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Will the massive spending on AI ever pay off? · The Financial Exchange Show

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1:10
Speaker 2: Good morning, Happy Friday, Welcome back to the Financial Exchange.
1:14
Speaker 2: If you weren't happy about markets yesterday, you're getting a
1:17
Speaker 2: bit of a turnaround today with all three major indssees
1:19
Speaker 2: in the green so far. Will be filling you in
1:23
Speaker 2: later during the show on where markets land for the day,
1:27
Speaker 2: but breaking a bit of a trend for the last
1:29
Speaker 2: few We had a new inflation read out this morning
1:32
Speaker 2: at eight thirty am, and that's where we're going to
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Speaker 2: start the program today. It's Mike, Paul and Tucker with you.
1:37
Speaker 2: And market Watch wrote this morning the Fed doesn't think
1:40
Speaker 2: inflation will run a muck again. The PCE price gauge
1:44
Speaker 2: will help clue us in. So Paul, did the PCE
1:47
Speaker 2: price gauge clue us in on whether or not inflation
1:50
Speaker 2: is going to run a muck?
1:51
Speaker 3: We still have no clue, Mike, still have no idea
1:54
Speaker 3: in what direction it's going to go. In terms of
1:56
Speaker 3: the numbers that we saw today, everything came in right
2:00
Speaker 3: in line with expectations. We saw the month over month
2:04
Speaker 3: number rise zero point two percent. That was, like I said,
2:07
Speaker 3: in line with expectations. And the annual figure for core
2:10
Speaker 3: PC sits at two point nine percent, again right on
2:13
Speaker 3: in line with what economists had estimated. The problem with
2:17
Speaker 3: the PCE is that a lot of it is telegraphed
2:20
Speaker 3: in the earlier CPI report that gets reported earlier in
2:23
Speaker 3: the month. I believe it was the eleventh this month,
2:25
Speaker 3: So there's often not a lot of surprises. A lot
2:29
Speaker 3: of it is very easy to sort of interpret what
2:32
Speaker 3: the number is going to come in at. So oftentimes
2:34
Speaker 3: we sit here at the end of the month and
2:36
Speaker 3: we prep for the core PCE and then there's very
2:40
Speaker 3: little of insightful commentary to be made other than it is.
2:43
Speaker 4: What it is.
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Speaker 2: Yeah, no, no offense to mister Bartash and market Watch,
2:46
Speaker 2: but this PCE price index did not clue us in
2:51
Speaker 2: to the direction of inflation, nor does it really ever
2:53
Speaker 2: clue us into the actual direction of inflation, or it
2:56
Speaker 2: hasn't for the last several years anyway. But we do
2:58
Speaker 2: talk about it because the Fed cares a bit more
3:01
Speaker 2: about this inflation reading than they do the CPI. They
3:04
Speaker 2: use it as their main gage for the direction of
3:07
Speaker 2: prices and just how far away from their target we
3:11
Speaker 2: actually are. And so that's I think the context that
3:13
Speaker 2: we can look at this taking a look at all
3:16
Speaker 2: the four inflation readings that we get between CPI and PCEE,
3:20
Speaker 2: we are now showing a reading of two point seven
3:23
Speaker 2: percent a year over year at the low three point
3:25
Speaker 2: one percent if you strip out food and energy on
3:27
Speaker 2: CPI at the high. And what I think is safe
3:30
Speaker 2: to say here is compared to the first quarter of
3:32
Speaker 2: this year, prices are running up faster during the second
3:36
Speaker 2: quarter than they were in the first. And really where
3:41
Speaker 2: we saw this start to take off is more at
3:43
Speaker 2: the end of the second quarter June July August is
3:46
Speaker 2: when we saw prices on a month over month basis
3:49
Speaker 2: getting to levels that I think normally the FED would
3:52
Speaker 2: be concerned about. The three month average for most of
3:57
Speaker 2: these price in disease. In fact, if you look at
3:59
Speaker 2: core CPIP, core PC, the three month average for all
4:02
Speaker 2: three right there at three point two percent, and so
4:05
Speaker 2: I think that is the piece that has some folks
4:08
Speaker 2: hung up about cutting in this environment. But in any case,
4:15
Speaker 2: I think very clearly the FED is on this path
4:18
Speaker 2: of lowering interest rates into this environment. I think they
4:21
Speaker 2: are today justified in doing so. But I think right
4:26
Speaker 2: now I'm trying to contextualize this right now, more than
4:31
Speaker 2: I think anytime in the last few years, the FED
4:34
Speaker 2: is justifiably confused about what to do next. I think
4:38
Speaker 2: they were confused about what to do next back in
4:40
Speaker 2: twenty twenty two, but they shouldn't have been. It's kind
4:43
Speaker 2: of my conclusion, like it was a pretty obvious prescription.
4:46
Speaker 2: I know that sounds obvious in hindsight, but we were
4:48
Speaker 2: saying at the time too that look, you just had
4:50
Speaker 2: Russia invade Ukraine, you had a massive amount of spending shutdowns,
4:54
Speaker 2: We're going to have inflation. You need to be raising
4:56
Speaker 2: interest rates. Today the waters are very muddy. It is
5:00
Speaker 2: really unclear what comes next. There are definitively concerns about
5:03
Speaker 2: the pace of hiring in the private sector, even the
5:06
Speaker 2: public sector. The pace of hiring obviously is pretty low,
5:09
Speaker 2: given the administration's goals to reduce headcount. And at the
5:12
Speaker 2: same time, there is still a tremendous amount of spending
5:16
Speaker 2: going on. GDP is getting revised upwards, there's a lot
5:19
Speaker 2: of infatuation with the stock market, with artificial intelligence, and
5:23
Speaker 2: all of those things are the possibility of being inflationary
5:26
Speaker 2: and running away to the upside here. And so I
5:30
Speaker 2: was listening to an interview with Stephen Myron with I
5:32
Speaker 2: believe Bloomberg. Just yesterday he whipped out the word transitory
5:35
Speaker 2: once again, you know, throwing it around on top of us.
