Latest / The Financial Exchange Show / Why are we seeing an increase in "doom spending"?

Transcript

Why are we seeing an increase in "doom spending"? · The Financial Exchange Show

0:00
Speaker 1: The Financial Exchange is produced by Money Matters Radio and
0:02
Speaker 1: is hosted by employees of the Armstrong Advisory Group, a
0:05
Speaker 1: registered investment advisor. All opinions expressed are solely those of
0:08
Speaker 1: the hosts. Do not reflect the opinions of Armstrong Advisory
0:11
Speaker 1: or anyone else. Investments can lose money. This program does
0:14
Speaker 1: not offer any specific financial or investment advice. Please consult
0:17
Speaker 1: your own financial, tax, and estate planning advisors before making
0:20
Speaker 1: any investment decisions. Armstrong Advisory and the advertisers heard on
0:23
Speaker 1: this program do not endorse each other or their services.
0:25
Speaker 1: Armstrong and Money Matters Radio do not compensate each other
0:28
Speaker 1: for referrals and are not affiliated. This is the Financial
0:34
Speaker 1: Exchange with Mike Armstrong and Paul Lane, your exclusive look
0:39
Speaker 1: at business and financial news affecting your day, your city,
0:42
Speaker 1: your world. Stay informed and up to date about economic
0:46
Speaker 1: and market trends plus breaking business news every day. The
0:50
Speaker 1: Financial Exchange is a proud partner of the Disabled American
0:53
Speaker 1: Veterans Department of Massachusetts. Help us support our great American
0:57
Speaker 1: heroes by visiting DAV five KT Boston and making a
1:01
Speaker 1: donation today. This is the Financial Exchange with Mike Armstrong
1:06
Speaker 1: and Fallane.
1:10
Speaker 2: Good morning, Welcome back to the Financial Exchange. If you're
1:13
Speaker 2: just joining us for CNA broad market increase across the
1:17
Speaker 2: board here with a Dow, SMP, and NASDAC all up
1:20
Speaker 2: more than six tens of a percent in early trading.
1:22
Speaker 2: That's after a reasonably steep sell off yesterday, with the
1:26
Speaker 2: SMP closing down one and a half percent. This morning
1:28
Speaker 2: at a thirty am, we received some inflation news from
1:32
Speaker 2: the Bureau of Economic Analysis personal consumption expenditures, with inflation
1:38
Speaker 2: numbers coming in at zero point three percent month over
1:42
Speaker 2: month increases. That's whether or not you include the prices
1:46
Speaker 2: of food and energy. A fair bit more tepid in
1:50
Speaker 2: terms of price increases than you saw from the Consumer
1:52
Speaker 2: Price Index report that was released earlier this month. One
1:56
Speaker 2: of the key features in this report that came out
1:58
Speaker 2: at eight thirty was at income and spending, and what
2:01
Speaker 2: was interesting there is that you did have a fairly
2:04
Speaker 2: decent sized bump in terms of income. Disposable personal income
2:09
Speaker 2: rose by zero point nine percent in the month of January,
2:12
Speaker 2: whereas spending drop dropped by zero point two percent. My
2:17
Speaker 2: interpretation of all of this, or at least my interpretation
2:21
Speaker 2: of how markets think this worked was that in January
2:24
Speaker 2: you might have seen a pretty reasonable boost in incomes
2:27
Speaker 2: from things like raises and bonuses that could have been
2:30
Speaker 2: received in January and reported. The drop in spending, however,
2:36
Speaker 2: might have been more attributed to things like wildfires in
2:39
Speaker 2: California as well as very cold and blizzard conditions that
2:44
Speaker 2: swept across the United States in the month of January.
2:47
Speaker 2: And so my interpretation, I don't know if that's right
2:50
Speaker 2: or wrong, Like we'll have to wait for a few
2:52
Speaker 2: months to see if it's confirmed, but I think that
2:53
Speaker 2: could be California. Obviously massive population in LA that was
2:58
Speaker 2: affected by the wildfire, and then those cold conditions can
3:01
Speaker 2: keep people out of stores and not traveling and shopping
3:05
Speaker 2: quite as much. But the alternative interpretation would be that
3:11
Speaker 2: spending is facing a downturn, and that's certainly not what
3:14
Speaker 2: markets are are expecting. As of today's moves, you've got,
3:18
Speaker 2: like I mentioned, all major indices up pretty strong in
3:22
Speaker 2: early trading. We've got the yield on the ten year
3:25
Speaker 2: treasury moving down slightly to four point two three nine percent.
3:31
Speaker 2: As you know, again, those inflation expectations came in right
3:34
Speaker 2: as anticipated price of oil moving down as well, but
3:39
Speaker 2: has bumped up quite a bit over the last few days.
3:41
Speaker 2: That's down to one percent, down by one percent to
3:44
Speaker 2: seventy three dollars per barrel, so overall bit of a
3:48
Speaker 2: market recovery from yesterday's sell off. Anything else catching your
3:51
Speaker 2: eye in an early trading here.
3:54
Speaker 3: Paul, No, I think we've covered most of it there.
3:56
Speaker 2: So I've got a question. What is a doom spending
4:00
Speaker 2: cash cannon? And can I get one somewhere?
4:03
Speaker 3: It sounds like a good party trader.
4:05
Speaker 4: It does, yeah, yeah.
4:07
Speaker 2: CNBC reports that one in five Americans are doom spending,
4:11
Speaker 2: and Bloomberg reports that rich people are firing a cash
4:13
Speaker 2: cannon at the US economy. How do we kind of
4:17
Speaker 2: make sense of all of this? We have heard multiple
4:21
Speaker 2: sources reporting about how consumers are worried about tariffs and
4:25
Speaker 2: worried about the state of the economy or just generally
4:28
Speaker 2: unhappy and spending money and can fall into that doom
4:32
Speaker 2: spending spiral.
4:33
Speaker 4: Are we seeing evidence of it in your mind?
4:35
Speaker 2: Or is this just people responding to surveys that might
4:38
Speaker 2: not really turn out to be much of anything.
