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The Fed’s Next Move: Inflation, AI, and Housing Costs · The Financial Exchange Show

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  Speaker 1: and Mark Vandetti.
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  Speaker 2: Good morning, Welcome back to the Financial Exchange. It's Mike,
• 1:14
  Speaker 2: Mark and Tucker with you on a Thursday, post jobs report,
• 1:17
  Speaker 2: pre inflation report coming out tomorrow. Market sliding in early
• 1:22
  Speaker 2: trading here as we open up the eleven o'clock hour.
• 1:25
  Speaker 2: The NASDAK currently down two hundred and ninety two points
• 1:28
  Speaker 2: one and a quarter percent, the SMP off seven tenths
• 1:32
  Speaker 2: of a percent in the Dow. I think seeing some
• 1:35
  Speaker 2: of that tech outflow down only one quarter of one percent.
• 1:39
  Speaker 2: Oil prices moving down again to sixty three dollars sixty
• 1:44
  Speaker 2: cents per barrel. Take a look at what's going on
• 1:47
  Speaker 2: in commodity markets that they have been pretty wild, but
• 1:51
  Speaker 2: relatively muted today, Gold pretty much flat, Silver down one
• 1:54
  Speaker 2: and a third percent. In the bond markets, we've got
• 1:58
  Speaker 2: the yield on the ten year Treasury edging lower down
• 2:01
  Speaker 2: to four point one three five percent, and nothing interesting
• 2:06
  Speaker 2: happening in crypto, so i'll skip it.
• 2:08
  Speaker 3: One item of no.
• 2:09
  Speaker 2: We've been talking a bit about interest rates as of late,
• 2:12
  Speaker 2: and the UH average thirty year fixed rate mortgage ticked
• 2:17
  Speaker 2: down back in early January after the President announced that
• 2:21
  Speaker 2: UH was it. Fanny and Freddy would go out and
• 2:23
  Speaker 2: buy some longer term bonds to try and artificially bring
• 2:26
  Speaker 2: down interest rates dropped pretty substantially down from six where
• 2:31
  Speaker 2: were we here six' two down to about six. Even
• 2:35
  Speaker 2: we've now bumped back. Up the average thirty year fixed
• 2:38
  Speaker 2: rate mortgage, yesterday according To Mortgage News, daily was six
• 2:41
  Speaker 2: point one four, percent bumping up a little bit on
• 2:44
  Speaker 2: the heels of that hot and expected unemployment. Report looking forward, Tomorrow,
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  Speaker 2: mark we've got that consumer price index. Reading expectations from
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  Speaker 2: What i'm, seeing would be for year over year prices
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  Speaker 2: to hit at two and a half, percent a month
• 3:01
  Speaker 2: of a month increase at point three. PERCENT i guess
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  Speaker 2: my question for you would be with interest rates where
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  Speaker 2: they are right, now with the state of the labor
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  Speaker 2: market and the state of, inflation and knowing that you
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  Speaker 2: have A i won't say a, bias but a a
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  Speaker 2: view of.
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  Speaker 4: Inflation THAT i do on unemployment Because i'm not confident
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  Speaker 4: in the fedsibility to find.
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  Speaker 2: Tune so my question for you would, be where we
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  Speaker 2: got the unemployment report, yesterday where do you need inflation
• 3:33
  Speaker 2: to settle out for you to be comfortable that rates
• 3:36
  Speaker 2: are at the perfect level that they are where they
• 3:38
  Speaker 2: are right.
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  Speaker 4: Now i'll answer that question a little bit. Differently you
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  Speaker 4: could infer a more specific, answer.
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  Speaker 3: But just PRETEND i asked a different. Question that'd be.
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  Speaker 4: Great USUALLY i usually. Do Now i'm going to answer,
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  Speaker 4: it but it's not going to be specific. Enough, probably
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  Speaker 4: inflation is. Elevated it's not as high as it, was
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  Speaker 4: but it's close to three. Percent if you look at
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  Speaker 4: measures that try to capture the trend in, inflation the
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  Speaker 4: trend in inflation or the long term component of inflation
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  Speaker 4: is what The fed can. Control that's what it. Does
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  Speaker 4: it lowers interest rates to stimulate demand more accurately prints,
• 4:10
  Speaker 4: money in turn lowering interest, rates in turn hopefully stimulating.
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  Speaker 4: Demand each link in that chain gets a little weaker
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  Speaker 4: as you proceed.
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  Speaker 1: Along it's.
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  Speaker 4: Elevated so is The fed doing its job on that? Score? Arguably.
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  Speaker 3: No what about?
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  Speaker 4: Unemployment if that were really, high you'd, say, well it's
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  Speaker 4: worth a little inflation to get more people. Employed there
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  Speaker 4: are long term benefits to keeping the labor force as
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  Speaker 4: close to maximum. Employment whatever that is also a moving
• 4:34
  Speaker 4: target is, possible And, mike you could make both an
• 4:37
  Speaker 4: argument that unemployment is unnaturally low and unemployment and low
• 4:41
  Speaker 4: fors four point three percent is of, yesterday is on
• 4:44
  Speaker 4: the very low end of historical observations at any other
• 4:48
  Speaker 4: period in the modern. Era if you told me inflation
• 4:51
  Speaker 4: was close to three and unemployment was in the low,
• 4:53
  Speaker 4: fours and you'd ask me or, anybody what's THE fed
• 4:56
  Speaker 4: going to do, next ninety nine point nine out of
• 5:00
  Speaker 4: one hundred respondents would have, said they got a titan
• 5:02
  Speaker 4: that's unnaturally.
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  Speaker 2: Lower so let me ask this because a lot's been
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  Speaker 2: made of, it especially by the Incoming Federal Reserve, Chair
• 5:09
  Speaker 2: kevin worsh whose WORDS i know you, discount BUT i.
• 5:13
  Speaker 4: DON'T i don't discount them because he's the incoming chair
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  Speaker 4: of The Federal, Reserve so they mean a. Lot it's
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  Speaker 4: his understanding of monetary economics THAT i discount because he's
• 5:23
  Speaker 4: not an. ECONOMIST i think he's a. LAWYER i think
• 5:25
  Speaker 4: he's A. Jd he might have AN mba. Too they
• 5:27
  Speaker 4: do some econ in THE.
