Latest / The Financial Exchange Show / Could a pair of strikes threaten to unwind the economy before the holidays?

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Could a pair of strikes threaten to unwind the economy before the holidays? · The Financial Exchange Show

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Speaker 2: Good morning, Welcome back to the Financial Exchange. It's Mike Armstrong,
1:17
Paul Lane, and Tucker Silva with you this Tuesday. As
1:20
markets trying to stage a bit of a comeback here,
1:23
We've got the Dow now up a quarter of one percent,
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the SMP flat for the day, down one point, the
1:29
Nasdaq pretty close to flat, down eight points in early trading.
1:33
The big market news of the day was that Asian markets,
1:36
specifically the Shanghai indecks up over four percent as they
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close out the trading day there on Chinese stimulative measures.
1:44
And then finally, the yield on the ten year Treasury
1:46
continuing to creep back up in a positive direction after
1:51
the Fed cut interest rates last week, now sitting around
1:54
three and three quarters a percent on that ten year
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treasury yield, which is, you know, the key yield that
2:00
gets used to determine things like mortgage rates. So we
2:02
keep an eye on that one as well. Anything else
2:04
catching your eye in markets in early trading so far, Paul.
2:08
Speaker 3: We talked about that consumer confidence data that came through
2:12
a little weaker than anticipated, but again just one data
2:15
point there. That was the lowest confidence reading that we've
2:19
seen in three years from the conference board that came
2:22
out of to any in this morning.
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Speaker 2: Early in trading so far today, speaking of Dow components,
2:28
you've got Boeing off about one percent. Boeing also happens
2:33
to be the second worst performing company in the Dow
2:36
Jones Industrial Average. You know, the worst performing company the
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Dow Jones Industrial Average, Paul Jeeuztel Intel is it bing
2:44
bing bing bang? Good job. Yeah, it's no wonder that
2:47
index has a tough time keeping up with other broad
2:51
measures of the overall US DOC market when you've got
2:55
real great companies like Boeing and Intel leading the way
2:58
in there. But nonetheless Boeing stock, by the way, this year,
3:02
off one percent today, but off about thirty eight percent
3:05
so far for the year. Intel's actually up one and
3:08
a half percent today, but down fifty two percent for
3:11
the year. But back to the issue with Boeing, if
3:14
you missed it, it was two fridays ago, I believe
3:17
that Boeing's union voted pretty close to unanimously to reject
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the offer from Boeing management for wage increases and additional
3:27
contributions to the four oh one K and other commitments
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that the company made. They've now come back to the
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table with what they're calling their final proposal, which good
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luck with that. Maybe that's a good negotiating tactic, but
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unless you plan on never making airplanes again, it's probably
3:42
not going to be your final offer. The proposal calls
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for a thirty percent raise over a four year time
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period that was previously sitting at twenty five percent. They
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also gave the union three days to ratify it, which
3:55
I don't I mean, just takes a while to vote
3:58
on things like this, but nonetheless, that is what has
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come to the table at this point, a thirty percent
4:03
pay raise over a four year time period, again not
4:07
up significantly, but up from that twenty five percent increase previously.
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Speaker 3: Your thoughts pull the leverage is really all in the
4:13
union's court at this point. Boeing, as you mentioned, has
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struggled tremendously as a company year to date, with their
4:19
stock price getting completely obliterated. They've they've burned about a
4:23
billion dollars a month in terms of cash flow, and
4:27
a prolonged strike would hit their credit ratings on the
4:30
debt that they have out there, leading some ratings agencies
4:34
out there to perhaps download debt, not download, rather downgrade
4:39
their debt to junk status. And you've got them burning
4:42
hundreds of millions of dollars the longer that these thirty thousand,
4:45
thirty three thousand machinists continue to strike. So they really
4:49
have a lot of leverage on their side if they
4:51
want to put the screws down to Boeing that really
4:53
needs to get this resolved and try and enact this
4:57
turnaround that they are attempting to under go here. So
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initially the union had been looking for a forty percent
5:04
paycrease over this four year period. As Mike mentioned, they've
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now come back Boweing. This is with a thirty percent
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pay increase over four years. That was up from twenty
5:13
five percent. So interesting to see where it'll it will settle.
