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Why the AI Chip Rally Is Starting to Look Extreme · The Financial Exchange Show

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Speaker 1: a donation today. This is the Financial Exchange with Chuck
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Speaker 1: Zada and Mike Armstrong.
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Speaker 2: It's Chuck, Mike and Tucker with you here, and as
1:14
Speaker 2: we kick things off, Stock's finding their feet a little bit.
1:17
Speaker 2: The Dow is up twenty points, the SMPN now thirty
1:20
Speaker 2: four points, NASDAK composite of one hundred and fifty three points,
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Speaker 2: so about a half percent for the SMP and NASDAK
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Speaker 2: pretty much flat on the DOO. This on the back
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Speaker 2: of a report that dropped it around eleven I'm sorry
1:34
Speaker 2: ten point fifteen Eastern from Axios with the headline US
1:39
Speaker 2: and Iran reached deal, but need Trump's final approval. Officials say,
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Speaker 2: So that's the headline. I'm gonna read just what's here?
1:48
Speaker 2: Just it's worth reading. US Nartian negotiators have reached an
1:53
Speaker 2: agreement on a sixty day Memorandum of Understanding to extend
1:56
Speaker 2: the ceasefire and launch negotiations on Iran's nuclear program, but
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Speaker 2: President Trump has yet to give it his final approval
2:04
Speaker 2: to US officials in a regional source involved in the
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Speaker 2: mediation efforts to tell Axios the signing of the MoU
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Speaker 2: would be the most significant diplomatic breakthrough since the war started,
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Speaker 2: but a final agreement that tackles Trump's nuclear demands would
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Speaker 2: still require further intensive negotiations. US officials said the deal
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Speaker 2: terms were mostly agreed to as of Tuesday, but both
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Speaker 2: sides still need to get approval from senior leadership. The
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Speaker 2: US officials claim the Iranians later came back and said
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Speaker 2: they had the necessary approvals and were prepared to sign,
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Speaker 2: but Iran has not confirmed that. The US negotiators brief
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Speaker 2: Trump on the details of the final deal, but he
2:37
Speaker 2: did not immediately sign off.
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Speaker 3: Quote.
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Speaker 2: The President relayed to the mediators he wants a couple
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Speaker 2: days to think about it. So a few things to
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Speaker 2: take away from this. Number One, it sounds like any
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Speaker 2: potential signing is at least a couple days away, made
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Speaker 2: in the weekend. Yeah. Number two, there's no confirmation of
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Speaker 2: any of this from Iran. And obviously, like as we've
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Speaker 2: seen through the last six weeks, there's kind of this
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Speaker 2: game of telephone that goes on where, quite honestly, sure
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Speaker 2: seems like the mediators are telling one side exactly what
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Speaker 2: they want to hear, and then the other side exactly
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Speaker 2: what they want to hear, and maybe something's getting lost
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Speaker 2: in the middle. It feels like that might have been
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Speaker 2: the case a few times in the last month or two.
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Speaker 2: So I am hopeful that something gets done here because
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Speaker 2: I just see the economic consequences building for every day
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Speaker 2: that it does not. The best time to have a
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Speaker 2: deal signed would be yesterday, but today would be good
3:34
Speaker 2: in terms of these specifics, and like what actually ends
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Speaker 2: up being in this none of us know right now.
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Speaker 2: So I and quite honestly, like for our show and
3:42
Speaker 2: our place, like we're concerned with the economic stuff here,
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Speaker 2: I don't know that I'm gonna be able to speak
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Speaker 2: definitively on like, well this is good for like, I
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Speaker 2: just I don't know. But what does matter to us
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Speaker 2: on like this show, is hey, do you have stuff
4:00
Speaker 2: start flowing through hormones so that the world economy is
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Speaker 2: no longer disrupted? And we'll see if this gets across
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Speaker 2: the finish line. We've said that a lot for the
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Speaker 2: last seven weeks now. Yeah, And forgive me if I
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Speaker 2: just sound a little jaded, because even in the last week,
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Speaker 2: there have been three separate instances where we've been told
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Speaker 2: a deal is hours away, and those hours have come
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Speaker 2: and gone and it hasn't gotten there. So I'm just
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Speaker 2: it's not that I'm skeptical that a deal will ever
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Speaker 2: get done. It's more just that I've seen like this
4:36
Speaker 2: exact story several times in the last week, right, and
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Speaker 2: I just need confirmation before I can really get excited
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Speaker 2: about anything.
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Speaker 3: In the meantime, gas prices have moved down. Oil prices
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Speaker 3: have moved down a bit. We were as high as
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Speaker 3: one hundred and ten bucks a barrel. We're now down
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Speaker 3: in the ninety dollars a barrel range. A little bit
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Speaker 3: below of this announcement, gas prices back to four dollars.
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Speaker 3: There's forty three cents a gallon. That's down from four
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Speaker 3: fifty six a week ago, so you know, some movement
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Speaker 3: here and there. I continue to get the questions, you know,
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Speaker 3: from people that you know, hey, we're energy independent in
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Speaker 3: the United States, why are we even feeling this? And
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Speaker 3: you know, I know it's a very basic economic question,
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Speaker 3: but I think people do do ask it pretty frequently,
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Speaker 3: like keep hearing that we produce more than enough oil
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Speaker 3: for the US to consume. And the answer remains that
5:29
Speaker 3: it's a global market in a global commodity and if
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Speaker 3: you're exon mobile and if you're producing that barrel of oil,
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Speaker 3: you can choose to sell it to pardon me, the
5:38
Speaker 3: refinery here in the United States for ninety bucks a barrel.