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  Speaker 2: Nba but so the question THAT i have is what
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  Speaker 2: if we, are in fact on the precipice of a
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  Speaker 2: technological productivity shift the license which we saw during the Later.
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  Speaker 4: So what should that mean FOR fed? Policy, yeah let
• 5:41
  Speaker 4: me first say if, you not many people subscribe to
• 5:44
  Speaker 4: The Financial times because it's. Expensive Jason, furman who teaches
• 5:47
  Speaker 4: over At, harvard has a fantastic article commentary on that
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  Speaker 4: Very he answers that very question, today and he answers
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  Speaker 4: it very, conventionally is the way anybody who's trained formally
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  Speaker 4: would answer. It so what happens if we do have
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  Speaker 4: AN ai induced productivity? Boom does that mean a lower
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  Speaker 4: so called neutral, rate the rate that balances those tension
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  Speaker 4: that those forces that we talked about inflation and, unemployment
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  Speaker 4: or higher? One actually all sql it, means and this
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  Speaker 4: might surprise, you a higher not a lower neutral. Rate
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  Speaker 4: it means more demand for loanable, funds for. Example and
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  Speaker 4: there are other consequences of a higher rate of productivity
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  Speaker 4: growth that dictate a, higher not a lower neutral. Rate
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  Speaker 4: so it's not entirely clear how THE fed should. Respond
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  Speaker 4: if you assume THAT ai is gonna send the economy
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  Speaker 4: going like, gangbusters maybe WHEN i put it the WAY
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  Speaker 4: i just, did it's more. Intuitive well said's gotta got
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  Speaker 4: the productivity.
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  Speaker 2: Boom while it could make all of us more effective
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  Speaker 2: and therefore not as much pressure on the labor, market
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  Speaker 2: the end effect would be an economy that booms so
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  Speaker 2: much that it still has a risk towards.
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  Speaker 3: Inflation is that the.
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  Speaker 4: It would increact the WAY i think About furman doesn't
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  Speaker 4: quite put it this way this, morning BUT i think
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  Speaker 4: he'd agree with the Way i'm putting. It it will
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  Speaker 4: increase the demand for loanable funds for. Investment we're seeing
• 7:02
  Speaker 4: that the several hundred billion in so called CAP x
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  Speaker 4: capital expenditures that where does that come? From it comes from?
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  Speaker 4: Investors where would it have gone otherwise to other? Projects
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  Speaker 4: how does it go TO ai and not to other? Projects,
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  Speaker 4: well the market sends price signals in the form of interest,
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  Speaker 4: rates all else, Equal, mike IF ai is the cornucopia
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  Speaker 4: that AND i don't know That i'm using. THAT i like,
• 7:26
  Speaker 4: analogy but it's supposed to this bountiest thing that's going
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  Speaker 4: to make us All and that may be. True by the,
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  Speaker 4: Way i'm not pooh pooing. It that means higher not
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  Speaker 4: lower neutral. Rates The fed's got to be, Uh The
• 7:41
  Speaker 4: fed's got to be careful here because it's it's it's
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  Speaker 4: it's it's. Ill it's not advisable to try to guess
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  Speaker 4: about the productivity effects OF ai because we don't know
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  Speaker 4: what's happening. Elsewhere it could boost. Productivity in, fact it
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  Speaker 4: sounds stupid to say it. Won't but what's. Happening if
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  Speaker 4: the service, sector like we talked about, earlier is, growing
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  Speaker 4: that's a that's that is a productivity that is a
• 8:01
  Speaker 4: languid productivity. Sector you can't scale what healthcare workers, do
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  Speaker 4: so if that's been, growing maybe there's a dre even WITH.
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  Speaker 4: Ai And furman has actually made this point separately since
• 8:13
  Speaker 4: Since i'm crushing On Jason furman right, now he's pointed
• 8:16
  Speaker 4: out that you don't know what's happening elsewhere in the.
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  Speaker 4: Economy WHEN ai boosts, productivity it could be falling. Elsewhere,
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  Speaker 4: again this ties into the services. Conversation we add. Later
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  Speaker 4: it's very very risky For, wosh Who i'm going to
• 8:27
  Speaker 4: continue to hammer for however long you keep me employed,
• 8:29
  Speaker 4: here and however long he's chaired The Federal. Reserve for
• 8:32
  Speaker 4: not being able to read a paper in monetary. ECONOMICS
• 8:34
  Speaker 4: i think that is. Key he, is as a, consequence
• 8:36
  Speaker 4: going to garble terms and approach this with an incoherent,
• 8:40
  Speaker 4: framework and he's Already, UNFORTUNATELY i know this didn't start
• 8:43
  Speaker 4: out as a bash fsh bash fest about, warsh but
• 8:48
  Speaker 4: he's already misstated the relationship between productivity and neutral. Rates
• 8:52
  Speaker 4: and what's even worse is that he's. Speculating he's speculating
• 8:56
  Speaker 4: about something then getting his optimal, reaction LIKE i got
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  Speaker 4: a problem with?
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  Speaker 3: That seems.
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  Speaker 2: Reasonable let's take a quick. Break when we come, Back
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  Speaker 1: Com i'p ed.
