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Nvidia’s OpenAI Backstop Raises Bubble Fears · The Financial Exchange Show

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Speaker 1: donation today. This is the Financial Exchange with Chuck Zada,
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Speaker 1: and Mike Armstrong.
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Speaker 2: Hope y'all had a great weekend. I hope you had
1:14
Speaker 2: some time to sit back, hang out with your family, friends,
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Speaker 2: you know, and enjoy things a little bit, because this week.
1:24
Speaker 3: You have no time to do those things.
1:26
Speaker 2: I mentioned at the end of last week that this
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Speaker 2: is one of the busiest calendar weeks that we have
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Speaker 2: on the year, and indeed it is kicking things off.
1:35
Speaker 2: We got durable goods orders this morning. Those came out
1:39
Speaker 2: at eight thirty am. If you didn't look at them,
1:41
Speaker 2: I'm sorry, but they happened. Tomorrow we've got ADP reporting
1:46
Speaker 2: weekly employment change. We've got SMPK SHILL our Home Price Index,
1:50
Speaker 2: the FHFA Home Price Index, some more data coming out.
1:54
Speaker 2: Then Wednesday we've got a FED meeting. We also get
1:57
Speaker 2: EIA data on crude and refined product inventories. Thursday, PCE
2:03
Speaker 2: inflation data and personal income and personal spending numbers. Jobless
2:08
Speaker 2: claims also going to be coming out then. And then Friday,
2:11
Speaker 2: you can finally relax a little bit because there's not
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Speaker 2: much then, but on the earning side busy as well. Tuesday,
2:18
Speaker 2: things start to kick into higher gear. We've got Visa,
2:21
Speaker 2: Coca Cola Boeing Corning, Waste Management Ups, Sherwin Williams, Hilton,
2:27
Speaker 2: you know, some some names there. Wednesday, things really get moving, Microsoft,
2:32
Speaker 2: Meta Costco, Procter and Gamble, General Dynamics, Boston Scientific, Robin Hood,
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Speaker 2: Nice Little Day Thursday, Apple, Amazon, MasterCard, Altrea, Bristol, Myers,
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Speaker 2: Squib you know again just you're talking, you know when
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Speaker 2: anytime you've got four mag seven names in two days,
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Speaker 2: that's a that's a week right there. So a lot
2:57
Speaker 2: coming up if you you know, need to find time
3:01
Speaker 2: to get some sleep. I recommend the night because during
3:03
Speaker 2: the day used to be plugged into this, you know,
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Speaker 2: not twenty four hours a day because that's not the day.
3:09
Speaker 2: But look, we got about sixteen hours a daylight right
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Speaker 2: now in the Northern Hemisphere. I recommend taking most of
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Speaker 2: that to pay attention to what's going on with markets
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Speaker 2: in the economy this week and then next week you can.
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Speaker 3: Get back to chilling.
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Speaker 4: Okay, So busy week over the weekend in the Middle East,
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Speaker 4: which had you know, become kind of a full crumb
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Speaker 4: for you know, markets in the last week. Over the
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Speaker 4: week weekend, we had three straight nights where there were
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Speaker 4: no strikes between the US and Iran no formal, you know,
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Speaker 4: memorandum of understanding signed, nothing like that. It just seems
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Speaker 4: as though from the reporting, the US basically said, look,
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Speaker 4: we've pretty much struck just about everything that we want
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Speaker 4: to right now, so we're not going to strike anything else.
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Speaker 4: Iran came out and said, well, if you're not striking us,
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Speaker 4: we're not going to strike you.
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Speaker 2: We'll see how long this holds. The last time it
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Speaker 2: lasted about well, the memorandum of understanding lasted three weeks,
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Speaker 2: but they were shooting at each other again within like
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Speaker 2: five days. So we'll see if we get past Tuesday
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Speaker 2: or Wednesday, if you want a sneaky prediction on this,
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Speaker 2: I unfortunately think that things start to ramp back up
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Speaker 2: probably Thursday Friday.
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Speaker 3: We've seen this by that specific time.
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Speaker 2: Because the last two FED meetings we've had pauses in
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Speaker 2: shooting around FED meetings, and I'm just wondering if this
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Speaker 2: is to you know, make things a little cleaner heading
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Speaker 2: into the FED. It could just be coincidence more than
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Speaker 2: anything else. But honestly, so here's where I've gotten to
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Speaker 2: on this. I've started keeping a calendar of what's going
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Speaker 2: on on any particular day, so that I can actually
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Speaker 2: track and recall what's going on.
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Speaker 3: That's where I've had to get to now.
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Speaker 2: And in doing so, you notice these patterns that pop
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Speaker 2: up when you go back and you're looking at it,
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Speaker 2: and you're like, oh, this is what happened, and this
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Speaker 2: is what triggered that, and this is the timing, and
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Speaker 2: here's what else was going on. And you happen to
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Speaker 2: notice that the last two FED meetings there have been
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Speaker 2: pauses in the shooting.
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Speaker 3: So I find that interesting. I'll tutor on Horn for
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Speaker 3: a minute.
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Speaker 4: Here was it Thursday that the Axios report came out
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Speaker 4: that President Trump was considering broader strike cigret against Iran.
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Speaker 3: Yes, at that exact moment, you know.
