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America's 'buy now, pay later' economy is nothing new · The Financial Exchange Show

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Speaker 1: donation today. This is the Financial Exchange with Chuck Zada,
1:06
Speaker 1: and Mark Fandetti, Chuck.
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Speaker 2: Mark and Tucker with you here.
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Speaker 3: And as we kick off the second week of September,
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Speaker 3: we've got stocks broadly in positive territory. The Dow Jones
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Speaker 3: is up seventy six points about point one seven percent,
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Speaker 3: the S and P five hundred up four tenths of
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Speaker 3: a percent, or about twenty five points back above sixty
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Speaker 3: five hundred, the Nasdaq Composite up one hundred and seventy
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Speaker 3: points about three quarters of a percent, and so all
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Speaker 3: your major US indices are chugging right along this despite
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Speaker 3: the SMP having eighty five more issues down today than up.
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Speaker 3: So you do have kind of megacap tech driving the
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Speaker 3: ship again, which quite honestly, that's been the position of
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Speaker 3: stability over the last couple of years. Anytime that you've
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Speaker 3: tried to get small caps leading or the rest of
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Speaker 3: the index leading, the whole thing's kind of fallen on
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Speaker 3: its face. So I know that we normally talk about, hey,
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Speaker 3: you want you know, kind of broad rallies that lead
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Speaker 3: the market forward. Broad rallies have not been supportive of
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Speaker 3: this market for the last two and a half years,
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Speaker 3: and so until proven otherwise, the safer position for the
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Speaker 3: market has actually been big Tech leading the way.
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Speaker 2: Tenure.
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Speaker 3: US Treasury is down two point seven basis points to
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Speaker 3: four point h five nine percent. When we take a
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Speaker 3: look at commodities, oil up forty five cents a barrel
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Speaker 3: on West Texas Intermediate sixty two to thirty two a barrel,
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Speaker 3: and we've got gold of another twenty six fifteen ounce
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Speaker 3: to thirty six seventy nine and eighty cents, another all
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Speaker 3: time high for gold as it continues to surge ahead.
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Speaker 3: We could talk a little bit about what that means
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Speaker 3: in conjunction with bond yields falling. Hint, it's not really
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Speaker 3: great on the inflation side of things, is my read.
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Speaker 3: But it is what it is, and it's kind of
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Speaker 3: what you're seeing here at the moment. I want to
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Speaker 3: talk a little bit about this Wall Street Journal piece.
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Speaker 3: It's titled Americas by Now Pay Later Economy. The subheader
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Speaker 3: is Signs of an emerging debt crisis are everywhere, from
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Speaker 3: credit cards and mortgages to government budgets and oh boy,
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Speaker 3: like Americans have too much debt? How are we ever
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Speaker 3: gonna pay for all the debt? I mean, look, I
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Speaker 3: know that at some point it all matters but I'm
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Speaker 3: sorry I from kind of pooping this a little bit.
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Speaker 2: But two things.
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Speaker 3: A since the day I was born, Americans have been
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Speaker 3: saying there's there's too much debt that we have and
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Speaker 3: this is gonna cause problems literally true, you know, like
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Speaker 3: you can go find the Time magazine articles from nineteen
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Speaker 3: thirty seven about all Americans you know, growing debt problem,
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Speaker 3: and you know this and that, and it hasn't been
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Speaker 3: an issue whether you know, it's not to say that
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Speaker 3: we haven't had blow ups like we have, like the
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Speaker 3: generally most you know, most of the recent recessions are
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Speaker 3: caused by some kind of excess leverage somewhere in the system.
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Speaker 3: But somehow that gets interpreted as like it's always a problem,
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Speaker 3: and it's just not. Most of the time, it's it's
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Speaker 3: fine as long as you can cover that debt, there's
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Speaker 3: no problem with having it taken out. And so I
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Speaker 3: think that I can pooh pooh some of this while
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Speaker 3: also saying, hey, what does this say about where America
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Speaker 3: is today in terms of where the debt is building
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Speaker 3: up and why it's potentially problematic.
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Speaker 2: And what I get.
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Speaker 3: To is an extension of what we've been seeing for
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Speaker 3: the last fifteen or twenty years, which is, if you're
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Speaker 3: in the top fifteen to twenty percent of wage journers
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Speaker 3: in the country, you're in a good spot. You might
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Speaker 3: not like things aren't perfect for it. I'm not saying
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Speaker 3: that they are. Like you still have to make choices.
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Speaker 3: Not all of us are Jeff Bezos, but you've been
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Speaker 3: able to figure out how to make things work generally
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Speaker 3: for the remaining people, in particular the bottom fifty to
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Speaker 3: sixty percent of wage earners. Even figuring out how to
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Speaker 3: pay for groceries now is increasingly a bigger problem, to
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Speaker 3: the point where you are ending up with people having
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Speaker 3: to put groceries you know, Hey, I'm paying for groceries,
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Speaker 3: you know, using a firm so that I can buy
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Speaker 3: now and pay later.
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Speaker 2: I'm you know, putting a.