5:40
Speaker 2: I thought that they had, yeah, put that word away
5:42
Speaker 2: and decided not to use it anymore.
5:44
Speaker 3: But this is probably too nice of a place for it,
5:47
Speaker 3: maybe just.
5:47
Speaker 2: Six the garbage can. Yeah, but that word was pulled
5:52
Speaker 2: back out by the newest voting member of the Federal
5:55
Speaker 2: Reserve to describe what they are seeing in terms of
5:57
Speaker 2: price increases right now. And it's kind of the trillion
6:00
Speaker 2: dollar question with all of this is can they get
6:03
Speaker 2: away with modestly lowering interest rates or you know, in
6:06
Speaker 2: Myron's opinion, dramatically lowering interest rates. I don't think he's
6:09
Speaker 2: going to get it, but that's his goal and not
6:13
Speaker 2: spark off a period of uncomfortable inflation. And to me,
6:18
Speaker 2: you know, these numbers are trending towards three percent. If
6:23
Speaker 2: you get much higher than that, then you start having
6:26
Speaker 2: people get frustrated. I think people are already frustrated, but
6:28
Speaker 2: you know, you start getting to three and a half
6:30
Speaker 2: four percent range, that is when the Fed is going
6:32
Speaker 2: to have to take a very serious look at their policy.
6:34
Speaker 4: Strategy.
6:34
Speaker 3: It's been really challenging over the course of the last
6:37
Speaker 3: six months or so to really gauge what direction the
6:40
Speaker 3: economy is going. Just when you think you have a
6:42
Speaker 3: beat on sort of where the economic data is trending,
6:45
Speaker 3: it's sort of reverse.
6:46
Speaker 2: Let's give some examples here.
6:47
Speaker 3: Yeah, I think this is a good example of it, really,
6:50
Speaker 3: where all of the statements in the week prior was
6:54
Speaker 3: jobs data had been revised down significantly. Nine hundred and
6:57
Speaker 3: eleven thousand jobs had been taken away from March of
6:59
Speaker 3: twenty four through March of twenty twenty five. You had
7:02
Speaker 3: the jobless claims number that came out I believe that
7:05
Speaker 3: was the first week of September that was in the
7:08
Speaker 3: elevator to high two hundred, Yeah, two fifty maybe range
7:12
Speaker 3: or maybe two mid two thirties. And then you had
7:15
Speaker 3: a number this week that was much lesser than anticipated
7:19
Speaker 3: on those continuing unemployment claims jobless claims that were being filed.
7:23
Speaker 3: So and then you also had a GDP number that
7:26
Speaker 3: came in revised to three point eight percent in gas.
7:30
Speaker 2: Which, by the way, that GDPER revision was primarily due
7:33
Speaker 2: to all of us.
7:33
Speaker 4: Spending more money exactly.
7:35
Speaker 2: It wasn't some nuanced like imports versus exports. I think
7:38
Speaker 2: it was really easy to explain. Turned out when we
7:41
Speaker 2: actually measured it. All the consumers in the US spent
7:44
Speaker 2: more money in Q two than we previously thought.
7:46
Speaker 3: Right, So you have a consumer spending continually with a
7:49
Speaker 3: lot of resiliency. That's been the story for the last
7:52
Speaker 3: two or three years. But the week before I would
7:54
Speaker 3: have told you, oh, there are there is some data
7:56
Speaker 3: point to the labor market weakening. Not to say that these,
7:59
Speaker 3: you know, job as claims are the end all be all.
8:01
Speaker 3: They're noisy. But again this week you had indications that
8:05
Speaker 3: the consumer's still spending, the jobless claims aren't as bad
8:08
Speaker 3: as anticipated, at least for this week. So you sort
8:10
Speaker 3: of pause for a moment. That, paired with the Q
8:13
Speaker 3: two GDP numbers, say perhaps some of these trends aren't
8:17
Speaker 3: really materializing. And I continue to sit here and debate
8:21
Speaker 3: whether or not we've seen the full impact from tariffs.
8:24
Speaker 3: I had read earlier that Ken Griffin from a Citadel
8:28
Speaker 3: had been on saying that we're only fifty percent of
8:30
Speaker 3: the way there in terms of the impact of tariffs
8:33
Speaker 3: on the economy. I don't think anyone really knows how
8:36
Speaker 3: far along the line we are. I would have told
8:38
Speaker 3: you in April that by this date we would have
8:41
Speaker 3: known the answer to that question, but we still don't
8:44
Speaker 3: have a clear, conclusive read on that yet.
8:47
Speaker 4: On the inflationary side of it, that is the reality here.
8:50
Speaker 2: I don't think that's bad news necessarily. There's oftentimes that
8:53
Speaker 2: kind of fog of the moment where it's really tough
8:55
Speaker 2: to tell exactly what the biggest looming issue could be.
