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SpaceX Joins the Nasdaq 100 as Oil Risks Fade · The Financial Exchange Show

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Speaker 2: Welcome back to this edition of the Financial Exchange. I
1:15
Speaker 2: hope all the listeners out there had a tremendous July
1:17
Speaker 2: fourth weekend, enjoying the sun, barbecues and everything else fireworks
1:22
Speaker 2: that goes along with the wonderful Fourth of July weekend.
1:26
Speaker 2: We start this week with a relatively slow week. It's
1:30
Speaker 2: not as nearly as significant in terms of calendar, you know,
1:34
Speaker 2: economic news, then earning season and some of the other
1:38
Speaker 2: data points that come out. We did have a job
1:39
Speaker 2: support that came out last week that was kind of
1:42
Speaker 2: tucked in before the Fourth of July weekend, so we'll
1:45
Speaker 2: revisit that a little bit on today's show. We will
1:48
Speaker 2: have the beginning of earning season later this week on
1:53
Speaker 2: Wednesday and Thursday. We'll start to pick up with PEPSI
1:56
Speaker 2: and Delta, but really the big boys don't start until
1:59
Speaker 2: the far week. On July fourteenth, the banks will report
2:03
Speaker 2: their Q two earnings data. We will get some more
2:07
Speaker 2: commentary from the Federal Reserve. Their meeting minutes from the
2:11
Speaker 2: prior meeting will be released this Wednesday at two o'clock,
2:14
Speaker 2: so we'll see if we can get any more information
2:17
Speaker 2: out of Kevin warsh in terms of what was discussed
2:21
Speaker 2: in the most recent meeting, and other than that, it
2:25
Speaker 2: is certainly inflation that is on investors' minds here where
2:30
Speaker 2: we've got stocks trading in mixed territory at the moments,
2:34
Speaker 2: with the S and P five hundred up about zero
2:36
Speaker 2: point four percent of the dowd Jones off about one
2:39
Speaker 2: hundred and eighty five points. Another company that has been
2:43
Speaker 2: in the headlines that will dive into a little bit
2:46
Speaker 2: is SpaceX SpaceX iPod. It must now be about fifteen
2:50
Speaker 2: trading days ago. I believe it was June eleventh or
2:53
Speaker 2: June twelfth where they started trading initially. They now have
2:56
Speaker 2: been included in the Nasdaq one hundred index. So we'll
2:59
Speaker 2: talk today on the program what that means for investors
3:03
Speaker 2: out there, and have plenty of chatter regarding Elon Muss, SpaceX,
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Speaker 2: and Tessa. But we'll start this program the hour first
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Speaker 2: hour of the program talking about the job support that
3:15
Speaker 2: came out last week that may have slid under the
3:17
Speaker 2: radar for listeners out there. Like I mentioned, it was
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Speaker 2: on the Thursday before we headed off to the long
3:23
Speaker 2: weekend here. It was a job support that was not
3:26
Speaker 2: as hot as some of the previous ones. We saw
3:29
Speaker 2: fifty seven thousand jobs added for the month of June.
3:32
Speaker 2: That was less than the one hundred and fifteen thousand
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Speaker 2: expected by economists. The unemployment rate did tick down from
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Speaker 2: four point three percent to four point two percent. There
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Speaker 2: were some revisions to prior month's data. Still, if you
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Speaker 2: look at this year in terms of jobs editions and
3:51
Speaker 2: mark curius your thoughts on this, because I know you
3:53
Speaker 2: broke it down last week, it still seems like the
3:55
Speaker 2: labor market is in a relatively solid play at this
4:00
Speaker 2: point in time. I don't think it's necessarily the cause
4:03
Speaker 2: for concern that perhaps economists and others thought heading into
4:07
Speaker 2: this year. But curious to any of your takeaways from
4:11
Speaker 2: last week's jobs report that I didn't hit there with
4:13
Speaker 2: just some of the headline numbers.
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Speaker 3: Well, let me answer that question by ignoring it for
4:16
Speaker 3: a second. I'll start with it.
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Speaker 2: Being a little bit sarcastic.
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Speaker 3: What we're really worried about is inflation, yeah, and what
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Speaker 3: the Fed's got to do in response, Most people don't
4:25
Speaker 3: care that much about the job's report for its own sake,
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Speaker 3: because I don't know, I don't know what to do
4:31
Speaker 3: with those numbers other than to put them into a
4:33
Speaker 3: little mental or actual model that helps you decide whether
4:37
Speaker 3: FED policy is too tight to loose or just right.
4:40
Speaker 3: Because it doesn't mean a lot to me. It's an
4:42
Speaker 3: abstract thing to say, fifty seven thousand jobs were estimated
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Speaker 3: to be created by businesses.
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Speaker 2: That will be an effect and will be revised in
4:50
Speaker 2: future months too. Like that number that I quote today
4:52
Speaker 2: is not necessarily promised tomorrow for next month.
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Speaker 3: No awesome point. Every month it's plus or minus. The
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Speaker 3: actual number, with ninety five percent confidence is plus or
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Speaker 3: minus one hundred and twenty I think. So actual job
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Speaker 3: creation could have been minus seventy or plus one seventy some.
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Speaker 2: Odd Did I do that?
5:11
Speaker 1: Right?
5:12
Speaker 3: Who cares?
5:13
Speaker 2: Who cares? This is radio. We're all enumerate. That means
5:19
Speaker 2: particularly shake it off the wee. Yeah, who cares? It's
5:23
Speaker 2: always plus.