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Speaker 4: Oil prices were shooting towards one hundred bucks a barrel,
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Speaker 4: and you on the show, Chuck, but we on the
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Speaker 4: Financial Exchange said, hey, does sure feel like we could
5:37
Speaker 4: face a pivot here? We did, you know, we did
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Speaker 4: hedge that with but we are heading into a weekend,
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Speaker 4: so we will see what happens when trading is closed.
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Speaker 4: But the Axios report came out saying, oh, watch out,
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Speaker 4: could be some increased hostilities. Oil prices were hitting one
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Speaker 4: hundred bucks a barrel. Again, everybody was writing about oil
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Speaker 4: shortages because of the Red Sea stuff, and then lo
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Speaker 4: and behold. You know, we had said, look for a
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Speaker 4: pivot here, it's quite possible we'll get one. And while
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Speaker 4: we did not get the president coming out and making
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Speaker 4: a very large public statement about it, we did see
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Speaker 4: it calm down in the Middle East.
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Speaker 3: Yeah, that well part of the Middle East.
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Speaker 2: If you want to talk about what's going on between
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Speaker 2: Saudi Arabia and the Houthis. Over in the western part
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Speaker 2: of Yemen, things are getting ugly, with at least three
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Speaker 2: potentially four Saudi Aramco facilities being struck over the weekend.
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Speaker 2: Still reminder, the Saudis and the Houthis were going at
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Speaker 2: it for you know, a period of years before they finally,
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Speaker 2: you know, said okay, enough is enough, and I think
6:39
Speaker 2: twenty twenty two and you know, took took a little
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Speaker 2: bit of a break. But there's absolutely no love lost
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Speaker 2: between the two sides, and there are signs that the
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Speaker 2: Houthis went pretty much straight for you know, major Saudi
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Speaker 2: Aramco facilities in their round of hostilities over the weekend.
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Speaker 2: Which the problem that you have here is, look, you
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Speaker 2: still don't have any traffic that's going through Hormus over
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Speaker 2: the weekend, even though you know things have paused. From
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Speaker 2: a military perspective, there's nothing moving through just because everyone's like,
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Speaker 2: we're not going to send ships through. We don't want
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Speaker 2: to be the first through the wall. We don't want
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Speaker 2: to like see what happens. So you've got that going on.
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Speaker 2: But now the indications are that in the Saudi port
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Speaker 2: of Yanbu, which is on the western side of Saudi
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Speaker 2: Arabia in the Red Sea, the indications are that the
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Speaker 2: loadings that are happening there are only about fifty percent
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Speaker 2: of what they were over you know, kind of the
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Speaker 2: previous four or five months, suggesting that you might have
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Speaker 2: a few million barrels of export capacity offline.
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Speaker 3: Not great.
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Speaker 2: The good news potentially offsetting that is Kazakhstan.
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Speaker 4: Again, I'm have not talked about Kazakhstan this this year.
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Speaker 4: We talked about it last week briefing. So here's the deal.
7:55
Speaker 4: Kazakhstan produces maybe mark the Bengo card.
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Speaker 2: Kazakhstan produces around one point eight million barrels a day
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Speaker 2: of oil. They also can't really export the oil direct
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Speaker 2: from Kazakhstan because it's pretty much a landlocked country, and
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Speaker 2: so they say, okay, like, what are we gonna do.
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Speaker 2: The answer is they have a big, old pipeline that
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Speaker 2: basically runs west from the western part of Kazakhstan. It
8:27
Speaker 2: loops around the Caspian Sea and goes through Turkey to
8:32
Speaker 2: the Black Sea. I think it's the Black Sea, or
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Speaker 2: maybe it's the c Ofasov. I don't know's it's one
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Speaker 2: of those two. No, it goes to the Black Sea.
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Speaker 2: And what was happening last week was Ukrainian drones and
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Speaker 2: cruise missiles were targeting ships loading.
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Speaker 3: There and blowing them up.
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Speaker 2: And this is because the exit on the Black Sea
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Speaker 2: is in the Russian port of I think it's I
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Speaker 2: forget which port it is, but Russian port. It exits
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Speaker 2: in a Russian port. Well, this Kazakhstan oil that's flowing through.
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Speaker 2: They halted the pipeline because the ships were being blown up,
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Speaker 2: and you don't want to pipe oil if you can't
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Speaker 2: empty it somewhere. So it was about one point five
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Speaker 2: million barrels a day of oil that were being stopped
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Speaker 2: because this is the primary export valve for Kazakhstan. Now,
9:19
Speaker 2: it also turns out that the oil that is generally
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Speaker 2: produced in Kazakhstan. A decent chunk of it is run
9:28
Speaker 2: through a nice little company known as Chevron, which happens
9:31
Speaker 2: to be a US company, And the word on the
9:35
Speaker 2: street is that the Chevronese, if you will, they got
9:39
Speaker 2: a little upset that, you know, the Ukrainians were targeting
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Speaker 2: tankers carrying their oil and they're like, yo, guys, can
9:45
Speaker 2: you stop this for a minute, Like we don't really
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Speaker 2: appreciate this. So it appears that those strikes on the
9:53
Speaker 2: ships loading Kazakhstanian Kazakhstani let's go Kazakhstani Kazakhstani oil produced
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Speaker 2: by Chevron have halted. Because when you have US oil
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Speaker 2: production from a third party country that was being targeted
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Speaker 2: because of a Russian exit port, that didn't really.