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Speaker 3: Chipotle you know, burrito on a payment plan, and it's
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Speaker 3: just real stuff. Like I know, we laugh about it,
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Speaker 3: but people don't do that stuff voluntarily. People don't sit
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Speaker 3: there and say, oh, like, gee, this is fun. It's
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Speaker 3: happening because someone just wants to have a burrito, just
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Speaker 3: to have like some kind of good in their life,
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Speaker 3: and the only way they can afford it is to
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Speaker 3: break it into you know, four payments of five dollars,
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Speaker 3: and that sucks for us, Like, I'm sorry, it's it's
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Speaker 3: just awful, But this is true. Now the piece on housing,
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Speaker 3: sixty nine percent of borrowers who took out a mortgage
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Speaker 3: ensured by the FAHA last years these are FAHA mortgages
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Speaker 3: had debt to income ratios that are considered risky, compared
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Speaker 3: with twenty eight percent in twenty twelve. So there are
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Speaker 3: more risky mortgages that are being made right now. We're
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Speaker 3: not going to know for probably five to seven years
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Speaker 3: whether that risk turns into any actual problem. Remember, not
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Speaker 3: called risk ends up paying off badly like some of it.
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Speaker 3: The nature of risk is sometimes the risk is worth taking,
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Speaker 3: and so I think in looking at this, it's something
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Speaker 3: that bears watching there. But ultimately, the reason that those
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Speaker 3: loans are considered risky is because those debt to income
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Speaker 3: ratios are higher. And I'm guessing it's not because people
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Speaker 3: suddenly decided, hey, let's go buy that luxury home on
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Speaker 3: an FAHA mortgage. That's not usually what happens with FAHA mortgages.
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Speaker 3: It's much more. Hey, home prices are still really high
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Speaker 3: and incomes have not kept with them, especially with mortgage
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Speaker 3: rates where they are and so bar wars. Have you
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Speaker 3: gotten into riskier loans in order to deal with this
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Speaker 3: that that could be a problem, but aren't necessarily going
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Speaker 3: to be one.
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Speaker 4: Yeah, it becomes a problem, as you suggested, and as
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Speaker 4: the article points out, if the economy slows, or if
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Speaker 4: inflation slows by a lot. Inflation is good if you
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Speaker 4: have that the real value, assuming your wages keep up
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Speaker 4: totally right, the real value of your payments goes down
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Speaker 4: alternatively or conversely, or the other side of that coin,
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Speaker 4: and whatever how you want to look at it, is
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Speaker 4: that dissinflation or deflation like we had in nineteen twenty
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Speaker 4: nine and nineteen thirty three. I know I'm going back
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Speaker 4: aways here, but we haven't then. We haven't had meaningful
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Speaker 4: I could tell you it was a tough It was
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Speaker 4: a tough period. We haven't had meaningful disinflation or deflation
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Speaker 4: in about one hundred years. I don't think I'm leaving
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Speaker 4: any uncomfortable disin now.
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Speaker 3: Nothing since you had a brief period in the financial
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Speaker 3: after the financial crisis.
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Speaker 4: Yeah, that was like one quarter of year over year,
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Speaker 4: very very fleeting, but still it was bad. When you'd
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Speaker 4: rather have inflation and let it eat away the real
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Speaker 4: value of your debt, So that can become a noxious
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Speaker 4: situation of vicious cycle if you like. This does become
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Speaker 4: a problem if we ever session, particularly a disinflationary recession,
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Speaker 4: so people losing their jobs and the real value of
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Speaker 4: their debt is, you know, not shrinking at the very
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Speaker 4: least looking chuck at as I'm sure you and Mike
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Speaker 4: Armstrong have done at. Household debt service payments is a
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Speaker 4: percentage of disposable personal income which the FED calculates every quarter,
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Speaker 4: which consists of mortgage debt and consumer debt. These ratios
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Speaker 4: don't look at all elevated relative to historical experience. That's
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Speaker 4: very big picture.
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Speaker 3: But and I think this is the thing, Like the
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Speaker 3: big picture doesn't look bad. But I think you can
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Speaker 3: make a case that it doesn't look bad because the
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Speaker 3: top twenty percent of Americans by income do so much
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Speaker 3: of the borrowing on things like houses and things like that,
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Speaker 3: and their incomes in their asset levels have grown to
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Speaker 3: the point where it's not really a huge issue for them. Generally,
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Speaker 3: if you make twenty five thousand dollars a year, you're
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Speaker 3: not buying a house in today's world in America and
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Speaker 3: most of it, and so okay, when you look at
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Speaker 3: you know, the thing that that person struggles with, it's
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Speaker 3: trying to make their rent payment and trying to even
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Speaker 3: just buy groceries, and are they having to go into
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Speaker 3: debt to buy groceries? And like, this is the problem.
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Speaker 3: Is in the aggregate things look okay, but you talk
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Speaker 3: to half of Americans right now and they're not okay financially.
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Speaker 4: And I think this is one of the things Bess
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Speaker 4: was getting at. Maybe I'm sorry to go back to
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Speaker 4: the last hour, but and he didn't make this point,
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Speaker 4: but it does follow that FED rate cuts won't help
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Speaker 4: the people who need help the most. The FED cuts,
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Speaker 4: the FED acts on the economy by stimulating demand. Some
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Speaker 4: of that demand goes into prices, hopefully some of it
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Speaker 4: goes into real GDP, like we talked about in the
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Speaker 4: last hour. But we don't appear to have a demand
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Speaker 4: problem right now. And if indeed the composition of borrowers
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Speaker 4: is as you posited that it is, and that seems
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Speaker 4: very plausible to me, FED rate cuts ain't gonna do
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Speaker 4: a thing for those at the in the lower tiers.
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Speaker 2: Let's take a quick break.
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Speaker 3: When we come back, we're gonna be joined by Ted
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Speaker 3: Rossman from bank Rate and he's going to talk to
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Speaker 3: us about their survey on prospective holidays spending. What are
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Speaker 3: people going to be buying for gifts under the tree
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Speaker 3: this year. We'll fill you in when we return.