5:23
Speaker 3: So suppose the number was zero. Let's let's give use
5:26
Speaker 3: a simple example that even I can convey this morning.
5:29
Speaker 3: If if the Fed's estimated FEDS not the FED obviously
5:34
Speaker 3: the if businesses who report it back to the Department
5:36
Speaker 3: of Labor, and many more will come. Like you said,
5:38
Speaker 3: so this is going to get revised if they said
5:40
Speaker 3: zero jobs. If they estimate zero jobs were created, it
5:42
Speaker 3: could be as many as one hundred and twenty plus
5:45
Speaker 3: on the plus site or on is that a better
5:47
Speaker 3: way to.
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Speaker 2: Oh, there you go, great wide range. So that's the point.
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Speaker 3: So you make the key point when it's a number
5:53
Speaker 3: as low as fifty some odd, we don't know what
5:56
Speaker 3: actually happened. They call it statistics for reason. A statistic
5:59
Speaker 3: means you don't know the population number you're estimating. Always
6:04
Speaker 3: good to keep that in mind. That said, take it
6:06
Speaker 3: at phase value, a little weak. So is the economy
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Speaker 3: running hot based on that number? M hard to argue
6:12
Speaker 3: that unemployments low, but it's staying low because the labor
6:16
Speaker 3: force fell. It just fell by a little more than
6:18
Speaker 3: the number of people who said they were unemployed newly unemployed.
6:22
Speaker 3: So it's not clear that the Fed is overstimulating the economy.
6:26
Speaker 3: But that doesn't mean they don't have to act on
6:29
Speaker 3: rising inflation, actual rising inflation, and rising inflation expectations, which
6:34
Speaker 3: is why it'll be interesting to see where they think
6:37
Speaker 3: the economy is in the upcoming release of the minutes
6:40
Speaker 3: and what they think their tools, if anything, can do
6:43
Speaker 3: about it.
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Speaker 2: The like you mentioned there's noise month to month, but
6:47
Speaker 2: it does seem like clearly there is a trend mark
6:50
Speaker 2: that the supply of labor is constrained or is lessening
6:55
Speaker 2: over time. And I'm wondering if anything you've read points
6:59
Speaker 2: to what has been sort of mentioned anecdotally that a
7:02
Speaker 2: lot of baby boomers are retiring, stepping away from the workforce.
7:06
Speaker 2: That seems to be a ten thousand today, right, Yeah,
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Speaker 2: the biggest contributing factor to the strengths the supply, obviously
7:10
Speaker 2: we've talked about lesser immigration to those seems to be
7:13
Speaker 2: two things that are certainly you can't no one could
7:16
Speaker 2: argue that you're not seeing that in the data here
7:19
Speaker 2: looking month by month, that the certainly the supply is shrinking.
7:22
Speaker 2: That probably has helped buoyed what has been at least
7:25
Speaker 2: a little bit slower in terms of additions, certainly last
7:28
Speaker 2: year from what we saw in prioris for new jobs
7:31
Speaker 2: being added. That lesser supplies.
7:33
Speaker 3: Yeah, like the some people like to talk about a
7:36
Speaker 3: break even, how many payrolls do we need to add
7:40
Speaker 3: to keep? Maybe they don't use the turn break even
7:42
Speaker 3: to describe it. How many payrolls do you need to
7:44
Speaker 3: add to keep the unemployment rate constant. Yeah, there are
7:48
Speaker 3: fundamental ways of measuring that. Some labor economists of which
7:51
Speaker 3: I'm not one, do that. There are statistical ways that
7:54
Speaker 3: I can do that any idiot can do well. Any
7:57
Speaker 3: idiot you know, claims to have some.
7:59
Speaker 2: Training can do.
8:00
Speaker 3: It's somewhere between eighty and one hundred or one hundred
8:03
Speaker 3: and twenty. You get the same number if you use
8:05
Speaker 3: a like back of the envelope statistical estimate or if
8:08
Speaker 3: you use a more rigorous fundamental approach. So like, we
8:11
Speaker 3: got to crank out one hundred and eighty to one
8:13
Speaker 3: hundred and twenty thousand new jobs a month to keep
8:15
Speaker 3: the unemployment rate steady. If you're wondering, wait, those come
8:18
Speaker 3: from different surveys. How do you do that? That is
8:20
Speaker 3: the key question. That's why it requires a little bit
8:23
Speaker 3: of work. And we're hitting that more or less this year, right,
8:27
Speaker 3: we're doing a buck Yeah.
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Speaker 2: I just was looking at the numbers this year. It
8:30
Speaker 2: seems like we're around that rate somewhere. Editionis.
8:33
Speaker 3: Yeah, last year we did like zilch Yep. Last year
8:36
Speaker 3: was a terrible year for job growth. Tariff chaos scared
8:39
Speaker 3: businesses and they didn't want to do anything. And this
8:42
Speaker 3: is not a political opinion, by the way. It's what
8:44
Speaker 3: business is said, and it's what the data say. So
8:49
Speaker 3: this year we appear to be at least hit and
8:50
Speaker 3: break even. It wouldn't It would explain the unemployment rate
8:53
Speaker 3: being steady. So I'll go back to the FED. It's
8:56
Speaker 3: not obvious that they're running things too hot, even though
9:00
Speaker 3: inflation was elevated coming into the Iran war or conflict,
9:04
Speaker 3: and now we've got to deal with the price spike,
9:06
Speaker 3: which will reverse. We're going to get some serious disinflation,
9:09
Speaker 3: I would think in the coming months, all else equal,
9:11
Speaker 3: But that doesn't mean the Fed's path. The FEDS path's
9:14
Speaker 3: probably a little wider. Worsh was right in his remarks. Now,
9:17
Speaker 3: I love Warsh to this point, so everything I say
9:19
Speaker 3: is biased by my feeling that he's got credibility and
9:22
Speaker 3: that he's saying the right things. So keep that in mind.