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It's in Boeing's best interest to try and get this
5:19
wrapped up really quickly.
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Speaker 2: Yeah, I've been trying to come up with reasons why
5:22
it might be somewhat in Boeing's favor here, and I've
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largely struggled to come up with them. But yeah, a
5:28
few points here that Boeing may have some some argument
5:32
to make here. One they genuinely can't afford a lot
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more like that, that isn't you know? Sometimes you have
5:38
companies coming out and asking the unions to take ahead,
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and it's like, well, okay, you know, take a look
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at your c suite and take a look at your
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stock price, like you can afford it. Yeah, Boeing's at
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risk of a credit downgrade here, and so it's not
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as though Boeing's going to ever go out of business
5:55
per se. But you know, they are strapped for cash
5:58
here and do need to try and make a good
6:00
deal with the unions. The unemployment rate has ticked up
6:05
a little bit, and so you know, had you gone
6:08
on strike, say in twenty twenty one, I would agree
6:11
wholehearted you with you, Paul, that like Boeing has no
6:13
upper hand here. You know, you've got more people not
6:17
working today, You've got a slightly looser labor market, and
6:19
so were I the striking union worker, I'd be a
6:22
little bit nervous about you know, what am I going
6:24
to do if this thing rattles on for three months?
6:26
Will I be able to find a job in the
6:29
Seattle area that compares in terms of wages or will
6:32
I struggle. The counterpoint to that would be the unemployment
6:35
rate for manufacturing sector right now is pretty remarkably lower
6:41
than the overall unemployment rate. The overall employment rates sitting
6:44
at four point two percent as of August according to
6:47
the Bureau of Labor Statistics, the manufacturing unemployment rate only
6:51
sitting at three and a half percent, So you know,
6:53
that is a that's about as low as the overall
6:56
unemployment rate has gotten to in this business cycle. So
6:59
that's a pretty low rate of unemployment. And I tend
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to agree that the union sort of has boeing over
7:07
the barrel on this one, but we will see, right,
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I mean, you are still going without work. It's been
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a few weeks now, it's been a few weeks in
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no paycheck. In addition to thirty percent pay increase over
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those four years, it doubles the ratification bonus to six
7:22
thousand bucks. It restores annual bonuses that the company had
7:25
proposed to eliminate, increases company contributions to employee four one
7:29
k plans committing to continuing to build new airplanes in
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the unionized pack Northwest. Although I consider that one to
7:36
be largely irrelevant since this contract won't cover any of
7:40
the periods of time that new blowing planes are created.
7:44
So we will see where this one goes. And the
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first thing the union said was there's no way we
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can vote on this in three days, so back off
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on that front.
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Speaker 3: We'll see that new Boweing CEO has a lot of
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work on his plate, that's for sure.
7:55
Speaker 2: Poor Kelly, Poor Kelly. Yeah, I would imagine that the
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piles and pile and wheelbarrows fill the cash that they
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put on his doorstep are helping to you know, cover
8:06
and mask the sting a little bit. But yeah, that's
8:08
what the money's for. As Don Draper says that that right,
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speaking of strikes, there's a looming East Coast port strike
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that could shake up things quite considerably here. Businesses are
8:20
preparing for a strike by dock workers on the Eastern
8:23
Gulf Coast, which would begin on October first if negotiations
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don't yield a new contract, and companies have been preparing
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for this, they've been well aware of it. You've seen
8:32
big businesses trying to stockpile their Christmas holiday stuff and
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get those orders in early because you know, a strike
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on the part of the East coast with dock workers
8:42
in October, that is prime time for goods coming into
8:45
the United States for the holiday shopping season.
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Speaker 3: Yeah, if this was to actually go to a strike,
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it's about six percent of GDP on a daily basis
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that could it be impacted by this type of shutdown.