• 10:33
  Speaker 2: Piece in The Wall Street journal today why the middle
• 10:35
  Speaker 2: class feels. Poor and this is not something. NEW i think,
• 10:41
  Speaker 2: we you, know social, MEDIA i think is kind of
• 10:43
  Speaker 2: dominated by desire for the yester years when things were
• 10:47
  Speaker 2: so much better in the. Economy AND i think we
• 10:49
  Speaker 2: spend a lot of time on this, show uh debating
• 10:53
  Speaker 2: that and contradicting that point, that, oh it is so
• 10:55
  Speaker 2: much better in nineteen. Seventy BUT i do understand why
• 10:58
  Speaker 2: people feel. Poor and they call it the decompression. EFFECT
• 11:01
  Speaker 2: i would call it to keep it up with the
• 11:03
  Speaker 2: keeping up with The joneses. Effect but here are the
• 11:05
  Speaker 2: stats THAT i think are. Important so in nineteen seventy,
• 11:09
  Speaker 2: five the median income for married couples with children was
• 11:14
  Speaker 2: fifteen thousand. Dollars if you were in the eightieth percentile
• 11:17
  Speaker 2: of incomes back in nineteen seventy, five for the same,
• 11:20
  Speaker 2: group your income was twenty two, thousand six hundred. Dollars
• 11:25
  Speaker 2: so the eightieth percentile earned fifty one percent more than
• 11:29
  Speaker 2: the median family last year that same. Statistics so if
• 11:33
  Speaker 2: you were median family with, children you were earning one
• 11:35
  Speaker 2: hundred and thirty three thousand dollars as a, household well
• 11:39
  Speaker 2: and above what was you know in nineteen seventy, five
• 11:42
  Speaker 2: even in inflation adjusted.
• 11:43
  Speaker 3: DOLLARS i do believe.
• 11:46
  Speaker 2: The eightieth percentile came in at two hundred and forty two,
• 11:49
  Speaker 2: thousand which is eighty five percent. More and so what
• 11:52
  Speaker 2: the author points out is that you have seen arise
• 11:56
  Speaker 2: in all. Incomes you've seen a general increase in inflation
• 12:00
  Speaker 2: adjusted earnings over the course of that, time whether you're
• 12:03
  Speaker 2: looking at average or. Median but the growth for the
• 12:07
  Speaker 2: top twenty, percent the top ten, percent and especially the
• 12:10
  Speaker 2: top five percent has far exceeded what we have seen
• 12:13
  Speaker 2: at the median. Level it has grown far, faster and
• 12:16
  Speaker 2: we see that THROUGH i mean other things we've talked,
• 12:19
  Speaker 2: about like The genie, Coefficient, right how is income distributed
• 12:21
  Speaker 2: across our? Economy it is less equally distributed today than
• 12:26
  Speaker 2: it has been pretty much anytime in modern. History and
• 12:30
  Speaker 2: so to, me more than anything, else you, know when
• 12:32
  Speaker 2: we talk about why are people? Dissatisfied why do they
• 12:36
  Speaker 2: feel like they're falling? BEHIND i know we point to
• 12:38
  Speaker 2: a lot of things like student loan debt and gambling
• 12:42
  Speaker 2: and everything, Else but more than much, ELSE i think
• 12:45
  Speaker 2: this income distribution is bigger than it was in the,
• 12:50
  Speaker 2: past and much, easily much more easily visible.
• 12:53
  Speaker 3: Today than it was in the. Past.
• 12:55
  Speaker 2: RIGHT i don't want to discount to The facebook And
• 12:58
  Speaker 2: instagram effect of you constantly see your, friends family and
• 13:04
  Speaker 2: coworkers who are you, know flaunting their wealth in different
• 13:08
  Speaker 2: ways than was possible in the nineteen. Seventies anything THAT
• 13:12
  Speaker 2: i got wrong there in terms of the you, know
• 13:14
  Speaker 2: inflation adjusted income or anything along those, LINES i.
• 13:17
  Speaker 3: Think that's generally the.
• 13:18
  Speaker 2: CASE i think it's pretty tough to argue that the
• 13:20
  Speaker 2: average person is worse off than they.
• 13:22
  Speaker 3: Were in nineteen seventy. Five the Average, american.
• 13:25
  Speaker 4: Well when you look at the big purchases homes and,
• 13:27
  Speaker 4: cars they've grown faster than income the cost of.
• 13:31
  Speaker 3: Them, yes, yeah so.
• 13:34
  Speaker 4: Said, differently it costs more salary years to buy a,
• 13:38
  Speaker 4: house like sixty percent, more, well forty percent. More i've
• 13:42
  Speaker 4: got the median the way to do this if you're,
• 13:45
  Speaker 4: interested BECAUSE i just did it in like thirty, seconds
• 13:47
  Speaker 4: SO i wouldn't call this rigorous or particularly well thought. Out, Sorry, mark.
• 13:51
  Speaker 3: What's easy for you is not easy for all the
• 13:53
  Speaker 3: rest of. Us But i'll Leave, Well i'm.
• 13:54
  Speaker 4: Just saying you, could like what you could Ask gemini
• 13:57
  Speaker 4: or whatever to do this for you and they'd give
• 13:59
  Speaker 4: you a similar result if if you're, interested just don't
• 14:01
  Speaker 4: take my. Word if you don't like my opinion on
• 14:03
  Speaker 4: tariffs or, something so you want to discount this. TOO
• 14:07
  Speaker 4: i get that eighty four nineteen eighty four median sales
• 14:11
  Speaker 4: price of a home, sold and don't adjust this for.
• 14:13
  Speaker 4: Inflation just leave the nominal series in, there divided by median.
• 14:16
  Speaker 4: Income that ratio was three point. Five so one way
• 14:20
  Speaker 4: to think about that is it's three point five salary
• 14:22
  Speaker 4: years to buy a home in nineteen eighty. Four as
• 14:26
  Speaker 4: of twenty twenty, two that was almost. SIX i, mean holy,
• 14:29
  Speaker 4: moly almost. Double it's come down to five is of
• 14:32
  Speaker 4: the end of twenty twenty. Four but these, are you,
• 14:34
  Speaker 4: know kind of noisy, series particularly the median sales price,
• 14:38
  Speaker 4: series because it's an asset and it. Bounce home price
• 14:41
  Speaker 4: have got a lot more volatile since THE fed really
• 14:43
  Speaker 4: started to screw things, Up i'll say about a generation
• 14:47
  Speaker 4: ago and let its attention wander from inflation into other. Things,
• 14:51
  Speaker 4: anyway it's a lot more expensive by can salaries to
• 14:54
  Speaker 4: buy a, home and we all know the story with
• 14:55
  Speaker 4: buying a. Car these obscene seven ten year, loans these
• 14:59
  Speaker 4: knocks shoose thousand dollars, payments AND i Know i'm quoting
• 15:02
  Speaker 4: nominal dollars, there but you don't even have to do
• 15:05
  Speaker 4: the inflation adjustment to know car prices have far outpaced
• 15:09
  Speaker 4: the general price general price level increases measured by something LIKE.
