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Why did SoftBank sell its entire stake in Nvidia? · The Financial Exchange Show

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  Speaker 1: and Mark vandetty.
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  Speaker 2: Welcome to this Tuesday edition of the Financial Exchange, and
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  Speaker 2: a happy Veterans Day to all our listeners out there,
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  Speaker 2: and a big thank you to all of those who
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  Speaker 2: have served and protected our country. We have a busy
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  Speaker 2: day today and the Financial Exchange a lot of stories
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  Speaker 2: to cover here. Certainly the one that will kick off
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  Speaker 2: the program with is the continued updates on where the
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  Speaker 2: US federal government shutdown sits. At the moment, we are
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  Speaker 2: about forty plus days in. However, we did get news
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  Speaker 2: last night, and some of this was kind of teased
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  Speaker 2: out yesterday. The Senate did in fact pass a past
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  Speaker 2: a measure to end the government shutdown through.
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  Speaker 3: A sixty to forty vote.
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  Speaker 2: It was approved to move along to the House of
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  Speaker 2: Representatives where they will vote on it, I believe, as
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  Speaker 2: early as Wednesday at four o'clock, and it's very likely
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  Speaker 2: that the Republican controlled House will move that on to
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  Speaker 2: the President's desk after and we could be looking at
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  Speaker 2: the end of the government shutdown, likely Thursday or Friday
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  Speaker 2: of this week. So certainly welcome news here. Mark that
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  Speaker 2: this will likely be put to bed here over the
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  Speaker 2: course the next couple of days. The agreement that is
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  Speaker 2: set in place will extend funding for the federal government
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  Speaker 2: until January thirtieth, and then myself and Mark and Chuck
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  Speaker 2: and Mike will be talking about this, probably all over
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  Speaker 2: again in a couple of months from now, where we
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  Speaker 2: can look forward to using some of our old material
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  Speaker 2: on potential looming government shutdown. But hopefully this buys us
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  Speaker 2: some time for now, and we'll see what the end
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  Speaker 2: of January will look like as long as all this
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  Speaker 2: stuff moves through over the course of the next couple
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  Speaker 2: of years.
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  Speaker 4: Yeah, I think the longer term lesson here is many
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  Speaker 4: of you have seen the comparisons of the lengths of
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  Speaker 4: recent shutdowns relative to shutdowns in the more distant past.
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  Speaker 4: They were brief because the issues weren't And this is
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  Speaker 4: common sense, I guess, but I had to stop and
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  Speaker 4: think about it. The issues just weren't as a vital
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  Speaker 4: We have no fiscal space left, is what I'm trying
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  Speaker 4: to say. That wasn't true In the eighties and nineties.
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  Speaker 4: Debt to GDP was forty fifty percent at most, so
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  Speaker 4: there was room to run, and we did. We did,
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  Speaker 4: indeed run. We're out arguably of fiscal runway. God forbid,
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  Speaker 4: we have an emergency, another pandemic, a war absent printing money,
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  Speaker 4: which is not unusual even in America. We did it
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  Speaker 4: in the forties, we did it in the eighteen Going
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  Speaker 4: back a little farther, we did in the eighteen sixties.
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  Speaker 4: We had very high bursive infleetion, tough time during those Yeah. Yeah,
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  Speaker 4: well we all we all scrimpt and saved. I guess
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  Speaker 4: we shouldn't be joking about the Civil War, but well
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  Speaker 4: maybe it's maybe it's I think maybe you keep out enough,
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  Speaker 4: maybe enough time has passed. But you know, look, my
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  Speaker 4: point is we're out of fiscal we're fiscal leg room now,
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  Speaker 4: so every little dispute is amplified.
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  Speaker 2: Right, and now we sit with a government that seems
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  Speaker 2: to be well positioned, I guess for the next couple months. So,
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  Speaker 2: but you're right, these issues will be Yeah, these issues
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  Speaker 2: have gone on for the last several years. And this
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  Speaker 2: this arbitrary ceiling that we set and then bump into
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  Speaker 2: and then we have to do this whole song and
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  Speaker 2: dance over and over again. It just seems like that
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  Speaker 2: is not going anywhere anytime soon. So that's one aspect
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  Speaker 2: of things, is that this is resolved, But from a
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  Speaker 2: longer term perspective physical discipline we were talking on yesterday's show,
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  Speaker 2: it's just not something that either political party has shown
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  Speaker 2: really any desire to get under control.
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  Speaker 4: It's really been horrendous.
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  Speaker 2: For twenty five or thirty years, it hasn't been an issue.
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  Speaker 2: So from our standpoint, this is going to be continued
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  Speaker 2: to be issue, you know, whether or not the government
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  Speaker 2: continues to run into these cliffs. What this means in
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  Speaker 2: terms of the impact on federal employees, they would be
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  Speaker 2: back paid for the period of time that they were
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  Speaker 2: not getting paid for. And then really with the.
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  Speaker 4: You don't save any money. None of this was about
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  Speaker 4: saving oh no, no, no really or even cutting spending, no not,
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  Speaker 4: None of it was about any of those fiscal.
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  Speaker 2: Really more about smaller deal points regarding the American Affordable
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  Speaker 2: Care Act and some of its credits and subsidies there.
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  Speaker 3: That was head of the dispute.
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  Speaker 2: You also had just some debates regarding government workers and
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  Speaker 2: potential firings of those. But anyway, all this gets put
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  Speaker 2: to the back burner for the moment here. The next
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  Speaker 2: thing that we moved to is just trying to gain
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  Speaker 2: sort of any determination as to what the economic impact
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  Speaker 2: could be of the government being shut down for six
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  Speaker 2: weeks or so. There are some pieces that have been
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  Speaker 2: written comparing it back to some other shutdowns that we've
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  Speaker 2: seen and potentially what it could do in terms of
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  Speaker 2: shaving off GDP growth. The Congressional Budget Office had estimated
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  Speaker 2: that if the shutdown where it last for six weeks,
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  Speaker 2: we're going to come in right around that time frame here,
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  Speaker 2: relatively close, that it would reduce the annualized growth of
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  Speaker 2: Q four GDP by one and a half percent. I've
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  Speaker 2: seen other estimates out there from Oxford Economics that it
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  Speaker 2: would only shave off one percent of GDP growth in
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  Speaker 2: Q four. Where do you kind of ligne on the side.
