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Is AI actually making American workers more productive? · The Financial Exchange Show

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Speaker 1: donation today. This is the Financial Exchange with Chuck Zada,
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Speaker 2: Chuck, Mike and Tucker with you here. And as we
1:15
Speaker 2: kick things off today, we got stocks.
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Speaker 3: Rebounding, making up about forty percent of Friday's losses thus far,
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Speaker 3: the Dow Jones Industrial average up four hundred points, the
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Speaker 3: S and P five hundred, up seventy, the Nasdaq composite
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Speaker 3: of three hundred and twenty five, so broad based rally
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Speaker 3: taking place today. In general, you know, you've seen pretty
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Speaker 3: good breadth across most of the indices, uh and again,
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Speaker 3: making up about forty percent or so of the the
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Speaker 3: losses that we saw on Friday when we had the
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Speaker 3: you know, the first real single day volatility that we've
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Speaker 3: seen in several months. As we take a look at
1:58
Speaker 3: markets to see what else is moving today, the tenure
2:01
Speaker 3: treasury not trading because the bond market is closed. You
2:05
Speaker 3: might ask yourself, hey, why is the bond market closed
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Speaker 3: when equity markets are open. This is actually just a really,
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Speaker 3: like all the time, simple thing, but it's a good reason.
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Speaker 3: The banks are closed in observance of Columbus Day, and
2:16
Speaker 3: banks cannot If banks are closed and they don't have
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Speaker 3: you know, certain funding needs in pricing, then you don't
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Speaker 3: have the bond market being open because you don't know
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Speaker 3: how much money is being borrowed and lent and how
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Speaker 3: much needs to take to change hands there, and so
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Speaker 3: as such, the bond market is closed. The let's see
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Speaker 3: prices for commodities. We got gold continuing just to scream
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Speaker 3: higher right now. It's up one hundred and twenty dollars
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Speaker 3: an ounce to forty one twenty cents, three percent move
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Speaker 3: up today for gold, breaking out to new all time highs.
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Speaker 3: You're seeing this across precious metal. Silver's up six percent,
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Speaker 3: palladiums up four percent. So it's it's just happening across
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Speaker 3: the board. Crude oil West Textas Intermediate up one dollar
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Speaker 3: and four cents a barrel of fifty nine to ninety
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Speaker 3: four at the moment when we take a look at
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Speaker 3: the TRIPA national average for gas prices breaking below three
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Speaker 3: ten a gallon for the first time in quite a while.
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Speaker 3: We're at three h eight and two tenthsive ascent nationally.
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Speaker 3: And if you go, if you happen to be listening
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Speaker 3: to us throughout you know, any of the southeastern into Texas,
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Speaker 3: you've got gas prices down the two sixties two seventies
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Speaker 3: throughout much of that region, so continuing to see those
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Speaker 3: sliding toward the mid twoes. Uh, if you're lucky enough
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Speaker 3: to be driving through the southern middle part of the
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Speaker 3: country right now.
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Speaker 4: It's the first real kickoff of earning season. This week
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Speaker 4: we'll have in terms of the schedule here, JP, Morgan, Wells, Fargo,
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Speaker 4: Goldman Sachs, black Rock City Group all reporting tomorrow before
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Speaker 4: the bell in addition to Johnson and Johnson just wanted
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Speaker 4: to get the big financials out.
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Speaker 2: Of the way.
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Speaker 4: Wednesday, we will be hearing from AML, Bank America, Morgan Stanley,
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Speaker 4: Abbot Labs, and Progressive as well. On top of that,
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Speaker 4: and then Thursday of this week we'll have Oh Taiwan
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Speaker 4: Semiconductor reporting and Charles Schwab. So first real kickoff on
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Speaker 4: the financial side. Any Friday, we got a good one too, Express.
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Speaker 4: I didn't even look at Friday because they usually hold off.
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Speaker 3: I anticipate that AM actually again good signals about kind
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Speaker 3: of that higher end consumer. I wouldn't expect to see
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Speaker 3: many problems there, given what we've been hearing from retailers
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Speaker 3: and you know, travel and hospitality. But interesting to see,
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Speaker 3: you know what they say, And so I think they're
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Speaker 3: one that I'm interested in as.
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Speaker 4: Well, any unique insight you think any of these will
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Speaker 4: share with us. I mean, I'm most interested to hear what,
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Speaker 4: if anything, they have to say about that private credit space.
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Speaker 4: But frankly, they don't have a lot of exposure to it,
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Speaker 4: and so some of the customers do, I presume, But yeah,
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Speaker 4: I guess we don't know.
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Speaker 3: You know, you don't know if Goldman Sachs has a
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Speaker 3: bunch of funds with private credit exposure. So it's we'll
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Speaker 3: see what we hear. I also don't know that there's
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Speaker 3: a great leading signal that you get from them. You know,
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Speaker 3: remember all the subprime stuff that blew up at the
5:10
Speaker 3: end of eight The first rumblings were coming second quarter
5:16
Speaker 3: two thousand and seven.
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Speaker 4: I wouldn't expect it. But if if you had someone
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Speaker 4: announce a bunch of loan losses that nobody was really anticipating, that, sure,
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Speaker 4: that would be a pretty good tell. But usually you
5:27
Speaker 4: don't get those until something really icky's happening.
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Speaker 3: Yeah, so we'll see what we get there. Piece in
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Speaker 3: the Wall Street Journal AI is juicing the economy? Sounds fun?
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Speaker 3: Is it making American workers more productive? Ooh, that's an
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Speaker 3: interesting question. Two part question, Is it juicing the economy? Yeah,
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Speaker 3: very clearly.