• 15:13
  Speaker 2: Cpi cars absolutely have as have clearly homes based on
• 15:18
  Speaker 2: the data that you just put. OUT i do want
• 15:21
  Speaker 2: to once, AGAIN i don't think you were doing the
• 15:23
  Speaker 2: show with me the day THAT i brought this, up
• 15:25
  Speaker 2: but the car's piece remains entirely our, fault AND i
• 15:29
  Speaker 2: just want to bring that piece up once again that.
• 15:33
  Speaker 4: Some of it was government mandated safety, stuff not not
• 15:36
  Speaker 4: all of, It. Mike i'm not trying to contradict, you.
• 15:38
  Speaker 3: But, no that's.
• 15:40
  Speaker 2: Fair, like, yes there are you, know where your fuel
• 15:42
  Speaker 2: emission standards and all sorts of things that go into the.
• 15:44
  Speaker 4: Price so you're saying that our appetite for nicer cars is.
• 15:47
  Speaker 3: Our appetite for SUVs has just.
• 15:49
  Speaker 2: FLIPPED i think it was just two decades ago that
• 15:53
  Speaker 2: half of all vehicles sold in The United states were,
• 15:55
  Speaker 2: sedans and today it's like twenty. Percent, yeah we want
• 16:00
  Speaker 2: bigger and bigger, cars, frankly in most cases for no
• 16:04
  Speaker 2: darn good. Reason and it's NOT i, mean are we
• 16:08
  Speaker 2: having bigger families than we did twenty years?
• 16:09
  Speaker 3: Ago most certainly not.
• 16:12
  Speaker 2: So, yeah our appetite for really expensive cars is just
• 16:15
  Speaker 2: that we like buying really expensive cars with really fancy,
• 16:18
  Speaker 2: features and it costs.
• 16:20
  Speaker 3: A heck of a lot more to do.
• 16:21
  Speaker 2: It the housing, piece on the other, HAND i don't
• 16:25
  Speaker 2: view that as much as individually our, fault as it
• 16:28
  Speaker 2: is collectively collectively our fault for not liking dense housing
• 16:33
  Speaker 2: in our.
• 16:33
  Speaker 4: Neighborhoods, no house prices have become like publicly traded asset
• 16:37
  Speaker 4: prices in some ways the appreciations not as severe is
• 16:41
  Speaker 4: not the right, word because that's it's not like a good,
• 16:42
  Speaker 4: adjective but you know WHAT i. Mean BUT i would,
• 16:45
  Speaker 4: still of, course because to, me all society's ills can
• 16:48
  Speaker 4: be traced back to The Federal reserve and running excessively
• 16:53
  Speaker 4: loose monetary. Policy and this is WHERE i agree With.
• 16:55
  Speaker 4: Warsh BUT i was bashing his economica literacy. Earlier that's
• 17:00
  Speaker 4: kind of a harsh way to put, it but it's
• 17:01
  Speaker 4: kind of. True but he has and maybe, this this
• 17:06
  Speaker 4: will compensate for his inability to read an economics, paper
• 17:09
  Speaker 4: the fact that he seems to want to narrow the
• 17:11
  Speaker 4: Fids field division a little, bit focus on more on
• 17:14
  Speaker 4: the price level and changes in it than all this other.
• 17:17
  Speaker 2: Stuff speaking of, housing The president has also made public
• 17:20
  Speaker 2: all of his initiatives on, housing some of WHICH i
• 17:23
  Speaker 2: think won't go.
• 17:23
  Speaker 3: Anywhere others may be more.
• 17:25
  Speaker 2: Serious but The New York times had a piece looking
• 17:28
  Speaker 2: at his position on.
• 17:31
  Speaker 3: Institutional buyers of. Homes and remember.
• 17:35
  Speaker 2: What he's, proposing which is large corporations shouldn't be able
• 17:39
  Speaker 2: to buy single family homes for the purpose of renting
• 17:41
  Speaker 2: them back. Out what The New York times pointed out
• 17:44
  Speaker 2: here is that he does still want to allow big institutional,
• 17:47
  Speaker 2: buyer big institutional companies to build no homes for the
• 17:51
  Speaker 2: purpose of, renting and for some, reason The New York
• 17:53
  Speaker 2: times thinks that's a bad, idea basically, saying, hey you're
• 17:57
  Speaker 2: you're saying that you don't want a nation of, renters
• 17:59
  Speaker 2: but on the other, hand you're willing to allow big
• 18:02
  Speaker 2: corporations to build new homes specifically for the purpose of.
• 18:05
  Speaker 2: Renting AND i just we have so many bad ideas about.
• 18:09
  Speaker 2: Housing and by the, WAY i don't think it's a
• 18:11
  Speaker 2: great idea to bar corporate buyers from you from buying
• 18:16
  Speaker 2: homes and competing with home. Buyers but, whatever it's probably
• 18:19
  Speaker 2: not going to make a big difference. Anyway but if
• 18:22
  Speaker 2: you want cheaper rent if you want cheaper, houses eventually
• 18:27
  Speaker 2: you want to allow, corporations anybody to build homes for whatever.
• 18:32
  Speaker 2: Purpose if it's because they want to rent them, out,
• 18:35
  Speaker 2: great that'll bring down. Rents, eventually rents will get so
• 18:38
  Speaker 2: low that it'll make sense for the company to sell
• 18:41
  Speaker 2: off that home to a homeowner and they will buy
• 18:43
  Speaker 2: it and it'll be adding to the total inventory of.
• 18:46
  Speaker 2: Homes SO i just we seem to conflate all of
• 18:49
  Speaker 2: this and blame big companies for all of our, problems and,
• 18:54
  Speaker 2: genuinely the problem with the housing market and why it's
• 18:57
  Speaker 2: so unaffordable has very it'll to do with big corporate
• 19:02
  Speaker 2: buyers buying or building or not building new.
• 19:05
  Speaker 3: Homes quick, Break Wall Street watch coming up.
• 19:08
  Speaker 1: Next bringing the latest financial news straight to your. Radio every.
