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Tech Stocks Are Crashing. Is the AI Boom Over? · The Financial Exchange Show

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  Speaker 1: is The Financial Exchange with Chuck Zotta and Mike Armstrong.
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  Speaker 2: Chuck, Mike, and Tucker with you here on The Financial Exchange.
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  Speaker 2: And I got to tell you, if you liked markets yesterday,
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  Speaker 2: you're going to hate them today. Because that's what we've
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  Speaker 2: got going on is a complete reversal. Actually, not a
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  Speaker 2: complete reversal. Here's what's going on. The NASDAQ, as we
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  Speaker 2: sit here right now, is off north of 3%, about
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  Speaker 2: three and a third, 851 points. It is being entirely
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  Speaker 2: led by semiconductors, which is not surprising as we get
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  Speaker 2: to the reason why I think this is happening. But
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  Speaker 2: NVIDIA's down 5%, Micron's down 10%, AMD's down 12%, Intel
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  Speaker 2: down 7%. Semiconductors are just a, it's all red. There
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  Speaker 2: is not a single S & P 500 semiconductor company
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  Speaker 2: that's positive today. So there's that. Even if you look
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  Speaker 2: at computer hardware, Dell down 10%, SanDisk down 14%, Arista
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  Speaker 2: Network 6%, Seagate 12%, Western Digital 12%. Computer hardware is
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  Speaker 2: just imploding today. That's the story. Along with that, you've
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  Speaker 2: got some other stuff that is a little bit red. Again,
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  Speaker 2: they're not technically tech companies, but Tesla's down 10 as well.
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  Speaker 2: That's more than a little red. Meta's down five. But
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  Speaker 2: Microsoft's hanging in down two. Google's down one. Amazon's down two.
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  Speaker 2: Apple's flat. So it really is concentrated in semis. And
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  Speaker 2: then Tesla's got its own thing. We talked about the
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  Speaker 2: pre-election risk that Elon faced given... Again, the success he
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  Speaker 2: had after the 24 election, where his companies popped upon
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  Speaker 2: a bunch of successful Republican victories. In this case, you
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  Speaker 2: have a string of Democrat victories. And so you've got
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  Speaker 2: Tesla and SpaceX both selling off hard, which is not
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  Speaker 2: entirely unexpected, given the outcomes from Tuesday. Yeah, SpaceX down
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  Speaker 2: about 8% now. Other than that, here's the wild thing.
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  Speaker 2: There are 17 more stocks in the S & P
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  Speaker 2: 500 that are up today than down, despite the index
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  Speaker 2: being off 1.8%. The Dow, which doesn't have the kind
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  Speaker 2: of semiconductor exposure that the other indices do, Dow's off
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  Speaker 2: 400 points. It was up 1,500 yesterday. So the Dow's like, man,
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  Speaker 2: what are you all freaking out about? But semis are
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  Speaker 2: getting bludgeoned right now. And so that is taking... pretty
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  Speaker 2: much the entire rest of the market with it just
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  Speaker 2: because of how big they've gotten in the index, Mike.
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  Speaker 3: Which, by the way, is not different than what happened yesterday.
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  Speaker 3: Bludgeoning was not what happened yesterday, but semis were down
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  Speaker 3: by and large yesterday.
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  Speaker 2: They started up for the day.
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  Speaker 3: They did, and then, yeah, you had companies like NVIDIA
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  Speaker 3: down a couple percentage points. It wasn't enough to drag
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  Speaker 3: the rest of the market down because there was this overall...
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  Speaker 3: optimism in markets yesterday. And I do want to talk
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  Speaker 3: about the, you know, the narrative on that one a
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  Speaker 3: little bit.
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  Speaker 2: But today's a reversal of that.
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  Speaker 3: Even the hyperscalers that were bid up yesterday are getting
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  Speaker 3: hit today.
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  Speaker 2: And so it is. Yeah, it's an interesting couple of
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  Speaker 2: days here in.
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  Speaker 3: Markets with a, you know, like we've talked about the
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  Speaker 3: lack of volatility in the indices.
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  Speaker 2: This is volatility in the big broad market indices. Yes.
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  Speaker 2: When you get to, hey, the S & P is
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  Speaker 2: off almost 2%, we're not talking like historic volatility.
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  Speaker 3: No.
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  Speaker 2: Again, don't get me wrong, but it's something where, okay, yeah,
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  Speaker 2: this is at least worth taking note of. When we
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  Speaker 2: talk about historic volatility, $ 7. No, like, even, quite honestly, like,
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  Speaker 2: if you look at, like, the data on it, it's
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  Speaker 2: something where, again, like, if... I'm looking for, hey, if
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  Speaker 2: you have, yeah, like, seven's, like, a top 20 worst day. Yeah.
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  Speaker 2: But even, like, you get north of, like, 4%, and
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  Speaker 2: you're like, okay, like, that's something to write home about,
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  Speaker 2: at least. Like, not a historic day, but one where
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  Speaker 2: you say... Yeah, we get one of those every few years,
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  Speaker 2: and that's worth paying attention to.
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  Speaker 4: Right.
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  Speaker 2: So let's talk a little bit. You mentioned the narrative
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  Speaker 2: from yesterday. Talk to me about your thoughts on how
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  Speaker 2: you want to approach that. What do you have on it?
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  Speaker 3: There were two separate things, I think, that you could
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  Speaker 3: look at as, again, trying to attribute single-day moves in stock,
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  Speaker 3: I think is a fool's errand to begin with. But one,
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  Speaker 3: it was pretty clear very early on what the results
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  Speaker 3: of the election were. There was really no doubt about,
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  Speaker 3: you know, which party had won. There weren't going to
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  Speaker 3: be any fights about voter fraud or lawsuits around ballot counting. Like,
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  Speaker 3: it was pretty clear that this was a significant election outcome,
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  Speaker 3: and there was really no doubt about the outcome of it.
