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Why the AI Boom Has Investors on Edge · The Financial Exchange Show

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  Speaker 1: and fall Lane.
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  Speaker 2: Good morning, Welcome back to the Financial Exchange. It's Mike
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  Speaker 2: Paulin Tucker with you on a bit of a selloff
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  Speaker 2: Tuesday here.
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  Speaker 3: Interesting to me too.
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  Speaker 2: By the way, that overnight, obviously the President announced we
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  Speaker 2: were delaying any new strikes on Iran and nonetheless not
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  Speaker 2: enough to move markets today. Oil price is falling a
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  Speaker 2: little bit in early trading, but stocks off a pretty
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  Speaker 2: substantial amount.
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  Speaker 1: Here.
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  Speaker 2: We got the S and P five hundred off three
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  Speaker 2: quarters for percent in early trading.
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  Speaker 3: Nasdaq a little bit more.
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  Speaker 2: Oil prices West Texas crewed edging lower, but not by
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  Speaker 2: much half a percent, down to one hundred and eight
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  Speaker 2: dollars a barrel. On the bond side, the thirty year
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  Speaker 2: treasury yield has jumped to five point one point eight percent.
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  Speaker 2: That's the highest.
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  Speaker 3: Wow? Is that the high sense PRIO eight? Hold on
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  Speaker 3: a minute.
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  Speaker 4: The thirty year has hit a nineteen year high, but
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  Speaker 4: you're looking.
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  Speaker 2: At the highest level since July two thousand and seven
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  Speaker 2: on the thirty year treasury, So nobody likes comparisons to
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  Speaker 2: pre Great Recession. On the ten year side, we're sitting
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  Speaker 2: at four point just shy of seven percent on that
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  Speaker 2: ten year Treasury yield. Mortgage News Daily has the thirty
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  Speaker 2: year fixed rate mortgage sitting just shy of six point
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  Speaker 2: seven percent. And taking a look at gas prices here
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  Speaker 2: in according to Triple A, still pretty steady here four
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  Speaker 2: dollars fifty three cents per gallon on the average. According
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  Speaker 2: to Triple A, We've talked at length about the pending
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  Speaker 2: you know, supply miss here and you know, the likely
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  Speaker 2: outcome for prices domestically and across the rest of the
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  Speaker 2: world here later this summer, should things not reopen, I
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  Speaker 2: suppose you can call today at least not you know,
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  Speaker 2: reversal on progress. But I don't see much progress as
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  Speaker 2: we sit here now. One two, What are we ten
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  Speaker 2: eleven weeks into the war and around something along those Yeah,
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  Speaker 2: big event coming up later this summer.
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  Speaker 3: It seems SpaceX intending to IPO.
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  Speaker 1: Uh.
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  Speaker 3: Some estimates run it near the two trillion dollar mark.
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  Speaker 1: Uh.
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  Speaker 2: You know, another one of Elon Musk's companies, which has
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  Speaker 2: now been already combined with Xai and SpaceX. I believe
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  Speaker 2: that means also that Twitter.
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  Speaker 3: Will be folded into this TPO, which is very interesting.
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  Speaker 2: You know, you go and buy one company that runs
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  Speaker 2: what was once one of the most popular social media sites.
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  Speaker 2: Combined with a rocket company is not exactly what you
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  Speaker 2: think of other than when you think of Elon Musk.
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  Speaker 3: What's I mean? Look, I think this will be probably
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  Speaker 3: the most well known IPO that we have seen in I.
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  Speaker 5: Was gonna say since Facebook probably, Yeah, can you think
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  Speaker 5: you know, Uber and Airbnb are popular names as well,
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  Speaker 5: but not to the extent.
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  Speaker 4: That Facebook, I feel like, really took hold.
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  Speaker 3: Yeah, it's obviously very different.
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  Speaker 2: You know, Uber, Lift, Facebook all were consumer facing products.
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  Speaker 2: SpaceX is only public facing because we've all seen their
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  Speaker 2: rocket launches on TV, but nonetheless now one of the
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  Speaker 2: largest defense contractors in the world and arguably the most
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  Speaker 2: advanced in terms of space exploration right now. It's also
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  Speaker 2: one in a long list of companies that have chosen
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  Speaker 2: to stay private for an incredibly long.
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  Speaker 4: Twenty five years since it's founding.
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  Speaker 2: And you do just one that speaks to the operation
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  Speaker 2: of markets today compared to the nineties, And we've talked
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  Speaker 2: about this a lot before, how there's just many fewer
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  Speaker 2: publicly traded companies today than there were then.
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  Speaker 3: That has to do with market mechanics, how much.
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  Speaker 2: Compliance costs there are to being public and how much
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  Speaker 2: access there is to cash while in private markets compared
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  Speaker 2: to thirty years ago. But furthermore, it does obviously raise
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  Speaker 2: the question of when you're talking about a company as
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  Speaker 2: mature as SpaceX going public, how much of the easy
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  Speaker 2: money has already been made? And there's no way to
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  Speaker 2: know that, but you know, tough for me to We
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  Speaker 2: made this comparison yesterday. I think Tesla went public in
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  Speaker 2: what was a tuckero five or something like that twenty
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  Speaker 2: ten and increased in market cap by I think one
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  Speaker 2: hundred times. Very difficult to envision a scenario where a
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  Speaker 2: two trillion company does two trillion dollar company does something
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  Speaker 2: like that, right, so obviously going to be a massive IPO,
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  Speaker 2: the fanfare of which will be unlike anything we've probably
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  Speaker 2: seen to your point, since Facebook, which was a very
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  Speaker 2: messy IPO. People kind of forget about that. But Facebook's
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  Speaker 2: IPO is a bit of a disaster. There were no trades,
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  Speaker 2: Nobody knew what price they were paying for the stock
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  Speaker 2: on the public market until like the next day, if
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  Speaker 2: your order had even been filled. I suspect it will
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  Speaker 2: go off a little bit more seamlessly than that, But
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  Speaker 2: there are a bunch of desires that Elon Musk has here,
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  Speaker 2: including offering shares to you know, loyal customers of his
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  Speaker 2: other brands and things like that, so that I don't
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  Speaker 2: know how it will be worked out, and so yeah,
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  Speaker 2: interesting piece of all of this.