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Speaker 4: We are seeing building construction, We are seeing semiconductor investment
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Speaker 4: and all sorts of things that are leading to increased employment,
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Speaker 4: increase spending across this US and global economy on the
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Speaker 4: artificial intelligence infrastructure bets that are being made, and a
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Speaker 4: few years ago that was all just big dreams. Today
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Speaker 4: it's actual spending. You are actually seeing boots on the
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Speaker 4: ground constructing data centers. You are seeing maybe not you know,
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Speaker 4: actual utility and power generation construction, but permitting and announcements
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Speaker 4: on that front. And so I think you can easily
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Speaker 4: say that AI is juicing the economy. And frankly, without
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Speaker 4: the AI trade juicing the economy, I'd be quite concerned
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Speaker 4: about economic growth given what's fallen off on the housing
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Speaker 4: side of things.
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Speaker 2: So yes to the first part.
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Speaker 3: So is it making employees more productive? Here's what I'll
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Speaker 3: tell you. And again, I try to talk to a
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Speaker 3: lot of people just so that I can get a
6:43
Speaker 3: sense of, you know, kind of a broader swath of
6:47
Speaker 3: what's going on. I've read this article and it confirms
6:49
Speaker 3: kind of what I've heard all my friends who work
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Speaker 3: in the tech space say that this is absolutely changing
6:57
Speaker 3: how they work on a daily basis. Think there are
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Speaker 3: two reasons for that. The first is it generally seems
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Speaker 3: like large language models have some pretty useful things that
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Speaker 3: they can do on the coding front to speed up
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Speaker 3: a lot of those processes. Yes, and so if you're
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Speaker 3: directly involved in, you know, the production of tech products, yeah,
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Speaker 3: there's there's definitely something there. The second piece is, Hey,
7:17
Speaker 3: if you work for a tech company, you're typically exposed
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Speaker 3: to a lot of these tools early and often relative
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Speaker 3: to someone you know who might work in a different industry,
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Speaker 3: and so you're able to pick these up, you know,
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Speaker 3: kind of you're you're at the tip of the spear
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Speaker 3: when it comes to adoption in a lot of these
7:32
Speaker 3: areas as well.
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Speaker 4: May I add a third piece, Yeah, if you work
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Speaker 4: in the tech space and don't say that you are
7:38
Speaker 4: being made more productive by artificial intelligence, I'm unsure you
7:41
Speaker 4: have a job tomorrow.
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Speaker 2: Yeah, but they're telling me I get them, not their boss.
7:46
Speaker 4: No, I get that, And that's where a difference between
7:48
Speaker 4: closed door conversations versus reality sets in. But I think
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Speaker 4: that third piece is playing a role across many other
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Speaker 4: places where oh, I better say that I'm more productive
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Speaker 4: because of artificial intelligence, because if I don't say it,
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Speaker 4: and if I don't prove it, then I might not
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Speaker 4: have a job tomorrow, and as a company, I might
8:03
Speaker 4: not have an investor tomorrow.
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Speaker 3: And I think that other than what we're seeing in tech,
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Speaker 3: I'm unclear if most other industries are seeing any major
8:14
Speaker 3: shift at this point in the aggregation. I know that
8:16
Speaker 3: JP Morgan came out last week and was like, y'are
8:19
Speaker 3: we're gonna spend two billion dollars on artificial intelligence? And
8:24
Speaker 3: sound like a pirate?
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Speaker 4: Like just wondering if JP Morgan sounds like a pirate
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Speaker 4: to you the name of the company or if.
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Speaker 2: I don't know anything.
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Speaker 3: They just wanted to make like a big hullabaloo of
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Speaker 3: Like I can't stand with companies are like, well, we're
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Speaker 3: spending this much on this new technology, Okay? Is that
8:42
Speaker 3: like good? Like I don't know if that's good or
8:46
Speaker 3: useful or anything. But they said they're gonna be spending
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Speaker 3: two billion dollars a year on AI. That's that's fine,
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Speaker 3: It's all well and good. You're hearing it anecdotally in
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Speaker 3: other places. But I'm just not sure that across the board.
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Speaker 3: You're seeing a meaningful shift right now. Sure, you're also
9:03
Speaker 3: obviously seeing all of the concerning things regarding AI technology,
9:07
Speaker 3: such as, you know, the fact that it's not necessarily
9:11
Speaker 3: right as often or more often than humans in a
9:14
Speaker 3: lot of instances. It's also obviously something that comes with
9:19
Speaker 3: a whole bunch of societal questions, whether you're talking about, hey,
9:22
Speaker 3: how do we deal with potential you know, large scale
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Speaker 3: job displacement, to why is AI allowed to talk to
9:28
Speaker 3: minors in sexually explicit terms? To you know, again, like
9:33
Speaker 3: you even get some of the like stuff that's it's
9:36
Speaker 3: hard to find too much that's worse than that, but
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Speaker 3: it's it's out there. When you talk about, you know,
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Speaker 3: some of the things along the lines of you know,
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Speaker 3: AI encouraging people towards self harm and things like that.
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Speaker 2: I mean, it's there's some pretty bad stuff out there.
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Speaker 3: And quite honestly, this is like before you even get
9:52
Speaker 3: to the fact that, hey, I don't really think that,
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Speaker 3: you know, Mark Zuckerberg has proven himself to be, you know,
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Speaker 3: a great steward of.
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Speaker 2: Ethical technological use historically.