8:59
If these sports on the East Coast or the Gulf
9:02
were to shut down for one day, it would take
9:04
about six days to clear any blacklogs. So it certainly
9:07
is an important issue. It's something that we experience firsthand
9:11
in twenty one, in twenty two with all the issues
9:14
in the ports of LA This time around, as Mike mentioned,
9:17
the West coast ports are not impacted. They have a
9:19
separate union agreement that have already settled on a deal.
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Speaker 2: But if this.
9:23
Speaker 3: Were to strike, then it would be a concerning measure.
9:28
Here we have until October first for them to sort
9:30
this out.
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Speaker 2: I hate to keep making these previous time inflation was
9:34
a real issue comparisons, but the last time there was
9:37
a strike across all East and Gulf Coast ports was
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nineteen seventy seven, and that did snarl up retailers ahead
9:44
of the holidays pretty considerably. And again bring it up
9:48
because there's been a ton of comparisons to today and
9:51
the nineteen seventies. Now we've seemingly largely put the inflation
9:55
concerns behind us, But these are the types of things that,
9:58
should they happen, back up spokes a backup yeah, could
10:02
create those problems again, should we not head into a recession.
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10:33
Speaker 2: Well, the Federal Reserve announcement on interest rates last week
10:36
has come and gone, and therefore every FED official out
10:39
there is hitting the stomping ground to tell everybody about
10:44
their viewpoints on things. So yesterday Neil cash Kari published
10:49
an essay Atlanta FED President Raphael Bostik, who a few
10:53
weeks ago announced that he violated all sorts of federal
10:56
Reserve trading policies spoke. Chicago Fed President Austin Goulesby spoke yesterday,
11:01
Minneapolis Fed President Neil Cashkari spoke at one pm yesterday today,
11:06
Federal Reserve Governor Michelle Bowman spoke about why she dissented
11:10
on the fifty basis point interest rate cut. You've got
11:12
Adrian Kougler, another FED governor, speaking tomorrow at four pm Thursday, one, two, three, four, five,
11:21
six different FED officials speaking, and then Friday, just to
11:25
top things off, Michelle Bowman's going to go again at
11:27
one fifteen. General tone that you seem to be getting
11:32
from Fed officials on where they go next, justification for
11:36
the fifty basis point cut, anything that you would take
11:39
away from these speeches that you've seen. And I know
11:41
that neither of us watched them live, because there's no
11:44
possible way you can catch all of them live.
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Speaker 3: Every FED member, Chuck had sort of laid this out before,
11:51
plays a different role within its cast of characters. And
11:54
it seems like these sentiments from different FED members kind
11:58
of go in line with some people who you know,
12:01
vietmaillarly disagree in Michelle Bowman's case, are those who who
12:05
do agree with the actions that the FED take has taken,
12:08
or those in between. Ultimately, everyone's entitled to their opinion.
12:13
No one is right at this point. Mike and I
12:15
can have our opinions too, and really it's a continuous
12:18
situation where we're trying to digest data as it comes through.
12:21
So it's unclear as to whether or not Michelle Bowman
12:24
is right that they should not have cut that significantly,
12:28
or that others are accurate in saying that they should
12:31
have cut quicker. Really, what it will come down to
12:33
is where the labor market lands. None of us know
12:37
where that's going to be over the course of the
12:39
next six to twelve months. But ultimately that's all I
12:42
take from is that each person has their own posting
12:44
and positioning, and ultimately it will be it will be
12:48
seen in the future as to who is correct in
12:52
their their sentiments here.
12:53
Speaker 2: So I'm gonna start with Michelle Bowman, as she did
12:56
make headlines here. She was the first voting committee member
12:59
to descent on a decision since two thousand and five.
13:02
That's a long time between you know, descents from voting members.
13:07
So Michelle Bowman's point was that it was not that
13:10
she thought rates should be higher, or that they shouldn't
13:12
move at all. She merely thought that fifty basis points
13:15
might have been too extreme of a decision. Quote, the
13:18
jumbo cut could be interpreted as a premature declaration of
13:21
victory on our price stability mandate. Accomplishing our mission of
13:24
returning to low and stable inflation at our two percent
13:27
goal is necessary to foster a strong labor market and
13:30
an economy that works for everyone in the longer term.
