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What is the rule of 72 and why do you need to know it? · The Financial Exchange Show

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  Speaker 1: and Mark Fandetti.
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  Speaker 2: Welcome to the second hour of the Financial Exchange. Paul Lane,
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  Speaker 2: Mark Fandetti, and Tucker Silva here with you. As we
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  Speaker 2: head into the second hour of the show and about
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  Speaker 2: an hour and a half into the trading day, all
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  Speaker 2: the US major market indices are in positive territory, with
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  Speaker 2: the Dow Jones up close to a half percent, the
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  Speaker 2: S and P five hundred little shy of up one percent,
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  Speaker 2: and the Nasdaq is up over one point three percent.
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  Speaker 2: And we'll start right there. As I mentioned before our
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  Speaker 2: prior break, and Video is set to report its earnings
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  Speaker 2: at the close to the bell this afternoon, and we'll
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  Speaker 2: have coverage of that earnings report to on tomorrow's show.
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  Speaker 2: But options markets are indicating that we could perhaps see
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  Speaker 2: an eight and a half percent move in either direction,
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  Speaker 2: either up or down, depending on what comes out from
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  Speaker 2: this most recent earnings report. The reason why this is
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  Speaker 2: so important, and the reason why we speak about in
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  Speaker 2: video so much is is twofold one in Video has
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  Speaker 2: been the major driver behind the AI trade over the
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  Speaker 2: course of the last couple of years. Its performance has
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  Speaker 2: really buoyed the smp S and P five hundred significantly
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  Speaker 2: off back to back years of over twenty percent returns
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  Speaker 2: in Video's sponsor is responsible for a significant amount of
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  Speaker 2: those gains. It now holds a waiting in the S
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  Speaker 2: and P five hundred. I'm doing this off the top
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  Speaker 2: of my head, mark, but I believe it's inner around
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  Speaker 2: six or seven percent. Yeah, six percent.
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  Speaker 3: My only contribution, and I stole it.
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  Speaker 2: That's all right, it's now you're pretty thorough. It's now
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  Speaker 2: up to six percent waiting the S and P five hundred.
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  Speaker 2: So it's significant, and that's the reason why we spend
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  Speaker 2: time talking about it.
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  Speaker 3: And an eight percent move could move the entire market
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  Speaker 3: by a half a percent. I'm rounding up a little bit.
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  Speaker 3: So whether or not you own it directly, if you
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  Speaker 3: have an index or so called index fund that calls
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  Speaker 3: itself an S and P five hundred fund or a
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  Speaker 3: large cap index fund in your four oh one k
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  Speaker 3: it it does matter, as would a report from any
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  Speaker 3: of the big weighted stocks in the S and P,
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  Speaker 3: the biggest marketcap weighted companies Apple, Microsoft, Amazon, and Video,
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  Speaker 3: et cetera.
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  Speaker 2: The reason why this report is important, other than the
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  Speaker 2: size and impact that Nvidia has in the markets, is
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  Speaker 2: also some regarding some issues specific to the AI industry
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  Speaker 2: in general. In late January, we had the release of
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  Speaker 2: deep Seek, which is the AI model that spun out
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  Speaker 2: of a Chinese hedge fund in that had been releasing
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  Speaker 2: models for the course of It's only i believe, a
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  Speaker 2: year and a half in development, the deep Seak in general,
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  Speaker 2: but the most recent model that they came out with,
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  Speaker 2: I believe debuted some point in late December to mid January,
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  Speaker 2: but they did release it publicly, so it's open source,
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  Speaker 2: meaning that anyone could take a look at the results
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  Speaker 2: from their most recent report. And what came out of
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  Speaker 2: that report from deep Seek is that there has been
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  Speaker 2: this theory out there in AI in general, this hyper
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  Speaker 2: scaling theory. Basically this idea that you need to add
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  Speaker 2: more and more data inputs into these models to make
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  Speaker 2: them perform better. You need to throw more and more
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  Speaker 2: information at them. So think about these models trying to
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  Speaker 2: consume every single piece of web page content that's on
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  Speaker 2: the internet. Feed The more information that you feed it,
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  Speaker 2: the better performing it would be. This required a significant
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  Speaker 2: amount of computing power, and this ties back in to Nvidia,
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  Speaker 2: and Vidia is behind designing the chips and infrastructure behind
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  Speaker 2: AI computing. With this hyper scaling theory, companies were having
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  Speaker 2: to spend billions and billions of dollars to scale up
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  Speaker 2: their model. When Deep Sea came out, it sort of
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  Speaker 2: pushed back that notion because Deepseak's model performed just as
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  Speaker 2: well as some of its competitors. Model like open Ai
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  Speaker 2: is probably the one you hear about most frequently chat TPT,
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  Speaker 2: which came out in November of twenty ten, eighty two.
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  Speaker 2: These other models were built on this idea you got
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  Speaker 2: to spend a ton of money to make them powerful.
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  Speaker 2: And now we sit in a different paradigm shift a
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  Speaker 2: bit that you know indicate that deep seek you may
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  Speaker 2: not need to spend as much to scale these moments.
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  Speaker 3: I've been trying for a month and a half to
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  Speaker 3: come up with an analogy, and I think I've got it.
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  Speaker 3: You tell me, Paul, and this is going to be
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  Speaker 3: I think right in your wheelhouse, right perfect. It's like
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  Speaker 3: if you no, we'll come back to that. If you
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  Speaker 3: were trying to calculate how many years it took for
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  Speaker 3: an investment to double, or equivalently, what interest rate you
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  Speaker 3: needed for an investment to double in five or ten years,
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  Speaker 3: we have a simple.
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  Speaker 4: Rule for that, right, rule seventy two.
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  Speaker 3: If you didn't know that, you'd have to know how
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  Speaker 3: to convert exponents to logarithms and then solve the problem
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  Speaker 3: that way using a table if you didn't have a calculator.
