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Are we in a stock market bubble? · The Financial Exchange Show

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Speaker 1: Zada and Mike Armstrong.
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Speaker 2: Kicking off Thursday on the Financial Exchange Chuck, Mike and
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Speaker 2: Tucker with you, and we got the.
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Speaker 3: S and P five hundred.
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Speaker 2: Knocking on the door of new record highs. That's right,
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Speaker 2: the S and P five hundred. Yesterday with another leg
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Speaker 2: up and just you know, went right up to that
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Speaker 2: sixty one hundred mark.
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Speaker 3: And said, ooh, actually it's a little cold in here.
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Speaker 2: I think I'm gonna turn around and closed yesterday a
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Speaker 2: little bit lowered about I think it was sixty eighty two,
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Speaker 2: but kind of knocking on the door of the highs
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Speaker 2: that it previously touched in early December. And again we've
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Speaker 2: we've basically been seeing this chopping between sixty one hundred
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Speaker 2: on the high side and about fifty eight hundred on
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Speaker 2: the low side for the better part of the last
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Speaker 2: two and a half, almost three months now since election day.
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Speaker 2: And so hey, can you find a way to break
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Speaker 2: through that sixty one hundred mark or can you find
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Speaker 2: a way, you know, to break through that fifty eight
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Speaker 2: hundred mark? Those are the questions, because we're getting bored
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Speaker 2: just sitting here.
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Speaker 4: Man.
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Speaker 5: Well, let's talk about the items that could get you there.
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Speaker 5: We've got more inflation data towards the end of this month,
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Speaker 5: but nothing that's going to move things much. The earnings
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Speaker 5: would be the main item.
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Speaker 3: Next, big next.
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Speaker 5: We got some fun ones kicking off next week, some
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Speaker 5: big earnings coming up, and so far they've been pretty good.
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Speaker 5: Beyond that, you then have inflation and unemployment readings for
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Speaker 5: the month of January, but you won't see those for
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Speaker 5: another two to three weeks, and so it's it's mainly
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Speaker 5: the earning story in terms of what could drive things
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Speaker 5: forward here. So what will we see in the coming
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Speaker 5: week here from a big name earnings?
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Speaker 2: Chuck, So I'll read the list that I have. I
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Speaker 2: know the last time my list was wrong. So if
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Speaker 2: Tucker has anything that appears different on his side, uh,
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Speaker 2: you know, he can let us know, kick things off
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Speaker 2: with a.
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Speaker 3: Big one on Monday and t wrong. No, just kidding,
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Speaker 3: go keep going.
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Speaker 2: Actually no, it is wrong because eighteens he's just not like,
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Speaker 2: what are they really gonna? Hey, we.
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Speaker 3: They might have bought direct TV again.
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Speaker 5: The only thing that I could expect from them would
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Speaker 5: be something really stupid.
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Speaker 2: We carried some phone calls back and forth, not to
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Speaker 2: diminished like what they do, but more just that there's
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Speaker 2: nothing particularly exciting.
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Speaker 3: That happens with them at this point.
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Speaker 2: Uh, Tuesday start to get a little bit busier. You
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Speaker 2: got Raytheon and Boeing and Lockheed Martin, so big aerospace
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Speaker 2: companies reporting. Then Starbucks also reporting, which is gonna be
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Speaker 2: interesting first full quarter for what's his name as the
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Speaker 2: the Brian Nickel.
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Speaker 5: I do like the combination of Starbucks with aerospace companies.
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Speaker 2: But listen, it's uh, it's it's just the stars companies
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Speaker 2: that report together. I don't know what else they do together,
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Speaker 2: focused on the stars exactly. Uh, You've got Wednesday's the
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Speaker 2: big one, Microsoft, Meta, and Tesla all on Wednesday. So
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Speaker 2: between the three of them, you got a bet Sizon
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Speaker 2: trillion dollars in market cap that's going to be reporting
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Speaker 2: on Wednesday Thursday. This is where I think the list
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Speaker 2: I have gets dodgy. My list says Apple and Amazon,
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Speaker 2: but I think they're not till the week after.
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Speaker 6: Actually seeing Apple and Visa.
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Speaker 2: No Amazon, so okay, Apple's right, and Visa so again
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Speaker 2: some big names. And this is before you even get
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Speaker 2: into you know, MasterCards reporting, Blackstone, Caterpillar, Honeywell, Comcast. You
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Speaker 2: know I didn't even read off some of those. T
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Speaker 2: Mobile is reporting next week as well, Qualcom ADP, So
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Speaker 2: there's a lot coming next week and ultimately until we
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Speaker 2: get you know, further clarity on some of the policies
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Speaker 2: such as tariffs, taxes, things like that, earnings are going
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Speaker 2: to be in the driver's seat with you know, some
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Speaker 2: potential headline risk depending on what types of policies get
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Speaker 2: an ounced, either to the upside or downside, depending on
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Speaker 2: you know, what the specific announcements are.
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Speaker 5: Yeah, I mean, you hear stories now of whole companies
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Speaker 5: setting up war teams effectively what they're calling, just to
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Speaker 5: move through and digest all of the change that is
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Speaker 5: occurring in the first four days we're gonna half days, yeah,
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Speaker 5: of the new Trump administration. And you know, as much
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Speaker 5: as we talk about all those changes, what I found
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Speaker 5: particularly interesting is the lack of action on certain items,
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Speaker 5: and to me, the biggest one. There was no day
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Speaker 5: one tariffs changes anywhere in the world, and so that's
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Speaker 5: telling to me. We'll see how that continues to develop.
