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AI Debt Worries Hit Tech Stocks · The Financial Exchange Show

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  Speaker 1: with Chuck Zada and Paul Lane.
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  Speaker 2: It's Chuck, Paul, and Tucker with you here. And this
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  Speaker 2: morning at 8.30 a.m. Eastern Time. The Consumer Price Index report,
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  Speaker 2: the CPI, came out and unfortunately showed inflation a little
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  Speaker 2: bit hotter than anticipated. Headline inflation rate was 0.6%, in
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  Speaker 2: line with the 0.6 expectations, but the unrounded number, out
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  Speaker 2: one more decimal point, took you to 0.64%, so it
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  Speaker 2: was a hot 0.6 if there's anything wrong. like that
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  Speaker 2: that exists, which, let's be honest, in CPI world, there is.
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  Speaker 2: There's a big difference between 0.64 and 0.56, even though
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  Speaker 2: both of them round to 0.6. This was also apparent
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  Speaker 2: on the core inflation side of things. Expectations were 0.2.
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  Speaker 2: We came in at 0.3. The unrounded was 0.33, so
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  Speaker 2: it was a hot 0.3. And so that set the
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  Speaker 2: bond market ablaze yet again. And as we sit here
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  Speaker 2: right now, 10-year Treasury is up 5.3 basis points to 5.27,
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  Speaker 2: so that'll put some renewed upward pressure on mortgage rates.
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  Speaker 2: And with higher rates, we've got stocks coming down as well.
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  Speaker 2: S & P 500 now off 61 points, the Dow
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  Speaker 2: off 70 points. NASDAQ Composite off 285. So tech stocks
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  Speaker 2: kind of leading the way down here. And in particular,
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  Speaker 2: got to be honest, the one that has caught my eye,
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  Speaker 2: we'll talk about this a little bit more. Well, no,
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  Speaker 2: let's talk about it now before we get to other
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  Speaker 2: things moving in markets. Paul, have you followed what's been
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  Speaker 2: going on with a little stock by the name of
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  Speaker 2: CoreWeave in the last couple of weeks?
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  Speaker 3: Well, I just was reading up on it a little
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  Speaker 3: bit this morning because... Because it's bad today. It's been
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  Speaker 3: going not so great today.
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  Speaker 2: So I.
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  Speaker 3: dove into what the heck is going on, and we
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  Speaker 3: should talk about it.
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  Speaker 2: So here are the few things that are going on
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  Speaker 2: with CoreWeave. A couple weeks ago on... Let me get
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  Speaker 2: the date right because I want to have the date right.
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  Speaker 2: On October 6th, CoreWeave touched an intraday high of 93.21.
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  Speaker 2: It sits here right now at 66.58. So I did
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  Speaker 2: the math so you don't have to, but this is a... Well, actually,
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  Speaker 2: I hadn't done the math yet. I was hoping to
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  Speaker 2: while I was talking, and I didn't quite get there.
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  Speaker 2: It's a 29% decline in a span of eight calendar days,
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  Speaker 2: four trading days because of the holiday on Monday for
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  Speaker 2: Columbus Day. So that's a big move down. And in particular,
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  Speaker 2: when we look just at how it is doing today,
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  Speaker 2: CoreWeave is doing, well, not well as you would expect
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  Speaker 2: if we're talking about it doing badly. It's down almost
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  Speaker 2: 15% today, which is not good. What gives? A couple
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  Speaker 2: other things, just when we talk about what's going on
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  Speaker 2: with CoreWeave. Credit default swaps. Their five-year credit default swap price,
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  Speaker 2: and a credit default swap, you might have heard this
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  Speaker 2: term before during the financial crisis, but if you haven't,
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  Speaker 2: it's basically a way for investors to bet on whether
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  Speaker 2: or not a company is going to be able to,
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  Speaker 2: or whether a company will not be able to pay
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  Speaker 2: its debts during a certain period of time. So CoreWeave's
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  Speaker 2: credit default swaps now for five years, meaning the probability
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  Speaker 2: that is being priced by the market that they default
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  Speaker 2: in the next five years is up to 10%, which
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  Speaker 2: is not great. The yields on their debt are now
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  Speaker 2: topping north of 15%, meaning if they want to issue
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  Speaker 2: new debt, they're going to have to pay 15% plus
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  Speaker 2: in order to do so. And this is tough when
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  Speaker 2: you're a company that doesn't really have, again, like you
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  Speaker 2: take a look at their financials and this is not
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  Speaker 2: a company that has the ability to finance itself through
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  Speaker 2: cash flow. It's free cash flow over the last 12
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  Speaker 2: months is negative $ 13 billion that has worsened in the
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  Speaker 2: last year from down $ 8 billion. So they need to
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  Speaker 2: either borrow or issue equity in order to do so.
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  Speaker 2: They are not profitable. They already have about $ 51 billion
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  Speaker 2: in long term debt out there, despite having about $ 7. 5
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  Speaker 2: billion in revenue. And CoreWeave likes to present itself as
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  Speaker 2: being pretty central to the AI build-out, and their debt
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  Speaker 2: is screaming that there's all kinds of problems with their
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  Speaker 2: financials right now. So, I often like to say, like,
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  Speaker 2: one of my favorite quotes is, hey, you're going to
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  Speaker 2: wake up and, you know, you're going to realize that
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  Speaker 2: there are bonds in your stocks. And what I mean
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  Speaker 2: by that is, hey, if you're a company like this
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  Speaker 2: and you need to finance yourself through debt issuance, eventually
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  Speaker 2: that hits the stock price because... eventually your equity investors
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  Speaker 2: wake up to the fact that they're the low man
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  Speaker 2: on the totem pole when it comes to, hey, who
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  Speaker 2: gets claimed to what if the company goes out of business?
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  Speaker 2: And not that Corby's being priced as though they're going
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  Speaker 2: out of business right now, but when you lose 29%
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  Speaker 2: in a week, that's not good.
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  Speaker 4: Yeah.