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  Speaker 5: It's going to be fascinating to fall they're trying to
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  Speaker 5: aim to raise about seventy five billion through the IPO,
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  Speaker 5: and which.
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  Speaker 2: By the way, we haven't even talked about that that
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  Speaker 2: small of a portion available on public markets would normally
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  Speaker 2: disqualify a.
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  Speaker 3: Company for even consideration in major indices.
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  Speaker 5: Yeah, and I think what's going to be important for
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  Speaker 5: investors to be aware of is that you have a
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  Speaker 5: lot of other investors on the private side, headfunge and
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  Speaker 5: venture capital firms that are going to have to navigate
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  Speaker 5: the lock up period that's associated with these IPOs, where
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  Speaker 5: there's a certain amount of days I don't know SpaceX exactly,
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  Speaker 5: where other companies out there hypothetically have ninety days where
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  Speaker 5: you're locked up the company goes public before you can
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  Speaker 5: sell your shares if you've been an inside holder, and
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  Speaker 5: so that liquidity aspect is always a consideration when you
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  Speaker 5: go into IPOs. There's just a lot of fascinating angles
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  Speaker 5: to this. The interest is going to be really through
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  Speaker 5: the roof, and the valuation seems like it's going to
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  Speaker 5: reach that level two of potentially you know, one and
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  Speaker 5: a half trillion dollars.
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  Speaker 2: It's going to be pretty significant events massive. So what's
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  Speaker 2: the date again that they're targeting.
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  Speaker 5: June twelfth is what they are targeting to list on
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  Speaker 5: the Nasdaq at SPCX would be the ticker. That's what
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  Speaker 5: they're targeting.
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  Speaker 4: Again. These things can move.
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  Speaker 3: Around, they can Can we take a break, Tucker, you
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  Speaker 3: let me check.
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  Speaker 2: All right, let's say quick break when we come back,
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  Speaker 2: playing a little bit of trivia next, and then I
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  Speaker 2: want to talk about the concern about correction risk and
• 7:53
  Speaker 2: just general concern the investors seem to have today given
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  Speaker 2: everything going on. That's next to the Financial Exchange.
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  Speaker 6: All right, time for Tribby here on the Financial Exchange
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  Speaker 6: and on this day. In sixteen forty three, Massachusetts, Bay, Plymouth, Connecticut,
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  Speaker 6: The New England we all know today didn't come into
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  Speaker 6: its current form until eighteen twenty. So our trivia question today,
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  Speaker 6: which was the final state to join the region of
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  Speaker 6: New England?
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  Speaker 4: Once again?
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  Speaker 6: Which was the final state to join the Region of
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• 9:25
  Speaker 2: Paul, We've been experiencing a phenomenon in markets that is
• 9:29
  Speaker 2: somewhat rare.
• 9:30
  Speaker 5: Uh.
• 9:31
  Speaker 2: Since late February, the ten year treasury yield has increased
• 9:36
  Speaker 2: from about four percent to nearly four and two thirds percent.
• 9:39
  Speaker 2: That is a massive uptick. And you know we've experienced
• 9:43
  Speaker 2: that several times in the last decade, where an increase
• 9:46
  Speaker 2: in yields Since stock prices, and they tend to move inversely.
• 9:52
  Speaker 2: What we've experienced here. We did see a temporary drop
• 9:56
  Speaker 2: in stock prices, as we all remember, back during the
• 9:58
  Speaker 2: initial stage of the but now we've seen stocks since
• 10:03
  Speaker 2: late February recover all of their losses and increase pretty dramatically.
• 10:07
  Speaker 2: We've been on a substantial run up, and some are
• 10:11
  Speaker 2: warning about the divergence of this. Hey, as the cost
• 10:14
  Speaker 2: to borrow money goes up, it naturally makes stocks look
• 10:19
  Speaker 2: less attractive. And there's some basic mechanics here. The first
• 10:23
  Speaker 2: basic piece would be when you're valuing a company, when
• 10:27
  Speaker 2: you're talking about SpaceX and you're trying to look at, hey,
• 10:31
  Speaker 2: this company could be worth x number of trillion dollars.
• 10:35
  Speaker 2: If you're actually trying to put a value on it,
• 10:36
  Speaker 2: what you're doing is you're saying, Okay, I believe that
• 10:38
  Speaker 2: the cash flows of this company in the future are
• 10:42
  Speaker 2: going to be this much higher, and therefore, you know,
• 10:45
  Speaker 2: if I assume that and I discount back to today's value,
• 10:48
  Speaker 2: then I can justify paying xyz price for this company
• 10:52
  Speaker 2: or that company. And the higher the interest rate, the
• 10:56
  Speaker 2: higher the discount. And because you know, alternatively, you could
• 11:00
  Speaker 2: always go put the money in a treasury bond for
• 11:03
  Speaker 2: thirty years paying five plus percent. To put this more simply,
• 11:08
  Speaker 2: to the average retail person investor, you've got cash, I
• 11:12
  Speaker 2: can either go buy a CD paying me now let's
• 11:17
  Speaker 2: call it four percent, or I can go put it
• 11:20
  Speaker 2: in stocks, which one is going to pay off better
• 11:24
  Speaker 2: for me. Or I could go buy a piece of
• 11:25
  Speaker 2: real estate or take your risk act of choice. When
• 11:28
  Speaker 2: interest rates are higher, it makes everything look everything else
• 11:30
  Speaker 2: look a little bit less attractive. That has broken down
• 11:33
  Speaker 2: of the last few months, and it has to do
• 11:34
  Speaker 2: with the fact that the economy is and companies in
• 11:38
  Speaker 2: particular are just ripping growth right now. Whether you look
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  Speaker 2: at GDP, which came in at a pretty respectable two
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  Speaker 2: percent for the first quarter, eighty percent of which has
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  Speaker 2: been attributed to AI and the growth of it that's
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  Speaker 2: going there, or you know, I think, more importantly to
• 11:54
  Speaker 2: the stock market, take a look at earnings growth, which
• 11:57
  Speaker 2: came in for the first quarter so far in the
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  Speaker 2: high two twenty percent years per year level. It's that
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  Speaker 2: combination of things that seems to be convincing investors to
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  Speaker 2: not worry about rates.