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Speaker 5: I do believe the Trump administration when they say they're
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Speaker 5: looking at February one as a target date. But until
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Speaker 5: Monday of this week, we didn't know of that February
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Speaker 5: one date, and so I do find a compelling that
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Speaker 5: there was no day one action even in regard to
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Speaker 5: trade with China.
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Speaker 2: Yeah, and yeah, we'll have to see if things evolve
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Speaker 2: over the next you know, eight to ten days on
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Speaker 2: that front. You know, if on February third we come
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Speaker 2: in and we're like, hey, this is what you know
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Speaker 2: actually went into place over the weekend, Okay, we can
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Speaker 2: talk about that. If not, then I kind of I
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Speaker 2: guess again. I was talking to Paul yesterday about this
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Speaker 2: and I kind of got out over my ski in
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Speaker 2: the fall where I said, look, the Trump administration is
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Speaker 2: talking really seriously about tariffs, like more serious and staffing
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Speaker 2: up in a way that makes you think that they
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Speaker 2: are coming. And you know, they were even saying yeah,
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Speaker 2: like we're going to do this on day one, and
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Speaker 2: they did a whole bunch of other stuff on day one,
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Speaker 2: and now they're kind of signaling February first. If we
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Speaker 2: don't see anything on February first, I then revert to
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Speaker 2: we'll talk about it when it actually happens. But I
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Speaker 2: can't pre talk about tariffs anymore. I need to actually
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Speaker 2: see what's there. And so We'll see what happens over
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Speaker 2: the next week to ten days. But I can't pre
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Speaker 2: talk tariffs more.
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Speaker 3: Yeah, I can't.
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Speaker 2: I'm ready to talk about them if they actually happen,
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Speaker 2: but I can't talk.
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Speaker 3: About what may or may not do anymore.
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Speaker 4: Agreed.
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Speaker 2: So we've got markets near all time highs, which leads
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Speaker 2: us to this piece from market Watch. Well, six sad as,
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Speaker 2: seven conditions are met for a stock mark market bubble.
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Speaker 5: So first thing first, does anyone have seven conditions that
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Speaker 5: they agree upon would designate a stock market bubble?
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Speaker 3: Well?
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Speaker 5: Is there any defined metric out there that any respectable
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Speaker 5: entity has ever put together saying these define a bubble?
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Speaker 3: In advance?
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Speaker 2: If someone actually took a giant bar of soap and
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Speaker 2: got the New York Stock Exchange covered in a giant bubble,
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Speaker 2: then you could say it's a stock market bubble for sure.
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Speaker 4: Yeah. Other than that, I have a tough time.
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Speaker 5: But let's let's run through what he defines as his signals.
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Speaker 4: One person signals for a This.
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Speaker 2: Is UBS a global equity strategist Andrew Garthwaite, who I
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Speaker 2: don't know Andrew from Tim and I couldn't tell you
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Speaker 2: anything about him.
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Speaker 4: So this is Tim Gait. Sure there is.
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Speaker 2: Somewhere This is not to poop poo Andrew. It's much
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Speaker 2: more how this is being presented, because I'm very sure
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Speaker 2: that in Andrew's own words, it's not being said quite like.
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Speaker 4: This, right.
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Speaker 5: So, first one that he checks the box on end
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Speaker 5: of a structural bull market. So UBS defines the structural
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Speaker 5: bull market as when equities outperformed bonds over a ten
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Speaker 5: year period by at least five percent per year.
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Speaker 3: Then that happened.
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Speaker 4: I wasn't tracking it. I didn't know that anybody.
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Speaker 3: Can't at it. So apparently they say it did.
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Speaker 4: Sure, profits under pressure.
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Speaker 3: Earnings growth is sloan, particularly in single little sectors. No,
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Speaker 3: it's not.
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Speaker 2: We're projected to see like seventeen percent earnings growth this year.
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Speaker 2: That's not true. And they were faster growing last year
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Speaker 2: than the year before.
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Speaker 4: So's I mean, maybe Nvidia's earnings growth is slowing.
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Speaker 5: Is are you choosing specific companies under specific sectors to
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Speaker 5: say this? But I don't think you can check the
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Speaker 5: box on earnings growth slowing when we are projecting what
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Speaker 5: was it, fourteen percent growth for the year on earnings.
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Speaker 2: Let me get you actually factset's most recent data. So
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Speaker 2: this is from January seventeenth, and what they are projecting.
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Speaker 2: This is again they take all the consensus analyst estimates
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Speaker 2: and stuff into a blender, and this is what they
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Speaker 2: come up with. Is counter your twenty twenty five fourteen
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Speaker 2: point eight percent earnings growth projected. It seems to be
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Speaker 2: pretty good. Count of your twenty twenty four was nine
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Speaker 2: point four So that's an acceleration. That's an acceleration, not
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Speaker 2: a deceleration. In the year before, in twenty three, I
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Speaker 2: can't remember what it was, but I can pull it
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Speaker 2: for you shortly, if you just give me just a minute.
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Speaker 5: So he then describes a loss of breadth, so a
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Speaker 5: handful of technology giants what UBS calls the Magnificent six.
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Speaker 5: Haven't we been talking about the Magnificent seven for the
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Speaker 5: last decade?
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Speaker 3: Why why would it be the Magnificent six?
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Speaker 4: Don't know.
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Speaker 3: I think that's not a movie.
