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Fed Hike Calms Markets as Inflation Questions Remain · The Financial Exchange Show

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  Speaker 1: is the financial exchange with chuck zotta and mike armstrong.
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  Speaker 2: Chuck mike tucker with you here on a thursday not
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  Speaker 2: a friday wishful thinking there chuck is it uh it's
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  Speaker 2: not friday in china yet.
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  Speaker 3: Right uh no Hang on.
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  Speaker 2: Got to pull up the old app. It's, let's see. Oh,
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  Speaker 2: hang on. I don't have Shanghai on here.
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  Speaker 3: It's 11.06 p.m. in Shanghai. Exactly 12 hours.
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  Speaker 2: Okay. So it's still today in China and still today here.
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  Speaker 2: And as we go through today, we've got a nice
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  Speaker 2: rally taking place in stocks and in bonds, which is
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  Speaker 2: fun to see because if you own those things, it
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  Speaker 2: means that they're going up. Generally, there's still parts of
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  Speaker 2: the stock market that are going down. So like as
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  Speaker 2: an example, if you happen to own Raytheon today, you're
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  Speaker 2: off 2%. But what's driving the market today is, hey,
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  Speaker 2: NVIDIA's up, Broadcom's up, Micron's up. And so as long
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  Speaker 2: as tech is clicking in that way, specifically the semiconductors,
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  Speaker 2: makes it hard for the market to have an overall
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  Speaker 2: down day. So the S & P 500 is up 0.85%.
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  Speaker 2: Dow is up 0.5%. NASDAQ composite up 1.35%. So broad-based
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  Speaker 2: rally taking place. We got the 10-year Treasury rallying as well,
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  Speaker 2: down 4.9 basis points to 4.955%. So a little bit
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  Speaker 2: of short-term improvement there after the Fed raised short-term interest
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  Speaker 2: rates yesterday by a quarter percent. Again, the 10-year Treasury
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  Speaker 2: not directly managed by the Fed, so you've got it
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  Speaker 2: moving in the opposite direction today. Dollar index weakening very modestly,
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  Speaker 2: down 0.09% to $ 99.
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  Speaker 3: 89.
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  Speaker 2: Gold finding its footing a little bit in the overnight session,
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  Speaker 2: now up $ 6. 80 an ounce to $ 43. 94 at one point.
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  Speaker 2: It was down around $ 4, 300, so a pretty big rally
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  Speaker 2: overnight on gold. We've got crude oil, West Texas Intermediate,
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  Speaker 2: down $ 1. 35 a barrel to $ 101. 11 right now. AAA national
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  Speaker 2: average for gas prices, though, still working through all those wholesale...
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  Speaker 2: price hikes that happened over the course of this week.
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  Speaker 2: And so AAA national average up $ 0. 07 overnight to $ 4. 43.
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  Speaker 2: Diesel up another $ 0. 08 overnight to $ 6. 39. Remember, the previous
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  Speaker 2: high on diesel all-time was $ 5. 61, so we are now
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  Speaker 2: nearly $ 0. 80 north of that, about 15% above the previous
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  Speaker 2: all-time high.
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  Speaker 4: The big news of the week was yesterday's Federal Reserve
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  Speaker 4: meeting in which, as you mentioned, Chuck, they hiked those
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  Speaker 4: rates by one quarter of one percent. First time in
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  Speaker 4: three years that they have done so. And on pretty
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  Speaker 4: much all accounts, I think it accomplished a few things.
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  Speaker 4: One was signifying to Marks and investors that the Fed
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  Speaker 4: is serious about inflation. Not that they necessarily needed to,
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  Speaker 4: but I think it sent another signal of the Fed's
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  Speaker 4: own independence, given that it was a unanimous vote to
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  Speaker 4: raise those interest rates in spite of the president's.
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  Speaker 3: Threats.
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  Speaker 4: Yeah, maybe not threats directly to the Fed board, but
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  Speaker 4: threats to international trade partners if they didn't bring rates down,
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  Speaker 4: which they did not. They did it a couple months
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  Speaker 4: before a midterm election, effectively. ignoring any of the pleas
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  Speaker 4: from pundits to not move on rates before midterms. So, again,
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  Speaker 4: I think if we're taking yesterday's meeting and actions and
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  Speaker 4: everything and grading them, I think it accomplished several different
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  Speaker 4: objectives at the same time and helped to calm investors
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  Speaker 4: to some degree, at least.
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  Speaker 2: Peace in Bloomberg. Treasury's gain as growing confidence in wars
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  Speaker 2: calms markets. You can file this under, hey, things are moving,
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  Speaker 2: and so we need to come up with a narrative
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  Speaker 2: that fits the numbers that we're seeing on the screen.
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  Speaker 2: If these reverse tomorrow, does that mean that, well, suddenly
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  Speaker 2: Warsh isn't trusted?
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  Speaker 4: Well, and also, if you're going to attribute something to
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  Speaker 4: Warsh's confidence, or confidence in Warsh, rather, I mean, did
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  Speaker 4: you watch what happened during the press conference? Because as
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  Speaker 4: the press conference was happening... Stocks sold off and bonds
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  Speaker 4: sold off. So what exactly are we talking about here
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  Speaker 4: if it's all about confidence in Warsh? Because again, we're
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  Speaker 4: seeing this action today. I think maybe it's justified given
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  Speaker 4: what we've seen over the last few weeks. But yesterday,
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  Speaker 4: during the speaking and immediately after it, investors lost confidence.