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  Speaker 5: Yeah, it's these two different paradigms that you're sort of
• 12:10
  Speaker 5: focusing at the moment. One is that twenty eight percent
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  Speaker 5: year over year earnings growth for the S and P
• 12:15
  Speaker 5: five hundred, as reported by Facts that we've got ninety
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  Speaker 5: one percent of companies that have reported this quarter, so
• 12:21
  Speaker 5: most of them are in the door. That's a tremendous
• 12:23
  Speaker 5: amount of earnings growth year over year. The last time
• 12:26
  Speaker 5: we were above that number was about five years ago
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  Speaker 5: in Q four of twenty twenty one, and that was
• 12:31
  Speaker 5: ripping right off of the pandemic Q four of twenty
• 12:34
  Speaker 5: twenty one. So that's one aspect of things you can
• 12:36
  Speaker 5: make the argument as a bullish investor, gee, companies are
• 12:39
  Speaker 5: earning a lot more money.
• 12:40
  Speaker 4: There was a concern heading into this year.
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  Speaker 5: That stocks were overpriced relative to where they've traded historically.
• 12:47
  Speaker 5: Some of those concerns have been assuaged by the fact
• 12:49
  Speaker 5: that great we have seen growth in earnings, so that
• 12:52
  Speaker 5: has brought down that price multiple mix that we've seen
• 12:56
  Speaker 5: a little bit still at an elevated pace in general
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  Speaker 5: from a historical perspective. The other argument you can make
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  Speaker 5: is the inflationary one, where you have the straight up
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  Speaker 5: from moves that has been closed for eleven some odd
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  Speaker 5: weeks eleven or twelve weeks now, and one fifth of
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  Speaker 5: global trade has been halted and is no longer going
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  Speaker 5: through that passed away. So there's a tremendous amount of
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  Speaker 5: inflationary pressure and that's put pressure on interest rates. If
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  Speaker 5: you're bullish, you're willing to overlook those inflationary concerns. And
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  Speaker 5: it feels like the market has over the last month
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  Speaker 5: or so, I would say, it seems like more so
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  Speaker 5: this week, there's been a little bit more focus perhaps
• 13:32
  Speaker 5: on that inflationary risk that looms out there. Those that's
• 13:35
  Speaker 5: kind of the state of where markets are right now,
• 13:38
  Speaker 5: these two tracks, and you have to ascribe, you know,
• 13:41
  Speaker 5: more faith in one or another sort of conveying this
• 13:44
  Speaker 5: inflationary pressure in a market setback or we continue to
• 13:47
  Speaker 5: rip along.
• 13:49
  Speaker 2: In the summer of twenty twenty two, I was out
• 13:52
  Speaker 2: in Utah for a gorgeous wedding in Park City, which
• 13:56
  Speaker 2: is a lot of fun place I'd never been for,
• 13:59
  Speaker 2: And I was taken cab to the to the hotel
• 14:03
  Speaker 2: and my it might have been an uber, I don't
• 14:05
  Speaker 2: actually recall, but in either case, my driver was just
• 14:10
  Speaker 2: you know, peppering me with all sorts of cryptocurrency picks
• 14:15
  Speaker 2: at the time, he was, you know, a big winner
• 14:18
  Speaker 2: on the crypto trade and was really pushing his book,
• 14:21
  Speaker 2: to which I said, Okay.
• 14:23
  Speaker 3: Wow, we might have cryptocurrency.
• 14:27
  Speaker 2: Maybe I just haven't been in enough cabs recently or
• 14:31
  Speaker 2: been speaking with my Uber drivers as much as I
• 14:33
  Speaker 2: usually do. But I haven't heard the same thing coming
• 14:36
  Speaker 2: from the general retail investor boasting about their semiconductor picks
• 14:42
  Speaker 2: this year that have, you know, clearly in a lot
• 14:45
  Speaker 2: of cases gone through the roof. But there is this
• 14:50
  Speaker 2: piece today in Bloomberg about the AI boom being a
• 14:53
  Speaker 2: dilemma for retail investors, and the dilemma is plain and simple.
• 14:57
  Speaker 2: On average, retail investors have made a lot of money
• 15:01
  Speaker 2: on the AI trade, and on average retail investors have
• 15:05
  Speaker 2: a pretty notorious reputation of being bad at diversifying and
• 15:08
  Speaker 2: selling their gains when they have realized them. And that's
• 15:13
  Speaker 2: what it's really setting up. And I'm have no real
• 15:18
  Speaker 2: way of measuring if what we're in right now is
• 15:21
  Speaker 2: a bubble that is going to pop anytime in the
• 15:23
  Speaker 2: near future. But I do continue to see a lot
• 15:29
  Speaker 2: of comparisons back to the dot com The dot com
• 15:31
  Speaker 2: one is the one that I keep latching onto because
• 15:35
  Speaker 2: there are just more and more of these very exciting
• 15:38
  Speaker 2: IPOs that launch and increase three hundred percent, and people
• 15:43
  Speaker 2: who are quitting their job to be day traders. Maybe
• 15:46
  Speaker 2: more of them are trying to quit their job to
• 15:48
  Speaker 2: be polymarket better as I'm not really sure, But in
• 15:50
  Speaker 2: either case, when we see such a concentrated market move
• 15:54
  Speaker 2: like the one that we've seen recently, it does set
• 15:58
  Speaker 2: things up for some potential damage to things down the road,
• 16:01
  Speaker 2: based on at least historically, how how booms like this
• 16:05
  Speaker 2: have ultimately ended.
• 16:07
  Speaker 5: Yeah, we've talked about the private credit issue as something
• 16:10
  Speaker 5: that we are concerned behead this year, and the argument
• 16:12
  Speaker 5: we've always had there is that doesn't have the same
• 16:15
  Speaker 5: sort of ripple impacts of people being exposed to that
• 16:19
  Speaker 5: type of at least issue retail investors. And where I'm
• 16:22
  Speaker 5: going with this is with the tech sector and AHI
• 16:25
  Speaker 5: that is the opposite. Where you have the tech sector
• 16:29
  Speaker 5: the weighting in the S and P five hundred, which
• 16:31
  Speaker 5: many retail investors hold or hold something like it in
• 16:34
  Speaker 5: their four own case, that's about thirty percent the waiting.