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Speaker 5: Those are driving the market while smaller stocks lag. That
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Speaker 5: is true, but it's also been true for most to
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Speaker 5: the last decade, and specifically the last three years, so
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Speaker 5: timing wise, I have some issues. My least favorite one
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Speaker 5: on the list, it's been twenty five years since the
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Speaker 5: last bubble calendar you're twenty twenty three. Okay, here, here's
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Speaker 5: earnings growth. Sorry, it got interrupted. Twenty twenty three earnings
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Speaker 5: growth was point eight percent.
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Speaker 3: Okay, so point eight nine point four and now projected
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Speaker 3: at fourteen.
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Speaker 4: That is a very clear acceleration.
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Speaker 3: What are we talking about? I'm sorry, but that's fun.
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Speaker 3: Like this piece is fundamentally wrong.
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Speaker 5: My least favorite one here, chuck, though, this is the best.
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Speaker 5: It's been twenty five years since the last bubble.
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Speaker 2: Oh boy, twenty five years since the last bubble.
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Speaker 5: Bett shows the number of which it has been twenty
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Speaker 5: five years since the last bubble, and we are putting
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Speaker 5: a check mark next to it because we do do Yeah.
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Speaker 3: It's just like Ortiz when he's up in the playoffs
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Speaker 3: would do so.
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Speaker 5: Sorry, the definition of this is a stock market bubble?
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Speaker 5: Are we saying that six o seven was somehow not
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Speaker 5: a bubble?
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Speaker 2: Uh?
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Speaker 4: Or twenty twenty one wasn't like inconclusive?
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Speaker 5: Okay, Okay, here's one that I will just generally give you,
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Speaker 5: But I don't know that it defines a bubble.
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Speaker 4: That this time is different narrative?
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Speaker 5: Well, yeah, and I suspect that whenever somebody says this
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Speaker 5: time is different that they are wrong. But people have
11:24
Speaker 5: been saying this time is different for every market cycle ever.
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Speaker 2: Well, and even on this it says, I'll read the
11:29
Speaker 2: next sentence, investors are betting big on generative AI is
11:32
Speaker 2: a game changer for productivity. Okay, let's let's go back
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Speaker 2: in time. I don't know, fifteen years or so, and
11:38
Speaker 2: I remember all of the three D printing bros. That
11:41
Speaker 2: were like, three D printing is going to be a
11:43
Speaker 2: game changeer for manufacturing. How much three D printing goes
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Speaker 2: on right now? There's there's some don't get me wrong,
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Speaker 2: but it hasn't been you know a thing. You can
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Speaker 2: go through like all these different you know things, And
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Speaker 2: just because something gets hype doesn't mean it's a bubble.
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Speaker 2: I'm not saying that this isn't a bubble, but I'm
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Speaker 2: saying this is a bad list. And some of these
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Speaker 2: are fundamentally dumb and or wrong inaccurate.
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Speaker 5: It would be Yeah, look, I mean, I will pick
12:11
Speaker 5: apart any of these pieces, but when you give me
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Speaker 5: one that has virtually zero statistics attached to it comparing
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Speaker 5: one market to another, and some of the statistics are wrong,
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Speaker 5: and some of the statistics are infactually inaccurate.
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Speaker 4: Man, this is irresponsible.
12:28
Speaker 3: Now I'll allow for this.
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Speaker 2: There's a pretty good chance that whoever wrote this piece
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Speaker 2: for MarketWatch, Stephen Goldstein.
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Speaker 4: Did not summarize, did not summarize these properly.
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Speaker 2: So I'll allow for that because something might be getting
12:44
Speaker 2: lost in translation between Andrew and Stephen.
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Speaker 3: Yeah.
12:47
Speaker 5: I don't necessarily blame Andrew for this one. I doubt
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Speaker 5: he had, you know, pre published review rights on it.
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Speaker 2: But this is why you have to read these things critically,
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Speaker 2: as some of these things are fundamentally now true and
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Speaker 2: others why would they matter?
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Speaker 5: What is there a set bubble clock? I love that one.
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Speaker 5: Just Oh, it's been twenty five years, so Mary.
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Speaker 2: You got to reset the bubble clock. It's been twenty
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Speaker 2: five years, all right. I'm eagerly anticipating the stock market
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Speaker 2: bubble of twenty fifty that I'm sure we will cover
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Speaker 2: in great detail.
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Speaker 3: At that point.
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Speaker 4: Yes, we're all very excited.
13:23
Speaker 3: Let's take a quick break.
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Speaker 2: When we come back, we'll talk about where economists think
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Speaker 2: the Trump economy is heading.
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Speaker 2: All right, Mike, we got a piece from the Wall
14:33
Speaker 2: Street Journal. It's titled where economists think the Trump Economy
14:39
Speaker 2: is headed and where do they think it's going?
14:42
Speaker 3: Mike, is it to Boise? Is it kalamazoo?
14:46
Speaker 4: You always bring up Kalamazoo?
14:48
Speaker 3: So usually Topeka.
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Speaker 5: Generally, economists have coalesced around an idea that the inflation
14:55
Speaker 5: slight uptick that we saw in the last couple of
14:58
Speaker 5: months of twenty four may continue into twenty twenty five.
15:02
Speaker 5: And before we get into where economists now believe inflation
15:06
Speaker 5: will be, I just want to bring up something that
15:07
Speaker 5: we've talked about before, which is individual inflation expectations and
15:12
Speaker 5: how those have shifted. The University of Michigan has been
15:16
Speaker 5: doing their sentiment survey since the nineteen sixties.
15:19
Speaker 3: Is it maybe even fifties.