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  Speaker 2: So I think that was part of it.
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  Speaker 3: I think the other part that was, you know, permeating
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  Speaker 3: through markets was, well, what if more regulation for data
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  Speaker 3: center build-outs, which is not purely a Democrat win outcome.
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  Speaker 3: There were ballot initiatives across the country that passed or failed,
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  Speaker 3: depending on the way the ballot was phrased, but in
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  Speaker 3: either case were not kind or helpful towards data center
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  Speaker 3: construction that really reaffirmed Americans' views on this point, which
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  Speaker 3: is they don't want it in their backyard and they
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  Speaker 3: want to slow it down. And so you saw that,
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  Speaker 3: I guess, theory in markets saying, hey, well, maybe this
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  Speaker 3: is good for the hyperscalers, but bad for the computer
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  Speaker 3: hardware companies, semiconductors included. And I don't know, that narrative
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  Speaker 3: struck me as kind of short-sighted, I guess, because I
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  Speaker 3: have some doubts that a bunch more regulation for any
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  Speaker 3: tech company is going to be perceived as a good
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  Speaker 3: thing by their investors.
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  Speaker 2: No, where Mark and I got to, and I was
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  Speaker 2: workshopping this during the show yesterday, and I continued to
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  Speaker 2: workshop it the rest of the day. You know how
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  Speaker 2: you just get an idea that bounces around in your head,
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  Speaker 2: and you're like, okay, where am I going with this?
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  Speaker 2: Here's where I've gotten to on this, is yes, I
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  Speaker 2: do think where you... The big risk with any new
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  Speaker 2: technology and its build-out is the one that always ends
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  Speaker 2: up happening. You build too much, right? It's... The example
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  Speaker 2: I gave yesterday, you decide you want to have a
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  Speaker 2: party on a Friday, and you invite 20 of your friends.
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  Speaker 2: And they actually bring, like, an extra five people, so
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  Speaker 2: you got 25 people, and you ordered, like, five pizzas,
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  Speaker 2: and all the pizza gets eaten. And you're like, hey,
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  Speaker 2: that was fun. Let's have another party next Friday. And
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  Speaker 2: the next Friday, you say, okay, guys, like, everyone come
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  Speaker 2: on back. And you're like, I don't want to run
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  Speaker 2: out of food, so you order seven pizzas.
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  Speaker 1: Mm-hmm.
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  Speaker 2: But all those friends, they brought more, and so now
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  Speaker 2: you've got 35 pizzas. You ate through all the pizza again.
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  Speaker 2: And you keep doing this and doing this until eventually,
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  Speaker 2: on like the 50th Saturday, or 50th Friday, you're like, okay,
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  Speaker 2: I've got 100,000 friends coming over. I'm going to order,
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  Speaker 2: you know, 50,000 pizzas, and then... It's an exponential friend
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  Speaker 2: return there, Chuck.
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  Speaker 1: It is.
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  Speaker 2: Like, I'm very popular. But then the problem is, hey,
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  Speaker 2: only 60,000 people show up, and now you've got 20,000
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  Speaker 2: extra pizzas. You never have enough pizza until the very
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  Speaker 2: moment when you're like, oh, crap, I ordered too much pizza.
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  Speaker 2: That's what it's like in any build-out of new technology. Railroad. Hey,
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  Speaker 2: we could never have enough. I was looking at this
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  Speaker 2: the other day just because I was looking at this
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  Speaker 2: the other day. Again, why? I don't know. But railroads,
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  Speaker 2: just as an example. Mike, do you know how many
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  Speaker 2: miles of railroads the United States had at the end
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  Speaker 2: of the 1830s? I do not. Tucker, any guesses? Nope. 2,800
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  Speaker 2: miles of railroad at the end of the 1830s. By
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  Speaker 2: the end of the 1880s, any idea how much we had?
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  Speaker 5: No.
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  Speaker 2: 163,000. Yeah. By the end of the 1910s, 250,000 miles.
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  Speaker 2: We left a lot of good railroads out there, but
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  Speaker 2: the companies that built and operated them, a bunch of
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  Speaker 2: them went out of business because eventually it was like, oh,
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  Speaker 2: we don't actually need this many. And you look at, like,
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  Speaker 2: Time after time, this is what we see.
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  Speaker 3: Chuck, in 1910, there were between 250 and 300 active
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  Speaker 3: car manufacturers.
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  Speaker 2: Right, exactly. This occurs everywhere. Airplanes, radio, the internet. You
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  Speaker 2: can go through this. There's never enough until you... You
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  Speaker 2: never get it just right. And so the point that
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  Speaker 2: I made yesterday that I think is interesting is... And
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  Speaker 2: this is actually... My own work. A lot of times
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  Speaker 2: I'll be like, no, I read this somewhere. I pulled it.
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  Speaker 2: I cribbed it from someone. Here's where I landed. is
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  Speaker 2: I think that you can get to a place where
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  Speaker 2: if you have state governments or the federal government that
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  Speaker 2: imposes any slowdown on the build out of data centers,
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  Speaker 2: you can prevent the boom cycle from getting as boomy.
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  Speaker 2: And so the bust is not as bad. you will
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  Speaker 2: not prevent the bust in its entirety because there are
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  Speaker 2: different issues that you have to deal with then in
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  Speaker 2: terms of the economics if you're always working from a shortage.
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  Speaker 2: In that you do not get to accurate price discovery
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  Speaker 2: for what these things should actually be priced at in
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  Speaker 2: the free market. It's like with rent control. You put
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  Speaker 2: rent control in, hey, that just discourages building. And so
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  Speaker 2: the rent for everything else that's not on rent control...