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  Speaker 3: Doesn't matter what exponents and logarithms are. You all heard
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  Speaker 3: of them, and you remember it from high school, probably
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  Speaker 3: the last time, if you're lucky, you ever had to
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  Speaker 3: encounter them.
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  Speaker 2: Let me just jump in with the rule of seventy
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  Speaker 2: two so everyone could be aware of it. The rule
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  Speaker 2: of seventy two is you take your average annual rate
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  Speaker 2: of return and divide it into the number seventy two.
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  Speaker 2: You get how many years it will take for your
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  Speaker 2: investment to double, So you get nine percent on average
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  Speaker 2: every single year. It takes eight years for your money
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  Speaker 2: to double.
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  Speaker 3: Beautiful, right, And you did that in a few seconds
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  Speaker 3: in your head. It would take most people sixty seconds
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  Speaker 3: on paper or even with a calculator to set the
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  Speaker 3: problem up, because you have to set up You have
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  Speaker 3: to either set the problem up in your head and
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  Speaker 3: then do the algebra in your head and then plug
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  Speaker 3: it into a calculator. My point is you did it
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  Speaker 3: in five seconds. It would take me thirty to sixty seconds,
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  Speaker 3: because I got to set the problem up in my
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  Speaker 3: head and then put it into Excel or something to solve.
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  Speaker 3: It's a shortcut that gets you the same answer. That's
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  Speaker 3: my analogy for what Deep Seek has done. They took
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  Speaker 3: centuries worth in this case, huge amounts of knowledge that
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  Speaker 3: took decades maybe to accumulate, maybe not quite that long
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  Speaker 3: in the case of AI, and they were able to
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  Speaker 3: do an n run around all of it. The same
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  Speaker 3: way you take the rule of seventy two to very
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  Speaker 3: quickly solve a math problem. They got there faster with
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  Speaker 3: a short cut, is how I think about it. Does
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  Speaker 3: that anoly you work, Paul, because you know this is
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  Speaker 3: sort of your area, the impact of on individual stocks.
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  Speaker 4: Does that I like that?
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  Speaker 3: I think that Would you use that analogy. I'm not
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  Speaker 3: saying you have to credit made I think it. Would
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  Speaker 3: you use that analogy?
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  Speaker 2: It's definitely part of the equation. No question about it
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  Speaker 2: is that they were able to do it as efficiently
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  Speaker 2: as some of these other models by using less information
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  Speaker 2: in a fraction of the time, by using a shortcut.
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  Speaker 2: I think that that is a reasonable analogy. The other
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  Speaker 2: aspect of this is the cost side of things, in
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  Speaker 2: the infrastructure side where this model not only is it
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  Speaker 2: open source, which deviates a little bit from some of
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  Speaker 2: its US competitors which are not fully open source, they
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  Speaker 2: tend to hold the secrets closer to the vest as
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  Speaker 2: to the inner workings of these models, whether it's the
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  Speaker 2: one Gemini from Google Anthropic which is kind of Amazon backed,
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  Speaker 2: or the chat ept which is tied to open AI
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  Speaker 2: and also Microsoft by proxy. There this model from Deepseek
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  Speaker 2: was able to run much more cost efficiently, much cheaper
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  Speaker 2: to run it, to run a performance review on it.
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  Speaker 2: Then it's peers out there.
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  Speaker 4: Because of the shortcuts.
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  Speaker 3: Right, you don't need a lot of computing power to
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  Speaker 3: use I'm gonna stick with my analogy because yep, it's
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  Speaker 3: taken me so long to come up with one. You
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  Speaker 3: don't need a lot of computing power to do the
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  Speaker 3: rule of seventy two, right, you'd need more computing power
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  Speaker 3: some any way to do it the old fashioned one.
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  Speaker 2: So it brings us to our point when we're talking
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  Speaker 2: about computing power. That's where Nvidia has made its bread
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  Speaker 2: and butter. It's made a lot of money selling chips
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  Speaker 2: and servers and other components in AI infrastructure because of
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  Speaker 2: this idea that you needed to spend boatloads of money
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  Speaker 2: in order to scale up.
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  Speaker 4: Your AI model.
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  Speaker 2: We now have a position where there's a competitor that
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  Speaker 2: has emerged that has open sourced their model and also
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  Speaker 2: proven out that they can run the model more cheaply.
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  Speaker 2: The infrastructure costs. That has been disputed a little bit.
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  Speaker 2: It's still from analysis that's done out there. There was
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  Speaker 2: still an indication that a lot of money was spent
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  Speaker 2: to build this deep Seek model. It wasn't done. There
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  Speaker 2: was rumors initially that it was six or seven million
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  Speaker 2: that it cost to build them.
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  Speaker 4: Allel that's not true. That's what it costs to run
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  Speaker 4: the model.
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  Speaker 2: You compare that to the tens of millions that some
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  Speaker 2: of the other competitors would cost. The infrastructure costs are
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  Speaker 2: much bigger. We're talking five hundred billion again. That number
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  Speaker 2: come out again, maybe Mark, They're just that's the everyone's
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  Speaker 2: go to me. It's five hundred billion.
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  Speaker 4: Dollars billion these days. But perhaps was five hundred million
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  Speaker 4: medament too high?
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  Speaker 2: Maybe sorry, five hundred million to a billion, that's where
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  Speaker 2: the infrastructure costs worth. So we sit on the precipice
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  Speaker 2: of them coming out with their earning support and any
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  Speaker 2: commentary that we get to either further that notion that
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  Speaker 2: you know, perhaps deeke Seep is making inroads to some
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  Speaker 2: of the competition that in video would face for selling
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  Speaker 2: more of its chips. That is all what's going to
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  Speaker 2: be under focus today, not to mention just in general,
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  Speaker 2: you have a lot of companies that are chasing in
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  Speaker 2: video because they have tremendous margins.