• 16:37
  Speaker 5: If we have some of these bigger IPOs coming this
• 16:39
  Speaker 5: year that have been rumored open ai and anthropic, you
• 16:42
  Speaker 5: would imagine that they eventually sort of find themselves into
• 16:45
  Speaker 5: that sector too.
• 16:46
  Speaker 2: And all of a sudden, yet, where we had it
• 16:48
  Speaker 2: like half of the S and P five hundred being tech.
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  Speaker 5: That's you start trending up into these really high concentration percentages.
• 16:54
  Speaker 5: And couple that with the fact that a lot of
• 16:56
  Speaker 5: these big hyperscaler players are using these circle financing methods
• 17:01
  Speaker 5: where in Vidia is investing in open Ai in return
• 17:04
  Speaker 5: for open Eye spending billions of dollars to buy their
• 17:06
  Speaker 5: chips and servers. If one cog in that wheel breaks,
• 17:11
  Speaker 5: you have this dramatic impact. And I don't mean to
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  Speaker 5: say that as some doomsday for listeners out there. I
• 17:17
  Speaker 5: think there could be momentum that continues for.
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  Speaker 4: This for a while. Who knows.
• 17:20
  Speaker 5: I don't know when the buck stops. But you're right,
• 17:23
  Speaker 5: there's elements that are reminiscent of that late nineties period
• 17:26
  Speaker 5: that all of us in this economy game tend to
• 17:30
  Speaker 5: bring up.
• 17:30
  Speaker 2: It feels like we've talked about this before, but the
• 17:33
  Speaker 2: markets right now to me, are facing three major threats.
• 17:37
  Speaker 2: One of them is the innovation of a new exciting
• 17:41
  Speaker 2: technology that is drawing in the exact type of investment
• 17:45
  Speaker 2: that we have seen from almost every major technology in history,
• 17:49
  Speaker 2: whether it's the automobile.
• 17:50
  Speaker 3: Trains, radio, or the internet.
• 17:53
  Speaker 2: It very much looks like those events in terms of
• 17:57
  Speaker 2: the investment that it's drawing in and the race to
• 18:00
  Speaker 2: build out the infrastructure to support it. Go look at
• 18:03
  Speaker 2: the stock market history on those Most of them did
• 18:05
  Speaker 2: not end terribly well. We face a debt mess from
• 18:10
  Speaker 2: private credit that is smaller than but reminiscent of the
• 18:15
  Speaker 2: mortgage backed security crisis of two thousand and seven, and
• 18:19
  Speaker 2: on top of that, we're facing a inflate an inflation shock,
• 18:23
  Speaker 2: and rising interest rates due to an oil price shock.
• 18:27
  Speaker 2: I do believe that markets might be able to navigate
• 18:29
  Speaker 2: any one of those things. My fear would be that
• 18:32
  Speaker 2: a lot has to go perfectly right for markets to
• 18:36
  Speaker 2: successfully navigate all through three of those potential risks that
• 18:40
  Speaker 2: at any point in time.
• 18:42
  Speaker 3: Could be worse than we perceive.
• 18:44
  Speaker 4: That's fair, you know, that's all.
• 18:47
  Speaker 5: But if you go back to the nineties, you can say,
• 18:49
  Speaker 5: oh yeah, crafts and burn and the dot com bubble exploded,
• 18:51
  Speaker 5: But step back in five or ten years after that,
• 18:55
  Speaker 5: the same argument.
• 18:56
  Speaker 4: I don't know could necessarily.
• 18:57
  Speaker 5: There was a lot of coffins of company that went down,
• 19:00
  Speaker 5: went under, but there were a lot of companies that
• 19:02
  Speaker 5: came through and have tremendously benefited from all the investment
• 19:06
  Speaker 5: during that period of time.
• 19:07
  Speaker 2: True, but how long did it take you to make
• 19:09
  Speaker 2: your money back if you were all in the Nasdaq
• 19:10
  Speaker 2: in two thousands? That's why you don't overconserate. But yeah,
• 19:13
  Speaker 2: close to twenty years. Yeah, it was a while. So
• 19:16
  Speaker 2: that is the fear that concerns me is you had
• 19:18
  Speaker 2: a lost decade in the two thousands, right, You lost
• 19:22
  Speaker 2: a bunch of money, made it all back by seven,
• 19:23
  Speaker 2: and then lost it all again. Right, Quick break, Wall
• 19:26
  Speaker 2: Street Watch coming up.
• 19:27
  Speaker 1: Next, bringing the latest financial news straight to your radio.
• 19:43
  Speaker 1: Every day, It's the Financial Exchange on the Financial Exchange
• 19:47
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• 19:53
  Speaker 1: the stocks, the data, and the headlines driving markets so
• 19:56
  Speaker 1: far today right here on the Financial Exchange Radio Network.
• 20:00
  Speaker 6: The markets are selling off as investors digest first big
• 20:04
  Speaker 6: retailer earnings from Home Depot this morning. As for the
• 20:07
  Speaker 6: Middle East, President Trump announced lee yesterday he was calling
• 20:10
  Speaker 6: off a plan to attack around after Gulf States appealed
• 20:15
  Speaker 6: wanting more time to pursue diplomacy. Right now, the Dow
• 20:19
  Speaker 6: is down nearly half a percent, SMP five hundred down
• 20:21
  Speaker 6: three quarters of a percent, Nasdaq selling off over one percent,
• 20:26
  Speaker 6: or two hundred and ninety two points lower, Russell two
• 20:28
  Speaker 6: thousands down one and a third of a percent, Tenure
• 20:32
  Speaker 6: Treasure reeled is up five basis points at four point
• 20:35
  Speaker 6: six seven percent, and Oil down about half a percent,
• 20:39
  Speaker 6: trading right around one hundred and eight dollars a barrel.
• 20:42
  Speaker 6: Home Depot up modestly after the home improvement retailer beat
• 20:46
  Speaker 6: expectations on the top and bottom lines and reaffirmed its
• 20:49
  Speaker 6: full year of guidance. The company also said its core
• 20:52
  Speaker 6: consumer remains engaged despite higher gas prices in weaning consumer confidence. Low's,
• 20:59
  Speaker 6: TJX and Target will report their earnings tomorrow morning ahead
• 21:03
  Speaker 6: of the opening bell. Meanwhile, The Wall Street Journal reported
• 21:06
  Speaker 6: that Alphabet's, Google and Blackstone plan to create an AI
• 21:10
  Speaker 6: cloud company.