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  Speaker 3: So yeah, I'm right there with you.
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  Speaker 2: I really think... Look, when we talk about moves in markets,
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  Speaker 2: everyone always wants to be like, oh, so-and-so did this,
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  Speaker 2: and that's why it happened, or so-and-so said that, and
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  Speaker 2: that's why it happened. And more often than not, after
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  Speaker 2: the first initial move, it's just not that. Typically what
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  Speaker 2: we see, the two dominant forces that move markets today
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  Speaker 2: are way more boring, but way more powerful. Flows and positionings.
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  Speaker 2: If everyone is positioned in a certain way going into
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  Speaker 2: an event, which, let's be honest, Mike, how many people
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  Speaker 2: before yesterday did you hear in the last week saying, hey,
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  Speaker 2: this is the time to load up and buy bonds
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  Speaker 2: because yields are peaking? Mike, I heard no one. No
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  Speaker 2: one at least who's got a platform big enough that they're,
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  Speaker 2: you know, publishing pieces in the wall street journal or,
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  Speaker 2: you know, on CNBC or on Bloomberg or did you
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  Speaker 2: hear anyone being like, Hey, yields are peaking. It's time
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  Speaker 2: to buy. No, everything was like, Oh, our yields are
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  Speaker 2: going to go to 6%. Like the debt is too big,
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  Speaker 2: like blah, blah, blah. Now, again, sentiment is not positioning,
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  Speaker 2: but it can be a tell as to like how
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  Speaker 2: people are positioned. The other piece is flows. Okay. If
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  Speaker 2: everyone is positioned in one way, then small marginal flows
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  Speaker 2: in the other direction aren't necessarily going to be offset
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  Speaker 2: by corresponding ones. And so they can move price just
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  Speaker 2: based on very small little flows because there's nothing much
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  Speaker 2: coming back in the other direction. And so flows and
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  Speaker 2: positioning are what matter a lot more to markets now
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  Speaker 2: than they ever have before, in my opinion, just because
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  Speaker 2: of how connected all these markets are and how quickly
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  Speaker 2: they move and how accessible data is. Talk to anyone
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  Speaker 2: who traded like 25, 30 years ago. It was different.
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  Speaker 2: It wasn't the same. At least the speed and pace
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  Speaker 2: of it wasn't the same, and the importance of positioning
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  Speaker 2: and flows weren't the same. So, yeah, like, is the market, like,
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  Speaker 2: suddenly waking up being like, hey, we trust Kevin Warsh now? No, like,
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  Speaker 2: to be fair, I thought he did a really, a
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  Speaker 2: much better job yesterday than he did in July. But
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  Speaker 2: it's not like markets suddenly wake up. Let me ask
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  Speaker 2: the other question. Mike, yields are coming down today, right?
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  Speaker 1: Yep.
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  Speaker 2: Did the U.S. debt situation get better overnight? Well, how
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  Speaker 2: come no one's talking about that? When yields were going up,
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  Speaker 2: all people would say is, oh, there's too much debt.
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  Speaker 2: There's too much debt. It's actually no. Tucker, what did
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  Speaker 2: they say?
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  Speaker 3: He's not ready.
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  Speaker 2: They were saying something. The debt! There we go. That's
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  Speaker 2: what they were saying. It was just like a constant
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  Speaker 2: version of... What'd they say again? Do you guys know
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  Speaker 2: that we have $ 40 trillion in debt?
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  Speaker 1: Yes, I did.
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  Speaker 2: Thank you for telling me. So, I just think that
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  Speaker 2: whenever a story comes out that's like, oh, markets move
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  Speaker 2: because of this, most of the time, quite honestly, it's
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  Speaker 2: like someone's got to write something and the underlying stuff,
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  Speaker 2: it's not actually that it's more boring, it's just that
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  Speaker 2: it's more technical and no one wants to get into
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  Speaker 2: the weeds on it a lot of times.
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  Speaker 3: Hey, what's up?
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  Speaker 2: I can't talk with a whispering version of myself. The debt!
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  Speaker 2: That's better. I prefer that. That's what my head sounds like,
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  Speaker 2: if you want to know. Let's take a quick break here.
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  Speaker 2: When we return, let's talk a little bit about some
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  Speaker 2: of the potential impacts of higher interest rates.
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• 10:46
  Speaker 2: Mike, we got a piece here in Barron's. Higher interest
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  Speaker 2: rates lead to more inflation, says this economist. Take that,
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  Speaker 2: central bankers.
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  Speaker 4: So, what, a couple hundred years of economic theory is
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  Speaker 4: just wrong, according to John Cochran?
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  Speaker 2: Well, here's the deal. Like, Cochran makes some viable points,
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  Speaker 2: which are that, hey, if you raise interest rates, then
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  Speaker 2: savers receive higher interest rates for owning, you know, bonds
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  Speaker 2: and putting money in savings accounts.
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  Speaker 3: There's one thing Americans are good at. It's saving money.
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  Speaker 2: And so, in theory, like, that can lead to more spending.
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  Speaker 2: Is it enough to, you know, overwhelm the negative credit
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  Speaker 2: impulse from higher borrowing rates? That's the $ 40 trillion question.
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  Speaker 1: Well.
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  Speaker 4: I think he brings up one other good point that
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  Speaker 4: I will acknowledge here. If you're raising interest rates and
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  Speaker 4: at the same time, the U S Congress is just
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  Speaker 4: increasing spending and spending 6% of deficits and not slowing
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  Speaker 4: that down in any meaningful way.