8:59
Speaker 2: But right now it just happens to be a tie
9:02
Speaker 2: between the two things that the FED is really in
9:04
Speaker 2: charge of at the moment, and so I do think
9:06
Speaker 2: they're gonna move cautiously. I don't think that the President
9:09
Speaker 2: is going to get the cuts that he wants. I
9:11
Speaker 2: don't think Stephen Myron, the President's appointee to the FED,
9:14
Speaker 2: is going to get the cuts that he wants. I
9:16
Speaker 2: think if there is a I always like to look
9:19
Speaker 2: at this from a perspective of what could really surprise everybody,
9:22
Speaker 2: and the answer would be no more rate cuts, or
9:25
Speaker 2: dramatically fewer than are being priced in, because right now
9:27
Speaker 2: you go take a look at markets, they are very
9:29
Speaker 2: clearly pricing in definitively two more cuts this year and
9:33
Speaker 2: probably more starting next year. And so if you want
9:36
Speaker 2: one thing that could surprise investors, it's that it's that
9:40
Speaker 2: data comes out that reverses the Fed's mind on where
9:43
Speaker 2: rates need to be, and they don't need to hike rates,
9:46
Speaker 2: they just pause.
9:47
Speaker 3: It's got to be inflation. That's the only way you'd
9:49
Speaker 3: have that is run away inflation.
9:51
Speaker 2: And run away again. We're not talking about eight percent here, right,
9:55
Speaker 2: We're not talking about twenty twenty two. It doesn't need
9:57
Speaker 2: to get that bad for the FED to have to
9:59
Speaker 2: pause what they're doing here. Let's take a quick break
10:01
Speaker 2: when we come back. New tariff announcements this morning overnight.
10:04
Speaker 2: When did these actually come out? Tuger, It was after
10:06
Speaker 2: I was asleep. I don't know when precisely it was,
10:08
Speaker 2: but new tariff announcements. We got to cover that next
10:11
Speaker 2: here on the Financial Exchange.
10:13
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10:41
Speaker 2: So, as I mentioned this morning, we learned of new
10:44
Speaker 2: tariffs being imposed on the pharmaceutical industry. I want to
10:48
Speaker 2: start there. There's also something about trucks, but starting on
10:51
Speaker 2: the pharmaceutical industry because I think this has been in
10:54
Speaker 2: focus for a lot of families over the course of
10:56
Speaker 2: the last several years, realizing that oh yeah, like a
10:59
Speaker 2: lot of my arts are being made in China or
11:01
Speaker 2: other parts of the world. And so I know for
11:05
Speaker 2: certainty that this story is going to get misinterpreted, and
11:09
Speaker 2: so I want to cover it specifically what it's going
11:11
Speaker 2: to do here. So starting October first, the United States
11:15
Speaker 2: will be imposing a one hundred tariff on some pharmaceuticals.
11:20
Speaker 2: But we're talking about branded or patented pharmaceutical product unless
11:25
Speaker 2: a company is building their pharmaceutical manufacturing plant in the
11:30
Speaker 2: United States. So that was the post from President Trump
11:33
Speaker 2: on Truth Social and so obviously your mind goes to, Okay,
11:37
Speaker 2: what precisely does that mean. The answer is that there
11:40
Speaker 2: are very few drugs that are patented or.
11:44
Speaker 4: Or or what's what's the other word it was.
11:48
Speaker 2: Brand that are manufactured outside the United States. Nine out
11:52
Speaker 2: of ten of these drugs are done in the United States,
11:58
Speaker 2: and then also nine out of ten ten prescriptions in
12:01
Speaker 2: the US are actually filled with generics, not branded drugs.
12:05
Speaker 2: Those generics are the ones that are heavily manufactured outside
12:08
Speaker 2: of the United States and are not affected by this. Overall.
12:12
Speaker 2: From what I was seeing the other day, only about
12:15
Speaker 2: five percent of the branded drugs that the United States
12:17
Speaker 2: imports come from China or come from Asia. Rather the
12:20
Speaker 2: rest of them primarily coming from Europe, and many of
12:23
Speaker 2: those European companies are already in the process of developing
12:27
Speaker 2: US manufacturing or have already done so, and so market
12:31
Speaker 2: reaction has been very muted on this. Not many companies
12:34
Speaker 2: are getting hit with this. I think the logical question
12:37
Speaker 2: is do they go after generics eventually? Right? Is this
12:40
Speaker 2: a first step? And I think that's a fair question
12:42
Speaker 2: to ask. But I think the very first thing people
12:44
Speaker 2: are going to react to is what's happening with the
12:47
Speaker 2: drugs that I take? And the answer is probably nothing,
12:49
Speaker 2: because you're probably on a generic.
12:51
Speaker 3: YEP, that's a good way to look at it. The
12:54
Speaker 3: spillover effects. You can see that over the course of
12:57
Speaker 3: the last couple of days. It's interesting that this story
12:59
Speaker 3: dovetails with Eli Lilly announcing that they were going to
13:02
Speaker 3: build another manufacturing plant in Houston. That's for six point
13:07
Speaker 3: five billion for weight loss drugs, and just you have
13:09
Speaker 3: a collective of farmer companies out there who have pooled
13:12
Speaker 3: together three hundred and fifty billion dollars to invest in
13:15
Speaker 3: US manufacturing and research and development over the course of
13:18
Speaker 3: the next decare. So it's not as if a lot
13:22
Speaker 3: of the big pharma players aren't already at least committing
13:25
Speaker 3: from you know, verbal commitments to invest in manufacturing research.
13:29
Speaker 3: So I think you take the story as a whole,
13:31
Speaker 3: you have companies that have been committed to do this
13:34
Speaker 3: in the first place, and you have minimal impact on
13:37
Speaker 3: the drugs that are out there. It's not as significant
13:41
Speaker 3: of a tariff story because it is not attached to
13:44
Speaker 3: generics at this point.
13:46
Speaker 2: This is really look, this is kind of the story
13:49
Speaker 2: of a lot of the tariffs that have been put
13:50
Speaker 2: into place thus far, which is make a big splash,
13:54
Speaker 2: but intentionally don't make it terribly impactful on American spending.