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Speaker 2: As promised.
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Speaker 3: We're now joined by Ted Rossman from Bankrate here to
11:48
Speaker 3: discuss bank rates. Twenty twenty five Early Holidays Shopping survey ted.
11:54
Speaker 2: How you doing today?
11:56
Speaker 6: I'm doing well. Thanks for having me.
11:57
Speaker 3: Tech can talk a little bit about what this survey
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Speaker 3: come and some of the interesting results that you found here.
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Speaker 6: We found that forty percent of holiday shoppers are concerned
12:07
Speaker 6: that holiday gifts are going to be more expensive this year.
12:10
Speaker 6: We could read potential tariff impacts into that, as well
12:14
Speaker 6: as just the general trend of rising prices the past
12:17
Speaker 6: few years. Many people are starting their holiday shopping early.
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Speaker 6: This is a trend that's really taken off ever since
12:24
Speaker 6: the pandemic started as more of a supply chain concern,
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Speaker 6: it's morphed into more of a way to spread out
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Speaker 6: your cash flow. We see about half of holiday shoppers
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Speaker 6: are going to start making purchases before the end of October.
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Speaker 6: A lot of the best deals are going to start
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Speaker 6: in early October with things like Amazon Prime Day and
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Speaker 6: Target Circle Week and all the copycat sales that go on.
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Speaker 3: When you look at what we are seeing as far
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Speaker 3: as impulse shopping, you know a lot of people saying, Hey,
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Speaker 3: I want to plan and start taking advantage of these
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Speaker 3: things earlier. Do you see a lot of people that's
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Speaker 3: like I saw this on TV, I got to do
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Speaker 3: it now, or hey, I'm going.
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Speaker 2: To do this late? Like what do we see there?
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Speaker 6: There is some of that, and that's actually part of
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Speaker 6: why retailers offer the early sales, because it's kind of
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Speaker 6: a buy something for a friend or family member and
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Speaker 6: maybe buy something for yourself. There's kind of a treat
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Speaker 6: yourself angle to something like Amazon Prime Day, which on
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Speaker 6: the face of it is kind of an early shopping kickoff.
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Speaker 6: The July version is kind of the back to school kickoff,
13:27
Speaker 6: but I'm sure they're happy if you buy things for
13:29
Speaker 6: yourself as well. Social media marketing fits into all this.
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Speaker 6: There is a little bit of a risk that if
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Speaker 6: you start early, you're just going to keep buying. I do, though,
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Speaker 6: think the early start can be used to your advantage
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Speaker 6: in a few ways. It does help you spread out
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Speaker 6: your cash flow. If nothing else, Even if you think
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Speaker 6: this is all crazy. We just celebrated Labor Day. We
13:49
Speaker 6: haven't really put summer to rest. If all this holiday
13:52
Speaker 6: shopping talk sounds early to you, if nothing else, at
13:55
Speaker 6: least start sketching out your budget and gift list and
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Speaker 6: start setting money aside from every paycheck. You might have
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Speaker 6: seven or eight paychecks between now and the end of
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Speaker 6: the year. A really smart strategy is to set money
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Speaker 6: aside ahead of time, rather than leaving it all till
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Speaker 6: the end. That's when you're at more risk of running
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Speaker 6: up at credit card balance. The average rate is twenty percent.
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Speaker 6: You want to plan in advance.
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Speaker 3: What are we seeing when it gets at you know,
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Speaker 3: cash flow and stuff like that. What percentage of Americans
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Speaker 3: are going to have to end up going into debt
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Speaker 3: in order to make their holiday purchases.
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Speaker 6: About a quarter of holiday shoppers admit that they're likely
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Speaker 6: to take on debt. Frankly, I fear the actual cause.
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Speaker 6: The actual result will be higher because about half of
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Speaker 6: credit card holders already have debt from month to month,
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Speaker 6: and by now pay later has been growing rapidly. That's
14:43
Speaker 6: been growing double digits every holiday season, and that's debt too.
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Speaker 6: It may feel different, it may feel more responsible if
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Speaker 6: you're financing something let's say four interest free payments over
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Speaker 6: six weeks. But there are a lot of financial pressures
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Speaker 6: out there. It continues to be interesting how sent is low,
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Speaker 6: but actual spending has been higher, and you just want
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Speaker 6: to make sure that you're spending smartly, so you're setting
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Speaker 6: money aside ahead of time, You're not taking on debt.
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Speaker 6: You don't want to be paying off this Christmas a
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Speaker 6: year from now, and try to stack discounts when possible.
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Speaker 6: So that's going to involve taking advantage of a store promo,
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Speaker 6: combining that with the rewards credit card that you hopefully
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Speaker 6: pay off right away. Maybe you use an online shopping
15:24
Speaker 6: portal like Racqueton, or you take advantage of MX offers
15:28
Speaker 6: and Chase offers and those other digital coupons that could
15:32
Speaker 6: be three or four ways to save on the same purchase.
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Speaker 3: Ted, appreciate you joining us today. Thank you so much
15:37
Speaker 3: for the time in for conducting the survey.
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Speaker 2: Anytime.
15:41
Speaker 6: Thank you.
15:41
Speaker 3: It's Ted Rossman with bank Rate talking about their twenty
15:45
Speaker 3: twenty five Early Holiday Shopping survey.
15:49
Speaker 5: All right, time for trivia here in the Financial Exchange
15:51
Speaker 5: and on this day in nineteen eighty six, the Oprah
15:55
Speaker 5: Winfree Show was first broadcast nationally. Oprah's wild least successful
16:01
Speaker 5: show ran from nineteen eighty six to twenty eleven. So
16:04
Speaker 5: our trivia question today, which host had the longest running
16:08
Speaker 5: daytime talk show?