9:25
Speaker 3: For what it's worth. Pitspath's probably a little easier after
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Speaker 3: last Thursday, would you agree?
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Speaker 2: I would agree. Yes. It seems like the takeaway from
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Speaker 2: this report, noise aside, or whatever the numbers end up
9:36
Speaker 2: being once the dust settles, is that there is not
9:39
Speaker 2: as much of a proverbial gun to the Fed's head
9:42
Speaker 2: to make a decision on interest series. I feel like
9:44
Speaker 2: this buys them some time where they can be a
9:47
Speaker 2: little bit more prudent as to what their next step
9:50
Speaker 2: may be. We're going to take a quick break here
9:52
Speaker 2: on the finish the stage. When we come back, we're
9:54
Speaker 2: going to talk a little bit more about what the
9:56
Speaker 2: next step may look like for the Federal Reserve in
9:59
Speaker 2: terms of interest rate hikes, kind of previewing what the
10:02
Speaker 2: fall may look like. And then also we'll be talking
10:05
Speaker 2: a little bit more about big tech and how they
10:08
Speaker 2: have really flipped course on what they're talking about in
10:11
Speaker 2: terms of AI job wipeouts or job creation. We'll have
10:16
Speaker 2: that and much much more right after this break here
10:18
Speaker 2: on the finis Exchange.
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11:28
Speaker 2: We discussed in the prior segment relatively I would say,
11:33
Speaker 2: muted jobs report that came out for the month of June. Mixed,
11:36
Speaker 2: you know, not particularly great, but certainly not that poor either.
11:41
Speaker 2: But in terms of the Federal Reserve, we mentioned that
11:44
Speaker 2: we felt as if our takeaway from that Juam's job
11:46
Speaker 2: report was that it really lessened the pressure for the
11:50
Speaker 2: Federal Reserve to take any action at their upcoming meeting,
11:52
Speaker 2: which will be held on July twenty ninth. Looking at
11:56
Speaker 2: the CME group which does probabilities for based on few
12:00
Speaker 2: interest rating for what the Federal Reserve may do. From
12:02
Speaker 2: an interest rate perspective, there's about a seventy six percent
12:06
Speaker 2: probability that the Federal Reserve will just hold rates where
12:10
Speaker 2: they are at the end of July's meeting. It's not
12:13
Speaker 2: until the months of September or October where it becomes
12:18
Speaker 2: more of a toss up as to whether or not
12:21
Speaker 2: they may hike interest rates going forward. Here in the
12:25
Speaker 2: month of October there is the highest probability of about
12:30
Speaker 2: forty five percent, and then the other are split amongst,
12:33
Speaker 2: you know, hiking half percent or keeping rates where they are,
12:37
Speaker 2: But the most likely probability is that you'd see a
12:40
Speaker 2: quarter of a percent hike in the month of October.
12:44
Speaker 2: So Mark, this was something that was not really being
12:47
Speaker 2: as heavily discussed when Warsh took office, but obviously with
12:51
Speaker 2: the US and Iran war and the significant price hikes
12:54
Speaker 2: are not hikes but increases on oil and gas and
12:57
Speaker 2: just general inflationary pressure that we seem now we are
13:00
Speaker 2: more focused on the idea of is the economy running
13:03
Speaker 2: too hot and does the Federal Reserve need to step
13:06
Speaker 2: in with interest rate pologize.
13:07
Speaker 3: So the framework to use here and I'm just going
13:10
Speaker 3: to put it like plain English. The fed's models say this,
13:13
Speaker 3: but in a much more complicated and elaborate way. The
13:16
Speaker 3: Fed's thinking we can influence demand. They do that by
13:20
Speaker 3: raising a lowering interest rates, which in turn they do
13:22
Speaker 3: by increasing or decreasing the money supply those That's the channel.
13:27
Speaker 3: So is should we be increasing or reducing demand right now?
13:30
Speaker 3: Is the question the Fed's always asking, or should be?
13:32
Speaker 3: They have other tools too, but their primary tool is
13:35
Speaker 3: the federal funds rate, which they use to influence overall
13:39
Speaker 3: demand in the economy, sometimes called aggregate demand. And last
13:44
Speaker 3: week's reports suggests that, well, demand is probably not exceeding
13:50
Speaker 3: the growth. Of course, you can't view demand in isolation.
13:53
Speaker 3: You've got to view it a relative to something, and
13:55
Speaker 3: that something is always supply. So is the economy's growth
13:59
Speaker 3: rate out pacing its potential growth rate? Is demand growing
14:03
Speaker 3: faster than supply? Last week's unemployment report, which you've already
14:07
Speaker 3: pointed out is going to be revised, potentially, would suggest
14:11
Speaker 3: that it isn't. And that's why we say that last
14:15
Speaker 3: week's report probably, like you said, it may have and
14:19
Speaker 3: may have uncocked the trigger anyway, the hammer on the
14:24
Speaker 3: gun be currently, the Fed's always got a gun to
14:27
Speaker 3: its head. Yeah, even in good times, it's always wondering, Oh,
14:30
Speaker 3: are things growing faster than the economy speed limit? Are
14:33
Speaker 3: we responsible for that? Or is it a blip? It's
14:36
Speaker 3: a really, really hard job. Last week's report suggests that
14:39
Speaker 3: there's a little, as you said, less pressure on the
14:41
Speaker 3: FED maybe than previously, but that could be an incorrect
14:44
Speaker 3: reading of the structure of the economy too.