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  Speaker 2: One other fact that... I think is interesting and just
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  Speaker 2: worth pointing out on this as well is I went
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  Speaker 2: through and again, I haven't I'll actually I haven't fully
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  Speaker 2: confirmed this, so I'm not going to say it. So
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  Speaker 2: I'll put that to the side right now. But Corweave
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  Speaker 2: not in a good spot as it relates to, you know,
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  Speaker 2: what the bond market is saying about them. And that
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  Speaker 2: in turn, along with everything else that we're seeing in
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  Speaker 2: semiconductors in the last week has tech stocks kind of
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  Speaker 2: leading the way down when you look at the sectors.
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  Speaker 2: Tech sector off almost 2% today in the S &
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  Speaker 2: P 500. It is the worst performing sector in the market.
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  Speaker 2: And so some real issues popping up there. It's not
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  Speaker 2: that they can't be answered. Maybe they will be able to.
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  Speaker 2: We've seen tech successfully answer the bell a few times
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  Speaker 2: in the this is not giving you the warm and
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  Speaker 2: fuzzies there. The other one that I think is worth
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  Speaker 2: paying attention to just because of its financial situation is Oracle,
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  Speaker 2: and they are down about 7% today as well. And
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  Speaker 2: so some problems being priced in on that one too.
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  Speaker 3: Yeah, this is a huge issue and we really can't
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  Speaker 3: talk about it enough. The amount of debt issuance that
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  Speaker 3: has been required as part of this AI data center
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  Speaker 3: build out is just absolutely immense. And you have companies
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  Speaker 3: doing all sorts of sophisticated maneuvers to do anything that
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  Speaker 3: they can to get what's called the investment grade credit
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  Speaker 3: status on the debt markets. And basically what that enables
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  Speaker 3: them is to get access to insurers' pockets. So any
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  Speaker 3: insurance company out there collects your premiums and then typically
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  Speaker 3: will go out and buy bonds with your premiums because
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  Speaker 3: they don't need to commit anything the capital, the lump sum,
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  Speaker 3: whether it be a death benefit or any type of
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  Speaker 3: other insurance product out there, they don't need to pay
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  Speaker 3: you tomorrow. So what they do is invest your capital.
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  Speaker 3: If you are able to attain that investment grade rating,
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  Speaker 3: it opens up the insurers that have deep pockets to
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  Speaker 3: buy your debt. CoreWeave, as an example, has been fighting
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  Speaker 3: for that designation, but now their yields on their debt
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  Speaker 3: are commanding 15%. And to your point that you made
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  Speaker 3: on the credit default swaps, they're not at that level yet.
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  Speaker 2: However.
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  Speaker 3: This percolates all across the ecosystem with AI data centers,
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  Speaker 3: where you have a series of companies that you've probably
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  Speaker 3: heard of if you follow the space, whether it's Cypher
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  Speaker 3: or TerraWolf or Applied Digital. These were companies that were
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  Speaker 3: Bitcoin miners, Chuck, that have pivoted to become more bigger
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  Speaker 3: players in the AI data center space. And the amount
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  Speaker 3: of financing that they're undergoing to build out these data
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  Speaker 3: centers and run their operations, it requires... Perfect execution. And
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  Speaker 3: it really requires sustained spending on AI. And it's a
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  Speaker 3: really tenuous sort of situation where you have borrowing costs
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  Speaker 3: increasing and just general conditions changing in the financial system
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  Speaker 3: that impacts these guys quite a bit when you're kind
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  Speaker 3: of going at this like a venture capital firm, sort
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  Speaker 3: of bend the farm as these companies are. Not all
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  Speaker 3: of them, but certainly several of them. It requires a
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  Speaker 3: lot of execution and there's a lot of pressure when
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  Speaker 3: things get tough.
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  Speaker 2: Let's take a quick break there. When we return, let's see,
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  Speaker 2: what do I want to get to? Let's talk about
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  Speaker 2: grocery prices when we return.
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• 10:35
  Speaker 4: a piece here in uh the financial times u.s grocery
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  Speaker 4: boys Prices poised to climb as soaring fuel costs drive inflation.
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  Speaker 4: The interesting thing, the last three months, we haven't seen
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  Speaker 4: it printing in the CPI. If you look at the CPI,
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  Speaker 4: food at home the last three months, minus 0.1%, 0.0%,
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  Speaker 4: minus 0.1%. So despite higher fuel costs, we're not seeing
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  Speaker 4: any of this translating into higher grocery costs overall. Now,
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  Speaker 4: I know that some of you listening are going to
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  Speaker 4: be like, Chuck, that's not what I'm seeing at the
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  Speaker 4: grocery store.
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  Speaker 2: That's fine. I'm not saying that this is the be-all
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  Speaker 2: and end-all, but what I am saying is this is
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  Speaker 2: what's being measured by the CPI. And generally, it's done
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  Speaker 2: a pretty good job, I think, of tracking things in
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  Speaker 2: the last four or five years. So it does suggest
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  Speaker 2: that there's probably some latent inflation set to hit things
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  Speaker 2: on the grocery side of things.
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  Speaker 3: Yeah, there's some statistics cited in this piece in which
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  Speaker 3: they do attribute some price increases. There was some data
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  Speaker 3: that they had done based on looking at sales receipts
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  Speaker 3: from Walmart, Target, and other retailers where they had seen
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  Speaker 3: a 3.3% increase year-over-year in prices. The CPI has it
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  Speaker 3: about 2.5%. So yeah, different metrics maybe would point you
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  Speaker 3: in different directions. CPI is the one that we tend
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  Speaker 3: to lean on the most in terms of fruit prices.
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  Speaker 3: Those have been flat. However you want to slice it,
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  Speaker 3: if you continue to see this pressure on the energy market,
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  Speaker 3: I just don't know how retailers couldn't continue to increase
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  Speaker 3: costs on food. Campbell's has mentioned that they have had
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  Speaker 3: anywhere from a 4% to 5% increase on 60% of
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  Speaker 3: its portfolio. You've got spot rates for Lon Hall trucking
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  Speaker 3: up 50% year over year. So the retailers are really
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  Speaker 3: focused on obviously trying to keep costs down. But the
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  Speaker 3: longer this goes on, you have inputs on the cost
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  Speaker 3: side and packaging and fuel increasing. You would expect to
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  Speaker 3: see it pick up. In the inflation reports in the
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  Speaker 3: future months here, Chuck.