5:42
Speaker 3: You can choose to ship it across the globe and
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Speaker 3: sell I know, it's a lot more than that for
5:47
Speaker 3: immediate delivery, but you can choose to ship it across
5:49
Speaker 3: the globe to India for a heck of a lot more.
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Speaker 3: And right now the market is dictating that you can
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Speaker 3: make a much bigger profit by sending that thing to
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Speaker 3: Singapore or India or many other places across the globe.
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Speaker 2: I do want to just hone in on one thing.
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Speaker 2: When we talk about energy and dependence, we're not energy independent.
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Speaker 2: From an oil perspective, the US, in terms of refined
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Speaker 2: product needs somewhere in the ballpark of twenty million barrels
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Speaker 2: of oil per day. We produce around thirteen and a half.
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Speaker 2: That still is, you know, double what it was fifteen
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Speaker 2: twenty years ago in terms of our production. The biggest
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Speaker 2: thing is we produce by far the most natural gas
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Speaker 2: out of any country in the world, with huge exports there.
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Speaker 2: So from the perspective of hey, overall energy, like when
6:37
Speaker 2: you think about actual energy in terms of you know,
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Speaker 2: basically like the heat energy that's released by the products
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Speaker 2: that you sell. We are a net exporter there, but
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Speaker 2: a big chunk of that comes from net gas, where
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Speaker 2: we just produce more than we need, quite honestly, so
6:55
Speaker 2: that that's again better position than a place like Singapore,
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Speaker 2: where you important ninety to the net gas that you
7:01
Speaker 2: use to heat your utility system or to power your
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Speaker 2: utility system. But it does not mean that we you know,
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Speaker 2: what it more likely means is.
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Speaker 3: That the United States and a few other wealthy energy
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Speaker 3: independent nations won't be subject to shortages, but will be
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Speaker 3: price takers at the pump and with oil to heat
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Speaker 3: your home and everything else.
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Speaker 2: Let's take a quick break here. When we come back,
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Speaker 2: let's do a little bit of trivia next.
7:27
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8:03
Speaker 4: Yeah, all right, time for trivia here on the Financial
8:06
Speaker 4: Exchange And as we know, every month has a birthstone
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Speaker 4: associated with it. Some months have multiple birthstones, like June
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Speaker 4: birthstone associated with it. So our trivia question today is
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Speaker 4: simply what is the birthstone for the month of May?
8:25
Speaker 4: Once again, what is the birthstone for the month of May.
8:29
Speaker 4: Be the fifth person today to textus at six one
8:32
Speaker 4: seven three six two thirteen eighty five with the correct
8:34
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Speaker 2: Once again.
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Speaker 4: The fifth correct response two text us to the number
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Speaker 4: six one seven three six two thirteen eighty five with
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Speaker 4: the correct answer along with keyword trivia, will win that
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Speaker 4: T shirt. See complete contest rules at Financial Exchange Show
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8:53
Speaker 2: Mike, we got a piece here from the Wall Street Journal.
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Speaker 2: It's titled the Chip Rally So tasty? Is it five
9:01
Speaker 2: point seven trillion dollars in counting? How much further can
9:05
Speaker 2: it go? And I have the answer.
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Speaker 3: Oh good, What does that even mean? By five point
9:12
Speaker 3: seven trillion? Is that how much the chip stocks have increased?
9:15
Speaker 2: The cumulative valuation increase Okay, got it. And so look,
9:20
Speaker 2: here's what we've seen. It's it's actually completely insane in
9:27
Speaker 2: terms of the recent move. The Philadelphia Semiconductor Index closed
9:34
Speaker 2: on March thirtieth at seven eighty four. March thirtieth, it
9:39
Speaker 2: closed yesterday at twelve eight thirty two. So if you
9:45
Speaker 2: do just some you know, back of the napkin math,
9:49
Speaker 2: what you end up with is an eighty one percent
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Speaker 2: gain in the last two months. And again and this
10:01
Speaker 2: piece here from the Wall Street Journal kind of like
10:04
Speaker 2: it buries the lead. It says the semi Conductor Index
10:06
Speaker 2: has climbed eighty two percent so far in twenty twenty six. No,
10:09
Speaker 2: it's done all of that in the last two months.
10:13
Speaker 2: And here's the point that I'll put in perspective. During
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Speaker 2: the tech booble back in late ninety nine early two thousand, uh,
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Speaker 2: the Philly Semiconductor Index blew out to the top side
10:29
Speaker 2: because again at that time, like stocks like Intel, we're
10:32
Speaker 2: going where the ones going nuts. Intel's been going kind
10:35
Speaker 2: of nuts here as well. What we have right now
10:39
Speaker 2: is the Philly Semiconductor Index is now sixty seven percent
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Speaker 2: above its two hundred day moving average, which I'm not
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Speaker 2: like a big technical analysis person or this and that.
10:51
Speaker 2: But what I can tell you is the only other
10:55
Speaker 2: times that we saw bigger moves relative to its long
10:58
Speaker 2: term average, we're in that two thousand move, and there
11:01
Speaker 2: was one back in ninety five as well that very
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Speaker 2: briefly got up there too. God, that is not the
11:07
Speaker 2: kind of company that you want to keep. Now, it
11:10
Speaker 2: doesn't mean that this can't go further, because in two
11:14
Speaker 2: thousand it went a lot further than this. So you
11:19
Speaker 2: can absolutely see this continue to go parabolic for a
11:22
Speaker 2: little bit here. But here's what I will tell you.
11:27
Speaker 2: The Philadelphia Semiconductor Index is not going to double every
11:31
Speaker 2: month for the rest of your life. It won't double
11:34
Speaker 2: every month for the rest of this year. It probably
11:38
Speaker 2: won't even double next month. But I admit that it's
11:41
Speaker 2: possible because sometimes these little manias just get a little
11:43
Speaker 2: out of whack. Uh.