• 19:23
  Speaker 1: Day it's The Financial exchange on The Financial Exchange Radio.
• 19:27
  Speaker 1: Network time now For Wall Street. WATCH a complete look
• 19:32
  Speaker 1: at what's moving markets so far, today right here on
• 19:35
  Speaker 1: The Financial Exchange Radio.
• 19:37
  Speaker 5: Network well after a mixed and mostly quiet start to the,
• 19:40
  Speaker 5: day markets have suddenly entered sell off, mode with all
• 19:43
  Speaker 5: three major averages down about one percent right. Now The
• 19:47
  Speaker 5: dow is down nine tenths of a, percent or four
• 19:50
  Speaker 5: hundred and forty two, POINTS smp five hundred down over
• 19:54
  Speaker 5: one percent or seventy five points, lower the tech Heavy
• 19:57
  Speaker 5: nasdaq down one point seven percent or three hundred and
• 20:00
  Speaker 5: ninety six, Points russell two thousand selling off one and
• 20:03
  Speaker 5: a half, Percent Tenure treasure yield is down five basis
• 20:07
  Speaker 5: points now at four point one two five, percent and
• 20:10
  Speaker 5: crude oiled down almost two percent. Lower trading at sixty
• 20:14
  Speaker 5: three dollars and forty eight cents a. Barrel appleven tumbling
• 20:18
  Speaker 5: nineteen percent despite the mobile advertising company beating quarterly, expectations
• 20:23
  Speaker 5: as traders are still weary about AI's potential impact on the. Business,
• 20:27
  Speaker 5: However Apple love AND ceo DOWNPLAYED ai threats to the.
• 20:31
  Speaker 5: Company newhile McDonald's posted stronger than expected growth in same store,
• 20:36
  Speaker 5: sales citing success from its value. Campaign during the fourth,
• 20:39
  Speaker 5: QUARTER us same store sales climbed six point eight, percent
• 20:43
  Speaker 5: while globally that same metric climbed five point seven. Percent
• 20:48
  Speaker 5: shares in the fast food jin are up by two,
• 20:50
  Speaker 5: percent sticking with that space Where Burger king parent company
• 20:53
  Speaker 5: restaurant brands beat on the top and bottom lines for
• 20:56
  Speaker 5: the previous, quarter lifted by strong international. Growth, however that
• 21:00
  Speaker 5: stock is down by four. Percent, Elsewhere cisco shares sinking eleven,
• 21:05
  Speaker 5: percent even after the networking equipment company reported higher revenue
• 21:10
  Speaker 5: due to INCREASING ai hyperscaler. Demand beer Maker Anheuser busch
• 21:15
  Speaker 5: IN bev beat fourth quarter earnings and revenue, forecast sending
• 21:18
  Speaker 5: that stock up by five, percent and after today's closing,
• 21:21
  Speaker 5: bill we'll see earnings from applied materials In Vertex. Pharmaceuticals
• 21:26
  Speaker 5: I'm Tucker silva and that Is Wall Street. Watch and
• 21:28
  Speaker 5: the trivia question we asked in the previous segment Was
• 21:31
  Speaker 5: Abraham lincoln is in The hall Of fame for which
• 21:33
  Speaker 5: sport that would be. Wrestling steve From, yarmouthport mass is
• 21:38
  Speaker 5: our winner today taking on The Financial Exchange show t.
• 21:41
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• 21:44
  Speaker 5: here on The Financial Exchange see complete contest rules At
• 21:48
  Speaker 5: Financial Exchange show dot.
• 21:49
  Speaker 2: Com Uh texter got in on our conversation on housing
• 21:53
  Speaker 2: talking about, regulation AND i do put this in the
• 21:57
  Speaker 2: overall category of why homes are so. EXPENSIVE i THINK
• 22:01
  Speaker 2: i put zoning in there as another. Regulation but, yeah
• 22:05
  Speaker 2: there are far more regulations that go into building a
• 22:08
  Speaker 2: home today that are much more strict than we were
• 22:10
  Speaker 2: used to in the.
• 22:11
  Speaker 3: Past it's extra.
• 22:13
  Speaker 2: Textan it was somewhat easier to build and get more
• 22:15
  Speaker 2: done with the property you owned back then comparatively because
• 22:18
  Speaker 2: regulations have gotten more. Strict it's not our. Grandfathers it's
• 22:22
  Speaker 2: not that our grandfathers had it so much. BETTER i
• 22:25
  Speaker 2: just think that a lot of their success was related
• 22:27
  Speaker 2: to an easier time in their regulatory history of The United.
• 22:30
  Speaker 3: STATES i don't know IF i blame it all on.
• 22:32
  Speaker 2: REGULATION i mean it was also in the nineteen, seventies for,
• 22:36
  Speaker 2: example a heck of a lot easier to get a
• 22:38
  Speaker 2: job without a college.
• 22:39
  Speaker 3: Education we were a much back to the.
• 22:41
  Speaker 2: Manufacturings so, YEAH i, mean there's a lot of things
• 22:45
  Speaker 2: that are. DIFFERENT i just continue to ask myself WOULD
• 22:48
  Speaker 2: i rather be born at a different point in?
• 22:51
  Speaker 4: Time anybody who answers yes to that, question forgive me
• 22:54
  Speaker 4: if you just answered yes in your, Head but you
• 22:56
  Speaker 4: need to have your head, examined you really. Do any
• 23:00
  Speaker 4: who was alive in the seventies and eighties AS i,
• 23:02
  Speaker 4: was and part of that, PERIOD i wasn't like a
• 23:06
  Speaker 4: keen economic, observer but for most of IT i. Was
• 23:09
  Speaker 4: and they know that would you rather be sick in
• 23:12
  Speaker 4: the seventies or? Today is there even a? Question would
• 23:15
  Speaker 4: you rather eat in a restaurant in the seventies where
• 23:17
  Speaker 4: the smoking section infringed on your? Section or would you
• 23:21
  Speaker 4: rather eat a? Restaurant is there any? Drugs, everything with
• 23:25
  Speaker 4: the exception of some life saving, drugs which is which makes,
• 23:28
  Speaker 4: this which which which makes the which exposes the cruel
• 23:33
  Speaker 4: side of, Innovation everything is cheaper no matter how you
• 23:37
  Speaker 4: want to measure it relative to, income life expectancies are
• 23:40
  Speaker 4: longer per CAPITA GDP n, say, oh there he goes
• 23:43
  Speaker 4: with there's economic. Statistics, well it's a lot, higher AND
• 23:45
  Speaker 4: i don't have a better measure of standards of. Living
• 23:48
  Speaker 4: it's basically it's increased by like fifty sixty percent since
• 23:52
  Speaker 4: then by any.