16:10
Speaker 2: Once again?
16:10
Speaker 5: Which host had the longest running daytime talk show? Be
16:15
Speaker 5: the fifth person today to text us at six one
16:18
Speaker 5: seven three six two thirteen eighty five with the correct answer,
16:22
Speaker 5: and you'll win a Financial Exchange Show T shirt once again.
16:25
Speaker 5: The fifth correct response to text us to the number
16:28
Speaker 5: six one seven three six two thirteen eighty five will
16:32
Speaker 5: win that T shirt. See complete contest rules at Financial
16:35
Speaker 5: Exchange Show dot com.
16:37
Speaker 3: Two questions for you guys. Eight Have you ever watched
16:41
Speaker 3: a full episode of Oprah?
16:44
Speaker 5: My mom always had it on, uh when I was younger. Uh,
16:47
Speaker 5: So I guess the answer is yes, but you never.
16:52
Speaker 5: I never liked sat down.
16:53
Speaker 2: It sounds like it was background noise.
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Speaker 5: Yeah, it was like a fish bowl.
16:56
Speaker 2: Yeah, Mark, what about you?
16:58
Speaker 3: Not to my knowledge, I would think I have either,
17:00
Speaker 3: but I just I'm not really around during the day.
17:04
Speaker 2: It was on to like three.
17:05
Speaker 3: I remember what are the big daytime talk shows now
17:09
Speaker 3: like they still exist?
17:11
Speaker 2: Right? Does the format still exist?
17:14
Speaker 5: I don't think so?
17:16
Speaker 2: What what what's on in that place?
17:18
Speaker 1: Now?
17:18
Speaker 4: You've got like five TVs in here?
17:20
Speaker 2: Is is it just? AI? If anyone has an answer
17:25
Speaker 2: to this texts?
17:27
Speaker 4: What's the bigger question? It sounds like you're working up
17:28
Speaker 4: to something. No, you're just wondering.
17:30
Speaker 3: Who watch I don't know what happened to daytime talk
17:32
Speaker 3: I don't know if it's still there on TV, if
17:35
Speaker 3: it's gone Texas at six one seven three six, two
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Speaker 3: thirteen eighty five, and let us know if there are
17:41
Speaker 3: still TV daytime talk shows.
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Speaker 5: A like Clarkson, Ben says, is one of them?
17:46
Speaker 2: She's got one?
17:47
Speaker 5: Yeah, doesn't true? Barrymore have another one?
17:49
Speaker 2: No idea? Yeah, no idea.
17:52
Speaker 3: But I'm I'm I'm kind of clueless in this area,
17:56
Speaker 3: and I'll admit it. So like this is why I'm
17:57
Speaker 3: asking for help. You know they always say like, hey,
18:00
Speaker 3: if you're in trouble, ask for help. I'm in trouble.
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Speaker 3: I don't know any daytime talk show hosts on TV,
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Speaker 3: and so I'm asking for help at six one seven
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Speaker 3: three six, two thirteen eighty five. I want to know
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Speaker 3: what happened to the format.
18:11
Speaker 5: Kelly and Mark?
18:13
Speaker 2: Who's Mark?
18:14
Speaker 6: I don't know.
18:15
Speaker 5: I'm just reading Ben's text, like Kelly Rippa that was
18:19
Speaker 5: so not Kelly Clarkson. Kelly Clarkson has one, so there's
18:23
Speaker 5: a lot of Kelly's.
18:24
Speaker 2: I don't know who the.
18:25
Speaker 5: Hell Mark is not? Mark Fandetti? Mark Fandetti is he's
18:27
Speaker 5: here with us right now?
18:28
Speaker 4: That's right.
18:30
Speaker 2: I've always wondered what happens to you at nude?
18:35
Speaker 3: Interesting in any case, As we take a look at
18:39
Speaker 3: markets as we head towards the bottom of the hour,
18:41
Speaker 3: the Dow Jones Industrial Average still up eighty one points,
18:44
Speaker 3: the smp is up twenty three, Nasdaq up one hundred
18:47
Speaker 3: and sixty five. So continued upward drifting markets again like
18:51
Speaker 3: last week. Early last week on Tuesday, looked like markets
18:55
Speaker 3: were getting a little bit shaky again, and they've just
18:57
Speaker 3: you know, picked themselves up, dusted themselves off, and continued
19:01
Speaker 3: their upward march here. And this has been the big
19:04
Speaker 3: theme pretty much since mid April, where I think the
19:11
Speaker 3: largest dip that we've seen has been maybe three and
19:15
Speaker 3: a half percent. It's been an incredibly calm last five
19:20
Speaker 3: months now, dating back to you know kind of April fifteenth,
19:25
Speaker 3: twentieth that range.
19:26
Speaker 2: Let's take a quick break. When we return, we've got
19:29
Speaker 2: the trivia answer.
19:30
Speaker 7: Then we're talking Tesla, bringing the latest financial news straight
19:42
Speaker 7: to your radio.
19:43
Speaker 1: Every day. It's the Financial Exchange on the Financial Exchange
19:47
Speaker 1: Radio Network. Time now for Wall Street. Watch a complete
19:53
Speaker 1: look at what's moving market so far today right here
19:56
Speaker 1: on the Financial Exchange Radio Network.