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Speaker 3: Make a ton of sense.
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Speaker 2: And so at least that production does seem to be
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Speaker 2: spooling back up today. So that's good news that you
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Speaker 2: don't have that one and a half million barrels offline anymore.
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Speaker 4: In any case, oil's back below ninety dollars on the
10:27
Speaker 4: West Texas. Crewed across the board were down six to
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Speaker 4: seven percent in early trading so far yesday. And I
10:35
Speaker 4: don't know, I guess we're all just kind of waiting
10:37
Speaker 4: for the headfake on this, because I don't think any
10:39
Speaker 4: no serious person that I've heard, is expecting a this
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Speaker 4: to be the breakthrough moment in the Middle East with
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Speaker 4: the US in Iran.
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Speaker 3: So fair to say.
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Speaker 4: It could be any serious people out there saying, oh, look, I'm.
10:55
Speaker 3: Not the serious test person.
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Speaker 2: Okay, the technical term, but I had some thoughts over
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Speaker 2: the weekend. OK, why don't we take a break and
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Speaker 2: I'll talk about those thoughts next.
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11:44
Speaker 2: During the last segments, Michael Armstrong remarked that no serious
11:49
Speaker 2: person can accurately say what's going to happen in the
11:54
Speaker 2: Middle East. There's something along those lines.
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Speaker 4: Yeah, ye, well, I said that, I don't hear any
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Speaker 4: serious people out there predicting that this is the moment
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Speaker 4: of breakthrough for the US and around.
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Speaker 2: So as a semi serious person, because I have a
12:09
Speaker 2: big belief that no one should take themselves too serious. Sure,
12:12
Speaker 2: it's it's you know, fundamentally an unseerious proposition if you're
12:16
Speaker 2: too serious. So here's an interesting thought that passed through
12:21
Speaker 2: my head over the weekend. Everyone keeps looking for, like
12:25
Speaker 2: what's the deal gonna be that gets the sides to
12:28
Speaker 2: like agree on, you know, on how things work, Like
12:32
Speaker 2: what's what's the deal that makes things stick? And I
12:34
Speaker 2: do maintain if you're looking for like an actual deal
12:38
Speaker 2: that makes things stick, I don't think you can get
12:40
Speaker 2: there yet because I don't think either side has experienced
12:43
Speaker 2: enough pain to be able to say I'm done with
12:47
Speaker 2: this with you. Sure, But the interesting interesting thought go
12:51
Speaker 2: through my head, and that thought was, well, what if
12:55
Speaker 2: the US just ups and leaves and says just unilatterly
12:59
Speaker 2: like we're done with this. I'm not saying that the
13:06
Speaker 2: United States will, but what if it's just like again,
13:10
Speaker 2: what if it's just we're not signing anything, we're not
13:14
Speaker 2: saying we're done.
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Speaker 3: What if we just stop this and move on? Now?
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Speaker 3: I guess let me think that through.
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Speaker 2: Here's the logical thinking through it and where it runs
13:27
Speaker 2: into problems. But I want to just work through this
13:30
Speaker 2: a little bit.
13:31
Speaker 3: Iran starts toll collecting.
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Speaker 2: Iran can't start toll collecting. Lloyd's of London over the
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Speaker 2: weekend or late last week basically said that they will
13:41
Speaker 2: refuse ship insurance to any ship that's paying a toll
13:45
Speaker 2: to Iran, which is again like that's a hard stop
13:50
Speaker 2: for most shipping companies. There are a handful, mostly the
13:53
Speaker 2: Greek ones, that are like, hey, it's the wild West,
13:56
Speaker 2: We'll do as we please. But the vast majority don't
13:59
Speaker 2: want to be on the back side of either Lloyd's
14:01
Speaker 2: of London or the US sanctions list.
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Speaker 3: Okay, so, but it still is.
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Speaker 2: Something where Iran couldn't force. Okay, fine, we might not
14:12
Speaker 2: take it toll, but we're still going to say, yep,
14:15
Speaker 2: you've got to come through our lane. You've got to,
14:18
Speaker 2: you know, deal with our inspections in this and that,
14:20
Speaker 2: and you can't. Iran could very much become not the
14:24
Speaker 2: toll taker, but hey, like they may manage the flow
14:27
Speaker 2: of oil through the region. Yeah, Now, other countries in
14:31
Speaker 2: the region are not going to be happy with this.
14:33
Speaker 2: The Saudis wouldn't be happy with it, the Kuwaitis wouldn't
14:36
Speaker 2: be happy with it. The iraqis may or may not
14:39
Speaker 2: depending on what day of the week it is. The
14:42
Speaker 2: Qataris certainly wouldn't be.
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Speaker 4: You know, the UAE is already like the UAE is
14:49
Speaker 4: done with Iran completely, like okay, like whatever, like you know,
14:52
Speaker 4: have added, guys, we're building all the pipeline capacity we
14:55
Speaker 4: can to bypass you.
14:56
Speaker 3: So you think it through and for.
15:00
Speaker 2: Our brief period, Iran becomes the most powerful force in
15:05
Speaker 2: the region from an economic perspective, in terms of they
15:08
Speaker 2: set the price of oil, if that were the case.