4:40
Speaker 3: I'm not sure if that we can put too much
4:42
Speaker 3: stock in this. I mean The theory behind this idea
4:44
Speaker 3: of doom spending a piece in CNBC is that one
4:47
Speaker 3: five Americans are going out there and spending more on
4:51
Speaker 3: items like household appliances such as refrigerators and washer dryers
4:56
Speaker 3: and things of that nature, perhaps getting ahead of potential
5:00
Speaker 3: tariffs and stockpiling non perishable food goods. You know. The
5:04
Speaker 3: item that I was most interested to see and did
5:06
Speaker 3: a little digging around that isn't covered in this article
5:08
Speaker 3: is new vehicle sales. You know, you'd think if that
5:11
Speaker 3: you were in a market for a car with these
5:13
Speaker 3: tariffs coming through. We've talked about so much on the show,
5:15
Speaker 3: the idea that vehicles moved back and forth from Mexico
5:18
Speaker 3: and Canada to the US, you know, several times over
5:21
Speaker 3: that could really and the executives at Ford and GM
5:24
Speaker 3: have said such as so much that they could add
5:27
Speaker 3: four or five thousand dollars to the sticker price on
5:29
Speaker 3: a vehicle. But from all the indications that I can get,
5:32
Speaker 3: they're anticipating one point two four million units sold for
5:36
Speaker 3: new vehicles in the United States. That would be a
5:38
Speaker 3: three and a half percent increase from February of last year.
5:41
Speaker 3: But again there's some seasonality in these numbers and not
5:44
Speaker 3: something that's like a blowaway figure. And here's the other
5:46
Speaker 3: thing I was just thinking about as I parted the data.
5:50
Speaker 3: There really was unclear on I can't even remember. This
5:54
Speaker 3: month seems so long, even though it's only twenty eight days.
5:56
Speaker 3: Like when was tariffs an actual concern for Mexico and Canada?
5:59
Speaker 3: Like my mind, I scratched my head. But anyway, this
6:02
Speaker 3: that is the theory behind this doom. Spending is pushing
6:05
Speaker 3: ahead some of those purchases. But I don't know if
6:07
Speaker 3: one in five, Mike, I don't know if that gets me.
6:10
Speaker 2: There, Yeah, I'm with you. I mean, we are seeing
6:13
Speaker 2: it in credit card balances. Thirty four percent of credit
6:16
Speaker 2: card borrowers have taken on more debt this year. Guess
6:19
Speaker 2: what every year credit card borrowers take on more debt
6:22
Speaker 2: outside of COVID when people actually started paying it off.
6:25
Speaker 2: Credit card debt now topping one point to one trillion
6:29
Speaker 2: with a T dollars. So that is a massive growing source.
6:33
Speaker 2: So look, spending is continuing. It's continuing, especially rapidly at
6:39
Speaker 2: the upper end of the income threshold. We were covering this,
6:43
Speaker 2: I believe. On Tuesday's show where I believe now the
6:47
Speaker 2: top ten percent of income earners are spending fifty percent
6:52
Speaker 2: of total consumers. So of all spending, half of it
6:56
Speaker 2: approximately is coming from the top ten percent of income earners,
6:59
Speaker 2: which I think thresholds right around a quarter million dollars
7:02
Speaker 2: of household income two fifty And I don't know what
7:07
Speaker 2: to make of that other than the continued hollowing out
7:11
Speaker 2: of the middle class right there.
7:12
Speaker 4: There are certainly more.
7:15
Speaker 2: Very high income earners in the US economy today compared
7:18
Speaker 2: to fifty years ago.
7:19
Speaker 4: There are certainly more very low income earners compared to
7:23
Speaker 4: fifty years ago.
7:24
Speaker 2: Is this fundamentally a bad thing for the stock market,
7:29
Speaker 2: for the economy, It's a bad thing for you know,
7:33
Speaker 2: equity and those types of issues.
7:35
Speaker 4: But is it a bad thing for.
7:38
Speaker 2: Brands that you know, more and more of the spending
7:41
Speaker 2: is coming from the top ten percent. I'm I guess
7:44
Speaker 2: uncertain if this is a stock market concern.
7:47
Speaker 3: No, I don't think that it necessarily would cause me
7:52
Speaker 3: to be overly concerned. I mean, ultimately, when you're looking
7:55
Speaker 3: at the stock market, the closest proxy, I mean, this
7:58
Speaker 3: is imperfect, but is growing, which is you know, two
8:01
Speaker 3: thirds of that is consumer spending, So whatever side it's
8:04
Speaker 3: coming from, whether it's the top ten or the middle
8:08
Speaker 3: fifty or whatever percent, like, you just want people consuming
8:11
Speaker 3: out there as a societal issue. Like I'm not qualified
8:15
Speaker 3: from an economist perspective to speak to that, but from
8:18
Speaker 3: a stock market perspective, all you want is just the consumption.
8:21
Speaker 3: Where it comes from is irrelevant for who's spending at
8:24
Speaker 3: Amazon and other places.
8:25
Speaker 2: To me, it does speak to some of the just
8:28
Speaker 2: you know, consumer and brand trends that we've seen over
8:31
Speaker 2: the course of the last few decades where experiences and
8:35
Speaker 2: social media have been very much geared towards the high end,
8:39
Speaker 2: customized type of thing. Right you go to a you
8:43
Speaker 2: go to I was at a ski resort last week,
8:45
Speaker 2: and so this kind of sticks with me is there
8:46
Speaker 2: was a special VIP section where you had, you know,
8:50
Speaker 2: customized skis and all sorts of stuff that was going
8:53
Speaker 2: on there that I don't really remember existing when I
8:55
Speaker 2: was a kid. You have all these custom experiences, the
8:58
Speaker 2: demand for airliness to expand their first class cabins and
9:03
Speaker 2: offer new things there. Even the likes of Southwest and
9:06
Speaker 2: Spirit Airlines are experimenting with some of these add on
9:08
Speaker 2: features that to me, is all explained by the fact
9:11
Speaker 2: that more and more of the spending is coming from
9:14
Speaker 2: the top ten percent and they're demanding a different type
9:16
Speaker 2: of experience.
9:17
Speaker 3: It's interesting you say that even at the lower level,
9:19
Speaker 3: Procter and Gamble has made efforts to innovate to build
9:23
Speaker 3: out more premium products so that they could probably sell
9:26
Speaker 3: to this same demographic, because the issue that they've been
9:29
Speaker 3: dealing with on the lower end of things is that
9:31
Speaker 3: people who are in that lower income threshold are searching
9:34
Speaker 3: out private brand labels to get a cheaper product at
9:37
Speaker 3: the grocery.