13:33
I find that comment to be interesting because, in fact,
13:38
by making the jumbo cut, my interpretation was that in fact,
13:42
they're not declaring victory and that they're quite worried about
13:45
that dual mandate, and so they had to move rates
13:48
down in order to protect the labor market from further
13:51
from further deterioration. So I thought it was an interesting
13:54
just you know, what she took away from the fifty
13:57
base point cut and the signals that it could send
13:59
into markets, being oh, we've already declared victory on the
14:01
dual mandate. Here to my interpretation, which I suppose, I
14:05
could see the argument that you're declaring victory on inflation,
14:08
and maybe she thinks that's too soon, But by doing fifty.
14:11
The risk that I thought of was, are you going
14:13
to freak people out by telling people that, hey, the
14:15
labor market's weak. Yeah.
14:16
Speaker 3: Her viewpoint was two things. The victory on inflation, the
14:20
victory left there. But she also seems to be saying
14:23
in her sentiments that she is of the opinion that
14:26
the labor market is still in a really strong place, which,
14:29
to be clear, it is historically. She's not ascribing to
14:32
the theory that typically when the labor market starts to weaken,
14:35
it is not something that weekends and plateaus. Oftentimes, it
14:39
can become a very slippery slope where that decline ends
14:43
up being something that runs away from the economy really quickly.
14:48
And so that's really what is the biggest piece to debate.
14:51
Whether she's going to be correct if the labor market
14:55
does plateau at the levels of that today, which we
14:58
would agree are still quite strong. But if the decline worsens,
15:02
then she's inn accurate saying that they, you know, really
15:05
have taken this this victory lap, or she's inaccurate saying
15:09
that they shouldn't have really, you know, gone this quickly.
15:11
Speaker 2: On the cut side, we will see on the other
15:14
end of that curve. You have Chicago Fed President Austin Goulesby, who,
15:19
to my knowledge, has traditionally been pretty dubbish during this
15:22
cycle at least, and I always find him interesting because
15:25
he's pretty outspoken and just has a more i don't know,
15:29
casual and outlandish way of describing FED policy. Then you're
15:32
more measured Jerme Powell or other Federal Reserve members quote
15:36
over the next twelve months, we have a long way
15:38
to come down to get the interest rate to something
15:41
like neutral, to try to hold the conditions where they are,
15:44
so Goalsby really making the argument that hey, not only
15:48
did we do the fifty basis points here, but that
15:50
might not be enough, and that hey, you know, the
15:53
neutral interest rate, if we're trying to find that, is
15:56
probably substantially lower than where we are right now, so
16:00
don't be surprised if we continue to cut rates further.
16:03
He has sounded quite a bit more strident than other
16:06
officials in calling for lower borrowing costs, and that's been
16:09
pretty persistent. So I don't think Goulesby really speaks for
16:12
the majority opinion on the Federal Reserve, but clearly at
16:15
least one FED member there saying that hey, he wants
16:18
to see substantially lower rates and relatively quickly. Yeah.
16:21
Speaker 3: The important to note on that neutral rate concept out
16:24
there to listeners. Basically, it's an abstract concept. There's not
16:27
exactly a neutral rate that you can pinpoint, but it's
16:30
really what economists say. It's the rate where military policy
16:34
is neither stimulating or restricting economic growth. It's kind of
16:37
that stasis there. Goolesby estimates that that's around or rather
16:42
the FED did their recent projections and estimated that it
16:45
was around two point nine percent. It's come down significantly
16:48
from where it was previously, but still much higher than
16:51
it was pre pandemic. So that is really the area
16:54
of focus as to where policy goes in the future
16:58
here in terms of whether more cuts are needed, which
17:01
Gooolsby points out that it is the case. But then
17:03
of course you've got others who don't feel the same way.
17:06
Speaker 2: The h you know. Taking a look at other interest
17:08
rates that we frequently monitor here, the yield on the sorry,
17:12
the interest rate on the average thirty year fixed rate
17:15
mortgages is, according to Mortgage News Daily, as we anticipated,
17:19
bumped up a little bit over the last week or so.