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Speaker 4: Yeah, when I'm really interested to see so coming from
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Speaker 4: the perspective of you know, a company that is not
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Speaker 4: JP Morgan doesn't have two billion to spend on developing
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Speaker 4: their own artificial intelligence tools. Right like that, That's where
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Speaker 4: I think most Americans land. My our company demoed a
10:23
Speaker 4: tool that you know, I found compelling. It was a
10:26
Speaker 4: artificial intelligence tool designed to help you fill out paperwork faster.
10:30
Speaker 4: Right because you know what's the prappiest part of almost
10:35
Speaker 4: any white collar job out there, it's probably and some
10:37
Speaker 4: blue collar jobs filling out paperwork. And so we took
10:40
Speaker 4: a look at that and interesting product. Interesting company. The
10:46
Speaker 4: cost of said product was probably more expensive than just
10:50
Speaker 4: hiring a person to do it, And so we're very
10:53
Speaker 4: much still at this early stage too, where I'm even
10:56
Speaker 4: if it does make someone more productive, I'm wondering how
11:00
Speaker 4: much money some of these companies are really spending to
11:02
Speaker 4: produce a product that, yes, make somebody more productive at
11:05
Speaker 4: a not terribly affordable cost.
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Speaker 2: Let's take a quick break.
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Speaker 3: When we come back, Ted Rossman from Bank Raad is
11:10
Speaker 3: going to join us talking about their twenty twenty five
11:12
Speaker 3: holiday spending survey.
11:15
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Speaker 3: As promised, We're now joined by Ted Rossman from Bank
12:28
Speaker 3: Right here to talk about their twenty twenty five holidays,
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Speaker 3: spending survey ted how are you today?
12:33
Speaker 6: Doing well? Good to be here.
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Speaker 2: What are some of the big takeaways from this survey?
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Speaker 7: People are a bit reluctant to spend this year, whether
12:42
Speaker 7: we're talking travel or gifts. On the gift side of things,
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Speaker 7: about a third say they're planning to spend last this year.
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Speaker 7: About forty percent are concerned about higher prices now. To
12:53
Speaker 7: be fair, there's also about another third that says they're
12:56
Speaker 7: going to spend more and everybody else is about the same,
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Speaker 7: So kind of a bag there. On the travel front,
13:02
Speaker 7: twenty one percent say they're going to travel this year
13:04
Speaker 7: for the holidays.
13:05
Speaker 6: Last year it was twenty seven.
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Speaker 7: I take all this with a bit of a grain
13:08
Speaker 7: of salt, because, as we know, the consumer mood has
13:11
Speaker 7: been very depressed this year. A lot of actual spending
13:14
Speaker 7: has come in better, but people are a little skittish
13:17
Speaker 7: as the holiday shopping season gets underway.
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Speaker 3: When you talk about that skittishness, is that concentrated in
13:24
Speaker 3: any one particular area, any one particular demographic, or anything
13:28
Speaker 3: like that.
13:29
Speaker 6: Upper income households are faring the best.
13:31
Speaker 7: Moody says that the top ten percent of earners are
13:34
Speaker 7: accounting for fifty percent of all spending, which is an
13:37
Speaker 7: all time high and a data set that goes back
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Speaker 7: to the late eighties. So upper income people are more
13:43
Speaker 7: insulated from this, but they're actually the ones who are
13:45
Speaker 7: propping up a lot of the overall statistics. We do
13:48
Speaker 7: see a lot of cutbacks among lower and middle income households.
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Speaker 7: That's one of the reasons why the overall numbers look
13:54
Speaker 7: better than what a lot of people are reporting. In
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Speaker 7: our holiday travel survey, we found that people in their
14:00
Speaker 7: twenties and thirties are the most likely to be cutting back.
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Speaker 7: That often correlates with parents of young kids. Many people
14:07
Speaker 7: are feeling that cumulative weight of inflation. It's not the
14:11
Speaker 7: prices have changed a lot over the past few months,
14:14
Speaker 7: or even over the past year, but it's when you
14:17
Speaker 7: go back to let's say the start of twenty twenty one,
14:20
Speaker 7: prices are up twenty five percent. As a result, people
14:23
Speaker 7: have dipped into savings, they've taken on debt, We're seeing
14:26
Speaker 7: some weakening in the job market. All this is adding
14:29
Speaker 7: up to a cumulative weight that people are just not
14:33
Speaker 7: feeling as spendy this year.
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Speaker 3: So this is the point where I asked the tough question,
14:38
Speaker 3: which is even though everyone's saying they're not going to
14:41
Speaker 3: spend as much, we haven't seen any real shift in
14:45
Speaker 3: spending trends over the course of this year. In the
14:47
Speaker 3: aggregate that this spending data, whether you're looking at retail sales,
14:50
Speaker 3: credit cards, like, however you slice it has continued to
14:53
Speaker 3: be pretty good.
14:54
Speaker 2: Why should I listen to what.
14:55
Speaker 3: People are telling me when their behavior for the last
14:59
Speaker 3: nine months says some different.
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Speaker 6: Well, it's a great point.
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Speaker 7: The TSA screened a record number of passengers per day
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Speaker 7: in the first nine months of the year. Last year
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Speaker 7: was a record, the year before that was a record.
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Speaker 7: Looks like this year could be another record. So yeah,
15:12
Speaker 7: it's kind of like what gives people are saying one thing,
15:15
Speaker 7: they're doing another. Consumer sentiment has not been as predictive
15:19
Speaker 7: the past few years. Really ever since the nineteen seventies,
15:22
Speaker 7: everybody always thought consumer sentiment was this great predictor, It
15:25
Speaker 7: was this leading indicator.