20:00
Speaker 5: It's to see in a nice little gain at this
20:02
Speaker 5: point as investors wait more inflation and jobs data do
20:05
Speaker 5: out this week ahead of the FEDS meeting next week. However,
20:08
Speaker 5: the size of the likely raycut is the biggest question
20:11
Speaker 5: that remains right now. The Dow is up by two
20:16
Speaker 5: tenths of one percent, or eighty eight points higher. SMP
20:19
Speaker 5: five hundred is up four tenths of one percent, NASDAC
20:22
Speaker 5: up eight tenths of one percent, or one hundred and
20:25
Speaker 5: seventy two points higher. Russell two thousand is edging higher.
20:29
Speaker 5: Tenure treasure real down three basis points and is now
20:31
Speaker 5: at four point zero four nine percent. In crude oil
20:35
Speaker 5: is up over one percent higher today, trading at sixty
20:38
Speaker 5: two dollars in sixty cents a barrel. Robinhood and appleven
20:42
Speaker 5: set to join the S and P five hundred on
20:45
Speaker 5: September twenty second. That news came on Friday, robinhood surging
20:49
Speaker 5: by fourteen percent, while Apple eleven shares are up by
20:52
Speaker 5: eleven percent. Meanwhile, Wall Street Journal reported that PNC Financial
20:58
Speaker 5: agreed to buy privately held First Bank and a four
21:01
Speaker 5: point one billion dollar DEALP and C shares are back
21:05
Speaker 5: or retreating almost one percent. Elsewhere, Some AT Therapeutic stock
21:09
Speaker 5: is sinking twenty five percent after the biopharmaceutical companies results
21:14
Speaker 5: from a Phase three trial for its lung cancer drug
21:17
Speaker 5: showed fewer improvements in patients. SpaceX agreed to pay seventeen
21:22
Speaker 5: billion dollars for the rights to some of Echo Star's
21:25
Speaker 5: wireless spectrum. EchoStar shares are jumping fifteen percent on that news,
21:29
Speaker 5: while competitors AT and T, Verizon and T Mobile are
21:33
Speaker 5: down about two percent. And according to a new filing
21:36
Speaker 5: this morning, ticket selling platform stub hub is aiming to
21:39
Speaker 5: raise as much as eight hundred and fifty million dollars
21:42
Speaker 5: for its IPO, giving it evaluation of up to nine
21:45
Speaker 5: point two billion dollars. The company plans to sell more
21:49
Speaker 5: than thirty four million shares price between twenty two and
21:52
Speaker 5: twenty five dollars per share. I'm Tucker Silva and that
21:58
Speaker 5: is Wall Street Watch. And in the segment, we asked
22:01
Speaker 5: you the tribute question, which host had the longest running
22:04
Speaker 5: daytime talk show. Well, that would be Maury Povich. He
22:08
Speaker 5: hosted Maury for thirty one years, beginning in nineteen ninety one.
22:13
Speaker 5: Tom from Spencer Mass is our winner today taking on
22:16
Speaker 5: the Financial Exchange Show Teacher. Congrats to Tom, and we
22:19
Speaker 5: played trivia every day here in the Financial Exchange. See
22:22
Speaker 5: complete contest rules at Financial Exchange Show dot com.
22:26
Speaker 3: Tesla market share drops to the lowest since twenty seventeen
22:29
Speaker 3: as competition heats up. To this a report from Reuters,
22:33
Speaker 3: and what we are seeing is that Tesla, which at
22:36
Speaker 3: one point had about eighty percent of the US EV market,
22:40
Speaker 3: now was down to thirty eight percent of total EV
22:43
Speaker 3: sales in August. It's the first time it's fallen below
22:47
Speaker 3: forty percent in a month since October of twenty of
22:50
Speaker 3: twenty seventeen. And so I think this is a continued
22:55
Speaker 3: question for Tesla, especially given the expiration of tax credits
22:59
Speaker 3: for evs at the end of this month. What do
23:02
Speaker 3: their sales look like as we head into twenty twenty six,
23:06
Speaker 3: and what does that do to the overall profitability of
23:08
Speaker 3: the company as Elon Musk tries to turn them from
23:11
Speaker 3: a car maker into a robot maker.
23:14
Speaker 4: So slowing demand overall for evs is was inevitable even
23:18
Speaker 4: without removal of incentives, et cetera. Correct slowing growth in
23:23
Speaker 4: or negative growth in Tesla's market share. This is a
23:26
Speaker 4: very bad combination if this is your core business, is it, though,
23:30
Speaker 4: or do they consider themselves to be evolving into something else?
23:35
Speaker 3: The whole thing now is they want to be a
23:36
Speaker 3: robot maker. I think because they realize that. Look, being
23:40
Speaker 3: a car maker's tough, and it's hard, and the margins
23:43
Speaker 3: are bad and it's tough business.
23:45
Speaker 4: Why would margins be better on a robot maker? Is
23:48
Speaker 4: it just more about the software there and the cleverness of.
23:51
Speaker 3: The well, we don't know, because there haven't been any
23:53
Speaker 3: robot makers before, so it's we could all speculate, but
23:57
Speaker 3: who knows who's.
23:58
Speaker 4: Actually primultiple on a a car maker currently that wants
24:02
Speaker 4: to become a robot maker. Why don't we do that?
24:07
Speaker 2: I mean, yeah, no, silly, I get what you're saying.
24:10
Speaker 3: Yeah, and so the question is, like, what are examples
24:14
Speaker 3: of you know, heavy machinery companies, because that's effectively what
24:18
Speaker 3: a robot is.
24:19
Speaker 2: Maybe it's media machinery, white machinery.