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  Speaker 2: Now, anytime that we talk about groceries with Paul, this
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  Speaker 2: gives us an opportunity to ask Paul about the current
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  Speaker 2: pricing of certain things at the grocery store. And so, Tucker,
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  Speaker 2: I happen to have pulled up Walmart.com. And I typed
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  Speaker 2: in groceries. And how many do you think we should do?
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  Speaker 2: Four or five items?
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  Speaker 1: Yeah.
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  Speaker 2: Five items we're going to do.
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  Speaker 3: It's rare I have a pin in my stomach on
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  Speaker 3: the show anymore after all these years, but I do now.
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  Speaker 2: So let's go. Paul, what do you think a 12-pack
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  Speaker 2: of ramen noodles costs?
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  Speaker 3: All right, so I'll go with... Hey, give me five
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  Speaker 3: seconds here.
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  Speaker 1: 320? 398.
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  Speaker 2: Pretty good. Pretty good. Pretty good there. Next one on
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  Speaker 2: the list. A party-sized bag of Doritos nacho cheese tortilla chips. 389?
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  Speaker 4: 594.
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  Speaker 3: Off by about 40% there.
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  Speaker 2: That's rough. That one's not really going to do it.
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  Speaker 2: A 15.5-ounce can of pinto beans.
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  Speaker 3: Oh, my God. I have no idea. All right. I'll
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  Speaker 3: go with $ 4.
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  Speaker 2: 92 cents.
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  Speaker 3: Damn.
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  Speaker 2: I never eat beans.
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  Speaker 3: I knew he was going to go high on beans.
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  Speaker 3: I never eat beans. Never have them.
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  Speaker 1: Paul. I knew it.
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  Speaker 2: A gallon of whole milk.
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  Speaker 3: This has got to be around $ 4.
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  Speaker 2: 10.
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  Speaker 4: $ 2. 42.
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  Speaker 3: Goddamn.
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  Speaker 4: $ 2.
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  Speaker 1: 42.
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  Speaker 3: I would agree.
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  Speaker 2: Let's go to page three. Let's see if we can
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  Speaker 2: get some more complex items as we go through this.
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  Speaker 3: Beans were pretty complex.
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  Speaker 2: Paul, 12-ounce can of Spam.
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  Speaker 3: Okay, now that I've learned my lesson for beans, I'm
• 14:27
  Speaker 3: going to go 110.
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  Speaker 1: 372.
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  Speaker 2: You had the beans and the Spam mixed up. And finally, finally,
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  Speaker 2: let's finish it off with this one. Vandekamp's Crunchy Breaded
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  Speaker 2: Fish Sticks, 24.6 ounces, 44 fish sticks in the box.
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  Speaker 3: Six bucks?
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  Speaker 2: $ 5.
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  Speaker 4: 48.
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  Speaker 2: Pretty good way to finish up, Paul. Pretty good way
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  Speaker 2: to finish up. Call me on that. I'll put you
• 14:53
  Speaker 2: to three for six on that one, which is pretty solid,
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  Speaker 2: all things considered. I'm impressed.
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  Speaker 3: I'm sweating.
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  Speaker 4: Based on beans, $ 4.
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  Speaker 2: 00. Listen, listen.
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  Speaker 3: Never had them.
• 15:06
  Speaker 2: Beans are the cheapest thing going. We have improved since
• 15:09
  Speaker 2: the $ 7 head of garlic. Okay. $ 7. All we can
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  Speaker 2: hope for is meaningful improvement. Speaking of price improvement, the IEA,
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  Speaker 2: the International Energy Association, or whatever they're called, what's the
• 15:24
  Speaker 2: A stand for? I don't even know at this point. Agency?
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  Speaker 2: That's the one. That's the one.
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  Speaker 3: Seem pretty easy.
• 15:32
  Speaker 2: Listen, when you get all tunnel visioned on something, you
• 15:35
  Speaker 2: just don't know what to do. There's too many acronyms
• 15:37
  Speaker 2: in our world. It is. We should come up with
• 15:40
  Speaker 2: an LLC to deal with all of them. Let's talk
• 15:43
  Speaker 2: a little bit about this piece here from the Wall
• 15:45
  Speaker 2: Street Journal. Global diesel squeeze to drag into 2027, IEA says.
• 15:48
  Speaker 2: And the big thing, we've talked about this. Yesterday, diesel
• 15:54
  Speaker 2: prices in the futures market up about 22 cents. And
• 15:59
  Speaker 2: the big issue that you have here is just there
• 16:01
  Speaker 2: is not enough refining going on. And there's not enough
• 16:04
  Speaker 2: spare capacity outside of anywhere but China, who, for whatever reason,
• 16:08
  Speaker 2: just does not want to turn their refineries up to
• 16:09
  Speaker 2: full blast. There's just not enough refining capacity available to
• 16:14
  Speaker 2: improve the picture in the next several months. And so
• 16:18
  Speaker 2: we are very much in a world where... Continued high
• 16:22
  Speaker 2: diesel costs are likely going to be a feature, at
• 16:25
  Speaker 2: least through the early part of the winter and potentially
• 16:27
  Speaker 2: through the entire thing. Diesel rose two cents overnight to $ 6. 29,
• 16:31
  Speaker 2: so we're moving back up over the last couple days.