9:38
Speaker 4: Store, which tracting end probably makes too.
9:40
Speaker 3: Yeah, that's probably the ironic piece of it, but that
9:45
Speaker 3: they're trying to innovate on the higher end to trap
9:47
Speaker 3: some of that market share, like like you're saying, so,
9:50
Speaker 3: you know, from airlines to ski resorts, to leisure and
9:53
Speaker 3: hospitality travel, even down to like the consumer staple dooda goods.
9:57
Speaker 3: Yeah exactly, Yeah, exactly.
9:58
Speaker 4: Yeah, I need that gold Sparkle laundry detergent, like.
10:01
Speaker 3: Some all they had, like some all over body deodorant
10:04
Speaker 3: that they're trying to push out, you know, Yeah, I.
10:07
Speaker 2: Do recall for the stinky wealthy Let's take a quick break.
10:12
Speaker 2: When we come back, I want to talk about some
10:15
Speaker 2: who have been the market winners and losers this year. Markets.
10:19
Speaker 2: Some markets are still up for the year, but those
10:22
Speaker 2: big companies that were dragging equities upward over the last
10:26
Speaker 2: few years are not the same ones that have been
10:29
Speaker 2: driving things this year. Let's take quick break and cover
10:32
Speaker 2: markets and the winners and losers losers next here on
10:35
Speaker 2: the Financial Exchange.
10:37
Speaker 1: Miss any of the show. The Financial Exchange Show podcast
10:40
Speaker 1: is available on Apple, Spotify, and iHeartRadio. Hit the subscribe
10:44
Speaker 1: button and leave us a five star review. This is
10:47
Speaker 1: the Financial Exchange Radio Network.
11:03
Speaker 5: The Financial Exchange is a proud partner of the Disabled
11:07
Speaker 5: American Veterans Department of Massachusetts. By making a donation, you
11:12
Speaker 5: can support the Veteran Advancement Program, which offers permanent and
11:17
Speaker 5: transitional affordable housing to veterans and their dependents. The DAV
11:21
Speaker 5: of Massachusetts is the only DAV department in the country
11:25
Speaker 5: to lead a veterans housing initiative for single bets and
11:29
Speaker 5: those with families. Visit DAV five K dot Boston to
11:33
Speaker 5: make a donation today and make note for this year's
11:36
Speaker 5: five K to be held on Saturday, November eighth. That's
11:41
Speaker 5: dav five k dot Boston.
11:43
Speaker 2: You may or may not be a fan of Elon
11:45
Speaker 2: Musk and his work over at DOJE, but one constituency
11:48
Speaker 2: that's likely pretty unhappy with his work are Tesla shareholders.
11:52
Speaker 2: On December seventeenth of last year, Tesla stock reaching an
11:55
Speaker 2: all time high of nearly four hundred and eighty dollars
11:58
Speaker 2: per share. As of this morning, anyway, it's sitting at
12:02
Speaker 2: two hundred and eighty nine.
12:03
Speaker 4: Dollars per share.
12:04
Speaker 2: About a forty percent sell off is what you've seen
12:07
Speaker 2: in Tesla shares, including nineteen percent sell off just this week,
12:11
Speaker 2: and speaks to a company that yes, does face additional
12:19
Speaker 2: competition from other electric vehicle makers. Let's be really clear
12:23
Speaker 2: about that. Especially in Europe and China, where BYD vehicles
12:27
Speaker 2: Chinese made electric vehicle company are being sold at substantially
12:32
Speaker 2: lower prices than Tesla, you face a really cutthroat competition area.
12:36
Speaker 2: When you combine that now with political backlash against Elon Musk,
12:41
Speaker 2: I think you are starting to see the early signs
12:43
Speaker 2: of sales declines that could be a real issue for
12:46
Speaker 2: twenty twenty five. I don't know how much Elon Musk
12:48
Speaker 2: cares about this honestly, Like you know, there's some that
12:51
Speaker 2: argue that would argue that, look, he does not care
12:54
Speaker 2: about money as much as people might think. And you know,
12:57
Speaker 2: he is focused on his work at Doze and what
13:01
Speaker 2: happens at Tesla is what happens at Tesla. But increasingly
13:05
Speaker 2: shareholders I think are relying on some other version of
13:09
Speaker 2: a turnaround at Tesla rather than just Tesla sales picking
13:12
Speaker 2: back up because it doesn't seem in the cards.
13:14
Speaker 3: It's always been so difficult about Tesla. And this is
13:17
Speaker 3: mentioned in the piece here, so I'm not breaking ground
13:19
Speaker 3: on this, but many analysts have said it before. It's
13:22
Speaker 3: never really been fundamentally valued based on traditional metrics that
13:27
Speaker 3: you know, Mark Ndetti with our sales that Mark Fandetti
13:31
Speaker 3: would you know, spend nights and mornings breaking out charts on.
13:34
Speaker 3: It's really been more about the allure of Elon Musk,
13:38
Speaker 3: you know, a regardless of all the controversy around maybe
13:42
Speaker 3: some of his recent political endeavors, a brilliant entrepreneur. I
13:46
Speaker 3: don't think anyone can take that away from him. To
13:49
Speaker 3: be able to build a successful car company is a
13:52
Speaker 3: huge achievement in its own I mean, there's only so
13:56
Speaker 3: few who have been able to do it over a
13:58
Speaker 3: sustainable period of time. Company now that trades at here
14:02
Speaker 3: I go, launching into the traditional metrics, but one hundred
14:04
Speaker 3: and forty three times on a price to earnings ratio
14:07
Speaker 3: that is astronomical, That is sky high, particularly force a
14:11
Speaker 3: company that sells cars. By the way, you know, the
14:13
Speaker 3: net margin on these cars seven percent, gross margins eighteen percent,
14:18
Speaker 3: So it is not like they are, you know, generating
14:21
Speaker 3: a tremendous amount of cash flow. But that's all besides
14:24
Speaker 3: the point. That's never what this story has been about robots.
14:27
Speaker 3: It's been about robots, it's been about you know, AI
14:30
Speaker 3: and innovation, it's been about self driving cars. It's always
14:34
Speaker 3: about the next thing that Elon Musk has promised and
14:36
Speaker 3: then delayed on for years. And this doesn't negate any
14:40
Speaker 3: of the historical achievements that he's had as an entrepreneur,
14:43
Speaker 3: because I don't want to discourage those. He's been absolutely tremendous.