11:46
Speaker 3: So that's, you know, a signal one that we keep
11:49
Speaker 3: an eye on, the other one that I just like
11:51
Speaker 3: to bring up over and over again. Or all these
11:54
Speaker 3: other companies that have nothing to do with AI, that
11:57
Speaker 3: are trying to have something to do with AI, whose
12:00
Speaker 3: stock prices are just getting bid through the roof. So
12:02
Speaker 3: for example, I've got three of them in front of me.
12:04
Speaker 3: Here Ford Motor Company stocks up thirty four percent over
12:08
Speaker 3: the last thirty days.
12:08
Speaker 2: They must be selling a lot more cars in the
12:10
Speaker 2: last month.
12:10
Speaker 1: No.
12:11
Speaker 3: They built out all this battery tech that they were
12:13
Speaker 3: going to use to build evs, and they're trying to
12:15
Speaker 3: decide what to do with it, and they're thinking, Hey,
12:17
Speaker 3: maybe we can use it to help power data centers.
12:19
Speaker 3: So boom Ford now an AI company. Your toilet toy
12:24
Speaker 3: by Toto, Yeah, the Japanese toilet manufacturer.
12:28
Speaker 2: Can we power AI data centers with flushes? No?
12:31
Speaker 3: But we turns out we need porcelain for the semiconductors,
12:34
Speaker 3: so we do. Toto stock up thirty seven percent over
12:38
Speaker 3: the last month.
12:39
Speaker 2: We're not in Kansas anymore.
12:40
Speaker 3: Corning, how old is this company? Corning eighteen hundreds, Yeah,
12:45
Speaker 3: eighteen fifty one, founded in Somerville, Massachusetts.
12:47
Speaker 2: Sure, it's one hundred and seventy five years old.
12:50
Speaker 3: Turns out we need some pretty specific glass to manure
12:53
Speaker 3: the manufacturer of these semiconductors. Stocks up twenty five percent
12:56
Speaker 3: over the last month. Those ones, I just find a entertaining,
13:01
Speaker 3: but be really concerning that you're digging that deep in
13:04
Speaker 3: the bag looking for these potential ancillary winners to the
13:08
Speaker 3: AI trade that I just refuse to believe that Ford
13:11
Speaker 3: is going to be a major player empowering the the
13:13
Speaker 3: AI data centered play.
13:15
Speaker 2: Yeah, it's it feels like we're it feels like we're
13:21
Speaker 2: one step away from like the Sears brand coming back
13:24
Speaker 2: and people being like, it's AI because you gotta buy drills,
13:29
Speaker 2: like you know, I'm getting close to them.
13:32
Speaker 3: Yeah, these again, maybe Toto is so good at you know,
13:37
Speaker 3: porcelain manufacturing that there is some business for them, But
13:40
Speaker 3: so is.
13:40
Speaker 2: My toilet if I need a new one.
13:43
Speaker 3: Well, that's that's why this whole thing is gonna be inflationary,
13:46
Speaker 3: because the AI trade is absorbing all of these raw
13:50
Speaker 3: inputs that go into a whole bunch of other things
13:53
Speaker 3: that are crowding out other spending. This is sometimes what
13:55
Speaker 3: happens with giant booms.
13:57
Speaker 2: Like this, how do you make porcelain? We don't have
14:01
Speaker 2: time to go through that today, Chuck, what do you
14:04
Speaker 2: mean I can actually believe it or not. I can
14:07
Speaker 2: have AI use some of its porcelain to tell me
14:11
Speaker 2: how do I make porcelain? And here's the answer, Mic Seashells.
14:18
Speaker 2: They just push them really hard together. You squish a
14:21
Speaker 2: bunch of seashells together. No, it's made by combining specific
14:26
Speaker 2: clays and minerals and then firing at very high temperatures.
14:30
Speaker 2: So you need china clay, feldspar, quartz or silica and silica,
14:36
Speaker 2: and then ball clay. The classic recipe is fifty percent
14:41
Speaker 2: china clay, twenty five percent feldspar, and twenty five percent quartz.
14:45
Speaker 2: First you gotta mix them, put them in a kitchen
14:47
Speaker 2: aid and just mix them up. Then you gotta form
14:51
Speaker 2: it into what you want it to be. What do
14:56
Speaker 2: you need to look like for AI?
14:57
Speaker 3: And then you gotta fire it, which takes all You
15:00
Speaker 3: gotta gas that you don't have. No, you gotta dry
15:03
Speaker 3: it slowly first to prevent cracking, because if it dries
15:06
Speaker 3: too fast, it's gonna crack. Then you've got to do
15:10
Speaker 3: the firing. You gotta get up to sixteen hundred and
15:12
Speaker 3: fifty degrees. Yeah, Tucker, get it fired up. Let's uh,
15:17
Speaker 3: let's get that puppy warming.
15:19
Speaker 2: And then kitchen's on fire. Then you've got to glaze it, okay,
15:25
Speaker 2: and then you gotta fire the glaze. Now, for this one,
15:28
Speaker 2: you need a heat of about twenty two hundred degrees. Again,
15:31
Speaker 2: this seems really difficult to do with an energy shoritch.
15:34
Speaker 2: And then you gotta cool it slowly, not too fast.
15:38
Speaker 2: You don't want to just you know, put it out
15:40
Speaker 2: in the snow or anything like that. You gotta let
15:42
Speaker 2: that porcelain cool delicately and slowly.
15:47
Speaker 3: Stainless steel toilets are gonna be back in vogue now,
15:50
Speaker 3: just like prisons.