15:21
Speaker 5: Might be fifties or forties, And they ask things like
15:25
Speaker 5: what do you expect inflation to be over the next
15:27
Speaker 5: twelve months. When they did this survey back in October,
15:30
Speaker 5: prior to the elections, Democrats were anticipating only one and
15:33
Speaker 5: a half percent inflation over the next three twelve months.
15:37
Speaker 5: That's after the US economy in fact, finished twenty twenty
15:40
Speaker 5: four with two point nine percent inflation, which.
15:43
Speaker 2: By the way, the long term average of inflation since
15:45
Speaker 2: nineteen eighty is two point nine percent.
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Speaker 5: Okay, so right in line Democrats prior to the election,
15:51
Speaker 5: we're expecting the next twelve months to show about half
15:54
Speaker 5: of that Republicans, on the other hand, were expecting inflation
15:59
Speaker 5: to be coming in at three point six percent over
16:01
Speaker 5: the next twelve months. Sure, okay, fine, we fast forward
16:06
Speaker 5: to post election Democrats now anticipating inflation coming in for
16:09
Speaker 5: the next twelve months four point two percent, Republicans zero
16:13
Speaker 5: point one percent. Chuck, how many times in the last
16:17
Speaker 5: one hundred years would you guess, outside of a recession
16:20
Speaker 5: that we've seen inflation at zero point one percent years
16:23
Speaker 5: outside of a recession, side of a recession in the
16:25
Speaker 5: last one hundred I don't have the answer, So I'm
16:27
Speaker 5: just guessing.
16:27
Speaker 2: I'm just guessing very rare. We looked at this for
16:30
Speaker 2: the last like twenty five years. The only time outside
16:32
Speaker 2: of recession that we saw it basically anywhere near there
16:36
Speaker 2: was twenty fifteen when Russia decided to pump a ton
16:38
Speaker 2: of oil and the price of oil fell from ninety
16:39
Speaker 2: a barrel to thirty. Other than that, you don't really
16:43
Speaker 2: see inflation at zero.
16:45
Speaker 3: So I can.
16:47
Speaker 2: Say pretty conclusively, if the US avoids recession this year,
16:51
Speaker 2: inflation will not be zero.
16:52
Speaker 3: So no r anywhere near.
16:54
Speaker 4: No.
16:55
Speaker 5: I mean lessons here. I just this type of response
17:00
Speaker 5: to an election is crazy because we.
17:02
Speaker 3: See it every time we do.
17:04
Speaker 5: Let's be really clear, like Donald Trump has no ability
17:07
Speaker 5: to wave his wand and bring down gas prices or
17:10
Speaker 5: egg prices.
17:11
Speaker 2: And if he did, Joe Biden would have had the
17:12
Speaker 2: same wand and would have waived it, and like we
17:15
Speaker 2: all would be like, oh, like great, like thanks for
17:17
Speaker 2: waving the wand man.
17:18
Speaker 5: So presidents don't do that, Congress doesn't do that, and
17:22
Speaker 5: prices aren't going to immediately shift based on your political expectations.
17:26
Speaker 5: Where this gets really dangerous obviously though for investors, is
17:30
Speaker 5: I do wonder, right, like if you are that group
17:33
Speaker 5: that says, now inflation's only going to be zero point
17:36
Speaker 5: one percent because my guy is in office, does it
17:38
Speaker 5: also influence other things that you do, like your willingness
17:42
Speaker 5: to quit your job and go find another one, or
17:44
Speaker 5: your willingness to invest completely differently based on your hopes
17:50
Speaker 5: with a new White House. And I don't have an
17:52
Speaker 5: answer to that, but I would just caution people to
17:54
Speaker 5: check those emotions out that I've.
17:56
Speaker 2: Seen firsthand with people I saw back in you know,
17:58
Speaker 2: twenty sixteen, a whole bunch of people that didn't like
18:00
Speaker 2: Donald Trump that said, you know what, I'm selling everything
18:03
Speaker 2: in my portfolio because he's gonna run the country into
18:06
Speaker 2: the ground. Ye, and if you did that, you missed
18:07
Speaker 2: out on some pretty significant gains in the market during
18:10
Speaker 2: his term. And then in twenty twenty, a whole bunch
18:12
Speaker 2: of people said, oh, I don't like Joe Biden like
18:15
Speaker 2: it was the other way, and I'm gonna sell everything
18:17
Speaker 2: and because he's gonna run the country into the ground.
18:20
Speaker 2: And sure enough, you missed out on some big gains
18:21
Speaker 2: over you know, that four year period. And it's not
18:23
Speaker 2: to say that the market always goes up, because it doesn't.
18:26
Speaker 2: It's much more that, hey, the president doesn't control The
18:30
Speaker 2: president is not the business cycle, which if I ever
18:34
Speaker 2: write a book, I'm gonna call it that and it'll
18:37
Speaker 2: be about phishing, but it'll be titled that.
18:39
Speaker 3: Anyways.
18:41
Speaker 2: The big thing that I come back to on any
18:43
Speaker 2: of this stripping aside, like any of the politics, might
18:48
Speaker 2: I slice it, Emotional investing is bad investing, whether it's
18:52
Speaker 2: because of politics, whether it's because you're having a bad day,
18:55
Speaker 2: whether it's because you're having a good day, whether it's
18:58
Speaker 2: because of anything. If you you are investing emotionally, don't
19:05
Speaker 2: take a break, get yourself back together and figure out
19:09
Speaker 2: how to make an unemotional decision, because otherwise you're putting
19:13
Speaker 2: yourself in a position where you might make some moves
19:15
Speaker 2: that you end up regretting later on.
19:17
Speaker 5: And it's not to say that the success or failure
19:19
Speaker 5: of the stock market is because of the president.