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  Speaker 4: They sell these.
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  Speaker 2: Chips at eighty to eighty five seventy five percent margins.
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  Speaker 2: And when you have that strong of a margin in
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  Speaker 2: an area that is famous for innovation and decreasing costs
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  Speaker 2: at are really rapid space, you're going to have a
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  Speaker 2: lot of competitors that are chasing you. So that is
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  Speaker 2: really all the backdrop that we have headed in to
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  Speaker 2: the close of the market today within videos earnings report
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  Speaker 2: like I mentioned, will dive into the full details of
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  Speaker 2: it tomorrow. Perhaps I would imagine they're not gonna say, oh,
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  Speaker 2: we're really screwed.
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  Speaker 4: You know, Deepseek is going.
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  Speaker 2: To erode our business, but any commentary that they have
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  Speaker 2: is going to be useful, and particularly what the sales
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  Speaker 2: figures are from their newest chip, the Blackwell, will be
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  Speaker 2: covering all that.
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  Speaker 3: They actually claim to be indifferent, right, they think, well,
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  Speaker 3: we don't care, what's whatever the algorithm, it still needs
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  Speaker 3: chips exactly.
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  Speaker 2: Their their takeaway is that if you drive down the
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  Speaker 2: cost of running models or make it more widely available
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  Speaker 2: for everyone to have a model, then that's great. That
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  Speaker 2: means mass adoption, and that means that they can continue
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  Speaker 2: to sell more chips to more companies that try to
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  Speaker 2: either use models or try to build their own. So
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  Speaker 2: that's their argument there. But you would imagine that would
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  Speaker 2: drive down perhaps some of the margin power that they have.
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  Speaker 2: If you know everyone's using it, then you'd think maybe
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  Speaker 2: the would see a little bit of drop in margin there.
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  Speaker 4: But we'll have to see.
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  Speaker 2: We're gonna be cover it, like I said on tomorrowshow,
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  Speaker 2: and Videa's earnings coming out at four o'clock today. Taking
• 11:16
  Speaker 2: a look at the stock in terms of how it's
• 11:18
  Speaker 2: trading so far today, it is up about five percent
• 11:21
  Speaker 2: through the first hour and a half for close to
• 11:24
  Speaker 2: two hours of trading, so we'll see how it fares
• 11:26
  Speaker 2: over the course of the rest of the show.
• 11:27
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• 11:53
  Speaker 2: A little more chatter here on artificial intelligence. It's been
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  Speaker 2: a little over two years since chat TPT was released
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  Speaker 2: out to the public. In November of twenty twenty two.
• 12:03
  Speaker 2: There was a recent survey that was done by the
• 12:06
  Speaker 2: Pew Research Center in which they tried to gauge what
• 12:09
  Speaker 2: Americans felt in terms of AI and its benefits, and
• 12:13
  Speaker 2: about eighty percent of Americans stated that they don't use
• 12:17
  Speaker 2: any type of artificial intelligence at work, and the ones
• 12:20
  Speaker 2: that do aren't bowled over by its benefits. And so
• 12:24
  Speaker 2: I think that is a fair point to make. As
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  Speaker 2: much as it is a extraordinary technology, the business case
• 12:31
  Speaker 2: uses aren't articulated well enough across multiple industries. I'm sure
• 12:35
  Speaker 2: that there's industries out there. And if anyone has any
• 12:39
  Speaker 2: work experience with a Texas at six one seven three
• 12:42
  Speaker 2: six y two one three eight five, I do have
• 12:44
  Speaker 2: you know family, friends and things like that that work
• 12:47
  Speaker 2: in the tech sector that are saying that they're using
• 12:49
  Speaker 2: it and it is beneficial. This particular you know uncle
• 12:52
  Speaker 2: that I'm speaking of was previously at broadcomon now works
• 12:55
  Speaker 2: at some startups, so he's very much kind of tied
• 12:58
  Speaker 2: to the sector. And those could be the first adopters
• 13:01
  Speaker 2: where you have a bank or a financial institution. I
• 13:05
  Speaker 2: don't mean to call a sostogy and slow to you know,
• 13:08
  Speaker 2: uptake technology, but typically it is some of these other
• 13:10
  Speaker 2: more legacy businesses that take longer to adopt this type
• 13:13
  Speaker 2: of new technology.
• 13:14
  Speaker 3: You wouldn't necessarily know the software that you're using is
• 13:18
  Speaker 3: being augmented by AARI. Even Microsoft is starting to integrate
• 13:22
  Speaker 3: some features, which.
• 13:23
  Speaker 2: Salesforce, which is our client relationship management software that we
• 13:26
  Speaker 2: use here, is trying to Instagram.
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  Speaker 3: So it's pretty subtle. So it's not like it's going to,
• 13:30
  Speaker 3: you know, jump off the screen and do your job
• 13:32
  Speaker 3: for you. So maybe software manufacturers have to do a
• 13:38
  Speaker 3: better job of explaining where things are AI augmented and
• 13:42
  Speaker 3: how it can improve time spent and workflow and stuff
• 13:47
  Speaker 3: like that. I every time this comes up, I have
• 13:49
  Speaker 3: to complain about Microsoft Office, which to me, mostly feels
• 13:53
  Speaker 3: like it felt in the mid nineties building a PowerPoint
• 13:56
  Speaker 3: to taking charts you've built somewhere else. But I don't
• 13:58
  Speaker 3: want to get too into the details here. Even to me,
• 14:02
  Speaker 3: it's really boring, so I can't imagine how it sounds
• 14:04
  Speaker 3: to you. But jeez, does it have to be so
• 14:07
  Speaker 3: hard to format a power point when you're bringing in
• 14:10
  Speaker 3: charts from a different software program, Excel or something else.