17:21
Last five days or so since the interest rate cut
17:24
that primarily you know, has nothing to do with what
17:26
the Fed did, but rather the reaction of longer term
17:29
treasuries here bumping up a little bit, and so that
17:32
that thirty year mortgage rate on average a few weeks
17:35
ago was sitting at six ' one five. We're now
17:38
up to six point two percent. The big question that
17:41
I have just about mortgages in the housing market generally
17:45
is how many people out there either just became aware
17:49
of how much mortgage rates have come down nearly two percent,
17:52
or still aren't aware of it yet, and what does
17:55
that do to stoke demand in the real estate sector.
17:58
Big open question in my view.
17:59
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18:23
Speaker 2: The number of tax proposals that Donald Trump, actually I'm
18:26
going to expand this beyond tax proposals to include tariffs
18:30
as well as just other consumer related policies that he's mentioned.
18:36
It's becoming a pretty long list, and the tax wish
18:39
list has now ballooned to over eleven trillion dollars. I'm
18:43
unsure if they also measure the in the offset impact
18:48
from things like tariffs, but nonetheless that that's the number
18:50
that's been come up with. So running through them here
18:54
would include relief on taxes for tipped workers, relief on
19:00
overtime for hourly employees, relief on taxes for senior citizens
19:05
collecting Social Security, relief on taxes for higher income residents
19:10
of primarily Democrat led states who have high taxes. Through
19:14
the salt deductions, we have now seen a proposed cap
19:19
on credit card interest rates in the ten percent range,
19:24
and apparently at a speech today in Georgia, he's expected
19:29
to outline his vision to use tax breaks and other
19:31
incentives to bolster US manufacturing. So I don't know what
19:35
that one specifically looks like, but that's apparently also on
19:39
the table. Just practically speaking, I think even his policy
19:44
advisors are having a tough time keeping track of all
19:47
of these things, and I've expressed my well, one my
19:52
general conclusion is that I think a lot of this
19:54
stuff is pure politics. They seem to come up in
19:58
certain states, such as when campaigning in Long Island he
20:01
brought up the salt deduction piece. And so I don't
20:03
know how many of these are genuine promises versus you know,
20:07
vote grabbers. But one thing that I find interesting is that,
20:11
you know, initially Kamala Harris's campaign staff was or campaign
20:16
itself was responding to some of these and saying, you
20:18
know what, we support a waiver on taxes on tipped wages. True,
20:23
they've stopped, and so I wonder if they're getting polling
20:26
that these are just not hitting the way that they
20:29
did previously, or or if it's merely been more successful
20:33
for Kamala Harris to just not discuss the economy and
20:35
focus on things like abortion. I genuinely I'm unsure, but
20:38
clearly they've backed away from some of this stuff. And
20:43
there's some of these that I just find so interesting, Like,
20:47
you know, it puts Trump in the same camp as
20:51
some very far left politicians when it comes to some
20:53
of these proposals, right.
20:55
Speaker 1: Like.
20:56
Speaker 2: You look at, for instance, the cap on credit card rates.
21:01
You are talking about a proposal there that literally Elizabeth
21:05
Warren has been proposing for like six years. She's been
21:08
bringing legislation to the Senate to try and get caps
21:11
on credit card rates for a number of years, and
21:14
I can get into all the reasons that would be
21:15
a stupid policy. You know, credit card companies aren't just
21:18
going to say, yeah, sure, let's lower our profit margins
21:21
for the next couple of years here. No, they're going
21:23
to make the money elsewhere. But you know, the between
21:27
that between the salt cap going away, right, this is
21:30
something that you know, many many Democrats have harped on
21:33
and have been pushing to get rid of. And now
21:35
you have the main candidate running on the Republican side
21:38
seemingly agreeing there and saying, yeah, we should get rid
21:40
of the cap on salt deductions, which, by the way,
21:43
was a feature that he instituted to try and get
21:45
states to, you know, kind of come in line and
21:48
reduce taxes and incentivize growth. And it's just it's getting
21:51
to the point where it's very difficult to predict and
21:55
understand what the A which ones are actually serious, and
21:58
B what the actual results would be. I've talked about
22:00
this at length. Like you think about the impact of
22:04
waiving taxes on overtime pay in one regard, you say Okay,
22:08
I could see how that would impact the supply side
22:10
of the labor market. You might have people saying, oh, yeah,
22:13
I got to work those overtime hours because I'm going
22:15
to reduce Yeah, I'm gonna get a whole bunch of
22:18
money and reduce my overall tax liability. On the other hand,
22:22
if you have, say a cop in Boston, Like let's
22:26
say you're a cop in Boston and you are offered
22:28
a lot of overtime today, and you know that in
22:30
order to make your budget work at home, you need
22:33
to be making two hundred grand a year. In this scenario,
22:37
you might actually be incentivized to work less. Right, If
22:39
I can make two hundred thousand dollars a year by
22:43
working fewer hours and not paying taxes on that income,
22:46
I might say, Okay, well, I used to have to
22:47
work fifty hours a week. Now I'm pulling it back
22:49
to forty two because I get the same net pay
22:50
when all is said and done. Yeah.