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  Speaker 2: I know it's not really clear data evidence one way
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  Speaker 2: or another, but rather muted impact is sort of where
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  Speaker 2: I would lean mark in terms of its economic impact
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  Speaker 2: the shutdown that we've just experienced here, I'm kind of
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  Speaker 2: jumping ahead by saying that we will have this resolved
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  Speaker 2: by Friday.
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  Speaker 3: So under that assumption, yeah, I'll go with the.
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  Speaker 4: Being counters who keep track of the components of GDP,
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  Speaker 4: which GDP is just overall spending, so it's consumption, which
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  Speaker 4: is what we spend investment, which is partly what we spend,
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  Speaker 4: partly what businesses spend, and housing is included in that.
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  Speaker 4: Government spending is the other component of GDP, and then
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  Speaker 4: there's a little adjustment for net exports because you don't
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  Speaker 4: want to double out them. So it's a short term
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  Speaker 4: accounting based measure of how much we have spent in
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  Speaker 4: a given period. GDP is a quarterly statistic that's different
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  Speaker 4: than growth. It's easy to confuse the two. I wouldn't
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  Speaker 4: expect any impact on the long term productive capacity of
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  Speaker 4: the US economy trend growth. In the short term, it
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  Speaker 4: could be a little bit disruptive, and maybe if you're
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  Speaker 4: on the cusp of recession then it does become more concerning.
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  Speaker 4: But generally speaking, using history as a precedent, you make
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  Speaker 4: up for these shutdowns pretty quickly because once again, no
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  Speaker 4: spending was actually cut, no employees were actually fired. I'm
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  Speaker 4: not saying they should have been, but this was not
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  Speaker 4: about shoring up our fiscal situation. It was fought over
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  Speaker 4: different considerations.
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  Speaker 2: And the other key consideration will be economic data. We
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  Speaker 2: have had a freeze in terms of any economic data
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  Speaker 2: that we've received, whether it be the jobs report, retail
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  Speaker 2: sales inflationary data, and so the next thing that we
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  Speaker 2: turned to is just trying to get a sense for
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  Speaker 2: when some of that data will be released. The first
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  Speaker 2: report that we will most likely receive, I would imagine
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  Speaker 2: by early next week, is the September Jobs and Inflation
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  Speaker 2: report that was basically already fully baked in and was
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  Speaker 2: ready to go prior to the government shutting down on
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  Speaker 2: October first, So we will likely get that very early
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  Speaker 2: next week because all of that data had been accumulated.
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  Speaker 2: When it comes to some of these other reports for
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  Speaker 2: the month of October and November, when you look at
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  Speaker 2: the key categories that us on the show and many
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  Speaker 2: economists investors look at on a monthly basis, whether it's
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  Speaker 2: retail sales or inflatia, there's been some projections that have
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  Speaker 2: been thrown out there based on other instances when the
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  Speaker 2: government was shut down and not collecting this type of data.
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  Speaker 2: December eighth is a projection that I saw thrown out
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  Speaker 2: there for the October and November jobs report. It's important
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  Speaker 2: to note that the Federal Reserve will get together for
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  Speaker 2: its next meeting on the ninth and tenth of December,
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  Speaker 2: so it's very likely that they will not have many
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  Speaker 2: of these months of economic data. When they do get together,
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  Speaker 2: it's going to be difficult for all these estimates to
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  Speaker 2: be compiled and be put together. So it's just going
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  Speaker 2: to be sort of a wait and see and they'll
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  Speaker 2: be kind of going in blindly.
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  Speaker 3: Very likely. Yeah, if you think.
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  Speaker 4: About the FED, I say this every time I'm on,
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  Speaker 4: but I think it's a helpful analogy. It's the economy's thermostat.
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  Speaker 4: The economy gets too hot, and specifically, what I mean
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  Speaker 4: by that is demand exceeds the economy's productive capacity. Demand
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  Speaker 4: overall demand sometimes called aggregate demand. You hear economist stow
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  Speaker 4: that term around, exceeds aggregate supply. When that happens, you
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  Speaker 4: get up with pressure on prices. It's unavoidable. The Fed's
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  Speaker 4: job is to the extent that when demand the extent
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  Speaker 4: that demand exceeds supply because it has overstimulated, because it
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  Speaker 4: is effectively printed too much money. The FED job is
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  Speaker 4: to cool the economy down. That's why make the thermostat analogy,
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  Speaker 4: and vice versa. When the economy is not living up
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  Speaker 4: to its productive potential, the Fed's job is to give.
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  Speaker 3: It a boost.
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  Speaker 4: It's tough it would be like asking your HVAC system
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  Speaker 4: to function properly without inputting the right room temperature. Should
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  Speaker 4: I be calling for heat? Should I be calling for AC?
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  Speaker 4: Should I be calling for nothing for the thermostat? I
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  Speaker 4: guess could ask those questions. That's what it would be asking.
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  Speaker 4: That's what the Fed's asking right now. It doesn't have
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  Speaker 4: a good reading on the ambient temperature.
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  Speaker 2: Yeah, it just was thinking of my son who's four
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  Speaker 2: years old. In the car will sometimes just say, you know,
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  Speaker 2: he'll say turn on the heat, but he means put
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  Speaker 2: on the cool air and just doesn't know the expression.
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  Speaker 2: It still needs to learn the air conditioning.
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  Speaker 4: So maybe a career as an HVACT technician is.
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  Speaker 2: Not He's still young. He'll figure it out. We're going
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  Speaker 2: to take a quick break here on the financial distange.
