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Will AI kill entry-level jobs? · The Financial Exchange Show

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  Speaker 1: making a donation Today. Face is the Financial Exchange with
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  Speaker 1: Mike Armstrong and Mark Vandetti.
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  Speaker 2: Good morning, Happy Tuesday, Welcome back to the Financial Exchange
• 1:15
  Speaker 2: as we head into our last few shows of the
• 1:20
  Speaker 2: year here and last show ahead of the Christmas holiday.
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  Speaker 2: We've got a shortened week this week in markets, with
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  Speaker 2: the markets closing tomorrow early and then closed all day Thursday.
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  Speaker 2: Of course, the following week we will see markets close
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  Speaker 2: again on Thursday for the New Year holiday. As we
• 1:37
  Speaker 2: take a look into that Santa Claus rally, which the
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  Speaker 2: technical time frame on that is the last five trading
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  Speaker 2: days of the year, followed by the first two days
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  Speaker 2: of the next year, so a seven day window for
• 1:49
  Speaker 2: that Santa Claus rally is the statistical window, so starts tomorrow.
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  Speaker 2: In trading, We've got a few different items to dive
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  Speaker 2: into today, including the Q three release on GDP. We've
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  Speaker 2: got some acquisition news in the AI infrastructure space. And
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  Speaker 2: then also I feel like because all the editors go
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  Speaker 2: on vacation this time of year, we've got a few
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  Speaker 2: just really great prediction stories that aren't going to come true,
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  Speaker 2: such as how there aren't going to be any entry
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  Speaker 2: level jobs anymore, which begs the question, how do you
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  Speaker 2: become a senior experienced person without an entry level job.
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  Speaker 3: But that's what we're going to be debating as well.
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  Speaker 2: We got to start with GDP mark released this morning
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  Speaker 2: at eight thirty am, delayed due to the government shutdown.
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  Speaker 2: This is a read on GDP through September thirtieth of
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  Speaker 2: this year, and to you to spoil a surprise, it
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  Speaker 2: was a big beat compared to expectations, pretty substantial beat.
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  Speaker 2: Expectations were to see GDP increase. I think the medium
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  Speaker 2: was three point two percent, but you know, anywhere from
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  Speaker 2: three to three point three percent was where I was
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  Speaker 2: seeing consensus estimates. We came in at four point three percent.
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  Speaker 2: It is fairly rare, outside of pretty volatile periods where
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  Speaker 2: economists models don't really work all that well, to see
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  Speaker 2: beats to the tune of one percent to the upside.
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  Speaker 2: I'm thinking of moments like twenty twenty and twenty twenty
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  Speaker 2: one when the economists were pretty terrible at calculating or
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  Speaker 2: estimating where GDP was going to because they we were
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  Speaker 2: doing a bunch of things that had never been seen before,
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  Speaker 2: shutting down the economy, restarting it, pumping a bunch.
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  Speaker 3: Of stimulus in.
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  Speaker 2: So during those periods of time, sure, you have some
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  Speaker 2: pretty substantial beats here, but let's dive into these numbers
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  Speaker 2: first and then we can talk about just how unique
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  Speaker 2: this is. So we did see once again. You know,
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  Speaker 2: we're a consumer based economy, and the consumer picked it
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  Speaker 2: up once again in the third quarter. Despite high interest
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  Speaker 2: rates and everything else, consumer spending grew at a three
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  Speaker 2: point five percent annualized pace in the quarter. That's up
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  Speaker 2: from two and a half percent in the previous and
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  Speaker 2: contributed a large portion of this. Where else did we
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  Speaker 2: see I mean, we saw surprises all over this report,
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  Speaker 2: given how substantial the beat was, But where else did
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  Speaker 2: we see surprises in the GDP?
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  Speaker 4: So, for context, GDP is spending. There are other ways
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  Speaker 4: to measure output and welfare. GDP is probably the best.
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  Speaker 4: There are criticisms of GDP. They say it doesn't measure happiness,
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  Speaker 4: it doesn't measure life expectancy, but it's not entirely Now,
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  Speaker 4: that's not what it's built for, and it is very
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  Speaker 4: highly correlated with all the things that matter, including stock prices,
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  Speaker 4: which is why it's worth keeping track of. It's also
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  Speaker 4: stale by the time you get it. As you said
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  Speaker 4: that the third quarter, now the second estimate was spectacular,
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  Speaker 4: not exceedingly rare, but pretty rare to get annualized GDPs.
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  Speaker 4: So this is a quarterly number that they effectively multiplied
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  Speaker 4: by four and it is after inflation. So there's your context,
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  Speaker 4: and numbers above four percent in the modern era are
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  Speaker 4: really rare. It didn't happen in twenty twenty four. It
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  Speaker 4: happened in twenty twenty three once though.
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  Speaker 5: So.
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  Speaker 2: One time in twenty twenty three we got a quarterly
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  Speaker 2: reading over four percent.
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  Speaker 4: When you annualize the number, which is the way they
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  Speaker 4: present this for some reason, the Europeans don't do it
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  Speaker 4: that way for some reason, we do. Like you said,
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  Speaker 4: the story was mainly a spending story. If you took
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  Speaker 4: away all other GDP by the way, is government spending
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  Speaker 4: plus investment plus consumer spending with an adjustment for so
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  Speaker 4: called net exports, that's exports minus imports. That adjustment has
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  Speaker 4: made so that you don't double count spending on.
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  Speaker 3: Imports.