15:11
Speaker 2: But it also then encourages what's already happening, which is, hey,
15:15
Speaker 2: we're gonna build all these bypass pipelines to not have
15:20
Speaker 2: to deal with the Straight of Horror moves anymore. The
15:22
Speaker 2: Saudis build more heading towards Zamboo. The UAE is already
15:26
Speaker 2: building more heading towards Fujira. You've got Iraq and Kuwait
15:31
Speaker 2: talking about building through Syria to exit on the Mediterranean,
15:36
Speaker 2: and within a couple of years all that capacity is elsewhere,
15:39
Speaker 2: and irn' sitting there saying, okay, great, we control the
15:41
Speaker 2: straight of Horror moves, which doesn't really have much oil
15:43
Speaker 2: flowing through it anymore. I'm still not sure that that
15:48
Speaker 2: really happens, because the issue that you run into then
15:53
Speaker 2: is if you are other countries in the region and
15:58
Speaker 2: the US says, okay, we're just gonna pick up and
16:00
Speaker 2: you know, take our ball and go home. The problem
16:03
Speaker 2: that you run into then is, okay, well, what why
16:07
Speaker 2: do we need to be aligned with you if you're
16:09
Speaker 2: not going to help enforce this, And that's where the
16:12
Speaker 2: thing breaks down, in my opinion, is most likely with
16:17
Speaker 2: you know, basically every other country in the Persian golf
16:20
Speaker 2: being like, well, we're buying all this stuff from you,
16:22
Speaker 2: We're you know, we're buying all this military equipment from you.
16:25
Speaker 2: You were signing all these economic deals, but you're not
16:28
Speaker 2: going to enforce, you know, maritime freedom in the straight
16:31
Speaker 2: up hormor moves. Why should we do this with you?
16:33
Speaker 2: Is the is the question that gets raised them And
16:37
Speaker 2: so I think that ultimately it all points back to
16:40
Speaker 2: again what you said, which is, look, you could see
16:44
Speaker 2: even something like this persisting for a week, a month
16:47
Speaker 2: or something like that, but eventually push comes to shove
16:49
Speaker 2: and someone's gonna get upset, and you know, the situation
16:53
Speaker 2: is just not stable.
16:55
Speaker 3: In that in that outcome, So.
16:58
Speaker 2: I go back to Look, we might just be pingponging
17:00
Speaker 2: back and forth for you know. I think that's until
17:04
Speaker 2: someone finally says enough, we're willing to like truly accept
17:08
Speaker 2: whatever these terms are, either the US saying we've had
17:12
Speaker 2: enough or Iron saying we've had enough. But we're not
17:15
Speaker 2: there yet. And we know this because there hasn't been
17:17
Speaker 2: a durable deal that's been signed.
17:19
Speaker 4: Yeah. Yeah, it's hard for me to imagine anything long
17:26
Speaker 4: term agreed to until there is a lot more pain
17:30
Speaker 4: for one of the two parties or both. Yeah, So
17:33
Speaker 4: that's that's kind of where I land on. It is
17:34
Speaker 4: more bouncing around.
17:36
Speaker 2: I want to hop forward to one story to this piece.
17:39
Speaker 2: China chip maker c XMT jumps four to sixty six
17:42
Speaker 2: and debut after blockbuster IPO. So CXMT. If you haven't
17:45
Speaker 2: heard of them, newsflash, I haven't either. Literally have never
17:49
Speaker 2: heard of this company before today. Here's what I do know.
17:53
Speaker 2: They make memory chips. And there's a great quote. I
17:58
Speaker 2: don't know who to attribute it to originally, but the
18:03
Speaker 2: quote is when China enters a room, profits leave, which
18:06
Speaker 2: I think is it's a really good quote. And you
18:09
Speaker 2: can go through like all kinds of industries where that's
18:11
Speaker 2: the case, EV's.
18:12
Speaker 3: Is the easiest one to look at globally.
18:15
Speaker 4: Nobody can make EV's to compete with the Chinese because well,
18:19
Speaker 4: for a number of reasons, but they've made them outrageously cheap,
18:21
Speaker 4: So you either block them from your market or you
18:25
Speaker 4: just lose your invstream before EV's, like a lot of
18:27
Speaker 4: electronics components, textiles, I think about, like, we're China like
18:32
Speaker 4: kind of got its manufacturing start.
18:34
Speaker 3: So here are the two things that I think.
18:36
Speaker 2: Are you know at you know the markets are going
18:39
Speaker 2: to struggle with, or that this stock's going to struggle with.
18:41
Speaker 2: Number One, there is this huge memory chip shortage that's
18:44
Speaker 2: driven prices up. Do we think CXMT is just gonna
18:47
Speaker 2: sit there and be like, yeah, we're gonna let the
18:49
Speaker 2: memory shortage persist. No, Like, based on what we know
18:52
Speaker 2: about how China tends to drive these things, they're going
18:55
Speaker 2: to try to fill that gap in more. It thus
18:58
Speaker 2: becomes really hard to justify a almost five hundred percent
19:02
Speaker 2: single day pop in the stock based on the fact
19:06
Speaker 2: that profits tend to disappear when Chinese companies enter an
19:09
Speaker 2: industry and this company's already in it, but it's freeing
19:12
Speaker 2: up more capital for additional expansion and things like that.