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  Speaker 2: When we come back, I want to talk specifically about
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  Speaker 2: the government shutdown and the impact on the labor market
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  Speaker 2: and the lack of data that we've seen and do
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  Speaker 2: we have the prerequisite data that will give us a
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  Speaker 2: good sense for where is the labor market at this point.
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  Speaker 2: We're going to talk about that right after this break
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  Speaker 2: here on the financial exchange stick with.
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  Speaker 3: All right, come back from break here.
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  Speaker 2: We are talking in the prior segment about the US
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  Speaker 2: labor market, and in particular, one of the things that's
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  Speaker 2: been really challenging with the labor market over the course
• 12:06
  Speaker 2: of the last month or so is we've had really
• 12:08
  Speaker 2: no economic data from a federal government perspective to get
• 12:12
  Speaker 2: a sense for where is the labor market at this
• 12:15
  Speaker 2: point in time. So as a result, we've been forced
• 12:17
  Speaker 2: to look at some of the private payroll data providers
• 12:21
  Speaker 2: and other just economists out there for other resources to
• 12:25
  Speaker 2: get a sense for where is the labor market at
• 12:28
  Speaker 2: this point in time. The unemployment rate sits about four
• 12:31
  Speaker 2: point three percent. It's projected that perhaps it had ticked
• 12:34
  Speaker 2: up to four point three six percent in October. But
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  Speaker 2: what we're seeing now is some different charts that we're
• 12:42
  Speaker 2: put together in a piece by Barons here. And the
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  Speaker 2: question I have to you, Mark is is how much
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  Speaker 2: stock do you put into some of these You know,
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  Speaker 2: private payroll data aggregators ADP is a big one, and
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  Speaker 2: oftentimes when they were released in conjunction with government data,
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  Speaker 2: we largely ignore I think their reference perhaps in passing.
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  Speaker 2: But now they've had their time in the sun over
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  Speaker 2: the course of the last month or so. How much
• 13:07
  Speaker 2: stock do you put into some of these reports and
• 13:09
  Speaker 2: some of these data points that are coming out on
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  Speaker 2: the private side of things.
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  Speaker 4: I think different bits of information from the private sector
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  Speaker 4: could be helpful if you're forecasting, if you're.
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  Speaker 3: Trying to do.
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  Speaker 4: Let me back up and just state it plainly, and
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  Speaker 4: then you tell me if this makes sense, Paul. If
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  Speaker 4: you're doing forecasting and most of us are not, I mean,
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  Speaker 4: I do it sort of as a hobby, but it's
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  Speaker 4: you know, it's not really part of my most urgent
• 13:34
  Speaker 4: day to day duties in my day job at Armstrong
• 13:36
  Speaker 4: Advisory Group because we're not a macroeconomic advisory for them,
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  Speaker 4: and I'm not a labor economist. But I have found
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  Speaker 4: that if you're trying to do your little forecast of
• 13:43
  Speaker 4: what the payroll change is going to be, and you
• 13:45
  Speaker 4: do that using statistical methods in computer software, if you
• 13:48
  Speaker 4: add to whatever your little model is what ADP reported
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  Speaker 4: this month, which usually comes out within a few days
• 13:55
  Speaker 4: of the DL's official report, you can improve your forecast
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  Speaker 4: a little bit. So I have found, and I'm sure
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  Speaker 4: others have found this too. Again, I'm not a labor
• 14:02
  Speaker 4: economist and it's not my kind of full time job,
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  Speaker 4: so I'll just call myself a hobbyist.
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  Speaker 3: I found that it's helpful. It does not just.
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  Speaker 4: I've found through month over month experience, if you go
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  Speaker 4: back and test it, you can improve your forecasting a
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  Speaker 4: little bit, so there's information in there, Paul. Now, should
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  Speaker 4: you and I as sort of uh, in this context
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  Speaker 4: labor are commentators economic and financial market commentator? Should we
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  Speaker 4: get all hung up on it?
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  Speaker 3: I don't know.
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  Speaker 4: This is where I struggle with with economic data and
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  Speaker 4: the way people use it.
• 14:31
  Speaker 3: There are.
• 14:33
  Speaker 4: Like, you know, like a lot of really spicy ingredients.
• 14:36
  Speaker 4: They're sort of good in very small quantities if you
• 14:38
  Speaker 4: know how to deploy them, but you shouldn't take them
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  Speaker 4: out of context, you know.
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  Speaker 3: That's that's the That's I think the best I could
• 14:46
  Speaker 3: say about it.
• 14:46
  Speaker 2: If a family member were to ask you a Thanksgiving
• 14:49
  Speaker 2: in a couple.
• 14:51
  Speaker 4: I'm gonna stop you right there.
• 14:53
  Speaker 5: I'm already If they were to to chat.
• 14:55
  Speaker 2: With you over some turkey and stuff and say, hey, Mark,
• 14:59
  Speaker 2: you know how is how has the labor market? Ben?
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  Speaker 3: You know what?
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  Speaker 2: What would you give to them as a generic sort
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  Speaker 2: of summation of where where do we stand at this point?
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  Speaker 2: Recognizing that, yeah, the data has been murky I guess
• 15:12
  Speaker 2: over the last month. Is so, how would you summarize
• 15:14
  Speaker 2: that to them in sort of the lay terms for
• 15:17
  Speaker 2: just someone sitting at the table, look.
• 15:19
  Speaker 4: The economy based on the last snapshot we had appears
• 15:22
  Speaker 4: to be good.
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  Speaker 3: Yep.
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  Speaker 4: Growth is and what I mean by that very simply
• 15:26
  Speaker 4: one concept. Growth is at or above trend, which is
• 15:30
  Speaker 4: about as good as it gets. Is the most you
• 15:32
  Speaker 4: can ask for, and it's been the case, by the way,
• 15:34
  Speaker 4: for the past few years. Policies have changed a lot,
• 15:37
  Speaker 4: tariff policy and monetary policies changing. We can get into that,
• 15:42
  Speaker 4: I think we will a little bit later in the
• 15:44
  Speaker 4: stack that Tucker Silov will put together. But it's amazing
• 15:48
  Speaker 4: how under the hood the economy doesn't change much, or
• 15:52
  Speaker 4: changes only very slowly, even in response to big policy changes.