19:22
Speaker 4: It's largely not.
19:23
Speaker 5: They might make all the best decisions and be faced
19:25
Speaker 5: with something like COVID, which shuts down the economy and
19:28
Speaker 5: tanks the stock market.
19:29
Speaker 3: Just take a quick break.
19:30
Speaker 2: When we come back, we got Wall Street Watch, and
19:32
Speaker 2: then we're talking stargate.
19:41
Speaker 1: Like us on Facebook and follow us on Twitter. Act
19:44
Speaker 1: TFE show. Breaking business news is always first right here
19:49
Speaker 1: on the Financial Exchange Radio Network. Time now for Wall
19:54
Speaker 1: Street Watch a complete look and what's moving markets so
19:57
Speaker 1: far today right here on the Financial Exchange Change Radio Network.
20:01
Speaker 6: Well one day after the SMP five hundred hit aen
20:04
Speaker 6: intra day high, markets today are in mixed territory as
20:07
Speaker 6: Wall Street continues to digest more developments from fourth quarter
20:12
Speaker 6: earning season. Right now, the Dow is up by sixty
20:16
Speaker 6: eight points, SMP five hundred dipping four points lower, and
20:20
Speaker 6: the NASDAC off by about a third of a percent,
20:23
Speaker 6: or sixty seven points russed two thousand is down half
20:26
Speaker 6: a percent, ten yere treas reeled up by five basis
20:29
Speaker 6: points at four point six five percent, and crude oil
20:34
Speaker 6: is up about two thirds of a percent, rating just
20:36
Speaker 6: below seventy six dollars a barrel. American Airlines posted quarterly
20:40
Speaker 6: results ahead of the opening bell this morning, beating on
20:43
Speaker 6: earnings and revenue. However, the carrier projected a weaker than
20:47
Speaker 6: expected outlook, sending that stock down by nine percent. Meanwhile,
20:52
Speaker 6: ge Aerospace shares up by six percent after the jet
20:56
Speaker 6: engine makers quarterly revenue surpassed estimates after an influx of
21:01
Speaker 6: orders elsewhere. Shares in video game maker Electronic Arts falling
21:05
Speaker 6: seventeen percent after the company cut its annual outlook, citing
21:10
Speaker 6: slowing demand for its soccer franchise.
21:13
Speaker 3: As well as other titles.
21:15
Speaker 6: Al CoA shares down by six percent after the aluminum
21:18
Speaker 6: producer swung a quarterly profit due to higher prices, but
21:22
Speaker 6: warned that tariffs threatened by President Trump would hit the
21:25
Speaker 6: industry's competitiveness. And after today's closing bell, we'll see earnings
21:30
Speaker 6: from Texas Instruments and CSX. I'm Tucker Silva and that's
21:35
Speaker 6: Wall Street Watch so earlier.
21:37
Speaker 2: This week, I think it was Tuesday, you had Sam
21:41
Speaker 2: Altman from open Ai, Larry Ellison of Oracle, and Masioshi
21:46
Speaker 2: Son of SoftBank at the White House for the announcement
21:50
Speaker 2: of open AI's Stargate project. It's talking about potentially spinning
21:55
Speaker 2: up to five hundred billion dollars to build new data
21:58
Speaker 2: centers in the night stints.
22:02
Speaker 3: So a couple things on this.
22:03
Speaker 2: The first thing that's notable is open Ai, who makes
22:07
Speaker 2: chat GPT. They have spent the first couple of years
22:11
Speaker 2: of their public facing life working really closely with Microsoft. Yeah,
22:17
Speaker 2: did I say that Microsoft had any representation at this meeting.
22:23
Speaker 4: No.
22:23
Speaker 5: In fact, sad Innadella, the CEO, was halfway around the
22:26
Speaker 5: world and Davas.
22:26
Speaker 2: Wasn't there, and so that's kind of interesting. And the
22:29
Speaker 2: two companies have kind of been going back and forth
22:31
Speaker 2: about their relationships. So maybe there's a little bit of
22:34
Speaker 2: fraying that's happening on that front.
22:36
Speaker 5: Yeah, that's been previously reported on Microsoft for whatever reason
22:40
Speaker 5: it might be. And I don't think any of us
22:41
Speaker 5: really know without being in the room, concerned about their
22:43
Speaker 5: relationship with open Ai and developing things in house as
22:47
Speaker 5: a standalone project. Rather than relying on open ai as
22:50
Speaker 5: much as they were previously.
22:51
Speaker 2: Yeah, and Microsoft basically said, look, we are not going
22:54
Speaker 2: to allow you to work with anyone else in terms
22:57
Speaker 2: of cloud computing capacity because we want to have not
23:00
Speaker 2: we want we have an exclusive agreement with you, and
23:03
Speaker 2: we are going to hold you to it. Open Ay
23:06
Speaker 2: I was like, no, you're violating this by not giving
23:08
Speaker 2: us enough capacity, and so we can go somewhere else.
23:10
Speaker 2: So it's been a little dodgy for the last six
23:12
Speaker 2: months or so. So they apparently were talking about doing
23:16
Speaker 2: this together, but it didn't work out. And so now
23:19
Speaker 2: open Ai heading to the arms of Oracle and soft
23:24
Speaker 2: Bank to try to do this. And I talked yesterday
23:27
Speaker 2: about look soft Bank, which is run by Masiyoshi Son.
23:30
Speaker 2: They have a long history of I'm trying to think
23:36
Speaker 2: of what the best way is to phrase this investing
23:41
Speaker 2: in stuff that doesn't end up panning out? Is I
23:45
Speaker 2: think the best way that I can phrase it.