• 14:14
  Speaker 3: It's so darn manual it has been forever. Microsoft Excel
• 14:17
  Speaker 3: can also be infuriated to work with. So I look
• 14:20
  Speaker 3: forward to the day when tasks that I would describe
• 14:23
  Speaker 3: as menial can be better automated. That will result in
• 14:27
  Speaker 3: obviously some job destruction, but presumably more productivity and hopefully
• 14:32
  Speaker 3: more job creation on the other side.
• 14:34
  Speaker 4: That's the idea behind it. That's certainly the case, but
• 14:36
  Speaker 4: it's not.
• 14:36
  Speaker 3: I mean, it's not going to add There are projections
• 14:39
  Speaker 3: that it could add as much as zero to a
• 14:41
  Speaker 3: few tenths to maybe a full percentage point to productivity growth.
• 14:45
  Speaker 3: Like Goldman Sachs, economists around the optimistic end of that spectrum,
• 14:48
  Speaker 3: and it's hard to say whether or not that will
• 14:50
  Speaker 3: result in economic golden age to use a phrase that's
• 14:53
  Speaker 3: become popular over the past month and a half or so,
• 14:56
  Speaker 3: because we don't know what you're starting with. Productivity could
• 14:59
  Speaker 3: be slated to slow down. It tends to mysteriously go up,
• 15:03
  Speaker 3: trend up and down. So will it result in higher
• 15:06
  Speaker 3: standards of living for everybody? Hard to say.
• 15:09
  Speaker 2: Paul, GM boosts its investor payout with new buybacks and
• 15:13
  Speaker 2: a dived and hike. GM Motors authorized a six billion
• 15:18
  Speaker 2: dollar buy back of shares. It also raised its dividend
• 15:22
  Speaker 2: by I believe twenty five percent or so, so they're
• 15:28
  Speaker 2: really focusing on returning cash flow to shareholders. There was
• 15:32
  Speaker 2: no real indication just yet as to how the potential
• 15:36
  Speaker 2: upcoming looming tariffs would impact the business. I mean, certainly,
• 15:41
  Speaker 2: GM executives have been on the record before with their
• 15:43
  Speaker 2: frustration regarding the uncertainty in Washington as to whether or
• 15:48
  Speaker 2: not the tariffs were going into effect or not. But
• 15:50
  Speaker 2: the where we sit today is effective March fourth, I believe,
• 15:54
  Speaker 2: on Monday of March March first or March fourth, at
• 15:59
  Speaker 2: the teriffs the me in so March fourth, basically next week,
• 16:02
  Speaker 2: the tariffs are going to effect on Mexico and Canada
• 16:05
  Speaker 2: that's the cutting drive.
• 16:07
  Speaker 3: What are your what do you think the odds are
• 16:08
  Speaker 3: of them actually taking effect? Oh gosh, because we've been
• 16:13
  Speaker 3: teased a couple of times, at least now.
• 16:15
  Speaker 4: With this, I'm gonna believe this is.
• 16:20
  Speaker 3: Don't even have to put a number on it, But
• 16:22
  Speaker 3: is he.
• 16:22
  Speaker 4: They'll go into effect? My question would be how long?
• 16:25
  Speaker 3: Yeah? Okay, more than more than.
• 16:26
  Speaker 2: I wouldn't be willing to bet. I wouldn't be willing
• 16:29
  Speaker 2: to bet over three months that they're in for any
• 16:33
  Speaker 2: you wouldn't be able to lay anything. I wouldn't want
• 16:34
  Speaker 2: to lay any money on that that they're they would
• 16:36
  Speaker 2: be in longer than three months.
• 16:37
  Speaker 4: At I'm with you.
• 16:39
  Speaker 3: I have no idea what to expect. I tend to
• 16:41
  Speaker 3: think that at the end of the day, they're gonna
• 16:44
  Speaker 3: steer the car away in this game of chicken that
• 16:47
  Speaker 3: they seem to like to play. Arguably, the damage that
• 16:49
  Speaker 3: has already been done with inflation expectations going up that
• 16:52
  Speaker 3: contributing to spooking equity prices. Uncertainty itself is damaging, even
• 16:58
  Speaker 3: if the fears aren't realized.
• 16:59
  Speaker 4: Is my point to be determined?
• 17:03
  Speaker 2: Right, We're going to see what we get out of
• 17:05
  Speaker 2: the next couple reports on the inflationary front, but you're right,
• 17:08
  Speaker 2: the expectations have been raised. GM has about five assembly
• 17:13
  Speaker 2: plants that are heavily exposed and integrated through the North
• 17:17
  Speaker 2: American auto parts supply chain, so this would have a
• 17:21
  Speaker 2: tremendous impact on them. Canada and Mexico are really critical
• 17:25
  Speaker 2: in the manufacturing process of their vehicles. So the stock
• 17:28
  Speaker 2: is doing pretty well today on the news of the
• 17:30
  Speaker 2: buybacks and increase dividend. The stocks up about five point
• 17:34
  Speaker 2: six percent in early trading.
• 17:35
  Speaker 1: Here bringing the latest financial news straight to your radio.
• 17:46
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• 17:50
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• 17:54
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• 17:58
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• 18:01
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• 18:05
  Speaker 2: Piece here from Bloomberg. Tesla feels the wrath of anti
• 18:09
  Speaker 2: Elon Musk backlash out there. We have seen throughout Europe
• 18:17
  Speaker 2: where Tesla sales plunged about forty five percent last month.
• 18:20
  Speaker 2: In the month of January in Europe, Tesla sold nine
• 18:25
  Speaker 2: and forty five cars. That is off almost fifty percent
• 18:28
  Speaker 2: from where it was a year ago, where that same
• 18:32
  Speaker 2: figure was eighteen thousand, one hundred and sixty one cars.
• 18:37
  Speaker 2: To give a broader sense, not just specific to Europe,
• 18:40
  Speaker 2: but where Tesla's US vehicle sales have been over the
• 18:43
  Speaker 2: course of the last couple of years. If we look
• 18:45
  Speaker 2: at twenty twenty two, they sold one point three million vehicles.