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  Speaker 4: Yeah, so even if you took out all those other categories,
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  Speaker 4: if you took out government, if you took out investment,
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  Speaker 4: which was flat, by the way, investment was the contribution
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  Speaker 4: there was negligible. Well, we can get into the drag
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  Speaker 4: on investment, that housing represented Housing cratered in the last
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  Speaker 4: two quarters. Maybe not as surprise. Even if you took
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  Speaker 4: out everything else, GDP would have grown at two point
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  Speaker 4: four percent. That is above what most researchers think is
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  Speaker 4: the economy's speed limits. Speak and I bring up the
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  Speaker 4: concept of a speed limit which is driven by structural forces,
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  Speaker 4: by the composition, if you like, of the economy, because
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  Speaker 4: that's what the Fed's got to pay attention to. So
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  Speaker 4: a spectacular report, yes, but one that contradicts the idea
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  Speaker 4: that's been supported by some soft labor market data that
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  Speaker 4: the economy is slowing and needs FED help. This actually
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  Speaker 4: complicates matters if correct, and it may not be upon
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  Speaker 4: further revision. We can get into that too. This complicates
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  Speaker 4: matters for the Fed. Mike, this is a red hot
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  Speaker 4: or was in the third quarter red hot economy.
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  Speaker 2: So we'll get into implications for the FED. I want
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  Speaker 2: to continue on the report itself and just where we
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  Speaker 2: saw these beats. So we talked about a strong unexpected
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  Speaker 2: consumer business investment.
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  Speaker 3: Though to your point, in spite of.
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  Speaker 2: All the hype over AI and all the excitement, there
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  Speaker 2: not exactly a contributor to GDP anything to make of
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  Speaker 2: that beyond the fact that.
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  Speaker 4: Well housing pulled it down so called residential fixed So
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  Speaker 4: within the investment category you've got gross private domestic investment,
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  Speaker 4: which is everything, and then under that you've got, among
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  Speaker 4: other things, you've got business investment, you've got residential fixed investment.
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  Speaker 2: If you're listening on radio right now, Mark is doing
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  Speaker 2: an exceptional jib of talking with his hands.
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  Speaker 4: We're doing it.
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  Speaker 3: It's really special to tune in on YouTube.
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  Speaker 4: So I'm just thinking in terms of wine items underneath
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  Speaker 4: the heading of gross private domestic investment, residential investment created
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  Speaker 4: by five percent.
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  Speaker 2: That's in line with what we've been doing by the
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  Speaker 2: way resident housing. And I think we've made this point
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  Speaker 2: and this is actually more measurable with the GDP report,
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  Speaker 2: is were it not for all this AI investment, we
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  Speaker 2: would be really seeing an economy that is not seeing
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  Speaker 2: much in the way of investment because of the drop
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  Speaker 2: in residential fixed investment. But fortunately AI infrastructure projects and
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  Speaker 2: data projects are making up for some of that, and
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  Speaker 2: so it's not quite the drag that it would otherwise be.
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  Speaker 4: I said, you know, a spectacular report.
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  Speaker 3: It was.
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  Speaker 4: I can't help but be blown away by a top
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  Speaker 4: line number of a above four annualized. That's rare, like
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  Speaker 4: we said, but it raises as many questions as it answers. Mike,
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  Speaker 4: how do you square this with rising unemployment? How do
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  Speaker 4: you square this with the industrial production and capacity utilization
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  Speaker 4: numbers we also got this morning. It was eclipsed by
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  Speaker 4: the eye popping GDP number which show more or less
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  Speaker 4: flat and industrial production was up a little bit, but
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  Speaker 4: nothing like what would support a four percent plus GDP number.
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  Speaker 4: And again the ongoing story in the labor market that
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  Speaker 4: the Fed fields the need to respond to. Again, lots
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  Speaker 4: of questions here that will only be answered with time.
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  Speaker 2: So quite a rare reading on GDP outside of what
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  Speaker 2: we talked about where turning points in the economy twenty
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  Speaker 2: twenty twenty twenty one was one of those to mention.
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  Speaker 2: It wasn't just the fact that it was over four
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  Speaker 2: percent annualized, which is rare and of itself, but the
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  Speaker 2: fact that estimates were off by more than a percentage
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  Speaker 2: point are interesting. And again, maybe this is not a
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  Speaker 2: great reading due to the government shutdown. Maybe there's some other.
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  Speaker 4: Something went on with experts too. Experts contributed net exports,
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  Speaker 4: which is exports minus imports. The trade deficit was still
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  Speaker 4: a positive. That is, we spent more on imported goods
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  Speaker 4: than we sent abroad, but net but exports jumped and
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  Speaker 4: that category net exports contributed. It's it's an adjustment. So
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  Speaker 4: this isn't quite the right way to think about it,
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  Speaker 4: but it's fine for this for our purposes. Net exports
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  Speaker 4: contributed one point six percent of the four point three percent,
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  Speaker 4: and I'm talking in percentage points.
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  Speaker 2: Here, so we're gonna take a quick break when we
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  Speaker 2: come back. I do want to switch over and put
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  Speaker 2: this all into context for what it does mean for
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  Speaker 2: the FED come twenty twenty six, because the FED is
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  Speaker 2: digesting three major data points now. One would be an
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  Speaker 2: uptick in the unemployment rate. Two is a downturn in inflation,
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  Speaker 2: which is a positive for them and it gives them room.
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  Speaker 2: And three is now a pretty exceptionally hot GDP report.
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  Speaker 2: Let's take quick break to talk about the FED next
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  Speaker 2: on The Financial Exchange.
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• 10:46
  Speaker 3: Mark. Prior to the break, sorry kind of yelled there.
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  Speaker 2: Prior to the break, we were discussing the GDP reports
• 10:51
  Speaker 2: and implications for J. Powell and the folks over at
• 10:55
  Speaker 2: the Federal Reserve. So I was talking about other data
• 10:58
  Speaker 2: points that we've received at and some of them were
• 11:01
  Speaker 2: quite surprising as well. Primarily, the CPI report came as
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  Speaker 2: I think the biggest surprise to investors, and plenty of
• 11:08
  Speaker 2: people have called in. Everybody who looked at it, Yeah,
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  Speaker 2: how accurate it was or was not. For context, the
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  Speaker 2: inflation report, economists were expecting three point one percent a
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  Speaker 2: year over year inflation. Instead we got two point seven percent.
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  Speaker 2: That is a miss to the downside that is incredibly
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  Speaker 2: rare and doesn't usually happen. So a lot of people
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  Speaker 2: started questioning, like, Okay, what exactly were we comparing here?