• 21:11
  Speaker 4: To compete with the likes of court.
• 21:12
  Speaker 6: Weave using Google's specialized chips. Alphabet shares down by two percent,
• 21:17
  Speaker 6: Blackstone down nearly one percent, and core Weave shares it
• 21:21
  Speaker 6: down over seven percent, and Cisco is now down by
• 21:24
  Speaker 6: three percent after it's CFO warned that the company would
• 21:29
  Speaker 6: see ups and downs with its gross profit margin as
• 21:33
  Speaker 6: it pushes further into AI infrastructure. I'm Tucker Silvan. That
• 21:39
  Speaker 6: is Wall Street Watching. On the previous segment, we asked
• 21:42
  Speaker 6: you the trivia question, which was the final state to
• 21:45
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• 21:49
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• 21:56
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• 22:00
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• 22:04
  Speaker 2: Market Watch has a piece today about inflation and retirees
• 22:09
  Speaker 2: and an interview with a financial advisor who describes phenomena
• 22:13
  Speaker 2: that he's experienced before that I think Paul and I
• 22:15
  Speaker 2: have both experienced before too, which is occasionally somebody will
• 22:19
  Speaker 2: have a big expense, they'll need to take money from
• 22:22
  Speaker 2: a portfolio that bumps them into a higher income tax bracket.
• 22:26
  Speaker 2: That tax then needs to get paid in the next year,
• 22:29
  Speaker 2: meaning more money needs to come out of the portfolio,
• 22:31
  Speaker 2: and it becomes problematic. And he makes the point that hey,
• 22:34
  Speaker 2: retirees with inflation face that triple threat because of that
• 22:38
  Speaker 2: high inflation, which I would debate.
• 22:42
  Speaker 3: One. Retirees do face.
• 22:45
  Speaker 2: Inflation just like the rest of us, and they just
• 22:47
  Speaker 2: got a massive tax cut so long as they don't
• 22:50
  Speaker 2: make more than one hundred and fifty thousand dollars as
• 22:52
  Speaker 2: a household. Furthermore, the tax brackets themselves are indexed to inflation,
• 22:58
  Speaker 2: and recently that inflation for the average person has been
• 23:02
  Speaker 2: higher on average than what retirees face. Gasoline prices, do
• 23:06
  Speaker 2: you drive more when you're retired or less?
• 23:08
  Speaker 3: Most people drive a little bit less.
• 23:10
  Speaker 2: Medical care services has been printing inflation that's lower than
• 23:14
  Speaker 2: overall inflation. So generally speaking, I don't really buy into
• 23:19
  Speaker 2: the idea that retirees, when they're faced with inflation, are
• 23:23
  Speaker 2: going to have this self fulfilling destruction of their portfolio
• 23:27
  Speaker 2: because they need to take out more and more. Yeah,
• 23:29
  Speaker 2: they might need to take out more and more, but
• 23:31
  Speaker 2: the tax brackets are growing with them, and this new
• 23:34
  Speaker 2: massive deduction that they're getting on for being over the
• 23:37
  Speaker 2: age of sixty five makes it so that this is
• 23:39
  Speaker 2: not much of an issue. But I do want to
• 23:42
  Speaker 2: talk about that one phenomenon where hey, a lot of
• 23:44
  Speaker 2: retireers do find themselves in a place where anything that
• 23:48
  Speaker 2: they touch from their savings in order to pay for
• 23:51
  Speaker 2: bills generates a tax bill. And how you navigate that
• 23:55
  Speaker 2: once you're in that retirement stage, Paul, because it's definitely
• 23:58
  Speaker 2: something you and I have run across front and try
• 24:00
  Speaker 2: to come up with creative solutions for how to fix
• 24:02
  Speaker 2: that problem.
• 24:03
  Speaker 5: Yeah, what happens often, Mike, is you enroll, you enroll
• 24:06
  Speaker 5: in your company's for one K plan when you start working,
• 24:09
  Speaker 5: and pre tax contribute contributions are the prevalent way that
• 24:14
  Speaker 5: people contribute to their retirement savings. But as you and
• 24:17
  Speaker 5: I know, and many retirees listening know that when you
• 24:20
  Speaker 5: go to access the funds that you've built this pre
• 24:23
  Speaker 5: tax nest egg on, whether it's in a four O,
• 24:25
  Speaker 5: one K or right, you got to pay taxes on
• 24:27
  Speaker 5: everything that you take out. And so you spend years,
• 24:31
  Speaker 5: thirty forty years working and saving to build that nest egg.
• 24:34
  Speaker 5: But then when you go to take out ten grand
• 24:37
  Speaker 5: to get that net ten grand, you have to typically
• 24:39
  Speaker 5: take out more and gross it up to account for
• 24:42
  Speaker 5: the taxes associated with that.
• 24:43
  Speaker 4: So a lot of our.
• 24:44
  Speaker 5: Planning goes goes into that to try and how do
• 24:48
  Speaker 5: you build a three legged stool approach to have a
• 24:51
  Speaker 5: blend of some pre tax dollars, some ROTH dollars, and
• 24:54
  Speaker 5: some regular dollars so that you can control your taxation
• 24:57
  Speaker 5: a little bit better in retirement.
• 24:59
  Speaker 4: That's but we try and work towards it.
• 25:01
  Speaker 2: And one issue that you know, people sometimes are not
• 25:04
  Speaker 2: aware of, so it is worth knowing. You know, when
• 25:06
  Speaker 2: you're working you get hit with that, you know, forty
• 25:08
  Speaker 2: thousand dollars surprise expense because your car gets total something
• 25:11
  Speaker 2: goes wrong in the house. You have the option to
• 25:13
  Speaker 2: at least borrow from the four to one k. It's
• 25:14
  Speaker 2: oftentimes not a good idea, but you can borrow from that.
• 25:17
  Speaker 2: There is no mechanism to do that once you're retired, right, Yeah,
• 25:21
  Speaker 2: Like the loans don't get made, but you can't borrow
• 25:24
  Speaker 2: from an IRA, so there is no mechanism for that
• 25:28
  Speaker 2: loan to be facilitated in retirement. And so yeah, frequently,
• 25:33
  Speaker 2: I'm sure Paul you've been faced with this too. It's hey,
• 25:35
  Speaker 2: you know, we have this big house project. We need
• 25:38
  Speaker 2: to do it.