19:15
Speaker 2: So I think this is notable. And by the way,
19:20
Speaker 2: membership stocks are feeling it today when you look at
19:23
Speaker 2: how they are performing, they are being dragged even though
19:27
Speaker 2: the index is trying to move up. Micron is an example,
19:29
Speaker 2: down five percent. Quick break Wall Street Watches next.
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19:54
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19:58
Speaker 5: Well after a strong open, the markets have now reverse
20:01
Speaker 5: course and are mixed ahead of a very busy week,
20:03
Speaker 5: including a big test for new FED chairman Kevin warshon
20:07
Speaker 5: his second meeting, and inflation reading and tech earnings from Microsoft, Meta,
20:12
Speaker 5: Apple and Amazon. Right now, the Dow is up half
20:14
Speaker 5: a percent or two hundred and sixty two points, s
20:17
Speaker 5: and P five hundred down nine points, about a tenth
20:20
Speaker 5: of a percent. NASDAK down nearly half a percent or
20:23
Speaker 5: one hundred and eleven points lower. RUSS two thousand is
20:26
Speaker 5: up over two thirds of a percent. Ten year treasure
20:29
Speaker 5: Reel down two basis points at four point sixty five
20:32
Speaker 5: percent and oil plunging six and a half percent, trading
20:36
Speaker 5: a eighty three dollars at barrel. Several energy companies are
20:39
Speaker 5: trading lower in reaction to the relief rally we're seeing
20:42
Speaker 5: in oil prices after the US and AROUN agreed deposit
20:46
Speaker 5: tacks against each other. Meanwhile, Chinese chip maker Cxmt made
20:50
Speaker 5: its stock market debut and shang Hi surging four hundred
20:54
Speaker 5: and sixty six percent to become the country's most valuable
20:57
Speaker 5: listed company. Sticking with the chipsec wearing Video shares of
21:01
Speaker 5: falling nearly four percent following reports that it is in
21:03
Speaker 5: talks to provide a roughly two hundred and fifty billion
21:07
Speaker 5: dollars backstop for open Ai is part of a massive
21:10
Speaker 5: data center project in southern Ohio, and shares in Cracker
21:14
Speaker 5: Barrel are down over five percent. After the restaurant chain
21:17
Speaker 5: and now It's chief executive, Julie Massino, will step down
21:20
Speaker 5: effect of August tenth after a few years of controversy
21:23
Speaker 5: around its refresh and logo change. Former Bloomen brand CEO
21:28
Speaker 5: David Deno will take over as its new CEO. I'm
21:33
Speaker 5: Tucker Silvan that is Wall Street Watch.
21:36
Speaker 2: Cracker Barrel used to be my go to stop on
21:38
Speaker 2: the way home from uh Foxwoods back in the day.
21:42
Speaker 4: I've voiced not a fan of cracker Barrel. Yeah it's fine, Yeah,
21:48
Speaker 4: it's fine.
21:49
Speaker 5: Uh.
21:50
Speaker 2: Piece in the Wall Street Journal the unsettled vibe that's
21:53
Speaker 2: creeping through the markets, Like what is what is this
21:56
Speaker 2: unsettled vibe and concern that it's a bubble? Is it?
22:01
Speaker 1: Is? That?
22:01
Speaker 3: What it is?
22:02
Speaker 4: I mean, it's it's you know, specific, I guess to.
22:10
Speaker 3: Yeah, it's that stocks are really.
22:12
Speaker 4: High, and you have all this other stuff going on,
22:14
Speaker 4: such as the potential for higher interest rates, tension the
22:17
Speaker 4: Middle East, and most importantly, questions about how much these
22:22
Speaker 4: giant companies are going to spend on AI development and
22:26
Speaker 4: whether or not there's ever going to be a return
22:28
Speaker 4: on it. So, yeah, I think that's what it is.
22:31
Speaker 4: This article makes it seem mysterious. I don't think it's
22:34
Speaker 4: no the unsettling mysterious vibe. It's just a open question
22:38
Speaker 4: as to whether or not the massive investments are going
22:40
Speaker 4: to pay off.
22:41
Speaker 2: The question is simple, can indices find a way to
22:46
Speaker 2: go up if semiconductors don't. That's the that's the game
22:52
Speaker 2: at this point, and today they're being answered negatively. The
22:57
Speaker 2: S and P open today up around six points as
23:00
Speaker 2: of this speaking. Right now, it's down fourteen, so down.
23:04
Speaker 2: It's a one percent intra day reversal.
23:07
Speaker 3: And one of.
23:08
Speaker 2: The worst performing parts of the market right now is
23:11
Speaker 2: the semiconductor index, which is down four and a quarter percent,
23:16
Speaker 2: Like this is the whole ballgame. What's holding the index
23:20
Speaker 2: together is that it's this this what we call dispersion. Uh,
23:26
Speaker 2: you've got the You've got other parts of the market
23:30
Speaker 2: that are holding up, and that money is rotating into.
23:33
Speaker 2: Rather than investors just saying I want to sell my
23:36
Speaker 2: stocks in set, it's I want to sell those stocks
23:39
Speaker 2: and buy other ones. So it as an example in
23:40
Speaker 2: tech today, semiconductors are off again four and a half
23:44
Speaker 2: percent right now, Mike, do you know what software happens
23:47
Speaker 2: to be doing.
23:49
Speaker 3: No, it's up three.