14:46
Speaker 2: Absolutely, we'll see any additional information that we get from
14:51
Speaker 2: Wednesday's release of the FED meeting minutes that will come
14:54
Speaker 2: at two o'clock in the middle of this week. Big
14:58
Speaker 2: Tech has suddenly flipped on the AI jobs wipeout scenario.
15:02
Speaker 2: So many of you listeners and anyone who really follows
15:05
Speaker 2: markets has probably heard these commentaries from the big CEOs
15:11
Speaker 2: at These are privately held companies, but they're the most
15:15
Speaker 2: sort of familiar in frontward facing on the AI front.
15:18
Speaker 2: Open AI and Anthropic are probably the two biggest names
15:21
Speaker 2: out there when it comes to large language models or AI,
15:24
Speaker 2: and their CEOs have previously come out with commentary that
15:28
Speaker 2: was quite scary for many of us out there to
15:31
Speaker 2: hear that. For example, Dario Modi, who's the CEO of Anthropic,
15:36
Speaker 2: in May of twenty twenty five mentioned that AI had
15:39
Speaker 2: the capability of eliminating half of entry level jobs. And
15:44
Speaker 2: then on the other front, Sam Altman, who is the
15:47
Speaker 2: CEO of open AI, which is the company behind chat GPT,
15:52
Speaker 2: he has also spoken about the significant potential that our
15:58
Speaker 2: official intelligence has to potential caused just seismic shifts in
16:02
Speaker 2: the workforce. Now they have finally woken up to the
16:07
Speaker 2: public posturing that is required with huge companies as they
16:11
Speaker 2: are in terms of messaging, and now mark the messaging
16:15
Speaker 2: is a lot more carefully constructed. I don't know how
16:19
Speaker 2: much of this, I have a guess. I don't know
16:21
Speaker 2: how much of this is trying to get a better
16:24
Speaker 2: public opinion rating or sort of Q rating out there
16:29
Speaker 2: with the general popus, which has continued to sort of
16:31
Speaker 2: sour their sentiment on artificial intelligence because of these bold
16:35
Speaker 2: proclamations by some of the CEOs. I feel like, if
16:38
Speaker 2: I were to put a pie together, that is probably
16:41
Speaker 2: the heaviest weighting that overwhelmingly they're trying to focus on
16:45
Speaker 2: making this message messaging more positive. And now you've got
16:49
Speaker 2: commentary from both of these CEOs which actually is alluding
16:53
Speaker 2: to this idea perhaps that AI will add more jobs
16:57
Speaker 2: than it will destroy, and maybe some of it is
17:01
Speaker 2: truly that they're recognizing that while this technology is continued
17:05
Speaker 2: to progress, that it actually is leading to more job
17:09
Speaker 2: creation or perhaps isn't having the societal impacts that they
17:12
Speaker 2: once estimated before. I would lean seventy five to twenty
17:16
Speaker 2: five to curating approval, and maybe twenty five percent to
17:20
Speaker 2: this idea that hey, perhaps we overestimated the impact of
17:24
Speaker 2: the technology, but certainly a shift has been marked here.
17:27
Speaker 3: Yeah, these guys are domain experts. They're really good coders
17:31
Speaker 3: who otherwise don't know what they're talking about. We don't
17:34
Speaker 3: know what the impact of AI will be on the
17:37
Speaker 3: economy when everything's moving around at the same time.
17:40
Speaker 2: We just don't know.
17:41
Speaker 3: They know that when they give AI the questionnaires that
17:45
Speaker 3: they give to potential new hires, AI can get all
17:48
Speaker 3: the right answers in ten minutes. It takes a new
17:50
Speaker 3: hire a week and they only get a fifty percent score. Yeah,
17:53
Speaker 3: that's scary if you're hiring for that position. Does that
17:55
Speaker 3: mean it's going to displace millions of jobs? Not necessarily
17:58
Speaker 3: depends on what's going on elsewhere in the economy. Labor
18:01
Speaker 3: will always have some sort of comparative or relative advantage.
18:04
Speaker 3: There will always be something people can do better in
18:07
Speaker 3: a relative sense that they don't have to do it
18:08
Speaker 3: in an absolute sense better. It's the same reason you trade,
18:10
Speaker 3: by the way, yep, okay, just think of trade technology.
18:14
Speaker 3: They both have similar impacts on the economy. They expand
18:17
Speaker 3: the frontier of what's possible, and neither historically has displaced
18:21
Speaker 3: every worker. So I guess these tech titans finally realized
18:25
Speaker 3: not so much. They haven't been humbled. They still believe
18:28
Speaker 3: that they're omniscient, but they've realized that you don't want
18:33
Speaker 3: to scare the crap out of You need your customers,
18:36
Speaker 3: you don't want to scare the crap out of potential
18:37
Speaker 3: investors exactly.
18:39
Speaker 2: And I feel as if the initial policy comments were
18:44
Speaker 2: actually to try and assuage some of investors' fears, because
18:49
Speaker 2: you're talking up your own book in a sense, when
18:50
Speaker 2: these earlier comments are made a year ago, you want
18:53
Speaker 2: to make it sound like it is all life world
18:56
Speaker 2: altering technology to justify the valuation that you're raising capital at.