• 23:53
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• 24:55
  Speaker 2: Com in the latest publication of misunderstanding of how housing,
• 24:58
  Speaker 2: Works New York times, polishers Maybe america needs some new
• 25:02
  Speaker 2: cities sub. Headline it sounds a bit kooky to promise
• 25:04
  Speaker 2: a whole city from, scratch but it's been done before
• 25:07
  Speaker 2: and might just help solve the housing. Crisis so they
• 25:12
  Speaker 2: bring up the city Of, Irvine, california which was largely
• 25:15
  Speaker 2: built by The Irvine, company most for most of its
• 25:19
  Speaker 2: one hundred and sixty year. History that was amazingly, farming
• 25:22
  Speaker 2: and then they transformed it into a center for employment
• 25:25
  Speaker 2: and housing in a whole bunch of. THINGS i guess
• 25:29
  Speaker 2: my point would be. HERE i don't think the way
• 25:33
  Speaker 2: to solve our housing crisis is by trying to erect
• 25:36
  Speaker 2: new cities out of. Nothing AND i also really Hope
• 25:41
  Speaker 2: New York times doesn't get into how you would go
• 25:43
  Speaker 2: about doing, This But i'm especially concerned if our government
• 25:47
  Speaker 2: has anything to do with the planning of. It if
• 25:50
  Speaker 2: you want some idea of what planned cities look, LIKE
• 25:53
  Speaker 2: i encourage you to just do a quick search from
• 25:56
  Speaker 2: some reliable sources on some ghost cities In china which
• 26:01
  Speaker 2: are entertaining but also kind of scary about what can
• 26:04
  Speaker 2: happen when central planning at the government level kind of goes.
• 26:09
  Speaker 2: Wrong and it's not that building a bunch of cities
• 26:12
  Speaker 2: Across china was unproductive from an employment AND gdp, perspective
• 26:17
  Speaker 2: but it turned out they built way more cities than anybody,
• 26:19
  Speaker 2: needed and now they're populations on the verge of, shrinking
• 26:22
  Speaker 2: and so they have a bunch of cities that are.
• 26:24
  Speaker 2: Unoccupied so we keep coming up with these creative ideas like,
• 26:28
  Speaker 2: hey we'll, just you, know go out to the middle
• 26:30
  Speaker 2: of nowhere and build an entirely new city out of,
• 26:33
  Speaker 2: nothing when there are simpler. Fixes there are a bunch
• 26:38
  Speaker 2: of places that people want to live because there are
• 26:41
  Speaker 2: jobs there. Today we don't need to create an entire
• 26:44
  Speaker 2: new economic.
• 26:45
  Speaker 3: Hub we just need to.
• 26:46
  Speaker 2: Allow those places where people want to live to build
• 26:50
  Speaker 2: more houses more. Easily it's really all it. Takes AND
• 26:55
  Speaker 2: i understand why you don't want that if you already live,
• 26:58
  Speaker 2: there it by definition means that your house becomes, cheaper
• 27:03
  Speaker 2: so that kind of thinks for.
• 27:04
  Speaker 3: You but that is the trade, off.
• 27:06
  Speaker 2: Right there is no way to, say, hey we're going
• 27:08
  Speaker 2: to build more affordable housing and at the same, Time,
• 27:14
  Speaker 2: johnny you who already owns a, home it's going to
• 27:16
  Speaker 2: get more valuable under that. Plan those two are in direct.
• 27:19
  Speaker 2: Conflicts they will never fix each. Other but if you
• 27:22
  Speaker 2: want to build more affordable, housing don't don't tell me
• 27:25
  Speaker 2: we're going to build a new city out in middle of, Nowhere.
• 27:30
  Speaker 2: Vermont that's not going to be successful in my. Estimation
• 27:34
  Speaker 2: what you need to do is set up cities that
• 27:36
  Speaker 2: are existing and desirable and where people want to live
• 27:40
  Speaker 2: to be able to build more dense. Housing AND i
• 27:44
  Speaker 2: fully comprehend why people don't like.
• 27:46
  Speaker 4: That, YEAH i thought their argument was going to go
• 27:48
  Speaker 4: in a different, direction AND i don't think the economists
• 27:50
  Speaker 4: they cite would would agree with the use to which
• 27:54
  Speaker 4: their work is being. Put cities are responsible for the
• 27:59
  Speaker 4: vast majority major metropolitan, areas So i'm talking like if
• 28:03
  Speaker 4: you're from The boston area like we are, Here i'm
• 28:05
  Speaker 4: Talking Metro west if you're familiar with. It BUT i
• 28:07
  Speaker 4: know people are listening all over the. Country you know
• 28:09
  Speaker 4: WHAT i mean by a major metro. Area the vast
• 28:13
  Speaker 4: majority of economic, activity like ninety percent occurs in major metro,
• 28:17
  Speaker 4: areas the nicest places that you'd want to, live like
• 28:20
  Speaker 4: in the, Villages florida if that's your, lifestyle or somewhere
• 28:24
  Speaker 4: in The dakotas if you want, TO i don't, know
• 28:26
  Speaker 4: run a dude ranch or something. Like there's nobody. There
• 28:28
  Speaker 4: they not responsible for any of THE, gdp And god
• 28:31
  Speaker 4: help you if you get.
• 28:32
  Speaker 1: Sick not in the.
• 28:32
  Speaker 4: Villages i'm sure they have terrific health. Care so things
• 28:35
  Speaker 4: happen not in not in, urban not in very rural
• 28:39
  Speaker 4: places here in The United. States they happen in. Cities
• 28:42
  Speaker 4: SO i thought their argument was because of just. Generally
• 28:47
  Speaker 4: we made this point kind of in the earlier in the.
