have to raise the pay
31:20
Speaker 2: ranges on these these jobs in order to fill them.
31:24
Speaker 4: I know that.
31:25
Speaker 2: Like, I know, no one wants to be like, oh,
31:28
Speaker 2: like that's the answer, but you gotta pay these people
31:31
Speaker 2: more otherwise. The I don't think people appreciate just how
31:37
Speaker 2: much of what we take for granted today revolves around
31:40
Speaker 2: air traffic controllers being able to operate efficiently and quite honestly,
31:46
Speaker 2: near perfectly.
31:47
Speaker 3: They do.
31:48
Speaker 2: They do. It's it's an incredibly demanding, high stress job,
31:52
Speaker 2: and we're doing a disservice to them by not providing
31:55
Speaker 2: enough pay so that they're not overworked and you know, potentially,
32:00
Speaker 2: you know, causing problems that are avoidable if you properly
32:03
Speaker 2: staff these places. Quick break when we come back at
32:06
Speaker 2: stack Roulette.
32:08
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32:10
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32:14
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32:40
Speaker 6: This segment of The Financial Exchange is brought to you
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33:23
Speaker 6: Ryan Gosling's castmate on The Mickey Mouse Club. That would
33:26
Speaker 6: of course be justin Timberlake. Kevin from Standish, Maine is
33:30
Speaker 6: our winner today taking on a Financial Exchange Show T shirt.
33:33
Speaker 6: Congrats to Kevin. We play trivia every day here in
33:36
Speaker 6: the Financial Exchange. See complete contest rules at Financial Exchange
33:40
Speaker 6: Show dot com.
33:41
Speaker 2: Paul, what do you got for stack roulette?
33:43
Speaker 4: Chack?
33:43
Speaker 3: We talked about this a little bit on yesterday, so
33:45
Speaker 3: some fall up on the idea that got float around
33:48
Speaker 3: by President Trump of a fifty year mortgage. A nice
33:53
Speaker 3: piece done here in the Wall Street Journal breaking down
33:56
Speaker 3: just sort of what that would mean from a cost perspective.
34:00
Speaker 3: Again yesterday's show, I was mentioning that I just didn't
34:03
Speaker 3: think it was a great idea a road to go down.
34:06
Speaker 3: There's just all sorts of complexities that come with it.
34:09
Speaker 3: They do a nice job here of lining out that
34:11
Speaker 3: if you had a four hundred thousand dollars home with
34:13
Speaker 3: a twenty percent down payment, let's say six point two
34:16
Speaker 3: percent mortgage rate over a fifty year mortgage versus the
34:20
Speaker 3: thirty year with the same terms and structure, you would
34:23
Speaker 3: save two hundred dollars a month on the principal and
34:25
Speaker 3: interest with that fifty being stretched out longer versus the
34:29
Speaker 3: thirty year, but you would up end up shelling out
34:32
Speaker 3: three hundred and thirty five thousand more in cumulative interest
34:36
Speaker 3: over that fifty year period rather than the thirty and
34:39
Speaker 3: you'd walk away if you sold it after ten years
34:42
Speaker 3: with thirty eight thousand less inequity. You know, that's just
34:46
Speaker 3: some of the issues here. But the other issue is
34:49
Speaker 3: on the lender side of things. Puts them in a
34:51
Speaker 3: really tough spot to lend out money to you over
34:53
Speaker 3: a thirty year period. Just more risks that can occur,
34:56
Speaker 3: whether death, divorce, job loss, all sorts of stuff that
35:00
Speaker 3: they're on the hook for if you're no longer able
35:02
Speaker 3: to pay that mortgage. Plus, we don't really have the
35:05
Speaker 3: securities that are tied to back this, so a lot
35:09
Speaker 3: would need to happen to you know, put this in
35:13
Speaker 3: a place, and it doesn't solve the issue of the
35:16
Speaker 3: twenty percent down. This is just really eroding at some
35:19
Speaker 3: of the monthly payment just by a little bit here.