14:46
Speaker 3: But that's where we sit right now. Is it seems
14:49
Speaker 3: like if the allure or the perception of Elon Musk fades,
14:54
Speaker 3: it's hard not to tie that into teslavaluation. Because that's
14:58
Speaker 3: what a lot of investor are banking on by investing
15:02
Speaker 3: in a company that trades as expensive as it does.
15:04
Speaker 3: So you're seeing that kind of luster be lost a
15:07
Speaker 3: little bit.
15:07
Speaker 2: Yeah, And you know, look, look, I have to be honest,
15:10
Speaker 2: I don't know how much of this is an Elon
15:12
Speaker 2: Musk story and issue, and how much of this is
15:14
Speaker 2: just a cyclical rotation out of these types of companies, because,
15:17
Speaker 2: as we mentioned, bitcoins down twenty three percent, right in
15:21
Speaker 2: video stocks down, Well it's back up today, but you know,
15:23
Speaker 2: been down double digit percentage wise, and many large US
15:27
Speaker 2: tech companies that were big benefactors over the last couple
15:29
Speaker 2: of years are being rotated out of.
15:31
Speaker 4: Early in twenty twenty five.
15:33
Speaker 2: And you know, tying out how much of that is
15:36
Speaker 2: a Tesla issue versus another issue is a big question.
15:39
Speaker 2: But none of those other names are down forty one percent,
15:41
Speaker 2: and so I think that's that's fair.
15:42
Speaker 3: No, that's why it's worth mentioning. You know, I want
15:45
Speaker 3: to go off on a slight tangent here pertaining to
15:47
Speaker 3: the magnificent seven names. Go for it, Paul in Vidia,
15:51
Speaker 3: where I just read in a piece this morning, and
15:54
Speaker 3: Tucker covered on Wall Street Brooks like, this is general
15:56
Speaker 3: consensus coverage from the investment community, this idea that the
15:59
Speaker 3: numbers that they came in with disappointed and they weren't
16:02
Speaker 3: growing at levels before, and I just I get it,
16:06
Speaker 3: that's that's true in a sense, but they were growing
16:09
Speaker 3: at such a gangbuster's rate, Like I can't reiterate enough
16:12
Speaker 3: just to go back looking at their revenue before we
16:15
Speaker 3: were sitting in this period of time twenty twenty one
16:17
Speaker 3: seventeen billion, twenty twenty two, twenty seven billion, twenty twenty three,
16:22
Speaker 3: twenty seven billion. Now here we sit twenty twenty four
16:25
Speaker 3: sixty billion. So that's a double for all the mathematicians
16:28
Speaker 3: out there, a double of revenue from twenty three to
16:31
Speaker 3: twenty four. Guess what they're expected to do this year
16:33
Speaker 3: in revenue, Mike, one hundred and thirty bleep in bi
16:36
Speaker 3: billion dollars. You know, these are tremendous rates of growth
16:39
Speaker 3: from a revenue perspective, and the stock has appreciated to
16:43
Speaker 3: reflect that. To be clear, I mean, it was up
16:45
Speaker 3: two hundred and forty percent and twenty three and one
16:47
Speaker 3: seventy six.
16:47
Speaker 4: Hundred percent of the last five year or something like
16:49
Speaker 4: something like that.
16:50
Speaker 3: So the valuation has reflected those gains, but unlike Tessa,
16:55
Speaker 3: there are numbers from a revenue perspective to back up
16:58
Speaker 3: the growth, and it can't continue to double revenue every
17:03
Speaker 3: single year. It's just impossible to continue to grow at
17:06
Speaker 3: that pace. So that is what frustrates to me a
17:08
Speaker 3: little bit is there's just such high expectations for the
17:12
Speaker 3: company and the numbers that we saw at least yesterday
17:14
Speaker 3: and we talked about it didn't indicate a slowdown. Did
17:18
Speaker 3: that pace? I mean, yeah, it wasn't going at It
17:21
Speaker 3: wasn't doubling revenue. It was just seventy eight percent revenue growth.
17:24
Speaker 3: And that's what has investors, I guess, upset.
17:27
Speaker 2: Yeah, just think about that for a moment. Investors were
17:31
Speaker 2: disappointed because by the fact they grew double, they weren't
17:35
Speaker 2: doubling their revenue by seventy eight.
17:37
Speaker 3: Think about owning a business out there and you're doubling
17:40
Speaker 3: your revenue. I mean, I get it. Wall Street's always
17:43
Speaker 3: about what can you do for me? How can you
17:45
Speaker 3: continue to grow at the same pace or more? But
17:47
Speaker 3: if you were doubling your revenue every year, you'd be
17:49
Speaker 3: pretty happy.
17:50
Speaker 2: Yeah, And look far be it from me to say,
17:54
Speaker 2: not possible. I did not think that this company could
17:58
Speaker 2: grow as quickly as they have for as long as
18:00
Speaker 2: they have, and it's been a relatively short period of time,
18:03
Speaker 2: and so far be it from me to challenge and say, oh,
18:05
Speaker 2: it's never going to happen. But to the point we
18:07
Speaker 2: talked about, and have talked about at length for quite
18:10
Speaker 2: some time, businesses generally with giant fat profit margins like
18:15
Speaker 2: in Nvidia has right now, don't usually maintain those giant
18:20
Speaker 2: fat profit margins without a government that's willing to grant
18:24
Speaker 2: them monopoly power.
18:25
Speaker 3: Yeah.
18:25
Speaker 2: Right, that's the only thing I can think of, is okay, Yeah,
18:28
Speaker 2: like Saudi, a Ramco might just permanently have giant fat
18:31
Speaker 2: profit margins, but they're not going to grow like a
18:33
Speaker 2: company like Nvidia has. Eventually, what happens is companies say, wow,
18:38
Speaker 2: you're able to sell me this thing at a fifty
18:41
Speaker 2: sixty seventy percent profit margin. I need to find a
18:44
Speaker 2: way to do this myself.
18:46
Speaker 3: Yeah, And there's so many That's the great thing about
18:48
Speaker 3: competition is that it will drive down the cost of things,
18:51
Speaker 3: particularly in tech. We've seen it over the years. Innovation
18:54
Speaker 3: will trump those efforts and bring down prices.