13:58
Speaker 2: Like that's been. When I look through the actual policies
14:01
Speaker 2: that have put it into place, there's a lot of
14:03
Speaker 2: give and take, but ultimately it's been we announce something.
14:07
Speaker 2: We then announced the exceptions, and when you look at
14:10
Speaker 2: the broader policy, you can see why, oh yeah, okay,
14:13
Speaker 2: this is actually not going to drive prices all that
14:16
Speaker 2: much higher in the United States because of the exceptions
14:18
Speaker 2: on these key components or these key pieces to the
14:21
Speaker 2: overall policy. And so that's how I'm kind of looking
14:23
Speaker 2: at this one too, is Yeah, it's making a splash.
14:26
Speaker 2: It's maybe a shot across the bow of some pharmaceutical
14:29
Speaker 2: makers that hey, we might be able to do this
14:31
Speaker 2: on generics too, so watch out. But for the time being,
14:34
Speaker 2: no big impact other than probably a few very specific
14:37
Speaker 2: drugs that are going to be more difficult for insurance
14:40
Speaker 2: companies and all that. If it does get hit with
14:42
Speaker 2: this one hundred percent terrify.
14:43
Speaker 3: Yeah, it feels like the whip on a racehorse being
14:46
Speaker 3: cracked down, you know, the whip gets cracked down of hey,
14:48
Speaker 3: we're coming after pharmaceutical companies unless you invest in manufacturing
14:52
Speaker 3: the United States. And then often it seems like companies
14:55
Speaker 3: sort of react over the few weeks by putting together
14:58
Speaker 3: some sort of dealer initiative to it to do just that.
15:01
Speaker 2: Moving over, Sorry, actually we didn't cover the big the
15:04
Speaker 2: big trucks, big trucks, so I don't know how big
15:07
Speaker 2: they have to be, but that is the other piece
15:09
Speaker 2: that they're going to be looking at commercial truck manufacturers
15:12
Speaker 2: where they are making those outside the United States, once
15:16
Speaker 2: again getting a look at tariffs here, so Germany's Dommler
15:19
Speaker 2: North America unit assemble some freighter freight liner brands in Mexico,
15:24
Speaker 2: those would be looking at some tariff. And so honestly,
15:30
Speaker 2: the auto industry is such a mess with tariffs that
15:32
Speaker 2: I have no idea what happens next on this. This
15:35
Speaker 2: has been the constant bane of for General Motors and
15:40
Speaker 2: many others, and I know that they are working as
15:43
Speaker 2: quickly as they can to push the administration to create
15:45
Speaker 2: exceptions for their vehicles and moving manufacturing and changing things
15:50
Speaker 2: at the same time. I would think that in the
15:54
Speaker 2: event the United States can get a attractive deal with
15:58
Speaker 2: Canada and Mexico, that this is the first thing that
16:00
Speaker 2: gets put away in terms of like negotiable tariffs. I
16:04
Speaker 2: would think that having vehicles made under the North American
16:10
Speaker 2: what is the new NAFTA. It's not new, it's like
16:12
Speaker 2: ten years old now, but the North American Trade Agreement
16:15
Speaker 2: that we have with these allies, I would think that
16:18
Speaker 2: anything that we're going to announce here, whether it's on
16:21
Speaker 2: heavy trucks or cars, is something that ultimately the administration
16:26
Speaker 2: is going to negotiate on because it is so impactful
16:29
Speaker 2: for Big American Manufacturing USMCA. Yes, thank you, Tucker, USMCA.
16:35
Speaker 2: That seems very likely to me because as it stands now,
16:38
Speaker 2: many of these domestic auto manufacturers are at a legitimate
16:43
Speaker 2: disadvantage to Korean manufacturers, to European manufacturers right like, those
16:47
Speaker 2: countries have navigated and negotiated deals for their cars to
16:51
Speaker 2: come into the United States, even if they are not
16:53
Speaker 2: manufactured in the US, whereas American manufacturers of vehicles, if
16:59
Speaker 2: they're doing it in Mexico, are getting hit with way
17:01
Speaker 2: bigger tariffs. And so I think there's still a lot
17:04
Speaker 2: to be worked out on this. I am concerned about
17:07
Speaker 2: the auto market generally, and this is again a bit
17:14
Speaker 2: of a stumbling block for many of those companies, but
17:16
Speaker 2: I don't think is a show stopper for any of them.
17:19
Speaker 3: Also worth only the last thing on the tariff front.
17:21
Speaker 3: There also were some tariffs announce on kitchen cabinets, bathroom vanities,
17:25
Speaker 3: and other similar products. A fifty percent tariff and a
17:29
Speaker 3: thirty percent tariff will be imposed on upholstered furniture. So
17:32
Speaker 3: you have the likes of URH and others down slightly
17:37
Speaker 3: on that news today.
17:38
Speaker 2: So taking in all this context, Paul, this is what
17:41
Speaker 2: I have to wonder about.
17:42
Speaker 5: Right.
17:42
Speaker 2: We just had that GDP revision yesterday that was primarily
17:46
Speaker 2: on the back of the US consumer, And at the
17:49
Speaker 2: same time, we've had all this bad data about the
17:51
Speaker 2: labor market and everything else pulling on people's views of
17:56
Speaker 2: the economy is pretty abysmal. All of this stuff is
17:59
Speaker 2: remaining true. And so if I'm looking at Q two
18:02
Speaker 2: data April through June data on consumer spending, is it
18:07
Speaker 2: just still a whole bunch of front running tariffs? You know,
18:10
Speaker 2: like you think about that. Logically, we didn't see yet
18:13
Speaker 2: the big price arrangements. We still had very big uncertainty
18:17
Speaker 2: on where teriffs were going to be. I certainly heard
18:20
Speaker 2: from people who were saying, heck, I actually did it myself, right.