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  Speaker 2: gets jacked up because you don't get accurate price discovery.
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  Speaker 2: This is the same thing in that, Hey, if you
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  Speaker 2: don't let rental rates for GPUs fall, then you're not
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  Speaker 2: going to know how cheap you can actually get for
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  Speaker 2: the AI models. And so you're not going to adequately
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  Speaker 2: see where supply and demand actually meet up, which means
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  Speaker 2: you end up with less of it than you otherwise would. I, I,
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  Speaker 2: Maybe oversimplifying things or overlooking the history of a lot
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  Speaker 2: of these technologies, Chuck.
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  Speaker 3: But what strikes me as slightly different about this compared
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  Speaker 3: to the automobile, railroads, radio or airplane manufacturers is that
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  Speaker 3: there's a fairly significant strategic race or national security components
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  Speaker 3: to the build out of A.I. in the way that
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  Speaker 3: there maybe wasn't with some of those other technologies. I'm
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  Speaker 3: sure there was a national security component to the railroad
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  Speaker 3: building and moving troops across the country quickly and all
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  Speaker 3: sorts of things that I'm not considering in the 1800s.
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  Speaker 2: Sure.
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  Speaker 3: But it does seem a little bit different with this
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  Speaker 3: technology compared to those other ones, and I don't really
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  Speaker 3: know how that affects all of this new clampdown on
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  Speaker 3: data center construction and regulation that people are now anticipating.
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  Speaker 2: Let's take a quick break. When we return... Let's see.
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  Speaker 2: Anything else that we want to talk about as it
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  Speaker 2: relates to data centers or if we kind of cleared
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  Speaker 2: that off the table? I got one more closing thought
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  Speaker 2: on it. Do it. All right. Quick break. Not now,
• 12:15
  Speaker 2: but after.
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• 13:10
  Speaker 2: Mike, I also want to just put a bow on
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  Speaker 2: the whole data center thing in terms of the polling
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  Speaker 2: that we've gotten on this is that Americans, by and large,
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  Speaker 2: just don't want data centers near them. There is a skew,
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  Speaker 2: a partisanship skew on this, where an NBC News poll,
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  Speaker 2: 81% of Democrats said that they didn't want data centers
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  Speaker 2: being constructed in their local area, 71% of Independents said
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  Speaker 2: they didn't, and 57% of Republicans. So it's a majority
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  Speaker 2: of all political stripes, but a narrower one for registered Republicans.
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  Speaker 2: But it's, again, across the board. It's like you're not
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  Speaker 2: looking there being like, hey, look at this group that
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  Speaker 2: really loves them and this that hates them. It's like, well,
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  Speaker 2: no one really likes them, and it just is a
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  Speaker 2: matter of how much. That's kind of what we see.
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  Speaker 2: And what I want to just put out there is
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  Speaker 2: this could have all gone very differently for these tech
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  Speaker 2: companies in that Americans by and large, no one just
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  Speaker 2: wakes up and is like, hey, you're building a data
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  Speaker 2: center near me. I hate that. The same way that
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  Speaker 2: no one wakes up and is like, well, I hate
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  Speaker 2: farms or I hate golf courses. There's something about the
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  Speaker 2: business in and of itself that we find distasteful.
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  Speaker 3: Although I will say that we seem to be in
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  Speaker 3: this moment right now where we really don't like anything
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  Speaker 3: being constructed anywhere near us.
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  Speaker 2: No, that's fair.
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  Speaker 3: Apartments.
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  Speaker 2: There's certain things where it's like, Okay, like, if you
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  Speaker 2: pull people on, like, yes, I get that if you
• 14:51
  Speaker 2: pull people on, like, building something near them, they'll be like, no,
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  Speaker 2: I don't want that.
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  Speaker 3: Yeah.
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  Speaker 2: But the data center thing is fundamentally different. Yeah, it's
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  Speaker 2: more extreme. It's different. And what I'm getting at here
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  Speaker 2: is people don't hate data centers. And, like, you don't
• 15:06
  Speaker 2: have apartment construction moratoriums going into place in, like, 41 states.
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  Speaker 1: Right.
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  Speaker 2: You know, like, that wasn't on the ballot this year.
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  Speaker 2: You don't have golf course moratoriums on the ballot. You
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  Speaker 2: did have data center ones. And I think it speaks
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  Speaker 2: to the fact that people don't hate data centers. They
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  Speaker 2: don't inherently hate them more or less than anything else
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  Speaker 2: that's being built. What they hate is how big tech
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  Speaker 2: has come to symbolize the lack of control we have
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  Speaker 2: over what we actually... The information that's consumed.
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  Speaker 5: The.
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  Speaker 2: divergence between haves and have-nots and the fact that corporations
• 15:48
  Speaker 2: don't seem to be responsible to any kind of desire
• 15:53
  Speaker 2: to actually improve the public good. Maybe that's fair, maybe
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  Speaker 2: that's not, but this is how they're perceived because tech
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  Speaker 2: companies have broken our trust for the last 15 to
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  Speaker 2: 20 years and all we have to show for it
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  Speaker 2: is personalized TV on our phones watching Instagram. Yeah. Yeah.
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  Speaker 3: I won't say that there isn't some degree of environmental
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  Speaker 3: aspect or cost assumption here, but I don't think people
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  Speaker 3: care as much about that.
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  Speaker 2: Mike, we don't. No one votes for pro-environmental causes the
• 16:25
  Speaker 2: way they did for anti-data center stuff. You talk about, again, oh,
• 16:29
  Speaker 2: I don't like how this data center uses my water. Okay, well,
• 16:33
  Speaker 2: what about the golf course next to you? All it's
• 16:36
  Speaker 2: doing is growing grass so that I can dig into
• 16:38
  Speaker 2: it with a nine iron. Yeah, I mean, Edgewater, Florida, right?