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  Speaker 2: Yeah.
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  Speaker 3: Then you can still have inflation, right?
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  Speaker 4: Like, and you could very easily argue that, Hey, a
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  Speaker 4: more effective path to control inflation could be to raise
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  Speaker 4: taxes and reduce spending. And you might see inflation come
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  Speaker 4: in control of, in a better case scenario. But I
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  Speaker 4: have a tougher time getting to, oh yeah, raise rates
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  Speaker 4: and you'll see more inflation. Now, I think all else equal,
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  Speaker 4: if you raise rates, you will see demand curbed in
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  Speaker 4: some areas. And all else equal, you get lower inflation there.
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  Speaker 4: But yeah, I can acknowledge for a moment that all
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  Speaker 4: of that can be very easily undone if the government
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  Speaker 4: just keeps on spending irresponsibly and printing money. Yeah.
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  Speaker 3: I think that's kind of where I get with that.
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  Speaker 3: But otherwise, if we're.
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  Speaker 4: Going to start saying that, hey, cut rates and you'll
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  Speaker 4: bring down inflation, that gets to a pretty dangerous spot.
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  Speaker 3: We've seen governments try and do that. Go see Turkey.
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  Speaker 4: It did not go well. Argentina's done it occasionally. Very
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  Speaker 4: much the opposite desired effect.
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  Speaker 3: Ultimately... one interesting thing.
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  Speaker 4: That I thought was brought up in the press conference,
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  Speaker 4: I don't remember if it was in response to Q
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  Speaker 4: and a, or just during Kevin Warsh's speeches, you.
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  Speaker 3: Know, who is, who is this for, right?
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  Speaker 4: Who, who does this help if we are seeing the fed,
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  Speaker 4: you know, attempt to contract the economy, because presumably it's
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  Speaker 4: not great if you are, well, today it is, but
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  Speaker 4: it's not great. If you own stocks, it's not great.
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  Speaker 4: If you own your home and his response, I think
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  Speaker 4: was the right one. Hey, That's not who the Fed
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  Speaker 4: is operating for, right? Because there are millions of Americans
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  Speaker 4: who over the last five years didn't own a home,
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  Speaker 4: didn't own a big stock portfolio. And for them, the
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  Speaker 4: thing that they have experienced is intolerable inflation and wages that,
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  Speaker 4: if they have, have barely kept pace with that inflation
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  Speaker 4: and in many cases didn't keep pace. And so that
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  Speaker 4: was his answer to it is, hey, if there's a
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  Speaker 4: group this is for, it is tolerable. for the group
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  Speaker 4: that doesn't have those assets that have helped offset the
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  Speaker 4: tremendous inflation that we've been seeing for over five years now.
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  Speaker 3: So yeah.
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  Speaker 1: Yeah.
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  Speaker 3: I think that was the right message.
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  Speaker 2: A piece of the New York times global economy is
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  Speaker 2: running out of wiggle room. Well, I like to wiggle.
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  Speaker 2: Why are we running out of room to do so, Michael?
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  Speaker 4: Well, I think there's something to this one too, Chuck.
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  Speaker 4: I mean, I don't, I don't know that you can
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  Speaker 4: quantify how much more wiggle room there is, but how
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  Speaker 4: much room does one need to wiggle? From every account,
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  Speaker 4: global supplies of all sorts of critical materials are dangerously low.
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  Speaker 2: And I think that's where it comes down to.
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  Speaker 4: Yes.
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  Speaker 3: Yes, we should.
• 14:37
  Speaker 4: It turns out reopening the Strait of Hormuz is pretty challenging.
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  Speaker 4: And so whether you're looking at construction supplies, aluminum, diesel fuel,
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  Speaker 4: any of this stuff is at fairly historically low inventory levels.
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  Speaker 4: And any further disruptions could really kind of screw things, right? Like,
• 15:01
  Speaker 4: you know, typically, I guess I would say you should
• 15:05
  Speaker 4: be more worried about El Nino season than you normally
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  Speaker 4: would be because we have no buffer right now in
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  Speaker 4: the global supply of critical materials.
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  Speaker 2: Did you say El Nino season?
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  Speaker 3: Yeah, I did say El Nino season.
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  Speaker 4: Yeah.
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  Speaker 2: All other tropical storms must bow before El Nino. Yeah,
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  Speaker 2: and look, when you get down to these levels, it's
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  Speaker 2: important to remember, in the United States, more often than not,
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  Speaker 2: we don't see abject shortages. We see higher prices.
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  Speaker 3: One of the wealthiest countries in the world.
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  Speaker 2: Okay. The poorer parts of the world that do not
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  Speaker 2: have the levels of wealth or the incomes that we
• 15:50
  Speaker 2: have that is where you see the shortages because as
• 15:54
  Speaker 2: much as we grumble about gas at four 50 or
• 15:58
  Speaker 2: diesel at six 50, you go to, you know, parts
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  Speaker 2: of Southeast Asia, large parts of Africa, even like poor
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  Speaker 2: parts of Europe. And you, you look at it and
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  Speaker 2: it's like, they can't afford those prices, you know? Okay.
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  Speaker 2: I'm only going to get a gallon of gas today
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  Speaker 2: because otherwise I'm not going to be able to afford gas.