15:27
Speaker 6: It was for a long time.
15:29
Speaker 7: It really hasn't been ever since the pandemic set In
15:32
Speaker 7: the past five years, consumer sentiment has been really depressed
15:36
Speaker 7: and a lot of the actual numbers have been better. Now,
15:39
Speaker 7: first it was COVID stuff, Now lately it's been inflation,
15:42
Speaker 7: it's been tariffs. People are climbing the wall of worry.
15:45
Speaker 7: Though they say that with stocks, sometimes it's happening with
15:48
Speaker 7: consumer spending right now, is that people are complaining about
15:51
Speaker 7: the cost of living and they're spending anyway, sometimes because
15:55
Speaker 7: they have to, because these are necessities, but sometimes because
15:58
Speaker 7: they want to traveled, concerts, sporting events. All these have
16:03
Speaker 7: been hot areas. Inflation is weighing on sentiment, but the
16:07
Speaker 7: bark has been worse than the bite when it comes
16:09
Speaker 7: to actual data.
16:10
Speaker 3: When we talk about consumers taking on debt for their
16:13
Speaker 3: holidays spending, how is that debt typically showing up? Is
16:17
Speaker 3: it credit cards? Is it buy now, pay later? Where
16:20
Speaker 3: is it happening?
16:22
Speaker 6: Primarily credit cards? But by now, pay later is.
16:24
Speaker 7: A growing segment of this By now, pay later tends
16:27
Speaker 7: to grow ten twelve something like that percent every year.
16:32
Speaker 7: In recent years, especially around the holidays. Credit card balances
16:35
Speaker 7: are much higher. I mean, the buy now, pay later
16:38
Speaker 7: market only accounts for something like three percent of the
16:41
Speaker 7: credit card market, So we really do look primarily at
16:44
Speaker 7: the credit card when we're talking about debt.
16:46
Speaker 6: The average interest rate is about twenty percent.
16:48
Speaker 7: Many store cards are north of thirty percent, So that's
16:51
Speaker 7: a buyer beware if you're at the checkout counter this
16:54
Speaker 7: holiday season and they offer you the stores branded credit card.
16:58
Speaker 7: Half of credit card holders carry debt from month to month.
17:01
Speaker 7: In our surveys, about a quarter of holiday shoppers say
17:06
Speaker 7: they're taking on debt for retail. About a third say
17:09
Speaker 7: they're taking on debt for travel. Frankly, I fear the
17:12
Speaker 7: toll will be hired just because half of credit card
17:15
Speaker 7: holders already have debt from month to month, so directly
17:18
Speaker 7: or indirectly, they may be adding to that. Not to
17:22
Speaker 7: say you can't have any fun, but try to set
17:24
Speaker 7: a good budget ahead of time. You still have five
17:27
Speaker 7: paychecks between now and the end of the year. Set
17:29
Speaker 7: money aside from each of them. Consider a zero percent
17:32
Speaker 7: balance transfer card to pause that interest clock for up
17:35
Speaker 7: to twenty four months, and.
17:37
Speaker 6: Maybe even consider cutting back.
17:39
Speaker 7: Maybe you talk to your family about, hey, could we
17:41
Speaker 7: buy fewer gifts this year?
17:43
Speaker 6: Others' heads may get nodding.
17:45
Speaker 3: Ted, appreciate you joining us today. Thanks so much for
17:47
Speaker 3: the information anytime.
17:49
Speaker 6: Thank you.
17:50
Speaker 3: Ted Rossman from Bankery talking about their twenty twenty five
17:53
Speaker 3: holiday spending survey.
17:54
Speaker 5: All right, time for trivia here on the Financial Exchange
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Speaker 5: and today is Paul Simon's fourth birthday. In nineteen eighty six,
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Speaker 5: Simon released his most successful and acclaimed album, Graceland. The
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Speaker 5: hit single from that album was you Can Call Me Al.
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Speaker 5: So our trivia question today which famous comedians start alongside
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Speaker 2: Once again?
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18:52
Speaker 3: Take a look at markets as we move towards the
18:54
Speaker 3: bottom of the hour, with the Dow is now five
18:56
Speaker 3: hundred and eighty two points, the S and P's up
18:58
Speaker 3: ninety six, and the NASDA can pose it up four
19:01
Speaker 3: hundred and thirty five, So market's continuing to stretch their
19:04
Speaker 3: legs further as we continue today again now having recouped
19:08
Speaker 3: about half of what they lost on Friday. We'll see
19:12
Speaker 3: if we continue to see a little bit of momentum
19:15
Speaker 3: in that direction. As we continue here, let's take a
19:19
Speaker 3: quick break. When we return, We've got the trivia answer,
19:23
Speaker 3: we got Wall Street Watch, and then let's talk home
19:27
Speaker 3: building after this.
19:40
Speaker 1: Bringing the latest financial news straight.
19:42
Speaker 6: To your radio.
19:43
Speaker 1: Every day, it's the Financial Exchange on the Financial Exchange
19:47
Speaker 1: Radio Network. Time now for Wall Street Watch. A complete
19:53
Speaker 1: look at what's moving markets so far today right here
19:56
Speaker 1: on the Financial Exchange Radio Network.
20:00
Speaker 5: Are rebounding from Friday's sell off after President Trump posted
20:04
Speaker 5: to social media yesterday in a fall up to his
20:06
Speaker 5: Friday post saying don't worry about China, It'll all be fine.
20:10
Speaker 5: Trump's initial post on Friday was critical of China, threatening
20:14
Speaker 5: massive tariffs.