18:24
Speaker 2: I've talked about it how I was buying a bunch
18:26
Speaker 2: of stone for a project that we were doing, and
18:30
Speaker 2: I rushed that shipment to get it to me well
18:33
Speaker 2: ahead of time. In case, it stopped getting imported, and
18:35
Speaker 2: so I just kind of wonder, hey, is that what
18:39
Speaker 2: we were seeing in the second quarter, and is that
18:41
Speaker 2: about to dry up and you know, shrink since Frankly,
18:46
Speaker 2: at this stage, I think that tariffs have been normalized
18:50
Speaker 2: to a large degree and consumers are not thinking about
18:52
Speaker 2: them every day in the way that they were in
18:53
Speaker 2: the second quarter.
18:54
Speaker 3: Did the AM I remember that that recent GDP report
18:58
Speaker 3: that revision did show that that saw a big uptick
19:01
Speaker 3: in sort of those durable goods. Yeah, as a result,
19:05
Speaker 3: like those categories of you know, washing machines or you know, stones,
19:09
Speaker 3: items like that that have a longer lifespan.
19:12
Speaker 2: Again, anybody that's trying to put together narrave on this
19:15
Speaker 2: is just guessing at the stage. We won't know until
19:17
Speaker 2: we see consumer spending for the next few months. But
19:19
Speaker 2: that kind of fits in with how I perceive things,
19:22
Speaker 2: how when I talk to people about terriffs, how they
19:25
Speaker 2: perceive things as well. Quick Break, we're gonna cover Wall
19:28
Speaker 2: Street next with Wall Street. Watch with Chucker.
19:41
Speaker 1: Like us on Facebook and follow us on Twitter.
19:43
Speaker 4: Act TFE show.
19:45
Speaker 5: Breaking business news is always first right here on the
19:48
Speaker 5: Financial Exchange Radio Network. Time Now for Wall Street watch
19:54
Speaker 5: a complete look at what's moving markets so far today
19:57
Speaker 5: right here on the Financial Exchange Radio Network.
20:01
Speaker 6: Well after its recent pullback, markets today are in mixed
20:04
Speaker 6: territory after the Core PCE index showed it climbed zero
20:09
Speaker 6: point two percent last month, in line with expectations. Right now,
20:15
Speaker 6: the Dow is up by three tenths of one percent,
20:17
Speaker 6: or one hundred and forty three points, SMP five hundred
20:20
Speaker 6: edging four points higher, Nasdaq is retreating about a third
20:25
Speaker 6: of a percent or seventy two points lower. Russell two
20:28
Speaker 6: thousand is up half a percent. Ten year treasureeled I
20:32
Speaker 6: cannot find that. I'm not sure what's going on there
20:34
Speaker 6: with CNBC. Crude oil is up over one and a
20:38
Speaker 6: half percent, rating just above sixty six dollars a barrel.
20:42
Speaker 6: Furniture and home good stocks including Williams, Sonoma, Wayfair, and
20:45
Speaker 6: RH are seeing modest losses on the day after President
20:49
Speaker 6: Trump announced tariffs on imported items such as kitchen cabinets
20:53
Speaker 6: and upholstered furniture. President Trump also announced that he will
20:56
Speaker 6: impose a twenty five percent tariff on imported heavy trucks,
21:01
Speaker 6: sending shares in Peter Built and Kenworth owner packar up
21:05
Speaker 6: over four percent. Pharmaceutical stocks are also garnering attention after
21:09
Speaker 6: Trump announced a one hundred percent tariffront branded patented imported drugs,
21:14
Speaker 6: exempting companies building plants in the US. ELI, Lilly, ABV,
21:19
Speaker 6: and Mark are all edging higher, while Nova Noorda's shares
21:22
Speaker 6: are down nearly two percent. Meanwhile, Intel stock climbing another
21:26
Speaker 6: two percent, now on pace for a fourth straight day
21:30
Speaker 6: of gains following report from the Wall Street Journal that
21:33
Speaker 6: CEO Lipputan has approached Apple, Taiwan Semiconductor and other companies
21:39
Speaker 6: about investments or partnerships, and Costco shares falling nearly three
21:43
Speaker 6: percent at the moment after the warehouse retailer posted higher
21:46
Speaker 6: sales and profit in the previous quarter. However, same store
21:50
Speaker 6: sales growth missed street expectations. Costco also noted that newly
21:55
Speaker 6: extended store hours were paying off. I'm Tucker still and
21:59
Speaker 6: that is Wall Street Watch.
22:01
Speaker 2: So, Tucker, you remember the story yesterday we covered with
22:04
Speaker 2: Intel approaching Apple. You just mentioned it, but Intel approaching
22:07
Speaker 2: Apple about a potential investment there and my comment at
22:11
Speaker 2: the time Chuck was doing the show was Intel only
22:15
Speaker 2: does this if they are getting the nod from one
22:19
Speaker 2: of their new shareholders, which is the United States government.
22:22
Speaker 2: It's the White House, right, They have a big steak
22:26
Speaker 2: in it, and Vidia now has a stake in it.