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  Speaker 2: the other stuff that's there, or, hey, that's all that
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  Speaker 2: I'm able to buy because the government has restricted how
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  Speaker 2: much I can buy. So I think that, by and large,
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  Speaker 2: and again, it kind of sucks to get to this
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  Speaker 2: point in your thinking just because it's very cynical. But, Mike,
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  Speaker 2: what's the thing that's driving the global economy now? AI.
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  Speaker 4: AI.
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  Speaker 2: Do AI companies care about prices for anything?
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  Speaker 3: Not today.
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  Speaker 4: They may in the future, but right now they just
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  Speaker 4: do not seem to care.
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  Speaker 2: Right now they do not. Right now they do not.
• 16:57
  Speaker 2: I mean, like, memory prices are up, what, like 500%
• 16:59
  Speaker 2: in the last year? And they're just like, gotta buy
• 17:03
  Speaker 2: me some memory. Lots of it. As long as those
• 17:07
  Speaker 2: companies are willing to pay, even though you can have
• 17:09
  Speaker 2: on a personal and household level throughout the world all
• 17:13
  Speaker 2: kinds of huge disruptions... The spending power of families in
• 17:19
  Speaker 2: Thailand or Senegal is not what drives the global economy
• 17:24
  Speaker 2: right now. And so as long as companies are still
• 17:29
  Speaker 2: building data centers in larger quantities than they were in
• 17:33
  Speaker 2: the previous year, you've got this unfortunate phenomenon where the
• 17:37
  Speaker 2: average person in the world probably feels like their economic
• 17:40
  Speaker 2: situation is worse, but the overall economy strengthens because... of
• 17:46
  Speaker 2: the amount of activity that's happening just in things not
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  Speaker 2: related to them that are still driving up the cost
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  Speaker 2: of what they have to pay for.
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  Speaker 3: Yeah, and the diesel one is just, again, so crazy.
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  Speaker 2: The diesel one's brutal.
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  Speaker 4: Because there is no way of changing demand. There's really
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  Speaker 4: not much of a price that I can even fathom
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  Speaker 4: at which point you say, okay, I'm just not doing this.
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  Speaker 3: There, of course, is, right?
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  Speaker 4: If diesel's $ 20 a gallon, then maybe the farmer just
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  Speaker 4: lets the crops die in the field. But that's literally
• 18:21
  Speaker 4: the choice is, hey, do I pay the outrageous diesel
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  Speaker 4: price and get my crops to market, or do I
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  Speaker 4: just let everything die and accept bankruptcy? And if he
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  Speaker 4: makes that choice, then it's, okay, now the price of
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  Speaker 4: food is moving up in response to it either way.
• 18:37
  Speaker 4: It's not like gasoline where you can just say, I'm
• 18:40
  Speaker 4: not booking that vacation. I'm going to take public transit instead,
• 18:45
  Speaker 4: and it takes longer to get there, but oh well.
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  Speaker 4: There's just not that option for really any marginal demand
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  Speaker 4: for diesel fuel.
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  Speaker 2: No, like, Tucker, we've got to get shirts that have this.
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  Speaker 2: Diesel is not eggs. You get upset at the price
• 19:04
  Speaker 2: of eggs, you say, fine, no eggs. Instead you get,
• 19:07
  Speaker 2: what is it, the Mung Beetle supplement or whatever it was?
• 19:10
  Speaker 3: I think it was mung beans.
• 19:11
  Speaker 2: Mung beans. Dung beetle, mung beans. I like the idea
• 19:15
  Speaker 2: of a mung beetle being a replacement for eggs, though.
• 19:18
  Speaker 2: Both high in protein. It's a dung beetle, isn't it?
• 19:22
  Speaker 4: Yes.
• 19:23
  Speaker 2: Definitely not an egg. Well, look, you shouldn't be eating
• 19:29
  Speaker 2: those either. Okay? You get mung beetles and dung eggs,
• 19:33
  Speaker 2: and it's a problem. Quick break. We got Wall Street
• 19:37
  Speaker 2: Watch next.
• 19:39
  Speaker 1: Bringing the latest financial news straight to your radio every day.
• 19:44
  Speaker 1: It's the Financial Exchange on the Financial Exchange Radio Network.
• 19:49
  Speaker 3: Time now for.
• 19:51
  Speaker 1: Wall Street Watch. Tracking the stocks, the data, and the
• 19:54
  Speaker 1: headlines driving markets so far today. Right here on the
• 19:57
  Speaker 1: Financial Exchange Radio Network.
• 19:59
  Speaker 5: Equity markets seeing a broad-based rally after the Fed yesterday
• 20:03
  Speaker 5: hiked rates for the first time in three years as
• 20:06
  Speaker 5: Fed Chairman Kevin Trudeau Warsh reiterated the central bank's mission
• 20:10
  Speaker 5: to tame inflation. Right now, the Dow is up over
• 20:13
  Speaker 5: half a percent or 288 points up. S & P
• 20:15
  Speaker 5: 500 now up over 1% or 76 points higher. NASDAQ
• 20:16
  Speaker 5: up 1.5% or 398 points up. Russell 2000 is climbing
• 20:19
  Speaker 5: over 1%. Ten-year treasury yield down 5 basis points at 4.947%.
• 20:21
  Speaker 5: Crude oil down about 1.5%, trading at $ 100 a barrel.
• 20:37
  Speaker 5: while Brent is down 2%, trading at $ 103. Generac is
• 20:42
  Speaker 5: rallying 19% after the generator maker agreed to a deal
• 20:46
  Speaker 5: with Amazon to supply backup power generators for its data centers.