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  Speaker 3: 77% voted against to prohibit new data centers from being approved, constructed, expanded,
• 16:47
  Speaker 3: operated within Edgewater.
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  Speaker 2: El Dorado, Kansas. Mike, do you know how many golf
• 16:52
  Speaker 2: courses are in Edgewater, Florida? Do you know how many
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  Speaker 2: golf courses are within 20 miles? Oh, within 20 miles
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  Speaker 2: of Edgewater, Florida? Oh, God. Three dozen? 18.
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  Speaker 5: Okay.
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  Speaker 2: Is there any golf course moratorium in Edgewater because they're
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  Speaker 2: using too much water?
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  Speaker 3: Right.
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  Speaker 2: No, because it's not about the environmental stuff. That might
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  Speaker 2: be the excuse that we use. Like, oh, I don't
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  Speaker 2: want them using my water. There's plenty of stuff that
• 17:19
  Speaker 2: uses water for non-drinking purposes. Yes, for non-drinking and crop purposes.
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  Speaker 2: And we're fine with it because we're just, like, okay
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  Speaker 2: with those things. Like, again, golf courses are the perfect example. Like,
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  Speaker 2: is anyone in Arizona being like, hey, we need to
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  Speaker 2: have a golf course moratorium? No, like you're not seeing
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  Speaker 2: anything like that. So the data center thing, in my opinion,
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  Speaker 2: it's like, yeah, like we might not like stuff being
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  Speaker 2: built next to us, but that stuff isn't on the ballot.
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  Speaker 2: Data centers are. And it's because we just don't like
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  Speaker 2: or trust the companies that they represent because they've broken
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  Speaker 2: our trust repeatedly for the last 20 years. And by
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  Speaker 2: the way, you mentioned the beginning, it didn't have to
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  Speaker 2: go this way. No, they could have been responsible stewards
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  Speaker 2: for the last 20 years and not sold our data
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  Speaker 2: and invaded privacy and all this stuff. Frankly, I don't
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  Speaker 2: even think it would have taken that much. Forget about
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  Speaker 2: the last 20.
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  Speaker 3: I think, honestly, if these companies had just done a
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  Speaker 3: better job over the last three years, they might not
• 18:19
  Speaker 3: be seeing the results that they are right now. I
• 18:21
  Speaker 3: know you're not going to trust these companies even if
• 18:24
  Speaker 3: they had done a better job the last three years,
• 18:25
  Speaker 3: but they could have gone to communities and done a
• 18:28
  Speaker 3: better job of, marketing themselves and selling themselves and providing,
• 18:34
  Speaker 3: you know, better things for the communities in which they
• 18:37
  Speaker 3: were building. And they really by and large did not,
• 18:41
  Speaker 3: they did not go on a PR, uh, blitz to
• 18:45
  Speaker 3: try and convince people. I remember there's one thing in Ohio,
• 18:49
  Speaker 3: I think where they said they'd pay every resident like
• 18:51
  Speaker 3: 1500 bucks. And that was, you know, it was stunning
• 18:53
  Speaker 3: because very few of them had done anything like that.
• 18:56
  Speaker 3: And so they'd, by and large, went into communities where
• 18:59
  Speaker 3: they thought they would be able to build these things,
• 19:01
  Speaker 3: Ohio being one of the big ones, didn't offer anything
• 19:05
  Speaker 3: to the communities, started breaking ground, and saw a massive backlash.
• 19:10
  Speaker 3: And I don't think they needed to go back 20
• 19:11
  Speaker 3: years to fix that. I really think they just needed
• 19:13
  Speaker 3: to do a better job over the last three, and they,
• 19:15
  Speaker 3: by and large, chose not to.
• 19:16
  Speaker 2: Well, and they also, again, you look at how they've
• 19:19
  Speaker 2: explained AI to us, it's like, oh, it's going to
• 19:21
  Speaker 2: put you all out of jobs. Well, yeah, let me
• 19:23
  Speaker 2: vote for that in my community, too.
• 19:25
  Speaker 3: Markets have gotten pretty substantially worse here as we've been talking.
• 19:28
  Speaker 2: Full recap is next with Wall Street Watch.
• 19:38
  Speaker 1: Like us on Facebook and follow us on Twitter at
• 19:41
  Speaker 1: TFE Show. Breaking business news is always first, right here
• 19:45
  Speaker 1: on the Financial Exchange Radio Network. Well, the post-election rally
• 19:41
  Speaker 1: has fizzled with equity markets selling off, driven by big
• 19:45
  Speaker 1: losses in the semiconductor space.
• 19:47
  Speaker 4: Right now, the Dow is down 2%. 1.4% or 764
• 20:09
  Speaker 4: points lower.
• 20:10
  Speaker 5: S & P 500 selling off 2.5% or 189 points lower.
• 20:11
  Speaker 5: Tech-heavy NASDAQ selling off nearly 1,000 points or 3.84% lower.