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  Speaker 2: Did we do the right data collection, et cetera.
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  Speaker 4: If you take it at phase value, inflation came to
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  Speaker 4: a grinding halt somehow miraculous maybe maybe not miraculously. The
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  Speaker 4: sarcasm is really not intended. It could have happened. We
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  Speaker 4: needed several more months of data to suggest a change
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  Speaker 4: in the trend. But that report, if you take it
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  Speaker 4: at phase value, suggests inflation came to a full stop
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  Speaker 4: in October like nothing happened, and then eked out a
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  Speaker 4: small prices increased by a very small amount of November
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  Speaker 4: or vice versa, or half and half or whatever.
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  Speaker 2: And I've seen all sorts of theories, bad data collection,
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  Speaker 2: timing of data collection. If you collected it towards the
• 12:07
  Speaker 2: end of November, when all the discounts were in for
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  Speaker 2: holiday retailers, maybe there was something to that as well.
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  Speaker 2: I don't have a great answer for it. We will
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  Speaker 2: see when the data plays out of the course of
• 12:17
  Speaker 2: the next few months. But on the heels of that,
• 12:20
  Speaker 2: the likelihood of a rate cut at the next meeting
• 12:24
  Speaker 2: spiked a little bit. You had a week ago basically
• 12:27
  Speaker 2: a one in four chance of the FED cutting rates
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  Speaker 2: at the next meeting come January twenty eighth. For some context, today,
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  Speaker 2: after this GDP report, the likelihood is now down to
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  Speaker 2: thirteen point three percent, dropping a full six or seven
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  Speaker 2: percentage points compared to where we were yesterday and substantially
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  Speaker 2: dropping from where we were a week ago. And so
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  Speaker 2: to your point, this hot of GDP report, in spite
• 12:52
  Speaker 2: of a miraculous disinflation report that we got for the
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  Speaker 2: month of November, this GDP report muddies.
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  Speaker 3: The waters for the folks at the Federal Reserve if.
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  Speaker 2: They're trying to make an argument that, hey, we need
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  Speaker 2: to get ahead of a slowing economy as evidenced buy.
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  Speaker 4: It doesn't just muddy the mic in my mind for
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  Speaker 4: what my two cents is worth it, it pours a
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  Speaker 4: dump truck of loan into them.
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  Speaker 2: I mean the premise, but go ahead, I think I
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  Speaker 2: want to explain why that is.
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  Speaker 4: Yeah, that's what I want to get into them. For
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  Speaker 4: the way the FED thinks about balancing inflation and growth.
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  Speaker 3: Really simplify it.
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  Speaker 2: It would seem to me that it would be impossible
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  Speaker 2: to have an American economy in twenty twenty six that
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  Speaker 2: both grows at four plus percent GDP and experiences inflation
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  Speaker 2: of under three percent.
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  Speaker 4: The way most economists think about the economy is that
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  Speaker 4: it's got, i'll say again, a speed limit, though that's
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  Speaker 4: not a perfect analogy. If it grows faster than the
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  Speaker 4: growth of the economy's ability to supply goods and services,
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  Speaker 4: then you get inflation. It's if you can grow the
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  Speaker 4: labor supply or increase productivity through investment, of which there
• 14:04
  Speaker 4: was none in the last quarter, by the way, then
• 14:07
  Speaker 4: you can keep up with growing demand. But those two forces,
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  Speaker 4: supply and demand in aggregate, determine whether or not inflation
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  Speaker 4: is increasing or decreasing. One way of measuring the slack
• 14:18
  Speaker 4: in the economy, whether there's enough or not enough supply,
• 14:22
  Speaker 4: is the unemployment rate that's been going up. That suggests
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  Speaker 4: slack increasing slack, which suggests that the economy is growing
• 14:30
  Speaker 4: less quickly than its potential growth rate, which gives the
• 14:34
  Speaker 4: Fed room to cut all else equal. If inflation expectations
• 14:37
  Speaker 4: are growing, or if the economy is with so called
• 14:40
  Speaker 4: supply shocks, then the Fed may not want to cut.
• 14:42
  Speaker 4: They're not worried about those things right now. The economy
• 14:45
  Speaker 4: has been growing over the last couple of quarters at
• 14:47
  Speaker 4: around a four percent clip. It grew very fast in
• 14:49
  Speaker 4: the second, grew very fast in the third. That is
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  Speaker 4: way above what anybody thinks the economy's potential growth rate is.
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  Speaker 4: This suggests that demand suggests I'm not saying I know
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  Speaker 4: for sure the demand is outpacing supply and historically absent
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  Speaker 4: luck pushing inflation in the other direction, like falling energy prices,
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  Speaker 4: which we've had a little bit.
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  Speaker 3: Of, Yeah, plenty of help from a falling energy press.
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  Speaker 4: Absent that, Mike, you're gonna get not just inflation at
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  Speaker 4: its current rate, which is by the way, still elevated.
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  Speaker 4: Even if you take November's CPI number at phase value,
• 15:21
  Speaker 4: you're going to get an increase in that rate, which
• 15:23
  Speaker 4: puts us right back where we were a few years ago.
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  Speaker 2: I think what some have written about, and what I
• 15:29
  Speaker 2: think is an open question, is are we in the
• 15:32
  Speaker 2: midst of a structural shift or structural turnaround in the
• 15:37
  Speaker 2: economy for some reason right now?
• 15:39
  Speaker 3: Right?
• 15:39
  Speaker 2: Is it that moment of the late nineties when a
• 15:42
  Speaker 2: tech boom is driving productivity and a hotter economy than
• 15:46
  Speaker 2: we might realize at the moment that's capable of rebounding.