• 18:48
  Speaker 2: Twenty twenty three it jumped up to one point eight million.
• 18:51
  Speaker 2: But last year in twenty twenty four is the first
• 18:53
  Speaker 2: year that we saw a sales decline out of Tesla,
• 18:57
  Speaker 2: where they only sold one point seven eight to nine vehicles,
• 19:01
  Speaker 2: a drop of close to one percent. If you look
• 19:03
  Speaker 2: back over prior years, they were increasing their numbers of
• 19:06
  Speaker 2: vehicles sold by significant percentages here, so to see a
• 19:10
  Speaker 2: one percent decline was significant. And here we have a
• 19:15
  Speaker 2: very controversial figure at the forefront of US politics, and
• 19:21
  Speaker 2: it could be it could be impactful to test.
• 19:23
  Speaker 3: He's meddling elsewhere. This is just the most baffling business decision.
• 19:28
  Speaker 3: It doesn't even need to be said that he's got
• 19:29
  Speaker 3: to write to his opinions. So some of them strike
• 19:31
  Speaker 3: me as a little outlandish, like Germany needs more Nazis.
• 19:34
  Speaker 3: No one's ever said that, Gee, what an interesting innovative.
• 19:38
  Speaker 3: What a refreshingly different opinion that Elon Musk seems to
• 19:41
  Speaker 3: have about Nazis in the German government or seemingly reformed Nazis.
• 19:45
  Speaker 3: And I'm not making this up, It's true, Michael Jordan
• 19:50
  Speaker 3: said in the midst of a heated nineteen ninety four
• 19:53
  Speaker 3: Senate campaign. Jesse Helm's former segregation ist Republican from North
• 19:58
  Speaker 3: Carolina was for re election. I forget who he was
• 20:01
  Speaker 3: running against. Jordan was encouraged to take a stand, and
• 20:05
  Speaker 3: you know what.
• 20:05
  Speaker 2: He said, Democrats buy shoes, Republicans by shoes as well.
• 20:11
  Speaker 1: Yeah.
• 20:11
  Speaker 4: Yeah, since then, that's.
• 20:13
  Speaker 3: Sort of been the rule that level headed business people follow.
• 20:17
  Speaker 3: It seems to me like he could be committing Elon Musk. No,
• 20:20
  Speaker 3: this is not my area, and this is probably a
• 20:22
  Speaker 3: little over the top, But is he committing business suicide here?
• 20:25
  Speaker 3: Does he know who buys evs? It ain't people in
• 20:29
  Speaker 3: red states. Does he know where the preponderance of the
• 20:31
  Speaker 3: GDP is produced. It's in blue states, like seventy percent
• 20:35
  Speaker 3: of it. Also, something that can be easily verified if
• 20:38
  Speaker 3: you doubt it. So he's alienating a broad swath of people.
• 20:43
  Speaker 3: Number one, but most of the GDP a broad swath
• 20:48
  Speaker 3: of not just any people, but people with on average
• 20:50
  Speaker 3: higher incomes. They don't buy as many evs per capita
• 20:53
  Speaker 3: in say, the Deep South, which tends to be solidly read.
• 20:57
  Speaker 3: From what point of view, does do his recent annex
• 21:00
  Speaker 3: makes sense other than maybe personal conviction.
• 21:03
  Speaker 2: In California, Tesla's sales fell twelve percent last year, So
• 21:07
  Speaker 2: kind of pointing to your point of the Blue States
• 21:09
  Speaker 2: where that is here a big area of where you
• 21:12
  Speaker 2: sell your vehicles.
• 21:13
  Speaker 3: Yeah, I would be disinclined to something as conspicuous as
• 21:18
  Speaker 3: a car or an item of clothing that became associated
• 21:21
  Speaker 3: with a brand, that became associated with a person with
• 21:24
  Speaker 3: very strong political views. I would shy away from, even
• 21:26
  Speaker 3: if they were mine. I don't ask if somebody, some
• 21:29
  Speaker 3: manufacturer has a libertarian CEO and then walk around with
• 21:32
  Speaker 3: all their merch conspicuously displayed. It's it seems like an
• 21:36
  Speaker 3: unseemly thing to do. I just don't understand from what
• 21:40
  Speaker 3: point of view any of this makes sense again, other
• 21:43
  Speaker 3: than he's just got this very deep conviction.
• 21:46
  Speaker 2: It'll be interesting to see what Tesla's sales trends over
• 21:49
  Speaker 2: the course of the next couple of quarters.
• 21:50
  Speaker 4: Here down.
• 21:51
  Speaker 5: The calendar has turned and the coal is here to stay.
• 21:53
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• 22:51
  Speaker 4: A little bit more on Elon muss D.
• 22:55
  Speaker 2: The DOJE Department of Government Efficient Efficiency Delete we did
• 23:00
  Speaker 2: five of its biggest spending cuts. Its celebrated last week. Initially,
• 23:05
  Speaker 2: the savings claims a year to date were increased to
• 23:09
  Speaker 2: about sixty five billion, but the top five of those
• 23:12
  Speaker 2: savings were removed from the site early hours of Tuesday,
• 23:18
  Speaker 2: as there were some media outlets that had pointed that
• 23:22
  Speaker 2: the cut savings lists were riddled with error.
• 23:25
  Speaker 3: So like every media outlet looked at them, it didn't
• 23:29
  Speaker 3: even take them that long to find that actual savings,
• 23:32
  Speaker 3: when properly tallied, were a fraction of the fifty five
• 23:35
  Speaker 3: or now it's I guess sixty five billion dollars that
• 23:37
  Speaker 3: are claimed a little bit embarrassing.