• 16:34
  Speaker 2: Based on where wholesale prices have gone, we're probably heading
• 16:38
  Speaker 2: back towards $ 6. 40 to $ 6. 50 diesel in the next week
• 16:41
  Speaker 2: or so, and so getting ready to knock on the
• 16:44
  Speaker 2: doors of all-time highs again. Again, there's not really much
• 16:47
  Speaker 2: you can do to change that. Refineries don't just have
• 16:50
  Speaker 2: a ton of spare capacity floating around. The industry got
• 16:53
  Speaker 2: very lean, very thin in the late 2010s because of
• 16:57
  Speaker 2: basically Russia trying to put a bunch of energy companies
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  Speaker 2: out of business by driving prices down. And so you're
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  Speaker 2: in a situation here where... diesel prices, even if you
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  Speaker 2: start to see some modest improvement, it's probably not going
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  Speaker 2: to stick for several months. And it's going to take
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  Speaker 2: a big chunk of 2027 to unwind some of these
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  Speaker 2: gains that we've seen. And we might not get back
• 17:20
  Speaker 2: to pre-war prices anytime next year.
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  Speaker 3: It's really hard to see that that would be the case,
• 17:25
  Speaker 3: that we would get back to those pre-war prices. It's
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  Speaker 3: In some ways, this year has actually, it could have
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  Speaker 3: been far worse, but you had China curbing some of
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  Speaker 3: their imports. You had a little bit of favorable circumstances
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  Speaker 3: sort of come into play over the last six months
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  Speaker 3: or so to keep energy prices. Certainly, they're way higher,
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  Speaker 3: don't get me wrong, but it could have been far worse.
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  Speaker 3: So we'll see how 27 plays out.
• 17:52
  Speaker 2: Let's talk a little bit about home prices here. Stubborn
• 17:54
  Speaker 2: sellers are the last thing propping up home prices. And
• 17:57
  Speaker 2: I do have to tell you, based on where rates
• 17:58
  Speaker 2: have moved in the last four or five weeks, it
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  Speaker 2: does feel like we're starting to get some pricing pressure here.
• 18:05
  Speaker 2: Mike Simonson, who we've had on the show quite a bit,
• 18:07
  Speaker 2: he's now over at Compass. I was looking at some
• 18:11
  Speaker 2: data of his earlier this week, and basically pending sales
• 18:15
  Speaker 2: data is showing prices flat now over the last month
• 18:18
  Speaker 2: or so. after some 1% to 3% gains in the
• 18:21
  Speaker 2: first nine months of the year, I think we're probably
• 18:24
  Speaker 2: heading towards pricing... that is going to be further challenged
• 18:28
  Speaker 2: if rates remain high heading into the winter.
• 18:30
  Speaker 3: Yeah, I think you have two factors here. One is
• 18:32
  Speaker 3: that the 30-year fixed mortgage has jumped up to 7.5%,
• 18:34
  Speaker 3: and some of the seasonal effects that people are kind
• 18:37
  Speaker 3: of staring at this month of September and October, realizing
• 18:40
  Speaker 3: that you don't have a lot of transaction volume of
• 18:42
  Speaker 3: homes closing in December and January. It's pretty easy to
• 18:45
  Speaker 3: psychologically just punt and say, all right, we're going to
• 18:48
  Speaker 3: go to the spring of 2027. and hope that interest
• 18:53
  Speaker 3: rates will be lower at that point. One-fifth of sellers
• 18:56
  Speaker 3: have dropped their asking price. I believe that was from
• 18:59
  Speaker 3: the month of September. And then we've had about 6%
• 19:02
  Speaker 3: of sellers, according to Redfin, just pull their listings off.
• 19:05
  Speaker 3: I have a brother and sister-in-law looking to sell a
• 19:07
  Speaker 3: home around this greater Boston area, experiencing some of the
• 19:09
  Speaker 3: similar pressures there.
• 19:11
  Speaker 2: The other thing that I've heard anecdotally, a lot of
• 19:14
  Speaker 2: people that bought vacation homes to rent out back during
• 19:18
  Speaker 2: the pandemic now looking for exits as they're not seeing
• 19:20
  Speaker 2: the revenue that they had hoped to see from them
• 19:22
  Speaker 2: And they are finding the sale market much more challenging
• 19:25
  Speaker 2: with these kinds of interest rates. Let's take a quick break.
• 19:30
  Speaker 2: When we return, we've got Wall Street Watch next.
• 19:39
  Speaker 1: Bringing the latest financial news straight to your radio every day.
• 19:43
  Speaker 1: It's the Financial Exchange on the Financial Exchange Radio Network.
• 19:49
  Speaker 1: Time now for Wall Street Watch. Tracking the stocks, the data,
• 19:53
  Speaker 1: and the headlines driving markets so far today. Right here
• 19:56
  Speaker 1: on the Financial Exchange Radio Network.
• 19:58
  Speaker 4: Well, yields are on the rise in reaction to a
• 20:01
  Speaker 4: hotter than expected inflation reading where consumer prices climbed 3.7%
• 20:04
  Speaker 4: in September, up from 3.4% in August. Right now, the
• 20:10
  Speaker 4: Dow is down only nine points. S & P 500
• 20:13
  Speaker 4: selling off eight-tenths of one percent or 64 points lower.
• 20:16
  Speaker 4: NASDAQ selling off as well, down over one percent or
• 20:19
  Speaker 4: 322 points lower. Rust 2000 selling off one and a
• 20:23
  Speaker 4: half percent. Ten-year Treasury yield is up three basis points
• 20:26
  Speaker 4: at 5.249 percent. And crude oil is up three-quarters of
• 20:30
  Speaker 4: a percent, trading right around $ 94 a barrel. More bank
• 20:35
  Speaker 4: earnings this morning after Bank of America missed third quarter
• 20:37
  Speaker 4: revenue expectations after being hit with a $ 1. 2 billion money
• 20:41
  Speaker 4: laundering penalty by regulators. Shares are dropping 7%. BlackRock edging
• 20:47
  Speaker 4: higher after the bank beat street profit expectations. Morgan Stanley
• 20:51
  Speaker 4: also beat expectations on blockbuster results in its equities trading franchise. However,
• 20:56
  Speaker 4: the stock is down 3%. Meanwhile, Dutch semiconductor company ASML
• 21:01
  Speaker 4: listed its.
• 21:04
  Speaker 2: Lifted its annual.