24:21
Speaker 3: That is the key ques depends on the size of
24:23
Speaker 3: the robot, I guess right. Ultimately, the question that you're
24:28
Speaker 3: going to be asking is how many of these can
24:33
Speaker 3: we sell? And what are the margins going to be
24:36
Speaker 3: on them? And even like when we talk about like
24:40
Speaker 3: big heavy machinery companies like Deer just as an example,
24:43
Speaker 3: they do forty billion dollars in revenue a year. I mean,
24:47
Speaker 3: it's it's not the pooh pooh Deer, but it kind
24:50
Speaker 3: of is because that's just not huge in terms of
24:54
Speaker 3: what we see for you know, big software companies and
24:58
Speaker 3: Apple and Nvidio and Amazon and those kinds of companies.
25:02
Speaker 3: Forty four billion dollars is it's it's a drop in
25:04
Speaker 3: the bucket. It's I like Deer myself, I you know,
25:07
Speaker 3: I'm a big believer in their products.
25:11
Speaker 2: But ultimately, okay, like who buys them. It's a small
25:15
Speaker 2: subset of the population.
25:17
Speaker 3: You know, it's industrial sized farms, people with large lawns,
25:22
Speaker 3: and occasionally, you know, municipalities that need, you know, something
25:27
Speaker 3: that can work around the town and stuff like that.
25:29
Speaker 2: Like that's that's kind of what it is.
25:32
Speaker 3: So I think that when we're talking about robots, everyone
25:38
Speaker 3: like the thing that everyone loves to say is, well,
25:41
Speaker 3: you know, we can sell billions of them because there
25:43
Speaker 3: will be one in every home to you know, do
25:45
Speaker 3: the laundry and do the dishes and this and that,
25:49
Speaker 3: to which I say, Okay, how much are they going
25:54
Speaker 3: to cost? Because most families don't just have a bunch
25:57
Speaker 3: of money sitting around for a robot. You know, if
26:01
Speaker 3: you're listening to this show, do you sit there and say, yeah,
26:03
Speaker 3: my robot budget this month is one thousand dollars a
26:06
Speaker 3: month or do you say, hey, it's kind of hard
26:09
Speaker 3: to pay the bills.
26:10
Speaker 2: I don't think I can afford that right now.
26:13
Speaker 1: Probably the latter.
26:14
Speaker 3: So if the price gets to the point where it's
26:17
Speaker 3: really affordable, what's gonna happen to the margins?
26:20
Speaker 2: They're probably not great?
26:22
Speaker 4: You know, you where the big barriers to entry even
26:26
Speaker 4: if Tesla was an early innovator leader like they were
26:30
Speaker 4: with evs as they're discovering now with evs.
26:33
Speaker 3: And are there and the thing that typically protects a
26:38
Speaker 3: business's margins are you know, things like network effects and
26:41
Speaker 3: things like that that can make it hard to pick
26:43
Speaker 3: someone else or a pat I guess, yeah, is there
26:45
Speaker 3: anything there in robotics?
26:48
Speaker 2: I don't know. We're at the early point of it, right,
26:53
Speaker 2: I don't know.
26:53
Speaker 4: It's amazing that it still commands such a premium in
26:57
Speaker 4: multiple terms relative to comps.
27:01
Speaker 3: But it's premium. It is an Elon premium. It's not
27:04
Speaker 3: related to products. It's not related to It is an
27:06
Speaker 3: Elon premium. You cannot have a big enough key man,
27:11
Speaker 3: you know, insurance policy on Elon for that company.
27:14
Speaker 4: But how do serious people argue, Like a couple of
27:16
Speaker 4: years ago, very serious people are arguing that the premium
27:19
Speaker 4: is attributable to their dominance and increased likely dominance of evs.
27:24
Speaker 4: That thesis is out the window. Yeah, am I misspeaking? Exaggerated?
27:30
Speaker 4: Now it's robots? Are you serious? I'm not saying I
27:33
Speaker 4: don't love. I don't know what Tesla's done.
27:35
Speaker 2: I do.
27:35
Speaker 4: It's a question of how much do you want to
27:37
Speaker 4: pay for it? Right?
27:38
Speaker 3: Always, always is Folks, Are you wondering where the economy
27:41
Speaker 3: is heading? GDP is growing, but Tariff's inflation and jobs numbers.
27:45
Speaker 2: They're making headlines.
27:46
Speaker 3: Interest rates, housing costs and policy changes are impacting all
27:49
Speaker 3: of us, and even AI is obviously changing how markets move.
27:53
Speaker 3: The Armstrong Advisory Group is hosting two financial seminars this
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Speaker 1: Nothing in the ad or in any Armstrong guide a
29:05
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29:08
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29:11
Speaker 1: Armstrong may contact you to offer investment advisory services.
29:16
Speaker 3: Apple's plan B for AI is actually pretty great. This
29:20
Speaker 3: is from Bloomberg and it talks about how, look, they're
29:23
Speaker 3: not spending billions of dollars, you know, building out their
29:26
Speaker 3: own data centers and AI facilities. They are content right
29:30
Speaker 3: now to let other people try to do that on
29:32
Speaker 3: their own and work on their own Apple intelligence stuff,
29:34
Speaker 3: which is largely on device based, and you know that.