20:16
Speaker 2: Right now, the dows up one.
20:18
Speaker 5: Point three percent, are six hundred and twenty eight points higher,
20:21
Speaker 5: SMP five hundred up one and a half percent or
20:24
Speaker 5: one hundred points higher, Nazdak up nearly two percent. Now
20:27
Speaker 5: we're four hundred and thirty eight points. Russell two thousand
20:31
Speaker 5: is up two point two percent. Bomb market close today
20:34
Speaker 5: and observance of the holiday and crude Oil is up
20:38
Speaker 5: one in a third percent, trading at fifty nine dollars
20:41
Speaker 5: in seventy cents a barrel. MP Materials surging twenty three
20:45
Speaker 5: percent now after the Pentagon recently took a stake in
20:48
Speaker 5: the rare Earth's producer, adding to its recent rally last
20:51
Speaker 5: week China Titan Rare Earth Export Controls. Other miners are
20:55
Speaker 5: seeing gains on the day, including USA Rare Earth Critical
20:59
Speaker 5: Medals and Energy Fuels. Meanwhile, shares in Broadcom rallying over
21:03
Speaker 5: nine percent following news that open Ai signed a multi
21:06
Speaker 5: year pact with Broadcom to collaborate on custom chips and
21:10
Speaker 5: networking equipment, where the two companies will jointly build and
21:14
Speaker 5: deploy ten gigawatts of custom AI accelerators Elsewhere. Shares and
21:18
Speaker 5: Warner Brothers Discovery rising four percent following reports that the
21:22
Speaker 5: company had rejected Paramount skydances proposed by out of roughly
21:26
Speaker 5: twenty dollars a share. Furthermore, reports also say that Paramount
21:30
Speaker 5: CEO David Ellison is making a play to buy Ali
21:34
Speaker 5: Warner before it splits. It may take his offer directly.
21:37
Speaker 5: Two shareholders, JP Morgan Chase up over two percent after
21:41
Speaker 5: the bank said it would directly invest ten billion dollars
21:44
Speaker 5: in companies it deems critical to national security, speaking of which, JP, Morgan, Chase,
21:50
Speaker 5: and other major banks including Wells Fargo, Goldman, Sachs, black Rock,
21:54
Speaker 5: and City Group will post their third quarter earnings tomorrow
21:57
Speaker 5: ahead of the open. Outside of banks, we have Johnson
22:00
Speaker 5: and Johnson, Erickson, Dominos, and Albertson's all reporting their earnings
22:04
Speaker 5: ahead of tomorrow's opening.
22:06
Speaker 2: Bell.
22:07
Speaker 5: I'm Tucker Silva and that is Wall Street Watch. And
22:09
Speaker 5: in the prior segment, we asked you the trivia question
22:13
Speaker 5: which famous comedians starred alongside Paul Simon in the music
22:16
Speaker 5: video You Can Call Me Al.
22:18
Speaker 2: That would be Chevy Chase.
22:21
Speaker 5: Scott from Chelmsford, Mass is our winner today, taking home
22:24
Speaker 5: a Financial Exchange Show t shirt. Congrats to Scott and
22:27
Speaker 5: we played trivia every day here in the Financial Exchange
22:30
Speaker 5: See complete contest rules at Financial Exchange Show dot com.
22:34
Speaker 3: Mike, we got a PC here from Bloomberg opinion. Squeezing
22:37
Speaker 3: builders isn't the way to lower housing costs?
22:39
Speaker 2: What are we talking about on this?
22:41
Speaker 4: Mainly we're talking about a tweet from Bill Paulty, who's
22:45
Speaker 4: the Federal Housing Finance Agency director. Quote when I was
22:51
Speaker 4: young and growing up in Paulty Holmes business, big home
22:54
Speaker 4: builders had less than ten percent of the market. Today
22:56
Speaker 4: that number is fifty percent in some say sixty. With
22:59
Speaker 4: great market show comes great responsibility. I encourage all builders
23:02
Speaker 4: to realize this, and sooner rather than later. So I
23:05
Speaker 4: think it's mainly a backlash to that one tweet basically saying, look,
23:12
Speaker 4: you know, adding threats to you know, monopolistic businesses in
23:18
Speaker 4: the housing sector is not a great way to build
23:20
Speaker 4: new homes, to which I have to say I agree,
23:22
Speaker 4: because according to the National Association of home Builders, whose
23:26
Speaker 4: data goes back to twenty twenty two and really anytime
23:29
Speaker 4: over the last couple decades, the highest percentage of homes
23:34
Speaker 4: that was represented by the top ten homebuilders was forty
23:38
Speaker 4: three point two percent according to them back in twenty
23:40
Speaker 4: twenty two. Maybe there's new data out that indicates fifty percent.
23:44
Speaker 4: But if the top ten is making up fifty to
23:47
Speaker 4: sixty percent of the new home building.
23:49
Speaker 2: It's pretty fragmented.
23:51
Speaker 4: That's not a monopolistic business, and no judge is going
23:54
Speaker 4: to find it as such. So I don't think that
23:57
Speaker 4: adding pressure to the home builders and threatening them.
24:00
Speaker 2: With because that's what this is.
24:01
Speaker 4: Right, when you have a government official saying, hey, figure
24:04
Speaker 4: this out, because you represent a huge portion of the
24:06
Speaker 4: new home building, what they're talking about is a threat
24:08
Speaker 4: to their monopoly status. And that's not seemingly to me
24:12
Speaker 4: at least, what is going on in this industry.
24:14
Speaker 5: No.