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  Speaker 3: So it's good, Paul.
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  Speaker 4: It's hard to deny that are their concerns.
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  Speaker 3: Sure you you ticked off a bunch YEP.
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  Speaker 2: Labor market, I would say specifically, I know you have
• 16:03
  Speaker 2: kind of specifically the economy in general labor market. What
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  Speaker 2: I would say, for you know, a key couple of
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  Speaker 2: bullet points is that you have an unemployment rate that
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  Speaker 2: has remained relatively steady at four point three percent. Yes,
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  Speaker 2: at the lows it was three and a half percent,
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  Speaker 2: so we're higher than we were there, but it has
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  Speaker 2: stayed very stable at this four point three percent. And
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  Speaker 2: historically I would be telling this person at the Thanksgiving table,
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  Speaker 2: that is a very good rate of unemployment, very very
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  Speaker 2: full rate there on the hiring shut On the hiring front,
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  Speaker 2: then we've seen a bit of a slowdown. There hasn't
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  Speaker 2: been this tremendous amount of job growth that we've seen
• 16:43
  Speaker 2: in twenty one twenty two. To be fair, those were
• 16:45
  Speaker 2: extremely robust periods of labor growth that were well beyond
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  Speaker 2: what you've seen historically. You've also seen more anecdotal evidence
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  Speaker 2: that there seems to be an uptick in layoffs. Unclear
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  Speaker 2: if that is wide spread that we've seen significant layoffs.
• 17:02
  Speaker 2: You just are starting to see some big headline companies
• 17:05
  Speaker 2: Amazon comes to mind, and others that are sort of
• 17:07
  Speaker 2: cutting headcount a little bit. And then you've heard also
• 17:10
  Speaker 2: just that those new entrants into the labor market are
• 17:12
  Speaker 2: having a little more difficulty.
• 17:14
  Speaker 3: So that's also that I what does all that mean though?
• 17:17
  Speaker 3: What does all that mean? Is that is the lad
• 17:20
  Speaker 3: I think you.
• 17:20
  Speaker 4: Know the answer to this. You're wrong, right, I don't
• 17:22
  Speaker 4: know that, But I'm not talking to you. I'm talking
• 17:24
  Speaker 4: to people.
• 17:25
  Speaker 2: Well, what I would say to investors or friends and
• 17:27
  Speaker 2: family out there. The big focus that the federal Reserve
• 17:29
  Speaker 2: has very clearly indicated that they are going to be
• 17:33
  Speaker 2: most focused on for the next six to twelve months
• 17:35
  Speaker 2: or however period of time. It is less so inflation
• 17:37
  Speaker 2: that we talked about a lot over the course of
• 17:39
  Speaker 2: the last year or so, particularly around April with the
• 17:42
  Speaker 2: implementation of TERRAS. There was a lot of thought put
• 17:46
  Speaker 2: behind this idea that was going to lead to increased prices.
• 17:48
  Speaker 2: No evidence to that just yet. It's really the labor market.
• 17:51
  Speaker 2: Does it trend into a negative direction where that unemployment
• 17:56
  Speaker 2: rate increases and we see a true slowdown. No evidence
• 18:00
  Speaker 2: to point to that just yet. The next six months
• 18:02
  Speaker 2: or so, that seems to be the Federal Reserve's biggest focus. Unfortunately,
• 18:06
  Speaker 2: the challenging part is going to be it's going to
• 18:08
  Speaker 2: be likely not until January or February that you could
• 18:12
  Speaker 2: say you'll have a good grasp and we'll kind of
• 18:14
  Speaker 2: be back running at the regularly scheduled deployment of all
• 18:19
  Speaker 2: this economic data because of the glut that we've sort
• 18:21
  Speaker 2: of created with this government.
• 18:22
  Speaker 4: Yeah, we just don't know, which is why it's puzzling
• 18:25
  Speaker 4: that some people are clamoring really loudly for interest rate cuts,
• 18:29
  Speaker 4: big interest rate cuts. You know, some of them have
• 18:33
  Speaker 4: political most of them have political motivations. That's always the case.
• 18:36
  Speaker 4: But you never really know the true state of the economy.
• 18:38
  Speaker 4: These figures that we're talking about, even when we get them,
• 18:41
  Speaker 4: they'll still just be statistics, which means it's an estimate,
• 18:45
  Speaker 4: and that estimate could be high low. It's never spot on.
• 18:50
  Speaker 3: We just don't know.
• 18:51
  Speaker 2: Taking a look at markets, we've got the Dow up
• 18:54
  Speaker 2: about eighty five points at the moment, the S and
• 18:56
  Speaker 2: P five hundred is slightly a negative territory, down about
• 18:59
  Speaker 2: a quarter percent, and the Nasdaq is down about two
• 19:03
  Speaker 2: thirds of a percent. Here we're going to take a
• 19:05
  Speaker 2: quick break here on the finish this change, but when
• 19:08
  Speaker 2: we come back, we're be talking a little bit about
• 19:10
  Speaker 2: US household debt hitting a new record according to the
• 19:14
  Speaker 2: New York Fed. We'll also be talking about SoftBank, who
• 19:18
  Speaker 2: sold its stake in Nvidia for a whopping five point
• 19:22
  Speaker 2: eight billion dollars. That and Wall Street rotch right after
• 19:25
  Speaker 2: this break.