• 20:51
  Speaker 5: Generac also granted the tech giant the right to buy
• 20:54
  Speaker 5: up to $ 340 million worth of its stock. Meanwhile, homebuilder
• 20:58
  Speaker 5: Lenar posted third-quarter earnings that disappointed and cut its full-year
• 21:03
  Speaker 5: home delivery target between 80 and 81,000 homes, citing interest
• 21:08
  Speaker 5: rate pressure and worsening conditions. Lennar is up by 1% today. Elsewhere,
• 21:13
  Speaker 5: Fluence Energy is sinking 16% after the battery storage maker
• 21:17
  Speaker 5: cut its full year of guidance. And overseas, Swedish carmaker
• 21:22
  Speaker 5: Volvo announced it is making its largest ever product push,
• 21:26
  Speaker 5: launching 13 new car models by the end of the
• 21:29
  Speaker 5: decade in a turnaround effort. I'm Tucker Silva and that
• 21:33
  Speaker 5: is Wall Street Watch.
• 21:36
  Speaker 2: Mike, anything we want to say? Anything further? We talked
• 21:39
  Speaker 2: about oil and gas prices a couple times so far today.
• 21:43
  Speaker 2: Anything else we want to add there? Nothing that comes
• 21:46
  Speaker 2: to mind, Chuck. It's not fun. I want to talk
• 21:49
  Speaker 2: a little bit about AI. I've got two pieces here.
• 21:52
  Speaker 2: The first, from Barron's, the world isn't ready for an
• 21:56
  Speaker 2: anthropic IPO. The second, from the New York Times, OpenAI
• 22:01
  Speaker 2: discloses six new incidents of concerning AI behavior. Michael, these
• 22:07
  Speaker 2: are the same story. Okay. I am becoming more and
• 22:16
  Speaker 2: more convinced that while there are all kinds of concerns
• 22:22
  Speaker 2: that I have about AI safety and things along those lines,
• 22:28
  Speaker 2: I very much think that OpenAI is trying to poison
• 22:31
  Speaker 2: the well as it relates to Anthropix IPO.
• 22:36
  Speaker 3: Could be.
• 22:37
  Speaker 2: I'm not sure it's going to work at all. I
• 22:40
  Speaker 2: don't know if it will either, but this piece, it
• 22:42
  Speaker 2: talks about, okay, we disclosed six new incidents. Mike, when
• 22:45
  Speaker 2: did these happen?
• 22:47
  Speaker 3: Not recently.
• 22:48
  Speaker 2: No, they didn't. Which means either A, OpenAI just found
• 22:53
  Speaker 2: out about them, which I doubt. You know, I don't
• 22:57
  Speaker 2: really find that credible. Or B, just like Elon Musk
• 23:03
  Speaker 2: tried to screw over and has successfully screwed over the OpenAI...
• 23:07
  Speaker 2: IPO because he doesn't like Sam Altman. Altman saying, well,
• 23:11
  Speaker 2: if I can't IPO, I'm not going to let Anthropic
• 23:14
  Speaker 2: beat me to it. Like it, it has that feel
• 23:18
  Speaker 2: to it of just like a bunch of high school pettiness.
• 23:22
  Speaker 3: Yeah.
• 23:23
  Speaker 2: Wrapped up in the fact that these things probably are
• 23:25
  Speaker 2: not the safest and there is a security discussion to
• 23:27
  Speaker 2: be had. But Mike, let me ask you this question.
• 23:32
  Speaker 2: When it comes to the people running the AI companies,
• 23:36
  Speaker 2: Who do you trust to tell you the truth about AI?
• 23:41
  Speaker 4: I have to choose between the people running the AI companies?
• 23:44
  Speaker 2: Your answer can be none of them.
• 23:45
  Speaker 4: Yeah, I mean, that was going to be my answer,
• 23:47
  Speaker 4: but I thought I was limited to selecting one.
• 23:49
  Speaker 2: Is there anyone there where you're like, you know what?
• 23:52
  Speaker 3: There's too much self-interest.
• 23:53
  Speaker 2: This person is telling me the truth, the whole truth,
• 23:56
  Speaker 2: and nothing but the truth.
• 23:57
  Speaker 4: Yeah, there's some that have been more consistent than others.
• 24:00
  Speaker 4: I'll acknowledge that, but none of whom would I trust
• 24:02
  Speaker 4: to get the real bottom line.
• 24:04
  Speaker 2: And this is fundamentally the problem is that like none
• 24:09
  Speaker 2: of these people are trustworthy narrators. Like what?
• 24:18
  Speaker 4: So I'll take a step back. I think some of
• 24:20
  Speaker 4: them have not proven themselves untrustworthy. That doesn't mean I
• 24:24
  Speaker 4: would trust them, but like a few, I think have
• 24:27
  Speaker 4: gone out there and, and specifically proven to us that
• 24:30
  Speaker 4: they can't be trusted with, uh, sticking to their word
• 24:35
  Speaker 4: and doing what most.
• 24:38
  Speaker 3: People would deem right.
• 24:40
  Speaker 4: You go look at Zuckerberg's previous actions around no full
• 24:43
  Speaker 4: harm caused by their platforms.
• 24:46
  Speaker 3: Yeah, I don't really love.
• 24:47
  Speaker 4: That they're going to be developing the next advanced technology tool.