23:47
Speaker 5: I want to paint it differently, because that's not exclusively
23:50
Speaker 5: they've been their experience obviously like they have made good investments, and.
23:55
Speaker 3: They have, but their recent track record is not great.
23:59
Speaker 5: True, And what was let's talk about some of their
24:03
Speaker 5: big recent flops. We were, well, yeah, which is a
24:08
Speaker 5: massive investment in that company, Hue.
24:10
Speaker 2: It was like twenty or thirty billion dollars and basically
24:13
Speaker 2: they end up getting nothing out of it. So like
24:16
Speaker 2: that was you know, a huge issue that they ran
24:20
Speaker 2: into back in like twenty seventeen, twenty eighteen. Other things
24:26
Speaker 2: and again just things that they've you know, talked about
24:29
Speaker 2: getting into and things along those lines. They announced back
24:33
Speaker 2: in October twenty seventeen that they were going to be
24:37
Speaker 2: helping Saudi Arabia develop something called Neom, which is basically
24:42
Speaker 2: this giant city that Saudi Arabia is trying to build
24:45
Speaker 2: and literally they they can't figure out how to build
24:48
Speaker 2: the thing in the middle of the desert because it's
24:50
Speaker 2: freaking hard to build cities just in the middle of
24:52
Speaker 2: the desert with no resources around them. So, like they've
24:56
Speaker 2: had some some flops and failures and things like that.
24:59
Speaker 2: They've had other things I have certainly worked out, you know,
25:02
Speaker 2: fine for them. Again, it's not to say that all
25:04
Speaker 2: their investments are failures, but they've had some issues. One
25:09
Speaker 2: that worked out really well for them, Armholdings. They were
25:12
Speaker 2: one of the companies that brought them to you know,
25:14
Speaker 2: kind of from smaller company to IPO and so that,
25:18
Speaker 2: you know, was something that worked out really well for them.
25:21
Speaker 2: But Son is kind of a huckster, I think, is
25:27
Speaker 2: the way that I look at it. You know, like
25:30
Speaker 2: he after the failure of we Work, he had a
25:36
Speaker 2: you know, he put out this big slide deck to
25:38
Speaker 2: investors in this presentation he was giving and I don't
25:41
Speaker 2: have it like off hand, but one of the pages
25:44
Speaker 2: was like we're here now and we're gonna go up, up, up,
25:47
Speaker 2: up up like this, and it's like, okay.
25:50
Speaker 3: Like what are we really doing here?
25:52
Speaker 2: Sure, So I do think that you have to read
25:56
Speaker 2: this a little bit critically and take it with a
25:57
Speaker 2: grain of salt, just because some of this stuff probably
26:01
Speaker 2: doesn't come to fruition in terms of the size and
26:03
Speaker 2: scale of it.
26:03
Speaker 3: But the piece that's really juicy is.
26:08
Speaker 2: Literally the day this is announced by the Trump administration,
26:11
Speaker 2: Elon Musku is not in the Trump administration, but is
26:15
Speaker 2: as close as you can be to them without being
26:17
Speaker 2: officially in it agreed, comes out and tweets they don't
26:22
Speaker 2: have this money. Actually they got no more than ten
26:25
Speaker 2: billion dollars committed. No, this isn't actually happening, and so
26:30
Speaker 2: I'm like, oh boy, juicy. This is juicy because if
26:33
Speaker 2: there's one thing that I really love, it's seeing billionaires bicker.
26:36
Speaker 2: Because look, let's be honest, none of them are actually
26:38
Speaker 2: gonna get hurt. Like they're all gonna be just fine.
26:41
Speaker 2: You don't sit there and you're like, oh, gee, whoever
26:44
Speaker 2: comes out of this is gonna like really, they'll all
26:46
Speaker 2: be fine, like they'll move on to the next way.
26:48
Speaker 2: But I just I love seeing billionaire, especially like ten
26:52
Speaker 2: billionaires bickering. You remember when Elon and Zuck We're gonna
26:55
Speaker 2: have the cage match, Yeah that we never got, which
26:56
Speaker 2: we said would never happen.
26:58
Speaker 5: But yeah, questions like, where does this put Elon Musk
27:04
Speaker 5: in terms of the crosshairs with Donald Trump For him
27:06
Speaker 5: to be tweeting about it on the day that it's announced.
27:08
Speaker 5: Donald Trump was front and center with this deal and
27:11
Speaker 5: really promoting the idea of it, and Elon Musk coming
27:15
Speaker 5: out day one. Now, you know, to be clear, he
27:17
Speaker 5: and Sam Altman have a pretty big history of feuding
27:22
Speaker 5: and so this isn't entirely surprising. But yeah, I believe
27:24
Speaker 5: what least one pending lawsuit between the two act. Yeah,
27:27
Speaker 5: so for Elon must be coming out and throwing this
27:30
Speaker 5: type of shade, if you will. At at the announcement
27:33
Speaker 5: on day one, I do wonder about the deterioration of
27:37
Speaker 5: potential relations between Trump and Musk.
27:39
Speaker 2: Yeah, it's and look, this is why generally you don't
27:45
Speaker 2: want people with giant who also run giant companies working
27:51
Speaker 2: in or directly adjacent to the federal government is because
27:54
Speaker 2: it creates all kinds of conflicts of interest for them.
27:57
Speaker 5: And this could be the best deal in the world,
27:59
Speaker 5: right and Elon Musk would hate it, right, like, this
28:01
Speaker 5: could be amazing, Like none of us know.