29:40
Speaker 3: Here's the interesting thing about this, So Apple's kind of
29:42
Speaker 3: gotten punished in the last couple of years for not
29:44
Speaker 3: doing enough on AI. The comparison that I'll make to Apple,
29:50
Speaker 3: what if they're like Toyota, who four or five years ago,
29:53
Speaker 3: everyone in their grandmother was pouring money into EV development,
29:56
Speaker 3: and Toyota said, no, we're not gonna do that. We're
30:00
Speaker 3: gonna stick with what we know, which is turtal combustion engines, hybrids,
30:05
Speaker 3: and and that's gonna be our stuff, and four years
30:09
Speaker 3: ago everyone called them crazy. They're like, how could you
30:11
Speaker 3: not be developing evs? Everyone's gonna drive one? And sure enough,
30:14
Speaker 3: everyone's not driving one today. What if Apple is Toyota
30:21
Speaker 3: for ai, where yeah, some people are gonna choose to
30:24
Speaker 3: use use it and it's gonna be a thing. You know,
30:26
Speaker 3: I'm not saying it won't be. But what if there's
30:29
Speaker 3: too much money being spent trying to build out all
30:31
Speaker 3: these data centers, just like trying to build out all
30:33
Speaker 3: these EV plants, and we're gonna have overcapacity and the
30:36
Speaker 3: margins go bad and the thing isn't profitable even though
30:39
Speaker 3: there's increased demand.
30:41
Speaker 2: And Apple sitting there saying yeah, like we were in
30:44
Speaker 2: the cat bird seat the whole time. I could see
30:46
Speaker 2: that as a plausible path.
30:47
Speaker 7: Well.
30:47
Speaker 4: I think of companies that have spent a lot and
30:50
Speaker 4: continue to like Microsoft and their Office Suite their flagship,
30:55
Speaker 4: also call it their flagship software Excel, PowerPoint word Functionally,
31:00
Speaker 4: they're no different than they were, at least for me
31:02
Speaker 4: thirty years ago. Powerpoints still does not know that I'm
31:05
Speaker 4: trying to center a chart and when I do the
31:07
Speaker 4: same thing on the next slot, I want it to
31:08
Speaker 4: look like I did it on the last slide. Why
31:10
Speaker 4: is mister Clippy not detecting that I want to do
31:13
Speaker 4: the same thing I just did the last thirty operations?
31:16
Speaker 4: It takes me as much time to do Now. There
31:19
Speaker 4: may be innovative features that I'm just not aware of.
31:22
Speaker 4: I don't think so because I constantly google how do
31:24
Speaker 4: you do this in Excel to make sure I'm not
31:26
Speaker 4: missing any new shortcuts or PowerPoint or word less. So
31:30
Speaker 4: it's a word process or you don't expect as much
31:33
Speaker 4: from it. Formatting is a chore getting it to recognize
31:38
Speaker 4: the repetitive that you want to replicate a simple operation
31:41
Speaker 4: that you've just done five times in a row, and
31:43
Speaker 4: not offering to do it for you is frustrating. Where
31:45
Speaker 4: are the fruits of spending to this point? For those
31:48
Speaker 4: of us that actually work? And I'm picking on Microsoft here,
31:51
Speaker 4: I'm sure there are other good candidates for possible sort
31:55
Speaker 4: of misguided investing quick.
31:57
Speaker 2: Break here when we come back stack.
31:59
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32:43
Speaker 3: All right, Mark, I'm gonna kick off stack role here.
32:47
Speaker 3: Lego on October fourth is going to be releasing their
32:51
Speaker 3: most expensive Lego set ever, So one thousand dollars you
32:58
Speaker 3: heard that right, one thousand dollars Lego death Star from
33:02
Speaker 3: Star Wars. It's two and a half feet tall, two
33:07
Speaker 3: and a half feet wide, and almost a foot deep,
33:12
Speaker 3: and it is nine thousand pieces.
33:16
Speaker 2: I don't know how long that takes you to put together.
33:19
Speaker 4: That be round?
33:20
Speaker 2: Yeah anyway, No, it's it's not round.
33:21
Speaker 3: It's like a cutout of the Death Star so you
33:24
Speaker 3: can play in some of the rooms and stuff inside it.
33:27
Speaker 4: Okay, okay, So oh yeah, that makes a lot more
33:31
Speaker 4: sense than what I was thinking.
33:34
Speaker 3: Look, when you combine Lego fans and Star Wars fans,
33:37
Speaker 3: someone's gonna pay up for this. I'm sure they don't
33:38
Speaker 3: have to sell very many of them for this to
33:40
Speaker 3: end up making money. The interesting thing came just as
33:43
Speaker 3: I was going through the most highly priced Lego sets
33:45
Speaker 3: out there. The next closest is the Millennium Falcon, which
33:48
Speaker 3: is eight hundred and fifty dollars right now. And then
33:53
Speaker 3: you get to the third place one, which is the
33:58
Speaker 3: leab Air leab Hair Crawler Crane. It's it's basically like
34:02
Speaker 3: a construction crane that is seven hundred dollars. I don't
34:06
Speaker 3: know if there's like a huge crane Officionado market for them.
34:11
Speaker 3: And then finally you get to the fourth most expensive
34:16
Speaker 3: Lego set, which is the Titanic nine thousand pieces, also
34:21
Speaker 3: six hundred and seventy nine dollars. But here's the thing
34:25
Speaker 3: about the Lego Titanic set.
34:28
Speaker 2: It doesn't sink. It's unsinkable.
34:32
Speaker 3: It doesn't like allow you to you know how like
34:35
Speaker 3: the Titanic broken half leg along the mid line and set.
34:38
Speaker 2: It doesn't do that. How do you build a Titanic.
34:41
Speaker 4: That would be very poor taste if it did.
34:43
Speaker 2: How would it be poor taste?