• 25:39
  Speaker 3: You know, all we have are IRA assets.
• 25:42
  Speaker 2: What do we do And that's where the planning does
• 25:44
  Speaker 2: come in to actually evaluate, Like okay, so we could
• 25:47
  Speaker 2: pull out one hundred thousand dollars for you to make
• 25:49
  Speaker 2: renovations to your home. That's what it's going to do
• 25:51
  Speaker 2: to you in taxes and medicare premiums two years from now.
• 25:55
  Speaker 2: Or do you take out a home equity line of
• 25:57
  Speaker 2: credit and pay that thing off over two years in
• 26:01
  Speaker 2: order to spread out the taxation? Or if you do
• 26:04
  Speaker 2: have more of that three legged stool approach, hey, am
• 26:06
  Speaker 2: I better off taking from the roth here? Maybe I've
• 26:10
  Speaker 2: got some appreciated stock that I could sell and face
• 26:13
  Speaker 2: capital gains. In that case where I have appreciated stock,
• 26:16
  Speaker 2: I might be able to borrow off of that. So
• 26:18
  Speaker 2: you know, how do I shape all of this in
• 26:21
  Speaker 2: order to Again, none of this has to do with
• 26:24
  Speaker 2: buying the right investment and growing your portfolio that way.
• 26:27
  Speaker 2: All of this that we're talking about purely goes into hey,
• 26:30
  Speaker 2: how do I increase my return by paying lesson taxes?
• 26:33
  Speaker 3: And that is a really key.
• 26:36
  Speaker 2: Focus of any financial planner that's out there working with
• 26:39
  Speaker 2: a customer on planning out their expenses and ensuring that
• 26:43
  Speaker 2: by the I know, everybody worries about the tax bomb
• 26:46
  Speaker 2: of having a big IRA and the required minimum distributions
• 26:49
  Speaker 2: that are going to come. But it's more than just that,
• 26:52
  Speaker 2: because yes, the IRS is going to eventually force you
• 26:55
  Speaker 2: to take out money, But what if something happens and
• 26:57
  Speaker 2: you need money? How do I go about facing that
• 27:00
  Speaker 2: emergency cost when all of my money is four oh
• 27:03
  Speaker 2: one K and that of Those are these issues that
• 27:06
  Speaker 2: advisors try to address. If you have questions like that,
• 27:09
  Speaker 2: if you're unsure of how your plan is going to
• 27:11
  Speaker 2: work with your mix of retirement assets, folks at Armstrong
• 27:15
  Speaker 2: would love to talk to you about how to maximize
• 27:18
  Speaker 2: your portfolio, not only from an investment but also from
• 27:20
  Speaker 2: a tax planning perspective. The number for the advisors at
• 27:24
  Speaker 2: Armstrong eight hundred three nine three for zero zero one.
• 27:27
  Speaker 2: Offices scattered throughout New England, happy to meet you close
• 27:30
  Speaker 2: to where you live again eight hundred three nine three
• 27:33
  Speaker 2: for zero zero one or Armstrong Advisory dot Com.
• 27:36
  Speaker 1: The proceeding was paid for by Armstrong Advisory Group, a
• 27:39
  Speaker 1: registered investment advisor. Nothing in the ad or in any
• 27:41
  Speaker 1: Armstrong guide a specific financial, legal or tax advice. Consult
• 27:45
  Speaker 1: your own financial, tax and estate planning advisors before making
• 27:47
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• 27:50
  Speaker 1: advisory services.
• 27:52
  Speaker 2: Few pieces of breaking news in the open in the
• 27:54
  Speaker 2: AI universe. One in the Musk versus Altman trial. The
• 28:01
  Speaker 2: case got thrown out. It was Elon Musk suing open
• 28:04
  Speaker 2: Ai over actions by the CEO Altman. The jury threw
• 28:08
  Speaker 2: out the case based on the statute of limitations, but
• 28:11
  Speaker 2: a lot of discovery happened there, including a bunch of
• 28:14
  Speaker 2: conflicts of interest of members of the boards of open
• 28:17
  Speaker 2: AI and the investments that they had made in their
• 28:19
  Speaker 2: personal accounts, and then the conflicting investments that they made
• 28:24
  Speaker 2: on behalf of the business. And then separately, one of
• 28:27
  Speaker 2: the founders of open ai has reportedly joined Anthropic now,
• 28:33
  Speaker 2: which again is interesting in and of itself that that
• 28:37
  Speaker 2: has taken place.
• 28:38
  Speaker 5: Now, Yeah, Andrea's Carpathy is his name, and he's sort
• 28:41
  Speaker 5: of the one of the foremost experts on AI in
• 28:47
  Speaker 5: terms of the sort of experience that he has. He
• 28:50
  Speaker 5: was one of the founders, like you mentioned, of open
• 28:52
  Speaker 5: ai back in twenty fifteen. He and another colleague at
• 28:57
  Speaker 5: Stanford created the first sort of deep learning art official
• 29:00
  Speaker 5: intelligence course going on eleven years ago. And so he
• 29:04
  Speaker 5: is someone that has garnered tremendous amount of respect in
• 29:07
  Speaker 5: the space. Switching sides there to anthropics sort of is
• 29:11
  Speaker 5: another hit that open ai takes. And I was joking
• 29:14
  Speaker 5: with Tucker off Air that if open ay was a
• 29:16
  Speaker 5: public company, this would be something that would take their
• 29:19
  Speaker 5: stock down more in terms of negative news. They had
• 29:22
  Speaker 5: had another Wall Street Journal piece where they had missed
• 29:24
  Speaker 5: some internal revenue targets. It seems like they're facing a
• 29:28
  Speaker 5: little bit more pressure as they were the Darling back
• 29:31
  Speaker 5: in twenty what was it November of twenty two.
• 29:33
  Speaker 4: That chat GPT was released. They've they've struggled.
• 29:36
  Speaker 6: Since you'll appreciate one of these responses on the post
• 29:41
  Speaker 6: from andredge yep on x so he says, this is
• 29:46
  Speaker 6: like Kevin Durant joining the seventy three and nine Warriors.