15:54
Speaker 2: It too expensive. It's fine with me. You're just sitting
15:57
Speaker 2: on the thing like I don't really care, you know,
16:00
Speaker 2: I don't care. Yeah, just make it go down. In
16:03
Speaker 2: any case, this is at some point, as I've said before,
16:09
Speaker 2: this is all going to become problematic because semiconductor cycles
16:14
Speaker 2: always end the same way. I refuse to believe that
16:17
Speaker 2: we've entered the one time in history where we will
16:21
Speaker 2: always need exponentially more semiconductors than the year before. Right
16:26
Speaker 2: for now, we may for next year, we may for
16:28
Speaker 2: the year after, we may I don't know, But it's
16:31
Speaker 2: not going to be forever. Because the other piece, there's
16:35
Speaker 2: only so much money to go around to actually buy
16:38
Speaker 2: this stuff. It's not like AI is going to create
16:42
Speaker 2: more dollars just for us to spend on more AI.
16:48
Speaker 2: So at some point this will become problematic. I don't
16:51
Speaker 2: know when that is, to be honest, but at some
16:54
Speaker 2: point this is going to be an issue. Speaking of issues,
16:57
Speaker 2: Google employee charged with insider trading on Holly market. Guys,
17:01
Speaker 2: I gotta be honest, These prediction markets are a real problem.
17:06
Speaker 2: So here's what this guy was doing. He's an internal
17:08
Speaker 2: Google employee.
17:09
Speaker 3: And every year they have their year in search stuff
17:13
Speaker 3: where you know, they tell you what were the most
17:15
Speaker 3: popular search categories for the year. And this guy seemingly
17:18
Speaker 3: knew what the answers were and bet a whole bunch
17:21
Speaker 3: of money and wager two point seven million dollars on
17:24
Speaker 3: bets about what the urine search results would be. And
17:27
Speaker 3: here is, you know, beyond the insider trading piece of it,
17:29
Speaker 3: the fundamental problem prior to three years ago, if you
17:33
Speaker 3: knew this information, Chuck, would you know how to bet
17:37
Speaker 3: on Google stock because of it?
17:39
Speaker 2: No, you couldn't do anything with it.
17:40
Speaker 3: Today you can make a two point seven million dollar
17:43
Speaker 3: wager on poly market and come out in the green,
17:47
Speaker 3: and you know, make a whole bunch of money on
17:49
Speaker 3: it in a way that you just no casino was
17:53
Speaker 3: taking your bet on this. This did not exist a
17:55
Speaker 3: few years ago, and this is going to continue to
17:58
Speaker 3: be massively problematic, and there's just no good way to
18:01
Speaker 3: police it.
18:01
Speaker 2: I'm curious how they place that bet. He said they didn't.
18:05
Speaker 2: They say that he did it on twenty five separate
18:07
Speaker 2: bets tied to this Tucker, I'm not a sports gambler,
18:11
Speaker 2: but taken the other side. But I'm no, it's not
18:14
Speaker 2: even who's taking the other side. My understanding is if
18:17
Speaker 2: you try to make a large bet on something very
18:20
Speaker 2: niche on a sports book, they won't let you. They've
18:23
Speaker 2: got very like limited maximums for like, you know, prop
18:26
Speaker 2: bets on how many three pointers?
18:28
Speaker 4: Sure it depends on the book, but yeah.
18:30
Speaker 2: You know, like because they want to avoid obvious manipulation
18:34
Speaker 2: of these markets and losing money to someone who has
18:36
Speaker 2: insider information.
18:38
Speaker 3: Well, remember that the house is on the other side
18:39
Speaker 3: of this bet. So I'm just not sure they care, But.
18:42
Speaker 2: They have to be at a certain point because at
18:44
Speaker 2: the moment this guy's placing this bet, I'm guessing that
18:47
Speaker 2: the market for the Google year and search term is
18:50
Speaker 2: not big enough for him to place one hundred k
18:52
Speaker 2: at once, which you had have to do twenty five times.
18:55
Speaker 3: Like these are not particularly liquid markets. Yeah, I don't
18:59
Speaker 3: know where the side of this the money is coming.
19:01
Speaker 2: They got to warehouse it at the beginning in order
19:05
Speaker 2: and then like sell it off to someone who wants
19:07
Speaker 2: the other side of it. And I'm kind of surprised
19:10
Speaker 2: that they're willing to take that risk and wearhousing it
19:12
Speaker 2: for that period.
19:13
Speaker 3: Anyway, the individual who allegedly did this will be, you know,
19:19
Speaker 3: tried and.
19:21
Speaker 2: Probably go to jail. But this is just getting crazy. Now,
19:25
Speaker 2: Let's take a quick break. When we return, We've got
19:28
Speaker 2: Wall Street Watch and the Trivia Answer next.
19:40
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Speaker 4: Breaking news last hour after Axios reported that the US
20:04
Speaker 4: and Iran have reached an agreement on a sixty day
20:07
Speaker 4: deal to extend the ceasefire and launch negotiations on Iran's
20:11
Speaker 4: nuclear program, but President Trump has yet to give his
20:15
Speaker 4: final approval. Once again, that report per Axios. Right now,
20:19
Speaker 4: the Dow is flat SMP five hundred, up about a
20:23
Speaker 4: half a percent, NASDAC up two thirds of a percent,
20:26
Speaker 4: Brush two thousands up four tenths of a percent, ten
20:29
Speaker 4: Your Treasure reeled down two basis points at four point
20:32
Speaker 4: four to six percent, and Oil up just over one
20:35
Speaker 4: percent higher, trading right around eighty nine dollars a barrel.