24:14
Speaker 3: I mean you take a look just as an example,
24:17
Speaker 3: and like just some of the big u some of
24:20
Speaker 3: the big home builders that are out there, and as
24:25
Speaker 3: an example, Lenar Corporation, they right now they're trailing twelve
24:30
Speaker 3: month margins are nine point seven percent. In May of
24:34
Speaker 3: twenty two, they were twenty one percent. If you will
24:36
Speaker 3: get the long term average, it's generally around you know,
24:40
Speaker 3: five to seven percent is kind of you know, where
24:42
Speaker 3: their margins have been.
24:43
Speaker 2: So they're a little high. But you sit there and say, okay, if.
24:45
Speaker 3: The margins can pressed by two percent, that makes the
24:50
Speaker 3: average home eight thousand dollars cheaper.
24:52
Speaker 2: Is that really, you know, the thing that moves the needle.
24:56
Speaker 2: I don't think so.
24:57
Speaker 4: And by the way, that company back in twenty twenty two,
25:00
Speaker 4: apparently ten point seven percent market share according to the
25:03
Speaker 4: National Association of home Builders.
25:05
Speaker 3: Okay, if you look at KB Home, their margins peaked
25:10
Speaker 3: right around the same time about fifteen percent. They're also
25:12
Speaker 3: down to about nine percent right now. So I think
25:16
Speaker 3: that when we look at this, a couple of things
25:20
Speaker 3: that I try to keep in mind on this. The
25:22
Speaker 3: first is it's a fragmented markets market, especially once you
25:25
Speaker 3: get out of like the southeast and Southwest. It's incredibly
25:29
Speaker 3: like it's you don't have these giant developments that happen
25:32
Speaker 3: in the northeast or the Pacific Northwest. A big development
25:36
Speaker 3: in the Northeast is like eighty units, whereas a big
25:38
Speaker 3: one in Florida is like twenty thousand units.
25:40
Speaker 4: So the question asks yourself, is our big Humboldt builders
25:45
Speaker 4: preventing access to homes and intentionally raising prices, are raising
25:51
Speaker 4: prices illegally? And the answer is very clearly not. Well,
25:54
Speaker 4: if now with those margin.
25:55
Speaker 3: If homebuilders want to make more money, I mean, you like,
25:58
Speaker 3: think about it, just very simply to make more money,
26:00
Speaker 3: you want to sell more units at a higher price.
26:04
Speaker 3: If home builders thought they could make more money, they
26:06
Speaker 3: could do it one of two ways. They can raise
26:08
Speaker 3: prices or make it up on volume. Yeah, there's one
26:11
Speaker 3: thing we know about how the world works. You rarely
26:13
Speaker 3: make it up on volume, and so I think ultimately
26:17
Speaker 3: the problem with home building it comes back to, you know,
26:20
Speaker 3: mostly a lot of local land use laws and things
26:22
Speaker 3: like that, where hey, if people actually wanted more homes
26:26
Speaker 3: and more affordable homes in their towns, they would vote
26:29
Speaker 3: in that fashion.
26:30
Speaker 2: Yeah, but we don't vote that way.
26:32
Speaker 1: Yeah.
26:32
Speaker 4: The problem to housing affordability isn't monopolies too big of homebuilders.
26:37
Speaker 4: It's not home builders sitting on vacant lots that they
26:40
Speaker 4: don't want to develop. It's not tariffs. By and large,
26:43
Speaker 4: the problem with high home prices is that nobody wants
26:46
Speaker 4: more homes.
26:48
Speaker 2: Very simple.
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27:56
Speaker 3: So every now and then Tucker hits like a stroke
27:59
Speaker 3: of steaf act genius here and he did it again.
28:04
Speaker 3: It is like you, I've never watched Tucker put together
28:08
Speaker 3: the stack, but I kind of picture him. You just
28:11
Speaker 3: kind of swaying in front of a couple of monitors
28:13
Speaker 3: and just occasionally like that looks good.
28:16
Speaker 4: You know, like that Tom Cruise movie where he has
28:18
Speaker 4: to direct all the stuff report that.
28:20
Speaker 3: One, except without you know, the whole idea of pre
28:24
Speaker 3: crime and everything being a thing someone before criming, you know,
28:28
Speaker 3: they have to crime first. In this case, Tucker knocked
28:32
Speaker 3: this one out of the park. Here here are the
28:34
Speaker 3: headlines from Bloomberg this market is nothing like the dot
28:38
Speaker 3: com bubble. From market Watch, this is the dumbest stock
28:42
Speaker 3: market in history.
28:45
Speaker 4: Those seem to contradict each other, don't they.
28:50
Speaker 3: We really should, so when it comes to, you know,
28:55
Speaker 3: dot com bubble versus dumbest stock market in history, it's
29:00
Speaker 3: true this is nothing like the dot com bubble.
29:03
Speaker 2: Sure very different.
29:06
Speaker 3: It might be the dumbest stock market in history, which
29:08
Speaker 3: means both of these headlines can actually be true.
29:12
Speaker 4: So to summarize the first argument that this market is
29:15
Speaker 4: nothing like the dot com bubble, the biggest compelling piece
29:18
Speaker 4: of evidence that near KSAR presents, at least in my view,
29:22
Speaker 4: would be that the earnings growth has been really strong,
29:26
Speaker 4: it's predicted to be continue to be strong, and that
29:33
Speaker 4: is really all that investors care about. Is Ultimately, if
29:36
Speaker 4: earning's growth is strong, then stocks can continue to go up.