• 24:50
  Speaker 4: I can't say that necessarily about the Anthropic CEO.
• 24:57
  Speaker 3: Can you? I can't.
• 24:59
  Speaker 2: But something doesn't feel right there.
• 25:04
  Speaker 3: Yeah, I don't think that's enough.
• 25:06
  Speaker 2: Here's the thing. Let's say that you're developing a new technology,
• 25:14
  Speaker 2: and you are nervous that that technology is going to
• 25:19
  Speaker 2: cause harm. Do you say, well, this could potentially end badly,
• 25:26
  Speaker 2: but we're just going to go ahead anyway?
• 25:28
  Speaker 3: Right, no.
• 25:29
  Speaker 2: That's not a rational... thoughts like especially when you're talking
• 25:35
  Speaker 2: about the scale of harm they're talking about like they're
• 25:37
  Speaker 2: not talking about like if you're trying to develop like
• 25:41
  Speaker 2: a new fish food you're like okay well this might
• 25:45
  Speaker 2: not work but you know the worst thing that happens
• 25:47
  Speaker 2: is like a few fish die this is like you've
• 25:50
  Speaker 2: got them going around saying like hey this could end
• 25:53
  Speaker 2: humanity but we've got to do it.
• 25:56
  Speaker 4: Yeah i don't like that message that's that's a very
• 25:58
  Speaker 4: fair point i think to your other question I think
• 26:02
  Speaker 4: for OpenAI to succeed in deterring a successful anthropic IPO,
• 26:07
  Speaker 4: they would need to drive things far enough to see
• 26:09
  Speaker 4: actual regulation. And the president pretty much just told us
• 26:13
  Speaker 4: all that he's going to veto anything that comes forward.
• 26:16
  Speaker 4: Not in as many words, but he pretty much just
• 26:19
  Speaker 4: made that an understanding. So I don't think we're going
• 26:21
  Speaker 4: to see any congressional action, certainly not before the midterms.
• 26:24
  Speaker 4: And these guys want IPO well before the midterms, it
• 26:26
  Speaker 4: sounds like. Like any day now.
• 26:30
  Speaker 2: They do, but remember, with any IPO, in order for
• 26:33
  Speaker 2: it to go off successfully, you need to have, if
• 26:39
  Speaker 2: you're doing a $ 50 billion raise, you've got to have
• 26:43
  Speaker 2: $ 250 billion of interest.
• 26:44
  Speaker 1: Mm-hmm.
• 26:47
  Speaker 2: And so the question is, okay, the SpaceX IPO hasn't
• 26:52
  Speaker 2: gone great. It's not as bad as it was at
• 26:57
  Speaker 2: one point back in late July, early August. Yeah. But
• 27:02
  Speaker 2: it's basically, okay, it's at $ 150. The first trading price
• 27:05
  Speaker 2: was like $ 145 or something like that. And so it's, okay,
• 27:09
  Speaker 2: so you've held this thing for three months and it
• 27:11
  Speaker 2: hasn't gone anywhere. Okay, so why am I going to
• 27:14
  Speaker 2: buy the next one?
• 27:16
  Speaker 3: Yeah.
• 27:17
  Speaker 2: That's data point number one.
• 27:18
  Speaker 4: Okay.
• 27:19
  Speaker 2: Data point number two is, hey, there's all kinds of
• 27:22
  Speaker 2: new regulatory threats to this industry. Why do I want
• 27:26
  Speaker 2: to buy in now, not knowing what that could look like?
• 27:31
  Speaker 2: And so, like, you quickly see, okay, like, yes, people
• 27:34
  Speaker 2: want the upside, but if the downside starts feeling more
• 27:38
  Speaker 2: tangible to them, that order book can dry up in
• 27:40
  Speaker 2: a hurry.
• 27:40
  Speaker 4: Yeah.
• 27:42
  Speaker 3: I don't know. I... I guess we'll find out, right?
• 27:44
  Speaker 4: I don't think it's going to last another month before
• 27:47
  Speaker 4: we get word from Anthropic as to what they are
• 27:49
  Speaker 4: doing with their planned IPO.
• 27:51
  Speaker 3: I'll be awfully surprised if they pull it.
• 27:54
  Speaker 2: I will, too, because it's so close now. Yeah. But it's...
• 28:00
  Speaker 2: I'll also.
• 28:01
  Speaker 3: Be surprised if it's a disaster of an IPO.
• 28:04
  Speaker 2: Put it this way. Heading into the SpaceX IPO, yes, like,
• 28:08
  Speaker 2: you know, people had, like, broad concerns because it's like, oh,
• 28:13
  Speaker 2: our total available market's the universe. I get it. It's grandiose.
• 28:18
  Speaker 2: It's kind of silly. I get that. But how much
• 28:22
  Speaker 2: excitement was there for that company to go public?
• 28:24
  Speaker 5: A lot.
• 28:27
  Speaker 2: Do you feel anything for Anthropic or OpenAI in terms
• 28:30
  Speaker 2: of excitement? It almost feels like duty more than anything else.
• 28:36
  Speaker 3: I don't know. I think there's a fair bit of
• 28:38
  Speaker 3: excitement specifically for Anthropic.
• 28:40
  Speaker 2: Do you? I do.
• 28:41
  Speaker 3: Yeah, I do.