20:38
Speaker 4: So merger news in the casino space this morning, where
20:41
Speaker 4: Caesar's Entertainment agreed to be bought by Ferutida Entertainment in
20:46
Speaker 4: a five point seven billion dollar deal. Meanwhile, cloud cloud
20:51
Speaker 4: data platform provider Snowflake is rallying thirty six percent after
20:56
Speaker 4: it raised its full year outlook and agreed to a
20:58
Speaker 4: six billion dollar deal with Amazon. Elsewhere, Salesforce logged higher
21:04
Speaker 4: profit in sales in the first quarter, However, its revenue
21:06
Speaker 4: outlook for the current quarter slightly disappointed. The stock is
21:10
Speaker 4: still up by half a percent. Dollar Tree rallying eighteen
21:13
Speaker 4: percent after the discount retailer beat expectations and impressed with
21:18
Speaker 4: its full year guidance. Best Buy rallying sixteen percent after
21:22
Speaker 4: it beat estimates for its latest quarter, where its comparable
21:26
Speaker 4: sales are up two percent year over year, and after
21:29
Speaker 4: today's closing bell more earnings on the way where Costco
21:33
Speaker 4: and Dell Technologies will post their results. I'm Tucker Silva
21:38
Speaker 4: and that is Wall Street watching. On the previous segment,
21:40
Speaker 4: we asked you the trivia question, what is the birthstone
21:43
Speaker 4: for the month of May? That would be Emerald and
21:47
Speaker 4: Eric from Woodstock Georgia is our winner today watching the
21:50
Speaker 4: show on YouTube is our winner. Taking home a Financial
21:53
Speaker 4: Exchange Show t shirt. And we play trivia every day
21:57
Speaker 4: here on the Financial Exchange Complete contest rules at Financial
22:01
Speaker 4: Exchange Show dot com.
22:03
Speaker 2: Couple things Number one, do you know how many states
22:06
Speaker 2: have a woodstock in them? Thirty twenty two? Close? Next, Tucker,
22:11
Speaker 2: you mentioned for Tida Entertainment is buying Caesars. Yes, can
22:17
Speaker 2: we talk about the portfolio that for Tida Entertainment now owns.
22:20
Speaker 4: I'll be honest, I haven't heard of them until this morning.
22:22
Speaker 2: So are you familiar with Tilman for titda no owns
22:27
Speaker 2: the Houston Rockets.
22:28
Speaker 4: Yes, okay, I know the Houston Rockets.
22:30
Speaker 2: So that is part of this along now with Caesar's
22:35
Speaker 2: Golden Nugget. Those casinos yep. Also in there good spot.
22:39
Speaker 2: The other piece that's just fascinating that's wrapped up in
22:41
Speaker 2: this as well. Landry's, who most people like, don't know
22:45
Speaker 2: what that is. They're a restaurant group much like a
22:49
Speaker 2: My wife worked at Landes once, so never heard of it.
22:52
Speaker 2: The restaurants that they own again, it's it's kind of
22:57
Speaker 2: like a who's the big publicly traded one. Yeah, it's
23:00
Speaker 2: that type of setup. Del Frisco's ChartHouse, Morton's, the Palm
23:08
Speaker 2: Bunch of steakhouses, and then Bubba Gump Shrimp Company. Yep,
23:13
Speaker 2: Hula hands there who own it? Now? Rainforest Cafe like
23:21
Speaker 2: this is again it's it's kind of a weird company
23:23
Speaker 2: that is going to own Caesars, the Houston Rockets, and
23:26
Speaker 2: the Rainforest Cafe all under one umbrella. It's kind of wild,
23:30
Speaker 2: Like you could have a night where you'd be like, hey,
23:33
Speaker 2: let's do it for toda night. We're gonna go to
23:34
Speaker 2: the Rockets game, and then we're gonna go to the
23:37
Speaker 2: Rainforest Cafe for dinner, and then we're gonna stay at
23:40
Speaker 2: the Golden Nugget Me Go Mortons instead. But yeah, well yeah,
23:45
Speaker 2: but you know, whatever you want to do. Uh. Piece
23:48
Speaker 2: in the Wall Street Journal trying to okay, Actually we
23:51
Speaker 2: got two pieces here that really Tucker. When I saw
23:54
Speaker 2: these this morning, I was like, Tucker's doing his h
23:58
Speaker 2: his thing, ok, or they the g Yeah, first one
24:01
Speaker 2: million new car buyers are gone and they're not coming
24:03
Speaker 2: back soon. I don't know what that means. They're not
24:07
Speaker 2: coming back. They're dead. God, they're dead. The cars are
24:10
Speaker 2: still being sold, like being like, oh, prices are too
24:13
Speaker 2: high for these people to buy it. Like, I know,
24:15
Speaker 2: I understand that, but that's like saying, hey, because car
24:18
Speaker 2: prices aren't eight dollars, there weren't two hundred million cars
24:22
Speaker 2: sold this year, Like, they're still selling the cars they're making.
24:28
Speaker 2: So I just don't know what to do with this.
24:30
Speaker 2: It just seems like useless fear mongering. The other piece
24:33
Speaker 2: that bothered me, uh ed Yard Denny, who again I
24:37
Speaker 2: like your Denny's data. His whole shtick is he's always
24:40
Speaker 2: bullish on American stocks, which look in the last fifteen years,
24:43
Speaker 2: Like how could you get to say there's anything wrong
24:45
Speaker 2: with that? But he's saying that the economy is not
24:48
Speaker 2: K shaped, it's G shaped, And I'm sorry, Ed, we
24:53
Speaker 2: can't do letter shapes for the economy anymore. We can't
24:56
Speaker 2: do numbers, we can't do symbols. Sometimes you just got
24:59
Speaker 2: to use more descriptive things than like the economy looks
25:02
Speaker 2: like this letter because I don't even understand what the
25:04
Speaker 2: G shape means. Because he's basically saying, hey, parents are
25:08
Speaker 2: helping their kids to spend money on houses and stuff.