22:29
Speaker 2: And my answer now as to why they're doing this
22:32
Speaker 2: is this announcement here where the Trump administration is now
22:35
Speaker 2: taking aim at chip makers with a new plan to
22:37
Speaker 2: throttle imports. Here is the plan. Trump administration is considering
22:42
Speaker 2: a plan that would force US companies to maintain a
22:48
Speaker 2: one to one ratio of chips imported from overseas to
22:52
Speaker 2: chips made in the United States. So timeline, we don't
22:58
Speaker 2: know how long they have to do this, how big
23:01
Speaker 2: the tariff would be for those that don't comply. All
23:03
Speaker 2: of these are questions, but all of a sudden, the
23:05
Speaker 2: context of the Nvidia investment in Intel, the Apple investment
23:09
Speaker 2: in Intel, the rumored Apple investment, but you know they
23:14
Speaker 2: have clearly approached Apple about this, all of a sudden,
23:17
Speaker 2: all those things make sense. I don't know that any
23:20
Speaker 2: of them will happen. I don't know if this policy
23:22
Speaker 2: will happen, but nonetheless, it is a clear I don't
23:26
Speaker 2: know to me, this is a clear one. For one
23:28
Speaker 2: line of okay, Intel was basically given this information or
23:31
Speaker 2: somebody was given the information that's something like this is
23:34
Speaker 2: in the works, and so go make some more deals
23:36
Speaker 2: because companies are going to be willing to pay for it.
23:38
Speaker 2: I think that's my kind of conclusion on the connection here.
23:41
Speaker 3: Domestic manufacturing of semiconductors is an important issue for national security,
23:46
Speaker 3: and we can all agree that it is something that
23:50
Speaker 3: really it has Byparson approval in terms of.
23:55
Speaker 2: All.
23:56
Speaker 3: However, this way of going about it I disagree with.
23:59
Speaker 3: I think that the idea of subsidy and encouragement for
24:04
Speaker 3: manufacturing through through grants and loans and other avenues is
24:08
Speaker 3: better than this idea of tariffing or doing this one
24:13
Speaker 3: for one change exchange of semiconductors one.
24:17
Speaker 2: This way of doing it would be extremely complicated. Yeah,
24:20
Speaker 2: I also to use this technique at the same time
24:24
Speaker 2: that well, I don't know, but if they're using the
24:26
Speaker 2: same emergency Act that the Supreme Court is currently weighing,
24:29
Speaker 2: then it has to risk there.
24:31
Speaker 4: That's another piece of this.
24:32
Speaker 2: So I think there are some fair questions there, but
24:35
Speaker 2: I'm not necessarily opposed to a carrot and a stick.
24:37
Speaker 2: I'm not sure that this is the right stick, but
24:40
Speaker 2: Nonetheless this, like you said, I think it's important that
24:45
Speaker 2: we focus on getting more domestic chip manufacturing, But I
24:49
Speaker 2: think most national security experts would also tell you that
24:53
Speaker 2: probably the most important thing is staying ahead on AI
24:56
Speaker 2: chip innovation. Exactly where if that prohibits you from doing
24:59
Speaker 2: in the UNI States that, oh.
25:01
Speaker 3: Well, that's where my christians one lie is that you
25:03
Speaker 3: still need to be on the cutting edge. And let's
25:07
Speaker 3: understand the reality of the situation that these supply chains
25:10
Speaker 3: are incredibly complex and intricate, and it is an extremely
25:14
Speaker 3: difficult process the manufacturing side.
25:16
Speaker 4: It's going to take a long time.
25:17
Speaker 3: For the US to catch up. So you need to
25:20
Speaker 3: allow for that process to occur rather than taking out
25:24
Speaker 3: the stick just yet because it's going to take some time.
25:26
Speaker 2: And by the way, I mean the reason that Intel
25:28
Speaker 2: has been taking these investments that Intel uh no longer
25:32
Speaker 2: manufacturers chips for Apple, by the way, is because they
25:34
Speaker 2: haven't been competitive.
25:35
Speaker 4: They've been a disaster. They've been an absolute disaster.
25:38
Speaker 2: That's the reality here is if you're trying to be
25:40
Speaker 2: competitive with the overall idea that we are going to
25:44
Speaker 2: manufacture here and do a good job. Intel has proven
25:47
Speaker 2: for a good decade now that they're incapable of doing so.
25:50
Speaker 3: Missed Mobile and missing the GPUs that Nvidia is behind
25:54
Speaker 3: right now.
25:54
Speaker 4: So yeah, they've been behind. Story that.
25:59
Speaker 2: I hesitate to bring up because we've almost been asking
26:01
Speaker 2: this question seemingly every day. But the Wall Street Journal
26:05
Speaker 2: has another piece here today on spending in AI and
26:10
Speaker 2: what the path really looks like. And this is Look,
26:14
Speaker 2: this is the whole game, right When you talk about
26:17
Speaker 2: markets being at all time highs, when you talk about
26:19
Speaker 2: valuations where they are, when you talk about the continued
26:22
Speaker 2: acceleration of the US economy, all of it is on
26:25
Speaker 2: the back of artificial intelligence promises.
26:28
Speaker 4: And so.
26:30
Speaker 2: Accurately, I think many people from journalists to economists to
26:36
Speaker 2: market analysts are asking the question, great, we see the impact,
26:41
Speaker 2: we see the investment that they do a really good
26:43
Speaker 2: piece on this new AI factory in North Dakota, tiny town,
26:49
Speaker 2: eleven hundred people, population, two motels, dollar general, a small college,
26:55
Speaker 2: and now fifteen billion dollar AI factory.
26:59
Speaker 4: That's going to be bigger.
27:00
Speaker 2: And ten home depots, ten home depots big Just think
27:03
Speaker 2: about that.
27:03
Speaker 3: You get exhausted walking around one home depot, let alone ten.