• 21:05
  Speaker 4: Forecast for the third time this year, saying it was
• 21:08
  Speaker 4: looking at ways to boost production. CoreWeave continues to plunge
• 21:13
  Speaker 4: down another 15% today over worries about its rising borrowing costs.
• 21:17
  Speaker 4: And The Wall Street Journal reported earlier today that Netflix
• 21:21
  Speaker 4: is cutting 6% of its staff for about 1,000 jobs globally.
• 21:25
  Speaker 4: This marks the streaming giant's biggest round of layoffs since 2022.
• 21:31
  Speaker 4: I'm Tucker Silva and that is Wall Street Watch.
• 21:35
  Speaker 2: Paul, let's hop forward a little bit in the stack-a-roonie.
• 21:38
  Speaker 2: We've got Peace and CNBC talking about the Social Security
• 21:41
  Speaker 2: cost of living adjustment. And in fact, we did just
• 21:46
  Speaker 2: get confirmation from... the AP, who I guess spoke to
• 21:50
  Speaker 2: Social Security, confirming that the COLA for this year is
• 21:54
  Speaker 2: going to be a 3.6% bump for the average benefit.
• 21:59
  Speaker 2: That'll be an additional $ 75 per month based on what
• 22:04
  Speaker 2: they are seeing. And so, again, kind of confirming what
• 22:10
  Speaker 2: the numbers are. They're actually, yeah, the Social Security Administration
• 22:13
  Speaker 2: announcing this just about... couple hours ago, it looks like
• 22:18
  Speaker 2: it was finally picked up here. And so yeah, it's
• 22:22
  Speaker 2: going to be about a $ 75 per month bump on average. Remember, though,
• 22:26
  Speaker 2: that depending on what happens with Medicare Part B costs,
• 22:29
  Speaker 2: those eat into that. And so your $ 75 jump could
• 22:32
  Speaker 2: end up being 65 or 55. And if you have
• 22:35
  Speaker 2: a smaller jump, because your benefits smaller, you might see
• 22:38
  Speaker 2: it wiped out entirely depending on what happens with Medicare
• 22:41
  Speaker 2: Part B, simply because those Part B increases the last
• 22:44
  Speaker 2: couple years have been pretty significant. And so that's something
• 22:48
  Speaker 2: worth paying attention to.
• 22:49
  Speaker 3: Yeah, the overwhelming feedback that I get from clients, and
• 22:53
  Speaker 3: I'm sure listeners out there have experienced the same, that
• 22:55
  Speaker 3: oftentimes these cost of living adjustments, just like you mentioned,
• 22:58
  Speaker 3: get eaten up by those Medicare Part B increases. This
• 23:01
  Speaker 3: is the 3.6 increase that we're seeing here. is higher
• 23:06
  Speaker 3: than what we had seen, I believe, for last year.
• 23:09
  Speaker 3: But in 2023 and 2022, we saw respectively an 8.7%
• 23:14
  Speaker 3: COLA and a 5.9% in 2022. So less than those,
• 23:19
  Speaker 3: but like you mentioned, oftentimes eaten up by some of
• 23:22
  Speaker 3: the higher healthcare costs seeping through on the Medicare Part B.
• 23:26
  Speaker 2: Yeah, Part B was back in 2023, it was $ 165
• 23:27
  Speaker 2: a person. went up $ 10 to $ 175. 24, then to $ 185. 25,
• 23:33
  Speaker 2: and then to $ 203 this year. So we've seen, again,
• 23:39
  Speaker 2: those $ 10 to $ 18 per year increases in Part B premiums.
• 23:44
  Speaker 2: We'll see where these end up coming in this year. Those,
• 23:47
  Speaker 2: I think, usually... I want to say those are usually
• 23:50
  Speaker 2: announced somewhere in the early November range, I think, is
• 23:54
  Speaker 2: when we get them. So we won't know that for
• 23:56
  Speaker 2: a few more weeks. But I think it's generally early
• 23:59
  Speaker 2: November premiums. when we start to see when those Part
• 24:03
  Speaker 2: B increases end up coming through. Folks, if you are
• 24:07
  Speaker 2: trying to figure out what your retirement looks like, the
• 24:12
  Speaker 2: folks at the Armstrong Advisory Group can help. Armstrong Advisory
• 24:16
  Speaker 2: Group helps people figure out how Social Security, Medicare, pensions, portfolio,
• 24:23
  Speaker 2: and what you actually want to do how that all
• 24:26
  Speaker 2: fits together into a coherent retirement. The two things that
• 24:29
  Speaker 2: you don't want to do, you don't want to retire
• 24:31
  Speaker 2: and then have to go back to work again. That's
• 24:34
  Speaker 2: not good for you. And you don't want to wait
• 24:36
  Speaker 2: too long to retire and miss out on years of
• 24:38
  Speaker 2: retirement if you don't like working. So, Armstrong Advisory Group
• 24:43
  Speaker 2: has offices all throughout the New England region, and you
• 24:47
  Speaker 2: can give our office a call at 800-393-4001 to set
• 24:49
  Speaker 2: up a time to speak with a member today. Again,
• 24:56
  Speaker 2: that phone number is 800-393-4001. Or you can go to armstrongadvisory.com
• 25:03
  Speaker 2: and click on the button to schedule a conversation with
• 25:07
  Speaker 2: a member of our team. That phone number again is 800-393-4001.
• 25:13
  Speaker 1: The proceeding was paid for by Armstrong Advisory Group, a
• 25:15
  Speaker 1: registered investment advisor. Nothing in the ad or in any
• 25:18
  Speaker 1: Armstrong guide is specific financial, legal, or tax advice. Consult
• 25:21
  Speaker 1: your own financial, tax, and estate planning advisors before making
• 25:24
  Speaker 1: any investment decisions. Armstrong may contact you to offer investment
• 25:27
  Speaker 1: advisory services.