• 28:44
  Speaker 4: You're seeing these announcements from major firms like Schwab. I
• 28:47
  Speaker 4: think there is, yeah. It might not be on the
• 28:51
  Speaker 4: level of the SpaceX piece, but yeah, honestly, I think
• 28:55
  Speaker 4: there is a lot of excitement for what is right
• 28:58
  Speaker 4: now the kind of undisputed leader in model development.
• 29:02
  Speaker 3: I don't know.
• 29:02
  Speaker 2: I mean, like, they had to come out this week.
• 29:08
  Speaker 2: Or maybe it was at the end of last week.
• 29:09
  Speaker 2: It was over the weekend. I'll quote here from the
• 29:12
  Speaker 2: piece in the Financial Times. Anthropics gross margins are above
• 29:16
  Speaker 2: 80% before accounting for revenue shared with distribution partners, including Amazon,
• 29:21
  Speaker 2: and the cost of training its models, according to two
• 29:23
  Speaker 2: of the people. Okay, those are some pretty big costs
• 29:27
  Speaker 2: that you're saying that, you know, you're excluding from that. Like, it's...
• 29:34
  Speaker 2: The reason this stuff gets published is because they want
• 29:37
  Speaker 2: it to be published. And I'm not saying that Anthropic
• 29:41
  Speaker 2: is evil or anything. I'm not saying that. What I
• 29:45
  Speaker 2: am saying is, I don't know that you publish stuff
• 29:51
  Speaker 2: like that if you're getting all kinds of excitement about
• 29:55
  Speaker 2: your IPO anyways. You're doing this because, hey, they've got
• 29:59
  Speaker 2: to audit their books because when you go public, you
• 30:01
  Speaker 2: have to publish audited financials. And it's clear that the
• 30:05
  Speaker 2: audited financials are not going to show that everything is
• 30:09
  Speaker 2: just hunky-dory. You don't start floating, well, our gross margins
• 30:14
  Speaker 2: are this if you exclude this, this, and this. I mean,
• 30:19
  Speaker 2: it doesn't really feel great when that's your IPO pitch. Like,
• 30:22
  Speaker 2: that's basically the, well, our total available market. It's like
• 30:26
  Speaker 2: when any exercise company goes public. Look at all the
• 30:29
  Speaker 2: people who exercise. If we get just 2% of that, okay.
• 30:35
  Speaker 2: Got it. So, look, maybe I'm whistling past the graveyard
• 30:39
  Speaker 2: on this. Maybe it's, you know, everything's fine and I'm
• 30:42
  Speaker 2: just off, you know, on my own, like, little view here.
• 30:46
  Speaker 2: But I... I don't feel that people are excited about
• 30:51
  Speaker 2: AI at this point. I think they were heading into SpaceX.
• 30:55
  Speaker 2: I think the worm has turned over the summer.
• 30:57
  Speaker 4: Yeah, I think what excited people about SpaceX was not AI.
• 31:01
  Speaker 3: And I think that people are.
• 31:04
  Speaker 4: I tend to think that people are going to be
• 31:06
  Speaker 4: excited about the first ever pure play model designer being
• 31:11
  Speaker 4: publicly traded.
• 31:12
  Speaker 2: Let's take a quick break here. When we return, Stack Roulette.
• 31:18
  Speaker 1: Smart financial talk whenever you want. Find the Financial Exchange
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• 31:48
  Speaker 4: It's your last chance this year to get a hold
• 31:51
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• 31:54
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• 31:56
  Speaker 4: And our last one of the year, it's going to
• 31:58
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• 32:03
  Speaker 4: me talking about this before, we're covering all the fundamentals
• 32:06
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• 32:09
  Speaker 2: We're going to have a.
• 32:09
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• 32:12
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• 32:15
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• 32:18
  Speaker 4: of these complicated programs. A lot of loopholes have been
• 32:22
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• 32:24
  Speaker 3: Over the years.
• 32:25
  Speaker 4: The number of Medicare plans that are available to the
• 32:29
  Speaker 4: average person across the country is just ballooned. And navigating
• 32:34
  Speaker 4: these two programs for pre-retirees is immensely complicated. How is
• 32:38
  Speaker 4: this going to work with my workplace benefits? What if
• 32:40
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• 32:44
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• 32:47
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• 32:50
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• 32:55
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• 33:00
  Speaker 4: the Fairfield by Marriott Inn & Suites at Enfield, Connecticut.
• 33:04
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• 33:07
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• 33:11
  Speaker 1: The proceeding was paid for by Armstrong Advisory Group, a
• 33:14
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• 33:16
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• 33:19
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• 33:22
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• 33:25
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• 33:27
  Speaker 2: Mike, can I kick off things for Stack Roulette?
• 33:30
  Speaker 3: Certainly, Chuck.
• 33:32
  Speaker 2: Got a piece here in the Bloomyburg. College sports are
• 33:35
  Speaker 2: starting to resemble the pros on and off the field.
• 33:37
  Speaker 2: And yes, that's true if you watch college football. or
• 33:42
  Speaker 2: men's and women's basketball. Other than that, they don't resemble
• 33:46
  Speaker 2: pro sports in any way, shape, or form because there's
• 33:48
  Speaker 2: basically very limited money in any other college sports aside
• 33:54
  Speaker 2: from those three, and the vast majority of it is
• 33:57
  Speaker 2: in college football. So this piece is talking about the
• 34:03
  Speaker 2: huge cost of renovation at the Kansas football stadium where
• 34:07
  Speaker 2: they're spending, remember, this is Kansas football, Kansas is not
• 34:12
  Speaker 2: known for football there. Historically, Tucker, would you say that
• 34:16
  Speaker 2: Kansas football is like a bottom third program in Division I? Oh, football? Definitely, yeah.