• 19:40
  Speaker 1: Like us on Facebook and follow us on Twitter at
• 19:43
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• 19:47
  Speaker 1: on the Financial Exchange Radio Network. Time Now for Wall
• 19:52
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• 19:55
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• 19:59
  Speaker 5: Following yesterday's strong rebound, Marcus today are mixed after the
• 20:03
  Speaker 5: Senate officially passed a bill to end the historic government shutdown,
• 20:08
  Speaker 5: sending it to the House. Right now, the Dow is
• 20:12
  Speaker 5: up three tenths of one percent or one hundred and
• 20:15
  Speaker 5: forty three points. SMP five hundred down over third of
• 20:18
  Speaker 5: a percent or twenty four points lower at NASDAC down
• 20:21
  Speaker 5: by eight tenths of one percent or one hundred and
• 20:24
  Speaker 5: ninety points. Rusted two thousand is down just over a
• 20:26
  Speaker 5: third of a percent. Ten year Treasure Bil no movement
• 20:31
  Speaker 5: today because the bomb market is closed in observance of
• 20:34
  Speaker 5: the Veteran Day holiday, and crude oil up one on
• 20:38
  Speaker 5: a third percent, trading just below sixty one dollars a barrel,
• 20:42
  Speaker 5: and Vidia shares pulling back by three percent after Soft
• 20:45
  Speaker 5: Bank disclosed it sold its entire five point eight billion
• 20:49
  Speaker 5: dollar stake in the chip maker in Ai Giant back
• 20:52
  Speaker 5: in October, where the firm said it looks to capitalize
• 20:55
  Speaker 5: on it's all in bet on chat GPT maker open Aiyes,
• 21:00
  Speaker 5: sticking with that sector where core weave stock is plunging
• 21:03
  Speaker 5: thirteen percent after the AI Infrastructure Company posted a disappointing
• 21:08
  Speaker 5: full year guidance incited a delay by a third party
• 21:12
  Speaker 5: data center developer. Core We've saw its revenue more than
• 21:15
  Speaker 5: double in the previous quarter, driven by the AI boom,
• 21:19
  Speaker 5: while its net loss narrowed. Meanwhile, Plant based protein company
• 21:22
  Speaker 5: and recent meme stock Beyond Meat saw its loss. Wide
• 21:26
  Speaker 5: in sales declined last quarter as demand from customers and
• 21:30
  Speaker 5: restaurants fell, beyond stock sinking six percent. Today Elsewhere, Paramount
• 21:36
  Speaker 5: reported growth from its streaming division, its first quarterly report
• 21:39
  Speaker 5: since its merger with Skydance. Paramount also raised its cost
• 21:43
  Speaker 5: cutting target to at least three billion dollars. That stock
• 21:47
  Speaker 5: is rallying eleven percent at the moment. Occidental Petroleum reported
• 21:52
  Speaker 5: mixed third quarter results, beating on adjusted earnings but missing
• 21:55
  Speaker 5: on revenue estimates. Shares are up over two percent, and
• 21:58
  Speaker 5: shares in Sony in Japan after the electronics and entertainment
• 22:03
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• 22:09
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• 22:31
  Speaker 3: US household debt hits a new record.
• 22:34
  Speaker 2: The New York Fed finds the data that came out
• 22:38
  Speaker 2: in the most recent quarter here was that United States
• 22:42
  Speaker 2: citizens had eighteen point five to nine trillion of debt
• 22:46
  Speaker 2: in Q three that was rising by one hundred and
• 22:49
  Speaker 2: nine seven billion. And the issue that I always have
• 22:51
  Speaker 2: mark with these pieces that use dollar values to indicate
• 22:55
  Speaker 2: the rising record that is reached is that inflation and
• 23:02
  Speaker 2: no adjustment for inflation, these numbers are always going to
• 23:05
  Speaker 2: continue to get higher and higher yea. And they do
• 23:09
  Speaker 2: this with credit card pieces, the news publications that we
• 23:12
  Speaker 2: cover a lot in the program, and ultimately, I just
• 23:16
  Speaker 2: to me, there's not a lot to do with these
• 23:18
  Speaker 2: type of pieces. To me, the bigger focus if you
• 23:21
  Speaker 2: want to look at household debt is delinquencies. Those are
• 23:24
  Speaker 2: the most important in my mind, whether it's on student
• 23:28
  Speaker 2: loans or credit card debt or mortgages. That to me,
• 23:31
  Speaker 2: is a much better indicator of how is the US
• 23:34
  Speaker 2: household faring? If those delinquencies start to uptick significantly, then
• 23:39
  Speaker 2: that's an area of concern certainly and is worth mentioning.
• 23:42
  Speaker 2: But this idea that numerically we're just going higher in
• 23:46
  Speaker 2: terms of the debt that this country have is not
• 23:49
  Speaker 2: something that concerns me. And from a delinquency standpoint, to
• 23:53
  Speaker 2: kind of answer the point that I posed, sure, we're
• 23:56
  Speaker 2: seeing a little bit of uptick on delinquencies on credit cards,
• 24:00
  Speaker 2: but in terms of the mortgage debt that we're seeing
• 24:03
  Speaker 2: really low rates of delinquencies there and nothing that I
• 24:08
  Speaker 2: would lose sleepover at this pot.
• 24:09
  Speaker 4: Yeah, I don't. Again, I'll go back to a point
• 24:11
  Speaker 4: I try to make in the last segment, which is
• 24:13
  Speaker 4: it depends on what you're using the data for. If
• 24:14
  Speaker 4: you're a forecaster, some of these statistics might be useful
• 24:19
  Speaker 4: in your modeling. That's sort of a complex point, but
• 24:22
  Speaker 4: I think it's important to keep in mind. I don't
• 24:23
  Speaker 4: know whether some of these help people predict the change
• 24:28
  Speaker 4: and say the broad direction of the broader economy stuff
• 24:31
  Speaker 4: like that. So I get we're given an article like
• 24:34
  Speaker 4: this in a publication meant for a popular consumption, so
• 24:38
  Speaker 4: we're expected to do something with it.
• 24:40
  Speaker 3: I think the.
• 24:41
  Speaker 4: Point you made about the trend. You didn't quite put
• 24:44
  Speaker 4: it this way. But the way I would put it
• 24:46
  Speaker 4: is household debt will move in in close union with
• 24:52
  Speaker 4: the overall economy. Is the economy gros soul, Well, debt,
• 24:55
  Speaker 4: that's normal. So look at debt not in an absolute sense,
• 24:59
  Speaker 4: but as a percentage of say, disposable income. And if
• 25:03
  Speaker 4: that fraction is growing, you might have a problem because
• 25:06
  Speaker 4: at some point people won't be able to service it.