• 25:29
  Speaker 2: Mortgage rates hitting 7.5% on average last week, according to
• 25:34
  Speaker 2: the Mortgage Bankers Association. This is the first time we've
• 25:37
  Speaker 2: seen them up in that range for a full week
• 25:41
  Speaker 2: since the end of 2023, back in November of 23.
• 25:46
  Speaker 2: So it's been a little while since we've seen them
• 25:48
  Speaker 2: in this range. And I got to tell you, it's
• 25:52
  Speaker 2: going to be something that creates a drag on housing.
• 25:55
  Speaker 2: The only question is how big the drag is. And
• 25:58
  Speaker 2: I think that's going to depend on how long this
• 25:59
  Speaker 2: lasts and if rates continue to move higher beyond where
• 26:03
  Speaker 2: we already are.
• 26:05
  Speaker 3: Yeah, what we saw in terms of the biggest issue
• 26:08
  Speaker 3: that the housing market has dealt with over the last
• 26:10
  Speaker 3: five or six years is that so many people were
• 26:12
  Speaker 3: sitting with those sub 4% mortgage rates. We now have
• 26:16
  Speaker 3: gotten to a point in time, according to Intercontinental Exchange,
• 26:19
  Speaker 3: that we have one third of mortgage holders throughout the
• 26:22
  Speaker 3: United States over 5% now. That compares to about one
• 26:26
  Speaker 3: fifth back in 2023. So people have gotten slightly more
• 26:31
  Speaker 3: used to higher interest rates, but 7.5% is a far
• 26:33
  Speaker 3: cry from the 5% or 6% that a lot of
• 26:34
  Speaker 3: people had over the course of the last few years.
• 26:42
  Speaker 3: So certainly this is going to put, like you mentioned,
• 26:45
  Speaker 3: pressure on the housing market. And, you know, there's only,
• 26:50
  Speaker 3: there's still, we're talking two thirds of people holding on
• 26:54
  Speaker 3: to those sub 5% interest rates that you'd imagine are
• 26:58
  Speaker 3: pretty hesitant to try and make a move, particularly when
• 27:00
  Speaker 3: you're talking about jump from three and a half to
• 27:03
  Speaker 3: seven and a half percent or whatever it may be.
• 27:05
  Speaker 2: You can put that off for so long, but eventually
• 27:07
  Speaker 2: we come back to the five Ds of housing. Yep. Divorce, downsizing, diapers, diamonds.
• 27:12
  Speaker 1: And death.
• 27:14
  Speaker 2: Who wasn't the first coin? We picked that up back
• 27:16
  Speaker 2: in 2021 or two, I think. We can take credit
• 27:19
  Speaker 2: for it. It's fine. It's not ours. It's not ours.
• 27:23
  Speaker 2: But in any case, look, you can put some of
• 27:26
  Speaker 2: this stuff off for a while. You can say, okay,
• 27:29
  Speaker 2: we want to downsize, but eventually you're going to. Once
• 27:34
  Speaker 2: you have a kid, you can't really put off that
• 27:36
  Speaker 2: kid growing. They grow at the pace they're going to.
• 27:40
  Speaker 2: you can put off a divorce for a little bit. Like,
• 27:42
  Speaker 2: you can be like, well, like, maybe I'll just, you know,
• 27:44
  Speaker 2: stick it out. Eventually, you're just like, okay, like, it's
• 27:47
  Speaker 2: time to do this. Diamonds, again, getting married, you can
• 27:50
  Speaker 2: be like, well, it's not the time. Eventually, it's like, hey,
• 27:53
  Speaker 2: we've been dating a while. Is it the time now?
• 27:54
  Speaker 2: And it's like, okay, you got to do it. And death, obviously,
• 27:57
  Speaker 2: we have no idea when any of us are going
• 27:59
  Speaker 2: to die. So I think that, yes, like, you do
• 28:03
  Speaker 2: get the people that have those low mortgage rates that
• 28:06
  Speaker 2: are like, oh, gee, I can't do it. But occasionally it's, hey,
• 28:09
  Speaker 2: there's a job offer that's too good to pass up
• 28:11
  Speaker 2: across the country and I got to move or, hey,
• 28:13
  Speaker 2: I'm getting married and I'm moving and yeah, like we're
• 28:16
  Speaker 2: going to sell this place and, you know, buy a
• 28:17
  Speaker 2: new one. Like these things happen at the margins. And
• 28:22
  Speaker 2: I think especially if you're not sure that rates are
• 28:26
  Speaker 2: going to move back down, because now we've had, again,
• 28:28
  Speaker 2: like four years in a row of, you know, rates
• 28:30
  Speaker 2: higher than a lot of people were used to. eventually say, look,
• 28:33
  Speaker 2: it might not get better. Maybe now is just the
• 28:35
  Speaker 2: time for us to go and make that move.
• 28:38
  Speaker 3: Yeah, particularly as a homeowner, you always have the flexibility
• 28:40
  Speaker 3: to refinance if rates go back down lower. So it's like,
• 28:44
  Speaker 3: are you going to drag your feet? Ultimately, like you
• 28:46
  Speaker 3: were mentioning, those pressures, and I start to feel them
• 28:49
  Speaker 3: personally too. I have three kids and in a home
• 28:51
  Speaker 3: that eventually we're going to reach that point where there's
• 28:55
  Speaker 3: just not enough space. And I can drag my feet
• 28:57
  Speaker 3: for as long as I want, but then those external
• 28:59
  Speaker 3: forces push you to ultimately look. And hopefully, in my case,
• 29:03
  Speaker 3: I can continue to wait it out a couple more years.
• 29:06
  Speaker 3: But you do have that somewhat leverage, I would call it,
• 29:10
  Speaker 3: as a mortgage holder to be able to say, all right, yeah,
• 29:13
  Speaker 3: I bought when the mortgage rates were at 7.5, but
• 29:15
  Speaker 3: if they drop to 5.5, great, I can look at refinancing,
• 29:18
  Speaker 3: assuming I'm going to be in the property for the
• 29:20
  Speaker 3: long term.