• 15:49
  Speaker 4: Possibly, but four verses two, give me a break. If
• 15:54
  Speaker 4: you said you said two point two, if you said
• 15:57
  Speaker 4: ten percent more, twenty percent more, two point two, two
• 16:00
  Speaker 4: point five trend or potential growth rate, I'll can see
• 16:03
  Speaker 4: that these estimates come with huge errors. So that's possible
• 16:07
  Speaker 4: even under very even under the most optimistic assumptions, though
• 16:10
  Speaker 4: it's hard to get to what we're averaging over the
• 16:13
  Speaker 4: past couple of quarters.
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  Speaker 2: Yeah, so a lot of weight in this GDP report.
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  Speaker 2: Big surprise again for context, very big surprise on the
• 16:23
  Speaker 2: GDP report that was released at eight thirty am this morning,
• 16:27
  Speaker 2: just like the GDPs or sorry, just like the inflation
• 16:30
  Speaker 2: surprise that we saw last week. And you're just again
• 16:36
  Speaker 2: we've been saying this a few times now, but you're
• 16:39
  Speaker 2: going to have to give it a few months to see. Hey,
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  Speaker 2: do future reports confirm what we are seeing in terms
• 16:46
  Speaker 2: of a slow down in inflation? Do future reports confirm
• 16:49
  Speaker 2: what we're seeing in the uptick and unemployment? Do they
• 16:53
  Speaker 2: confirm what we're seeing in an acceleration in GDP? Because
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  Speaker 2: I guess I won't say that it would be impossible,
• 16:59
  Speaker 2: but it would be if not a first then exceedingly
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  Speaker 2: rare to see those trends continue. And what I mean
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  Speaker 2: by that is unemployment trend continuing upwards, inflation trend continuing downwards,
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  Speaker 2: GDP trend continuing upwards. Those are seemingly in contradiction. The
• 17:17
  Speaker 2: first two are not right. If if you have unemployment
• 17:19
  Speaker 2: take up, I could see unemployment, I could see inflation
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  Speaker 2: coming down, but only because GDP.
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  Speaker 4: Was coming up, unless there's some special factors pushing inflation
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  Speaker 4: down in the short term. I'll use again the example
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  Speaker 4: of an energy an energy press shock energy prices. I
• 17:31
  Speaker 4: say shock. That sounds negative, but it could actually be
• 17:33
  Speaker 4: positive for consumers in the short run. That might help
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  Speaker 4: the example. You gave it a late nineties when productivity
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  Speaker 4: was increasing rapidly. We didn't know it at the time.
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  Speaker 4: We only knew it at the very tail end of
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  Speaker 4: the nineties because it takes time to make to get
• 17:43
  Speaker 4: the data in and to make sense of it. The
• 17:46
  Speaker 4: telecom and internet, more generally revolution was making workers more productive.
• 17:52
  Speaker 4: That allowed the FED to keep rates lower than a
• 17:55
  Speaker 4: four to zero point five percent unemployment rate would have suggested.
• 17:58
  Speaker 4: Greenspan got that right. We may be going through something
• 18:01
  Speaker 4: similar here. But it could also be true that rates
• 18:04
  Speaker 4: are too low the so called natural rate of interest,
• 18:07
  Speaker 4: which you and Chucks Outa sometimes talk about here is
• 18:10
  Speaker 4: a moving target. It may be increasing productivity though, would
• 18:14
  Speaker 4: make that rate higher, not lower. So again, a lot
• 18:17
  Speaker 4: of contradictions and questions are raised by this mic. We're
• 18:20
  Speaker 4: certainly not going to resolve it here.
• 18:22
  Speaker 3: No, no, we won't.
• 18:23
  Speaker 2: But it's just it's so easy to make the comparisons
• 18:27
  Speaker 2: to the late nineties for a whole slew of Okay,
• 18:31
  Speaker 2: what you're saying related technology related is but there's so
• 18:36
  Speaker 2: many easy comparisons to make there that I think it's
• 18:39
  Speaker 2: it's almost too tempting to do so, and I think
• 18:43
  Speaker 2: there's some danger in doing so.
• 18:44
  Speaker 4: What you're saying is it might be the case that,
• 18:46
  Speaker 4: like the nineties, there was a productivity boom that allowed
• 18:49
  Speaker 4: the economy to grow faster than what most people thought
• 18:52
  Speaker 4: was its speed limit without stoking inflation.
• 18:55
  Speaker 3: Right.
• 18:57
  Speaker 4: Possibly, Yeah, we won't know. The frustrating thing, this is
• 19:00
  Speaker 4: why the Fed's job is so hard, is that we
• 19:02
  Speaker 4: won't know for like years.
• 19:05
  Speaker 3: We will not know for quite some time.
• 19:07
  Speaker 2: Markets are open on like trading volume after a fairly
• 19:11
  Speaker 2: decent day yesterday in markets, but we'll be covering what
• 19:16
  Speaker 2: is moving today up and down, and where we might
• 19:21
  Speaker 2: be heading led heading into the Christmas holiday next with
• 19:25
  Speaker 2: Wall Street Watch.
• 19:40
  Speaker 1: Like us on Facebook and follow us on Twitter at
• 19:43
  Speaker 1: TFFE show. Breaking business news is always first right here
• 19:47
  Speaker 1: on the Financial Exchange Radio Network. Time now for Wall
• 19:53
  Speaker 1: Street Watch a complete look at what's moving market so
• 19:56
  Speaker 1: far today Right here on the Financial Exchange Radio Network.