23:51
Speaker 2: It's not investors saying I'm gonna sell my semiconductors and
23:54
Speaker 2: go buy bonds. It is investors saying, well, I want
23:57
Speaker 2: tech exposures, so I'm gonna move and go from Micron
24:02
Speaker 2: into Salesforce. So I'm going to go from Nvidia into Microsoft.
24:10
Speaker 2: That is what we are seeing in the market today.
24:13
Speaker 4: But I will say that that interest rate trade off,
24:16
Speaker 4: the bond trade off that you just mentioned, while not
24:18
Speaker 4: being exercised today, is a bigger looming threat to markets.
24:23
Speaker 3: Than it has been in.
24:26
Speaker 4: I guess modern investing history since Great Financial Crisis, Right,
24:30
Speaker 4: I mean, consider the alternative right now, if you choose
24:33
Speaker 4: to sit out equity markets, you can lock in through
24:37
Speaker 4: a US Treasury bond, a ten year guaranteed rate of
24:40
Speaker 4: return of four point sixty five three percent. There is
24:44
Speaker 4: the threat that that could go higher in the future,
24:48
Speaker 4: but that's a reasonably compelling alternative compared to the entirety
24:54
Speaker 4: of the twenty ten decade, for example, And I think
24:57
Speaker 4: that's a missed point.
24:58
Speaker 2: Sometimes the question is what does the next ten years?
25:03
Speaker 2: The question for answering that is what does the next
25:06
Speaker 2: ten years look like? And specifically, hey, is it the
25:11
Speaker 2: twenty tens? Well, think about what the twenty tens were. Hey,
25:15
Speaker 2: interest rates were nothing because there was very low growth
25:19
Speaker 2: for most of it. There was no inflation and stocks
25:22
Speaker 2: actually did pretty well. So would you have wanted to
25:24
Speaker 2: get four point six percent?
25:26
Speaker 1: Then?
25:28
Speaker 2: I don't know, Like the alternative in that decade was
25:30
Speaker 2: stocks produced double digit annual returns.
25:33
Speaker 3: Yep.
25:34
Speaker 2: Another question is okay? Or is the next ten years
25:38
Speaker 2: not the twenty tens? Is the nineteen seventies if you're
25:42
Speaker 2: dealing with inflation averaging five percent, you're getting four to
25:46
Speaker 2: six you're losing purchasing power yep?
25:49
Speaker 4: Or is it the two thousands inflation's low but the
25:52
Speaker 4: stock market makes nothing for a decade is defined by
25:55
Speaker 4: two of the worst crashes we've ever seen.
25:56
Speaker 2: Correct, and look, in all honesty, it's going to be
26:01
Speaker 2: none of these. It's going to be something that's gonna
26:03
Speaker 2: be now that we've never seen before, you know, before
26:06
Speaker 2: the twenty tens. I still remember back in twenty eleven.
26:09
Speaker 2: The big concerns in twenty eleven were, Hey, are we
26:11
Speaker 2: going into a double dip recession? Is the Eurozone going
26:14
Speaker 2: to hold together? Are are people ever gonna have jobs again?
26:19
Speaker 2: Because unemployment's still really high three years after peaking. Like
26:23
Speaker 2: these were the questions that we're facing us then, and
26:27
Speaker 2: they turned out to not be things that you needed
26:29
Speaker 2: to worry about for the next ten years. The big
26:32
Speaker 2: questions facing us now, you know, you look at them, Hey,
26:36
Speaker 2: can we you know, durably get inflation down? What's the
26:40
Speaker 2: Middle East gonna look like, what's the situation between the
26:42
Speaker 2: US and China? You know, what's happening in terms of
26:46
Speaker 2: you know, resource security and manufacturing security, Like these are
26:50
Speaker 2: the big ones for the next ten years in my opinion,
26:54
Speaker 2: but like ten years from now, we might look back
26:56
Speaker 2: and be like, yeah, those weren't the actual things that mattered, right,
26:59
Speaker 2: you know, no one, no one looks back now and
27:01
Speaker 2: is like, man, that Eurozone thing really was a problem.
27:05
Speaker 2: But at the time it was okay, Like, remember this
27:09
Speaker 2: was not we're not talking Brexit. This was back when
27:12
Speaker 2: you were talking gregsit and Italy create that crisis and
27:16
Speaker 2: portug get out of here. Like those were the things
27:19
Speaker 2: that you were talking about back then, and those didn't
27:23
Speaker 2: materialize into problems at all, but I still remember them
27:26
Speaker 2: being very front and center of that in that summer
27:28
Speaker 2: of twenty eleven when those fears were acute. So I
27:33
Speaker 2: think right now and obviously the one that you got
27:35
Speaker 2: to add in is look what does AI do to
27:38
Speaker 2: the entire world economy? Which brings us then to this
27:41
Speaker 2: next piece, this Wall Street Journal exclusive Oh yeah, and
27:46
Speaker 2: video and talks with open AI to guarantee two hundred
27:48
Speaker 2: and fifty billion dollars in financing fro for data centers.
27:52
Speaker 2: So huh, so here's the deal. Huh, here's the deal.
27:58
Speaker 2: Is Macioschi saw On is the He's the big kahuna
28:03
Speaker 2: at soft Bank, the Japanese investment firm, and they are
28:07
Speaker 2: trying to build. I think it's like they're trying to
28:10
Speaker 2: say that eventually it's gonna be like a six hundred
28:12
Speaker 2: billion dollar data center in Ohio.