25:12
Speaker 3: Why is that shaped like a G? No, it's an
25:14
Speaker 3: aerial G instead of a times New Roman G.
25:16
Speaker 2: Is it a lower K history, I prefer a seraphon
25:19
Speaker 2: my g's. I don't want a sand Serafont do it
25:22
Speaker 2: in Windings. You'll figure it out, all right. So I
25:25
Speaker 2: don't know what to do with a G shaped economy.
25:28
Speaker 2: So I'm just gonna do absolutely nothing with it.
25:30
Speaker 3: Yeah, I don't know what to do with all of
25:32
Speaker 3: these stories about the shape of the economy or again,
25:35
Speaker 3: a million potential new car buyers did not just die off.
25:39
Speaker 3: I don't know how you're getting to that piece of information,
25:44
Speaker 3: one piece that again is being put out there to
25:47
Speaker 3: scare people, I think more than anything else, as we like.
25:50
Speaker 2: To do, I don't think this part's scary enough. Actually,
25:52
Speaker 2: so more workers are.
25:54
Speaker 3: Rating there for oh one k's as average balances fall.
25:57
Speaker 3: So first things first, average balances fell as of March first,
26:00
Speaker 3: the stock market was down. Average balances fell because the
26:03
Speaker 3: stock market is down. Yes, we're done with that story.
26:05
Speaker 2: Yes, the stock market has gone up since then.
26:07
Speaker 3: The pace of hardship withdrawals, they are up a year
26:10
Speaker 3: overy year, they're up to two and a half percent,
26:12
Speaker 3: but they're at two point three percent last year, so
26:14
Speaker 3: let's not go freaking out quite yet. The share of
26:18
Speaker 3: workers been outstanding alone at the end of twenty two
26:21
Speaker 3: by the end of the first quarter was nineteen point
26:23
Speaker 3: two percent. Again, we're at eighteen to eight at the
26:27
Speaker 3: end of a year ago, so I think there's some
26:30
Speaker 3: indications that there's a little bit more stress in the
26:33
Speaker 3: workers' lives right now. Generally speaking, I think Fidelity's got
26:37
Speaker 3: some pretty good insight on this, but I will also
26:39
Speaker 3: point out the average contribution rate to a four oh
26:42
Speaker 3: one K, this includes both your contributions plus your employers,
26:46
Speaker 3: went up to fourteen point four percent. It's the highest
26:48
Speaker 3: on record. So I need to get some better data
26:52
Speaker 3: on that piece. That's the one I had to questioned about,
26:55
Speaker 3: because that does not include employees who aren't contributing.
26:59
Speaker 2: Right, Yeah, you don't have a four oh one K,
27:01
Speaker 2: then you're not either. You don't have one, or you're
27:04
Speaker 2: at the plan, but you're not contributing, like you're not
27:07
Speaker 2: included as a contributor, right, So that piece matters too,
27:11
Speaker 2: and we still have I think it's somewhere in the ballpark,
27:13
Speaker 2: like twenty percent of Americans aren't covered by a workplace plan,
27:17
Speaker 2: and even of the ones that are covered, I think
27:19
Speaker 2: about twenty percent of those don't contribute.
27:21
Speaker 3: These days, with auto enrollment and auto step ups, I
27:24
Speaker 3: think that a lot more of them are getting covered
27:26
Speaker 3: these days. I think that number has been shrinking. But
27:30
Speaker 3: there's a lot of good news when it comes to
27:33
Speaker 3: the way that we have now set up the four
27:34
Speaker 3: oh one K system. I love the idea of auto contribution,
27:37
Speaker 3: auto enrollment and annual automatic step ups, but we are
27:41
Speaker 3: seeing some of the negative ramifications here too, because what
27:44
Speaker 3: it's clearly leading to is people funneling too much money
27:47
Speaker 3: into their four oh one K. And believe it or not,
27:49
Speaker 3: that is a thing, right, It can be a thing
27:52
Speaker 3: to put too much into your four oh one K.
27:54
Speaker 2: One.
27:54
Speaker 3: It can leave you in a precarious financial situation where
27:57
Speaker 3: you need to take a loan or a hardship withdrawal two.
28:01
Speaker 3: It can just lead you into a messy tax situation.
28:03
Speaker 3: If you actually put too much into your traditional four
28:06
Speaker 3: oh one K by the time you're in your seventies,
28:08
Speaker 3: that can end up being a little bit messy. If
28:11
Speaker 3: you have questions about your workplace retirement plan and how
28:14
Speaker 3: to best fit it into your overall financial situation, give
28:18
Speaker 3: the folks at Armstrong Advisory Group a call. It is
28:20
Speaker 3: not quite as simple as just auto and rolling and sticking.
28:23
Speaker 2: It in there.
28:24
Speaker 3: That can work initially, but by the time you're in
28:26
Speaker 3: your sixties a lot starts to change. The phone number
28:29
Speaker 3: for the Armstrong Advisory Group eight hundred three nine three
28:32
Speaker 3: for zero zero one. You can check us out online
28:35
Speaker 3: at Armstrong Advisory dot com, but that phone numbered again,
28:38
Speaker 3: eight hundred three nine three for zero zero one.