• 20:00
  Speaker 5: Markets are edging highers. Wall Street reacts to a solid
• 20:03
  Speaker 5: third quarter GDP reading, which had been delayed due to
• 20:06
  Speaker 5: the government shutdown. The reading showed the economy grew at
• 20:10
  Speaker 5: four point three percent annuallyzed rate, beating forecasts of three
• 20:14
  Speaker 5: point three percent. Right now, the Dow is up over
• 20:17
  Speaker 5: tenth of a percent, or fifty nine points higher. SMP
• 20:20
  Speaker 5: five hundred also up a tenth of percent, Nasdaq up
• 20:23
  Speaker 5: ten points higher, Russell two thousand is actually down six
• 20:28
  Speaker 5: tenths of a percent, Tenure Treasure reeled up one basis
• 20:31
  Speaker 5: point at four point one eighty two percent, and crude
• 20:34
  Speaker 5: oil off about a quarter percent, trading a fifty seven
• 20:37
  Speaker 5: dollars in eighty seven cents a barrel. Novo Nordisk is
• 20:41
  Speaker 5: among the big winners on the day after the Danish
• 20:43
  Speaker 5: drug maker said it will begin selling a pill version
• 20:46
  Speaker 5: of its weight loss medicine we Govi in January after
• 20:50
  Speaker 5: securing approval from US regulators. Shares a rallying over eight percent. Meanwhile,
• 20:55
  Speaker 5: shares in shipmaker Huntington Ingalls Industries are climbing about half
• 20:59
  Speaker 5: a percent after Bloomberg reported that President Trump plans to
• 21:02
  Speaker 5: meet with several defense industry executives next week to urge
• 21:06
  Speaker 5: them to spend more on weapons in research and development elsewhere.
• 21:09
  Speaker 5: Service Now announced it will acquire cybersecurity startup Armists and
• 21:13
  Speaker 5: a cash deal valued at seven point seventy five billion dollars.
• 21:17
  Speaker 5: The enterprise software company said the deal will bolster its
• 21:21
  Speaker 5: cybersecurity capabilities in the age of AI and more than
• 21:25
  Speaker 5: triple its market opportunity for security and risk solutions. Service
• 21:29
  Speaker 5: Now stock is actually retreating two percent. Reddit stock falling
• 21:33
  Speaker 5: two percent, despite equities research analysts at need him a
• 21:36
  Speaker 5: company adding the social media platform to its top stock
• 21:40
  Speaker 5: list for twenty twenty six and as a reminder, markets
• 21:44
  Speaker 5: will close early tomorrow afternoon at one o'clock. I'm Tucker
• 21:48
  Speaker 5: Silva and that is Wall Street Watch and remember you
• 21:51
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• 22:11
  Speaker 3: Mark.
• 22:12
  Speaker 2: I want to talk about this, this piece from the
• 22:14
  Speaker 2: journal about the AI ending entry level jobs, and I'll
• 22:18
  Speaker 2: start by acknowledging for a moment, and maybe maybe you
• 22:21
  Speaker 2: can do better answer than this question than I can.
• 22:23
  Speaker 2: But in terms of tasks that you have personally found
• 22:27
  Speaker 2: AI good at, I think a lot of them probably
• 22:30
  Speaker 2: do fall into an entry level job category. Right, If
• 22:34
  Speaker 2: you were to categorize things that you see within the
• 22:37
  Speaker 2: financial services and analysis region of work, what sort of
• 22:44
  Speaker 2: tasks does AI seem to be good at at this stage?
• 22:48
  Speaker 4: If you think about financial services, which is where we work.
• 22:50
  Speaker 4: So this is going to be a little financial centric, sorry, but.
• 22:53
  Speaker 3: In any just the context that we have, and you
• 22:55
  Speaker 3: can start out.
• 22:57
  Speaker 4: And you start out working a lot in spreadsheets. You
• 22:59
  Speaker 4: maybe you work for an investment manager and your job
• 23:02
  Speaker 4: is to help reconcile prices or price securities or something
• 23:07
  Speaker 4: along those lines. You spend most of your day in
• 23:09
  Speaker 4: Microsoft Excel. At least that's been the dominant spreadsheet program
• 23:13
  Speaker 4: for the past thirty five years or so. Can AI
• 23:17
  Speaker 4: do a lot of the basic stuff that you're responsible
• 23:21
  Speaker 4: for as an entry level analyst. It can do it,
• 23:24
  Speaker 4: but you've got to check the work. You've got to
• 23:25
  Speaker 4: check it for reasonability and accuracy. Copilot which is Microsoft's
• 23:31
  Speaker 4: sidecar AI program, you've all seen it. It's got the
• 23:34
  Speaker 4: little Copilot icon up or right hand corner. That's what
• 23:36
  Speaker 4: it is. You can tell it to look at my
• 23:38
  Speaker 4: spreadsheet for obvious errors. And without deeper knowledge of the
• 23:43
  Speaker 4: subject matter or context or specific instructions, it's not going
• 23:48
  Speaker 4: to do as good a job as an experienced person could.
• 23:50
  Speaker 2: I have heard, by the way that it's quite bad
• 23:52
  Speaker 2: at generating formulas based on commands.
• 23:54
  Speaker 4: Well, but it depends. I guess you have to tell
• 23:57
  Speaker 4: it again, you've got to know your stuff, so you've
• 23:59
  Speaker 4: got to be able to check. Don't because you asked
• 24:02
  Speaker 4: for the correlation between what's in column A and column
• 24:04
  Speaker 4: B of your spreadsheet, don't assume it used the right formula.
• 24:08
  Speaker 4: So you've got to have a subject matter expert checking
• 24:11
  Speaker 4: the work. They'll always be a place for a human
• 24:14
  Speaker 4: being with judgment and again expertise to make sure the robot,
• 24:19
  Speaker 4: so to speak, is doing it right. So you know,
• 24:24
  Speaker 4: if you're, say a copywriter, or you do a lot
• 24:28
  Speaker 4: in Microsoft Word, you can use copilot there to prove documents.
• 24:32
  Speaker 4: But you've got to be specific. You have to say,
• 24:34
  Speaker 4: and I'm polite to it. So I assume these things
• 24:36
  Speaker 4: are going to be running the world at some point.
• 24:37
  Speaker 4: I'm always very polite.
• 24:38
  Speaker 3: I'm shut down.
• 24:39
  Speaker 4: I thank it right, So hi, and can you you
• 24:42
  Speaker 4: have to tell it to check these this this document
• 24:45
  Speaker 4: is intended for someone with a ninth grade, say, reading
• 24:49
  Speaker 4: level capability. Please check it for spacing, punctuation and unclear sentate.