• 23:40
  Speaker 2: The New York Times goes on in this piece here
• 23:42
  Speaker 2: to say that these were the five largest savings cuts
• 23:46
  Speaker 2: on the list. Eight billion dollar cut to the Immigrations
• 23:48
  Speaker 2: and Customers Enforcement three six one hundred and fifty five
• 23:53
  Speaker 2: million dollar cuts at the US Agency for International Development,
• 23:57
  Speaker 2: and a two hundred and thirty two million dollar cut
• 23:59
  Speaker 2: at the SOL Security Administration. You know, you can look
• 24:02
  Speaker 2: through the details of the New York Times piece as
• 24:04
  Speaker 2: they go into specifics as to why there were some
• 24:08
  Speaker 2: questions on those figures. Those were some of the largest
• 24:11
  Speaker 2: ones in question there.
• 24:13
  Speaker 3: On the cost still I'm on the website now doze
• 24:15
  Speaker 3: dot com. They're still making the claim that estimated savings
• 24:18
  Speaker 3: are sixty five billion dollars. Good luck trying to make now.
• 24:21
  Speaker 3: By the way, just for context, I support drinking the
• 24:24
  Speaker 3: federal government a lot more dramatically than most. I'd cut
• 24:26
  Speaker 3: it by fifty percent and not apologize it's bloated. It's
• 24:30
  Speaker 3: probably a drag on the economy. It certainly infringes on
• 24:33
  Speaker 3: individual liberties. There's my little libertarian rant. But you can't
• 24:38
  Speaker 3: make heather tails out of this website. If you produce
• 24:40
  Speaker 3: anything like this for a middle manager anywhere in the country,
• 24:43
  Speaker 3: they would show you the door. You can't total things,
• 24:46
  Speaker 3: you can't download independently. Verifying the stuff, as the Wall
• 24:50
  Speaker 3: Street Journal, Bloomberg and New York Times did took hours
• 24:52
  Speaker 3: and hours of a team of experienced journalists, and they
• 24:55
  Speaker 3: aren't even sure of what they came up with, other
• 24:58
  Speaker 3: than that the savings here are actually overstated. It just
• 25:01
  Speaker 3: doesn't instill a lot of confidence. Hopefully Congress can do better.
• 25:05
  Speaker 2: Bigger picture, we run a two trillion dollar deficit every
• 25:09
  Speaker 2: single year in terms of our budget.
• 25:11
  Speaker 4: So I want to.
• 25:13
  Speaker 2: Reinforce that for listeners out there that when we're talking
• 25:16
  Speaker 2: about whether it's fifty five or sixty five billion, these
• 25:19
  Speaker 2: cuts are very small and relative to what we spend
• 25:23
  Speaker 2: on the deficit that we incur on an annual basis.
• 25:27
  Speaker 2: So I'm not here to say I haven't done the
• 25:29
  Speaker 2: research that these other media outlets have done. I'm not
• 25:31
  Speaker 2: here to say whether it's one number or another, but
• 25:34
  Speaker 2: bottom line, I'm in agreement. We absolutely need to get
• 25:37
  Speaker 2: the deficit under control. The amount of dead in this
• 25:39
  Speaker 2: country has run off the rails. So I support similarly
• 25:43
  Speaker 2: those steps, but it's hard if you're not going to
• 25:47
  Speaker 2: touch you know, two thirds of the budget, which is
• 25:50
  Speaker 2: you know, social security, benefits, Medicare, and military. I guess
• 25:53
  Speaker 2: there's been some rumors that perhaps there'll be some adjustments
• 25:56
  Speaker 2: on military spending, but it's it's challenging to make significant
• 25:59
  Speaker 2: in and we'll continue to see what type of.
• 26:03
  Speaker 4: Progress that they're able to.
• 26:04
  Speaker 1: Maybe.
• 26:05
  Speaker 3: Okay, so instead of just dumping on doors, which I
• 26:07
  Speaker 3: have the intentions are good, let's look at the deficit
• 26:11
  Speaker 3: a year from now. Two years from now. If it's smaller,
• 26:15
  Speaker 3: all things consider, this administration will have done a good job.
• 26:18
  Speaker 3: Maybe they don't get to three percent of GDP as
• 26:21
  Speaker 3: they claim to want to, but we'll give them credit
• 26:25
  Speaker 3: for that. If it's bigger than the roughly six percent
• 26:28
  Speaker 3: of GDP that it represented last year, that's just the
• 26:32
  Speaker 3: value of the deficit divided by the total output of
• 26:34
  Speaker 3: the nation's goods and services, then they will be subject
• 26:39
  Speaker 3: to some justified criticism.
• 26:42
  Speaker 2: Yep, We're going to take a quick break here on
• 26:44
  Speaker 2: the Financial Exchange. When we come back, a little bit
• 26:46
  Speaker 2: of stack roulette right after.
• 26:48
  Speaker 1: This, miss any of the show. The Financial Exchange Show
• 26:51
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• 26:56
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• 26:59
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• 27:04
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• 27:07
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• 27:11
  Speaker 1: the Financial Exchange Radio Network.
• 27:20
  Speaker 2: All right, time for a little bit of stack roulette. Mark,
• 27:24
  Speaker 2: I'll let you bat lead off here.