29:39
Speaker 4: My counter would point would be, I don't think investors
29:42
Speaker 4: in nineteen ninety nine expected earning his growth to start falling,
29:46
Speaker 4: But once it did, stocks fell dramatically, and it eventually
29:50
Speaker 4: did start falling, and so I don't know why this
29:54
Speaker 4: would make this moment different than that one correct someday
29:58
Speaker 4: earnings might fall again, which case I bet stocks would two.
30:02
Speaker 3: Right, Look, if if you actually believe that we're going
30:04
Speaker 3: to become the United States of Nvidio, Okay, like that
30:08
Speaker 3: that's reasonable. People can disagree. But if you actually believe, Hey,
30:13
Speaker 3: in Vidia is a you know, four trillion dollar company
30:16
Speaker 3: today and it should be forty trillion dollars in the
30:18
Speaker 3: next five years, there's not much I can say to
30:21
Speaker 3: dissuade you. And by the way, like you might be right,
30:24
Speaker 3: Like I don't know, like you could be. On the
30:27
Speaker 3: other hand, like history tends to suggest that that won't
30:29
Speaker 3: be the case. The case for this being the dumbest
30:33
Speaker 3: stock market in history is, I mean, look, in my
30:39
Speaker 3: personal opinion, you're competing against two other markets maybe three
30:47
Speaker 3: for dumbest twenty twenty one, Yeah, where we had Trevor
30:53
Speaker 3: Milton pushing a truck down a hill saying it was
30:55
Speaker 3: electrically powered and it wasn't.
30:58
Speaker 2: We had spac Mane.
31:00
Speaker 4: Yeah, we had memestock, mami Mania, we had all sorts
31:03
Speaker 4: of non fundamental based driven We had.
31:06
Speaker 2: Long Island blockchain company. I mean, we had like that.
31:09
Speaker 4: One feels dumber. We had some real Well, here's the thing,
31:13
Speaker 4: stack the evidence for me, you're good to keep going.
31:15
Speaker 3: You've got all these companies in the last like month
31:18
Speaker 3: or two that have started saying they're gonna be cryptocurrency
31:20
Speaker 3: treasuries that they don't really actually do anything. Yeah, you've
31:24
Speaker 3: got this whole circular thing going on in AI right
31:27
Speaker 3: now where everyone's just trading the same dollars back and
31:30
Speaker 3: forth and no one might actually make any money off
31:32
Speaker 3: those things. Other things that you have going on right now,
31:37
Speaker 3: you got an awful lot of spackiness out there today
31:40
Speaker 3: as well. So like I mean, Shamath launched a new
31:42
Speaker 3: Spash's that's all you need to know.
31:44
Speaker 2: What was the other one other than twenty twenty one
31:46
Speaker 2: in your mind?
31:48
Speaker 3: Ninety nine, nineteen, twenty nine, twenty nine, Okay, because I
31:52
Speaker 3: don't actually think ninety nine was. Here's the thing about
31:54
Speaker 3: ninety nine, it was it was headst dot com betting
32:00
Speaker 3: on pets dot com as part of like a diversified portfolio.
32:04
Speaker 2: Was not a problem.
32:06
Speaker 3: Yeah, you could actually make a case the two thousand
32:08
Speaker 3: and one And I'm not just saying like the popping
32:10
Speaker 3: of the tech bubble, like once you started getting into
32:13
Speaker 3: like the Enron and Worldcolm frauds. That's where the real
32:17
Speaker 3: problem was, like startups being overvalued by people that got
32:23
Speaker 3: you know, all hyped up on them tales old in time.
32:25
Speaker 4: Sure you know twenty nine, twenty twenty one and right now.
32:30
Speaker 3: Yes, Other than that, like it's kind of hard to
32:33
Speaker 3: find like a time when things have been dumber because
32:37
Speaker 3: the other thing that you have going on now.
32:38
Speaker 2: Can you give me some time teen twenty nine contexts?
32:40
Speaker 2: Let me give you more now, just while we're talking
32:42
Speaker 2: about it.
32:43
Speaker 3: You you have companies that are like going public now
32:46
Speaker 3: with this whole like stable coin thing. Sure, you're you're
32:50
Speaker 3: basically a bank. Why are you going to be.
32:52
Speaker 2: Like so much more transformative than a bank?
32:55
Speaker 3: I would say even less? And when the bank, you're
32:58
Speaker 3: basically a gift card. And when the bank's start doing this,
33:00
Speaker 3: why are you going to still exist? So there's some
33:04
Speaker 3: dumb there. You had some of this stuff back in
33:06
Speaker 3: twenty nine as well. This is your time is a
33:10
Speaker 3: flat circle? Okay, yeah, there's that. Let's take a quick
33:17
Speaker 3: break when we come back, let's do a little bit
33:20
Speaker 3: of stack roulette.
33:20
Speaker 2: I can expand on twenty nine as well.
33:22
Speaker 1: Sure, here the Financial Exchange every day from eleven to
33:27
Speaker 1: noon on Serious XM's Business radio channel one thirty two.
33:30
Speaker 1: Keep it here for the latest business and financial news
33:33
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33:36
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33:40
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33:45
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33:48
Speaker 1: to date on breaking business news all morning long. This
33:52
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34:05
Speaker 2: Mike, what do you got for me?
34:06
Speaker 4: For stack Roulett, I would like to present the Wall
34:09
Speaker 4: Street Journals five ideas for helping solve America's student loan
34:13
Speaker 4: program problem, which include what.
34:16
Speaker 2: Did I say program? Oh?