• 28:49
  Speaker 4: Show if you want to increase your, wages go work
• 28:54
  Speaker 4: for someone who's. Wealthy in a wealthy, area everything gets
• 28:57
  Speaker 4: scaled up those you could call those extern things that
• 29:00
  Speaker 4: just kind of spill. OVER i thought that's where this
• 29:04
  Speaker 4: article was going not like we need more, houses so
• 29:07
  Speaker 4: let's build seventy, story you, know concrete abominations like you
• 29:12
  Speaker 4: Know britain did with public, housing and like we. Tried
• 29:16
  Speaker 4: that wasn't my sense of where this story should.
• 29:18
  Speaker 2: Go, sorry let's say a quick. Break when we come.
• 29:21
  Speaker 2: Back Stack roulette is.
• 29:22
  Speaker 3: Next text us.
• 29:24
  Speaker 1: Six one, seven three six two one three eight five
• 29:27
  Speaker 1: with your comments and questions about today's. Show this is
• 29:30
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• 29:35
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• 30:29
  Speaker 3: Boston, hey it's time for a wee bit of stack.
• 30:31
  Speaker 3: Roulette what do you have for? Us so we were.
• 30:32
  Speaker 4: Talking earlier about the purpose of. Tariffs who bears the
• 30:37
  Speaker 4: cost of? TARIFFS i don't want to belabor it too. Much,
• 30:42
  Speaker 4: yeah you're talking about Every, yeah everybody that's looked at
• 30:44
  Speaker 4: it has concluded that consumers bear the cost of. Tariff
• 30:47
  Speaker 4: that's kind of the, point, Right if you want people
• 30:48
  Speaker 4: to switch away from foreign, goods, sure you want to
• 30:50
  Speaker 4: make it more painful to buy foreign. Goods SO i
• 30:52
  Speaker 4: don't know why you would deny, that but, anyway some people.
• 30:55
  Speaker 4: Do New York, fed maybe, coincidentally earlier today released a
• 31:00
  Speaker 4: study that concluded yet, again so this isn't exactly like breaking,
• 31:03
  Speaker 4: news because it's the same result that anybody who's ever
• 31:06
  Speaker 4: looked at this from time immemorial has. Reached The New
• 31:11
  Speaker 4: York fed study has looked at the most Recent i'll
• 31:14
  Speaker 4: just call them rounds of, tariffs even though some of
• 31:16
  Speaker 4: them are, tweets, this, that and the, other so it's
• 31:18
  Speaker 4: hard to make them into a coherent. Policy but, anyway
• 31:21
  Speaker 4: ninety four percent of the tariff, incidents which by which
• 31:25
  Speaker 4: they mean cost was borne by The United states in
• 31:28
  Speaker 4: the First they just looked at the first eight months
• 31:30
  Speaker 4: of twenty twenty five because that's when they were doing the. Study,
• 31:33
  Speaker 4: so you, know.
• 31:34
  Speaker 3: Does it breakout by business versus consumer or does?
• 31:37
  Speaker 4: It they, do but it gets a little tricky to,
• 31:40
  Speaker 4: read So i'm not sure my understanding of the way
• 31:44
  Speaker 4: they're presenting this data is. Correct but whether it's a,
• 31:47
  Speaker 4: company mic or a, person you, know pack profits passed
• 31:50
  Speaker 4: through their, owners passed through to us through the stock,
• 31:52
  Speaker 4: market for. Example so, yeah consumers bear the cost of,
• 31:56
  Speaker 4: tariffs it's not like foreign. Governments that's a little bit
• 31:59
  Speaker 4: of a different subject than we're talking.
• 32:00
  Speaker 3: About, no that's.
• 32:01
  Speaker 4: EARLIER i GUESS i want to.
• 32:04
  Speaker 2: Talk about the smart. Money uh we wh when when
• 32:07
  Speaker 2: people refer to the smart money, mark who are they
• 32:10
  Speaker 2: generally Referring.
• 32:11
  Speaker 4: Usually, institute usually investment what used to be called investment,
• 32:14
  Speaker 4: banks So Golden sachs Or Morgan.
• 32:16
  Speaker 2: Chaser do you think private equity would fit into that?
• 32:18
  Speaker 2: Bucket they, Do, yeah they. Don't they don't stock. Market
• 32:24
  Speaker 2: BUT i think, generally like if you're talking smart, hey
• 32:28
  Speaker 2: where's the smart money? GOING a lot of you, know
• 32:30
  Speaker 2: institutional investors have been placing money into private equity over
• 32:33
  Speaker 2: the last few, years AND i think you would generally
• 32:37
  Speaker 2: describe some of that money as going towards private, equity
• 32:39
  Speaker 2: maybe private equity.
• 32:40
  Speaker 3: Itself. Pension, Yeah i've been tossing a ton of money.
• 32:44
  Speaker 4: Cheese, yeah since roughly two.
• 32:45
  Speaker 2: Thousand, Yeah SO i want to talk about how that
• 32:48
  Speaker 2: smart money is not always the. Smartest we've seen this
• 32:53
  Speaker 2: over and over again with private equity over the course
• 32:55
  Speaker 2: of the last, year.
• 32:56
  Speaker 3: And it seemingly.
• 32:57
  Speaker 2: Continues but first last year where the number of cases
• 33:02
  Speaker 2: of fraud and bankruptcies specific to some private equity. Companies,
• 33:07
  Speaker 2: fortunately we haven't seen that explode into a whole bunch
• 33:12
  Speaker 2: more discoveries of companies that are funded by private equity
• 33:15
  Speaker 2: that are just blowing. Up and you, know there was a,
• 33:18
  Speaker 2: QUESTION i, think as to whether this was a real systemic,
• 33:21
  Speaker 2: issue and we, said, hey we just need to wait
• 33:23
  Speaker 2: a few months and see if these continue to blow,
• 33:25
  Speaker 2: up and by and large correct If i'm. WRONG i
• 33:28
  Speaker 2: don't think we have seen that be the.