18:57
Speaker 2: For sure, markets remain open and recovering from yesterday's broad
19:02
Speaker 2: market selloff. We have got the S and P up
19:06
Speaker 2: seventeen points or one third of one percent, Nasdaq fifty
19:10
Speaker 2: one a little bit less than a third of a percent,
19:12
Speaker 2: and the Dow Jones Industrial Average up one hundred and
19:14
Speaker 2: fifty five points. These same indices were up about half
19:18
Speaker 2: a percent in earlier trading, so we will see where
19:20
Speaker 2: it goes throughout the show. Quick break, we'll be right
19:22
Speaker 2: back on the Financial Exchange.
19:30
Speaker 1: Bringing the latest financial news straight to your radio. Every day.
19:34
Speaker 1: It's the Financial Exchange on the Financial Exchange Radio Network.
19:52
Speaker 2: Over the last several quarters, Meta, Facebook and Instagram's parent company,
19:56
Speaker 2: has been speaking at length about how they've been able
19:58
Speaker 2: to drive increased AD sale and offer lots of compelling
20:02
Speaker 2: AI tools to specifically their AD developers, and really drive
20:07
Speaker 2: prices higher on all of that stuff, target people better,
20:11
Speaker 2: all sorts of compelling things when it comes to artificial intelligence. Today,
20:15
Speaker 2: Meta announcing that they plan to release a standalone Meta
20:18
Speaker 2: AI app in an effort to compete with Open AI's
20:21
Speaker 2: chat GPT. And I have to say, I don't really
20:23
Speaker 2: understand why I'd like to I get that everybody thinks
20:27
Speaker 2: that they need to have this standalone web based or
20:34
Speaker 2: application based chat GPT competitor. But Meta, you've been really
20:41
Speaker 2: rewarded by investors over the last few quarters for saying, look, no,
20:44
Speaker 2: we found another use of AI where we can really
20:47
Speaker 2: drive ad sales. Who the heck is going to jump
20:50
Speaker 2: on to say, yeah, I want to use Facebook's AI
20:53
Speaker 2: instead of chat GPT's free version. I'm just I'm not
20:57
Speaker 2: terribly compelled to believe that this is going to be something.
21:00
Speaker 2: I would much rather Meta say, hey, we are releasing
21:03
Speaker 2: this brand new, I don't know, AI based tool to
21:10
Speaker 2: create video content for our platforms or or something that's
21:14
Speaker 2: customized to Meta and their business units, rather than just
21:19
Speaker 2: another thing that's gonna try and compete with deep seek
21:22
Speaker 2: chat GPT. What are the other named ones that are
21:24
Speaker 2: out there?
21:25
Speaker 3: Good Gemini is for Google, and then Anthropic is the Amazon.
21:29
Speaker 2: I just I just you know, you're gonna have a
21:31
Speaker 2: lot of costs to rule this out, and I genuinely
21:33
Speaker 2: don't know that anybody's going to utilize it.
21:36
Speaker 3: Yeah, I think that their theory, they they they would
21:38
Speaker 3: tell you, Mike, from a strategic perspective, is that because
21:41
Speaker 3: they have what I mean, between all their family of apps,
21:44
Speaker 3: maybe half of the world's population is on them, you know,
21:47
Speaker 3: between two and a half to three billion or something
21:49
Speaker 3: along those lines, that they would be more easily able
21:53
Speaker 3: to even just convert a percentage of those users onto
21:57
Speaker 3: their platform, Like that's the way to go about it.
21:59
Speaker 3: It's you. I've heard many leaders in the space, like
22:02
Speaker 3: Zuckerberg say that they want to be at the forefront
22:05
Speaker 3: and the primary use of AI. Everyone's trying to grab
22:09
Speaker 3: that Google like equivalent to AI use and right now
22:14
Speaker 3: Chat GPT has the lead in the clubhouse, but this
22:17
Speaker 3: is metas and Facebook's push to try and replicate that.
22:21
Speaker 3: I just don't know to your point too, if, like
22:24
Speaker 3: if that can really do it just because you have
22:26
Speaker 3: a large user base on other platforms, can you get
22:30
Speaker 3: that to translate over I'm not sure, because there's going
22:32
Speaker 3: to be a lot of competition in the space, and
22:34
Speaker 3: I think I'd rather do it for the innovation on
22:38
Speaker 3: the current products is probably a better way to go
22:40
Speaker 3: about it.
22:40
Speaker 4: I'd agree with you.
22:41
Speaker 2: In a separate meta related story, if you scratch out
22:46
Speaker 2: his curly hair and just put my finger over it
22:48
Speaker 2: here from it and I encourage everyone to go to
22:50
Speaker 2: CNBC and find the picture of Mark Zuckerberg putting on
22:55
Speaker 2: these new experimental Aria Jen two smart glasses.
23:00
Speaker 4: The dude looks exactly like Garth from Wayne Oh yeah,
23:02
Speaker 4: I see you now.
23:02
Speaker 2: It's like one hundred percent yeah, Garth from Wayne's World.
23:06
Speaker 4: You gotta go check this out.
23:08
Speaker 2: If you're a giant Dana Carvey fan like myself, he
23:11
Speaker 2: just looks exactly like him. These glasses are preposterous.
23:14
Speaker 4: Nobody's ever going to wear them. I don't know who.
23:17
Speaker 3: Thank you for covering that. Thank you for covering They had.
23:20
Speaker 2: A super Bowl commercial, super Bowl commercial, like, nobody's ever
23:22
Speaker 2: gonna buy them.
23:23
Speaker 4: It's not gonna happen.
23:24
Speaker 5: I don't nobody want to see anybody wearing these things.
23:27
Speaker 5: No ray bands involved. They look decent.
23:31
Speaker 3: Who the hell's gonna wear these?
23:34
Speaker 5: AI Voice Assistant what.
23:37
Speaker 3: I can't get creepy? I can't, I can't get there.
23:39
Speaker 3: I just do it. You're right, I just don't know
23:41
Speaker 3: who's gonna wear them.
23:42
Speaker 4: It's the creepy factor, isn't it. It totally is.
23:44
Speaker 5: If I see somebody on the street wearing them, I'm like, well,
23:46
Speaker 5: what are they recording?
23:47
Speaker 1: Right?