28:14
Speaker 3: Okay, it's obviously not right now. Uh.
28:17
Speaker 2: The lead tenant in this thing is supposed to be
28:20
Speaker 2: open Ai, And so what in video is talking about
28:23
Speaker 2: doing is not giving open Ai two hundred and fifty
28:26
Speaker 2: billion dollars right away, sure, but rather saying, hey, if
28:30
Speaker 2: you need to borrow in order to finance the leasing
28:35
Speaker 2: of that data center from soft Bank, we will guarantee
28:40
Speaker 2: that loan for you. They haven't specified the terms right like,
28:43
Speaker 2: we don't have any details, but we're gonna guarantee that
28:46
Speaker 2: loan so that that construction can move forward.
28:49
Speaker 4: So would you define open Ai as one of Invidia's
28:53
Speaker 4: top ten customers.
28:55
Speaker 3: I would define them as one of their top two customers.
28:57
Speaker 4: Yeah, so one of my top two customers is having
29:03
Speaker 4: trouble financing one of the critical, critical buildouts that they
29:09
Speaker 4: need in order to keep buying my product.
29:13
Speaker 3: So in order to.
29:15
Speaker 4: Again, if you want to take the most negative view here,
29:17
Speaker 4: which I do, in order to continue that gravy train,
29:22
Speaker 4: I'm going to use my credit worthiness to back up
29:25
Speaker 4: your expansion projects so that you can keep buying my
29:28
Speaker 4: semiconductors at these elevated prices.
29:30
Speaker 2: Yes, the best summary that I've seen of this is
29:34
Speaker 2: from Andy Constant on Twitter on x and Andy's an
29:40
Speaker 2: ex Bridgewater guy who occasionally is right, occasionally is wrong.
29:43
Speaker 2: But I thought that his his summer here is good.
29:47
Speaker 2: Here here's his quote from this morning. To make this simple,
29:51
Speaker 2: Masioshi Son is a government subsidized home builder. Open Ai
29:56
Speaker 2: is a no income, no job home buyer who needs
29:59
Speaker 2: a more mortgage. In Vidia is Fanny May, who enhances
30:03
Speaker 2: the credit of open Ai and has a monopoly to
30:05
Speaker 2: sell wallboard, lumber, steel, and concrete to the home builder.
30:09
Speaker 3: Yeah, so it's.
30:10
Speaker 2: Basically, Hey, you're trying to buy this house. I'm going
30:15
Speaker 2: to guarantee your loan, and then I am going to
30:19
Speaker 2: help to finance the construction of the house that you're building,
30:24
Speaker 2: and hopefully I can keep all these plates spinning.
30:26
Speaker 4: And what brought down things during that event in a
30:31
Speaker 4: great financial crisis was the misunderstood interlinkings of all these
30:36
Speaker 4: companies and their attachment to the housing market, which was
30:38
Speaker 4: seen as this market that could never decrease in value.
30:42
Speaker 3: And feels pretty similar.
30:44
Speaker 4: You are linking the financial success of the second largest
30:49
Speaker 4: company in the world is in video now number two,
30:51
Speaker 4: one of the top two conducts, the one of the
30:53
Speaker 4: largest two companies in the world, to these other companies
30:57
Speaker 4: that are far less credit worthy, and you are inextriably
31:01
Speaker 4: linking them together in terms of their success or failure.
31:04
Speaker 2: Well, and look open a we've talked about like they've
31:07
Speaker 2: got real questions as to how they're gonna be able
31:09
Speaker 2: to revenue eize and you know, prophetize. And when we
31:15
Speaker 2: talk about you know, soft Bank, soft Bank's history is
31:19
Speaker 2: littered with malinvestment that ends up just somehow getting bailed
31:22
Speaker 2: out by someone. I mean, they were like one of
31:24
Speaker 2: the lead financers and.
31:26
Speaker 3: We work.
31:28
Speaker 2: They just they've got a pretty decent track record of
31:31
Speaker 2: making the wrong investment at the wrong time, but somehow
31:33
Speaker 2: keep getting access to capital just because I don't know
31:36
Speaker 2: who they know, but it must be everybody.
31:39
Speaker 3: So We're gonna see how this goes.
31:41
Speaker 2: But it's more circular financing, you know, money moving from
31:46
Speaker 2: one company to another that goes back into the company
31:48
Speaker 2: when they buy their product. And again it's more and
31:53
Speaker 2: more creative financing to keep things going. But we'll see
31:57
Speaker 2: how things go here. Quick break, we've got let's talk
32:01
Speaker 2: about single stock futures contracts.
32:06
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32:40
Speaker 2: All right, we got word over the weekend that the
32:43
Speaker 2: CME Group is going to be launching single stock futures.
32:47
Speaker 2: And the basic premise of this is, look, futures exist
32:50
Speaker 2: in you know, indices, non commodities, you know, broadly speaking
32:55
Speaker 2: about the oil that.
32:56
Speaker 3: We quote, is a futures contract.
32:58
Speaker 2: Yes, it's basically saying, hey, will you buy X barrels
33:01
Speaker 2: of oil for delivery on this date? Likewise, futures on
33:04
Speaker 2: a stock are will you buy x shares of this
33:07
Speaker 2: stock for delivery to your account on this date. The
33:12
Speaker 2: big thing is, well, there are a couple of things.