35:23
Speaker 2: Everyone like talks about all this and you know, they're
35:26
Speaker 2: like trying to analyze it in terms of, Okay, if
35:29
Speaker 2: this is the price, but blah blah blah blah blah
35:30
Speaker 2: blah blah, and everyone's missing. Like the first problem that
35:36
Speaker 2: you run into on the idea of a fifty year mortgage,
35:38
Speaker 2: which the idea is to get down to the down
35:40
Speaker 2: payment lower. Sure that that's the idea, is okay, if
35:43
Speaker 2: you add you know, more payments, you can get the
35:45
Speaker 2: down payment lower. The estimates are that it might reduce
35:47
Speaker 2: the down payment by like seven to ten percent. If
35:53
Speaker 2: everyone now has the ability to buy a property with
35:59
Speaker 2: seven to ten percent more purchasing power, the value of
36:03
Speaker 2: those properties will move up in accordance. Because the way
36:07
Speaker 2: most people buy homes is not this. They don't do this. Well,
36:12
Speaker 2: the most that we should spend on our house is,
36:15
Speaker 2: you know, thirty six percent of our debt to income,
36:17
Speaker 2: so we're gonna spend twenty. No, the way it generally
36:20
Speaker 2: works is, hey, I want to buy this house. How
36:22
Speaker 2: much does it cost bank? Can we afford this? Yes,
36:25
Speaker 2: but it's at the top end of what you can afford. Okay, great,
36:28
Speaker 2: we'll do it. Like most people are maxing out what
36:31
Speaker 2: they can spend on marriage. Good financial advisor. It's true,
36:35
Speaker 2: but like this is what you generally see. Like if
36:37
Speaker 2: the problem is, hey, we can't afford to buy more
36:40
Speaker 2: house and now you give people. If you give everyone
36:43
Speaker 2: the ability to buy more house, Okay, that four hundred
36:46
Speaker 2: thousand dollars home might now go for four to twenty
36:49
Speaker 2: five and your mortgage payment is the same. It's not
36:51
Speaker 2: more affordable, right, This is shuffling the deck chairs on
36:56
Speaker 2: the Titanic, not really the Titanic. They I don't think
37:00
Speaker 2: housing's in this, like saying cataclysmic, you know, like thing,
37:03
Speaker 2: I think housing prices are just not really gonna go
37:05
Speaker 2: anywhere for three to five years. It's just we got
37:07
Speaker 2: to burn off this excess inventory and higher pricing. But
37:12
Speaker 2: the way that you fix this is not being like, hey,
37:16
Speaker 2: just you know, take out a fifty year mortgage, because
37:18
Speaker 2: if it's the same thing as hey, let's give down
37:21
Speaker 2: payment assistance to first time home buyers, Well, if you
37:23
Speaker 2: give everyone twenty five thousand dollars, he's just gonna need
37:26
Speaker 2: to do you know what smart sellers do. They say, Hey,
37:28
Speaker 2: we're gonna raise the price by twenty five thousand because
37:31
Speaker 2: you just gave everyone more money.
37:33
Speaker 3: Not to mention you'd have to do it again in
37:34
Speaker 3: another cycle for the next person.
37:36
Speaker 2: So great, ten years from now, we can do seventy
37:39
Speaker 2: year mortgages. You know, you won't ever be able to
37:43
Speaker 2: pay it off because you'll be dead.
37:45
Speaker 3: My son will be good to go in five years,
37:47
Speaker 3: but start him at ten, Right Like.
37:49
Speaker 2: If if you start your kids on their seventy year
37:52
Speaker 2: mortgage for their get buy your kids a house for
37:55
Speaker 2: their fifth birthday, and it'll be paid off, you know
37:58
Speaker 2: when they're you know, finally getting ready to move out
38:00
Speaker 2: of it. I mean, it's just like you have to
38:04
Speaker 2: think of this in terms of just you know, human
38:07
Speaker 2: life cycles and stuff as well. Mark Zuckerberg, there's an
38:11
Speaker 2: article about him, What's it mean? Says he's picking your
38:20
Speaker 2: pick for staff. Says I didn't read this one. It
38:23
Speaker 2: says he's picking group think over a godfather.
38:25
Speaker 3: He's more focused on products rather than research on the
38:29
Speaker 3: artificial intelligence fronts. He let go of one of the
38:31
Speaker 3: leading scientists.
38:32
Speaker 4: In the space.
38:33
Speaker 3: You let go with a godfather, one of the godfathers,
38:36
Speaker 3: Paul Young, Pinton and Lukun.
38:38
Speaker 2: You never go against the family. That's what I'm talking about.
38:43
Speaker 2: We're gonna take a quick break. We'll be back tomorrow
38:45
Speaker 2: on the Financial Exchange,