• 33:29
  Speaker 3: Case talking about the private, debt, yeah we've talked about
• 33:33
  Speaker 3: the private credit mark automotive.
• 33:35
  Speaker 2: Industry in automotive as well as in, telecom you had
• 33:38
  Speaker 2: some fraud and we were sitting there, thinking, well if
• 33:41
  Speaker 2: if you smell, smoke might there be a fire? Here
• 33:44
  Speaker 2: and by and, large you, know it's now been six
• 33:47
  Speaker 2: months or so and we haven't seen.
• 33:49
  Speaker 4: No other shoot hasn't.
• 33:51
  Speaker 2: Dropped it has not but one other area here where,
• 33:55
  Speaker 2: again you, know it's really tough to be correct one
• 33:59
  Speaker 2: hundred percent into the.
• 34:00
  Speaker 3: Time one of the.
• 34:01
  Speaker 2: Other big areas that private equity has put a lot
• 34:04
  Speaker 2: of their funds, into both in the way of loans
• 34:07
  Speaker 2: and investment over the past decade has been software software companies,
• 34:12
  Speaker 2: specifically and they've been a desirable, target. Right these are low,
• 34:19
  Speaker 2: expense high margin businesses that have seen a tremendous amount
• 34:23
  Speaker 2: of growth over the last. Decade and as, such you,
• 34:27
  Speaker 2: know giant companies Like blackstone, AREAS kkr And Blue owl
• 34:30
  Speaker 2: have poured money into those types of. Companies and with
• 34:36
  Speaker 2: a you, know brand new software From anthropic that gets
• 34:41
  Speaker 2: released two weeks, ago all of a, sudden all of
• 34:44
  Speaker 2: those investments are looking very questionable. Today these companies that
• 34:48
  Speaker 2: previously had these massive barriers to entry because guess, what
• 34:53
  Speaker 2: not a lot of people have the coding and design
• 34:55
  Speaker 2: skills to be able to design something as user friendly
• 35:00
  Speaker 2: as TurboTax Or expedia or you, know name your favorite
• 35:05
  Speaker 2: website that you actually use to do. Things and guess,
• 35:08
  Speaker 2: what it was really really hard to design something like
• 35:10
  Speaker 2: that that worked well and actually accomplished what people wanted to.
• 35:15
  Speaker 2: Do the narrative that is now dominating is, well that
• 35:20
  Speaker 2: just GOT i don't, know one hundred times easier than
• 35:23
  Speaker 2: it was five years ago to design all of that.
• 35:25
  Speaker 2: Stuff and so now all of those same companies that
• 35:28
  Speaker 2: have been pouring money into these offerings are not falling,
• 35:31
  Speaker 2: apart but they are facing the same investor pressure that
• 35:36
  Speaker 2: the software companies themselves have Been over the last couple
• 35:39
  Speaker 2: of weeks on this renewed thinking of, okay maybe there's
• 35:43
  Speaker 2: another problem in private.
• 35:44
  Speaker 4: Equity undoubtedly it's not A i was gonna say it's
• 35:49
  Speaker 4: not a big part doesn't have to. BE i think
• 35:51
  Speaker 4: these are mostly venture capital focused managers as opposed to
• 35:55
  Speaker 4: the biggest whitcher buyout type firms that focus on very traditional.
• 35:59
  Speaker 4: Industries SO i wouldn't say it's, dominant but it could
• 36:03
  Speaker 4: be enough to CAUSE i, mean there's not going to
• 36:06
  Speaker 4: be like a run on the, bank because that's not
• 36:07
  Speaker 4: the nature of private. Equity when and a sophisticated investor
• 36:10
  Speaker 4: gives them their. Capital they know they're not they're not
• 36:13
  Speaker 4: going to back a return for years until you, know
• 36:15
  Speaker 4: the investments have to be, made the improvements have to be,
• 36:18
  Speaker 4: made depending on what the business, is and then it
• 36:21
  Speaker 4: becomes cash flow positive after like several, years and then
• 36:23
  Speaker 4: you get everything back and hopefully then some after like
• 36:26
  Speaker 4: as long as a decade or even more hard to, Say,
• 36:29
  Speaker 4: mike what their ramifications would be if a lot of
• 36:32
  Speaker 4: these investments suddenly become. Obsolete maybe not.
• 36:35
  Speaker 3: Quite the right, word but, YEAH i doubt they've become.
• 36:37
  Speaker 2: Obsolete and it's certainly not, overnight but it's just Been
• 36:41
  Speaker 2: i've been pouring over it over the last week and
• 36:44
  Speaker 2: thinking about it in terms of my own, life my own,
• 36:46
  Speaker 2: business and looking, at you, know the amount of money
• 36:50
  Speaker 2: that my own business spends on, software everything from antivirus
• 36:55
  Speaker 2: to customer relationship management to financial planning and investment summary
• 37:02
  Speaker 2: and trading, Right, like all of those things are big
• 37:05
  Speaker 2: software expenses that any corporation. BUYS i, think for you,
• 37:09
  Speaker 2: know one like, ours maybe twenty five grand a month
• 37:12
  Speaker 2: in software. Costs IF i can replace any single one of,
• 37:16
  Speaker 2: those like how dramatically does that change the financial, Picture
• 37:21
  Speaker 2: not for. Us for, us it's a relatively minor. Change
• 37:24
  Speaker 2: for the customers, themselves it's a relatively minor. Shift but
• 37:27
  Speaker 2: for those companies that offer that, software your stock price
• 37:32
  Speaker 2: is entirely dependent on the growth rates that you have,
• 37:35
  Speaker 2: seen AND i think those growth rates are what's in question.
• 37:38
  Speaker 2: Now that's the piece to me THAT i find. Fascinating
• 37:41
  Speaker 2: all the time that we have for, today will be
• 37:44
  Speaker 2: right back at tomorrow with an Inflation friday markets remain
• 37:47
  Speaker 2: in negative, TERRITORY nasdac leading the way down one point six.
• 37:51
  Speaker 3: Percent we'll be back.
• 37:52
  Speaker 2: TOMORROW i have a great rest of, day, folks