23:48
Speaker 4: Yeah? Yeah, it's weird. Everybody hates this, so keep on.
23:52
Speaker 3: You still got the metaverse? Keep on going, Mark, how's
23:55
Speaker 3: the metaverse good?
23:57
Speaker 4: Don't don't ask?
23:57
Speaker 3: What's real estate in the metaverse look like?
24:00
Speaker 5: If you're nearing retirement agent are concerned about how to
24:03
Speaker 5: protect your assets, well, you need to call Cushing and Dolan,
24:06
Speaker 5: the experts in elder law. Their new guide is called
24:10
Speaker 5: Back to the Basics, and it will help you create
24:13
Speaker 5: a plan that can help you understand issues like avoiding probate,
24:16
Speaker 5: passing your assets along to your family, and potentially elimitting
24:21
Speaker 5: your state taxes. Just a reminder, last day of the month,
24:24
Speaker 5: last day of February's here. It's your last chance to
24:27
Speaker 5: get it. This free guide has all the information you
24:30
Speaker 5: need to build a safe and secure as state plan
24:33
Speaker 5: that'll give you peace of mind as you close in
24:36
Speaker 5: on retirement. Call eight six six eight four eight five
24:40
Speaker 5: six nine to nine right now and request your free
24:44
Speaker 5: guide today. You can also request a no obligation consultation
24:48
Speaker 5: to review any current planning you've done. Cushing and Dolan
24:52
Speaker 5: have been helping families like yours for more than thirty years.
24:56
Speaker 5: Let them help you too. Get their new guide called
24:58
Speaker 5: back to the basics. T today again is the last
25:01
Speaker 5: day of the month. Last chance to get it by
25:04
Speaker 5: calling eight six six eight four eight five six nine nine.
25:08
Speaker 5: That's eight six six eight four eight five six nine nine,
25:11
Speaker 5: or you can request the guide from their website Legal
25:15
Speaker 5: exchange show dot com.
25:17
Speaker 1: The proceeding was paid for and the views expressed are
25:19
Speaker 1: solely those of Cushing and Dolan. Cushing and Dolan and
25:21
Speaker 1: or Armstrong Advisory may contact you offering legal or investment services.
25:24
Speaker 1: Cushing and Armstrong do not endorse each other and are
25:26
Speaker 1: not affiliated.
25:27
Speaker 4: I'm gonna jump around here.
25:28
Speaker 2: Paul Tyler Cowen from Bloomberg has a piece on the
25:32
Speaker 2: five million dollar gold card for immigrants. Economically, I agree
25:37
Speaker 2: with Tyler here. It makes reasonable economic sense to allow
25:42
Speaker 2: for somebody that is that wealthy to go buy into
25:45
Speaker 2: getting and obtaining a green card to be able to
25:47
Speaker 2: live and work here in the United States. Economically, I
25:50
Speaker 2: think that there is a potentially big payoff. I have
25:53
Speaker 2: no idea what the universe of potential applicants for this
25:56
Speaker 2: type of thing looks like, and so I don't want
25:58
Speaker 2: to overstate it's import importance. But you know, as the
26:01
Speaker 2: administration point has pointed out right, if Apple desperately wants
26:05
Speaker 2: that developer to reside and work in the United States,
26:09
Speaker 2: then they can go and buy one for them and
26:11
Speaker 2: make that happen. I doubt that that's really the case,
26:14
Speaker 2: because if a company is big and powerful, as Apple
26:16
Speaker 2: wants talent, they can just hire them where they live
26:19
Speaker 2: and you know, make them part of the organization. Still, like,
26:23
Speaker 2: this is a very small world these days. It's not
26:25
Speaker 2: the nineteen sixties where if I want that engineer on staff,
26:28
Speaker 2: I need them to be living in New York City.
26:30
Speaker 4: That's just not the case. I think.
26:33
Speaker 2: You know, there's a few things about this. It's probably
26:35
Speaker 2: going to be heavily weighted towards older folks across the world,
26:38
Speaker 2: because who has five million dollars older people? So that's
26:42
Speaker 2: going to be a reality. But you know, look, I
26:45
Speaker 2: think this is a positive too in the fact that
26:47
Speaker 2: it's it's getting people thinking about immigration in a different fashion.
26:51
Speaker 2: You know, this is putting a specific price tag on
26:55
Speaker 2: the ability to live in the United States. I would
26:58
Speaker 2: argue that, you know, we should also I'll be putting
27:00
Speaker 2: a skills price tag on living in the United States.
27:04
Speaker 2: Go take a look, for instance, if you want to
27:06
Speaker 2: migrate to New Zealand as an example, a country that
27:10
Speaker 2: is fairly famous historically for having these skill specific requirements.
27:15
Speaker 4: If you want to live.
27:15
Speaker 2: There, there's like a fifty page questionnaire about Okay, what
27:19
Speaker 2: sort of designations do you have? They want doctors, they
27:22
Speaker 2: want nurses to move there and work in that country
27:25
Speaker 2: and be able to do that. And it kind of
27:28
Speaker 2: pairs with this next story here from the Wall Street
27:30
Speaker 2: Journal of the FAA aiming to boost hiring of air
27:32
Speaker 2: traffic controllers. Okay, you want to go do that, You're
27:35
Speaker 2: going to need somebody in school for several years to
27:37
Speaker 2: go and get trained on being an air traffic controller,
27:40
Speaker 2: whereas the world is full of air traffic controllers in
27:44
Speaker 2: different countries that have the skill sets required to do this.
27:47
Speaker 2: That's to me where immigration can be a positive thing
27:50
Speaker 2: for this country is saying we have a shortage of
27:52
Speaker 2: this type of thing. It's good paying job, we need
27:56
Speaker 2: the skill set, we need it. Now, what sort of
27:59
Speaker 2: immigration can we use in order to fill that skills
28:02
Speaker 2: gap and bring people into this kind I love.