• 29:21
  Speaker 4: By the way, just to give proper credit, it was
• 29:23
  Speaker 4: Sean O'Toole, who is the founder and CEO of Foreclosure Radar.
• 29:26
  Speaker 4: He invented the original Five D's of real estate back
• 29:30
  Speaker 4: in 2006.
• 29:32
  Speaker 3: Patches O'Houlihan.
• 29:34
  Speaker 2: I was going to say, he's a distant cousin of
• 29:36
  Speaker 2: Patches O'Houlihan, I believe. If you can dodge a mortgage,
• 29:40
  Speaker 2: you can dodge a house, is what I believe he said.
• 29:43
  Speaker 2: Let's take a quick break, and when we return, we're
• 29:48
  Speaker 2: going to do a little bit of Stack Roulette next here.
• 29:51
  Speaker 1: Markets, money, business. The Financial Exchange brings it together every
• 29:56
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• 29:59
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• 30:03
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• 30:08
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• 30:11
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• 30:14
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• 30:18
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• 30:33
  Speaker 2: Paul, what do you got for me for Stack Roulette?
• 30:36
  Speaker 3: Chuck, I want to talk a little bit about an
• 30:38
  Speaker 3: announcement that just came out of ESPN. ESPN has now
• 30:42
  Speaker 3: launched ESPN JV, Junior Varsity, which is a new YouTube
• 30:46
  Speaker 3: channel dedicated to introducing... younger audience to the excitement of
• 30:50
  Speaker 3: sports through engaging and family-friendly content, according to a press
• 30:55
  Speaker 3: release by ESPN. Love this move for them as someone
• 30:58
  Speaker 3: who has young kids and a son who's starting to
• 31:01
  Speaker 3: get a little bit interested into sports. He is just
• 31:06
  Speaker 3: very unlikely to watch ESPN the way the three of
• 31:09
  Speaker 3: us did growing up, where it was just a rite
• 31:11
  Speaker 3: of passage to consume SportsCenter every morning to figure out
• 31:15
  Speaker 3: what happened with the Red Sox or whatever team that
• 31:17
  Speaker 3: you were following.
• 31:18
  Speaker 2: Not just every morning, several times every morning.
• 31:21
  Speaker 3: Yeah, you'd watch the same one over and over again,
• 31:24
  Speaker 3: and it would be particularly frustrating when you caught the end.
• 31:26
  Speaker 2: Of the highlight.
• 31:26
  Speaker 3: You're like, oh, great, now I've got to wait until
• 31:28
  Speaker 3: the whole new show comes around just to watch it.
• 31:31
  Speaker 3: Far different times that we live in today where basically
• 31:33
  Speaker 3: you can access any highlight you want virtually on demand.
• 31:37
  Speaker 3: So this idea of YouTube, which has taken the majority
• 31:40
  Speaker 3: of eyeballs, like if you look at some of the
• 31:42
  Speaker 3: reason why Netflix has struggled, Tucker had mentioned it before
• 31:46
  Speaker 3: in Wall Street Watch where they had laid off, I
• 31:48
  Speaker 3: think it was a thousand employees, is because from a
• 31:51
  Speaker 3: viewing perspective, YouTube nationally has really taken the most majority
• 31:56
  Speaker 3: of market share from a viewership standpoint. And that is
• 31:59
  Speaker 3: especially prevalent with the younger audience. So ESPN teaming up
• 32:03
  Speaker 3: with YouTube to, uh, put some content on there, I
• 32:06
  Speaker 3: think it's, is a smart move for them to try
• 32:08
  Speaker 3: to monetize some of their highlights.
• 32:09
  Speaker 2: I'm on there now.
• 32:10
  Speaker 4: There's like a guess what happens video where they, it's
• 32:14
  Speaker 4: like a little animation over a sports highlight. It says,
• 32:16
  Speaker 4: what happens next? And it's, it's like a interception B
• 32:20
  Speaker 4: touchdown C sack. So it's kind of interactive, this trivia time.
• 32:24
  Speaker 1: Um, Pretty interesting.
• 32:27
  Speaker 2: I like that. I think it's good. I think, again,
• 32:32
  Speaker 2: we'll see how much time and effort they actually end
• 32:34
  Speaker 2: up investing into it. Because this is always the question
• 32:38
  Speaker 2: when you have a giant company and kind of a
• 32:43
  Speaker 2: niche product that they're trying to develop. Hey, how much
• 32:46
  Speaker 2: time are they going to invest into it? But ultimately, look,
• 32:48
  Speaker 2: if you're ESPN and you're trying to build that next
• 32:50
  Speaker 2: generation of sports fans, you want to do this because
• 32:53
  Speaker 2: of what it means for your bottom line 20 years
• 32:55
  Speaker 2: from now. not because it's having a meaningful impact today.
• 32:58
  Speaker 3: Yeah.
• 32:59
  Speaker 2: So we'll see if they end up sticking with it.
• 33:01
  Speaker 4: Also, let's not forget the live-to-action cartoon animation games that
• 33:08
  Speaker 4: they've been broadcasting, too. You've seen the Toy Story ones.
• 33:11
  Speaker 4: You've seen Monsters, Inc. games, where it's like an actual
• 33:15
  Speaker 4: football game's going on, and it looks like there's characters.
• 33:19
  Speaker 4: Who's yelling out there?
• 33:21
  Speaker 2: There's characters. What do you mean, who's yelling out there?
• 33:23
  Speaker 2: Somebody's yelling out there.
• 33:24
  Speaker 1: Yeah.
• 33:25
  Speaker 2: Uh.
• 33:26
  Speaker 3: and then uh.
• 33:27
  Speaker 4: yet like this different characters or whatever it's so i'm
• 33:30
  Speaker 4: on the espn jv website right now and uh... they
• 33:33
  Speaker 4: have all that.
• 33:34
  Speaker 3: Posted as well Fans have rushed the studio furious with
• 33:37
  Speaker 3: this new endeavor.
• 33:39
  Speaker 2: Really like USB and JV. Did either of you happen
• 33:43
  Speaker 2: to catch yesterday Apple's announcement of the HomeView smart hub?