• 20:12
  Speaker 5: Rust 2000 is off 1.6%. 10-year treasury yield is flat
• 20:14
  Speaker 5: at 4.884%. And crude oil is up about 2.5%, trading
• 20:15
  Speaker 5: at $ 90, while Brent is also up 2.5% and $ 97
• 20:15
  Speaker 5: a barrel. Qualcomm falling 10% after Chipmaker reported lower revenue
• 20:41
  Speaker 5: in the previous quarter as a sharp rise in automotive
• 20:44
  Speaker 5: chip sales was offset by declining handset revenue. Another chip
• 20:49
  Speaker 5: company in Arm Holdings reported a 27% jump in revenue
• 20:52
  Speaker 5: in the previous quarter. However, the stock is down by 12%. Elsewhere,
• 20:58
  Speaker 5: Zillow reported a drop in traffic to its platforms amid
• 21:01
  Speaker 5: what the company called one of the toughest housing markets
• 21:03
  Speaker 5: in a generation. Zillow shares are dropping by 8%. Elsewhere,
• 21:08
  Speaker 5: Wendy's rejected a takeover bid from Treon Fund Management to
• 21:12
  Speaker 5: take the burger chain private for about $ 1. 4 billion, saying
• 21:16
  Speaker 5: it undervalues the company's long-term earnings potential. And Expedia sinking
• 21:21
  Speaker 5: 13% after the online booking company issued mostly weaker-than-expected guidance
• 21:28
  Speaker 5: for the current quarter. I'm Tucker Silva, and that is
• 21:31
  Speaker 5: Wall Street Watch.
• 21:32
  Speaker 2: Chuck, we've been.
• 21:33
  Speaker 3: Warning about a market turnaround and eventually a market that
• 21:41
  Speaker 3: gets oversaturated with the excitement about data center construction and potentially.
• 21:48
  Speaker 2: A bubble popping.
• 21:49
  Speaker 3: I'll be the first to admit, I have no idea
• 21:51
  Speaker 3: if today's the day that that's the kickoff of that.
• 21:54
  Speaker 2: I have my doubts.
• 21:55
  Speaker 3: Only because statistically it's pretty improbable. But days like this
• 21:59
  Speaker 3: in markets are... Frightening for some investors, and I get why.
• 22:06
  Speaker 3: I mean, we are seeing, I would guess, what do
• 22:11
  Speaker 3: you think? Worst 5% of days in the NASDAQ that
• 22:14
  Speaker 3: we see on a regular basis?
• 22:17
  Speaker 2: Ever? 10%? I don't have NASDAQ data, but I did
• 22:21
  Speaker 2: suspect that this was going to come up as a question.
• 22:27
  Speaker 2: And for the S & P 500, at least, which, again,
• 22:30
  Speaker 2: is not off as much, this is a bottom 3%
• 22:34
  Speaker 2: day if we're looking down 2.5% right now. So I
• 22:38
  Speaker 2: would imagine the NASDAQ is in a similar category where
• 22:41
  Speaker 2: you have anywhere from in a given year, five to
• 22:45
  Speaker 2: six of these. Yeah, it happens. Here's the scary point.
• 22:50
  Speaker 3: The stuff that is crumbling today in markets is the
• 22:53
  Speaker 3: exact stuff that led portfolios for the last three years.
• 22:57
  Speaker 3: And Everyone always likes to talk about the importance of diversification,
• 23:01
  Speaker 3: and I think most people are good about that. But
• 23:05
  Speaker 3: days like this, like I mentioned, are frightening. And they
• 23:09
  Speaker 3: are especially frightening if you have not done the work
• 23:13
  Speaker 3: to understand how a day, month, year, like the one
• 23:20
  Speaker 3: indicative of the one that we are seeing today, affects
• 23:23
  Speaker 3: those plans.
• 23:24
  Speaker 2: Maybe you have money that.
• 23:26
  Speaker 3: You're using to try and fund a future home purchase,
• 23:30
  Speaker 3: or your kid's college tuition, or your retirement that's five
• 23:34
  Speaker 3: years down the road. If you have done the work
• 23:38
  Speaker 3: up front, then you've already asked yourself, okay, what is
• 23:41
  Speaker 3: going to happen to my plans if this 2.5% down
• 23:45
  Speaker 3: day turns into a 30% down year? How is that
• 23:50
  Speaker 3: going to change my ability to retire or my plans
• 23:54
  Speaker 3: to pull off that college tuition payment or any of
• 23:59
  Speaker 3: these different things that we all save money for. And
• 24:02
  Speaker 3: that is the purpose of financial planning.
• 24:05
  Speaker 2: It is putting.
• 24:09
  Speaker 3: Your life down on paper and then stress testing the
• 24:13
  Speaker 3: assumptions that go into there because we all know stocks
• 24:15
  Speaker 3: don't just go up by 7% a year and then
• 24:18
  Speaker 3: you go home happy and.
• 24:19
  Speaker 2: It's really predictable.
• 24:21
  Speaker 3: It's defined by days like the one we are seeing
• 24:24
  Speaker 3: right now. If you are finding yourself in that position of, hey,
• 24:29
  Speaker 3: I've got this money, I saved it up, it's done
• 24:32
  Speaker 3: really well for me for the last three years, but
• 24:34
  Speaker 3: I don't know how it fits into the complexity of
• 24:37
  Speaker 3: my life. I don't know how a bad market for
• 24:41
  Speaker 3: a year and a half or a bad market for
• 24:44
  Speaker 3: a lot longer than that, because keep in mind, we
• 24:47
  Speaker 3: haven't seen this in 15 plus years, but there are
• 24:51
  Speaker 3: bad markets that last five years. There are bad markets
• 24:53
  Speaker 3: that last a decade. If you haven't thought through how
• 24:57
  Speaker 3: that can impact your life, then I implore you to
• 25:03
  Speaker 3: give Armstrong Advisor Group a call. This is the type
• 25:05
  Speaker 3: of work that we do with our clients to set
• 25:08
  Speaker 3: them up, not so that they are impervious to market downturns,
• 25:11
  Speaker 3: nobody is, but so that they are aware that we
• 25:16
  Speaker 3: have thought through it, have a plan to deal with it,
• 25:19
  Speaker 3: and know how it's going to affect their financial scenarios
• 25:21
  Speaker 3: if it gets bad. If you have those questions, please
• 25:24
  Speaker 3: give us a ring. The number is 800-393-4001. You can
• 25:30
  Speaker 3: book a time for us to call you back if
• 25:32
  Speaker 3: you're driving, you're at work right now, armstrongadvisory.com. But that
• 25:36
  Speaker 3: phone number, once again, it's the first step, 800-393-4001.