• 24:56
  Speaker 4: You've got to be really for the So I'm using
• 25:03
  Speaker 4: it but giving it very specific prompts and checking and
• 25:06
  Speaker 4: double checking, and then you're running again with the same prompts,
• 25:09
  Speaker 4: and it'll sometimes give you point out different things. On average,
• 25:13
  Speaker 4: it's helpful. It might replace some very junior people in
• 25:16
  Speaker 4: my experience, Mike.
• 25:17
  Speaker 2: So all of that is to say that there can't
• 25:22
  Speaker 2: be a universe in which AI just ends entry level jobs.
• 25:26
  Speaker 2: And I think what the article might mean to say
• 25:29
  Speaker 2: is that a lot of the tasks that are currently
• 25:31
  Speaker 2: performed by entry level employees, especially in white collar jobs.
• 25:36
  Speaker 2: Right now, AI is pretty good at if I need
• 25:40
  Speaker 2: an intern to go through two different spreadsheets and you know,
• 25:46
  Speaker 2: correct the nine digit zip codes and match them up
• 25:50
  Speaker 2: with the five digit zip codes. AI can do that,
• 25:52
  Speaker 2: whereas so could an interurn that I would have hired previously.
• 25:56
  Speaker 3: That doesn't mean that.
• 25:58
  Speaker 4: There's some will work for you, Mike, You're still you're
• 26:01
  Speaker 4: still checking it for you would do that with an intern,
• 26:03
  Speaker 4: of course, sure.
• 26:04
  Speaker 2: But my point would be every single technology that we
• 26:11
  Speaker 2: have ever created as a human race, if it's been
• 26:14
  Speaker 2: actually useful, has led to new jobs, new productivity, new
• 26:20
  Speaker 2: products that get created that then require new labor in
• 26:24
  Speaker 2: order to produce that stuff. I think about the Internet,
• 26:28
  Speaker 2: right Did we look at the Internet today and say, wow,
• 26:31
  Speaker 2: that sure put all the entry level mail carriers who
• 26:37
  Speaker 2: were rushing around New York City out of a job
• 26:39
  Speaker 2: because we have email, Like, yeah, it definitely did. But
• 26:43
  Speaker 2: do we say that there's now no jobs for twenty
• 26:46
  Speaker 2: to twenty four year olds.
• 26:47
  Speaker 3: I think not.
• 26:48
  Speaker 2: And so I keep seeing these pieces written that AI
• 26:51
  Speaker 2: is going to destroy the labor market and is going
• 26:54
  Speaker 2: to make it so that we're all useless, and I
• 26:57
  Speaker 2: just don't get it. I don't get why anyone thinks
• 27:00
  Speaker 2: that that's even possible. And yes, so the obvious question is, Okay,
• 27:05
  Speaker 2: if AI destroys all entry level jobs at big banks,
• 27:08
  Speaker 2: then where are you going to get your talent ten
• 27:10
  Speaker 2: years from now, Because every one of your C suite
• 27:14
  Speaker 2: executives was an entry level employee thirty years ago. So
• 27:19
  Speaker 2: explain to me how that's going to work, I guess
• 27:22
  Speaker 2: would be my point in case here. So AI will
• 27:25
  Speaker 2: change things, it will put certain jobs, it'll destroy certain jobs,
• 27:29
  Speaker 2: certain jobs will cease to exist in any meaningful way
• 27:32
  Speaker 2: going forward. I just don't buy the argument that this
• 27:35
  Speaker 2: technology is so much different that it's going to cause,
• 27:38
  Speaker 2: for instance, permanent fifteen percent unemployment.
• 27:40
  Speaker 4: One fun exercise if you want to convince yourself that
• 27:43
  Speaker 4: technology has created more jobs than it's destroyed, is to,
• 27:47
  Speaker 4: for example, google number of typists, and it'll one of
• 27:51
  Speaker 4: the first links is to a Federal Reserve database. There
• 27:54
  Speaker 4: used to be a million of them. Now there's like
• 27:56
  Speaker 4: forty thousand. If you go back to nineteen seventy to today,
• 27:59
  Speaker 4: or you can look at people employed in the retail trade.
• 28:02
  Speaker 4: That number peaked in roughly nineteen eighty I may be
• 28:07
  Speaker 4: off by five or ten years there, but as soon
• 28:09
  Speaker 4: as barcode scanners came along in automatic checkout and most
• 28:13
  Speaker 4: of us, let's I'm old enough to remember barcode scanners
• 28:17
  Speaker 4: being introduced in George W. Bush HW Bush fumbling with them,
• 28:20
  Speaker 4: marveling at them, and stuff like that. But that little
• 28:25
  Speaker 4: historical episode is a reminder that they became prevalent. Retail
• 28:30
  Speaker 4: employment as a percentage of employment topped out just about
• 28:34
  Speaker 4: that time, and since then it's been declining. So there
• 28:37
  Speaker 4: are lots of series you can look at to convince you.
• 28:40
  Speaker 4: But by the larger point is that despite the decline
• 28:42
  Speaker 4: in typists, the virtual disappearance of typeists, and the decline
• 28:46
  Speaker 4: in people working in retail as a percentage of the
• 28:50
  Speaker 4: overall labor force, the unemployment rate is not trended up. Indeed,
• 28:53
  Speaker 4: it's never, for the most part, never in the history
• 28:56
  Speaker 4: of recorded unemployment in this country been lower. So your point, Mike,
• 29:00
  Speaker 4: jobs have shifted.
• 29:02
  Speaker 3: Yeah, Now you might not like that.
• 29:03
  Speaker 2: You might say that we were better off as society
• 29:06
  Speaker 2: when there are more people working face to face in
• 29:08
  Speaker 2: retail compared to now all the people working in warehouses.
• 29:11
  Speaker 2: And I don't have a comment for you on that.
• 29:13
  Speaker 2: But the idea that we're all just going to be
• 29:15
  Speaker 2: unemployed due to AI is just yeah.
• 29:18
  Speaker 4: Just is there a scenario where it is more disruptive?