28:04
Speaker 3: The coupling of those two ideas because I feel like
28:08
Speaker 3: most of us, from a consensus perspective, probably not all
28:11
Speaker 3: can agree that immigration legal immigration is vital for the
28:16
Speaker 3: growth of this country. I mean, you have a declining
28:18
Speaker 3: US population, and if you want to continue economic growth,
28:22
Speaker 3: you need to have more people, whether it's to support
28:24
Speaker 3: the social security system and also to other different endeavors
28:27
Speaker 3: there the economic growth the United States in general, you
28:30
Speaker 3: need to have more people come in. So I love
28:31
Speaker 3: the idea of trying to make it easier for people
28:35
Speaker 3: to immigrate or try and find other ways to adjust
28:39
Speaker 3: the immigration process. I mean, obviously this five million dollars
28:43
Speaker 3: one is on the high end where you're going to
28:44
Speaker 3: get a very select group of people who could even
28:46
Speaker 3: afford to do that. But if there could be some
28:48
Speaker 3: more scrutiny on creating legal ways for immigrants to come
28:52
Speaker 3: into the country to better the economics of the United States,
28:56
Speaker 3: then I am all for it. So at least it's
28:58
Speaker 3: trending in the right direction the types of ideas I
29:01
Speaker 3: can get behind.
29:02
Speaker 4: Let's take a quick break.
29:03
Speaker 2: When we come back, Paul Lamonica joining us next, talk
29:06
Speaker 2: a bit about Formula one that's next year on the
29:08
Speaker 2: Financial Exchange.
29:10
Speaker 1: Text UYS six one seven, twenty six, two one three
29:13
Speaker 1: eight five With your comments and questions, about today's show.
29:16
Speaker 1: This is the Financial Exchange Radio Network.
29:19
Speaker 6: Ladies and gentlemen, the weekend.
29:31
Speaker 3: Has promised. We are joined by Paul Lamonica from Barons
29:35
Speaker 3: to talk to us a little bit about F one. Paul,
29:39
Speaker 3: thanks so much for joining us today.
29:41
Speaker 6: Next a lot, how do you guys do it?
29:43
Speaker 3: Doing well? Doing well? We're almost almost to the weekend here.
29:47
Speaker 3: So this particular company, obviously many people are familiar with
29:51
Speaker 3: Formula one. The popularity has surged tremendously in the United
29:55
Speaker 3: States after the Netflix show Drive to Survive, which had
29:59
Speaker 3: you know, record viewership. It seem like across the world
30:01
Speaker 3: and particularly in this country as well. So there's some
30:04
Speaker 3: optimism around F one perhaps taking off here domestically. But
30:08
Speaker 3: the stock that you mentioned that gets exposure to F one,
30:12
Speaker 3: which is the Liberty Media Group or libert Liberty Formula one,
30:16
Speaker 3: it isn't a direct peer play on F one. So
30:19
Speaker 3: maybe if you could just start there and explain sort
30:21
Speaker 3: of the other businesses that are involved in this company
30:24
Speaker 3: and how much exposure someone would get to investing in
30:28
Speaker 3: F one for this type of company.
30:30
Speaker 6: Yeah, it's a little complicated because Liberty Media. You know
30:33
Speaker 6: John Malone, he loves tracking stocks, which is what the
30:38
Speaker 6: Formula one is currently structured as. Now, a tracking stock
30:43
Speaker 6: gives you direct ownership, does not give you, excuse me,
30:47
Speaker 6: direct ownership of the business. It just tracks since the
30:50
Speaker 6: name the performance of a part of the company. And
30:53
Speaker 6: what's a little complicated is that Formula one also includes
30:59
Speaker 6: the Liberty Live Group shares, which is Malone's ownership stake
31:05
Speaker 6: in Live Nation. Now that's going to be spun off soon,
31:09
Speaker 6: which will allow Formula one to be a pure play
31:12
Speaker 6: on the F one racing business. So that makes it
31:15
Speaker 6: a little bit less complicated going forward, and analysts think that,
31:19
Speaker 6: you know, that should give the stock a boost because
31:21
Speaker 6: tracking stocks often will trade the discount because of their complexity.
31:25
Speaker 3: Now, how about going into Formula one now that you
31:29
Speaker 3: kind of explained that distinction there that they'll be more
31:31
Speaker 3: of a pure play on Formula one. What are they
31:33
Speaker 3: seeing from the business of Formula one in terms of
31:36
Speaker 3: increase at attendance for these events as well as viewership?
31:40
Speaker 3: What are they seeing on that side of things?
31:42
Speaker 6: Yeah, that's that's where I think analysts are, you know,
31:45
Speaker 6: pretty bullish. The ratings for the past couple of years
31:48
Speaker 6: on ESPN and the US for the races have been very,
31:52
Speaker 6: very strong.
31:53
Speaker 1: Uh.
31:54
Speaker 6: You know, you had an increase in revenue for the
31:58
Speaker 6: full year for Formula One, thanks in large part also
32:02
Speaker 6: to attendance increases at the live events. So it's uh,
32:07
Speaker 6: you know, a sport that has always been popular around
32:10
Speaker 6: the world, but as you noted, I think, in part
32:12
Speaker 6: due to drive to Shavive, it now has this increased
32:16
Speaker 6: US interest and as a result there there are races
32:19
Speaker 6: in the US as well, Miami, Austin and Las Vegas,
32:22
Speaker 6: although there have been some concerns about attendance at Vegas.
32:26
Speaker 6: It's a weird race, you know, taking place you know,
32:28
Speaker 6: on the strip in the middle of the night at
32:31
Speaker 6: the end of the year, So I think there are
32:33
Speaker 6: still some questions about the viability of that race, but
32:35
Speaker 6: not the sport its overall.
32:37
Speaker 3: In terms of the TV rights deal, those are coming
32:40
Speaker 3: up soon. You mentioned ESPN had just you know passed
32:44
Speaker 3: on Baseball extending those So where do you think the
32:47
Speaker 3: TV deal will go in terms of emerging you know,
32:50
Speaker 3: whether it's ESPN or others who might bid on it.
32:53
Speaker 6: Yeah, it's a great question. You know there's a media
32:57
Speaker 6: uh uh investing you know, media site Puck that had
33:01
Speaker 6: a report recently saying that ESPN might not bid for
33:06
Speaker 6: new rights, you know, because that is a network that
33:09
Speaker 6: I think is you know, cutting costs a little bit.
33:11
Speaker 6: But you could have Netflix because of drive to survive,
33:14
Speaker 6: bid and we've seen what they've done with live sports,
33:16
Speaker 6: the NFL game on Christmas, the you know, Mike Tyson,
33:20
Speaker 6: you know, Jake Paul Fight, you know as well, So
33:23
Speaker 6: there's definitely an increased interest in live sports in addition
33:27
Speaker 6: to the reality programming. You know, you can't count out NBC,
33:31
Speaker 6: I think is another company that might want to bid.