27:07
Speaker 2: But these data centers are really fueling the economic growth
27:11
Speaker 2: in this country. Right now. These things are being built domestically,
27:17
Speaker 2: They are needing massive energy requirements, and so the electricity
27:23
Speaker 2: generation facilities are being beefed up and built new in
27:26
Speaker 2: order to facilitate all of this. But the question keeps
27:31
Speaker 2: getting asked and nobody's got a great answer yet, which is,
27:36
Speaker 2: no one really knows how and when these investments will
27:40
Speaker 2: be paid back.
27:41
Speaker 4: I thought this was a fantastic piece.
27:42
Speaker 3: I know you guys have probably covered it exhaustively this
27:45
Speaker 3: week with just Nvidia and open AI and some of
27:47
Speaker 3: the deals that have been done. Just the focus on
27:50
Speaker 3: the investment in infrastructure and the hundreds of billions of
27:53
Speaker 3: dollars that are being spent. What I liked him particularly
27:56
Speaker 3: about this is that in order to justify the amount
27:59
Speaker 3: of spending that my and I are speaking about here,
28:01
Speaker 3: the three hundred or four hundred billion of CAPEX that's
28:03
Speaker 3: going into building these data centers, you have different consultants
28:07
Speaker 3: and a comments out there estimating that, for example, the
28:10
Speaker 3: revenue generated by AI would have to reach two trillion
28:13
Speaker 3: dollars according to Baye an annual revenue by twenty thirty
28:18
Speaker 3: to justify this wave of infrastructure spending. And right now,
28:22
Speaker 3: if you look at the revenues of Amazon, Alphabet, Microsoft, Meta,
28:27
Speaker 3: and Nvidia, that two trillion dollar number isn't even all
28:31
Speaker 3: four of those or all six of those companies combined,
28:34
Speaker 3: And it's five times the size of the global subscription
28:38
Speaker 3: software market. And so as much as all of us
28:40
Speaker 3: have used probably chatch ept or other sorts of AI
28:44
Speaker 3: chatbot prompts, how do we get enough revenue to substantiate
28:49
Speaker 3: that capital expensures? And the comparisons to the fiber optics
28:53
Speaker 3: cables back in the late nineties are great studies of
28:57
Speaker 3: what seems like eerily similar of times.
29:01
Speaker 2: This it's the it's the field of dreams. Promise, if
29:05
Speaker 2: you build it, he will come.
29:06
Speaker 4: Yeah. Yeah, And.
29:10
Speaker 2: To be fair like kind of happened with the Internet.
29:14
Speaker 3: It did, it just took longer to take hold, and
29:18
Speaker 3: you had a lot of companies that invested heavily.
29:21
Speaker 2: That were the ones that actually profited exactly.
29:25
Speaker 3: Think of Global Crossings, WorldCom, three sixty networks companies that
29:29
Speaker 3: you don't talk about now, but it's really Google and
29:32
Speaker 3: Facebook and others that benefited from the fiber optic buildout
29:37
Speaker 3: in the mid two thousands that occurred in the mid nine.
29:40
Speaker 2: The multi trillion dollar question. Will it be Google, Facebook,
29:43
Speaker 2: and Video and Open AI that profit on the infrastructure
29:46
Speaker 2: that they are all investing heavily in, or will it
29:49
Speaker 2: is small.
29:50
Speaker 3: Not names that just leverage all the hundreds of billions
29:52
Speaker 3: of dollars that these other big hyperscalers spend to build
29:55
Speaker 3: out this infrastructure.
29:56
Speaker 4: Yeah, and just do it in a smarter way.
29:58
Speaker 2: I mean the credit piece here, and the piece that
30:02
Speaker 2: I am a little bit concerned about is you're not
30:04
Speaker 2: hearing about a lot of those startups like you were
30:06
Speaker 2: in the Internet stage. You're not hearing about some brand
30:09
Speaker 2: new upstart who has manufactured a really compelling AI product.
30:14
Speaker 2: You're instead seeing ai Google focusing on their AI product,
30:19
Speaker 2: You're seeing Apple focusing on it. And I haven't really
30:22
Speaker 2: come across a whole lot of brand new, unknown companies
30:26
Speaker 2: that put something in front of me, the user, and say,
30:30
Speaker 2: look at this, this is compelling, this is something you
30:33
Speaker 2: should pay for. And I think that's what everybody's waiting
30:35
Speaker 2: for and looking for and also questioning who's going to
30:38
Speaker 2: make it.
30:39
Speaker 3: Chat GPT would be the biggest argument with seven hundred
30:41
Speaker 3: million users. But I get what you're saying that there
30:43
Speaker 3: are to be clear, there are hundreds of startups out
30:46
Speaker 3: there doing this stuff, but it probably hasn't made the
30:48
Speaker 3: way to our faces just yet.
30:51
Speaker 4: In front of us.
30:52
Speaker 2: Let's take a quick break here. When we come back,
30:56
Speaker 2: we can move on from the AI virtuous circle. Let's
30:59
Speaker 2: go over to Americans in their financial plans. This is
31:04
Speaker 2: this is an interesting one for me. Quick break. We'll
31:06
Speaker 2: be back with that next on the Financial Exchange.
31:08
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32:13
Speaker 2: Almost half of Americans forty seven percent, don't have a
32:16
Speaker 2: written financial plan, according to a recent study from the
32:19
Speaker 2: Orleans Center for the Future of Retirement. And my next
32:22
Speaker 2: question is, allions, who on earth did you speak to?
32:24
Speaker 2: Because there's no way that fifty three percent of Americans
32:26
Speaker 2: have a written financial plan. No, there's no chance. No,
32:31
Speaker 2: what are you talking about. There's no way that fifty
32:35
Speaker 2: three percent of Americans have a written financial plan. If
32:38
Speaker 2: you're listening right now, like who that you know? If
32:44
Speaker 2: you pulled ten of your friends, do you honestly think
32:46
Speaker 2: half of them would have a written financial plan? I
32:48
Speaker 2: know a certainty that people in my age demographic would not.