• 29:21
  Speaker 4: I don't want to poop poo it. By the way,
• 29:23
  Speaker 4: I'm not saying I know. I'm only saying that history
• 29:26
  Speaker 4: is encouraging here. It could be fast, and.
• 29:31
  Speaker 3: I think it could be especially disruptive.
• 29:33
  Speaker 2: I think it could, you know, yeah, not industries faster
• 29:36
  Speaker 2: than others. But if you're asking me what does it
• 29:39
  Speaker 2: look like ten years from now, my guess would be
• 29:42
  Speaker 2: that a continued normal set of business cycles that result
• 29:45
  Speaker 2: in similar unemployment to what we've had for the last
• 29:47
  Speaker 2: fifty sixty years.
• 29:48
  Speaker 4: If we continue to get GDP annualized real at four
• 29:52
  Speaker 4: percent plus in conjunction with rising unemployment, MIC, I'll be
• 29:56
  Speaker 4: a little bit more worried. That would mean productivities increasing rapidly,
• 29:59
  Speaker 4: which would suggest that something's going on. That's probably nobody's
• 30:03
  Speaker 4: base case, but it's possible to tie it back to
• 30:06
  Speaker 4: today's GDP number.
• 30:07
  Speaker 3: Let's take a quick break.
• 30:09
  Speaker 2: When we come back, everyone and their mother is putting
• 30:11
  Speaker 2: out forecast for what twenty twenty six is going to
• 30:14
  Speaker 2: mean for equity markets, so we'll be covering what their
• 30:17
  Speaker 2: mothers are saying about equity markets come twenty twenty six.
• 30:20
  Speaker 3: That's next.
• 30:21
  Speaker 1: Find daily interviews in full shows of the Financial Exchange
• 30:24
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• 31:18
  Speaker 3: High jiet G.
• 31:22
  Speaker 2: Bells those holidays, jie G Bells, Mark we spent a
• 31:31
  Speaker 2: lot of the COVID era talking about the yield curve
• 31:35
  Speaker 2: and its inversion that I'm looking at the chart here
• 31:38
  Speaker 2: from the Federal Reserve. The yield curve on the two
• 31:40
  Speaker 2: ten year looks like it inverted back in July of
• 31:43
  Speaker 2: twenty twenty two. There was some stuff going on in
• 31:46
  Speaker 2: twenty twenty two, largely the highest inflation we've seen in
• 31:50
  Speaker 2: was it fifty years, forty fast years, something in that
• 31:55
  Speaker 2: general range, and so not spectacularly strange since though in
• 32:02
  Speaker 2: August of twenty twenty four it's flipped back, and I
• 32:06
  Speaker 2: think I'm speaking of this inverted yield curve as though
• 32:09
  Speaker 2: everybody has any idea what I'm talking about when we
• 32:12
  Speaker 2: talk about the yield curve. What you typically expect in
• 32:15
  Speaker 2: a normal environment is that if you want to borrow
• 32:17
  Speaker 2: money for a longer period of time, you're going to
• 32:21
  Speaker 2: get charged more in interest than if you were to
• 32:23
  Speaker 2: borrow it for ninety days. So if you go to
• 32:25
  Speaker 2: your Laran Shark and say, hey, I need money for
• 32:27
  Speaker 2: ninety days, you would generally expect a lower interest rate
• 32:31
  Speaker 2: than if you're borrowing it for nine years. Logical makes sense, Hey,
• 32:35
  Speaker 2: I'm not going to get my money back for nine years,
• 32:37
  Speaker 2: I would expect more. What happened for a brief period
• 32:40
  Speaker 2: of time there, and has happened several times in the
• 32:42
  Speaker 2: past as well, is no. In fact, the borrowing rate
• 32:45
  Speaker 2: on the short term was higher than in the long term.
• 32:49
  Speaker 2: And that's I don't know if you have a more
• 32:51
  Speaker 2: concise definition of why that happens.
• 32:54
  Speaker 4: But FED hike to kill inflation and consequently growth, and
• 33:00
  Speaker 4: let me, it's like when you're trying to kill us.
• 33:02
  Speaker 4: I hate to draw analogies to diseases people that might
• 33:05
  Speaker 4: actually be fighting, but some cures for diseases also really
• 33:08
  Speaker 4: hurt the body. We all know this, and that's effectively
• 33:11
  Speaker 4: what the fed's remedies are like.
• 33:13
  Speaker 2: In any case, we've definitely more normalized now and to
• 33:16
  Speaker 2: this point, the yield curve is no longer inverted, and
• 33:19
  Speaker 2: it actually looks more and more normal.
• 33:22
  Speaker 3: It is getting steeper as we go out here, and.
• 33:24
  Speaker 4: Some are Feds now lowering rates. Long term rates have
• 33:27
  Speaker 4: pretty much they've come down a little bit, but not much.
• 33:30
  Speaker 4: Very long term rates have actually gone up, so you
• 33:32
  Speaker 4: get a more normal, upward sloping term structure.
• 33:35
  Speaker 2: And the concern people have when it inverts is, you know,
• 33:38
  Speaker 2: for the reasons that Mark mentioned. It's often seen as
• 33:40
  Speaker 2: a signal for a recession in the future when that
• 33:43
  Speaker 2: yield curve inverts. It did not result in it this
• 33:46
  Speaker 2: time around, but we had a really bad economy in
• 33:48
  Speaker 2: twenty twenty two. Now, some specifically those over at the
• 33:53
  Speaker 2: Wall Street Journal saying that the reverse of this is
• 33:57
  Speaker 2: clearing the way for a stop and.
• 33:59
  Speaker 4: It's not some mistle thing here. The Fed's easing. This
• 34:02
  Speaker 4: puts upward pressure on longer term interest rates, which we
• 34:07
  Speaker 4: have seen, and that has typically coincided with not surprisingly
• 34:12
  Speaker 4: periods of i'll just say above trend economic growth, which
• 34:16
  Speaker 4: in turn has been good for earnings, which in turn
• 34:18
  Speaker 4: has been good for stock prices. Yeah, it's very simple.