• 29:51
  Speaker 4: Well done, that's pretty well done.
• 29:53
  Speaker 3: I don't even like.
• 29:54
  Speaker 4: Even Mike, even Mike to pick up on that.
• 29:56
  Speaker 2: Yeah, the piece of all this that I really uggle
• 30:00
  Speaker 2: to wrap my head around. Maybe this is the wrong
• 30:01
  Speaker 2: comparison to be making, but I don't understand if these
• 30:05
  Speaker 2: models are going to go the way of search where
• 30:09
  Speaker 2: initially in the days of the Internet, there were a
• 30:11
  Speaker 2: lot of different search engines that were all competing, and
• 30:14
  Speaker 2: one of them came to dominate to the point now
• 30:17
  Speaker 2: where we don't say we're going to online sorch something.
• 30:19
  Speaker 3: We just say we're going to go.
• 30:22
  Speaker 2: Social media didn't go that way, right like social media
• 30:25
  Speaker 2: started off with MySpace, then Facebook took over. Soon thereafter,
• 30:30
  Speaker 2: Instagram was getting hot, so Facebook bought them. Snapchat and
• 30:34
  Speaker 2: others are still, you know, coming about to talk and
• 30:37
  Speaker 2: kind of usurping where the eyeballs go. And I really
• 30:42
  Speaker 2: have a very difficult time, I mean, from my perspective,
• 30:47
  Speaker 2: AI tools seem a lot more like search.
• 30:50
  Speaker 3: Than they do social media. From the mere perspective of.
• 30:55
  Speaker 2: If I'm using Gemini every day, nobody other than all
• 31:00
  Speaker 2: the advertisers and Google themselves know that I'm using Gemini
• 31:03
  Speaker 2: instead of Chat, GPT, you don't know. My social network
• 31:07
  Speaker 2: doesn't know unless.
• 31:07
  Speaker 3: We talk about it.
• 31:10
  Speaker 2: But on the other hand, clearly these tools are leapfrogging
• 31:14
  Speaker 2: each other in terms of capabilities and the power.
• 31:17
  Speaker 3: Users are definitely.
• 31:18
  Speaker 2: Wanting to put themselves in a position where they can
• 31:20
  Speaker 2: readily switch from one to the other. And so I
• 31:23
  Speaker 2: just have a really tough time understanding if it is
• 31:25
  Speaker 2: going to be a winner take all, or if it's
• 31:28
  Speaker 2: going to be just this constant game of switching and competing,
• 31:32
  Speaker 2: in which case maybe the models don't really have any mote.
• 31:37
  Speaker 3: I don't know.
• 31:37
  Speaker 5: The model argument has been made that it's the fastest
• 31:40
  Speaker 5: appreciating asset out there. There's a tremendous amount of input
• 31:43
  Speaker 5: costs that go into training your models, and that now
• 31:46
  Speaker 5: that you have three or four options out there, that
• 31:49
  Speaker 5: they could be eroded down in terms of value. That's
• 31:52
  Speaker 5: thinking of it from the consumer prism of like Mike
• 31:56
  Speaker 5: and Paul, how do we use it as individuals on
• 31:58
  Speaker 5: the enterprise side. The reason that Anthropic has become it
• 32:03
  Speaker 5: seems like more of the they were just named, you know,
• 32:05
  Speaker 5: number one disruptor in the CNBC list that they point
• 32:08
  Speaker 5: out every single year, where uh, just they point out
• 32:11
  Speaker 5: the fifty most disruptive companies where I'm sure open ai.
• 32:14
  Speaker 5: I'd have to look back. The list was probably at
• 32:16
  Speaker 5: a higher point than Anthropic was before, and that's because
• 32:19
  Speaker 5: Anthropic has really established a lot of dominance in the
• 32:23
  Speaker 5: enterprise market where they've seen their revenue growth just actually explode.
• 32:27
  Speaker 5: I believe they're running an annualized revenue rate of thirty
• 32:30
  Speaker 5: five billion a year, and that number was you know,
• 32:33
  Speaker 5: call it a couple billion just a year or so ago.
• 32:35
  Speaker 5: I mean the company was only founded within the last
• 32:38
  Speaker 5: you know, two or three years, so it's just explosive
• 32:40
  Speaker 5: growth that you're seeing on the enterprise side.
• 32:42
  Speaker 4: I feel like that is maybe the.
• 32:43
  Speaker 5: Area that deserves more focus than the consumer lens for
• 32:49
  Speaker 5: the moment.
• 32:50
  Speaker 2: Yeah, and yet I will say when I speak to
• 32:52
  Speaker 2: the general public about their user habits, like I think
• 32:56
  Speaker 2: still most people are using GPT if they have an
• 32:59
  Speaker 2: app on their phone, using it for casual stuff.
• 33:01
  Speaker 4: Yes, I feel like that is more the case.
• 33:03
  Speaker 3: So it'll be fascinating to see which way they develop.
• 33:06
  Speaker 2: In a best case scenario for the consumer, they get
• 33:09
  Speaker 2: monetized and just become better and cheaper, like a lot
• 33:13
  Speaker 2: of these different platforms. I don't know what that means
• 33:17
  Speaker 2: for the stock market if that happens. So yeah, let's
• 33:20
  Speaker 2: take a quick break when we come back, a little
• 33:22
  Speaker 2: bit of stack roulette here on.
• 33:23
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• 33:27
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• 34:01
  Speaker 3: Stack Roulette Time. Paul, What do you have for us
• 34:04
  Speaker 3: this morning?
• 34:05
  Speaker 4: Mike.
• 34:05
  Speaker 5: I thought the travel agent job was dead long ago
• 34:10
  Speaker 5: with the advent of the Internet and online travel agencies,
• 34:14
  Speaker 5: and then in.
• 34:15
  Speaker 2: A giant building right across the highway called Trip Advisor
• 34:18
  Speaker 2: that you know, attempted to just do that put it
• 34:21
  Speaker 2: out of business.
• 34:22
  Speaker 4: Exactly stunning to me.
• 34:23
  Speaker 5: A piece in the Wall Street Journal here that the
• 34:25
  Speaker 5: travel agent profession is growing, with the industry revenue now
• 34:28
  Speaker 5: projected to reach one hundred and thirty four billion this year.