• 34:23
  Speaker 5: You never see them on marquee television.
• 34:27
  Speaker 2: They're objectively bad. I mean, you take a look at... No,
• 34:31
  Speaker 2: for real. They're an objectively bad program. Their all-time record
• 34:35
  Speaker 2: is 610, 686, and 58, so they have a a
• 34:40
  Speaker 2: losing record historically, and they're spending $ 800 million to upgrade
• 34:44
  Speaker 2: their football stadium. Right, exactly. Which I can tell you,
• 34:50
  Speaker 2: it's not going... This is not... You can just not
• 34:54
  Speaker 2: update it. You don't have to, but they feel like
• 34:58
  Speaker 2: they have to in order to get a chance to
• 35:00
  Speaker 2: get the revenue that the big boys get, which... Look,
• 35:03
  Speaker 2: here's the deal. In today's day and age, there was
• 35:07
  Speaker 2: a great piece from, I think it was The Athletic
• 35:09
  Speaker 2: earlier this week, where if you look at the NIL spending, name, image,
• 35:14
  Speaker 2: and likeness spending from Division I college football teams, the
• 35:18
  Speaker 2: top current, you know, top ten basically has the highest
• 35:22
  Speaker 2: spending on NIL rights out of, you know, any teams
• 35:26
  Speaker 2: that are in Division I football. And so it's not surprising, hey,
• 35:30
  Speaker 2: if you pay more for players, you will get better players,
• 35:33
  Speaker 2: and yada, yada, yada. Now, those of you who have
• 35:35
  Speaker 2: listened to our program for a while, I have no
• 35:38
  Speaker 2: problem with players being paid. In fact, I love it.
• 35:41
  Speaker 2: I was a very bad college kicker, which means I
• 35:44
  Speaker 2: would not have been paid. But I do know that
• 35:47
  Speaker 2: there were people that were worthy of being paid that
• 35:51
  Speaker 2: I played against when I was in college. I know
• 35:54
  Speaker 2: this because some of them went on to play on Sundays.
• 35:56
  Speaker 2: and they probably could have made a few bucks in
• 35:58
  Speaker 2: college playing on Saturdays. So I have no problem with
• 36:03
  Speaker 2: college football players being paid. What I think the problem
• 36:06
  Speaker 2: is here is not something that any of the pending
• 36:08
  Speaker 2: legislation actually addresses, because basically, like, if you actually read through,
• 36:14
  Speaker 2: you guys are familiar with this Protect College Sports Act
• 36:17
  Speaker 2: that's trying to make its way through Congress? I'm actually not, no.
• 36:20
  Speaker 2: The big thing that... The major thing that it does,
• 36:23
  Speaker 2: in my opinion, it does some things to be like, oh,
• 36:25
  Speaker 2: you can't have more than one transfer and this and that. Whatever.
• 36:29
  Speaker 2: The big thing that it does is it grants an
• 36:32
  Speaker 2: antitrust exemption to the NCAA to set and enforce rules
• 36:38
  Speaker 2: about transfers, compensation, agent regulation, blah, blah, blah. The problem
• 36:43
  Speaker 2: is that it does this without allowing for any collective
• 36:46
  Speaker 2: bargaining with the actual labor, the athletes. And so when
• 36:51
  Speaker 2: you have billions of dollars at stake, but you are
• 36:55
  Speaker 2: saying we're going to give you an antitrust exemption that
• 36:58
  Speaker 2: doesn't include any kind of collective bargaining for the athletes
• 37:01
  Speaker 2: that are going to be governed by that entity that
• 37:03
  Speaker 2: now has an antitrust exemption. Well, you're not really giving
• 37:08
  Speaker 2: like the players the action, like any kind of say
• 37:11
  Speaker 2: in this. And so I got to be honest, like
• 37:16
  Speaker 2: that's a real like problem for me. But the other
• 37:19
  Speaker 2: thing is, look, it's clear that the current system doesn't work.
• 37:22
  Speaker 2: All you see is, okay, you get all these emails about, oh,
• 37:27
  Speaker 2: give us money to this college so that we can
• 37:29
  Speaker 2: pay more college football players. And you're like, okay, that
• 37:33
  Speaker 2: doesn't really feel like giving money to a college, but
• 37:36
  Speaker 2: it's fine, I guess. And so I land back in
• 37:39
  Speaker 2: the same place I've always been, which is Power 5 football,
• 37:44
  Speaker 2: spin it off, they become private entities... license the college
• 37:49
  Speaker 2: names and mascots and everything, and so the colleges get
• 37:52
  Speaker 2: a bunch of money from licensing it, and then you
• 37:54
  Speaker 2: just run it as basically, hey, it's age 18 to
• 37:58
  Speaker 2: 22 football. Call it a day. Do you really need
• 38:02
  Speaker 2: that person to pretend they're going to college?
• 38:07
  Speaker 3: Yes. I don't.
• 38:10
  Speaker 2: If you want real amateurism, there's plenty of sports that
• 38:12
  Speaker 2: you can watch that still have that. Power 5 football
• 38:15
  Speaker 2: isn't that. Let's take a quick break for the rest
• 38:18
  Speaker 2: of the day. We're back tomorrow with more Financial Exchange.