• 34:21
  Speaker 2: Plain and simple. For a number of different reasons. Lower
• 34:23
  Speaker 2: interest rates across the board tends to drive up asset prices,
• 34:30
  Speaker 2: tends to drive up drive up economic activity, disincentivizes savings,
• 34:34
  Speaker 2: and incentivizes investment. The criticism would be it also sometimes
• 34:39
  Speaker 2: incentivizes speculation and can contribute to bubbles and inflation, push
• 34:43
  Speaker 2: up things like inflation. But in the short term that's
• 34:46
  Speaker 2: typically the relationship you see, and we've seen a fair
• 34:49
  Speaker 2: bit of interest rate cutting over the course of the
• 34:51
  Speaker 2: last eighteen eighteen months or so.
• 34:54
  Speaker 5: When the holidays roll in and the cold settles over
• 34:57
  Speaker 5: New England, find your escape in the US Virgin Island.
• 35:00
  Speaker 5: Let's trade the freezing temps and gray skies from warm sun,
• 35:03
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• 35:06
  Speaker 5: the second you land. This December through early January, Saint
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• 35:27
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• 35:31
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• 35:34
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• 35:39
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• 35:42
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• 35:45
  Speaker 5: out of the cold into pure sunshine. This holiday season,
• 35:49
  Speaker 5: let yourself fall naturally in rhythm with the heartbeat of
• 35:52
  Speaker 5: the islands. Visit America's Caribbean paradise the US Virgin Islands.
• 35:56
  Speaker 5: Go to visit USBI dot com and book your trip today.
• 36:01
  Speaker 5: That's visit USVI dot com.
• 36:05
  Speaker 1: Mark.
• 36:05
  Speaker 2: There's a piece in the Globe today about New England
• 36:09
  Speaker 2: and the kind of almost super commute for many people
• 36:12
  Speaker 2: that commute into Boston. And I've always kind of known
• 36:16
  Speaker 2: the differential and incomes from Boston, but not actually been
• 36:19
  Speaker 2: able to put my hands on it. And I was
• 36:21
  Speaker 2: speaking with somebody last year who works in healthcare. She
• 36:26
  Speaker 2: was nurse, and she was doing one of these pretty
• 36:29
  Speaker 2: hefty commutes. She was going from Rhode Island up into
• 36:32
  Speaker 2: Boston for a nine to five nursing role. But she
• 36:36
  Speaker 2: was making a good fifty percent more than she could
• 36:40
  Speaker 2: find for a similar role in Rhode Island, and it
• 36:43
  Speaker 2: was exhausting, it was draining on her, but you know,
• 36:46
  Speaker 2: ultimately she decided for the time being, at least it
• 36:48
  Speaker 2: was worthwhile. I was pulling some income numbers from twenty
• 36:51
  Speaker 2: twenty three median income in Boston, ninety five thousand dollars
• 36:54
  Speaker 2: that compares to sixty seven thousand dollars in Providence, Rhode Island,
• 36:58
  Speaker 2: and it just kind of made me wonder, like, well,
• 37:00
  Speaker 2: what have you done one of these daily hour plus
• 37:03
  Speaker 2: commutes for a job. Sure, yeah, I mean it made
• 37:07
  Speaker 2: me ask the same question of how much of a
• 37:09
  Speaker 2: paid differential would I need to get to make that
• 37:12
  Speaker 2: worth my worth my while I mean most everybody outside
• 37:16
  Speaker 2: of me, I guess has to deal with a thirty
• 37:18
  Speaker 2: plus minute commute.
• 37:20
  Speaker 4: Well, if you live in a Rhode Island, which which
• 37:22
  Speaker 4: I did up until about nineteen ninety nine, your choices
• 37:25
  Speaker 4: are limited. Rhode Island's economy is small. Nothing against it, sure,
• 37:29
  Speaker 4: but it's not particularly It's small, not particularly well diversified,
• 37:32
  Speaker 4: and subject to the boom bust cycles associated with manufacturing.
• 37:36
  Speaker 4: It used to be a manufacturing I'll say hub. That's
• 37:39
  Speaker 4: a little exaggerated, but anyway, and of course construction. So
• 37:42
  Speaker 4: if you want to work in financial services, and more accurately,
• 37:45
  Speaker 4: you want opportunities to to progress in your career in
• 37:50
  Speaker 4: financial services, Mike, you got to work in a bigger
• 37:53
  Speaker 4: like if you don't, you don't work in south western Connecticut,
• 37:59
  Speaker 4: you live there and you commute into the city.
• 38:02
  Speaker 2: Yeah, if I could do it again, man, I was
• 38:04
  Speaker 2: looking at like, for instance, you can take the train
• 38:06
  Speaker 2: from Pawtucket, Rhode Island, right into Boston. It takes over Tucket, Patucket.
• 38:10
  Speaker 2: It's one quick paw Pawtucket. It takes a little bit
• 38:14
  Speaker 2: more than an hour. But you know, you're looking at
• 38:16
  Speaker 2: real estate prices that are rough.
• 38:18
  Speaker 4: That's not a bad commute. The one you're referring to
• 38:20
  Speaker 4: T stations in Attleborough and you zoom right in. Yeah,
• 38:24
  Speaker 4: I've done that as well as so I know.
• 38:26
  Speaker 3: I know.
• 38:26
  Speaker 2: We talk a lot about affordability in the New England
• 38:28
  Speaker 2: region and it is a problem, but people are finding
• 38:34
  Speaker 2: solutions to it. And the solution is a miserable commute,
• 38:36
  Speaker 2: but plenty of people make it work. We got to
• 38:39
  Speaker 2: take quick Break Markets remain slightly in positive territory as
• 38:43
  Speaker 2: we close out the last few trading days before the
• 38:45
  Speaker 2: holiday season.
• 38:46
  Speaker 1: Here.
• 38:47
  Speaker 3: Quick Break will be back with a lot more in
• 38:48
  Speaker 3: the second hour
• 39:01
  Speaker 1: Five