28:03
Speaker 2: I mean again, like when you're talking about like half
28:05
Speaker 2: a trillion dollars, like I don't know, like sure, like
28:08
Speaker 2: it sounds great, Like I have no idea how this
28:12
Speaker 2: is actually going to end up working out. But Elon
28:16
Speaker 2: coming out that day being like, and here's his direct quote,
28:19
Speaker 2: soft Bank has well under ten billion dollars secured. I
28:21
Speaker 2: have that on good authority. I mean, what are we
28:26
Speaker 2: really doing here?
28:28
Speaker 5: So now, again, should I trust Elon Musk about who
28:32
Speaker 5: has funding when he has previously been sued by the
28:34
Speaker 5: SEC for claiming that they had funding secure to take
28:37
Speaker 5: Tesla private with no actually evidence of that.
28:40
Speaker 3: I don't know that I should.
28:41
Speaker 2: No, But as I noted, like Son is kind of
28:44
Speaker 2: a huckster in his own right.
28:46
Speaker 3: So you're like, I don't know who to believe on this, Like,
28:50
Speaker 3: what what do we do with this? I guess we'll
28:53
Speaker 3: just see how it works out.
28:54
Speaker 5: But what are they again, assuming that this is all
28:57
Speaker 5: legitimates and comes to pass, what are they actually planning
29:01
Speaker 5: to do? It's the build out of data centers to
29:03
Speaker 5: support the expansion of artificial intelligence and the massive data
29:10
Speaker 5: and power that it consumes. Correct, Yes, although nothing on
29:12
Speaker 5: the electricity side purely, just on the server side of things.
29:16
Speaker 5: Is what they plan to do with this money should
29:18
Speaker 5: it actually come to pass. Which the thing I noted
29:21
Speaker 5: in a couple of weeks ago, it's unclear if you
29:25
Speaker 5: actually continue to need this much computing power because a
29:30
Speaker 5: lot of these big AI firms have gotten to the
29:33
Speaker 5: point where they've kind of said, hey, we've run out
29:36
Speaker 5: of stuff to train our models on, like we've reached
29:39
Speaker 5: the end of the Internet. And so if you already
29:43
Speaker 5: are encapsulating all of the Internet and all of that
29:47
Speaker 5: information that's out there, you kind of look at it
29:48
Speaker 5: and you go, well, what do we do?
29:51
Speaker 2: What do we need this for? And I think that's
29:54
Speaker 2: a valid question that's out there. The thing that they're
29:57
Speaker 2: going to talk about is the move towards it's what
30:00
Speaker 2: they call artificial general intelligence AGI, not just AI. The
30:05
Speaker 2: difference between a GI and AI AI right now is trained. Hey, like,
30:09
Speaker 2: you put something in and it spits out a general
30:11
Speaker 2: you know, an answer to you based on it's knowledge
30:15
Speaker 2: in that area. Artificial general intelligence is the idea that
30:19
Speaker 2: you can make something that actually thinks like a person
30:22
Speaker 2: and can operate across different environments because it understands the
30:29
Speaker 2: world man man again, it's the best way I can
30:37
Speaker 2: It's it's instead of hey, can you build a better
30:41
Speaker 2: drill that does more stuff? It's can you build me
30:45
Speaker 2: a robot that can drill for me and then also
30:48
Speaker 2: put the drill down and hammer and deal with the
30:52
Speaker 2: plumbing and the electrical and everything. That's what AGI is
30:56
Speaker 2: as opposed to a better tool. It's something that can
30:59
Speaker 2: operate a whole by tools, and that's what they're trying
31:02
Speaker 2: to build, and who knows if they can actually get there,
31:03
Speaker 2: because to me, AGI feels an awful lot like self
31:07
Speaker 2: driving cars. Hey, wait, a week away. It's always a
31:11
Speaker 2: week away, you know, just like Fusion Power. We'll take
31:15
Speaker 2: a quick break here when we come back. Let's see
31:19
Speaker 2: we want to talk more about earnings, or we want
31:21
Speaker 2: to go out to California and talk fires.
31:22
Speaker 5: I think we should probably get out to California here,
31:24
Speaker 5: so let's cover that next year on the Financial Exchange.
31:27
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32:09
Speaker 2: All right, So we've got more fires breaking out this
32:13
Speaker 2: time north of Los Angeles. Actually a couple different ones. Yeah,
32:18
Speaker 2: there's one here called the Supulvtave fire. Do you guys
32:22
Speaker 2: know how fires are named in California?
32:24
Speaker 4: By the way, is it similar to hurricanes.
32:26
Speaker 2: No, they're named by the street that they originate on.
32:30
Speaker 2: So if anyone's ever wondering, like, hey, why is this
32:32
Speaker 2: one called this or that interesting, it's because of the
32:36
Speaker 2: street that they originate on, is how they do the naming.
32:39
Speaker 2: So you had a couple new ones that broke out here.
32:42
Speaker 2: Won the Supulvita fire, which is I guess near bell Air,
32:47
Speaker 2: which was close.
32:48
Speaker 5: To the Palisades fire effectively, yes, a couple miles away
32:51
Speaker 5: the highway of the four h five that it seemingly leaped
32:53
Speaker 5: over with some presumably embers, that is now closing on
32:56
Speaker 5: the belt Air Air, which is a pretty heavily populated
32:59
Speaker 5: area and.
33:02
Speaker 4: Burning quickly there.