28:41
Speaker 1: The proceeding was paid for by Armstrong Advisory Group, a
28:44
Speaker 1: registered investment advisor. Nothing in the ad or in any
28:46
Speaker 1: Armstrong guide a specific financial, legal or tax advice. Consult
28:50
Speaker 1: your own financial tax into state planning advisors before making
28:52
Speaker 1: any investment decisions. Armstrong may contact you to offer investment
28:55
Speaker 1: advisory services.
28:57
Speaker 2: Take a quick break when we return stock Roulettes.
29:01
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29:08
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29:51
Speaker 2: Mike, what you got for stock Rolet? Uh?
29:54
Speaker 3: Forty two percent of homeowners say insurance costs have gone
29:57
Speaker 3: up a lot, and I don't debate this estimates well,
30:01
Speaker 3: according to the BLS, homeowners insurance is up about seven
30:04
Speaker 3: point two percent year over year. According to a new
30:08
Speaker 3: survey by the Pew Research Center, they're saying that, well, sorry,
30:14
Speaker 3: they're the ones that said that. Forty two percent are
30:15
Speaker 3: say it's going up. But according to a published report
30:18
Speaker 3: by the Consumer Federation of America, between twenty twenty one
30:21
Speaker 3: and twenty twenty four, homeowners' insurance rates are up twenty
30:24
Speaker 3: four percent. My question is what is the benefit of
30:27
Speaker 3: a Pew Research study asking adults whether or not they
30:30
Speaker 3: feel like homeowners insurance has gone up a lot? We
30:33
Speaker 3: measure this stuff right. We can just tell you whether
30:36
Speaker 3: or not homeowners insurance has gone up, rather than asking, Uh,
30:40
Speaker 3: let's see three five hundred and twenty four US adults
30:43
Speaker 3: whether or not they feel bad about the fact that
30:46
Speaker 3: insurance rates have gone up.
30:48
Speaker 2: Yeah. I don't think anyone feel here. Here's my question,
30:51
Speaker 2: who are the fifty eight percent of people who said
30:53
Speaker 2: that they haven't gone up? Yeah.
30:55
Speaker 3: According to that same group that did the study, most
31:02
Speaker 3: homeowners are exposed to this. Over that twenty twenty one
31:04
Speaker 3: to twenty twenty four timeframe, premiums increase in ninety five
31:08
Speaker 3: percent of you as zip codes. So everybody has seen
31:11
Speaker 3: their premiums go up. It's a matter of how much
31:13
Speaker 3: the causes are obvious. Inflation costs, rebuilding costs are all
31:18
Speaker 3: through the roof. We've seen more disasters over that same
31:21
Speaker 3: time period that have resulted in losses.
31:24
Speaker 2: The other The.
31:25
Speaker 3: More interesting study that I see, though, is how state
31:28
Speaker 3: regulations play out and what that actually leads to So
31:32
Speaker 3: what researches have found is that homeowners' insurance rates in.
31:37
Speaker 2: Less regulated states.
31:41
Speaker 3: When they experience increases, So due to insurance losses in
31:45
Speaker 3: highly regulated states, those less regulated states see their premiums
31:49
Speaker 3: go up. So if California has a whole bunch of wildfires,
31:52
Speaker 3: oftentimes you will see I'm going to choose New Hampshire
31:56
Speaker 3: here because I think they have a relatively low, low
31:59
Speaker 3: touch regulatory ENVI for their insurance companies, their rates get
32:02
Speaker 3: you know, boosted through the roof because that insurance company
32:05
Speaker 3: can't really raise rates much in California.
32:07
Speaker 2: So what do they do?
32:08
Speaker 3: They make up the profit elsewhere. And so that piece
32:11
Speaker 3: I found interesting. It has not really happened the other
32:13
Speaker 3: way around. Right, You don't see disaster in New Hampshire
32:17
Speaker 3: causing rates to increase a whole lot in Florida, for example.
32:21
Speaker 2: I want to talk about what Robinhood announced yesterday, which
32:25
Speaker 2: is that they are unveiling AI agents that can be
32:31
Speaker 2: instructed to rebalance portfolios, monitor themes, or execute trading strategies automatically.
32:38
Speaker 3: Yeah, they also for some reason, are talking about how
32:41
Speaker 3: they can use these same AI agents to complete purchases
32:45
Speaker 3: for you of like retail goods using your credit card.
32:48
Speaker 3: So hey, I want to buy this, wait until it
32:50
Speaker 3: goes on sale and then just buy it for me.
32:53
Speaker 3: And yeah, so I can tell you a couple things
32:58
Speaker 3: about this, Okay. Number one, there are a whole bunch
33:03
Speaker 3: of plaintiff lawyers that are just licking their chops right
33:06
Speaker 3: now because you know that someone's going to do something
33:10
Speaker 3: stupid after signing up for this and then sue Robin
33:15
Speaker 3: Hood for doing something stupid, and Robinhood's gonna say, well,
33:18
Speaker 3: you sign this agreement, you know, idemnifying us from any
33:20
Speaker 3: responsibility from what your AI in.
33:22
Speaker 2: Which you do. By the way, so sure you will.
33:24
Speaker 3: I did read the I went and pulled the terms
33:27
Speaker 3: of service until they looked at him. And it's very
33:29
Speaker 3: clear that if your AI chatbot executes a trade that
33:32
Speaker 3: you wouldn't have done, you are fully liable for it.
33:35
Speaker 2: No if sands or butts. Either way, there's going to
33:37
Speaker 2: be lawsuits because noice.
33:39
Speaker 3: Uh.