• 27:25
  Speaker 3: We all know, Paul that the price of eggs is
• 27:28
  Speaker 3: about eight dollars a dozen on average nationally, up nearly
• 27:32
  Speaker 3: four times from last fall. Part of that is due
• 27:36
  Speaker 3: to obvious the obvious reason of having to call a
• 27:39
  Speaker 3: big part of the production herd or flock or whatever
• 27:43
  Speaker 3: they call it. New York Times naturally is raising questions
• 27:48
  Speaker 3: though about whether a lack of competition in the egg
• 27:52
  Speaker 3: market might be responsible. As it turns out, I didn't
• 27:55
  Speaker 3: know this. They report only five firms. Five firms control
• 28:00
  Speaker 3: out fifty percent of the market nationally, so that immediately
• 28:04
  Speaker 3: raises some people's suspicions about the possibility of collusion or
• 28:09
  Speaker 3: anti competitive behavior. And to this point, Federal Trade Commission,
• 28:16
  Speaker 3: the entity that's responsible for enforcing our anti trust laws,
• 28:19
  Speaker 3: has not indicated that an investigation is underway. But if
• 28:23
  Speaker 3: these rises persist, you can expect politicians to step up
• 28:27
  Speaker 3: their search, I guess for a scapegoat. But again, what
• 28:30
  Speaker 3: I found interesting here is that just a handful of
• 28:32
  Speaker 3: maybe I shouldn't, but there's been a lot of consolidation,
• 28:36
  Speaker 3: and just a handful up from a few dozen only
• 28:39
  Speaker 3: a few decades ago, control nearly the majority of the
• 28:42
  Speaker 3: country's egg production.
• 28:45
  Speaker 2: Those just looking that year over year difference, it is
• 28:48
  Speaker 2: really stark. I mean to be at eight eight bucks
• 28:50
  Speaker 2: a dozen from two to twenty five last fall.
• 28:53
  Speaker 3: But relatedly, you've made a point.
• 28:55
  Speaker 2: Yeah, Well, one company that's not going to let the
• 28:59
  Speaker 2: egg spoil its breakfast is McDonald's. McDonald's is saying that
• 29:04
  Speaker 2: it's going to spare customers and egg surcharge. I believe
• 29:08
  Speaker 2: that waffle House was in the position where they were
• 29:13
  Speaker 2: levying a surcharge on eggs, but McDonald's has got in
• 29:16
  Speaker 2: the other direction, and in fact, they're going to launch
• 29:18
  Speaker 2: a one day offer on the McMuffin sandwich to have
• 29:22
  Speaker 2: it just be for one buck. The discount is celebrating
• 29:26
  Speaker 2: fifty years of breakfast menu items and arrives right on
• 29:29
  Speaker 2: a timely spot where US egg prices are at record high.
• 29:33
  Speaker 2: So I think from a marketing perspective, you know, my
• 29:36
  Speaker 2: two cents on this is that phenomenal, phenomenal move by
• 29:40
  Speaker 2: McDonald's to go out there and attack something that is
• 29:44
  Speaker 2: under a tremendous amount of scrutiny and frustration for a
• 29:48
  Speaker 2: lot of American consumers out there. What better way to
• 29:51
  Speaker 2: sort of entice people into your stores by offering a
• 29:54
  Speaker 2: reasonable deal when egg prices are running out of control.
• 29:57
  Speaker 3: So a great way to turn a negative store into
• 30:01
  Speaker 3: a little, maybe a lot of positive publicity and generate
• 30:04
  Speaker 3: some good will for.
• 30:05
  Speaker 2: Those people out there eager to hit up that deal.
• 30:08
  Speaker 2: The McMuffin deal will be available to users of the
• 30:11
  Speaker 2: McDonald's app on March second. So what is that next?
• 30:16
  Speaker 4: Yet? Not I checked.
• 30:17
  Speaker 3: I was gonna go out and get it today, but
• 30:21
  Speaker 3: I wouldn't.
• 30:22
  Speaker 2: Not out there yet, Not out there yet, it will
• 30:25
  Speaker 2: be available. It sounds like this upcoming Sunday. Another PC
• 30:29
  Speaker 2: here from the Wall Street Journal. The investor who won
• 30:32
  Speaker 2: big on zombie malls is now going all in on
• 30:35
  Speaker 2: empty offices. I was wondering if someone was going to
• 30:38
  Speaker 2: take this stance. We know that malls had been under
• 30:41
  Speaker 2: a tremendous amount of valuation scrutiny as the Seers and
• 30:45
  Speaker 2: other major department stores were closing up shop because of
• 30:49
  Speaker 2: inroads made by Amazon and other e commerce companies out there.
• 30:53
  Speaker 2: The need for you know, thousands or hundreds of thousands
• 30:56
  Speaker 2: of square feet at the mall just wasn't the same
• 30:59
  Speaker 2: sort of appeal. So there was this New York based company, Namdar,
• 31:04
  Speaker 2: that had acquired a significant amount of zombie malls out there,
• 31:07
  Speaker 2: cut costs down significantly, had done pretty well with the strategy.
• 31:11
  Speaker 2: They've now tried to pivot to office space. Office space
• 31:14
  Speaker 2: has been another area of commercial real estate that has
• 31:17
  Speaker 2: just been demolished since the pandemic, where many people are
• 31:20
  Speaker 2: working remotely. Though there has been a little bit of
• 31:23
  Speaker 2: change in posture on some of the major companies out there,
• 31:26
  Speaker 2: whether you look at Amazon or JP Morgan, that are
• 31:29
  Speaker 2: starting to focus on bringing people back to the office,
• 31:32
  Speaker 2: not always having the space to do it, but they're
• 31:34
  Speaker 2: at least trying to get more people back in the office.
• 31:37
  Speaker 2: So this New York based company, it bought ten buildings
• 31:41
  Speaker 2: for more than four hundred and eighty million beginning in
• 31:44
  Speaker 2: twenty twenty one, and the results have been rather mixed.