34:45
Speaker 4: Like it's it's designed a snap in the middle and sink.
34:48
Speaker 3: That that's what the Titanic did. If you're making a
34:52
Speaker 3: lego of a disaster. Don't you have to be able
34:55
Speaker 3: to recreate the disaster? Maybe the poor taste is making
34:59
Speaker 3: it Titanic one to begin with, not the fact that,
35:02
Speaker 3: hey it doesn't bet.
35:04
Speaker 5: I was gonna ask if it came intact or if
35:06
Speaker 5: it was the disaster Titanic, Like, I don't know what
35:09
Speaker 5: set it was.
35:10
Speaker 4: What kid would want to put together the sunken titan
35:12
Speaker 4: I don't think these are kids morbid.
35:15
Speaker 3: Okay, well here's the thing, Mark, So I'm a big
35:17
Speaker 3: believer in like, disaster tourism shouldn't be a thing to
35:20
Speaker 3: begin with, right like all of.
35:23
Speaker 2: The people, Yes, it really does.
35:26
Speaker 3: Like it's you're basically like spending money to relive someone's
35:31
Speaker 3: family's worst day of their life. I guess the point
35:34
Speaker 3: I'm making is maybe the Titanic lego shouldn't exist, but
35:38
Speaker 3: if it does, it should actually, you know, be what
35:42
Speaker 3: the Titanic was, which was the ship that people thought
35:45
Speaker 3: couldn't sink that did.
35:46
Speaker 4: It wouldn't be hard to modify it.
35:49
Speaker 2: I don't know what might be.
35:50
Speaker 5: By the way, I'm seeing according to AI that the
35:53
Speaker 5: nine thousand piece lego set can take anywhere between fifteen
35:56
Speaker 5: and thirty hours.
35:58
Speaker 3: So it's a it's a solid week of work. It's
36:00
Speaker 3: either a part time or full time job for a week.
36:03
Speaker 3: I'm pretty sure that would take me a month. I'm
36:04
Speaker 3: not even exactly.
36:05
Speaker 2: It could be a while.
36:07
Speaker 3: They have an Eiffel Tower one that's ten thousand and
36:10
Speaker 3: one pieces. How much do you think they struggled to
36:13
Speaker 3: get it to ten thousand and one? So it's you know,
36:15
Speaker 3: it's a little more than ten thousand. But yeah, honestly,
36:19
Speaker 3: the Titanic one, it does kind of rub me the
36:21
Speaker 3: wrong way because you probably shouldn't be selling it to
36:24
Speaker 3: begin with, and be if you do sell it, well
36:27
Speaker 3: you have to actually have it do what the Titanic did.
36:31
Speaker 2: I don't know.
36:33
Speaker 3: Yeah, I'm uncomfortable with it, but right like, I'm not
36:36
Speaker 3: a fan of disaster tourism in general. It's just kinda
36:41
Speaker 3: it doesn't feel good to me.
36:42
Speaker 4: Now, do they have a Hindenburg too? Is it part
36:43
Speaker 4: of the line up.
36:44
Speaker 3: There or do they have I did not see one
36:46
Speaker 3: of those. I don't know how you make lego blimps
36:48
Speaker 3: A Lego's that one? You know, They've got a bunch
36:52
Speaker 3: of Star Wars, one bunch of Lord of the Rings
36:54
Speaker 3: ones that.
36:54
Speaker 4: That star blew up, but you know that was fictional
36:58
Speaker 4: did twice twice?
36:59
Speaker 2: Yeah, it wasn't the same Death Star, But you know
37:02
Speaker 2: the other ones.
37:03
Speaker 3: It's like okay, like, yeah, there's a river steamboat and
37:05
Speaker 3: you know, a floating restaurant.
37:06
Speaker 2: I'm just looking at other their boats. You know.
37:08
Speaker 3: The Titanic's the one that they made the biggest just
37:10
Speaker 3: because everyone knows it.
37:12
Speaker 2: But it does kind of feel like disaster tourism, right.
37:15
Speaker 4: You're profiting off of a trail because nobody wants to
37:18
Speaker 4: build like what was the the what was the sister
37:20
Speaker 4: ship the Britannic or something? No, why not sell that?
37:23
Speaker 4: Or like what happy.
37:25
Speaker 3: The QI two the biggest ship in the world for
37:27
Speaker 3: a while, That sounds right right it was when I
37:30
Speaker 3: was a kid. I don't even I've never been on
37:33
Speaker 3: a cruise my life, so in any case, I just
37:37
Speaker 3: I don't know, but uh, it just caught my eye that, like,
37:41
Speaker 3: I don't know, the Titanic. It just feels wrong for
37:43
Speaker 3: two reasons, Like what I'm not a disaster tourism believer,
37:45
Speaker 3: but if you're gonna build the Titanic, I don't know
37:48
Speaker 3: how you build a lego set where you can't have
37:51
Speaker 3: it like recreate what happened, because that's the only reason
37:55
Speaker 3: people know about the Titanic today. Maybe one other large
37:59
Speaker 3: cruise ship from the nineteen tens aside from the.
38:02
Speaker 4: Britannic ustorship, the Carpathian, which rescues or I.
38:05
Speaker 2: Guess you could say, or you could say like the Lusitania.
38:08
Speaker 3: But why do we know that again, disaster tourism, like
38:11
Speaker 3: no one knows, just normal cruise ships from back then.
38:16
Speaker 3: We're gonna take a quick break for the entire rest
38:17
Speaker 3: of the day. We'll see you tomorrow on the Financial
38:19
Speaker 3: Exchange