• 25:42
  Speaker 1: The proceeding was paid for by Armstrong Advisory Group, a
• 25:44
  Speaker 1: registered investment advisor. Nothing in the ad or in any
• 25:47
  Speaker 1: Armstrong guide is specific financial, legal, or tax advice. Consult
• 25:50
  Speaker 1: your own financial, tax, and estate planning advisors before making
• 25:53
  Speaker 1: any investment decisions. Armstrong may contact you to offer investment
• 25:56
  Speaker 1: advisory services.
• 25:58
  Speaker 2: Mike, I do have a good stat just on how
• 26:01
  Speaker 2: bad it is in semiconductors right now. Yeah, please. Semiconductor index,
• 26:06
  Speaker 2: the Philly Semiconductor Index in the last five days, including today,
• 26:10
  Speaker 2: is now off 17.5%. Almost a 20% haircut in five days.
• 26:16
  Speaker 2: There are only five other periods in history where this
• 26:22
  Speaker 2: has happened. How many of them can you name? Sorry,
• 26:26
  Speaker 2: with the Semiconductor Index down, how much in five days? 17.5%. Uh,
• 26:34
  Speaker 2: was 2022 one of.
• 26:38
  Speaker 4: Them?
• 26:38
  Speaker 3: No.
• 26:39
  Speaker 2: 2001. Dotcom bust. Yes. Multiple times in 2000, 2001 and
• 26:44
  Speaker 2: 2002 that they get looped in there. Oh, eight Oh nine.
• 26:47
  Speaker 1: Yep.
• 26:48
  Speaker 2: You got two of them. There's three left. Uh, 87.
• 26:52
  Speaker 2: There weren't semiconductors in 87. Not really. At least there
• 26:55
  Speaker 2: wasn't an index for them. I believe it's only been
• 26:57
  Speaker 2: around since 94, 2020. Yep.
• 26:58
  Speaker 1: 2020.
• 26:59
  Speaker 2: You got, there's two more. No, give it to me.
• 27:06
  Speaker 2: Asian financial crisis, 1997. Yeah. And other one, this one
• 27:12
  Speaker 2: I'm not surprised that you didn't grab, the Russian debt
• 27:15
  Speaker 2: default in the 90s.
• 27:16
  Speaker 1: Of course.
• 27:17
  Speaker 2: So that's it. You're talking a very, very small sample
• 27:23
  Speaker 2: size that we have ever seen this kind of pain
• 27:27
  Speaker 2: in semiconductor stocks and again, it's not that everything else
• 27:31
  Speaker 2: is up. If you go and look at the S
• 27:34
  Speaker 2: & P 500, seven out of the 11 sectors are down.
• 27:37
  Speaker 2: The problem that I think a lot of investors are
• 27:39
  Speaker 2: going to have coming out of this is that they've
• 27:41
  Speaker 2: been piling into tech for the last few years. And
• 27:44
  Speaker 2: even if you weren't, Mike and I have talked about this,
• 27:47
  Speaker 2: between 40 and 50% of the S & P 500
• 27:50
  Speaker 2: is directly tied to the success of the AI trade.
• 27:53
  Speaker 3: Not necessarily just because they sell semis, but Plenty of
• 27:57
  Speaker 3: companies are the ones building the data centers or supplying
• 28:00
  Speaker 3: them with equipment, not even technological equipment, like Caterpillar.
• 28:05
  Speaker 2: Caterpillar is off 4.5% today, and Caterpillar's stock has been
• 28:09
  Speaker 2: cut in half in the last six months. Wow. It
• 28:12
  Speaker 2: peaked at 1,073. It's at 5.63 now, almost a 50%
• 28:18
  Speaker 2: drop from its peak for Caterpillar. Other ones that are
• 28:22
  Speaker 2: kind of in the same boat, they're the most extreme one. Yeah.
• 28:26
  Speaker 2: On that side of things. But again, like you look
• 28:31
  Speaker 2: at what's happened, not so much now just because utilities
• 28:34
  Speaker 2: are catching a bit with like a flight to safety, because, again,
• 28:37
  Speaker 2: it's exactly what you would expect. Consumer staples, health care
• 28:40
  Speaker 2: and utilities are three of the four sectors that are up.
• 28:42
  Speaker 2: What's the other one, Mike? Energy. Energy. Which, again, is
• 28:48
  Speaker 2: just a function of, hey, energy's gotten bludgeoned the first
• 28:51
  Speaker 2: three days this week, and now it's picking up because
• 28:54
  Speaker 2: there's concerns about what might happen in the Middle East still.
• 28:58
  Speaker 2: I thought Democrats hated energy companies. This is why you
• 29:02
  Speaker 2: don't make investment decisions just based on the results of elections. Again,
• 29:07
  Speaker 2: the crazy thing, you go back, and I'll pull the
• 29:11
  Speaker 2: data now just so that I have it, so Do
• 29:13
  Speaker 2: you want to look from the date of the 2020
• 29:15
  Speaker 2: election or from the 21 inauguration?
• 29:17
  Speaker 3: 2020 election.
• 29:21
  Speaker 2: Okay, so let's call it, what was that, like 11,
• 29:23
  Speaker 2: I think it was 7 of 2020? Something like that.
• 29:27
  Speaker 2: And we'll go through, call it 11-8 of 2024. So
• 29:32
  Speaker 2: here's the deal, Mike. If you look at relative performance, again,
• 29:38
  Speaker 2: these are just the security that I picked for this.
• 29:40
  Speaker 2: You can look at this different ways if you want.