• 25:08
  Speaker 4: Household debt is a percentage of disposable income, has no
• 25:11
  Speaker 4: long term trend. I'm looking at the series right now.
• 25:13
  Speaker 4: If you google it, you'll find what I'm looking at.
• 25:16
  Speaker 4: And we're not anywhere near all time highs or even local.
• 25:20
  Speaker 2: What do we get in seven or eight, just to
• 25:22
  Speaker 2: give up a basis of comparison as to probably when
• 25:24
  Speaker 2: it I would imagine got quite high.
• 25:27
  Speaker 4: Yeah, because of the burden or mortgage debt. It was
• 25:33
  Speaker 4: in the metric again, is debt service payments as a
• 25:37
  Speaker 4: percentage of disposable personal income. That's the series I'm looking at.
• 25:40
  Speaker 4: There are others, but they'll all give you broadly the
• 25:43
  Speaker 4: same conclusion. Was twice roughly twice the well, now I'm
• 25:47
  Speaker 4: sorry it was fifteen six call it sixteen percent, rounding
• 25:50
  Speaker 4: up a little bit versus eleven point two percent today
• 25:53
  Speaker 4: and high elevens. Again, debt is a percentage of disposable debt.
• 25:58
  Speaker 4: Service payments is a percentage of disposable personal income nearly
• 26:02
  Speaker 4: twelve percent throughout the twenty tens. So we're not at
• 26:05
  Speaker 4: right our eyes, We're not at at red flag levels
• 26:12
  Speaker 4: relative to the more recent era of data. I'm not
• 26:16
  Speaker 4: saying that changes in this might not be predictive of trouble.
• 26:20
  Speaker 4: And if we go into recession, obviously this is going
• 26:22
  Speaker 4: to be a problem.
• 26:23
  Speaker 3: Sure, but so's.
• 26:24
  Speaker 2: Everything soft Bank sells It's Nvidia steak for five point
• 26:28
  Speaker 2: eight million billion dollars to fund open Ai.
• 26:32
  Speaker 3: This is a.
• 26:34
  Speaker 2: Very interesting trajectory that soft Bank has had here. It's
• 26:39
  Speaker 2: the head of it, Masha Masayoshi Sun, and you really
• 26:44
  Speaker 2: needed to study there with that pronunciation.
• 26:46
  Speaker 3: But I think I did it all right.
• 26:47
  Speaker 2: They have made some huge bets over their timeframe. Where
• 26:51
  Speaker 2: they had bet big on we Work, which famously crossed
• 26:54
  Speaker 2: and burned, they invested four point four billion dollars in
• 26:57
  Speaker 2: that in twenty sixteen. They've also made big bets now,
• 27:01
  Speaker 2: most recently in open Ai committing close to thirty billion
• 27:04
  Speaker 2: dollars of investment into the company behind chach GPT. The
• 27:08
  Speaker 2: sale of Nvidia by SoftBank was not an indication necessarily.
• 27:12
  Speaker 2: It seems that they were pessimistic on in Vidia and
• 27:16
  Speaker 2: its future, but more so they needed the cash to
• 27:18
  Speaker 2: fund some of the huge bets that they're making in
• 27:22
  Speaker 2: open Ai. This particular fund, the Vision Fund that is
• 27:25
  Speaker 2: behind soft bake. They are just the blank check company.
• 27:28
  Speaker 2: They write huge bets to a lot of big tech
• 27:32
  Speaker 2: companies out there with the hopes that they cash in
• 27:34
  Speaker 2: big They've had some massive successes with Yahoo and Ali Baba,
• 27:39
  Speaker 2: and they've had some massive failures with we Work, and
• 27:41
  Speaker 2: particularly in twenty twenty two and twenty twenty three, they
• 27:44
  Speaker 2: just lost their shirt in terms of how the fund
• 27:46
  Speaker 2: is performed. But they have a whole lot of money
• 27:49
  Speaker 2: behind them, and they better hope that this open Ai
• 27:52
  Speaker 2: bet hits because they are the biggest investor in open
• 27:56
  Speaker 2: Ai at this point behind chatchipt.
• 27:58
  Speaker 3: With that thirty billion dollar commit.
• 28:00
  Speaker 4: Are they publicly traded? Forgive me, I don't. I don't
• 28:02
  Speaker 4: follow Japanese financially.
• 28:03
  Speaker 3: I do think that they are okay, all right?
• 28:06
  Speaker 4: You know you don't have to squirm, So they're basically
• 28:08
  Speaker 4: you know, you're not squirming, but you know what I mean,
• 28:11
  Speaker 4: I could have looked that up. Sorry. So they're basically
• 28:15
  Speaker 4: they're they're an investment bank. They're like a Goldman what
• 28:18
  Speaker 4: we used to call investment banks here, they're like a
• 28:20
  Speaker 4: Goldman SAX, but a lot narrower soft bank. I'm just
• 28:23
  Speaker 4: what I'm trying to get at here is why should
• 28:24
  Speaker 4: people care? I get I mean, these guys just they're
• 28:28
  Speaker 4: sort of they're just like a growth shop.
• 28:30
  Speaker 3: They just crazy growth. Yeah, they just make huge bets.
• 28:32
  Speaker 2: And in particularly the reason that this gets them to
• 28:35
  Speaker 2: the writer is that it's a sale of the video,
• 28:37
  Speaker 2: which has done tremendously well for them. They had lamented
• 28:40
  Speaker 2: a selling in video before it really rose to prominence
• 28:44
  Speaker 2: over the last few years or so. But again really
• 28:47
  Speaker 2: piling all of their resources into open air. We'll see
• 28:50
  Speaker 2: how that plays out for them. We're going to take
• 28:52
  Speaker 2: a quick break here on.