• 31:48
  Speaker 2: I'm not saying that they're here. The Wall Street Journal
• 31:50
  Speaker 2: rout there is not reporting that they're knocking the cover
• 31:52
  Speaker 2: off the ball. For example, one of the office buildings
• 31:55
  Speaker 2: that it had purchased down in Manhattan by Madison Square
• 31:59
  Speaker 2: Garden was on three forty five Seventh Avenue, and they
• 32:03
  Speaker 2: were on the impression that it was going to be
• 32:05
  Speaker 2: rezoned to be instead of office, converted into residential for
• 32:10
  Speaker 2: multi family units. That didn't go through, and as a
• 32:13
  Speaker 2: result of that, they had to sell four of their
• 32:15
  Speaker 2: buildings that they bought on Seventh Avenue in late twenty
• 32:19
  Speaker 2: twenty four at a forty two million dollar loss. So
• 32:21
  Speaker 2: I'm just interested in the strategy of it. It's something
• 32:24
  Speaker 2: that potentially could be a long term benefit. But they're
• 32:28
  Speaker 2: running into a lot of issues with unions that and
• 32:32
  Speaker 2: their work on these office buildings that they didn't have
• 32:35
  Speaker 2: to battle with malls. But an interesting strategy nonetheless on
• 32:38
  Speaker 2: the real estate side for someone perhaps they will benefit
• 32:42
  Speaker 2: from buying some of these office buildings at depress level.
• 32:45
  Speaker 3: They committed over one hundred million dollars on a rumor
• 32:48
  Speaker 3: that the city was going to be changing its property zoning.
• 32:51
  Speaker 2: A rumor must have been a really strong rumor to
• 32:55
  Speaker 2: put up that amount of money. There's it's interesting some
• 33:00
  Speaker 2: of the nicer office space though, if you look at
• 33:03
  Speaker 2: the commercial real estate market on office specifically, like the
• 33:06
  Speaker 2: A plus space or the really strong office space out there.
• 33:11
  Speaker 2: From a location perspective, that has rallied back quite a bit.
• 33:13
  Speaker 2: But the problem with some of their purchases is that
• 33:16
  Speaker 2: they were buying buildings in good locations, but very old buildings,
• 33:20
  Speaker 2: and those just are not doing as well. If you
• 33:22
  Speaker 2: want to get people to come back to office, they
• 33:25
  Speaker 2: are looking for more monitor managing.
• 33:27
  Speaker 3: If you've got them, can you get rid of that
• 33:29
  Speaker 3: seventies musty smell? Have you ever been in like an
• 33:31
  Speaker 3: old law office in Manhattan or something. Everything's paneled and
• 33:34
  Speaker 3: there are secret doors. Very cool, but they smell. It's
• 33:37
  Speaker 3: not a bad smell, but it's distinctive. Do you think
• 33:40
  Speaker 3: gutting it gets I would on the spot again with
• 33:43
  Speaker 3: a Chuck Zata type question here. That's somewhat rhetorical, somewhat playful,
• 33:47
  Speaker 3: but yeah, I don't know that I could live with that.
• 33:49
  Speaker 3: It's probably just the paneling and the carpeting on you.
• 33:52
  Speaker 3: Once you get it down to the studs, you don't
• 33:53
  Speaker 3: have that issue.
• 33:54
  Speaker 2: Low's came out with its earnings beating Wall Street expectations
• 33:58
  Speaker 2: as they, similar to Home Depot, broke a eight consecutive
• 34:02
  Speaker 2: quarter of decline in same source stales. They finally saw
• 34:06
  Speaker 2: a positive uptick on their same sales stores metric out there.
• 34:11
  Speaker 2: Some of that was aided by some of the hurricanes
• 34:13
  Speaker 2: that we had experience over the course of the last
• 34:16
  Speaker 2: quarter that they're reporting on. In general, the themes from
• 34:20
  Speaker 2: the piece here on Low's earnings was similar to what
• 34:24
  Speaker 2: we heard from Home Depot. Where the American consumer has
• 34:28
  Speaker 2: really put a pause on any major renovation efforts out
• 34:33
  Speaker 2: there because of interest rates and all the things on
• 34:36
  Speaker 2: the affordability sides. You know, no sense just this yet
• 34:40
  Speaker 2: as to what tariffs would impact on Loew's future earnings.
• 34:45
  Speaker 2: Obviously that they have some you know, exposure in terms
• 34:49
  Speaker 2: of importing lumber from Canada and things like that. So
• 34:52
  Speaker 2: the stock in early trading I believe was up on
• 34:55
  Speaker 2: this most recent earnings report. Here, Let's just take a
• 34:57
  Speaker 2: look to see how they're faring. I believe they were
• 35:00
  Speaker 2: up about four or five percent. They are up about
• 35:03
  Speaker 2: four percent or so.
• 35:05
  Speaker 3: It looks like Elon didn't hear our criticism about coosing
• 35:08
  Speaker 3: up too much to a political current political regime and
• 35:11
  Speaker 3: how that might be bad for business. Because he appears
• 35:13
  Speaker 3: to be chairing Trump's cabinet meeting, which is being broadcast.
• 35:16
  Speaker 4: I just wonder how he is pretty cool that.
• 35:18
  Speaker 3: They're broadcasting this. By the way, I don't know that
• 35:20
  Speaker 3: I've ever seen a cabinet meeting badcast lit.
• 35:21
  Speaker 2: I just don't understand how he has enough time in
• 35:23
  Speaker 2: the day to run Tesla, to be involved with space ads,
• 35:27
  Speaker 2: and also to be reworking the spending of the US government.
• 35:31
  Speaker 3: If you paid that much for such a great head
• 35:32
  Speaker 3: of hair, which I'm very envious of, wouldn't you flaunt it?
• 35:35
  Speaker 3: Why is he wearing the cap all the time? Why
• 35:37
  Speaker 3: is he hiding that magnificent scientific advancement that is his
• 35:41
  Speaker 3: head of air.
• 35:42
  Speaker 4: We're not going to be able to answer that question.
• 35:44
  Speaker 4: That's all the time. That okay, that's all the time
• 35:46
  Speaker 4: that we have for this edition of the Financial Exchange.
• 35:48
  Speaker 4: Will be right back at it tomorrow at ten am.
• 35:50
  Speaker 4: We'll have Nvidia's earnings and much more. Thanks so much
• 35:53
  Speaker 4: for joining us.