22:53
Speaker 3: And I also would worry about businesses in terms of
22:56
how they would shift their practices with employees, is to
23:01
give them more overtime, or how employees would try to
23:04
kind of rig the system to benefit from that. Tax
23:06
free treatment. I just don't know how you could fully incorporate.
23:14
Speaker 2: That in.
23:14
Speaker 3: It just seems like there'd be a lot of manipulation there.
23:16
Speaker 2: It would be. I mean to me, that's actually one
23:18
of the least controversial ones.
23:20
Speaker 3: Well, it just screws over the government, I guess, yeah.
23:22
Speaker 2: I mean, it wouldn't hurt you. It's a business. With
23:24
all of these, you have problems with social Security funding
23:27
and other issues in terms of how you pay for
23:30
it that aren't being discussed at all. But in terms
23:32
of purely like impact on the labor market, I have
23:35
the least problems with the overtime pay one. I think
23:38
the tax on tips is crazy that one.
23:41
Speaker 3: That's probably a better example to highlight that there would
23:43
be all so such a cannery done there on the
23:46
tips front to get a lot more wages exempt from
23:48
federal taxation. But I don't even know why we spend
23:51
so much time doing these.
23:53
Speaker 2: You just find it all on realistic go back to you.
23:58
Speaker 3: Know, Biden getting into office and all the things we
24:00
talked about him potentially instituting. It just has to go
24:02
clear through so many hurls, And I try to remind
24:04
myself that when I'm trying to work out these complex
24:07
potential proposals.
24:08
Speaker 2: My counterpoint with that would be gifts to the American
24:12
tax payer are a lot easier to pass than penalties
24:15
to the American tax payer. Sure, and that's been proven
24:18
time and time again. A lot easier to increase source
24:21
security or reduce taxes than it is to stabilize their
24:25
security and raise taxes.
24:27
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25:35
Speaker 2: Jim Cavello is not exactly a household name, but he's
25:38
Goldman Sachs head of stock Research, and he issued a
25:41
warning recently that well, quote, building too much of what
25:46
the world doesn't need typically ends badly. I find this
25:49
article in this piece just interesting because it relates to
25:53
a conversation Chuck and I were having yesterday, which is,
25:55
you know, you've got these massive subsidies in the United
25:58
States for companies to build semiconductors. You had yesterday the
26:03
United Arab Emirates courting Taiwan Semi to start building fabs. There.
26:08
I'm sure you have the same thing going on to
26:10
a large degree in China, in Korea, obviously, in Taiwan Semi.
26:15
In Taiwan itself. You have continued pushes and i'd imagine
26:18
places in India too. You have this push to start
26:21
manufacturing semiconductors all across the board. And not exactly what
26:26
Jim is referring to here, but I do see this
26:29
scenario of the world assuming exactly what needs to be built,
26:35
rather than markets dictating what needs to be built. And
26:38
part of this is market led. Right now, there is
26:40
a shortage of advanced semiconductors available on the market right now.
26:44
That's why Nvidia has a month's backlog in order to
26:46
get some, and you really can't unless you're a big customer.