33:03
Speaker 5: And then you also have this other fire, the Huge Fire,
33:07
Speaker 5: the Huge fire, which has broken out in a less
33:09
Speaker 5: populated area, but pretty rapidly from what I'm seeing, starting yesterday,
33:14
Speaker 5: burned about ten thousand acres, which just to give somebody
33:17
Speaker 5: a sense for that, it's about a third of the
33:20
Speaker 5: acreage of the city of Boston in I mean, this
33:25
Speaker 5: thing broke out yesterday afternoon. It was like twelve hours,
33:28
Speaker 5: so it was very very rapid. Fortunately, has not gotten
33:32
Speaker 5: down that's in the Santa Clarita area and has not
33:35
Speaker 5: quite gotten down to that more populated area, So I
33:38
Speaker 5: guess that part is the fortunate piece. But yeah, this
33:42
Speaker 5: thing is very clearly not over. And I know they
33:46
Speaker 5: were either receiving or expecting some rain over the next
33:49
Speaker 5: coming days, but these winds that they are continuing to
33:51
Speaker 5: receive is just spreading these fires further.
33:54
Speaker 3: Yeah, you got.
33:55
Speaker 2: Gusts of up to seventy miles an hour, and so
33:57
Speaker 2: it's just continuing to spread here.
34:00
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35:01
Speaker 2: The other piece on this that is just a little
35:04
Speaker 2: bit pedantic, but unfortunately, like the reality of how the
35:09
Speaker 2: financial situation is going to play out here, there's a
35:12
Speaker 2: big deal as to whether or not the fires that
35:15
Speaker 2: have already happened, the Eaten fire and the Palisades fire,
35:20
Speaker 2: whether they are one event or two events. And the
35:23
Speaker 2: reason why this matters is just as an example, there's
35:25
Speaker 2: an insurance company called Mercury General that operates in California.
35:29
Speaker 2: They've about six percent of California's homeowners insurgance market. If
35:34
Speaker 2: this is treated as two events, what Mercury can do
35:38
Speaker 2: is remember, insurers don't just hold all the risks themselves.
35:41
Speaker 2: They go out and they buy what's called reinsurance, where
35:43
Speaker 2: they say, hey, we've you know, insured X, Y and Z,
35:47
Speaker 2: we want to offload some of that risk to another carrier,
35:50
Speaker 2: and so there's special reinsurance companies that specifically specialize in
35:54
Speaker 2: this perture.
35:54
Speaker 5: Hathway is a big one, if I'm not mistaken as
35:57
Speaker 5: his Chubb.
35:58
Speaker 3: Yes.
35:59
Speaker 2: And so if it's two events, what Mercury can do
36:01
Speaker 2: is they can say, look, we're going to use our
36:03
Speaker 2: reinsurance up to the limit of the first event one
36:06
Speaker 2: point two nine billion dollars, and then we will reinstate
36:10
Speaker 2: coverage pay paying in order to do so, and we
36:13
Speaker 2: can get one point two three eight billion for the
36:16
Speaker 2: second event. And obviously that's like, okay, great, two and
36:20
Speaker 2: a half billion dollars off their books.
36:22
Speaker 4: Right.
36:23
Speaker 2: If it's only one event, then they can only offload
36:27
Speaker 2: half of that, and so they have to come up
36:30
Speaker 2: with the rest of it from their own pockets and
36:32
Speaker 2: things like that.
36:33
Speaker 5: Based on this is the fact that this is being written,
36:35
Speaker 5: I am guessing that these contracts do not have a
36:38
Speaker 5: very clear definition of how you define one fire event
36:42
Speaker 5: versus multiple It's pretty it's pretty likely, for instance, that
36:46
Speaker 5: these two fires are connected in some way, shape or form.
36:48
Speaker 5: They were started and then embers from one fire led
36:51
Speaker 5: to a start of the second one. Maybe we don't
36:53
Speaker 5: know it, maybe months before that type of investigation is concluded.
36:59
Speaker 5: And even if it does clue that that was the case,
37:01
Speaker 5: it might be unclear as to whether or not that's
37:02
Speaker 5: defined as one or two events. And so my guess
37:05
Speaker 5: is that this big type of thing probably gets played
37:08
Speaker 5: out in the courts in some way, shape or form.
37:10
Speaker 5: I'm guessing that they won't you know, they might settle
37:12
Speaker 5: it eventually, but they may be looking towards a judge
37:15
Speaker 5: or jury to determine are these one or two separate
37:17
Speaker 5: events and then defining them as such.
37:19
Speaker 2: The other thing to remember then is again it insurers
37:23
Speaker 2: are very good at figuring out how to not lose money,
37:26
Speaker 2: because again, if they lose too much, they go out
37:28
Speaker 2: of business like it's they're done. So let's say that
37:33
Speaker 2: this gets treated as two events. The reinsurance company then
37:36
Speaker 2: may say, Okay, this is a risk that we now
37:38
Speaker 2: need to account for. Your reinsurance premiums are going up,
37:42
Speaker 2: and you're gonna have to pay us more to cover
37:43
Speaker 2: this because there's a greater likelihood of this occurring in
37:48
Speaker 2: the future as opposed to how things might have been
37:50
Speaker 2: treated previously.
37:51
Speaker 5: So and that's in part how you see premiums for
37:56
Speaker 5: insurance across the country going north.
37:59
Speaker 3: Yes, so there's that. Let's take a quick break here.
38:03
Speaker 2: We still got more to come on the financial exchange,
38:05
Speaker 2: whole bunch hour two coming up, including we'll kick things
38:08
Speaker 2: off with a discussion of our tax is too high
38:11
Speaker 2: or too low. I'll leave you with that, and then
38:14
Speaker 2: we'll pick that up when we return