• 29:43
  Speaker 2: The Invesco Solar ETF during Joe Biden's term lost 52%.
• 29:48
  Speaker 2: The State Street Energy Select Spider ETF made 280%. Oh.
• 29:56
  Speaker 2: Because Joe Biden obviously wanted to drill a lot of wells, right? Yeah.
• 30:01
  Speaker 2: They always called him, like, Oily Joe. Like, that was,
• 30:04
  Speaker 2: you know, his name. And that's why energy stocks went up, right?
• 30:10
  Speaker 2: There's some guy whose nickname is Oily Joe who's pissed
• 30:13
  Speaker 2: right now. Oily Joe, if you happen to be listening,
• 30:15
  Speaker 2: please text in at the text line.
• 30:17
  Speaker 3: 617-362-1385.
• 30:20
  Speaker 2: We'd love to hear from you. What a bad nickname.
• 30:23
  Speaker 2: I mean, I don't know. I think it's a pretty
• 30:26
  Speaker 2: good one. If someone's like, hey, Oily Joe, you don't
• 30:29
  Speaker 2: have to be like, is he talking to me? Yeah,
• 30:31
  Speaker 2: that's true. He's talking to you. So, yeah, these are
• 30:36
  Speaker 2: the things that you have to pay attention to. If
• 30:39
  Speaker 2: you're like, oh, this means that this is going to happen.
• 30:42
  Speaker 2: And by the way, here's the other thing I'll say.
• 30:44
  Speaker 2: For the first two months after that election... The Invesco
• 30:49
  Speaker 2: Solar ETF made 61%. So investors were like, oh, like,
• 30:53
  Speaker 2: solar is going to be big. And then it wasn't. So, like,
• 30:58
  Speaker 2: you can even get these short-term head fakes that happen
• 31:01
  Speaker 2: that you need to be aware of. And this is
• 31:03
  Speaker 2: why I caution anyone being like, well, here's what happened
• 31:06
  Speaker 2: in the election, and here's how, like, these stocks are
• 31:08
  Speaker 2: going to perform the next two years. Buddy, I have
• 31:12
  Speaker 2: seen some things you wouldn't believe. I mean, just as, like,
• 31:15
  Speaker 2: another example just from this year. Has there been any
• 31:19
  Speaker 2: conflict in the world this year, Michael? Quite a bit
• 31:21
  Speaker 2: of it. There's been a little bit, right? Just a little.
• 31:25
  Speaker 2: What do you mean? Exactly. If one were to take
• 31:29
  Speaker 2: a look at the State Street Aerospace and Defense ETF,
• 31:33
  Speaker 2: you'd find that it's down 6.4% year-to-date. You can know
• 31:38
  Speaker 2: exactly what's going to happen in the world. And still
• 31:41
  Speaker 2: get the investment. And markets will still move against you
• 31:44
  Speaker 2: on the actual trade. So be really careful on this
• 31:48
  Speaker 2: stuff because it's not just see ball, hit ball. It's,
• 31:54
  Speaker 2: you know, sometimes you see the ball and the ball
• 31:56
  Speaker 2: hits you. That's markets. Let's take a quick break. When
• 32:00
  Speaker 2: we return, let's talk a little bit about what we're
• 32:03
  Speaker 2: seeing in energy prices and what's going on under the
• 32:06
  Speaker 2: hood there.
• 32:08
  Speaker 1: Your business day moves fast. Keep up with the Financial
• 32:11
  Speaker 1: Exchange on YouTube with live market coverage, video highlights, shorts,
• 32:15
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• 32:19
  Speaker 1: the Financial Exchange Media Network. Take the Financial Exchange with you.
• 32:24
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• 32:28
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• 32:32
  Speaker 1: Exchange Media Network.
• 32:40
  Speaker 2: Mike, a couple days ago, was it Monday, I think? Yes. Yeah,
• 32:44
  Speaker 2: it was Monday. We were talking about price stickiness. And
• 32:51
  Speaker 2: one of the topics that came up was utilities and
• 32:54
  Speaker 2: shopping around for the generation portion of your utility bill.
• 32:59
  Speaker 2: There's two portions in your bill. There's generation and distribution.
• 33:03
  Speaker 2: If you ever look at your bill from Eversource or
• 33:04
  Speaker 2: National Grid in Massachusetts, or if you're not in Massachusetts
• 33:08
  Speaker 2: from your local supplier... you'll see those two items. Here's
• 33:11
  Speaker 2: the distribution cost and here's the generation cost. And I
• 33:14
  Speaker 2: made the comment on Monday, hey, only like 15 to
• 33:17
  Speaker 2: 17% of Massachusetts residents shop for their generation supplier. Most
• 33:26
  Speaker 2: people don't. And it turns out that someone at Eversource
• 33:31
  Speaker 2: was listening to the show. We appreciate it. Yes, thank you, Eversource.
• 33:35
  Speaker 2: We enjoy when you guys listen and Honestly, thanks for
• 33:40
  Speaker 2: keeping the lights on. We kind of need it. But
• 33:43
  Speaker 2: here's the thing. They sent back this email. I'm going
• 33:47
  Speaker 2: to read a portion of it. During the segment, it
• 33:51
  Speaker 2: was stated that only 15% to 17% of Massachusetts residents
• 33:54
  Speaker 2: choose an alternative electricity supplier. I wanted to share some
• 33:58
  Speaker 2: Eversource-specific information as that figure doesn't reflect the significant number
• 34:01
  Speaker 2: of our customers who receive their electricity supply through a
• 34:04
  Speaker 2: third-party municipal aggregation program. In fact, approximately 82% of Eversource
• 34:09
  Speaker 2: customers in Eastern Mass and 64% in Western Mass receive
• 34:13
  Speaker 2: their electricity supply through either a municipal aggregation program or
• 34:17
  Speaker 2: an alternative supplier rather than Eversource's basic service offering. So
• 34:23
  Speaker 2: what this is talking about is there are a number
• 34:25
  Speaker 2: of towns or, you know, conglomerations of towns, conglomerates of
• 34:30
  Speaker 2: towns that do negotiate on behalf of their residents for...