33:15
Speaker 2: The first is that in theory, you can borrow more
33:19
Speaker 2: money doing this than if you are if you are
33:26
Speaker 2: just you know, using margin in a regular brokerage account.
33:28
Speaker 2: Because the margin requirements are less, you can leverage. I
33:32
Speaker 2: think it's up to like six or seven to one
33:33
Speaker 2: instead of just two to one. Perfect, so you can
33:36
Speaker 2: you can take on more leverage if you want to,
33:40
Speaker 2: but the you're not required to, but like you could
33:45
Speaker 2: if you want to other things. A contract is one
33:49
Speaker 2: hundred shares, so if you're talking about let's just use
33:53
Speaker 2: in video as an example, if you have to buy
33:57
Speaker 2: one hundred shares of Nvidia right now at two hundred
33:59
Speaker 2: bucks a share, twenty grand to do so, if you're
34:02
Speaker 2: doing it on margin, you could do it with only
34:05
Speaker 2: like a few grands, so you don't need to put
34:06
Speaker 2: up as much.
34:07
Speaker 3: YEA.
34:07
Speaker 2: Naturally, your losses are magnified in the event that it
34:10
Speaker 2: goes down, but your profits are you know, they grow
34:13
Speaker 2: from that leverage.
34:16
Speaker 3: Other things that are interesting about this.
34:18
Speaker 2: Back in the early two thousands, excuse me, single stock
34:23
Speaker 2: futures were authorized and allowed, Actually they never really got
34:28
Speaker 2: much interest and so they were canceled. So here's the
34:31
Speaker 2: piece that's interesting to me. They're all of these weird
34:34
Speaker 2: exchanges that are set up online right now that have that.
34:39
Speaker 4: Are basically like offshore derivative exchanges and like effectively allow
34:44
Speaker 4: you to trade twenty four hours a day.
34:45
Speaker 2: Yes, I don't know their actual legal status in the
34:48
Speaker 2: United States, so I'm not really gonna tell anyone any
34:51
Speaker 2: of them. But here's the deal is this is either
34:55
Speaker 2: gonna be it's gonna be one of two things. Either hey,
34:59
Speaker 2: there's not really that much interest in this, because the
35:02
Speaker 2: one of the benefits of this new single stock futures
35:05
Speaker 2: trading is it's going to be like twenty three hours
35:07
Speaker 2: a day so you can trade them all the time.
35:09
Speaker 2: So it's either gonna be, hey, there's no interest in
35:11
Speaker 2: this and so okay, it's not really something where those
35:15
Speaker 2: you know, offshore markets.
35:16
Speaker 3: Are going to be able to grow much more.
35:19
Speaker 2: Or hey, everyone's totally interested in this and you can
35:22
Speaker 2: use these futures without having to do the weird offshore ones,
35:26
Speaker 2: and the offshore ones aren't going to get much more
35:28
Speaker 2: business because of that.
35:29
Speaker 4: So either way, those offshore, weird markets that nobody really
35:32
Speaker 4: cares about are maybe in some trouble.
35:34
Speaker 2: It seems to be kind of lose lose, and so
35:37
Speaker 2: that's kind of how I look at it.
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36:52
Speaker 2: The comparison I'll make I guess is before sports betting
36:56
Speaker 2: was legalized in the United States, there were all these
36:59
Speaker 2: off shore platforms that existed of you know, questionable legality. Okay,
37:05
Speaker 2: what happened once, you know, sports betting was legalized in
37:07
Speaker 2: the US, Well, everyone used the legal ones. It didn't
37:09
Speaker 2: result in like more business for these offshore ones. I
37:11
Speaker 2: don't even I can't even remember what the names of
37:14
Speaker 2: them were, if they still exist. But this is kind
37:17
Speaker 2: of the same thing. Hey, if there's really that much interest,
37:21
Speaker 2: all right, the offshore ones are not in good shape.
37:23
Speaker 2: And if there isn't, well, then the offshore ones are
37:25
Speaker 2: pretty much maxed out.
37:26
Speaker 3: Yeah, that's it.
37:28
Speaker 2: It kind of how it feels like that in my opinion.
37:35
Speaker 3: Markets. No, I don't want to do that.
37:38
Speaker 1: I don't.
37:38
Speaker 3: I don't like looking at them too much, you know,
37:40
Speaker 3: you don't want to spook them. It's you don't want
37:43
Speaker 3: to like open the box, Tom, Like, oh, what's in
37:45
Speaker 3: the box? You know?
37:45
Speaker 2: Like America's demand for power soaring, and so are the
37:49
Speaker 2: cost of building out the grid. Yeah, it's supply and demand.
37:51
Speaker 2: If you need to build more grid, but you don't
37:54
Speaker 2: supply more grid than grid cost more.
37:56
Speaker 4: Yeah, cost of large scale solar projects increase to an
38:00
Speaker 4: average sixty nine per megawatt hour, up from fifty eight
38:02
Speaker 4: last year. Batteries cost are all up so same time
38:06
Speaker 4: that a lot of those tax credits are going away,
38:08
Speaker 4: that cost themselves are going up because guess what, they're
38:10
Speaker 4: still demand even without the credits.
38:12
Speaker 3: Quick break here, we're back with more in just a bit.