19:01
Speaker 2: Are the need to continue to raise and raise more
19:04
Speaker 2: money to support your future endeavors, but now realizing that
19:09
Speaker 2: there's a danger in being too pessimistic or perhaps too
19:14
Speaker 2: dystopian in some of the commentary. So these public figures,
19:17
Speaker 2: though they're not publicly traded companies yet they are set
19:20
Speaker 2: to be later this year, are realizing that what you
19:22
Speaker 2: say really matters. We're going to take a quick break
19:25
Speaker 2: here on the Financial Exchange when we come back, taking
19:28
Speaker 2: a look at markets with Wall Street Watch and much
19:30
Speaker 2: more right after this.
19:39
Speaker 1: Like us on Facebook and follow us on Twitter at
19:42
Speaker 1: TFE show. Breaking business news is always first right here
19:46
Speaker 1: on the Financial Exchange Radio Network. Time out full Wall
19:51
Speaker 1: Street Watch tracking the stocks, the data, and the headlines
19:55
Speaker 1: driving markets so far today right here on the Financial
19:58
Speaker 1: Exchange Radio Network.
20:00
Speaker 4: Traders are returning from the July fourth holiday and seeing
20:03
Speaker 4: a tech rally to begin the week, and now markets
20:07
Speaker 4: are mixed, with the Dow down two tenths of a
20:10
Speaker 4: percent or one hundred and seven points, SMP five hundred
20:13
Speaker 4: up nearly six tenths of a percent, nasdak now up
20:17
Speaker 4: one point one percent or three hundred and four points higher.
20:20
Speaker 4: RUSS two thousand is up about a half a percent ten,
20:23
Speaker 4: Your Treasure reeled is flat at four point four to
20:25
Speaker 4: eight percent, and Oil edging higher, trading at sixty eight
20:30
Speaker 4: dollars at barrel. Breaking jobs news from Microsoft's Xbox division
20:35
Speaker 4: this morning, after the tech giant said it plans to
20:37
Speaker 4: eliminate thirty two hundred jobs, or around twenty percent of
20:41
Speaker 4: its staff, as part of a massive reorganization to spur
20:44
Speaker 4: growth in the struggling gaming division. Sixteen hundred jobs will
20:49
Speaker 4: be eliminated today and the rest will be executed over
20:52
Speaker 4: the next twelve months. Microsoft down by over one percent.
20:57
Speaker 4: Sticking with tech where Broadcom announced this morning it will
21:00
Speaker 4: provide custom chips for Apple in an expanded deal that
21:04
Speaker 4: runs through twenty thirty one. Broadcom up by over five percent,
21:08
Speaker 4: while Apple shares are up one percent. Meanwhile, Budget Airline
21:12
Speaker 4: UK excuse me, Budget UK airline easy Jet agreed in
21:16
Speaker 4: principle to a takeover offer by US investment firm Castle
21:20
Speaker 4: Lake and a deal that could exceed seven billion dollars.
21:23
Speaker 4: And Bank of America upgraded T Mobile to buy from neutral,
21:27
Speaker 4: citing peak bearishness and the telecommunications sector. T Mobile stock
21:31
Speaker 4: is up one percent today on Tucker Silva and that
21:36
Speaker 4: is Wall street Watch.
21:38
Speaker 2: SpaceX has now officially joined the Nasdaq one hundred and
21:43
Speaker 2: fifteen days after they started trading. The Nasdaq on May
21:48
Speaker 2: one of twenty six had made changes to their policies
21:53
Speaker 2: on inclusion of companies into the nazdak Hunt basically to
21:57
Speaker 2: accommodate SpaceX. It now has a market cap SpaceX that
22:02
Speaker 2: exceeds to trillion dollars. And the reason why there was
22:08
Speaker 2: a lot of consternation as to whether or not to
22:10
Speaker 2: add SpaceX to a lot of the major induices out
22:14
Speaker 2: there has to deal with the fact that though they
22:16
Speaker 2: went public, very few of their shares are actually out
22:20
Speaker 2: there to be traded on a daily basis. Only about
22:23
Speaker 2: four to five percent of what's called the float, basically
22:26
Speaker 2: the available shares of the company can be traded for
22:30
Speaker 2: public consumption, and so typically you need a much heavier
22:35
Speaker 2: percentage of your float to be available in order to
22:38
Speaker 2: be included. And a lot of these benchmark industries that
22:40
Speaker 2: are used heavily in passive index investing that has become
22:44
Speaker 2: kind of the prevalent way to invest. So the NASDAQ
22:48
Speaker 2: one hundred, it's not nearly as big as the market
22:50
Speaker 2: for the S and P five hundred which is truly
22:53
Speaker 2: you know, has trillions of dollars attached to it from
22:56
Speaker 2: all the different passive index funds that you can get
22:59
Speaker 2: into you on that side of things, But NASDAKA is
23:01
Speaker 2: significant too. It's about eight hundred billion that commands assets
23:07
Speaker 2: in the NASDAQ one hundred benchmarking that's out there. In
23:11
Speaker 2: Vesco has its QQQ, which is probably the one that's
23:14
Speaker 2: the most well recognized in terms of the NASDEKA hundred exposure,
23:19
Speaker 2: with about four hundred and eighty billion dollars there. And
23:21
Speaker 2: so what does this mean for SpaceX. It does mean
23:25
Speaker 2: that there is some clamoring to purchase some of their
23:28
Speaker 2: stock to get index inclusion, but it is worth noting
23:33
Speaker 2: that there are going to be mechanisms in place so
23:37