• 34:37
  Speaker 2: the generation side anyways. And so this is like, it's
• 34:41
  Speaker 2: separate from an individual going out and doing it, but
• 34:45
  Speaker 2: you might be in a town where, hey, your town has,
• 34:47
  Speaker 2: you know, a negotiated rate for generation. And so you
• 34:50
  Speaker 2: pay that instead of what the base rate is for,
• 34:54
  Speaker 2: you know, Eversource service or for National Grid service. And
• 34:58
  Speaker 2: so I did go back and do some research on
• 35:00
  Speaker 2: this that confirms exactly what Eversource said, because it's like,
• 35:03
  Speaker 2: it's true. So I think both of these are true
• 35:06
  Speaker 2: in that Yes, on an individual level, only 15% to
• 35:09
  Speaker 2: 17% of individuals go through and are like, hey, does
• 35:12
  Speaker 2: it make sense for me to choose a different generation supplier?
• 35:16
  Speaker 2: But you do have towns that do it at the
• 35:18
  Speaker 2: town level and end up with a different one through
• 35:21
  Speaker 2: those kinds of programs. So I think that's cool that
• 35:24
  Speaker 2: Eversource was listening and gave us a little bit of
• 35:26
  Speaker 2: new information. I enjoy that. Yeah, that is a.
• 35:30
  Speaker 2: I guess I need to further understand that. But yeah,
• 35:31
  Speaker 2: with 82% of Eastern Mass....
• 35:34
  Speaker 3: I guess negotiating that at the aggregate level, that does
• 35:36
  Speaker 3: kind of change the makeup of it.
• 35:38
  Speaker 2: But, yeah, good point. Mike, also, I did during the break,
• 35:42
  Speaker 2: I pulled the distribution data, given now where the markets are.
• 35:47
  Speaker 2: The NASDAQ composite is now down 5.5%. The S &
• 35:49
  Speaker 2: P is down 3.2%. Yeah, it got ugly. Yeah, we
• 35:54
  Speaker 2: really should just stop doing the show because the markets
• 35:56
  Speaker 2: do not like our show, today at least. The NASDAQ
• 36:00
  Speaker 2: composite is now in a bottom 0.3 percentile day. Since
• 36:05
  Speaker 2: the NASDAQ composite started in 1984, only 34 trading days
• 36:10
  Speaker 2: out of 10,581 have been this bad or worse. So
• 36:15
  Speaker 2: now you're getting to the point where it's like, okay,
• 36:18
  Speaker 2: we're starting to get... You're in a bottom... If you
• 36:21
  Speaker 2: are in literally double digits for the history, like a
• 36:24
  Speaker 2: top XY date for any index... Now you've got my attention.
• 36:30
  Speaker 5: Yep.
• 36:31
  Speaker 2: Yeah, this is a notable day right now. S &
• 36:35
  Speaker 2: P 500 being down 3.5. I'm just taking a little
• 36:38
  Speaker 2: mosey on over there to see what that would mean.
• 36:41
  Speaker 2: S & P down a little more than 3.5. We
• 36:43
  Speaker 2: are talking.
• 36:46
  Speaker 2: Bottom first percentile day as well. You know, again, not
• 36:49
  Speaker 2: quite as bad. There's about 200 days that have been
• 36:51
  Speaker 2: this bad or worse, but you got to remember the
• 36:53
  Speaker 2: S & P goes back to 1928 in all forms.
• 36:56
  Speaker 2: And so there's a bigger sample size in terms of days.
• 36:58
  Speaker 2: It's 24,000 days. And this is a bottom 200 day
• 37:02
  Speaker 2: that you have here. You know, it's going to be
• 37:04
  Speaker 2: fairly ugly overnight. Tomorrow? Korean markets. Oh, I don't even
• 37:11
  Speaker 2: want to think about it. But like, This is starting
• 37:13
  Speaker 2: to get, honestly, a little disorderly as well, which is
• 37:16
  Speaker 2: kind of concerning to me. Explain disorderly to folks. By disorderly,
• 37:21
  Speaker 2: what I mean is, hey, there are times where a
• 37:23
  Speaker 2: market just steadily sells off over the course of the day. And, okay,
• 37:29
  Speaker 2: like you understand, we're now seeing the magnitude of moves
• 37:31
  Speaker 2: where there's margin calls that are happening that accelerate things
• 37:34
  Speaker 2: to the downside. The VIX has blown out 10 points
• 37:37
  Speaker 2: and now is at 27. So, like, you're going to
• 37:40
  Speaker 2: get for big hedge funds that manage their book based
• 37:45
  Speaker 2: on risk budgets and things like that. Hey, if you're
• 37:49
  Speaker 2: seeing higher volatility, it means you've got to take your
• 37:51
  Speaker 2: book down further because your risk manager is tapping you
• 37:53
  Speaker 2: on the shoulder. And so these things can compound a
• 37:56
  Speaker 2: little bit. So this is starting to get a little
• 38:00
  Speaker 2: concerning in terms of short-term market stability. Again, it doesn't
• 38:05
  Speaker 2: necessarily mean anything longer term here, but this is... It's notable.
• 38:11
  Speaker 2: This is now notable at this point and not just
• 38:15
  Speaker 2: a garden variety sell-off for a day, in my opinion.
• 38:18
  Speaker 2: Let's take a quick break. When we return, we've got
• 38:20
  Speaker 2: more coming up.