• 28:54
  Speaker 3: The Financial Exchange.
• 28:55
  Speaker 2: But when we come back, when we're talking about the
• 28:57
  Speaker 2: idea of a fifty year mortgage, is that a terrible idea?
• 29:01
  Speaker 2: We'll talk about that right after this break.
• 29:05
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  Speaker 2: Piece here from Bloomberg by Aliston Straeger. A fifty year mortgage.
• 30:10
  Speaker 2: It's not a terrible idea. I'm gonna tell you why
• 30:13
  Speaker 2: I think it is a terrible idea. For many years,
• 30:19
  Speaker 2: most of us are accustomed to the thirty year fixed
• 30:21
  Speaker 2: mortgage out there, and when you're talking about the thirty
• 30:24
  Speaker 2: year fixed mortgage, typically the way that that rate is
• 30:28
  Speaker 2: determined is by using the US Tenure Treasury as a
• 30:31
  Speaker 2: benchmark to dictate what rate that a bank is going
• 30:35
  Speaker 2: to assess you when you borrow the money to buy
• 30:37
  Speaker 2: a house and put a mortgage together. There are very
• 30:42
  Speaker 2: few securities. You can make some arguments perhaps on a
• 30:45
  Speaker 2: twenty year treasury or a little bit shorter than that,
• 30:48
  Speaker 2: that could be used to price a fifty year mortgage.
• 30:51
  Speaker 2: And oh, by the way, if you're the bank, imagine
• 30:54
  Speaker 2: lending out money for a fifty year period. You're taking
• 30:57
  Speaker 2: on a whole lot of risk as a lender to
• 30:59
  Speaker 2: commit to thirty years to thirty years, but to commit
• 31:02
  Speaker 2: to fifty almost twice that period of time is the
• 31:05
  Speaker 2: significant risk You run into all sorts of complications as
• 31:09
  Speaker 2: the lender. If I'm the borrower Paul Lane takes a
• 31:13
  Speaker 2: fifty year fixed mortgage, I could lose my job, get
• 31:15
  Speaker 2: to void thank you.
• 31:16
  Speaker 3: This now, right.
• 31:17
  Speaker 4: They just wouldn't be federally. They're going to lavish it
• 31:19
  Speaker 4: with federal substance. Is the issue here. I think like
• 31:22
  Speaker 4: as a private lender, you do whatever you want correct
• 31:24
  Speaker 4: me if I'm wrong.
• 31:24
  Speaker 3: You could.
• 31:25
  Speaker 4: Yes, they just don't because they all want to conform
• 31:27
  Speaker 4: and they want to they ultimately they want to securitize
• 31:30
  Speaker 4: their Sorry, this is just off the top of my head,
• 31:32
  Speaker 4: not my area, but as far as I know, everybody
• 31:35
  Speaker 4: conforms to the thirty year structure because it's it's easier
• 31:39
  Speaker 4: to move a loane off your books if you want
• 31:42
  Speaker 4: to sell it for example.
• 31:43
  Speaker 2: Yeah, the mortgage backed securities market far more liquid for
• 31:46
  Speaker 2: that than a fifty year one.
• 31:47
  Speaker 4: That's so they would the government would have to actively
• 31:50
  Speaker 4: aid and abt this practice, right.
• 31:52
  Speaker 3: Correct, SIMI liquidity for it.
• 31:53
  Speaker 2: And then you know you have the other issues here
• 31:57
  Speaker 2: that if you lend, you know really low rates of interest,
• 32:03
  Speaker 2: and interest rates run up as the lender, you're missing
• 32:06
  Speaker 2: out on that opportunity cost there by being locked in
• 32:09
  Speaker 2: for a significant period of time.
• 32:12
  Speaker 4: Yeah, so banks may not want to hold onto these suckers.
• 32:14
  Speaker 2: To me, that's the biggest thing is for a consumer,
• 32:17
  Speaker 2: what are some of the downsize to it? I mean, yes,
• 32:20
  Speaker 2: your monthly payment gets lower, just like the trick that
• 32:22
  Speaker 2: they'll do to you if you go buy a car,
• 32:24
  Speaker 2: they'll stretch you out on monthly payment. By just making
• 32:27
  Speaker 2: the loan longer. Same thing would be applying here. Oh
• 32:29
  Speaker 2: don't worry, Mark, we can get you in this car
• 32:31
  Speaker 2: for two hundred and fifty bucks, you know, five hundred
• 32:33
  Speaker 2: bucks a month. Oh yeah, we're just you're just gonna
• 32:34
  Speaker 2: have to have a ten year auto loan that you're
• 32:36
  Speaker 2: paying interest on. Same sort of concept here. The fifty
• 32:40
  Speaker 2: year mortgage spam is going to be pretty low relative
• 32:42
  Speaker 2: to the thirty one year one. You're not building a
• 32:44
  Speaker 2: lot of equity by doing that, and you're not making
• 32:47
  Speaker 2: a significant progress paying down the principle.
• 32:51
  Speaker 4: Yeah, if you if you stay up at night worrying
• 32:54
  Speaker 4: about the potential for negative equity, now you'll be warring
• 32:57
  Speaker 4: about that potential for potentially your whole working life under
• 33:00
  Speaker 4: a fifty I'm not saying it's a bad thing. I'm
• 33:02
  Speaker 4: willing to let the market sort this out. But that's
• 33:04
  Speaker 4: not really actually what's happening here. The government will be
• 33:07
  Speaker 4: actively encouraged or will be uh facilitating the development of
• 33:12
  Speaker 4: this market through again subsidies and regulations and uhgar makes
• 33:19
  Speaker 4: some good. Stragger makes good. I mean, I'm in her
• 33:21
  Speaker 4: camp as a sort of libertarian leaning occasional economists. She
• 33:25
  Speaker 4: she's that's her full time job, and she's a PhD.