33:40
Speaker 2: The other piece that I know is that if there
33:43
Speaker 2: is one way that you can consistently make money in
33:49
Speaker 2: the trading business, it is by making money just handling
33:54
Speaker 2: that flow instead of trying to make money buying low
33:58
Speaker 2: and selling high. And the reason why Robinhood wants agent's
34:03
Speaker 2: trading is because it's going to mean more trading activity
34:06
Speaker 2: on their platform and more revenue for them. Yes, like
34:09
Speaker 2: the cost of them operating an agent is going to
34:12
Speaker 2: be negligible compared to what they can make from the
34:15
Speaker 2: extra flow they get from that agent trading when you
34:18
Speaker 2: would not be right, And it's not going to inherently
34:23
Speaker 2: produce better outcomes for traders because you're still telling it
34:27
Speaker 2: what to do. It's just it's doing it for you
34:29
Speaker 2: instead of you doing it yourself. And I get it,
34:34
Speaker 2: like Robinod's going to make you know, a boatload more
34:36
Speaker 2: money because of this, I bet, but I'm not sure
34:40
Speaker 2: it leads to any better outcomes for people. Here's another
34:42
Speaker 2: question that I was thinking about.
34:43
Speaker 3: So one of the big risks that researchers have had
34:47
Speaker 3: identified with these models is you know, once you put
34:51
Speaker 3: your information into them, it's pretty clear in a lot
34:55
Speaker 3: of cases that that information's out there, and you know,
34:58
Speaker 3: the models are training on it, and it can potentially
35:01
Speaker 3: be discovered and hacked into it and used in all
35:04
Speaker 3: different ways. If I'm currently trading on Robinhood and I'm
35:07
Speaker 3: not using an AI model, then I know whatever it
35:11
Speaker 3: is that I've personally researched, and I don't know, you know,
35:16
Speaker 3: what the next Robinhood trader is planning on doing. Sure,
35:20
Speaker 3: if I and a whole bunch of other traders feed
35:23
Speaker 3: our plans into an AI model, what happens.
35:28
Speaker 2: Like that area that Robinhood won't trade against me?
35:30
Speaker 3: Well, Robinhood might try against me, But that AI model
35:33
Speaker 3: suddenly has non public information. Right If the AI model
35:39
Speaker 3: potentially knows what all of these other traders are planning
35:42
Speaker 3: to execute, then that's material non public information, and I
35:47
Speaker 3: really wonder how that's going to all work. I mean, well,
35:50
Speaker 3: perhaps the AI model has trained itself pretty well. And
35:54
Speaker 3: I'm not talking about a retail customer, but you know,
35:56
Speaker 3: let's say that well of those you know, big market
36:01
Speaker 3: makers is using the same model del and suddenly has
36:04
Speaker 3: their trades lined up into this thing. And the A
36:07
Speaker 3: model that's servicing Charlie's account suddenly kind of looks at
36:12
Speaker 3: that and says, Okay, there's a big demand coming for
36:14
Speaker 3: the XYZ security. Is it really well trained enough to
36:17
Speaker 3: know not to trade on that inside information? It?
36:21
Speaker 2: Is it inside for me? Well, it's here's any source
36:26
Speaker 2: of alpha is non public information. Yeah, the illegal kind
36:29
Speaker 2: of trade on is material non public information like information
36:33
Speaker 2: from public companies where you know X and blah blah blah.
36:38
Speaker 2: But any source of alpha is private information that like
36:42
Speaker 2: you have like a model for this, and that is like,
36:45
Speaker 2: there's no problem with that. But the question that I
36:48
Speaker 2: think the.
36:48
Speaker 3: One that I think about is if if the AI
36:51
Speaker 3: model knows that an executive at a company is trying
36:53
Speaker 3: to unload a bunch of their shares because they're using
36:55
Speaker 3: the AI model to trade it, and then executes your
36:59
Speaker 3: trade based on that, that's material nonpublican but.
37:01
Speaker 2: They wouldn't like a senior person wouldn't be able to
37:03
Speaker 2: do that. They've they've got lockups and disclosures anyways. Yeah,
37:06
Speaker 2: so I'm not sure that's a piece. But the question
37:09
Speaker 2: that I would have is, Okay, I'm telling this model,
37:12
Speaker 2: here's how I want a trade. How do I know that,
37:16
Speaker 2: like the metadata from that model not me, But hey,
37:20
Speaker 2: how do I know that my plan isn't being sold
37:24
Speaker 2: to some other broker who wants to take the other
37:26
Speaker 2: side of that trade? Yeah, Like I don't know what
37:30
Speaker 2: you're gonna do with it.
37:31
Speaker 3: Yeah, it's going to end very messily, but it's not
37:36
Speaker 3: very predictable how that's going to happen.
37:38
Speaker 2: What's gonna end up happening is this is like, it's
37:41
Speaker 2: gonna be wild when AI actually ends up killing the
37:44
Speaker 2: Internet because no one trusts it anymore. Yeah, yeah, it's
37:48
Speaker 2: gonna be one of two places we're gonna this is
37:50
Speaker 2: gonna go like streaming did. Everyone's gonna be like, oh,
37:53
Speaker 2: this is the Golden Age. It's so easy. Look at
37:55
Speaker 2: how cheap it is to do all this stuff. And
37:57
Speaker 2: then ten years from now it's gonna be like the
37:59
Speaker 2: internet does. Oh well, we saw it coming here. Let's
38:04
Speaker 2: take a quick break for the rest of the day.
38:07
Speaker 2: We'll be back tomorrow.
38:09
Speaker 3: For good Friday show. Not good Friday, but a Friday
38:12
Speaker 3: show that will be good.
38:13
Speaker 2: Well, it'll be okay. We can't promise good, but tomorrow
38:17
Speaker 2: will be okay.
38:18
Speaker 1: Ish.
38:19
Speaker 2: We'll see you then