26:50
But historically, when governments have all said, oh yeah, we
26:54
need to go out and build this, there's been a
26:56
lot of instances of demise in the wake of the
27:00
those types of decisions.
27:00
Speaker 3: It's a fair point and it's an interesting conversation to
27:03
have on AI in general. I've been trying to spend
27:06
a lot more time just trying to understand the whole
27:09
the industry as a whole, because it's complex and there's
27:12
a lot of things that go into it. But ultimately,
27:15
what this piece comes down to is there is trillions
27:18
of dollars being pumped into this industry, into the semiconductor
27:22
space and the development of AI. Some people you will
27:25
talk to, I feel many in the technology space do
27:29
feel that at some point the evolution of this will
27:33
allow for enhance productivity. But it's a fair point that
27:36
Jim Corvell makes as the head of research from Goldman Sachs,
27:39
saying that perhaps the predictivity hance enhancements that are being
27:43
baked in here are overly optimistic. We're really not going
27:46
to know. To go against his point, we're really not
27:49
going to know the fruits of this labor until five,
27:53
maybe ten years from now. And I think the fair
27:55
point to make is that valuations are significantly high or
27:59
priced to perfect for a lot of these companies out there,
28:02
and it must it might take a much longer market
28:04
cycle than Wall Street's comfortable with until we actually start
28:09
seeing these enhancements reach everyday business.
28:12
Speaker 2: Jim brings up another point that I find intriguing, and
28:17
I'm just interested in your take too, But he brings
28:19
up like, you know, hey, I was driving down the
28:22
one oh one and from between San Jose and San Francisco,
28:25
and he counted the billboards about artificial intelligence and found
28:28
nearly forty of them that he passed, which you know
28:32
between San Jose and San Francisco. That's I'm not surprised
28:35
by that. And his point was it was only a
28:37
few years ago that these same billboards were all about crypto,
28:41
and you know, he sees a lot of compelling similarities
28:44
between the arguments made about crypto and those made about
28:47
artificial intelligence. And I don't disagree with any of his
28:50
assessment there. The piece that I do disagree with is
28:53
that I never got to the point with crypto where
28:57
somebody was able to concisely explain to me how there
28:59
was a great business opportunity there.
29:02
Speaker 3: I don't think, Yeah, I agree with you. I don't
29:04
think the parallels can be drawn as easily. I know
29:06
he mentioned that in this piece, But the enhancements of
29:11
AI are supposed to promise enhance productivity, making things easier
29:14
to operate as a business. Where did crypto come into
29:17
play where there was going to be enhanced productivity that
29:20
resulted from a digital card?
29:21
Speaker 2: I didn't see.
29:22
Speaker 3: There was none of that being mentioned. And to follow
29:25
the dollars, which isn't always necessarily the right way to go,
29:28
fortune five hundred companies are spending trillions of dollars on
29:32
this development. I have to feel that the people who
29:35
are very much smarter than me feel as at least
29:38
there is some significance behind Now the argument can be
29:40
made against me, yeah, Paul, but Blackrock and others spend
29:43
a lot on the crypto space. I don't know if
29:45
the dollars line up the same though.
29:47
Speaker 2: The other argument that I would bring up there is
29:50
big companies spend trillions of dollars on the Internet in
29:53
nineteen ninety nine and two thousand. We still use the
29:56
internet today. It is a massive part of all of
29:58
our lives. There was, in argument, a bubble in the
30:00
stock prices related to the Internet in two thousand, definitely,
30:03
So you know, just because something is a successful technology
30:06
that survives doesn't mean it ain't a bubble. Right, Let's
30:09
take a quick break when we come back, a bit
30:10
of stack roulette here on the Financial Exchange.
30:13
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31:14
Speaker 2: Paul, what do you have for us for stack Roulette?
31:16
Speaker 1: Here?
31:16
Speaker 3: There are some just universal truths out there, Mike, where
31:20
these are just sort of messages or values to live by.