32:52
Speaker 4: Oh definitely. I'm not saying they shouldn't, yeah, but they don't.
32:55
Speaker 4: No chance.
32:57
Speaker 2: So I don't know who aleons talk to here. I
32:59
Speaker 2: don't buy the data i've and get his way off.
33:00
Speaker 2: I would be willing to bet that seventy five to
33:03
Speaker 2: eighty percent of Americans do not have a written financial plan,
33:07
Speaker 2: probably more because most people until they have a really
33:11
Speaker 2: difficult decision, wing it and frankly, a lot of the
33:15
Speaker 2: time that works out all right, but there are scenarios
33:17
Speaker 2: where it doesn't. The piece from CNBC then goes into
33:21
Speaker 2: like how to potentially address that, how to figure out
33:25
Speaker 2: how to find a financial advisor? What you should be
33:27
Speaker 2: looking for. I guess my point would be any professional
33:33
Speaker 2: that you work for, that you work with, is going
33:35
Speaker 2: to cost you money. Obviously, not a lot of financial
33:37
Speaker 2: planners do this for free, nor should they. But before
33:43
Speaker 2: you go just hunting for one, because I think that's
33:46
Speaker 2: oftentimes what happens is like, oh, I'm sixty.
33:48
Speaker 4: Two years old.
33:49
Speaker 2: Time now to find me a financial advisor, really ask
33:52
Speaker 2: yourself what it is you're trying to accomplish, right like,
33:56
Speaker 2: because if you go in blindly, then those the circumstances
34:00
Speaker 2: where I see people getting over sold and a little
34:03
Speaker 2: bit starstruck by all the fancy, all the fancy verbiage
34:07
Speaker 2: and everything else, and they end up just making bad decisions.
34:10
Speaker 2: Like if I'm going to meet with the financial advisor,
34:13
Speaker 2: what am I trying to accomplish. What am I trying
34:15
Speaker 2: to answer? What questions do I have that I don't
34:16
Speaker 2: know the answer to? And then from there you can
34:19
Speaker 2: try to hone it down right, like, Okay, I have
34:21
Speaker 2: a ton of questions about how to fund my kids college.
34:25
Speaker 2: You probably shouldn't be talking to your uncle's financial advisor
34:28
Speaker 2: that manages money for everybody only worth twenty million dollars plus.
34:32
Speaker 2: He might be the best investor out there, but he's
34:34
Speaker 2: not gonna have a lot of great advice in all
34:35
Speaker 2: likelihood to how to do a faft sapp. Likewise, you know,
34:40
Speaker 2: if your goal is to build a plan around how
34:44
Speaker 2: to successfully retire and you're talking to a financial advisor
34:47
Speaker 2: that primarily helps out on managing debt repayment, again, might
34:53
Speaker 2: not be the best match there. And so that I
34:56
Speaker 2: think is the most important piece is why do I
34:59
Speaker 2: need a financial advisor? What questions do I have? And
35:04
Speaker 2: then just admit, like, what things do I not know?
35:05
Speaker 2: Like I have no idea how much your insurance I
35:07
Speaker 2: should have? Okay, great, Yeah, certain financial advisors can help
35:12
Speaker 2: you with that, but not all of them, and it's
35:14
Speaker 2: important to kind of check the background and ask them
35:16
Speaker 2: those questions like what do you specialize in. I know
35:18
Speaker 2: you help my uncle or my parents, but do you
35:21
Speaker 2: actually have any expertise and the things that I have
35:22
Speaker 2: questions on.
35:23
Speaker 3: Right, And for some people, it's outsourcing the capability to
35:27
Speaker 3: a professional because maybe you just don't want to spend
35:30
Speaker 3: the time to do it yourself, you know, similar to
35:33
Speaker 3: things around the house or other services that you find
35:35
Speaker 3: yourself just not having the time for and not having
35:38
Speaker 3: the interest in it because you don't have the requisite
35:40
Speaker 3: background for it. So that can be a driving factor,
35:43
Speaker 3: but you have to assess if it's right for you,
35:45
Speaker 3: because not everybody needs one, but there are some people
35:49
Speaker 3: who really benefit folks.
35:51
Speaker 2: Markets near all time are at all time highs near
35:54
Speaker 2: all time high from evaluation perspective, economy at a seeming
35:58
Speaker 2: turning point, and I know folks have questions about it.
36:00
Speaker 2: That's why people tune into our show. If you tune
36:03
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36:05
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36:18
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36:21
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36:32
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37:31
Speaker 2: As we head up to the top of the hour,
37:33
Speaker 2: markets are seemingly losing some of their esteem here. The Dow,
37:37
Speaker 2: which was up more than half percent, is up only
37:39
Speaker 2: a quarter of a percent. SMP five hundred up a
37:42
Speaker 2: little bit less than one fifth of one percent, the
37:44
Speaker 2: NASDAK currently down thirty points, or about point one four percent.
37:49
Speaker 2: The Rustle two thousand is still in the positive for
37:51
Speaker 2: the day. The ten year treasury yield, which I was
37:54
Speaker 2: also having a tough time pulling up Tucker, is about
37:58
Speaker 2: flat for the day, slightly down to point zero zero
38:01
Speaker 2: six percent. As we close in on the top of
38:04
Speaker 2: the hour, we got a lot more to cover in
38:06
Speaker 2: the second hour the show. Folks, stay tuned, We'll be
38:08
Speaker 2: right back