Speaker 2: that even if someone were to own the NASDAQ one
23:40
Speaker 2: hundred that SpaceX waiting in it would only be about
23:44
Speaker 2: a half percent zero point seven percent from all of
23:48
Speaker 2: the information that I've read, Because there are so few
23:51
Speaker 2: shares available for public trading, they are putting in a
23:54
Speaker 2: mechanism in place to make sure that it doesn't have
23:57
Speaker 2: an overwhelming waiting on the NASDA a hundred. Looking at
24:01
Speaker 2: the size of some of the companies that are in
24:03
Speaker 2: the NASDAQ one hundred, and Nvidia, Apple, and Microsoft command
24:08
Speaker 2: pretty significant waitings. Amazon and Google as well. Where just
24:13
Speaker 2: between Nvidia and Apple for the NASDAQ one hundred, you're
24:16
Speaker 2: looking at about twenty three or twenty four percent of
24:20
Speaker 2: the Nasdaq one hundred. But you know, to be clear,
24:23
Speaker 2: SpaceX is not going to take on this three or
24:26
Speaker 2: four percent waiting in the S and P even not
24:30
Speaker 2: the SMP in the NASDAQA hundred, even though they have
24:32
Speaker 2: a two trillion dollars market cap. The S and P
24:34
Speaker 2: five hundred is not going to include SpaceX in it
24:39
Speaker 2: just yet. It's not until twenty twenty seven that they
24:42
Speaker 2: would become eligible. But certainly, like I mentioned, the major
24:45
Speaker 2: takeaway from this is that there will be some buying
24:48
Speaker 2: demand to help include into some of these indices out there.
24:52
Speaker 3: Yeah, very few people index to the Nasdaq because it's
24:55
Speaker 3: it's not an asset class. You could make an argument
24:57
Speaker 3: that SMP is large cap blend that is a distinct
25:00
Speaker 3: asset class that is imperfectly correlated with other asset classes.
25:03
Speaker 3: It's a good diversifier, and it's a good source of
25:05
Speaker 3: long term growth, and it's market cap weighted. It's not
25:09
Speaker 3: strictly market cap weighted. There are profitability and listing requirements.
25:16
Speaker 2: And that's why SpaceX isn't getting on there.
25:18
Speaker 3: Yeah. Yeah, And a very particular person will point out,
25:22
Speaker 3: so the S and P is technically sort of actively managed,
25:24
Speaker 3: unlike say the Russell one thousand index, which is purely
25:27
Speaker 3: market cap weighted, so that there is that popular ETF
25:31
Speaker 3: that you mentioned used by people who want exposure to
25:35
Speaker 3: who want greater than market cap exposure to, say technology stocks,
25:38
Speaker 3: but they exclude stuff that there's no reason not to own,
25:41
Speaker 3: like financial services companies, So it's a it's a weird.
25:46
Speaker 3: It's not an index in the same sense that the
25:49
Speaker 3: SNP need. The S and P is not an index
25:52
Speaker 3: in the same way that the Russell one is probably
25:53
Speaker 3: the purest There are others out there. Morgan Stanley Capital
25:56
Speaker 3: MSCI runs a suite of indices that are also market
25:59
Speaker 3: cap weighted. These little distinctions may not seem like they
26:03
Speaker 3: matter much, they do in the construction of say a
26:06
Speaker 3: target date funded a four to one K plan, though,
26:07
Speaker 3: are a balanced fund, so it is good to understand
26:11
Speaker 3: what you own.
26:12
Speaker 2: Absolutely another sort of side store here with SpaceX, beyond
26:17
Speaker 2: their inclusion in some of the indices that we're discussing here.
26:21
Speaker 2: There is continued speculation about the idea of SpaceX and
26:26
Speaker 2: Tesla potentially moving towards a merger. Again, nothing official on this.
26:30
Speaker 2: This is just market pundits who are sort of just
26:34
Speaker 2: throwing it out there as a potential event that could occur.
26:39
Speaker 2: If you look at the IPO filing from SpaceX, Tesla
26:43
Speaker 2: is mentioned eighty eight times according to this piece here
26:48
Speaker 2: from Bloomberg, and there are now what appears to be
26:53
Speaker 2: on must and more sort of efforts to position these
26:57
Speaker 2: companies to be more alike than one And would think
27:00
Speaker 2: initially you're just looking at the companies, you might think, geep,
27:03
Speaker 2: SpaceX launch rockets and Tesla seals electronic vehicles. How is
27:08
Speaker 2: there synergies there from a merger perspective. But Musk has
27:12
Speaker 2: really made a concerted effort to sort of focus Tesla's
27:16
Speaker 2: future growth on humanoid robots and atomus driving and on
27:21
Speaker 2: SpaceX's front. While certainly launching rockets is a core business,
27:26
Speaker 2: he has also acquired Xai to roll up into SpaceX,
27:30
Speaker 2: so AI and everything all artificial intelligence has become the
27:34
Speaker 2: focus there. So there is this speculation out there that
27:38
Speaker 2: he could look to merge the two companies. He's done
27:42
Speaker 2: it before, Xai rolling up into SpaceX as an example,
27:45
Speaker 2: Tesla acquired solar City back in twenty sixteen. He has
27:50
Speaker 2: this knack for kind of rolling up some of these
27:52
Speaker 2: non unprofitable businesses into two bigger entities. And from a
27:57
Speaker 2: control perspective, if you're Musk, he he has about I
28:01
Speaker 2: believe it's eighty percent of the voting share on SpaceX.