• 33:50
  Speaker 3: I have seen the announcement, and I was curious, what's
• 33:53
  Speaker 3: the selling point with this? Do you know what is
• 33:56
  Speaker 3: so great about it as to why we should have
• 33:57
  Speaker 3: it in our homes?
• 33:59
  Speaker 2: No.
• 34:00
  Speaker 1: Okay.
• 34:01
  Speaker 2: So here's the deal. It's called the HomeView Smart Home Hub.
• 34:05
  Speaker 2: It costs $ 300. And basically what it does is you
• 34:09
  Speaker 2: can talk to it. You ask it different questions. And
• 34:13
  Speaker 2: the demo video they put out, it was like a
• 34:15
  Speaker 2: three-minute video, and it was basically showing this thing sitting
• 34:18
  Speaker 2: in a kitchen. And people asking it various questions like, oh, hey,
• 34:25
  Speaker 2: what's grandma's recipe for French toast? Or Hey, we're having
• 34:30
  Speaker 2: an argument about what constitutes, like, a duck versus a goose. Like,
• 34:35
  Speaker 2: can you help us understand this? So it's like a
• 34:38
  Speaker 2: combination voice assistant AI. And it's unclear to me... The.
• 34:48
  Speaker 2: The feedback that I saw online was generally pretty negative
• 34:54
  Speaker 2: towards it. And the sense that I got was that
• 35:00
  Speaker 2: this wasn't helping. It's not an Apple device that, A,
• 35:05
  Speaker 2: is cool in any way, which, again, the big selling
• 35:07
  Speaker 2: point of Apple has always been the coolness factor. That's
• 35:11
  Speaker 2: been why people buy it. Or the ease of use factor.
• 35:15
  Speaker 2: This does have that ease of use factor, so I
• 35:18
  Speaker 2: do think that there's some of it there. But I
• 35:23
  Speaker 2: think that the piece that was... The two pieces that
• 35:27
  Speaker 2: I saw that were being talked about as not being...
• 35:35
  Speaker 2: encouraging when it comes to this is that I think
• 35:40
  Speaker 2: a lot of people felt that, A, why do I
• 35:44
  Speaker 2: need this when I already own any other digital assistant?
• 35:48
  Speaker 3: Amazon's got two-thirds of the market here.
• 35:51
  Speaker 2: What's the point of this? And the other piece is
• 35:55
  Speaker 2: the actual video demoing it was... A little dystopian, I think,
• 36:04
  Speaker 2: in terms of like, oh, we can't even remember how
• 36:08
  Speaker 2: to make French toast, so we have to ask the
• 36:11
  Speaker 2: Home Hub for a recipe.
• 36:13
  Speaker 4: Just pull it up on your phone, dummy.
• 36:16
  Speaker 1: What's the difference?
• 36:17
  Speaker 2: Some of that. So I think that we'll see how
• 36:20
  Speaker 2: it ends up developing. I don't know whether it's going
• 36:24
  Speaker 2: to be a big hit or not, but I very
• 36:27
  Speaker 2: much saw... mixed reactions to it. And I have some
• 36:32
  Speaker 2: of those questions as well.
• 36:33
  Speaker 4: Price points wrong.
• 36:34
  Speaker 2: You think 300 is too high? Way too high. Just because,
• 36:37
  Speaker 2: what do the other ones go for? I don't have
• 36:39
  Speaker 2: any of these, so I don't know what they sell for.
• 36:41
  Speaker 4: I know in the past, the Amazon Echo Show, I think,
• 36:45
  Speaker 4: was like, what, $ 99 or something like that? Actually, the
• 36:49
  Speaker 4: higher-end ones are $ 250.
• 36:51
  Speaker 3: The Echo Dot ranges between $ 40 to $ 80, but the
• 36:56
  Speaker 3: better models, I guess, are $ 95 to $ 120.
• 36:59
  Speaker 4: I'm seeing an Echo Show 5 is $ 99, but then
• 37:03
  Speaker 4: there's a higher-end one at $ 250. So I don't know
• 37:05
  Speaker 4: what the difference is, but. Yeah, I guess you had
• 37:08
  Speaker 4: 50 extra bucks because it's Apple.
• 37:09
  Speaker 1: So I don't know.
• 37:11
  Speaker 4: I think it was too high, too high.
• 37:13
  Speaker 3: Yeah, this comes, you know, John Ternes is the new
• 37:16
  Speaker 3: CEO of Apple after Tim Cook had stepped aside, really
• 37:19
  Speaker 3: clearly making a huge emphasis on expanding out the product line.
• 37:23
  Speaker 3: Apple had already announced its foldable iPhone Duo, which goes
• 37:28
  Speaker 3: on sale in about 10 days or so here. So
• 37:31
  Speaker 3: This is kind of the early innings of his tenure,
• 37:33
  Speaker 3: if they can have any success with these products. Initially,
• 37:36
  Speaker 3: I mean, what do we know? Like I said, I'm
• 37:39
  Speaker 3: in the same boat as Chuck. I don't have one
• 37:40
  Speaker 3: of these at the house.
• 37:42
  Speaker 2: Yeah, maybe I'm just not the target for it.
• 37:44
  Speaker 3: It just seems like this doesn't do much different from
• 37:48
  Speaker 3: what Alexa does or an Amazon Echo does. I just
• 37:52
  Speaker 3: don't really see the differentiation there. I guess the argument
• 37:55
  Speaker 3: is that it's Apple, it's a better product, but it
• 37:58
  Speaker 3: doesn't look new to me.
• 38:00
  Speaker 2: To take a break for the rest of the day,
• 38:02
  Speaker 2: equities remain largely down on all of the major indices.
• 38:05
  Speaker 2: 10-year treasury coming in a little bit, only up 3.2
• 38:09
  Speaker 2: basis points in the face of that hot inflation report today.
• 38:13
  Speaker 2: We'll see you back here tomorrow and got a whole
• 38:16
  Speaker 2: bunch more to get to, including producer price index data tomorrow.