• 33:28
  Speaker 4: So she she knows her stuff. She outlines the pros
• 33:31
  Speaker 4: and cons pretty clearly. There's no way consumers will understand
• 33:36
  Speaker 4: what they're getting into here, though, to your point, car
• 33:39
  Speaker 4: dealers find it very easy to trick us, as you
• 33:41
  Speaker 4: put it, because most of us can't do myself included.
• 33:43
  Speaker 3: I have to spreadsheeted out or I have to have
• 33:45
  Speaker 3: the calculator.
• 33:46
  Speaker 1: Yeah you do.
• 33:47
  Speaker 4: We have our little financial calculators, so we know what
• 33:49
  Speaker 4: we're paying an interest over the life right alone. But
• 33:51
  Speaker 4: it is not straightforward. It is complex, and it's it's
• 33:55
  Speaker 4: fully disclosed when you take one of these suckers out,
• 33:57
  Speaker 4: I guess, but a little.
• 33:58
  Speaker 3: Bit, and again important to note here this is all
• 34:01
  Speaker 3: theoretical chatter.
• 34:02
  Speaker 2: There is not imminately going to be a fifty year
• 34:05
  Speaker 2: mortgage issue, but it's just something that has been I guess.
• 34:09
  Speaker 4: For the housing we haven't talked about implications for the
• 34:11
  Speaker 4: larger market, though presumably it increases demand that's going to
• 34:14
  Speaker 4: push prices up equal right, and my house is more affordable.
• 34:18
  Speaker 2: The altruistic idea behind this is trying to get more
• 34:20
  Speaker 2: people in houses because of the affordability issue. But to me,
• 34:23
  Speaker 2: this is not attacking the right part of the problem.
• 34:26
  Speaker 2: It's the supply side that you should be attacking. I
• 34:28
  Speaker 2: don't think that really Washington, DC has any real fixes
• 34:32
  Speaker 2: to fix the supply side. So that's why perhaps you
• 34:35
  Speaker 2: turn to the financial instruments as a way to combat that.
• 34:40
  Speaker 2: But I don't know if this really solves it all.
• 34:44
  Speaker 4: No, if you're lament to if you lament that home
• 34:46
  Speaker 4: prices are too high, this is not a prescription for that.
• 34:51
  Speaker 4: This will push prices. I assume all else equal. By
• 34:54
  Speaker 4: making houses more affordable, by enabling a as you pointed out,
• 34:57
  Speaker 4: people to stretch their payments out, will we'll make it
• 35:00
  Speaker 4: easier to buy house and thereby again all else will
• 35:03
  Speaker 4: push up prices.
• 35:05
  Speaker 3: Yep, we'll see.
• 35:06
  Speaker 5: The state planning isn't just about taxes. It's about peace
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  Speaker 5: Simplicity of Joint Revocable Trusts, also explains how a trust
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  Speaker 5: can protect your children's inheritance from creditors, divorce, or bad
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  Speaker 5: financial decisions down the road. This guide makes it easy
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  Speaker 5: request it from their website Legal exchange show dot com.
• 36:08
  Speaker 1: The proceeding was paid for and the views expressed are
• 36:10
  Speaker 1: solely those of Cushing and Dolan. Cushing and Dolan and
• 36:13
  Speaker 1: or Armstrong Advisory may contact you offering legal or investment services.
• 36:16
  Speaker 1: Cushing and Armstrong did not endorse each other and are
• 36:18
  Speaker 1: not affiliated.
• 36:19
  Speaker 2: One last note on the housing market, first time home
• 36:22
  Speaker 2: buyers have had a very difficult time over the course
• 36:25
  Speaker 2: of the last few years, a combination of prices rising
• 36:28
  Speaker 2: significantly and mortgage rates ticking up pretty significantly as well
• 36:32
  Speaker 2: from the lows that they were in twenty one or
• 36:34
  Speaker 2: twenty twenty two. The first time home buyers represented only
• 36:39
  Speaker 2: one fifth of home sold during a twelve month period
• 36:42
  Speaker 2: ending in June. That was a record low. There was
• 36:45
  Speaker 2: also some coverage on a story from the National Association
• 36:48
  Speaker 2: of Realtors where the median home age for a buyer
• 36:53
  Speaker 2: has reached forty in this country. Just four or five
• 36:57
  Speaker 2: years ago, the median age for a first time home
• 36:59
  Speaker 2: buyer was thirty three years old, and if you go
• 37:01
  Speaker 2: back to the nineties, that was twenty eight or twenty nine,
• 37:03
  Speaker 2: and that sort of speaks to mark some of the
• 37:05
  Speaker 2: issues that we were covering with the fifty year mortgage
• 37:09
  Speaker 2: or some of those considerations. It's trying to address the
• 37:12
  Speaker 2: fact that for the first time home buyer it's a
• 37:15
  Speaker 2: really difficult market on the.
• 37:17
  Speaker 3: Housing side of things here.
• 37:19
  Speaker 2: So we'll see if anything can be done there, but
• 37:22
  Speaker 2: not too optimistic that any fix comes anytime soon here.
• 37:26
  Speaker 2: Taking a look around at markets as we head towards
• 37:28
  Speaker 2: the bottom of the hour here, the Dow Jones is
• 37:31
  Speaker 2: up close to two hundred points, the S and P
• 37:33
  Speaker 2: five hundred is off about a third of a percent,
• 37:37
  Speaker 2: and the Nasdaq is off close to one percent after
• 37:40
  Speaker 2: a pretty significant rally yesterday on some of the optimism
• 37:44
  Speaker 2: regarding the government shutdown. Wrapping up here. The bond market
• 37:48
  Speaker 2: is closed today, so no real action on the US
• 37:52
  Speaker 2: Treasury market today. Will be reopened tomorrow. And we've got
• 37:56
  Speaker 2: oil and gas US Texas up about one point three
• 38:00
  Speaker 2: three percent. That's all the time that we have for
• 38:03
  Speaker 2: the first hour of the program here, but stick with us.
• 38:05
  Speaker 3: We'll be right back after this break.
• 38:07
  Speaker 2: We've got a lot more to color here on the
• 38:09
  Speaker 2: financial exchange.