28:05
Speaker 2: He's got about twenty percent of the voting share on Tesla.
28:08
Speaker 2: If he were to merge those two together, then he
28:11
Speaker 2: could hold pretty significant voting control of the combined companies.
28:17
Speaker 2: In terms of the synergies between the two, that to me,
28:22
Speaker 2: I can't fully wrap my head around and really give
28:25
Speaker 2: you know, two cents on that, but certainly it would
28:27
Speaker 2: create a large company. It's they're already both very large
28:31
Speaker 2: on their own, with two trillion dollars in market cap
28:33
Speaker 2: for SpaceX and Tesla exceeds a trillion dollars. But it
28:37
Speaker 2: seems like this is being discussed more and more as
28:39
Speaker 2: a possibility. Mark, Yeah, I don't. I don't know.
28:44
Speaker 3: If you own either one, it's because you'll love Elon
28:46
Speaker 3: or believe it, and maybe you don't love him, but
28:47
Speaker 3: you and he's got.
28:49
Speaker 2: The track record. By the way, I this not a criticism.
28:52
Speaker 3: So what's the difference?
28:54
Speaker 2: Synergies?
28:55
Speaker 3: Give me a break?
28:56
Speaker 2: It would seem to me. I mean, I don't know.
28:58
Speaker 3: Maybe it being flip, but maybe Elon knows. I mean,
29:00
Speaker 3: what's the difference? Now? So you you you you toggle
29:03
Speaker 3: to a different screen on your computer if you're Elon. Okay,
29:06
Speaker 3: let's take it like he runs both companies, uh like
29:09
Speaker 3: literally combining.
29:11
Speaker 2: So maybe there's some.
29:12
Speaker 3: Back office stuff that could be scaled, like why don't
29:15
Speaker 3: we have two HR departments and two So that might
29:18
Speaker 3: that's the argument for mergers, or one company buys another
29:21
Speaker 3: they lay off all the luggage, like like may back
29:23
Speaker 3: office people like you don't need this because we're redundant,
29:27
Speaker 3: or maybe the other guy gets or a woman gets
29:29
Speaker 3: laid off.
29:29
Speaker 2: God, yeah, computing resources. It seems like is is the spin.
29:33
Speaker 2: At least this is mentioned. This piece is like this
29:37
Speaker 2: that Tesla will continue to need chips for HumanID robots
29:41
Speaker 2: and evs. Obviously there's been talk about SpaceX launching solar
29:45
Speaker 2: powered AI satellites that will require some chip workers. Well,
29:49
Speaker 2: so again this is just what is being discussed, you
29:53
Speaker 2: can kind of see how everybody thinks sense. Yeah, it
29:56
Speaker 2: does seem like there's a lot of there's a lot
29:59
Speaker 2: of speculation that points to that, So be interesting to
30:02
Speaker 2: see as that story sort of develops here, whether or
30:05
Speaker 2: not that occurs, and when it does occur. We're going
30:08
Speaker 2: to take a quick break here on the Financial Exchange,
30:11
Speaker 2: and when we come back, when we're talking about a
30:13
Speaker 2: sudden glut of oil, something that I didn't think I'd
30:16
Speaker 2: be saying a month or two ago, where we need
30:18
Speaker 2: discussing that and much much more right after this break
30:21
Speaker 2: on the Financial Exchange.
30:23
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30:43
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30:46
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30:59
Speaker 2: It's sudden. The glut of oil threatens to weaken Iran's
31:03
Speaker 2: hand in talks. So we are into the sixty days
31:08
Speaker 2: of discussions between the US and Iran, and certainly one
31:12
Speaker 2: of the biggest focuses in terms of the resolution of
31:17
Speaker 2: the war between the two is the impact on oil
31:20
Speaker 2: and the energy market, particularly travel through the Strait of Hormuz,
31:24
Speaker 2: which was a critical supply chain point that was at
31:28
Speaker 2: much debate during the war, and I guess we're still
31:31
Speaker 2: going through the negotiation, so as those continue, it continues
31:35
Speaker 2: to be an area of significant focus. What we're seeing here,
31:38
Speaker 2: much to the surprise of some analysts out there, is
31:43
Speaker 2: actually a potential glut of oil. We had reached as
31:46
Speaker 2: high as four dollars and fifty cents a gallon in
31:50
Speaker 2: terms of the average price paid at the pump during
31:53
Speaker 2: the war, but now we sit with West Texas Intermediate
31:57
Speaker 2: as of earlier this morning, I believe it was trading
31:59
Speaker 2: around sixty eight dollars a barrel. The analysts here mentioning
32:04
Speaker 2: that we are seeing anywhere from about thirty to sixty
32:08
Speaker 2: tankers a day traveling through the Strait of Hormuz. Certainly
32:11
Speaker 2: not the levels that we saw pre war when it
32:14
Speaker 2: was that number was closer to one hundred, but significant
32:16
Speaker 2: improvement from where it was previously. And there are multiple
32:21
Speaker 2: different supply levers that are being increased. We're seeing OPEC
32:26
Speaker 2: announced just recently that they will increase their production by
32:28
Speaker 2: one hundred eighty eight thousand barrels per day in the
32:32
Speaker 2: month of August. That's their fifth straight month of increases.