34:18
Speaker 4: Sorry, problem, Offering more aid colleges specifically automating loan repayment workplaces,
34:26
Speaker 4: pitching in presumably for repayment, longer grace periods for those
34:31
Speaker 4: student loans, and then states quote stepping up.
34:35
Speaker 2: Can anyone answer.
34:37
Speaker 4: Me why you write a five point plan on bringing
34:40
Speaker 4: down the cost of education without talking about bringing down
34:44
Speaker 4: the cost of education.
34:46
Speaker 2: Because it's not actually a plan to bring down the
34:48
Speaker 2: cost of education. I mean, I know it's not. I know.
34:50
Speaker 4: It's slightly different between bringing down the cost of education
34:54
Speaker 4: and fixing the student loan program, but they seem pretty interrelated.
34:59
Speaker 4: You seriously didn't propose anything on reforming how universities work
35:05
Speaker 4: and how they finance themselves and how they deliver education
35:08
Speaker 4: to their students to make it maybe slightly more cost
35:11
Speaker 4: efficient for some types of areas.
35:14
Speaker 2: Well, here's the other thing.
35:15
Speaker 3: And look, this is not to you know, slight, Notre Dame,
35:18
Speaker 3: who is providing you know, this new grant package for families.
35:23
Speaker 3: Most colleges aren't Notre Dame. Sure, Like I don't know
35:27
Speaker 3: exactly where it stands, but I'm guessing Notre Dame is
35:30
Speaker 3: somewhere in the top twenty five endowments nationwide. Seems likely,
35:34
Speaker 3: you know, Like we're talking billions of dollars, not millions
35:37
Speaker 3: of dollars. And so most schools can't do it. Can't
35:42
Speaker 3: do that, you know, like if if, if you are
35:45
Speaker 3: any other you know, and look, I'm a big believer,
35:47
Speaker 3: you go to just about any school and commit yourself,
35:49
Speaker 3: you're gonna get a darn good education. You go to
35:51
Speaker 3: any school and just fool around, you're gonna get a
35:53
Speaker 3: crappy education.
35:54
Speaker 2: Regardless of how good the school is.
35:55
Speaker 3: You may be able to cover it up at a
35:57
Speaker 3: good school because of the networking connections that you can
35:59
Speaker 3: get there.
35:59
Speaker 1: Ye.
36:00
Speaker 3: But ultimately, if you apply yourself anywhere, whether it is
36:04
Speaker 3: North Notre Dame, North Dakota, Appalachian State, Duke, wherever it
36:08
Speaker 3: might be, you can get a good education. So this
36:13
Speaker 3: like Notre Dame being like, hey, we can do this, okay,
36:15
Speaker 3: Appalachian State can't. So that's not really like a solution
36:20
Speaker 3: for them. Automating loan repayment. So saying okay, your your
36:24
Speaker 3: loans are gonna be automatically withheld, just like taxes, Well,
36:29
Speaker 3: that doesn't really fix the student loan system might.
36:32
Speaker 2: Make it worse. Like what does that do?
36:36
Speaker 3: Yeah, Like it's there aren't many people out there that
36:40
Speaker 3: are like, hey, you know what I'm gonna do.
36:42
Speaker 2: I'm gonna screw over the student loan system.
36:44
Speaker 3: No, most people are like, I took out these loans
36:46
Speaker 3: and they're like, you know, it's really hard for me
36:48
Speaker 3: to pay them back, and I'm gonna do what I can,
36:51
Speaker 3: and they're following me forever, and now the interest just
36:53
Speaker 3: keeps adding up and what do I do? Oh great,
36:55
Speaker 3: Like my life is finally over now and after sixty years,
36:58
Speaker 3: I still ow these.
36:58
Speaker 4: I was just floored by this, Like, no single proposal
37:01
Speaker 4: had anything to do with looking at the efficiency of
37:05
Speaker 4: delivering education to students.
37:07
Speaker 2: Right, you could put in workplaces, pitch in.
37:10
Speaker 3: Okay, you think they're not going to cut salary as
37:12
Speaker 3: part of that then, because there's only so big of
37:14
Speaker 3: a compensation bucket.
37:16
Speaker 2: State step up.
37:17
Speaker 3: Oh yeah, all these states with money just sloshing around
37:20
Speaker 3: in their coffers. They have plenty of money to put
37:23
Speaker 3: towards covering student loans. You know, like these I'm sorry,
37:28
Speaker 3: they're not answers.
37:30
Speaker 2: Garbage proposals.
37:31
Speaker 3: They're not answers here in my opinion, So I I
37:36
Speaker 3: don't know.
37:37
Speaker 2: They're just not saying you shouldn't do any of these things.
37:39
Speaker 4: I'm just saying it's not fixing the root cause of
37:41
Speaker 4: the problem, which is that delivering education in the United
37:44
Speaker 4: States is extraordinarily expensive.
37:46
Speaker 3: Baby boomers still love their department stores. Here's what they
37:49
Speaker 3: know that gen z Ers don't. The department stores still exist.
37:56
Speaker 3: So you're not optimistic, not really, Like the whole thing
37:59
Speaker 3: is like, hey, like you know, if you order from
38:01
Speaker 3: like the Bloomingdale's in New York City, they'll make a
38:03
Speaker 3: house call to an apartment in New York City to
38:06
Speaker 3: deliver your thing. Yeah, I'm sure that's really affordable for
38:09
Speaker 3: Bloomingdale's do everywhere, and most people can totally afford to
38:12
Speaker 3: shop at Bloomingdale's in New York City. Quick break here
38:16
Speaker 3: for the rest of the day. We'll see you tomorrow
38:18
Speaker 3: on the Financial Exchange