31:24
Whether it's the idea of you know, just trying to
31:27
be friends with someone in a casual relationship that never
31:30
seems to work out. You've got also this idea of
31:34
buying a property with someone else that you happen to
31:36
be friends with or not married to. It's just a
31:39
cardinalson in my mind. There's just so many issues that
31:42
can come from both of those scenarios that I laid out,
31:45
and there was a huge surge of this, to my
31:49
surprise in twenty twenty one post Pandemic, where there's a
31:53
piece in the Wall Street Journal where they highlight people
31:56
who bought homes together with their friends and surprise, surprise,
32:00
and how they want out, and all the logistical pains
32:03
in the next that you can deal with when you're
32:05
up against owning property with whether it's a boyfriend or
32:08
girlfriend that can get really dicey at times too. Or
32:12
you can go into scenarios with friends where surprise, surprise,
32:15
three years later some of them want out. The piece
32:17
that they hlight here is buying a home in Austin,
32:20
Texas at twenty twenty one with some friends envisioning weekend getaways,
32:24
lazy days of the pool, but only a fraction of
32:26
the ownership. But of course three years later, two of
32:29
these friends want out, and then you have all the
32:32
issues of buying someone's steak out just constantly.
32:36
Speaker 2: The worst idea Sanadalton, get a timeshare. I can't think
32:43
of few ways to almost definitively allow Murphy's Law to apply. Then,
32:53
by investing in a home with a good friend, what
32:57
could go wrong? Right? I just a friend. You know,
33:01
you can see eye to eye on everything, and you
33:05
can still have missteps here. And I mean even if
33:08
this all went perfectly over the last five years, right,
33:11
and yeah, in this case, it kind of did. They
33:13
bought it in twenty twenty one at a low mortgage rate,
33:16
basically doubled in value over the last few years. But
33:19
one person wants out, the others don't. And now they're
33:22
sitting here like, well, we can't afford to buy you
33:25
out because I'm not going to go refinance the mortgage
33:27
at six and a half percent. So what do we do?
33:31
And you know, you can imagine how a money issue
33:34
eclipsing six figures suddenly could throw a bit of a
33:38
wrench into a relationship. This is such a dangerous idea.
33:44
And like, there's plenty of people that own properties that
33:47
are not married couples, and you know, I think there's
33:50
I think there's degrees to which this is a bad idea.
33:54
You know, if you have a long term partner that
33:56
you've been together with for decades, when you're not married.
33:59
That's a difference scenario. I would suggest that buying a
34:03
property with a sibling is a less stupid idea than
34:06
buying a property with a college friend. But in either case,
34:09
it just it reads to me as total recipe for
34:12
friendship disaster. And I'll be this not like this made
34:16
up a large majority of real estate transactions over the
34:19
last few years or anything like that, but there are
34:23
going to be some uncomfortable conversations here over the next
34:26
few years when it comes to this type of thing.
34:28
And just yeah, word of caution when mixing business with friendships.
34:33
Speaker 3: Yeah, even the family angle too. You mentioned the siblings,
34:35
but how many times do we run into situations where
34:38
you have the lake house or the cape house that
34:39
gets passed down to the next generation and all the
34:42
issues that arise from that where siblings have different priorities
34:45
and different lifestyles and sharing a home with other families. Yeah,
34:50
it can be challenging. It can lead to a lot
34:53
of disputes. So, like you said, it's not a huge
34:56
fragment of the market, but an interesting piece.
34:59
Speaker 2: Nonetheless, it's just a good follow up piece on a
35:01
trend that I know we commented on in twenty twenty one, like,
35:04
oh boy, this seems like a stupid idea. I wonder
35:06
how that's going to run now, And we don have
35:08
no evidence that this is widespread in issue that's out there,
35:11
but I imagine it will be. Markets have swung into
35:16
positive territory here, with the Nasdaq leading the way, up
35:18
nearly one hundred and seven points, or six tenths of
35:21
a percent, s and P five hundred up nearly fourteen
35:23
points a quarter of one percent, in the Dow Jones
35:25
Industrial Average up over fifty points one tenth of one percent.
35:29
At the moment, that is all the time we have
35:32
for today's issue the Financial Exchange. We'll be right back
35:34
at it tomorrow, folks, So we'll talk to you then