32:36
Speaker 2: And you've got other countries like Kuwait and the UAE
32:40
Speaker 2: also saying that they're going to be increasing their production.
32:44
Speaker 2: There was significant concern that a lot of countries drew
32:49
Speaker 2: down their strategic reserves and this would create significant demand
32:54
Speaker 2: for oil inventories as this war potentially wraps up. But
32:58
Speaker 2: from what it seems like, this is going to be
33:01
Speaker 2: more of a drawn out process the restoring of strategic reserves.
33:05
Speaker 2: Even though on June twenty sixth, the US its reserve
33:09
Speaker 2: reached their lowest levels since nineteen eighty three, it seems
33:12
Speaker 2: like these purchases to refill those reserves mark are going
33:16
Speaker 2: to be sort of staggered and take anywhere from from
33:19
Speaker 2: twelve to eighteen months. And I've read here that it
33:22
Speaker 2: could begin in Q four. It's not something that's going
33:25
Speaker 2: to be imminent those places.
33:26
Speaker 3: So that element deserves, that element gives a RAN some leverage,
33:29
Speaker 3: and they're going to draw this out. They'll draw it
33:31
Speaker 3: out for one hundred years if they can, they have
33:33
Speaker 3: every incentive to the President himself has said he likes
33:36
Speaker 3: to say tap us along. I guess he means string
33:39
Speaker 3: us along. Maybe tapping us along means the same thing
33:41
Speaker 3: to him, or maybe that's the new parlance.
33:44
Speaker 1: I don't know.
33:45
Speaker 3: So okay, so oil's cheap again. All the handwringing was
33:50
Speaker 3: it misplaced? Was it with all the armchair people who
33:56
Speaker 3: droned on about operational capacity? And we've got this many
33:59
Speaker 3: weeks left and like people.
34:00
Speaker 2: Who destruction of infrastructure was mentioned a lot which can still?
34:04
Speaker 3: I mean, so, does a RAN have an incentive here
34:06
Speaker 3: to to in order to maintain maximum leverage, do something
34:13
Speaker 3: to cause the price to shoot up again in the
34:15
Speaker 3: short term so that we restock more slow If restocking,
34:19
Speaker 3: if the more quickly restocking takes place gives a RAN
34:21
Speaker 3: more leverge, it gives a RAND less leverage. Excuse me,
34:24
Speaker 3: do they have an incentive to slow that process down?
34:26
Speaker 3: Will they occasionally lob a drone into the strait just
34:29
Speaker 3: to remind everybody that they control it? And then I
34:32
Speaker 3: keep coming back to this war has cost us a
34:34
Speaker 3: lot of inflation. We've already gone past the FEDS two
34:37
Speaker 3: percent target this year. It's cost US several hundred billion
34:39
Speaker 3: dollars properly measured, repairing the bases, replacing the Tomahawks, replacing
34:44
Speaker 3: the Patriot missile systems. VA benefits for people who were injured,
34:49
Speaker 3: hundreds of them, not to mention the dozen or so
34:53
Speaker 3: thirteen or so service members who were killed. What in
34:56
Speaker 3: the world did we do this for now? I'm not
34:58
Speaker 3: saying it won't in the end work out. Maybe in
35:01
Speaker 3: five years. Iran his tame and they're a vassal state
35:04
Speaker 3: of ours, very pliable. But so far it's really unclear
35:08
Speaker 3: that this cost anything other than a lot of volatility.
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36:29
Speaker 2: We just wrapped up the fourth July Long weekend at
36:32
Speaker 2: Triple A. Had forecaster records sixty one point four million
36:36
Speaker 2: drivers that would be taking trips over fifty miles for
36:40
Speaker 2: the July fourth week That was just ahead of last
36:42
Speaker 2: year's total. It doesn't seem like the higher gas prices
36:46
Speaker 2: really thwarted anyone's ambitions to get out there and travel
36:50
Speaker 2: for the holiday weekend. We had average gas prices of
36:54
Speaker 2: about three dollars and eighty four cents a gallon, still elevated,
36:58
Speaker 2: but like I mentioned in the prior segment, down from
37:01
Speaker 2: the peak that we saw of about four dollars and
37:03
Speaker 2: fifty cents at the start of the Iran war. In
37:07
Speaker 2: terms of several summer travel plans, there are seventy seven
37:11
Speaker 2: percent of survey respondents that said that they are going
37:14
Speaker 2: to continue planning trips just as was they were before,
37:18
Speaker 2: perhaps some minor adjustments that they will undertake on their
37:22
Speaker 2: trips in terms of traveling less than they may have.
37:25
Speaker 2: But ultimately we sit with an unemployment rate of four
37:28
Speaker 2: point two percent. The consumer has continued to remain resilient
37:32
Speaker 2: and that has not been dented at all here by
37:35
Speaker 2: some higher prices at the pump. Taking a look around
37:39
Speaker 2: at markets, we've got the Dow Jones off about seventy points,
37:44
Speaker 2: the S and P five hundred is up a little
37:47
Speaker 2: bit over a half percent, the Nasdaq is rallying a
37:49
Speaker 2: bit up over one percent on the day. Like I
37:53
Speaker 2: mentioned earlier, SpaceX has been included in the Nasdaq one
37:58
Speaker 2: hundred after its first fifteen days of trading. That's all
38:02
Speaker 2: the time that we have for the first hour of
38:04
Speaker 2: the program. Here, we're gonna take a quick break, but
38:06
Speaker 2: we have much much more to discuss in the second hour.
38:09
Speaker 2: Stick with us.