33:34
Speaker 6: And there's one analyst at Evercore ISI who he estimates
33:38
Speaker 6: that the new three year deal, assuming it's another three
33:41
Speaker 6: year deal, you know, could increase from eighty five million
33:44
Speaker 6: to one hundred and fifty million. So that's obviously a
33:46
Speaker 6: nice pop for Formula one to have that money and
33:50
Speaker 6: their cofers.
33:51
Speaker 3: That's Paul la Monica from Baron's Breaking Down Formula One. Paul,
33:55
Speaker 3: thanks so much for the time, and have a fantastic weekend.
33:58
Speaker 6: Thanks a lot, you two guys.
34:01
Speaker 2: The irs, facing budget cuts after a pretty big budget
34:04
Speaker 2: increase under the Biden administration, is heading into tax season
34:10
Speaker 2: and the Wall Street Journal has an excellent piece on
34:12
Speaker 2: a thing that we've covered before but not in much length,
34:15
Speaker 2: which is another type of scam, another type of fraud
34:18
Speaker 2: that everyone is well aware of out there, and this
34:22
Speaker 2: is a tax return fraud. So here's the basic premise.
34:26
Speaker 2: You rowed a tax refund because you withheld more than
34:29
Speaker 2: you actually Oh, somebody files a return on your behalf
34:32
Speaker 2: because guess what, if somebody wants your Social Security number,
34:35
Speaker 2: they can buy it for pretty cheap given how many
34:37
Speaker 2: data breaches there have been over the course of the years.
34:40
Speaker 2: They go, they file that return, they say, yeah, go
34:42
Speaker 2: ahead and deposit that check in this bank account, which
34:44
Speaker 2: does not actually belong to you, and the IRS does
34:47
Speaker 2: so because they think that it's you that's filing the return.
34:51
Speaker 2: At the end of fiscal year twenty twenty four, the
34:54
Speaker 2: IRS had four hundred and seventy thousand open cases in
34:58
Speaker 2: which it was assisting tax identification and theft victims. According
35:01
Speaker 2: to a report from the National Taxpayer Advocate Service, from
35:05
Speaker 2: twenty twenty to twenty twenty four, the average time to
35:07
Speaker 2: finish these cases rose from four months to more than
35:10
Speaker 2: twenty two months. Wow, Which again is why I think
35:13
Speaker 2: we need to fund the IRS. It's not because they're
35:16
Speaker 2: going to go and audit you. It's because they need
35:18
Speaker 2: to crack down on this type of garbage that exists
35:20
Speaker 2: out there, and modern nine is their systems. But I
35:22
Speaker 2: recognize that nobody agrees with me on that one. If
35:25
Speaker 2: you want to protect yourself from this, there's actually a
35:27
Speaker 2: fairly simple way to do this. I have done so myself,
35:31
Speaker 2: where you can create a pin on the IRS website
35:34
Speaker 2: that you literally cannot file your tax return without.
35:36
Speaker 4: Hmmm.
35:37
Speaker 3: Interesting.
35:39
Speaker 2: It's not foolproof. They could hack the IRS website and
35:41
Speaker 2: get access to it. But if somebody goes and files
35:43
Speaker 2: your return under your soalecurity number under TurboTax, it will
35:47
Speaker 2: immediately get rejected from the IRS and they can't file it.
35:51
Speaker 2: Something to look into, you know, Oh, let me just
35:54
Speaker 2: pull it out for you. Do you want my social too?
35:56
Speaker 2: I'm address.
35:57
Speaker 3: I had gotten to notice from's first name, first dog's name. Rather,
36:01
Speaker 3: I had got a nose from the IRS that someone
36:03
Speaker 3: had filed under my tax city like no penalties or
36:06
Speaker 3: no ramifications from it, just to know it's like, hey,
36:08
Speaker 3: we this happened and we're we're working on it.
36:10
Speaker 4: Yeah, maybe there'd go one hundred thousand dollars. They're like,
36:13
Speaker 4: oh no, thanks.
36:14
Speaker 3: Hopefully that that hacker can just take care of my debt,
36:17
Speaker 3: and thanks man did take care of it. There record
36:20
Speaker 3: breaking seventy one thousand apartments are set to emerge from
36:24
Speaker 3: office conversions. This is something that we talked about a
36:26
Speaker 3: little bit locally in the Boston Greater Boston area or
36:29
Speaker 3: the Boston market, where this idea that there would be
36:32
Speaker 3: incentives put into place to convert office space into rental units,
36:36
Speaker 3: and this is occurring more so in New York currently.
36:39
Speaker 3: But the biggest takeaway so far through these these conversions
36:43
Speaker 3: is that they're taking a really long time. Yeah, And
36:46
Speaker 3: like that's was the biggest hurdle to this whole initiative
36:49
Speaker 3: in the first place. My sister works in commercial real estate,
36:52
Speaker 3: and when this was heating up in Boston, I kind
36:54
Speaker 3: of ran it by her if her company was considering,
36:56
Speaker 3: and the bottom line was the cost to redo office
36:59
Speaker 3: buildings into in a multi family apartment situation is just
37:04
Speaker 3: so tremendous, and then you also have just a difficulty
37:09
Speaker 3: renting it out at rates that would be favorable if
37:12
Speaker 3: there's going to be some Section eight component to it.
37:14
Speaker 3: That was the Boston issue that dealt with. There's just
37:16
Speaker 3: a tremendous amount of capital that goes into it, and
37:18
Speaker 3: who knows if you're going to be able to get
37:20
Speaker 3: the rental income from the units. It's just going to
37:23
Speaker 3: take such a long time in investment. Again.
37:24
Speaker 2: Well, and you finally have businesses saying they want the
37:26
Speaker 2: office space back, right, so I'll be I believe that
37:30
Speaker 2: we weren't going to see here instead is a whole
37:32
Speaker 2: lot of just class a development of office space rather
37:36
Speaker 2: than turning into apartments. It would be my guess, quick
37:39
Speaker 2: break for the next forty eight hours or so. We'll
37:41
Speaker 2: be back at it on Monday, and then tariff announcement
37:44
Speaker 2: coming Tuesday.
37:44
Speaker 4: We shall see folks. Stay tuned, have a great weekend.