• 34:31
  Speaker 5: That's up seventeen percent from where it was in twenty
• 34:34
  Speaker 5: twenty three.
• 34:35
  Speaker 4: And there's even posts.
• 34:37
  Speaker 5: On LinkedIn that indicate that it is a fastest growing,
• 34:41
  Speaker 5: one of the twenty five fastest growing jobs over the
• 34:43
  Speaker 5: course of the last five years, three years, the travel Advisor.
• 34:46
  Speaker 5: And it stuns me just because I feel as if
• 34:50
  Speaker 5: that many people that I talked to, whether my parents
• 34:54
  Speaker 5: or clients, seem to be able to roll up their
• 34:56
  Speaker 5: sleeves and sort of plan out travel. Itineries themselves with
• 35:01
  Speaker 5: all the tools that you have available online to search things,
• 35:04
  Speaker 5: to sort out reviews, but it seems like on the
• 35:06
  Speaker 5: higher end of things, there still is a tremendous amount
• 35:09
  Speaker 5: of emphasis for people to try and find out special
• 35:13
  Speaker 5: nooks and experiences that they can sort of partake in
• 35:17
  Speaker 5: by contracting out a travel advisor, a trip advisor to
• 35:21
  Speaker 5: do that.
• 35:21
  Speaker 2: So here's what I'm comfortable say. So, my family just
• 35:25
  Speaker 2: went down to Disney World, which I'm hoping to not
• 35:29
  Speaker 2: do again in my lifetime, but not because there's a
• 35:32
  Speaker 2: terrible experience. It was not a terrible experience. It was
• 35:34
  Speaker 2: just a lot and it's not my idea of a
• 35:36
  Speaker 2: relaxing vacation. But we did utilize an agent there, and
• 35:39
  Speaker 2: Disney compensates them, and they don't offer you a discount
• 35:42
  Speaker 2: if you don't use one. And frankly, there is not
• 35:46
  Speaker 2: a lot that I've done that is more complicated than
• 35:49
  Speaker 2: navigating the complexities of park passes, understanding the terminology at
• 35:55
  Speaker 2: Disney World. I can kind of comprehend why if you
• 36:01
  Speaker 2: are spending as much money as you need to spend
• 36:04
  Speaker 2: now to travel on one of these instagram worthy vacations
• 36:09
  Speaker 2: that people are trying to take. Why you might say, yeah,
• 36:12
  Speaker 2: I'll spend five percent of that on a travel agent
• 36:14
  Speaker 2: so that I don't screw something up and land me
• 36:17
  Speaker 2: with a bunch of missed flights or lost baggage, or
• 36:19
  Speaker 2: the risks that you run of running into a tourist
• 36:22
  Speaker 2: trap that you weren't aware of because you trusted AI
• 36:26
  Speaker 2: to plan out your trip. So I guess I can
• 36:28
  Speaker 2: get it in that context of, Hey, I'm about to
• 36:30
  Speaker 2: spend ten thousand dollars on a trip to Italy as
• 36:34
  Speaker 2: a retired couple. Yeah, I'm sure I could do the research,
• 36:38
  Speaker 2: but I'd rather trust it to somebody who knows what
• 36:40
  Speaker 2: the heck they're talking about. I can comprehend that that's
• 36:42
  Speaker 2: what we're talking about, such a big purchase.
• 36:44
  Speaker 5: I guess I'm thinking from the lens of you know,
• 36:46
  Speaker 5: when you do a beach vacation, there's not a lot
• 36:48
  Speaker 5: of strategy. It's just like, Hey, what beach you're gonna
• 36:49
  Speaker 5: pop your chair on? But the complexity that would come
• 36:51
  Speaker 5: with an Italian vacation is a far different deal in
• 36:55
  Speaker 5: terms of what cities do you hit, What tourist locations
• 36:57
  Speaker 5: do you hit?
• 36:58
  Speaker 3: Where?
• 36:58
  Speaker 4: What museums?
• 36:59
  Speaker 5: You know, what sites do you see how to string
• 37:02
  Speaker 5: that all together.
• 37:03
  Speaker 2: For me personally, I have no interest only because like
• 37:07
  Speaker 2: half of the fun of going on vacation to me
• 37:09
  Speaker 2: is you know, dreaming about it and planning it and
• 37:12
  Speaker 2: like doing the work of figuring out what we're going
• 37:14
  Speaker 2: to do.
• 37:16
  Speaker 3: Example here, we traveled my wife.
• 37:19
  Speaker 2: And I recently and I did use AI to try
• 37:22
  Speaker 2: and build out some of the plans, and we were
• 37:25
  Speaker 2: doing this big hike, multi day hike with a you know,
• 37:28
  Speaker 2: hut that we were staying in.
• 37:29
  Speaker 3: It completely screwed up.
• 37:31
  Speaker 2: Really, it basically told me that this trail existed, that
• 37:34
  Speaker 2: I could get from point A to point B that
• 37:35
  Speaker 2: did not exist, and there was no actual way of
• 37:37
  Speaker 2: doing so. And had I followed the instructions, like would
• 37:39
  Speaker 2: have been in some pretty bad places. But you know,
• 37:44
  Speaker 2: again even that I enjoyed being like, oh AI has
• 37:47
  Speaker 2: no extra idea what it's talking about. I instead need
• 37:49
  Speaker 2: to go to this other website and you know, figure
• 37:53
  Speaker 2: it out. But yeah, if you're spending thousands of dollars
• 37:56
  Speaker 2: on a vacation, which you know, for a lot of
• 37:58
  Speaker 2: people is what they are looking to do these days, Yeah,
• 38:01
  Speaker 2: it's sometimes can pay to have that professional action knows
• 38:03
  Speaker 2: what they're doing. It's all the time we have for today.
• 38:05
  Speaker 2: Markets are continuing to sell off, but not worsening. NASDAK
• 38:10
  Speaker 2: off one and a quarter percent, SMP off three quarters
• 38:13
  Speaker 2: of percent, now closing in down half a percent. We'll
• 38:16
  Speaker 2: be back out of tomorrow tomorrow after the bell In
• 38:18
  Speaker 2: video reports earnings, so tune in for the rest of
• 38:20
  Speaker 2: the week. Big earnings week here as we close out
• 38:23
  Speaker 2: Q one earning season.